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92_HB5744 LRB9215312SMpk 1 AN ACT concerning taxes. 2 Be it enacted by the People of the State of Illinois, 3 represented in the General Assembly: 4 Section 5. The Illinois Income Tax Act is amended by 5 changing Section 203 as follows: 6 (35 ILCS 5/203) (from Ch. 120, par. 2-203) 7 Sec. 203. Base income defined. 8 (a) Individuals. 9 (1) In general. In the case of an individual, base 10 income means an amount equal to the taxpayer's adjusted 11 gross income for the taxable year as modified by 12 paragraph (2). 13 (2) Modifications. The adjusted gross income 14 referred to in paragraph (1) shall be modified by adding 15 thereto the sum of the following amounts: 16 (A) An amount equal to all amounts paid or 17 accrued to the taxpayer as interest or dividends 18 during the taxable year to the extent excluded from 19 gross income in the computation of adjusted gross 20 income, except stock dividends of qualified public 21 utilities described in Section 305(e) of the 22 Internal Revenue Code; 23 (B) An amount equal to the amount of tax 24 imposed by this Act to the extent deducted from 25 gross income in the computation of adjusted gross 26 income for the taxable year; 27 (C) An amount equal to the amount received 28 during the taxable year as a recovery or refund of 29 real property taxes paid with respect to the 30 taxpayer's principal residence under the Revenue Act 31 of 1939 and for which a deduction was previously -2- LRB9215312SMpk 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income; 13 (D-5) An amount, to the extent not included in 14 adjusted gross income, equal to the amount of money 15 withdrawn by the taxpayer in the taxable year from a 16 medical care savings account and the interest earned 17 on the account in the taxable year of a withdrawal 18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- LRB9215312SMpk 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- LRB9215312SMpk 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- LRB9215312SMpk 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- LRB9215312SMpk 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- LRB9215312SMpk 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- LRB9215312SMpk 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- LRB9215312SMpk 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 beginning on or after 5 March 1, 2000 (the first day the State Treasurer was 6 authorized to accept any moneys into the Colloge 7 Savings Pool), an amount equal to any amount 8 included in adjusted gross income representing (i) 9 any amount held in, (ii) earnings on any amount held 10 in, or (iii) any disbursements from a College 11 Savings Pool account established under Section 16.5 12 of the State Treasurer Act, so long as disbursed 13 amounts are used for qualified expenses as 14 determined under Section 16.5 of the State Treasurer 15 Act. This subparagraph is exempt from the provisions 16 of Section 250. 17 (b) Corporations. 18 (1) In general. In the case of a corporation, base 19 income means an amount equal to the taxpayer's taxable 20 income for the taxable year as modified by paragraph (2). 21 (2) Modifications. The taxable income referred to 22 in paragraph (1) shall be modified by adding thereto the 23 sum of the following amounts: 24 (A) An amount equal to all amounts paid or 25 accrued to the taxpayer as interest and all 26 distributions received from regulated investment 27 companies during the taxable year to the extent 28 excluded from gross income in the computation of 29 taxable income; 30 (B) An amount equal to the amount of tax 31 imposed by this Act to the extent deducted from 32 gross income in the computation of taxable income 33 for the taxable year; 34 (C) In the case of a regulated investment -10- LRB9215312SMpk 1 company, an amount equal to the excess of (i) the 2 net long-term capital gain for the taxable year, 3 over (ii) the amount of the capital gain dividends 4 designated as such in accordance with Section 5 852(b)(3)(C) of the Internal Revenue Code and any 6 amount designated under Section 852(b)(3)(D) of the 7 Internal Revenue Code, attributable to the taxable 8 year (this amendatory Act of 1995 (Public Act 89-89) 9 is declarative of existing law and is not a new 10 enactment); 11 (D) The