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90_HB2495
35 ILCS 5/304 from Ch. 120, par. 3-304
35 ILCS 5/804 from Ch. 120, par. 8-804
35 ILCS 5/1501 from Ch. 120, par. 15-1501
Amends the Illinois Income Tax Act. Provides that for
tax years ending on or after December 31, 1998, persons other
than residents who derive business income from this State and
one or more other states shall apportion their business
income using a single factor sales formula. Provides that
this sales factor shall be a fraction, the numerator of which
is the total sales of the person in this State during the
taxable year, and the denominator of which is the total sales
of the person everywhere during the taxable year. Provides
that no penalty shall be imposed for failure to pay the
estimated tax due before the effective date of this
amendatory Act if the underpayments are solely attributable
to the change in the apportionment of income. In the
definition of "unitary business group", provides that if the
members' accounting periods differ, the common parent's
accounting period, or if there is no common parent, the
accounting period of the member that is expected to have, on
a recurring basis, the greatest Illinois income tax liability
must be used to determine which apportionment method to use.
Provides that the provisions of this amendatory Act apply to
tax years ending on or after December 31, 1998. Effective
immediately.
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1 AN ACT to amend the Illinois Income Tax Act by changing
2 Sections 304, 804, and 1501.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 5. The Illinois Income Tax Act is amended by
6 changing Sections 304, 804, and 1501 as follows:
7 (35 ILCS 5/304) (from Ch. 120, par. 3-304)
8 Sec. 304. Business income of persons other than
9 residents.
10 (a) In general. The business income of a person other
11 than a resident shall be allocated to this State if such
12 person's business income is derived solely from this State.
13 If a person other than a resident derives business income
14 from this State and one or more other states, then, for tax
15 years ending on or before December 30, 1998, and except as
16 otherwise provided by this Section, such person's business
17 income shall be apportioned to this State by multiplying the
18 income by a fraction, the numerator of which is the sum of
19 the property factor (if any), the payroll factor (if any) and
20 200% of the sales factor (if any), and the denominator of
21 which is 4 reduced by the number of factors other than the
22 sales factor which have a denominator of zero and by an
23 additional 2 if the sales factor has a denominator of zero.
24 For tax years ending on or after December 31, 1998, and
25 except as otherwise provided by this Section, persons other
26 than residents who derive business income from this State and
27 one or more other states shall apportion their business
28 income to this State as provided in subsection (h) of this
29 Section.
30 (1) Property factor.
31 (A) The property factor is a fraction, the
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1 numerator of which is the average value of the person's
2 real and tangible personal property owned or rented and
3 used in the trade or business in this State during the
4 taxable year and the denominator of which is the average
5 value of all the person's real and tangible personal
6 property owned or rented and used in the trade or
7 business during the taxable year.
8 (B) Property owned by the person is valued at its
9 original cost. Property rented by the person is valued at
10 8 times the net annual rental rate. Net annual rental
11 rate is the annual rental rate paid by the person less
12 any annual rental rate received by the person from
13 sub-rentals.
14 (C) The average value of property shall be
15 determined by averaging the values at the beginning and
16 ending of the taxable year but the Director may require
17 the averaging of monthly values during the taxable year
18 if reasonably required to reflect properly the average
19 value of the person's property.
20 (2) Payroll factor.
21 (A) The payroll factor is a fraction, the numerator
22 of which is the total amount paid in this State during
23 the taxable year by the person for compensation, and the
24 denominator of which is the total compensation paid
25 everywhere during the taxable year.
26 (B) Compensation is paid in this State if:
27 (i) The individual's service is performed
28 entirely within this State;
29 (ii) The individual's service is performed
30 both within and without this State, but the service
31 performed without this State is incidental to the
32 individual's service performed within this State; or
33 (iii) Some of the service is performed within
34 this State and either the base of operations, or if
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1 there is no base of operations, the place from which
2 the service is directed or controlled is within this
3 State, or the base of operations or the place from
4 which the service is directed or controlled is not
5 in any state in which some part of the service is
6 performed, but the individual's residence is in this
7 State.
8 Beginning with taxable years ending on or after
9 December 31, 1992, for residents of states that impose a
10 comparable tax liability on residents of this State, for
11 purposes of item (i) of this paragraph (B), in the case
12 of persons who perform personal services under personal
13 service contracts for sports performances, services by
14 that person at a sporting event taking place in Illinois
15 shall be deemed to be a performance entirely within this
16 State.
17 (3) Sales factor.
18 (A) The sales factor is a fraction, the numerator
19 of which is the total sales of the person in this State
20 during the taxable year, and the denominator of which is
21 the total sales of the person everywhere during the
22 taxable year.
