Illinois General Assembly - Full Text of SB2246
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Full Text of SB2246  94th General Assembly

SB2246 94TH GENERAL ASSEMBLY


 


 
94TH GENERAL ASSEMBLY
State of Illinois
2005 and 2006
SB2246

 

Introduced 1/11/2006, by Sen. Terry Link

 

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

    Amends the Illinois Income Tax Act. Creates an income tax deduction in an amount equal to 65% of the gross wages paid to a released individual during the released individual's sustained employment with the taxpayer during the taxable year. Defines "released individual" as a person who, within the immediately preceding 3 calendar years prior to initial employment by the taxpayer, has completed a sentence imposed by any State court or federal court in Illinois for any criminal offense for which a term of incarceration of more than 60 days may be imposed, regardless of whether the person was actually incarcerated. Provides that the deduction may not exceed $20,000 per released individual in any taxable year. Creates an income tax deduction for certain tuition, training, and child-care expenses paid by the taxpayer with respect to released individuals who are employed by the taxpayer. Provides that the deduction may not exceed $1,000 per released individual in any taxable year. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         interest paid, accrued, or incurred, directly or
2         indirectly, to the same foreign person; and
3             (EE) An amount equal to the income from intangible
4         property taken into account for the taxable year (net
5         of the deductions allocable thereto) with respect to
6         transactions with a foreign person who would be a
7         member of the taxpayer's unitary business group but for
8         the fact that the foreign person's business activity
9         outside the United States is 80% or more of that
10         person's total business activity, but not to exceed the
11         addition modification required to be made for the same
12         taxable year under Section 203(a)(2)(D-18) for
13         intangible expenses and costs paid, accrued, or
14         incurred, directly or indirectly, to the same foreign
15         person; .
16             (FF) For taxable years ending on or after December
17         31, 2006 and ending on or before December 30, 2011,
18         with respect to employees initially hired on or after
19         the effective date of this amendatory Act of the 94th
20         General Assembly, an amount equal to 65% of the gross
21         wages paid to a released individual during the released
22         individual's sustained employment with the taxpayer
23         during the taxable year. For the purposes of this
24         subparagraph and of subparagraph (GG), "released
25         individual" means a person who, within the immediately
26         preceding 3 calendar years prior to initial employment
27         by the taxpayer, has completed a sentence imposed by
28         any State court or federal court in Illinois for any
29         criminal offense for which a term of incarceration of
30         more than 60 days may be imposed, regardless of whether
31         the person was actually incarcerated; "sustained
32         employment" means a period of employment that is not
33         less than 180 days during the taxable year. The
34         deduction under this subparagraph is in addition to any
35         expense deducted from the taxpayer's federal adjusted
36         gross income or any other deduction under this Act. In

 

 

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1         no event may the deduction under this subparagraph
2         exceed $20,000 per released individual in any taxable
3         year; and
4             (GG) For taxable years ending on or after December
5         31, 2006 and ending on or before December 30, 2011,
6         with respect to employees initially hired on or after
7         the effective date of this amendatory Act of the 94th
8         General Assembly, an amount equal to 100% of the
9         allowable employer costs paid for the benefit of a
10         released individual during the released individual's
11         sustained employment with the taxpayer during the
12         taxable year. For the purpose of this subparagraph,
13         "allowable employer costs" include, without
14         limitation, job-training expenses, tuition for
15         enrollment and the completion of a General Equivalency
16         Degree, and child care. The deduction under this
17         subparagraph is in addition to any expense deducted
18         from the taxpayer's federal adjusted gross income or
19         any other deduction under this Act. In no event may the
20         deduction under this subparagraph exceed $1,000 per
21         released individual in any taxable year.
 
22     (b) Corporations.
23         (1) In general. In the case of a corporation, base
24     income means an amount equal to the taxpayer's taxable
25     income for the taxable year as modified by paragraph (2).
26         (2) Modifications. The taxable income referred to in
27     paragraph (1) shall be modified by adding thereto the sum
28     of the following amounts:
29             (A) An amount equal to all amounts paid or accrued
30         to the taxpayer as interest and all distributions
31         received from regulated investment companies during
32         the taxable year to the extent excluded from gross
33         income in the computation of taxable income;
34             (B) An amount equal to the amount of tax imposed by
35         this Act to the extent deducted from gross income in

 

 

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

 

 

