State of Illinois
90th General Assembly
Legislation

   [ Search ]   [ Legislation ]   [ Bill Summary ]
[ Home ]   [ Back ]   [ Bottom ]


[ Introduced ][ Senate Amendment 001 ][ Senate Amendment 002 ]

90_SB0592eng

      35 ILCS 5/304             from Ch. 120, par. 3-304
          Amends the Illinois Income Tax Act.  Provides that  if  a
      person  other  than  a  resident derives business income from
      this  State  and  others,  the  business  income   shall   be
      apportioned  to  this  State by multiplying the income by the
      sales factor (now by multiplying the income  by  a  fraction,
      the numerator of which is the sum of the property factor, the
      payroll  factor,  and  200%  of  the  sales  factor  and  the
      denominator  of  which  is 4 reduced by the number of factors
      other than the sales factor which have a denominator of  zero
      and  by an additional 2 if the sales factor has a denominator
      of zero).  Deletes provisions  in  the  definition  of  sales
      factor  stating  that sales are in this State if the property
      is  shipped  from  this  State  and  the  purchaser  is   the
      government  or  is  otherwise  exempt from taxation.  Deletes
      provision stating that sales are not in  this  State  if  the
      seller  and  purchaser  would  be members of the same unitary
      business group but for the fact that one of them is a  person
      with  80%  or  more of total business activity outside of the
      United States and  the  property  is  purchased  for  resale.
      Provides that the provision excluding dividends and Subpart F
      income  from  the  sales  factor shall apply to taxable years
      ending on or after  December  31,  1995  (now  taxable  years
      ending  on  or  after December 31, 1995 and excluding taxable
      years   ending   after   December   31,   1997).    Effective
      immediately.
                                                    LRB9000850KDksA
SB592 Engrossed                               LRB9000850KDksA
 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, 1997, 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, 1997, 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
SB592 Engrossed             -2-               LRB9000850KDksA
 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
SB592 Engrossed             -3-               LRB9000850KDksA
 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
SB592 Engrossed             -4-               LRB9000850KDksA
 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  and  excluding  taxable  years  ending   after
23        December  31,  1997,  the following items of income shall
24        not be included in the numerator or  denominator  of  the
25        sales  factor:  dividends; amounts included under Section
26        78 of the Internal Revenue Code; and Subpart F income  as
27        defined  in  Section 952 of the Internal Revenue Code. No
28        inference shall be  drawn  from  the  enactment  of  this
29        paragraph  (D)  in  construing  this  Section for taxable
30        years ending before December 31, 1995.
31        (b)  Insurance companies.
32        (1)  In  general.  Except  as   otherwise   provided   by
33    paragraph  (2), business income of an insurance company for a
34    taxable  year  shall  be  apportioned  to   this   State   by
SB592 Engrossed             -5-               LRB9000850KDksA
 1    multiplying such income by a fraction, the numerator of which
 2    is the direct premiums written for insurance upon property or
 3    risk  in  this  State,  and  the  denominator of which is the
 4    direct premiums written for insurance upon property  or  risk
 5    everywhere. For purposes of this subsection, the term "direct
 6    premiums  written"  means the total amount of direct premiums
 7    written, assessments and annuity considerations  as  reported
 8    for  the  taxable  year  on the annual statement filed by the
 9    company with the Illinois Director of Insurance in  the  form
10    approved    by   the   National   Convention   of   Insurance
11    Commissioners or such other form as may be prescribed in lieu
12    thereof.
13        (2)  Reinsurance. If the  principal  source  of  premiums
14    written  by  an  insurance  company  consists of premiums for
15    reinsurance accepted by  it,  the  business  income  of  such
16    company  shall  be  apportioned  to this State by multiplying
17    such income by a fraction, the numerator of which is the  sum
18    of (i) direct premiums written for insurance upon property or
19    risk   in   this   State,  plus  (ii)  premiums  written  for
20    reinsurance accepted in respect of property or risk  in  this
21    State,  and  the  denominator  of  which  is the sum of (iii)
22    direct premiums written for insurance upon property  or  risk
23    everywhere,   plus  (iv)  premiums  written  for  reinsurance
24    accepted in respect  of  property  or  risk  everywhere.  For
25    purposes  of this paragraph, premiums written for reinsurance
26    accepted in respect  of  property  or  risk  in  this  State,
27    whether  or  not otherwise determinable, may, at the election
28    of the company, be determined on the basis of the  proportion
29    which   premiums   written   for  reinsurance  accepted  from
30    companies  commercially  domiciled  in  Illinois   bears   to
31    premiums  written  for reinsurance accepted from all sources,
32    or, alternatively, in the proportion which  the  sum  of  the
33    direct  premiums  written for insurance upon property or risk
34    in this State by each ceding company from  which  reinsurance
SB592 Engrossed             -6-               LRB9000850KDksA
 1    is  accepted  bears  to  the sum of the total direct premiums
 2    written by each such ceding company for the taxable year.
 3        (c)  Financial organizations.