23 (B) Sales of tangible personal property are in this
24 State if:
25 (i) The property is delivered or shipped to a
26 purchaser, other than the United States government,
27 within this State regardless of the f. o. b. point
28 or other conditions of the sale; or
29 (ii) The property is shipped from an office,
30 store, warehouse, factory or other place of storage
31 in this State and either the purchaser is the United
32 States government or the person is not taxable in
33 the state of the purchaser; provided, however, that
34 premises owned or leased by a person who has
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1 independently contracted with the seller for the
2 printing of newspapers, periodicals or books shall
3 not be deemed to be an office, store, warehouse,
4 factory or other place of storage for purposes of
5 this Section. Sales of tangible personal property
6 are not in this State if the seller and purchaser
7 would be members of the same unitary business group
8 but for the fact that either the seller or purchaser
9 is a person with 80% or more of total business
10 activity outside of the United States and the
11 property is purchased for resale.
12 (C) Sales, other than sales of tangible personal
13 property, are in this State if:
14 (i) The income-producing activity is performed
15 in this State; or
16 (ii) The income-producing activity is
17 performed both within and without this State and a
18 greater proportion of the income-producing activity
19 is performed within this State than without this
20 State, based on performance costs.
21 (D) For taxable years ending on or after December
22 31, 1995, the following items of income shall not be
23 included in the numerator or denominator of the sales
24 factor: dividends; amounts included under Section 78 of
25 the Internal Revenue Code; and Subpart F income as
26 defined in Section 952 of the Internal Revenue Code. No
27 inference shall be drawn from the enactment of this
28 paragraph (D) in construing this Section for taxable
29 years ending before December 31, 1995.
30 (b) Insurance companies.
31 (1) In general. Except as otherwise provided by
32 paragraph (2), business income of an insurance company for a
33 taxable year shall be apportioned to this State by
34 multiplying such income by a fraction, the numerator of which
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1 is the direct premiums written for insurance upon property or
2 risk in this State, and the denominator of which is the
3 direct premiums written for insurance upon property or risk
4 everywhere. For purposes of this subsection, the term "direct
5 premiums written" means the total amount of direct premiums
6 written, assessments and annuity considerations as reported
7 for the taxable year on the annual statement filed by the
8 company with the Illinois Director of Insurance in the form
9 approved by the National Convention of Insurance
10 Commissioners or such other form as may be prescribed in lieu
11 thereof.
12 (2) Reinsurance. If the principal source of premiums
13 written by an insurance company consists of premiums for
14 reinsurance accepted by it, the business income of such
15 company shall be apportioned to this State by multiplying
16 such income by a fraction, the numerator of which is the sum
17 of (i) direct premiums written for insurance upon property or
18 risk in this State, plus (ii) premiums written for
19 reinsurance accepted in respect of property or risk in this
20 State, and the denominator of which is the sum of (iii)
21 direct premiums written for insurance upon property or risk
22 everywhere, plus (iv) premiums written for reinsurance
23 accepted in respect of property or risk everywhere. For
24 purposes of this paragraph, premiums written for reinsurance
25 accepted in respect of property or risk in this State,
26 whether or not otherwise determinable, may, at the election
27 of the company, be determined on the basis of the proportion
28 which premiums written for reinsurance accepted from
29 companies commercially domiciled in Illinois bears to
30 premiums written for reinsurance accepted from all sources,
31 or, alternatively, in the proportion which the sum of the
32 direct premiums written for insurance upon property or risk
33 in this State by each ceding company from which reinsurance
34 is accepted bears to the sum of the total direct premiums
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1 written by each such ceding company for the taxable year.
2 (c) Financial organizations.
3 (1) In general. Business income of a financial
4 organization shall be apportioned to this State by
5 multiplying such income by a fraction, the numerator of which
6 is its business income from sources within this State, and
7 the denominator of which is its business income from all
8 sources. For the purposes of this subsection, the business
9 income of a financial organization from sources within this
10 State is the sum of the amounts referred to in subparagraphs
11 (A) through (E) following, but excluding the adjusted income
12 of an international banking facility as determined in
13 paragraph (2):
14 (A) Fees, commissions or other compensation for
15 financial services rendered within this State;
16 (B) Gross profits from trading in stocks, bonds or
17 other securities managed within this State;
18 (C) Dividends, and interest from Illinois
19 customers, which are received within this State;
20 (D) Interest charged to customers at places of
21 business maintained within this State for carrying debit
22 balances of margin accounts, without deduction of any
23 costs incurred in carrying such accounts; and
24 (E) Any other gross income resulting from the
25 operation as a financial organization within this State.
26 In computing the amounts referred to in paragraphs (A)
27 through (E) of this subsection, any amount received by a
28 member of an affiliated group (determined under Section
29 1504(a) of the Internal Revenue Code but without
30 reference to whether any such corporation is an
31 "includible corporation" under Section 1504(b) of the
32 Internal Revenue Code) from another member of such group
33 shall be included only to the extent such amount exceeds
34 expenses of the recipient directly related thereto.
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1 (2) International Banking Facility.
2 (A) Adjusted Income. The adjusted income of an
3 international banking facility is its income reduced by
4 the amount of the floor amount.
