State of Illinois
92nd General Assembly
Legislation

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[ Introduced ][ Engrossed ][ House Amendment 001 ]


92_HB3288sam001

 










                                           LRB9205822SMdvam05

 1                    AMENDMENT TO HOUSE BILL 3288

 2        AMENDMENT NO.     .  Amend House Bill 3288  by  replacing
 3    everything after the enacting clause with the following:

 4        "Section  5.   The  Illinois Income Tax Act is amended by
 5    changing Sections 201, 202, 203, 209,  303,  502,  506,  701,
 6    710, 905, 911, and 1501 as follows:

 7        (35 ILCS 5/201) (from Ch. 120, par. 2-201)
 8        Sec. 201.  Tax Imposed.
 9        (a)  In  general.  A tax measured by net income is hereby
10    imposed on every individual, corporation,  trust  and  estate
11    for  each  taxable  year  ending  after  July 31, 1969 on the
12    privilege of earning or receiving income in or as a  resident
13    of  this  State.  Such  tax shall be in addition to all other
14    occupation or privilege taxes imposed by this State or by any
15    municipal corporation or political subdivision thereof.
16        (b)  Rates. The tax imposed by  subsection  (a)  of  this
17    Section shall be determined as follows, except as adjusted by
18    subsection (d-1):
19             (1)  In  the case of an individual, trust or estate,
20        for taxable years ending prior to July 1, 1989, an amount
21        equal to 2 1/2% of the  taxpayer's  net  income  for  the
22        taxable year.
 
                            -2-            LRB9205822SMdvam05
 1             (2)  In  the case of an individual, trust or estate,
 2        for taxable years beginning prior to  July  1,  1989  and
 3        ending after June 30, 1989, an amount equal to the sum of
 4        (i)  2  1/2%  of the taxpayer's net income for the period
 5        prior to July 1, 1989, as calculated under Section 202.3,
 6        and (ii) 3% of the taxpayer's net income for  the  period
 7        after June 30, 1989, as calculated under Section 202.3.
 8             (3)  In  the case of an individual, trust or estate,
 9        for taxable years  beginning  after  June  30,  1989,  an
10        amount  equal  to 3% of the taxpayer's net income for the
11        taxable year.
12             (4)  (Blank).
13             (5)  (Blank).
14             (6)  In the case of a corporation, for taxable years
15        ending prior to July 1, 1989, an amount equal  to  4%  of
16        the taxpayer's net income for the taxable year.
17             (7)  In the case of a corporation, for taxable years
18        beginning prior to July 1, 1989 and ending after June 30,
19        1989,  an  amount  equal  to  the  sum  of  (i) 4% of the
20        taxpayer's net income for the period  prior  to  July  1,
21        1989, as calculated under Section 202.3, and (ii) 4.8% of
22        the  taxpayer's  net income for the period after June 30,
23        1989, as calculated under Section 202.3.
24             (8)  In the case of a corporation, for taxable years
25        beginning after June 30, 1989, an amount equal to 4.8% of
26        the taxpayer's net income for the taxable year.
27        (c)  Beginning  on  July  1,  1979  and  thereafter,   in
28    addition to such income tax, there is also hereby imposed the
29    Personal  Property Tax Replacement Income Tax measured by net
30    income  on  every   corporation   (including   Subchapter   S
31    corporations),  partnership  and trust, for each taxable year
32    ending after June 30, 1979.  Such taxes are  imposed  on  the
33    privilege  of earning or receiving income in or as a resident
34    of this State.  The Personal Property Tax Replacement  Income
 
                            -3-            LRB9205822SMdvam05
 1    Tax  shall  be  in  addition  to  the  income  tax imposed by
 2    subsections (a) and (b) of this Section and  in  addition  to
 3    all other occupation or privilege taxes imposed by this State
 4    or  by  any  municipal  corporation  or political subdivision
 5    thereof.
 6        (d)  Additional Personal Property Tax Replacement  Income
 7    Tax  Rates.  The personal property tax replacement income tax
 8    imposed by this subsection and subsection (c) of this Section
 9    in the case of a  corporation,  other  than  a  Subchapter  S
10    corporation and except as adjusted by subsection (d-1), shall
11    be an additional amount equal to 2.85% of such taxpayer's net
12    income for the taxable year, except that beginning on January
13    1,  1981, and thereafter, the rate of 2.85% specified in this
14    subsection shall be reduced to 2.5%, and in  the  case  of  a
15    partnership,  trust or a Subchapter S corporation shall be an
16    additional amount equal to 1.5% of such taxpayer's net income
17    for the taxable year.
18        (d-1)  Rate reduction for certain foreign  insurers.   In
19    the case of a foreign insurer, as defined by Section 35A-5 of
20    the  Illinois  Insurance  Code,  whose  state  or  country of
21    domicile  imposes  on  insurers  domiciled  in   Illinois   a
22    retaliatory  tax  (excluding  any insurer whose premiums from
23    reinsurance assumed are 50% or more of  its  total  insurance
24    premiums  as determined under paragraph (2) of subsection (b)
25    of  Section  304,  except   that   for   purposes   of   this
26    determination   premiums  from  reinsurance  do  not  include
27    premiums  from  inter-affiliate  reinsurance   arrangements),
28    beginning  with taxable years ending on or after December 31,
29    1999, the sum of the rates of tax imposed by subsections  (b)
30    and  (d)  shall be reduced (but not increased) to the rate at
31    which the total amount of tax imposed under this Act, net  of
32    all credits allowed under this Act, shall equal (i) the total
33    amount  of tax that would be imposed on the foreign insurer's
34    net income allocable to Illinois for the taxable year by such
 
                            -4-            LRB9205822SMdvam05
 1    foreign insurer's state or country of domicile  if  that  net
 2    income were subject to all income taxes and taxes measured by
 3    net income imposed by such foreign insurer's state or country
 4    of  domicile,  net  of  all credits allowed or (ii) a rate of
 5    zero if no such tax is imposed on such income by the  foreign
 6    insurer's  state  of  domicile.  For  the  purposes  of  this
 7    subsection   (d-1),  an  inter-affiliate  includes  a  mutual
 8    insurer under common management.
 9             (1)  For the purposes of  subsection  (d-1),  in  no
10        event  shall  the  sum  of  the  rates  of tax imposed by
11        subsections (b) and (d) be  reduced  below  the  rate  at
12        which the sum of:
13                  (A)  the  total  amount  of tax imposed on such
14             foreign insurer under this Act for a  taxable  year,
15             net of all credits allowed under this Act, plus
16                  (B)  the  privilege  tax imposed by Section 409
17             of the Illinois Insurance Code, the  fire  insurance
18             company  tax  imposed  by  Section  12  of  the Fire
19             Investigation Act, and  the  fire  department  taxes
20             imposed   under  Section  11-10-1  of  the  Illinois
21             Municipal Code,
22        equals 1.25% of the net taxable premiums written for  the
23        taxable  year,  as described by subsection (1) of Section
24        409 of the Illinois Insurance Code.  This paragraph  will
25        in  no event increase the rates imposed under subsections
26        (b) and (d).
27             (2)  Any reduction in the rates of  tax  imposed  by
28        this  subsection shall be applied first against the rates
29        imposed by subsection (b) and only after the tax  imposed
30        by  subsection  (a) net of all credits allowed under this
31        Section other than the credit  allowed  under  subsection
32        (i)  has  been reduced to zero, against the rates imposed
33        by subsection (d).
34        This subsection (d-1) is exempt from  the  provisions  of
 
                            -5-            LRB9205822SMdvam05
 1    Section 250.
 2        (e)  Investment  credit.   A  taxpayer shall be allowed a
 3    credit against the Personal Property Tax  Replacement  Income
 4    Tax for investment in qualified property.
 5             (1)  A  taxpayer  shall be allowed a credit equal to
 6        .5% of the basis of qualified property placed in  service
 7        during the taxable year, provided such property is placed
 8        in  service  on  or  after  July 1, 1984.  There shall be
 9        allowed an additional credit equal to .5% of the basis of
10        qualified property placed in service during  the  taxable
11        year,  provided  such property is placed in service on or
12        after July 1, 1986, and the  taxpayer's  base  employment
13        within  Illinois  has  increased  by  1% or more over the
14        preceding year as determined by the taxpayer's employment
15        records filed with the Illinois Department of  Employment
16        Security.   Taxpayers  who  are  new to Illinois shall be
17        deemed to have met the 1% growth in base  employment  for
18        the first year in which they file employment records with
19        the  Illinois  Department  of  Employment  Security.  The
20        provisions added to this Section by  Public  Act  85-1200
21        (and restored by Public Act 87-895) shall be construed as
22        declaratory  of  existing law and not as a new enactment.
23        If, in any year, the increase in base  employment  within
24        Illinois  over  the  preceding  year is less than 1%, the
25        additional credit shall be  limited  to  that  percentage
26        times  a  fraction, the numerator of which is .5% and the
27        denominator of which is 1%, but  shall  not  exceed  .5%.
28        The  investment credit shall not be allowed to the extent
29        that it would reduce a taxpayer's liability  in  any  tax
30        year  below  zero,  nor  may  any  credit  for  qualified
31        property  be  allowed for any year other than the year in
32        which the property was placed in service in Illinois. For
33        tax years ending on or after December 31, 1987, and on or
34        before December 31, 1988, the credit shall be allowed for
 
                            -6-            LRB9205822SMdvam05
 1        the tax year in which the property is placed in  service,
 2        or, if the amount of the credit exceeds the tax liability
 3        for  that year, whether it exceeds the original liability
 4        or the liability as later amended,  such  excess  may  be
 5        carried forward and applied to the tax liability of the 5
 6        taxable  years  following  the excess credit years if the
 7        taxpayer (i) makes investments which cause  the  creation
 8        of  a  minimum  of  2,000  full-time  equivalent  jobs in
 9        Illinois,  (ii)  is  located  in   an   enterprise   zone
10        established  pursuant to the Illinois Enterprise Zone Act
11        and (iii) is certified by the Department of Commerce  and
12        Community  Affairs  as  complying  with  the requirements
13        specified in clause (i) and (ii) by July  1,  1986.   The
14        Department of Commerce and Community Affairs shall notify
15        the  Department  of  Revenue  of  all such certifications
16        immediately. For tax  years  ending  after  December  31,
17        1988,  the  credit  shall  be allowed for the tax year in
18        which the property is  placed  in  service,  or,  if  the
19        amount  of  the credit exceeds the tax liability for that
20        year, whether it exceeds the original  liability  or  the
21        liability  as  later  amended, such excess may be carried
22        forward and applied to the tax liability of the 5 taxable
23        years following the excess credit years. The credit shall
24        be applied to the earliest year  for  which  there  is  a
25        liability. If there is credit from more than one tax year
26        that  is  available to offset a liability, earlier credit
27        shall be applied first.
28             (2)  The term "qualified  property"  means  property
29        which:
30                  (A)  is   tangible,   whether   new   or  used,
31             including buildings  and  structural  components  of
32             buildings  and signs that are real property, but not
33             including land or improvements to real property that
34             are not a structural component of a building such as
 
                            -7-            LRB9205822SMdvam05
 1             landscaping,  sewer  lines,  local   access   roads,
 2             fencing, parking lots, and other appurtenances;
 3                  (B)  is  depreciable pursuant to Section 167 of
 4             the  Internal  Revenue  Code,  except  that  "3-year
 5             property" as defined in Section 168(c)(2)(A) of that
 6             Code is not eligible for the credit provided by this
 7             subsection (e);
 8                  (C)  is acquired  by  purchase  as  defined  in
 9             Section 179(d) of the Internal Revenue Code;
10                  (D)  is  used  in Illinois by a taxpayer who is
11             primarily engaged in  manufacturing,  or  in  mining
12             coal or fluorite, or in retailing; and
13                  (E)  has  not  previously been used in Illinois
14             in such a manner and  by  such  a  person  as  would
15             qualify  for  the credit provided by this subsection
16             (e) or subsection (f).
17             (3)  For   purposes   of   this   subsection    (e),
18        "manufacturing" means the material staging and production
19        of  tangible  personal  property  by  procedures commonly
20        regarded as manufacturing,  processing,  fabrication,  or
21        assembling  which changes some existing material into new
22        shapes, new qualities, or new combinations.  For purposes
23        of this subsection (e) the term "mining" shall  have  the
24        same  meaning  as  the term "mining" in Section 613(c) of
25        the  Internal  Revenue  Code.   For  purposes   of   this
26        subsection  (e),  the  term "retailing" means the sale of
27        tangible  personal  property  or  services  rendered   in
28        conjunction  with  the sale of tangible consumer goods or
29        commodities.
30             (4)  The basis of qualified property  shall  be  the
31        basis  used  to  compute  the  depreciation deduction for
32        federal income tax purposes.
33             (5)  If the basis of the property for federal income
34        tax depreciation purposes is increased after it has  been
 
                            -8-            LRB9205822SMdvam05
 1        placed in service in Illinois by the taxpayer, the amount
 2        of  such  increase  shall  be  deemed  property placed in
 3        service on the date of such increase in basis.
 4             (6)  The term "placed in  service"  shall  have  the
 5        same  meaning as under Section 46 of the Internal Revenue
 6        Code.
 7             (7)  If during any taxable year, any property ceases
 8        to be qualified property in the  hands  of  the  taxpayer
 9        within  48  months  after being placed in service, or the
10        situs of any qualified property is moved outside Illinois
11        within 48 months  after  being  placed  in  service,  the
12        Personal  Property  Tax  Replacement  Income Tax for such
13        taxable year shall be increased.  Such increase shall  be
14        determined by (i) recomputing the investment credit which
15        would  have been allowed for the year in which credit for
16        such property was originally allowed by eliminating  such
17        property from such computation and, (ii) subtracting such
18        recomputed  credit  from  the amount of credit previously
19        allowed. For  the  purposes  of  this  paragraph  (7),  a
20        reduction  of  the  basis of qualified property resulting
21        from a redetermination of the  purchase  price  shall  be
22        deemed  a disposition of qualified property to the extent
23        of such reduction.
24             (8)  Unless the investment  credit  is  extended  by
25        law,  the  basis  of qualified property shall not include
26        costs incurred after December 31, 2003, except for  costs
27        incurred  pursuant  to a binding contract entered into on
28        or before December 31, 2003.
29             (9)  Each taxable year ending  before  December  31,
30        2000,  a  partnership  may  elect  to pass through to its
31        partners the credits to which the partnership is entitled
32        under this  subsection  (e)  for  the  taxable  year.   A
33        partner  may use the credit allocated to him or her under
34        this  paragraph  only  against   the   tax   imposed   in
 
                            -9-            LRB9205822SMdvam05
 1        subsections   (c)  and  (d)  of  this  Section.   If  the
 2        partnership makes that election, those credits  shall  be
 3        allocated  among  the  partners  in  the  partnership  in
 4        accordance  with the rules set forth in Section 704(b) of
 5        the Internal Revenue  Code,  and  the  rules  promulgated
 6        under  that  Section,  and  the  allocated  amount of the
 7        credits shall be allowed to the partners for that taxable
 8        year.  The partnership shall make this  election  on  its
 9        Personal  Property  Tax Replacement Income Tax return for
10        that taxable year.  The  election  to  pass  through  the
11        credits shall be irrevocable.
12             For  taxable  years  ending on or after December 31,
13        2000, a partner that  qualifies  its  partnership  for  a
14        subtraction  under  subparagraph  (I) of paragraph (2) of
15        subsection (d) of  Section  203  or  a  shareholder  that
16        qualifies  a  Subchapter  S corporation for a subtraction
17        under subparagraph (S) of paragraph (2) of subsection (b)
18        of Section 203 shall  be  allowed  a  credit  under  this
19        subsection  (e)  equal  to its share of the credit earned
20        under this subsection (e) during the taxable year by  the
21        partnership  or  Subchapter  S corporation, determined in
22        accordance  with  the   determination   of   income   and
23        distributive  share  of income under Sections 702 and 704
24        and Subchapter S of  the  Internal  Revenue  Code.   This
25        paragraph is exempt from the provisions of Section 250.
26          (f)  Investment credit; Enterprise Zone.
27             (1)  A  taxpayer  shall  be allowed a credit against
28        the tax imposed  by  subsections  (a)  and  (b)  of  this
29        Section  for  investment  in  qualified property which is
30        placed in service in an Enterprise Zone created  pursuant
31        to  the  Illinois  Enterprise  Zone  Act.  For  partners,
32        shareholders  of Subchapter S corporations, and owners of
33        limited liability companies, if the liability company  is
34        treated  as  a  partnership  for  purposes of federal and
 
                            -10-           LRB9205822SMdvam05
 1        State income taxation, there shall be  allowed  a  credit
 2        under  this subsection (f) to be determined in accordance
 3        with the determination of income and  distributive  share
 4        of  income under Sections 702 and 704 and Subchapter S of
 5        the Internal Revenue Code. The credit shall be .5% of the
 6        basis for such property.  The credit shall  be  available
 7        only  in the taxable year in which the property is placed
 8        in service in  the  Enterprise  Zone  and  shall  not  be
 9        allowed  to  the extent that it would reduce a taxpayer's
10        liability for the tax imposed by subsections (a) and  (b)
11        of this Section to below zero. For tax years ending on or
12        after  December 31, 1985, the credit shall be allowed for
13        the tax year in which the property is placed in  service,
14        or, if the amount of the credit exceeds the tax liability
15        for  that year, whether it exceeds the original liability
16        or the liability as later amended,  such  excess  may  be
17        carried forward and applied to the tax liability of the 5
18        taxable  years  following  the  excess  credit  year. The
19        credit shall be applied to the earliest  year  for  which
20        there  is  a liability. If there is credit from more than
21        one tax year that is available to offset a liability, the
22        credit accruing first in time shall be applied first.
23             (2)  The  term  qualified  property  means  property
24        which:
25                  (A)  is  tangible,   whether   new   or   used,
26             including  buildings  and  structural  components of
27             buildings;
28                  (B)  is depreciable pursuant to Section 167  of
29             the  Internal  Revenue  Code,  except  that  "3-year
30             property" as defined in Section 168(c)(2)(A) of that
31             Code is not eligible for the credit provided by this
32             subsection (f);
33                  (C)  is  acquired  by  purchase  as  defined in
34             Section 179(d) of the Internal Revenue Code;
 
                            -11-           LRB9205822SMdvam05
 1                  (D)  is used in  the  Enterprise  Zone  by  the
 2             taxpayer; and
 3                  (E)  has  not  been previously used in Illinois
 4             in such a manner and  by  such  a  person  as  would
 5             qualify  for  the credit provided by this subsection
 6             (f) or subsection (e).
 7             (3)  The basis of qualified property  shall  be  the
 8        basis  used  to  compute  the  depreciation deduction for
 9        federal income tax purposes.
10             (4)  If the basis of the property for federal income
11        tax depreciation purposes is increased after it has  been
12        placed in service in the Enterprise Zone by the taxpayer,
13        the  amount  of  such  increase  shall be deemed property
14        placed in service on the date of such increase in basis.
15             (5)  The term "placed in  service"  shall  have  the
16        same  meaning as under Section 46 of the Internal Revenue
17        Code.
18             (6)  If during any taxable year, any property ceases
19        to be qualified property in the  hands  of  the  taxpayer
20        within  48  months  after being placed in service, or the
21        situs of any qualified  property  is  moved  outside  the
22        Enterprise  Zone  within  48 months after being placed in
23        service, the tax imposed under subsections (a) and (b) of
24        this Section for such taxable year  shall  be  increased.
25        Such  increase shall be determined by (i) recomputing the
26        investment credit which would have been allowed  for  the
27        year  in  which  credit  for such property was originally
28        allowed  by   eliminating   such   property   from   such
29        computation,  and (ii) subtracting such recomputed credit
30        from the amount of credit previously  allowed.   For  the
31        purposes  of this paragraph (6), a reduction of the basis
32        of qualified property resulting from a redetermination of
33        the purchase price  shall  be  deemed  a  disposition  of
34        qualified property to the extent of such reduction.
 