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1             December 31, 1986 shall not exceed the amount of
2             such carryback or carryforward;
3             For taxable years in which there is a net operating
4         loss carryback or carryforward from more than one other
5         taxable year ending prior to December 31, 1986, the
6         addition modification provided in this subparagraph
7         (E) shall be the sum of the amounts computed
8         independently under the preceding provisions of this
9         subparagraph (E) for each such taxable year;
10             (E-5) For taxable years ending after December 31,
11         1997, an amount equal to any eligible remediation costs
12         that the corporation deducted in computing adjusted
13         gross income and for which the corporation claims a
14         credit under subsection (l) of Section 201;
15             (E-10) For taxable years 2001 and thereafter, an
16         amount equal to the bonus depreciation deduction (30%
17         of the adjusted basis of the qualified property) taken
18         on the taxpayer's federal income tax return for the
19         taxable year under subsection (k) of Section 168 of the
20         Internal Revenue Code; and
21             (E-11) If the taxpayer reports a capital gain or
22         loss on the taxpayer's federal income tax return for
23         the taxable year based on a sale or transfer of
24         property for which the taxpayer was required in any
25         taxable year to make an addition modification under
26         subparagraph (E-10), then an amount equal to the
27         aggregate amount of the deductions taken in all taxable
28         years under subparagraph (T) with respect to that
29         property.
30             The taxpayer is required to make the addition
31         modification under this subparagraph only once with
32         respect to any one piece of property;
33             (E-12) For taxable years ending on or after
34         December 31, 2004, an amount equal to the amount
35         otherwise allowed as a deduction in computing base
36         income for interest paid, accrued, or incurred,

 

 

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

 

 

SB2246 - 20 - LRB094 16188 BDD 51431 b

1                 and is paid pursuant to a contract or agreement
2                 that reflects an arm's-length interest rate
3                 and terms; or
4                 (iii) the taxpayer can establish, based on
5             clear and convincing evidence, that the interest
6             paid, accrued, or incurred relates to a contract or
7             agreement entered into at arm's-length rates and
8             terms and the principal purpose for the payment is
9             not federal or Illinois tax avoidance; or
10                 (iv) an item of interest paid, accrued, or
11             incurred, directly or indirectly, to a foreign
12             person if the taxpayer establishes by clear and
13             convincing evidence that the adjustments are
14             unreasonable; or if the taxpayer and the Director
15             agree in writing to the application or use of an
16             alternative method of apportionment under Section
17             304(f).
18                 Nothing in this subsection shall preclude the
19             Director from making any other adjustment
20             otherwise allowed under Section 404 of this Act for
21             any tax year beginning after the effective date of
22             this amendment provided such adjustment is made
23             pursuant to regulation adopted by the Department
24             and such regulations provide methods and standards
25             by which the Department will utilize its authority
26             under Section 404 of this Act;
27             (E-13) For taxable years ending on or after
28         December 31, 2004, an amount equal to the amount of
29         intangible expenses and costs otherwise allowed as a
30         deduction in computing base income, and that were paid,
31         accrued, or incurred, directly or indirectly, to a
32         foreign person who would be a member of the same
33         unitary business group but for the fact that the
34         foreign person's business activity outside the United
35         States is 80% or more of that person's total business
36         activity. The addition modification required by this

 

 

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

 

 

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

 

 

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1             (F) An amount equal to the amount of any tax
2         imposed by this Act which was refunded to the taxpayer
3         and included in such total for the taxable year;
4             (G) An amount equal to any amount included in such
5         total under Section 78 of the Internal Revenue Code;
6             (H) In the case of a regulated investment company,
7         an amount equal to the amount of exempt interest
8         dividends as defined in subsection (b) (5) of Section
9         852 of the Internal Revenue Code, paid to shareholders
10         for the taxable year;
11             (I) With the exception of any amounts subtracted
12         under subparagraph (J), an amount equal to the sum of
13         all amounts disallowed as deductions by (i) Sections
14         171(a) (2), and 265(a)(2) and amounts disallowed as
15         interest expense by Section 291(a)(3) of the Internal
16         Revenue Code, as now or hereafter amended, and all
17         amounts of expenses allocable to interest and
18         disallowed as deductions by Section 265(a)(1) of the
19         Internal Revenue Code, as now or hereafter amended; and
20         (ii) for taxable years ending on or after August 13,
21         1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and
22         832(b)(5)(B)(i) of the Internal Revenue Code; the
23         provisions of this subparagraph are exempt from the
24         provisions of Section 250;
25             (J) An amount equal to all amounts included in such
26         total which are exempt from taxation by this State
27         either by reason of its statutes or Constitution or by
28         reason of the Constitution, treaties or statutes of the
29         United States; provided that, in the case of any
30         statute of this State that exempts income derived from
31         bonds or other obligations from the tax imposed under
32         this Act, the amount exempted shall be the interest net
33         of bond premium amortization;
34             (K) An amount equal to those dividends included in
35         such total which were paid by a corporation which
36         conducts business operations in an Enterprise Zone or