 4        (1)  In  general.  Business   income   of   a   financial
 5    organization   shall   be   apportioned   to  this  State  by
 6    multiplying such income by a fraction, the numerator of which
 7    is its business income from sources within  this  State,  and
 8    the  denominator  of  which  is  its business income from all
 9    sources. For the purposes of this  subsection,  the  business
10    income  of  a financial organization from sources within this
11    State is the sum of the amounts referred to in  subparagraphs
12    (A)  through (E) following, but excluding the adjusted income
13    of  an  international  banking  facility  as  determined   in
14    paragraph (2):
15             (A)  Fees,  commissions  or  other  compensation for
16        financial services rendered within this State;
17             (B)  Gross profits from trading in stocks, bonds  or
18        other securities managed within this State;
19             (C)  Dividends,    and    interest   from   Illinois
20        customers, which are received within this State;
21             (D)  Interest charged  to  customers  at  places  of
22        business  maintained within this State for carrying debit
23        balances of margin accounts,  without  deduction  of  any
24        costs incurred in carrying such accounts; and
25             (E)  Any  other  gross  income  resulting  from  the
26        operation  as a financial organization within this State.
27        In computing the amounts referred to  in  paragraphs  (A)
28        through  (E) of this subsection, any amount received by a
29        member of an affiliated group (determined  under  Section
30        1504(a)   of   the  Internal  Revenue  Code  but  without
31        reference  to  whether  any  such   corporation   is   an
32        "includible  corporation"  under  Section  1504(b) of the
33        Internal Revenue Code) from another member of such  group
34        shall  be included only to the extent such amount exceeds
SB592 Engrossed             -7-               LRB9000850KDksA
 1        expenses of the recipient directly related thereto.
 2        (2)  International Banking Facility.
 3             (A)  Adjusted Income.  The  adjusted  income  of  an
 4        international  banking  facility is its income reduced by
 5        the amount of the floor amount.
 6             (B)  Floor Amount.  The floor amount  shall  be  the
 7        amount,  if  any, determined by multiplying the income of
 8        the international banking facility  by  a  fraction,  not
 9        greater than one, which is determined as follows:
10                  (i)  The numerator shall be:
11                  The   average   aggregate,   determined   on  a
12             quarterly basis,  of  the  financial  organization's
13             loans  to  banks  in  foreign  countries, to foreign
14             domiciled borrowers (except where secured  primarily
15             by real estate) and to foreign governments and other
16             foreign  official  institutions, as reported for its
17             branches, agencies and offices within the  state  on
18             its  "Consolidated Report of Condition", Schedule A,
19             Lines 2.c., 5.b., and 7.a., which was filed with the
20             Federal  Deposit  Insurance  Corporation  and  other
21             regulatory authorities, for the year 1980, minus
22                  The  average   aggregate,   determined   on   a
23             quarterly  basis, of such loans (other than loans of
24             an international banking facility), as  reported  by
25             the financial institution for its branches, agencies
26             and  offices  within the state, on the corresponding
27             Schedule and lines of  the  Consolidated  Report  of
28             Condition  for  the  current taxable year, provided,
29             however, that in no case shall the amount determined
30             in this clause (the subtrahend)  exceed  the  amount
31             determined  in  the  preceding clause (the minuend);
32             and
33                  (ii)  the  denominator  shall  be  the  average
34             aggregate, determined on a quarterly basis,  of  the
SB592 Engrossed             -8-               LRB9000850KDksA
 1             international  banking  facility's loans to banks in
 2             foreign countries, to  foreign  domiciled  borrowers
 3             (except  where secured primarily by real estate) and
 4             to foreign governments and  other  foreign  official
 5             institutions,  which  were recorded in its financial
 6             accounts for the current taxable year.
 7             (C)  Change to Consolidated Report of Condition  and
 8        in  Qualification.   In the event the Consolidated Report
 9        of Condition which is  filed  with  the  Federal  Deposit
10        Insurance Corporation and other regulatory authorities is
11        altered  so that the information required for determining
12        the floor amount is not found on Schedule A, lines  2.c.,
13        5.b. and 7.a., the financial institution shall notify the
14        Department  and  the  Department  may,  by regulations or
15        otherwise,  prescribe  or  authorize  the   use   of   an
16        alternative  source  for  such information. The financial
17        institution shall also notify the Department  should  its
18        international  banking  facility fail to qualify as such,
19        in whole or in part, or should there be any amendment  or
20        change  to  the  Consolidated  Report  of  Condition,  as
21        originally  filed, to the extent such amendment or change
22        alters the information  used  in  determining  the  floor
23        amount.
24        (d)  Transportation  services.  Business  income  derived
25    from  furnishing transportation services shall be apportioned
26    to this State in accordance with paragraphs (1) and (2):
27             (1)  Such business income (other than  that  derived
28        from  transportation by pipeline) shall be apportioned to
29        this State by multiplying such income by a fraction,  the
30        numerator  of which is the revenue miles of the person in
31        this State, and the denominator of which is  the  revenue
32        miles  of  the  person  everywhere.  For purposes of this
33        paragraph, a revenue mile  is  the  transportation  of  1
34        passenger  or 1 net ton of freight the distance of 1 mile
SB592 Engrossed             -9-               LRB9000850KDksA
 1        for a consideration. Where a person  is  engaged  in  the
 2        transportation   of  both  passengers  and  freight,  the
 3        fraction above referred to shall be determined  by  means
 4        of  an average of the passenger revenue mile fraction and
 5        the freight revenue mile fraction,  weighted  to  reflect
 6        the person's
 7                  (A)  relative  railway  operating  income  from
 8             total   passenger  and  total  freight  service,  as
 9             reported to the Interstate Commerce  Commission,  in
10             the case of transportation by railroad, and
11                  (B)  relative gross receipts from passenger and
12             freight  transportation,  in  case of transportation
13             other than by railroad.
