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90_HB0991
New Act
35 ILCS 5/203 from Ch. 120, par. 2-203
Creates the Educational Choice Act. Establishes a pilot
program under which, beginning with the 1998-99 school year,
the parents or guardians of pupils residing within a selected
geographic region of the Chicago school district are entitled
to vouchers for payment of qualified education expenses
incurred by the pupils while enrolled at public or non-home
based, nonpublic elementary or secondary schools that are
located in the region selected. A pupil must be a member of
a family that has a total family income that does not exceed
one and one-half times the family income level necessary to
qualify for free meals under the National School Lunch Act in
order to participate in the program. The State Board of
Education is to reimburse the school at which a pupil enrolls
for the amount of the voucher (which cannot exceed the lesser
of $2,500 or the pupil's qualified education expenses
reasonably incurred at the school at which the pupil is
enrolled, subject to equitable allocation of a lower amount
if the aggregate amount needed to fund vouchers for all
qualifying pupils would otherwise exceed $5,000,000 in any
year). Creates a Council of Advisers that is to select the
region that is to be the locus of the pilot program. Defines
terms. Adds provisions relative to the manner in which
vouchers are requested, issued, and paid. Provides for a
reduction in the Chicago school district's State aid by an
amount equal to total vouchers paid, subject to a maximum
reduction in one year of $5,000,000. Provides that the
amount of a voucher is not taxable for Illinois income tax
purposes to a person who redeems the voucher. Amends the
Illinois Income Tax Act to provide that an amount equal to a
redeemed voucher shall be deducted from the adjusted gross
income that constitutes the base income of an individual for
Illinois income tax purposes. Provides that the Act is
repealed July 1, 2002. Effective immediately.
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1 AN ACT concerning a pilot program of vouchers for
2 educational expenses.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 1. Short Title. This Act may be cited as the
6 Educational Choice Act.
7 Section 5. Findings and declaration of policy. The
8 General Assembly finds and declares that:
9 (1) The imposition on families of the compulsory
10 education law imposes grave responsibilities on the General
11 Assembly to safeguard the academic freedom of choice of
12 schools of taxpaying parents and students.
13 (2) There is a crisis in elementary and secondary
14 education in Illinois. Many school children are performing
15 significantly below relevant national standards; others are
16 dropping out of school before completing the ordinary course
17 of secondary education. A substantial number of our young
18 people are leaving school without the basic skills and
19 knowledge that will enable them to find and hold a job or
20 otherwise function in our society. Businesses cite an
21 untrained workforce as a reason for locating elsewhere.
22 (3) Some schools in Illinois are providing a better
23 elementary and secondary education than others. Pupils in
24 those schools are performing near or above relevant national
25 standards and generally remain in school until they complete
26 the ordinary course of their secondary education. Young
27 people leave these schools with the basic skills and
28 knowledge that will enable them to find and hold jobs and
29 otherwise function as productive members of society.
30 (4) Parents of school age children are frequently unable
31 to enroll their children in schools that will provide them a
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1 quality education. Sometimes this inability is due to laws
2 and regulations that limit parents' freedom to select schools
3 that they believe can provide their children with a quality
4 education. Sometimes this inability is due to the parents'
5 lack of standing to influence the educational policies and
6 procedures of schools their children attend or lack of funds
7 to pay for a quality education. Businesses cite the
8 unavailability of quality schools to which their employees
9 can send their children as a reason for locating elsewhere.
10 (5) Adopting a pilot educational choice program will
11 enable parents to select schools they believe will provide a
12 quality education for their children, empower them to
13 influence the educational policies and procedures of the
14 schools their children attend, and provide them with at least
15 a portion of the funds necessary to pay for a quality
16 education. Such a program will begin to help alleviate the
17 crisis in Illinois elementary and secondary education and
18 assist more Illinois children to become productive members of
19 our society. It will also encourage businesses to locate in
20 Illinois and promote employment.
21 (6) The provisions of this Act are in the public
22 interest, for the public benefit, and serve a secular public
23 purpose.
24 Section 10. Definitions. As used in this Act:
25 (1) "Qualifying pupil" means an individual who:
26 (i) resides within the geographic region in a school
27 district with a population exceeding 500,000 selected by the
28 Council of Advisers established in Section 45 of this Act;
29 (ii) is under age 21 at the close of the school
30 year for which the voucher is sought;
31 (iii) during the school year for which the voucher
32 is sought is a full-time pupil enrolled in a 1st through 12th
33 grade education program at any qualifying school as defined
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1 in this Act; and
2 (iv) is a member of a family that has a total
3 family income that does not exceed an amount equal to 1.5
4 times the family income level necessary to qualify for free
5 meals under the National School Lunch Act.
6 (2) "Qualified education expenses" means costs
7 reasonably incurred by a custodian on behalf of a qualifying
8 pupil for services at the qualifying school in which the
9 pupil is enrolled during the regular school year. Qualified
10 education expenses shall not include costs incurred for
11 supplies or extra-curricular activities.
12 (3) "Qualifying school" means any public or non-home
13 based, nonpublic elementary or secondary school that is
14 located within the geographic region selected by the Council
15 of Advisers, that is in compliance with Title VI of the Civil
16 Rights Act of 1964, and attendance at which satisfies the
17 requirements of Section 26-1 of the School Code, except that
18 nothing in that Section 26-1 shall be construed to require a
19 child to attend any particular public or nonpublic school.
20 (4) "Custodian" means, with respect to a qualifying
21 pupil, an Illinois resident who is the parent, or parents, or
22 legal guardian of such qualifying pupil.
23 (5) "Voucher" means a written instrument with which a
24 custodian of a qualifying pupil may pay a qualifying school a
25 sum certain for qualified education expenses incurred on
26 behalf of such qualifying pupil at the school. The voucher
27 shall require the State Board of Education to reimburse the
28 qualifying school within a designated time period for a sum
29 which is the least of the following: (i) the qualified
30 education expenses incurred by a qualifying pupil at the
31 school in which the pupil is enrolled, or (ii) $2,500.