 

 

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

 

 

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

 

 

SB2246 - 26 - LRB094 16188 BDD 51431 b

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

 

 

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1         that interinsurer or reciprocal insurer with respect
2         to the attorney-in-fact under Section 835(b) of the
3         Internal Revenue Code for the taxable year;
4             (S) For taxable years ending on or after December
5         31, 1997, in the case of a Subchapter S corporation, an
6         amount equal to all amounts of income allocable to a
7         shareholder subject to the Personal Property Tax
8         Replacement Income Tax imposed by subsections (c) and
9         (d) of Section 201 of this Act, including amounts
10         allocable to organizations exempt from federal income
11         tax by reason of Section 501(a) of the Internal Revenue
12         Code. This subparagraph (S) is exempt from the
13         provisions of Section 250;
14             (T) For taxable years 2001 and thereafter, for the
15         taxable year in which the bonus depreciation deduction
16         (30% of the adjusted basis of the qualified property)
17         is taken on the taxpayer's federal income tax return
18         under subsection (k) of Section 168 of the Internal
19         Revenue Code and for each applicable taxable year
20         thereafter, an amount equal to "x", where:
21                 (1) "y" equals the amount of the depreciation
22             deduction taken for the taxable year on the
23             taxpayer's federal income tax return on property
24             for which the bonus depreciation deduction (30% of
25             the adjusted basis of the qualified property) was
26             taken in any year under subsection (k) of Section
27             168 of the Internal Revenue Code, but not including
28             the bonus depreciation deduction; and
29                 (2) "x" equals "y" multiplied by 30 and then
30             divided by 70 (or "y" multiplied by 0.429).
31             The aggregate amount deducted under this
32         subparagraph in all taxable years for any one piece of
33         property may not exceed the amount of the bonus
34         depreciation deduction (30% of the adjusted basis of
35         the qualified property) taken on that property on the
36         taxpayer's federal income tax return under subsection

 

 

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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
35         person's total business activity, but not to exceed the
36         addition modification required to be made for the same

 

 

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1         taxable year under Section 203(b)(2)(E-12) for
2         interest paid, accrued, or incurred, directly or
3         indirectly, to the same foreign person; and
4             (X) 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(b)(2)(E-13) for
14         intangible expenses and costs paid, accrued, or
15         incurred, directly or indirectly, to the same foreign
16         person; .
17             (Y) For taxable years ending on or after December
18         31, 2006 and ending on or before December 30, 2011,
19         with respect to employees initially hired on or after
20         the effective date of this amendatory Act of the 94th
21         General Assembly, an amount equal to 65% of the gross
22         wages paid to a released individual during the released
23         individual's sustained employment with the taxpayer
24         during the taxable year. For the purposes of this
25         subparagraph and of subparagraph (Z), "released
26         individual" means a person who, within the immediately
27         preceding 3 calendar years prior to initial employment
28         by the taxpayer, has completed a sentence imposed by
29         any State court or federal court in Illinois for any
30         criminal offense for which a term of incarceration of
31         more than 60 days may be imposed, regardless of whether
32         the person was actually incarcerated; "sustained
33         employment" means a period of employment that is not
34         less than 180 days during the taxable year. The
35         deduction under this subparagraph is in addition to any
36         expense deducted from the taxpayer's federal adjusted

 

 

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1         gross income or any other deduction under this Act. In
2         no event may the deduction under this subparagraph
3         exceed $20,000 per released individual in any taxable
4         year; and
5             (Z) For taxable years ending on or after December
6         31, 2006 and ending on or before December 30, 2011,
7         with respect to employees initially hired on or after
8         the effective date of this amendatory Act of the 94th
9         General Assembly, an amount equal to 100% of the
10         allowable employer costs paid for the benefit of a
11         released individual during the released individual's
12         sustained employment with the taxpayer during the
13         taxable year. For the purpose of this subparagraph,
14         "allowable employer costs" include, without
15         limitation, job-training expenses, tuition for
16         enrollment and the completion of a General Equivalency
17         Degree, and child care. The deduction under this
18         subparagraph is in addition to any expense deducted
19         from the taxpayer's federal adjusted gross income or
20         any other deduction under this Act. In no event may the
21         deduction under this subparagraph exceed $1,000 per
22         released individual in any taxable year.
23         (3) Special rule. For purposes of paragraph (2) (A),
24     "gross income" in the case of a life insurance company, for
25     tax years ending on and after December 31, 1994, shall mean
26     the gross investment income for the taxable year.
 
