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92_HB1049 LRB9207049NTsb 1 AN ACT relating to education. 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- LRB9207049NTsb 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income; 13 (D-5) An amount, to the extent not included in 14 adjusted gross income, equal to the amount of money 15 withdrawn by the taxpayer in the taxable year from a 16 medical care savings account and the interest earned 17 on the account in the taxable year of a withdrawal 18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- LRB9207049NTsb 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- LRB9207049NTsb 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- LRB9207049NTsb 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- LRB9207049NTsb 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- LRB9207049NTsb 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- LRB9207049NTsb 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) Beginning with taxable years ending on or 17 after December 31, 2001, $500 for a person holding 18 a teaching certificate issued under the School Code 19 and employed as a teacher in a public school 20 district governed by the School Code. 21 (b) Corporations. 22 (1) In general. In the case of a corporation, base 23 income means an amount equal to the taxpayer's taxable 24 income for the taxable year as modified by paragraph (2). 25 (2) Modifications. The taxable income referred to 26 in paragraph (1) shall be modified by adding thereto the 27 sum of the following amounts: 28 (A) An amount equal to all amounts paid or 29 accrued to the taxpayer as interest and all 30 distributions received from regulated investment 31 companies during the taxable year to the extent 32 excluded from gross income in the computation of 33 taxable income; 34 (B) An amount equal to the amount of tax -9- LRB9207049NTsb 1 imposed by this Act to the extent deducted from 2 gross income in the computation of taxable income 3 for the taxable year; 4 (C) In the case of a regulated investment 5 company, an amount equal to the excess of (i) the 6 net long-term capital gain for the taxable year, 7 over (ii) the amount of the capital gain dividends 8 designated as such in accordance with Section 9 852(b)(3)(C) of the Internal Revenue Code and any 10 amount designated under Section 852(b)(3)(D) of the 11 Internal Revenue Code, attributable to the taxable 12 year (this amendatory Act of 1995 (Public Act 89-89) 13 is declarative of existing law and is not a new 14 enactment); 15 (D) The amount of any net operating loss 16 deduction taken in arriving at taxable income, other 17 than a net operating loss carried forward from a 18 taxable year ending prior to December 31, 1986; 19 (E) For taxable years in which a net operating 20 loss carryback or carryforward from a taxable year 21 ending prior to December 31, 1986 is an element of 22 taxable income under paragraph (1) of subsection (e) 23 or subparagraph (E) of paragraph (2) of subsection 24 (e), the amount by which addition modifications 25 other than those provided by this subparagraph (E) 26 exceeded subtraction modifications in such earlier 27 taxable year, with the following limitations applied 28 in the order that they are listed: 29 (i) the addition modification relating to 30 the net operating loss carried back or forward 31 to the taxable year from any taxable year 32 ending prior to December 31, 1986 shall be 33 reduced by the amount of addition modification 34 under this subparagraph (E) which related to -10- LRB9207049NTsb 1 that net operating loss and which was taken 2 into account in calculating the base income of 3 an earlier taxable year, and 4 (ii) the addition modification relating 5 to the net operating loss carried back or 6 forward to the taxable year from any taxable 7 year ending prior to December 31, 1986 shall 8 not exceed the amount of such carryback or 9 carryforward; 10 For taxable years in which there is a net 11 operating loss carryback or carryforward from more 12 than one other taxable year ending prior to December 13 31, 1986, the addition modification provided in this 14 subparagraph (E) shall be the sum of the amounts 15 computed independently under the preceding 16 provisions of this subparagraph (E) for each such 17 taxable year; and 18 (E-5) For taxable years ending after December 19 31, 1997, an amount equal to any eligible 20 remediation costs that the corporation deducted in 21 computing adjusted gross income and for which the 22 corporation claims a credit under subsection (l) of 23 Section 201; 24 and by deducting from the total so obtained the sum of 25 the following amounts: 26 (F) An amount equal to the amount of any tax 27 imposed by this Act which was refunded to the 28 taxpayer and included in such total for the taxable 29 year; 30 (G) An amount equal to any amount included in 31 such total under Section 78 of the Internal Revenue 32 Code; 33 (H) In the case of a regulated investment 34 company, an amount equal to the amount of exempt -11- LRB9207049NTsb 1 interest dividends as defined in subsection (b) (5) 2 of Section 852 of the Internal Revenue Code, paid to 3 shareholders for the taxable year; 4 (I) With the exception of any amounts 5 subtracted under subparagraph (J), an amount equal 6 to the sum of all amounts disallowed as deductions 7 by (i) Sections 171(a) (2), and 265(a)(2) and 8 amounts disallowed as interest