Illinois General Assembly - Full Text of HB3858
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Full Text of HB3858  94th General Assembly

HB3858 94TH GENERAL ASSEMBLY


 


 
94TH GENERAL ASSEMBLY
State of Illinois
2005 and 2006
HB3858

 

Introduced 2/25/2005, by Rep. James H. Meyer - Rosemary Mulligan - Sidney H. Mathias - David R. Leitch - Sandra M. Pihos

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 5/203   from Ch. 120, par. 2-203

    Amends the Illinois Income Tax Act. For taxable years ending on or after December 31, 2005, provides for a deduction from adjusted gross income of up to $5,000 paid by an individual taxpayer for dependent care provided for a child, disabled spouse, or other dependent adult during the taxable year. Provides that the amount may not be deducted unless certain information identifying the person providing the services is included on the return. Excepts the deduction from the sunset requirements. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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1     AN ACT regarding taxation.
 
2     Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
 
4     Section 5. The Illinois Income Tax Act is amended by
5 changing Section 203 as follows:
 
6     (35 ILCS 5/203)  (from Ch. 120, par. 2-203)
7     Sec. 203. Base income defined.
8     (a) Individuals.
9         (1) In general. In the case of an individual, base
10     income means an amount equal to the taxpayer's adjusted
11     gross income for the taxable year as modified by paragraph
12     (2).
13         (2) Modifications. The adjusted gross income referred
14     to in paragraph (1) shall be modified by adding thereto the
15     sum of the following amounts:
16             (A) An amount equal to all amounts paid or accrued
17         to the taxpayer as interest or dividends during the
18         taxable year to the extent excluded from gross income
19         in the computation of adjusted gross income, except
20         stock dividends of qualified public utilities
21         described in Section 305(e) of the Internal Revenue
22         Code;
23             (B) An amount equal to the amount of tax imposed by
24         this Act to the extent deducted from gross income in
25         the computation of adjusted gross income for the
26         taxable year;
27             (C) An amount equal to the amount received during
28         the taxable year as a recovery or refund of real
29         property taxes paid with respect to the taxpayer's
30         principal residence under the Revenue Act of 1939 and
31         for which a deduction was previously taken under
32         subparagraph (L) of this paragraph (2) prior to July 1,

 

 

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1         1991, the retrospective application date of Article 4
2         of Public Act 87-17. In the case of multi-unit or
3         multi-use structures and farm dwellings, the taxes on
4         the taxpayer's principal residence shall be that
5         portion of the total taxes for the entire property
6         which is attributable to such principal residence;
7             (D) An amount equal to the amount of the capital
8         gain deduction allowable under the Internal Revenue
9         Code, to the extent deducted from gross income in the
10         computation of adjusted gross income;
11             (D-5) An amount, to the extent not included in
12         adjusted gross income, equal to the amount of money
13         withdrawn by the taxpayer in the taxable year from a
14         medical care savings account and the interest earned on
15         the account in the taxable year of a withdrawal
16         pursuant to subsection (b) of Section 20 of the Medical
17         Care Savings Account Act or subsection (b) of Section
18         20 of the Medical Care Savings Account Act of 2000;
19             (D-10) For taxable years ending after December 31,
20         1997, an amount equal to any eligible remediation costs
21         that the individual deducted in computing adjusted
22         gross income and for which the individual claims a
23         credit under subsection (l) of Section 201;
24             (D-15) For taxable years 2001 and thereafter, an
25         amount equal to the bonus depreciation deduction (30%
26         of the adjusted basis of the qualified property) taken
27         on the taxpayer's federal income tax return for the
28         taxable year under subsection (k) of Section 168 of the
29         Internal Revenue Code;
30             (D-16) If the taxpayer reports a capital gain or
31         loss on the taxpayer's federal income tax return for
32         the taxable year based on a sale or transfer of
33         property for which the taxpayer was required in any
34         taxable year to make an addition modification under
35         subparagraph (D-15), then an amount equal to the
36         aggregate amount of the deductions taken in all taxable

 

 

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1         years under subparagraph (Z) with respect to that
2         property.
3             The taxpayer is required to make the addition
4         modification under this subparagraph only once with
5         respect to any one piece of property;
6             (D-17) For taxable years ending on or after
7         December 31, 2004, an amount equal to the amount
8         otherwise allowed as a deduction in computing base
9         income for interest paid, accrued, or incurred,
10         directly or indirectly, to a foreign person who would
11         be a member of the same unitary business group but for
12         the fact that foreign person's business activity
13         outside the United States is 80% or more of the foreign
14         person's total business activity. The addition
15         modification required by this subparagraph shall be
16         reduced to the extent that dividends were included in
17         base income of the unitary group for the same taxable
18         year and received by the taxpayer or by a member of the
19         taxpayer's unitary business group (including amounts
20         included in gross income under Sections 951 through 964
21         of the Internal Revenue Code and amounts included in
22         gross income under Section 78 of the Internal Revenue
23         Code) with respect to the stock of the same person to
24         whom the interest was paid, accrued, or incurred.
25             This paragraph shall not apply to the following:
26                 (i) an item of interest paid, accrued, or
27             incurred, directly or indirectly, to a foreign
28             person who is subject in a foreign country or
29             state, other than a state which requires mandatory
30             unitary reporting, to a tax on or measured by net
31             income with respect to such interest; or
32                 (ii) an item of interest paid, accrued, or
33             incurred, directly or indirectly, to a foreign
34             person if the taxpayer can establish, based on a
35             preponderance of the evidence, both of the
36             following:

 

 

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1                     (a) the foreign person, during the same
2                 taxable year, paid, accrued, or incurred, the
3                 interest to a person that is not a related
4                 member, and
5                     (b) the transaction giving rise to the
6                 interest expense between the taxpayer and the
7                 foreign person did not have as a principal
8                 purpose the avoidance of Illinois income tax,
9                 and is paid pursuant to a contract or agreement
10                 that reflects an arm's-length interest rate
11                 and terms; or
12                 (iii) the taxpayer can establish, based on
13             clear and convincing evidence, that the interest
14             paid, accrued, or incurred relates to a contract or
15             agreement entered into at arm's-length rates and
16             terms and the principal purpose for the payment is
17             not federal or Illinois tax avoidance; or
18                 (iv) an item of interest paid, accrued, or
19             incurred, directly or indirectly, to a foreign
20             person if the taxpayer establishes by clear and
21             convincing evidence that the adjustments are
22             unreasonable; or if the taxpayer and the Director
23             agree in writing to the application or use of an
24             alternative method of apportionment under Section
25             304(f).
26                 Nothing in this subsection shall preclude the
27             Director from making any other adjustment
28             otherwise allowed under Section 404 of this Act for
29             any tax year beginning after the effective date of
30             this amendment provided such adjustment is made
31             pursuant to regulation adopted by the Department
32             and such regulations provide methods and standards
33             by which the Department will utilize its authority
34             under Section 404 of this Act;
35             (D-18) For taxable years ending on or after
36         December 31, 2004, an amount equal to the amount of

 

 

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1         intangible expenses and costs otherwise allowed as a
2         deduction in computing base income, and that were paid,
3         accrued, or incurred, directly or indirectly, to a
4         foreign person who would be a member of the same
5         unitary business group but for the fact that the
6         foreign person's business activity outside the United
7         States is 80% or more of that person's total business
8         activity. The addition modification required by this
9         subparagraph shall be reduced to the extent that
10         dividends were included in base income of the unitary
11         group for the same taxable year and received by the
12         taxpayer or by a member of the taxpayer's unitary
13         business group (including amounts included in gross
14         income under Sections 951 through 964 of the Internal
15         Revenue Code and amounts included in gross income under
16         Section 78 of the Internal Revenue Code) with respect
17         to the stock of the same person to whom the intangible
18         expenses and costs were directly or indirectly paid,
19         incurred, or accrued. The preceding sentence does not
20         apply to the extent that the same dividends caused a
21         reduction to the addition modification required under
22         Section 203(a)(2)(D-17) of this Act. As used in this
23         subparagraph, the term "intangible expenses and costs"
24         includes (1) expenses, losses, and costs for, or
25         related to, the direct or indirect acquisition, use,
26         maintenance or management, ownership, sale, exchange,
27         or any other disposition of intangible property; (2)
28         losses incurred, directly or indirectly, from
29         factoring transactions or discounting transactions;
30         (3) royalty, patent, technical, and copyright fees;
31         (4) licensing fees; and (5) other similar expenses and
32         costs. For purposes of this subparagraph, "intangible
33         property" includes patents, patent applications, trade
34         names, trademarks, service marks, copyrights, mask
35         works, trade secrets, and similar types of intangible
36         assets.

 

 

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1             This paragraph shall not apply to the following:
2                 (i) any item of intangible expenses or costs
3             paid, accrued, or incurred, directly or
4             indirectly, from a transaction with a foreign
5             person who is subject in a foreign country or
6             state, other than a state which requires mandatory
7             unitary reporting, to a tax on or measured by net
8             income with respect to such item; or
9                 (ii) any item of intangible expense or cost
10             paid, accrued, or incurred, directly or
11             indirectly, if the taxpayer can establish, based
12             on a preponderance of the evidence, both of the
13             following:
14                     (a) the foreign person during the same
15                 taxable year paid, accrued, or incurred, the
16                 intangible expense or cost to a person that is
17                 not a related member, and
18                     (b) the transaction giving rise to the
19                 intangible expense or cost between the
20                 taxpayer and the foreign person did not have as
21                 a principal purpose the avoidance of Illinois
22                 income tax, and is paid pursuant to a contract
23                 or agreement that reflects arm's-length terms;
24                 or
25                 (iii) any item of intangible expense or cost
26             paid, accrued, or incurred, directly or
27             indirectly, from a transaction with a foreign
28             person if the taxpayer establishes by clear and
29             convincing evidence, that the adjustments are
30             unreasonable; or if the taxpayer and the Director
31             agree in writing to the application or use of an
32             alternative method of apportionment under Section
33             304(f);
34                 Nothing in this subsection shall preclude the
35             Director from making any other adjustment
36             otherwise allowed under Section 404 of this Act for

 

 