27     (c) Trusts and estates.
28         (1) In general. In the case of a trust or estate, base
29     income means an amount equal to the taxpayer's taxable
30     income for the taxable year as modified by paragraph (2).
31         (2) Modifications. Subject to the provisions of
32     paragraph (3), the taxable income referred to in paragraph
33     (1) shall be modified by adding thereto the sum of the
34     following amounts:
35             (A) An amount equal to all amounts paid or accrued

 

 

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

 

 

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1             taxable year from any taxable year ending prior to
2             December 31, 1986 shall 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
35         property for which the taxpayer was required in any
36         taxable year to make an addition modification under

 

 

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

 

 

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

 

 

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

 

 

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1         includes patents, patent applications, trade names,
2         trademarks, service marks, copyrights, mask works,
3         trade secrets, and similar types of intangible assets.
4             This paragraph shall not apply to the following:
5                 (i) any item of intangible expenses or costs
6             paid, accrued, or incurred, directly or
7             indirectly, from a transaction with a foreign
8             person who is subject in a foreign country or
9             state, other than a state which requires mandatory
10             unitary reporting, to a tax on or measured by net
11             income with respect to such item; or
12                 (ii) any item of intangible expense or cost
13             paid, accrued, or incurred, directly or
14             indirectly, if the taxpayer can establish, based
15             on a preponderance of the evidence, both of the
16             following:
17                     (a) the foreign person during the same
18                 taxable year paid, accrued, or incurred, the
19                 intangible expense or cost to a person that is
20                 not a related member, and
21                     (b) the transaction giving rise to the
22                 intangible expense or cost between the
23                 taxpayer and the foreign person did not have as
24                 a principal purpose the avoidance of Illinois
25                 income tax, and is paid pursuant to a contract
26                 or agreement that reflects arm's-length terms;
27                 or
28                 (iii) any item of intangible expense or cost
29             paid, accrued, or incurred, directly or
30             indirectly, from a transaction with a foreign
31             person if the taxpayer establishes by clear and
32             convincing evidence, that the adjustments are
33             unreasonable; or if the taxpayer and the Director
34             agree in writing to the application or use of an
35             alternative method of apportionment under Section
36             304(f);

 

 

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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 sum of the
11     following amounts:
12             (H) An amount equal to all amounts included in such
13         total pursuant to the provisions of Sections 402(a),
14         402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
15         Internal Revenue Code or included in such total as
16         distributions under the provisions of any retirement
17         or disability plan for employees of any governmental
18         agency or unit, or retirement payments to retired
19         partners, which payments are excluded in computing net
20         earnings from self employment by Section 1402 of the
21         Internal Revenue Code and regulations adopted pursuant
22         thereto;
23             (I) The valuation limitation amount;
24             (J) An amount equal to the amount of any tax
25         imposed by this Act which was refunded to the taxpayer
26         and included in such total for the taxable year;
27             (K) An amount equal to all amounts included in
28         taxable income as modified by subparagraphs (A), (B),
29         (C), (D), (E), (F) and (G) which are exempt from
30         taxation by this State either by reason of its statutes
31         or Constitution or by reason of the Constitution,
32         treaties or statutes of the United States; provided
33         that, in the case of any statute of this State that
34         exempts income derived from bonds or other obligations
35         from the tax imposed under this Act, the amount
36         exempted shall be the interest net of bond premium

 

 

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1         amortization;
2             (L) With the exception of any amounts subtracted
3         under subparagraph (K), an amount equal to the sum of
4         all amounts disallowed as deductions by (i) Sections
5         171(a) (2) and 265(a)(2) of the Internal Revenue Code,
6         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             (M) An amount equal to those dividends included in
16         such total which were paid by a corporation which
17         conducts business operations in an Enterprise Zone or
18         zones created under the Illinois Enterprise Zone Act
19         and conducts substantially all of its operations in an
20         Enterprise Zone or Zones;
21             (N) An amount equal to any contribution made to a
22         job training project established pursuant to the Tax
23         Increment Allocation Redevelopment Act;
24             (O) An amount equal to those dividends included in
25         such total that were paid by a corporation that
26         conducts business operations in a federally designated
27         Foreign Trade Zone or Sub-Zone and that is designated a
28         High Impact Business located in Illinois; provided
29         that dividends eligible for the deduction provided in
30         subparagraph (M) of paragraph (2) of this subsection
31         shall not be eligible for the deduction provided under
32         this subparagraph (O);
33             (P) An amount equal to the amount of the deduction
34         used to compute the federal income tax credit for
35         restoration of substantial amounts held under claim of
36         right for the taxable year pursuant to Section 1341 of