amount of any net operating loss 12 deduction taken in arriving at taxable income, other 13 than a net operating loss carried forward from a 14 taxable year ending prior to December 31, 1986; 15 (E) For taxable years in which a net operating 16 loss carryback or carryforward from a taxable year 17 ending prior to December 31, 1986 is an element of 18 taxable income under paragraph (1) of subsection (e) 19 or subparagraph (E) of paragraph (2) of subsection 20 (e), the amount by which addition modifications 21 other than those provided by this subparagraph (E) 22 exceeded subtraction modifications in such earlier 23 taxable year, with the following limitations applied 24 in the order that they are listed: 25 (i) the addition modification relating to 26 the net operating loss carried back or forward 27 to the taxable year from any taxable year 28 ending prior to December 31, 1986 shall be 29 reduced by the amount of addition modification 30 under this subparagraph (E) which related to 31 that net operating loss and which was taken 32 into account in calculating the base income of 33 an earlier taxable year, and 34 (ii) the addition modification relating -11- LRB9215312SMpk 1 to the net operating loss carried back or 2 forward to the taxable year from any taxable 3 year ending prior to December 31, 1986 shall 4 not exceed the amount of such carryback or 5 carryforward; 6 For taxable years in which there is a net 7 operating loss carryback or carryforward from more 8 than one other taxable year ending prior to December 9 31, 1986, the addition modification provided in this 10 subparagraph (E) shall be the sum of the amounts 11 computed independently under the preceding 12 provisions of this subparagraph (E) for each such 13 taxable year; and 14 (E-5) For taxable years ending after December 15 31, 1997, an amount equal to any eligible 16 remediation costs that the corporation deducted in 17 computing adjusted gross income and for which the 18 corporation claims a credit under subsection (l) of 19 Section 201; 20 and by deducting from the total so obtained the sum of 21 the following amounts: 22 (F) An amount equal to the amount of any tax 23 imposed by this Act which was refunded to the 24 taxpayer and included in such total for the taxable 25 year; 26 (G) An amount equal to any amount included in 27 such total under Section 78 of the Internal Revenue 28 Code; 29 (H) In the case of a regulated investment 30 company, an amount equal to the amount of exempt 31 interest dividends as defined in subsection (b) (5) 32 of Section 852 of the Internal Revenue Code, paid to 33 shareholders for the taxable year; 34 (I) With the exception of any amounts -12- LRB9215312SMpk 1 subtracted under subparagraph (J), an amount equal 2 to the sum of all amounts disallowed as deductions 3 by (i) Sections 171(a) (2), and 265(a)(2) and 4 amounts disallowed as interest expense by Section 5 291(a)(3) of the Internal Revenue Code, as now or 6 hereafter amended, and all amounts of expenses 7 allocable to interest and disallowed as deductions 8 by Section 265(a)(1) of the Internal Revenue Code, 9 as now or hereafter amended; and (ii) for taxable 10 years ending on or after August 13, 1999, Sections 11 171(a)(2), 265, 280C, 291(a)(3), and 832(b)(5)(B)(i) 12 of the Internal Revenue Code; the provisions of this 13 subparagraph are exempt from the provisions of 14 Section 250; 15 (J) An amount equal to all amounts included in 16 such total which are exempt from taxation by this 17 State either by reason of its statutes or 18 Constitution or by reason of the Constitution, 19 treaties or statutes of the United States; provided 20 that, in the case of any statute of this State that 21 exempts income derived from bonds or other 22 obligations from the tax imposed under this Act, the 23 amount exempted shall be the interest net of bond 24 premium amortization; 25 (K) An amount equal to those dividends 26 included in such total which were paid by a 27 corporation which conducts business operations in an 28 Enterprise Zone or zones created under the Illinois 29 Enterprise Zone Act and conducts substantially all 30 of its operations in an Enterprise Zone or zones; 31 (L) An amount equal to those dividends 32 included in such total that were paid by a 33 corporation that conducts business operations in a 34 