Illinois General Assembly - Full Text of SB1865
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Full Text of SB1865  94th General Assembly

SB1865sam001 94TH GENERAL ASSEMBLY

Sen. John M. Sullivan

Filed: 3/8/2005

 

 


 

 


 
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1
AMENDMENT TO SENATE BILL 1865

2     AMENDMENT NO. ______. Amend Senate Bill 1865 by by
3 replacing everything after the enacting clause with the
4 following:
 
5     "Section 5. The Illinois Income Tax Act is amended by
6 changing Section 203 as follows:
 
7     (35 ILCS 5/203)  (from Ch. 120, par. 2-203)
8     Sec. 203. Base income defined.
9     (a) Individuals.
10         (1) In general. In the case of an individual, base
11     income means an amount equal to the taxpayer's adjusted
12     gross income for the taxable year as modified by paragraph
13     (2).
14         (2) Modifications. The adjusted gross income referred
15     to in paragraph (1) shall be modified by adding thereto the
16     sum of the following amounts:
17             (A) An amount equal to all amounts paid or accrued
18         to the taxpayer as interest or dividends during the
19         taxable year to the extent excluded from gross income
20         in the computation of adjusted gross income, except
21         stock dividends of qualified public utilities
22         described in Section 305(e) of the Internal Revenue
23         Code;
24             (B) An amount equal to the amount of tax imposed by

 

 

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1         this Act to the extent deducted from gross income in
2         the computation of adjusted gross income for the
3         taxable year;
4             (C) An amount equal to the amount received during
5         the taxable year as a recovery or refund of real
6         property taxes paid with respect to the taxpayer's
7         principal residence under the Revenue Act of 1939 and
8         for which a deduction was previously taken under
9         subparagraph (L) of this paragraph (2) prior to July 1,
10         1991, the retrospective application date of Article 4
11         of Public Act 87-17. In the case of multi-unit or
12         multi-use structures and farm dwellings, the taxes on
13         the taxpayer's principal residence shall be that
14         portion of the total taxes for the entire property
15         which is attributable to such principal residence;
16             (D) An amount equal to the amount of the capital
17         gain deduction allowable under the Internal Revenue
18         Code, to the extent deducted from gross income in the
19         computation of adjusted gross income;
20             (D-5) An amount, to the extent not included in
21         adjusted gross income, equal to the amount of money
22         withdrawn by the taxpayer in the taxable year from a
23         medical care savings account and the interest earned on
24         the account in the taxable year of a withdrawal
25         pursuant to subsection (b) of Section 20 of the Medical
26         Care Savings Account Act or subsection (b) of Section
27         20 of the Medical Care Savings Account Act of 2000;
28             (D-10) For taxable years ending after December 31,
29         1997, an amount equal to any eligible remediation costs
30         that the individual deducted in computing adjusted
31         gross income and for which the individual claims a
32         credit under subsection (l) of Section 201;
33             (D-15) For taxable years 2001 and thereafter, an
34         amount equal to the bonus depreciation deduction (30%

 

 

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1         of the adjusted basis of the qualified property) taken
2         on the taxpayer's federal income tax return for the
3         taxable year under subsection (k) of Section 168 of the
4         Internal Revenue Code;
5             (D-16) If the taxpayer reports a capital gain or
6         loss on the taxpayer's federal income tax return for
7         the taxable year based on a sale or transfer of
8         property for which the taxpayer was required in any
9         taxable year to make an addition modification under
10         subparagraph (D-15), then an amount equal to the
11         aggregate amount of the deductions taken in all taxable
12         years under subparagraph (Z) with respect to that
13         property.
14             The taxpayer is required to make the addition
15         modification under this subparagraph only once with
16         respect to any one piece of property;
17             (D-17) For taxable years ending on or after
18         December 31, 2004, an amount equal to the amount
19         otherwise allowed as a deduction in computing base
20         income for interest paid, accrued, or incurred,
21         directly or indirectly, to a foreign person who would
22         be a member of the same unitary business group but for
23         the fact that foreign person's business activity
24         outside the United States is 80% or more of the foreign
25         person's total business activity. The addition
26         modification required by this subparagraph shall be
27         reduced to the extent that dividends were included in
28         base income of the unitary group for the same taxable
29         year and received by the taxpayer or by a member of the
30         taxpayer's unitary business group (including amounts
31         included in gross income under Sections 951 through 964
32         of the Internal Revenue Code and amounts included in
33         gross income under Section 78 of the Internal Revenue
34         Code) with respect to the stock of the same person to

 

 

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1         whom the interest was paid, accrued, or incurred.
2             This paragraph shall not apply to the following:
3                 (i) an item of interest paid, accrued, or
4             incurred, directly or indirectly, to 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 interest; or
9                 (ii) an item of interest paid, accrued, or
10             incurred, directly or indirectly, to a foreign
11             person if the taxpayer can establish, based on a
12             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                 interest to a person that is not a related
17                 member, and
18                     (b) the transaction giving rise to the
19                 interest expense between the taxpayer and the
20                 foreign person did not have as a principal
21                 purpose the avoidance of Illinois income tax,
22                 and is paid pursuant to a contract or agreement
23                 that reflects an arm's-length interest rate
24                 and terms; or
25                 (iii) the taxpayer can establish, based on
26             clear and convincing evidence, that the interest
27             paid, accrued, or incurred relates to a contract or
28             agreement entered into at arm's-length rates and
29             terms and the principal purpose for the payment is
30             not federal or Illinois tax avoidance; or
31                 (iv) an item of interest paid, accrued, or
32             incurred, directly or indirectly, to a foreign
33             person if the taxpayer establishes by clear and
34             convincing evidence that the adjustments are

 

 

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1             unreasonable; or if the taxpayer and the Director
2             agree in writing to the application or use of an
3             alternative method of apportionment under Section
4             304(f).
5                 Nothing in this subsection shall preclude the
6             Director from making any other adjustment
7             otherwise allowed under Section 404 of this Act for
8             any tax year beginning after the effective date of
9             this amendment provided such adjustment is made
10             pursuant to regulation adopted by the Department
11             and such regulations provide methods and standards
12             by which the Department will utilize its authority
13             under Section 404 of this Act;
14             (D-18) For taxable years ending on or after
15         December 31, 2004, an amount equal to the amount of
16         intangible expenses and costs otherwise allowed as a
17         deduction in computing base income, and that were paid,
18         accrued, or incurred, directly or indirectly, to a
19         foreign person who would be a member of the same
20         unitary business group but for the fact that the
21         foreign person's business activity outside the United
22         States is 80% or more of that person's total business
23         activity. The addition modification required by this
24         subparagraph shall be reduced to the extent that
25         dividends were included in base income of the unitary
26         group for the same taxable year and received by the
27         taxpayer or by a member of the taxpayer's unitary
28         business group (including amounts included in gross
29         income under Sections 951 through 964 of the Internal
30         Revenue Code and amounts included in gross income under
31         Section 78 of the Internal Revenue Code) with respect
32         to the stock of the same person to whom the intangible
33         expenses and costs were directly or indirectly paid,
34         incurred, or accrued. The preceding sentence does not