expense by Section 9 291(a)(3) of the Internal Revenue Code, as now or 10 hereafter amended, and all amounts of expenses 11 allocable to interest and disallowed as deductions 12 by Section 265(a)(1) of the Internal Revenue Code, 13 as now or hereafter amended; and (ii) for taxable 14 years ending on or after August 13, 1999, Sections 15 171(a)(2), 265, 280C, 291(a)(3), and 832(b)(5)(B)(i) 16 of the Internal Revenue Code; the provisions of this 17 subparagraph are exempt from the provisions of 18 Section 250; 19 (J) An amount equal to all amounts included in 20 such total which are exempt from taxation by this 21 State either by reason of its statutes or 22 Constitution or by reason of the Constitution, 23 treaties or statutes of the United States; provided 24 that, in the case of any statute of this State that 25 exempts income derived from bonds or other 26 obligations from the tax imposed under this Act, the 27 amount exempted shall be the interest net of bond 28 premium amortization; 29 (K) An amount equal to those dividends 30 included in such total which were paid by a 31 corporation which conducts business operations in an 32 Enterprise Zone or zones created under the Illinois 33 Enterprise Zone Act and conducts substantially all 34 of its operations in an Enterprise Zone or zones; -12- LRB9207049NTsb 1 (L) An amount equal to those dividends 2 included in such total that were paid by a 3 corporation that conducts business operations in a 4 federally designated Foreign Trade Zone or Sub-Zone 5 and that is designated a High Impact Business 6 located in Illinois; provided that dividends 7 eligible for the deduction provided in subparagraph 8 (K) of paragraph 2 of this subsection shall not be 9 eligible for the deduction provided under this 10 subparagraph (L); 11 (M) For any taxpayer that is a financial 12 organization within the meaning of Section 304(c) of 13 this Act, an amount included in such total as 14 interest income from a loan or loans made by such 15 taxpayer to a borrower, to the extent that such a 16 loan is secured by property which is eligible for 17 the Enterprise Zone Investment Credit. To determine 18 the portion of a loan or loans that is secured by 19 property eligible for a Section 201(f)201(h)20 investment credit to the borrower, the entire 21 principal amount of the loan or loans between the 22 taxpayer and the borrower should be divided into the 23 basis of the Section 201(f)201(h)investment credit 24 property which secures the loan or loans, using for 25 this purpose the original basis of such property on 26 the date that it was placed in service in the 27 Enterprise Zone. The subtraction modification 28 available to taxpayer in any year under this 29 subsection shall be that portion of the total 30 interest paid by the borrower with respect to such 31 loan attributable to the eligible property as 32 calculated under the previous sentence; 33 (M-1) For any taxpayer that is a financial 34 organization within the meaning of Section 304(c) of -13- LRB9207049NTsb 1 this Act, an amount included in such total as 2 interest income from a loan or loans made by such 3 taxpayer to a borrower, to the extent that such a 4 loan is secured by property which is eligible for 5 the High Impact Business Investment Credit. To 6 determine the portion of a loan or loans that is 7 secured by property eligible for a Section 201(h) 8201(i)investment credit to the borrower, the entire 9 principal amount of the loan or loans between the 10 taxpayer and the borrower should be divided into the 11 basis of the Section 201(h)201(i)investment credit 12 property which secures the loan or loans, using for 13 this purpose the original basis of such property on 14 the date that it was placed in service in a 15 federally designated Foreign Trade Zone or Sub-Zone 16 located in Illinois. No taxpayer that is eligible 17 for the deduction provided in subparagraph (M) of 18 paragraph (2) of this subsection shall be eligible 19 for the deduction provided under this subparagraph 20 (M-1). The subtraction modification available to 21 taxpayers in any year under this subsection shall be 22 that portion of the total interest paid by the 23 borrower with respect to such loan attributable to 24 the eligible property as calculated under the 25 previous sentence; 26 (N) Two times any contribution made during the 27 taxable year to a designated zone organization to 28 the extent that the contribution (i) qualifies as a 29 charitable contribution under subsection (c) of 30 Section 170 of the Internal Revenue Code and (ii) 31 must, by its terms, be used for a project approved 32 by the Department of Commerce and Community Affairs 33 under Section 11 of the Illinois Enterprise Zone 34 Act; -14- LRB9207049NTsb 1 (O) An amount equal to: (i) 85% for taxable 2 years ending on or before December 31, 1992, or, a 3 percentage equal to the percentage allowable under 4 Section 243(a)(1) of the Internal Revenue Code of 5 1986 for taxable years ending after December 31, 6 1992, of the amount by which dividends included in 7 taxable income and received from a corporation that 8 is not created or organized under the laws of the 9 United States or any state or political subdivision 10 thereof, including, for taxable years ending on or 11 after December 31, 1988, dividends received or 12 deemed received or paid or deemed paid under 13 Sections 951 through 964 of the Internal Revenue 14 