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92_HB4006 LRB9214118SMdv 1 AN ACT in relation to taxes. 2 Be it enacted by the People of the State of Illinois, 3 represented in the General Assembly: 4 Section 5. The Illinois Income Tax Act is amended by 5 changing Section 2-203 as follows: 6 (35 ILCS 5/203) (from Ch. 120, par. 2-203) 7 Sec. 203. Base income defined. 8 (a) Individuals. 9 (1) In general. In the case of an individual, base 10 income means an amount equal to the taxpayer's adjusted 11 gross income for the taxable year as modified by 12 paragraph (2). 13 (2) Modifications. The adjusted gross income 14 referred to in paragraph (1) shall be modified by adding 15 thereto the sum of the following amounts: 16 (A) An amount equal to all amounts paid or 17 accrued to the taxpayer as interest or dividends 18 during the taxable year to the extent excluded from 19 gross income in the computation of adjusted gross 20 income, except stock dividends of qualified public 21 utilities described in Section 305(e) of the 22 Internal Revenue Code; 23 (B) An amount equal to the amount of tax 24 imposed by this Act to the extent deducted from 25 gross income in the computation of adjusted gross 26 income for the taxable year; 27 (C) An amount equal to the amount received 28 during the taxable year as a recovery or refund of 29 real property taxes paid with respect to the 30 taxpayer's principal residence under the Revenue Act 31 of 1939 and for which a deduction was previously -2- LRB9214118SMdv 1 taken under subparagraph (L) of this paragraph (2) 2 prior to July 1, 1991, the retrospective application 3 date of Article 4 of Public Act 87-17. In the case 4 of multi-unit or multi-use structures and farm 5 dwellings, the taxes on the taxpayer's principal 6 residence shall be that portion of the total taxes 7 for the entire property which is attributable to 8 such principal residence; 9 (D) An amount equal to the amount of the 10 capital gain deduction allowable under the Internal 11 Revenue Code, to the extent deducted from gross 12 income in the computation of adjusted gross income; 13 (D-5) An amount, to the extent not included in 14 adjusted gross income, equal to the amount of money 15 withdrawn by the taxpayer in the taxable year from a 16 medical care savings account and the interest earned 17 on the account in the taxable year of a withdrawal 18 pursuant to subsection (b) of Section 20 of the 19 Medical Care Savings Account Act or subsection (b) 20 of Section 20 of the Medical Care Savings Account 21 Act of 2000; and 22 (D-10) For taxable years ending after December 23 31, 1997, an amount equal to any eligible 24 remediation costs that the individual deducted in 25 computing adjusted gross income and for which the 26 individual claims a credit under subsection (l) of 27 Section 201; 28 and by deducting from the total so obtained the sum of 29 the following amounts: 30 (E) For taxable years ending before December 31 31, 2001, any amount included in such total in 32 respect of any compensation (including but not 33 limited to any compensation paid or accrued to a 34 serviceman while a prisoner of war or missing in -3- LRB9214118SMdv 1 action) paid to a resident by reason of being on 2 active duty in the Armed Forces of the United States 3 and in respect of any compensation paid or accrued 4 to a resident who as a governmental employee was a 5 prisoner of war or missing in action, and in respect 6 of any compensation paid to a resident in 1971 or 7 thereafter for annual training performed pursuant to 8 Sections 502 and 503, Title 32, United States Code 9 as a member of the Illinois National Guard. For 10 taxable years ending on or after December 31, 2001, 11 any amount included in such total in respect of any 12 compensation (including but not limited to any 13 compensation paid or accrued to a serviceman while a 14 prisoner of war or missing in action) paid to a 15 resident by reason of being a member of any 16 component of the Armed Forces of the United States 17 and in respect of any compensation paid or accrued 18 to a resident who as a governmental employee was a 19 prisoner of war or missing in action, and in respect 20 of any compensation paid to a resident in 2001 or 21 thereafter by reason of being a member of the 22 Illinois National Guard. The provisions of this 23 amendatory Act of the 92nd General Assembly are 24 exempt from the provisions of Section 250; 25 (F) An amount equal to all amounts included in 26 such total pursuant to the provisions of Sections 27 402(a), 402(c), 403(a), 403(b), 406(a), 407(a), and 28 408 of the Internal Revenue Code, or included in 29 such total as distributions under the provisions of 30 any retirement or disability plan for employees of 31 any governmental agency or unit, or retirement 32 payments to retired partners, which payments are 33 excluded in computing net earnings from self 34 employment by Section 1402 of the Internal Revenue -4- LRB9214118SMdv 1 Code and regulations adopted pursuant thereto; 2 (G) The valuation limitation amount; 3 (H) An amount equal to the amount of any tax 4 imposed by this Act which was refunded to the 5 taxpayer and included in such total for the taxable 6 year; 7 (I) An amount equal to all amounts included in 8 such total pursuant to the provisions of Section 111 9 of the Internal Revenue Code as a recovery of items 10 previously deducted from adjusted gross income in 11 the computation of taxable income; 12 (J) An amount equal to those dividends 13 included in such total which were paid by a 14 corporation which conducts business operations in an 15 Enterprise Zone or zones created under the Illinois 16 Enterprise Zone Act, and conducts substantially all 17 of its operations in an Enterprise Zone or zones; 18 (K) An amount equal to those dividends 19 included in such total that were paid by a 20 corporation that conducts business operations in a 21 federally designated Foreign Trade Zone or Sub-Zone 22 and that is designated a High