5 (B) Floor Amount. The floor amount shall be the
6 amount, if any, determined by multiplying the income of
7 the international banking facility by a fraction, not
8 greater than one, which is determined as follows:
9 (i) The numerator shall be:
10 The average aggregate, determined on a
11 quarterly basis, of the financial organization's
12 loans to banks in foreign countries, to foreign
13 domiciled borrowers (except where secured primarily
14 by real estate) and to foreign governments and other
15 foreign official institutions, as reported for its
16 branches, agencies and offices within the state on
17 its "Consolidated Report of Condition", Schedule A,
18 Lines 2.c., 5.b., and 7.a., which was filed with the
19 Federal Deposit Insurance Corporation and other
20 regulatory authorities, for the year 1980, minus
21 The average aggregate, determined on a
22 quarterly basis, of such loans (other than loans of
23 an international banking facility), as reported by
24 the financial institution for its branches, agencies
25 and offices within the state, on the corresponding
26 Schedule and lines of the Consolidated Report of
27 Condition for the current taxable year, provided,
28 however, that in no case shall the amount determined
29 in this clause (the subtrahend) exceed the amount
30 determined in the preceding clause (the minuend);
31 and
32 (ii) the denominator shall be the average
33 aggregate, determined on a quarterly basis, of the
34 international banking facility's loans to banks in
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1 foreign countries, to foreign domiciled borrowers
2 (except where secured primarily by real estate) and
3 to foreign governments and other foreign official
4 institutions, which were recorded in its financial
5 accounts for the current taxable year.
6 (C) Change to Consolidated Report of Condition and
7 in Qualification. In the event the Consolidated Report
8 of Condition which is filed with the Federal Deposit
9 Insurance Corporation and other regulatory authorities is
10 altered so that the information required for determining
11 the floor amount is not found on Schedule A, lines 2.c.,
12 5.b. and 7.a., the financial institution shall notify the
13 Department and the Department may, by regulations or
14 otherwise, prescribe or authorize the use of an
15 alternative source for such information. The financial
16 institution shall also notify the Department should its
17 international banking facility fail to qualify as such,
18 in whole or in part, or should there be any amendment or
19 change to the Consolidated Report of Condition, as
20 originally filed, to the extent such amendment or change
21 alters the information used in determining the floor
22 amount.
23 (d) Transportation services. Business income derived
24 from furnishing transportation services shall be apportioned
25 to this State in accordance with paragraphs (1) and (2):
26 (1) Such business income (other than that derived
27 from transportation by pipeline) shall be apportioned to
28 this State by multiplying such income by a fraction, the
29 numerator of which is the revenue miles of the person in
30 this State, and the denominator of which is the revenue
31 miles of the person everywhere. For purposes of this
32 paragraph, a revenue mile is the transportation of 1
33 passenger or 1 net ton of freight the distance of 1 mile
34 for a consideration. Where a person is engaged in the
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1 transportation of both passengers and freight, the
2 fraction above referred to shall be determined by means
3 of an average of the passenger revenue mile fraction and
4 the freight revenue mile fraction, weighted to reflect
5 the person's
6 (A) relative railway operating income from
7 total passenger and total freight service, as
8 reported to the Interstate Commerce Commission, in
9 the case of transportation by railroad, and
10 (B) relative gross receipts from passenger and
11 freight transportation, in case of transportation
12 other than by railroad.
13 (2) Such business income derived from
14 transportation by pipeline shall be apportioned to this
15 State by multiplying such income by a fraction, the
16 numerator of which is the revenue miles of the person in
17 this State, and the denominator of which is the revenue
18 miles of the person everywhere. For the purposes of this
19 paragraph, a revenue mile is the transportation by
20 pipeline of 1 barrel of oil, 1,000 cubic feet of gas, or
21 of any specified quantity of any other substance, the
22 distance of 1 mile for a consideration.
23 (e) Combined apportionment. Where 2 or more persons are
24 engaged in a unitary business as described in subsection
25 (a)(27) of Section 1501, a part of which is conducted in this
26 State by one or more members of the group, the business
27 income attributable to this State by any such member or
28 members shall be apportioned by means of the combined
29 apportionment method.
30 (f) Alternative allocation. If the allocation and
31 apportionment provisions of subsections (a) through (e) and
32 of subsection (h) do not fairly represent the extent of a
33 person's business activity in this State, the person may
34 petition for, or the Director may require, in respect of all
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1 or any part of the person's business activity, if reasonable:
2 (1) Separate accounting;
3 (2) The exclusion of any one or more factors;
4 (3) The inclusion of one or more additional factors
5 which will fairly represent the person's business
6 activities in this State; or
7 (4) The employment of any other method to
8 effectuate an equitable allocation and apportionment of
9 the person's business income.
10 (g) Cross reference. For allocation of business income
11 by residents, see Section 301(a).
12 (h) Sales factor. For tax years ending on or after
13 December 31, 1998, persons other than residents who derive
14 business income from this State and one or more other states
15 shall apportion their business income to this State by
16 multiplying the income by the sales factor.
17 (1) The sales factor is a fraction, the numerator
18 of which is the total sales of the person in this State
19 during the taxable year, and the denominator of which is
20 the total sales of the person everywhere during the
21 taxable year.
22 (2) Sales of tangible personal property are in this
23 State if the property is delivered or shipped to a
24 purchaser within this State regardless of the f.o.b.
25 point or other conditions of the sale.