Code, exceed the amount of the modification provided 15 under subparagraph (G) of paragraph (2) of this 16 subsection (b) which is related to such dividends; 17 plus (ii) 100% of the amount by which dividends, 18 included in taxable income and received, including, 19 for taxable years ending on or after December 31, 20 1988, dividends received or deemed received or paid 21 or deemed paid under Sections 951 through 964 of the 22 Internal Revenue Code, from any such corporation 23 specified in clause (i) that would but for the 24 provisions of Section 1504 (b) (3) of the Internal 25 Revenue Code be treated as a member of the 26 affiliated group which includes the dividend 27 recipient, exceed the amount of the modification 28 provided under subparagraph (G) of paragraph (2) of 29 this subsection (b) which is related to such 30 dividends; 31 (P) An amount equal to any contribution made 32 to a job training project established pursuant to 33 the Tax Increment Allocation Redevelopment Act; 34 (Q) An amount equal to the amount of the -15- LRB9207049NTsb 1 deduction used to compute the federal income tax 2 credit for restoration of substantial amounts held 3 under claim of right for the taxable year pursuant 4 to Section 1341 of the Internal Revenue Code of 5 1986; 6 (R) In the case of an attorney-in-fact with 7 respect to whom an interinsurer or a reciprocal 8 insurer has made the election under Section 835 of 9 the Internal Revenue Code, 26 U.S.C. 835, an amount 10 equal to the excess, if any, of the amounts paid or 11 incurred by that interinsurer or reciprocal insurer 12 in the taxable year to the attorney-in-fact over the 13 deduction allowed to that interinsurer or reciprocal 14 insurer with respect to the attorney-in-fact under 15 Section 835(b) of the Internal Revenue Code for the 16 taxable year; and 17 (S) For taxable years ending on or after 18 December 31, 1997, in the case of a Subchapter S 19 corporation, an amount equal to all amounts of 20 income allocable to a shareholder subject to the 21 Personal Property Tax Replacement Income Tax imposed 22 by subsections (c) and (d) of Section 201 of this 23 Act, including amounts allocable to organizations 24 exempt from federal income tax by reason of Section 25 501(a) of the Internal Revenue Code. This 26 subparagraph (S) is exempt from the provisions of 27 Section 250. 28 (3) Special rule. For purposes of paragraph (2) 29 (A), "gross income" in the case of a life insurance 30 company, for tax years ending on and after December 31, 31 1994, shall mean the gross investment income for the 32 taxable year. 33 (c) Trusts and estates. 34 (1) In general. In the case of a trust or estate, -16- LRB9207049NTsb 1 base income means an amount equal to the taxpayer's 2 taxable income for the taxable year as modified by 3 paragraph (2). 4 (2) Modifications. Subject to the provisions of 5 paragraph (3), the taxable income referred to in 6 paragraph (1) shall be modified by adding thereto the sum 7 of the following amounts: 8 (A) An amount equal to all amounts paid or 9 accrued to the taxpayer as interest or dividends 10 during the taxable year to the extent excluded from 11 gross income in the computation of taxable income; 12 (B) In the case of (i) an estate, $600; (ii) a 13 trust which, under its governing instrument, is 14 required to distribute all of its income currently, 15 $300; and (iii) any other trust, $100, but in each 16 such case, only to the extent such amount was 17 deducted in the computation of taxable income; 18 (C) An amount equal to the amount of tax 19 imposed by this Act to the extent deducted from 20 gross income in the computation of taxable income 21 for the taxable year; 22 (D) The amount of any net operating loss 23 deduction taken in arriving at taxable income, other 24 than a net operating loss carried forward from a 25 taxable year ending prior to December 31, 1986; 26 (E) For taxable years in which a net operating 27 loss carryback or carryforward from a taxable year 28 ending prior to December 31, 1986 is an element of 29 taxable income under paragraph (1) of subsection (e) 30 or subparagraph (E) of paragraph (2) of subsection 31 (e), the amount by which addition modifications 32 other than those provided by this subparagraph (E) 33 exceeded subtraction modifications in such taxable 34 year, with the following limitations applied in the -17- LRB9207049NTsb 1 order that they are listed: 2 (i) the addition modification relating to 3 the net operating loss carried back or forward 4 to the taxable year from any taxable year 5 ending prior to December 31, 1986 shall be 6 reduced by the amount of addition modification 7 under this subparagraph (E) which related to 8 that net operating loss and which was taken 9 into account in calculating the base income of 10 an earlier taxable year, and 11 (ii) the addition modification relating 12 to the net operating loss carried back or 13 forward to the taxable year from any taxable 14 year ending prior to December 31, 1986 shall 15 not exceed the amount of such carryback or 16 carryforward; 17 For taxable years in which there is a net 18 operating loss carryback or carryforward from more 19 than one other taxable year ending prior to December 20 31, 1986, the addition modification provided in this 21 subparagraph (E) shall be the sum of the amounts 22 computed independently under the preceding 23 provisions of this subparagraph (E) for each such 