State of Illinois
90th General Assembly
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90_HB2983

      35 ILCS 5/203             from Ch. 120, par. 2-203
          Amends the Illinois Income Tax Act.  Provides  that,  for
      purposes of determining the base income of a corporation, the
      amount    of    a   taxpayer's   adjustment   under   Section
      832(b)(5)(B)(i) of the Internal Revenue  Code  shall  not  be
      treated  as  an amount of interest excluded from gross income
      in the computation of taxable income.  Exempt from the sunset
      provisions of Section 250.  Effective January 1, 1999.
                                                     LRB9008808KDks
                                               LRB9008808KDks
 1        AN ACT to amend the Illinois Income Tax Act  by  changing
 2    Section 203.
 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 Section 203 as follows:
 7        (35 ILCS 5/203) (from Ch. 120, par. 2-203)
 8        Sec. 203.  Base income defined.
 9        (a)  Individuals.
10             (1)  In general.  In the case of an individual, base
11        income  means  an amount equal to the taxpayer's adjusted
12        gross  income  for  the  taxable  year  as  modified   by
13        paragraph (2).
14             (2)  Modifications.    The   adjusted  gross  income
15        referred to in paragraph (1) shall be modified by  adding
16        thereto the sum of the following amounts:
17                  (A)  An  amount  equal  to  all amounts paid or
18             accrued to the taxpayer  as  interest  or  dividends
19             during  the taxable year to the extent excluded from
20             gross income in the computation  of  adjusted  gross
21             income,  except  stock dividends of qualified public
22             utilities  described  in  Section  305(e)   of   the
23             Internal Revenue Code;
24                  (B)  An  amount  equal  to  the  amount  of tax
25             imposed by this Act  to  the  extent  deducted  from
26             gross  income  in  the computation of adjusted gross
27             income for the taxable year;
28                  (C)  An amount equal  to  the  amount  received
29             during  the  taxable year as a recovery or refund of
30             real  property  taxes  paid  with  respect  to   the
31             taxpayer's principal residence under the Revenue Act
                            -2-                LRB9008808KDks
 1             of  1939  and  for  which a deduction was previously
 2             taken under subparagraph (L) of this  paragraph  (2)
 3             prior to July 1, 1991, the retrospective application
 4             date  of Article 4 of Public Act 87-17.  In the case
 5             of  multi-unit  or  multi-use  structures  and  farm
 6             dwellings, the taxes  on  the  taxpayer's  principal
 7             residence  shall  be that portion of the total taxes
 8             for the entire property  which  is  attributable  to
 9             such principal residence;
10                  (D)  An  amount  equal  to  the  amount  of the
11             capital gain deduction allowable under the  Internal
12             Revenue  Code,  to  the  extent  deducted from gross
13             income in the computation of adjusted gross  income;
14             and
15                  (D-5)  An amount, to the extent not included in
16             adjusted  gross income, equal to the amount of money
17             withdrawn by the taxpayer in the taxable year from a
18             medical care savings account and the interest earned
19             on the account in the taxable year of  a  withdrawal
20             pursuant  to  subsection  (b)  of  Section 20 of the
21             Medical Care Savings Account Act;
22        and by deducting from the total so obtained  the  sum  of
23        the following amounts:
24                  (E)  Any  amount  included  in  such  total  in
25             respect  of  any  compensation  (including  but  not
26             limited  to  any  compensation  paid or accrued to a
27             serviceman while a prisoner of  war  or  missing  in
28             action)  paid  to  a  resident by reason of being on
29             active duty in the Armed Forces of the United States
30             and in respect of any compensation paid  or  accrued
31             to  a  resident who as a governmental employee was a
32             prisoner of war or missing in action, and in respect
33             of any compensation paid to a resident  in  1971  or
34             thereafter for annual training performed pursuant to
                            -3-                LRB9008808KDks
 1             Sections  502  and 503, Title 32, United States Code
 2             as a member of the Illinois National Guard;
 3                  (F)  An amount equal to all amounts included in
 4             such total pursuant to the  provisions  of  Sections
 5             402(a),  402(c), 403(a), 403(b), 406(a), 407(a), and
 6             408 of the Internal Revenue  Code,  or  included  in
 7             such  total as distributions under the provisions of
 8             any retirement or disability plan for  employees  of
 9             any  governmental  agency  or  unit,  or  retirement
10             payments  to  retired  partners,  which payments are
11             excluded  in  computing  net  earnings   from   self
12             employment  by  Section 1402 of the Internal Revenue
13             Code and regulations adopted pursuant thereto;
14                  (G)  The valuation limitation amount;
15                  (H)  An amount equal to the amount of  any  tax
16             imposed  by  this  Act  which  was  refunded  to the
17             taxpayer and included in such total for the  taxable
18             year;
19                  (I)  An amount equal to all amounts included in
20             such total pursuant to the provisions of Section 111
21             of  the Internal Revenue Code as a recovery of items
22             previously deducted from adjusted  gross  income  in
23             the computation of taxable income;
24                  (J)  An   amount   equal   to  those  dividends
25             included  in  such  total  which  were  paid  by   a
26             corporation which conducts business operations in an
27             Enterprise  Zone or zones created under the Illinois
28             Enterprise Zone Act, and conducts substantially  all
29             of its operations in an Enterprise Zone or zones;
