Illinois General Assembly - Full Text of HB3086
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Full Text of HB3086  99th General Assembly




HB3086 EnrolledLRB099 10675 HLH 30934 b

1    AN ACT concerning revenue.
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4    Section 5. The Illinois Income Tax Act is amended by
5changing Section 1501 as follows:
6    (35 ILCS 5/1501)  (from Ch. 120, par. 15-1501)
7    Sec. 1501. Definitions.
8    (a) In general. When used in this Act, where not otherwise
9distinctly expressed or manifestly incompatible with the
10intent thereof:
11        (1) Business income. The term "business income" means
12    all income that may be treated as apportionable business
13    income under the Constitution of the United States.
14    Business income is net of the deductions allocable thereto.
15    Such term does not include compensation or the deductions
16    allocable thereto. For each taxable year beginning on or
17    after January 1, 2003, a taxpayer may elect to treat all
18    income other than compensation as business income. This
19    election shall be made in accordance with rules adopted by
20    the Department and, once made, shall be irrevocable.
21        (1.5) Captive real estate investment trust:
22            (A) The term "captive real estate investment
23        trust" means a corporation, trust, or association:



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1                (i) that is considered a real estate
2            investment trust for the taxable year under
3            Section 856 of the Internal Revenue Code;
4                (ii) the certificates of beneficial interest
5            or shares of which are not regularly traded on an
6            established securities market; and
7                (iii) of which more than 50% of the voting
8            power or value of the beneficial interest or
9            shares, at any time during the last half of the
10            taxable year, is owned or controlled, directly,
11            indirectly, or constructively, by a single
12            corporation.
13            (B) The term "captive real estate investment
14        trust" does not include:
15                (i) a real estate investment trust of which
16            more than 50% of the voting power or value of the
17            beneficial interest or shares is owned or
18            controlled, directly, indirectly, or
19            constructively, by:
20                    (a) a real estate investment trust, other
21                than a captive real estate investment trust;
22                    (b) a person who is exempt from taxation
23                under Section 501 of the Internal Revenue Code,
24                and who is not required to treat income
25                received from the real estate investment trust
26                as unrelated business taxable income under



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1                Section 512 of the Internal Revenue Code;
2                    (c) a listed Australian property trust, if
3                no more than 50% of the voting power or value
4                of the beneficial interest or shares of that
5                trust, at any time during the last half of the
6                taxable year, is owned or controlled, directly
7                or indirectly, by a single person;
8                    (d) an entity organized as a trust,
9                provided a listed Australian property trust
10                described in subparagraph (c) owns or
11                controls, directly or indirectly, or
12                constructively, 75% or more of the voting power
13                or value of the beneficial interests or shares
14                of such entity; or
15                    (e) an entity that is organized outside of
16                the laws of the United States and that
17                satisfies all of the following criteria:
18                        (1) at least 75% of the entity's total
19                    asset value at the close of its taxable
20                    year is represented by real estate assets
21                    (as defined in Section 856(c)(5)(B) of the
22                    Internal Revenue Code, thereby including
23                    shares or certificates of beneficial
24                    interest in any real estate investment
25                    trust), cash and cash equivalents, and
26                    U.S. Government securities;



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1                        (2) the entity is not subject to tax on
2                    amounts that are distributed to its
3                    beneficial owners or is exempt from
4                    entity-level taxation;
5                        (3) the entity distributes at least
6                    85% of its taxable income (as computed in
7                    the jurisdiction in which it is organized)
8                    to the holders of its shares or
9                    certificates of beneficial interest on an
10                    annual basis;
11                        (4) either (i) the shares or
12                    beneficial interests of the entity are
13                    regularly traded on an established
14                    securities market or (ii) not more than 10%
15                    of the voting power or value in the entity
16                    is held, directly, indirectly, or
17                    constructively, by a single entity or
18                    individual; and
19                        (5) the entity is organized in a
20                    country that has entered into a tax treaty
21                    with the United States; or
22                (ii) during its first taxable year for which it
23            elects to be treated as a real estate investment
24            trust under Section 856(c)(1) of the Internal
25            Revenue Code, a real estate investment trust the
26            certificates of beneficial interest or shares of