24 taxable year; 25 (F) For taxable years ending on or after 26 January 1, 1989, an amount equal to the tax deducted 27 pursuant to Section 164 of the Internal Revenue Code 28 if the trust or estate is claiming the same tax for 29 purposes of the Illinois foreign tax credit under 30 Section 601 of this Act; 31 (G) An amount equal to the amount of the 32 capital gain deduction allowable under the Internal 33 Revenue Code, to the extent deducted from gross 34 income in the computation of taxable income; and -18- LRB9207049NTsb 1 (G-5) For taxable years ending after December 2 31, 1997, an amount equal to any eligible 3 remediation costs that the trust or estate deducted 4 in computing adjusted gross income and for which the 5 trust or estate claims a credit under subsection (l) 6 of Section 201; 7 and by deducting from the total so obtained the sum of 8 the following amounts: 9 (H) 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 such 13 total as distributions under the provisions of any 14 retirement or disability plan for employees of any 15 governmental agency or unit, or retirement payments 16 to retired partners, which payments are excluded in 17 computing net earnings from self employment by 18 Section 1402 of the Internal Revenue Code and 19 regulations adopted pursuant thereto; 20 (I) The valuation limitation amount; 21 (J) 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 (K) An amount equal to all amounts included in 26 taxable income as modified by subparagraphs (A), 27 (B), (C), (D), (E), (F) and (G) which are exempt 28 from taxation by this State either by reason of its 29 statutes or Constitution or by reason of the 30 Constitution, treaties or statutes of the United 31 States; provided that, in the case of any statute of 32 this State that exempts income derived from bonds or 33 other obligations from the tax imposed under this 34 Act, the amount exempted shall be the interest net -19- LRB9207049NTsb 1 of bond premium amortization; 2 (L) With the exception of any amounts 3 subtracted under subparagraph (K), an amount equal 4 to the sum of all amounts disallowed as deductions 5 by (i) Sections 171(a) (2) and 265(a)(2) of the 6 Internal Revenue Code, as now or hereafter amended, 7 and all amounts of expenses allocable to interest 8 and disallowed as deductions by Section 265(1) of 9 the Internal Revenue Code of 1954, as now or 10 hereafter amended; and (ii) for taxable years ending 11 on or after August 13, 1999, Sections 171(a)(2), 12 265, 280C, and 832(b)(5)(B)(i) of the Internal 13 Revenue Code; the provisions of this subparagraph 14 are exempt from the provisions of Section 250; 15 (M) An amount equal to those dividends 16 included in such total which were paid by a 17 corporation which conducts business operations in an 18 Enterprise Zone or zones created under the Illinois 19 Enterprise Zone Act and conducts substantially all 20 of its operations in an Enterprise Zone or Zones; 21 (N) An amount equal to any contribution made 22 to a job training project established pursuant to 23 the Tax Increment Allocation Redevelopment Act; 24 (O) An amount equal to those dividends 25 included in such total that were paid by a 26 corporation that conducts business operations in a 27 federally designated Foreign Trade Zone or Sub-Zone 28 and that is designated a High Impact Business 29 located in Illinois; provided that dividends 30 eligible for the deduction provided in subparagraph 31 (M) of paragraph (2) of this subsection shall not be 32 eligible for the deduction provided under this 33 subparagraph (O); 34 (P) An amount equal to the amount of the -20- LRB9207049NTsb 1 deduction used to compute the federal income tax 2 credit for restoration of substantial amounts held 3 under claim of right for the taxable year pursuant 4 to Section 1341 of the Internal Revenue Code of 5 1986; and 6 (Q) For taxable year 1999 and thereafter, an 7 amount equal to the amount of any (i) distributions, 8 to the extent includible in gross income for federal 9 income tax purposes, made to the taxpayer because of 10 his or her status as a victim of persecution for 11 racial or religious reasons by Nazi Germany or any 12 other Axis regime or as an heir of the victim and 13 (ii) items of income, to the extent includible in 14 gross income for federal income tax purposes, 15 attributable to, derived from or in any way related 16 to assets stolen from, hidden from, or otherwise 17 lost to a victim of persecution for racial or 18 religious reasons by Nazi Germany or any other Axis 19 regime immediately prior to, during, and immediately 20 after World War II, including, but not limited to, 21 interest on the proceeds receivable as insurance 22 under policies issued to a victim of persecution for 23 racial or religious reasons by Nazi Germany or any 24 other Axis regime by European insurance companies 25 immediately prior to and during World War II; 26 provided, however, this subtraction from federal 27 adjusted gross income does not apply to assets 28 acquired with such assets or with the proceeds from 29 the sale of such assets; provided, further, this 30 paragraph shall only apply to a taxpayer who was the 31 first recipient of such assets after their recovery 32 and who is a victim of persecution for racial or 33 religious reasons by Nazi Germany or any other Axis 34 regime or as an heir of the victim. The amount of -21- LRB9207049NTsb 1 and the eligibility for any public assistance, 2 benefit, or similar entitlement is not affected by 3 the inclusion of items (i) and (ii) of this 4 paragraph in gross income for federal income tax 5 purposes. This paragraph is exempt from the 6 provisions of Section 250. 