14             (2)  Such    business    income     derived     from
15        transportation  by  pipeline shall be apportioned to this
16        State by multiplying  such  income  by  a  fraction,  the
17        numerator  of which is the revenue miles of the person in
18        this State, and the denominator of which is  the  revenue
19        miles  of the person everywhere. For the purposes of this
20        paragraph,  a  revenue  mile  is  the  transportation  by
21        pipeline of 1 barrel of oil, 1,000 cubic feet of gas,  or
22        of  any  specified  quantity  of any other substance, the
23        distance of 1 mile for a consideration.
24        (e)  Combined apportionment.  Where 2 or more persons are
25    engaged in a unitary  business  as  described  in  subsection
26    (a)(27) of Section 1501, a part of which is conducted in this
27    State  by  one  or  more  members  of the group, the business
28    income attributable to this  State  by  any  such  member  or
29    members  shall  be  apportioned  by  means  of  the  combined
30    apportionment method.
31        (f)  Alternative   allocation.   If  the  allocation  and
32    apportionment provisions of subsections (a) through  (e)  and
33    of  subsection  (h)  do  not fairly represent the extent of a
34    person's business activity in  this  State,  the  person  may
SB592 Engrossed             -10-              LRB9000850KDksA
 1    petition  for, or the Director may require, in respect of all
 2    or any part of the person's business activity, if reasonable:
 3             (1)  Separate accounting;
 4             (2)  The exclusion of any one or more factors;
 5             (3)  The inclusion of one or more additional factors
 6        which  will  fairly  represent  the   person's   business
 7        activities in this State; or
 8             (4)  The   employment   of   any   other  method  to
 9        effectuate an equitable allocation and  apportionment  of
10        the person's business income.
11        (g)  Cross  reference.  For allocation of business income
12    by residents, see Section 301(a).
13        (h)  Sales factor.  For tax  years  ending  on  or  after
14    December  31,  1997,  persons other than residents who derive
15    business income from this State and one or more other  states
16    shall  apportion  their  business  income  to  this  State by
17    mutiplying the income by the sales factor.
18             (1)  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             (2)  Sales of tangible personal property are in this
24        State if the  property  is  delivered  or  shipped  to  a
25        purchaser  within  this  State  regardless  of the f.o.b.
26        point or other conditions of the sale.
27             (3)  Sales, other than sales  of  tangible  personal
28        property, are in this State if:
29                  (A)  the income producing activity is performed
30             in this State; or
31                  (B)  the income producing activity is performed
32             both  within  and  without  this State and a greater
33             proportion  of  the  income-producing  activity   is
34             performed within this State than without this State,
SB592 Engrossed             -11-              LRB9000850KDksA
 1             based on performance costs.
 2             (4)  For  taxable  years ending on or after December
 3        31, 1995, the following items  of  income  shall  not  be
 4        included  in  the  numerator  or denominator of the sales
 5        factor; dividends; amounts included under Section  78  of
 6        the  Internal  Revenue  Code;  and  Subpart  F  income as
 7        defined in Section 953 of the Internal Revenue Code.   No
 8        inference  shall  be  drawn  from  the  enactment of this
 9        paragraph (4) in  construing  this  Section  for  taxable
10        years ending before December 31, 1995.  The provisions of
11        this  amendatory Act of 1997 apply to tax years ending on
12        or after December 31, 1997.
13    (Source: P.A. 89-379,  eff.  1-1-96;  89-399,  eff.  8-20-95;
14    89-626, eff. 8-9-96.)
15        (35 ILCS 5/804) (from Ch. 120, par. 8-804)
16        Sec. 804.  Failure to Pay Estimated Tax.
17        (a)  In general. In case of any underpayment of estimated
18    tax  by  a  taxpayer, except as provided in subsection (d) or
19    (e), the taxpayer shall be liable to a penalty in  an  amount
20    determined  at  the  rate  prescribed  by  Section 3-3 of the
21    Uniform Penalty and Interest  Act  upon  the  amount  of  the
22    underpayment  (determined  under  subsection  (b))  for  each
23    required installment.
24        (b)  Amount  of  underpayment. For purposes of subsection
25    (a), the amount of the underpayment shall be the excess of:
26             (1)  the amount of the installment  which  would  be
27        required to be paid under subsection (c), over
28             (2)  the  amount, if any, of the installment paid on
29        or before the last date prescribed for payment.
30        (c)  Amount of Required Installments.
31             (1)  Amount.
32                  (A)  In  General.   Except   as   provided   in
33             paragraph   (2),   the   amount   of   any  required
SB592 Engrossed             -12-              LRB9000850KDksA
 1             installment shall be  25%  of  the  required  annual
 2             payment.
 3                  (B)  Required  Annual Payment.  For purposes of
 4             subparagraph (A), the term "required annual payment"
 5             means the lesser of
 6                       (i)  90% of the tax shown  on  the  return
 7                  for the taxable year, or if no return is filed,
 8                  90% of the tax for such year, or
 9                       (ii)  100%  of the tax shown on the return
10                  of the taxpayer for the preceding taxable  year
11                  if  a  return  showing  a liability for tax was
12                  filed by the taxpayer for the preceding taxable
13                  year and such preceding year was a taxable year
14                  of 12 months.