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1            which are not regularly traded on an established
2            securities market, but only if the certificates of
3            beneficial interest or shares of the real estate
4            investment trust are regularly traded on an
5            established securities market prior to the earlier
6            of the due date (including extensions) for filing
7            its return under this Act for that first taxable
8            year or the date it actually files that return.
9            (C) For the purposes of this subsection (1.5), the
10        constructive ownership rules prescribed under Section
11        318(a) of the Internal Revenue Code, as modified by
12        Section 856(d)(5) of the Internal Revenue Code, apply
13        in determining the ownership of stock, assets, or net
14        profits of any person.
15            (D) For the purposes of this item (1.5), for
16        taxable years ending on or after August 16, 2007, the
17        voting power or value of the beneficial interest or
18        shares of a real estate investment trust does not
19        include any voting power or value of beneficial
20        interest or shares in a real estate investment trust
21        held directly or indirectly in a segregated asset
22        account by a life insurance company (as described in
23        Section 817 of the Internal Revenue Code) to the extent
24        such voting power or value is for the benefit of
25        entities or persons who are either immune from taxation
26        or exempt from taxation under subtitle A of the



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1        Internal Revenue Code.
2        (2) Commercial domicile. The term "commercial
3    domicile" means the principal place from which the trade or
4    business of the taxpayer is directed or managed.
5        (3) Compensation. The term "compensation" means wages,
6    salaries, commissions and any other form of remuneration
7    paid to employees for personal services.
8        (4) Corporation. The term "corporation" includes
9    associations, joint-stock companies, insurance companies
10    and cooperatives. Any entity, including a limited
11    liability company formed under the Illinois Limited
12    Liability Company Act, shall be treated as a corporation if
13    it is so classified for federal income tax purposes.
14        (5) Department. The term "Department" means the
15    Department of Revenue of this State.
16        (6) Director. The term "Director" means the Director of
17    Revenue of this State.
18        (7) Fiduciary. The term "fiduciary" means a guardian,
19    trustee, executor, administrator, receiver, or any person
20    acting in any fiduciary capacity for any person.
21        (8) Financial organization.
22            (A) The term "financial organization" means any
23        bank, bank holding company, trust company, savings
24        bank, industrial bank, land bank, safe deposit
25        company, private banker, savings and loan association,
26        building and loan association, credit union, currency



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1        exchange, cooperative bank, small loan company, sales
2        finance company, investment company, or any person
3        which is owned by a bank or bank holding company. For
4        the purpose of this Section a "person" will include
5        only those persons which a bank holding company may
6        acquire and hold an interest in, directly or
7        indirectly, under the provisions of the Bank Holding
8        Company Act of 1956 (12 U.S.C. 1841, et seq.), except
9        where interests in any person must be disposed of
10        within certain required time limits under the Bank
11        Holding Company Act of 1956.
12            (B) For purposes of subparagraph (A) of this
13        paragraph, the term "bank" includes (i) any entity that
14        is regulated by the Comptroller of the Currency under
15        the National Bank Act, or by the Federal Reserve Board,
16        or by the Federal Deposit Insurance Corporation and
17        (ii) any federally or State chartered bank operating as
18        a credit card bank.
19            (C) For purposes of subparagraph (A) of this
20        paragraph, the term "sales finance company" has the
21        meaning provided in the following item (i) or (ii):
22                (i) A person primarily engaged in one or more
23            of the following businesses: the business of
24            purchasing customer receivables, the business of
25            making loans upon the security of customer
26            receivables, the business of making loans for the