30                  (K)  An   amount   equal   to  those  dividends
31             included  in  such  total  that  were  paid   by   a
32             corporation  that  conducts business operations in a
33             federally designated Foreign Trade Zone or  Sub-Zone
34             and  that  is  designated  a  High  Impact  Business
                            -4-                LRB9008808KDks
 1             located   in   Illinois;   provided  that  dividends
 2             eligible for the deduction provided in  subparagraph
 3             (J) of paragraph (2) of this subsection shall not be
 4             eligible  for  the  deduction  provided  under  this
 5             subparagraph (K);
 6                  (L)  For  taxable  years  ending after December
 7             31, 1983, an amount equal  to  all  social  security
 8             benefits  and  railroad retirement benefits included
 9             in such total pursuant to Sections 72(r) and  86  of
10             the Internal Revenue Code;
11                  (M)  With   the   exception   of   any  amounts
12             subtracted under subparagraph (N), 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  of  1954,  as  now  or
19             hereafter amended;
20                  (N)  An amount equal to all amounts included in
21             such total which are exempt from  taxation  by  this
22             State   either   by   reason   of  its  statutes  or
23             Constitution  or  by  reason  of  the  Constitution,
24             treaties or statutes of the United States;  provided
25             that,  in the case of any statute of this State that
26             exempts  income  derived   from   bonds   or   other
27             obligations from the tax imposed under this Act, the
28             amount  exempted  shall  be the interest net of bond
29             premium amortization;
30                  (O)  An amount equal to any  contribution  made
31             to  a  job  training project established pursuant to
32             the Tax Increment Allocation Redevelopment Act;
33                  (P)  An amount  equal  to  the  amount  of  the
34             deduction  used  to  compute  the federal income tax
                            -5-                LRB9008808KDks
 1             credit for restoration of substantial  amounts  held
 2             under  claim  of right for the taxable year pursuant
 3             to Section 1341 of  the  Internal  Revenue  Code  of
 4             1986;
 5                  (Q)  An amount equal to any amounts included in
 6             such   total,   received   by  the  taxpayer  as  an
 7             acceleration in the payment of  life,  endowment  or
 8             annuity  benefits  in advance of the time they would
 9             otherwise be payable as an indemnity for a  terminal
10             illness;
11                  (R)  An  amount  equal  to  the  amount  of any
12             federal or State  bonus  paid  to  veterans  of  the
13             Persian Gulf War;
14                  (S)  An  amount,  to  the  extent  included  in
15             adjusted  gross  income,  equal  to  the amount of a
16             contribution made in the taxable year on  behalf  of
17             the  taxpayer  to  a  medical  care  savings account
18             established under the Medical Care  Savings  Account
19             Act  to  the  extent the contribution is accepted by
20             the account administrator as provided in that Act;
21                  (T)  An  amount,  to  the  extent  included  in
22             adjusted  gross  income,  equal  to  the  amount  of
23             interest earned in the taxable  year  on  a  medical
24             care  savings  account established under the Medical
25             Care Savings Account Act on behalf of the  taxpayer,
26             other  than interest added pursuant to item (D-5) of
27             this paragraph (2);
28                  (U)  For one taxable year beginning on or after
29             January 1, 1994, an amount equal to the total amount
30             of tax imposed and paid under  subsections  (a)  and
31             (b)  of  Section  201  of  this Act on grant amounts
32             received by the  taxpayer  under  the  Nursing  Home
33             Grant  Assistance  Act during the taxpayer's taxable
34             years 1992 and 1993; and
                            -6-                LRB9008808KDks
 1                  (V)  Beginning with  tax  years  ending  on  or
 2             after  December  31,  1995 and ending with tax years
 3             ending on or before December  31,  1999,  an  amount
 4             equal  to  the  amount  paid  by a taxpayer who is a
 5             self-employed taxpayer, a partner of a  partnership,
 6             or  a  shareholder in a Subchapter S corporation for
 7             health insurance or  long-term  care  insurance  for
 8             that   taxpayer   or   that   taxpayer's  spouse  or
 9             dependents, to the extent that the amount  paid  for
10             that  health  insurance  or long-term care insurance
11             may be deducted under Section 213  of  the  Internal
12             Revenue  Code  of 1986, has not been deducted on the
13             federal income tax return of the taxpayer, and  does
14             not  exceed  the taxable income attributable to that
15             taxpayer's  income,   self-employment   income,   or
16             Subchapter  S  corporation  income;  except  that no
17             deduction shall be allowed under this  item  (V)  if
18             the  taxpayer  is  eligible  to  participate  in any
19             health insurance or long-term care insurance plan of
20             an  employer  of  the  taxpayer  or  the  taxpayer's
21             spouse.  The amount  of  the  health  insurance  and
22             long-term  care insurance subtracted under this item
23             (V) shall be determined by multiplying total  health
24             insurance and long-term care insurance premiums paid
25             by  the  taxpayer times a number that represents the
26             fractional percentage of eligible  medical  expenses
27             under  Section  213  of the Internal Revenue Code of
28             1986 not actually deducted on the taxpayer's federal
29             income tax return.
30        (b)  Corporations.
31             (1)  In general.  In the case of a corporation, base
32        income means an amount equal to  the  taxpayer's  taxable
33        income for the taxable year as modified by paragraph (2).
