Public Act 90-0717 of the 90th General Assembly

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Public Act 90-0717

SB1291 Enrolled                                LRB9007338KDks

    AN ACT to amend the Illinois Income Tax Act  by  changing
Sections 201 and 203.

    Be  it  enacted  by  the People of the State of Illinois,
represented in the General Assembly:

    Section 5.  The Illinois Income Tax  Act  is  amended  by
changing Sections 201 and 203 as follows:

    (35 ILCS 5/201) (from Ch. 120, par. 2-201)
    Sec. 201.  Tax Imposed.
    (a)  In  general.  A tax measured by net income is hereby
imposed on every individual, corporation,  trust  and  estate
for  each  taxable  year  ending  after  July 31, 1969 on the
privilege of earning or receiving income in or as a  resident
of  this  State.  Such  tax shall be in addition to all other
occupation or privilege taxes imposed by this State or by any
municipal corporation or political subdivision thereof.
    (b)  Rates. The tax imposed by  subsection  (a)  of  this
Section shall be determined as follows:
         (1)  In  the case of an individual, trust or estate,
    for taxable years ending prior to July 1, 1989, an amount
    equal to 2 1/2% of the  taxpayer's  net  income  for  the
    taxable year.
         (2)  In  the case of an individual, trust or estate,
    for taxable years beginning prior to  July  1,  1989  and
    ending after June 30, 1989, an amount equal to the sum of
    (i)  2  1/2%  of the taxpayer's net income for the period
    prior to July 1, 1989, as calculated under Section 202.3,
    and (ii) 3% of the taxpayer's net income for  the  period
    after June 30, 1989, as calculated under Section 202.3.
         (3)  In  the case of an individual, trust or estate,
    for taxable years  beginning  after  June  30,  1989,  an
    amount  equal  to 3% of the taxpayer's net income for the
    taxable year.
         (4)  (Blank).
         (5)  (Blank).
         (6)  In the case of a corporation, for taxable years
    ending prior to July 1, 1989, an amount equal  to  4%  of
    the taxpayer's net income for the taxable year.
         (7)  In the case of a corporation, for taxable years
    beginning prior to July 1, 1989 and ending after June 30,
    1989,  an  amount  equal  to  the  sum  of  (i) 4% of the
    taxpayer's net income for the period  prior  to  July  1,
    1989, as calculated under Section 202.3, and (ii) 4.8% of
    the  taxpayer's  net income for the period after June 30,
    1989, as calculated under Section 202.3.
         (8)  In the case of a corporation, for taxable years
    beginning after June 30, 1989, an amount equal to 4.8% of
    the taxpayer's net income for the taxable year.
    (c)  Beginning  on  July  1,  1979  and  thereafter,   in
addition to such income tax, there is also hereby imposed the
Personal  Property Tax Replacement Income Tax measured by net
income  on  every   corporation   (including   Subchapter   S
corporations),  partnership  and trust, for each taxable year
ending after June 30, 1979.  Such taxes are  imposed  on  the
privilege  of earning or receiving income in or as a resident
of this State.  The Personal Property Tax Replacement  Income
Tax  shall  be  in  addition  to  the  income  tax imposed by
subsections (a) and (b) of this Section and  in  addition  to
all other occupation or privilege taxes imposed by this State
or  by  any  municipal  corporation  or political subdivision
thereof.
    (d)  Additional Personal Property Tax Replacement  Income
Tax  Rates.  The personal property tax replacement income tax
imposed by this subsection and subsection (c) of this Section
in the case of a  corporation,  other  than  a  Subchapter  S
corporation,  shall be an additional amount equal to 2.85% of
such taxpayer's net income for the taxable year, except  that
beginning  on  January  1,  1981, and thereafter, the rate of
2.85% specified in this subsection shall be reduced to  2.5%,
and  in  the  case  of a partnership, trust or a Subchapter S
corporation shall be an additional amount equal  to  1.5%  of
such taxpayer's net income for the taxable year.
    (e)  Investment  credit.   A  taxpayer shall be allowed a
credit against the Personal Property Tax  Replacement  Income
Tax for investment in qualified property.