Impact Business 23 located in Illinois; provided that dividends 24 eligible for the deduction provided in subparagraph 25 (J) of paragraph (2) of this subsection shall not be 26 eligible for the deduction provided under this 27 subparagraph (K); 28 (L) For taxable years ending after December 29 31, 1983, an amount equal to all social security 30 benefits and railroad retirement benefits included 31 in such total pursuant to Sections 72(r) and 86 of 32 the Internal Revenue Code; 33 (M) With the exception of any amounts 34 subtracted under subparagraph (N), an amount equal -5- LRB9214118SMdv 1 to the sum of all amounts disallowed as deductions 2 by (i) Sections 171(a) (2), and 265(2) of the 3 Internal Revenue Code of 1954, as now or hereafter 4 amended, and all amounts of expenses allocable to 5 interest and disallowed as deductions by Section 6 265(1) of the Internal Revenue Code of 1954, as now 7 or hereafter amended; and (ii) for taxable years 8 ending on or after August 13, 1999, Sections 9 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the 10 Internal Revenue Code; the provisions of this 11 subparagraph are exempt from the provisions of 12 Section 250; 13 (N) An amount equal to all amounts included in 14 such total which are exempt from taxation by this 15 State either by reason of its statutes or 16 Constitution or by reason of the Constitution, 17 treaties or statutes of the United States; provided 18 that, in the case of any statute of this State that 19 exempts income derived from bonds or other 20 obligations from the tax imposed under this Act, the 21 amount exempted shall be the interest net of bond 22 premium amortization; 23 (O) An amount equal to any contribution made 24 to a job training project established pursuant to 25 the Tax Increment Allocation Redevelopment Act; 26 (P) An amount equal to the amount of the 27 deduction used to compute the federal income tax 28 credit for restoration of substantial amounts held 29 under claim of right for the taxable year pursuant 30 to Section 1341 of the Internal Revenue Code of 31 1986; 32 (Q) An amount equal to any amounts included in 33 such total, received by the taxpayer as an 34 acceleration in the payment of life, endowment or -6- LRB9214118SMdv 1 annuity benefits in advance of the time they would 2 otherwise be payable as an indemnity for a terminal 3 illness; 4 (R) An amount equal to the amount of any 5 federal or State bonus paid to veterans of the 6 Persian Gulf War; 7 (S) An amount, to the extent included in 8 adjusted gross income, equal to the amount of a 9 contribution made in the taxable year on behalf of 10 the taxpayer to a medical care savings account 11 established under the Medical Care Savings Account 12 Act or the Medical Care Savings Account Act of 2000 13 to the extent the contribution is accepted by the 14 account administrator as provided in that Act; 15 (T) An amount, to the extent included in 16 adjusted gross income, equal to the amount of 17 interest earned in the taxable year on a medical 18 care savings account established under the Medical 19 Care Savings Account Act or the Medical Care Savings 20 Account Act of 2000 on behalf of the taxpayer, other 21 than interest added pursuant to item (D-5) of this 22 paragraph (2); 23 (U) For one taxable year beginning on or after 24 January 1, 1994, an amount equal to the total amount 25 of tax imposed and paid under subsections (a) and 26 (b) of Section 201 of this Act on grant amounts 27 received by the taxpayer under the Nursing Home 28 Grant Assistance Act during the taxpayer's taxable 29 years 1992 and 1993; 30 (V) Beginning with tax years ending on or 31 after December 31, 1995 and ending with tax years 32 ending on or before December 31, 2004, an amount 33 equal to the amount paid by a taxpayer who is a 34 self-employed taxpayer, a partner of a partnership, -7- LRB9214118SMdv 1 or a shareholder in a Subchapter S corporation for 2 health insurance or long-term care insurance for 3 that taxpayer or that taxpayer's spouse or 4 dependents, to the extent that the amount paid for 5 that health insurance or long-term care insurance 6 may be deducted under Section 213 of the Internal 7 Revenue Code of 1986, has not been deducted on the 8 federal income tax return of the taxpayer, and does 9 not exceed the taxable income attributable to that 10 taxpayer's income, self-employment income, or 11 Subchapter S corporation income; except that no 12 deduction shall be allowed under this item (V) if 13 the taxpayer is eligible to participate in any 14 health insurance or long-term care insurance plan of 15 an employer of the taxpayer or the taxpayer's 16 spouse. The amount of the health insurance and 17 long-term care insurance subtracted under this item 18 (V) shall be determined by multiplying total health 19 insurance and long-term care insurance premiums paid 20 by the taxpayer times a number that represents the 21 fractional percentage of eligible medical expenses 22 under Section 213 of the Internal Revenue Code of 23 1986 not actually deducted on the taxpayer's federal 24 income tax return; 25 (W) For taxable years beginning on or after 26 January 1, 1998, all amounts included in the 27 taxpayer's federal gross income in the taxable year 28 from amounts converted from a regular IRA to a Roth 29 IRA. This paragraph is exempt from the provisions of 30 Section 250; 31 (X) For taxable year 1999 and thereafter, an 32 amount equal to the amount of any (i) distributions, 33 to the extent includible in gross income for federal 34 income tax purposes, made to the taxpayer because of -8- LRB9214118SMdv 1 his or her status as a victim of persecution for 2 racial or religious reasons by Nazi Germany or any 3 other Axis regime or as an heir of the victim and 4 (ii) items of income, to the extent includible in 5 gross income for federal income tax purposes, 6 attributable to, derived from or in any way related 7 to assets stolen from, hidden from, or otherwise 8 lost to a victim of persecution