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92_SB0052eng SB52 Engrossed LRB9202839SMdv 1 AN ACT concerning taxation. 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 SB52 Engrossed -2- LRB9202839SMdv 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income; 13 (D-5) An amount, to the extent not included in 14 adjusted gross income, equal to the amount of money 15 withdrawn by the taxpayer in the taxable year from a 16 medical care savings account and the interest earned 17 on the account in the taxable year of a withdrawal 18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 SB52 Engrossed -3- LRB9202839SMdv 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 SB52 Engrossed -4- LRB9202839SMdv 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 SB52 Engrossed -5- LRB9202839SMdv 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 SB52 Engrossed -6- LRB9202839SMdv 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, SB52 Engrossed -7- LRB9202839SMdv 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; and 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 SB52 Engrossed -8- LRB9202839SMdv 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. 32 (b) Corporations. 33 (1) In general. In the case of a corporation, base 34 income means an amount equal to the taxpayer's taxable SB52 Engrossed -9- LRB9202839SMdv 1 income for the taxable year as modified by paragraph (2). 2 (2) Modifications. The taxable income referred to 3 in paragraph (1) shall be modified by adding thereto the 4 sum of the following amounts: 5 (A) An amount equal to all amounts paid or 6 accrued to the taxpayer as interest and all 7 distributions received from regulated investment 8 companies during the taxable year to the extent 9 excluded from gross income in the computation of 10 taxable income; 11 (B) An amount equal to the amount of tax 12 imposed by this Act to the extent deducted from 13 gross income in the computation of taxable income 14 for the taxable year; 15 (C) In the case of a regulated investment 16 company, an amount equal to the excess of (i) the 17 net long-term capital gain for the taxable year, 18 over (ii) the amount of the capital gain dividends 19 designated as such in accordance with Section 20 852(b)(3)(C) of the Internal Revenue Code and any 21 amount designated under Section 852(b)(3)(D) of the 22 Internal Revenue Code, attributable to the taxable 23 year (this amendatory Act of 1995 (Public Act 89-89) 24 is declarative of existing law and is not a new 25 enactment); 26 (D) The amount of any net operating loss 27 deduction taken in arriving at taxable income, other 28 than a net operating loss carried forward from a 29 taxable year ending prior to December 31, 1986; 30 (E) For taxable years in which a net operating 31 loss carryback or carryforward from a taxable year 32 ending prior to December 31, 1986 is an element of 33 taxable income under paragraph (1) of subsection (e) 34 or subparagraph (E) of paragraph (2) of subsection SB52 Engrossed -10- LRB9202839SMdv 1 (e), the amount by which addition modifications 2 other than those provided by this subparagraph (E) 3 exceeded subtraction modifications in such earlier 4 taxable year, with the following limitations applied 5 in the order that they are listed: 6 (i) the addition modification relating to 7 the net operating loss carried back or forward 8 to the taxable year from any taxable year 9 ending prior to December 31, 1986 shall be 10 reduced by the amount of addition modification 11 under this subparagraph (E) which related to 12 that net operating loss and which was taken 13 into account in calculating the base income of 14 an earlier taxable year, and 15 (ii) the addition modification relating 16 to the net operating loss carried back or 17 forward to the taxable year from any taxable 18 year ending prior to December 31, 1986 shall 19 not exceed the amount of such carryback or 20 carryforward; 21 For taxable years in which there is a net 22 operating loss carryback or carryforward from more 23 than one other taxable year ending prior to December 24 31, 1986, the addition modification provided in this 25 subparagraph (E) shall be the sum of the amounts 26 computed independently under the preceding 27 provisions of this subparagraph (E) for each such 28 taxable year; and 29 (E-5) For taxable years ending after December 30 31, 1997, an amount equal to any eligible 31 remediation costs that the corporation deducted in 32 