         (1)  A  taxpayer  shall be allowed a credit equal to
    .5% of the basis of qualified property placed in  service
    during the taxable year, provided such property is placed
    in  service  on  or  after  July 1, 1984.  There shall be
    allowed an additional credit equal to .5% of the basis of
    qualified property placed in service during  the  taxable
    year,  provided  such property is placed in service on or
    after July 1, 1986, and the  taxpayer's  base  employment
    within  Illinois  has  increased  by  1% or more over the
    preceding year as determined by the taxpayer's employment
    records filed with the Illinois Department of  Employment
    Security.   Taxpayers  who  are  new to Illinois shall be
    deemed to have met the 1% growth in base  employment  for
    the first year in which they file employment records with
    the  Illinois  Department  of  Employment  Security.  The
    provisions added to this Section by  Public  Act  85-1200
    (and restored by Public Act 87-895) shall be construed as
    declaratory  of  existing law and not as a new enactment.
    If, in any year, the increase in base  employment  within
    Illinois  over  the  preceding  year is less than 1%, the
    additional credit shall be  limited  to  that  percentage
    times  a  fraction, the numerator of which is .5% and the
    denominator of which is 1%, but  shall  not  exceed  .5%.
    The  investment credit shall not be allowed to the extent
    that it would reduce a taxpayer's liability  in  any  tax
    year  below  zero,  nor  may  any  credit  for  qualified
    property  be  allowed for any year other than the year in
    which the property was placed in service in Illinois. For
    tax years ending on or after December 31, 1987, and on or
    before December 31, 1988, the credit shall be allowed for
    the tax year in which the property is placed in  service,
    or, if the amount of the credit exceeds the tax liability
    for  that year, whether it exceeds the original liability
    or the liability as later amended,  such  excess  may  be
    carried forward and applied to the tax liability of the 5
    taxable  years  following  the excess credit years if the
    taxpayer (i) makes investments which cause  the  creation
    of  a  minimum  of  2,000  full-time  equivalent  jobs in
    Illinois,  (ii)  is  located  in   an   enterprise   zone
    established  pursuant to the Illinois Enterprise Zone Act
    and (iii) is certified by the Department of Commerce  and
    Community  Affairs  as  complying  with  the requirements
    specified in clause (i) and (ii) by July  1,  1986.   The
    Department of Commerce and Community Affairs shall notify
    the  Department  of  Revenue  of  all such certifications
    immediately. For tax  years  ending  after  December  31,
    1988,  the  credit  shall  be allowed for the tax year in
    which the property is  placed  in  service,  or,  if  the
    amount  of  the credit exceeds the tax liability for that
    year, whether it exceeds the original  liability  or  the
    liability  as  later  amended, such excess may be carried
    forward and applied to the tax liability of the 5 taxable
    years following the excess credit years. The credit shall
    be applied to the earliest year  for  which  there  is  a
    liability. If there is credit from more than one tax year
    that  is  available to offset a liability, earlier credit
    shall be applied first.
         (2)  The term "qualified  property"  means  property
    which:
              (A)  is   tangible,   whether   new   or  used,
         including buildings  and  structural  components  of
         buildings  and signs that are real property, but not
         including land or improvements to real property that
         are not a structural component of a building such as
         landscaping,  sewer  lines,  local   access   roads,
         fencing, parking lots, and other appurtenances;
              (B)  is  depreciable pursuant to Section 167 of
         the  Internal  Revenue  Code,  except  that  "3-year
         property" as defined in Section 168(c)(2)(A) of that
         Code is not eligible for the credit provided by this
         subsection (e);
              (C)  is acquired  by  purchase  as  defined  in
         Section 179(d) of the Internal Revenue Code;
              (D)  is  used  in Illinois by a taxpayer who is
         primarily engaged in  manufacturing,  or  in  mining
         coal or fluorite, or in retailing; and
              (E)  has  not  previously been used in Illinois
         in such a manner and  by  such  a  person  as  would
         qualify  for  the credit provided by this subsection
         (e) or subsection (f).