federally designated Foreign Trade Zone or Sub-Zone -13- LRB9215312SMpk 1 and that is designated a High Impact Business 2 located in Illinois; provided that dividends 3 eligible for the deduction provided in subparagraph 4 (K) of paragraph 2 of this subsection shall not be 5 eligible for the deduction provided under this 6 subparagraph (L); 7 (M) For any taxpayer that is a financial 8 organization within the meaning of Section 304(c) of 9 this Act, an amount included in such total as 10 interest income from a loan or loans made by such 11 taxpayer to a borrower, to the extent that such a 12 loan is secured by property which is eligible for 13 the Enterprise Zone Investment Credit. To determine 14 the portion of a loan or loans that is secured by 15 property eligible for a Section 201(f) investment 16 credit to the borrower, the entire principal amount 17 of the loan or loans between the taxpayer and the 18 borrower should be divided into the basis of the 19 Section 201(f) investment credit property which 20 secures the loan or loans, using for this purpose 21 the original basis of such property on the date that 22 it was placed in service in the Enterprise Zone. 23 The subtraction modification available to taxpayer 24 in any year under this subsection shall be that 25 portion of the total interest paid by the borrower 26 with respect to such loan attributable to the 27 eligible property as calculated under the previous 28 sentence; 29 (M-1) For any taxpayer that is a financial 30 organization within the meaning of Section 304(c) of 31 this Act, an amount included in such total as 32 interest income from a loan or loans made by such 33 taxpayer to a borrower, to the extent that such a 34 loan is secured by property which is eligible for -14- LRB9215312SMpk 1 the High Impact Business Investment Credit. To 2 determine the portion of a loan or loans that is 3 secured by property eligible for a Section 201(h) 4 investment credit to the borrower, the entire 5 principal amount of the loan or loans between the 6 taxpayer and the borrower should be divided into the 7 basis of the Section 201(h) investment credit 8 property which secures the loan or loans, using for 9 this purpose the original basis of such property on 10 the date that it was placed in service in a 11 federally designated Foreign Trade Zone or Sub-Zone 12 located in Illinois. No taxpayer that is eligible 13 for the deduction provided in subparagraph (M) of 14 paragraph (2) of this subsection shall be eligible 15 for the deduction provided under this subparagraph 16 (M-1). The subtraction modification available to 17 taxpayers in any year under this subsection shall be 18 that portion of the total interest paid by the 19 borrower with respect to such loan attributable to 20 the eligible property as calculated under the 21 previous sentence; 22 (N) Two times any contribution made during the 23 taxable year to a designated zone organization to 24 the extent that the contribution (i) qualifies as a 25 charitable contribution under subsection (c) of 26 Section 170 of the Internal Revenue Code and (ii) 27 must, by its terms, be used for a project approved 28 by the Department of Commerce and Community Affairs 29 under Section 11 of the Illinois Enterprise Zone 30 Act; 31 (O) An amount equal to: (i) 85% for taxable 32 years ending on or before December 31, 1992, or, a 33 percentage equal to the percentage allowable under 34 Section 243(a)(1) of the Internal Revenue Code of -15- LRB9215312SMpk 1 1986 for taxable years ending after December 31, 2 1992, of the amount by which dividends included in 3 taxable income and received from a corporation that 4 is not created or organized under the laws of the 5 United States or any state or political subdivision 6 thereof, including, for taxable years ending on or 7 after December 31, 1988, dividends received or 8 deemed received or paid or deemed paid under 9 Sections 951 through 964 of the Internal Revenue 10 Code, exceed the amount of the modification provided 11 under subparagraph (G) of paragraph (2) of this 12 subsection (b) which is related to such dividends; 13 plus (ii) 100% of the amount by which dividends, 14 included in taxable income and received, including, 15 for taxable years ending on or after December 31, 16 1988, dividends received or deemed received or paid 