computing adjusted gross income and for which the 33 corporation claims a credit under subsection (l) of 34 Section 201; SB52 Engrossed -11- LRB9202839SMdv 1 and by deducting from the total so obtained the sum of 2 the following amounts: 3 (F) 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 (G) An amount equal to any amount included in 8 such total under Section 78 of the Internal Revenue 9 Code; 10 (H) In the case of a regulated investment 11 company, an amount equal to the amount of exempt 12 interest dividends as defined in subsection (b) (5) 13 of Section 852 of the Internal Revenue Code, paid to 14 shareholders for the taxable year; 15 (I) With the exception of any amounts 16 subtracted under subparagraph (J), an amount equal 17 to the sum of all amounts disallowed as deductions 18 by (i) Sections 171(a) (2), and 265(a)(2) and 19 amounts disallowed as interest expense by Section 20 291(a)(3) of the Internal Revenue Code, as now or 21 hereafter amended, and all amounts of expenses 22 allocable to interest and disallowed as deductions 23 by Section 265(a)(1) of the Internal Revenue Code, 24 as now or hereafter amended; and (ii) for taxable 25 years ending on or after August 13, 1999, Sections 26 171(a)(2), 265, 280C, 291(a)(3), and 832(b)(5)(B)(i) 27 of the Internal Revenue Code; the provisions of this 28 subparagraph are exempt from the provisions of 29 Section 250; 30 (J) An amount equal to all amounts included in 31 such total which are exempt from taxation by this 32 State either by reason of its statutes or 33 Constitution or by reason of the Constitution, 34 treaties or statutes of the United States; provided SB52 Engrossed -12- LRB9202839SMdv 1 that, in the case of any statute of this State that 2 exempts income derived from bonds or other 3 obligations from the tax imposed under this Act, the 4 amount exempted shall be the interest net of bond 5 premium amortization; 6 (K) An amount equal to those dividends 7 included in such total which were paid by a 8 corporation which conducts business operations in an 9 Enterprise Zone or zones created under the Illinois 10 Enterprise Zone Act and conducts substantially all 11 of its operations in an Enterprise Zone or zones; 12 (L) An amount equal to those dividends 13 included in such total that were paid by a 14 corporation that conducts business operations in a 15 federally designated Foreign Trade Zone or Sub-Zone 16 and that is designated a High Impact Business 17 located in Illinois; provided that dividends 18 eligible for the deduction provided in subparagraph 19 (K) of paragraph 2 of this subsection shall not be 20 eligible for the deduction provided under this 21 subparagraph (L); 22 (M) For any taxpayer that is a financial 23 organization within the meaning of Section 304(c) of 24 this Act, an amount included in such total as 25 interest income from a loan or loans made by such 26 taxpayer to a borrower, to the extent that such a 27 loan is secured by property which is eligible for 28 the Enterprise Zone Investment Credit. To determine 29 the portion of a loan or loans that is secured by 30 property eligible for a Section 201(f)201(h)31 investment credit to the borrower, the entire 32 principal amount of the loan or loans between the 33 taxpayer and the borrower should be divided into the 34 basis of the Section 201(f)201(h)investment credit SB52 Engrossed -13- LRB9202839SMdv 1 property which secures the loan or loans, using for 2 this purpose the original basis of such property on 3 the date that it was placed in service in the 4 Enterprise Zone. The subtraction modification 5 available to taxpayer in any year under this 6 subsection shall be that portion of the total 7 interest paid by the borrower with respect to such 8 loan attributable to the eligible property as 9 calculated under the previous sentence; 10 (M-1) For any taxpayer that is a financial 11 organization within the meaning of Section 304(c) of 12 this Act, an amount included in such total as 13 interest income from a loan or loans made by such 14 taxpayer to a borrower, to the extent that such a 15 loan is secured by property which is eligible for 16 the High Impact Business Investment Credit. To 17 determine the portion of a loan or loans that is 18 secured by property eligible for a Section 201(h) 19201(i)investment credit to the borrower, the entire 20 principal amount of the loan or loans between the 21 taxpayer and the borrower should be divided into the 22 