 

 

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1         apply to the extent that the same dividends caused a
2         reduction to the addition modification required under
3         Section 203(a)(2)(D-17) of this Act. As used in this
4         subparagraph, the term "intangible expenses and costs"
5         includes (1) expenses, losses, and costs for, or
6         related to, the direct or indirect acquisition, use,
7         maintenance or management, ownership, sale, exchange,
8         or any other disposition of intangible property; (2)
9         losses incurred, directly or indirectly, from
10         factoring transactions or discounting transactions;
11         (3) royalty, patent, technical, and copyright fees;
12         (4) licensing fees; and (5) other similar expenses and
13         costs. For purposes of this subparagraph, "intangible
14         property" includes patents, patent applications, trade
15         names, trademarks, service marks, copyrights, mask
16         works, trade secrets, and similar types of intangible
17         assets.
18             This paragraph shall not apply to the following:
19                 (i) any item of intangible expenses or costs
20             paid, accrued, or incurred, directly or
21             indirectly, from a transaction with a foreign
22             person who is subject in a foreign country or
23             state, other than a state which requires mandatory
24             unitary reporting, to a tax on or measured by net
25             income with respect to such item; or
26                 (ii) any item of intangible expense or cost
27             paid, accrued, or incurred, directly or
28             indirectly, if the taxpayer can establish, based
29             on a preponderance of the evidence, both of the
30             following:
31                     (a) the foreign person during the same
32                 taxable year paid, accrued, or incurred, the
33                 intangible expense or cost to a person that is
34                 not a related member, and

 

 

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1                     (b) the transaction giving rise to the
2                 intangible expense or cost between the
3                 taxpayer and the foreign person did not have as
4                 a principal purpose the avoidance of Illinois
5                 income tax, and is paid pursuant to a contract
6                 or agreement that reflects arm's-length terms;
7                 or
8                 (iii) any item of intangible expense or cost
9             paid, accrued, or incurred, directly or
10             indirectly, from a transaction with a foreign
11             person if the taxpayer establishes by clear and
12             convincing evidence, that the adjustments are
13             unreasonable; or if the taxpayer and the Director
14             agree in writing to the application or use of an
15             alternative method of apportionment under Section
16             304(f);
17                 Nothing in this subsection shall preclude the
18             Director from making any other adjustment
19             otherwise allowed under Section 404 of this Act for
20             any tax year beginning after the effective date of
21             this amendment provided such adjustment is made
22             pursuant to regulation adopted by the Department
23             and such regulations provide methods and standards
24             by which the Department will utilize its authority
25             under Section 404 of this Act;
26             (D-20) For taxable years beginning on or after
27         January 1, 2002, in the case of a distribution from a
28         qualified tuition program under Section 529 of the
29         Internal Revenue Code, other than (i) a distribution
30         from a College Savings Pool created under Section 16.5
31         of the State Treasurer Act or (ii) a distribution from
32         the Illinois Prepaid Tuition Trust Fund, an amount
33         equal to the amount excluded from gross income under
34         Section 529(c)(3)(B);

 

 

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1     and by deducting from the total so obtained the sum of the
2     following amounts:
3             (E) For taxable years ending before December 31,
4         2001, any amount included in such total in respect of
5         any compensation (including but not limited to any
6         compensation paid or accrued to a serviceman while a
7         prisoner of war or missing in action) paid to a
8         resident by reason of being on active duty in the Armed
9         Forces of the United States and in respect of any
10         compensation paid or accrued to a resident who as a
11         governmental employee was a prisoner of war or missing
12         in action, and in respect of any compensation paid to a
13         resident in 1971 or thereafter for annual training
14         performed pursuant to Sections 502 and 503, Title 32,
15         United States Code as a member of the Illinois National
16         Guard. For taxable years ending on or after December
17         31, 2001, any amount included in such total in respect
18         of any compensation (including but not limited to any
19         compensation paid or accrued to a serviceman while a
20         prisoner of war or missing in action) paid to a
21         resident by reason of being a member of any component
22         of the Armed Forces of the United States and in respect
23         of any compensation paid or accrued to a resident who
24         as a governmental employee was a prisoner of war or
25         missing in action, and in respect of any compensation
26         paid to a resident in 2001 or thereafter by reason of
27         being a member of the Illinois National Guard. The
28         provisions of this amendatory Act of the 92nd General
29         Assembly are exempt from the provisions of Section 250;
30             (F) An amount equal to all amounts included in such
31         total pursuant to the provisions of Sections 402(a),
32         402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the
33         Internal Revenue Code, or included in such total as
34         distributions under the provisions of any retirement

 

 

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1         or disability plan for employees of any governmental
2         agency or unit, or retirement payments to retired
3         partners, which payments are excluded in computing net
4         earnings from self employment by Section 1402 of the
5         Internal Revenue Code and regulations adopted pursuant
6         thereto;
7             (G) The valuation limitation amount;
8             (H) An amount equal to the amount of any tax
9         imposed by this Act which was refunded to the taxpayer
10         and included in such total for the taxable year;
11             (I) An amount equal to all amounts included in such
12         total pursuant to the provisions of Section 111 of the
13         Internal Revenue Code as a recovery of items previously
14         deducted from adjusted gross income in the computation
15         of taxable income;
16             (J) An amount equal to those dividends included in
17         such total which were paid by a corporation which
18         conducts business operations in an Enterprise Zone or
19         zones created under the Illinois Enterprise Zone Act,
20         and conducts substantially all of its operations in an
21         Enterprise Zone or zones;
22             (K) An amount equal to those dividends included in
23         such total that were paid by a corporation that
24         conducts business operations in a federally designated
25         Foreign Trade Zone or Sub-Zone and that is designated a
26         High Impact Business located in Illinois; provided
27         that dividends eligible for the deduction provided in
28         subparagraph (J) of paragraph (2) of this subsection
29         shall not be eligible for the deduction provided under
30         this subparagraph (K);
31             (L) For taxable years ending after December 31,
32         1983, an amount equal to all social security benefits
33         and railroad retirement benefits included in such
34         total pursuant to Sections 72(r) and 86 of the Internal

 