 

 

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1         the Internal Revenue Code of 1986;
2             (Q) For taxable year 1999 and thereafter, an amount
3         equal to the amount of any (i) distributions, to the
4         extent includible in gross income for federal income
5         tax purposes, made to the taxpayer because of his or
6         her status as a victim of persecution for racial or
7         religious reasons by Nazi Germany or any other Axis
8         regime or as an heir of the victim and (ii) items of
9         income, to the extent includible in gross income for
10         federal income tax purposes, attributable to, derived
11         from or in any way related to assets stolen from,
12         hidden from, or otherwise lost to a victim of
13         persecution for racial or religious reasons by Nazi
14         Germany or any other Axis regime immediately prior to,
15         during, and immediately after World War II, including,
16         but not limited to, interest on the proceeds receivable
17         as insurance under policies issued to a victim of
18         persecution for racial or religious reasons by Nazi
19         Germany or any other Axis regime by European insurance
20         companies immediately prior to and during World War II;
21         provided, however, this subtraction from federal
22         adjusted gross income does not apply to assets acquired
23         with such assets or with the proceeds from the sale of
24         such assets; provided, further, this paragraph shall
25         only apply to a taxpayer who was the first recipient of
26         such assets after their recovery and who is a victim of
27         persecution for racial or religious reasons by Nazi
28         Germany or any other Axis regime or as an heir of the
29         victim. The amount of and the eligibility for any
30         public assistance, benefit, or similar entitlement is
31         not affected by the inclusion of items (i) and (ii) of
32         this paragraph in gross income for federal income tax
33         purposes. This paragraph is exempt from the provisions
34         of Section 250;
35             (R) For taxable years 2001 and thereafter, for the
36         taxable year in which the bonus depreciation deduction

 

 

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

 

 

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

 

 

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1         person; .
2             (W) For taxable years ending on or after December
3         31, 2006 and ending on or before December 30, 2011,
4         with respect to employees initially hired on or after
5         the effective date of this amendatory Act of the 94th
6         General Assembly, an amount equal to 65% of the gross
7         wages paid to a released individual during the released
8         individual's sustained employment with the taxpayer
9         during the taxable year. For the purposes of this
10         subparagraph and of subparagraph (X), "released
11         individual" means a person who, within the immediately
12         preceding 3 calendar years prior to initial employment
13         by the taxpayer, has completed a sentence imposed by
14         any State court or federal court in Illinois for any
15         criminal offense for which a term of incarceration of
16         more than 60 days may be imposed, regardless of whether
17         the person was actually incarcerated; "sustained
18         employment" means a period of employment that is not
19         less than 180 days during the taxable year. The
20         deduction under this subparagraph is in addition to any
21         expense deducted from the taxpayer's federal adjusted
22         gross income or any other deduction under this Act. In
23         no event may the deduction under this subparagraph
24         exceed $20,000 per released individual in any taxable
25         year; and
26             (X) For taxable years ending on or after December
27         31, 2006 and ending on or before December 30, 2011,
28         with respect to employees initially hired on or after
29         the effective date of this amendatory Act of the 94th
30         General Assembly, an amount equal to 100% of the
31         allowable employer costs paid for the benefit of a
32         released individual during the released individual's
33         sustained employment with the taxpayer during the
34         taxable year. For the purpose of this subparagraph,
35         "allowable employer costs" include, without
36         limitation, job-training expenses, tuition for

 

 

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1         enrollment and the completion of a General Equivalency
2         Degree, and child care. The deduction under this
3         subparagraph is in addition to any expense deducted
4         from the taxpayer's federal adjusted gross income or
5         any other deduction under this Act. In no event may the
6         deduction under this subparagraph exceed $1,000 per
7         released individual in any taxable year.
8         (3) Limitation. The amount of any modification
9     otherwise required under this subsection shall, under
10     regulations prescribed by the Department, be adjusted by
11     any amounts included therein which were properly paid,
12     credited, or required to be distributed, or permanently set
13     aside for charitable purposes pursuant to Internal Revenue
14     Code Section 642(c) during the taxable year.
 