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1            express purpose of funding purchases of tangible
2            personal property or services by the borrower, or
3            the business of finance leasing. For purposes of
4            this item (i), "customer receivable" means:
5                    (a) a retail installment contract or
6                retail charge agreement within the meaning of
7                the Sales Finance Agency Act, the Retail
8                Installment Sales Act, or the Motor Vehicle
9                Retail Installment Sales Act;
10                    (b) an installment, charge, credit, or
11                similar contract or agreement arising from the
12                sale of tangible personal property or services
13                in a transaction involving a deferred payment
14                price payable in one or more installments
15                subsequent to the sale; or
16                    (c) the outstanding balance of a contract
17                or agreement described in provisions (a) or (b)
18                of this item (i).
19                A customer receivable need not provide for
20            payment of interest on deferred payments. A sales
21            finance company may purchase a customer receivable
22            from, or make a loan secured by a customer
23            receivable to, the seller in the original
24            transaction or to a person who purchased the
25            customer receivable directly or indirectly from
26            that seller.



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1                (ii) A corporation meeting each of the
2            following criteria:
3                    (a) the corporation must be a member of an
4                "affiliated group" within the meaning of
5                Section 1504(a) of the Internal Revenue Code,
6                determined without regard to Section 1504(b)
7                of the Internal Revenue Code;
8                    (b) more than 50% of the gross income of
9                the corporation for the taxable year must be
10                interest income derived from qualifying loans.
11                A "qualifying loan" is a loan made to a member
12                of the corporation's affiliated group that
13                originates customer receivables (within the
14                meaning of item (i)) or to whom customer
15                receivables originated by a member of the
16                affiliated group have been transferred, to the
17                extent the average outstanding balance of
18                loans from that corporation to members of its
19                affiliated group during the taxable year do not
20                exceed the limitation amount for that
21                corporation. The "limitation amount" for a
22                corporation is the average outstanding
23                balances during the taxable year of customer
24                receivables (within the meaning of item (i))
25                originated by all members of the affiliated
26                group. If the average outstanding balances of



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1                the loans made by a corporation to members of
2                its affiliated group exceed the limitation
3                amount, the interest income of that
4                corporation from qualifying loans shall be
5                equal to its interest income from loans to
6                members of its affiliated groups times a
7                fraction equal to the limitation amount
8                divided by the average outstanding balances of
9                the loans made by that corporation to members
10                of its affiliated group;
11                    (c) the total of all shareholder's equity
12                (including, without limitation, paid-in
13                capital on common and preferred stock and
14                retained earnings) of the corporation plus the
15                total of all of its loans, advances, and other
16                obligations payable or owed to members of its
17                affiliated group may not exceed 20% of the
18                total assets of the corporation at any time
19                during the tax year; and
20                    (d) more than 50% of all interest-bearing
21                obligations of the affiliated group payable to
22                persons outside the group determined in
23                accordance with generally accepted accounting
24                principles must be obligations of the
25                corporation.
26            This amendatory Act of the 91st General Assembly is



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1        declaratory of existing law.
2            (D) Subparagraphs (B) and (C) of this paragraph are
3        declaratory of existing law and apply retroactively,
4        for all tax years beginning on or before December 31,
5        1996, to all original returns, to all amended returns
6        filed no later than 30 days after the effective date of
7        this amendatory Act of 1996, and to all notices issued
8        on or before the effective date of this amendatory Act
9        of 1996 under subsection (a) of Section 903, subsection
10        (a) of Section 904, subsection (e) of Section 909, or
11        Section 912. A taxpayer that is a "financial
12        organization" that engages in any transaction with an
13        affiliate shall be a "financial organization" for all
14        purposes of this Act.
15            (E) For all tax years beginning on or before
16        December 31, 1996, a taxpayer that falls within the
17        definition of a "financial organization" under
18        subparagraphs (B) or (C) of this paragraph, but who
19        does not fall within the definition of a "financial
20        organization" under the Proposed Regulations issued by
21        the Department of Revenue on July 19, 1996, may
22        irrevocably elect to apply the Proposed Regulations
23        for all of those years as though the Proposed
24        Regulations had been lawfully promulgated, adopted,
25        and in effect for all of those years. For purposes of
26        applying subparagraphs (B) or (C) of this paragraph to



