Full Text of HB3086 99th General Assembly
HB3086eng 99TH GENERAL ASSEMBLY |
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| 1 | | AN ACT concerning revenue.
| 2 | | Be it enacted by the People of the State of Illinois,
| 3 | | represented in the General Assembly:
| 4 | | Section 5. The Illinois Income Tax Act is amended by | 5 | | changing Section 1501 as follows:
| 6 | | (35 ILCS 5/1501) (from Ch. 120, par. 15-1501)
| 7 | | Sec. 1501. Definitions.
| 8 | | (a) In general. When used in this Act, where not
otherwise | 9 | | distinctly expressed or manifestly incompatible with the | 10 | | intent
thereof:
| 11 | | (1) Business income. The term "business income" means | 12 | | all income that may be treated as apportionable business | 13 | | income under the Constitution of the United States. | 14 | | Business income is net of the deductions allocable thereto. | 15 | | Such term does not include compensation
or the deductions | 16 | | allocable thereto.
For each taxable year beginning on or | 17 | | after January 1, 2003, a taxpayer may
elect to treat all | 18 | | income other than compensation as business income. This
| 19 | | election shall be made in accordance with rules adopted by | 20 | | the Department and,
once made, shall be irrevocable.
| 21 | | (1.5) Captive real estate investment trust:
| 22 | | (A) The term "captive real estate investment | 23 | | trust" means a corporation, trust, or association:
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| 1 | | (i) that is considered a real estate | 2 | | investment trust for the taxable year under | 3 | | Section 856 of the Internal Revenue Code;
| 4 | | (ii) the certificates of beneficial interest | 5 | | or shares of which are not regularly traded on an | 6 | | established securities market; and | 7 | | (iii) of which more than 50% of the voting | 8 | | power or value of the beneficial interest or | 9 | | shares, at any time during the last half of the | 10 | | taxable year, is owned or controlled, directly, | 11 | | indirectly, or constructively, by a single | 12 | | corporation. | 13 | | (B) The term "captive real estate investment | 14 | | trust" does not include: | 15 | | (i) a real estate investment trust of which | 16 | | more than 50% of the voting power or value of the | 17 | | beneficial interest or shares is owned or | 18 | | controlled, directly, indirectly, or | 19 | | constructively, by: | 20 | | (a) a real estate investment trust, other | 21 | | than a captive real estate investment trust; | 22 | | (b) a person who is exempt from taxation | 23 | | under Section 501 of the Internal Revenue Code, | 24 | | and who is not required to treat income | 25 | | received from the real estate investment trust | 26 | | as unrelated business taxable income under |
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| 1 | | Section 512 of the Internal Revenue Code; | 2 | | (c) a listed Australian property trust, if | 3 | | no more than 50% of the voting power or value | 4 | | of the beneficial interest or shares of that | 5 | | trust, at any time during the last half of the | 6 | | taxable year, is owned or controlled, directly | 7 | | or indirectly, by a single person; | 8 | | (d) an entity organized as a trust, | 9 | | provided a listed Australian property trust | 10 | | described in subparagraph (c) owns or | 11 | | controls, directly or indirectly, or | 12 | | constructively, 75% or more of the voting power | 13 | | or value of the beneficial interests or shares | 14 | | of such entity; or | 15 | | (e) an entity that is organized outside of | 16 | | the laws of the United States and that | 17 | | satisfies all of the following criteria: | 18 | | (1) at least 75% of the entity's total | 19 | | asset value at the close of its taxable | 20 | | year is represented by real estate assets | 21 | | (as defined in Section 856(c)(5)(B) of the | 22 | | Internal Revenue Code, thereby including | 23 | | shares or certificates of beneficial | 24 | | interest in any real estate investment | 25 | | trust), cash and cash equivalents, and | 26 | | U.S. Government securities; |
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| 1 | | (2) the entity is not subject to tax on | 2 | | amounts that are distributed to its | 3 | | beneficial owners or is exempt from | 4 | | entity-level taxation; | 5 | | (3) the entity distributes at least | 6 | | 85% of its taxable income (as computed in | 7 | | the jurisdiction in which it is organized) | 8 | | to the holders of its shares or | 9 | | certificates of beneficial interest on an | 10 | | annual basis; | 11 | | (4) either (i) the shares or | 12 | | beneficial interests of the entity are | 13 | | regularly traded on an established | 14 | | securities market or (ii) not more than 10% | 15 | | of the voting power or value in the entity | 16 | | is held, directly, indirectly, or | 17 | | constructively, by a single entity or | 18 | | individual; and | 19 | | (5) the entity is organized in a | 20 | | country that has entered into a tax treaty | 21 | | with the United States; or | 22 | | (ii) during its first taxable year for which it | 23 | | elects to be treated as a real estate investment | 24 | | trust under Section 856(c)(1) of the Internal | 25 | | Revenue Code, a real estate investment trust the | 26 | | certificates of beneficial interest or shares of |
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| 1 | | which are not regularly traded on an established | 2 | | securities market, but only if the certificates of | 3 | | beneficial interest or shares of the real estate | 4 | | investment trust are regularly traded on an | 5 | | established securities market prior to the earlier | 6 | | of the due date (including extensions) for filing | 7 | | its return under this Act for that first taxable | 8 | | year or the date it actually files that return. | 9 | | (C) For the purposes of this subsection (1.5), the | 10 | | constructive ownership rules prescribed under Section | 11 | | 318(a) of the Internal Revenue Code, as modified by | 12 | | Section 856(d)(5) of the Internal Revenue Code, apply | 13 | | in determining the ownership of stock, assets, or net | 14 | | profits of any person.