32 Section 15. Educational choice program. Beginning with
33 the 1998-99 school year, a custodian of a qualifying pupil
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1 shall be entitled, subject to item (2) of Section 45, to a
2 voucher for payment of qualified education expenses incurred
3 on behalf of a qualifying pupil at any qualified school in
4 which such pupil is enrolled.
5 Section 20. Request for a voucher. A custodian who
6 applies in accordance with procedures established by the
7 State Board of Education shall receive a voucher with the
8 dollar limits set out in this Act. Such procedures shall
9 require application for the voucher, with documentation as to
10 eligibility, no later than October 1 of the year of
11 attendance.
12 Section 25. Issuance and payment of voucher. The State
13 Board of Education shall establish procedures for the
14 issuance of the voucher to a custodian who has made proper
15 application, the presentation of the voucher by the custodian
16 to the qualifying school, and the presentation of the voucher
17 for payment by the qualifying school. Such procedures shall
18 require that:
19 (1) the voucher be issued to the custodian no later than
20 November 15 of the school year of attendance;
21 (2) the custodian present the voucher to the qualifying
22 school no later than November 30 of the year of attendance;
23 (3) the qualifying school present the voucher to the
24 State Board of Education for payment no later than December
25 15 of the school year of attendance; and
26 (4) the State Board of Education pay the voucher no
27 later than February 1 of the school year of attendance.
28 Section 30. Funding. The State Board of Education shall
29 reduce the State aid otherwise due a school district with a
30 population exceeding 500,000 by the total amount of vouchers
31 paid under the provisions of this Act. In no year may the
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1 total amount of State aid reduced by the State Board of
2 Education from such district exceed $5,000,000. The State
3 Board of Education shall insure that the State aid payable to
4 districts with populations of less than 500,000 is neither
5 reduced nor increased as a result of the reduction of State
6 aid provided in this Section to a district with a population
7 exceeding 500,000. A school district with a population
8 exceeding 500,000 may count qualifying pupils who receive
9 vouchers and who previously were enrolled in its schools for
10 the purposes of determining the apportionment of State aid
11 provided under Section 18-8 of the School Code.
12 Section 35. Not gross income. The amount of any voucher
13 redeemed under this Act shall not be considered gross income
14 and shall not be taxable for Illinois income tax purposes.
15 Section 40. Penalties. It shall be a Class 3 felony to
16 use or attempt to use a voucher for any purpose other than a
17 purpose permitted by this Act. It shall be a Class 3 felony
18 to, with intent to defraud, knowingly forge, alter, or
19 misrepresent information on a voucher or on any documents
20 submitted in application for a voucher, to issue or deliver
21 any such document knowing it to have been thus forged,
22 altered, or based on misrepresentation, or to possess, with
23 intent to issue or deliver, any such document knowing it to
24 have been forged, altered, or based on misrepresentation.
25 Section 45. Council of Advisers. There is created a
26 Council of Advisers to consist of 15 members appointed as
27 follows: the Governor, the President of the Senate, the
28 Minority Leader of the Senate, the Speaker of the House, and
29 the Minority Leader of the House shall each appoint one
30 representative of public schools, one representative of
31 nonpublic schools, and one representative of the general
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1 public. The term of each member shall commence upon
2 appointment and shall expire on July 1, 2002. Vacancies on
3 the Council shall be filled by the respective appointing
4 authority. If a legislative leader fails to make his or her
5 appointment to the Council, within 60 days after the
6 effective date of this Act or 30 days after the occurrence of
7 a vacancy on the Council, the appointment shall be made by
8 the Governor. Members of the Council shall select a chairman
9 and such other officers as it deems necessary.
10 The Council shall advise the State Board of Education on
11 the operation of this Act and shall have other powers and
12 duties as follows:
13 (1) The Council shall, following public hearings and
14 input from educators, parents, and students, select one of
15 the 6 recognized regions that on the effective date of this
16 Act comprise a school district with a population exceeding
17 500,000 as the geographical area for the operation of the
18 pilot program created by this Act. To the extent possible,
19 the Council shall select a region that has a broad selection
20 of public and nonpublic schools, adequate transportation
21 resources available for pupils, and demonstrated parental and
22 community support for the program. The region selected by
23 the Council shall not be changed prior to July 1, 2002.
24 (2) If the amount needed to fund vouchers for all
25 qualifying pupils exceeds $5,000,000 in any year, the Council
26 shall determine an equitable way to allocate the $5,000,000
27 among the qualifying pupils consistent with the stated
28 purpose and policy of this Act.
29 (3) The Council shall arrange to have conducted an
30 independent evaluation of the effectiveness of this program.
31 The evaluation shall be updated annually and a comprehensive
32 review and evaluation shall be completed after the end of the
33 2001-2002 school year.
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1 Section 50. Rules and regulations. The State Board of
2 Education shall, upon recommendation of the Council of
3 Advisers, promulgate the rules and regulations necessary to
4 implement the Act. The State Board of Education shall
5 promulgate such rules and regulations only to the extent
6 necessary to facilitate the operation of this program and
7 shall not use this Act to create further substantive
8 educational requirements on any school.
9 Section 55. Notification. Beginning with the 1998-99
10 school year, at the start of each school year, the chief
11 administrative officer of each school within the selected
12 region shall notify custodians of qualifying pupils that
13 vouchers are available.
14 Section 75. The Illinois Income Tax Act is amended by
15 changing Section 203 as follows:
16 (35 ILCS 5/203) (from Ch. 120, par. 2-203)
17 Sec. 203. Base income defined.
18 (a) Individuals.
19 (1) In general. In the case of an individual, base
20 income means an amount equal to the taxpayer's adjusted
21 gross income for the taxable year as modified by
22 paragraph (2).