 

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1         Revenue Code;
2             (M) With the exception of any amounts subtracted
3         under subparagraph (N), an amount equal to the sum of
4         all amounts disallowed as deductions by (i) Sections
5         171(a) (2), and 265(2) of the Internal Revenue Code of
6         1954, as now or hereafter amended, and all amounts of
7         expenses allocable to interest and disallowed as
8         deductions by Section 265(1) of the Internal Revenue
9         Code of 1954, as now or hereafter amended; and (ii) for
10         taxable years ending on or after August 13, 1999,
11         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
12         the Internal Revenue Code; the provisions of this
13         subparagraph are exempt from the provisions of Section
14         250;
15             (N) An amount equal to all amounts included in such
16         total which are exempt from taxation by this State
17         either by reason of its statutes or Constitution or by
18         reason of the Constitution, treaties or statutes of the
19         United States; provided that, in the case of any
20         statute of this State that exempts income derived from
21         bonds or other obligations from the tax imposed under
22         this Act, the amount exempted shall be the interest net
23         of bond premium amortization;
24             (O) An amount equal to any contribution made to a
25         job training project established pursuant to the Tax
26         Increment Allocation Redevelopment Act;
27             (P) An amount equal to the amount of the deduction
28         used to compute the federal income tax credit for
29         restoration of substantial amounts held under claim of
30         right for the taxable year pursuant to Section 1341 of
31         the Internal Revenue Code of 1986;
32             (Q) An amount equal to any amounts included in such
33         total, received by the taxpayer as an acceleration in
34         the payment of life, endowment or annuity benefits in

 

 

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1         advance of the time they would otherwise be payable as
2         an indemnity for a terminal illness;
3             (R) An amount equal to the amount of any federal or
4         State bonus paid to veterans of the Persian Gulf War;
5             (S) An amount, to the extent included in adjusted
6         gross income, equal to the amount of a contribution
7         made in the taxable year on behalf of the taxpayer to a
8         medical care savings account established under the
9         Medical Care Savings Account Act or the Medical Care
10         Savings Account Act of 2000 to the extent the
11         contribution is accepted by the account administrator
12         as provided in that Act;
13             (T) An amount, to the extent included in adjusted
14         gross income, equal to the amount of interest earned in
15         the taxable year on a medical care savings account
16         established under the Medical Care Savings Account Act
17         or the Medical Care Savings Account Act of 2000 on
18         behalf of the taxpayer, other than interest added
19         pursuant to item (D-5) of this paragraph (2);
20             (U) For one taxable year beginning on or after
21         January 1, 1994, an amount equal to the total amount of
22         tax imposed and paid under subsections (a) and (b) of
23         Section 201 of this Act on grant amounts received by
24         the taxpayer under the Nursing Home Grant Assistance
25         Act during the taxpayer's taxable years 1992 and 1993;
26             (V) Beginning with tax years ending on or after
27         December 31, 1995 and ending with tax years ending on
28         or before December 31, 2004, an amount equal to the
29         amount paid by a taxpayer who is a self-employed
30         taxpayer, a partner of a partnership, or a shareholder
31         in a Subchapter S corporation for health insurance or
32         long-term care insurance for that taxpayer or that
33         taxpayer's spouse or dependents, to the extent that the
34         amount paid for that health insurance or long-term care

 

 

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

 

 

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1         persecution for racial or religious reasons by Nazi
2         Germany or any other Axis regime immediately prior to,
3         during, and immediately after World War II, including,
4         but not limited to, interest on the proceeds receivable
5         as insurance under policies issued to a victim of
6         persecution for racial or religious reasons by Nazi
7         Germany or any other Axis regime by European insurance
8         companies immediately prior to and during World War II;
9         provided, however, this subtraction from federal
10         adjusted gross income does not apply to assets acquired
11         with such assets or with the proceeds from the sale of
12         such assets; provided, further, this paragraph shall
13         only apply to a taxpayer who was the first recipient of
14         such assets after their recovery and who is a victim of
15         persecution for racial or religious reasons by Nazi
16         Germany or any other Axis regime or as an heir of the
17         victim. The amount of and the eligibility for any
18         public assistance, benefit, or similar entitlement is
19         not affected by the inclusion of items (i) and (ii) of
20         this paragraph in gross income for federal income tax
21         purposes. This paragraph is exempt from the provisions
22         of Section 250;
23             (Y) For taxable years beginning on or after January
24         1, 2002 and ending on or before December 31, 2004,
25         moneys contributed in the taxable year to a College
26         Savings Pool account under Section 16.5 of the State
27         Treasurer Act, except that amounts excluded from gross
28         income under Section 529(c)(3)(C)(i) of the Internal
29         Revenue Code shall not be considered moneys
30         contributed under this subparagraph (Y). For taxable
31         years beginning on or after January 1, 2005, a maximum
32         of $10,000 contributed in the taxable year to (i) a
33         College Savings Pool account under Section 16.5 of the
34         State Treasurer Act or (ii) the Illinois Prepaid

 

 

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

 

 

09400SB1865sam001 - 15 - LRB094 08543 BDD 43421 a

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

 

 

09400SB1865sam001 - 16 - LRB094 08543 BDD 43421 a

1         taxable year under Section 203(a)(2)(D-17) for
2         interest paid, accrued, or incurred, directly or
3         indirectly, to the same foreign person; and
4             (EE) An amount equal to the income from intangible
5         property taken into account for the taxable year (net
6         of the deductions allocable thereto) with respect to
7         transactions with a foreign person who would be a
8         member of the taxpayer's unitary business group but for
9         the fact that the foreign person's business activity
10         outside the United States is 80% or more of that
11         person's total business activity, but not to exceed the
12         addition modification required to be made for the same
13         taxable year under Section 203(a)(2)(D-18) for
14         intangible expenses and costs paid, accrued, or
15         incurred, directly or indirectly, to the same foreign
16         person; and .
17             (FF) For taxable years ending on or after December
18         31, 2005 through taxable years ending on or before
19         December 30, 2010, an amount, not to exceed $2,000,
20         equal to the burial expenses incurred during the
21         taxable year an individual taxpayer who pays the burial
22         expenses for a fetus for which a fetal death
23         certificate has been issued under Section 20 of the
24         Vital Records Act. The deduction under this
25         subparagraph may be taken by only one taxpayer with
26         respect to any one fetal death. The Department must
27         adopt rules to enforce and administer the provisions of
28         this subparagraph. Without limitation, these rules
29         must set forth allowable burial expenses and
30         requirements for the documentation of the burial
31         expenses.
 