15     (d) Partnerships.
16         (1) In general. In the case of a partnership, base
17     income means an amount equal to the taxpayer's taxable
18     income for the taxable year as modified by paragraph (2).
19         (2) Modifications. The taxable income referred to in
20     paragraph (1) shall be modified by adding thereto the sum
21     of the following amounts:
22             (A) An amount equal to all amounts paid or accrued
23         to the taxpayer as interest or dividends during the
24         taxable year to the extent excluded from gross income
25         in the computation of taxable income;
26             (B) An amount equal to the amount of tax imposed by
27         this Act to the extent deducted from gross income for
28         the taxable year;
29             (C) The amount of deductions allowed to the
30         partnership pursuant to Section 707 (c) of the Internal
31         Revenue Code in calculating its taxable income;
32             (D) An amount equal to the amount of the capital
33         gain deduction allowable under the Internal Revenue
34         Code, to the extent deducted from gross income in the
35         computation of taxable income;

 

 

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1             (D-5) For taxable years 2001 and thereafter, an
2         amount equal to the bonus depreciation deduction (30%
3         of the adjusted basis of the qualified property) taken
4         on the taxpayer's federal income tax return for the
5         taxable year under subsection (k) of Section 168 of the
6         Internal Revenue Code;
7             (D-6) If the taxpayer reports a capital gain or
8         loss on the taxpayer's federal income tax return for
9         the taxable year based on a sale or transfer of
10         property for which the taxpayer was required in any
11         taxable year to make an addition modification under
12         subparagraph (D-5), then an amount equal to the
13         aggregate amount of the deductions taken in all taxable
14         years under subparagraph (O) with respect to that
15         property.
16             The taxpayer is required to make the addition
17         modification under this subparagraph only once with
18         respect to any one piece of property;
19             (D-7) For taxable years ending on or after December
20         31, 2004, an amount equal to the amount otherwise
21         allowed as a deduction in computing base income for
22         interest paid, accrued, or incurred, directly or
23         indirectly, to a foreign person who would be a member
24         of the same unitary business group but for the fact the
25         foreign person's business activity outside the United
26         States is 80% or more of the foreign person's total
27         business activity. The addition modification required
28         by this subparagraph shall be reduced to the extent
29         that dividends were included in base income of the
30         unitary group for the same taxable year and received by
31         the taxpayer or by a member of the taxpayer's unitary
32         business group (including amounts included in gross
33         income pursuant to Sections 951 through 964 of the
34         Internal Revenue Code and amounts included in gross
35         income under Section 78 of the Internal Revenue Code)
36         with respect to the stock of the same person to whom

 

 

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1         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
35             unreasonable; or if the taxpayer and the Director
36             agree in writing to the application or use of an

 

 

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

 

 

SB2246 - 47 - LRB094 16188 BDD 51431 b

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

 

 

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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 following
21     amounts:
22             (E) The valuation limitation amount;
23             (F) An amount equal to the amount of any tax
24         imposed by this Act which was refunded to the taxpayer
25         and included in such total for the taxable year;
26             (G) An amount equal to all amounts included in
27         taxable income as modified by subparagraphs (A), (B),
28         (C) and (D) which are exempt from taxation by this
29         State either by reason of its statutes or Constitution
30         or by reason of the Constitution, treaties or statutes
31         of the United States; provided that, in the case of any
32         statute of this State that exempts income derived from
33         bonds or other obligations from the tax imposed under
34         this Act, the amount exempted shall be the interest net
35         of bond premium amortization;
36             (H) Any income of the partnership which

 

 

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1         constitutes personal service income as defined in
2         Section 1348 (b) (1) of the Internal Revenue Code (as
3         in effect December 31, 1981) or a reasonable allowance
4         for compensation paid or accrued for services rendered
5         by partners to the partnership, whichever is greater;
6             (I) An amount equal to all amounts of income
7         distributable to an entity subject to the Personal
8         Property Tax Replacement Income Tax imposed by
9         subsections (c) and (d) of Section 201 of this Act
10         including amounts distributable to organizations
11         exempt from federal income tax by reason of Section
12         501(a) of the Internal Revenue Code;
13             (J) With the exception of any amounts subtracted
14         under subparagraph (G), an amount equal to the sum of
15         all amounts disallowed as deductions by (i) Sections
16         171(a) (2), and 265(2) of the Internal Revenue Code of
17         1954, as now or hereafter amended, and all amounts of
18         expenses allocable to interest and disallowed as
19         deductions by Section 265(1) of the Internal Revenue
20         Code, as now or hereafter amended; and (ii) for taxable
21         years ending on or after August 13, 1999, Sections
22         171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
23         Internal Revenue Code; the provisions of this
24         subparagraph are exempt from the provisions of Section
25         250;
26             (K) An amount equal to those dividends included in
27         such total which were paid by a corporation which
28         conducts business operations in an Enterprise Zone or
29         zones created under the Illinois Enterprise Zone Act,
30         enacted by the 82nd General Assembly, and conducts
31         substantially all of its operations in an Enterprise
32         Zone or Zones;
33             (L) An amount equal to any contribution made to a
34         job training project established pursuant to the Real
35         Property Tax Increment Allocation Redevelopment Act;
36             (M) An amount equal to those dividends included in