                            -12-           LRB9205822SMdvam05
 1          (g)  Jobs Tax Credit; Enterprise Zone and Foreign Trade
 2    Zone or Sub-Zone.
 3             (1)  A taxpayer conducting a trade or business in an
 4        enterprise  zone  or a High Impact Business designated by
 5        the  Department  of  Commerce   and   Community   Affairs
 6        conducting  a trade or business in a federally designated
 7        Foreign Trade Zone or Sub-Zone shall be allowed a  credit
 8        against  the  tax  imposed  by subsections (a) and (b) of
 9        this Section in the amount of $500 per eligible  employee
10        hired to work in the zone during the taxable year.
11             (2)  To qualify for the credit:
12                  (A)  the  taxpayer must hire 5 or more eligible
13             employees to work in an enterprise zone or federally
14             designated Foreign Trade Zone or Sub-Zone during the
15             taxable year;
16                  (B)  the taxpayer's total employment within the
17             enterprise  zone  or  federally  designated  Foreign
18             Trade Zone or Sub-Zone must increase by  5  or  more
19             full-time  employees  beyond  the  total employed in
20             that zone at the end of the previous  tax  year  for
21             which  a  jobs  tax  credit  under  this Section was
22             taken, or beyond the total employed by the  taxpayer
23             as of December 31, 1985, whichever is later; and
24                  (C)  the  eligible  employees  must be employed
25             180 consecutive days in order to be deemed hired for
26             purposes of this subsection.
27             (3)  An "eligible employee" means  an  employee  who
28        is:
29                  (A)  Certified  by  the  Department of Commerce
30             and Community Affairs  as  "eligible  for  services"
31             pursuant  to  regulations  promulgated in accordance
32             with Title II of the Job Training  Partnership  Act,
33             Training Services for the Disadvantaged or Title III
34             of  the Job Training Partnership Act, Employment and
 
                            -13-           LRB9205822SMdvam05
 1             Training Assistance for Dislocated Workers Program.
 2                  (B)  Hired  after  the   enterprise   zone   or
 3             federally  designated Foreign Trade Zone or Sub-Zone
 4             was designated or the trade or business was  located
 5             in that zone, whichever is later.
 6                  (C)  Employed in the enterprise zone or Foreign
 7             Trade  Zone  or Sub-Zone. An employee is employed in
 8             an enterprise zone or federally  designated  Foreign
 9             Trade  Zone or Sub-Zone if his services are rendered
10             there or it  is  the  base  of  operations  for  the
11             services performed.
12                  (D)  A  full-time  employee  working 30 or more
13             hours per week.
14             (4)  For tax years ending on or after  December  31,
15        1985  and prior to December 31, 1988, the credit shall be
16        allowed for the tax year in which the eligible  employees
17        are hired.  For tax years ending on or after December 31,
18        1988,  the  credit  shall  be  allowed  for  the tax year
19        immediately following the tax year in which the  eligible
20        employees are hired.  If the amount of the credit exceeds
21        the  tax  liability for that year, whether it exceeds the
22        original liability or the  liability  as  later  amended,
23        such excess may be carried forward and applied to the tax
24        liability  of  the  5  taxable years following the excess
25        credit year.  The credit shall be applied to the earliest
26        year for which there is a liability. If there  is  credit
27        from more than one tax year that is available to offset a
28        liability, earlier credit shall be applied first.
29             (5)  The Department of Revenue shall promulgate such
30        rules and regulations as may be deemed necessary to carry
31        out the purposes of this subsection (g).
32             (6)  The  credit  shall  be  available  for eligible
33        employees hired on or after January 1, 1986.
34             (h)  Investment credit; High Impact Business.
 
                            -14-           LRB9205822SMdvam05
 1             (1)  Subject to subsection (b) of Section 5.5 of the
 2        Illinois Enterprise Zone Act, a taxpayer shall be allowed
 3        a credit against the tax imposed by subsections  (a)  and
 4        (b)  of this Section for investment in qualified property
 5        which is placed in service by a  Department  of  Commerce
 6        and  Community  Affairs  designated High Impact Business.
 7        The credit shall be .5% of the basis for  such  property.
 8        The  credit  shall  not  be  available  until the minimum
 9        investments in qualified property set  forth  in  Section
10        5.5  of  the  Illinois  Enterprise  Zone  Act  have  been
11        satisfied  and shall not be allowed to the extent that it
12        would reduce a taxpayer's liability for the  tax  imposed
13        by subsections (a) and (b) of this Section to below zero.
14        The  credit  applicable to such minimum investments shall
15        be taken in  the  taxable  year  in  which  such  minimum
16        investments   have   been   completed.   The  credit  for
17        additional investments beyond the minimum investment by a
18        designated high impact business shall be  available  only
19        in  the  taxable  year in which the property is placed in
20        service and shall not be allowed to the  extent  that  it
21        would  reduce  a taxpayer's liability for the tax imposed
22        by subsections (a) and (b) of this Section to below zero.
23        For tax years ending on or after December 31,  1987,  the
24        credit  shall  be  allowed  for the tax year in which the
25        property is placed in service, or, if the amount  of  the
26        credit  exceeds  the tax liability for that year, whether
27        it exceeds the original liability  or  the  liability  as
28        later  amended,  such  excess  may be carried forward and
29        applied to the tax  liability  of  the  5  taxable  years
30        following  the  excess  credit year.  The credit shall be
31        applied to  the  earliest  year  for  which  there  is  a
32        liability.   If  there  is  credit from more than one tax
33        year that is available to offset a liability, the  credit
34        accruing first in time shall be applied first.
 
                            -15-           LRB9205822SMdvam05
 1             Changes  made  in  this subdivision (h)(1) by Public
 2        Act 88-670 restore changes made by Public Act 85-1182 and
 3        reflect existing law.
 4             (2)  The  term  qualified  property  means  property
 5        which:
 6                  (A)  is  tangible,   whether   new   or   used,
 7             including  buildings  and  structural  components of
 8             buildings;
 9                  (B)  is depreciable pursuant to Section 167  of
10             the  Internal  Revenue  Code,  except  that  "3-year
11             property" as defined in Section 168(c)(2)(A) of that
12             Code is not eligible for the credit provided by this
13             subsection (h);
14                  (C)  is  acquired  by  purchase  as  defined in
15             Section 179(d) of the Internal Revenue Code; and
16                  (D)  is not eligible for  the  Enterprise  Zone
17             Investment Credit provided by subsection (f) of this
18             Section.
19             (3)  The  basis  of  qualified property shall be the
20        basis used to  compute  the  depreciation  deduction  for
21        federal income tax purposes.
22             (4)  If the basis of the property for federal income
23        tax  depreciation purposes is increased after it has been
24        placed in service in a federally designated Foreign Trade
25        Zone or Sub-Zone located in Illinois by the taxpayer, the
26        amount of such increase shall be deemed  property  placed
27        in service on the date of such increase in basis.
28             (5)  The  term  "placed  in  service" shall have the
29        same meaning as under Section 46 of the Internal  Revenue
30        Code.
31             (6)  If  during any taxable year ending on or before
32        December 31, 1996, any property ceases  to  be  qualified
33        property  in  the  hands of the taxpayer within 48 months
34        after being placed  in  service,  or  the  situs  of  any
 
                            -16-           LRB9205822SMdvam05
 1        qualified  property  is  moved outside Illinois within 48
 2        months after being placed in  service,  the  tax  imposed
 3        under  subsections  (a)  and (b) of this Section for such
 4        taxable year shall be increased.  Such increase shall  be
 5        determined by (i) recomputing the investment credit which
 6        would  have been allowed for the year in which credit for
 7        such property was originally allowed by eliminating  such
 8        property from such computation, and (ii) subtracting such
 9        recomputed  credit  from  the amount of credit previously
10        allowed.  For the  purposes  of  this  paragraph  (6),  a
11        reduction  of  the  basis of qualified property resulting
12        from a redetermination of the  purchase  price  shall  be
13        deemed  a disposition of qualified property to the extent
14        of such reduction.
15             (7)  Beginning with tax years ending after  December
16        31,  1996,  if  a taxpayer qualifies for the credit under
17        this  subsection  (h)  and  thereby  is  granted  a   tax
18        abatement  and the taxpayer relocates its entire facility
19        in violation of the explicit  terms  and  length  of  the
20        contract  under  Section 18-183 of the Property Tax Code,
21        the tax imposed under subsections (a)  and  (b)  of  this
22        Section  shall be increased for the taxable year in which
23        the taxpayer relocated its facility by an amount equal to
24        the amount of credit received by the taxpayer under  this
25        subsection (h).
26        (i)  A credit shall be allowed against the tax imposed by
27    subsections  (a)  and (b) of this Section for the tax imposed
28    by subsections (c) and (d)  of  this  Section.   This  credit
29    shall   be   computed  by  multiplying  the  tax  imposed  by
30    subsections (c) and (d) of this Section by  a  fraction,  the
31    numerator  of  which is base income allocable to Illinois and
32    the denominator of which is Illinois base income, and further
33    multiplying  the  product  by  the  tax   rate   imposed   by
34    subsections (a) and (b) of this Section.
 
                            -17-           LRB9205822SMdvam05
 1        Any  credit  earned  on  or after December 31, 1986 under
 2    this subsection which is unused in the  year  the  credit  is
 3    computed  because  it  exceeds  the  tax liability imposed by
 4    subsections (a) and (b) for that year (whether it exceeds the
 5    original liability or the liability as later amended) may  be
 6    carried  forward  and applied to the tax liability imposed by
 7    subsections (a) and (b) of the 5 taxable years following  the
 8    excess  credit  year.   This credit shall be applied first to
 9    the earliest year for which there is a liability.   If  there
10    is a credit under this subsection from more than one tax year
11    that  is  available to offset a liability the earliest credit
12    arising under this subsection shall be applied first.
13        If, during any taxable year ending on or  after  December
14    31,  1986, the tax imposed by subsections (c) and (d) of this
15    Section for which a taxpayer has claimed a credit under  this
16    subsection  (i) is reduced, the amount of credit for such tax
17    shall also be reduced.  Such reduction shall be determined by
18    recomputing the credit to take into account the  reduced  tax
19    imposed  by  subsection  (c)  and (d).  If any portion of the
20    reduced amount of credit has  been  carried  to  a  different
21    taxable  year,  an  amended  return  shall  be filed for such
22    taxable year to reduce the amount of credit claimed.
23        (j)  Training expense credit.  Beginning with  tax  years
24    ending  on  or  after  December 31, 1986, a taxpayer shall be
25    allowed a credit against the tax imposed  by  subsection  (a)
26    and  (b)  under this Section for all amounts paid or accrued,
27    on behalf of all persons employed by the taxpayer in Illinois
28    or Illinois residents  employed  outside  of  Illinois  by  a
29    taxpayer,   for   educational   or   vocational  training  in
30    semi-technical or technical fields or semi-skilled or skilled
31    fields,  which  were  deducted  from  gross  income  in   the
32    computation  of  taxable  income.  The credit against the tax
33    imposed by subsections (a) and (b)  shall  be  1.6%  of  such
34    training  expenses.  For partners, shareholders of subchapter
 
                            -18-           LRB9205822SMdvam05
 1    S corporations, and owners of limited liability companies, if
 2    the  liability  company  is  treated  as  a  partnership  for
 3    purposes of federal and State income taxation, there shall be
 4    allowed a credit under this subsection (j) to  be  determined
 5    in   accordance   with   the   determination  of  income  and
 6    distributive share of income under Sections 702 and  704  and
 7    subchapter S of the Internal Revenue Code.
 8        Any  credit allowed under this subsection which is unused
 9    in the year the credit is earned may be  carried  forward  to
10    each  of the 5 taxable years following the year for which the
11    credit is first computed until it is used.  This credit shall
12    be applied first to the earliest year for which  there  is  a
13    liability.   If  there is a credit under this subsection from
14    more than  one  tax  year  that  is  available  to  offset  a
15    liability  the  earliest credit arising under this subsection
16    shall be applied first.
17        (k)  Research and development credit.
18        Beginning with tax years ending after  July  1,  1990,  a
19    taxpayer shall be allowed a credit against the tax imposed by
20    subsections  (a)  and  (b)  of  this  Section  for increasing
21    research  activities  in  this  State.   The  credit  allowed
22    against the tax imposed by subsections (a) and (b)  shall  be
23    equal to 6 1/2% of the qualifying expenditures for increasing
24    research activities in this State. For partners, shareholders
25    of subchapter S corporations, and owners of limited liability
26    companies,   if   the  liability  company  is  treated  as  a
27    partnership  for  purposes  of  federal  and   State   income
28    taxation,   there  shall  be  allowed  a  credit  under  this
29    subsection  to  be  determined   in   accordance   with   the
30    determination  of  income  and  distributive  share of income
31    under Sections 702 and 704 and subchapter S of  the  Internal
32    Revenue Code.
33        For    purposes    of    this   subsection,   "qualifying
34    expenditures" means the qualifying  expenditures  as  defined
 
                            -19-           LRB9205822SMdvam05
 1    for  the  federal  credit  for increasing research activities
 2    which would be allowable under Section  41  of  the  Internal
 3    Revenue   Code   and  which  are  conducted  in  this  State,
 4    "qualifying expenditures for increasing  research  activities
 5    in  this  State"  means the excess of qualifying expenditures
 6    for the  taxable  year  in  which  incurred  over  qualifying
 7    expenditures  for  the  base period, "qualifying expenditures
 8    for the base period" means  the  average  of  the  qualifying
 9    expenditures  for  each  year  in  the base period, and "base
10    period" means the 3 taxable years immediately  preceding  the
11    taxable year for which the determination is being made.
12        Any credit in excess of the tax liability for the taxable
13    year may be carried forward. A taxpayer may elect to have the
14    unused  credit  shown  on  its final completed return carried
15    over as a credit against the tax liability for the  following
16    5  taxable  years  or until it has been fully used, whichever
17    occurs first.
18        If an unused credit is carried forward to  a  given  year
19    from  2  or  more  earlier  years, that credit arising in the
20    earliest year will be applied first against the tax liability
21    for the given year.  If a tax liability for  the  given  year
22    still  remains,  the  credit from the next earliest year will
23    then be applied, and so on, until all credits have been  used
24    or  no  tax  liability  for  the  given  year  remains.   Any
25    remaining  unused  credit  or  credits  then  will be carried
26    forward to the next following year in which a  tax  liability
27    is  incurred, except that no credit can be carried forward to
28    a year which is more than 5 years after the year in which the
29    expense for which the credit is given was incurred.
30        Unless extended by law,  the  credit  shall  not  include
31    costs  incurred  after  December  31,  2004, except for costs
32    incurred pursuant to a binding contract entered  into  on  or
33    before December 31, 2004.
34        No  inference  shall be drawn from this amendatory Act of
 
                            -20-           LRB9205822SMdvam05
 1    the 91st General Assembly  in  construing  this  Section  for
 2    taxable years beginning before January 1, 1999.
 3        (l)  Environmental Remediation Tax Credit.
 4             (i)  For  tax   years ending after December 31, 1997
 5        and on or before December 31, 2001, a taxpayer  shall  be
 6        allowed  a  credit against the tax imposed by subsections
 7        (a) and (b) of this Section for certain amounts paid  for
 8        unreimbursed  eligible remediation costs, as specified in
 9        this  subsection.   For   purposes   of   this   Section,
10        "unreimbursed  eligible  remediation  costs"  means costs
11        approved by the Illinois Environmental Protection  Agency
12        ("Agency")  under  Section  58.14  of  the  Environmental
13        Protection Act that were paid in performing environmental
14        remediation  at a site for which a No Further Remediation
15        Letter was  issued  by  the  Agency  and  recorded  under
16        Section  58.10  of the Environmental Protection Act.  The
17        credit must be claimed for  the  taxable  year  in  which
18        Agency  approval  of  the  eligible  remediation costs is
19        granted.  The credit is not available to any taxpayer  if
20        the  taxpayer  or any related party caused or contributed
21        to, in any  material  respect,  a  release  of  regulated
22        substances  on, in, or under the site that was identified
23        and addressed by the remedial action pursuant to the Site
24        Remediation Program of the Environmental Protection  Act.
25        After  the  Pollution  Control  Board  rules  are adopted
26        pursuant to the Illinois Administrative Procedure Act for
27        the administration and enforcement of Section 58.9 of the
28        Environmental Protection Act, determinations as to credit
29        availability for purposes of this Section shall  be  made
30        consistent  with  those  rules.   For  purposes  of  this
31        Section,   "taxpayer"   includes   a   person  whose  tax
32        attributes the taxpayer has succeeded  to  under  Section
33        381  of  the  Internal  Revenue  Code and "related party"
34        includes the persons disallowed a deduction for losses by
 
                            -21-           LRB9205822SMdvam05
 1        paragraphs (b), (c), and (f)(1) of  Section  267  of  the
 2        Internal  Revenue  Code  by  virtue  of  being  a related
 3        taxpayer, as well as any of  its  partners.   The  credit
 4        allowed  against  the  tax imposed by subsections (a) and
 5        (b) shall be equal to 25% of  the  unreimbursed  eligible
 6        remediation  costs in excess of $100,000 per site, except
 7        that the $100,000 threshold shall not apply to  any  site
 8        contained  in  an  enterprise  zone  as determined by the
 9        Department of Commerce and Community Affairs.  The  total
10        credit  allowed  shall not exceed $40,000 per year with a
11        maximum total of $150,000 per  site.   For  partners  and
12        shareholders of subchapter S corporations, there shall be
13        allowed  a  credit under this subsection to be determined
14        in  accordance  with  the  determination  of  income  and
15        distributive share of income under Sections 702  and  704
16        and of subchapter S of the Internal Revenue Code.
17             (ii)  A credit allowed under this subsection that is
18        unused  in  the  year the credit is earned may be carried
19        forward to each of the 5 taxable years following the year
20        for which the credit is first earned until  it  is  used.
21        The  term "unused credit" does not include any amounts of
22        unreimbursed eligible remediation costs in excess of  the
23        maximum  credit  per site authorized under paragraph (i).
24        This credit shall be applied first to the  earliest  year
25        for  which  there  is  a liability.  If there is a credit
26        under this subsection from more than one tax year that is
27        available to offset  a  liability,  the  earliest  credit
28        arising  under this subsection shall be applied first.  A
29        credit allowed under this subsection may  be  sold  to  a
30        buyer as part of a sale of all or part of the remediation
31        site  for which the credit was granted.  The purchaser of
32        a remediation site and the tax credit  shall  succeed  to
33        the  unused  credit and remaining carry-forward period of
34        the seller.  To perfect the transfer, the assignor  shall
 
                            -22-           LRB9205822SMdvam05
 1        record  the  transfer  in the chain of title for the site
 2        and  provide  written  notice  to  the  Director  of  the
 3        Illinois Department of Revenue of the  assignor's  intent
 4        to  sell  the  remediation site and the amount of the tax
 5        credit to be transferred as a portion of the sale.  In no
 6        event may a credit be transferred to any taxpayer if  the
 7        taxpayer  or  a related party would not be eligible under
 8        the provisions of subsection (i).
 9             (iii)  For purposes of this Section, the term "site"
10        shall have the same meaning as under Section 58.2 of  the
11        Environmental Protection Act.
12        (m)  Education expense credit.
13        Beginning  with tax years ending after December 31, 1999,
14    a taxpayer who is the custodian of  one  or  more  qualifying
15    pupils  shall  be allowed a credit against the tax imposed by
16    subsections  (a)  and  (b)  of  this  Section  for  qualified
17    education expenses  incurred  on  behalf  of  the  qualifying
18    pupils.   The  credit  shall  be  equal  to  25% of qualified
19    education expenses, but in no  event  may  the  total  credit
20    under this subsection Section claimed by a family that is the
21    custodian of qualifying pupils exceed $500. In no event shall
22    a   credit   under  this  subsection  reduce  the  taxpayer's
23    liability under this Act to less than zero.  This  subsection
24    is exempt from the provisions of Section 250 of this Act.
25        For purposes of this subsection;
26        "Qualifying   pupils"   means  individuals  who  (i)  are
27    residents of the State of Illinois, (ii) are under the age of
28    21 at the close of the school year  for  which  a  credit  is
29    sought,  and  (iii) during the school year for which a credit
30    is sought were full-time pupils enrolled  in  a  kindergarten
31    through  twelfth  grade  education  program at any school, as
32    defined in this subsection.
33        "Qualified education expense" means the  amount  incurred
34    on  behalf  of  a  qualifying  pupil  in  excess  of $250 for
 
                            -23-           LRB9205822SMdvam05
 1    tuition, book fees, and lab fees at the school in  which  the
 2    pupil is enrolled during the regular school year.
 3        "School"  means  any  public  or  nonpublic elementary or
 4    secondary school in Illinois that is in compliance with Title
 5    VI of the Civil Rights Act of 1964 and  attendance  at  which
 6    satisfies  the  requirements  of  Section  26-1 of the School
 7    Code, except that nothing shall be  construed  to  require  a
 8    child  to attend any particular public or nonpublic school to
 9    qualify for the credit under this Section.
10        "Custodian" means, with respect to qualifying pupils,  an
11    Illinois  resident  who  is  a  parent,  the parents, a legal
12    guardian, or the legal guardians of the qualifying pupils.
13    (Source: P.A. 90-123, eff.  7-21-97;  90-458,  eff.  8-17-97;
14    90-605,  eff.  6-30-98;  90-655,  eff.  7-30-98; 90-717, eff.
15    8-7-98; 90-792, eff. 1-1-99; 91-9, eff. 1-1-00; 91-357,  eff.
16    7-29-99;  91-643, eff. 8-20-99; 91-644, eff. 8-20-99; 91-860,
17    eff. 6-22-00; 91-913, eff. 1-1-01; revised 10-24-00.)