basis of the Section 201(h)201(i)investment credit 23 property which secures the loan or loans, using for 24 this purpose the original basis of such property on 25 the date that it was placed in service in a 26 federally designated Foreign Trade Zone or Sub-Zone 27 located in Illinois. No taxpayer that is eligible 28 for the deduction provided in subparagraph (M) of 29 paragraph (2) of this subsection shall be eligible 30 for the deduction provided under this subparagraph 31 (M-1). The subtraction modification available to 32 taxpayers in any year under this subsection shall be 33 that portion of the total interest paid by the 34 borrower with respect to such loan attributable to SB52 Engrossed -14- LRB9202839SMdv 1 the eligible property as calculated under the 2 previous sentence; 3 (N) Two times any contribution made during the 4 taxable year to a designated zone organization to 5 the extent that the contribution (i) qualifies as a 6 charitable contribution under subsection (c) of 7 Section 170 of the Internal Revenue Code and (ii) 8 must, by its terms, be used for a project approved 9 by the Department of Commerce and Community Affairs 10 under Section 11 of the Illinois Enterprise Zone 11 Act; 12 (O) An amount equal to: (i) 85% for taxable 13 years ending on or before December 31, 1992, or, a 14 percentage equal to the percentage allowable under 15 Section 243(a)(1) of the Internal Revenue Code of 16 1986 for taxable years ending after December 31, 17 1992, of the amount by which dividends included in 18 taxable income and received from a corporation that 19 is not created or organized under the laws of the 20 United States or any state or political subdivision 21 thereof, including, for taxable years ending on or 22 after December 31, 1988, dividends received or 23 deemed received or paid or deemed paid under 24 Sections 951 through 964 of the Internal Revenue 25 Code, exceed the amount of the modification provided 26 under subparagraph (G) of paragraph (2) of this 27 subsection (b) which is related to such dividends; 28 plus (ii) 100% of the amount by which dividends, 29 included in taxable income and received, including, 30 for taxable years ending on or after December 31, 31 1988, dividends received or deemed received or paid 32 or deemed paid under Sections 951 through 964 of the 33 Internal Revenue Code, from any such corporation 34 specified in clause (i) that would but for the SB52 Engrossed -15- LRB9202839SMdv 1 provisions of Section 1504 (b) (3) of the Internal 2 Revenue Code be treated as a member of the 3 affiliated group which includes the dividend 4 recipient, exceed the amount of the modification 5 provided under subparagraph (G) of paragraph (2) of 6 this subsection (b) which is related to such 7 dividends; 8 (P) An amount equal to any contribution made 9 to a job training project established pursuant to 10 the Tax Increment Allocation Redevelopment Act; 11 (Q) An amount equal to the amount of the 12 deduction used to compute the federal income tax 13 credit for restoration of substantial amounts held 14 under claim of right for the taxable year pursuant 15 to Section 1341 of the Internal Revenue Code of 16 1986; 17 (R) In the case of an attorney-in-fact with 18 respect to whom an interinsurer or a reciprocal 19 insurer has made the election under Section 835 of 20 the Internal Revenue Code, 26 U.S.C. 835, an amount 21 equal to the excess, if any, of the amounts paid or 22 incurred by that interinsurer or reciprocal insurer 23 in the taxable year to the attorney-in-fact over the 24 deduction allowed to that interinsurer or reciprocal 25 insurer with respect to the attorney-in-fact under 26 Section 835(b) of the Internal Revenue Code for the 27 taxable year; and 28 (S) For taxable years ending on or after 29 December 31, 1997, in the case of a Subchapter S 30 corporation, an amount equal to all amounts of 31 income allocable to a shareholder subject to the 32 Personal Property Tax Replacement Income Tax imposed 33 by subsections (c) and (d) of Section 201 of this 34 Act, including amounts allocable to organizations SB52 Engrossed -16- LRB9202839SMdv 1 exempt from federal income tax by reason of Section 2 501(a) of the Internal Revenue Code. This 3 subparagraph (S) is exempt from the provisions of 4 Section 250. 5 (3) Special rule. For purposes of paragraph (2) 6 (A), "gross income" in the case of a life insurance 7 company, for tax years ending on and after December 31, 8 1994, shall mean the gross investment income for the 9 taxable year. 10 (c) Trusts and estates. 