23 (2) Modifications. The adjusted gross income
24 referred to in paragraph (1) shall be modified by adding
25 thereto the sum of the following amounts:
26 (A) An amount equal to all amounts paid or
27 accrued to the taxpayer as interest or dividends
28 during the taxable year to the extent excluded from
29 gross income in the computation of adjusted gross
30 income, except stock dividends of qualified public
31 utilities described in Section 305(e) of the
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1 Internal Revenue Code;
2 (B) An amount equal to the amount of tax
3 imposed by this Act to the extent deducted from
4 gross income in the computation of adjusted gross
5 income for the taxable year;
6 (C) An amount equal to the amount received
7 during the taxable year as a recovery or refund of
8 real property taxes paid with respect to the
9 taxpayer's principal residence under the Revenue Act
10 of 1939 and for which a deduction was previously
11 taken under subparagraph (L) of this paragraph (2)
12 prior to July 1, 1991, the retrospective application
13 date of Article 4 of Public Act 87-17. In the case
14 of multi-unit or multi-use structures and farm
15 dwellings, the taxes on the taxpayer's principal
16 residence shall be that portion of the total taxes
17 for the entire property which is attributable to
18 such principal residence;
19 (D) An amount equal to the amount of the
20 capital gain deduction allowable under the Internal
21 Revenue Code, to the extent deducted from gross
22 income in the computation of adjusted gross income;
23 and
24 (D-5) An amount, to the extent not included in
25 adjusted gross income, equal to the amount of money
26 withdrawn by the taxpayer in the taxable year from a
27 medical care savings account and the interest earned
28 on the account in the taxable year of a withdrawal
29 pursuant to subsection (b) of Section 20 of the
30 Medical Care Savings Account Act;
31 and by deducting from the total so obtained the sum of
32 the following amounts:
33 (E) Any amount included in such total in
34 respect of any compensation (including but not
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1 limited to any compensation paid or accrued to a
2 serviceman while a prisoner of war or missing in
3 action) paid to a resident by reason of being on
4 active duty in the Armed Forces of the United States
5 and in respect of any compensation paid or accrued
6 to a resident who as a governmental employee was a
7 prisoner of war or missing in action, and in respect
8 of any compensation paid to a resident in 1971 or
9 thereafter for annual training performed pursuant to
10 Sections 502 and 503, Title 32, United States Code
11 as a member of the Illinois National Guard;
12 (F) An amount equal to all amounts included in
13 such total pursuant to the provisions of Sections
14 402(a), 402(c), 403(a), 403(b), 406(a), 407(a), and
15 408 of the Internal Revenue Code, or included in
16 such total as distributions under the provisions of
17 any retirement or disability plan for employees of
18 any governmental agency or unit, or retirement
19 payments to retired partners, which payments are
20 excluded in computing net earnings from self
21 employment by Section 1402 of the Internal Revenue
22 Code and regulations adopted pursuant thereto;
23 (G) The valuation limitation amount;
24 (H) An amount equal to the amount of any tax
25 imposed by this Act which was refunded to the
26 taxpayer and included in such total for the taxable
27 year;
28 (I) An amount equal to all amounts included in
29 such total pursuant to the provisions of Section 111
30 of the Internal Revenue Code as a recovery of items
31 previously deducted from adjusted gross income in
32 the computation of taxable income;
33 (J) An amount equal to those dividends
34 included in such total which were paid by a
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1 corporation which conducts business operations in an
2 Enterprise Zone or zones created under the Illinois
3 Enterprise Zone Act, and conducts substantially all
4 of its operations in an Enterprise Zone or zones;
5 (K) An amount equal to those dividends
6 included in such total that were paid by a
7 corporation that conducts business operations in a
8 federally designated Foreign Trade Zone or Sub-Zone
9 and that is designated a High Impact Business
10 located in Illinois; provided that dividends
11 eligible for the deduction provided in subparagraph
12 (J) of paragraph (2) of this subsection shall not be
13 eligible for the deduction provided under this
14 subparagraph (K);
15 (L) For taxable years ending after December
16 31, 1983, an amount equal to all social security
17 benefits and railroad retirement benefits included
18 in such total pursuant to Sections 72(r) and 86 of
19 the Internal Revenue Code;
20 (M) With the exception of any amounts
21 subtracted under subparagraph (N), an amount equal
22 to the sum of all amounts disallowed as deductions
23 by Sections 171(a) (2), and 265(2) of the Internal
24 Revenue Code of 1954, as now or hereafter amended,
25 and all amounts of expenses allocable to interest
26 and disallowed as deductions by Section 265(1) of
27 the Internal Revenue Code of 1954, as now or
28 hereafter amended;
29 (N) An amount equal to all amounts included in
30 such total which are exempt from taxation by this
31 State either by reason of its statutes or
32 Constitution or by reason of the Constitution,
33 treaties or statutes of the United States; provided
34 that, in the case of any statute of this State that
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1 exempts income derived from bonds or other
2 obligations from the tax imposed under this Act, the
3 amount exempted shall be the interest net of bond
4 premium amortization;
5 (O) An amount equal to any contribution made
6 to a job training project established pursuant to
7 the Tax Increment Allocation Redevelopment Act;
8 (P) An amount equal to the amount of the
9 deduction used to compute the federal income tax
10 credit for restoration of substantial amounts held
11 under claim of right for the taxable year pursuant
12 to Section 1341 of the Internal Revenue Code of
13 1986;
14 (Q) An amount equal to any amounts included in
15 such total, received by the taxpayer as an
16 acceleration in the payment of life, endowment or
17 annuity benefits in advance of the time they would
18 otherwise be payable as an indemnity for a terminal
19 illness;
20 (R) An amount equal to the amount of any
21 federal or State bonus paid to veterans of the
22 Persian Gulf War;
23 (S) An amount, to the extent included in
24 adjusted gross income, equal to the amount of a
25 contribution made in the taxable year on behalf of