26 (3) Sales, other than sales of tangible personal
27 property, are in this State if:
28 (A) the income producing activity is performed
29 in this State; or
30 (B) the income producing activity is performed
31 both within and without this State and a greater
32 proportion of the income-producing activity is
33 performed within this State than without this State,
34 based on performance costs.
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1 (4) The following items of income shall not be
2 included in the numerator or denominator of the sales
3 factor: dividends; amounts included under Section 78 of
4 the Internal Revenue Code; and Subpart F income as
5 defined in Section 952 of the Internal Revenue Code.
6 (Source: P.A. 89-379, eff. 1-1-96; 89-399, eff. 8-20-95;
7 89-626, eff. 8-9-96; 90-562, eff. 12-16-97.)
8 (35 ILCS 5/804) (from Ch. 120, par. 8-804)
9 Sec. 804. Failure to Pay Estimated Tax.
10 (a) In general. In case of any underpayment of estimated
11 tax by a taxpayer, except as provided in subsection (d) or
12 (e), the taxpayer shall be liable to a penalty in an amount
13 determined at the rate prescribed by Section 3-3 of the
14 Uniform Penalty and Interest Act upon the amount of the
15 underpayment (determined under subsection (b)) for each
16 required installment.
17 (b) Amount of underpayment. For purposes of subsection
18 (a), the amount of the underpayment shall be the excess of:
19 (1) the amount of the installment which would be
20 required to be paid under subsection (c), over
21 (2) the amount, if any, of the installment paid on
22 or before the last date prescribed for payment.
23 (c) Amount of Required Installments.
24 (1) Amount.
25 (A) In General. Except as provided in
26 paragraph (2), the amount of any required
27 installment shall be 25% of the required annual
28 payment.
29 (B) Required Annual Payment. For purposes of
30 subparagraph (A), the term "required annual payment"
31 means the lesser of
32 (i) 90% of the tax shown on the return
33 for the taxable year, or if no return is filed,
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1 90% of the tax for such year, or
2 (ii) 100% of the tax shown on the return
3 of the taxpayer for the preceding taxable year
4 if a return showing a liability for tax was
5 filed by the taxpayer for the preceding taxable
6 year and such preceding year was a taxable year
7 of 12 months.
8 (2) Lower Required Installment where Annualized
9 Income Installment is Less Than Amount Determined Under
10 Paragraph (1).
11 (A) In General. In the case of any required
12 installment if a taxpayer establishes that the
13 annualized income installment is less than the
14 amount determined under paragraph (1),
15 (i) the amount of such required
16 installment shall be the annualized income
17 installment, and
18 (ii) any reduction in a required
19 installment resulting from the application of
20 this subparagraph shall be recaptured by
21 increasing the amount of the next required
22 installment determined under paragraph (1) by
23 the amount of such reduction, and by increasing
24 subsequent required installments to the extent
25 that the reduction has not previously been
26 recaptured under this clause.
27 (B) Determination of Annualized Income
28 Installment. In the case of any required
29 installment, the annualized income installment is
30 the excess, if any, of
31 (i) an amount equal to the applicable
32 percentage of the tax for the taxable year
33 computed by placing on an annualized basis the
34 net income for months in the taxable year
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1 ending before the due date for the installment,
2 over
3 (ii) the aggregate amount of any prior
4 required installments for the taxable year.
5 (C) Applicable Percentage.
6 In the case of the following The applicable
7 required installments: percentage is:
8 1st ............................... 22.5%
9 2nd ............................... 45%
10 3rd ............................... 67.5%
11 4th ............................... 90%
12 (D) Annualized Net Income; Individuals. For
13 individuals, net income shall be placed on an
14 annualized basis by:
15 (i) multiplying by 12, or in the case of
16 a taxable year of less than 12 months, by the
17 number of months in the taxable year, the net
18 income computed without regard to the standard
19 exemption for the months in the taxable year
20 ending before the month in which the
21 installment is required to be paid;
22 (ii) dividing the resulting amount by the
23 number of months in the taxable year ending
24 before the month in which such installment date
25 falls; and
26 (iii) deducting from such amount the
27 standard exemption allowable for the taxable
28 year, such standard exemption being determined
29 as of the last date prescribed for payment of
30 the installment.
31 (E) Annualized Net Income; Corporations. For
32 corporations, net income shall be placed on an
33 annualized basis by multiplying by 12 the taxable
34 income
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1 (i) for the first 3 months of the taxable
2 year, in the case of the installment required
3 to be paid in the 4th month,
4 (ii) for the first 3 months or for the
5 first 5 months of the taxable year, in the case
6 of the installment required to be paid in the
7 6th month,
8 (iii) for the first 6 months or for the
9 first 8 months of the taxable year, in the case
10 of the installment required to be paid in the
11 9th month, and
12 (iv) for the first 9 months or for the
13 first 11 months of the taxable year, in the
14 case of the installment required to be paid in
15 the 12th month of the taxable year,
16 then dividing the resulting amount by the number of
17 months in the taxable year (3, 5, 6, 8, 9, or 11 as
18 the case may be).