for racial or 9 religious reasons by Nazi Germany or any other Axis 10 regime immediately prior to, during, and immediately 11 after World War II, including, but not limited to, 12 interest on the proceeds receivable as insurance 13 under policies issued to a victim of persecution for 14 racial or religious reasons by Nazi Germany or any 15 other Axis regime by European insurance companies 16 immediately prior to and during World War II; 17 provided, however, this subtraction from federal 18 adjusted gross income does not apply to assets 19 acquired with such assets or with the proceeds from 20 the sale of such assets; provided, further, this 21 paragraph shall only apply to a taxpayer who was the 22 first recipient of such assets after their recovery 23 and who is a victim of persecution for racial or 24 religious reasons by Nazi Germany or any other Axis 25 regime or as an heir of the victim. The amount of 26 and the eligibility for any public assistance, 27 benefit, or similar entitlement is not affected by 28 the inclusion of items (i) and (ii) of this 29 paragraph in gross income for federal income tax 30 purposes. This paragraph is exempt from the 31 provisions of Section 250;and32 (Y) For taxable years beginning on or after 33 January 1, 2002, moneys contributed in the taxable 34 year to a College Savings Pool account under Section -9- LRB9214118SMdv 1 16.5 of the State Treasurer Act. This subparagraph 2 (Y) is exempt from the provisions of Section 250; 3 and 4 (Z) For taxable years ending on or after 5 December 31, 2002, $1,000 per child or the amount of 6 the taxpayer's adjusted gross income, whichever is 7 less, for a married couple filing a joint return who 8 have a minor child or children, if one parent is a 9 full-time stay-at-home parent responsible for the 10 care of the children. A deduction under this 11 subparagraph in excess of the taxpayer's adjusted 12 gross income may not be carried forward or back. 13 This subparagraph is exempt from the provisions of 14 Section 250. 15 (b) Corporations. 16 (1) In general. In the case of a corporation, base 17 income means an amount equal to the taxpayer's taxable 18 income for the taxable year as modified by paragraph (2). 19 (2) Modifications. The taxable income referred to 20 in paragraph (1) shall be modified by adding thereto the 21 sum of the following amounts: 22 (A) An amount equal to all amounts paid or 23 accrued to the taxpayer as interest and all 24 distributions received from regulated investment 25 companies during the taxable year to the extent 26 excluded from gross income in the computation of 27 taxable income; 28 (B) An amount equal to the amount of tax 29 imposed by this Act to the extent deducted from 30 gross income in the computation of taxable income 31 for the taxable year; 32 (C) In the case of a regulated investment 33 company, an amount equal to the excess of (i) the 34 net long-term capital gain for the taxable year, -10- LRB9214118SMdv 1 over (ii) the amount of the capital gain dividends 2 designated as such in accordance with Section 3 852(b)(3)(C) of the Internal Revenue Code and any 4 amount designated under Section 852(b)(3)(D) of the 5 Internal Revenue Code, attributable to the taxable 6 year (this amendatory Act of 1995 (Public Act 89-89) 7 is declarative of existing law and is not a new 8 enactment); 9 (D) The amount of any net operating loss 10 deduction taken in arriving at taxable income, other 11 than a net operating loss carried forward from a 12 taxable year ending prior to December 31, 1986; 13 (E) For taxable years in which a net operating 14 loss carryback or carryforward from a taxable year 15 ending prior to December 31, 1986 is an element of 16 taxable income under paragraph (1) of subsection (e) 17 or subparagraph (E) of paragraph (2) of subsection 18 (e), the amount by which addition modifications 19 other than those provided by this subparagraph (E) 20 exceeded subtraction modifications in such earlier 21 taxable year, with the following limitations applied 22 in the order that they are listed: 23 (i) the addition modification relating to 24 the net operating loss carried back or forward 25 to the taxable year from any taxable year 26 ending prior to December 31, 1986 shall be 27 reduced by the amount of addition modification 28 under this subparagraph (E) which related to 29 that net operating loss and which was taken 30 into account in calculating the base income of 31 an earlier taxable year, and 32 (ii) the addition modification relating 33 to the net operating loss carried back or 34 forward to the taxable year from any taxable -11- LRB9214118SMdv 1 year ending prior to December 31, 1986 shall 2 not exceed the amount of such carryback or 3 carryforward; 4 For taxable years in which there is a net 5 operating loss carryback or carryforward from more 6 than one other taxable year ending prior to December 7 31, 1986, the addition modification provided in this 8 subparagraph (E) shall be the sum of the amounts 9 computed independently under the preceding 10 provisions of this subparagraph (E) for each such 11 taxable year; and 12 (E-5) For taxable years ending after December 13 31, 1997, an amount equal to any eligible 14 remediation costs that the corporation deducted in 15 computing adjusted gross income and for which the 16 corporation claims a credit under subsection (l) of 17 Section 201; 18 and by deducting from the total so obtained the sum of 19 the following amounts: 20 (F) An amount equal to the amount of any tax 21 imposed by this Act which was refunded to the 22 taxpayer and included in such total for the taxable 23 year; 24 (G) An amount equal to any amount included in 25 such total under Section 78 of the Internal Revenue 26 Code; 27 (H) In the case of a regulated investment 28 company, an amount equal to the amount of exempt 29 interest dividends as defined in subsection (b) (5) 30 of Section 852 of the Internal Revenue Code, paid to 31 shareholders for the taxable year; 32 (I) With