18        (35 ILCS 5/202) (from Ch. 120, par. 2-202)
19        Sec. 202. Net Income Defined. In general. For purposes of
20    this Act, a taxpayer's net income for a taxable year shall be
21    that portion of his base income for such  year  except  money
22    and  other  benefits, other than salary, received by a driver
23    in a ridesharing arrangement using a motor vehicle, which  is
24    allocable  to  this  State under the provisions of Article 3,
25    less the standard exemption allowed by Section  204  and  the
26    deduction allowed by Section 207.
27    (Source: P.A. 85-731.)

28        (35 ILCS 5/203) (from Ch. 120, par. 2-203)
29        Sec. 203.  Base income defined.
30        (a)  Individuals.
31             (1)  In general.  In the case of an individual, base
32        income  means  an amount equal to the taxpayer's adjusted
 
                            -24-           LRB9205822SMdvam05
 1        gross  income  for  the  taxable  year  as  modified   by
 2        paragraph (2).
 3             (2)  Modifications.    The   adjusted  gross  income
 4        referred to in paragraph (1) shall be modified by  adding
 5        thereto the sum of the following amounts:
 6                  (A)  An  amount  equal  to  all amounts paid or
 7             accrued to the taxpayer  as  interest  or  dividends
 8             during  the taxable year to the extent excluded from
 9             gross income in the computation  of  adjusted  gross
10             income,  except  stock dividends of qualified public
11             utilities  described  in  Section  305(e)   of   the
12             Internal Revenue Code;
13                  (B)  An  amount  equal  to  the  amount  of tax
14             imposed by this Act  to  the  extent  deducted  from
15             gross  income  in  the computation of adjusted gross
16             income for the taxable year;
17                  (C)  An amount equal  to  the  amount  received
18             during  the  taxable year as a recovery or refund of
19             real  property  taxes  paid  with  respect  to   the
20             taxpayer's principal residence under the Revenue Act
21             of  1939  and  for  which a deduction was previously
22             taken under subparagraph (L) of this  paragraph  (2)
23             prior to July 1, 1991, the retrospective application
24             date  of Article 4 of Public Act 87-17.  In the case
25             of  multi-unit  or  multi-use  structures  and  farm
26             dwellings, the taxes  on  the  taxpayer's  principal
27             residence  shall  be that portion of the total taxes
28             for the entire property  which  is  attributable  to
29             such principal residence;
30                  (D)  An  amount  equal  to  the  amount  of the
31             capital gain deduction allowable under the  Internal
32             Revenue  Code,  to  the  extent  deducted from gross
33             income in the computation of adjusted gross income;
34                  (D-5)  An amount, to the extent not included in
 
                            -25-           LRB9205822SMdvam05
 1             adjusted gross income, equal to the amount of  money
 2             withdrawn by the taxpayer in the taxable year from a
 3             medical care savings account and the interest earned
 4             on  the  account in the taxable year of a withdrawal
 5             pursuant to subsection (b)  of  Section  20  of  the
 6             Medical  Care  Savings Account Act or subsection (b)
 7             of Section 20 of the Medical  Care  Savings  Account
 8             Act of 2000; and
 9                  (D-10)  For taxable years ending after December
10             31,   1997,   an   amount   equal  to  any  eligible
11             remediation costs that the  individual  deducted  in
12             computing  adjusted  gross  income and for which the
13             individual claims a credit under subsection  (l)  of
14             Section 201;
15        and  by  deducting  from the total so obtained the sum of
16        the following amounts:
17                  (E)  Any  amount  included  in  such  total  in
18             respect  of  any  compensation  (including  but  not
19             limited to any compensation paid  or  accrued  to  a
20             serviceman  while  a  prisoner  of war or missing in
21             action) paid to a resident by  reason  of  being  on
22             active duty in the Armed Forces of the United States
23             and  in  respect of any compensation paid or accrued
24             to a resident who as a governmental employee  was  a
25             prisoner of war or missing in action, and in respect
26             of  any  compensation  paid to a resident in 1971 or
27             thereafter for annual training performed pursuant to
28             Sections 502 and 503, Title 32, United  States  Code
29             as a member of the Illinois National Guard;
30                  (F)  An amount equal to all amounts included in
31             such  total  pursuant  to the provisions of Sections
32             402(a), 402(c), 403(a), 403(b), 406(a), 407(a),  and
33             408  of  the  Internal  Revenue Code, or included in
34             such total as distributions under the provisions  of
 
                            -26-           LRB9205822SMdvam05
 1             any  retirement  or disability plan for employees of
 2             any  governmental  agency  or  unit,  or  retirement
 3             payments to retired  partners,  which  payments  are
 4             excluded   in   computing  net  earnings  from  self
 5             employment by Section 1402 of the  Internal  Revenue
 6             Code and regulations adopted pursuant thereto;
 7                  (G)  The valuation limitation amount;
 8                  (H)  An  amount  equal to the amount of any tax
 9             imposed by  this  Act  which  was  refunded  to  the
10             taxpayer  and included in such total for the taxable
11             year;
12                  (I)  An amount equal to all amounts included in
13             such total pursuant to the provisions of Section 111
14             of the Internal Revenue Code as a recovery of  items
15             previously  deducted  from  adjusted gross income in
16             the computation of taxable income;
17                  (J)  An  amount  equal   to   those   dividends
18             included   in  such  total  which  were  paid  by  a
19             corporation which conducts business operations in an
20             Enterprise Zone or zones created under the  Illinois
21             Enterprise  Zone Act, and conducts substantially all
22             of its operations in an Enterprise Zone or zones;
23                  (K)  An  amount  equal   to   those   dividends
24             included   in   such  total  that  were  paid  by  a
25             corporation that conducts business operations  in  a
26             federally  designated Foreign Trade Zone or Sub-Zone
27             and  that  is  designated  a  High  Impact  Business
28             located  in  Illinois;   provided   that   dividends
29             eligible  for the deduction provided in subparagraph
30             (J) of paragraph (2) of this subsection shall not be
31             eligible  for  the  deduction  provided  under  this
32             subparagraph (K);
33                  (L)  For taxable years  ending  after  December
34             31,  1983,  an  amount  equal to all social security
 
                            -27-           LRB9205822SMdvam05
 1             benefits and railroad retirement  benefits  included
 2             in  such  total pursuant to Sections 72(r) and 86 of
 3             the Internal Revenue Code;
 4                  (M)  With  the   exception   of   any   amounts
 5             subtracted  under  subparagraph (N), an amount equal
 6             to the sum of all amounts disallowed  as  deductions
 7             by  (i)  Sections  171(a)  (2),  and  265(2)  of the
 8             Internal Revenue Code of 1954, as now  or  hereafter
 9             amended,  and  all  amounts of expenses allocable to
10             interest and  disallowed as  deductions  by  Section
11             265(1)  of the Internal Revenue Code of 1954, as now
12             or hereafter amended; and  (ii)  for  taxable  years
13             ending   on  or  after  August  13,  1999,  Sections
14             171(a)(2), 265, 280C,  and  832(b)(5)(B)(i)  of  the
15             Internal   Revenue  Code;  the  provisions  of  this
16             subparagraph  are  exempt  from  the  provisions  of
17             Section 250;
18                  (N)  An amount equal to all amounts included in
19             such total which are exempt from  taxation  by  this
20             State   either   by   reason   of  its  statutes  or
21             Constitution  or  by  reason  of  the  Constitution,
22             treaties or statutes of the United States;  provided
23             that,  in the case of any statute of this State that
24             exempts  income  derived   from   bonds   or   other
25             obligations from the tax imposed under this Act, the
26             amount  exempted  shall  be the interest net of bond
27             premium amortization;
28                  (O)  An amount equal to any  contribution  made
29             to  a  job  training project established pursuant to
30             the Tax Increment Allocation Redevelopment Act;
31                  (P)  An amount  equal  to  the  amount  of  the
32             deduction  used  to  compute  the federal income tax
33             credit for restoration of substantial  amounts  held
34             under  claim  of right for the taxable year pursuant
 
                            -28-           LRB9205822SMdvam05
 1             to Section 1341 of  the  Internal  Revenue  Code  of
 2             1986;
 3                  (Q)  An amount equal to any amounts included in
 4             such   total,   received   by  the  taxpayer  as  an
 5             acceleration in the payment of  life,  endowment  or
 6             annuity  benefits  in advance of the time they would
 7             otherwise be payable as an indemnity for a  terminal
 8             illness;
 9                  (R)  An  amount  equal  to  the  amount  of any
10             federal or State  bonus  paid  to  veterans  of  the
11             Persian Gulf War;
12                  (S)  An  amount,  to  the  extent  included  in
13             adjusted  gross  income,  equal  to  the amount of a
14             contribution made in the taxable year on  behalf  of
15             the  taxpayer  to  a  medical  care  savings account
16             established under the Medical Care  Savings  Account
17             Act  or the Medical Care Savings Account Act of 2000
18             to the extent the contribution is  accepted  by  the
19             account administrator as provided in that Act;
20                  (T)  An  amount,  to  the  extent  included  in
21             adjusted  gross  income,  equal  to  the  amount  of
22             interest  earned  in  the  taxable year on a medical
23             care savings account established under  the  Medical
24             Care Savings Account Act or the Medical Care Savings
25             Account Act of 2000 on behalf of the taxpayer, other
26             than  interest  added pursuant to item (D-5) of this
27             paragraph (2);
28                  (U)  For one taxable year beginning on or after
29             January 1, 1994, an amount equal to the total amount
30             of tax imposed and paid under  subsections  (a)  and
31             (b)  of  Section  201  of  this Act on grant amounts
32             received by the  taxpayer  under  the  Nursing  Home
33             Grant  Assistance  Act during the taxpayer's taxable
34             years 1992 and 1993;
 
                            -29-           LRB9205822SMdvam05
 1                  (V)  Beginning with  tax  years  ending  on  or
 2             after  December  31,  1995 and ending with tax years
 3             ending on or before December  31,  2004,  an  amount
 4             equal  to  the  amount  paid  by a taxpayer who is a
 5             self-employed taxpayer, a partner of a  partnership,
 6             or  a  shareholder in a Subchapter S corporation for
 7             health insurance or  long-term  care  insurance  for
 8             that   taxpayer   or   that   taxpayer's  spouse  or
 9             dependents, to the extent that the amount  paid  for
10             that  health  insurance  or long-term care insurance
11             may be deducted under Section 213  of  the  Internal
12             Revenue  Code  of 1986, has not been deducted on the
13             federal income tax return of the taxpayer, and  does
14             not  exceed  the taxable income attributable to that
15             taxpayer's  income,   self-employment   income,   or
16             Subchapter  S  corporation  income;  except  that no
17             deduction shall be allowed under this  item  (V)  if
18             the  taxpayer  is  eligible  to  participate  in any
19             health insurance or long-term care insurance plan of
20             an  employer  of  the  taxpayer  or  the  taxpayer's
21             spouse.  The amount  of  the  health  insurance  and
22             long-term  care insurance subtracted under this item
23             (V) shall be determined by multiplying total  health
24             insurance and long-term care insurance premiums paid
25             by  the  taxpayer times a number that represents the
26             fractional percentage of eligible  medical  expenses
27             under  Section  213  of the Internal Revenue Code of
28             1986 not actually deducted on the taxpayer's federal
29             income tax return;
30                  (W)  For taxable years beginning  on  or  after
31             January   1,  1998,  all  amounts  included  in  the
32             taxpayer's federal gross income in the taxable  year
33             from  amounts converted from a regular IRA to a Roth
34             IRA. This paragraph is exempt from the provisions of
 
                            -30-           LRB9205822SMdvam05
 1             Section 250; and
 2                  (X)  For taxable year 1999 and  thereafter,  an
 3             amount equal to the amount of any (i) distributions,
 4             to the extent includible in gross income for federal
 5             income tax purposes, made to the taxpayer because of
 6             his  or  her  status  as a victim of persecution for
 7             racial or religious reasons by Nazi Germany  or  any
 8             other  Axis  regime  or as an heir of the victim and
 9             (ii) items of income, to the  extent  includible  in
10             gross   income  for  federal  income  tax  purposes,
11             attributable to, derived from or in any way  related
12             to  assets  stolen  from,  hidden from, or otherwise
13             lost to  a  victim  of  persecution  for  racial  or
14             religious  reasons by Nazi Germany or any other Axis
15             regime immediately prior to, during, and immediately
16             after World War II, including, but not  limited  to,
17             interest  on  the  proceeds  receivable as insurance
18             under policies issued to a victim of persecution for
19             racial or religious reasons by Nazi Germany  or  any
20             other  Axis  regime  by European insurance companies
21             immediately  prior  to  and  during  World  War  II;
22             provided, however,  this  subtraction  from  federal
23             adjusted  gross  income  does  not  apply  to assets
24             acquired with such assets or with the proceeds  from
25             the  sale  of  such  assets; provided, further, this
26             paragraph shall only apply to a taxpayer who was the
27             first recipient of such assets after their  recovery
28             and  who  is  a  victim of persecution for racial or
29             religious reasons by Nazi Germany or any other  Axis
30             regime  or  as an heir of the victim.  The amount of
31             and  the  eligibility  for  any  public  assistance,
32             benefit, or similar entitlement is not  affected  by
33             the   inclusion  of  items  (i)  and  (ii)  of  this
34             paragraph in gross income  for  federal  income  tax
 
                            -31-           LRB9205822SMdvam05
 1             purposes.     This  paragraph  is  exempt  from  the
 2             provisions of Section 250; and
 3                  (Y)  Any  amount  included  in  adjusted  gross
 4             income, other than salary, received by a driver in a
 5             ridesharing arrangement using a motor vehicle.

 6        (b)  Corporations.
 7             (1)  In general.  In the case of a corporation, base
 8        income means an amount equal to  the  taxpayer's  taxable
 9        income for the taxable year as modified by paragraph (2).
10             (2)  Modifications.   The taxable income referred to
11        in paragraph (1) shall be modified by adding thereto  the
12        sum of the following amounts:
13                  (A)  An  amount  equal  to  all amounts paid or
14             accrued  to  the  taxpayer  as  interest   and   all
15             distributions  received  from  regulated  investment
16             companies  during  the  taxable  year  to the extent
17             excluded from gross income  in  the  computation  of
18             taxable income;
19                  (B)  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                  (C)  In the  case  of  a  regulated  investment
24             company,  an  amount  equal to the excess of (i) the
25             net long-term capital gain  for  the  taxable  year,
26             over  (ii)  the amount of the capital gain dividends
27             designated  as  such  in  accordance  with   Section
28             852(b)(3)(C)  of  the  Internal Revenue Code and any
29             amount designated under Section 852(b)(3)(D) of  the
30             Internal  Revenue  Code, attributable to the taxable
31             year (this amendatory Act of 1995 (Public Act 89-89)
32             is declarative of existing law  and  is  not  a  new
33             enactment);
34                  (D)  The  amount  of  any  net  operating  loss
 
                            -32-           LRB9205822SMdvam05
 1             deduction taken in arriving at taxable income, other
 2             than  a  net  operating  loss carried forward from a
 3             taxable year ending prior to December 31, 1986;
 4                  (E)  For taxable years in which a net operating
 5             loss carryback or carryforward from a  taxable  year
 6             ending  prior  to December 31, 1986 is an element of
 7             taxable income under paragraph (1) of subsection (e)
 8             or subparagraph (E) of paragraph (2)  of  subsection
 9             (e),  the  amount  by  which  addition modifications
10             other than those provided by this  subparagraph  (E)
11             exceeded  subtraction  modifications in such earlier
12             taxable year, with the following limitations applied
13             in the order that they are listed:
14                       (i)  the addition modification relating to
15                  the net operating loss carried back or  forward
16                  to  the  taxable  year  from  any  taxable year
17                  ending prior to  December  31,  1986  shall  be
18                  reduced  by the amount of addition modification
19                  under this subparagraph (E)  which  related  to
20                  that  net  operating  loss  and which was taken
21                  into account in calculating the base income  of
22                  an earlier taxable year, and
23                       (ii)  the  addition  modification relating
24                  to the  net  operating  loss  carried  back  or
25                  forward  to  the  taxable year from any taxable
26                  year ending prior to December  31,  1986  shall
27                  not  exceed  the  amount  of  such carryback or
28                  carryforward;
29                  For taxable years  in  which  there  is  a  net
30             operating  loss  carryback or carryforward from more
31             than one other taxable year ending prior to December
32             31, 1986, the addition modification provided in this
33             subparagraph (E) shall be the  sum  of  the  amounts
34             computed    independently    under   the   preceding
 
                            -33-           LRB9205822SMdvam05
 1             provisions of this subparagraph (E)  for  each  such
 2             taxable year; and
 3                  (E-5)  For  taxable years ending after December
 4             31,  1997,  an  amount   equal   to   any   eligible
 5             remediation  costs  that the corporation deducted in
 6             computing adjusted gross income and  for  which  the
 7             corporation  claims a credit under subsection (l) of
 8             Section 201;
 9        and by deducting from the total so obtained  the  sum  of
10        the following amounts:
11                  (F)  An  amount  equal to the amount of any tax
12             imposed by  this  Act  which  was  refunded  to  the
13             taxpayer  and included in such total for the taxable
14             year;
15                  (G)  An amount equal to any amount included  in
16             such  total under Section 78 of the Internal Revenue
17             Code;
18                  (H)  In the  case  of  a  regulated  investment
19             company,  an  amount  equal  to the amount of exempt
20             interest dividends as defined in subsection (b)  (5)
21             of Section 852 of the Internal Revenue Code, paid to
22             shareholders for the taxable year;
23                  (I)  With   the   exception   of   any  amounts
24             subtracted under subparagraph (J), an  amount  equal
25             to  the  sum of all amounts disallowed as deductions
26             by  (i)  Sections  171(a)  (2),  and  265(a)(2)  and
27             amounts disallowed as interest  expense  by  Section
28             291(a)(3)  of  the  Internal Revenue Code, as now or
29             hereafter  amended,  and  all  amounts  of  expenses
30             allocable to interest and disallowed  as  deductions
31             by  Section  265(a)(1) of the Internal Revenue Code,
32             as now or hereafter amended; and  (ii)  for  taxable
33             years  ending  on or after August 13, 1999, Sections
34             171(a)(2), 265, 280C, 291(a)(3), and 832(b)(5)(B)(i)
 
                            -34-           LRB9205822SMdvam05
 1             of the Internal Revenue Code; the provisions of this
 2             subparagraph  are  exempt  from  the  provisions  of
 3             Section 250;
 4                  (J)  An amount equal to all amounts included in
 5             such total which are exempt from  taxation  by  this
 6             State   either   by   reason   of  its  statutes  or
 7             Constitution  or  by  reason  of  the  Constitution,
 8             treaties or statutes of the United States;  provided
 9             that,  in the case of any statute of this State that
10             exempts  income  derived   from   bonds   or   other
11             obligations from the tax imposed under this Act, the
12             amount  exempted  shall  be the interest net of bond
13             premium amortization;
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 and conducts substantially all
19             of its operations in an Enterprise Zone or zones;
20                  (L)  An  amount  equal   to   those   dividends
21             included   in   such  total  that  were  paid  by  a
22             corporation that conducts business operations  in  a
23             federally  designated Foreign Trade Zone or Sub-Zone
24             and  that  is  designated  a  High  Impact  Business
25             located  in  Illinois;   provided   that   dividends
26             eligible  for the deduction provided in subparagraph
27             (K) of paragraph 2 of this subsection shall  not  be
28             eligible  for  the  deduction  provided  under  this
29             subparagraph (L);
30                  (M)  For  any  taxpayer  that  is  a  financial
31             organization within the meaning of Section 304(c) of
32             this  Act,  an  amount  included  in  such  total as
33             interest income from a loan or loans  made  by  such
34             taxpayer  to  a  borrower, to the extent that such a
 