11 (1) In general. In the case of a trust or estate, 12 base income means an amount equal to the taxpayer's 13 taxable income for the taxable year as modified by 14 paragraph (2). 15 (2) Modifications. Subject to the provisions of 16 paragraph (3), the taxable income referred to in 17 paragraph (1) shall be modified by adding thereto the sum 18 of the following amounts: 19 (A) An amount equal to all amounts paid or 20 accrued to the taxpayer as interest or dividends 21 during the taxable year to the extent excluded from 22 gross income in the computation of taxable income; 23 (B) In the case of (i) an estate, $600; (ii) a 24 trust which, under its governing instrument, is 25 required to distribute all of its income currently, 26 $300; and (iii) any other trust, $100, but in each 27 such case, only to the extent such amount was 28 deducted in the computation of taxable income; 29 (C) An amount equal to the amount of tax 30 imposed by this Act to the extent deducted from 31 gross income in the computation of taxable income 32 for the taxable year; 33 (D) The amount of any net operating loss 34 deduction taken in arriving at taxable income, other SB52 Engrossed -17- LRB9202839SMdv 1 than a net operating loss carried forward from a 2 taxable year ending prior to December 31, 1986; 3 (E) For taxable years in which a net operating 4 loss carryback or carryforward from a taxable year 5 ending prior to December 31, 1986 is an element of 6 taxable income under paragraph (1) of subsection (e) 7 or subparagraph (E) of paragraph (2) of subsection 8 (e), the amount by which addition modifications 9 other than those provided by this subparagraph (E) 10 exceeded subtraction modifications in such taxable 11 year, with the following limitations applied in the 12 order that they are listed: 13 (i) the addition modification relating to 14 the net operating loss carried back or forward 15 to the taxable year from any taxable year 16 ending prior to December 31, 1986 shall be 17 reduced by the amount of addition modification 18 under this subparagraph (E) which related to 19 that net operating loss and which was taken 20 into account in calculating the base income of 21 an earlier taxable year, and 22 (ii) the addition modification relating 23 to the net operating loss carried back or 24 forward to the taxable year from any taxable 25 year ending prior to December 31, 1986 shall 26 not exceed the amount of such carryback or 27 carryforward; 28 For taxable years in which there is a net 29 operating loss carryback or carryforward from more 30 than one other taxable year ending prior to December 31 31, 1986, the addition modification provided in this 32 subparagraph (E) shall be the sum of the amounts 33 computed independently under the preceding 34 provisions of this subparagraph (E) for each such SB52 Engrossed -18- LRB9202839SMdv 1 taxable year; 2 (F) For taxable years ending on or after 3 January 1, 1989, an amount equal to the tax deducted 4 pursuant to Section 164 of the Internal Revenue Code 5 if the trust or estate is claiming the same tax for 6 purposes of the Illinois foreign tax credit under 7 Section 601 of this Act; 8 (G) An amount equal to the amount of the 9 capital gain deduction allowable under the Internal 10 Revenue Code, to the extent deducted from gross 11 income in the computation of taxable income; and 12 (G-5) For taxable years ending after December 13 31, 1997, an amount equal to any eligible 14 remediation costs that the trust or estate deducted 15 in computing adjusted gross income and for which the 16 trust or estate claims a credit under subsection (l) 17 of Section 201; 18 and by deducting from the total so obtained the sum of 19 the following amounts: 20 (H) An amount equal to all amounts included in 21 such total pursuant to the provisions of Sections 22 402(a), 402(c), 403(a), 403(b), 406(a), 407(a) and 23 408 of the Internal Revenue Code or included in such 24 total as distributions under the provisions of any 25 retirement or disability plan for employees of any 26 governmental agency or unit, or retirement payments 27 to retired partners, which payments are excluded in 28 computing net earnings from self employment by 29 Section 1402 of the Internal Revenue Code and 30 regulations adopted pursuant thereto; 31 (I) The valuation limitation amount; 32 (J) An amount equal to the amount of any