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92_HB0307 LRB9202530SMdv 1 AN ACT in relation to taxes. 2 Be it enacted by the People of the State of Illinois, 3 represented in the General Assembly: 4 Section 5. The Illinois Income Tax Act is amended by 5 changing Section 203 as follows: 6 (35 ILCS 5/203) (from Ch. 120, par. 2-203) 7 Sec. 203. Base income defined. 8 (a) Individuals. 9 (1) In general. In the case of an individual, base 10 income means an amount equal to the taxpayer's adjusted 11 gross income for the taxable year as modified by 12 paragraph (2). 13 (2) Modifications. The adjusted gross income 14 referred to in paragraph (1) shall be modified by adding 15 thereto the sum of the following amounts: 16 (A) An amount equal to all amounts paid or 17 accrued to the taxpayer as interest or dividends 18 during the taxable year to the extent excluded from 19 gross income in the computation of adjusted gross 20 income, except stock dividends of qualified public 21 utilities described in Section 305(e) of the 22 Internal Revenue Code; 23 (B) An amount equal to the amount of tax 24 imposed by this Act to the extent deducted from 25 gross income in the computation of adjusted gross 26 income for the taxable year; 27 (C) An amount equal to the amount received 28 during the taxable year as a recovery or refund of 29 real property taxes paid with respect to the 30 taxpayer's principal residence under the Revenue Act 31 of 1939 and for which a deduction was previously -2- LRB9202530SMdv 1 taken under subparagraph (L) of this paragraph (2) 2 prior to July 1, 1991, the retrospective application 3 date of Article 4 of Public Act 87-17. In the case 4 of multi-unit or multi-use structures and farm 5 dwellings, the taxes on the taxpayer's principal 6 residence shall be that portion of the total taxes 7 for the entire property which is attributable to 8 such principal residence; 9 (D) An amount equal to the amount of the 10 capital gain deduction allowable under the Internal 11 Revenue Code, to the extent deducted from gross 12 income in the computation of adjusted gross income; 13 (D-5) An amount, to the extent not included in 14 adjusted gross income, equal to the amount of money 15 withdrawn by the taxpayer in the taxable year from a 16 medical care savings account and the interest earned 17 on the account in the taxable year of a withdrawal 18 pursuant to subsection (b) of Section 20 of the 19 Medical Care Savings Account Act or subsection (b) 20 of Section 20 of the Medical Care Savings Account 21 Act of 2000; and 22 (D-10) For taxable years ending after December 23 31, 1997, an amount equal to any eligible 24 remediation costs that the individual deducted in 25 computing adjusted gross income and for which the 26 individual claims a credit under subsection (l) of 27 Section 201; 28 and by deducting from the total so obtained the sum of 29 the following amounts: 30 (E) Any amount included in such total in 31 respect of any compensation (including but not 32 limited to any compensation paid or accrued to a 33 serviceman while a prisoner of war or missing in 34 action) paid to a resident by reason of being on -3- LRB9202530SMdv 1 active duty in the Armed Forces of the United States 2 and in respect of any compensation paid or accrued 3 to a resident who as a governmental employee was a 4 prisoner of war or missing in action, and in respect 5 of any compensation paid to a resident in 1971 or 6 thereafter for annual training performed pursuant to 7 Sections 502 and 503, Title 32, United States Code 8 as a member of the Illinois National Guard; 9 (F) An amount equal to all amounts included in 10 such total pursuant to the provisions of Sections 11 402(a), 402(c), 403(a), 403(b), 406(a), 407(a), and 12 408 of the Internal Revenue Code, or included in 13 such total as distributions under the provisions of 14 any retirement or disability plan for employees of 15 any governmental agency or unit, or retirement 16 payments to retired partners, which payments are 17 excluded in computing net earnings from self 18 employment by Section 1402 of the Internal Revenue 19 Code and regulations adopted pursuant thereto; 20 (G) The valuation limitation amount; 21 (H) An amount equal to the amount of any tax 22 imposed by this Act which was refunded to the 23 taxpayer and included in such total for the taxable 24 year; 25 (I) An amount equal to all amounts included in 26 such total pursuant to the provisions of Section 111 27 of the Internal Revenue Code as a recovery of items 28 previously deducted from adjusted gross income in 29 the computation of taxable