                            -35-           LRB9205822SMdvam05
 1             loan is secured by property which  is  eligible  for
 2             the Enterprise Zone Investment Credit.  To determine
 3             the  portion  of  a loan or loans that is secured by
 4             property  eligible  for  a  Section  201(f)   201(h)
 5             investment   credit  to  the  borrower,  the  entire
 6             principal amount of the loan or  loans  between  the
 7             taxpayer and the borrower should be divided into the
 8             basis of the Section 201(f) 201(h) investment credit
 9             property  which secures the loan or loans, using for
10             this purpose the original basis of such property  on
11             the  date  that  it  was  placed  in  service in the
12             Enterprise  Zone.   The   subtraction   modification
13             available   to  taxpayer  in  any  year  under  this
14             subsection  shall  be  that  portion  of  the  total
15             interest paid by the borrower with respect  to  such
16             loan   attributable  to  the  eligible  property  as
17             calculated under the previous sentence;
18                  (M-1)  For any taxpayer  that  is  a  financial
19             organization within the meaning of Section 304(c) of
20             this  Act,  an  amount  included  in  such  total as
21             interest income from a loan or loans  made  by  such
22             taxpayer  to  a  borrower, to the extent that such a
23             loan is secured by property which  is  eligible  for
24             the  High  Impact  Business  Investment  Credit.  To
25             determine the portion of a loan  or  loans  that  is
26             secured  by  property  eligible for a Section 201(h)
27             201(i) investment credit to the borrower, the entire
28             principal amount of the loan or  loans  between  the
29             taxpayer and the borrower should be divided into the
30             basis of the Section 201(h) 201(i) investment credit
31             property  which secures the loan or loans, using for
32             this purpose the original basis of such property  on
33             the  date  that  it  was  placed  in  service  in  a
34             federally  designated Foreign Trade Zone or Sub-Zone
 
                            -36-           LRB9205822SMdvam05
 1             located in Illinois.  No taxpayer that  is  eligible
 2             for  the  deduction  provided in subparagraph (M) of
 3             paragraph (2) of this subsection shall  be  eligible
 4             for  the  deduction provided under this subparagraph
 5             (M-1).  The subtraction  modification  available  to
 6             taxpayers in any year under this subsection shall be
 7             that  portion  of  the  total  interest  paid by the
 8             borrower with respect to such loan  attributable  to
 9             the   eligible  property  as  calculated  under  the
10             previous sentence;
11                  (N)  Two times any contribution made during the
12             taxable year to a designated  zone  organization  to
13             the  extent that the contribution (i) qualifies as a
14             charitable  contribution  under  subsection  (c)  of
15             Section 170 of the Internal Revenue  Code  and  (ii)
16             must,  by  its terms, be used for a project approved
17             by the Department of Commerce and Community  Affairs
18             under  Section  11  of  the Illinois Enterprise Zone
19             Act;
20                  (O)  An amount equal to: (i)  85%  for  taxable
21             years  ending  on or before December 31, 1992, or, a
22             percentage equal to the percentage  allowable  under
23             Section  243(a)(1)  of  the Internal Revenue Code of
24             1986 for taxable years  ending  after  December  31,
25             1992,  of  the amount by which dividends included in
26             taxable income and received from a corporation  that
27             is  not  created  or organized under the laws of the
28             United States or any state or political  subdivision
29             thereof,  including,  for taxable years ending on or
30             after  December  31,  1988,  dividends  received  or
31             deemed  received  or  paid  or  deemed  paid   under
32             Sections  951  through  964  of the Internal Revenue
33             Code, exceed the amount of the modification provided
34             under subparagraph (G)  of  paragraph  (2)  of  this
 
                            -37-           LRB9205822SMdvam05
 1             subsection  (b)  which is related to such dividends;
 2             plus (ii) 100% of the  amount  by  which  dividends,
 3             included  in taxable income and received, including,
 4             for taxable years ending on or  after  December  31,
 5             1988,  dividends received or deemed received or paid
 6             or deemed paid under Sections 951 through 964 of the
 7             Internal Revenue Code,  from  any  such  corporation
 8             specified  in  clause  (i)  that  would  but for the
 9             provisions of Section 1504 (b) (3) of  the  Internal
10             Revenue   Code   be  treated  as  a  member  of  the
11             affiliated  group  which   includes   the   dividend
12             recipient,  exceed  the  amount  of the modification
13             provided under subparagraph (G) of paragraph (2)  of
14             this   subsection  (b)  which  is  related  to  such
15             dividends;
16                  (P)  An amount equal to any  contribution  made
17             to  a  job  training project established pursuant to
18             the Tax Increment Allocation Redevelopment Act;
19                  (Q)  An amount  equal  to  the  amount  of  the
20             deduction  used  to  compute  the federal income tax
21             credit for restoration of substantial  amounts  held
22             under  claim  of right for the taxable year pursuant
23             to Section 1341 of  the  Internal  Revenue  Code  of
24             1986;
25                  (R)  In  the  case  of an attorney-in-fact with
26             respect to whom  an  interinsurer  or  a  reciprocal
27             insurer  has  made the election under Section 835 of
28             the Internal Revenue Code, 26 U.S.C. 835, an  amount
29             equal  to the excess, if any, of the amounts paid or
30             incurred by that interinsurer or reciprocal  insurer
31             in the taxable year to the attorney-in-fact over the
32             deduction allowed to that interinsurer or reciprocal
33             insurer  with  respect to the attorney-in-fact under
34             Section 835(b) of the Internal Revenue Code for  the
 
                            -38-           LRB9205822SMdvam05
 1             taxable year; and
 2                  (S)  For  taxable  years  ending  on  or  after
 3             December  31,  1997,  in  the case of a Subchapter S
 4             corporation, an  amount  equal  to  all  amounts  of
 5             income  allocable  to  a  shareholder subject to the
 6             Personal Property Tax Replacement Income Tax imposed
 7             by subsections (c) and (d) of Section  201  of  this
 8             Act,  including  amounts  allocable to organizations
 9             exempt from federal income tax by reason of  Section
10             501(a)   of   the   Internal   Revenue  Code.   This
11             subparagraph (S) is exempt from  the  provisions  of
12             Section 250.
13             (3)  Special  rule.   For  purposes of paragraph (2)
14        (A), "gross income" in  the  case  of  a  life  insurance
15        company,  for  tax years ending on and after December 31,
16        1994, shall mean the  gross  investment  income  for  the
17        taxable year.

18        (c)  Trusts and estates.
19             (1)  In  general.  In the case of a trust or estate,
20        base income means  an  amount  equal  to  the  taxpayer's
21        taxable  income  for  the  taxable  year  as  modified by
22        paragraph (2).
23             (2)  Modifications.  Subject to  the  provisions  of
24        paragraph   (3),   the  taxable  income  referred  to  in
25        paragraph (1) shall be modified by adding thereto the sum
26        of the following amounts:
27                  (A)  An amount equal to  all  amounts  paid  or
28             accrued  to  the  taxpayer  as interest or dividends
29             during the taxable year to the extent excluded  from
30             gross income in the computation of taxable income;
31                  (B)  In the case of (i) an estate, $600; (ii) a
32             trust  which,  under  its  governing  instrument, is
33             required to distribute all of its income  currently,
34             $300;  and  (iii) any other trust, $100, but in each
 
                            -39-           LRB9205822SMdvam05
 1             such case,  only  to  the  extent  such  amount  was
 2             deducted in the computation of taxable income;
 3                  (C)  An  amount  equal  to  the  amount  of tax
 4             imposed by this Act  to  the  extent  deducted  from
 5             gross  income  in  the computation of taxable income
 6             for the taxable year;
 7                  (D)  The  amount  of  any  net  operating  loss
 8             deduction taken in arriving at taxable income, other
 9             than a net operating loss  carried  forward  from  a
10             taxable year ending prior to December 31, 1986;
11                  (E)  For taxable years in which a net operating
12             loss  carryback  or carryforward from a taxable year
13             ending prior to December 31, 1986 is an  element  of
14             taxable income under paragraph (1) of subsection (e)
15             or  subparagraph  (E) of paragraph (2) of subsection
16             (e), the  amount  by  which  addition  modifications
17             other  than  those provided by this subparagraph (E)
18             exceeded subtraction modifications in  such  taxable
19             year,  with the following limitations applied in the
20             order that they are listed:
21                       (i)  the addition modification relating to
22                  the net operating loss carried back or  forward
23                  to  the  taxable  year  from  any  taxable year
24                  ending prior to  December  31,  1986  shall  be
25                  reduced  by the amount of addition modification
26                  under this subparagraph (E)  which  related  to
27                  that  net  operating  loss  and which was taken
28                  into account in calculating the base income  of
29                  an earlier taxable year, and
30                       (ii)  the  addition  modification relating
31                  to the  net  operating  loss  carried  back  or
32                  forward  to  the  taxable year from any taxable
33                  year ending prior to December  31,  1986  shall
34                  not  exceed  the  amount  of  such carryback or
 
                            -40-           LRB9205822SMdvam05
 1                  carryforward;
 2                  For taxable years  in  which  there  is  a  net
 3             operating  loss  carryback or carryforward from more
 4             than one other taxable year ending prior to December
 5             31, 1986, the addition modification provided in this
 6             subparagraph (E) shall be the  sum  of  the  amounts
 7             computed    independently    under   the   preceding
 8             provisions of this subparagraph (E)  for  each  such
 9             taxable year;
10                  (F)  For  taxable  years  ending  on  or  after
11             January 1, 1989, an amount equal to the tax deducted
12             pursuant to Section 164 of the Internal Revenue Code
13             if  the trust or estate is claiming the same tax for
14             purposes of the Illinois foreign  tax  credit  under
15             Section 601 of this Act;
16                  (G)  An  amount  equal  to  the  amount  of the
17             capital gain deduction allowable under the  Internal
18             Revenue  Code,  to  the  extent  deducted from gross
19             income in the computation of taxable income; and
20                  (G-5)  For taxable years ending after  December
21             31,   1997,   an   amount   equal  to  any  eligible
22             remediation costs that the trust or estate  deducted
23             in computing adjusted gross income and for which the
24             trust or estate claims a credit under subsection (l)
25             of Section 201;
26        and  by  deducting  from the total so obtained the sum of
27        the following amounts:
28                  (H)  An amount equal to all amounts included in
29             such total pursuant to the  provisions  of  Sections
30             402(a),  402(c),  403(a), 403(b), 406(a), 407(a) and
31             408 of the Internal Revenue Code or included in such
32             total as distributions under the provisions  of  any
33             retirement  or  disability plan for employees of any
34             governmental agency or unit, or retirement  payments
 
                            -41-           LRB9205822SMdvam05
 1             to  retired partners, which payments are excluded in
 2             computing  net  earnings  from  self  employment  by
 3             Section  1402  of  the  Internal  Revenue  Code  and
 4             regulations adopted pursuant thereto;
 5                  (I)  The valuation limitation amount;
 6                  (J)  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                  (K)  An amount equal to all amounts included in
11             taxable  income  as  modified  by subparagraphs (A),
12             (B), (C), (D), (E), (F) and  (G)  which  are  exempt
13             from  taxation by this State either by reason of its
14             statutes  or  Constitution  or  by  reason  of   the
15             Constitution,  treaties  or  statutes  of the United
16             States; provided that, in the case of any statute of
17             this State that exempts income derived from bonds or
18             other obligations from the tax  imposed  under  this
19             Act,  the  amount exempted shall be the interest net
20             of bond premium amortization;
21                  (L)  With  the   exception   of   any   amounts
22             subtracted  under  subparagraph (K), an amount equal
23             to the sum of all amounts disallowed  as  deductions
24             by  (i)  Sections  171(a)  (2)  and 265(a)(2) of the
25             Internal Revenue Code, as now or hereafter  amended,
26             and  all  amounts  of expenses allocable to interest
27             and disallowed as deductions by  Section  265(1)  of
28             the  Internal  Revenue  Code  of  1954,  as  now  or
29             hereafter amended; and (ii) for taxable years ending
30             on  or  after  August  13, 1999, Sections 171(a)(2),
31             265,  280C,  and  832(b)(5)(B)(i)  of  the  Internal
32             Revenue Code; the provisions  of  this  subparagraph
33             are exempt from the provisions of Section 250;
34                  (M)  An   amount   equal   to  those  dividends
 
                            -42-           LRB9205822SMdvam05
 1             included  in  such  total  which  were  paid  by   a
 2             corporation which conducts business operations in an
 3             Enterprise  Zone or zones created under the Illinois
 4             Enterprise Zone Act and conducts  substantially  all
 5             of its operations in an Enterprise Zone or Zones;
 6                  (N)  An  amount  equal to any contribution made
 7             to a job training project  established  pursuant  to
 8             the Tax Increment Allocation Redevelopment Act;
 9                  (O)  An   amount   equal   to  those  dividends
10             included  in  such  total  that  were  paid   by   a
11             corporation  that  conducts business operations in a
12             federally designated Foreign Trade Zone or  Sub-Zone
13             and  that  is  designated  a  High  Impact  Business
14             located   in   Illinois;   provided  that  dividends
15             eligible for the deduction provided in  subparagraph
16             (M) of paragraph (2) of this subsection shall not be
17             eligible  for  the  deduction  provided  under  this
18             subparagraph (O);
19                  (P)  An  amount  equal  to  the  amount  of the
20             deduction used to compute  the  federal  income  tax
21             credit  for  restoration of substantial amounts held
22             under claim of right for the taxable  year  pursuant
23             to  Section  1341  of  the  Internal Revenue Code of
24             1986; and
25                  (Q)  For taxable year 1999 and  thereafter,  an
26             amount equal to the amount of any (i) distributions,
27             to the extent includible in gross income for federal
28             income tax purposes, made to the taxpayer because of
29             his  or  her  status  as a victim of persecution for
30             racial or religious reasons by Nazi Germany  or  any
31             other  Axis  regime  or as an heir of the victim and
32             (ii) items of income, to the  extent  includible  in
33             gross   income  for  federal  income  tax  purposes,
34             attributable to, derived from or in any way  related
 
                            -43-           LRB9205822SMdvam05
 1             to  assets  stolen  from,  hidden from, or otherwise
 2             lost to  a  victim  of  persecution  for  racial  or
 3             religious  reasons by Nazi Germany or any other Axis
 4             regime immediately prior to, during, and immediately
 5             after World War II, including, but not  limited  to,
 6             interest  on  the  proceeds  receivable as insurance
 7             under policies issued to a victim of persecution for
 8             racial or religious reasons by Nazi Germany  or  any
 9             other  Axis  regime  by European insurance companies
10             immediately  prior  to  and  during  World  War  II;
11             provided, however,  this  subtraction  from  federal
12             adjusted  gross  income  does  not  apply  to assets
13             acquired with such assets or with the proceeds  from
14             the  sale  of  such  assets; provided, further, this
15             paragraph shall only apply to a taxpayer who was the
16             first recipient of such assets after their  recovery
17             and  who  is  a victim of  persecution for racial or
18             religious reasons by Nazi Germany or any other  Axis
19             regime  or  as an heir of the victim.  The amount of
20             and  the  eligibility  for  any  public  assistance,
21             benefit, or similar entitlement is not  affected  by
22             the   inclusion  of  items  (i)  and  (ii)  of  this
23             paragraph in gross income  for  federal  income  tax
24             purposes.   This   paragraph   is  exempt  from  the
25             provisions of Section 250.
26             (3)  Limitation.  The  amount  of  any  modification
27        otherwise  required  under  this  subsection shall, under
28        regulations prescribed by the Department, be adjusted  by
29        any  amounts  included  therein which were properly paid,
30        credited, or required to be distributed,  or  permanently
31        set  aside  for charitable purposes pursuant  to Internal
32        Revenue Code Section 642(c) during the taxable year.

33        (d)  Partnerships.
34             (1)  In general. In the case of a partnership,  base
 
                            -44-           LRB9205822SMdvam05
 1        income  means  an  amount equal to the taxpayer's taxable
 2        income for the taxable year as modified by paragraph (2).
 3             (2)  Modifications. The taxable income  referred  to
 4        in  paragraph (1) shall be modified by adding thereto the
 5        sum of the following amounts:
 6                  (A)  An amount equal to  all  amounts  paid  or
 7             accrued  to  the  taxpayer  as interest or dividends
 8             during the taxable year to the extent excluded  from
 9             gross income in the computation of taxable income;
10                  (B)  An  amount  equal  to  the  amount  of tax
11             imposed by this Act  to  the  extent  deducted  from
12             gross income for the taxable year;
13                  (C)  The  amount  of  deductions allowed to the
14             partnership pursuant  to  Section  707  (c)  of  the
15             Internal  Revenue  Code  in  calculating its taxable
16             income; and
17                  (D)  An amount  equal  to  the  amount  of  the
18             capital  gain deduction allowable under the Internal
19             Revenue Code, to  the  extent  deducted  from  gross
20             income in the computation of taxable income;
21        and by deducting from the total so obtained the following
22        amounts:
23                  (E)  The valuation limitation amount;
24                  (F)  An  amount  equal to the amount of any tax
25             imposed by  this  Act  which  was  refunded  to  the
26             taxpayer  and included in such total for the taxable
27             year;
28                  (G)  An amount equal to all amounts included in
29             taxable income as  modified  by  subparagraphs  (A),
30             (B),  (C)  and (D) which are exempt from taxation by
31             this State either  by  reason  of  its  statutes  or
32             Constitution  or  by  reason  of  the  Constitution,
33             treaties  or statutes of the United States; provided
34             that, in the case of any statute of this State  that
 
                            -45-           LRB9205822SMdvam05
 1             exempts   income   derived   from   bonds  or  other
 2             obligations from the tax imposed under this Act, the
 3             amount exempted shall be the interest  net  of  bond
 4             premium amortization;
 5                  (H)  Any   income   of  the  partnership  which
 6             constitutes personal service income  as  defined  in
 7             Section  1348  (b)  (1) of the Internal Revenue Code
 8             (as in effect December 31,  1981)  or  a  reasonable
 9             allowance  for  compensation  paid  or  accrued  for
10             services  rendered  by  partners to the partnership,
11             whichever is greater;
12                  (I)  An amount equal to all amounts  of  income
13             distributable  to  an entity subject to the Personal
14             Property  Tax  Replacement  Income  Tax  imposed  by
15             subsections (c) and (d) of Section 201 of  this  Act
16             including  amounts  distributable  to  organizations
17             exempt  from federal income tax by reason of Section
18             501(a) of the Internal Revenue Code;
19                  (J)  With  the   exception   of   any   amounts
20             subtracted  under  subparagraph (G), an amount equal
21             to the sum of all amounts disallowed  as  deductions
22             by  (i)  Sections  171(a)  (2),  and  265(2)  of the
23             Internal Revenue Code of 1954, as now  or  hereafter
24             amended,  and  all  amounts of expenses allocable to
25             interest and disallowed  as  deductions  by  Section
26             265(1)  of  the  Internal  Revenue  Code,  as now or
27             hereafter amended; and (ii) for taxable years ending
28             on or after August  13,  1999,  Sections  171(a)(2),
29             265,  280C,  and  832(b)(5)(B)(i)  of  the  Internal
30             Revenue  Code;  the  provisions of this subparagraph
31             are exempt from the provisions of Section 250;
32                  (K)  An  amount  equal   to   those   dividends
33             included   in  such  total  which  were  paid  by  a
34             corporation which conducts business operations in an
 
                            -46-           LRB9205822SMdvam05
 1             Enterprise Zone or zones created under the  Illinois
 2             Enterprise  Zone  Act,  enacted  by the 82nd General
 3             Assembly, and  conducts  substantially  all  of  its
 4             operations  which  does  not conduct such operations
 5             other than in an Enterprise Zone or Zones;
 6                  (L)  An amount equal to any  contribution  made
 7             to  a  job  training project established pursuant to
 8             the   Real   Property   Tax   Increment   Allocation
 9             Redevelopment Act;
10                  (M)  An  amount  equal   to   those   dividends
11             included   in   such  total  that  were  paid  by  a
12             corporation that conducts business operations  in  a
13             federally  designated Foreign Trade Zone or Sub-Zone
14             and  that  is  designated  a  High  Impact  Business
15             located  in  Illinois;   provided   that   dividends
16             eligible  for the deduction provided in subparagraph
17             (K) of paragraph (2) of this subsection shall not be
18             eligible  for  the  deduction  provided  under  this
19             subparagraph (M); and
20                  (N)  An amount  equal  to  the  amount  of  the
21             deduction  used  to  compute  the federal income tax
22             credit for restoration of substantial  amounts  held
23             under  claim  of right for the taxable year pursuant
24             to Section 1341 of  the  Internal  Revenue  Code  of
25             1986.