34             (2)  Modifications.   The taxable income referred to
                            -7-                LRB9008808KDks
 1        in paragraph (1) shall be modified by adding thereto  the
 2        sum of the following amounts:
 3                  (A)  An  amount  equal  to  all amounts paid or
 4             accrued  to  the  taxpayer  as  interest   and   all
 5             distributions  received  from  regulated  investment
 6             companies  during  the  taxable  year  to the extent
 7             excluded from gross income  in  the  computation  of
 8             taxable   income,   except  that  the  amount  of  a
 9             taxpayer's adjustment under Section  832(b)(5)(B)(i)
10             of the Internal Revenue Code shall not be treated as
11             an  amount of interest excluded from gross income in
12             the computation of taxable income; the changes  made
13             by  this  amendatory Act of 1998 are exempt from the
14             provisions of Section 250;
15                  (B)  An amount  equal  to  the  amount  of  tax
16             imposed  by  this  Act  to  the extent deducted from
17             gross income in the computation  of  taxable  income
18             for the taxable year;
19                  (C)  In  the  case  of  a  regulated investment
20             company, an amount equal to the excess  of  (i)  the
21             net  long-term  capital  gain  for the taxable year,
22             over (ii) the amount of the capital  gain  dividends
23             designated   as  such  in  accordance  with  Section
24             852(b)(3)(C) of the Internal Revenue  Code  and  any
25             amount  designated under Section 852(b)(3)(D) of the
26             Internal Revenue Code, attributable to  the  taxable
27             year.
28        This  amendatory  Act  of 1995 is declarative of existing
29    law and is not a new enactment.
30                  (D)  The  amount  of  any  net  operating  loss
31             deduction taken in arriving at taxable income, other
32             than a net operating loss  carried  forward  from  a
33             taxable year ending prior to December 31, 1986; and
34                  (E)  For taxable years in which a net operating
                            -8-                LRB9008808KDks
 1             loss  carryback  or carryforward from a taxable year
 2             ending prior to December 31, 1986 is an  element  of
 3             taxable income under paragraph (1) of subsection (e)
 4             or  subparagraph  (E) of paragraph (2) of subsection
 5             (e), the  amount  by  which  addition  modifications
 6             other  than  those provided by this subparagraph (E)
 7             exceeded subtraction modifications in  such  earlier
 8             taxable year, with the following limitations applied
 9             in the order that they are listed:
10                       (i)  the addition modification relating to
11                  the  net operating loss carried back or forward
12                  to the  taxable  year  from  any  taxable  year
13                  ending  prior  to  December  31,  1986 shall be
14                  reduced by the amount of addition  modification
15                  under  this  subparagraph  (E) which related to
16                  that net operating loss  and  which  was  taken
17                  into  account in calculating the base income of
18                  an earlier taxable year, and
19                       (ii)  the addition  modification  relating
20                  to  the  net  operating  loss  carried  back or
21                  forward to the taxable year  from  any  taxable
22                  year  ending  prior  to December 31, 1986 shall
23                  not exceed the  amount  of  such  carryback  or
24                  carryforward;
25                  For  taxable  years  in  which  there  is a net
26             operating loss carryback or carryforward  from  more
27             than one other taxable year ending prior to December
28             31, 1986, the addition modification provided in this
29             subparagraph  (E)  shall  be  the sum of the amounts
30             computed   independently   under    the    preceding
31             provisions  of  this  subparagraph (E) for each such
32             taxable year,
33        and by deducting from the total so obtained  the  sum  of
34        the following amounts:
                            -9-                LRB9008808KDks
 1                  (F)  An  amount  equal to the amount of any tax
 2             imposed by  this  Act  which  was  refunded  to  the
 3             taxpayer  and included in such total for the taxable
 4             year;
 5                  (G)  An amount equal to any amount included  in
 6             such  total under Section 78 of the Internal Revenue
 7             Code;
 8                  (H)  In the  case  of  a  regulated  investment
 9             company,  an  amount  equal  to the amount of exempt
10             interest dividends as defined in subsection (b)  (5)
11             of Section 852 of the Internal Revenue Code, paid to
12             shareholders for the taxable year;
13                  (I)  With   the   exception   of   any  amounts
14             subtracted under subparagraph (J), an  amount  equal
15             to  the  sum of all amounts disallowed as deductions
16             by Sections 171(a) (2), and  265(a)(2)  and  amounts
17             disallowed  as interest expense by Section 291(a)(3)
18             of the Internal Revenue Code, as  now  or  hereafter
19             amended,  and  all  amounts of expenses allocable to
20             interest and disallowed  as  deductions  by  Section
21             265(a)(1)  of  the  Internal Revenue Code, as now or
22             hereafter amended;
23                  (J)  An amount equal to all amounts included in
24             such total which are exempt from  taxation  by  this
25             State   either   by   reason   of  its  statutes  or
26             Constitution  or  by  reason  of  the  Constitution,
27             treaties or statutes of the United States;  provided
28             that,  in the case of any statute of this State that
29             exempts  income  derived   from   bonds   or   other
30             obligations from the tax imposed under this Act, the
31             amount  exempted  shall  be the interest net of bond
32             premium amortization;
33                  (K)  An  amount  equal   to   those   dividends
34             included   in  such  total  which  were  paid  by  a
                            -10-               LRB9008808KDks
 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                  (L)  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             (K) of paragraph 2 of this subsection shall  not  be
13             eligible  for  the  deduction  provided  under  this
14             subparagraph (L);
15                  (M)  For  any  taxpayer  that  is  a  financial
16             organization within the meaning of Section 304(c) of
17             this  Act,  an  amount  included  in  such  total as
18             interest income from a loan or loans  made  by  such
19             taxpayer  to  a  borrower, to the extent that such a
20             loan is secured by property which  is  eligible  for
21             the  Enterprise Zone Investment Credit. To determine
22             the portion of a loan or loans that  is  secured  by
23             property  eligible  for  a Section 201(h) investment
24             credit to the borrower, the entire principal  amount
25             of  the  loan  or loans between the taxpayer and the
26             borrower should be divided into  the  basis  of  the
27             Section  201(h)  investment  credit  property  which
28             secures  the  loan  or loans, using for this purpose
29             the original basis of such property on the date that
30             it was placed in service  in  the  Enterprise  Zone.