         (3)  For   purposes   of   this   subsection    (e),
    "manufacturing" means the material staging and production
    of  tangible  personal  property  by  procedures commonly
    regarded as manufacturing,  processing,  fabrication,  or
    assembling  which changes some existing material into new
    shapes, new qualities, or new combinations.  For purposes
    of this subsection (e) the term "mining" shall  have  the
    same  meaning  as  the term "mining" in Section 613(c) of
    the  Internal  Revenue  Code.   For  purposes   of   this
    subsection  (e),  the  term "retailing" means the sale of
    tangible  personal  property  or  services  rendered   in
    conjunction  with  the sale of tangible consumer goods or
    commodities.
         (4)  The basis of qualified property  shall  be  the
    basis  used  to  compute  the  depreciation deduction for
    federal income tax purposes.
         (5)  If the basis of the property for federal income
    tax depreciation purposes is increased after it has  been
    placed in service in Illinois by the taxpayer, the amount
    of  such  increase  shall  be  deemed  property placed in
    service on the date of such increase in basis.
         (6)  The term "placed in  service"  shall  have  the
    same  meaning as under Section 46 of the Internal Revenue
    Code.
         (7)  If during any taxable year, any property ceases
    to be qualified property in the  hands  of  the  taxpayer
    within  48  months  after being placed in service, or the
    situs of any qualified property is moved outside Illinois
    within 48 months  after  being  placed  in  service,  the
    Personal  Property  Tax  Replacement  Income Tax for such
    taxable year shall be increased.  Such increase shall  be
    determined by (i) recomputing the investment credit which
    would  have been allowed for the year in which credit for
    such property was originally allowed by eliminating  such
    property from such computation and, (ii) subtracting such
    recomputed  credit  from  the amount of credit previously
    allowed. For  the  purposes  of  this  paragraph  (7),  a
    reduction  of  the  basis of qualified property resulting
    from a redetermination of the  purchase  price  shall  be
    deemed  a disposition of qualified property to the extent
    of such reduction.
         (8)  Unless the investment  credit  is  extended  by
    law,  the  basis  of qualified property shall not include
    costs incurred after December 31, 2003, except for  costs
    incurred  pursuant  to a binding contract entered into on
    or before December 31, 2003.
         (9)  Each taxable year, a partnership may  elect  to
    pass  through  to  its  partners the credits to which the
    partnership is entitled under this subsection (e) for the
    taxable year.  A partner may use the credit allocated  to
    him  or  her  under  this  paragraph only against the tax
    imposed in subsections (c) and (d) of this  Section.   If
    the  partnership makes that election, those credits shall
    be allocated among the partners  in  the  partnership  in
    accordance  with the rules set forth in Section 704(b) of
    the Internal Revenue  Code,  and  the  rules  promulgated
    under  that  Section,  and  the  allocated  amount of the
    credits shall be allowed to the partners for that taxable
    year.  The partnership shall make this  election  on  its
    Personal  Property  Tax Replacement Income Tax return for
    that taxable year.  The  election  to  pass  through  the
    credits shall be irrevocable.
    (f)  Investment credit; Enterprise Zone.
         (1)  A  taxpayer  shall  be allowed a credit against
    the tax imposed  by  subsections  (a)  and  (b)  of  this
    Section  for  investment  in  qualified property which is
    placed in service in an Enterprise Zone created  pursuant
    to the Illinois Enterprise Zone Act. For partners and for
    shareholders of Subchapter S corporations, there shall be
    allowed   a  credit  under  this  subsection  (f)  to  be
    determined in accordance with the determination of income
    and distributive share of income under Sections  702  and
    704  and  Subchapter  S of the Internal Revenue Code. The
    credit shall be .5% of the basis for such property.   The
    credit  shall  be  available  only in the taxable year in
    which the property is placed in service in the Enterprise
    Zone and shall not be allowed to the extent that it would
    reduce a taxpayer's liability  for  the  tax  imposed  by
    subsections  (a)  and  (b) of this Section to below zero.
    For tax years ending on or after December 31,  1985,  the
    credit  shall  be  allowed  for the tax year in which the
    property is placed in service, or, if the amount  of  the
    credit  exceeds  the tax liability for that year, whether
    it exceeds the original liability  or  the  liability  as
    later  amended,  such  excess  may be carried forward and
    applied to the tax  liability  of  the  5  taxable  years
    following  the  excess  credit  year. The credit shall be
    applied to  the  earliest  year  for  which  there  is  a
    liability. If there is credit from more than one tax year
    that  is  available  to  offset  a  liability, the credit
    accruing first in time shall be applied first.