| 15 | | (D) For the purposes of this item (1.5), for | 16 | | taxable years ending on or after August 16, 2007, the | 17 | | voting power or value of the beneficial interest or | 18 | | shares of a real estate investment trust does not | 19 | | include any voting power or value of beneficial | 20 | | interest or shares in a real estate investment trust | 21 | | held directly or indirectly in a segregated asset | 22 | | account by a life insurance company (as described in | 23 | | Section 817 of the Internal Revenue Code) to the extent | 24 | | such voting power or value is for the benefit of | 25 | | entities or persons who are either immune from taxation | 26 | | or exempt from taxation under subtitle A of the |
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| 1 | | Internal Revenue Code.
| 2 | | (2) Commercial domicile. The term "commercial | 3 | | domicile" means the
principal
place from which the trade or | 4 | | business of the taxpayer is directed or managed.
| 5 | | (3) Compensation. The term "compensation" means wages, | 6 | | salaries,
commissions
and any other form of remuneration | 7 | | paid to employees for personal services.
| 8 | | (4) Corporation. The term "corporation" includes | 9 | | associations, joint-stock
companies, insurance companies | 10 | | and cooperatives. Any entity, including a
limited | 11 | | liability company formed under the Illinois Limited | 12 | | Liability Company
Act, shall be treated as a corporation if | 13 | | it is so classified for federal
income tax purposes.
| 14 | | (5) Department. The term "Department" means the | 15 | | Department of Revenue of
this State.
| 16 | | (6) Director. The term "Director" means the Director of | 17 | | Revenue of this
State.
| 18 | | (7) Fiduciary. The term "fiduciary" means a guardian, | 19 | | trustee, executor,
administrator, receiver, or any person | 20 | | acting in any fiduciary capacity for any
person.
| 21 | | (8) Financial organization.
| 22 | | (A) The term "financial organization" means
any
| 23 | | bank, bank holding company, trust company, savings | 24 | | bank, industrial bank,
land bank, safe deposit | 25 | | company, private banker, savings and loan association,
| 26 | | building and loan association, credit union, currency |
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| 1 | | exchange, cooperative
bank, small loan company, sales | 2 | | finance company, investment company, or any
person | 3 | | which is owned by a bank or bank holding company. For | 4 | | the purpose of
this Section a "person" will include | 5 | | only those persons which a bank holding
company may | 6 | | acquire and hold an interest in, directly or | 7 | | indirectly, under the
provisions of the Bank Holding | 8 | | Company Act of 1956 (12 U.S.C. 1841, et seq.),
except | 9 | | where interests in any person must be disposed of | 10 | | within certain
required time limits under the Bank | 11 | | Holding Company Act of 1956.
| 12 | | (B) For purposes of subparagraph (A) of this | 13 | | paragraph, the term
"bank" includes (i) any entity that | 14 | | is regulated by the Comptroller of the
Currency under | 15 | | the National Bank Act, or by the Federal Reserve Board, | 16 | | or by
the
Federal Deposit Insurance Corporation and | 17 | | (ii) any federally or State chartered
bank
operating as | 18 | | a credit card bank.