31             The  subtraction  modification available to taxpayer
32             in any year under  this  subsection  shall  be  that
33             portion  of  the total interest paid by the borrower
34             with  respect  to  such  loan  attributable  to  the
                            -11-               LRB9008808KDks
 1             eligible property as calculated under  the  previous
 2             sentence;
 3                  (M-1)  For  any  taxpayer  that  is a financial
 4             organization within the meaning of Section 304(c) of
 5             this Act,  an  amount  included  in  such  total  as
 6             interest  income  from  a loan or loans made by such
 7             taxpayer to a borrower, to the extent  that  such  a
 8             loan  is  secured  by property which is eligible for
 9             the High  Impact  Business  Investment  Credit.   To
10             determine  the  portion  of  a loan or loans that is
11             secured by property eligible for  a  Section  201(i)
12             investment   credit  to  the  borrower,  the  entire
13             principal amount of the loan or  loans  between  the
14             taxpayer and the borrower should be divided into the
15             basis   of  the  Section  201(i)  investment  credit
16             property which secures the loan or loans, using  for
17             this  purpose the original basis of such property on
18             the  date  that  it  was  placed  in  service  in  a
19             federally designated Foreign Trade Zone or  Sub-Zone
20             located  in  Illinois.  No taxpayer that is eligible
21             for the deduction provided in  subparagraph  (M)  of
22             paragraph  (2)  of this subsection shall be eligible
23             for the deduction provided under  this  subparagraph
24             (M-1).   The  subtraction  modification available to
25             taxpayers in any year under this subsection shall be
26             that portion of  the  total  interest  paid  by  the
27             borrower  with  respect to such loan attributable to
28             the  eligible  property  as  calculated  under   the
29             previous sentence;
30                  (N)  Two times any contribution made during the
31             taxable  year  to  a designated zone organization to
32             the extent that the contribution (i) qualifies as  a
33             charitable  contribution  under  subsection  (c)  of
34             Section  170  of  the Internal Revenue Code and (ii)
                            -12-               LRB9008808KDks
 1             must, by its terms, be used for a  project  approved
 2             by  the Department of Commerce and Community Affairs
 3             under Section 11 of  the  Illinois  Enterprise  Zone
 4             Act;
 5                  (O)  An  amount  equal  to: (i) 85% for taxable
 6             years ending on or before December 31, 1992,  or,  a
 7             percentage  equal  to the percentage allowable under
 8             Section 243(a)(1) of the Internal  Revenue  Code  of
 9             1986  for  taxable  years  ending after December 31,
10             1992, of the amount by which dividends  included  in
11             taxable  income and received from a corporation that
12             is not created or organized under the  laws  of  the
13             United  States or any state or political subdivision
14             thereof, including, for taxable years ending  on  or
15             after  December  31,  1988,  dividends  received  or
16             deemed   received  or  paid  or  deemed  paid  under
17             Sections 951 through 964  of  the  Internal  Revenue
18             Code, exceed the amount of the modification provided
19             under  subparagraph  (G)  of  paragraph  (2) of this
20             subsection (b) which is related to  such  dividends;
21             plus  (ii)  100%  of  the amount by which dividends,
22             included in taxable income and received,  including,
23             for  taxable  years  ending on or after December 31,
24             1988, dividends received or deemed received or  paid
25             or deemed paid under Sections 951 through 964 of the
26             Internal  Revenue  Code,  from  any such corporation
27             specified in clause  (i)  that  would  but  for  the
28             provisions  of  Section 1504 (b) (3) of the Internal
29             Revenue  Code  be  treated  as  a  member   of   the
30             affiliated   group   which   includes  the  dividend
31             recipient, exceed the  amount  of  the  modification
32             provided  under subparagraph (G) of paragraph (2) of
33             this  subsection  (b)  which  is  related  to   such
34             dividends;
                            -13-               LRB9008808KDks
 1                  (P)  An  amount  equal to any contribution made
 2             to a job training project  established  pursuant  to
 3             the Tax Increment Allocation Redevelopment Act; and
 4                  (Q)  An  amount  equal  to  the  amount  of the
 5             deduction used to compute  the  federal  income  tax
 6             credit  for  restoration of substantial amounts held
 7             under claim of right for the taxable  year  pursuant
 8             to  Section  1341  of  the  Internal Revenue Code of
 9             1986.