income; 30 (J) An amount equal to those dividends 31 included in such total which were paid by a 32 corporation which conducts business operations in an 33 Enterprise Zone or zones created under the Illinois 34 Enterprise Zone Act, and conducts substantially all -4- LRB9202530SMdv 1 of its operations in an Enterprise Zone or zones; 2 (K) An amount equal to those dividends 3 included in such total that were paid by a 4 corporation that conducts business operations in a 5 federally designated Foreign Trade Zone or Sub-Zone 6 and that is designated a High Impact Business 7 located in Illinois; provided that dividends 8 eligible for the deduction provided in subparagraph 9 (J) of paragraph (2) of this subsection shall not be 10 eligible for the deduction provided under this 11 subparagraph (K); 12 (L) For taxable years ending after December 13 31, 1983, an amount equal to all social security 14 benefits and railroad retirement benefits included 15 in such total pursuant to Sections 72(r) and 86 of 16 the Internal Revenue Code; 17 (M) With the exception of any amounts 18 subtracted under subparagraph (N), an amount equal 19 to the sum of all amounts disallowed as deductions 20 by (i) Sections 171(a) (2), and 265(2) of the 21 Internal Revenue Code of 1954, as now or hereafter 22 amended, and all amounts of expenses allocable to 23 interest and disallowed as deductions by Section 24 265(1) of the Internal Revenue Code of 1954, as now 25 or hereafter amended; and (ii) for taxable years 26 ending on or after August 13, 1999, Sections 27 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the 28 Internal Revenue Code; the provisions of this 29 subparagraph are exempt from the provisions of 30 Section 250; 31 (N) An amount equal to all amounts included in 32 such total which are exempt from taxation by this 33 State either by reason of its statutes or 34 Constitution or by reason of the Constitution, -5- LRB9202530SMdv 1 treaties or statutes of the United States; provided 2 that, in the case of any statute of this State that 3 exempts income derived from bonds or other 4 obligations from the tax imposed under this Act, the 5 amount exempted shall be the interest net of bond 6 premium amortization; 7 (O) An amount equal to any contribution made 8 to a job training project established pursuant to 9 the Tax Increment Allocation Redevelopment Act; 10 (P) An amount equal to the amount of the 11 deduction used to compute the federal income tax 12 credit for restoration of substantial amounts held 13 under claim of right for the taxable year pursuant 14 to Section 1341 of the Internal Revenue Code of 15 1986; 16 (Q) An amount equal to any amounts included in 17 such total, received by the taxpayer as an 18 acceleration in the payment of life, endowment or 19 annuity benefits in advance of the time they would 20 otherwise be payable as an indemnity for a terminal 21 illness; 22 (R) An amount equal to the amount of any 23 federal or State bonus paid to veterans of the 24 Persian Gulf War; 25 (S) An amount, to the extent included in 26 adjusted gross income, equal to the amount of a 27 contribution made in the taxable year on behalf of 28 the taxpayer to a medical care savings account 29 established under the Medical Care Savings Account 30 Act or the Medical Care Savings Account Act of 2000 31 to the extent the contribution is accepted by the 32 account administrator as provided in that Act; 33 (T) An amount, to the extent included in 34 adjusted gross income, equal to the amount of -6- LRB9202530SMdv 1 interest earned in the taxable year on a medical 2 care savings account established under the Medical 3 Care Savings Account Act or the Medical Care Savings 4 Account Act of 2000 on behalf of the taxpayer, other 5 than interest added pursuant to item (D-5) of this 6 paragraph (2); 7 (U) For one taxable year beginning on or after 8 January 1, 1994, an amount equal to the total amount 9 of tax imposed and paid under subsections (a) and 10 (b) of Section 201 of this Act on grant amounts 11 received by the taxpayer under the Nursing Home 12 Grant Assistance Act during the taxpayer's taxable 13 years 1992 and 1993; 14 (V) Beginning with tax years ending on or 15 after December 31, 1995 and ending with tax years 16 ending on or before December 31, 2004, an amount 17 equal to the amount paid by a taxpayer who is a 18 self-employed taxpayer, a partner of a partnership, 19 or a shareholder in a Subchapter S corporation for 20 health insurance or long-term care insurance for 21 that taxpayer or that taxpayer's spouse or 22 dependents, to the extent that the amount paid for 