15             (2)  Lower  Required  Installment  where  Annualized
16        Income Installment is Less Than Amount  Determined  Under
17        Paragraph (1).
18                  (A)  In  General.   In the case of any required
19             installment  if  a  taxpayer  establishes  that  the
20             annualized  income  installment  is  less  than  the
21             amount determined under paragraph (1),
22                       (i)  the   amount   of    such    required
23                  installment  shall  be  the  annualized  income
24                  installment, and
25                       (ii)  any    reduction   in   a   required
26                  installment resulting from the  application  of
27                  this   subparagraph   shall  be  recaptured  by
28                  increasing the  amount  of  the  next  required
29                  installment  determined  under paragraph (1) by
30                  the amount of such reduction, and by increasing
31                  subsequent required installments to the  extent
32                  that  the  reduction  has  not  previously been
33                  recaptured under this clause.
34                  (B)  Determination   of    Annualized    Income
SB592 Engrossed             -13-              LRB9000850KDksA
 1             Installment.    In   the   case   of   any  required
 2             installment, the annualized  income  installment  is
 3             the excess, if any, of
 4                       (i)  an  amount  equal  to  the applicable
 5                  percentage of the  tax  for  the  taxable  year
 6                  computed  by placing on an annualized basis the
 7                  net income  for  months  in  the  taxable  year
 8                  ending before the due date for the installment,
 9                  over
10                       (ii)  the  aggregate  amount  of any prior
11                  required installments for the taxable year.
12                  (C)  Applicable Percentage.
13             In the case of the following          The applicable
14             required installments:                percentage is:
15             1st ...............................            22.5%
16             2nd ...............................              45%
17             3rd ...............................            67.5%
18             4th ...............................              90%
19                  (D)  Annualized Net Income;  Individuals.   For
20             individuals,  net  income  shall  be  placed  on  an
21             annualized basis by:
22                       (i)  multiplying  by 12, or in the case of
23                  a taxable year of less than 12 months,  by  the
24                  number  of  months in the taxable year, the net
25                  income computed without regard to the  standard
26                  exemption  for  the  months in the taxable year
27                  ending  before   the   month   in   which   the
28                  installment is required to be paid;
29                       (ii)  dividing the resulting amount by the
30                  number  of  months  in  the taxable year ending
31                  before the month in which such installment date
32                  falls; and
33                       (iii)  deducting  from  such  amount   the
34                  standard  exemption  allowable  for the taxable
SB592 Engrossed             -14-              LRB9000850KDksA
 1                  year, such standard exemption being  determined
 2                  as  of  the last date prescribed for payment of
 3                  the installment.
 4                  (E)  Annualized Net Income; Corporations.   For
 5             corporations,  net  income  shall  be  placed  on an
 6             annualized basis by multiplying by  12  the  taxable
 7             income
 8                       (i)  for the first 3 months of the taxable
 9                  year,  in  the case of the installment required
10                  to be paid in the 4th month,
11                       (ii)  for the first 3 months  or  for  the
12                  first 5 months of the taxable year, in the case
13                  of  the  installment required to be paid in the
14                  6th month,
15                       (iii)  for the first 6 months or  for  the
16                  first 8 months of the taxable year, in the case
17                  of  the  installment required to be paid in the
18                  9th month, and
19                       (iv)  for the first 9 months  or  for  the
20                  first  11  months  of  the taxable year, in the
21                  case of the installment required to be paid  in
22                  the 12th month of the taxable year,
23             then  dividing the resulting amount by the number of
24             months in the taxable year (3, 5, 6, 8, 9, or 11  as
25             the case may be).
26        (d)  Exceptions.  Notwithstanding  the  provisions of the
27    preceding subsections, the penalty imposed by subsection  (a)
28    shall not be imposed if the taxpayer was not required to file
29    an Illinois income tax return for the preceding taxable year,
30    or  if the taxpayer has underpaid taxes solely because of the
31    increased rate in effect during the period from July 1,  1989
32    through  December  1989, or, for individuals, if the taxpayer
33    had no tax liability for the preceding taxable year and  such
34    year was a taxable year of 12 months.  The penalty imposed by
SB592 Engrossed             -15-              LRB9000850KDksA
 1    subsection (a) shall also not be imposed on any underpayments
 2    of  estimated  tax  due  before  the  effective  date of this
 3    amendatory  Act  of  1997  which  underpayments  are   solely
 4    attributable  to  the change in apportionment from subsection
 5    (a) to subsection (h) of Section 304.  The provisions of this
 6    amendatory Act of 1997 apply to tax years ending on or  after
 7    December 31, 1997.
 8        (e)  The  penalty  imposed  for underpayment of estimated
 9    tax by subsection (a) of this Section shall not be imposed to
10    the extent that the Department or his  designate  determines,
11    pursuant  to  Section 3-8 of the Uniform Penalty and Interest
12    Act that the penalty should not be imposed.
13        (f)  Definition of tax. For purposes of  subsections  (b)
14    and  (c),  the term "tax" means the excess of the tax imposed
15    under Article 2  of  this  Act,  over  the  amounts  credited
16    against such tax under Sections 601(b) (3) and (4).
17        (g)  Application  of  Section  in case of tax withheld on
18    compensation. For purposes of applying this  Section  in  the
19    case  of  an individual, tax withheld under Article 7 for the
20    taxable year shall be deemed a payment of estimated tax,  and
21    an  equal  part  of  such amount shall be deemed paid on each
22    installment date for such taxable year, unless  the  taxpayer
23    establishes  the  dates  on  which  all amounts were actually
24    withheld, in which case the  amounts  so  withheld  shall  be
25    deemed  payments  of estimated tax on the dates on which such
26    amounts were actually withheld.
27        (i)  Short taxable year. The application of this  Section
28    to  taxable  years  of  less  than  12  months  shall  be  in
29    accordance with regulations prescribed by the Department.