19 (d) Exceptions. Notwithstanding the provisions of the
20 preceding subsections, the penalty imposed by subsection (a)
21 shall not be imposed if the taxpayer was not required to file
22 an Illinois income tax return for the preceding taxable year,
23 or if the taxpayer has underpaid taxes solely because of the
24 increased rate in effect during the period from July 1, 1989
25 through December 1989, or, for individuals, if the taxpayer
26 had no tax liability for the preceding taxable year and such
27 year was a taxable year of 12 months. The penalty imposed by
28 subsection (a) shall also not be imposed on any underpayments
29 of estimated tax due before the effective date of this
30 amendatory Act of 1998 which underpayments are solely
31 attributable to the change in apportionment from subsection
32 (a) to subsection (h) of Section 304. The provisions of this
33 amendatory Act of 1998 apply to tax years ending on or after
34 December 31, 1998.
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1 (e) The penalty imposed for underpayment of estimated
2 tax by subsection (a) of this Section shall not be imposed to
3 the extent that the Department or his designate determines,
4 pursuant to Section 3-8 of the Uniform Penalty and Interest
5 Act that the penalty should not be imposed.
6 (f) Definition of tax. For purposes of subsections (b)
7 and (c), the term "tax" means the excess of the tax imposed
8 under Article 2 of this Act, over the amounts credited
9 against such tax under Sections 601(b) (3) and (4).
10 (g) Application of Section in case of tax withheld on
11 compensation. For purposes of applying this Section in the
12 case of an individual, tax withheld under Article 7 for the
13 taxable year shall be deemed a payment of estimated tax, and
14 an equal part of such amount shall be deemed paid on each
15 installment date for such taxable year, unless the taxpayer
16 establishes the dates on which all amounts were actually
17 withheld, in which case the amounts so withheld shall be
18 deemed payments of estimated tax on the dates on which such
19 amounts were actually withheld.
20 (g-5) Amounts withheld under the State Salary and
21 Annuity Withholding Act. An individual who has amounts
22 withheld under paragraph (10) of Section 4 of the State
23 Salary and Annuity Withholding Act may elect to have those
24 amounts treated as payments of estimated tax made on the
25 dates on which those amounts are actually withheld.
26 (i) Short taxable year. The application of this Section
27 to taxable years of less than 12 months shall be in
28 accordance with regulations prescribed by the Department.
29 The changes in this Section made by Public Act 84-127
30 shall apply to taxable years ending on or after January 1,
31 1986.
32 (Source: P.A. 90-448, eff. 8-16-97.)
33 (35 ILCS 5/1501) (from Ch. 120, par. 15-1501)
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1 Sec. 1501. Definitions.
2 (a) In general. When used in this Act, where not
3 otherwise distinctly expressed or manifestly incompatible
4 with the intent thereof:
5 (1) Business income. The term "business income"
6 means income arising from transactions and activity in
7 the regular course of the taxpayer's trade or business,
8 net of the deductions allocable thereto, and includes
9 income from tangible and intangible property if the
10 acquisition, management, and disposition of the property
11 constitute integral parts of the taxpayer's regular trade
12 or business operations. Such term does not include
13 compensation or the deductions allocable thereto.
14 (2) Commercial domicile. The term "commercial
15 domicile" means the principal place from which the trade
16 or business of the taxpayer is directed or managed.
17 (3) Compensation. The term "compensation" means
18 wages, salaries, commissions and any other form of
19 remuneration paid to employees for personal services.
20 (4) Corporation. The term "corporation" includes
21 associations, joint-stock companies, insurance companies
22 and cooperatives. Any entity, including a limited
23 liability company formed under the Illinois Limited
24 Liability Company Act, shall be treated as a corporation
25 if it is so classified for federal income tax purposes.
26 (5) Department. The term "Department" means the
27 Department of Revenue of this State.
28 (6) Director. The term "Director" means the
29 Director of Revenue of this State.
30 (7) Fiduciary. The term "fiduciary" means a
31 guardian, trustee, executor, administrator, receiver, or
32 any person acting in any fiduciary capacity for any
33 person.
34 (8) Financial organization.
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1 (A) The term "financial organization" means
2 any bank, bank holding company, trust company,
3 savings bank, industrial bank, land bank, safe
4 deposit company, private banker, savings and loan
5 association, building and loan association, credit
6 union, currency exchange, cooperative bank, small
7 loan company, sales finance company, investment
8 company, or any person which is owned by a bank or
9 bank holding company. For the purpose of this
10 Section a "person" will include only those persons
11 which a bank holding company may acquire and hold an
12 interest in, directly or indirectly, under the
13 provisions of the Bank Holding Company Act of 1956
14 (12 U.S.C. 1841, et seq.), except where interests in
15 any person must be disposed of within certain
16 required time limits under the Bank Holding Company
17 Act of 1956.
18 (B) For purposes of subparagraph (A) of this
19 paragraph, the term "bank" includes (i) any entity
20 that is regulated by the Comptroller of the Currency
21 under the National Bank Act, or by the Federal
22 Reserve Board, or by the Federal Deposit Insurance
23 Corporation and (ii) any federally or State
24 chartered bank operating as a credit card bank.