23 that health insurance or long-term care insurance 24 may be deducted under Section 213 of the Internal 25 Revenue Code of 1986, has not been deducted on the 26 federal income tax return of the taxpayer, and does 27 not exceed the taxable income attributable to that 28 taxpayer's income, self-employment income, or 29 Subchapter S corporation income; except that no 30 deduction shall be allowed under this item (V) if 31 the taxpayer is eligible to participate in any 32 health insurance or long-term care insurance plan of 33 an employer of the taxpayer or the taxpayer's 34 spouse. The amount of the health insurance and -7- LRB9202530SMdv 1 long-term care insurance subtracted under this item 2 (V) shall be determined by multiplying total health 3 insurance and long-term care insurance premiums paid 4 by the taxpayer times a number that represents the 5 fractional percentage of eligible medical expenses 6 under Section 213 of the Internal Revenue Code of 7 1986 not actually deducted on the taxpayer's federal 8 income tax return; 9 (W) For taxable years beginning on or after 10 January 1, 1998, all amounts included in the 11 taxpayer's federal gross income in the taxable year 12 from amounts converted from a regular IRA to a Roth 13 IRA. This paragraph is exempt from the provisions of 14 Section 250;and15 (X) For taxable year 1999 and thereafter, an 16 amount equal to the amount of any (i) distributions, 17 to the extent includible in gross income for federal 18 income tax purposes, made to the taxpayer because of 19 his or her status as a victim of persecution for 20 racial or religious reasons by Nazi Germany or any 21 other Axis regime or as an heir of the victim and 22 (ii) items of income, to the extent includible in 23 gross income for federal income tax purposes, 24 attributable to, derived from or in any way related 25 to assets stolen from, hidden from, or otherwise 26 lost to a victim of persecution for racial or 27 religious reasons by Nazi Germany or any other Axis 28 regime immediately prior to, during, and immediately 29 after World War II, including, but not limited to, 30 interest on the proceeds receivable as insurance 31 under policies issued to a victim of persecution for 32 racial or religious reasons by Nazi Germany or any 33 other Axis regime by European insurance companies 34 immediately prior to and during World War II; -8- LRB9202530SMdv 1 provided, however, this subtraction from federal 2 adjusted gross income does not apply to assets 3 acquired with such assets or with the proceeds from 4 the sale of such assets; provided, further, this 5 paragraph shall only apply to a taxpayer who was the 6 first recipient of such assets after their recovery 7 and who is a victim of persecution for racial or 8 religious reasons by Nazi Germany or any other Axis 9 regime or as an heir of the victim. The amount of 10 and the eligibility for any public assistance, 11 benefit, or similar entitlement is not affected by 12 the inclusion of items (i) and (ii) of this 13 paragraph in gross income for federal income tax 14 purposes. This paragraph is exempt from the 15 provisions of Section 250; and 16 (Y) For taxable years ending on or after 17 December 31, 2001, all amounts included in the 18 taxpayer's federal gross income in the taxable year 19 from amounts contributed to a Roth IRA. This 20 paragraph is exempt from the provisions of Section 21 250. 22 (b) Corporations. 23 (1) In general. In the case of a corporation, base 24 income means an amount equal to the taxpayer's taxable 25 income for the taxable year as modified by paragraph (2). 26 (2) Modifications. The taxable income referred to 27 in paragraph (1) shall be modified by adding thereto the 28 sum of the following amounts: 29 (A) An amount equal to all amounts paid or 30 accrued to the taxpayer as interest and all 31 distributions received from regulated investment 32 companies during the taxable year to the extent 33 excluded from gross income in the computation of 34 taxable income; -9- LRB9202530SMdv 1 (B) An amount equal to the amount of tax 2 imposed by this Act to the extent deducted from 3 gross income in the computation of taxable income 4 for the taxable year; 5 (C) In the case of a regulated investment 6 company, an amount equal to the excess of (i) the 7 net long-term capital gain for the taxable year, 8 over (ii) the amount of the capital gain dividends 9 designated as such in accordance with Section 10 852(b)(3)(C) of the Internal Revenue Code and any 11 amount designated under Section 852(b)(3)(D) of the 12 Internal Revenue Code, attributable to the taxable 13 year (this amendatory Act of 1995 (Public Act 89-89) 14 is declarative of existing law and is not a new 15 enactment); 16 (D) The amount of any net operating loss 17 deduction taken in arriving at taxable income, other 18 than a net operating loss carried forward from a 19 taxable year ending prior to December 31, 1986; 20 (E) For taxable years in which a net operating 21 loss carryback or carryforward from a taxable year 22 ending prior to December 31, 1986 is an element of 23 taxable income under paragraph (1) of subsection (e) 24 or subparagraph (E) of paragraph (2) of subsection 25 (e), the amount by which addition modifications 26 other than those provided by this subparagraph (E) 27 exceeded subtraction modifications in such earlier 28 taxable year, with the following limitations applied 29 in the order that they are listed: 30 (i) the addition modification relating to 31 the net operating loss carried back or forward 32 to the taxable year from any taxable year 33 ending prior to December 31, 1986 shall be 34 reduced by the amount of addition modification -10- LRB9202530SMdv 1 under this subparagraph (E) which related to 2 that net operating loss and which was taken 3 into account in calculating the base income of 4 an earlier taxable year, and 5 (ii) the addition modification relating 6 to the net operating loss carried back or 7 forward to the taxable year from any taxable 8 year ending prior to December 31, 1986 shall 9 not exceed the amount of such carryback or 10 carryforward; 11 For taxable years in which there is a net 12 operating loss carryback or carryforward from more 13 than one other taxable year ending prior to December 14 31, 1986, the addition modification provided in this 15 subparagraph (E) shall be the sum of the amounts 16 computed independently under the preceding 17 provisions of this subparagraph (E) for each such 18 taxable year; and 19 (E-5) For taxable years ending after December 20 31, 1997, an amount equal to any eligible 21 remediation costs that the corporation deducted in 22 computing adjusted gross income and for which the 23 corporation claims a credit under subsection (l) of 24 Section 201; 25 and by deducting from the total so obtained the sum of 26 the following amounts: 27 (F) An amount equal to the amount of any tax 28 imposed by this Act which was refunded to the 29 taxpayer and included in such total for the taxable 30 year; 31 (G) An amount equal to any amount included in 32 such total under Section 78 of the Internal Revenue 33 Code; 34 (H) In the case of a regulated investment -11- LRB9202530SMdv 1 company, an amount equal to the amount of exempt 2 interest dividends as defined in subsection (b) (5) 3 of Section 852 of the Internal Revenue Code, paid to 4 shareholders for the taxable year; 5 (I) With the exception of any amounts 6 subtracted under subparagraph (J), an amount equal 7 to the sum of all amounts disallowed as deductions 8 by (i) Sections 171(a) (2), and 265(a)(2) and 9 amounts disallowed as interest expense by Section 10 291(a)(3) of the Internal Revenue Code, as now or 11 hereafter amended, and all amounts of expenses 12 allocable to interest and disallowed as deductions 13 by Section 265(a)(1) of the Internal Revenue Code, 14 as now or hereafter amended; and (ii) for taxable 15 years ending on or after August 13, 1999, Sections 16 171(a)(2), 265, 280C, 291(a)(3), and 832(b)(5)(B)(i) 17 of the Internal Revenue Code; the provisions of this 18 subparagraph are exempt from the provisions of 19 Section 250; 20 (J) 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 (K) An amount equal to those dividends 31 included in such total which were paid by a 32 corporation which conducts business operations in an 33 Enterprise Zone or zones created under the Illinois 34 Enterprise Zone Act and conducts substantially all -12- LRB9202530SMdv 1 of its operations in an Enterprise Zone or zones; 2 (L) An amount equal to those dividends 3 included in such total that were paid by a 4 corporation that conducts business operations in a 5 federally designated Foreign Trade Zone or Sub-Zone 6 and that is designated a High Impact Business 7 located in Illinois; provided that dividends 8 eligible for the deduction provided in subparagraph 9 (K) of paragraph 2 of this subsection shall not be 10 eligible for the deduction provided under this 11 subparagraph (L); 12 (M) For any taxpayer that is a financial 13 organization within the meaning of Section 304(c) of 14 this Act, an amount included in such total as 15 interest income from a loan or loans made by such 16 taxpayer to a borrower, to the extent that