30        The  changes  in  this  Section made by Public Act 84-127
31    shall apply to taxable years ending on or  after  January  1,
32    1986.
33    (Source: P.A. 86-678; 86-953; 86-1028; 87-205.)
SB592 Engrossed             -16-              LRB9000850KDksA
 1        (35 ILCS 5/1501) (from Ch. 120, par. 15-1501)
 2        Sec. 1501.  Definitions.
 3        (a)  In  general.  When  used  in  this  Act,  where  not
 4    otherwise  distinctly  expressed  or  manifestly incompatible
 5    with the intent thereof:
 6             (1)  Business income.  The  term  "business  income"
 7        means  income  arising  from transactions and activity in
 8        the regular course of the taxpayer's trade  or  business,
 9        net  of  the  deductions  allocable thereto, and includes
10        income from  tangible  and  intangible  property  if  the
11        acquisition,  management, and disposition of the property
12        constitute integral parts of the taxpayer's regular trade
13        or  business  operations.  Such  term  does  not  include
14        compensation or the deductions allocable thereto.
15             (2)  Commercial  domicile.  The   term   "commercial
16        domicile"  means the principal place from which the trade
17        or business of the taxpayer is directed or managed.
18             (3)  Compensation.  The  term  "compensation"  means
19        wages,  salaries,  commissions  and  any  other  form  of
20        remuneration paid to employees for personal services.
21             (4)  Corporation. The  term  "corporation"  includes
22        associations,  joint-stock companies, insurance companies
23        and  cooperatives.  Any  entity,  including   a   limited
24        liability  company  formed  under  the  Illinois  Limited
25        Liability  Company Act, shall be treated as a corporation
26        if it is so classified for federal income tax purposes.
27             (5)  Department. The  term  "Department"  means  the
28        Department of Revenue of this State.
29             (6)  Director.   The   term   "Director"  means  the
30        Director of Revenue of this State.
31             (7)  Fiduciary.  The  term   "fiduciary"   means   a
32        guardian,  trustee, executor, administrator, receiver, or
33        any person acting  in  any  fiduciary  capacity  for  any
34        person.
SB592 Engrossed             -17-              LRB9000850KDksA
 1             (8)  Financial organization.
 2                  (A)  The  term  "financial  organization" means
 3             any  bank,  bank  holding  company,  trust  company,
 4             savings  bank,  industrial  bank,  land  bank,  safe
 5             deposit company, private banker,  savings  and  loan
 6             association,  building  and loan association, credit
 7             union, currency exchange,  cooperative  bank,  small
 8             loan  company,  sales  finance  company,  investment
 9             company,  or  any person which is owned by a bank or
10             bank holding  company.   For  the  purpose  of  this
11             Section  a  "person" will include only those persons
12             which a bank holding company may acquire and hold an
13             interest  in,  directly  or  indirectly,  under  the
14             provisions of the Bank Holding Company Act  of  1956
15             (12 U.S.C. 1841, et seq.), except where interests in
16             any  person  must  be  disposed  of  within  certain
17             required  time limits under the Bank Holding Company
18             Act of 1956.
19                  (B)  For purposes of subparagraph (A)  of  this
20             paragraph,  the  term "bank" includes (i) any entity
21             that is regulated by the Comptroller of the Currency
22             under the National  Bank  Act,  or  by  the  Federal
23             Reserve  Board,  or by the Federal Deposit Insurance
24             Corporation  and  (ii)  any   federally   or   State
25             chartered bank operating as a credit card bank.
26                  (C)  For  purposes  of subparagraph (A) of this
27             paragraph, the term "sales finance company" means  a
28             person   primarily   engaged   in  the  business  of
29             purchasing or making  loans  upon  the  security  of
30             retail   installment   contracts  or  retail  charge
31             agreements or the outstanding  balances  under  such
32             contracts  or  agreements.  The term includes but is
33             not limited  to  persons:  (i)  to  whom  the  Sales
34             Finance  Agency  Act  is  rendered  inapplicable  by
SB592 Engrossed             -18-              LRB9000850KDksA
 1             subsection  (b)  of Section 17 thereof; (ii) engaged
 2             in consumer sales finance activities governed by the
 3             Sales Finance Agency Act or that would  be  governed
 4             by  that  Act  if  conducted  in  this  State; (iii)
 5             engaged  in  activities  governed  by   the   Retail
 6             Installment  Sales  Act,  including  the  making  or
 7             purchasing of retail installment contracts or retail
 8             charge  agreements  for  "goods"  or  "services"  as
 9             defined  in  that  Act,  or activities that would be
10             governed by that Act if  conducted  in  this  State;
11             (iv)  engaged  in  activities  governed by the Motor
12             Vehicle Retail Installment Sales Act or  that  would
13             be  governed by that Act if conducted in this State;
14             (v)  engaged  in   commercial   finance   activities
15             governed  by the Illinois Uniform Commercial Code or
16             that would be governed by that Code if conducted  in
17             this  State;  or (vi) engaged in the finance leasing
18             of  tangible  personal   property   where   "finance
19             leasing" is activity that is the economic equivalent
20             of  an extension of credit and for which a deduction
21             for depreciation under Section 167 of  the  Internal
22             Revenue Code of 1986 is not available to a lessor.
23                  (D)  Subparagraphs   (B)   and   (C)   of  this
24             paragraph are declaratory of existing law and  apply
25             retroactively,  for  all  tax  years beginning on or
26             before December 31, 1996,  to all original  returns,
27             to  all  amended returns filed no later than 30 days
28             after the effective date of this amendatory  Act  of
29             1996,  and  to  all  notices issued on or before the
30             effective date of this amendatory Act of 1996  under
31             subsection  (a)  of  Section  903, subsection (a) of
32             Section 904,  subsection  (e)  of  Section  909,  or
33             Section   912.  A  taxpayer  that  is  a  "financial
34             organization" that engages in any  transaction  with
SB592 Engrossed             -19-              LRB9000850KDksA
 1             an affiliate shall be a "financial organization" for
 2             all purposes of this Act.