25 (C) For purposes of subparagraph (A) of this
26 paragraph, the term "sales finance company" means a
27 person primarily engaged in the business of
28 purchasing or making loans upon the security of
29 retail installment contracts or retail charge
30 agreements or the outstanding balances under such
31 contracts or agreements. The term includes but is
32 not limited to persons: (i) to whom the Sales
33 Finance Agency Act is rendered inapplicable by
34 subsection (b) of Section 17 thereof; (ii) engaged
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1 in consumer sales finance activities governed by the
2 Sales Finance Agency Act or that would be governed
3 by that Act if conducted in this State; (iii)
4 engaged in activities governed by the Retail
5 Installment Sales Act, including the making or
6 purchasing of retail installment contracts or retail
7 charge agreements for "goods" or "services" as
8 defined in that Act, or activities that would be
9 governed by that Act if conducted in this State;
10 (iv) engaged in activities governed by the Motor
11 Vehicle Retail Installment Sales Act or that would
12 be governed by that Act if conducted in this State;
13 (v) engaged in commercial finance activities
14 governed by the Illinois Uniform Commercial Code or
15 that would be governed by that Code if conducted in
16 this State; or (vi) engaged in the finance leasing
17 of tangible personal property where "finance
18 leasing" is activity that is the economic equivalent
19 of an extension of credit and for which a deduction
20 for depreciation under Section 167 of the Internal
21 Revenue Code of 1986 is not available to a lessor.
22 (D) Subparagraphs (B) and (C) of this
23 paragraph are declaratory of existing law and apply
24 retroactively, for all tax years beginning on or
25 before December 31, 1996, to all original returns,
26 to all amended returns filed no later than 30 days
27 after the effective date of this amendatory Act of
28 1996, and to all notices issued on or before the
29 effective date of this amendatory Act of 1996 under
30 subsection (a) of Section 903, subsection (a) of
31 Section 904, subsection (e) of Section 909, or
32 Section 912. A taxpayer that is a "financial
33 organization" that engages in any transaction with
34 an affiliate shall be a "financial organization" for
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1 all purposes of this Act.
2 (E) For all tax years beginning on or before
3 December 31, 1996, a taxpayer that falls within the
4 definition of a "financial organization" under
5 subparagraphs (B) or (C) of this paragraph, but who
6 does not fall within the definition of a "financial
7 organization" under the Proposed Regulations issued
8 by the Department of Revenue on July 19, 1996, may
9 irrevocably elect to apply the Proposed Regulations
10 for all of those years as though the Proposed
11 Regulations had been lawfully promulgated, adopted,
12 and in effect for all of those years. For purposes
13 of applying subparagraphs (B) or (C) of this
14 paragraph to all of those years, the election
15 allowed by this subparagraph applies only to the
16 taxpayer making the election and to those members of
17 the taxpayer's unitary business group who are
18 ordinarily required to apportion business income
19 under the same subsection of Section 304 of this Act
20 as the taxpayer making the election. No election
21 allowed by this subparagraph shall be made under a
22 claim filed under subsection (d) of Section 909 more
23 than 30 days after the effective date of this
24 amendatory Act of 1996.
25 (9) Fiscal year. The term "fiscal year" means an
26 accounting period of 12 months ending on the last day of
27 any month other than December.
28 (10) Includes and including. The terms "includes"
29 and "including" when used in a definition contained in
30 this Act shall not be deemed to exclude other things
31 otherwise within the meaning of the term defined.
32 (11) Internal Revenue Code. The term "Internal
33 Revenue Code" means the United States Internal Revenue
34 Code of 1954 or any successor law or laws relating to
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1 federal income taxes in effect for the taxable year.
2 (12) Mathematical error. The term "mathematical
3 error" includes the following types of errors, omissions,
4 or defects in a return filed by a taxpayer which prevents
5 acceptance of the return as filed for processing:
6 (A) arithmetic errors or incorrect
7 computations on the return or supporting schedules;
8 (B) entries on the wrong lines;
9 (C) omission of required supporting forms or
10 schedules or the omission of the information in
11 whole or in part called for thereon; and
12 (D) an attempt to claim, exclude, deduct, or
13 improperly report, in a manner directly contrary to
14 the provisions of the Act and regulations thereunder
15 any item of income, exemption, deduction, or credit.
16 (13) Nonbusiness income. The term "nonbusiness
17 income" means all income other than business income or
18 compensation.
19 (14) Nonresident. The term "nonresident" means a
20 person who is not a resident.
21 (15) Paid, incurred and accrued. The terms "paid",
22 "incurred" and "accrued" shall be construed according to
23 the method of accounting upon the basis of which the
24 person's base income is computed under this Act.
25 (16) Partnership and partner. The term
26 "partnership" includes a syndicate, group, pool, joint
27 venture or other unincorporated organization, through or
28 by means of which any business, financial operation, or
29 venture is carried on, and which is not, within the
30 meaning of this Act, a trust or estate or a corporation;
31 and the term "partner" includes a member in such
32 syndicate, group, pool, joint venture or organization.