7 (3) Limitation. The amount of any modification 8 otherwise required under this subsection shall, under 9 regulations prescribed by the Department, be adjusted by 10 any amounts included therein which were properly paid, 11 credited, or required to be distributed, or permanently 12 set aside for charitable purposes pursuant to Internal 13 Revenue Code Section 642(c) during the taxable year. 14 (d) Partnerships. 15 (1) In general. In the case of a partnership, base 16 income means an amount equal to the taxpayer's taxable 17 income for the taxable year as modified by paragraph (2). 18 (2) Modifications. The taxable income referred to 19 in paragraph (1) shall be modified by adding thereto the 20 sum of the following amounts: 21 (A) An amount equal to all amounts paid or 22 accrued to the taxpayer as interest or dividends 23 during the taxable year to the extent excluded from 24 gross income in the computation of taxable income; 25 (B) An amount equal to the amount of tax 26 imposed by this Act to the extent deducted from 27 gross income for the taxable year; 28 (C) The amount of deductions allowed to the 29 partnership pursuant to Section 707 (c) of the 30 Internal Revenue Code in calculating its taxable 31 income; and 32 (D) 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 -22- LRB9207049NTsb 1 income in the computation of taxable income; 2 and by deducting from the total so obtained the following 3 amounts: 4 (E) The valuation limitation amount; 5 (F) An amount equal to the amount of any tax 6 imposed by this Act which was refunded to the 7 taxpayer and included in such total for the taxable 8 year; 9 (G) An amount equal to all amounts included in 10 taxable income as modified by subparagraphs (A), 11 (B), (C) and (D) which are exempt from taxation by 12 this State either by reason of its statutes or 13 Constitution or by reason of the Constitution, 14 treaties or statutes of the United States; provided 15 that, in the case of any statute of this State that 16 exempts income derived from bonds or other 17 obligations from the tax imposed under this Act, the 18 amount exempted shall be the interest net of bond 19 premium amortization; 20 (H) Any income of the partnership which 21 constitutes personal service income as defined in 22 Section 1348 (b) (1) of the Internal Revenue Code 23 (as in effect December 31, 1981) or a reasonable 24 allowance for compensation paid or accrued for 25 services rendered by partners to the partnership, 26 whichever is greater; 27 (I) An amount equal to all amounts of income 28 distributable to an entity subject to the Personal 29 Property Tax Replacement Income Tax imposed by 30 subsections (c) and (d) of Section 201 of this Act 31 including amounts distributable to organizations 32 exempt from federal income tax by reason of Section 33 501(a) of the Internal Revenue Code; 34 (J) With the exception of any amounts -23- LRB9207049NTsb 1 subtracted under subparagraph (G), an amount equal 2 to the sum of all amounts disallowed as deductions 3 by (i) Sections 171(a) (2), and 265(2) of the 4 Internal Revenue Code of 1954, as now or hereafter 5 amended, and all amounts of expenses allocable to 6 interest and disallowed as deductions by Section 7 265(1) of the Internal Revenue Code, as now or 8 hereafter amended; and (ii) for taxable years ending 9 on or after August 13, 1999, Sections 171(a)(2), 10 265, 280C, and 832(b)(5)(B)(i) of the Internal 11 Revenue Code; the provisions of this subparagraph 12 are exempt from the provisions of Section 250; 13 (K) An amount equal to those dividends 14 included in such total which were paid by a 15 corporation which conducts business operations in an 16 Enterprise Zone or zones created under the Illinois 17 Enterprise Zone Act, enacted by the 82nd General 18 Assembly, and which does not conduct such operations 19 other than in an Enterprise Zone or Zones; 20 (L) An amount equal to any contribution made 21 to a job training project established pursuant to 22 the Real Property Tax Increment Allocation 23 Redevelopment Act; 24 (M) An amount equal to those dividends 25 included in such total that were paid by a 26 corporation that conducts business operations in a 27 federally designated Foreign Trade Zone or Sub-Zone 28 and that is designated a High Impact Business 29 located in Illinois; provided that dividends 30 eligible for the deduction provided in subparagraph 31 (K) of paragraph (2) of this subsection shall not be 32 eligible for the deduction provided under this 33 subparagraph (M); and 34 (N) An amount equal to the amount of the -24- LRB9207049NTsb 1 deduction used to compute the federal income tax 2 credit for restoration of substantial amounts held 3 under claim of right for the taxable year pursuant 4 to Section 1341 of the Internal Revenue Code of 5 1986. 6 (e) Gross income; adjusted gross income; taxable income. 