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1        all of those years, the election allowed by this
2        subparagraph applies only to the taxpayer making the
3        election and to those members of the taxpayer's unitary
4        business group who are ordinarily required to
5        apportion business income under the same subsection of
6        Section 304 of this Act as the taxpayer making the
7        election. No election allowed by this subparagraph
8        shall be made under a claim filed under subsection (d)
9        of Section 909 more than 30 days after the effective
10        date of this amendatory Act of 1996.
11            (F) Finance Leases. For purposes of this
12        subsection, a finance lease shall be treated as a loan
13        or other extension of credit, rather than as a lease,
14        regardless of how the transaction is characterized for
15        any other purpose, including the purposes of any
16        regulatory agency to which the lessor is subject. A
17        finance lease is any transaction in the form of a lease
18        in which the lessee is treated as the owner of the
19        leased asset entitled to any deduction for
20        depreciation allowed under Section 167 of the Internal
21        Revenue Code.
22        (9) Fiscal year. The term "fiscal year" means an
23    accounting period of 12 months ending on the last day of
24    any month other than December.
25        (9.5) Fixed place of business. The term "fixed place of
26    business" has the same meaning as that term is given in



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1    Section 864 of the Internal Revenue Code and the related
2    Treasury regulations.
3        (10) Includes and including. The terms "includes" and
4    "including" when used in a definition contained in this Act
5    shall not be deemed to exclude other things otherwise
6    within the meaning of the term defined.
7        (11) Internal Revenue Code. The term "Internal Revenue
8    Code" means the United States Internal Revenue Code of 1954
9    or any successor law or laws relating to federal income
10    taxes in effect for the taxable year.
11        (11.5) Investment partnership.
12            (A) The term "investment partnership" means any
13        entity that is treated as a partnership for federal
14        income tax purposes that meets the following
15        requirements:
16                (i) no less than 90% of the partnership's cost
17            of its total assets consists of qualifying
18            investment securities, deposits at banks or other
19            financial institutions, and office space and
20            equipment reasonably necessary to carry on its
21            activities as an investment partnership;
22                (ii) no less than 90% of its gross income
23            consists of interest, dividends, and gains from
24            the sale or exchange of qualifying investment
25            securities; and
26                (iii) the partnership is not a dealer in



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1            qualifying investment securities.
2            (B) For purposes of this paragraph (11.5), the term
3        "qualifying investment securities" includes all of the
4        following:
5                (i) common stock, including preferred or debt
6            securities convertible into common stock, and
7            preferred stock;
8                (ii) bonds, debentures, and other debt
9            securities;
10                (iii) foreign and domestic currency deposits
11            secured by federal, state, or local governmental
12            agencies;
13                (iv) mortgage or asset-backed securities
14            secured by federal, state, or local governmental
15            agencies;
16                (v) repurchase agreements and loan
17            participations;
18                (vi) foreign currency exchange contracts and
19            forward and futures contracts on foreign
20            currencies;
21                (vii) stock and bond index securities and
22            futures contracts and other similar financial
23            securities and futures contracts on those
24            securities;
25                (viii) options for the purchase or sale of any
26            of the securities, currencies, contracts, or