26 the taxpayer to a medical care savings account
27 established under the Medical Care Savings Account
28 Act to the extent the contribution is accepted by
29 the account administrator as provided in that Act;
30 (T) An amount, to the extent included in
31 adjusted gross income, equal to the amount of
32 interest earned in the taxable year on a medical
33 care savings account established under the Medical
34 Care Savings Account Act on behalf of the taxpayer,
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1 other than interest added pursuant to item (D-5) of
2 this paragraph (2);
3 (U) For one taxable year beginning on or after
4 January 1, 1994, an amount equal to the total amount
5 of tax imposed and paid under subsections (a) and
6 (b) of Section 201 of this Act on grant amounts
7 received by the taxpayer under the Nursing Home
8 Grant Assistance Act during the taxpayer's taxable
9 years 1992 and 1993; and
10 (V) Beginning with tax years ending on or
11 after December 31, 1995 and ending with tax years
12 ending on or before December 31, 1999, an amount
13 equal to the amount paid by a taxpayer who is a
14 self-employed taxpayer, a partner of a partnership,
15 or a shareholder in a Subchapter S corporation for
16 health insurance or long-term care insurance for
17 that taxpayer or that taxpayer's spouse or
18 dependents, to the extent that the amount paid for
19 that health insurance or long-term care insurance
20 may be deducted under Section 213 of the Internal
21 Revenue Code of 1986, has not been deducted on the
22 federal income tax return of the taxpayer, and does
23 not exceed the taxable income attributable to that
24 taxpayer's income, self-employment income, or
25 Subchapter S corporation income; except that no
26 deduction shall be allowed under this item (V) if
27 the taxpayer is eligible to participate in any
28 health insurance or long-term care insurance plan of
29 an employer of the taxpayer or the taxpayer's
30 spouse. The amount of the health insurance and
31 long-term care insurance subtracted under this item
32 (V) shall be determined by multiplying total health
33 insurance and long-term care insurance premiums paid
34 by the taxpayer times a number that represents the
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1 fractional percentage of eligible medical expenses
2 under Section 213 of the Internal Revenue Code of
3 1986 not actually deducted on the taxpayer's federal
4 income tax return; and.
5 (W) An amount equal to the amount of any
6 voucher redeemed under the Educational Choice Act.
7 (b) Corporations.
8 (1) In general. In the case of a corporation, base
9 income means an amount equal to the taxpayer's taxable
10 income for the taxable year as modified by paragraph (2).
11 (2) Modifications. The taxable income referred to
12 in paragraph (1) shall be modified by adding thereto the
13 sum of the following amounts:
14 (A) An amount equal to all amounts paid or
15 accrued to the taxpayer as interest and all
16 distributions received from regulated investment
17 companies during the taxable year to the extent
18 excluded from gross income in the computation of
19 taxable income;
20 (B) An amount equal to the amount of tax
21 imposed by this Act to the extent deducted from
22 gross income in the computation of taxable income
23 for the taxable year;
24 (C) In the case of a regulated investment
25 company or real estate investment trust, an amount
26 equal to the excess of (i) the net long-term capital
27 gain for the taxable year, over (ii) the amount of
28 the capital gain dividends designated as such in
29 accordance with Section 852(b)(3)(C) or Section
30 857(b)(3)(C) of the Internal Revenue Code and any
31 amount designated under Section 852(b)(3)(D) of the
32 Internal Revenue Code, attributable to the taxable
33 year.
34 This amendatory Act of 1995 is declarative of existing
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1 law and is not a new enactment.
2 (D) The amount of any net operating loss
3 deduction taken in arriving at taxable income, other
4 than a net operating loss carried forward from a
5 taxable year ending prior to December 31, 1986; and
6 (E) For taxable years in which a net operating
7 loss carryback or carryforward from a taxable year
8 ending prior to December 31, 1986 is an element of
9 taxable income under paragraph (1) of subsection (e)
10 or subparagraph (E) of paragraph (2) of subsection
11 (e), the amount by which addition modifications
12 other than those provided by this subparagraph (E)
13 exceeded subtraction modifications in such earlier
14 taxable year, with the following limitations applied
15 in the order that they are listed:
16 (i) the addition modification relating to
17 the net operating loss carried back or forward
18 to the taxable year from any taxable year
19 ending prior to December 31, 1986 shall be
20 reduced by the amount of addition modification
21 under this subparagraph (E) which related to
22 that net operating loss and which was taken
23 into account in calculating the base income of
24 an earlier taxable year, and
25 (ii) the addition modification relating
26 to the net operating loss carried back or
27 forward to the taxable year from any taxable
28 year ending prior to December 31, 1986 shall
29 not exceed the amount of such carryback or
30 carryforward;
31 For taxable years in which there is a net
32 operating loss carryback or carryforward from more
33 than one other taxable year ending prior to December
34 31, 1986, the addition modification provided in this
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1 subparagraph (E) shall be the sum of the amounts
2 computed independently under the preceding
3 provisions of this subparagraph (E) for each such
4 taxable year,
5 and by deducting from the total so obtained the sum of
6 the following amounts:
7 (F) An amount equal to the amount of any tax
8 imposed by this Act which was refunded to the
9 taxpayer and included in such total for the taxable
10 year;
11 (G) An amount equal to any amount included in
12 such total under Section 78 of the Internal Revenue
13 Code;
14 (H) In the case of a regulated investment
15 company, an amount equal to the amount of exempt
16 interest dividends as defined in subsection (b) (5)
17 of Section 852 of the Internal Revenue Code, paid to
18 shareholders for the taxable year;
19 (I) With the exception of any amounts
20 subtracted under subparagraph (J), an amount equal
21 to the sum of all amounts disallowed as deductions
22 by Sections 171(a) (2), and 265(a)(2) and amounts
23 disallowed as interest expense by Section 291(a)(3)
24 of the Internal Revenue Code, as now or hereafter
25 amended, and all amounts of expenses allocable to