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1             any tax year beginning after the effective date of
2             this amendment provided such adjustment is made
3             pursuant to regulation adopted by the Department
4             and such regulations provide methods and standards
5             by which the Department will utilize its authority
6             under Section 404 of this Act;
7             (D-20) For taxable years beginning on or after
8         January 1, 2002, in the case of a distribution from a
9         qualified tuition program under Section 529 of the
10         Internal Revenue Code, other than (i) a distribution
11         from a College Savings Pool created under Section 16.5
12         of the State Treasurer Act or (ii) a distribution from
13         the Illinois Prepaid Tuition Trust Fund, an amount
14         equal to the amount excluded from gross income under
15         Section 529(c)(3)(B);
16     and by deducting from the total so obtained the sum of the
17     following amounts:
18             (E) For taxable years ending before December 31,
19         2001, any amount included in such total in respect of
20         any compensation (including but not limited to any
21         compensation paid or accrued to a serviceman while a
22         prisoner of war or missing in action) paid to a
23         resident by reason of being on active duty in the Armed
24         Forces of the United States and in respect of any
25         compensation paid or accrued to a resident who as a
26         governmental employee was a prisoner of war or missing
27         in action, and in respect of any compensation paid to a
28         resident in 1971 or thereafter for annual training
29         performed pursuant to Sections 502 and 503, Title 32,
30         United States Code as a member of the Illinois National
31         Guard. For taxable years ending on or after December
32         31, 2001, any amount included in such total in respect
33         of any compensation (including but not limited to any
34         compensation paid or accrued to a serviceman while a
35         prisoner of war or missing in action) paid to a
36         resident by reason of being a member of any component

 

 

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1         of the Armed Forces of the United States and in respect
2         of any compensation paid or accrued to a resident who
3         as a governmental employee was a prisoner of war or
4         missing in action, and in respect of any compensation
5         paid to a resident in 2001 or thereafter by reason of
6         being a member of the Illinois National Guard. The
7         provisions of this amendatory Act of the 92nd General
8         Assembly are exempt from the provisions of Section 250;
9             (F) An amount equal to all amounts included in such
10         total pursuant to the provisions of Sections 402(a),
11         402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the
12         Internal Revenue Code, or included in such total as
13         distributions under the provisions of any retirement
14         or disability plan for employees of any governmental
15         agency or unit, or retirement payments to retired
16         partners, which payments are excluded in computing net
17         earnings from self employment by Section 1402 of the
18         Internal Revenue Code and regulations adopted pursuant
19         thereto;
20             (G) The valuation limitation amount;
21             (H) An amount equal to the amount of any tax
22         imposed by this Act which was refunded to the taxpayer
23         and included in such total for the taxable year;
24             (I) An amount equal to all amounts included in such
25         total pursuant to the provisions of Section 111 of the
26         Internal Revenue Code as a recovery of items previously
27         deducted from adjusted gross income in the computation
28         of taxable income;
29             (J) An amount equal to those dividends included in
30         such total which were paid by a corporation which
31         conducts business operations in an Enterprise Zone or
32         zones created under the Illinois Enterprise Zone Act,
33         and conducts substantially all of its operations in an
34         Enterprise Zone or zones;
35             (K) An amount equal to those dividends included in
36         such total that were paid by a corporation that

 

 

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1         conducts business operations in a federally designated
2         Foreign Trade Zone or Sub-Zone and that is designated a
3         High Impact Business located in Illinois; provided
4         that dividends eligible for the deduction provided in
5         subparagraph (J) of paragraph (2) of this subsection
6         shall not be eligible for the deduction provided under
7         this subparagraph (K);
8             (L) For taxable years ending after December 31,
9         1983, an amount equal to all social security benefits
10         and railroad retirement benefits included in such
11         total pursuant to Sections 72(r) and 86 of the Internal
12         Revenue Code;
13             (M) With the exception of any amounts subtracted
14         under subparagraph (N), an amount equal to the sum of
15         all amounts disallowed as deductions by (i) Sections
16         171(a) (2), and 265(2) of the Internal Revenue Code of
17         1954, as now or hereafter amended, and all amounts of
18         expenses allocable to interest and disallowed as
19         deductions by Section 265(1) of the Internal Revenue
20         Code of 1954, as now or hereafter amended; and (ii) for
21         taxable years ending on or after August 13, 1999,
22         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
23         the Internal Revenue Code; the provisions of this
24         subparagraph are exempt from the provisions of Section
25         250;
26             (N) An amount equal to all amounts included in such
27         total which are exempt from taxation by this State
28         either by reason of its statutes or Constitution or by
29         reason of the Constitution, treaties or statutes of the
30         United States; provided that, in the case of any
31         statute of this State that exempts income derived from
32         bonds or other obligations from the tax imposed under
33         this Act, the amount exempted shall be the interest net
34         of bond premium amortization;
35             (O) An amount equal to any contribution made to a
36         job training project established pursuant to the Tax

 

 

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1         Increment Allocation Redevelopment Act;
2             (P) An amount equal to the amount of the deduction
3         used to compute the federal income tax credit for
4         restoration of substantial amounts held under claim of
5         right for the taxable year pursuant to Section 1341 of
6         the Internal Revenue Code of 1986;
7             (Q) An amount equal to any amounts included in such
8         total, received by the taxpayer as an acceleration in
9         the payment of life, endowment or annuity benefits in
10         advance of the time they would otherwise be payable as
11         an indemnity for a terminal illness;
12             (R) An amount equal to the amount of any federal or
13         State bonus paid to veterans of the Persian Gulf War;
14             (S) An amount, to the extent included in adjusted
15         gross income, equal to the amount of a contribution
16         made in the taxable year on behalf of the taxpayer to a
17         medical care savings account established under the
18         Medical Care Savings Account Act or the Medical Care
19         Savings Account Act of 2000 to the extent the
20         contribution is accepted by the account administrator
21         as provided in that Act;
22             (T) An amount, to the extent included in adjusted
23         gross income, equal to the amount of interest earned in
24         the taxable year on a medical care savings account
25         established under the Medical Care Savings Account Act
26         or the Medical Care Savings Account Act of 2000 on
27         behalf of the taxpayer, other than interest added
28         pursuant to item (D-5) of this paragraph (2);
29             (U) For one taxable year beginning on or after
30         January 1, 1994, an amount equal to the total amount of
31         tax imposed and paid under subsections (a) and (b) of
32         Section 201 of this Act on grant amounts received by
33         the taxpayer under the Nursing Home Grant Assistance
34         Act during the taxpayer's taxable years 1992 and 1993;
35             (V) Beginning with tax years ending on or after
36         December 31, 1995 and ending with tax years ending on

 

 

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1         or before December 31, 2004, an amount equal to the
2         amount paid by a taxpayer who is a self-employed
3         taxpayer, a partner of a partnership, or a shareholder
4         in a Subchapter S corporation for health insurance or
5         long-term care insurance for that taxpayer or that
6         taxpayer's spouse or dependents, to the extent that the
7         amount paid for that health insurance or long-term care
8         insurance may be deducted under Section 213 of the
9         Internal Revenue Code of 1986, has not been deducted on
10         the federal income tax return of the taxpayer, and does
11         not exceed the taxable income attributable to that
12         taxpayer's income, self-employment income, or
13         Subchapter S corporation income; except that no
14         deduction shall be allowed under this item (V) if the
15         taxpayer is eligible to participate in any health
16         insurance or long-term care insurance plan of an
17         employer of the taxpayer or the taxpayer's spouse. The
18         amount of the health insurance and long-term care
19         insurance subtracted under this item (V) shall be
20         determined by multiplying total health insurance and
21         long-term care insurance premiums paid by the taxpayer
22         times a number that represents the fractional
23         percentage of eligible medical expenses under Section
24         213 of the Internal Revenue Code of 1986 not actually
25         deducted on the taxpayer's federal income tax return;
26             (W) For taxable years beginning on or after January
27         1, 1998, all amounts included in the taxpayer's federal
28         gross income in the taxable year from amounts converted
29         from a regular IRA to a Roth IRA. This paragraph is
30         exempt from the provisions of Section 250;
31             (X) For taxable year 1999 and thereafter, an amount
32         equal to the amount of any (i) distributions, to the
33         extent includible in gross income for federal income
34         tax purposes, made to the taxpayer because of his or
35         her status as a victim of persecution for racial or
36         religious reasons by Nazi Germany or any other Axis

 

 

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1         regime or as an heir of the victim and (ii) items of
2         income, to the extent includible in gross income for
3         federal income tax purposes, attributable to, derived
4         from or in any way related to assets stolen from,
5         hidden from, or otherwise lost to a victim of
6         persecution for racial or religious reasons by Nazi
7         Germany or any other Axis regime immediately prior to,
8         during, and immediately after World War II, including,
9         but not limited to, interest on the proceeds receivable
10         as insurance under policies issued to a victim of
11         persecution for racial or religious reasons by Nazi
12         Germany or any other Axis regime by European insurance
13         companies immediately prior to and during World War II;
14         provided, however, this subtraction from federal
15         adjusted gross income does not apply to assets acquired
16         with such assets or with the proceeds from the sale of
17         such assets; provided, further, this paragraph shall
18         only apply to a taxpayer who was the first recipient of
19         such assets after their recovery and who is a victim of
20         persecution for racial or religious reasons by Nazi
21         Germany or any other Axis regime or as an heir of the
22         victim. The amount of and the eligibility for any
23         public assistance, benefit, or similar entitlement is
24         not affected by the inclusion of items (i) and (ii) of
25         this paragraph in gross income for federal income tax
26         purposes. This paragraph is exempt from the provisions
27         of Section 250;
28             (Y) For taxable years beginning on or after January
29         1, 2002 and ending on or before December 31, 2004,
30         moneys contributed in the taxable year to a College
31         Savings Pool account under Section 16.5 of the State
32         Treasurer Act, except that amounts excluded from gross
33         income under Section 529(c)(3)(C)(i) of the Internal
34         Revenue Code shall not be considered moneys
35         contributed under this subparagraph (Y). For taxable
36         years beginning on or after January 1, 2005, a maximum

 

 

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1         of $10,000 contributed in the taxable year to (i) a
2         College Savings Pool account under Section 16.5 of the
3         State Treasurer Act or (ii) the Illinois Prepaid
4         Tuition Trust Fund, except that amounts excluded from
5         gross income under Section 529(c)(3)(C)(i) of the
6         Internal Revenue Code shall not be considered moneys
7         contributed under this subparagraph (Y). This
8         subparagraph (Y) is exempt from the provisions of
9         Section 250;
10             (Z) For taxable years 2001 and thereafter, for the
11         taxable year in which the bonus depreciation deduction
12         (30% of the adjusted basis of the qualified property)
13         is taken on the taxpayer's federal income tax return
14         under subsection (k) of Section 168 of the Internal
15         Revenue Code and for each applicable taxable year
16         thereafter, an amount equal to "x", where:
17                 (1) "y" equals the amount of the depreciation
18             deduction taken for the taxable year on the
19             taxpayer's federal income tax return on property
20             for which the bonus depreciation deduction (30% of
21             the adjusted basis of the qualified property) was
22             taken in any year under subsection (k) of Section
23             168 of the Internal Revenue Code, but not including
24             the bonus depreciation deduction; and
25                 (2) "x" equals "y" multiplied by 30 and then
26             divided by 70 (or "y" multiplied by 0.429).
27             The aggregate amount deducted under this
28         subparagraph in all taxable years for any one piece of
29         property may not exceed the amount of the bonus
30         depreciation deduction (30% of the adjusted basis of
31         the qualified property) taken on that property on the
32         taxpayer's federal income tax return under subsection
33         (k) of Section 168 of the Internal Revenue Code;
34             (AA) If the taxpayer reports a capital gain or loss
35         on the taxpayer's federal income tax return for the
36         taxable year based on a sale or transfer of property