tax 33 imposed by this Act which was refunded to the 34 taxpayer and included in such total for the taxable SB52 Engrossed -19- LRB9202839SMdv 1 year; 2 (K) An amount equal to all amounts included in 3 taxable income as modified by subparagraphs (A), 4 (B), (C), (D), (E), (F) and (G) which are exempt 5 from taxation by this State either by reason of its 6 statutes or Constitution or by reason of the 7 Constitution, treaties or statutes of the United 8 States; provided that, in the case of any statute of 9 this State that exempts income derived from bonds or 10 other obligations from the tax imposed under this 11 Act, the amount exempted shall be the interest net 12 of bond premium amortization; 13 (L) With the exception of any amounts 14 subtracted under subparagraph (K), an amount equal 15 to the sum of all amounts disallowed as deductions 16 by (i) Sections 171(a) (2) and 265(a)(2) of the 17 Internal Revenue Code, as now or hereafter amended, 18 and all amounts of expenses allocable to interest 19 and disallowed as deductions by Section 265(1) of 20 the Internal Revenue Code of 1954, as now or 21 hereafter amended; and (ii) for taxable years ending 22 on or after August 13, 1999, Sections 171(a)(2), 23 265, 280C, and 832(b)(5)(B)(i) of the Internal 24 Revenue Code; the provisions of this subparagraph 25 are exempt from the provisions of Section 250; 26 (M) An amount equal to those dividends 27 included in such total which were paid by a 28 corporation which conducts business operations in an 29 Enterprise Zone or zones created under the Illinois 30 Enterprise Zone Act and conducts substantially all 31 of its operations in an Enterprise Zone or Zones; 32 (N) An amount equal to any contribution made 33 to a job training project established pursuant to 34 the Tax Increment Allocation Redevelopment Act; SB52 Engrossed -20- LRB9202839SMdv 1 (O) An amount equal to those dividends 2 included in such total that were paid by a 3 corporation that conducts business operations in a 4 federally designated Foreign Trade Zone or Sub-Zone 5 and that is designated a High Impact Business 6 located in Illinois; provided that dividends 7 eligible for the deduction provided in subparagraph 8 (M) of paragraph (2) of this subsection shall not be 9 eligible for the deduction provided under this 10 subparagraph (O); 11 (P) An amount equal to the amount of the 12 deduction used to compute the federal income tax 13 credit for restoration of substantial amounts held 14 under claim of right for the taxable year pursuant 15 to Section 1341 of the Internal Revenue Code of 16 1986; and 17 (Q) For taxable year 1999 and thereafter, an 18 amount equal to the amount of any (i) distributions, 19 to the extent includible in gross income for federal 20 income tax purposes, made to the taxpayer because of 21 his or her status as a victim of persecution for 22 racial or religious reasons by Nazi Germany or any 23 other Axis regime or as an heir of the victim and 24 (ii) items of income, to the extent includible in 25 gross income for federal income tax purposes, 26 attributable to, derived from or in any way related 27 to assets stolen from, hidden from, or otherwise 28 lost to a victim of persecution for racial or 29 religious reasons by Nazi Germany or any other Axis 30 regime immediately prior to, during, and immediately 31 after World War II, including, but not limited to, 32 interest on the proceeds receivable as insurance 33 under policies issued to a victim of persecution for 34 racial or religious reasons by Nazi Germany or any SB52 Engrossed -21- LRB9202839SMdv 1 other Axis regime by European insurance companies 2 immediately prior to and during World War II; 3 provided, however, this subtraction from federal 4 adjusted gross income does not apply to assets 5 acquired with such assets or with the proceeds from 6 the sale of such assets; provided, further, this 7 paragraph shall only apply to a taxpayer who was the 8 first recipient of such assets after their recovery 9 and who is a victim of persecution for racial or 10 religious reasons by Nazi Germany or any other Axis 11 regime or as an heir of the victim. The amount of 12 and the eligibility for any public assistance, 13 benefit, or similar entitlement is not affected by 14 the inclusion of items (i) and (ii) of this 15 paragraph in gross income for federal income tax 16 purposes. This paragraph is exempt from the 17 provisions of Section 250. 