| 19 | | (C) For purposes of subparagraph (A) of this | 20 | | paragraph, the term
"sales finance company" has the | 21 | | meaning provided in the following item (i) or
(ii):
| 22 | | (i) A person primarily engaged in one or more | 23 | | of the following
businesses: the business of | 24 | | purchasing customer receivables, the business
of | 25 | | making loans upon the security of customer | 26 | | receivables, the
business of making loans for the |
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| 1 | | express purpose of funding purchases of
tangible | 2 | | personal property or services by the borrower, or | 3 | | the business of
finance leasing. For purposes of | 4 | | this item (i), "customer receivable"
means:
| 5 | | (a) a retail installment contract or | 6 | | retail charge agreement within
the
meaning
of | 7 | | the Sales Finance Agency Act, the Retail | 8 | | Installment Sales Act, or the
Motor Vehicle | 9 | | Retail Installment Sales Act;
| 10 | | (b) an installment, charge, credit, or | 11 | | similar contract or agreement
arising from
the | 12 | | sale of tangible personal property or services | 13 | | in a transaction involving
a deferred payment | 14 | | price payable in one or more installments | 15 | | subsequent
to the sale; or
| 16 | | (c) the outstanding balance of a contract | 17 | | or agreement described in
provisions
(a) or (b) | 18 | | of this item (i).
| 19 | | A customer receivable need not provide for | 20 | | payment of interest on
deferred
payments. A sales | 21 | | finance company may purchase a customer receivable | 22 | | from, or
make a loan secured by a customer | 23 | | receivable to, the seller in the original
| 24 | | transaction or to a person who purchased the | 25 | | customer receivable directly or
indirectly from | 26 | | that seller.
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| 1 | | (ii) A corporation meeting each of the | 2 | | following criteria:
| 3 | | (a) the corporation must be a member of an | 4 | | "affiliated group" within
the
meaning of | 5 | | Section 1504(a) of the Internal Revenue Code, | 6 | | determined
without regard to Section 1504(b) | 7 | | of the Internal Revenue Code;
| 8 | | (b) more than 50% of the gross income of | 9 | | the corporation for the
taxable
year
must be | 10 | | interest income derived from qualifying loans. | 11 | | A "qualifying
loan" is a loan made to a member | 12 | | of the corporation's affiliated group that
| 13 | | originates customer receivables (within the | 14 | | meaning of item (i)) or to whom
customer | 15 | | receivables originated by a member of the | 16 | | affiliated group have been
transferred, to
the | 17 | | extent the average outstanding balance of | 18 | | loans from that corporation
to members of its | 19 | | affiliated group during the taxable year do not | 20 | | exceed
the limitation amount for that | 21 | | corporation. The "limitation amount" for a
| 22 | | corporation is the average outstanding | 23 | | balances during the taxable year of
customer | 24 | | receivables (within the meaning of item (i)) | 25 | | originated by
all members of the affiliated | 26 | | group.
If the average outstanding balances of |
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| 1 | | the
loans made by a corporation to members of | 2 | | its affiliated group exceed the
limitation | 3 | | amount, the interest income of that | 4 | | corporation from qualifying
loans shall be | 5 | | equal to its interest income from loans to | 6 | | members of its
affiliated groups times a | 7 | | fraction equal to the limitation amount | 8 | | divided by
the average outstanding balances of | 9 | | the loans made by that corporation to
members | 10 | | of its affiliated group;
| 11 | | (c) the total of all shareholder's equity | 12 | | (including, without
limitation,
paid-in
| 13 | | capital on common and preferred stock and | 14 | | retained earnings) of the
corporation plus the | 15 | | total of all of its loans, advances, and other
| 16 | | obligations payable or owed to members of its | 17 | | affiliated group may not
exceed 20% of the | 18 | | total assets of the corporation at any time | 19 | | during the tax
year; and
| 20 | | (d) more than 50% of all interest-bearing | 21 | | obligations of the
affiliated group payable to | 22 | | persons outside the group determined in | 23 | | accordance
with generally accepted accounting | 24 | | principles must be obligations of the
| 25 | | corporation.
| 26 | | This amendatory Act of the 91st General Assembly is |
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| 1 | | declaratory of
existing
law.
| 2 | | (D) Subparagraphs
(B) and (C) of this paragraph are | 3 | | declaratory of
existing law and apply retroactively, | 4 | | for all tax years beginning on or before
December 31, | 5 | | 1996,
to all original returns, to all amended returns | 6 | | filed no later than 30
days after the effective date of | 7 | | this amendatory Act of 1996, and to all
notices issued | 8 | | on or before the effective date of this amendatory Act | 9 | | of 1996
under subsection (a) of Section 903, subsection | 10 | | (a) of Section 904,
subsection (e) of Section 909, or | 11 | | Section 912.