the exception of any amounts 33 subtracted under subparagraph (J), an amount equal 34 to the sum of all amounts disallowed as deductions -12- LRB9214118SMdv 1 by (i) Sections 171(a) (2), and 265(a)(2) and 2 amounts disallowed as interest expense by Section 3 291(a)(3) of the Internal Revenue Code, as now or 4 hereafter amended, and all amounts of expenses 5 allocable to interest and disallowed as deductions 6 by Section 265(a)(1) of the Internal Revenue Code, 7 as now or hereafter amended; and (ii) for taxable 8 years ending on or after August 13, 1999, Sections 9 171(a)(2), 265, 280C, 291(a)(3), and 832(b)(5)(B)(i) 10 of the Internal Revenue Code; the provisions of this 11 subparagraph are exempt from the provisions of 12 Section 250; 13 (J) An amount equal to all amounts included in 14 such total which are exempt from taxation by this 15 State either by reason of its statutes or 16 Constitution or by reason of the Constitution, 17 treaties or statutes of the United States; provided 18 that, in the case of any statute of this State that 19 exempts income derived from bonds or other 20 obligations from the tax imposed under this Act, the 21 amount exempted shall be the interest net of bond 22 premium amortization; 23 (K) An amount equal to those dividends 24 included in such total which were paid by a 25 corporation which conducts business operations in an 26 Enterprise Zone or zones created under the Illinois 27 Enterprise Zone Act and conducts substantially all 28 of its operations in an Enterprise Zone or zones; 29 (L) An amount equal to those dividends 30 included in such total that were paid by a 31 corporation that conducts business operations in a 32 federally designated Foreign Trade Zone or Sub-Zone 33 and that is designated a High Impact Business 34 located in Illinois; provided that dividends -13- LRB9214118SMdv 1 eligible for the deduction provided in subparagraph 2 (K) of paragraph 2 of this subsection shall not be 3 eligible for the deduction provided under this 4 subparagraph (L); 5 (M) For any taxpayer that is a financial 6 organization within the meaning of Section 304(c) of 7 this Act, an amount included in such total as 8 interest income from a loan or loans made by such 9 taxpayer to a borrower, to the extent that such a 10 loan is secured by property which is eligible for 11 the Enterprise Zone Investment Credit. To determine 12 the portion of a loan or loans that is secured by 13 property eligible for a Section 201(f) investment 14 credit to the borrower, the entire principal amount 15 of the loan or loans between the taxpayer and the 16 borrower should be divided into the basis of the 17 Section 201(f) investment credit property which 18 secures the loan or loans, using for this purpose 19 the original basis of such property on the date that 20 it was placed in service in the Enterprise Zone. 21 The subtraction modification available to taxpayer 22 in any year under this subsection shall be that 23 portion of the total interest paid by the borrower 24 with respect to such loan attributable to the 25 eligible property as calculated under the previous 26 sentence; 27 (M-1) For any taxpayer that is a financial 28 organization within the meaning of Section 304(c) of 29 this Act, an amount included in such total as 30 interest income from a loan or loans made by such 31 taxpayer to a borrower, to the extent that such a 32 loan is secured by property which is eligible for 33 the High Impact Business Investment Credit. To 34 determine the portion of a loan or loans that is -14- LRB9214118SMdv 1 secured by property eligible for a Section 201(h) 2 investment credit to the borrower, the entire 3 principal amount of the loan or loans between the 4 taxpayer and the borrower should be divided into the 5 basis of the Section 201(h) investment credit 6 property which secures the loan or loans, using for 7 this purpose the original basis of such property on 8 the date that it was placed in service in a 9 federally designated Foreign Trade Zone or Sub-Zone 10 located in Illinois. No taxpayer that is eligible 11 for the deduction provided in subparagraph (M) of 12 paragraph (2) of this subsection shall be eligible 13 for the deduction provided under this subparagraph 14 (M-1). The subtraction modification available to 15 taxpayers in any year under this subsection shall be 16 that portion of the total interest paid by the 17 borrower with respect to such loan attributable to 18 the eligible property as calculated under the 19 previous sentence; 20 (N) Two times any contribution made during the 21 taxable year to a designated zone organization to 22 the extent that the contribution (i) qualifies as a 23 charitable contribution under subsection (c) of 24 Section 170 of the Internal Revenue Code and (ii) 25 must, by its terms, be used for a project approved 26 by the Department of Commerce and Community Affairs 27 under Section 11 of the Illinois Enterprise Zone 28 Act; 29 (O) An amount equal to: (i) 85% for taxable 30 years ending on or before December 31, 1992, or, a 31 percentage equal to the percentage allowable under 32 Section 243(a)(1) of the Internal Revenue Code of 33 1986 for taxable years ending after December 31, 34 1992, of the amount by which dividends included in -15- LRB9214118SMdv 1 taxable income and received from a corporation that 2 is not created or organized under the laws of the 3 United States or any state or political subdivision 4 thereof, including, for taxable years ending on or 5 after December 31, 1988, dividends received or 6 deemed received or paid or deemed paid under 7 Sections 951 through 964 of the Internal Revenue 8 Code, exceed the amount of the modification provided 9 under subparagraph (G) of paragraph (2) of this 10 subsection (b) which is related to such dividends; 11 plus (ii) 100% of the amount by which dividends, 12 included in taxable income and received, including, 13 for taxable years ending on or after December 31, 14 1988, dividends received or deemed received