 

 

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1         for which the taxpayer was required in any taxable year
2         to make an addition modification under subparagraph
3         (D-15), then an amount equal to that addition
4         modification.
5             The taxpayer is allowed to take the deduction under
6         this subparagraph only once with respect to any one
7         piece of property;
8             (BB) Any amount included in adjusted gross income,
9         other than salary, received by a driver in a
10         ridesharing arrangement using a motor vehicle;
11             (CC) The amount of (i) any interest income (net of
12         the deductions allocable thereto) taken into account
13         for the taxable year with respect to a transaction with
14         a taxpayer that is required to make an addition
15         modification with respect to such transaction under
16         Section 203(a)(2)(D-17), 203(b)(2)(E-13),
17         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
18         the amount of that addition modification, and (ii) any
19         income from intangible property (net of the deductions
20         allocable thereto) taken into account for the taxable
21         year with respect to a transaction with a taxpayer that
22         is required to make an addition modification with
23         respect to such transaction under Section
24         203(a)(2)(D-18), 203(b)(2)(E-14), 203(c)(2)(G-13), or
25         203(d)(2)(D-8), but not to exceed the amount of that
26         addition modification;
27             (DD) An amount equal to the interest income taken
28         into account for the taxable year (net of the
29         deductions allocable thereto) with respect to
30         transactions with a foreign person who would be a
31         member of the taxpayer's unitary business group but for
32         the fact that the foreign person's business activity
33         outside the United States is 80% or more of that
34         person's total business activity, but not to exceed the
35         addition modification required to be made for the same
36         taxable year under Section 203(a)(2)(D-17) for

 

 

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1         interest paid, accrued, or incurred, directly or
2         indirectly, to the same foreign person; and
3             (EE) An amount equal to the income from intangible
4         property taken into account for the taxable year (net
5         of the deductions allocable thereto) with respect to
6         transactions with a foreign person who would be a
7         member of the taxpayer's unitary business group but for
8         the fact that the foreign person's business activity
9         outside the United States is 80% or more of that
10         person's total business activity, but not to exceed the
11         addition modification required to be made for the same
12         taxable year under Section 203(a)(2)(D-18) for
13         intangible expenses and costs paid, accrued, or
14         incurred, directly or indirectly, to the same foreign
15         person; and
16             (FF) For taxable years ending on or after December
17         31, 2005, up to $5,000 paid by the taxpayer for
18         dependent care provided for a child, disabled spouse,
19         or other dependent adult during the taxable year. No
20         amount paid or incurred for dependent care shall be
21         deducted unless (i) the name, address, and taxpayer
22         identification number of the person performing the
23         services are included on the return to which the
24         deduction relates or (ii) if the person performing the
25         services is an organization described in Section
26         501(c)(3) of the Internal Revenue Code and is exempt
27         from tax under Section 501(a) of the Internal Revenue
28         Code, the name and address of the person are included
29         on the return to which the deduction relates. This
30         paragraph is exempt from the provisions of Section 250.
 
31     (b) Corporations.
32         (1) In general. In the case of a corporation, base
33     income means an amount equal to the taxpayer's taxable
34     income for the taxable year as modified by paragraph (2).
35         (2) Modifications. The taxable income referred to in

 

 

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1     paragraph (1) shall be modified by adding thereto the sum
2     of the following amounts:
3             (A) An amount equal to all amounts paid or accrued
4         to the taxpayer as interest and all distributions
5         received from regulated investment companies during
6         the taxable year to the extent excluded from gross
7         income in the computation of taxable income;
8             (B) An amount equal to the amount of tax imposed by
9         this Act to the extent deducted from gross income in
10         the computation of taxable income for the taxable year;
11             (C) In the case of a regulated investment company,
12         an amount equal to the excess of (i) the net long-term
13         capital gain for the taxable year, over (ii) the amount
14         of the capital gain dividends designated as such in
15         accordance with Section 852(b)(3)(C) of the Internal
16         Revenue Code and any amount designated under Section
17         852(b)(3)(D) of the Internal Revenue Code,
18         attributable to the taxable year (this amendatory Act
19         of 1995 (Public Act 89-89) is declarative of existing
20         law and is not a new enactment);
21             (D) The amount of any net operating loss deduction
22         taken in arriving at taxable income, other than a net
23         operating loss carried forward from a taxable year
24         ending prior to December 31, 1986;
25             (E) For taxable years in which a net operating loss
26         carryback or carryforward from a taxable year ending
27         prior to December 31, 1986 is an element of taxable
28         income under paragraph (1) of subsection (e) or
29         subparagraph (E) of paragraph (2) of subsection (e),
30         the amount by which addition modifications other than
31         those provided by this subparagraph (E) exceeded
32         subtraction modifications in such earlier taxable
33         year, with the following limitations applied in the
34         order that they are listed:
35                 (i) the addition modification relating to the
36             net operating loss carried back or forward to the

 

 

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1             taxable year from any taxable year ending prior to
2             December 31, 1986 shall be reduced by the amount of
3             addition modification under this subparagraph (E)
4             which related to that net operating loss and which
5             was taken into account in calculating the base
6             income of an earlier taxable year, and
7                 (ii) the addition modification relating to the
8             net operating loss carried back or forward to the
9             taxable year from any taxable year ending prior to
10             December 31, 1986 shall not exceed the amount of
11             such carryback or carryforward;
12             For taxable years in which there is a net operating
13         loss carryback or carryforward from more than one other
14         taxable year ending prior to December 31, 1986, the
15         addition modification provided in this subparagraph
16         (E) shall be the sum of the amounts computed
17         independently under the preceding provisions of this
18         subparagraph (E) for each such taxable year;
19             (E-5) For taxable years ending after December 31,
20         1997, an amount equal to any eligible remediation costs
21         that the corporation deducted in computing adjusted
22         gross income and for which the corporation claims a
23         credit under subsection (l) of Section 201;
24             (E-10) For taxable years 2001 and thereafter, an
25         amount equal to the bonus depreciation deduction (30%
26         of the adjusted basis of the qualified property) taken
27         on the taxpayer's federal income tax return for the
28         taxable year under subsection (k) of Section 168 of the
29         Internal Revenue Code; and
30             (E-11) If the taxpayer reports a capital gain or
31         loss on the taxpayer's federal income tax return for
32         the taxable year based on a sale or transfer of
33         property for which the taxpayer was required in any
34         taxable year to make an addition modification under
35         subparagraph (E-10), then an amount equal to the
36         aggregate amount of the deductions taken in all taxable

 

 

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1         years under subparagraph (T) with respect to that
2         property.
3             The taxpayer is required to make the addition
4         modification under this subparagraph only once with
5         respect to any one piece of property;
6             (E-12) For taxable years ending on or after
7         December 31, 2004, an amount equal to the amount
8         otherwise allowed as a deduction in computing base
9         income for interest paid, accrued, or incurred,
10         directly or indirectly, to a foreign person who would
11         be a member of the same unitary business group but for
12         the fact the foreign person's business activity
13         outside the United States is 80% or more of the foreign
14         person's total business activity. The addition
15         modification required by this subparagraph shall be
16         reduced to the extent that dividends were included in
17         base income of the unitary group for the same taxable
18         year and received by the taxpayer or by a member of the
19         taxpayer's unitary business group (including amounts
20         included in gross income pursuant to Sections 951
21         through 964 of the Internal Revenue Code and amounts
22         included in gross income under Section 78 of the
23         Internal Revenue Code) with respect to the stock of the
24         same person to whom the interest was paid, accrued, or
25         incurred.
26             This paragraph shall not apply to the following:
27                 (i) an item of interest paid, accrued, or
28             incurred, directly or indirectly, to a foreign
29             person who is subject in a foreign country or
30             state, other than a state which requires mandatory
31             unitary reporting, to a tax on or measured by net
32             income with respect to such interest; or
33                 (ii) an item of interest paid, accrued, or
34             incurred, directly or indirectly, to a foreign
35             person if the taxpayer can establish, based on a
36             preponderance of the evidence, both of the

 

 

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1             following:
2                     (a) the foreign person, during the same
3                 taxable year, paid, accrued, or incurred, the
4                 interest to a person that is not a related
5                 member, and
6                     (b) the transaction giving rise to the
7                 interest expense between the taxpayer and the
8                 foreign person did not have as a principal
9                 purpose the avoidance of Illinois income tax,
10                 and is paid pursuant to a contract or agreement
11                 that reflects an arm's-length interest rate
12                 and terms; or
13                 (iii) the taxpayer can establish, based on
14             clear and convincing evidence, that the interest
15             paid, accrued, or incurred relates to a contract or
16             agreement entered into at arm's-length rates and
17             terms and the principal purpose for the payment is
18             not federal or Illinois tax avoidance; or
19                 (iv) an item of interest paid, accrued, or
20             incurred, directly or indirectly, to a foreign
21             person if the taxpayer establishes by clear and
22             convincing evidence that the adjustments are
23             unreasonable; or if the taxpayer and the Director
24             agree in writing to the application or use of an
25             alternative method of apportionment under Section
26             304(f).
27                 Nothing in this subsection shall preclude the
28             Director from making any other adjustment
29             otherwise allowed under Section 404 of this Act for
30             any tax year beginning after the effective date of
31             this amendment provided such adjustment is made
32             pursuant to regulation adopted by the Department
33             and such regulations provide methods and standards
34             by which the Department will utilize its authority
35             under Section 404 of this Act;
36             (E-13) For taxable years ending on or after

 

 

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1         December 31, 2004, an amount equal to the amount of
2         intangible expenses and costs otherwise allowed as a
3         deduction in computing base income, and that were paid,
4         accrued, or incurred, directly or indirectly, to a
5         foreign person who would be a member of the same
6         unitary business group but for the fact that the
7         foreign person's business activity outside the United
8         States is 80% or more of that person's total business
9         activity. The addition modification required by this
10         subparagraph shall be reduced to the extent that
11         dividends were included in base income of the unitary
12         group for the same taxable year and received by the
13         taxpayer or by a member of the taxpayer's unitary
14         business group (including amounts included in gross
15         income pursuant to Sections 951 through 964 of the
16         Internal Revenue Code and amounts included in gross
17         income under Section 78 of the Internal Revenue Code)
18         with respect to the stock of the same person to whom
19         the intangible expenses and costs were directly or
20         indirectly paid, incurred, or accrued. The preceding
21         sentence shall not apply to the extent that the same
22         dividends caused a reduction to the addition
23         modification required under Section 203(b)(2)(E-12) of
24         this Act. As used in this subparagraph, the term
25         "intangible expenses and costs" includes (1) expenses,
26         losses, and costs for, or related to, the direct or
27         indirect acquisition, use, maintenance or management,
28         ownership, sale, exchange, or any other disposition of
29         intangible property; (2) losses incurred, directly or
30         indirectly, from factoring transactions or discounting
31         transactions; (3) royalty, patent, technical, and
32         copyright fees; (4) licensing fees; and (5) other
33         similar expenses and costs. For purposes of this
34         subparagraph, "intangible property" includes patents,
35         patent applications, trade names, trademarks, service
36         marks, copyrights, mask works, trade secrets, and