A taxpayer that is a "financial | 12 | | organization" that engages in any transaction
with an | 13 | | affiliate shall be a "financial organization" for all | 14 | | purposes of this
Act.
| 15 | | (E) For all tax years beginning on or
before | 16 | | December 31, 1996, a taxpayer that falls within the | 17 | | definition
of a
"financial organization" under | 18 | | subparagraphs (B) or (C) of this paragraph, but
who | 19 | | does
not fall within the definition of a "financial | 20 | | organization" under the Proposed
Regulations issued by | 21 | | the Department of Revenue on July 19, 1996, may
| 22 | | irrevocably elect to apply the Proposed Regulations | 23 | | for all of those years as
though the Proposed | 24 | | Regulations had been lawfully promulgated, adopted, | 25 | | and in
effect for all of those years. For purposes of | 26 | | applying subparagraphs (B) or
(C) of
this
paragraph to |
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| 1 | | all of those years, the election allowed by this | 2 | | subparagraph
applies only to the taxpayer making the | 3 | | election and to those members of the
taxpayer's unitary | 4 | | business group who are ordinarily required to | 5 | | apportion
business income under the same subsection of | 6 | | Section 304 of this Act as the
taxpayer making the | 7 | | election. No election allowed by this subparagraph | 8 | | shall
be made under a claim
filed under subsection (d) | 9 | | of Section 909 more than 30 days after the
effective | 10 | | date of this amendatory Act of 1996.
| 11 | | (F) Finance Leases. For purposes of this | 12 | | subsection, a finance lease
shall be treated as a loan | 13 | | or other extension of credit, rather than as a
lease,
| 14 | | regardless of how the transaction is characterized for | 15 | | any other purpose,
including the purposes of any | 16 | | regulatory agency to which the lessor is subject.
A | 17 | | finance lease is any transaction in the form of a lease | 18 | | in which the lessee
is treated as the owner of the | 19 | | leased asset entitled to any deduction for
| 20 | | depreciation allowed under Section 167 of the Internal | 21 | | Revenue Code.
| 22 | | (9) Fiscal year. The term "fiscal year" means an | 23 | | accounting period of
12 months ending on the last day of | 24 | | any month other than December.
| 25 | | (9.5) Fixed place of business. The term "fixed place of | 26 | | business" has the same meaning as that term is given in |
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| 1 | | Section 864 of the Internal Revenue Code and the related | 2 | | Treasury regulations.
| 3 | | (10) Includes and including. The terms "includes" and | 4 | | "including" when
used in a definition contained in this Act | 5 | | shall not be deemed to exclude
other things otherwise | 6 | | within the meaning of the term defined.
| 7 | | (11) Internal Revenue Code. The term "Internal Revenue | 8 | | Code" means the
United States Internal Revenue Code of 1954 | 9 | | or any successor law or laws
relating to federal income | 10 | | taxes in effect for the taxable year.
| 11 | | (11.5) Investment partnership. | 12 | | (A) The term "investment partnership" means any | 13 | | entity that is treated as a partnership for federal | 14 | | income tax purposes that meets the following | 15 | | requirements: | 16 | | (i) no less than 90% of the partnership's cost | 17 | | of its total assets consists of qualifying | 18 | | investment securities, deposits at banks or other | 19 | | financial institutions, and office space and | 20 | | equipment reasonably necessary to carry on its | 21 | | activities as an investment partnership; | 22 | | (ii) no less than 90% of its gross income | 23 | | consists of interest, dividends, and gains from | 24 | | the sale or exchange of qualifying investment | 25 | | securities; and
| 26 | | (iii) the partnership is not a dealer in |
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| 1 | | qualifying investment securities. | 2 | | (B) For purposes of this paragraph (11.5), the term | 3 | | "qualifying investment securities" includes all of the | 4 | | following:
| 5 | | (i) common stock, including preferred or debt | 6 | | securities convertible into common stock, and | 7 | | preferred stock; | 8 | | (ii) bonds, debentures, and other debt | 9 | | securities; | 10 | | (iii) foreign and domestic currency deposits | 11 | | secured by federal, state, or local governmental | 12 | | agencies; | 13 | | (iv) mortgage or asset-backed securities | 14 | | secured by federal, state, or local governmental | 15 | | agencies; | 16 | | (v) repurchase agreements and loan | 17 | | participations; | 18 | | (vi) foreign currency exchange contracts and | 19 | | forward and futures contracts on foreign | 20 | | currencies; | 21 | | (vii) stock and bond index securities and | 22 | | futures contracts and other similar financial | 23 | | securities and futures contracts on those | 24 | | securities;
| 25 | | (viii) options for the purchase or sale of any | 26 | | of the securities, currencies, contracts, or |
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| 1 | | financial instruments described in items (i) to | 2 | | (vii), inclusive;
| 3 | | (ix) regulated futures contracts;
| 4 | | (x) commodities (not described in Section | 5 | | 1221(a)(1) of the Internal Revenue Code) or | 6 | | futures, forwards, and options with respect to | 7 | | such commodities, provided, however, that any item | 8 | | of a physical commodity to which title is actually | 9 | | acquired in the partnership's capacity as a dealer | 10 | | in such commodity shall not be a qualifying | 11 | | investment security;
| 12 | | (xi) derivatives; and
| 13 | | (xii) a partnership interest in another | 14 | | partnership that is an investment partnership.