10             (3)  Special rule.  For purposes  of  paragraph  (2)
11        (A),  "gross  income"  in  the  case  of a life insurance
12        company, for tax years ending on and after  December  31,
13        1994,  shall  mean  the  gross  investment income for the
14        taxable year.
15        (c)  Trusts and estates.
16             (1)  In general.  In the case of a trust or  estate,
17        base  income  means  an  amount  equal  to the taxpayer's
18        taxable income  for  the  taxable  year  as  modified  by
19        paragraph (2).
20             (2)  Modifications.   Subject  to  the provisions of
21        paragraph  (3),  the  taxable  income  referred   to   in
22        paragraph (1) shall be modified by adding thereto the sum
23        of the following amounts:
24                  (A)  An  amount  equal  to  all amounts paid or
25             accrued to the taxpayer  as  interest  or  dividends
26             during  the taxable year to the extent excluded from
27             gross income in the computation of taxable income;
28                  (B)  In the case of (i) an estate, $600; (ii) a
29             trust which,  under  its  governing  instrument,  is
30             required  to distribute all of its income currently,
31             $300; and (iii) any other trust, $100, but  in  each
32             such  case,  only  to  the  extent  such  amount was
33             deducted in the computation of taxable income;
34                  (C)  An amount  equal  to  the  amount  of  tax
                            -14-               LRB9008808KDks
 1             imposed  by  this  Act  to  the extent deducted from
 2             gross income in the computation  of  taxable  income
 3             for the taxable year;
 4                  (D)  The  amount  of  any  net  operating  loss
 5             deduction taken in arriving at taxable income, other
 6             than  a  net  operating  loss carried forward from a
 7             taxable year ending prior to December 31, 1986;
 8                  (E)  For taxable years in which a net operating
 9             loss carryback or carryforward from a  taxable  year
10             ending  prior  to December 31, 1986 is an element of
11             taxable income under paragraph (1) of subsection (e)
12             or subparagraph (E) of paragraph (2)  of  subsection
13             (e),  the  amount  by  which  addition modifications
14             other than those provided by this  subparagraph  (E)
15             exceeded  subtraction  modifications in such taxable
16             year, with the following limitations applied in  the
17             order that they are listed:
18                       (i)  the addition modification relating to
19                  the  net operating loss carried back or forward
20                  to the  taxable  year  from  any  taxable  year
21                  ending  prior  to  December  31,  1986 shall be
22                  reduced by the amount of addition  modification
23                  under  this  subparagraph  (E) which related to
24                  that net operating loss  and  which  was  taken
25                  into  account in calculating the base income of
26                  an earlier taxable year, and
27                       (ii)  the addition  modification  relating
28                  to  the  net  operating  loss  carried  back or
29                  forward to the taxable year  from  any  taxable
30                  year  ending  prior  to December 31, 1986 shall
31                  not exceed the  amount  of  such  carryback  or
32                  carryforward;
33                  For  taxable  years  in  which  there  is a net
34             operating loss carryback or carryforward  from  more
                            -15-               LRB9008808KDks
 1             than one other taxable year ending prior to December
 2             31, 1986, the addition modification provided in this
 3             subparagraph  (E)  shall  be  the sum of the amounts
 4             computed   independently   under    the    preceding
 5             provisions  of  this  subparagraph (E) for each such
 6             taxable year;
 7                  (F)  For  taxable  years  ending  on  or  after
 8             January 1, 1989, an amount equal to the tax deducted
 9             pursuant to Section 164 of the Internal Revenue Code
10             if the trust or estate is claiming the same tax  for
11             purposes  of  the  Illinois foreign tax credit under
12             Section 601 of this Act; and
13                  (G)  An amount  equal  to  the  amount  of  the
14             capital  gain deduction allowable under the Internal
15             Revenue Code, to  the  extent  deducted  from  gross
16             income in the computation of taxable income;
17        and  by  deducting  from the total so obtained the sum of
18        the following amounts:
19                  (H)  An amount equal to all amounts included in
20             such total pursuant to the  provisions  of  Sections
21             402(a),  402(c),  403(a), 403(b), 406(a), 407(a) and
22             408 of the Internal Revenue Code or included in such
23             total as distributions under the provisions  of  any
24             retirement  or  disability plan for employees of any
25             governmental agency or unit, or retirement  payments
26             to  retired partners, which payments are excluded in
27             computing  net  earnings  from  self  employment  by
28             Section  1402  of  the  Internal  Revenue  Code  and
29             regulations adopted pursuant thereto;
30                  (I)  The valuation limitation amount;
31                  (J)  An amount equal to the amount of  any  tax
32             imposed  by  this  Act  which  was  refunded  to the
33             taxpayer and included in such total for the  taxable
34             year;
                            -16-               LRB9008808KDks
 1                  (K)  An amount equal to all amounts included in
 2             taxable  income  as  modified  by subparagraphs (A),
 3             (B), (C), (D), (E), (F) and  (G)  which  are  exempt
 4             from  taxation by this State either by reason of its
 5             statutes  or  Constitution  or  by  reason  of   the
 6             Constitution,  treaties  or  statutes  of the United
 7             States; provided that, in the case of any statute of
 8             this State that exempts income derived from bonds or
 9             other obligations from the tax  imposed  under  this
10             Act,  the  amount exempted shall be the interest net
11             of bond premium amortization;
12                  (L)  With  the   exception   of   any   amounts
13             subtracted  under  subparagraph (K), an amount equal
14             to the sum of all amounts disallowed  as  deductions
15             by Sections 171(a) (2) and 265(a)(2) of the Internal
16             Revenue  Code,  as now or hereafter amended, and all
17             amounts  of  expenses  allocable  to  interest   and
18             disallowed  as  deductions  by Section 265(1) of the
19             Internal Revenue Code of 1954, as now  or  hereafter
20             amended;
21                  (M)  An   amount   equal   to  those  dividends
22             included  in  such  total  which  were  paid  by   a
23             corporation which conducts business operations in an