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1            financial instruments described in items (i) to
2            (vii), inclusive;
3                (ix) regulated futures contracts;
4                (x) commodities (not described in Section
5            1221(a)(1) of the Internal Revenue Code) or
6            futures, forwards, and options with respect to
7            such commodities, provided, however, that any item
8            of a physical commodity to which title is actually
9            acquired in the partnership's capacity as a dealer
10            in such commodity shall not be a qualifying
11            investment security;
12                (xi) derivatives; and
13                (xii) a partnership interest in another
14            partnership that is an investment partnership.
15        (12) Mathematical error. The term "mathematical error"
16    includes the following types of errors, omissions, or
17    defects in a return filed by a taxpayer which prevents
18    acceptance of the return as filed for processing:
19            (A) arithmetic errors or incorrect computations on
20        the return or supporting schedules;
21            (B) entries on the wrong lines;
22            (C) omission of required supporting forms or
23        schedules or the omission of the information in whole
24        or in part called for thereon; and
25            (D) an attempt to claim, exclude, deduct, or
26        improperly report, in a manner directly contrary to the



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1        provisions of the Act and regulations thereunder any
2        item of income, exemption, deduction, or credit.
3        (13) Nonbusiness income. The term "nonbusiness income"
4    means all income other than business income or
5    compensation.
6        (14) Nonresident. The term "nonresident" means a
7    person who is not a resident.
8        (15) Paid, incurred and accrued. The terms "paid",
9    "incurred" and "accrued" shall be construed according to
10    the method of accounting upon the basis of which the
11    person's base income is computed under this Act.
12        (16) Partnership and partner. The term "partnership"
13    includes a syndicate, group, pool, joint venture or other
14    unincorporated organization, through or by means of which
15    any business, financial operation, or venture is carried
16    on, and which is not, within the meaning of this Act, a
17    trust or estate or a corporation; and the term "partner"
18    includes a member in such syndicate, group, pool, joint
19    venture or organization.
20        The term "partnership" includes any entity, including
21    a limited liability company formed under the Illinois
22    Limited Liability Company Act, classified as a partnership
23    for federal income tax purposes.
24        The term "partnership" does not include a syndicate,
25    group, pool, joint venture, or other unincorporated
26    organization established for the sole purpose of playing



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1    the Illinois State Lottery.
2        (17) Part-year resident. The term "part-year resident"
3    means an individual who became a resident during the
4    taxable year or ceased to be a resident during the taxable
5    year. Under Section 1501(a)(20)(A)(i) residence commences
6    with presence in this State for other than a temporary or
7    transitory purpose and ceases with absence from this State
8    for other than a temporary or transitory purpose. Under
9    Section 1501(a)(20)(A)(ii) residence commences with the
10    establishment of domicile in this State and ceases with the
11    establishment of domicile in another State.
12        (18) Person. The term "person" shall be construed to
13    mean and include an individual, a trust, estate,
14    partnership, association, firm, company, corporation,
15    limited liability company, or fiduciary. For purposes of
16    Section 1301 and 1302 of this Act, a "person" means (i) an
17    individual, (ii) a corporation, (iii) an officer, agent, or
18    employee of a corporation, (iv) a member, agent or employee
19    of a partnership, or (v) a member, manager, employee,
20    officer, director, or agent of a limited liability company
21    who in such capacity commits an offense specified in
22    Section 1301 and 1302.
23        (18A) Records. The term "records" includes all data
24    maintained by the taxpayer, whether on paper, microfilm,
25    microfiche, or any type of machine-sensible data
26    compilation.



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1        (19) Regulations. The term "regulations" includes
2    rules promulgated and forms prescribed by the Department.
3        (20) Resident. The term "resident" means:
4            (A) an individual (i) who is in this State for
5        other than a temporary or transitory purpose during the
6        taxable year; or (ii) who is domiciled in this State
7        but is absent from the State for a temporary or
8        transitory purpose during the taxable year;
9            (B) The estate of a decedent who at his or her
10        death was domiciled in this State;
11            (C) A trust created by a will of a decedent who at
12        his death was domiciled in this State; and
13            (D) An irrevocable trust, the grantor of which was
14        domiciled in this State at the time such trust became
15        irrevocable. For purpose of this subparagraph, a trust
16        shall be considered irrevocable to the extent that the
17        grantor is not treated as the owner thereof under
18        Sections 671 through 678 of the Internal Revenue Code.
19        (21) Sales. The term "sales" means all gross receipts
20    of the taxpayer not allocated under Sections 301, 302 and
21    303.
22        (22) State. The term "state" when applied to a
23    jurisdiction other than this State means any state of the
24    United States, the District of Columbia, the Commonwealth
25    of Puerto Rico, any Territory or Possession of the United
26    States, and any foreign country, or any political