such a 17 loan is secured by property which is eligible for 18 the Enterprise Zone Investment Credit. To determine 19 the portion of a loan or loans that is secured by 20 property eligible for a Section 201(f)201(h)21 investment credit to the borrower, the entire 22 principal amount of the loan or loans between the 23 taxpayer and the borrower should be divided into the 24 basis of the Section 201(f)201(h)investment credit 25 property which secures the loan or loans, using for 26 this purpose the original basis of such property on 27 the date that it was placed in service in the 28 Enterprise Zone. The subtraction modification 29 available to taxpayer in any year under this 30 subsection shall be that portion of the total 31 interest paid by the borrower with respect to such 32 loan attributable to the eligible property as 33 calculated under the previous sentence; 34 (M-1) For any taxpayer that is a financial -13- LRB9202530SMdv 1 organization within the meaning of Section 304(c) of 2 this Act, an amount included in such total as 3 interest income from a loan or loans made by such 4 taxpayer to a borrower, to the extent that such a 5 loan is secured by property which is eligible for 6 the High Impact Business Investment Credit. To 7 determine the portion of a loan or loans that is 8 secured by property eligible for a Section 201(h) 9201(i)investment credit to the borrower, the entire 10 principal amount of the loan or loans between the 11 taxpayer and the borrower should be divided into the 12 basis of the Section 201(h)201(i)investment credit 13 property which secures the loan or loans, using for 14 this purpose the original basis of such property on 15 the date that it was placed in service in a 16 federally designated Foreign Trade Zone or Sub-Zone 17 located in Illinois. No taxpayer that is eligible 18 for the deduction provided in subparagraph (M) of 19 paragraph (2) of this subsection shall be eligible 20 for the deduction provided under this subparagraph 21 (M-1). The subtraction modification available to 22 taxpayers in any year under this subsection shall be 23 that portion of the total interest paid by the 24 borrower with respect to such loan attributable to 25 the eligible property as calculated under the 26 previous sentence; 27 (N) Two times any contribution made during the 28 taxable year to a designated zone organization to 29 the extent that the contribution (i) qualifies as a 30 charitable contribution under subsection (c) of 31 Section 170 of the Internal Revenue Code and (ii) 32 must, by its terms, be used for a project approved 33 by the Department of Commerce and Community Affairs 34 under Section 11 of the Illinois Enterprise Zone -14- LRB9202530SMdv 1 Act; 2 (O) An amount equal to: (i) 85% for taxable 3 years ending on or before December 31, 1992, or, a 4 percentage equal to the percentage allowable under 5 Section 243(a)(1) of the Internal Revenue Code of 6 1986 for taxable years ending after December 31, 7 1992, of the amount by which dividends included in 8 taxable income and received from a corporation that 9 is not created or organized under the laws of the 10 United States or any state or political subdivision 11 thereof, including, for taxable years ending on or 12 after December 31, 1988, dividends received or 13 deemed received or paid or deemed paid under 14 Sections 951 through 964 of the Internal Revenue 15 Code, exceed the amount of the modification provided 16 under subparagraph (G) of paragraph (2) of this 17 subsection (b) which is related to such dividends; 18 plus (ii) 100% of the amount by which dividends, 19 included in taxable income and received, including, 20 for taxable years ending on or after December 31, 21 1988, dividends received or deemed received or paid 22 or deemed paid under Sections 951 through 964 of the 23 Internal Revenue Code, from any such corporation 24 specified in clause (i) that would but for the 25 provisions of Section 1504 (b) (3) of the Internal 26 Revenue Code be treated as a member of the 27 affiliated group which includes the dividend 28 recipient, exceed the amount of the modification 29 provided under subparagraph (G) of paragraph (2) of 30 this subsection (b) which is related to such 31 dividends; 32 (P) An amount equal to any contribution made 33 to a job training project established pursuant to 34 the Tax Increment Allocation Redevelopment Act; -15- LRB9202530SMdv 1 (Q) 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 (R) In the case of an attorney-in-fact with 8 respect to whom an interinsurer or a reciprocal 9 insurer has made the election under Section 835 