         (2)  The  term  qualified  property  means  property
    which:
              (A)  is  tangible,   whether   new   or   used,
         including  buildings  and  structural  components of
         buildings;
              (B)  is depreciable pursuant to Section 167  of
         the  Internal  Revenue  Code,  except  that  "3-year
         property" as defined in Section 168(c)(2)(A) of that
         Code is not eligible for the credit provided by this
         subsection (f);
              (C)  is  acquired  by  purchase  as  defined in
         Section 179(d) of the Internal Revenue Code;
              (D)  is used in  the  Enterprise  Zone  by  the
         taxpayer; and
              (E)  has  not  been previously used in Illinois
         in such a manner and  by  such  a  person  as  would
         qualify  for  the credit provided by this subsection
         (f) or subsection (e).
         (3)  The basis of qualified property  shall  be  the
    basis  used  to  compute  the  depreciation deduction for
    federal income tax purposes.
         (4)  If the basis of the property for federal income
    tax depreciation purposes is increased after it has  been
    placed in service in the Enterprise Zone by the taxpayer,
    the  amount  of  such  increase  shall be deemed property
    placed in service on the date of such increase in basis.
         (5)  The term "placed in  service"  shall  have  the
    same  meaning as under Section 46 of the Internal Revenue
    Code.
         (6)  If during any taxable year, any property ceases
    to be qualified property in the  hands  of  the  taxpayer
    within  48  months  after being placed in service, or the
    situs of any qualified  property  is  moved  outside  the
    Enterprise  Zone  within  48 months after being placed in
    service, the tax imposed under subsections (a) and (b) of
    this Section for such taxable year  shall  be  increased.
    Such  increase shall be determined by (i) recomputing the
    investment credit which would have been allowed  for  the
    year  in  which  credit  for such property was originally
    allowed  by   eliminating   such   property   from   such
    computation,  and (ii) subtracting such recomputed credit
    from the amount of credit previously  allowed.   For  the
    purposes  of this paragraph (6), a reduction of the basis
    of qualified property resulting from a redetermination of
    the purchase price  shall  be  deemed  a  disposition  of
    qualified property to the extent of such reduction.
         (g)  Jobs  Tax  Credit;  Enterprise Zone and Foreign
Trade Zone or Sub-Zone.
         (1)  A taxpayer conducting a trade or business in an
    enterprise zone or a High Impact Business  designated  by
    the   Department   of   Commerce  and  Community  Affairs
    conducting a trade or business in a federally  designated
    Foreign  Trade Zone or Sub-Zone shall be allowed a credit
    against the tax imposed by subsections  (a)  and  (b)  of
    this  Section in the amount of $500 per eligible employee
    hired to work in the zone during the taxable year.
         (2)  To qualify for the credit:
              (A)  the taxpayer must hire 5 or more  eligible
         employees to work in an enterprise zone or federally
         designated Foreign Trade Zone or Sub-Zone during the
         taxable year;
              (B)  the taxpayer's total employment within the
         enterprise  zone  or  federally  designated  Foreign
         Trade  Zone  or  Sub-Zone must increase by 5 or more
         full-time employees beyond  the  total  employed  in
         that  zone  at  the end of the previous tax year for
         which a jobs  tax  credit  under  this  Section  was
         taken,  or beyond the total employed by the taxpayer
         as of December 31, 1985, whichever is later; and
              (C)  the eligible employees  must  be  employed
         180 consecutive days in order to be deemed hired for
         purposes of this subsection.
         (3)  An  "eligible  employee"  means an employee who
    is:
              (A)  Certified by the  Department  of  Commerce
         and  Community  Affairs  as  "eligible for services"
         pursuant to regulations  promulgated  in  accordance
         with  Title  II of the Job Training Partnership Act,
         Training Services for the Disadvantaged or Title III
         of the Job Training Partnership Act, Employment  and
         Training Assistance for Dislocated Workers Program.