24             Enterprise  Zone or zones created under the Illinois
25             Enterprise Zone Act and conducts  substantially  all
26             of its operations in an Enterprise Zone or Zones;
27                  (N)  An  amount  equal to any contribution made
28             to a job training project  established  pursuant  to
29             the Tax Increment Allocation Redevelopment Act;
30                  (O)  An   amount   equal   to  those  dividends
31             included  in  such  total  that  were  paid   by   a
32             corporation  that  conducts business operations in a
33             federally designated Foreign Trade Zone or  Sub-Zone
34             and  that  is  designated  a  High  Impact  Business
                            -17-               LRB9008808KDks
 1             located   in   Illinois;   provided  that  dividends
 2             eligible for the deduction provided in  subparagraph
 3             (M) of paragraph (2) of this subsection shall not be
 4             eligible  for  the  deduction  provided  under  this
 5             subparagraph (O); and
 6                  (P)  An  amount  equal  to  the  amount  of the
 7             deduction used to compute  the  federal  income  tax
 8             credit  for  restoration of substantial amounts held
 9             under claim of right for the taxable  year  pursuant
10             to  Section  1341  of  the  Internal Revenue Code of
11             1986.
12             (3)  Limitation.  The  amount  of  any  modification
13        otherwise  required  under  this  subsection shall, under
14        regulations prescribed by the Department, be adjusted  by
15        any  amounts  included  therein which were properly paid,
16        credited, or required to be distributed,  or  permanently
17        set  aside  for charitable purposes pursuant  to Internal
18        Revenue Code Section 642(c) during the taxable year.
19        (d)  Partnerships.
20             (1)  In general. In the case of a partnership,  base
21        income  means  an  amount equal to the taxpayer's taxable
22        income for the taxable year as modified by paragraph (2).
23             (2)  Modifications. The taxable income  referred  to
24        in  paragraph (1) shall be modified by adding thereto the
25        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 taxable income;
30                  (B)  An  amount  equal  to  the  amount  of tax
31             imposed by this Act  to  the  extent  deducted  from
32             gross income for the taxable year; and
33                  (C)  The  amount  of  deductions allowed to the
34             partnership pursuant  to  Section  707  (c)  of  the
                            -18-               LRB9008808KDks
 1             Internal  Revenue  Code  in  calculating its taxable
 2             income;
 3                  (D)  An amount  equal  to  the  amount  of  the
 4             capital  gain deduction allowable under the Internal
 5             Revenue Code, to  the  extent  deducted  from  gross
 6             income in the computation of taxable income;
 7        and by deducting from the total so obtained the following
 8        amounts:
 9                  (E)  The valuation limitation amount;
10                  (F)  An  amount  equal to the amount of any tax
11             imposed by  this  Act  which  was  refunded  to  the
12             taxpayer  and included in such total for the taxable
13             year;
14                  (G)  An amount equal to all amounts included in
15             taxable income as  modified  by  subparagraphs  (A),
16             (B),  (C)  and (D) which are exempt from taxation by
17             this State either  by  reason  of  its  statutes  or
18             Constitution  or  by  reason  of  the  Constitution,
19             treaties  or statutes of the United States; provided
20             that, in the case of any statute of this State  that
21             exempts   income   derived   from   bonds  or  other
22             obligations from the tax imposed under this Act, the
23             amount exempted shall be the interest  net  of  bond
24             premium amortization;
25                  (H)  Any   income   of  the  partnership  which
26             constitutes personal service income  as  defined  in
27             Section  1348  (b)  (1) of the Internal Revenue Code
28             (as in effect December 31,  1981)  or  a  reasonable
29             allowance  for  compensation  paid  or  accrued  for
30             services  rendered  by  partners to the partnership,
31             whichever is greater;
32                  (I)  An amount equal to all amounts  of  income
33             distributable  to  an entity subject to the Personal
34             Property  Tax  Replacement  Income  Tax  imposed  by
                            -19-               LRB9008808KDks
 1             subsections (c) and (d) of Section 201 of  this  Act
 2             including  amounts  distributable  to  organizations
 3             exempt  from federal income tax by reason of Section
 4             501(a) of the Internal Revenue Code;
 5                  (J)  With  the   exception   of   any   amounts
 6             subtracted  under  subparagraph (G), an amount equal
 7             to the sum of all amounts disallowed  as  deductions
 8             by  Sections  171(a) (2), and 265(2) of the Internal
 9             Revenue Code of 1954, as now or  hereafter  amended,
10             and  all  amounts  of expenses allocable to interest
11             and disallowed as deductions by  Section  265(1)  of
12             the  Internal  Revenue  Code,  as  now  or hereafter
13             amended;
14                  (K)  An  amount  equal   to   those   dividends
15             included   in  such  total  which  were  paid  by  a
16             corporation which conducts business operations in an
17             Enterprise Zone or zones created under the  Illinois
18             Enterprise  Zone  Act,  enacted  by the 82nd General
19             Assembly, and which does not conduct such operations
20             other than in an Enterprise Zone or Zones;
21                  (L)  An amount equal to any  contribution  made
22             to  a  job  training project established pursuant to
23             the   Real   Property   Tax   Increment   Allocation
24             Redevelopment Act;
25                  (M)  An  amount  equal   to   those   dividends
26             included   in   such  total  that  were  paid  by  a
27             corporation that conducts business operations  in  a
28             federally  designated Foreign Trade Zone or Sub-Zone
29             and  that  is  designated  a  High  Impact  Business
30             located  in  Illinois;   provided   that   dividends
31             eligible  for the deduction provided in subparagraph
32             (K) of paragraph (2) of this subsection shall not be
33             eligible  for  the  deduction  provided  under  this
34             subparagraph (M); and
                            -20-               LRB9008808KDks
 1                  (N)  An amount  equal  to  the  amount  of  the
 2             deduction  used  to  compute  the federal income tax
 3             credit for restoration of substantial  amounts  held
 4             under  claim  of right for the taxable year pursuant
 5             to Section 1341 of  the  Internal  Revenue  Code  of
 6             1986.