or paid 15 or deemed paid under Sections 951 through 964 of the 16 Internal Revenue Code, from any such corporation 17 specified in clause (i) that would but for the 18 provisions of Section 1504 (b) (3) of the Internal 19 Revenue Code be treated as a member of the 20 affiliated group which includes the dividend 21 recipient, exceed the amount of the modification 22 provided under subparagraph (G) of paragraph (2) of 23 this subsection (b) which is related to such 24 dividends; 25 (P) An amount equal to any contribution made 26 to a job training project established pursuant to 27 the Tax Increment Allocation Redevelopment Act; 28 (Q) An amount equal to the amount of the 29 deduction used to compute the federal income tax 30 credit for restoration of substantial amounts held 31 under claim of right for the taxable year pursuant 32 to Section 1341 of the Internal Revenue Code of 33 1986; 34 (R) In the case of an attorney-in-fact with -16- LRB9214118SMdv 1 respect to whom an interinsurer or a reciprocal 2 insurer has made the election under Section 835 of 3 the Internal Revenue Code, 26 U.S.C. 835, an amount 4 equal to the excess, if any, of the amounts paid or 5 incurred by that interinsurer or reciprocal insurer 6 in the taxable year to the attorney-in-fact over the 7 deduction allowed to that interinsurer or reciprocal 8 insurer with respect to the attorney-in-fact under 9 Section 835(b) of the Internal Revenue Code for the 10 taxable year; and 11 (S) For taxable years ending on or after 12 December 31, 1997, in the case of a Subchapter S 13 corporation, an amount equal to all amounts of 14 income allocable to a shareholder subject to the 15 Personal Property Tax Replacement Income Tax imposed 16 by subsections (c) and (d) of Section 201 of this 17 Act, including amounts allocable to organizations 18 exempt from federal income tax by reason of Section 19 501(a) of the Internal Revenue Code. This 20 subparagraph (S) is exempt from the provisions of 21 Section 250. 22 (3) Special rule. For purposes of paragraph (2) 23 (A), "gross income" in the case of a life insurance 24 company, for tax years ending on and after December 31, 25 1994, shall mean the gross investment income for the 26 taxable year. 27 (c) Trusts and estates. 28 (1) In general. In the case of a trust or estate, 29 base income means an amount equal to the taxpayer's 30 taxable income for the taxable year as modified by 31 paragraph (2). 32 (2) Modifications. Subject to the provisions of 33 paragraph (3), the taxable income referred to in 34 paragraph (1) shall be modified by adding thereto the sum -17- LRB9214118SMdv 1 of the following amounts: 2 (A) An amount equal to all amounts paid or 3 accrued to the taxpayer as interest or dividends 4 during the taxable year to the extent excluded from 5 gross income in the computation of taxable income; 6 (B) In the case of (i) an estate, $600; (ii) a 7 trust which, under its governing instrument, is 8 required to distribute all of its income currently, 9 $300; and (iii) any other trust, $100, but in each 10 such case, only to the extent such amount was 11 deducted in the computation of taxable income; 12 (C) An amount equal to the amount of tax 13 imposed by this Act to the extent deducted from 14 gross income in the computation of taxable income 15 for the taxable year; 16 (D) The amount of any net operating loss 17 deduction taken in arriving at taxable income, other 18 than a net operating loss carried forward from a 19 taxable year ending prior to December 31, 1986; 20 (E) For taxable years in which a net operating 21 loss carryback or carryforward from a taxable year 22 ending prior to December 31, 1986 is an element of 23 taxable income under paragraph (1) of subsection (e) 24 or subparagraph (E) of paragraph (2) of subsection 25 (e), the amount by which addition modifications 26 other than those provided by this subparagraph (E) 27 exceeded subtraction modifications in such taxable 28 year, with the following limitations applied in the 29 order that they are listed: 30 (i) the addition modification relating to 31 the net operating loss carried back or forward 32 to the taxable year from any taxable year 33 ending prior to December 31, 1986 shall be 34 reduced by the amount of addition modification -18- LRB9214118SMdv 1 under this subparagraph (E) which related to 2 that net operating loss and which was taken 3 into account in calculating the base income of 4 an earlier taxable year, and 5 (ii) the addition modification relating 6 to the net operating loss carried back or 7 forward to the taxable year from any taxable 8 year ending prior to December 31, 1986 shall 9 not exceed the amount of such carryback or 10 carryforward; 11 For taxable years in which there is a net 12 operating loss carryback or carryforward from more 13 than one other taxable year ending prior to December 14 31, 1986, the addition modification provided in this 15 subparagraph (E) shall be the sum of the amounts 16 computed independently under the preceding 17 provisions of this subparagraph (E) for each such 18 taxable year; 19 (F) For taxable years ending on or after 20 January 1, 1989, an amount equal to the tax deducted 21 pursuant to Section 164 of the Internal Revenue Code 22 if the trust or estate is claiming the same tax for 23 purposes of the Illinois foreign tax credit under 24 Section 601 of this Act; 25 (G) An amount equal to the amount of the 26 capital gain deduction allowable under the Internal 27 Revenue Code, to the extent deducted from gross 28 income in the computation of taxable income; and 29 (G-5) For taxable years ending after December 30 31, 1997, an amount equal to any eligible 31 remediation costs that the trust or estate deducted 32 in computing adjusted gross income and for which the 33 trust or estate claims a credit under subsection (l) 34 of Section 201; -19- LRB9214118SMdv 1 and by deducting from the total so obtained the sum of 2 the following amounts: 3 (H) An amount equal to all amounts