26 interest and disallowed as deductions by Section
27 265(a)(1) of the Internal Revenue Code, as now or
28 hereafter amended;
29 (J) An amount equal to all amounts included in
30 such total which are exempt from taxation by this
31 State either by reason of its statutes or
32 Constitution or by reason of the Constitution,
33 treaties or statutes of the United States; provided
34 that, in the case of any statute of this State that
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1 exempts income derived from bonds or other
2 obligations from the tax imposed under this Act, the
3 amount exempted shall be the interest net of bond
4 premium amortization;
5 (K) An amount equal to those dividends
6 included in such total which were paid by a
7 corporation which conducts business operations in an
8 Enterprise Zone or zones created under the Illinois
9 Enterprise Zone Act and conducts substantially all
10 of its operations in an Enterprise Zone or zones;
11 (L) An amount equal to those dividends
12 included in such total that were paid by a
13 corporation that conducts business operations in a
14 federally designated Foreign Trade Zone or Sub-Zone
15 and that is designated a High Impact Business
16 located in Illinois; provided that dividends
17 eligible for the deduction provided in subparagraph
18 (K) of paragraph 2 of this subsection shall not be
19 eligible for the deduction provided under this
20 subparagraph (L);
21 (M) For any taxpayer that is a financial
22 organization within the meaning of Section 304(c) of
23 this Act, an amount included in such total as
24 interest income from a loan or loans made by such
25 taxpayer to a borrower, to the extent that such a
26 loan is secured by property which is eligible for
27 the Enterprise Zone Investment Credit. To determine
28 the portion of a loan or loans that is secured by
29 property eligible for a Section 201(h) investment
30 credit to the borrower, the entire principal amount
31 of the loan or loans between the taxpayer and the
32 borrower should be divided into the basis of the
33 Section 201(h) investment credit property which
34 secures the loan or loans, using for this purpose
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1 the original basis of such property on the date that
2 it was placed in service in the Enterprise Zone.
3 The subtraction modification available to taxpayer
4 in any year under this subsection shall be that
5 portion of the total interest paid by the borrower
6 with respect to such loan attributable to the
7 eligible property as calculated under the previous
8 sentence;
9 (M-1) For any taxpayer that is a financial
10 organization within the meaning of Section 304(c) of
11 this Act, an amount included in such total as
12 interest income from a loan or loans made by such
13 taxpayer to a borrower, to the extent that such a
14 loan is secured by property which is eligible for
15 the High Impact Business Investment Credit. To
16 determine the portion of a loan or loans that is
17 secured by property eligible for a Section 201(i)
18 investment credit to the borrower, the entire
19 principal amount of the loan or loans between the
20 taxpayer and the borrower should be divided into the
21 basis of the Section 201(i) investment credit
22 property which secures the loan or loans, using for
23 this purpose the original basis of such property on
24 the date that it was placed in service in a
25 federally designated Foreign Trade Zone or Sub-Zone
26 located in Illinois. No taxpayer that is eligible
27 for the deduction provided in subparagraph (M) of
28 paragraph (2) of this subsection shall be eligible
29 for the deduction provided under this subparagraph
30 (M-1). The subtraction modification available to
31 taxpayers in any year under this subsection shall be
32 that portion of the total interest paid by the
33 borrower with respect to such loan attributable to
34 the eligible property as calculated under the
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1 previous sentence;
2 (N) Two times any contribution made during the
3 taxable year to a designated zone organization to
4 the extent that the contribution (i) qualifies as a
5 charitable contribution under subsection (c) of
6 Section 170 of the Internal Revenue Code and (ii)
7 must, by its terms, be used for a project approved
8 by the Department of Commerce and Community Affairs
9 under Section 11 of the Illinois Enterprise Zone
10 Act;
11 (O) An amount equal to: (i) 85% for taxable
12 years ending on or before December 31, 1992, or, a
13 percentage equal to the percentage allowable under
14 Section 243(a)(1) of the Internal Revenue Code of
15 1986 for taxable years ending after December 31,
16 1992, of the amount by which dividends included in
17 taxable income and received from a corporation that
18 is not created or organized under the laws of the
19 United States or any state or political subdivision
20 thereof, including, for taxable years ending on or
21 after December 31, 1988, dividends received or
22 deemed received or paid or deemed paid under
23 Sections 951 through 964 of the Internal Revenue
24 Code, exceed the amount of the modification provided
25 under subparagraph (G) of paragraph (2) of this
26 subsection (b) which is related to such dividends;
27 plus (ii) 100% of the amount by which dividends,
28 included in taxable income and received, including,
29 for taxable years ending on or after December 31,
30 1988, dividends received or deemed received or paid
31 or deemed paid under Sections 951 through 964 of the
32 Internal Revenue Code, from any such corporation
33 specified in clause (i) that would but for the
34 provisions of Section 1504 (b) (3) of the Internal
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1 Revenue Code be treated as a member of the
2 affiliated group which includes the dividend
3 recipient, exceed the amount of the modification
4 provided under subparagraph (G) of paragraph (2) of
5 this subsection (b) which is related to such
6 dividends;
7 (P) An amount equal to any contribution made
8 to a job training project established pursuant to
9 the Tax Increment Allocation Redevelopment Act; and
10 (Q) An amount equal to the amount of the
11 deduction used to compute the federal income tax
12 credit for restoration of substantial amounts held
13 under claim of right for the taxable year pursuant
14 to Section 1341 of the Internal Revenue Code of
15 1986.
16 (3) Special rule. For purposes of paragraph (2)
17 (A), "gross income" in the case of a life insurance
18 company, for tax years ending on and after December 31,
19 1994, shall mean the gross investment income for the
20 taxable year.
21 (c) Trusts and estates.