32     (b) Corporations.
33         (1) In general. In the case of a corporation, base

 

 

09400SB1865sam001 - 17 - LRB094 08543 BDD 43421 a

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

 

 

09400SB1865sam001 - 18 - LRB094 08543 BDD 43421 a

1         subtraction modifications in such earlier taxable
2         year, with the following limitations applied in the
3         order that they are listed:
4                 (i) the addition modification relating to the
5             net operating loss carried back or forward to the
6             taxable year from any taxable year ending prior to
7             December 31, 1986 shall be reduced by the amount of
8             addition modification under this subparagraph (E)
9             which related to that net operating loss and which
10             was taken into account in calculating the base
11             income of an earlier taxable year, and
12                 (ii) the addition modification relating to the
13             net operating loss carried back or forward to the
14             taxable year from any taxable year ending prior to
15             December 31, 1986 shall not exceed the amount of
16             such carryback or carryforward;
17             For taxable years in which there is a net operating
18         loss carryback or carryforward from more than one other
19         taxable year ending prior to December 31, 1986, the
20         addition modification provided in this subparagraph
21         (E) shall be the sum of the amounts computed
22         independently under the preceding provisions of this
23         subparagraph (E) for each such taxable year;
24             (E-5) For taxable years ending after December 31,
25         1997, an amount equal to any eligible remediation costs
26         that the corporation deducted in computing adjusted
27         gross income and for which the corporation claims a
28         credit under subsection (l) of Section 201;
29             (E-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

 

 

09400SB1865sam001 - 19 - LRB094 08543 BDD 43421 a

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

 

 

09400SB1865sam001 - 20 - LRB094 08543 BDD 43421 a

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

 

 

09400SB1865sam001 - 21 - LRB094 08543 BDD 43421 a

1             304(f).
2                 Nothing in this subsection shall preclude the
3             Director from making any other adjustment
4             otherwise allowed under Section 404 of this Act for
5             any tax year beginning after the effective date of
6             this amendment provided such adjustment is made
7             pursuant to regulation adopted by the Department
8             and such regulations provide methods and standards
9             by which the Department will utilize its authority
10             under Section 404 of this Act;
11             (E-13) For taxable years ending on or after
12         December 31, 2004, an amount equal to the amount of
13         intangible expenses and costs otherwise allowed as a
14         deduction in computing base income, and that were paid,
15         accrued, or incurred, directly or indirectly, to a
16         foreign person who would be a member of the same
17         unitary business group but for the fact that the
18         foreign person's business activity outside the United
19         States is 80% or more of that person's total business
20         activity. The addition modification required by this
21         subparagraph shall be reduced to the extent that
22         dividends were included in base income of the unitary
23         group for the same taxable year and received by the
24         taxpayer or by a member of the taxpayer's unitary
25         business group (including amounts included in gross
26         income pursuant to Sections 951 through 964 of the
27         Internal Revenue Code and amounts included in gross
28         income under Section 78 of the Internal Revenue Code)
29         with respect to the stock of the same person to whom
30         the intangible expenses and costs were directly or
31         indirectly paid, incurred, or accrued. The preceding
32         sentence shall not apply to the extent that the same
33         dividends caused a reduction to the addition
34         modification required under Section 203(b)(2)(E-12) of

 

 

09400SB1865sam001 - 22 - LRB094 08543 BDD 43421 a

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

 

 

09400SB1865sam001 - 23 - LRB094 08543 BDD 43421 a

1                 a principal purpose the avoidance of Illinois
2                 income tax, and is paid pursuant to a contract
3                 or agreement that reflects arm's-length terms;
4                 or
5                 (iii) any item of intangible expense or cost
6             paid, accrued, or incurred, directly or
7             indirectly, from a transaction with a foreign
8             person if the taxpayer establishes by clear and
9             convincing evidence, that the adjustments are
10             unreasonable; or if the taxpayer and the Director
11             agree in writing to the application or use of an
12             alternative method of apportionment under Section
13             304(f);
14                 Nothing in this subsection shall preclude the
15             Director from making any other adjustment
16             otherwise allowed under Section 404 of this Act for
17             any tax year beginning after the effective date of
18             this amendment provided such adjustment is made
19             pursuant to regulation adopted by the Department
20             and such regulations provide methods and standards
21             by which the Department will utilize its authority
22             under Section 404 of this Act;
23     and by deducting from the total so obtained the sum of the
24     following amounts:
25             (F) An amount equal to the amount of any tax
26         imposed by this Act which was refunded to the taxpayer
27         and included in such total for the taxable year;
28             (G) An amount equal to any amount included in such
29         total under Section 78 of the Internal Revenue Code;
30             (H) In the case of a regulated investment company,
31         an amount equal to the amount of exempt interest
32         dividends as defined in subsection (b) (5) of Section
33         852 of the Internal Revenue Code, paid to shareholders
34         for the taxable year;

 

 

09400SB1865sam001 - 24 - LRB094 08543 BDD 43421 a

1             (I) With the exception of any amounts subtracted
2         under subparagraph (J), an amount equal to the sum of
3         all amounts disallowed as deductions by (i) Sections
4         171(a) (2), and 265(a)(2) and amounts disallowed as
5         interest expense by Section 291(a)(3) of the Internal
6         Revenue Code, as now or hereafter amended, and all
7         amounts of expenses allocable to interest and
8         disallowed as deductions by Section 265(a)(1) of the
9         Internal Revenue Code, as now or hereafter amended; and
10         (ii) for taxable years ending on or after August 13,
11         1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and
12         832(b)(5)(B)(i) of the Internal Revenue Code; the
13         provisions of this subparagraph are exempt from the
14         provisions of Section 250;
15             (J) An amount equal to all amounts included in such
16         total which are exempt from taxation by this State
17         either by reason of its statutes or Constitution or by
18         reason of the Constitution, treaties or statutes of the
19         United States; provided that, in the case of any
20         statute of this State that exempts income derived from
21         bonds or other obligations from the tax imposed under
22         this Act, the amount exempted shall be the interest net
23         of bond premium amortization;
24             (K) An amount equal to those dividends included in
25         such total which were paid by a corporation which
26         conducts business operations in an Enterprise Zone or
27         zones created under the Illinois Enterprise Zone Act
28         and conducts substantially all of its operations in an
29         Enterprise Zone or zones;
30             (L) An amount equal to those dividends included in
31         such total that were paid by a corporation that
32         conducts business operations in a federally designated
33         Foreign Trade Zone or Sub-Zone and that is designated a
34         High Impact Business located in Illinois; provided

 

 