included in 4 such total pursuant to the provisions of Sections 5 402(a), 402(c), 403(a), 403(b), 406(a), 407(a) and 6 408 of the Internal Revenue Code or included in such 7 total as distributions under the provisions of any 8 retirement or disability plan for employees of any 9 governmental agency or unit, or retirement payments 10 to retired partners, which payments are excluded in 11 computing net earnings from self employment by 12 Section 1402 of the Internal Revenue Code and 13 regulations adopted pursuant thereto; 14 (I) The valuation limitation amount; 15 (J) An amount equal to the amount of any tax 16 imposed by this Act which was refunded to the 17 taxpayer and included in such total for the taxable 18 year; 19 (K) An amount equal to all amounts included in 20 taxable income as modified by subparagraphs (A), 21 (B), (C), (D), (E), (F) and (G) which are exempt 22 from taxation by this State either by reason of its 23 statutes or Constitution or by reason of the 24 Constitution, treaties or statutes of the United 25 States; provided that, in the case of any statute of 26 this State that exempts income derived from bonds or 27 other obligations from the tax imposed under this 28 Act, the amount exempted shall be the interest net 29 of bond premium amortization; 30 (L) With the exception of any amounts 31 subtracted under subparagraph (K), an amount equal 32 to the sum of all amounts disallowed as deductions 33 by (i) Sections 171(a) (2) and 265(a)(2) of the 34 Internal Revenue Code, as now or hereafter amended, -20- LRB9214118SMdv 1 and all amounts of expenses allocable to interest 2 and disallowed as deductions by Section 265(1) of 3 the Internal Revenue Code of 1954, as now or 4 hereafter amended; and (ii) for taxable years ending 5 on or after August 13, 1999, Sections 171(a)(2), 6 265, 280C, and 832(b)(5)(B)(i) of the Internal 7 Revenue Code; the provisions of this subparagraph 8 are exempt from the provisions of Section 250; 9 (M) An amount equal to those dividends 10 included in such total which were paid by a 11 corporation which conducts business operations in an 12 Enterprise Zone or zones created under the Illinois 13 Enterprise Zone Act and conducts substantially all 14 of its operations in an Enterprise Zone or Zones; 15 (N) An amount equal to any contribution made 16 to a job training project established pursuant to 17 the Tax Increment Allocation Redevelopment Act; 18 (O) An amount equal to those dividends 19 included in such total that were paid by a 20 corporation that conducts business operations in a 21 federally designated Foreign Trade Zone or Sub-Zone 22 and that is designated a High Impact Business 23 located in Illinois; provided that dividends 24 eligible for the deduction provided in subparagraph 25 (M) of paragraph (2) of this subsection shall not be 26 eligible for the deduction provided under this 27 subparagraph (O); 28 (P) An amount equal to the amount of the 29 deduction used to compute the federal income tax 30 credit for restoration of substantial amounts held 31 under claim of right for the taxable year pursuant 32 to Section 1341 of the Internal Revenue Code of 33 1986; and 34 (Q) For taxable year 1999 and thereafter, an -21- LRB9214118SMdv 1 amount equal to the amount of any (i) distributions, 2 to the extent includible in gross income for federal 3 income tax purposes, made to the taxpayer because of 4 his or her status as a victim of persecution for 5 racial or religious reasons by Nazi Germany or any 6 other Axis regime or as an heir of the victim and 7 (ii) items of income, to the extent includible in 8 gross income for federal income tax purposes, 9 attributable to, derived from or in any way related 10 to assets stolen from, hidden from, or otherwise 11 lost to a victim of persecution for racial or 12 religious reasons by Nazi Germany or any other Axis 13 regime immediately prior to, during, and immediately 14 after World War II, including, but not limited to, 15 interest on the proceeds receivable as insurance 16 under policies issued to a victim of persecution for 17 racial or religious reasons by Nazi Germany or any 18 other Axis regime by European insurance companies 19 immediately prior to and during World War II; 20 provided, however, this subtraction from federal 21 adjusted gross income does not apply to assets 22 acquired with such assets or with the proceeds from 23 the sale of such assets; provided, further, this 24 paragraph shall only apply to a taxpayer who was the 25 first recipient of such assets after their recovery 26 and who is a victim of persecution for racial or 27 religious reasons by Nazi Germany or any other Axis 28 regime or as an heir of the victim. The amount of 29 and the eligibility for any public assistance, 30 benefit, or similar entitlement is not affected by 31 the inclusion of items (i) and (ii) of this 32 paragraph in gross income for federal income tax 33 purposes. This paragraph is exempt from the 34 provisions of Section 250. -22- LRB9214118SMdv 1 (3) Limitation. The amount of any modification 2 otherwise required under this subsection shall, under 3 regulations prescribed by the Department, be adjusted by 4 any amounts included therein which were properly paid, 5 credited, or required to be distributed, or permanently 6 set aside for charitable purposes pursuant to Internal 7 Revenue Code Section 642(c) during the taxable year. 8 (d) Partnerships. 9 (1) In general. In the case of a partnership, base 10 income means an amount equal to the taxpayer's taxable 11 income for the taxable year as modified by paragraph (2). 