22 (1) In general. In the case of a trust or estate,
23 base income means an amount equal to the taxpayer's
24 taxable income for the taxable year as modified by
25 paragraph (2).
26 (2) Modifications. Subject to the provisions of
27 paragraph (3), the taxable income referred to in
28 paragraph (1) shall be modified by adding thereto the sum
29 of the following amounts:
30 (A) An amount equal to all amounts paid or
31 accrued to the taxpayer as interest or dividends
32 during the taxable year to the extent excluded from
33 gross income in the computation of taxable income;
34 (B) In the case of (i) an estate, $600; (ii) a
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1 trust which, under its governing instrument, is
2 required to distribute all of its income currently,
3 $300; and (iii) any other trust, $100, but in each
4 such case, only to the extent such amount was
5 deducted in the computation of taxable income;
6 (C) An amount equal to the amount of tax
7 imposed by this Act to the extent deducted from
8 gross income in the computation of taxable income
9 for the taxable year;
10 (D) The amount of any net operating loss
11 deduction taken in arriving at taxable income, other
12 than a net operating loss carried forward from a
13 taxable year ending prior to December 31, 1986;
14 (E) For taxable years in which a net operating
15 loss carryback or carryforward from a taxable year
16 ending prior to December 31, 1986 is an element of
17 taxable income under paragraph (1) of subsection (e)
18 or subparagraph (E) of paragraph (2) of subsection
19 (e), the amount by which addition modifications
20 other than those provided by this subparagraph (E)
21 exceeded subtraction modifications in such taxable
22 year, with the following limitations applied in the
23 order that they are listed:
24 (i) the addition modification relating to
25 the net operating loss carried back or forward
26 to the taxable year from any taxable year
27 ending prior to December 31, 1986 shall be
28 reduced by the amount of addition modification
29 under this subparagraph (E) which related to
30 that net operating loss and which was taken
31 into account in calculating the base income of
32 an earlier taxable year, and
33 (ii) the addition modification relating
34 to the net operating loss carried back or
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1 forward to the taxable year from any taxable
2 year ending prior to December 31, 1986 shall
3 not exceed the amount of such carryback or
4 carryforward;
5 For taxable years in which there is a net
6 operating loss carryback or carryforward from more
7 than one other taxable year ending prior to December
8 31, 1986, the addition modification provided in this
9 subparagraph (E) shall be the sum of the amounts
10 computed independently under the preceding
11 provisions of this subparagraph (E) for each such
12 taxable year;
13 (F) For taxable years ending on or after
14 January 1, 1989, an amount equal to the tax deducted
15 pursuant to Section 164 of the Internal Revenue Code
16 if the trust or estate is claiming the same tax for
17 purposes of the Illinois foreign tax credit under
18 Section 601 of this Act; and
19 (G) An amount equal to the amount of the
20 capital gain deduction allowable under the Internal
21 Revenue Code, to the extent deducted from gross
22 income in the computation of taxable income;
23 and by deducting from the total so obtained the sum of
24 the following amounts:
25 (H) An amount equal to all amounts included in
26 such total pursuant to the provisions of Sections
27 402(a), 402(c), 403(a), 403(b), 406(a), 407(a) and
28 408 of the Internal Revenue Code or included in such
29 total as distributions under the provisions of any
30 retirement or disability plan for employees of any
31 governmental agency or unit, or retirement payments
32 to retired partners, which payments are excluded in
33 computing net earnings from self employment by
34 Section 1402 of the Internal Revenue Code and
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1 regulations adopted pursuant thereto;
2 (I) The valuation limitation amount;
3 (J) An amount equal to the amount of any tax
4 imposed by this Act which was refunded to the
5 taxpayer and included in such total for the taxable
6 year;
7 (K) An amount equal to all amounts included in
8 taxable income as modified by subparagraphs (A),
9 (B), (C), (D), (E), (F) and (G) which are exempt
10 from taxation by this State either by reason of its
11 statutes or Constitution or by reason of the
12 Constitution, treaties or statutes of the United
13 States; provided that, in the case of any statute of
14 this State that exempts income derived from bonds or
15 other obligations from the tax imposed under this
16 Act, the amount exempted shall be the interest net
17 of bond premium amortization;
18 (L) With the exception of any amounts
19 subtracted under subparagraph (K), an amount equal
20 to the sum of all amounts disallowed as deductions
21 by Sections 171(a) (2) and 265(a)(2) of the Internal
22 Revenue Code, as now or hereafter amended, and all
23 amounts of expenses allocable to interest and
24 disallowed as deductions by Section 265(1) of the
25 Internal Revenue Code of 1954, as now or hereafter
26 amended;
27 (M) An amount equal to those dividends
28 included in such total which were paid by a
29 corporation which conducts business operations in an
30 Enterprise Zone or zones created under the Illinois
31 Enterprise Zone Act and conducts substantially all
32 of its operations in an Enterprise Zone or Zones;
33 (N) An amount equal to any contribution made
34 to a job training project established pursuant to
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1 the Tax Increment Allocation Redevelopment Act;
2 (O) An amount equal to those dividends
3 included in such total that were paid by a
4 corporation that conducts business operations in a
5 federally designated Foreign Trade Zone or Sub-Zone
6 and that is designated a High Impact Business
7 located in Illinois; provided that dividends
8 eligible for the deduction provided in subparagraph
9 (M) of paragraph (2) of this subsection shall not be
10 eligible for the deduction provided under this
11 subparagraph (O); and
12 (P) An amount equal to the amount of the
13 deduction used to compute the federal income tax
14 credit for restoration of substantial amounts held
15 under claim of right for the taxable year pursuant
16 to Section 1341 of the Internal Revenue Code of
17 1986.
18 (3) Limitation. The amount of any modification
19 otherwise required under this subsection shall, under
20 regulations prescribed by the Department, be adjusted by
21 any amounts included therein which were properly paid,
22 credited, or required to be distributed, or permanently
23 set aside for charitable purposes pursuant to Internal
24 Revenue Code Section 642(c) during the taxable year.
25 (d) Partnerships.