of 10 the Internal Revenue Code, 26 U.S.C. 835, an amount 11 equal to the excess, if any, of the amounts paid or 12 incurred by that interinsurer or reciprocal insurer 13 in the taxable year to the attorney-in-fact over the 14 deduction allowed to that interinsurer or reciprocal 15 insurer with respect to the attorney-in-fact under 16 Section 835(b) of the Internal Revenue Code for the 17 taxable year; and 18 (S) For taxable years ending on or after 19 December 31, 1997, in the case of a Subchapter S 20 corporation, an amount equal to all amounts of 21 income allocable to a shareholder subject to the 22 Personal Property Tax Replacement Income Tax imposed 23 by subsections (c) and (d) of Section 201 of this 24 Act, including amounts allocable to organizations 25 exempt from federal income tax by reason of Section 26 501(a) of the Internal Revenue Code. This 27 subparagraph (S) is exempt from the provisions of 28 Section 250. 29 (3) Special rule. For purposes of paragraph (2) 30 (A), "gross income" in the case of a life insurance 31 company, for tax years ending on and after December 31, 32 1994, shall mean the gross investment income for the 33 taxable year. 34 (c) Trusts and estates. -16- LRB9202530SMdv 1 (1) In general. In the case of a trust or estate, 2 base income means an amount equal to the taxpayer's 3 taxable income for the taxable year as modified by 4 paragraph (2). 5 (2) Modifications. Subject to the provisions of 6 paragraph (3), the taxable income referred to in 7 paragraph (1) shall be modified by adding thereto the sum 8 of the following amounts: 9 (A) An amount equal to all amounts paid or 10 accrued to the taxpayer as interest or dividends 11 during the taxable year to the extent excluded from 12 gross income in the computation of taxable income; 13 (B) In the case of (i) an estate, $600; (ii) a 14 trust which, under its governing instrument, is 15 required to distribute all of its income currently, 16 $300; and (iii) any other trust, $100, but in each 17 such case, only to the extent such amount was 18 deducted in the computation of taxable income; 19 (C) An amount equal to the amount of tax 20 imposed by this Act to the extent deducted from 21 gross income in the computation of taxable income 22 for the taxable year; 23 (D) The amount of any net operating loss 24 deduction taken in arriving at taxable income, other 25 than a net operating loss carried forward from a 26 taxable year ending prior to December 31, 1986; 27 (E) For taxable years in which a net operating 28 loss carryback or carryforward from a taxable year 29 ending prior to December 31, 1986 is an element of 30 taxable income under paragraph (1) of subsection (e) 31 or subparagraph (E) of paragraph (2) of subsection 32 (e), the amount by which addition modifications 33 other than those provided by this subparagraph (E) 34 exceeded subtraction modifications in such taxable -17- LRB9202530SMdv 1 year, with the following limitations applied in the 2 order that they are listed: 3 (i) the addition modification relating to 4 the net operating loss carried back or forward 5 to the taxable year from any taxable year 6 ending prior to December 31, 1986 shall be 7 reduced by the amount of addition modification 8 under this subparagraph (E) which related to 9 that net operating loss and which was taken 10 into account in calculating the base income of 11 an earlier taxable year, and 12 (ii) the addition modification relating 13 to the net operating loss carried back or 14 forward to the taxable year from any taxable 15 year ending prior to December 31, 1986 shall 16 not exceed the amount of such carryback or 17 carryforward; 18 For taxable years in which there is a net 19 operating loss carryback or carryforward from more 20 than one other taxable year ending prior to December 21 31, 1986, the addition modification provided in this 22 subparagraph (E) shall be the sum of the amounts 23 computed independently under the preceding 24 provisions of this subparagraph (E) for each such 25 taxable year; 26 (F) For taxable years ending on or after 27 January 1, 1989, an amount equal to the tax deducted 28 pursuant to Section 164 of the Internal Revenue Code 29 if the trust or estate is claiming the same tax for 30 purposes of the Illinois foreign tax credit under 31 Section 601 of this Act; 32 (G) An amount equal to the amount of the 33 capital gain deduction allowable under the Internal 34 Revenue Code, to the extent deducted from gross -18- LRB9202530SMdv 1 income in the computation of taxable income; and 2 (G-5) For taxable years ending after December 3 31, 1997, an amount