18 (3) Limitation. The amount of any modification 19 otherwise required under this subsection shall, under 20 regulations prescribed by the Department, be adjusted by 21 any amounts included therein which were properly paid, 22 credited, or required to be distributed, or permanently 23 set aside for charitable purposes pursuant to Internal 24 Revenue Code Section 642(c) during the taxable year. 25 (d) Partnerships. 26 (1) In general. In the case of a partnership, base 27 income means an amount equal to the taxpayer's taxable 28 income for the taxable year as modified by paragraph (2). 29 (2) Modifications. The taxable income referred to 30 in paragraph (1) shall be modified by adding thereto the 31 sum of the following amounts: 32 (A) An amount equal to all amounts paid or 33 accrued to the taxpayer as interest or dividends 34 during the taxable year to the extent excluded from SB52 Engrossed -22- LRB9202839SMdv 1 gross income in the computation of taxable income; 2 (B) An amount equal to the amount of tax 3 imposed by this Act to the extent deducted from 4 gross income for the taxable year; 5 (C) The amount of deductions allowed to the 6 partnership pursuant to Section 707 (c) of the 7 Internal Revenue Code in calculating its taxable 8 income; and 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 taxable income; 13 and by deducting from the total so obtained the following 14 amounts: 15 (E) The valuation limitation amount; 16 (F) An amount equal to the amount of any tax 17 imposed by this Act which was refunded to the 18 taxpayer and included in such total for the taxable 19 year; 20 (G) An amount equal to all amounts included in 21 taxable income as modified by subparagraphs (A), 22 (B), (C) and (D) which are exempt from taxation by 23 this State either by reason of its statutes or 24 Constitution or by reason of the Constitution, 25 treaties or statutes of the United States; provided 26 that, in the case of any statute of this State that 27 exempts income derived from bonds or other 28 obligations from the tax imposed under this Act, the 29 amount exempted shall be the interest net of bond 30 premium amortization; 31 (H) Any income of the partnership which 32 constitutes personal service income as defined in 33 Section 1348 (b) (1) of the Internal Revenue Code 34 (as in effect December 31, 1981) or a reasonable SB52 Engrossed -23- LRB9202839SMdv 1 allowance for compensation paid or accrued for 2 services rendered by partners to the partnership, 3 whichever is greater; 4 (I) An amount equal to all amounts of income 5 distributable to an entity subject to the Personal 6 Property Tax Replacement Income Tax imposed by 7 subsections (c) and (d) of Section 201 of this Act 8 including amounts distributable to organizations 9 exempt from federal income tax by reason of Section 10 501(a) of the Internal Revenue Code; 11 (J) With the exception of any amounts 12 subtracted under subparagraph (G), an amount equal 13 to the sum of all amounts disallowed as deductions 14 by (i) Sections 171(a) (2), and 265(2) of the 15 Internal Revenue Code of 1954, as now or hereafter 16 amended, and all amounts of expenses allocable to 17 interest and disallowed as deductions by Section 18 265(1) of the Internal Revenue Code, as now or 19 hereafter amended; and (ii) for taxable years ending 20 on or after August 13, 1999, Sections 171(a)(2), 21 265, 280C, and 832(b)(5)(B)(i) of the Internal 22 Revenue Code; the provisions of this subparagraph 23 are exempt from the provisions of Section 250; 24 (K) An amount equal to those dividends 25 included in such total which were paid by a 26 corporation which conducts business operations in an 27 Enterprise Zone or zones created under the Illinois 28 Enterprise Zone Act, enacted by the 82nd General 29 Assembly, and which does not conduct such operations 30 other than in an Enterprise Zone or Zones; 31 (L) An amount equal to any contribution made 32 to a job training project established pursuant to 33 the Real Property Tax Increment Allocation 34 Redevelopment Act; SB52 Engrossed -24- LRB9202839SMdv 1 (M) An amount equal to those dividends 2 included in such total that were paid by a 3 corporation that conducts business operations in a 4 federally designated Foreign Trade Zone or Sub-Zone 5 and that is designated a High Impact Business 6 located in Illinois; provided that dividends 7 eligible for the deduction provided in subparagraph 8 (K) of paragraph (2) of this subsection shall not be 9 eligible for the deduction provided under this 10 subparagraph (M); and 11 (N) An amount equal to the amount of the 12 deduction used to compute the federal income tax 13 credit for restoration of substantial amounts held 14 under claim of right for the taxable year pursuant 15 to Section 1341 of the Internal Revenue Code of 16 1986. 