| 15 | | (12) Mathematical error. The term "mathematical error" | 16 | | includes the
following types of errors, omissions, or | 17 | | defects in a return filed by a
taxpayer which prevents | 18 | | acceptance of the return as filed for processing:
| 19 | | (A) arithmetic errors or incorrect computations on | 20 | | the return or
supporting schedules;
| 21 | | (B) entries on the wrong lines;
| 22 | | (C) omission of required supporting forms or | 23 | | schedules or the omission
of the information in whole | 24 | | or in part called for thereon; and
| 25 | | (D) an attempt to claim, exclude, deduct, or | 26 | | improperly report, in a
manner
directly contrary to the |
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| 1 | | provisions of the Act and regulations thereunder
any | 2 | | item of income, exemption, deduction, or credit.
| 3 | | (13) Nonbusiness income. The term "nonbusiness income" | 4 | | means all income
other than business income or | 5 | | compensation.
| 6 | | (14) Nonresident. The term "nonresident" means a | 7 | | person who is not a
resident.
| 8 | | (15) Paid, incurred and accrued. The terms "paid", | 9 | | "incurred" and
"accrued"
shall be construed according to | 10 | | the method of accounting upon the basis
of which the | 11 | | person's base income is computed under this Act.
| 12 | | (16) Partnership and partner. The term "partnership" | 13 | | includes a syndicate,
group, pool, joint venture or other | 14 | | unincorporated organization, through
or by means of which | 15 | | any business, financial operation, or venture is carried
| 16 | | on, and which is not, within the meaning of this Act, a | 17 | | trust or estate
or a corporation; and the term "partner" | 18 | | includes a member in such syndicate,
group, pool, joint | 19 | | venture or organization.
| 20 | | The term "partnership" includes any entity, including | 21 | | a limited
liability company formed under the Illinois
| 22 | | Limited Liability Company Act, classified as a partnership | 23 | | for federal income tax purposes.
| 24 | | The term "partnership" does not include a syndicate, | 25 | | group, pool,
joint venture, or other unincorporated | 26 | | organization established for the
sole purpose of playing |
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| 1 | | the Illinois State Lottery.
| 2 | | (17) Part-year resident. The term "part-year resident" | 3 | | means an individual
who became a resident during the | 4 | | taxable year or ceased to be a resident
during the taxable | 5 | | year. Under Section 1501(a)(20)(A)(i) residence
commences | 6 | | with presence in this State for other than a temporary or | 7 | | transitory
purpose and ceases with absence from this State | 8 | | for other than a temporary or
transitory purpose. Under | 9 | | Section 1501(a)(20)(A)(ii) residence commences
with the | 10 | | establishment of domicile in this State and ceases with the
| 11 | | establishment of domicile in another State.
| 12 | | (18) Person. The term "person" shall be construed to | 13 | | mean and include
an individual, a trust, estate, | 14 | | partnership, association, firm, company,
corporation, | 15 | | limited liability company, or fiduciary. For purposes of | 16 | | Section
1301 and 1302 of this Act, a "person" means (i) an | 17 | | individual, (ii) a
corporation, (iii) an officer, agent, or | 18 | | employee of a
corporation, (iv) a member, agent or employee | 19 | | of a partnership, or (v)
a member,
manager, employee, | 20 | | officer, director, or agent of a limited liability company
| 21 | | who in such capacity commits an offense specified in | 22 | | Section 1301 and 1302.
| 23 | | (18A) Records. The term "records" includes all data | 24 | | maintained by the
taxpayer, whether on paper, microfilm, | 25 | | microfiche, or any type of
machine-sensible data | 26 | | compilation.
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| 1 | | (19) Regulations. The term "regulations" includes | 2 | | rules promulgated and
forms prescribed by the Department.
| 3 | | (20) Resident. The term "resident" means:
| 4 | | (A) an individual (i) who is
in this State for | 5 | | other than a temporary or transitory purpose during the
| 6 | | taxable year; or (ii) who is domiciled in this State | 7 | | but is absent from
the State for a temporary or | 8 | | transitory purpose during the taxable year;
| 9 | | (B) The estate of a decedent who at his or her | 10 | | death was domiciled in
this
State;
| 11 | | (C) A trust created by a will of a decedent who at | 12 | | his death was
domiciled
in this State; and
| 13 | | (D) An irrevocable trust, the grantor of which was | 14 | | domiciled in this
State
at the time such trust became | 15 | | irrevocable. For purpose of this subparagraph,
a trust | 16 | | shall be considered irrevocable to the extent that the | 17 | | grantor is
not treated as the owner thereof under | 18 | | Sections 671 through 678 of the Internal
Revenue Code.