equal to any eligible 4 remediation costs that the trust or estate deducted 5 in computing adjusted gross income and for which the 6 trust or estate claims a credit under subsection (l) 7 of Section 201; 8 and by deducting from the total so obtained the sum of 9 the following amounts: 10 (H) An amount equal to all amounts included in 11 such total pursuant to the provisions of Sections 12 402(a), 402(c), 403(a), 403(b), 406(a), 407(a) and 13 408 of the Internal Revenue Code or included in such 14 total as distributions under the provisions of any 15 retirement or disability plan for employees of any 16 governmental agency or unit, or retirement payments 17 to retired partners, which payments are excluded in 18 computing net earnings from self employment by 19 Section 1402 of the Internal Revenue Code and 20 regulations adopted pursuant thereto; 21 (I) The valuation limitation amount; 22 (J) An amount equal to the amount of any tax 23 imposed by this Act which was refunded to the 24 taxpayer and included in such total for the taxable 25 year; 26 (K) An amount equal to all amounts included in 27 taxable income as modified by subparagraphs (A), 28 (B), (C), (D), (E), (F) and (G) which are exempt 29 from taxation by this State either by reason of its 30 statutes or Constitution or by reason of the 31 Constitution, treaties or statutes of the United 32 States; provided that, in the case of any statute of 33 this State that exempts income derived from bonds or 34 other obligations from the tax imposed under this -19- LRB9202530SMdv 1 Act, the amount exempted shall be the interest net 2 of bond premium amortization; 3 (L) With the exception of any amounts 4 subtracted under subparagraph (K), an amount equal 5 to the sum of all amounts disallowed as deductions 6 by (i) Sections 171(a) (2) and 265(a)(2) of the 7 Internal Revenue Code, as now or hereafter amended, 8 and all amounts of expenses allocable to interest 9 and disallowed as deductions by Section 265(1) of 10 the Internal Revenue Code of 1954, as now or 11 hereafter amended; and (ii) for taxable years ending 12 on or after August 13, 1999, Sections 171(a)(2), 13 265, 280C, and 832(b)(5)(B)(i) of the Internal 14 Revenue Code; the provisions of this subparagraph 15 are exempt from the provisions of Section 250; 16 (M) An amount equal to those dividends 17 included in such total which were paid by a 18 corporation which conducts business operations in an 19 Enterprise Zone or zones created under the Illinois 20 Enterprise Zone Act and conducts substantially all 21 of its operations in an Enterprise Zone or Zones; 22 (N) An amount equal to any contribution made 23 to a job training project established pursuant to 24 the Tax Increment Allocation Redevelopment Act; 25 (O) 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 (M) of paragraph (2) of this subsection shall not be 33 eligible for the deduction provided under this 34 subparagraph (O); -20- LRB9202530SMdv 1 (P) 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; and 7 (Q) For taxable year 1999 and thereafter, an 8 amount equal to the amount of any (i) distributions, 9 to the extent includible in gross income for federal 10 income tax purposes, made to the taxpayer because of 11 his or her status as a victim of persecution for 12 racial or religious reasons by Nazi Germany or any 13 other Axis regime or as an heir of the victim and 14 (ii) items of income, to the extent includible in 15 gross income for federal income tax purposes, 16 attributable to, derived from or in any way related 17 to assets stolen from, hidden from, or otherwise 18 lost to a victim of persecution for racial or 19 religious reasons by Nazi Germany or any other Axis 20 regime immediately prior to, during, and immediately 21 after World War II, including, but not limited to, 22 interest on the proceeds receivable as insurance 23 under policies issued to a victim of persecution for 24 racial or religious reasons by Nazi Germany or any 25 other Axis regime by European insurance companies 26 immediately prior to and during World War II; 27 provided, however, this subtraction from federal 28 adjusted gross income does not apply to assets 29 acquired with such assets or with the proceeds from 30 the sale of such assets; provided, further, this 31 paragraph shall only apply to a taxpayer who was the 32 first recipient of such assets after their recovery 33 and who is a victim of persecution for racial or 34 religious reasons by Nazi Germany or any other Axis -21- LRB9202530SMdv 1 regime or as an heir of the victim. The amount of 2 and the eligibility for any public assistance, 3 benefit, or similar entitlement is not affected by 4 the inclusion of items (i) and (ii) of this 5 paragraph in gross income for federal income tax 6 purposes. This paragraph is exempt from the 7 provisions of Section 250. 