26        (e)  Gross income; adjusted gross income; taxable income.
27             (1)  In  general.   Subject  to  the  provisions  of
28        paragraph  (2)  and  subsection  (b) (3), for purposes of
29        this Section  and  Section  803(e),  a  taxpayer's  gross
30        income,  adjusted gross income, or taxable income for the
31        taxable year shall  mean  the  amount  of  gross  income,
32        adjusted   gross   income   or  taxable  income  properly
33        reportable  for  federal  income  tax  purposes  for  the
34        taxable year under the provisions of the Internal Revenue
 
                            -47-           LRB9205822SMdvam05
 1        Code. Taxable income may be less than zero. However,  for
 2        taxable  years  ending on or after December 31, 1986, net
 3        operating loss carryforwards from  taxable  years  ending
 4        prior  to  December  31,  1986, may not exceed the sum of
 5        federal taxable income for the taxable  year  before  net
 6        operating  loss  deduction,  plus  the excess of addition
 7        modifications  over  subtraction  modifications  for  the
 8        taxable year.  For taxable years ending prior to December
 9        31, 1986, taxable income may never be an amount in excess
10        of the net operating loss for the taxable year as defined
11        in subsections (c) and (d) of Section 172 of the Internal
12        Revenue Code, provided that  when  taxable  income  of  a
13        corporation  (other  than  a  Subchapter  S corporation),
14        trust,  or  estate  is  less  than  zero   and   addition
15        modifications,  other than those provided by subparagraph
16        (E) of paragraph (2) of subsection (b)  for  corporations
17        or  subparagraph  (E)  of paragraph (2) of subsection (c)
18        for trusts and estates, exceed subtraction modifications,
19        an  addition  modification  must  be  made  under   those
20        subparagraphs  for  any  other  taxable year to which the
21        taxable income less than zero  (net  operating  loss)  is
22        applied under Section 172 of the Internal Revenue Code or
23        under   subparagraph   (E)   of  paragraph  (2)  of  this
24        subsection (e) applied in conjunction with Section 172 of
25        the Internal Revenue Code.
26             (2)  Special rule.  For purposes of paragraph (1) of
27        this subsection, the taxable income  properly  reportable
28        for federal income tax purposes shall mean:
29                  (A)  Certain  life insurance companies.  In the
30             case of a life insurance company subject to the  tax
31             imposed by Section 801 of the Internal Revenue Code,
32             life  insurance  company  taxable  income,  plus the
33             amount of distribution  from  pre-1984  policyholder
34             surplus accounts as calculated under Section 815a of
 
                            -48-           LRB9205822SMdvam05
 1             the Internal Revenue Code;
 2                  (B)  Certain other insurance companies.  In the
 3             case  of  mutual  insurance companies subject to the
 4             tax imposed by Section 831 of the  Internal  Revenue
 5             Code, insurance company taxable income;
 6                  (C)  Regulated  investment  companies.   In the
 7             case of a regulated investment  company  subject  to
 8             the  tax  imposed  by  Section  852  of the Internal
 9             Revenue Code, investment company taxable income;
10                  (D)  Real estate  investment  trusts.   In  the
11             case  of  a  real estate investment trust subject to
12             the tax imposed  by  Section  857  of  the  Internal
13             Revenue  Code,  real estate investment trust taxable
14             income;
15                  (E)  Consolidated corporations.  In the case of
16             a corporation which is a  member  of  an  affiliated
17             group  of  corporations filing a consolidated income
18             tax return for the taxable year for  federal  income
19             tax  purposes,  taxable income determined as if such
20             corporation had filed a separate return for  federal
21             income  tax  purposes  for the taxable year and each
22             preceding taxable year for which it was a member  of
23             an   affiliated   group.   For   purposes   of  this
24             subparagraph, the taxpayer's separate taxable income
25             shall be determined as if the election  provided  by
26             Section  243(b) (2) of the Internal Revenue Code had
27             been in effect for all such years;
28                  (F)  Cooperatives.    In   the   case   of    a
29             cooperative  corporation or association, the taxable
30             income of such organization determined in accordance
31             with the provisions of Section 1381 through 1388  of
32             the Internal Revenue Code;
33                  (G)  Subchapter  S  corporations.   In the case
34             of: (i) a Subchapter S corporation for  which  there
 
                            -49-           LRB9205822SMdvam05
 1             is  in effect an election for the taxable year under
 2             Section 1362  of  the  Internal  Revenue  Code,  the
 3             taxable  income  of  such  corporation determined in
 4             accordance with  Section  1363(b)  of  the  Internal
 5             Revenue  Code, except that taxable income shall take
 6             into account  those  items  which  are  required  by
 7             Section  1363(b)(1)  of the Internal Revenue Code to
 8             be  separately  stated;  and  (ii)  a  Subchapter  S
 9             corporation for which there is in effect  a  federal
10             election  to  opt  out  of  the  provisions  of  the
11             Subchapter  S  Revision Act of 1982 and have applied
12             instead the prior federal Subchapter S rules  as  in
13             effect  on  July 1, 1982, the taxable income of such
14             corporation  determined  in  accordance   with   the
15             federal  Subchapter  S rules as in effect on July 1,
16             1982; and
17                  (H)  Partnerships.    In   the   case   of    a
18             partnership, taxable income determined in accordance
19             with  Section  703  of  the  Internal  Revenue Code,
20             except that taxable income shall take  into  account
21             those  items which are required by Section 703(a)(1)
22             to be separately stated but  which  would  be  taken
23             into  account  by  an  individual in calculating his
24             taxable income.

25        (f)  Valuation limitation amount.
26             (1)  In general.  The  valuation  limitation  amount
27        referred  to  in subsections (a) (2) (G), (c) (2) (I) and
28        (d)(2) (E) is an amount equal to:
29                  (A)  The  sum  of  the   pre-August   1,   1969
30             appreciation  amounts  (to  the extent consisting of
31             gain reportable under the provisions of Section 1245
32             or 1250  of  the  Internal  Revenue  Code)  for  all
33             property  in respect of which such gain was reported
34             for the taxable year; plus
 
                            -50-           LRB9205822SMdvam05
 1                  (B)  The  lesser  of  (i)  the   sum   of   the
 2             pre-August  1,  1969  appreciation  amounts  (to the
 3             extent consisting of capital gain) for all  property
 4             in  respect  of  which  such  gain  was reported for
 5             federal income tax purposes for the taxable year, or
 6             (ii) the net capital  gain  for  the  taxable  year,
 7             reduced  in  either  case by any amount of such gain
 8             included in the amount determined  under  subsection
 9             (a) (2) (F) or (c) (2) (H).
10             (2)  Pre-August 1, 1969 appreciation amount.
11                  (A)  If  the  fair  market  value  of  property
12             referred   to   in   paragraph   (1)   was   readily
13             ascertainable  on  August 1, 1969, the pre-August 1,
14             1969 appreciation amount for such  property  is  the
15             lesser  of  (i) the excess of such fair market value
16             over the taxpayer's basis (for determining gain) for
17             such property on that  date  (determined  under  the
18             Internal Revenue Code as in effect on that date), or
19             (ii)  the  total  gain  realized  and reportable for
20             federal income tax purposes in respect of the  sale,
21             exchange or other disposition of such property.
22                  (B)  If  the  fair  market  value  of  property
23             referred   to  in  paragraph  (1)  was  not  readily
24             ascertainable on August 1, 1969, the  pre-August  1,
25             1969  appreciation  amount for such property is that
26             amount which bears the same ratio to the total  gain
27             reported  in  respect  of  the  property for federal
28             income tax purposes for the  taxable  year,  as  the
29             number  of  full calendar months in that part of the
30             taxpayer's holding period for  the  property  ending
31             July  31,  1969 bears to the number of full calendar
32             months in the taxpayer's entire holding  period  for
33             the property.
34                  (C)  The   Department   shall   prescribe  such
 
                            -51-           LRB9205822SMdvam05
 1             regulations as may be necessary  to  carry  out  the
 2             purposes of this paragraph.

 3        (g)  Double  deductions.   Unless  specifically  provided
 4    otherwise, nothing in this Section shall permit the same item
 5    to be deducted more than once.

 6        (h)  Legislative intention.  Except as expressly provided
 7    by   this   Section   there  shall  be  no  modifications  or
 8    limitations on the amounts of income, gain, loss or deduction
 9    taken into account  in  determining  gross  income,  adjusted
10    gross  income  or  taxable  income  for  federal  income  tax
11    purposes for the taxable year, or in the amount of such items
12    entering  into  the computation of base income and net income
13    under this Act for such taxable year, whether in  respect  of
14    property values as of August 1, 1969 or otherwise.
15    (Source:  P.A.  90-491,  eff.  1-1-98;  90-717,  eff. 8-7-98;
16    90-770, eff. 8-14-98;  91-192,  eff.  7-20-99;  91-205,  eff.
17    7-20-99;  91-357, eff. 7-29-99; 91-541, eff. 8-13-99; 91-676,
18    eff. 12-23-99; 91-845, eff.  6-22-00;  91-913,  eff.  1-1-01;
19    revised 1-15-01.)

20        (35 ILCS 5/209)
21        Sec.  209.  Tax  Credit  for "TECH-PREP" youth vocational
22    programs.
23        (a)  Beginning with tax years ending on or after June 30,
24    1995,  every   taxpayer   who   is   primarily   engaged   in
25    manufacturing  is allowed a credit against the tax imposed by
26    subsections (a) and (b) of Section 201 in an amount equal  to
27    20% of the taxpayer's direct payroll expenditures for which a
28    credit  has  not already been claimed under subsection (j) of
29    Section 201 of this Act, in the tax year for which the credit
30    is claimed, for cooperative secondary school youth vocational
31    programs  in  Illinois  which  are  certified  as  qualifying
32    TECH-PREP programs by the State Board of  Education  and  the
 
                            -52-           LRB9205822SMdvam05
 1    Department  of  Revenue because the programs prepare students
 2    to be technically skilled workers and  meet  the  performance
 3    standards   of   business  and  industry  and  the  admission
 4    standards of higher education. The credit may also be claimed
 5    for personal services rendered to the taxpayer by a TECH-PREP
 6    student or instructor (i)  which  would  be  subject  to  the
 7    provisions  of  Article  7  of  this  Act  if  the student or
 8    instructor was an employee of the taxpayer and (ii) for which
 9    no credit under this Section is claimed by another taxpayer.
10        (b)  If  the  amount  of  the  credit  exceeds  the   tax
11    liability for the year, the excess may be carried forward and
12    applied to the tax liability of the 2 taxable years following
13    the  excess  credit  year. The credit shall be applied to the
14    earliest year for which there is a tax  liability.  If  there
15    are credits from more than one tax year that are available to
16    offset  a  liability,  the  earlier  credit  shall be applied
17    first.
18        (c)  A taxpayer claiming  the  credit  provided  by  this
19    Section  shall maintain and record such information regarding
20    its participation in a qualifying TECH-PREP  program  as  the
21    Department  may  require  by  regulation.  When  claiming the
22    credit provided by this Section, the taxpayer  shall  provide
23    such  information regarding the taxpayer's participation in a
24    qualifying TECH-PREP program as the Department of Revenue may
25    require by regulation.
26        (d)  This Section does not apply to those  programs  with
27    national  standards  that  have  been  or  in  the future are
28    approved  by  the  U.S.  Department  of  Labor,   Bureau   of
29    Apprenticeship  Training  or any federal agency succeeding to
30    the responsibilities of that Bureau.
31    (Source: P.A. 88-505; 89-399, eff. 8-20-95.)

32        (35 ILCS 5/303) (from Ch. 120, par. 3-303)
33        Sec. 303.   Nonbusiness  income  of  persons  other  than
 
                            -53-           LRB9205822SMdvam05
 1    residents.
 2        (a)  In  general.  Any  item of capital gain or loss, and
 3    any item of income from  rents  or  royalties  from  real  or
 4    tangible  personal  property, interest, dividends, and patent
 5    or copyright royalties, and prizes awarded under the Illinois
 6    Lottery Law, to the extent such item constitutes  nonbusiness
 7    income,   together   with  any  item  of  deduction  directly
 8    allocable thereto, shall be allocated  by  any  person  other
 9    than a resident as provided in this Section.
10        (b)  Capital gains and losses. (1) Real property. Capital
11    gains and losses from sales or exchanges of real property are
12    allocable  to  this  State if the property is located in this
13    State.
14        (2)  Tangible personal property. Capital gains and losses
15    from sales or exchanges of  tangible  personal  property  are
16    allocable  to  this  State  if,  at  the time of such sale or
17    exchange:
18        (A)  The property had its situs in this State; or
19        (B)  The taxpayer had its  commercial  domicile  in  this
20    State  and was not taxable in the state in which the property
21    had its situs.
22        (3)  Intangibles. Capital gains and losses from sales  or
23    exchanges  of  intangible  personal property are allocable to
24    this State if the taxpayer had  its  commercial  domicile  in
25    this State at the time of such sale or exchange.
26        (c)  Rents  and  royalties.  (1) Real property. Rents and
27    royalties from real property are allocable to this  State  if
28    the property is located in this State.
29        (2)  Tangible personal property. Rents and royalties from
30    tangible personal property are allocable to this State:
31        (A)  If  and  to the extent that the property is utilized
32    in this State; or
33        (B)  In their entirety if, at  the  time  such  rents  or
34    royalties   were  paid  or  accrued,  the  taxpayer  had  its
 
                            -54-           LRB9205822SMdvam05
 1    commercial domicile in this State and was not organized under
 2    the laws  of  or  taxable  with  respect  to  such  rents  or
 3    royalties  in  the  state in which the property was utilized.
 4    The extent of utilization of tangible personal property in  a
 5    state  is  determined  by  multiplying the rents or royalties
 6    derived from such property by a fraction,  the  numerator  of
 7    which  is  the  number  of  days  of physical location of the
 8    property in the state during the rental or royalty period  in
 9    the  taxable  year and the denominator of which is the number
10    of days of  physical  location  of  the  property  everywhere
11    during all rental or royalty periods in the taxable year.  If
12    the  physical  location  of the property during the rental or
13    royalty period is unknown or unascertainable by the taxpayer,
14    tangible personal property is utilized in the state in  which
15    the  property  was  located at the time the rental or royalty
16    payer obtained possession.
17        (d)  Patent and copyright royalties.
18        (1)  Allocation.  Patent  and  copyright  royalties   are
19    allocable to this State:
20        (A)  If and to the extent that the patent or copyright is
21    utilized by the payer in this State; or
22        (B)  If and to the extent that the patent or copyright is
23    utilized by the payer in a state in which the taxpayer is not
24    taxable  with respect to such royalties and, at the time such
25    royalties  were  paid  or  accrued,  the  taxpayer  had   its
26    commercial domicile in this State.
27        (2)  Utilization.
28        (A)  A  patent  is utilized in a state to the extent that
29    it is employed in production, fabrication,  manufacturing  or
30    other  processing  in  the  state  or  to  the  extent that a
31    patented product is produced in the state.  If the  basis  of
32    receipts  from patent royalties does not permit allocation to
33    states or if the accounting procedures do not reflect  states
34    of  utilization,  the patent is utilized in this State if the
 
                            -55-           LRB9205822SMdvam05
 1    taxpayer has its commercial domicile in this State.
 2        (B)  A copyright is utilized in a  state  to  the  extent
 3    that  printing  or other publication originates in the state.
 4    If the basis of receipts from copyright  royalties  does  not
 5    permit  allocation  to states or if the accounting procedures
 6    do not  reflect  states  of  utilization,  the  copyright  is
 7    utilized  in  this  State  if the taxpayer has its commercial
 8    domicile in this State.
 9        (e)  Illinois lottery, wagering,  and  gambling  winnings
10    prizes.    Prizes  awarded  under the "Illinois Lottery Law",
11    approved December 14, 1973,  are  allocable  to  this  State.
12    Payments  made  after  December  31,  2001,  of winnings from
13    pari-mutuel  wagering  conducted  at  a   wagering   facility
14    licensed  under the Illinois Horse Racing Act of 1975 or from
15    gambling games conducted on a riverboat  licensed  under  the
16    Riverboat Gambling Act are allocable to this State.
17        (f)  Taxability   in   other   state.   For  purposes  of
18    allocation of income pursuant to this Section, a taxpayer  is
19    taxable in another state if:
20        (1)  In  that  state he is subject to a net income tax, a
21    franchise tax measured by net income, a franchise tax for the
22    privilege of doing business, or a corporate stock tax; or
23        (2)  That state has jurisdiction to subject the  taxpayer
24    to a net income tax regardless of whether, in fact, the state
25    does or does not.
26        (g)  Cross references. (1) For allocation of interest and
27    dividends  by  persons  other  than  residents,  see  Section
28    301(c)(2).
29        (2)  For  allocation  of nonbusiness income by residents,
30    see Section 301(a).
31    (Source: P.A. 79-743.)

32        (35 ILCS 5/502) (from Ch. 120, par. 5-502)
33        Sec. 502.  Returns and notices.
 