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1    subdivision of any of the foregoing. For purposes of the
2    foreign tax credit under Section 601, the term "state"
3    means any state of the United States, the District of
4    Columbia, the Commonwealth of Puerto Rico, and any
5    territory or possession of the United States, or any
6    political subdivision of any of the foregoing, effective
7    for tax years ending on or after December 31, 1989.
8        (23) Taxable year. The term "taxable year" means the
9    calendar year, or the fiscal year ending during such
10    calendar year, upon the basis of which the base income is
11    computed under this Act. "Taxable year" means, in the case
12    of a return made for a fractional part of a year under the
13    provisions of this Act, the period for which such return is
14    made.
15        (24) Taxpayer. The term "taxpayer" means any person
16    subject to the tax imposed by this Act.
17        (25) International banking facility. The term
18    international banking facility shall have the same meaning
19    as is set forth in the Illinois Banking Act or as is set
20    forth in the laws of the United States or regulations of
21    the Board of Governors of the Federal Reserve System.
22        (26) Income Tax Return Preparer.
23            (A) The term "income tax return preparer" means any
24        person who prepares for compensation, or who employs
25        one or more persons to prepare for compensation, any
26        return of tax imposed by this Act or any claim for



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1        refund of tax imposed by this Act. The preparation of a
2        substantial portion of a return or claim for refund
3        shall be treated as the preparation of that return or
4        claim for refund.
5            (B) A person is not an income tax return preparer
6        if all he or she does is
7                (i) furnish typing, reproducing, or other
8            mechanical assistance;
9                (ii) prepare returns or claims for refunds for
10            the employer by whom he or she is regularly and
11            continuously employed;
12                (iii) prepare as a fiduciary returns or claims
13            for refunds for any person; or
14                (iv) prepare claims for refunds for a taxpayer
15            in response to any notice of deficiency issued to
16            that taxpayer or in response to any waiver of
17            restriction after the commencement of an audit of
18            that taxpayer or of another taxpayer if a
19            determination in the audit of the other taxpayer
20            directly or indirectly affects the tax liability
21            of the taxpayer whose claims he or she is
22            preparing.
23        (27) Unitary business group.
24            (A) The term "unitary business group" means a group
25        of persons related through common ownership whose
26        business activities are integrated with, dependent



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1        upon and contribute to each other. The group will not
2        include those members whose business activity outside
3        the United States is 80% or more of any such member's
4        total business activity; for purposes of this
5        paragraph and clause (a)(3)(B)(ii) of Section 304,
6        business activity within the United States shall be
7        measured by means of the factors ordinarily applicable
8        under subsections (a), (b), (c), (d), or (h) of Section
9        304 except that, in the case of members ordinarily
10        required to apportion business income by means of the 3
11        factor formula of property, payroll and sales
12        specified in subsection (a) of Section 304, including
13        the formula as weighted in subsection (h) of Section
14        304, such members shall not use the sales factor in the
15        computation and the results of the property and payroll
16        factor computations of subsection (a) of Section 304
17        shall be divided by 2 (by one if either the property or
18        payroll factor has a denominator of zero). The
19        computation required by the preceding sentence shall,
20        in each case, involve the division of the member's
21        property, payroll, or revenue miles in the United
22        States, insurance premiums on property or risk in the
23        United States, or financial organization business
24        income from sources within the United States, as the
25        case may be, by the respective worldwide figures for
26        such items. Common ownership in the case of