 7        (e)  Gross income; adjusted gross income; taxable income.
 8             (1)  In  general.   Subject  to  the  provisions  of
 9        paragraph  (2)  and  subsection  (b) (3), for purposes of
10        this Section  and  Section  803(e),  a  taxpayer's  gross
11        income,  adjusted gross income, or taxable income for the
12        taxable year shall  mean  the  amount  of  gross  income,
13        adjusted   gross   income   or  taxable  income  properly
14        reportable  for  federal  income  tax  purposes  for  the
15        taxable year under the provisions of the Internal Revenue
16        Code. Taxable income may be less than zero. However,  for
17        taxable  years  ending on or after December 31, 1986, net
18        operating loss carryforwards from  taxable  years  ending
19        prior  to  December  31,  1986, may not exceed the sum of
20        federal taxable income for the taxable  year  before  net
21        operating  loss  deduction,  plus  the excess of addition
22        modifications  over  subtraction  modifications  for  the
23        taxable year.  For taxable years ending prior to December
24        31, 1986, taxable income may never be an amount in excess
25        of the net operating loss for the taxable year as defined
26        in subsections (c) and (d) of Section 172 of the Internal
27        Revenue Code, provided that  when  taxable  income  of  a
28        corporation  (other  than  a  Subchapter  S corporation),
29        trust,  or  estate  is  less  than  zero   and   addition
30        modifications,  other than those provided by subparagraph
31        (E) of paragraph (2) of subsection (b)  for  corporations
32        or  subparagraph  (E)  of paragraph (2) of subsection (c)
33        for trusts and estates, exceed subtraction modifications,
34        an  addition  modification  must  be  made  under   those
                            -21-               LRB9008808KDks
 1        subparagraphs  for  any  other  taxable year to which the
 2        taxable income less than zero  (net  operating  loss)  is
 3        applied under Section 172 of the Internal Revenue Code or
 4        under   subparagraph   (E)   of  paragraph  (2)  of  this
 5        subsection (e) applied in conjunction with Section 172 of
 6        the Internal Revenue Code.
 7             (2)  Special rule.  For purposes of paragraph (1) of
 8        this subsection, the taxable income  properly  reportable
 9        for federal income tax purposes shall mean:
10                  (A)  Certain  life insurance companies.  In the
11             case of a life insurance company subject to the  tax
12             imposed by Section 801 of the Internal Revenue Code,
13             life  insurance  company  taxable  income,  plus the
14             amount of distribution  from  pre-1984  policyholder
15             surplus accounts as calculated under Section 815a of
16             the Internal Revenue Code;
17                  (B)  Certain other insurance companies.  In the
18             case  of  mutual  insurance companies subject to the
19             tax imposed by Section 831 of the  Internal  Revenue
20             Code, insurance company taxable income;
21                  (C)  Regulated  investment  companies.   In the
22             case of a regulated investment  company  subject  to
23             the  tax  imposed  by  Section  852  of the Internal
24             Revenue Code, investment company taxable income;
25                  (D)  Real estate  investment  trusts.   In  the
26             case  of  a  real estate investment trust subject to
27             the tax imposed  by  Section  857  of  the  Internal
28             Revenue  Code,  real estate investment trust taxable
29             income;
30                  (E)  Consolidated corporations.  In the case of
31             a corporation which is a  member  of  an  affiliated
32             group  of  corporations filing a consolidated income
33             tax return for the taxable year for  federal  income
34             tax  purposes,  taxable income determined as if such
                            -22-               LRB9008808KDks
 1             corporation had filed a separate return for  federal
 2             income  tax  purposes  for the taxable year and each
 3             preceding taxable year for which it was a member  of
 4             an   affiliated   group.   For   purposes   of  this
 5             subparagraph, the taxpayer's separate taxable income
 6             shall be determined as if the election  provided  by
 7             Section  243(b) (2) of the Internal Revenue Code had
 8             been in effect for all such years;
 9                  (F)  Cooperatives.    In   the   case   of    a
10             cooperative  corporation or association, the taxable
11             income of such organization determined in accordance
12             with the provisions of Section 1381 through 1388  of
13             the Internal Revenue Code;
14                  (G)  Subchapter  S  corporations.   In the case
15             of: (i) a Subchapter S corporation for  which  there
16             is  in effect an election for the taxable year under
17             Section 1362  of  the  Internal  Revenue  Code,  the
18             taxable  income  of  such  corporation determined in
19             accordance with  Section  1363(b)  of  the  Internal