7 (1) In general. Subject to the provisions of 8 paragraph (2) and subsection (b) (3), for purposes of 9 this Section and Section 803(e), a taxpayer's gross 10 income, adjusted gross income, or taxable income for the 11 taxable year shall mean the amount of gross income, 12 adjusted gross income or taxable income properly 13 reportable for federal income tax purposes for the 14 taxable year under the provisions of the Internal Revenue 15 Code. Taxable income may be less than zero. However, for 16 taxable years ending on or after December 31, 1986, net 17 operating loss carryforwards from taxable years ending 18 prior to December 31, 1986, may not exceed the sum of 19 federal taxable income for the taxable year before net 20 operating loss deduction, plus the excess of addition 21 modifications over subtraction modifications for the 22 taxable year. For taxable years ending prior to December 23 31, 1986, taxable income may never be an amount in excess 24 of the net operating loss for the taxable year as defined 25 in subsections (c) and (d) of Section 172 of the Internal 26 Revenue Code, provided that when taxable income of a 27 corporation (other than a Subchapter S corporation), 28 trust, or estate is less than zero and addition 29 modifications, other than those provided by subparagraph 30 (E) of paragraph (2) of subsection (b) for corporations 31 or subparagraph (E) of paragraph (2) of subsection (c) 32 for trusts and estates, exceed subtraction modifications, 33 an addition modification must be made under those 34 subparagraphs for any other taxable year to which the -25- LRB9207049NTsb 1 taxable income less than zero (net operating loss) is 2 applied under Section 172 of the Internal Revenue Code or 3 under subparagraph (E) of paragraph (2) of this 4 subsection (e) applied in conjunction with Section 172 of 5 the Internal Revenue Code. 6 (2) Special rule. For purposes of paragraph (1) of 7 this subsection, the taxable income properly reportable 8 for federal income tax purposes shall mean: 9 (A) Certain life insurance companies. In the 10 case of a life insurance company subject to the tax 11 imposed by Section 801 of the Internal Revenue Code, 12 life insurance company taxable income, plus the 13 amount of distribution from pre-1984 policyholder 14 surplus accounts as calculated under Section 815a of 15 the Internal Revenue Code; 16 (B) Certain other insurance companies. In the 17 case of mutual insurance companies subject to the 18 tax imposed by Section 831 of the Internal Revenue 19 Code, insurance company taxable income; 20 (C) Regulated investment companies. In the 21 case of a regulated investment company subject to 22 the tax imposed by Section 852 of the Internal 23 Revenue Code, investment company taxable income; 24 (D) Real estate investment trusts. In the 25 case of a real estate investment trust subject to 26 the tax imposed by Section 857 of the Internal 27 Revenue Code, real estate investment trust taxable 28 income; 29 (E) Consolidated corporations. In the case of 30 a corporation which is a member of an affiliated 31 group of corporations filing a consolidated income 32 tax return for the taxable year for federal income 33 tax purposes, taxable income determined as if such 34 corporation had filed a separate return for federal -26- LRB9207049NTsb 1 income tax purposes for the taxable year and each 2 preceding taxable year for which it was a member of 3 an affiliated group. For purposes of this 4 subparagraph, the taxpayer's separate taxable income 5 shall be determined as if the election provided by 6 Section 243(b) (2) of the Internal Revenue Code had 7 been in effect for all such years; 8 (F) Cooperatives. In the case of a 9 cooperative corporation or association, the taxable 10 income of such organization determined in accordance 11 with the provisions of Section 1381 through 1388 of 12 the Internal Revenue Code; 13 (G) Subchapter S corporations. In the case 14 of: (i) a Subchapter S corporation for which there 15 is in effect an election for the taxable year under 16 Section 1362 of the Internal Revenue Code, the 17 taxable income of such corporation determined in 18 accordance with Section 1363(b) of the Internal 19 Revenue Code, except that taxable income shall take 20 into account those items which are required by 21 Section 1363(b)(1) of the Internal Revenue Code to 22 be separately stated; and (ii) a Subchapter S 23 corporation for which there is in effect a federal 24 election to opt out of the provisions of the 25 Subchapter S Revision Act of 1982 and have applied 26 instead the prior federal Subchapter S rules as in 27 effect on July 1, 1982, the taxable income of such 28 corporation determined in accordance with the 29 federal Subchapter S rules as in effect on July 1, 30 1982; and 31 (H) Partnerships. In the case of a 32 partnership, taxable income determined in accordance 33 with Section 703 of the Internal Revenue Code, 34 except that taxable income shall take into account -27- LRB9207049NTsb 1 those items which are required by Section 703(a)(1) 2 to be separately stated but which would be taken 3 into account by an individual in calculating his 4 taxable income. 5 (f) Valuation limitation amount. 6 (1) In general. The valuation limitation amount 7 referred to in subsections (a) (2) (G), (c) (2) (I) and 8 (d)(2) (E) is an amount equal to: 9 (A) The sum of the pre-August 1, 1969 10 appreciation amounts (to the extent consisting of 11 gain reportable under the provisions of Section 1245 12 or 1250 of the Internal Revenue Code) for all 13 property in respect of which such gain was reported 14 for the taxable year; plus 15 (B) The lesser of (i) the sum of the 16 pre-August 1, 1969 appreciation amounts (to the 17 extent consisting of capital gain) for all property 18 in respect of which such gain was reported for 19 federal income tax purposes for the taxable year, or 20 (ii) the net capital gain for the taxable year, 21 reduced in either case by any amount of such gain 22 included in the amount determined under subsection 23 (a) (2) (F) or (c) (2) (H). 