| 19 | | (21) Sales. The term "sales" means all gross receipts | 20 | | of the taxpayer
not allocated under Sections 301, 302 and | 21 | | 303.
| 22 | | (22) State. The term "state" when applied to a | 23 | | jurisdiction other than
this State means any state of the | 24 | | United States, the District of Columbia,
the Commonwealth | 25 | | of Puerto Rico, any Territory or Possession of the United
| 26 | | States, and any foreign country, or any political |
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| 1 | | subdivision of any of the
foregoing. For purposes of the | 2 | | foreign tax credit under Section 601, the
term "state" | 3 | | means any state of the United States, the District of | 4 | | Columbia,
the Commonwealth of Puerto Rico, and any | 5 | | territory or possession of the
United States, or any | 6 | | political subdivision of any of the foregoing,
effective | 7 | | for tax years ending on or after December 31, 1989.
| 8 | | (23) Taxable year. The term "taxable year" means the | 9 | | calendar year, or
the fiscal year ending during such | 10 | | calendar year, upon the basis of which
the base income is | 11 | | computed under this Act. "Taxable year" means, in the
case | 12 | | of a return made for a fractional part of a year under the | 13 | | provisions
of this Act, the period for which such return is | 14 | | made.
| 15 | | (24) Taxpayer. The term "taxpayer" means any person | 16 | | subject to the tax
imposed by this Act.
| 17 | | (25) International banking facility. The term | 18 | | international banking
facility shall have the same meaning | 19 | | as is set forth in the Illinois Banking
Act or as is set | 20 | | forth in the laws of the United States or regulations of
| 21 | | the Board of Governors of the Federal Reserve System.
| 22 | | (26) Income Tax Return Preparer.
| 23 | | (A) The term "income tax return preparer"
means any | 24 | | person who prepares for compensation, or who employs | 25 | | one or more
persons to prepare for compensation, any | 26 | | return of tax imposed by this Act
or any claim for |
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| 1 | | refund of tax imposed by this Act. The preparation of a
| 2 | | substantial portion of a return or claim for refund | 3 | | shall be treated as
the preparation of that return or | 4 | | claim for refund.
| 5 | | (B) A person is not an income tax return preparer | 6 | | if all he or she does
is
| 7 | | (i) furnish typing, reproducing, or other | 8 | | mechanical assistance;
| 9 | | (ii) prepare returns or claims for refunds for | 10 | | the employer by whom he
or she is regularly and | 11 | | continuously employed;
| 12 | | (iii) prepare as a fiduciary returns or claims | 13 | | for refunds for any
person; or
| 14 | | (iv) prepare claims for refunds for a taxpayer | 15 | | in response to any
notice
of deficiency issued to | 16 | | that taxpayer or in response to any waiver of
| 17 | | restriction after the commencement of an audit of | 18 | | that taxpayer or of another
taxpayer if a | 19 | | determination in the audit of the other taxpayer | 20 | | directly or
indirectly affects the tax liability | 21 | | of the taxpayer whose claims he or she is
| 22 | | preparing.
| 23 | | (27) Unitary business group. | 24 | | (A) The term "unitary business group" means
a group | 25 | | of persons related through common ownership whose | 26 | | business activities
are integrated with, dependent |
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| 1 | | upon and contribute to each other. The group
will not | 2 | | include those members whose business activity outside | 3 | | the United
States is 80% or more of any such member's | 4 | | total business activity; for
purposes of this | 5 | | paragraph and clause (a)(3)(B)(ii) of Section 304,
| 6 | | business
activity within the United States shall be | 7 | | measured by means of the factors
ordinarily applicable | 8 | | under subsections (a), (b), (c), (d), or (h)
of Section
| 9 | | 304 except that, in the case of members ordinarily | 10 | | required to apportion
business income by means of the 3 | 11 | | factor formula of property, payroll and sales
| 12 | | specified in subsection (a) of Section 304, including | 13 | | the
formula as weighted in subsection (h) of Section | 14 | | 304, such members shall
not use the sales factor in the | 15 | | computation and the results of the property
and payroll | 16 | | factor computations of subsection (a) of Section 304 | 17 | | shall be
divided by 2 (by one if either
the property or | 18 | | payroll factor has a denominator of zero). The | 19 | | computation
required by the preceding sentence shall, | 20 | | in each case, involve the division of
the member's | 21 | | property, payroll, or revenue miles in the United | 22 | | States,
insurance premiums on property or risk in the | 23 | | United States, or financial
organization business | 24 | | income from sources within the United States, as the
| 25 | | case may be, by the respective worldwide figures for | 26 | | such items. Common
ownership in the case of |
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| 1 | | corporations is the direct or indirect control or
| 2 | | ownership of more than 50% of the outstanding voting | 3 | | stock of the persons
carrying on unitary business | 4 | | activity. Unitary business activity can
ordinarily be | 5 | | illustrated where the activities of the members are: | 6 | | (1) in the
same general line (such as manufacturing, | 7 | | wholesaling, retailing of tangible
personal property, | 8 | | insurance, transportation or finance); or (2) are | 9 | | steps in a
vertically structured enterprise or process | 10 | | (such as the steps involved in the
production of | 11 | | natural resources, which might include exploration, | 12 | | mining,
refining, and marketing); and, in either | 13 | | instance, the members are functionally
integrated | 14 | | through the exercise of strong centralized management | 15 | | (where, for
example, authority over such matters as | 16 | | purchasing, financing, tax compliance,
product line, | 17 | | personnel, marketing and capital investment is not | 18 | | left to each
member).