09400SB1865sam001 - 25 - LRB094 08543 BDD 43421 a

1         that dividends eligible for the deduction provided in
2         subparagraph (K) of paragraph 2 of this subsection
3         shall not be eligible for the deduction provided under
4         this subparagraph (L);
5             (M) For any taxpayer that is a financial
6         organization within the meaning of Section 304(c) of
7         this Act, an amount included in such total as interest
8         income from a loan or loans made by such taxpayer to a
9         borrower, to the extent that such a loan is secured by
10         property which is eligible for the Enterprise Zone
11         Investment Credit. To determine the portion of a loan
12         or loans that is secured by property eligible for a
13         Section 201(f) investment credit to the borrower, the
14         entire principal amount of the loan or loans between
15         the taxpayer and the borrower should be divided into
16         the basis of the Section 201(f) investment credit
17         property which secures the loan or loans, using for
18         this purpose the original basis of such property on the
19         date that it was placed in service in the Enterprise
20         Zone. The subtraction modification available to
21         taxpayer in any year under this subsection shall be
22         that portion of the total interest paid by the borrower
23         with respect to such loan attributable to the eligible
24         property as calculated under the previous sentence;
25             (M-1) For any taxpayer that is a financial
26         organization within the meaning of Section 304(c) of
27         this Act, an amount included in such total as interest
28         income from a loan or loans made by such taxpayer to a
29         borrower, to the extent that such a loan is secured by
30         property which is eligible for the High Impact Business
31         Investment Credit. To determine the portion of a loan
32         or loans that is secured by property eligible for a
33         Section 201(h) investment credit to the borrower, the
34         entire principal amount of the loan or loans between

 

 

09400SB1865sam001 - 26 - LRB094 08543 BDD 43421 a

1         the taxpayer and the borrower should be divided into
2         the basis of the Section 201(h) investment credit
3         property which secures the loan or loans, using for
4         this purpose the original basis of such property on the
5         date that it was placed in service in a federally
6         designated Foreign Trade Zone or Sub-Zone located in
7         Illinois. No taxpayer that is eligible for the
8         deduction provided in subparagraph (M) of paragraph
9         (2) of this subsection shall be eligible for the
10         deduction provided under this subparagraph (M-1). The
11         subtraction modification available to taxpayers in any
12         year under this subsection shall be that portion of the
13         total interest paid by the borrower with respect to
14         such loan attributable to the eligible property as
15         calculated under the previous sentence;
16             (N) Two times any contribution made during the
17         taxable year to a designated zone organization to the
18         extent that the contribution (i) qualifies as a
19         charitable contribution under subsection (c) of
20         Section 170 of the Internal Revenue Code and (ii) must,
21         by its terms, be used for a project approved by the
22         Department of Commerce and Economic Opportunity under
23         Section 11 of the Illinois Enterprise Zone Act;
24             (O) An amount equal to: (i) 85% for taxable years
25         ending on or before December 31, 1992, or, a percentage
26         equal to the percentage allowable under Section
27         243(a)(1) of the Internal Revenue Code of 1986 for
28         taxable years ending after December 31, 1992, of the
29         amount by which dividends included in taxable income
30         and received from a corporation that is not created or
31         organized under the laws of the United States or any
32         state or political subdivision thereof, including, for
33         taxable years ending on or after December 31, 1988,
34         dividends received or deemed received or paid or deemed

 

 

09400SB1865sam001 - 27 - LRB094 08543 BDD 43421 a

1         paid under Sections 951 through 964 of the Internal
2         Revenue Code, exceed the amount of the modification
3         provided under subparagraph (G) of paragraph (2) of
4         this subsection (b) which is related to such dividends;
5         plus (ii) 100% of the amount by which dividends,
6         included in taxable income and received, including,
7         for taxable years ending on or after December 31, 1988,
8         dividends received or deemed received or paid or deemed
9         paid under Sections 951 through 964 of the Internal
10         Revenue Code, from any such corporation specified in
11         clause (i) that would but for the provisions of Section
12         1504 (b) (3) of the Internal Revenue Code be treated as
13         a member of the affiliated group which includes the
14         dividend recipient, exceed the amount of the
15         modification provided under subparagraph (G) of
16         paragraph (2) of this subsection (b) which is related
17         to such dividends;
18             (P) An amount equal to any contribution made to a
19         job training project established pursuant to the Tax
20         Increment Allocation Redevelopment Act;
21             (Q) An amount equal to the amount of the deduction
22         used to compute the federal income tax credit for
23         restoration of substantial amounts held under claim of
24         right for the taxable year pursuant to Section 1341 of
25         the Internal Revenue Code of 1986;
26             (R) In the case of an attorney-in-fact with respect
27         to whom an interinsurer or a reciprocal insurer has
28         made the election under Section 835 of the Internal
29         Revenue Code, 26 U.S.C. 835, an amount equal to the
30         excess, if any, of the amounts paid or incurred by that
31         interinsurer or reciprocal insurer in the taxable year
32         to the attorney-in-fact over the deduction allowed to
33         that interinsurer or reciprocal insurer with respect
34         to the attorney-in-fact under Section 835(b) of the

 

 

09400SB1865sam001 - 28 - LRB094 08543 BDD 43421 a

1         Internal Revenue Code for the taxable year;
2             (S) For taxable years ending on or after December
3         31, 1997, in the case of a Subchapter S corporation, an
4         amount equal to all amounts of income allocable to a
5         shareholder subject to the Personal Property Tax
6         Replacement Income Tax imposed by subsections (c) and
7         (d) of Section 201 of this Act, including amounts
8         allocable to organizations exempt from federal income
9         tax by reason of Section 501(a) of the Internal Revenue
10         Code. This subparagraph (S) is exempt from the
11         provisions of Section 250;
12             (T) For taxable years 2001 and thereafter, for the
13         taxable year in which the bonus depreciation deduction
14         (30% of the adjusted basis of the qualified property)
15         is taken on the taxpayer's federal income tax return
16         under subsection (k) of Section 168 of the Internal
17         Revenue Code and for each applicable taxable year
18         thereafter, an amount equal to "x", where:
19                 (1) "y" equals the amount of the depreciation
20             deduction taken for the taxable year on the
21             taxpayer's federal income tax return on property
22             for which the bonus depreciation deduction (30% of
23             the adjusted basis of the qualified property) was
24             taken in any year under subsection (k) of Section
25             168 of the Internal Revenue Code, but not including
26             the bonus depreciation deduction; and
27                 (2) "x" equals "y" multiplied by 30 and then
28             divided by 70 (or "y" multiplied by 0.429).
29             The aggregate amount deducted under this
30         subparagraph in all taxable years for any one piece of
31         property may not exceed the amount of the bonus
32         depreciation deduction (30% of the adjusted basis of
33         the qualified property) taken on that property on the
34         taxpayer's federal income tax return under subsection