24 (2) Pre-August 1, 1969 appreciation amount. 25 (A) If the fair market value of property 26 referred to in paragraph (1) was readily 27 ascertainable on August 1, 1969, the pre-August 1, 28 1969 appreciation amount for such property is the 29 lesser of (i) the excess of such fair market value 30 over the taxpayer's basis (for determining gain) for 31 such property on that date (determined under the 32 Internal Revenue Code as in effect on that date), or 33 (ii) the total gain realized and reportable for 34 federal income tax purposes in respect of the sale, -28- LRB9207049NTsb 1 exchange or other disposition of such property. 2 (B) If the fair market value of property 3 referred to in paragraph (1) was not readily 4 ascertainable on August 1, 1969, the pre-August 1, 5 1969 appreciation amount for such property is that 6 amount which bears the same ratio to the total gain 7 reported in respect of the property for federal 8 income tax purposes for the taxable year, as the 9 number of full calendar months in that part of the 10 taxpayer's holding period for the property ending 11 July 31, 1969 bears to the number of full calendar 12 months in the taxpayer's entire holding period for 13 the property. 14 (C) The Department shall prescribe such 15 regulations as may be necessary to carry out the 16 purposes of this paragraph. 17 (g) Double deductions. Unless specifically provided 18 otherwise, nothing in this Section shall permit the same item 19 to be deducted more than once. 20 (h) Legislative intention. Except as expressly provided 21 by this Section there shall be no modifications or 22 limitations on the amounts of income, gain, loss or deduction 23 taken into account in determining gross income, adjusted 24 gross income or taxable income for federal income tax 25 purposes for the taxable year, or in the amount of such items 26 entering into the computation of base income and net income 27 under this Act for such taxable year, whether in respect of 28 property values as of August 1, 1969 or otherwise. 29 (Source: P.A. 90-491, eff. 1-1-98; 90-717, eff. 8-7-98; 30 90-770, eff. 8-14-98; 91-192, eff. 7-20-99; 91-205, eff. 31 7-20-99; 91-357, eff. 7-29-99; 91-541, eff. 8-13-99; 91-676, 32 eff. 12-23-99; 91-845, eff. 6-22-00; 91-913, eff. 1-1-01; 33 revised 1-15-01.) -29- LRB9207049NTsb 1 Section 10. The Higher Education Student Assistance Act 2 is amended by changing Section 65.25 as follows: 3 (110 ILCS 947/65.25) 4 Sec. 65.25. Teacher shortage scholarships; loan 5 forgiveness. 6 (a) The Commission may annually award a number of 7 scholarships to persons preparing to teach in areas of 8 identified staff shortages. Such scholarships shall be 9 issued to individuals who make application to the Commission 10 and who agree to take courses at qualified institutions of 11 higher learning which will prepare them to teach in areas of 12 identified staff shortages. 13 (b) Scholarships awarded under this Section shall be 14 issued pursuant to regulations promulgated by the Commission; 15 provided that no rule or regulation promulgated by the State 16 Board of Education prior to the effective date of this 17 amendatory Act of 1993 pursuant to the exercise of any right, 18 power, duty, responsibility or matter of pending business 19 transferred from the State Board of Education to the 20 Commission under this Section shall be affected thereby, and 21 all such rules and regulations shall become the rules and 22 regulations of the Commission until modified or changed by 23 the Commission in accordance with law. The Commission shall 24 allocate the scholarships awarded between persons initially 25 preparing to teach, persons holding valid teaching 26 certificates issued under Articles 21 and 34 of the School 27 Code, and persons holding a bachelor's degree from any 28 accredited college or university who have been employed for a 29 minimum of 10 years in a field other than teaching. 30 (c) Each scholarship shall be utilized by its holder for 31 the payment of tuition and non-revenue bond fees at any 32 qualified institution of higher learning. Such tuition and 33 fees shall be available only for courses that will enable the -30- LRB9207049NTsb 1 individual to be certified to teach in areas of identified 2 staff shortages. The Commission shall determine which 3 courses are eligible for tuition payments under this Section. 4 (d) The Commission may make tuition payments directly to 5 the qualified institution of higher learning which the 6 individual attends for the courses prescribed or may make 7 payments to the teacher. Any teacher who received payments 8 and who fails to enroll in the courses prescribed shall 9 refund the payments to the Commission. 