 

 

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1         similar types of intangible assets.
2             This paragraph shall not apply to the following:
3                 (i) any item of intangible expenses or costs
4             paid, accrued, or incurred, directly or
5             indirectly, from a transaction with a foreign
6             person who is subject in a foreign country or
7             state, other than a state which requires mandatory
8             unitary reporting, to a tax on or measured by net
9             income with respect to such item; or
10                 (ii) any item of intangible expense or cost
11             paid, accrued, or incurred, directly or
12             indirectly, if the taxpayer can establish, based
13             on a preponderance of the evidence, both of the
14             following:
15                     (a) the foreign person during the same
16                 taxable year paid, accrued, or incurred, the
17                 intangible expense or cost to a person that is
18                 not a related member, and
19                     (b) the transaction giving rise to the
20                 intangible expense or cost between the
21                 taxpayer and the foreign person did not have as
22                 a principal purpose the avoidance of Illinois
23                 income tax, and is paid pursuant to a contract
24                 or agreement that reflects arm's-length terms;
25                 or
26                 (iii) any item of intangible expense or cost
27             paid, accrued, or incurred, directly or
28             indirectly, from a transaction with a foreign
29             person if the taxpayer establishes by clear and
30             convincing evidence, that the adjustments are
31             unreasonable; or if the taxpayer and the Director
32             agree in writing to the application or use of an
33             alternative method of apportionment under Section
34             304(f);
35                 Nothing in this subsection shall preclude the
36             Director from making any other adjustment

 

 

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1             otherwise allowed under Section 404 of this Act for
2             any tax year beginning after the effective date of
3             this amendment provided such adjustment is made
4             pursuant to regulation adopted by the Department
5             and such regulations provide methods and standards
6             by which the Department will utilize its authority
7             under Section 404 of this Act;
8     and by deducting from the total so obtained the sum of the
9     following amounts:
10             (F) An amount equal to the amount of any tax
11         imposed by this Act which was refunded to the taxpayer
12         and included in such total for the taxable year;
13             (G) An amount equal to any amount included in such
14         total under Section 78 of the Internal Revenue Code;
15             (H) In the case of a regulated investment company,
16         an amount equal to the amount of exempt interest
17         dividends as defined in subsection (b) (5) of Section
18         852 of the Internal Revenue Code, paid to shareholders
19         for the taxable year;
20             (I) With the exception of any amounts subtracted
21         under subparagraph (J), an amount equal to the sum of
22         all amounts disallowed as deductions by (i) Sections
23         171(a) (2), and 265(a)(2) and amounts disallowed as
24         interest expense by Section 291(a)(3) of the Internal
25         Revenue Code, as now or hereafter amended, and all
26         amounts of expenses allocable to interest and
27         disallowed as deductions by Section 265(a)(1) of the
28         Internal Revenue Code, as now or hereafter amended; and
29         (ii) for taxable years ending on or after August 13,
30         1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and
31         832(b)(5)(B)(i) of the Internal Revenue Code; the
32         provisions of this subparagraph are exempt from the
33         provisions of Section 250;
34             (J) An amount equal to all amounts included in such
35         total which are exempt from taxation by this State
36         either by reason of its statutes or Constitution or by

 

 

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1         reason of the Constitution, treaties or statutes of the
2         United States; provided that, in the case of any
3         statute of this State that exempts income derived from
4         bonds or other obligations from the tax imposed under
5         this Act, the amount exempted shall be the interest net
6         of bond premium amortization;
7             (K) An amount equal to those dividends included in
8         such total which were paid by a corporation which
9         conducts business operations in an Enterprise Zone or
10         zones created under the Illinois Enterprise Zone Act
11         and conducts substantially all of its operations in an
12         Enterprise Zone or zones;
13             (L) An amount equal to those dividends included in
14         such total that were paid by a corporation that
15         conducts business operations in a federally designated
16         Foreign Trade Zone or Sub-Zone and that is designated a
17         High Impact Business located in Illinois; provided
18         that dividends eligible for the deduction provided in
19         subparagraph (K) of paragraph 2 of this subsection
20         shall not be eligible for the deduction provided under
21         this subparagraph (L);
22             (M) For any taxpayer that is a financial
23         organization within the meaning of Section 304(c) of
24         this Act, an amount included in such total as interest
25         income from a loan or loans made by such taxpayer to a
26         borrower, to the extent that such a loan is secured by
27         property which is eligible for the Enterprise Zone
28         Investment Credit. To determine the portion of a loan
29         or loans that is secured by property eligible for a
30         Section 201(f) investment credit to the borrower, the
31         entire principal amount of the loan or loans between
32         the taxpayer and the borrower should be divided into
33         the basis of the Section 201(f) investment credit
34         property which secures the loan or loans, using for
35         this purpose the original basis of such property on the
36         date that it was placed in service in the Enterprise

 

 

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1         Zone. The subtraction modification available to
2         taxpayer in any year under this subsection shall be
3         that portion of the total interest paid by the borrower
4         with respect to such loan attributable to the eligible
5         property as calculated under the previous sentence;
6             (M-1) For any taxpayer that is a financial
7         organization within the meaning of Section 304(c) of
8         this Act, an amount included in such total as interest
9         income from a loan or loans made by such taxpayer to a
10         borrower, to the extent that such a loan is secured by
11         property which is eligible for the High Impact Business
12         Investment Credit. To determine the portion of a loan
13         or loans that is secured by property eligible for a
14         Section 201(h) investment credit to the borrower, the
15         entire principal amount of the loan or loans between
16         the taxpayer and the borrower should be divided into
17         the basis of the Section 201(h) investment credit
18         property which secures the loan or loans, using for
19         this purpose the original basis of such property on the
20         date that it was placed in service in a federally
21         designated Foreign Trade Zone or Sub-Zone located in
22         Illinois. No taxpayer that is eligible for the
23         deduction provided in subparagraph (M) of paragraph
24         (2) of this subsection shall be eligible for the
25         deduction provided under this subparagraph (M-1). The
26         subtraction modification available to taxpayers in any
27         year under this subsection shall be that portion of the
28         total interest paid by the borrower with respect to
29         such loan attributable to the eligible property as
30         calculated under the previous sentence;
31             (N) Two times any contribution made during the
32         taxable year to a designated zone organization to the
33         extent that the contribution (i) qualifies as a
34         charitable contribution under subsection (c) of
35         Section 170 of the Internal Revenue Code and (ii) must,
36         by its terms, be used for a project approved by the

 

 

HB3858 - 25 - LRB094 04073 BDD 34093 b

1         Department of Commerce and Economic Opportunity under
2         Section 11 of the Illinois Enterprise Zone Act;
3             (O) An amount equal to: (i) 85% for taxable years
4         ending on or before December 31, 1992, or, a percentage
5         equal to the percentage allowable under Section
6         243(a)(1) of the Internal Revenue Code of 1986 for
7         taxable years ending after December 31, 1992, of the
8         amount by which dividends included in taxable income
9         and received from a corporation that is not created or
10         organized under the laws of the United States or any
11         state or political subdivision thereof, including, for
12         taxable years ending on or after December 31, 1988,
13         dividends received or deemed received or paid or deemed
14         paid under Sections 951 through 964 of the Internal
15         Revenue Code, exceed the amount of the modification
16         provided under subparagraph (G) of paragraph (2) of
17         this subsection (b) which is related to such dividends;
18         plus (ii) 100% of the amount by which dividends,
19         included in taxable income and received, including,
20         for taxable years ending on or after December 31, 1988,
21         dividends received or deemed received or paid or deemed
22         paid under Sections 951 through 964 of the Internal
23         Revenue Code, from any such corporation specified in
24         clause (i) that would but for the provisions of Section
25         1504 (b) (3) of the Internal Revenue Code be treated as
26         a member of the affiliated group which includes the
27         dividend recipient, exceed the amount of the
28         modification provided under subparagraph (G) of
29         paragraph (2) of this subsection (b) which is related
30         to such dividends;
31             (P) An amount equal to any contribution made to a
32         job training project established pursuant to the Tax
33         Increment Allocation Redevelopment Act;
34             (Q) An amount equal to the amount of the deduction
35         used to compute the federal income tax credit for
36         restoration of substantial amounts held under claim of

 

 

HB3858 - 26 - LRB094 04073 BDD 34093 b

1         right for the taxable year pursuant to Section 1341 of
2         the Internal Revenue Code of 1986;
3             (R) In the case of an attorney-in-fact with respect
4         to whom an interinsurer or a reciprocal insurer has
5         made the election under Section 835 of the Internal
6         Revenue Code, 26 U.S.C. 835, an amount equal to the
7         excess, if any, of the amounts paid or incurred by that
8         interinsurer or reciprocal insurer in the taxable year
9         to the attorney-in-fact over the deduction allowed to
10         that interinsurer or reciprocal insurer with respect
11         to the attorney-in-fact under Section 835(b) of the
12         Internal Revenue Code for the taxable year;
13             (S) For taxable years ending on or after December
14         31, 1997, in the case of a Subchapter S corporation, an
15         amount equal to all amounts of income allocable to a
16         shareholder subject to the Personal Property Tax
17         Replacement Income Tax imposed by subsections (c) and
18         (d) of Section 201 of this Act, including amounts
19         allocable to organizations exempt from federal income
20         tax by reason of Section 501(a) of the Internal Revenue
21         Code. This subparagraph (S) is exempt from the
22         provisions of Section 250;
23             (T) For taxable years 2001 and thereafter, for the
24         taxable year in which the bonus depreciation deduction
25         (30% of the adjusted basis of the qualified property)
26         is taken on the taxpayer's federal income tax return
27         under subsection (k) of Section 168 of the Internal
28         Revenue Code and for each applicable taxable year
29         thereafter, an amount equal to "x", where:
30                 (1) "y" equals the amount of the depreciation
31             deduction taken for the taxable year on the
32             taxpayer's federal income tax return on property
33             for which the bonus depreciation deduction (30% of
34             the adjusted basis of the qualified property) was
35             taken in any year under subsection (k) of Section
36             168 of the Internal Revenue Code, but not including

 

 