 

 

09400SB1865sam001 - 29 - LRB094 08543 BDD 43421 a

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

 

 

09400SB1865sam001 - 30 - LRB094 08543 BDD 43421 a

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

 

 

09400SB1865sam001 - 31 - LRB094 08543 BDD 43421 a

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

 

 

09400SB1865sam001 - 32 - LRB094 08543 BDD 43421 a

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

 

 

09400SB1865sam001 - 33 - LRB094 08543 BDD 43421 a

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

 

 

09400SB1865sam001 - 34 - LRB094 08543 BDD 43421 a

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

 

 

09400SB1865sam001 - 35 - LRB094 08543 BDD 43421 a

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             (G-13) For taxable years ending on or after
9         December 31, 2004, an amount equal to the amount of
10         intangible expenses and costs otherwise allowed as a
11         deduction in computing base income, and that were paid,
12         accrued, or incurred, directly or indirectly, to a
13         foreign person who would be a member of the same
14         unitary business group but for the fact that the
15         foreign person's business activity outside the United
16         States is 80% or more of that person's total business
17         activity. The addition modification required by this
18         subparagraph shall be reduced to the extent that
19         dividends were included in base income of the unitary
20         group for the same taxable year and received by the
21         taxpayer or by a member of the taxpayer's unitary
22         business group (including amounts included in gross
23         income pursuant to Sections 951 through 964 of the
24         Internal Revenue Code and amounts included in gross
25         income under Section 78 of the Internal Revenue Code)
26         with respect to the stock of the same person to whom
27         the intangible expenses and costs were directly or
28         indirectly paid, incurred, or accrued. The preceding
29         sentence shall not apply to the extent that the same
30         dividends caused a reduction to the addition
31         modification required under Section 203(c)(2)(G-12) of
32         this Act. As used in this subparagraph, the term
33         "intangible expenses and costs" includes: (1)
34         expenses, losses, and costs for or related to the

 

 

09400SB1865sam001 - 36 - LRB094 08543 BDD 43421 a

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

 

 

09400SB1865sam001 - 37 - LRB094 08543 BDD 43421 a

1                 or
2                 (iii) any item of intangible expense or cost
3             paid, accrued, or incurred, directly or
4             indirectly, from a transaction with a foreign
5             person if the taxpayer establishes by clear and
6             convincing evidence, that the adjustments are
7             unreasonable; or if the taxpayer and the Director
8             agree in writing to the application or use of an
9             alternative method of apportionment under Section
10             304(f);
11                 Nothing in this subsection shall preclude the
12             Director from making any other adjustment
13             otherwise allowed under Section 404 of this Act for
14             any tax year beginning after the effective date of
15             this amendment provided such adjustment is made
16             pursuant to regulation adopted by the Department
17             and such regulations provide methods and standards
18             by which the Department will utilize its authority
19             under Section 404 of this Act;
20     and by deducting from the total so obtained the sum of the
21     following amounts:
22             (H) An amount equal to all amounts included in such
23         total pursuant to the provisions of Sections 402(a),
24         402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
25         Internal Revenue Code or included in such total as
26         distributions under the provisions of any retirement
27         or disability plan for employees of any governmental
28         agency or unit, or retirement payments to retired
29         partners, which payments are excluded in computing net
30         earnings from self employment by Section 1402 of the
31         Internal Revenue Code and regulations adopted pursuant
32         thereto;
33             (I) The valuation limitation amount;
34             (J) An amount equal to the amount of any tax

 

 

09400SB1865sam001 - 38 - LRB094 08543 BDD 43421 a

1         imposed by this Act which was refunded to the taxpayer
2         and included in such total for the taxable year;
3             (K) An amount equal to all amounts included in
4         taxable income as modified by subparagraphs (A), (B),
5         (C), (D), (E), (F) and (G) which are exempt from
6         taxation by this State either by reason of its statutes
7         or Constitution or by reason of the Constitution,
8         treaties or statutes of the United States; provided
9         that, in the case of any statute of this State that
10         exempts income derived from bonds or other obligations
11         from the tax imposed under this Act, the amount
12         exempted shall be the interest net of bond premium
13         amortization;
14             (L) With the exception of any amounts subtracted
15         under subparagraph (K), an amount equal to the sum of
16         all amounts disallowed as deductions by (i) Sections
17         171(a) (2) and 265(a)(2) of the Internal Revenue Code,
18         as now or hereafter amended, and all amounts of
19         expenses allocable to interest and disallowed as
20         deductions by Section 265(1) of the Internal Revenue
21         Code of 1954, as now or hereafter amended; and (ii) for
22         taxable years ending on or after August 13, 1999,
23         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
24         the Internal Revenue Code; the provisions of this
25         subparagraph are exempt from the provisions of Section
26         250;
27             (M) An amount equal to those dividends included in
28         such total which were paid by a corporation which
29         conducts business operations in an Enterprise Zone or
30         zones created under the Illinois Enterprise Zone Act
31         and conducts substantially all of its operations in an
32         Enterprise Zone or Zones;
33             (N) An amount equal to any contribution made to a
34         job training project established pursuant to the Tax

 

 

09400SB1865sam001 - 39 - LRB094 08543 BDD 43421 a

1         Increment Allocation Redevelopment Act;
2             (O) An amount equal to those dividends included in
3         such total that were paid by a corporation that
4         conducts business operations in a federally designated
5         Foreign Trade Zone or Sub-Zone and that is designated a
6         High Impact Business located in Illinois; provided
7         that dividends eligible for the deduction provided in
8         subparagraph (M) of paragraph (2) of this subsection
9         shall not be eligible for the deduction provided under
10         this subparagraph (O);
11             (P) An amount equal to the amount of the deduction
12         used to compute the federal income tax credit for
13         restoration of substantial amounts held under claim of
14         right for the taxable year pursuant to Section 1341 of
15         the Internal Revenue Code of 1986;
16             (Q) For taxable year 1999 and thereafter, an amount
17         equal to the amount of any (i) distributions, to the
18         extent includible in gross income for federal income
19         tax purposes, made to the taxpayer because of his or
20         her status as a victim of persecution for racial or
21         religious reasons by Nazi Germany or any other Axis
22         regime or as an heir of the victim and (ii) items of
23         income, to the extent includible in gross income for
24         federal income tax purposes, attributable to, derived
25         from or in any way related to assets stolen from,
26         hidden from, or otherwise lost to a victim of
27         persecution for racial or religious reasons by Nazi
28         Germany or any other Axis regime immediately prior to,
29         during, and immediately after World War II, including,
30         but not limited to, interest on the proceeds receivable
31         as insurance under policies issued to a victim of
32         persecution for racial or religious reasons by Nazi
33         Germany or any other Axis regime by European insurance
34         companies immediately prior to and during World War II;