10 (e) Following the completion of the program of study, 11 persons who held valid teaching certificates and persons 12 holding a bachelor's degree from any accredited college or 13 university who have been employed for a minimum of 10 years 14 in a field other than teaching prior to receiving a teacher 15 shortage scholarship must accept employment within 2 years in 16 a school in Illinois within 60 miles of the person's 17 residence to teach in an area of identified staff shortage 18 for a period of at least 3 years; provided, however that any 19 such person instead may elect to accept employment within 20 such 2 year period to teach in an area of identified staff 21 shortage for a period of at least 3 years in a school in 22 Illinois which is more than 60 miles from such person's 23 residence. Persons initially preparing to teach prior to 24 receiving a teacher shortage scholarship must accept 25 employment within 2 years in a school in Illinois to teach in 26 an area of identified staff shortage for a period of at least 27 3 years. Individuals who fail to comply with this provision 28 shall refund all of the scholarships awarded to the 29 Commission, whether payments were made directly to the 30 institutions of higher learning or to the individuals, and 31 this condition shall be agreed to in writing by all 32 scholarship recipients at the time the scholarship is 33 awarded. No individual shall be required to refund tuition 34 payments if his or her failure to obtain employment as a -31- LRB9207049NTsb 1 teacher in a school is the result of financial conditions 2 within school districts. The rules and regulations 3 promulgated as provided in this Section shall contain 4 provisions regarding the waiving and deferral of such 5 payments. 6 (f) The Commission, with the cooperation of the State 7 Board of Education, shall assist individuals who have 8 participated in the scholarship program established by this 9 Section in finding employment in areas of identified staff 10 shortages. 11 (g) Beginning in September, 1994 and annually 12 thereafter, the Commission, using data annually supplied by 13 the State Board of Education under procedures developed by it 14 to measure the level of shortage of qualified bilingual 15 personnel serving students with disabilities, shall annually 16 publish (i) the level of shortage of qualified bilingual 17 personnel serving students with disabilities, and (ii) 18 allocations of scholarships for personnel preparation 19 training programs in the areas of bilingual special education 20 teacher training and bilingual school service personnel. 21 (h) Appropriations for the scholarships outlined in this 22 Section shall be made to the Commission from funds 23 appropriated by the General Assembly. The Commission shall 24 request an appropriation each year to sufficiently fund at 25 least 25 scholarships. 26 (i) This Section is substantially the same as Section 27 30-4c of the School Code, which Section is repealed by this 28 amendatory Act of 1993, and shall be construed as a 29 continuation of the teacher shortage scholarship program 30 established under that prior law, and not as a new or 31 different teacher shortage scholarship program. The State 32 Board of Education shall transfer to the Commission, as the 33 successor to the State Board of Education for all purposes of 34 administering and implementing the provisions of this -32- LRB9207049NTsb 1 Section, all books, accounts, records, papers, documents, 2 contracts, agreements, and pending business in any way 3 relating to the teacher shortage scholarship program 4 continued under this Section; and all scholarships at any 5 time awarded under that program by, and all applications for 6 any such scholarships at any time made to, the State Board of 7 Education shall be unaffected by the transfer to the 8 Commission of all responsibility for the administration and 9 implementation of the teacher shortage scholarship program 10 continued under this Section. The State Board of Education 11 shall furnish to the Commission such other information as the 12 Commission may request to assist it in administering this 13 Section. 14 (i-5) The Commission shall establish a loan forgiveness 15 program in which 15% of a person's student loans are forgiven 16 by teaching in a public school in this State in an area of 17 identified staff shortage for a period of one year, with an 18 additional 5% in loan forgiveness for each year thereafter. 19 However, the maximum rate of loan forgiveness per person 20 under this program may not exceed 30%. 21 (j) For the purposes of this Section: 22 "Qualified institution of higher learning" means the 23 University of Illinois, Southern Illinois University, Chicago 24 State University, Eastern Illinois University, Governors 25 State University, Illinois State University, Northeastern 26 Illinois University, Northern Illinois University, Western 27 Illinois University, the public community colleges subject to 28 the Public Community College Act and any Illinois privately 29 operated college, community college or university offering 30 degrees and instructional programs above the high school 31 level either in residence or by correspondence. The Board of 32 Higher Education and the Commission, in consultation with the 33 State Board of Education, shall identify qualified 34 institutions to supply the demand for bilingual special -33- LRB9207049NTsb 1 education teachers and bilingual school service personnel. 2 "Areas of identified staff shortages" means courses of 3 study in which the number of teachers is insufficient to meet 4 student or school district demand for such instruction as 5 determined by the State Board of Education. 6 (Source: P.A. 88-228; 89-4, eff. 1-1-96.) 7 Section 99. Effective date. This Act takes effect on 8 July 1, 2001.