                            -56-           LRB9205822SMdvam05
 1        (a)  In general. A  return  with  respect  to  the  taxes
 2    imposed  by  this  Act  shall be made by every person for any
 3    taxable year:
 4             (1)  For which such  person  is  liable  for  a  tax
 5        imposed by this Act, or
 6             (2)  In  the  case of a resident or in the case of a
 7        corporation which is qualified to  do  business  in  this
 8        State,  for  which  such  person  is  required  to make a
 9        federal income tax return,  regardless  of  whether  such
10        person is liable for a tax imposed by this Act.  However,
11        this  paragraph  shall  not  require a resident to make a
12        return if such person has an Illinois base income of  the
13        basic  amount  in  Section  204(b)  or less and is either
14        claimed as a dependent on  another  person's  tax  return
15        under the Internal Revenue Code of 1986, or is claimed as
16        a  dependent  on  another  person's tax return under this
17        Act.
18        (b)  Fiduciaries and receivers.
19             (1)  Decedents. If an individual  is  deceased,  any
20        return  or  notice required of such individual under this
21        Act shall be made  by  his  executor,  administrator,  or
22        other person charged with the property of such decedent.
23             (2)  Individuals   under   a   disability.   If   an
24        individual  is unable to make a return or notice required
25        under this Act, the return or  notice  required  of  such
26        individual  shall  be  made by his duly authorized agent,
27        guardian, fiduciary or other person charged with the care
28        of the person or property of such individual.
29             (3)  Estates and trusts. Returns or notices required
30        of an estate or a trust shall be made  by  the  fiduciary
31        thereof.
32             (4)  Receivers,    trustees    and   assignees   for
33        corporations. In a case  where  a  receiver,  trustee  in
34        bankruptcy, or assignee, by order of a court of competent
 
                            -57-           LRB9205822SMdvam05
 1        jurisdiction,  by  operation  of  law,  or otherwise, has
 2        possession of or holds title to all or substantially  all
 3        the property or business of a corporation, whether or not
 4        such   property  or  business  is  being  operated,  such
 5        receiver, trustee, or assignee shall make the returns and
 6        notices required of such corporation in the  same  manner
 7        and  form  as  corporations  are  required  to  make such
 8        returns and notices.
 9        (c)  Joint returns by husband and wife.
10             (1)  Except as  provided  in  paragraph  (3),  if  a
11        husband  and  wife file a joint federal income tax return
12        for a taxable year they shall file a joint  return  under
13        this  Act  for  such  taxable  year and their liabilities
14        shall be joint and several, but if the federal income tax
15        liability of either spouse is determined  on  a  separate
16        federal  income  tax  return,  they  shall  file separate
17        returns under this Act.
18             (2)  If neither spouse is required to file a federal
19        income tax return and either or both are required to file
20        a return under this Act, they may elect to file  separate
21        or  joint  returns  and  pursuant  to such election their
22        liabilities shall be separate or joint and several.
23             (3)  If either husband or wife is a resident and the
24        other is a nonresident, they shall file separate  returns
25        in  this  State  on  such forms as may be required by the
26        Department in which event their tax liabilities shall  be
27        separate; but they may elect to determine their joint net
28        income  and file a joint return as if both were residents
29        and in such case, their liabilities shall  be  joint  and
30        several.
31             (4)  Innocent spouses.
32                  (A)  However,  for  tax liabilities arising and
33             paid prior to August 13, 1999 the effective date  of
34             this amendatory Act of the 91st General Assembly, an
 
                            -58-           LRB9205822SMdvam05
 1             innocent  spouse  shall be relieved of liability for
 2             tax  (including  interest  and  penalties)  for  any
 3             taxable year for which a joint return has been made,
 4             upon submission of proof that the  Internal  Revenue
 5             Service  has  made  a  determination  under  Section
 6             6013(e)  of  the Internal Revenue Code, for the same
 7             taxable  year,  which  determination  relieved   the
 8             spouse  from  liability for federal income taxes. If
 9             there is no federal income tax  liability  at  issue
10             for the same taxable year, the Department shall rely
11             on  the  provisions  of Section 6013(e) to determine
12             whether  the  person  requesting   innocent   spouse
13             abatement  of tax, penalty, and interest is entitled
14             to that relief.
15                  (B)  For tax liabilities arising on  and  after
16             August   13,   1999   the  effective  date  of  this
17             amendatory Act of the 91st General Assembly or which
18             arose prior  to  that  effective  date,  but  remain
19             unpaid   as  of  that  the  effective  date,  if  an
20             individual who filed a joint return for any  taxable
21             year  has made an election under this paragraph, the
22             individual's liability for  any  tax  shown  on  the
23             joint  return  shall  not  exceed  the  individual's
24             separate   return   amount   and   the  individual's
25             liability  for  any  deficiency  assessed  for  that
26             taxable year shall not exceed  the  portion  of  the
27             deficiency  properly  allocable  to  the individual.
28             For purposes of this paragraph:
29                       (i)  An election properly made pursuant to
30                  Section 6015 of the Internal Revenue Code shall
31                  constitute an election  under  this  paragraph,
32                  provided   that   the  election  shall  not  be
33                  effective until the individual has notified the
34                  Department of the  election  in  the  form  and
 
                            -59-           LRB9205822SMdvam05
 1                  manner prescribed by the Department.
 2                       (ii)  If  no  election has been made under
 3                  Section  6015,  the  individual  may  make   an
 4                  election  under  this paragraph in the form and
 5                  manner prescribed by the  Department,  provided
 6                  that  no election may be made if the Department
 7                  finds  that  assets  were  transferred  between
 8                  individuals filing a joint return as part of  a
 9                  scheme  by such individuals to avoid payment of
10                  Illinois income tax and the election shall  not
11                  eliminate  the  individual's  liability for any
12                  portion of  a  deficiency  attributable  to  an
13                  error on the return of which the individual had
14                  actual knowledge as of the date of filing.
15                       (iii)  In  determining the separate return
16                  amount   or   portion   of    any    deficiency
17                  attributable  to  an individual, the Department
18                  shall follow the provisions in subsections  (c)
19                  and  (d) of Section 6015 6015(b) and (c) of the
20                  Internal Revenue Code.
21                       (iv)  In determining the  validity  of  an
22                  individual's  election  under subparagraph (ii)
23                  and in  determining  an  electing  individual's
24                  separate   return  amount  or  portion  of  any
25                  deficiency  under   subparagraph   (iii),   any
26                  determination  made  by  the  Secretary  of the
27                  Treasury, by the United  States  Tax  Court  on
28                  petition  for  review of a determination by the
29                  Secretary of the Treasury, or  on  appeal  from
30                  the  United States Tax Court under Section 6015
31                  6015(a) of the Internal Revenue Code  regarding
32                  criteria  for  eligibility  or under subsection
33                  (d) of Section  6015  6015(b)  or  (c)  of  the
34                  Internal  Revenue Code regarding the allocation
 
                            -60-           LRB9205822SMdvam05
 1                  of any item of income, deduction,  payment,  or
 2                  credit between an individual making the federal
 3                  election  and that individual's spouse shall be
 4                  conclusively presumed  to  be  correct.    With
 5                  respect  to any item that is not the subject of
 6                  a  determination  by  the  Secretary   of   the
 7                  Treasury   or   the   federal  courts,  in  any
 8                  proceeding  involving  this   subsection,   the
 9                  individual  making  the election shall have the
10                  burden of proof with respect to any item except
11                  that the Department shall have  the  burden  of
12                  proof  with  respect  to  items  in subdivision
13                  (ii).
14                       (v)  Any election made  by  an  individual
15                  under  this subsection shall apply to all years
16                  for which that individual and the spouse  named
17                  in the election have filed a joint return.
18                       (vi)  After  receiving  a  notice that the
19                  federal  election  has  been  made   or   after
20                  receiving  an  election under subdivision (ii),
21                  the Department shall take no collection  action
22                  against   the   electing   individual  for  any
23                  liability arising from a joint  return  covered
24                  by   the  election  until  the  Department  has
25                  notified the  electing  individual  in  writing
26                  that  the election is invalid or of the portion
27                  of the liability the Department  has  allocated
28                  to  the  electing  individual.   Within 60 days
29                  (150 days if  the  individual  is  outside  the
30                  United  States)  after  the  issuance  of  such
31                  notification, the individual may file a written
32                  protest of the denial of the election or of the
33                  Department's  determination  of  the  liability
34                  allocated  to him or her and shall be granted a
 
                            -61-           LRB9205822SMdvam05
 1                  hearing  within  the   Department   under   the
 2                  provisions  of  Section  908.   If a protest is
 3                  filed, the Department shall take no  collection
 4                  action  against  the  electing individual until
 5                  the decision regarding the protest  has  become
 6                  final  under  subsection (d) of Section 908 or,
 7                  if administrative review  of  the  Department's
 8                  decision is requested under Section 1201, until
 9                  the decision of the court becomes final.
10        (d)  Partnerships.  Every  partnership  having  any  base
11    income  allocable  to  this  State in accordance with section
12    305(c) shall  retain  information  concerning  all  items  of
13    income,  gain, loss and deduction; the names and addresses of
14    all of the partners, or names and addresses of members  of  a
15    limited  liability  company,  or  other  persons who would be
16    entitled to share in the base income of  the  partnership  if
17    distributed;  the  amount  of the distributive share of each;
18    and such other pertinent information as the Department may by
19    forms or regulations prescribe. The  partnership  shall  make
20    that  information  available to the Department when requested
21    by the Department.
22        (e)  For taxable years ending on or  after  December  31,
23    1985,  and  before  December  31,  1993,  taxpayers  that are
24    corporations (other than Subchapter  S  corporations)  having
25    the  same  taxable  year  and  that  are  members of the same
26    unitary business  group  may  elect  to  be  treated  as  one
27    taxpayer  for purposes of any original return, amended return
28    which includes the same taxpayers of the unitary group  which
29    joined   in   the  election  to  file  the  original  return,
30    extension,  claim  for  refund,  assessment,  collection  and
31    payment and determination of the group's tax liability  under
32    this Act. This subsection (e) does not permit the election to
33    be  made  for  some,  but not all, of the purposes enumerated
34    above. For taxable years ending  on  or  after  December  31,
 
                            -62-           LRB9205822SMdvam05
 1    1987,    corporate   members   (other   than   Subchapter   S
 2    corporations) of the same unitary business group making  this
 3    subsection  (e)  election  are  not required to have the same
 4    taxable year.
 5        For taxable years ending on or after December  31,  1993,
 6    taxpayers  that  are  corporations  (other  than Subchapter S
 7    corporations) and that  are  members   of  the  same  unitary
 8    business  group shall be treated as one taxpayer for purposes
 9    of any original return, amended  return  which  includes  the
10    same  taxpayers  of  the unitary group which joined in filing
11    the original return, extension, claim for refund, assessment,
12    collection and payment and determination of the  group's  tax
13    liability under this Act.
14        (f)  The  Department may promulgate regulations to permit
15    nonresident individual  partners  of  the  same  partnership,
16    nonresident Subchapter S corporation shareholders of the same
17    Subchapter   S   corporation,   and  nonresident  individuals
18    transacting an insurance business in Illinois under a  Lloyds
19    plan  of operation, and nonresident individual members of the
20    same  limited  liability  company  that  is  treated   as   a
21    partnership  under  Section 1501 (a)(16) of this Act, to file
22    composite  individual  income  tax  returns  reflecting   the
23    composite  income  of  such individuals allocable to Illinois
24    and to make composite individual income  tax  payments.   The
25    Department  may  by  regulation  also  permit  such composite
26    returns to include the income tax owed by Illinois  residents
27    attributable  to their income from partnerships, Subchapter S
28    corporations, insurance businesses organized under  a  Lloyds
29    plan  of  operation,  or limited liability companies that are
30    treated as partnership under Section  1501  (a)(16)  of  this
31    Act,  in which case such Illinois residents will be permitted
32    to claim credits on their individual returns for their shares
33    of the composite tax payments.  This paragraph of  subsection
34    (f)  applies to taxable years ending on or after December 31,
 
                            -63-           LRB9205822SMdvam05
 1    1987.
 2        For taxable years ending on or after December  31,  1999,
 3    the  Department  may,  by regulation, also permit any persons
 4    transacting an insurance business organized  under  a  Lloyds
 5    plan  of  operation  to file composite returns reflecting the
 6    income of such persons allocable  to  Illinois  and  the  tax
 7    rates  applicable  to  such  persons under Section 201 and to
 8    make composite tax payments and shall,  by  regulation,  also
 9    provide   that   the   income   and   apportionment   factors
10    attributable  to  the  transaction  of  an insurance business
11    organized under a Lloyds plan  of  operation  by  any  person
12    joining  in  the  filing  of  a  composite  return shall, for
13    purposes of allocating and apportioning income under  Article
14    3  of  this Act and computing net income under Section 202 of
15    this Act, be excluded from any other income and apportionment
16    factors of that person or of any unitary business  group,  as
17    defined in subdivision (a)(27) of Section 1501, to which that
18    person may belong.
19        (g)  The  Department  may  adopt  rules  to authorize the
20    electronic filing of any return required to  be  filed  under
21    this Section.
22    (Source: P.A.  90-613,  eff.  7-9-98;  91-541,  eff. 8-13-99;
23    91-913, eff. 1-1-01.)

24        (35 ILCS 5/506) (from Ch. 120, par. 5-506)
25        Sec. 506.  Federal Returns.
26        (a)  In general.  Any person required to  make  a  return
27    for  a  taxable  year  under this Act may, at any time that a
28    deficiency could be assessed or a refund claimed  under  this
29    Act in respect of any item reported or properly reportable on
30    such  return or any amendment thereof, be required to furnish
31    to the Department a true and correct copy of any return which
32    may pertain to such item and which was filed by  such  person
33    under the provisions of the Internal Revenue Code.
 
                            -64-           LRB9205822SMdvam05
 1        (b)  Changes affecting federal income tax. A person shall
 2    notify the Department if: In the event
 3             (1)  the  taxable  income,  any  item  of  income or
 4        deduction, the income tax liability, or  any  tax  credit
 5        reported  in  a  federal  income  tax  return of that any
 6        person for any year  is  altered  by  amendment  of  such
 7        return  or  as  a  result  of  any other recomputation or
 8        redetermination of federal taxable income  or  loss,  and
 9        such  alteration  reflects  a  change  or settlement with
10        respect to any item or items, affecting  the  computation
11        of  such  person's net income, net loss, or of any credit
12        provided by Article 2 of this Act for any year under this
13        Act, or in the number of personal exemptions allowable to
14        such person under Section 151  of  the  Internal  Revenue
15        Code, or
16             (2)  the  amount  of  tax required to be withheld by
17        that person  from  compensation  paid  to  employees  and
18        required  to  be  reported  by  that  person on a federal
19        return is altered by amendment of the return  or  by  any
20        other  recomputation or redetermination that is agreed to
21        or finally determined on or after January  1,  2002,  and
22        the alteration affects the amount of compensation subject
23        to  withholding  by that person under Section 701 of this
24        Act such person  shall  notify  the  Department  of  such
25        alteration.
26    Such  notification  shall be in the form of an amended return
27    or such other form  as  the  Department  may  by  regulations
28    prescribe,  shall  contain  the person's name and address and
29    such other information as the Department may  by  regulations
30    prescribe,  shall  be  signed  by  such  person  or  his duly
31    authorized representative, and shall be filed not later  than
32    120  days after such alteration has been agreed to or finally
33    determined for federal income tax  purposes  or  any  federal
34    income   tax   deficiency   or  refund,  tentative  carryback
 
                            -65-           LRB9205822SMdvam05
 1    adjustment, abatement or credit resulting therefrom has  been
 2    assessed or paid, whichever shall first occur.
 3    (Source: P.A. 90-491, eff. 1-1-98.)

 4        (35 ILCS 5/701) (from Ch. 120, par. 7-701)
 5        Sec. 701.  Requirement and Amount of Withholding.
 6        (a)  In  General. Every employer maintaining an office or
 7    transacting business within this State and required under the
 8    provisions of the Internal Revenue Code to withhold a tax on:
 9             (1)  compensation paid in this State (as  determined
10        under Section 304 (a) (2) (B) to an individual; or
11             (2)  payments  described  in  subsection  (b)  shall
12        deduct  and  withhold  from  such  compensation  for each
13        payroll  period  (as  defined  in  Section  3401  of  the
14        Internal Revenue Code) an amount equal to the  amount  by
15        which   such   individual's   compensation   exceeds  the
16        proportionate  part   of   this   withholding   exemption
17        (computed as provided in Section 702) attributable to the
18        payroll  period  for  which  such compensation is payable
19        multiplied by a percentage equal to  the  percentage  tax
20        rate  for  individuals  provided  in  subsection  (b)  of
21        Section 201.
22        (b)  Payment to Residents.
23        Any  payment  (including compensation) to a resident by a
24    payor maintaining an office or  transacting  business  within
25    this  State  (including  any  agency, officer, or employee of
26    this State or of any political subdivision of this State) and
27    on which withholding of tax is required under the  provisions
28    of   the   Internal  Revenue  Code  shall  be  deemed  to  be
29    compensation paid in this State by an employer to an employee
30    for the purposes of Article 7 and Section 601 (b) (1) to  the
31    extent  such  payment  is  included  in  the recipient's base
32    income and not subjected to withholding by another state.
33        (c)  Special Definitions.
 
                            -66-           LRB9205822SMdvam05
 1        Withholding  shall  be  considered  required  under   the
 2    provisions  of  the  Internal  Revenue Code to the extent the
 3    Internal Revenue Code either requires withholding  or  allows
 4    for  voluntary  withholding  the  payor  and  recipient  have
 5    entered  into such a voluntary withholding agreement. For the
 6    purposes  of  Article  7  and  Section  1002  (c)  the   term
 7    "employer" includes any payor who is required to withhold tax
 8    pursuant to this Section.
 9        (d)  Reciprocal Exemption.
10        The  Director may enter into an agreement with the taxing
11    authorities of any state which imposes a tax on  or  measured
12    by  income to provide that compensation paid in such state to
13    residents of this State shall be exempt from  withholding  of
14    such  tax;  in such case, any compensation paid in this State
15    to residents of such state shall be exempt from  withholding.
16    All   reciprocal   agreements   shall   be   subject  to  the
17    requirements of Section 2505-575 of the Department of Revenue
18    Law (20 ILCS 2505/2505-575).
19        (e)  Notwithstanding subsection (a) (2) of this  Section,
20    no  withholding is required on payments for which withholding
21    is required under  Section  3405  or  3406  of  the  Internal
22    Revenue Code of 1954.
23    (Source: P.A. 90-491, eff. 1-1-98; 91-239, eff. 1-1-00.)

24        (35 ILCS 5/710) (from Ch. 120, par. 7-710)
25        Sec.   710.   Withholding  from  lottery,  wagering,  and
26    gambling winnings.
27        (a)  In General.
28             (1)  Any person making a payment to  a  resident  or
29        nonresident  of  winnings  under the Illinois Lottery Law
30        and not required to withhold  Illinois  income  tax  from
31        such  payment under Subsection (b) of Section 701 of this
32        Act because those winnings are  not  subject  to  federal
33        income tax withholding, must withhold Illinois income tax
 
                            -67-           LRB9205822SMdvam05
 1        from  such  payment at a rate equal to the percentage tax
 2        rate  for  individuals  provided  in  subsection  (b)  of
 3        Section 201, provided that withholding is not required if
 4        such payment of winnings is less than $2,000 ($1,000, for
 5        payments made before January 1, 2002).
 6             (2)  Any person making a payment after December  31,
 7        2001  to  a  resident  or  nonresident  of  winnings from
 8        pari-mutuel wagering conducted  at  a  wagering  facility
 9        licensed  under  the Illinois Horse Racing Act of 1975 or
10        from gambling games conducted  on  a  riverboat  licensed
11        under  the  Riverboat  Gambling  Act, and not required to
12        withhold Illinois income  tax  from  such  payment  under
13        subsection  (b)  of Section 701 of this Act because those
14        winnings  are  not  subject   to   federal   income   tax
15        withholding,  must withhold Illinois income tax from such
16        payment at a rate equal to the percentage  tax  rate  for
17        individuals  provided  in  subsection (b) of Section 201,
18        provided that withholding is not required if such payment
19        of winnings is less than $2,000.
20        (b)  Credit for  taxes  withheld.   Any  amount  withheld
21    under  Subsection  (a) shall be a credit against the Illinois
22    income tax liability of the person to  whom  the  payment  of
23    winnings  was  made for the taxable year in which that person
24    incurred an Illinois income tax  liability  with  respect  to
25    those winnings.
26    (Source: P.A. 85-731.)