12 (2) Modifications. The taxable income referred to 13 in paragraph (1) shall be modified by adding thereto the 14 sum of the following amounts: 15 (A) An amount equal to all amounts paid or 16 accrued to the taxpayer as interest or dividends 17 during the taxable year to the extent excluded from 18 gross income in the computation of 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 for the taxable year; 22 (C) The amount of deductions allowed to the 23 partnership pursuant to Section 707 (c) of the 24 Internal Revenue Code in calculating its taxable 25 income; and 26 (D) An amount equal to the amount of the 27 capital gain deduction allowable under the Internal 28 Revenue Code, to the extent deducted from gross 29 income in the computation of taxable income; 30 and by deducting from the total so obtained the following 31 amounts: 32 (E) The valuation limitation amount; 33 (F) An amount equal to the amount of any tax 34 imposed by this Act which was refunded to the -23- LRB9214118SMdv 1 taxpayer and included in such total for the taxable 2 year; 3 (G) An amount equal to all amounts included in 4 taxable income as modified by subparagraphs (A), 5 (B), (C) and (D) which are exempt from taxation by 6 this 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 (H) Any income of the partnership which 15 constitutes personal service income as defined in 16 Section 1348 (b) (1) of the Internal Revenue Code 17 (as in effect December 31, 1981) or a reasonable 18 allowance for compensation paid or accrued for 19 services rendered by partners to the partnership, 20 whichever is greater; 21 (I) An amount equal to all amounts of income 22 distributable to an entity subject to the Personal 23 Property Tax Replacement Income Tax imposed by 24 subsections (c) and (d) of Section 201 of this Act 25 including amounts distributable to organizations 26 exempt from federal income tax by reason of Section 27 501(a) of the Internal Revenue Code; 28 (J) With the exception of any amounts 29 subtracted under subparagraph (G), an amount equal 30 to the sum of all amounts disallowed as deductions 31 by (i) Sections 171(a) (2), and 265(2) of the 32 Internal Revenue Code of 1954, as now or hereafter 33 amended, and all amounts of expenses allocable to 34 interest and disallowed as deductions by Section -24- LRB9214118SMdv 1 265(1) of the Internal Revenue Code, as now or 2 hereafter amended; and (ii) for taxable years ending 3 on or after August 13, 1999, Sections 171(a)(2), 4 265, 280C, and 832(b)(5)(B)(i) of the Internal 5 Revenue Code; the provisions of this subparagraph 6 are exempt from the provisions of Section 250; 7 (K) An amount equal to those dividends 8 included in such total which were paid by a 9 corporation which conducts business operations in an 10 Enterprise Zone or zones created under the Illinois 11 Enterprise Zone Act, enacted by the 82nd General 12 Assembly, and which does not conduct such operations 13 other than in an Enterprise Zone or Zones; 14 (L) An amount equal to any contribution made 15 to a job training project established pursuant to 16 the Real Property Tax Increment Allocation 17 Redevelopment Act; 18 (M) An amount equal to those dividends 19 included in such total that were paid by a 20 corporation that conducts business operations in a 21 federally designated Foreign Trade Zone or Sub-Zone 22 and that is designated a High Impact Business 23 located in Illinois; provided that dividends 24 eligible for the deduction provided in subparagraph 25 (K) of paragraph (2) of this subsection shall not be 26 eligible for the deduction provided under this 27 subparagraph (M); and 28 (N) An amount equal to the amount of the 29 deduction used to compute the federal income tax 30 credit for restoration of substantial amounts held 31 under claim of right for the taxable year pursuant 32 to Section 1341 of the Internal Revenue Code of 33 1986. 34 (e) Gross income; adjusted gross income; taxable income. -25- LRB9214118SMdv 1 (1) In general. Subject to the provisions of 2 paragraph (2) and subsection (b) (3), for purposes of 3 this Section and Section 803(e), a taxpayer's gross 4 income, adjusted gross income, or taxable income for the 5 taxable year shall mean the amount of gross income, 6 adjusted gross income or taxable income properly 7 reportable for federal income tax purposes for the 8 taxable year under the provisions of the Internal Revenue 9 Code. Taxable income may be less than zero. However, for 10 taxable years ending on or after December 31, 1986, net 11 operating loss carryforwards from taxable years ending 12 prior to December 31, 1986, may not exceed the sum of 13 federal taxable income for the taxable year before net 14 operating loss deduction, plus the excess of addition 15 modifications over subtraction modifications for the 16 taxable year. For taxable years ending prior to December 17 31, 1986, taxable income may never be an amount in excess 18 of the net operating loss for the taxable year as defined 19 in subsections (c) and (d) of Section 172 of the Internal 20 Revenue Code, provided that when taxable income of a 21 corporation (other than a Subchapter S corporation), 22 trust, or estate is less than zero and addition 23 modifications, other than those provided by subparagraph 24 (E) of paragraph (2) of subsection (b) for corporations 25 or subparagraph (E) of paragraph (2) of subsection (c) 26 for trusts and estates, exceed subtraction modifications, 27 an addition modification must be made under those 28 subparagraphs for any other taxable year to which the 29 taxable income less than zero (net operating loss) is 30 applied under Section 172 of the Internal Revenue Code or 31 under subparagraph (E) of paragraph (2) of this 32 subsection (e) applied in conjunction with Section 172 of 33 the Internal Revenue Code. 34 (2) Special rule. For purposes of paragraph (1) of -26- LRB9214118SMdv 1 this subsection, the taxable income properly reportable 2 for federal income tax purposes shall mean: 3 (A) Certain life insurance companies. In the 4 case of a life insurance company subject to the tax 5 imposed by Section 801 of the Internal Revenue Code, 6 life insurance company taxable income, plus the 7 amount of distribution from pre-1984 policyholder 8 surplus accounts as calculated under Section 815a of 9 the Internal Revenue Code; 10 (B) Certain other insurance companies. In the 11 case of mutual insurance