 3                  (E)  For  all  tax years beginning on or before
 4             December 31, 1996, a taxpayer that falls within  the
 5             definition   of  a  "financial  organization"  under
 6             subparagraphs (B) or (C) of this paragraph, but  who
 7             does  not fall within the definition of a "financial
 8             organization" under the Proposed Regulations  issued
 9             by  the  Department of Revenue on July 19, 1996, may
10             irrevocably elect to apply the Proposed  Regulations
11             for  all  of  those  years  as  though  the Proposed
12             Regulations had been lawfully promulgated,  adopted,
13             and  in effect for all of those years.  For purposes
14             of  applying  subparagraphs  (B)  or  (C)  of   this
15             paragraph  to  all  of  those  years,  the  election
16             allowed  by  this  subparagraph  applies only to the
17             taxpayer making the election and to those members of
18             the  taxpayer's  unitary  business  group  who   are
19             ordinarily  required  to  apportion  business income
20             under the same subsection of Section 304 of this Act
21             as the taxpayer making the  election.   No  election
22             allowed  by  this subparagraph shall be made under a
23             claim filed under subsection (d) of Section 909 more
24             than 30  days  after  the  effective  date  of  this
25             amendatory Act of 1996.
26             (9)  Fiscal  year.  The  term "fiscal year" means an
27        accounting period of 12 months ending on the last day  of
28        any month other than December.
29             (10)  Includes  and  including. The terms "includes"
30        and "including" when used in a  definition  contained  in
31        this  Act  shall  not  be  deemed to exclude other things
32        otherwise within the meaning of the term defined.
33             (11)  Internal  Revenue  Code.  The  term  "Internal
34        Revenue Code" means the United  States  Internal  Revenue
SB592 Engrossed             -20-              LRB9000850KDksA
 1        Code  of  1954  or  any successor law or laws relating to
 2        federal income taxes in effect for the taxable year.
 3             (12)  Mathematical  error.  The  term  "mathematical
 4        error" includes the following types of errors, omissions,
 5        or defects in a return filed by a taxpayer which prevents
 6        acceptance of the return as filed for processing:
 7                  (A)  arithmetic     errors     or     incorrect
 8             computations on the return or supporting schedules;
 9                  (B)  entries on the wrong lines;
10                  (C)  omission of required supporting  forms  or
11             schedules  or  the  omission  of  the information in
12             whole or in part called for thereon; and
13                  (D)  an attempt to claim, exclude,  deduct,  or
14             improperly  report, in a manner directly contrary to
15             the provisions of the Act and regulations thereunder
16             any item of income, exemption, deduction, or credit.
17             (13)  Nonbusiness  income.  The  term   "nonbusiness
18        income"  means  all  income other than business income or
19        compensation.
20             (14)  Nonresident. The term  "nonresident"  means  a
21        person who is not a resident.
22             (15)  Paid,  incurred and accrued. The terms "paid",
23        "incurred" and "accrued" shall be construed according  to
24        the  method  of  accounting  upon  the basis of which the
25        person's base income is computed under this Act.
26             (16)  Partnership    and    partner.    The     term
27        "partnership"  includes  a  syndicate, group, pool, joint
28        venture or other unincorporated organization, through  or
29        by  means  of which any business, financial operation, or
30        venture is carried on,  and  which  is  not,  within  the
31        meaning  of this Act, a trust or estate or a corporation;
32        and  the  term  "partner"  includes  a  member  in   such
33        syndicate, group, pool, joint venture or organization.
34             Any  entity,  including  a limited liability company
SB592 Engrossed             -21-              LRB9000850KDksA
 1        formed under the Illinois Limited Liability Company  Act,
 2        shall  be treated as a partnership if it is so classified
 3        for federal income tax purposes.
 4             For purposes of the tax imposed at subsection (c) of
 5        Section 201 of this Act, the term "partnership" does  not
 6        include  a syndicate, group, pool, joint venture or other
 7        unincorporated  organization  established  for  the  sole
 8        purpose of playing the Illinois State Lottery.
 9             (17)  Part-year  resident.   The   term   "part-year
10        resident"  means  an  individual  who  became  a resident
11        during the taxable year or ceased to be a resident during
12        the taxable year. Under Section 1501  (a)  (20)  (A)  (i)
13        residence commences with presence in this State for other
14        than  a  temporary  or transitory purpose and ceases with
15        absence from this State for other  than  a  temporary  or
16        transitory  purpose. Under Section 1501 (a) (20) (A) (ii)
17        residence commences with the establishment of domicile in
18        this State and ceases with the establishment of  domicile
19        in another State.
20             (18)  Person.  The  term "person" shall be construed
21        to mean and  include  an  individual,  a  trust,  estate,
22        partnership,  association,  firm,  company,  corporation,
23        limited  liability company, or fiduciary. For purposes of
24        Section 1301 and 1302 of this Act, a "person"  means  (i)
25        an  individual,  (ii)  a  corporation,  (iii) an officer,
26        agent, or employee of a corporation, (iv) a member, agent
27        or employee of a partnership, or (v) a  member,  manager,
28        employee,  officer,  director,  or  agent  of  a  limited
29        liability company who in such capacity commits an offense
30        specified in Section 1301 and 1302.