33 Any entity, including a limited liability company
34 formed under the Illinois Limited Liability Company Act,
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1 shall be treated as a partnership if it is so classified
2 for federal income tax purposes.
3 For purposes of the tax imposed at subsection (c) of
4 Section 201 of this Act, the term "partnership" does not
5 include a syndicate, group, pool, joint venture or other
6 unincorporated organization established for the sole
7 purpose of playing the Illinois State Lottery.
8 (17) Part-year resident. The term "part-year
9 resident" means an individual who became a resident
10 during the taxable year or ceased to be a resident during
11 the taxable year. Under Section 1501 (a) (20) (A) (i)
12 residence commences with presence in this State for other
13 than a temporary or transitory purpose and ceases with
14 absence from this State for other than a temporary or
15 transitory purpose. Under Section 1501 (a) (20) (A) (ii)
16 residence commences with the establishment of domicile in
17 this State and ceases with the establishment of domicile
18 in another State.
19 (18) Person. The term "person" shall be construed
20 to mean and include an individual, a trust, estate,
21 partnership, association, firm, company, corporation,
22 limited liability company, or fiduciary. For purposes of
23 Section 1301 and 1302 of this Act, a "person" means (i)
24 an individual, (ii) a corporation, (iii) an officer,
25 agent, or employee of a corporation, (iv) a member, agent
26 or employee of a partnership, or (v) a member, manager,
27 employee, officer, director, or agent of a limited
28 liability company who in such capacity commits an offense
29 specified in Section 1301 and 1302.
30 (18A) Records. The term "records" includes all
31 data maintained by the taxpayer, whether on paper,
32 microfilm, microfiche, or any type of machine-sensible
33 data compilation.
34 (19) Regulations. The term "regulations" includes
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1 rules promulgated and forms prescribed by the Department.
2 (20) Resident. The term "resident" means:
3 (A) an individual (i) who is in this State for
4 other than a temporary or transitory purpose during
5 the taxable year; or (ii) who is domiciled in this
6 State but is absent from the State for a temporary
7 or transitory purpose during the taxable year;
8 (B) The estate of a decedent who at his or her
9 death was domiciled in this State;
10 (C) A trust created by a will of a decedent
11 who at his death was domiciled in this State; and
12 (D) An irrevocable trust, the grantor of which
13 was domiciled in this State at the time such trust
14 became irrevocable. For purpose of this
15 subparagraph, a trust shall be considered
16 irrevocable to the extent that the grantor is not
17 treated as the owner thereof under Sections 671
18 through 678 of the Internal Revenue Code.
19 (21) Sales. The term "sales" means all gross
20 receipts of the taxpayer not allocated under Sections
21 301, 302 and 303.
22 (22) State. The term "state" when applied to a
23 jurisdiction other than this State means any state of the
24 United States, the District of Columbia, the Commonwealth
25 of Puerto Rico, any Territory or Possession of the United
26 States, and any foreign country, or any political
27 subdivision of any of the foregoing. For purposes of the
28 foreign tax credit under Section 601, the term "state"
29 means any state of the United States, the District of
30 Columbia, the Commonwealth of Puerto Rico, and any
31 territory or possession of the United States, or any
32 political subdivision of any of the foregoing, effective
33 for tax years ending on or after December 31, 1989.
34 (23) Taxable year. The term "taxable year" means
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1 the calendar year, or the fiscal year ending during such
2 calendar year, upon the basis of which the base income is
3 computed under this Act. "Taxable year" means, in the
4 case of a return made for a fractional part of a year
5 under the provisions of this Act, the period for which
6 such return is made.
7 (24) Taxpayer. The term "taxpayer" means any person
8 subject to the tax imposed by this Act.
9 (25) International banking facility. The term
10 international banking facility shall have the same
11 meaning as is set forth in the Illinois Banking Act or as
12 is set forth in the laws of the United States or
13 regulations of the Board of Governors of the Federal
14 Reserve System.
15 (26) Income Tax Return Preparer.
16 (A) The term "income tax return preparer"
17 means any person who prepares for compensation, or
18 who employs one or more persons to prepare for
19 compensation, any return of tax imposed by this Act
20 or any claim for refund of tax imposed by this Act.
21 The preparation of a substantial portion of a return
22 or claim for refund shall be treated as the
23 preparation of that return or claim for refund.
24 (B) A person is not an income tax return
25 preparer if all he or she does is
26 (i) furnish typing, reproducing, or other
27 mechanical assistance;
28 (ii) prepare returns or claims for
29 refunds for the employer by whom he or she is
30 regularly and continuously employed;
31 (iii) prepare as a fiduciary returns or
32 claims for refunds for any person; or
33 (iv) prepare claims for refunds for a
34 taxpayer in response to any notice of
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1 deficiency issued to that taxpayer or in
2 response to any waiver of restriction after the
3 commencement of an audit of that taxpayer or of
4 another taxpayer if a determination in the
5 audit of the other taxpayer directly or
6 indirectly affects the tax liability of the
7 taxpayer whose claims he or she is preparing.