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1        corporations is the direct or indirect control or
2        ownership of more than 50% of the outstanding voting
3        stock of the persons carrying on unitary business
4        activity. Unitary business activity can ordinarily be
5        illustrated where the activities of the members are:
6        (1) in the same general line (such as manufacturing,
7        wholesaling, retailing of tangible personal property,
8        insurance, transportation or finance); or (2) are
9        steps in a vertically structured enterprise or process
10        (such as the steps involved in the production of
11        natural resources, which might include exploration,
12        mining, refining, and marketing); and, in either
13        instance, the members are functionally integrated
14        through the exercise of strong centralized management
15        (where, for example, authority over such matters as
16        purchasing, financing, tax compliance, product line,
17        personnel, marketing and capital investment is not
18        left to each member).
19            (B) In no event, shall any unitary business group
20        include members which are ordinarily required to
21        apportion business income under different subsections
22        of Section 304 except that for tax years ending on or
23        after December 31, 1987 this prohibition shall not
24        apply to a holding company that would otherwise be a
25        member of a unitary business group with taxpayers that
26        apportion business income under any of subsections



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1        (b), (c), (c-1), or (d) of Section 304. If a unitary
2        business group would, but for the preceding sentence,
3        include members that are ordinarily required to
4        apportion business income under different subsections
5        of Section 304, then for each subsection of Section 304
6        for which there are two or more members, there shall be
7        a separate unitary business group composed of such
8        members. For purposes of the preceding two sentences, a
9        member is "ordinarily required to apportion business
10        income" under a particular subsection of Section 304 if
11        it would be required to use the apportionment method
12        prescribed by such subsection except for the fact that
13        it derives business income solely from Illinois. As
14        used in this paragraph, the phrase "United States"
15        means only the 50 states and the District of Columbia,
16        but does not include any territory or possession of the
17        United States or any area over which the United States
18        has asserted jurisdiction or claimed exclusive rights
19        with respect to the exploration for or exploitation of
20        natural resources.
21            (C) Holding companies.
22                (i) For purposes of this subparagraph, a
23            "holding company" is a corporation (other than a
24            corporation that is a financial organization under
25            paragraph (8) of this subsection (a) of Section
26            1501 because it is a bank holding company under the



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1            provisions of the Bank Holding Company Act of 1956
2            (12 U.S.C. 1841, et seq.) or because it is owned by
3            a bank or a bank holding company) that owns a
4            controlling interest in one or more other
5            taxpayers ("controlled taxpayers"); that, during
6            the period that includes the taxable year and the 2
7            immediately preceding taxable years or, if the
8            corporation was formed during the current or
9            immediately preceding taxable year, the taxable
10            years in which the corporation has been in
11            existence, derived substantially all its gross
12            income from dividends, interest, rents, royalties,
13            fees or other charges received from controlled
14            taxpayers for the provision of services, and gains
15            on the sale or other disposition of interests in
16            controlled taxpayers or in property leased or
17            licensed to controlled taxpayers or used by the
18            taxpayer in providing services to controlled
19            taxpayers; and that incurs no substantial expenses
20            other than expenses (including interest and other
21            costs of borrowing) incurred in connection with
22            the acquisition and holding of interests in
23            controlled taxpayers and in the provision of
24            services to controlled taxpayers or in the leasing
25            or licensing of property to controlled taxpayers.
26                (ii) The income of a holding company which is a