17 or deemed paid under Sections 951 through 964 of the 18 Internal Revenue Code, from any such corporation 19 specified in clause (i) that would but for the 20 provisions of Section 1504 (b) (3) of the Internal 21 Revenue Code be treated as a member of the 22 affiliated group which includes the dividend 23 recipient, exceed the amount of the modification 24 provided under subparagraph (G) of paragraph (2) of 25 this subsection (b) which is related to such 26 dividends; 27 (P) An amount equal to any contribution made 28 to a job training project established pursuant to 29 the Tax Increment Allocation Redevelopment Act; 30 (Q) An amount equal to the amount of the 31 deduction used to compute the federal income tax 32 credit for restoration of substantial amounts held 33 under claim of right for the taxable year pursuant 34 to Section 1341 of the Internal Revenue Code of -16- LRB9215312SMpk 1 1986; 2 (R) In the case of an attorney-in-fact with 3 respect to whom an interinsurer or a reciprocal 4 insurer has made the election under Section 835 of 5 the Internal Revenue Code, 26 U.S.C. 835, an amount 6 equal to the excess, if any, of the amounts paid or 7 incurred by that interinsurer or reciprocal insurer 8 in the taxable year to the attorney-in-fact over the 9 deduction allowed to that interinsurer or reciprocal 10 insurer with respect to the attorney-in-fact under 11 Section 835(b) of the Internal Revenue Code for the 12 taxable year; and 13 (S) For taxable years ending on or after 14 December 31, 1997, in the case of a Subchapter S 15 corporation, an amount equal to all amounts of 16 income allocable to a shareholder subject to the 17 Personal Property Tax Replacement Income Tax imposed 18 by subsections (c) and (d) of Section 201 of this 19 Act, including amounts allocable to organizations 20 exempt from federal income tax by reason of Section 21 501(a) of the Internal Revenue Code. This 22 subparagraph (S) is exempt from the provisions of 23 Section 250. 24 (3) Special rule. For purposes of paragraph (2) 25 (A), "gross income" in the case of a life insurance 26 company, for tax years ending on and after December 31, 27 1994, shall mean the gross investment income for the 28 taxable year. 29 (c) Trusts and estates. 30 (1) In general. In the case of a trust or estate, 31 base income means an amount equal to the taxpayer's 32 taxable income for the taxable year as modified by 33 paragraph (2). 34 (2) Modifications. Subject to the provisions of -17- LRB9215312SMpk 1 paragraph (3), the taxable income referred to in 2 paragraph (1) shall be modified by adding thereto the sum 3 of the following amounts: 4 (A) An amount equal to all amounts paid or 5 accrued to the taxpayer as interest or dividends 6 during the taxable year to the extent excluded from 7 gross income in the computation of taxable income; 8 (B) In the case of (i) an estate, $600; (ii) a 9 trust which, under its governing instrument, is 10 required to distribute all of its income currently, 11 $300; and (iii) any other trust, $100, but in each 12 such case, only to the extent such amount was 13 deducted in the computation of taxable income; 14 (C) An amount equal to the amount of tax 15 imposed by this Act to the extent deducted from 16 gross income in the computation of taxable income 17 for the taxable year; 18 (D) The amount of any net operating loss 19 deduction taken in arriving at taxable income, other 20 than a net operating loss carried forward from a 21 taxable year ending prior to December 31, 1986; 22 (E) For taxable years in which a net operating 23 loss carryback or carryforward from a taxable year 24 ending prior to December 31, 1986 is an element of 25 taxable income under paragraph (1) of subsection (e) 26 or subparagraph (E) of paragraph (2) of subsection 27 (e), the amount by which addition modifications 28 other than those provided by this subparagraph (E) 29 exceeded subtraction modifications in such taxable 30 year, with the following limitations applied in the 31 order that they are listed: 32 (i) the addition modification relating to 33 the net operating loss carried back or forward 34 to the taxable year from any taxable year -18- LRB9215312SMpk 1 ending prior to December 31, 1986 shall be 2 reduced by the amount of addition modification 3 under this subparagraph (E) which related to 