20             Revenue  Code, except that taxable income shall take
21             into account  those  items  which  are  required  by
22             Section  1363(b)(1)  of the Internal Revenue Code to
23             be  separately  stated;  and  (ii)  a  Subchapter  S
24             corporation for which there is in effect  a  federal
25             election  to  opt  out  of  the  provisions  of  the
26             Subchapter  S  Revision Act of 1982 and have applied
27             instead the prior federal Subchapter S rules  as  in
28             effect  on  July 1, 1982, the taxable income of such
29             corporation  determined  in  accordance   with   the
30             federal  Subchapter  S rules as in effect on July 1,
31             1982; and
32                  (H)  Partnerships.    In   the   case   of    a
33             partnership, taxable income determined in accordance
34             with  Section  703  of  the  Internal  Revenue Code,
                            -23-               LRB9008808KDks
 1             except that taxable income shall take  into  account
 2             those  items which are required by Section 703(a)(1)
 3             to be separately stated but  which  would  be  taken
 4             into  account  by  an  individual in calculating his
 5             taxable income.
 6        (f)  Valuation limitation amount.
 7             (1)  In general.  The  valuation  limitation  amount
 8        referred  to  in subsections (a) (2) (G), (c) (2) (I) and
 9        (d)(2) (E) is an amount equal to:
10                  (A)  The  sum  of  the   pre-August   1,   1969
11             appreciation  amounts  (to  the extent consisting of
12             gain reportable under the provisions of Section 1245
13             or 1250  of  the  Internal  Revenue  Code)  for  all
14             property  in respect of which such gain was reported
15             for the taxable year; plus
16                  (B)  The  lesser  of  (i)  the   sum   of   the
17             pre-August  1,  1969  appreciation  amounts  (to the
18             extent consisting of capital gain) for all  property
19             in  respect  of  which  such  gain  was reported for
20             federal income tax purposes for the taxable year, or
21             (ii) the net capital  gain  for  the  taxable  year,
22             reduced  in  either  case by any amount of such gain
23             included in the amount determined  under  subsection
24             (a) (2) (F) or (c) (2) (H).
25        (2)  Pre-August 1, 1969 appreciation amount.
26                  (A)  If  the  fair  market  value  of  property
27             referred   to   in   paragraph   (1)   was   readily
28             ascertainable  on  August 1, 1969, the pre-August 1,
29             1969 appreciation amount for such  property  is  the
30             lesser  of  (i) the excess of such fair market value
31             over the taxpayer's basis (for determining gain) for
32             such property on that  date  (determined  under  the
33             Internal Revenue Code as in effect on that date), or
34             (ii)  the  total  gain  realized  and reportable for
                            -24-               LRB9008808KDks
 1             federal income tax purposes in respect of the  sale,
 2             exchange or other disposition of such property.
 3                  (B)  If  the  fair  market  value  of  property
 4             referred   to  in  paragraph  (1)  was  not  readily
 5             ascertainable on August 1, 1969, the  pre-August  1,
 6             1969  appreciation  amount for such property is that
 7             amount which bears the same ratio to the total  gain
 8             reported  in  respect  of  the  property for federal
 9             income tax purposes for the  taxable  year,  as  the
10             number  of  full calendar months in that part of the
11             taxpayer's holding period for  the  property  ending
12             July  31,  1969 bears to the number of full calendar
13             months in the taxpayer's entire holding  period  for
14             the property.
15                  (C)  The   Department   shall   prescribe  such
16             regulations as may be necessary  to  carry  out  the
17             purposes of this paragraph.
18        (g)  Double  deductions.   Unless  specifically  provided
19    otherwise, nothing in this Section shall permit the same item
20    to be deducted more than once.
21        (h)  Legislative intention.  Except as expressly provided
22    by   this   Section   there  shall  be  no  modifications  or
23    limitations on the amounts of income, gain, loss or deduction
24    taken into account  in  determining  gross  income,  adjusted
25    gross  income  or  taxable  income  for  federal  income  tax
26    purposes for the taxable year, or in the amount of such items
27    entering  into  the computation of base income and net income
28    under this Act for such taxable year, whether in  respect  of
29    property values as of August 1, 1969 or otherwise.
30    (Source:  P.A.  89-89,  eff.  6-30-95;  89-235,  eff. 8-4-95;
31    89-418, eff. 11-15-95; 89-460,  eff.  5-24-96;  89-626,  eff.
32    8-9-96; 90-491, eff. 1-1-98.)
33        Section  99.   Effective  date.   This  Act  takes effect
                            -25-               LRB9008808KDks
 1    January 1, 1999.

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