17 (e) Gross income; adjusted gross income; taxable income. 18 (1) In general. Subject to the provisions of 19 paragraph (2) and subsection (b) (3), for purposes of 20 this Section and Section 803(e), a taxpayer's gross 21 income, adjusted gross income, or taxable income for the 22 taxable year shall mean the amount of gross income, 23 adjusted gross income or taxable income properly 24 reportable for federal income tax purposes for the 25 taxable year under the provisions of the Internal Revenue 26 Code. Taxable income may be less than zero. However, for 27 taxable years ending on or after December 31, 1986, net 28 operating loss carryforwards from taxable years ending 29 prior to December 31, 1986, may not exceed the sum of 30 federal taxable income for the taxable year before net 31 operating loss deduction, plus the excess of addition 32 modifications over subtraction modifications for the 33 taxable year. For taxable years ending prior to December 34 31, 1986, taxable income may never be an amount in excess SB52 Engrossed -25- LRB9202839SMdv 1 of the net operating loss for the taxable year as defined 2 in subsections (c) and (d) of Section 172 of the Internal 3 Revenue Code, provided that when taxable income of a 4 corporation (other than a Subchapter S corporation), 5 trust, or estate is less than zero and addition 6 modifications, other than those provided by subparagraph 7 (E) of paragraph (2) of subsection (b) for corporations 8 or subparagraph (E) of paragraph (2) of subsection (c) 9 for trusts and estates, exceed subtraction modifications, 10 an addition modification must be made under those 11 subparagraphs for any other taxable year to which the 12 taxable income less than zero (net operating loss) is 13 applied under Section 172 of the Internal Revenue Code or 14 under subparagraph (E) of paragraph (2) of this 15 subsection (e) applied in conjunction with Section 172 of 16 the Internal Revenue Code. 17 (2) Special rule. For purposes of paragraph (1) of 18 this subsection, the taxable income properly reportable 19 for federal income tax purposes shall mean: 20 (A) Certain life insurance companies. In the 21 case of a life insurance company subject to the tax 22 imposed by Section 801 of the Internal Revenue Code, 23 life insurance company taxable income, plus the 24 amount of distribution from pre-1984 policyholder 25 surplus accounts as calculated under Section 815a of 26 the Internal Revenue Code; 27 (B) Certain other insurance companies. In the 28 case of mutual insurance companies subject to the 29 tax imposed by Section 831 of the Internal Revenue 30 Code, insurance company taxable income; 31 (C) Regulated investment companies. In the 32 case of a regulated investment company subject to 33 the tax imposed by Section 852 of the Internal 34 Revenue Code, investment company taxable income; SB52 Engrossed -26- LRB9202839SMdv 1 (D) Real estate investment trusts. In the 2 case of a real estate investment trust subject to 3 the tax imposed by Section 857 of the Internal 4 Revenue Code, real estate investment trust taxable 5 income; 6 (E) Consolidated corporations. In the case of 7 a corporation which is a member of an affiliated 8 group of corporations filing a consolidated income 9 tax return for the taxable year for federal income 10 tax purposes, taxable income determined as if such 11 corporation had filed a separate return for federal 12 income tax purposes for the taxable year and each 13 preceding taxable year for which it was a member of 14 an affiliated group. For purposes of this 15 subparagraph, the taxpayer's separate taxable income 16 shall be determined as if the election provided by 17 Section 243(b) (2) of the Internal Revenue Code had 18 been in effect for all such years; 19 (F) Cooperatives. In the case of a 20 cooperative corporation or association, the taxable 21 income of such organization determined in accordance 22 with the provisions of Section 1381 through 1388 of 23 the Internal Revenue Code; 24 (G) Subchapter S corporations. In the case 25 of: (i) a Subchapter S corporation for which there 26 is in effect an election for the taxable year