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1             the bonus depreciation deduction; and
2                 (2) "x" equals "y" multiplied by 30 and then
3             divided by 70 (or "y" multiplied by 0.429).
4             The aggregate amount deducted under this
5         subparagraph in all taxable years for any one piece of
6         property may not exceed the amount of the bonus
7         depreciation deduction (30% of the adjusted basis of
8         the qualified property) taken on that property on the
9         taxpayer's federal income tax return under subsection
10         (k) of Section 168 of the Internal Revenue Code;
11             (U) If the taxpayer reports a capital gain or loss
12         on the taxpayer's federal income tax return for the
13         taxable year based on a sale or transfer of property
14         for which the taxpayer was required in any taxable year
15         to make an addition modification under subparagraph
16         (E-10), then an amount equal to that addition
17         modification.
18             The taxpayer is allowed to take the deduction under
19         this subparagraph only once with respect to any one
20         piece of property;
21             (V) The amount of: (i) any interest income (net of
22         the deductions allocable thereto) taken into account
23         for the taxable year with respect to a transaction with
24         a taxpayer that is required to make an addition
25         modification with respect to such transaction under
26         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
27         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
28         the amount of such addition modification and (ii) any
29         income from intangible property (net of the deductions
30         allocable thereto) taken into account for the taxable
31         year with respect to a transaction with a taxpayer that
32         is required to make an addition modification with
33         respect to such transaction under Section
34         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
35         203(d)(2)(D-8), but not to exceed the amount of such
36         addition modification;

 

 

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1             (W) An amount equal to the interest income taken
2         into account for the taxable year (net of the
3         deductions allocable thereto) with respect to
4         transactions with a foreign person who would be a
5         member of the taxpayer's unitary business group but for
6         the fact that the foreign person's business activity
7         outside the United States is 80% or more of that
8         person's total business activity, but not to exceed the
9         addition modification required to be made for the same
10         taxable year under Section 203(b)(2)(E-12) for
11         interest paid, accrued, or incurred, directly or
12         indirectly, to the same foreign person; and
13             (X) An amount equal to the income from intangible
14         property taken into account for the taxable year (net
15         of the deductions allocable thereto) with respect to
16         transactions with a foreign person who would be a
17         member of the taxpayer's unitary business group but for
18         the fact that the foreign person's business activity
19         outside the United States is 80% or more of that
20         person's total business activity, but not to exceed the
21         addition modification required to be made for the same
22         taxable year under Section 203(b)(2)(E-13) for
23         intangible expenses and costs paid, accrued, or
24         incurred, directly or indirectly, to the same foreign
25         person.
26         (3) Special rule. For purposes of paragraph (2) (A),
27     "gross income" in the case of a life insurance company, for
28     tax years ending on and after December 31, 1994, shall mean
29     the gross investment income for the taxable year.
 
30     (c) Trusts and estates.
31         (1) In general. In the case of a trust or estate, base
32     income means an amount equal to the taxpayer's taxable
33     income for the taxable year as modified by paragraph (2).
34         (2) Modifications. Subject to the provisions of
35     paragraph (3), the taxable income referred to in paragraph

 

 

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1     (1) shall be modified by adding thereto the sum of the
2     following amounts:
3             (A) An amount equal to all amounts paid or accrued
4         to the taxpayer as interest or dividends during the
5         taxable year to the extent excluded from gross income
6         in the computation of taxable income;
7             (B) In the case of (i) an estate, $600; (ii) a
8         trust which, under its governing instrument, is
9         required to distribute all of its income currently,
10         $300; and (iii) any other trust, $100, but in each such
11         case, only to the extent such amount was deducted in
12         the computation of taxable income;
13             (C) An amount equal to the amount of tax imposed by
14         this Act to the extent deducted from gross income in
15         the computation of taxable income for the taxable year;
16             (D) The amount of any net operating loss deduction
17         taken in arriving at taxable income, other than a net
18         operating loss carried forward from a taxable year
19         ending prior to December 31, 1986;
20             (E) For taxable years in which a net operating loss
21         carryback or carryforward from a taxable year ending
22         prior to December 31, 1986 is an element of taxable
23         income under paragraph (1) of subsection (e) or
24         subparagraph (E) of paragraph (2) of subsection (e),
25         the amount by which addition modifications other than
26         those provided by this subparagraph (E) exceeded
27         subtraction modifications in such taxable year, with
28         the following limitations applied in the order that
29         they are listed:
30                 (i) the addition modification relating to the
31             net operating loss carried back or forward to the
32             taxable year from any taxable year ending prior to
33             December 31, 1986 shall be reduced by the amount of
34             addition modification under this subparagraph (E)
35             which related to that net operating loss and which
36             was taken into account in calculating the base

 

 

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1             income of an earlier taxable year, and
2                 (ii) the addition modification relating to the
3             net operating loss carried back or forward to the
4             taxable year from any taxable year ending prior to
5             December 31, 1986 shall not exceed the amount of
6             such carryback or carryforward;
7             For taxable years in which there is a net operating
8         loss carryback or carryforward from more than one other
9         taxable year ending prior to December 31, 1986, the
10         addition modification provided in this subparagraph
11         (E) shall be the sum of the amounts computed
12         independently under the preceding provisions of this
13         subparagraph (E) for each such taxable year;
14             (F) For taxable years ending on or after January 1,
15         1989, an amount equal to the tax deducted pursuant to
16         Section 164 of the Internal Revenue Code if the trust
17         or estate is claiming the same tax for purposes of the
18         Illinois foreign tax credit under Section 601 of this
19         Act;
20             (G) An amount equal to the amount of the capital
21         gain deduction allowable under the Internal Revenue
22         Code, to the extent deducted from gross income in the
23         computation of taxable income;
24             (G-5) For taxable years ending after December 31,
25         1997, an amount equal to any eligible remediation costs
26         that the trust or estate deducted in computing adjusted
27         gross income and for which the trust or estate claims a
28         credit under subsection (l) of Section 201;
29             (G-10) For taxable years 2001 and thereafter, an
30         amount equal to the bonus depreciation deduction (30%
31         of the adjusted basis of the qualified property) taken
32         on the taxpayer's federal income tax return for the
33         taxable year under subsection (k) of Section 168 of the
34         Internal Revenue Code; and
35             (G-11) If the taxpayer reports a capital gain or
36         loss on the taxpayer's federal income tax return for

 

 

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1         the taxable year based on a sale or transfer of
2         property for which the taxpayer was required in any
3         taxable year to make an addition modification under
4         subparagraph (G-10), then an amount equal to the
5         aggregate amount of the deductions taken in all taxable
6         years under subparagraph (R) with respect to that
7         property.
8             The taxpayer is required to make the addition
9         modification under this subparagraph only once with
10         respect to any one piece of property;
11             (G-12) For taxable years ending on or after
12         December 31, 2004, an amount equal to the amount
13         otherwise allowed as a deduction in computing base
14         income for interest paid, accrued, or incurred,
15         directly or indirectly, to a foreign person who would
16         be a member of the same unitary business group but for
17         the fact that the foreign person's business activity
18         outside the United States is 80% or more of the foreign
19         person's total business activity. The addition
20         modification required by this subparagraph shall be
21         reduced to the extent that dividends were included in
22         base income of the unitary group for the same taxable
23         year and received by the taxpayer or by a member of the
24         taxpayer's unitary business group (including amounts
25         included in gross income pursuant to Sections 951
26         through 964 of the Internal Revenue Code and amounts
27         included in gross income under Section 78 of the
28         Internal Revenue Code) with respect to the stock of the
29         same person to whom the interest was paid, accrued, or
30         incurred.
31             This paragraph shall not apply to the following:
32                 (i) an item of interest paid, accrued, or
33             incurred, directly or indirectly, to a foreign
34             person who is subject in a foreign country or
35             state, other than a state which requires mandatory
36             unitary reporting, to a tax on or measured by net

 

 

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1             income with respect to such interest; or
2                 (ii) an item of interest paid, accrued, or
3             incurred, directly or indirectly, to a foreign
4             person if the taxpayer can establish, based on a
5             preponderance of the evidence, both of the
6             following:
7                     (a) the foreign person, during the same
8                 taxable year, paid, accrued, or incurred, the
9                 interest to a person that is not a related
10                 member, and
11                     (b) the transaction giving rise to the
12                 interest expense between the taxpayer and the
13                 foreign person did not have as a principal
14                 purpose the avoidance of Illinois income tax,
15                 and is paid pursuant to a contract or agreement
16                 that reflects an arm's-length interest rate
17                 and terms; or
18                 (iii) the taxpayer can establish, based on
19             clear and convincing evidence, that the interest
20             paid, accrued, or incurred relates to a contract or
21             agreement entered into at arm's-length rates and
22             terms and the principal purpose for the payment is
23             not federal or Illinois tax avoidance; or
24                 (iv) an item of interest paid, accrued, or
25             incurred, directly or indirectly, to a foreign
26             person if the taxpayer establishes by clear and
27             convincing evidence that the adjustments are
28             unreasonable; or if the taxpayer and the Director
29             agree in writing to the application or use of an
30             alternative method of apportionment under Section
31             304(f).
32                 Nothing in this subsection shall preclude the
33             Director from making any other adjustment
34             otherwise allowed under Section 404 of this Act for
35             any tax year beginning after the effective date of
36             this amendment provided such adjustment is made

 

 

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1             pursuant to regulation adopted by the Department
2             and such regulations provide methods and standards
3             by which the Department will utilize its authority
4             under Section 404 of this Act;
5             (G-13) For taxable years ending on or after
6         December 31, 2004, an amount equal to the amount of
7         intangible expenses and costs otherwise allowed as a
8         deduction in computing base income, and that were paid,
9         accrued, or incurred, directly or indirectly, to a
10         foreign person who would be a member of the same
11         unitary business group but for the fact that the
12         foreign person's business activity outside the United
13         States is 80% or more of that person's total business
14         activity. The addition modification required by this
15         subparagraph shall be reduced to the extent that
16         dividends were included in base income of the unitary
17         group for the same taxable year and received by the
18         taxpayer or by a member of the taxpayer's unitary
19         business group (including amounts included in gross
20         income pursuant to Sections 951 through 964 of the
21         Internal Revenue Code and amounts included in gross
22         income under Section 78 of the Internal Revenue Code)
23         with respect to the stock of the same person to whom
24         the intangible expenses and costs were directly or
25         indirectly paid, incurred, or accrued. The preceding
26         sentence shall not apply to the extent that the same
27         dividends caused a reduction to the addition
28         modification required under Section 203(c)(2)(G-12) of
29         this Act. As used in this subparagraph, the term
30         "intangible expenses and costs" includes: (1)
31         expenses, losses, and costs for or related to the
32         direct or indirect acquisition, use, maintenance or
33         management, ownership, sale, exchange, or any other
34         disposition of intangible property; (2) losses
35         incurred, directly or indirectly, from factoring
36         transactions or discounting transactions; (3) royalty,

 

 