4 that net operating loss and which was taken 5 into account in calculating the base income of 6 an earlier taxable year, and 7 (ii) the addition modification relating 8 to the net operating loss carried back or 9 forward to the taxable year from any taxable 10 year ending prior to December 31, 1986 shall 11 not exceed the amount of such carryback or 12 carryforward; 13 For taxable years in which there is a net 14 operating loss carryback or carryforward from more 15 than one other taxable year ending prior to December 16 31, 1986, the addition modification provided in this 17 subparagraph (E) shall be the sum of the amounts 18 computed independently under the preceding 19 provisions of this subparagraph (E) for each such 20 taxable year; 21 (F) For taxable years ending on or after 22 January 1, 1989, an amount equal to the tax deducted 23 pursuant to Section 164 of the Internal Revenue Code 24 if the trust or estate is claiming the same tax for 25 purposes of the Illinois foreign tax credit under 26 Section 601 of this Act; 27 (G) An amount equal to the amount of the 28 capital gain deduction allowable under the Internal 29 Revenue Code, to the extent deducted from gross 30 income in the computation of taxable income; and 31 (G-5) For taxable years ending after December 32 31, 1997, an amount equal to any eligible 33 remediation costs that the trust or estate deducted 34 in computing adjusted gross income and for which the -19- LRB9215312SMpk 1 trust or estate claims a credit under subsection (l) 2 of Section 201; 3 and by deducting from the total so obtained the sum of 4 the following amounts: 5 (H) An amount equal to all amounts included in 6 such total pursuant to the provisions of Sections 7 402(a), 402(c), 403(a), 403(b), 406(a), 407(a) and 8 408 of the Internal Revenue Code or included in such 9 total as distributions under the provisions of any 10 retirement or disability plan for employees of any 11 governmental agency or unit, or retirement payments 12 to retired partners, which payments are excluded in 13 computing net earnings from self employment by 14 Section 1402 of the Internal Revenue Code and 15 regulations adopted pursuant thereto; 16 (I) The valuation limitation amount; 17 (J) An amount equal to the amount of any tax 18 imposed by this Act which was refunded to the 19 taxpayer and included in such total for the taxable 20 year; 21 (K) An amount equal to all amounts included in 22 taxable income as modified by subparagraphs (A), 23 (B), (C), (D), (E), (F) and (G) which are exempt 24 from taxation by this State either by reason of its 25 statutes or Constitution or by reason of the 26 Constitution, treaties or statutes of the United 27 States; provided that, in the case of any statute of 28 this State that exempts income derived from bonds or 29 other obligations from the tax imposed under this 30 Act, the amount exempted shall be the interest net 31 of bond premium amortization; 32 (L) With the exception of any amounts 33 subtracted under subparagraph (K), an amount equal 34 to the sum of all amounts disallowed as deductions -20- LRB9215312SMpk 1 by (i) Sections 171(a) (2) and 265(a)(2) of the 2 Internal Revenue Code, as now or hereafter amended, 3 and all amounts of expenses allocable to interest 4 and disallowed as deductions by Section 265(1) of 5 the Internal Revenue Code of 1954, as now or 6 hereafter amended; and (ii) for taxable years ending 7 on or after August 13, 1999, Sections 171(a)(2), 8 265, 280C, and 832(b)(5)(B)(i) of the Internal 9 Revenue Code; the provisions of this subparagraph 10 are exempt from the provisions of Section 250; 11 (M) An amount equal to those dividends 12 included in such total which were paid by a 13 corporation which conducts business operations in an 14 Enterprise Zone or zones created under the Illinois 15 Enterprise Zone Act and conducts substantially all 16 of its operations in an Enterprise Zone or Zones; 17 (N) An amount equal to any contribution made 18 to a job training project established pursuant to 19 the Tax Increment Allocation Redevelopment Act; 20 (O) 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 (M) of paragraph (2) of this subsection shall not be 28 eligible for the deduction provided under this 29 subparagraph (O); 30 (P) An amount equal to the amount of the 31 deduction used to compute the federal income tax 32 credit for restoration of substantial amounts held 33 under claim of right for the taxable year pursuant 34 to Section 1341 of the Internal Revenue Code of -21- LRB9215312SMpk 1 1986; and 2 (Q) 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 -22- LRB9215312SMpk 1 purposes. This paragraph is exempt from the 2 provisions of Section 250. 