under 27 Section 1362 of the Internal Revenue Code, the 28 taxable income of such corporation determined in 29 accordance with Section 1363(b) of the Internal 30 Revenue Code, except that taxable income shall take 31 into account those items which are required by 32 Section 1363(b)(1) of the Internal Revenue Code to 33 be separately stated; and (ii) a Subchapter S 34 corporation for which there is in effect a federal SB52 Engrossed -27- LRB9202839SMdv 1 election to opt out of the provisions of the 2 Subchapter S Revision Act of 1982 and have applied 3 instead the prior federal Subchapter S rules as in 4 effect on July 1, 1982, the taxable income of such 5 corporation determined in accordance with the 6 federal Subchapter S rules as in effect on July 1, 7 1982; and 8 (H) Partnerships. In the case of a 9 partnership, taxable income determined in accordance 10 with Section 703 of the Internal Revenue Code, 11 except that taxable income shall take into account 12 those items which are required by Section 703(a)(1) 13 to be separately stated but which would be taken 14 into account by an individual in calculating his 15 taxable income. 16 (f) Valuation limitation amount. 17 (1) In general. The valuation limitation amount 18 referred to in subsections (a) (2) (G), (c) (2) (I) and 19 (d)(2) (E) is an amount equal to: 20 (A) The sum of the pre-August 1, 1969 21 appreciation amounts (to the extent consisting of 22 gain reportable under the provisions of Section 1245 23 or 1250 of the Internal Revenue Code) for all 24 property in respect of which such gain was reported 25 for the taxable year; plus 26 (B) The lesser of (i) the sum of the 27 pre-August 1, 1969 appreciation amounts (to the 28 extent consisting of capital gain) for all property 29 in respect of which such gain was reported for 30 federal income tax purposes for the taxable year, or 31 (ii) the net capital gain for the taxable year, 32 reduced in either case by any amount of such gain 33 included in the amount determined under subsection 34 (a) (2) (F) or (c) (2) (H). SB52 Engrossed -28- LRB9202839SMdv 1 (2) Pre-August 1, 1969 appreciation amount. 2 (A) If the fair market value of property 3 referred to in paragraph (1) was readily 4 ascertainable on August 1, 1969, the pre-August 1, 5 1969 appreciation amount for such property is the 6 lesser of (i) the excess of such fair market value 7 over the taxpayer's basis (for determining gain) for 8 such property on that date (determined under the 9 Internal Revenue Code as in effect on that date), or 10 (ii) the total gain realized and reportable for 11 federal income tax purposes in respect of the sale, 12 exchange or other disposition of such property. 13 (B) If the fair market value of property 14 referred to in paragraph (1) was not readily 15 ascertainable on August 1, 1969, the pre-August 1, 16 1969 appreciation amount for such property is that 17 amount which bears the same ratio to the total gain 18 reported in respect of the property for federal 19 income tax purposes for the taxable year, as the 20 number of full calendar months in that part of the 21 taxpayer's holding period for the property ending 22 July 31, 1969 bears to the number of full calendar 23 months in the taxpayer's entire holding period for 24 the property. 25 (C) The Department shall prescribe such 26 regulations as may be necessary to carry out the 27 purposes of this paragraph. 28 (g) Double deductions. Unless specifically provided 29 otherwise, nothing in this Section shall permit the same item 30 to be deducted more than once. 31 (h) Legislative intention. Except as expressly provided 32 by this Section there shall be no modifications or 33 limitations on the amounts of income, gain, loss or deduction SB52 Engrossed -29- LRB9202839SMdv 1 taken into account in determining gross income, adjusted 2 gross income or taxable income for federal income tax 3 purposes for the taxable year, or in the amount of such items 4 entering into the computation of base income and net income 5 under this Act for such taxable year, whether in respect of 6 property values as of August 1, 1969 or otherwise. 7 (Source: P.A. 90-491, eff. 1-1-98; 90-717, eff. 8-7-98; 8 90-770, eff. 8-14-98; 91-192, eff. 7-20-99; 91-205, eff. 9 7-20-99; 91-357, eff. 7-29-99; 91-541, eff. 8-13-99; 91-676, 10 eff. 12-23-99; 91-845, eff. 6-22-00; 91-913, eff. 1-1-01; 11 revised 10-24-00) 12 Section 99. Effective date. This Act takes effect upon 13 becoming law.