 

 

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

 

 

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1         (k) of Section 168 of the Internal Revenue Code;
2             (P) 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         (D-5), 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             (Q) 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             (R) 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
35         person's total business activity, but not to exceed the
36         addition modification required to be made for the same

 

 

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1         taxable year under Section 203(d)(2)(D-7) for interest
2         paid, accrued, or incurred, directly or indirectly, to
3         the same foreign person; and
4             (S) 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(d)(2)(D-8) for
14         intangible expenses and costs paid, accrued, or
15         incurred, directly or indirectly, to the same foreign
16         person.
17             (T) For taxable years ending on or after December
18         31, 2006 and ending on or before December 30, 2011,
19         with respect to employees initially hired on or after
20         the effective date of this amendatory Act of the 94th
21         General Assembly, an amount equal to 65% of the gross
22         wages paid to a released individual during the released
23         individual's sustained employment with the taxpayer
24         during the taxable year. For the purposes of this
25         subparagraph and of subparagraph (U), "released
26         individual" means a person who, within the immediately
27         preceding 3 calendar years prior to initial employment
28         by the taxpayer, has completed a sentence imposed by
29         any State court or federal court in Illinois for any
30         criminal offense for which a term of incarceration of
31         more than 60 days may be imposed, regardless of whether
32         the person was actually incarcerated; "sustained
33         employment" means a period of employment that is not
34         less than 180 days during the taxable year. The
35         deduction under this subparagraph is in addition to any
36         expense deducted from the taxpayer's federal adjusted

 

 

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1         gross income or any other deduction under this Act. In
2         no event may the deduction under this subparagraph
3         exceed $20,000 per released individual in any taxable
4         year; and
5             (U) For taxable years ending on or after December
6         31, 2006 and ending on or before December 30, 2011,
7         with respect to employees initially hired on or after
8         the effective date of this amendatory Act of the 94th
9         General Assembly, an amount equal to 100% of the
10         allowable employer costs paid for the benefit of a
11         released individual during the released individual's
12         sustained employment with the taxpayer during the
13         taxable year. For the purpose of this subparagraph,
14         "allowable employer costs" include, without
15         limitation, job-training expenses, tuition for
16         enrollment and the completion of a General Equivalency
17         Degree, and child care. The deduction under this
18         subparagraph is in addition to any expense deducted
19         from the taxpayer's federal adjusted gross income or
20         any other deduction under this Act. In no event may the
21         deduction under this subparagraph exceed $1,000 per
22         released individual in any taxable year.
 
23     (e) Gross income; adjusted gross income; taxable income.
24         (1) In general. Subject to the provisions of paragraph
25     (2) and subsection (b) (3), for purposes of this Section
26     and Section 803(e), a taxpayer's gross income, adjusted
27     gross income, or taxable income for the taxable year shall
28     mean the amount of gross income, adjusted gross income or
29     taxable income properly reportable for federal income tax
30     purposes for the taxable year under the provisions of the
31     Internal Revenue Code. Taxable income may be less than
32     zero. However, for taxable years ending on or after
33     December 31, 1986, net operating loss carryforwards from
34     taxable years ending prior to December 31, 1986, may not
35     exceed the sum of federal taxable income for the taxable

 

 