companies subject to the 12 tax imposed by Section 831 of the Internal Revenue 13 Code, insurance company taxable income; 14 (C) Regulated investment companies. In the 15 case of a regulated investment company subject to 16 the tax imposed by Section 852 of the Internal 17 Revenue Code, investment company taxable income; 18 (D) Real estate investment trusts. In the 19 case of a real estate investment trust subject to 20 the tax imposed by Section 857 of the Internal 21 Revenue Code, real estate investment trust taxable 22 income; 23 (E) Consolidated corporations. In the case of 24 a corporation which is a member of an affiliated 25 group of corporations filing a consolidated income 26 tax return for the taxable year for federal income 27 tax purposes, taxable income determined as if such 28 corporation had filed a separate return for federal 29 income tax purposes for the taxable year and each 30 preceding taxable year for which it was a member of 31 an affiliated group. For purposes of this 32 subparagraph, the taxpayer's separate taxable income 33 shall be determined as if the election provided by 34 Section 243(b) (2) of the Internal Revenue Code had -27- LRB9214118SMdv 1 been in effect for all such years; 2 (F) Cooperatives. In the case of a 3 cooperative corporation or association, the taxable 4 income of such organization determined in accordance 5 with the provisions of Section 1381 through 1388 of 6 the Internal Revenue Code; 7 (G) Subchapter S corporations. In the case 8 of: (i) a Subchapter S corporation for which there 9 is in effect an election for the taxable year under 10 Section 1362 of the Internal Revenue Code, the 11 taxable income of such corporation determined in 12 accordance with Section 1363(b) of the Internal 13 Revenue Code, except that taxable income shall take 14 into account those items which are required by 15 Section 1363(b)(1) of the Internal Revenue Code to 16 be separately stated; and (ii) a Subchapter S 17 corporation for which there is in effect a federal 18 election to opt out of the provisions of the 19 Subchapter S Revision Act of 1982 and have applied 20 instead the prior federal Subchapter S rules as in 21 effect on July 1, 1982, the taxable income of such 22 corporation determined in accordance with the 23 federal Subchapter S rules as in effect on July 1, 24 1982; and 25 (H) Partnerships. In the case of a 26 partnership, taxable income determined in accordance 27 with Section 703 of the Internal Revenue Code, 28 except that taxable income shall take into account 29 those items which are required by Section 703(a)(1) 30 to be separately stated but which would be taken 31 into account by an individual in calculating his 32 taxable income. 33 (f) Valuation limitation amount. 34 (1) In general. The valuation limitation amount -28- LRB9214118SMdv 1 referred to in subsections (a) (2) (G), (c) (2) (I) and 2 (d)(2) (E) is an amount equal to: 3 (A) The sum of the pre-August 1, 1969 4 appreciation amounts (to the extent consisting of 5 gain reportable under the provisions of Section 1245 6 or 1250 of the Internal Revenue Code) for all 7 property in respect of which such gain was reported 8 for the taxable year; plus 9 (B) The lesser of (i) the sum of the 10 pre-August 1, 1969 appreciation amounts (to the 11 extent consisting of capital gain) for all property 12 in respect of which such gain was reported for 13 federal income tax purposes for the taxable year, or 14 (ii) the net capital gain for the taxable year, 15 reduced in either case by any amount of such gain 16 included in the amount determined under subsection 17 (a) (2) (F) or (c) (2) (H). 18 (2) Pre-August 1, 1969 appreciation amount. 19 (A) If the fair market value of property 20 referred to in paragraph (1) was readily 21 ascertainable on August 1, 1969, the pre-August 1, 22 1969 appreciation amount for such property is the 23 lesser of (i) the excess of such fair market value 24 over the taxpayer's basis (for determining gain) for 25 such property on that date (determined under the 26 Internal Revenue Code as in effect on that date), or 27 (ii) the total gain realized and reportable for 28 federal income tax purposes in respect of the sale, 29 exchange or other disposition of such property. 30 (B) If the fair market value of property 31 referred to in paragraph (1) was not readily 32 ascertainable on August 1, 1969, the pre-August 1, 33 1969 appreciation amount for such property is that 34 amount which bears the same ratio to the total gain -29- LRB9214118SMdv 1 reported in respect of the property for federal 2 income tax purposes for the taxable year, as the 3 number of full calendar months in that part of the 4 taxpayer's holding period for the property ending 5 July 31, 1969 bears to the number of full calendar 6 months in the taxpayer's entire holding period for 7 the property. 8 (C) The Department shall prescribe such 9 regulations as may be necessary to carry out the 10 purposes of this paragraph. 11 (g) Double deductions. Unless specifically provided 12 otherwise, nothing in this Section shall permit the same item 13 to be deducted more than once. 14 (h) Legislative intention. Except as expressly provided 15 by this Section there shall be no modifications or 16 limitations on the amounts of income, gain, loss or deduction 17 taken into account in determining gross income, adjusted 18 gross income or taxable income for federal income tax 19 purposes for the taxable year, or in the amount of such items 20 entering into the computation of base income and net income 21 under this Act for such taxable year, whether in respect of 22 property values as of August 1, 1969 or otherwise. 23 (Source: P.A. 91-192, eff. 7-20-99; 91-205, eff. 7-20-99; 24 91-357, eff. 7-29-99; 91-541, eff. 8-13-99; 91-676, eff. 25 12-23-99; 91-845, eff. 6-22-00; 91-913, eff. 1-1-01; 92-16, 26 eff. 6-28-01; 92-244, eff. 8-3-01; 92-439, eff. 8-17-01; 27 revised 9-21-01.) 28 Section 99. Effective date. This Act takes effect upon 29 becoming law.