3 (3) Limitation. The amount of any modification 4 otherwise required under this subsection shall, under 5 regulations prescribed by the Department, be adjusted by 6 any amounts included therein which were properly paid, 7 credited, or required to be distributed, or permanently 8 set aside for charitable purposes pursuant to Internal 9 Revenue Code Section 642(c) during the taxable year. 10 (d) Partnerships. 11 (1) In general. In the case of a partnership, base 12 income means an amount equal to the taxpayer's taxable 13 income for the taxable year as modified by paragraph (2). 14 (2) Modifications. The taxable income referred to 15 in paragraph (1) shall be modified by adding thereto the 16 sum of the following amounts: 17 (A) An amount equal to all amounts paid or 18 accrued to the taxpayer as interest or dividends 19 during the taxable year to the extent excluded from 20 gross income in the computation of taxable income; 21 (B) An amount equal to the amount of tax 22 imposed by this Act to the extent deducted from 23 gross income for the taxable year; 24 (C) The amount of deductions allowed to the 25 partnership pursuant to Section 707 (c) of the 26 Internal Revenue Code in calculating its taxable 27 income; and 28 (D) An amount equal to the amount of the 29 capital gain deduction allowable under the Internal 30 Revenue Code, to the extent deducted from gross 31 income in the computation of taxable income; 32 and by deducting from the total so obtained the following 33 amounts: 34 (E) The valuation limitation amount; -23- LRB9215312SMpk 1 (F) An amount equal to the amount of any tax 2 imposed by this Act which was refunded to the 3 taxpayer and included in such total for the taxable 4 year; 5 (G) An amount equal to all amounts included in 6 taxable income as modified by subparagraphs (A), 7 (B), (C) and (D) which are exempt from taxation by 8 this State either by reason of its statutes or 9 Constitution or by reason of the Constitution, 10 treaties or statutes of the United States; provided 11 that, in the case of any statute of this State that 12 exempts income derived from bonds or other 13 obligations from the tax imposed under this Act, the 14 amount exempted shall be the interest net of bond 15 premium amortization; 16 (H) Any income of the partnership which 17 constitutes personal service income as defined in 18 Section 1348 (b) (1) of the Internal Revenue Code 19 (as in effect December 31, 1981) or a reasonable 20 allowance for compensation paid or accrued for 21 services rendered by partners to the partnership, 22 whichever is greater; 23 (I) An amount equal to all amounts of income 24 distributable to an entity subject to the Personal 25 Property Tax Replacement Income Tax imposed by 26 subsections (c) and (d) of Section 201 of this Act 27 including amounts distributable to organizations 28 exempt from federal income tax by reason of Section 29 501(a) of the Internal Revenue Code; 30 (J) With the exception of any amounts 31 subtracted under subparagraph (G), an amount equal 32 to the sum of all amounts disallowed as deductions 33 by (i) Sections 171(a) (2), and 265(2) of the 34 Internal Revenue Code of 1954, as now or hereafter -24- LRB9215312SMpk 1 amended, and all amounts of expenses allocable to 2 interest and disallowed as deductions by Section 3 265(1) of the Internal Revenue Code, 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 (K) 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, enacted by the 82nd General 14 Assembly, and which does not conduct such operations 15 other than in an Enterprise Zone or Zones; 16 (L) An amount equal to any contribution made 17 to a job training project established pursuant to 18 the Real Property Tax Increment Allocation 19 Redevelopment Act; 20 (M) 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 (M); and 30 (N) An amount equal to the amount of the 31 deduction used to compute the federal income tax 32 credit for restoration of substantial amounts held 33 under claim of right for the taxable year pursuant 34 to Section 1341 of the Internal Revenue Code of -25- LRB9215312SMpk 1 1986. 