8 (3) Limitation. The amount of any modification 9 otherwise required under this subsection shall, under 10 regulations prescribed by the Department, be adjusted by 11 any amounts included therein which were properly paid, 12 credited, or required to be distributed, or permanently 13 set aside for charitable purposes pursuant to Internal 14 Revenue Code Section 642(c) during the taxable year. 15 (d) Partnerships. 16 (1) In general. In the case of a partnership, base 17 income means an amount equal to the taxpayer's taxable 18 income for the taxable year as modified by paragraph (2). 19 (2) Modifications. The taxable income referred to 20 in paragraph (1) shall be modified by adding thereto the 21 sum of the following amounts: 22 (A) An amount equal to all amounts paid or 23 accrued to the taxpayer as interest or dividends 24 during the taxable year to the extent excluded from 25 gross income in the computation of taxable income; 26 (B) An amount equal to the amount of tax 27 imposed by this Act to the extent deducted from 28 gross income for the taxable year; 29 (C) The amount of deductions allowed to the 30 partnership pursuant to Section 707 (c) of the 31 Internal Revenue Code in calculating its taxable 32 income; and 33 (D) An amount equal to the amount of the 34 capital gain deduction allowable under the Internal -22- LRB9202530SMdv 1 Revenue Code, to the extent deducted from gross 2 income in the computation of taxable income; 3 and by deducting from the total so obtained the following 4 amounts: 5 (E) The valuation limitation amount; 6 (F) An amount equal to the amount of any tax 7 imposed by this Act which was refunded to the 8 taxpayer and included in such total for the taxable 9 year; 10 (G) An amount equal to all amounts included in 11 taxable income as modified by subparagraphs (A), 12 (B), (C) and (D) which are exempt from taxation by 13 this State either by reason of its statutes or 14 Constitution or by reason of the Constitution, 15 treaties or statutes of the United States; provided 16 that, in the case of any statute of this State that 17 exempts income derived from bonds or other 18 obligations from the tax imposed under this Act, the 19 amount exempted shall be the interest net of bond 20 premium amortization; 21 (H) Any income of the partnership which 22 constitutes personal service income as defined in 23 Section 1348 (b) (1) of the Internal Revenue Code 24 (as in effect December 31, 1981) or a reasonable 25 allowance for compensation paid or accrued for 26 services rendered by partners to the partnership, 27 whichever is greater; 28 (I) An amount equal to all amounts of income 29 distributable to an entity subject to the Personal 30 Property Tax Replacement Income Tax imposed by 31 subsections (c) and (d) of Section 201 of this Act 32 including amounts distributable to organizations 33 exempt from federal income tax by reason of Section 34 501(a) of the Internal Revenue Code; -23- LRB9202530SMdv 1 (J) With the exception of any amounts 2 subtracted under subparagraph (G), an amount equal 3 to the sum of all amounts disallowed as deductions 4 by (i) Sections 171(a) (2), and 265(2) of the 5 Internal Revenue Code of 1954, as now or hereafter 6 amended, and all amounts of expenses allocable to 7 interest and disallowed as deductions by Section 8 265(1) of the Internal Revenue Code, as now or 9 hereafter amended; and (ii) for taxable years ending 10 on or after August 13, 1999, Sections 171(a)(2), 11 265, 280C, and 832(b)(5)(B)(i) of the Internal 12 Revenue Code; the provisions of this subparagraph 13 are exempt from the provisions of Section 250; 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 -24- LRB9202530SMdv 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 -25- LRB9202530SMdv 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 -26- LRB9202530SMdv 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, -27- LRB9202530SMdv 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 -28- LRB9202530SMdv 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. 90-491, eff. 1-1-98; 90-717, eff. 8-7-98; 31 90-770, eff. 8-14-98; 91-192, eff. 7-20-99; 91-205, eff. 32 7-20-99; 91-357, eff. 7-29-99; 91-541, eff. 8-13-99; 91-676, 33 eff. 12-23-99; 91-845, eff. 6-22-00; 91-913, eff. 1-1-01; -29- LRB9202530SMdv 1 revised 1-15-01.) 2 Section 99. Effective date. This Act takes effect upon 3 becoming law.