 

 

09400SB1865sam001 - 40 - LRB094 08543 BDD 43421 a

1         provided, however, this subtraction from federal
2         adjusted gross income does not apply to assets acquired
3         with such assets or with the proceeds from the sale of
4         such assets; provided, further, this paragraph shall
5         only apply to a taxpayer who was the first recipient of
6         such assets after their recovery and who is a victim of
7         persecution for racial or religious reasons by Nazi
8         Germany or any other Axis regime or as an heir of the
9         victim. The amount of and the eligibility for any
10         public assistance, benefit, or similar entitlement is
11         not affected by the inclusion of items (i) and (ii) of
12         this paragraph in gross income for federal income tax
13         purposes. This paragraph is exempt from the provisions
14         of Section 250;
15             (R) For taxable years 2001 and thereafter, for the
16         taxable year in which the bonus depreciation deduction
17         (30% of the adjusted basis of the qualified property)
18         is taken on the taxpayer's federal income tax return
19         under subsection (k) of Section 168 of the Internal
20         Revenue Code and for each applicable taxable year
21         thereafter, an amount equal to "x", where:
22                 (1) "y" equals the amount of the depreciation
23             deduction taken for the taxable year on the
24             taxpayer's federal income tax return on property
25             for which the bonus depreciation deduction (30% of
26             the adjusted basis of the qualified property) was
27             taken in any year under subsection (k) of Section
28             168 of the Internal Revenue Code, but not including
29             the bonus depreciation deduction; and
30                 (2) "x" equals "y" multiplied by 30 and then
31             divided by 70 (or "y" multiplied by 0.429).
32             The aggregate amount deducted under this
33         subparagraph in all taxable years for any one piece of
34         property may not exceed the amount of the bonus

 

 

09400SB1865sam001 - 41 - LRB094 08543 BDD 43421 a

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

 

 

09400SB1865sam001 - 42 - LRB094 08543 BDD 43421 a

1         member of the taxpayer's unitary business group but for
2         the fact the foreign person's business activity
3         outside the United States is 80% or more of that
4         person's total business activity, but not to exceed the
5         addition modification required to be made for the same
6         taxable year under Section 203(c)(2)(G-12) for
7         interest paid, accrued, or incurred, directly or
8         indirectly, to the same foreign person; and
9             (V) An amount equal to the income from intangible
10         property taken into account for the taxable year (net
11         of the deductions allocable thereto) with respect to
12         transactions with a foreign person who would be a
13         member of the taxpayer's unitary business group but for
14         the fact that the foreign person's business activity
15         outside the United States is 80% or more of that
16         person's total business activity, but not to exceed the
17         addition modification required to be made for the same
18         taxable year under Section 203(c)(2)(G-13) for
19         intangible expenses and costs paid, accrued, or
20         incurred, directly or indirectly, to the same foreign
21         person.
22         (3) Limitation. The amount of any modification
23     otherwise required under this subsection shall, under
24     regulations prescribed by the Department, be adjusted by
25     any amounts included therein which were properly paid,
26     credited, or required to be distributed, or permanently set
27     aside for charitable purposes pursuant to Internal Revenue
28     Code Section 642(c) during the taxable year.
 
29     (d) Partnerships.
30         (1) In general. In the case of a partnership, base
31     income means an amount equal to the taxpayer's taxable
32     income for the taxable year as modified by paragraph (2).
33         (2) Modifications. The taxable income referred to in

 

 

09400SB1865sam001 - 43 - LRB094 08543 BDD 43421 a

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 or dividends during the
5         taxable year to the extent excluded from gross income
6         in the computation of taxable income;
7             (B) An amount equal to the amount of tax imposed by
8         this Act to the extent deducted from gross income for
9         the taxable year;
10             (C) The amount of deductions allowed to the
11         partnership pursuant to Section 707 (c) of the Internal
12         Revenue Code in calculating its taxable income;
13             (D) An amount equal to the amount of the capital
14         gain deduction allowable under the Internal Revenue
15         Code, to the extent deducted from gross income in the
16         computation of taxable income;
17             (D-5) For taxable years 2001 and thereafter, an
18         amount equal to the bonus depreciation deduction (30%
19         of the adjusted basis of the qualified property) taken
20         on the taxpayer's federal income tax return for the
21         taxable year under subsection (k) of Section 168 of the
22         Internal Revenue Code;
23             (D-6) If the taxpayer reports a capital gain or
24         loss on the taxpayer's federal income tax return for
25         the taxable year based on a sale or transfer of
26         property for which the taxpayer was required in any
27         taxable year to make an addition modification under
28         subparagraph (D-5), then an amount equal to the
29         aggregate amount of the deductions taken in all taxable
30         years under subparagraph (O) with respect to that
31         property.
32             The taxpayer is required to make the addition
33         modification under this subparagraph only once with
34         respect to any one piece of property;

 

 

09400SB1865sam001 - 44 - LRB094 08543 BDD 43421 a

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

 

 

09400SB1865sam001 - 45 - LRB094 08543 BDD 43421 a

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

 

 

09400SB1865sam001 - 46 - LRB094 08543 BDD 43421 a

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

 

 

09400SB1865sam001 - 47 - LRB094 08543 BDD 43421 a

1         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);

 

 

09400SB1865sam001 - 48 - LRB094 08543 BDD 43421 a

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

 

 

09400SB1865sam001 - 49 - LRB094 08543 BDD 43421 a

1         subsections (c) and (d) of Section 201 of this Act
2         including amounts distributable to organizations
3         exempt from federal income tax by reason of Section
4         501(a) of the Internal Revenue Code;
5             (J) With the exception of any amounts subtracted
6         under subparagraph (G), an amount equal to the sum of
7         all amounts disallowed as deductions by (i) Sections
8         171(a) (2), and 265(2) of the Internal Revenue Code of
9         1954, 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, as now or hereafter amended; and (ii) for taxable
13         years ending on or after August 13, 1999, Sections
14         171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
15         Internal Revenue Code; the provisions of this
16         subparagraph are exempt from the provisions of Section
17         250;
18             (K) 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         enacted by the 82nd General Assembly, and conducts
23         substantially all of its operations in an Enterprise
24         Zone or Zones;
25             (L) An amount equal to any contribution made to a
26         job training project established pursuant to the Real
27         Property Tax Increment Allocation Redevelopment Act;
28             (M) An amount equal to those dividends included in
29         such total that were paid by a corporation that
30         conducts business operations in a federally designated
31         Foreign Trade Zone or Sub-Zone and that is designated a
32         High Impact Business located in Illinois; provided
33         that dividends eligible for the deduction provided in
34         subparagraph (K) of paragraph (2) of this subsection