26 (1) In general. In the case of a partnership, base
27 income means an amount equal to the taxpayer's taxable
28 income for the taxable year as modified by paragraph (2).
29 (2) Modifications. The taxable income referred to
30 in paragraph (1) shall be modified by adding thereto the
31 sum of the following amounts:
32 (A) An amount equal to all amounts paid or
33 accrued to the taxpayer as interest or dividends
34 during the taxable year to the extent excluded from
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1 gross income in the computation of taxable income;
2 (B) An amount equal to the amount of tax
3 imposed by this Act to the extent deducted from
4 gross income for the taxable year; and
5 (C) The amount of deductions allowed to the
6 partnership pursuant to Section 707 (c) of the
7 Internal Revenue Code in calculating its taxable
8 income;
9 (D) An amount equal to the amount of the
10 capital gain deduction allowable under the Internal
11 Revenue Code, to the extent deducted from gross
12 income in the computation of taxable income;
13 and by deducting from the total so obtained the following
14 amounts:
15 (E) The valuation limitation amount;
16 (F) An amount equal to the amount of any tax
17 imposed by this Act which was refunded to the
18 taxpayer and included in such total for the taxable
19 year;
20 (G) An amount equal to all amounts included in
21 taxable income as modified by subparagraphs (A),
22 (B), (C) and (D) which are exempt from taxation by
23 this State either by reason of its statutes or
24 Constitution or by reason of the Constitution,
25 treaties or statutes of the United States; provided
26 that, in the case of any statute of this State that
27 exempts income derived from bonds or other
28 obligations from the tax imposed under this Act, the
29 amount exempted shall be the interest net of bond
30 premium amortization;
31 (H) Any income of the partnership which
32 constitutes personal service income as defined in
33 Section 1348 (b) (1) of the Internal Revenue Code
34 (as in effect December 31, 1981) or a reasonable
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1 allowance for compensation paid or accrued for
2 services rendered by partners to the partnership,
3 whichever is greater;
4 (I) An amount equal to all amounts of income
5 distributable to an entity subject to the Personal
6 Property Tax Replacement Income Tax imposed by
7 subsections (c) and (d) of Section 201 of this Act
8 including amounts distributable to organizations
9 exempt from federal income tax by reason of Section
10 501(a) of the Internal Revenue Code;
11 (J) With the exception of any amounts
12 subtracted under subparagraph (G), an amount equal
13 to the sum of all amounts disallowed as deductions
14 by Sections 171(a) (2), and 265(2) of the Internal
15 Revenue Code of 1954, as now or hereafter amended,
16 and all amounts of expenses allocable to interest
17 and disallowed as deductions by Section 265(1) of
18 the Internal Revenue Code, as now or hereafter
19 amended;
20 (K) An amount equal to those dividends
21 included in such total which were paid by a
22 corporation which conducts business operations in an
23 Enterprise Zone or zones created under the Illinois
24 Enterprise Zone Act, enacted by the 82nd General
25 Assembly, and which does not conduct such operations
26 other than in an Enterprise Zone or Zones;
27 (L) An amount equal to any contribution made
28 to a job training project established pursuant to
29 the Real Property Tax Increment Allocation
30 Redevelopment Act;
31 (M) An amount equal to those dividends
32 included in such total that were paid by a
33 corporation that conducts business operations in a
34 federally designated Foreign Trade Zone or Sub-Zone
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1 and that is designated a High Impact Business
2 located in Illinois; provided that dividends
3 eligible for the deduction provided in subparagraph
4 (K) of paragraph (2) of this subsection shall not be
5 eligible for the deduction provided under this
6 subparagraph (M); and
7 (N) An amount equal to the amount of the
8 deduction used to compute the federal income tax
9 credit for restoration of substantial amounts held
10 under claim of right for the taxable year pursuant
11 to Section 1341 of the Internal Revenue Code of
12 1986.
13 (e) Gross income; adjusted gross income; taxable income.
14 (1) In general. Subject to the provisions of
15 paragraph (2) and subsection (b) (3), for purposes of
16 this Section and Section 803(e), a taxpayer's gross
17 income, adjusted gross income, or taxable income for the
18 taxable year shall mean the amount of gross income,
19 adjusted gross income or taxable income properly
20 reportable for federal income tax purposes for the
21 taxable year under the provisions of the Internal Revenue
22 Code. Taxable income may be less than zero. However, for
23 taxable years ending on or after December 31, 1986, net
24 operating loss carryforwards from taxable years ending
25 prior to December 31, 1986, may not exceed the sum of
26 federal taxable income for the taxable year before net
27 operating loss deduction, plus the excess of addition
28 modifications over subtraction modifications for the
29 taxable year. For taxable years ending prior to December
30 31, 1986, taxable income may never be an amount in excess
31 of the net operating loss for the taxable year as defined
32 in subsections (c) and (d) of Section 172 of the Internal
33 Revenue Code, provided that when taxable income of a
34 corporation (other than a Subchapter S corporation),
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1 trust, or estate is less than zero and addition
2 modifications, other than those provided by subparagraph
3 (E) of paragraph (2) of subsection (b) for corporations
4 or subparagraph (E) of paragraph (2) of subsection (c)
5 for trusts and estates, exceed subtraction modifications,
6 an addition modification must be made under those
7 subparagraphs for any other taxable year to which the
8 taxable income less than zero (net operating loss) is
9 applied under Section 172 of the Internal Revenue Code or
10 under subparagraph (E) of paragraph (2) of this
11 subsection (e) applied in conjunction with Section 172 of
12 the Internal Revenue Code.