| 19 | | (B) In no event, shall any
unitary business group | 20 | | include members
which are ordinarily required to | 21 | | apportion business income under different
subsections | 22 | | of Section 304 except that for tax years ending on or | 23 | | after
December 31, 1987 this prohibition shall not | 24 | | apply to a holding company that would otherwise be a | 25 | | member of a unitary business group with taxpayers that | 26 | | apportion business income under any of subsections |
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| 1 | | (b), (c), (c-1), or (d) of Section 304. If a unitary | 2 | | business
group would, but for the preceding sentence, | 3 | | include members that are
ordinarily required to | 4 | | apportion business income under different subsections | 5 | | of
Section 304, then for each subsection of Section 304 | 6 | | for which there are two or
more members, there shall be | 7 | | a separate unitary business group composed of such
| 8 | | members. For purposes of the preceding two sentences, a | 9 | | member is "ordinarily
required to apportion business | 10 | | income" under a particular subsection of Section
304 if | 11 | | it would be required to use the apportionment method | 12 | | prescribed by such
subsection except for the fact that | 13 | | it derives business income solely from
Illinois. As | 14 | | used in this paragraph, the phrase "United States" | 15 | | means only the 50 states and the District of Columbia, | 16 | | but does not include any territory or possession of the | 17 | | United States or any area over which the United States | 18 | | has asserted jurisdiction or claimed exclusive rights | 19 | | with respect to the exploration for or exploitation of | 20 | | natural resources.
| 21 | | (C) Holding companies. | 22 | | (i) For purposes of this subparagraph, a | 23 | | "holding company" is a corporation (other than a | 24 | | corporation that is a financial organization under | 25 | | paragraph (8) of this subsection (a) of Section | 26 | | 1501 because it is a bank holding company under the |
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| 1 | | provisions of the Bank Holding Company Act of 1956 | 2 | | (12 U.S.C. 1841, et seq.) or because it is owned by | 3 | | a bank or a bank holding company) that owns a | 4 | | controlling interest in one or more other | 5 | | taxpayers ("controlled taxpayers"); that, during | 6 | | the period that includes the taxable year and the 2 | 7 | | immediately preceding taxable years or, if the | 8 | | corporation was formed during the current or | 9 | | immediately preceding taxable year, the taxable | 10 | | years in which the corporation has been in | 11 | | existence, derived substantially all its gross | 12 | | income from dividends, interest, rents, royalties, | 13 | | fees or other charges received from controlled | 14 | | taxpayers for the provision of services, and gains | 15 | | on the sale or other disposition of interests in | 16 | | controlled taxpayers or in property leased or | 17 | | licensed to controlled taxpayers or used by the | 18 | | taxpayer in providing services to controlled | 19 | | taxpayers; and that incurs no substantial expenses | 20 | | other than expenses (including interest and other | 21 | | costs of borrowing) incurred in connection with | 22 | | the acquisition and holding of interests in | 23 | | controlled taxpayers and in the provision of | 24 | | services to controlled taxpayers or in the leasing | 25 | | or licensing of property to controlled taxpayers. | 26 | | (ii) The income of a holding company which is a |
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| 1 | | member of more than one unitary business group | 2 | | shall be included in each unitary business group of | 3 | | which it is a member on a pro rata basis, by | 4 | | including in each unitary business group that | 5 | | portion of the base income of the holding company | 6 | | that bears the same proportion to the total base | 7 | | income of the holding company as the gross receipts | 8 | | of the unitary business group bears to the combined | 9 | | gross receipts of all unitary business groups (in | 10 | | both cases without regard to the holding company) | 11 | | or on any other reasonable basis, consistently | 12 | | applied. | 13 | | (iii) A holding company shall apportion its | 14 | | business income under the subsection of Section | 15 | | 304 used by the other members of its unitary | 16 | | business group. The apportionment factors of a | 17 | | holding company which would be a member of more | 18 | | than one unitary business group shall be included | 19 | | with the apportionment factors of each unitary | 20 | | business group of which it is a member on a pro | 21 | | rata basis using the same method used in clause | 22 | | (ii). | 23 | | (iv) The provisions of this subparagraph (C) | 24 | | are intended to clarify existing law. | 25 | | (D) If including the base income and factors of a | 26 | | holding company in more than one unitary business group |