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1         patent, technical, and copyright fees; (4) licensing
2         fees; and (5) other similar expenses and costs. For
3         purposes of this subparagraph, "intangible property"
4         includes patents, patent applications, trade names,
5         trademarks, service marks, copyrights, mask works,
6         trade secrets, and similar types of intangible assets.
7             This paragraph shall not apply to the following:
8                 (i) any item of intangible expenses or costs
9             paid, accrued, or incurred, directly or
10             indirectly, from a transaction with a foreign
11             person who is subject in a foreign country or
12             state, other than a state which requires mandatory
13             unitary reporting, to a tax on or measured by net
14             income with respect to such item; or
15                 (ii) any item of intangible expense or cost
16             paid, accrued, or incurred, directly or
17             indirectly, if the taxpayer can establish, based
18             on a preponderance of the evidence, both of the
19             following:
20                     (a) the foreign person during the same
21                 taxable year paid, accrued, or incurred, the
22                 intangible expense or cost to a person that is
23                 not a related member, and
24                     (b) the transaction giving rise to the
25                 intangible expense or cost between the
26                 taxpayer and the foreign person did not have as
27                 a principal purpose the avoidance of Illinois
28                 income tax, and is paid pursuant to a contract
29                 or agreement that reflects arm's-length terms;
30                 or
31                 (iii) any item of intangible expense or cost
32             paid, accrued, or incurred, directly or
33             indirectly, from a transaction with a foreign
34             person if the taxpayer establishes by clear and
35             convincing evidence, that the adjustments are
36             unreasonable; or if the taxpayer and the Director

 

 

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1             agree in writing to the application or use of an
2             alternative method of apportionment under Section
3             304(f);
4                 Nothing in this subsection shall preclude the
5             Director from making any other adjustment
6             otherwise allowed under Section 404 of this Act for
7             any tax year beginning after the effective date of
8             this amendment provided such adjustment is made
9             pursuant to regulation adopted by the Department
10             and such regulations provide methods and standards
11             by which the Department will utilize its authority
12             under Section 404 of this Act;
13     and by deducting from the total so obtained the sum of the
14     following amounts:
15             (H) An amount equal to all amounts included in such
16         total pursuant to the provisions of Sections 402(a),
17         402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
18         Internal Revenue Code or included in such total as
19         distributions under the provisions of any retirement
20         or disability plan for employees of any governmental
21         agency or unit, or retirement payments to retired
22         partners, which payments are excluded in computing net
23         earnings from self employment by Section 1402 of the
24         Internal Revenue Code and regulations adopted pursuant
25         thereto;
26             (I) The valuation limitation amount;
27             (J) An amount equal to the amount of any tax
28         imposed by this Act which was refunded to the taxpayer
29         and included in such total for the taxable year;
30             (K) An amount equal to all amounts included in
31         taxable income as modified by subparagraphs (A), (B),
32         (C), (D), (E), (F) and (G) which are exempt from
33         taxation by this State either by reason of its statutes
34         or Constitution or by reason of the Constitution,
35         treaties or statutes of the United States; provided
36         that, in the case of any statute of this State that

 

 

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1         exempts income derived from bonds or other obligations
2         from the tax imposed under this Act, the amount
3         exempted shall be the interest net of bond premium
4         amortization;
5             (L) With the exception of any amounts subtracted
6         under subparagraph (K), an amount equal to the sum of
7         all amounts disallowed as deductions by (i) Sections
8         171(a) (2) and 265(a)(2) of the Internal Revenue Code,
9         as now or hereafter amended, and all amounts of
10         expenses allocable to interest and disallowed as
11         deductions by Section 265(1) of the Internal Revenue
12         Code of 1954, as now or hereafter amended; and (ii) for
13         taxable years ending on or after August 13, 1999,
14         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
15         the Internal Revenue Code; the provisions of this
16         subparagraph are exempt from the provisions of Section
17         250;
18             (M) An amount equal to those dividends included in
19         such total which were paid by a corporation which
20         conducts business operations in an Enterprise Zone or
21         zones created under the Illinois Enterprise Zone Act
22         and conducts substantially all of its operations in an
23         Enterprise Zone or Zones;
24             (N) An amount equal to any contribution made to a
25         job training project established pursuant to the Tax
26         Increment Allocation Redevelopment Act;
27             (O) An amount equal to those dividends included in
28         such total that were paid by a corporation that
29         conducts business operations in a federally designated
30         Foreign Trade Zone or Sub-Zone and that is designated a
31         High Impact Business located in Illinois; provided
32         that dividends eligible for the deduction provided in
33         subparagraph (M) of paragraph (2) of this subsection
34         shall not be eligible for the deduction provided under
35         this subparagraph (O);
36             (P) An amount equal to the amount of the deduction

 

 

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1         used to compute the federal income tax credit for
2         restoration of substantial amounts held under claim of
3         right for the taxable year pursuant to Section 1341 of
4         the Internal Revenue Code of 1986;
5             (Q) For taxable year 1999 and thereafter, an amount
6         equal to the amount of any (i) distributions, to the
7         extent includible in gross income for federal income
8         tax purposes, made to the taxpayer because of his or
9         her status as a victim of persecution for racial or
10         religious reasons by Nazi Germany or any other Axis
11         regime or as an heir of the victim and (ii) items of
12         income, to the extent includible in gross income for
13         federal income tax purposes, attributable to, derived
14         from or in any way related to assets stolen from,
15         hidden from, or otherwise lost to a victim of
16         persecution for racial or religious reasons by Nazi
17         Germany or any other Axis regime immediately prior to,
18         during, and immediately after World War II, including,
19         but not limited to, interest on the proceeds receivable
20         as insurance under policies issued to a victim of
21         persecution for racial or religious reasons by Nazi
22         Germany or any other Axis regime by European insurance
23         companies immediately prior to and during World War II;
24         provided, however, this subtraction from federal
25         adjusted gross income does not apply to assets acquired
26         with such assets or with the proceeds from the sale of
27         such assets; provided, further, this paragraph shall
28         only apply to a taxpayer who was the first recipient of
29         such assets after their recovery and who is a victim of
30         persecution for racial or religious reasons by Nazi
31         Germany or any other Axis regime or as an heir of the
32         victim. The amount of and the eligibility for any
33         public assistance, benefit, or similar entitlement is
34         not affected by the inclusion of items (i) and (ii) of
35         this paragraph in gross income for federal income tax
36         purposes. This paragraph is exempt from the provisions

 

 

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1         of Section 250;
2             (R) For taxable years 2001 and thereafter, for the
3         taxable year in which the bonus depreciation deduction
4         (30% of the adjusted basis of the qualified property)
5         is taken on the taxpayer's federal income tax return
6         under subsection (k) of Section 168 of the Internal
7         Revenue Code and for each applicable taxable year
8         thereafter, an amount equal to "x", where:
9                 (1) "y" equals the amount of the depreciation
10             deduction taken for the taxable year on the
11             taxpayer's federal income tax return on property
12             for which the bonus depreciation deduction (30% of
13             the adjusted basis of the qualified property) was
14             taken in any year under subsection (k) of Section
15             168 of the Internal Revenue Code, but not including
16             the bonus depreciation deduction; and
17                 (2) "x" equals "y" multiplied by 30 and then
18             divided by 70 (or "y" multiplied by 0.429).
19             The aggregate amount deducted under this
20         subparagraph in all taxable years for any one piece of
21         property may not exceed the amount of the bonus
22         depreciation deduction (30% of the adjusted basis of
23         the qualified property) taken on that property on the
24         taxpayer's federal income tax return under subsection
25         (k) of Section 168 of the Internal Revenue Code;
26             (S) If the taxpayer reports a capital gain or loss
27         on the taxpayer's federal income tax return for the
28         taxable year based on a sale or transfer of property
29         for which the taxpayer was required in any taxable year
30         to make an addition modification under subparagraph
31         (G-10), then an amount equal to that addition
32         modification.
33             The taxpayer is allowed to take the deduction under
34         this subparagraph only once with respect to any one
35         piece of property;
36             (T) The amount of (i) any interest income (net of

 

 

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1         the deductions allocable thereto) taken into account
2         for the taxable year with respect to a transaction with
3         a taxpayer that is required to make an addition
4         modification with respect to such transaction under
5         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
6         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
7         the amount of such addition modification and (ii) any
8         income from intangible property (net of the deductions
9         allocable thereto) taken into account for the taxable
10         year with respect to a transaction with a taxpayer that
11         is required to make an addition modification with
12         respect to such transaction under Section
13         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
14         203(d)(2)(D-8), but not to exceed the amount of such
15         addition modification;
16             (U) An amount equal to the interest income taken
17         into account for the taxable year (net of the
18         deductions allocable thereto) with respect to
19         transactions with a foreign person who would be a
20         member of the taxpayer's unitary business group but for
21         the fact the foreign person's business activity
22         outside the United States is 80% or more of that
23         person's total business activity, but not to exceed the
24         addition modification required to be made for the same
25         taxable year under Section 203(c)(2)(G-12) for
26         interest paid, accrued, or incurred, directly or
27         indirectly, to the same foreign person; and
28             (V) An amount equal to the income from intangible
29         property taken into account for the taxable year (net
30         of the deductions allocable thereto) with respect to
31         transactions with a foreign person who would be a
32         member of the taxpayer's unitary business group but for
33         the fact that the foreign person's business activity
34         outside the United States is 80% or more of that
35         person's total business activity, but not to exceed the
36         addition modification required to be made for the same

 

 

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1         taxable year under Section 203(c)(2)(G-13) for
2         intangible expenses and costs paid, accrued, or
3         incurred, directly or indirectly, to the same foreign
4         person.
5         (3) Limitation. The amount of any modification
6     otherwise required under this subsection shall, under
7     regulations prescribed by the Department, be adjusted by
8     any amounts included therein which were properly paid,
9     credited, or required to be distributed, or permanently set
10     aside for charitable purposes pursuant to Internal Revenue
11     Code Section 642(c) during the taxable year.
 