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1            member of more than one unitary business group
2            shall be included in each unitary business group of
3            which it is a member on a pro rata basis, by
4            including in each unitary business group that
5            portion of the base income of the holding company
6            that bears the same proportion to the total base
7            income of the holding company as the gross receipts
8            of the unitary business group bears to the combined
9            gross receipts of all unitary business groups (in
10            both cases without regard to the holding company)
11            or on any other reasonable basis, consistently
12            applied.
13                (iii) A holding company shall apportion its
14            business income under the subsection of Section
15            304 used by the other members of its unitary
16            business group. The apportionment factors of a
17            holding company which would be a member of more
18            than one unitary business group shall be included
19            with the apportionment factors of each unitary
20            business group of which it is a member on a pro
21            rata basis using the same method used in clause
22            (ii).
23                (iv) The provisions of this subparagraph (C)
24            are intended to clarify existing law.
25            (D) If including the base income and factors of a
26        holding company in more than one unitary business group



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1        under subparagraph (C) does not fairly reflect the
2        degree of integration between the holding company and
3        one or more of the unitary business groups, the
4        dependence of the holding company and one or more of
5        the unitary business groups upon each other, or the
6        contributions between the holding company and one or
7        more of the unitary business groups, the holding
8        company may petition the Director, under the
9        procedures provided under Section 304(f), for
10        permission to include all base income and factors of
11        the holding company only with members of a unitary
12        business group apportioning their business income
13        under one subsection of subsections (a), (b), (c), or
14        (d) of Section 304. If the petition is granted, the
15        holding company shall be included in a unitary business
16        group only with persons apportioning their business
17        income under the selected subsection of Section 304
18        until the Director grants a petition of the holding
19        company either to be included in more than one unitary
20        business group under subparagraph (C) or to include its
21        base income and factors only with members of a unitary
22        business group apportioning their business income
23        under a different subsection of Section 304.
24            (E) If the unitary business group members'
25        accounting periods differ, the common parent's
26        accounting period or, if there is no common parent, the



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1        accounting period of the member that is expected to
2        have, on a recurring basis, the greatest Illinois
3        income tax liability must be used to determine whether
4        to use the apportionment method provided in subsection
5        (a) or subsection (h) of Section 304. The prohibition
6        against membership in a unitary business group for
7        taxpayers ordinarily required to apportion income
8        under different subsections of Section 304 does not
9        apply to taxpayers required to apportion income under
10        subsection (a) and subsection (h) of Section 304. The
11        provisions of this amendatory Act of 1998 apply to tax
12        years ending on or after December 31, 1998.
13        (28) Subchapter S corporation. The term "Subchapter S
14    corporation" means a corporation for which there is in
15    effect an election under Section 1362 of the Internal
16    Revenue Code, or for which there is a federal election to
17    opt out of the provisions of the Subchapter S Revision Act
18    of 1982 and have applied instead the prior federal
19    Subchapter S rules as in effect on July 1, 1982.
20        (30) Foreign person. The term "foreign person" means
21    any person who is a nonresident alien individual and any
22    nonindividual entity, regardless of where created or
23    organized, whose business activity outside the United
24    States is 80% or more of the entity's total business
25    activity.



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1    (b) Other definitions.
2        (1) Words denoting number, gender, and so forth, when
3    used in this Act, where not otherwise distinctly expressed
4    or manifestly incompatible with the intent thereof:
5            (A) Words importing the singular include and apply
6        to several persons, parties or things;
7            (B) Words importing the plural include the
8        singular; and
9            (C) Words importing the masculine gender include
10        the feminine as well.
11        (2) "Company" or "association" as including successors
12    and assigns. The word "company" or "association", when used
13    in reference to a corporation, shall be deemed to embrace
14    the words "successors and assigns of such company or
15    association", and in like manner as if these last-named
16    words, or words of similar import, were expressed.
17        (3) Other terms. Any term used in any Section of this
18    Act with respect to the application of, or in connection
19    with, the provisions of any other Section of this Act shall
20    have the same meaning as in such other Section.
21(Source: P.A. 96-641, eff. 8-24-09; 97-507, eff. 8-23-11;
2297-636, eff. 6-1-12.)
23    Section 99. Effective date. This Act takes effect upon
24becoming law.