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1     year before net operating loss deduction, plus the excess
2     of addition modifications over subtraction modifications
3     for the taxable year. For taxable years ending prior to
4     December 31, 1986, taxable income may never be an amount in
5     excess of the net operating loss for the taxable year as
6     defined in subsections (c) and (d) of Section 172 of the
7     Internal Revenue Code, provided that when taxable income of
8     a corporation (other than a Subchapter S corporation),
9     trust, or estate is less than zero and addition
10     modifications, other than those provided by subparagraph
11     (E) of paragraph (2) of subsection (b) for corporations or
12     subparagraph (E) of paragraph (2) of subsection (c) for
13     trusts and estates, exceed subtraction modifications, an
14     addition modification must be made under those
15     subparagraphs for any other taxable year to which the
16     taxable income less than zero (net operating loss) is
17     applied under Section 172 of the Internal Revenue Code or
18     under subparagraph (E) of paragraph (2) of this subsection
19     (e) applied in conjunction with Section 172 of the Internal
20     Revenue Code.
21         (2) Special rule. For purposes of paragraph (1) of this
22     subsection, the taxable income properly reportable for
23     federal income tax purposes shall mean:
24             (A) Certain life insurance companies. In the case
25         of a life insurance company subject to the tax imposed
26         by Section 801 of the Internal Revenue Code, life
27         insurance company taxable income, plus the amount of
28         distribution from pre-1984 policyholder surplus
29         accounts as calculated under Section 815a of the
30         Internal Revenue Code;
31             (B) Certain other insurance companies. In the case
32         of mutual insurance companies subject to the tax
33         imposed by Section 831 of the Internal Revenue Code,
34         insurance company taxable income;
35             (C) Regulated investment companies. In the case of
36         a regulated investment company subject to the tax

 

 

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1         imposed by Section 852 of the Internal Revenue Code,
2         investment company taxable income;
3             (D) Real estate investment trusts. In the case of a
4         real estate investment trust subject to the tax imposed
5         by Section 857 of the Internal Revenue Code, real
6         estate investment trust taxable income;
7             (E) Consolidated corporations. In the case of a
8         corporation which is a member of an affiliated group of
9         corporations filing a consolidated income tax return
10         for the taxable year for federal income tax purposes,
11         taxable income determined as if such corporation had
12         filed a separate return for federal income tax purposes
13         for the taxable year and each preceding taxable year
14         for which it was a member of an affiliated group. For
15         purposes of this subparagraph, the taxpayer's separate
16         taxable income shall be determined as if the election
17         provided by Section 243(b) (2) of the Internal Revenue
18         Code had been in effect for all such years;
19             (F) Cooperatives. In the case of a cooperative
20         corporation or association, the taxable income of such
21         organization determined in accordance with the
22         provisions of Section 1381 through 1388 of the Internal
23         Revenue Code;
24             (G) Subchapter S corporations. In the case of: (i)
25         a Subchapter S corporation for which there is in effect
26         an election for the taxable year under Section 1362 of
27         the Internal Revenue Code, the taxable income of such
28         corporation determined in accordance with Section
29         1363(b) of the Internal Revenue Code, except that
30         taxable income shall take into account those items
31         which are required by Section 1363(b)(1) of the
32         Internal Revenue Code to be separately stated; and (ii)
33         a Subchapter S corporation for which there is in effect
34         a federal election to opt out of the provisions of the
35         Subchapter S Revision Act of 1982 and have applied
36         instead the prior federal Subchapter S rules as in

 

 

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1         effect on July 1, 1982, the taxable income of such
2         corporation determined in accordance with the federal
3         Subchapter S rules as in effect on July 1, 1982; and
4             (H) Partnerships. In the case of a partnership,
5         taxable income determined in accordance with Section
6         703 of the Internal Revenue Code, except that taxable
7         income shall take into account those items which are
8         required by Section 703(a)(1) to be separately stated
9         but which would be taken into account by an individual
10         in calculating his taxable income.
11         (3) Recapture of business expenses on disposition of
12     asset or business. Notwithstanding any other law to the
13     contrary, if in prior years income from an asset or
14     business has been classified as business income and in a
15     later year is demonstrated to be non-business income, then
16     all expenses, without limitation, deducted in such later
17     year and in the 2 immediately preceding taxable years
18     related to that asset or business that generated the
19     non-business income shall be added back and recaptured as
20     business income in the year of the disposition of the asset
21     or business. Such amount shall be apportioned to Illinois
22     using the greater of the apportionment fraction computed
23     for the business under Section 304 of this Act for the
24     taxable year or the average of the apportionment fractions
25     computed for the business under Section 304 of this Act for
26     the taxable year and for the 2 immediately preceding
27     taxable years.
28     (f) Valuation limitation amount.
29         (1) In general. The valuation limitation amount
30     referred to in subsections (a) (2) (G), (c) (2) (I) and
31     (d)(2) (E) is an amount equal to:
32             (A) The sum of the pre-August 1, 1969 appreciation
33         amounts (to the extent consisting of gain reportable
34         under the provisions of Section 1245 or 1250 of the
35         Internal Revenue Code) for all property in respect of
36         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.
 
35     (g) Double deductions. Unless specifically provided

 

 

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