12     (d) Partnerships.
13         (1) In general. In the case of a partnership, base
14     income means an amount equal to the taxpayer's taxable
15     income for the taxable year as modified by paragraph (2).
16         (2) Modifications. The taxable income referred to in
17     paragraph (1) shall be modified by adding thereto the sum
18     of the following amounts:
19             (A) An amount equal to all amounts paid or accrued
20         to the taxpayer as interest or dividends during the
21         taxable year to the extent excluded from gross income
22         in the computation of taxable income;
23             (B) An amount equal to the amount of tax imposed by
24         this Act to the extent deducted from gross income for
25         the taxable year;
26             (C) The amount of deductions allowed to the
27         partnership pursuant to Section 707 (c) of the Internal
28         Revenue Code in calculating its taxable income;
29             (D) An amount equal to the amount of the capital
30         gain deduction allowable under the Internal Revenue
31         Code, to the extent deducted from gross income in the
32         computation of taxable income;
33             (D-5) For taxable years 2001 and thereafter, an
34         amount equal to the bonus depreciation deduction (30%
35         of the adjusted basis of the qualified property) taken

 

 

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1         on the taxpayer's federal income tax return for the
2         taxable year under subsection (k) of Section 168 of the
3         Internal Revenue Code;
4             (D-6) If the taxpayer reports a capital gain or
5         loss on the taxpayer's federal income tax return for
6         the taxable year based on a sale or transfer of
7         property for which the taxpayer was required in any
8         taxable year to make an addition modification under
9         subparagraph (D-5), then an amount equal to the
10         aggregate amount of the deductions taken in all taxable
11         years under subparagraph (O) with respect to that
12         property.
13             The taxpayer is required to make the addition
14         modification under this subparagraph only once with
15         respect to any one piece of property;
16             (D-7) For taxable years ending on or after December
17         31, 2004, an amount equal to the amount otherwise
18         allowed as a deduction in computing base income for
19         interest paid, accrued, or incurred, directly or
20         indirectly, to a foreign person who would be a member
21         of the same unitary business group but for the fact the
22         foreign person's business activity outside the United
23         States is 80% or more of the foreign person's total
24         business activity. The addition modification required
25         by this subparagraph shall be reduced to the extent
26         that dividends were included in base income of the
27         unitary group for the same taxable year and received by
28         the taxpayer or by a member of the taxpayer's unitary
29         business group (including amounts included in gross
30         income pursuant to Sections 951 through 964 of the
31         Internal Revenue Code and amounts included in gross
32         income under Section 78 of the Internal Revenue Code)
33         with respect to the stock of the same person to whom
34         the interest was paid, accrued, or incurred.
35             This paragraph shall not apply to the following:
36                 (i) an item of interest paid, accrued, or

 

 

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1             incurred, directly or indirectly, to a foreign
2             person who is subject in a foreign country or
3             state, other than a state which requires mandatory
4             unitary reporting, to a tax on or measured by net
5             income with respect to such interest; or
6                 (ii) an item of interest paid, accrued, or
7             incurred, directly or indirectly, to a foreign
8             person if the taxpayer can establish, based on a
9             preponderance of the evidence, both of the
10             following:
11                     (a) the foreign person, during the same
12                 taxable year, paid, accrued, or incurred, the
13                 interest to a person that is not a related
14                 member, and
15                     (b) the transaction giving rise to the
16                 interest expense between the taxpayer and the
17                 foreign person did not have as a principal
18                 purpose the avoidance of Illinois income tax,
19                 and is paid pursuant to a contract or agreement
20                 that reflects an arm's-length interest rate
21                 and terms; or
22                 (iii) the taxpayer can establish, based on
23             clear and convincing evidence, that the interest
24             paid, accrued, or incurred relates to a contract or
25             agreement entered into at arm's-length rates and
26             terms and the principal purpose for the payment is
27             not federal or Illinois tax avoidance; or
28                 (iv) an item of interest paid, accrued, or
29             incurred, directly or indirectly, to a foreign
30             person if the taxpayer establishes by clear and
31             convincing evidence that the adjustments are
32             unreasonable; or if the taxpayer and the Director
33             agree in writing to the application or use of an
34             alternative method of apportionment under Section
35             304(f).
36                 Nothing in this subsection shall preclude the

 

 

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1             Director from making any other adjustment
2             otherwise allowed under Section 404 of this Act for
3             any tax year beginning after the effective date of
4             this amendment provided such adjustment is made
5             pursuant to regulation adopted by the Department
6             and such regulations provide methods and standards
7             by which the Department will utilize its authority
8             under Section 404 of this Act; and
9             (D-8) For taxable years ending on or after December
10         31, 2004, an amount equal to the amount of intangible
11         expenses and costs otherwise allowed as a deduction in
12         computing base income, and that were paid, accrued, or
13         incurred, directly or indirectly, to a foreign person
14         who would be a member of the same unitary business
15         group but for the fact that the foreign person's
16         business activity outside the United States is 80% or
17         more of that person's total business activity. The
18         addition modification required by this subparagraph
19         shall be reduced to the extent that dividends were
20         included in base income of the unitary group for the
21         same taxable year and received by the taxpayer or by a
22         member of the taxpayer's unitary business group
23         (including amounts included in gross income pursuant
24         to Sections 951 through 964 of the Internal Revenue
25         Code and amounts included in gross income under Section
26         78 of the Internal Revenue Code) with respect to the
27         stock of the same person to whom the intangible
28         expenses and costs were directly or indirectly paid,
29         incurred or accrued. The preceding sentence shall not
30         apply to the extent that the same dividends caused a
31         reduction to the addition modification required under
32         Section 203(d)(2)(D-7) of this Act. As used in this
33         subparagraph, the term "intangible expenses and costs"
34         includes (1) expenses, losses, and costs for, or
35         related to, the direct or indirect acquisition, use,
36         maintenance or management, ownership, sale, exchange,

 

 

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1         or any other disposition of intangible property; (2)
2         losses incurred, directly or indirectly, from
3         factoring transactions or discounting transactions;
4         (3) royalty, patent, technical, and copyright fees;
5         (4) licensing fees; and (5) other similar expenses and
6         costs. For purposes of this subparagraph, "intangible
7         property" includes patents, patent applications, trade
8         names, trademarks, service marks, copyrights, mask
9         works, trade secrets, and similar types of intangible
10         assets;
11             This paragraph shall not apply to the following:
12                 (i) any item of intangible expenses or costs
13             paid, accrued, or incurred, directly or
14             indirectly, from a transaction with a foreign
15             person who is subject in a foreign country or
16             state, other than a state which requires mandatory
17             unitary reporting, to a tax on or measured by net
18             income with respect to such item; or
19                 (ii) any item of intangible expense or cost
20             paid, accrued, or incurred, directly or
21             indirectly, if the taxpayer can establish, based
22             on a preponderance of the evidence, both of the
23             following:
24                     (a) the foreign person during the same
25                 taxable year paid, accrued, or incurred, the
26                 intangible expense or cost to a person that is
27                 not a related member, and
28                     (b) the transaction giving rise to the
29                 intangible expense or cost between the
30                 taxpayer and the foreign person did not have as
31                 a principal purpose the avoidance of Illinois
32                 income tax, and is paid pursuant to a contract
33                 or agreement that reflects arm's-length terms;
34                 or
35                 (iii) any item of intangible expense or cost
36             paid, accrued, or incurred, directly or

 

 

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1             indirectly, from a transaction with a foreign
2             person if the taxpayer establishes by clear and
3             convincing evidence, that the adjustments are
4             unreasonable; or if the taxpayer and the Director
5             agree in writing to the application or use of an
6             alternative method of apportionment under Section
7             304(f);
8                 Nothing in this subsection shall preclude the
9             Director from making any other adjustment
10             otherwise allowed under Section 404 of this Act for
11             any tax year beginning after the effective date of
12             this amendment provided such adjustment is made
13             pursuant to regulation adopted by the Department
14             and such regulations provide methods and standards
15             by which the Department will utilize its authority
16             under Section 404 of this Act;
17     and by deducting from the total so obtained the following
18     amounts:
19             (E) The valuation limitation amount;
20             (F) An amount equal to the amount of any tax
21         imposed by this Act which was refunded to the taxpayer
22         and included in such total for the taxable year;
23             (G) An amount equal to all amounts included in
24         taxable income as modified by subparagraphs (A), (B),
25         (C) and (D) which are exempt from taxation by this
26         State either by reason of its statutes or Constitution
27         or by reason of the Constitution, treaties or statutes
28         of the United States; provided that, in the case of any
29         statute of this State that exempts income derived from
30         bonds or other obligations from the tax imposed under
31         this Act, the amount exempted shall be the interest net
32         of bond premium amortization;
33             (H) Any income of the partnership which
34         constitutes personal service income as defined in
35         Section 1348 (b) (1) of the Internal Revenue Code (as
36         in effect December 31, 1981) or a reasonable allowance

 

 

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1         for compensation paid or accrued for services rendered
2         by partners to the partnership, whichever is greater;
3             (I) An amount equal to all amounts of income
4         distributable to an entity subject to the Personal
5         Property Tax Replacement Income Tax imposed by
6         subsections (c) and (d) of Section 201 of this Act
7         including amounts distributable to organizations
8         exempt from federal income tax by reason of Section
9         501(a) of the Internal Revenue Code;
10             (J) With the exception of any amounts subtracted
11         under subparagraph (G), an amount equal to the sum of
12         all amounts disallowed as deductions by (i) Sections
13         171(a) (2), and 265(2) of the Internal Revenue Code of
14         1954, as now or hereafter amended, and all amounts of
15         expenses allocable to interest and disallowed as
16         deductions by Section 265(1) of the Internal Revenue
17         Code, as now or hereafter amended; and (ii) for taxable
18         years ending on or after August 13, 1999, Sections
19         171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
20         Internal Revenue Code; the provisions of this
21         subparagraph are exempt from the provisions of Section
22         250;
23             (K) An amount equal to those dividends included in
24         such total which were paid by a corporation which
25         conducts business operations in an Enterprise Zone or
26         zones created under the Illinois Enterprise Zone Act,
27         enacted by the 82nd General Assembly, and conducts
28         substantially all of its operations in an Enterprise
29         Zone or Zones;
30             (L) An amount equal to any contribution made to a
31         job training project established pursuant to the Real
32         Property Tax Increment Allocation Redevelopment Act;
33             (M) An amount equal to those dividends included in
34         such total that were paid by a corporation that
35         conducts business operations in a federally designated
36         Foreign Trade Zone or Sub-Zone and that is designated a

 

 

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1         High Impact Business located in Illinois; provided
2         that dividends eligible for the deduction provided in
3         subparagraph (K) of paragraph (2) of this subsection
4         shall not be eligible for the deduction provided under
5         this subparagraph (M);
6             (N) An amount equal to the amount of the deduction
7         used to compute the federal income tax credit for
8         restoration of substantial amounts held under claim of
9         right for the taxable year pursuant to Section 1341 of
10         the Internal Revenue Code of 1986;
11             (O) For taxable years 2001 and thereafter, for the
12         taxable year in which the bonus depreciation deduction
13         (30% of the adjusted basis of the qualified property)
14         is taken on the taxpayer's federal income tax return
15         under subsection (k) of Section 168 of the Internal
16         Revenue Code and for each applicable taxable year
17         thereafter, an amount equal to "x", where:
18                 (1) "y" equals the amount of the depreciation
19             deduction taken for the taxable year on the
20             taxpayer's federal income tax return on property
21             for which the bonus depreciation deduction (30% of
22             the adjusted basis of the qualified property) was
23             taken in any year under subsection (k) of Section
24             168 of the Internal Revenue Code, but not including
25             the bonus depreciation deduction; and
26                 (2) "x" equals "y" multiplied by 30 and then
27             divided by 70 (or "y" multiplied by 0.429).
28             The aggregate amount deducted under this
29         subparagraph in all taxable years for any one piece of
30         property may not exceed the amount of the bonus
31         depreciation deduction (30% of the adjusted basis of
32         the qualified property) taken on that property on the
33         taxpayer's federal income tax return under subsection
34         (k) of Section 168 of the Internal Revenue Code;
35             (P) If the taxpayer reports a capital gain or loss
36         on the taxpayer's federal income tax return for the