31             (18A)  Records.   The  term  "records"  includes all
32        data  maintained  by  the  taxpayer,  whether  on  paper,
33        microfilm, microfiche, or any  type  of  machine-sensible
34        data compilation.
SB592 Engrossed             -22-              LRB9000850KDksA
 1             (19)  Regulations.  The  term "regulations" includes
 2        rules promulgated and forms prescribed by the Department.
 3             (20)  Resident. The term "resident" means:
 4                  (A)  an individual (i) who is in this State for
 5             other than a temporary or transitory purpose  during
 6             the  taxable  year; or (ii) who is domiciled in this
 7             State but is absent from the State for  a  temporary
 8             or transitory purpose during the taxable year;
 9                  (B)  The estate of a decedent who at his or her
10             death was domiciled in this State;
11                  (C)  A  trust  created  by a will of a decedent
12             who at his death was domiciled in this State; and
13                  (D)  An irrevocable trust, the grantor of which
14             was domiciled in this State at the time  such  trust
15             became    irrevocable.    For    purpose   of   this
16             subparagraph,   a   trust   shall   be    considered
17             irrevocable  to  the  extent that the grantor is not
18             treated as the  owner  thereof  under  Sections  671
19             through 678 of the Internal Revenue Code.
20             (21)  Sales.   The  term  "sales"  means  all  gross
21        receipts of the taxpayer  not  allocated  under  Sections
22        301, 302 and 303.
23             (22)  State.  The  term  "state"  when  applied to a
24        jurisdiction other than this State means any state of the
25        United States, the District of Columbia, the Commonwealth
26        of Puerto Rico, any Territory or Possession of the United
27        States,  and  any  foreign  country,  or  any   political
28        subdivision of any of the foregoing.  For purposes of the
29        foreign  tax  credit  under Section 601, the term "state"
30        means any state of the United  States,  the  District  of
31        Columbia,  the  Commonwealth  of  Puerto  Rico,  and  any
32        territory  or  possession  of  the  United States, or any
33        political subdivision of any of the foregoing,  effective
34        for tax years ending on or after December 31, 1989.
SB592 Engrossed             -23-              LRB9000850KDksA
 1             (23)  Taxable  year.  The  term "taxable year" means
 2        the calendar year, or the fiscal year ending during  such
 3        calendar year, upon the basis of which the base income is
 4        computed  under  this  Act.  "Taxable year" means, in the
 5        case of a return made for a fractional  part  of  a  year
 6        under  the  provisions  of this Act, the period for which
 7        such return is made.
 8             (24)  Taxpayer. The term "taxpayer" means any person
 9        subject to the tax imposed by this Act.
10             (25)  International  banking  facility.   The   term
11        international   banking  facility  shall  have  the  same
12        meaning as is set forth in the Illinois Banking Act or as
13        is set  forth  in  the  laws  of  the  United  States  or
14        regulations  of  the  Board  of  Governors of the Federal
15        Reserve System.
16             (26)  Income Tax Return Preparer.
17                  (A)  The  term  "income  tax  return  preparer"
18             means any person who prepares for  compensation,  or
19             who  employs  one  or  more  persons  to prepare for
20             compensation, any return of tax imposed by this  Act
21             or  any claim for refund of tax imposed by this Act.
22             The preparation of a substantial portion of a return
23             or  claim  for  refund  shall  be  treated  as   the
24             preparation of that return or claim for refund.
25                  (B)  A  person  is  not  an  income  tax return
26             preparer if all he or she does is
27                       (i)  furnish typing, reproducing, or other
28                  mechanical assistance;
29                       (ii)  prepare  returns   or   claims   for
30                  refunds  for  the employer by whom he or she is
31                  regularly and continuously employed;
32                       (iii)  prepare as a fiduciary  returns  or
33                  claims for refunds for any person; or
34                       (iv)  prepare  claims  for  refunds  for a
SB592 Engrossed             -24-              LRB9000850KDksA
 1                  taxpayer  in  response   to   any   notice   of
 2                  deficiency   issued  to  that  taxpayer  or  in
 3                  response to any waiver of restriction after the
 4                  commencement of an audit of that taxpayer or of
 5                  another taxpayer  if  a  determination  in  the
 6                  audit   of   the  other  taxpayer  directly  or
 7                  indirectly affects the  tax  liability  of  the
 8                  taxpayer whose claims he or she is preparing.
 9             (27)  Unitary  business  group.   The  term "unitary
10        business group" means a group of persons related  through
11        common ownership whose business activities are integrated
12        with,  dependent  upon and contribute to each other.  The
13        group will  not  include  those  members  whose  business
14        activity  outside the United States is 80% or more of any
15        such member's total business activity;  for  purposes  of
16        this  paragraph  and  clause  (a) (3) (B) (ii) of Section
17        304, business activity within the United States shall  be
18        measured  by  means  of the factors ordinarily applicable
19        under subsections (a), (b),  (c),  and  (d),  or  (h)  of
20        Section   304   except  that,  in  the  case  of  members
21        ordinarily required to apportion business income by means
22        of the 3 factor formula of property,  payroll  and  sales
23        specified  in  subsection  (a)  of  Section  304,  or the
24        single-factor sales formula specified in  subsection  (h)
25        of  Section  304,  such  members  shall not use the sales
26        factor in the computation and the results of the property
27        and payroll factor  computations  of  subsection  (a)  of
28        Section  304  shall be divided by 2 (by one if either the
29        property or payroll factor has a  denominator  of  zero).