13 (2) Special rule. For purposes of paragraph (1) of
14 this subsection, the taxable income properly reportable
15 for federal income tax purposes shall mean:
16 (A) Certain life insurance companies. In the
17 case of a life insurance company subject to the tax
18 imposed by Section 801 of the Internal Revenue Code,
19 life insurance company taxable income, plus the
20 amount of distribution from pre-1984 policyholder
21 surplus accounts as calculated under Section 815a of
22 the Internal Revenue Code;
23 (B) Certain other insurance companies. In the
24 case of mutual insurance companies subject to the
25 tax imposed by Section 831 of the Internal Revenue
26 Code, insurance company taxable income;
27 (C) Regulated investment companies. In the
28 case of a regulated investment company subject to
29 the tax imposed by Section 852 of the Internal
30 Revenue Code, investment company taxable income;
31 (D) Real estate investment trusts. In the
32 case of a real estate investment trust subject to
33 the tax imposed by Section 857 of the Internal
34 Revenue Code, real estate investment trust taxable
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1 income;
2 (E) Consolidated corporations. In the case of
3 a corporation which is a member of an affiliated
4 group of corporations filing a consolidated income
5 tax return for the taxable year for federal income
6 tax purposes, taxable income determined as if such
7 corporation had filed a separate return for federal
8 income tax purposes for the taxable year and each
9 preceding taxable year for which it was a member of
10 an affiliated group. For purposes of this
11 subparagraph, the taxpayer's separate taxable income
12 shall be determined as if the election provided by
13 Section 243(b) (2) of the Internal Revenue Code had
14 been in effect for all such years;
15 (F) Cooperatives. In the case of a
16 cooperative corporation or association, the taxable
17 income of such organization determined in accordance
18 with the provisions of Section 1381 through 1388 of
19 the Internal Revenue Code;
20 (G) Subchapter S corporations. In the case
21 of: (i) a Subchapter S corporation for which there
22 is in effect an election for the taxable year under
23 Section 1362 of the Internal Revenue Code, the
24 taxable income of such corporation determined in
25 accordance with Section 1363(b) of the Internal
26 Revenue Code, except that taxable income shall take
27 into account those items which are required by
28 Section 1363(b)(1) of the Internal Revenue Code to
29 be separately stated; and (ii) a Subchapter S
30 corporation for which there is in effect a federal
31 election to opt out of the provisions of the
32 Subchapter S Revision Act of 1982 and have applied
33 instead the prior federal Subchapter S rules as in
34 effect on July 1, 1982, the taxable income of such
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1 corporation determined in accordance with the
2 federal Subchapter S rules as in effect on July 1,
3 1982; and
4 (H) Partnerships. In the case of a
5 partnership, taxable income determined in accordance
6 with Section 703 of the Internal Revenue Code,
7 except that taxable income shall take into account
8 those items which are required by Section 703(a)(1)
9 to be separately stated but which would be taken
10 into account by an individual in calculating his
11 taxable income.
12 (f) Valuation limitation amount.
13 (1) In general. The valuation limitation amount
14 referred to in subsections (a) (2) (G), (c) (2) (I) and
15 (d)(2) (E) is an amount equal to:
16 (A) The sum of the pre-August 1, 1969
17 appreciation amounts (to the extent consisting of
18 gain reportable under the provisions of Section 1245
19 or 1250 of the Internal Revenue Code) for all
20 property in respect of which such gain was reported
21 for the taxable year; plus
22 (B) The lesser of (i) the sum of the
23 pre-August 1, 1969 appreciation amounts (to the
24 extent consisting of capital gain) for all property
25 in respect of which such gain was reported for
26 federal income tax purposes for the taxable year, or
27 (ii) the net capital gain for the taxable year,
28 reduced in either case by any amount of such gain
29 included in the amount determined under subsection
30 (a) (2) (F) or (c) (2) (H).
31 (2) Pre-August 1, 1969 appreciation amount.
32 (A) If the fair market value of property
33 referred to in paragraph (1) was readily
34 ascertainable on August 1, 1969, the pre-August 1,
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1 1969 appreciation amount for such property is the
2 lesser of (i) the excess of such fair market value
3 over the taxpayer's basis (for determining gain) for
4 such property on that date (determined under the
5 Internal Revenue Code as in effect on that date), or
6 (ii) the total gain realized and reportable for
7 federal income tax purposes in respect of the sale,
8 exchange or other disposition of such property.
9 (B) If the fair market value of property
10 referred to in paragraph (1) was not readily
11 ascertainable on August 1, 1969, the pre-August 1,
12 1969 appreciation amount for such property is that
13 amount which bears the same ratio to the total gain
14 reported in respect of the property for federal
15 income tax purposes for the taxable year, as the
16 number of full calendar months in that part of the
17 taxpayer's holding period for the property ending
18 July 31, 1969 bears to the number of full calendar
19 months in the taxpayer's entire holding period for
20 the property.
21 (C) The Department shall prescribe such
22 regulations as may be necessary to carry out the
23 purposes of this paragraph.
24 (g) Double deductions. Unless specifically provided
25 otherwise, nothing in this Section shall permit the same item
26 to be deducted more than once.
27 (h) Legislative intention. Except as expressly provided
28 by this Section there shall be no modifications or
29 limitations on the amounts of income, gain, loss or deduction
30 taken into account in determining gross income, adjusted
31 gross income or taxable income for federal income tax
32 purposes for the taxable year, or in the amount of such items
33 entering into the computation of base income and net income
34 under this Act for such taxable year, whether in respect of
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1 property values as of August 1, 1969 or otherwise.
2 (Source: P.A. 88-195; 88-648, eff. 9-16-94; 88-669, eff.
3 11-29-94; 88-670, eff. 12-2-94; 89-89, eff. 6-30-95; 89-235,
4 eff. 8-4-95; 89-418, eff. 11-15-95; 89-460, eff. 5-24-96;
5 89-626, eff. 8-9-96.)
6 Section 80. Repeal. This Act is repealed July 1, 2002.
7 Section 99. Effective Date. This Act takes effect upon
8 becoming law.