8 (27) Unitary business group. The term "unitary
9 business group" means a group of persons related through
10 common ownership whose business activities are integrated
11 with, dependent upon and contribute to each other. The
12 group will not include those members whose business
13 activity outside the United States is 80% or more of any
14 such member's total business activity; for purposes of
15 this paragraph and clause (a) (3) (B) (ii) of Section
16 304, business activity within the United States shall be
17 measured by means of the factors ordinarily applicable
18 under subsections (a), (b), (c), and (d), or (h) of
19 Section 304 except that, in the case of members
20 ordinarily required to apportion business income by means
21 of the 3 factor formula of property, payroll and sales
22 specified in subsection (a) of Section 304, or the
23 single-factor sales formula specified in subsection (h)
24 of Section 304, such members shall not use the sales
25 factor in the computation and the results of the property
26 and payroll factor computations of subsection (a) of
27 Section 304 shall be divided by 2 (by one if either the
28 property or payroll factor has a denominator of zero).
29 The computation required by the preceding sentence shall,
30 in each case, involve the division of the member's
31 property, payroll, or revenue miles in the United States,
32 insurance premiums on property or risk in the United
33 States, or financial organization business income from
34 sources within the United States, as the case may be, by
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1 the respective worldwide figures for such items. Common
2 ownership in the case of corporations is the direct or
3 indirect control or ownership of more than 50% of the
4 outstanding voting stock of the persons carrying on
5 unitary business activity. Unitary business activity can
6 ordinarily be illustrated where the activities of the
7 members are: (1) in the same general line (such as
8 manufacturing, wholesaling, retailing of tangible
9 personal property, insurance, transportation or finance);
10 or (2) are steps in a vertically structured enterprise or
11 process (such as the steps involved in the production of
12 natural resources, which might include exploration,
13 mining, refining, and marketing); and, in either
14 instance, the members are functionally integrated through
15 the exercise of strong centralized management (where, for
16 example, authority over such matters as purchasing,
17 financing, tax compliance, product line, personnel,
18 marketing and capital investment is not left to each
19 member). In no event, however, will any unitary business
20 group include members which are ordinarily required to
21 apportion business income under different subsections of
22 Section 304 except that for tax years ending on or after
23 December 31, 1987 this prohibition shall not apply to a
24 unitary business group composed of one or more taxpayers
25 all of which apportion business income pursuant to
26 subsection (b) of Section 304, or all of which apportion
27 business income pursuant to subsection (d) of Section
28 304, and a holding company of such single-factor
29 taxpayers (see definition of "financial organization" for
30 rule regarding holding companies of financial
31 organizations). If a unitary business group would, but
32 for the preceding sentence, include members that are
33 ordinarily required to apportion business income under
34 different subsections of Section 304, then for each
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1 subsection of Section 304 for which there are two or more
2 members, there shall be a separate unitary business group
3 composed of such members. For purposes of the preceding
4 two sentences, a member is "ordinarily required to
5 apportion business income" under a particular subsection
6 of Section 304 if it would be required to use the
7 apportionment method prescribed by such subsection except
8 for the fact that it derives business income solely from
9 Illinois. If the unitary business group members'
10 accounting periods differ, the common parent's accounting
11 period or, if there is no common parent, the accounting
12 period of the member that is expected to have, on a
13 recurring basis, the greatest Illinois income tax
14 liability must be used to determine whether to use the
15 apportionment method provided in subsection (a) or
16 subsection (h) of Section 304. The prohibition against
17 membership in a unitary business group for taxpayers
18 ordinarily required to apportion income under different
19 subsections of Section 304 does not apply to taxpayers
20 required to apportion income under subsection (a) and
21 subsection (h) of Section 304. The provisions of this
22 amendatory Act of 1998 apply to tax years ending on or
23 after December 31, 1998.
24 (28) Subchapter S corporation. The term
25 "Subchapter S corporation" means a corporation for which
26 there is in effect an election under Section 1362 of the
27 Internal Revenue Code, or for which there is a federal
28 election to opt out of the provisions of the Subchapter S
29 Revision Act of 1982 and have applied instead the prior
30 federal Subchapter S rules as in effect on July 1, 1982.
31 (b) Other definitions.
32 (1) Words denoting number, gender, and so forth,
33 when used in this Act, where not otherwise distinctly
34 expressed or manifestly incompatible with the intent
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1 thereof:
2 (A) Words importing the singular include and
3 apply to several persons, parties or things;
4 (B) Words importing the plural include the
5 singular; and
6 (C) Words importing the masculine gender
7 include the feminine as well.
8 (2) "Company" or "association" as including
9 successors and assigns. The word "company" or
10 "association", when used in reference to a corporation,
11 shall be deemed to embrace the words "successors and
12 assigns of such company or association", and in like
13 manner as if these last-named words, or words of similar
14 import, were expressed.
15 (3) Other terms. Any term used in any Section of
16 this Act with respect to the application of, or in
17 connection with, the provisions of any other Section of
18 this Act shall have the same meaning as in such other
19 Section.
20 (Source: P.A. 88-480; 89-399, eff. 8-20-95; 89-711, eff.
21 2-14-97.)
22 Section 99. Effective date. This Act takes effect upon
23 becoming law.