 

 

09400SB1865sam001 - 50 - LRB094 08543 BDD 43421 a

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

 

 

09400SB1865sam001 - 51 - LRB094 08543 BDD 43421 a

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

 

 

09400SB1865sam001 - 52 - LRB094 08543 BDD 43421 a

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

 

 

09400SB1865sam001 - 53 - LRB094 08543 BDD 43421 a

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

 

 

09400SB1865sam001 - 54 - LRB094 08543 BDD 43421 a

1         by Section 857 of the Internal Revenue Code, real
2         estate investment trust taxable income;
3             (E) Consolidated corporations. In the case of a
4         corporation which is a member of an affiliated group of
5         corporations filing a consolidated income tax return
6         for the taxable year for federal income tax purposes,
7         taxable income determined as if such corporation had
8         filed a separate return for federal income tax purposes
9         for the taxable year and each preceding taxable year
10         for which it was a member of an affiliated group. For
11         purposes of this subparagraph, the taxpayer's separate
12         taxable income shall be determined as if the election
13         provided by Section 243(b) (2) of the Internal Revenue
14         Code had been in effect for all such years;
15             (F) Cooperatives. In the case of a cooperative
16         corporation or association, the taxable income of such
17         organization determined in accordance with the
18         provisions of Section 1381 through 1388 of the Internal
19         Revenue Code;
20             (G) Subchapter S corporations. In the case of: (i)
21         a Subchapter S corporation for which there is in effect
22         an election for the taxable year under Section 1362 of
23         the Internal Revenue Code, the taxable income of such
24         corporation determined in accordance with Section
25         1363(b) of the Internal Revenue Code, except that
26         taxable income shall take into account those items
27         which are required by Section 1363(b)(1) of the
28         Internal Revenue Code to be separately stated; and (ii)
29         a Subchapter S corporation for which there is in effect
30         a federal election to opt out of the provisions of the
31         Subchapter S Revision Act of 1982 and have applied
32         instead the prior federal Subchapter S rules as in
33         effect on July 1, 1982, the taxable income of such
34         corporation determined in accordance with the federal

 

 

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1         Subchapter S rules as in effect on July 1, 1982; and
2             (H) Partnerships. In the case of a partnership,
3         taxable income determined in accordance with Section
4         703 of the Internal Revenue Code, except that taxable
5         income shall take into account those items which are
6         required by Section 703(a)(1) to be separately stated
7         but which would be taken into account by an individual
8         in calculating his taxable income.
9         (3) Recapture of business expenses on disposition of
10     asset or business. Notwithstanding any other law to the
11     contrary, if in prior years income from an asset or
12     business has been classified as business income and in a
13     later year is demonstrated to be non-business income, then
14     all expenses, without limitation, deducted in such later
15     year and in the 2 immediately preceding taxable years
16     related to that asset or business that generated the
17     non-business income shall be added back and recaptured as
18     business income in the year of the disposition of the asset
19     or business. Such amount shall be apportioned to Illinois
20     using the greater of the apportionment fraction computed
21     for the business under Section 304 of this Act for the
22     taxable year or the average of the apportionment fractions
23     computed for the business under Section 304 of this Act for
24     the taxable year and for the 2 immediately preceding
25     taxable years.
26     (f) Valuation limitation amount.
27         (1) In general. The valuation limitation amount
28     referred to in subsections (a) (2) (G), (c) (2) (I) and
29     (d)(2) (E) is an amount equal to:
30             (A) The sum of the pre-August 1, 1969 appreciation
31         amounts (to the extent consisting of gain reportable
32         under the provisions of Section 1245 or 1250 of the
33         Internal Revenue Code) for all property in respect of
34         which such gain was reported for the taxable year; plus

 

 

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1             (B) The lesser of (i) the sum of the pre-August 1,
2         1969 appreciation amounts (to the extent consisting of
3         capital gain) for all property in respect of which such
4         gain was reported for federal income tax purposes for
5         the taxable year, or (ii) the net capital gain for the
6         taxable year, reduced in either case by any amount of
7         such gain included in the amount determined under
8         subsection (a) (2) (F) or (c) (2) (H).
9         (2) Pre-August 1, 1969 appreciation amount.
10             (A) If the fair market value of property referred
11         to in paragraph (1) was readily ascertainable on August
12         1, 1969, the pre-August 1, 1969 appreciation amount for
13         such property is the lesser of (i) the excess of such
14         fair market value over the taxpayer's basis (for
15         determining gain) for such property on that date
16         (determined under the Internal Revenue Code as in
17         effect on that date), or (ii) the total gain realized
18         and reportable for federal income tax purposes in
19         respect of the sale, exchange or other disposition of
20         such property.
21             (B) If the fair market value of property referred
22         to in paragraph (1) was not readily ascertainable on
23         August 1, 1969, the pre-August 1, 1969 appreciation
24         amount for such property is that amount which bears the
25         same ratio to the total gain reported in respect of the
26         property for federal income tax purposes for the
27         taxable year, as the number of full calendar months in
28         that part of the taxpayer's holding period for the
29         property ending July 31, 1969 bears to the number of
30         full calendar months in the taxpayer's entire holding
31         period for the property.
32             (C) The Department shall prescribe such
33         regulations as may be necessary to carry out the
34         purposes of this paragraph.
 

 

 

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1     (g) Double deductions. Unless specifically provided
2 otherwise, nothing in this Section shall permit the same item
3 to be deducted more than once.
 
4     (h) Legislative intention. Except as expressly provided by
5 this Section there shall be no modifications or limitations on
6 the amounts of income, gain, loss or deduction taken into
7 account in determining gross income, adjusted gross income or
8 taxable income for federal income tax purposes for the taxable
9 year, or in the amount of such items entering into the
10 computation of base income and net income under this Act for
11 such taxable year, whether in respect of property values as of
12 August 1, 1969 or otherwise.
13 (Source: P.A. 92-16, eff. 6-28-01; 92-244, eff. 8-3-01; 92-439,
14 eff. 8-17-01; 92-603, eff. 6-28-02; 92-626, eff. 7-11-02;
15 92-651, eff. 7-11-02; 92-846, eff. 8-23-02; 93-812, eff.
16 7-26-04; 93-840, eff. 7-30-04; revised 10-12-04.)
 
17     Section 99. Effective date. This Act takes effect upon
18 becoming law.".