27        (35 ILCS 5/905) (from Ch. 120, par. 9-905)
28        Sec. 905.  Limitations on Notices of Deficiency.
29        (a)  In  general.  Except  as  otherwise provided in this
30    Act:
31             (1)  A notice of  deficiency  shall  be  issued  not
32        later  than  3 years after the date the return was filed,
33        and
 
                            -68-           LRB9205822SMdvam05
 1             (2)  No deficiency shall be  assessed  or  collected
 2        with  respect  to the year for which the return was filed
 3        unless such notice is issued within such period.
 4        (b)  Omission of more than 25% of income. If the taxpayer
 5    omits from base income an amount properly includible  therein
 6    which is in excess of 25% of the amount of base income stated
 7    in the return, a notice of deficiency may be issued not later
 8    than 6 years after the return was filed. For purposes of this
 9    paragraph,  there  shall not be taken into account any amount
10    which is omitted in the return if such amount is disclosed in
11    the return, or in a statement attached to the  return,  in  a
12    manner  adequate  to apprise the Department of the nature and
13    the amount of such item.
14        (c)  No return or fraudulent  return.  If  no  return  is
15    filed  or  a false and fraudulent return is filed with intent
16    to evade the tax imposed by this Act, a notice of  deficiency
17    may be issued at any time.
18        (d)  Failure  to  report  federal  change.  If a taxpayer
19    fails to notify the Department in any case where notification
20    is required by Section 304(c) or 506(b), or fails to report a
21    change or correction which is treated in the same  manner  as
22    if  it  were  a deficiency for federal income tax purposes, a
23    notice of deficiency may be issued (i) at any time or (ii) on
24    or  after  August  13,  1999  the  effective  date  of   this
25    amendatory  Act of the 91st General Assembly, at any time for
26    the taxable year for which the notification  is  required  or
27    for  any  taxable  year  to  which  the taxpayer may carry an
28    Article 2 credit, or a Section 207 loss, earned, incurred, or
29    used in the year for  which  the  notification  is  required;
30    provided, however, that the amount of any proposed assessment
31    set forth in the notice shall be limited to the amount of any
32    deficiency resulting under this Act from the recomputation of
33    the  taxpayer's net income, Article 2 credits, or Section 207
34    loss earned, incurred, or used in the taxable year for  which
 
                            -69-           LRB9205822SMdvam05
 1    the  notification is required after giving effect to the item
 2    or items required to be reported.
 3        (e)  Report of federal change.
 4             (1)  Before August 13, 1999 the  effective  date  of
 5        this  amendatory Act of the 91st General Assembly, in any
 6        case where notification of  an  alteration  is  given  as
 7        required by Section 506(b), a notice of deficiency may be
 8        issued  at  any  time  within 2 years after the date such
 9        notification is given, provided, however, that the amount
10        of any proposed assessment set forth in such notice shall
11        be limited to the  amount  of  any  deficiency  resulting
12        under  this  Act from recomputation of the taxpayer's net
13        income, net loss, or Article 2 credits  for  the  taxable
14        year  after  giving effect to the item or items reflected
15        in the reported alteration.
16             (2)  On and after August 13, 1999 the effective date
17        of this amendatory Act of the 91st General  Assembly,  in
18        any  case where notification of an alteration is given as
19        required by Section 506(b), a notice of deficiency may be
20        issued at any time within 2 years  after  the  date  such
21        notification  is given for the taxable year for which the
22        notification is given or for any taxable  year  to  which
23        the  taxpayer may carry an Article 2 credit, or a Section
24        207 loss, earned, incurred, or used in the year for which
25        the notification is given, provided,  however,  that  the
26        amount  of  any  proposed  assessment  set  forth in such
27        notice shall be limited to the amount of  any  deficiency
28        resulting  under  this  Act  from  recomputation  of  the
29        taxpayer's  net income, Article 2 credits, or Section 207
30        loss earned, incurred, or used in the  taxable  year  for
31        which  the  notification  is given after giving effect to
32        the item or items reflected in the reported alteration.
33        (f)  Extension by agreement. Where, before the expiration
34    of the time prescribed in this section for the issuance of  a
 
                            -70-           LRB9205822SMdvam05
 1    notice  of  deficiency,  both the Department and the taxpayer
 2    shall have consented in writing to its  issuance  after  such
 3    time,  such  notice  may  be  issued at any time prior to the
 4    expiration of the period  agreed  upon.  In  the  case  of  a
 5    taxpayer  who  is a partnership, Subchapter S corporation, or
 6    trust and who enters into an agreement  with  the  Department
 7    pursuant  to  this  subsection on or after January 1, 2002, a
 8    notice  of  deficiency  may  be  issued  to   the   partners,
 9    shareholders,  or  beneficiaries  of the taxpayer at any time
10    prior to the  expiration  of  the  period  agreed  upon.  Any
11    proposed  assessment  set forth in the notice, however, shall
12    be limited to the amount of any  deficiency  resulting  under
13    this  Act  from  recomputation of items of income, deduction,
14    credits, or other amounts of the taxpayer that are taken into
15    account  by  the  partner,  shareholder,  or  beneficiary  in
16    computing its liability under this Act. The period so  agreed
17    upon may be extended by subsequent agreements in writing made
18    before the expiration of the period previously agreed upon.
19        (g)  Erroneous  refunds.  In  any case in which there has
20    been an erroneous refund of tax payable  under  this  Act,  a
21    notice of deficiency may be issued at any time within 2 years
22    from  the  making  of such refund, or within 5 years from the
23    making of such refund if it appears  that  any  part  of  the
24    refund  was  induced  by  fraud or the misrepresentation of a
25    material fact, provided, however,  that  the  amount  of  any
26    proposed assessment set forth in such notice shall be limited
27    to the amount of such erroneous refund.
28        Beginning  July  1,  1993, in any case in which there has
29    been a refund of tax payable under this Act attributable to a
30    net loss carryback as provided for in Section 207,  and  that
31    refund  is  subsequently determined to be an erroneous refund
32    due to a reduction in the amount of the net  loss  which  was
33    originally  carried  back,  a  notice  of  deficiency for the
34    erroneous refund amount may be issued at any time during  the
 
                            -71-           LRB9205822SMdvam05
 1    same  time  period  in  which  a  notice of deficiency can be
 2    issued on the loss year creating  the  carryback  amount  and
 3    subsequent  erroneous  refund.  The  amount  of  any proposed
 4    assessment set forth in the notice shall be  limited  to  the
 5    amount of such erroneous refund.
 6        (h)  Time  return  deemed  filed.  For  purposes  of this
 7    Section a tax return filed before the last day prescribed  by
 8    law (including any extension thereof) shall be deemed to have
 9    been filed on such last day.
10        (i)  Request  for  prompt determination of liability. For
11    purposes of Subsection (a)(1), in the case of  a  tax  return
12    required  under  this Act in respect of a decedent, or by his
13    estate  during  the  period  of  administration,  or   by   a
14    corporation,  the period referred to in such Subsection shall
15    be 18 months after a written request for prompt determination
16    of liability is filed with the Department (at such  time  and
17    in   such   form  and  manner  as  the  Department  shall  by
18    regulations prescribe) by  the  executor,  administrator,  or
19    other  fiduciary representing the estate of such decedent, or
20    by such corporation, but not more than 3 years after the date
21    the return was filed. This Subsection shall not apply in  the
22    case of a corporation unless:
23             (1) (A)  Such    written    request   notifies   the
24        Department that the corporation contemplates  dissolution
25        at  or before the expiration of such 18-month period, (B)
26        the  dissolution  is  begun  in  good  faith  before  the
27        expiration  of  such  18-month  period,   and   (C)   the
28        dissolution is completed;
29             (2) (A)  Such    written    request   notifies   the
30        Department that a dissolution  has  in  good  faith  been
31        begun, and (B) the dissolution is completed; or
32             (3)  A  dissolution  has  been completed at the time
33        such written request is made.
34        (j)  Withholding tax. In the  case  of  returns  required
 
                            -72-           LRB9205822SMdvam05
 1    under  Article  7  of  this  Act (with respect to any amounts
 2    withheld as tax or any amounts required to have been withheld
 3    as tax) a notice of deficiency shall be issued not later than
 4    3 years after the 15th day of the  4th  month  following  the
 5    close  of  the  calendar  year  in which such withholding was
 6    required.
 7        (k)  Penalties for failure to make  information  reports.
 8    A   notice  of  deficiency  for  the  penalties  provided  by
 9    Subsection 1405.1(c) of this Act may not be issued more  than
10    3  years  after  the  due date of the reports with respect to
11    which the penalties are asserted.
12        (l)  Penalty for failure to file withholding returns.   A
13    notice  of  deficiency for penalties provided by Section 1004
14    of this  Act  for  taxpayer's  failure  to  file  withholding
15    returns  may  not  be  issued more than three years after the
16    15th day of the 4th month following the close of the calendar
17    year in which  the  withholding  giving  rise  to  taxpayer's
18    obligation to file those returns occurred.
19        (m)  Transferee  liability. A notice of deficiency may be
20    issued to a transferee relative to a liability asserted under
21    Section 1405 during time periods defined as follows:
22             1)  Initial  Transferee.   In  the   case   of   the
23        liability  of  an initial transferee, up to 2 years after
24        the expiration of the period of limitation for assessment
25        against the transferor, except that if a court proceeding
26        for review of the assessment against the  transferor  has
27        begun,  then  up  to  2  years  after  the  return of the
28        certified copy of the judgment in the court proceeding.
29             2)  Transferee of Transferee.  In the  case  of  the
30        liability  of  a  transferee,  up  to  2  years after the
31        expiration of the period  of  limitation  for  assessment
32        against  the  preceding  transferee,  but not more than 3
33        years after the expiration of the  period  of  limitation
34        for  assessment  against  the  initial transferor; except
 
                            -73-           LRB9205822SMdvam05
 1        that  if,  before  the  expiration  of  the   period   of
 2        limitation  for  the  assessment  of the liability of the
 3        transferee, a court proceeding for the collection of  the
 4        tax  or  liability  in  respect  thereof  has  been begun
 5        against the initial  transferor  or  the  last  preceding
 6        transferee,  as  the  case  may  be,  then  the period of
 7        limitation  for  assessment  of  the  liability  of   the
 8        transferee  shall  expire 2 years after the return of the
 9        certified copy of the judgment in the court proceeding.
10        (n)  Notice of decrease in net loss.  On  and  after  the
11    effective  date  of  this  amendatory Act of the 92nd General
12    Assembly, no notice of deficiency  shall  be  issued  as  the
13    result  of a decrease determined by the Department in the net
14    loss incurred by a taxpayer under Section  207  of  this  Act
15    unless  the  Department  has  notified  the  taxpayer  of the
16    proposed decrease within 3 years after the  return  reporting
17    the loss was filed or within one year after an amended return
18    reporting an increase in the loss was filed, provided that in
19    the  case  of  an  amended return, a decrease proposed by the
20    Department more than 3 years after the  original  return  was
21    filed  may not exceed the increase claimed by the taxpayer on
22    the original return.
23    (Source: P.A. 90-491, eff. 1-1-98; 91-541, eff. 8-13-99.)

24        (35 ILCS 5/911) (from Ch. 120, par. 9-911)
25        Sec. 911. Limitations on Claims for Refund.
26        (a)  In general. Except as  otherwise  provided  in  this
27    Act:
28             (1)  A  claim  for  refund  shall be filed not later
29        than 3 years after the date the return was filed (in  the
30        case  of  returns  required  under  Article 7 of this Act
31        respecting any amounts withheld as tax, not later than  3
32        years  after  the 15th day of the 4th month following the
33        close of the calendar year in which such withholding  was
 
                            -74-           LRB9205822SMdvam05
 1        made),  or  one  year  after  the  date the tax was paid,
 2        whichever is the later; and
 3             (2)  No credit or refund shall be  allowed  or  made
 4        with  respect  to  the year for which the claim was filed
 5        unless such claim is filed within such period.
 6        (b)  Federal changes.
 7             (1)  In general.  In any case where notification  of
 8        an alteration is required by Section 506 (b), a claim for
 9        refund  may  be  filed  within  2 years after the date on
10        which such notification was due  (regardless  of  whether
11        such  notice  was  given),  but  the  amount  recoverable
12        pursuant  to  a  claim  filed under this Section shall be
13        limited to the amount of any overpayment resulting  under
14        this Act from recomputation of the taxpayer's net income,
15        net loss, or Article 2 credits for the taxable year after
16        giving  effect  to  the  item  or  items reflected in the
17        alteration required to be reported.
18             (2)  Tentative  carryback  adjustments  paid  before
19        January 1, 1974. If, as the result of the payment  before
20        January   1,   1974  of  a  federal  tentative  carryback
21        adjustment, a notification of an alteration  is  required
22        under Section 506 (b), a claim for refund may be filed at
23        any   time   before  January  1,  1976,  but  the  amount
24        recoverable pursuant to a claim filed under this  Section
25        shall  be  limited  to  the  amount  of  any  overpayment
26        resulting  under  this  Act  from  recomputation  of  the
27        taxpayer's  base income for the taxable year after giving
28        effect to  the  federal  alteration  resulting  from  the
29        tentative   carryback   adjustment  irrespective  of  any
30        limitation imposed in paragraph (l) of this subsection.
31        (c)  Extension   by   agreement.    Where,   before   the
32    expiration of the time prescribed in  this  section  for  the
33    filing  of  a  claim  for refund, both the Department and the
34    claimant shall have consented in writing to its filing  after
 
                            -75-           LRB9205822SMdvam05
 1    such  time,  such claim may be filed at any time prior to the
 2    expiration of the period agreed upon.  The period  so  agreed
 3    upon may be extended by subsequent agreements in writing made
 4    before  the  expiration of the period previously agreed upon.
 5    In the case of a taxpayer who is a partnership, Subchapter  S
 6    corporation,  or  trust and who enters into an agreement with
 7    the Department  pursuant  to  this  subsection  on  or  after
 8    January  1,  2002,  a  claim  for refund may be issued to the
 9    partners, shareholders, or beneficiaries of the  taxpayer  at
10    any  time  prior to the expiration of the period agreed upon.
11    Any refund allowed pursuant to the claim, however,  shall  be
12    limited  to  the  amount  of any overpayment of tax due under
13    this Act that results from recomputation of items of  income,
14    deduction, credits, or other amounts of the taxpayer that are
15    taken   into   account   by   the  partner,  shareholder,  or
16    beneficiary in computing its liability under this Act.
17        (d)  Limit on amount of credit or refund.
18             (1)  Limit where claim filed within  3-year  period.
19        If  the claim was filed by the claimant during the 3-year
20        period prescribed in subsection (a), the  amount  of  the
21        credit  or refund shall not exceed the portion of the tax
22        paid within the period, immediately preceding the  filing
23        of  the  claim,  equal  to 3 years plus the period of any
24        extension of time for filing the return.
25             (2)  Limit  where  claim  not  filed  within  3-year
26        period.  If the claim was not filed  within  such  3-year
27        period,  the  amount  of  the  credit or refund shall not
28        exceed the portion of the tax paid during  the  one  year
29        immediately preceding the filing of the claim.
30        (e)  Time  return  deemed  filed.   For  purposes of this
31    section a tax return filed before the last day prescribed  by
32    law  for  the filing of such return (including any extensions
33    thereof) shall be deemed to have been filed on such last day.
34        (f)  No claim for refund based on the taxpayer's taking a
 
                            -76-           LRB9205822SMdvam05
 1    credit for estimated tax payments as provided by Section  601
 2    (b)  (2)  or  for  any  amount paid by a taxpayer pursuant to
 3    Section 602(a) or for any amount of credit for  tax  withheld
 4    pursuant  to Section 701 may be filed more than 3 years after
 5    the due date, as provided by Section 505, of the return which
 6    was required to be filed relative to  the  taxable  year  for
 7    which  the  payments  were  made  or  for  which  the tax was
 8    withheld. The changes in this subsection  (f)  made  by  this
 9    amendatory  Act  of  1987  shall  apply  to all taxable years
10    ending on or after December 31, 1969.
11        (g)  Special Period of Limitation  with  Respect  to  Net
12    Loss  Carrybacks.    If  the  claim  for refund relates to an
13    overpayment attributable to a net loss carryback as  provided
14    by  Section  207,  in lieu of the 3 year period of limitation
15    prescribed in subsection (a), the period shall be that period
16    which ends 3 years after  the  time  prescribed  by  law  for
17    filing  the  return  (including  extensions  thereof) for the
18    taxable year of the net loss which results in such  carryback
19    (or,  on and after August 13, 1999 the effective date of this
20    amendatory Act of the 91st General Assembly, with respect  to
21    a change in the carryover of an Article 2 credit to a taxable
22    year  resulting  from  the  carryback  of  a Section 207 loss
23    incurred in a taxable year beginning on or after  January  1,
24    2000, the period shall be that period that ends 3 years after
25    the  time  prescribed by law for filing the return (including
26    extensions of that time) for that subsequent  taxable  year),
27    or the period prescribed in subsection (c) in respect of such
28    taxable year, whichever expires later.  In the case of such a
29    claim, the amount of the refund may exceed the portion of the
30    tax  paid within the period provided in subsection (d) to the
31    extent of the amount of the overpayment attributable to  such
32    carryback. On and after August 13, 1999 the effective date of
33    this  amendatory  Act  of  the  91st General Assembly, if the
34    claim for refund relates to an  overpayment  attributable  to
 
                            -77-           LRB9205822SMdvam05
 1    the  carryover  of  an  Article 2 credit, or of a Section 207
 2    loss, earned, incurred (in a taxable  year  beginning  on  or
 3    after  January  1,  2000),  or  used  in  a  year for which a
 4    notification of a change  affecting  federal  taxable  income
 5    must  be filed under subsection (b) of Section 506, the claim
 6    may be filed within the period prescribed in paragraph (1) of
 7    subsection  (b)  in  respect  of  the  year  for  which   the
 8    notification  is  required.  In the case of such a claim, the
 9    amount of the refund may exceed the portion of the  tax  paid
10    within the period provided in subsection (d) to the extent of
11    the   amount   of   the   overpayment   attributable  to  the
12    recomputation of the taxpayer's Article 2 credits, or Section
13    207 loss, earned, incurred, or used in the taxable  year  for
14    which the notification is given.
15        (h)  Claim  for  refund  based on net loss.  On and after
16    the effective date of this amendatory Act of the 92nd General
17    Assembly, no claim for refund shall be allowed to the  extent
18    the  refund  is  the result of an amount of net loss incurred
19    under Section 207 of this Act that was not  reported  to  the
20    Department   within  3  years  of  the  due  date  (including
21    extensions) of the return for the loss  year  on  either  the
22    original return filed by the taxpayer or on amended return.
23    (Source: P.A. 90-491, eff. 1-1-98; 91-541, eff. 8-13-99.)

24        (35 ILCS 5/1501) (from Ch. 120, par. 15-1501)
25        Sec. 1501.  Definitions.
26        (a)  In  general.  When  used  in  this  Act,  where  not
27    otherwise  distinctly  expressed  or  manifestly incompatible
28    with the intent thereof:
29             (1)  Business income.  The  term  "business  income"
30        means  income  arising  from transactions and activity in
31        the regular course of the taxpayer's trade  or  business,
32        net  of  the  deductions  allocable thereto, and includes
33        income from  tangible  and  intangible  property  if  the
 
                            -78-           LRB9205822SMdvam05
 1        acquisition,  management, and disposition of the property
 2        constitute integral parts of the taxpayer's regular trade
 3        or  business  operations.  Such  term  does  not  include
 4        compensation or the  deductions  allocable  thereto.  For
 5        each  taxable year beginning on or after January 1, 2002,
 6        a taxpayer may elect  to  treat  all  income  other  than
 7        compensation  as business income.  This election shall be
 8        made in accordance with rules adopted by  the  Department
 9        and, once made, shall be irrevocable.
10             (2)  Commercial   domicile.   The  term  "commercial
11        domicile" means the principal place from which the  trade
12        or business of the taxpayer is directed or managed.
13             (3)  Compensation.  The  term  "compensation"  means
14        wages,  salaries,  commissions  and  any  other  form  of
15        remuneration paid to employees for personal services.
16             (4)  Corporation.  The  term  "corporation" includes
17        associations, joint-stock companies, insurance  companies
18        and   cooperatives.   Any  entity,  including  a  limited
19        liability  company  formed  under  the  Illinois  Limited
20        Liability Company Act, shall be treated as a  corporation
21        if it is so classified for federal income tax purposes.
22             (5)  Department.  The  term  "Department"  means the
23        Department of Revenue of this State.
24             (6)  Director.  The  term   "Director"   means   the
25        Director of Revenue of this State.
26             (7)  Fiduciary.   The   term   "fiduciary"  means  a
27        guardian, trustee, executor, administrator, receiver,  or
28        any  person  acting  in  any  fiduciary  capacity for any
29        person.
30             (8)  Financial organization.
31                  (A)  The term  "financial  organization"  means
32             any  bank,  bank  holding  company,  trust  company,
33             savings  bank,  industrial  bank,  land  bank,  safe
34             deposit  company,  private  banker, savings and loan
 
                            -79-           LRB9205822SMdvam05
 1             association, building and loan  association,  credit
 2             union,  currency  exchange,  cooperative bank, small
 3             loan  company,  sales  finance  company,  investment
 4             company, or any person which is owned by a  bank  or
 5             bank  holding  company.   For  the  purpose  of this
 6             Section a "person" will include only  those  persons
 7             which a bank holding company may acquire and hold an
 8             interest  in,  directly  or  indirectly,  under  the
 9             provisions  of  the Bank Holding Company Act of 1956
10             (12 U.S.C. 1841, et seq.), except where interests in
11             any  person  must  be  disposed  of  within  certain
12             required time limits under the Bank Holding  Company
13             Act of 1956.
14                  (B)  For  purposes  of subparagraph (A) of this
15             paragraph, the term "bank" includes (i)  any  entity
16             that is regulated by the Comptroller of the Currency
17             under  the  National  Bank  Act,  or  by the Federal
18             Reserve Board, or by the Federal  Deposit  Insurance
19             Corporation   and   (ii)   any  federally  or  State
20             chartered bank operating as a credit card bank.
21                  (C)  For purposes of subparagraph (A)  of  this
22             paragraph,  the term "sales finance company" has the
23             meaning provided in the following item (i) or (ii):
24                       (i)  A person primarily engaged in one  or
25                  more of the following businesses:  the business
26                  of   purchasing   customer   receivables,   the
27                  business  of  making loans upon the security of
28                  customer receivables, the  business  of  making
29                  loans   for  the  express  purpose  of  funding
30                  purchases  of  tangible  personal  property  or
31                  services by the borrower, or  the  business  of
32                  finance  leasing.   For  purposes  of this item
33                  (i), "customer receivable" means:
34                       (a)  a  retail  installment  contract   or
 