30        The computation required by the preceding sentence shall,
31        in  each  case,  involve  the  division  of  the member's
32        property, payroll, or revenue miles in the United States,
33        insurance premiums on property  or  risk  in  the  United
34        States,  or  financial  organization business income from
SB592 Engrossed             -25-              LRB9000850KDksA
 1        sources within the United States, as the case may be,  by
 2        the  respective worldwide figures for such items.  Common
 3        ownership in the case of corporations is  the  direct  or
 4        indirect  control  or  ownership  of more than 50% of the
 5        outstanding voting  stock  of  the  persons  carrying  on
 6        unitary business activity.  Unitary business activity can
 7        ordinarily  be  illustrated  where  the activities of the
 8        members are:  (1) in  the  same  general  line  (such  as
 9        manufacturing,   wholesaling,   retailing   of   tangible
10        personal property, insurance, transportation or finance);
11        or (2) are steps in a vertically structured enterprise or
12        process  (such as the steps involved in the production of
13        natural  resources,  which  might  include   exploration,
14        mining,   refining,   and   marketing);  and,  in  either
15        instance, the members are functionally integrated through
16        the exercise of strong centralized management (where, for
17        example,  authority  over  such  matters  as  purchasing,
18        financing,  tax  compliance,  product  line,   personnel,
19        marketing  and  capital  investment  is  not left to each
20        member). In no event, however, will any unitary  business
21        group  include  members  which are ordinarily required to
22        apportion business income under different subsections  of
23        Section  304 except that for tax years ending on or after
24        December 31, 1987 this prohibition shall not apply  to  a
25        unitary  business group composed of one or more taxpayers
26        all  of  which  apportion  business  income  pursuant  to
27        subsection (b) of Section 304, or all of which  apportion
28        business  income  pursuant  to  subsection (d) of Section
29        304,  and  a  holding  company  of   such   single-factor
30        taxpayers (see definition of "financial organization" for
31        rule    regarding    holding   companies   of   financial
32        organizations).  If a unitary business group  would,  but
33        for  the  preceding  sentence,  include  members that are
34        ordinarily required to apportion  business  income  under
SB592 Engrossed             -26-              LRB9000850KDksA
 1        different  subsections  of  Section  304,  then  for each
 2        subsection of Section 304 for which there are two or more
 3        members, there shall be a separate unitary business group
 4        composed of such members.  For purposes of the  preceding
 5        two  sentences,  a  member  is  "ordinarily  required  to
 6        apportion  business income" under a particular subsection
 7        of Section 304  if  it  would  be  required  to  use  the
 8        apportionment method prescribed by such subsection except
 9        for  the fact that it derives business income solely from
10        Illinois.   If  the  unitary  business   group   members'
11        accounting periods differ, the common parent's accounting
12        period  or,  if there is no common parent, the accounting
13        period of the member that  is  expected  to  have,  on  a
14        recurring   basis,   the  greatest  Illinois  income  tax
15        liability must be used to determine whether  to  use  the
16        apportionment   method  provided  in  subsection  (a)  or
17        subsection (h) of Section 304.  The  prohibition  against
18        membership  in  a  unitary  business  group for taxpayers
19        ordinarily required to apportion income  under  different
20        subsections  of  Section  304 does not apply to taxpayers
21        required to apportion income  under  subsection  (a)  and
22        subsection  (h)  of  Section 304.  The provisions of this
23        amendatory Act of 1997 apply to tax years  ending  on  or
24        after December 31, 1997.
25             (28)  Subchapter    S    corporation.     The   term
26        "Subchapter S corporation" means a corporation for  which
27        there  is in effect an election under Section 1362 of the
28        Internal Revenue Code, or for which there  is  a  federal
29        election to opt out of the provisions of the Subchapter S
30        Revision  Act  of 1982 and have applied instead the prior
31        federal Subchapter S rules as in effect on July 1, 1982.
32        (b)  Other definitions.
33             (1)  Words denoting number, gender,  and  so  forth,
34        when  used  in  this  Act, where not otherwise distinctly
SB592 Engrossed             -27-              LRB9000850KDksA
 1        expressed or  manifestly  incompatible  with  the  intent
 2        thereof:
 3                  (A)  Words  importing  the singular include and
 4             apply to several persons, parties or things;
 5                  (B)  Words importing  the  plural  include  the
 6             singular; and
 7                  (C)  Words   importing   the  masculine  gender
 8             include the feminine as well.
 9             (2)  "Company"   or   "association"   as   including
10        successors   and   assigns.   The   word   "company"   or
11        "association", when used in reference to  a  corporation,
12        shall  be  deemed  to  embrace  the words "successors and
13        assigns of such company  or  association",  and  in  like
14        manner  as if these last-named words, or words of similar
15        import, were expressed.
16             (3)  Other terms. Any term used in  any  Section  of
17        this  Act  with  respect  to  the  application  of, or in
18        connection with, the provisions of any other  Section  of
19        this  Act  shall  have  the same meaning as in such other
20        Section.
21    (Source: P.A. 88-480;  89-399,  eff.  8-20-95;  89-711,  eff.
22    2-14-97.)
23        Section  99.  Effective date.  This Act takes effect upon
24    becoming law.

[ Top ]