2 (e) Gross income; adjusted gross income; taxable income. 3 (1) In general. Subject to the provisions of 4 paragraph (2) and subsection (b) (3), for purposes of 5 this Section and Section 803(e), a taxpayer's gross 6 income, adjusted gross income, or taxable income for the 7 taxable year shall mean the amount of gross income, 8 adjusted gross income or taxable income properly 9 reportable for federal income tax purposes for the 10 taxable year under the provisions of the Internal Revenue 11 Code. Taxable income may be less than zero. However, for 12 taxable years ending on or after December 31, 1986, net 13 operating loss carryforwards from taxable years ending 14 prior to December 31, 1986, may not exceed the sum of 15 federal taxable income for the taxable year before net 16 operating loss deduction, plus the excess of addition 17 modifications over subtraction modifications for the 18 taxable year. For taxable years ending prior to December 19 31, 1986, taxable income may never be an amount in excess 20 of the net operating loss for the taxable year as defined 21 in subsections (c) and (d) of Section 172 of the Internal 22 Revenue Code, provided that when taxable income of a 23 corporation (other than a Subchapter S corporation), 24 trust, or estate is less than zero and addition 25 modifications, other than those provided by subparagraph 26 (E) of paragraph (2) of subsection (b) for corporations 27 or subparagraph (E) of paragraph (2) of subsection (c) 28 for trusts and estates, exceed subtraction modifications, 29 an addition modification must be made under those 30 subparagraphs for any other taxable year to which the 31 taxable income less than zero (net operating loss) is 32 applied under Section 172 of the Internal Revenue Code or 33 under subparagraph (E) of paragraph (2) of this 34 subsection (e) applied in conjunction with Section 172 of -26- LRB9215312SMpk 1 the Internal Revenue Code. 2 (2) Special rule. For purposes of paragraph (1) of 3 this subsection, the taxable income properly reportable 4 for federal income tax purposes shall mean: 5 (A) Certain life insurance companies. In the 6 case of a life insurance company subject to the tax 7 imposed by Section 801 of the Internal Revenue Code, 8 life insurance company taxable income, plus the 9 amount of distribution from pre-1984 policyholder 10 surplus accounts as calculated under Section 815a of 11 the Internal Revenue Code; 12 (B) Certain other insurance companies. In the 13 case of mutual insurance companies subject to the 14 tax imposed by Section 831 of the Internal Revenue 15 Code, insurance company taxable income; 16 (C) Regulated investment companies. In the 17 case of a regulated investment company subject to 18 the tax imposed by Section 852 of the Internal 19 Revenue Code, investment company taxable income; 20 (D) Real estate investment trusts. In the 21 case of a real estate investment trust subject to 22 the tax imposed by Section 857 of the Internal 23 Revenue Code, real estate investment trust taxable 24 income; 25 (E) Consolidated corporations. In the case of 26 a corporation which is a member of an affiliated 27 group of corporations filing a consolidated income 28 tax return for the taxable year for federal income 29 tax purposes, taxable income determined as if such 30 corporation had filed a separate return for federal 31 income tax purposes for the taxable year and each 32 preceding taxable year for which it was a member of 33 an affiliated group. For purposes of this 34 subparagraph, the taxpayer's separate taxable income -27- LRB9215312SMpk 1 shall be determined as if the election provided by 2 Section 243(b) (2) of the Internal Revenue Code had 3 been in effect for all such years; 4 (F) Cooperatives. In the case of a 5 cooperative corporation or association, the taxable 6 income of such organization determined in accordance 7 with the provisions of Section 1381 through 1388 of 8 the Internal Revenue Code; 9 (G) Subchapter S corporations. In the case 10 of: (i) a Subchapter S corporation for which there 11 is in effect an election for the taxable year under 12 Section 1362 of the Internal Revenue Code, the 13 taxable income