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| 1 | | under subparagraph (C) does not fairly reflect the | 2 | | degree of integration between the holding company and | 3 | | one or more of the unitary business groups, the | 4 | | dependence of the holding company and one or more of | 5 | | the unitary business groups upon each other, or the | 6 | | contributions between the holding company and one or | 7 | | more of the unitary business groups, the holding | 8 | | company may petition the Director, under the | 9 | | procedures provided under Section 304(f), for | 10 | | permission to include all base income and factors of | 11 | | the holding company only with members of a unitary | 12 | | business group apportioning their business income | 13 | | under one subsection of subsections (a), (b), (c), or | 14 | | (d) of Section 304. If the petition is granted, the | 15 | | holding company shall be included in a unitary business | 16 | | group only with persons apportioning their business | 17 | | income under the selected subsection of Section 304 | 18 | | until the Director grants a petition of the holding | 19 | | company either to be included in more than one unitary | 20 | | business group under subparagraph (C) or to include its | 21 | | base income and factors only with members of a unitary | 22 | | business group apportioning their business income | 23 | | under a different subsection of Section 304. | 24 | | (E) If the unitary business group members' | 25 | | accounting periods differ,
the common parent's | 26 | | accounting period or, if there is no common parent, the
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| 1 | | accounting period of the member that is expected to | 2 | | have, on a recurring basis,
the greatest Illinois | 3 | | income tax liability must be used to determine whether | 4 | | to
use the apportionment method provided in subsection | 5 | | (a) or subsection (h) of
Section 304. The
prohibition | 6 | | against membership in a unitary business group for | 7 | | taxpayers
ordinarily required to apportion income | 8 | | under different subsections of Section
304 does not | 9 | | apply to taxpayers required to apportion income under | 10 | | subsection
(a) and subsection (h) of Section
304. The | 11 | | provisions of this amendatory Act of 1998 apply to tax
| 12 | | years ending on or after December 31, 1998.
| 13 | | (28) Subchapter S corporation. The term "Subchapter S | 14 | | corporation"
means a corporation for which there is in | 15 | | effect an election under Section
1362 of the Internal | 16 | | Revenue Code, or for which there is a federal election
to | 17 | | opt out of the provisions of the Subchapter S Revision Act | 18 | | of 1982 and
have applied instead the prior federal | 19 | | Subchapter S rules as in effect on July
1, 1982.
| 20 | | (30) Foreign person. The term "foreign person" means | 21 | | any person who is a nonresident alien individual and any | 22 | | nonindividual entity, regardless of where created or | 23 | | organized, whose business activity outside the United | 24 | | States is 80% or more of the entity's total business | 25 | | activity.
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| 1 | | (b) Other definitions.
| 2 | | (1) Words denoting number, gender, and so forth,
when | 3 | | used in this Act, where not otherwise distinctly expressed | 4 | | or manifestly
incompatible with the intent thereof:
| 5 | | (A) Words importing the singular include and apply | 6 | | to several persons,
parties or things;
| 7 | | (B) Words importing the plural include the | 8 | | singular; and
| 9 | | (C) Words importing the masculine gender include | 10 | | the feminine as well.
| 11 | | (2) "Company" or "association" as including successors | 12 | | and assigns. The
word "company" or "association", when used | 13 | | in reference to a corporation,
shall be deemed to embrace | 14 | | the words "successors and assigns of such company
or | 15 | | association", and in like manner as if these last-named | 16 | | words, or words
of similar import, were expressed.
| 17 | | (3) Other terms. Any term used in any Section of this | 18 | | Act with respect
to the application of, or in connection | 19 | | with, the provisions of any other
Section of this Act shall | 20 | | have the same meaning as in such other Section.
| 21 | | (Source: P.A. 96-641, eff. 8-24-09; 97-507, eff. 8-23-11; | 22 | | 97-636, eff. 6-1-12 .)
| 23 | | Section 99. Effective date. This Act takes effect upon | 24 | | becoming law.
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