                            -80-           LRB9205822SMdvam05
 1                  retail  charge  agreement within the meaning of
 2                  the  Sales  Finance  Agency  Act,  the   Retail
 3                  Installment  Sales  Act,  or  the Motor Vehicle
 4                  Retail Installment Sales Act;
 5                       (b)  an installment,  charge,  credit,  or
 6                  similar  contract or agreement arising from the
 7                  sale of tangible personal property or  services
 8                  in  a  transaction involving a deferred payment
 9                  price  payable  in  one  or  more  installments
10                  subsequent to the sale; or
11                       (c)  the outstanding balance of a contract
12                  or agreement described in provisions (a) or (b)
13                  of this item (i).
14                  A customer  receivable  need  not  provide  for
15             payment  of  interest on deferred payments.  A sales
16             finance company may purchase a  customer  receivable
17             from,   or   make  a  loan  secured  by  a  customer
18             receivable  to,   the   seller   in   the   original
19             transaction   or  to  a  person  who  purchased  the
20             customer receivable directly or indirectly from that
21             seller.
22                       (ii)  A corporation meeting  each  of  the
23                  following criteria:
24                       (a)  the  corporation  must be a member of
25                  an "affiliated group"  within  the  meaning  of
26                  Section  1504(a)  of the Internal Revenue Code,
27                  determined without regard to Section 1504(b) of
28                  the Internal Revenue Code;
29                       (b)  more than 50% of the gross income  of
30                  the  corporation  for  the taxable year must be
31                  interest income derived from qualifying  loans.
32                  A  "qualifying loan" is a loan made to a member
33                  of  the  corporation's  affiliated  group  that
34                  originates  customer  receivables  (within  the
 
                            -81-           LRB9205822SMdvam05
 1                  meaning  of  item  (i))  or  to  whom  customer
 2                  receivables  originated  by  a  member  of  the
 3                  affiliated group have been transferred, to  the
 4                  extent the average outstanding balance of loans
 5                  from   that   corporation  to  members  of  its
 6                  affiliated group during the taxable year do not
 7                  exceed   the   limitation   amount   for   that
 8                  corporation.  The  "limitation  amount"  for  a
 9                  corporation is the average outstanding balances
10                  during the taxable year of customer receivables
11                  (within  the meaning of item (i)) originated by
12                  all members of the affiliated group.    If  the
13                  average  outstanding balances of the loans made
14                  by a corporation to members of  its  affiliated
15                  group   exceed   the   limitation  amount,  the
16                  interest  income  of  that   corporation   from
17                  qualifying loans shall be equal to its interest
18                  income  from loans to members of its affiliated
19                  groups times a fraction equal to the limitation
20                  amount  divided  by  the  average   outstanding
21                  balances  of the loans made by that corporation
22                  to members of its affiliated group;
23                       (c)  the total of all shareholder's equity
24                  (including, without limitation, paid-in capital
25                  on common  and  preferred  stock  and  retained
26                  earnings)  of the corporation plus the total of
27                  all  of  its   loans,   advances,   and   other
28                  obligations  payable  or owed to members of its
29                  affiliated group may  not  exceed  20%  of  the
30                  total  assets  of  the  corporation at any time
31                  during the tax year; and
32                       (d)  more than 50% of all interest-bearing
33                  obligations of the affiliated group payable  to
34                  persons   outside   the   group  determined  in
 
                            -82-           LRB9205822SMdvam05
 1                  accordance with generally  accepted  accounting
 2                  principles   must   be   obligations   of   the
 3                  corporation.
 4             This  amendatory Act of the 91st General Assembly is
 5        declaratory of existing law.
 6                  (D)  Subparagraphs  (B)   and   (C)   of   this
 7             paragraph  are declaratory of existing law and apply
 8             retroactively, for all tax  years  beginning  on  or
 9             before  December 31, 1996,  to all original returns,
10             to all amended returns filed no later than  30  days
11             after  the  effective date of this amendatory Act of
12             1996, and to all notices issued  on  or  before  the
13             effective  date of this amendatory Act of 1996 under
14             subsection (a) of Section  903,  subsection  (a)  of
15             Section  904,  subsection  (e)  of  Section  909, or
16             Section  912.  A  taxpayer  that  is  a   "financial
17             organization"  that  engages in any transaction with
18             an affiliate shall be a "financial organization" for
19             all purposes of this Act.
20                  (E)  For all tax years beginning on  or  before
21             December  31, 1996, a taxpayer that falls within the
22             definition  of  a  "financial  organization"   under
23             subparagraphs  (B) or (C) of this paragraph, but who
24             does not fall within the definition of a  "financial
25             organization"  under the Proposed Regulations issued
26             by the Department of Revenue on July 19,  1996,  may
27             irrevocably  elect to apply the Proposed Regulations
28             for all  of  those  years  as  though  the  Proposed
29             Regulations  had been lawfully promulgated, adopted,
30             and in effect for all of those years.  For  purposes
31             of   applying  subparagraphs  (B)  or  (C)  of  this
32             paragraph  to  all  of  those  years,  the  election
33             allowed by this subparagraph  applies  only  to  the
34             taxpayer making the election and to those members of
 
                            -83-           LRB9205822SMdvam05
 1             the   taxpayer's  unitary  business  group  who  are
 2             ordinarily required  to  apportion  business  income
 3             under the same subsection of Section 304 of this Act
 4             as  the  taxpayer  making the election.  No election
 5             allowed by this subparagraph shall be made  under  a
 6             claim filed under subsection (d) of Section 909 more
 7             than  30  days  after  the  effective  date  of this
 8             amendatory Act of 1996.
 9                  (F)  Finance  Leases.   For  purposes  of  this
10             subsection, a finance lease shall be  treated  as  a
11             loan  or other extension of credit, rather than as a
12             lease,  regardless  of  how   the   transaction   is
13             characterized  for  any other purpose, including the
14             purposes of  any  regulatory  agency  to  which  the
15             lessor   is   subject.    A  finance  lease  is  any
16             transaction in the form of  a  lease  in  which  the
17             lessee  is  treated as the owner of the leased asset
18             entitled to any deduction for  depreciation  allowed
19             under Section 167 of the Internal Revenue Code.
20             (9)  Fiscal  year.  The  term "fiscal year" means an
21        accounting period of 12 months ending on the last day  of
22        any month other than December.
23             (10)  Includes  and  including. The terms "includes"
24        and "including" when used in a  definition  contained  in
25        this  Act  shall  not  be  deemed to exclude other things
26        otherwise within the meaning of the term defined.
27             (11)  Internal  Revenue  Code.  The  term  "Internal
28        Revenue Code" means the United  States  Internal  Revenue
29        Code  of  1954  or  any successor law or laws relating to
30        federal income taxes in effect for the taxable year.
31             (12)  Mathematical  error.  The  term  "mathematical
32        error" includes the following types of errors, omissions,
33        or defects in a return filed by a taxpayer which prevents
34        acceptance of the return as filed for processing:
 
                            -84-           LRB9205822SMdvam05
 1                  (A)  arithmetic     errors     or     incorrect
 2             computations on the return or supporting schedules;
 3                  (B)  entries on the wrong lines;
 4                  (C)  omission of required supporting  forms  or
 5             schedules  or  the  omission  of  the information in
 6             whole or in part called for thereon; and
 7                  (D)  an attempt to claim, exclude,  deduct,  or
 8             improperly  report, in a manner directly contrary to
 9             the provisions of the Act and regulations thereunder
10             any item of income, exemption, deduction, or credit.
11             (13)  Nonbusiness  income.  The  term   "nonbusiness
12        income"  means  all  income other than business income or
13        compensation.
14             (14)  Nonresident. The term  "nonresident"  means  a
15        person who is not a resident.
16             (15)  Paid,  incurred and accrued. The terms "paid",
17        "incurred" and "accrued" shall be construed according  to
18        the  method  of  accounting  upon  the basis of which the
19        person's base income is computed under this Act.
20             (16)  Partnership    and    partner.    The     term
21        "partnership"  includes  a  syndicate, group, pool, joint
22        venture or other unincorporated organization, through  or
23        by  means  of which any business, financial operation, or
24        venture is carried on,  and  which  is  not,  within  the
25        meaning  of this Act, a trust or estate or a corporation;
26        and  the  term  "partner"  includes  a  member  in   such
27        syndicate, group, pool, joint venture or organization.
28             The   term   "partnership"   includes   any  entity,
29        including a limited liability company  formed  under  the
30        Illinois  Limited  Liability Company Act, classified as a
31        partnership for federal income tax purposes.
32             The term "partnership" does not include a syndicate,
33        group,  pool,  joint  venture,  or  other  unincorporated
34        organization established for the sole purpose of  playing
 
                            -85-           LRB9205822SMdvam05
 1        the Illinois State Lottery.
 2             (17)  Part-year   resident.   The   term  "part-year
 3        resident" means  an  individual  who  became  a  resident
 4        during the taxable year or ceased to be a resident during
 5        the  taxable  year.  Under  Section 1501 (a) (20) (A) (i)
 6        residence commences with presence in this State for other
 7        than a temporary or transitory purpose  and  ceases  with
 8        absence  from  this  State  for other than a temporary or
 9        transitory purpose. Under Section 1501 (a) (20) (A)  (ii)
10        residence commences with the establishment of domicile in
11        this  State and ceases with the establishment of domicile
12        in another State.
13             (18)  Person. The term "person" shall  be  construed
14        to  mean  and  include  an  individual,  a trust, estate,
15        partnership,  association,  firm,  company,  corporation,
16        limited liability company, or fiduciary. For purposes  of
17        Section  1301  and 1302 of this Act, a "person" means (i)
18        an individual, (ii)  a  corporation,  (iii)  an  officer,
19        agent, or employee of a corporation, (iv) a member, agent
20        or  employee  of a partnership, or (v) a member, manager,
21        employee,  officer,  director,  or  agent  of  a  limited
22        liability company who in such capacity commits an offense
23        specified in Section 1301 and 1302.
24             (18A)  Records.  The  term  "records"  includes  all
25        data  maintained  by  the  taxpayer,  whether  on  paper,
26        microfilm,  microfiche,  or  any type of machine-sensible
27        data compilation.
28             (19)  Regulations. The term  "regulations"  includes
29        rules promulgated and forms prescribed by the Department.
30             (20)  Resident. The term "resident" means:
31                  (A)  an individual (i) who is in this State for
32             other  than a temporary or transitory purpose during
33             the taxable year; or (ii) who is domiciled  in  this
34             State  but  is absent from the State for a temporary
 
                            -86-           LRB9205822SMdvam05
 1             or transitory purpose during the taxable year;
 2                  (B)  The estate of a decedent who at his or her
 3             death was domiciled in this State;
 4                  (C)  A trust created by a will  of  a  decedent
 5             who at his death was domiciled in this State; and
 6                  (D)  An irrevocable trust, the grantor of which
 7             was  domiciled  in this State at the time such trust
 8             became   irrevocable.   For    purpose    of    this
 9             subparagraph,    a   trust   shall   be   considered
10             irrevocable to the extent that the  grantor  is  not
11             treated  as  the  owner  thereof  under Sections 671
12             through 678 of the Internal Revenue Code.
13             (21)  Sales.  The  term  "sales"  means  all   gross
14        receipts  of  the  taxpayer  not allocated under Sections
15        301, 302 and 303.
16             (22)  State. The term  "state"  when  applied  to  a
17        jurisdiction other than this State means any state of the
18        United States, the District of Columbia, the Commonwealth
19        of Puerto Rico, any Territory or Possession of the United
20        States,   and  any  foreign  country,  or  any  political
21        subdivision of any of the foregoing.  For purposes of the
22        foreign tax credit under Section 601,  the  term  "state"
23        means  any  state  of  the United States, the District of
24        Columbia,  the  Commonwealth  of  Puerto  Rico,  and  any
25        territory or possession of  the  United  States,  or  any
26        political  subdivision of any of the foregoing, effective
27        for tax years ending on or after December 31, 1989.
28             (23)  Taxable year. The term  "taxable  year"  means
29        the  calendar year, or the fiscal year ending during such
30        calendar year, upon the basis of which the base income is
31        computed under this Act. "Taxable  year"  means,  in  the
32        case  of  a  return  made for a fractional part of a year
33        under the provisions of this Act, the  period  for  which
34        such return is made.
 
                            -87-           LRB9205822SMdvam05
 1             (24)  Taxpayer. The term "taxpayer" means any person
 2        subject to the tax imposed by this Act.
 3             (25)  International   banking  facility.   The  term
 4        international  banking  facility  shall  have  the   same
 5        meaning as is set forth in the Illinois Banking Act or as
 6        is  set  forth  in  the  laws  of  the  United  States or
 7        regulations of the Board  of  Governors  of  the  Federal
 8        Reserve System.
 9             (26)  Income Tax Return Preparer.
10                  (A)  The  term  "income  tax  return  preparer"
11             means  any  person who prepares for compensation, or
12             who employs one  or  more  persons  to  prepare  for
13             compensation,  any return of tax imposed by this Act
14             or any claim for refund of tax imposed by this  Act.
15             The preparation of a substantial portion of a return
16             or   claim  for  refund  shall  be  treated  as  the
17             preparation of that return or claim for refund.
18                  (B)  A person  is  not  an  income  tax  return
19             preparer if all he or she does is
20                       (i)  furnish typing, reproducing, or other
21                  mechanical assistance;
22                       (ii)  prepare   returns   or   claims  for
23                  refunds for the employer by whom he or  she  is
24                  regularly and continuously employed;
25                       (iii)  prepare  as  a fiduciary returns or
26                  claims for refunds for any person; or
27                       (iv)  prepare claims  for  refunds  for  a
28                  taxpayer   in   response   to   any  notice  of
29                  deficiency  issued  to  that  taxpayer  or   in
30                  response to any waiver of restriction after the
31                  commencement of an audit of that taxpayer or of
32                  another  taxpayer  if  a  determination  in the
33                  audit  of  the  other  taxpayer   directly   or
34                  indirectly  affects  the  tax  liability of the
 
                            -88-           LRB9205822SMdvam05
 1                  taxpayer whose claims he or she is preparing.
 2             (27)  Unitary business  group.   The  term  "unitary
 3        business  group" means a group of persons related through
 4        common ownership whose business activities are integrated
 5        with, dependent upon and contribute to each  other.   The
 6        group  will  not  include  those  members  whose business
 7        activity outside the United States is 80% or more of  any
 8        such  member's  total  business activity; for purposes of
 9        this paragraph and clause (a) (3)  (B)  (ii)  of  Section
10        304,  business activity within the United States shall be
11        measured by means of the  factors  ordinarily  applicable
12        under  subsections  (a), (b), (c), (d), or (h) of Section
13        304 except  that,  in  the  case  of  members  ordinarily
14        required  to  apportion business income by means of the 3
15        factor formula of property, payroll and  sales  specified
16        in  subsection  (a) of Section 304, including the formula
17        as weighted  in  subsection  (h)  of  Section  304,  such
18        members shall not use the sales factor in the computation
19        and  the  results  of  the  property  and  payroll factor
20        computations of subsection (a) of Section  304  shall  be
21        divided  by  2  (by one if either the property or payroll
22        factor  has  a  denominator  of  zero).  The  computation
23        required by the preceding sentence shall, in  each  case,
24        involve  the  division of the member's property, payroll,
25        or revenue miles in the United States, insurance premiums
26        on property or risk in the United  States,  or  financial
27        organization  business  income  from  sources  within the
28        United States, as the case  may  be,  by  the  respective
29        worldwide  figures  for  such items.  Common ownership in
30        the case  of  corporations  is  the  direct  or  indirect
31        control  or ownership of more than 50% of the outstanding
32        voting stock of the persons carrying on unitary  business
33        activity.   Unitary  business  activity can ordinarily be
34        illustrated where the activities of the members are:  (1)
 
                            -89-           LRB9205822SMdvam05
 1        in  the  same  general  line  (such   as   manufacturing,
 2        wholesaling,  retailing  of  tangible  personal property,
 3        insurance, transportation or finance); or (2)  are  steps
 4        in a vertically structured enterprise or process (such as
 5        the   steps   involved   in  the  production  of  natural
 6        resources,  which  might  include  exploration,   mining,
 7        refining,  and  marketing);  and, in either instance, the
 8        members are functionally integrated through the  exercise
 9        of  strong  centralized  management  (where, for example,
10        authority over such matters as purchasing, financing, tax
11        compliance,  product  line,  personnel,   marketing   and
12        capital  investment  is  not  left to each member). In no
13        event, however, will any unitary business  group  include
14        members   which  are  ordinarily  required  to  apportion
15        business income under different  subsections  of  Section
16        304 except that for tax years ending on or after December
17        31,  1987  this  prohibition shall not apply to a unitary
18        business group composed of one or more taxpayers  all  of
19        which  apportion  business  income pursuant to subsection
20        (b) of Section 304, or all of  which  apportion  business
21        income  pursuant  to subsection (d) of Section 304, and a
22        holding company  of  such  single-factor  taxpayers  (see
23        definition of "financial organization" for rule regarding
24        holding  companies  of  financial  organizations).   If a
25        unitary business  group  would,  but  for  the  preceding
26        sentence, include members that are ordinarily required to
27        apportion  business income under different subsections of
28        Section 304, then for each subsection of Section 304  for
29        which  there  are  two  or more members, there shall be a
30        separate unitary business group composed of such members.
31        For purposes of the preceding two sentences, a member  is
32        "ordinarily  required to apportion business income" under
33        a particular subsection of Section 304  if  it  would  be
34        required  to  use  the apportionment method prescribed by
 
                            -90-           LRB9205822SMdvam05
 1        such subsection except  for  the  fact  that  it  derives
 2        business  income  solely  from  Illinois.  If the unitary
 3        business group members' accounting  periods  differ,  the
 4        common  parent's  accounting  period  or,  if there is no
 5        common parent, the accounting period of the  member  that
 6        is  expected  to have, on a recurring basis, the greatest
 7        Illinois income tax liability must be used  to  determine
 8        whether  to  use  the  apportionment  method  provided in
 9        subsection (a) or subsection (h)  of  Section  304.   The
10        prohibition  against  membership  in  a  unitary business
11        group for  taxpayers  ordinarily  required  to  apportion
12        income  under  different  subsections of Section 304 does
13        not apply to taxpayers required to apportion income under
14        subsection (a) and subsection (h) of  Section  304.   The
15        provisions  of  this  amendatory Act of 1998 apply to tax
16        years ending on or after December 31, 1998.
17             (28)  Subchapter   S    corporation.     The    term
18        "Subchapter  S corporation" means a corporation for which
19        there is in effect an election under Section 1362 of  the
20        Internal  Revenue  Code,  or for which there is a federal
21        election to opt out of the provisions of the Subchapter S
22        Revision Act of 1982 and have applied instead  the  prior
23        federal Subchapter S rules as in effect on July 1, 1982.

24        (b)  Other definitions.
25             (1)  Words  denoting  number,  gender, and so forth,
26        when used in this Act,  where  not  otherwise  distinctly
27        expressed  or  manifestly  incompatible  with  the intent
28        thereof:
29                  (A)  Words importing the singular  include  and
30             apply to several persons, parties or things;
31                  (B)  Words  importing  the  plural  include the
32             singular; and
33                  (C)  Words  importing  the   masculine   gender
34             include the feminine as well.
 
                            -91-           LRB9205822SMdvam05
 1             (2)  "Company"   or   "association"   as   including
 2        successors   and   assigns.   The   word   "company"   or
 3        "association",  when  used in reference to a corporation,
 4        shall be deemed to  embrace  the  words  "successors  and
 5        assigns  of  such  company  or  association", and in like
 6        manner as if these last-named words, or words of  similar
 7        import, were expressed.
 8             (3)  Other  terms.  Any  term used in any Section of
 9        this Act with  respect  to  the  application  of,  or  in
10        connection  with,  the provisions of any other Section of
11        this Act shall have the same meaning  as  in  such  other
12        Section.
13    (Source:  P.A.  90-613,  eff.  7-9-98;  91-535,  eff. 1-1-00;
14    91-913, eff. 1-1-01.)".

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