 

 

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1         taxable year based on a sale or transfer of property
2         for which the taxpayer was required in any taxable year
3         to make an addition modification under subparagraph
4         (D-5), then an amount equal to that addition
5         modification.
6             The taxpayer is allowed to take the deduction under
7         this subparagraph only once with respect to any one
8         piece of property;
9             (Q) The amount of (i) any interest income (net of
10         the deductions allocable thereto) taken into account
11         for the taxable year with respect to a transaction with
12         a taxpayer that is required to make an addition
13         modification with respect to such transaction under
14         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
15         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
16         the amount of such addition modification and (ii) any
17         income from intangible property (net of the deductions
18         allocable thereto) taken into account for the taxable
19         year with respect to a transaction with a taxpayer that
20         is required to make an addition modification with
21         respect to such transaction under Section
22         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
23         203(d)(2)(D-8), but not to exceed the amount of such
24         addition modification;
25             (R) An amount equal to the interest income taken
26         into account for the taxable year (net of the
27         deductions allocable thereto) with respect to
28         transactions with a foreign person who would be a
29         member of the taxpayer's unitary business group but for
30         the fact that the foreign person's business activity
31         outside the United States is 80% or more of that
32         person's total business activity, but not to exceed the
33         addition modification required to be made for the same
34         taxable year under Section 203(d)(2)(D-7) for interest
35         paid, accrued, or incurred, directly or indirectly, to
36         the same foreign person; and

 

 

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1             (S) An amount equal to the income from intangible
2         property taken into account for the taxable year (net
3         of the deductions allocable thereto) with respect to
4         transactions with a foreign person who would be a
5         member of the taxpayer's unitary business group but for
6         the fact that the foreign person's business activity
7         outside the United States is 80% or more of that
8         person's total business activity, but not to exceed the
9         addition modification required to be made for the same
10         taxable year under Section 203(d)(2)(D-8) for
11         intangible expenses and costs paid, accrued, or
12         incurred, directly or indirectly, to the same foreign
13         person.
 
14     (e) Gross income; adjusted gross income; taxable income.
15         (1) In general. Subject to the provisions of paragraph
16     (2) and subsection (b) (3), for purposes of this Section
17     and Section 803(e), a taxpayer's gross income, adjusted
18     gross income, or taxable income for the taxable year shall
19     mean the amount of gross income, adjusted gross income or
20     taxable income properly reportable for federal income tax
21     purposes for the taxable year under the provisions of the
22     Internal Revenue Code. Taxable income may be less than
23     zero. However, for taxable years ending on or after
24     December 31, 1986, net operating loss carryforwards from
25     taxable years ending prior to December 31, 1986, may not
26     exceed the sum of federal taxable income for the taxable
27     year before net operating loss deduction, plus the excess
28     of addition modifications over subtraction modifications
29     for the taxable year. For taxable years ending prior to
30     December 31, 1986, taxable income may never be an amount in
31     excess of the net operating loss for the taxable year as
32     defined in subsections (c) and (d) of Section 172 of the
33     Internal Revenue Code, provided that when taxable income of
34     a corporation (other than a Subchapter S corporation),
35     trust, or estate is less than zero and addition

 

 

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1     modifications, other than those provided by subparagraph
2     (E) of paragraph (2) of subsection (b) for corporations or
3     subparagraph (E) of paragraph (2) of subsection (c) for
4     trusts and estates, exceed subtraction modifications, an
5     addition modification must be made under those
6     subparagraphs for any other taxable year to which the
7     taxable income less than zero (net operating loss) is
8     applied under Section 172 of the Internal Revenue Code or
9     under subparagraph (E) of paragraph (2) of this subsection
10     (e) applied in conjunction with Section 172 of the Internal
11     Revenue Code.
12         (2) Special rule. For purposes of paragraph (1) of this
13     subsection, the taxable income properly reportable for
14     federal income tax purposes shall mean:
15             (A) Certain life insurance companies. In the case
16         of a life insurance company subject to the tax imposed
17         by Section 801 of the Internal Revenue Code, life
18         insurance company taxable income, plus the amount of
19         distribution from pre-1984 policyholder surplus
20         accounts as calculated under Section 815a of the
21         Internal Revenue Code;
22             (B) Certain other insurance companies. In the case
23         of mutual insurance companies subject to the tax
24         imposed by Section 831 of the Internal Revenue Code,
25         insurance company taxable income;
26             (C) Regulated investment companies. In the case of
27         a regulated investment company subject to the tax
28         imposed by Section 852 of the Internal Revenue Code,
29         investment company taxable income;
30             (D) Real estate investment trusts. In the case of a
31         real estate investment trust subject to the tax imposed
32         by Section 857 of the Internal Revenue Code, real
33         estate investment trust taxable income;
34             (E) Consolidated corporations. In the case of a
35         corporation which is a member of an affiliated group of
36         corporations filing a consolidated income tax return

 

 

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1         for the taxable year for federal income tax purposes,
2         taxable income determined as if such corporation had
3         filed a separate return for federal income tax purposes
4         for the taxable year and each preceding taxable year
5         for which it was a member of an affiliated group. For
6         purposes of this subparagraph, the taxpayer's separate
7         taxable income shall be determined as if the election
8         provided by Section 243(b) (2) of the Internal Revenue
9         Code had been in effect for all such years;
10             (F) Cooperatives. In the case of a cooperative
11         corporation or association, the taxable income of such
12         organization determined in accordance with the
13         provisions of Section 1381 through 1388 of the Internal
14         Revenue Code;
15             (G) Subchapter S corporations. In the case of: (i)
16         a Subchapter S corporation for which there is in effect
17         an election for the taxable year under Section 1362 of
18         the Internal Revenue Code, the taxable income of such
19         corporation determined in accordance with Section
20         1363(b) of the Internal Revenue Code, except that
21         taxable income shall take into account those items
22         which are required by Section 1363(b)(1) of the
23         Internal Revenue Code to be separately stated; and (ii)
24         a Subchapter S corporation for which there is in effect
25         a federal election to opt out of the provisions of the
26         Subchapter S Revision Act of 1982 and have applied
27         instead the prior federal Subchapter S rules as in
28         effect on July 1, 1982, the taxable income of such
29         corporation determined in accordance with the federal
30         Subchapter S rules as in effect on July 1, 1982; and
31             (H) Partnerships. In the case of a partnership,
32         taxable income determined in accordance with Section
33         703 of the Internal Revenue Code, except that taxable
34         income shall take into account those items which are
35         required by Section 703(a)(1) to be separately stated
36         but which would be taken into account by an individual

 

 

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1         in calculating his taxable income.
2         (3) Recapture of business expenses on disposition of
3     asset or business. Notwithstanding any other law to the
4     contrary, if in prior years income from an asset or
5     business has been classified as business income and in a
6     later year is demonstrated to be non-business income, then
7     all expenses, without limitation, deducted in such later
8     year and in the 2 immediately preceding taxable years
9     related to that asset or business that generated the
10     non-business income shall be added back and recaptured as
11     business income in the year of the disposition of the asset
12     or business. Such amount shall be apportioned to Illinois
13     using the greater of the apportionment fraction computed
14     for the business under Section 304 of this Act for the
15     taxable year or the average of the apportionment fractions
16     computed for the business under Section 304 of this Act for
17     the taxable year and for the 2 immediately preceding
18     taxable years.
19     (f) Valuation limitation amount.
20         (1) In general. The valuation limitation amount
21     referred to in subsections (a) (2) (G), (c) (2) (I) and
22     (d)(2) (E) is an amount equal to:
23             (A) The sum of the pre-August 1, 1969 appreciation
24         amounts (to the extent consisting of gain reportable
25         under the provisions of Section 1245 or 1250 of the
26         Internal Revenue Code) for all property in respect of
27         which such gain was reported for the taxable year; plus
28             (B) The lesser of (i) the sum of the pre-August 1,
29         1969 appreciation amounts (to the extent consisting of
30         capital gain) for all property in respect of which such
31         gain was reported for federal income tax purposes for
32         the taxable year, or (ii) the net capital gain for the
33         taxable year, reduced in either case by any amount of
34         such gain included in the amount determined under
35         subsection (a) (2) (F) or (c) (2) (H).
36         (2) Pre-August 1, 1969 appreciation amount.

 

 

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1             (A) If the fair market value of property referred
2         to in paragraph (1) was readily ascertainable on August
3         1, 1969, the pre-August 1, 1969 appreciation amount for
4         such property is the lesser of (i) the excess of such
5         fair market value over the taxpayer's basis (for
6         determining gain) for such property on that date
7         (determined under the Internal Revenue Code as in
8         effect on that date), or (ii) the total gain realized
9         and reportable for federal income tax purposes in
10         respect of the sale, exchange or other disposition of
11         such property.
12             (B) If the fair market value of property referred
13         to in paragraph (1) was not readily ascertainable on
14         August 1, 1969, the pre-August 1, 1969 appreciation
15         amount for such property is that amount which bears the
16         same ratio to the total gain reported in respect of the
17         property for federal income tax purposes for the
18         taxable year, as the number of full calendar months in
19         that part of the taxpayer's holding period for the
20         property ending July 31, 1969 bears to the number of
21         full calendar months in the taxpayer's entire holding
22         period for the property.
23             (C) The Department shall prescribe such
24         regulations as may be necessary to carry out the
25         purposes of this paragraph.
 
26     (g) Double deductions. Unless specifically provided
27 otherwise, nothing in this Section shall permit the same item
28 to be deducted more than once.
 
29     (h) Legislative intention. Except as expressly provided by
30 this Section there shall be no modifications or limitations on
31 the amounts of income, gain, loss or deduction taken into
32 account in determining gross income, adjusted gross income or
33 taxable income for federal income tax purposes for the taxable
34 year, or in the amount of such items entering into the

 

 

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1 computation of base income and net income under this Act for
2 such taxable year, whether in respect of property values as of
3 August 1, 1969 or otherwise.
4 (Source: P.A. 92-16, eff. 6-28-01; 92-244, eff. 8-3-01; 92-439,
5 eff. 8-17-01; 92-603, eff. 6-28-02; 92-626, eff. 7-11-02;
6 92-651, eff. 7-11-02; 92-846, eff. 8-23-02; 93-812, eff.
7 7-26-04; 93-840, eff. 7-30-04; revised 10-12-04.)
 
8     Section 99. Effective date. This Act takes effect upon
9 becoming law.