of such corporation determined in 14 accordance with Section 1363(b) of the Internal 15 Revenue Code, except that taxable income shall take 16 into account those items which are required by 17 Section 1363(b)(1) of the Internal Revenue Code to 18 be separately stated; and (ii) a Subchapter S 19 corporation for which there is in effect a federal 20 election to opt out of the provisions of the 21 Subchapter S Revision Act of 1982 and have applied 22 instead the prior federal Subchapter S rules as in 23 effect on July 1, 1982, the taxable income of such 24 corporation determined in accordance with the 25 federal Subchapter S rules as in effect on July 1, 26 1982; and 27 (H) Partnerships. In the case of a 28 partnership, taxable income determined in accordance 29 with Section 703 of the Internal Revenue Code, 30 except that taxable income shall take into account 31 those items which are required by Section 703(a)(1) 32 to be separately stated but which would be taken 33 into account by an individual in calculating his 34 taxable income. -28- LRB9215312SMpk 1 (f) Valuation limitation amount. 2 (1) In general. The valuation limitation amount 3 referred to in subsections (a) (2) (G), (c) (2) (I) and 4 (d)(2) (E) is an amount equal to: 5 (A) The sum of the pre-August 1, 1969 6 appreciation amounts (to the extent consisting of 7 gain reportable under the provisions of Section 1245 8 or 1250 of the Internal Revenue Code) for all 9 property in respect of which such gain was reported 10 for the taxable year; plus 11 (B) The lesser of (i) the sum of the 12 pre-August 1, 1969 appreciation amounts (to the 13 extent consisting of capital gain) for all property 14 in respect of which such gain was reported for 15 federal income tax purposes for the taxable year, or 16 (ii) the net capital gain for the taxable year, 17 reduced in either case by any amount of such gain 18 included in the amount determined under subsection 19 (a) (2) (F) or (c) (2) (H). 20 (2) Pre-August 1, 1969 appreciation amount. 21 (A) If the fair market value of property 22 referred to in paragraph (1) was readily 23 ascertainable on August 1, 1969, the pre-August 1, 24 1969 appreciation amount for such property is the 25 lesser of (i) the excess of such fair market value 26 over the taxpayer's basis (for determining gain) for 27 such property on that date (determined under the 28 Internal Revenue Code as in effect on that date), or 29 (ii) the total gain realized and reportable for 30 federal income tax purposes in respect of the sale, 31 exchange or other disposition of such property. 32 (B) If the fair market value of property 33 referred to in paragraph (1) was not readily 34 ascertainable on August 1, 1969, the pre-August 1, -29- LRB9215312SMpk 1 1969 appreciation amount for such property is that 2 amount which bears the same ratio to the total gain 3 reported in respect of the property for federal 4 income tax purposes for the taxable year, as the 5 number of full calendar months in that part of the 6 taxpayer's holding period for the property ending 7 July 31, 1969 bears to the number of full calendar 8 months in the taxpayer's entire holding period for 9 the property. 10 (C) The Department shall prescribe such 11 regulations as may be necessary to carry out the 12 purposes of this paragraph. 13 (g) Double deductions. Unless specifically provided 14 otherwise, nothing in this Section shall permit the same item 15 to be deducted more than once. 16 (h) Legislative intention. Except as expressly provided 17 by this Section there shall be no modifications or 18 limitations on the amounts of income, gain, loss or deduction 19 taken into account in determining gross income, adjusted 20 gross income or taxable income for federal income tax 21 purposes for the taxable year, or in the amount of such items 22 entering into the computation of base income and net income 23 under this Act for such taxable year, whether in respect of 24 property values as of August 1, 1969 or otherwise. 25 (Source: P.A. 91-192, eff. 7-20-99; 91-205, eff. 7-20-99; 26 91-357, eff. 7-29-99; 91-541, eff. 8-13-99; 91-676, eff. 27 12-23-99; 91-845, eff. 6-22-00; 91-913, eff. 1-1-01; 92-16, 28 eff. 6-28-01; 92-244, eff. 8-3-01; 92-439, eff. 8-17-01; 29 revised 9-21-01.) 30 Section 99. Effective date. This Act takes effect upon 31 becoming law.