              (B)  Hired   after   the   enterprise  zone  or
         federally designated Foreign Trade Zone or  Sub-Zone
         was  designated or the trade or business was located
         in that zone, whichever is later.
              (C)  Employed in the enterprise zone or Foreign
         Trade Zone or Sub-Zone. An employee is  employed  in
         an  enterprise  zone or federally designated Foreign
         Trade Zone or Sub-Zone if his services are  rendered
         there  or  it  is  the  base  of  operations for the
         services performed.
              (D)  A full-time employee working  30  or  more
         hours per week.
         (4)  For  tax  years ending on or after December 31,
    1985 and prior to December 31, 1988, the credit shall  be
    allowed  for the tax year in which the eligible employees
    are hired.  For tax years ending on or after December 31,
    1988, the credit  shall  be  allowed  for  the  tax  year
    immediately  following the tax year in which the eligible
    employees are hired.  If the amount of the credit exceeds
    the tax liability for that year, whether it  exceeds  the
    original  liability  or  the  liability as later amended,
    such excess may be carried forward and applied to the tax
    liability of the 5 taxable  years  following  the  excess
    credit year.  The credit shall be applied to the earliest
    year  for  which there is a liability. If there is credit
    from more than one tax year that is available to offset a
    liability, earlier credit shall be applied first.
         (5)  The Department of Revenue shall promulgate such
    rules and regulations as may be deemed necessary to carry
    out the purposes of this subsection (g).
         (6)  The credit  shall  be  available  for  eligible
    employees hired on or after January 1, 1986.
         (h)  Investment credit; High Impact Business.
         (1)  Subject to subsection (b) of Section 5.5 of the
    Illinois Enterprise Zone Act, a taxpayer shall be allowed
    a  credit  against the tax imposed by subsections (a) and
    (b) of this Section for investment in qualified  property
    which  is  placed  in service by a Department of Commerce
    and Community Affairs designated  High  Impact  Business.
    The  credit  shall be .5% of the basis for such property.
    The credit shall  not  be  available  until  the  minimum
    investments  in  qualified  property set forth in Section
    5.5  of  the  Illinois  Enterprise  Zone  Act  have  been
    satisfied and shall not be allowed to the extent that  it
    would  reduce  a taxpayer's liability for the tax imposed
    by subsections (a) and (b) of this Section to below zero.
    The credit applicable to such minimum  investments  shall
    be  taken  in  the  taxable  year  in  which such minimum
    investments  have  been  completed.    The   credit   for
    additional investments beyond the minimum investment by a
    designated  high  impact business shall be available only
    in the taxable year in which the property  is  placed  in
    service  and  shall  not be allowed to the extent that it
    would reduce a taxpayer's liability for the  tax  imposed
    by subsections (a) and (b) of this Section to below zero.
    For  tax  years ending on or after December 31, 1987, the
    credit shall be allowed for the tax  year  in  which  the
    property  is  placed in service, or, if the amount of the
    credit exceeds the tax liability for that  year,  whether
    it  exceeds  the  original  liability or the liability as
    later amended, such excess may  be  carried  forward  and
    applied  to  the  tax  liability  of  the 5 taxable years
    following the excess credit year.  The  credit  shall  be
    applied  to  the  earliest  year  for  which  there  is a
    liability.  If there is credit from  more  than  one  tax
    year  that is available to offset a liability, the credit
    accruing first in time shall be applied first.
         Changes made in this subdivision  (h)(1)  by  Public
    Act 88-670 restore changes made by Public Act 85-1182 and
    reflect existing law.
         (2)  The  term  qualified  property  means  property
    which:
              (A)  is   tangible,   whether   new   or  used,
         including buildings  and  structural  components  of
         buildings;
              (B)  is  depreciable pursuant to Section 167 of
         the  Internal  Revenue  Code,  except  that  "3-year
         property" as defined in Section 168(c)(2)(A) of that
         Code is not eligible for the credit provided by this
         subsection (h);
              (C)  is acquired  by  purchase  as  defined  in
         Section 179(d) of the Internal Revenue Code; and
              (D)  is  not  eligible  for the Enterprise Zone
         Investment Credit provided by subsection (f) of this
         Section.
         (3)  The basis of qualified property  shall  be  the
    basis  used  to  compute  the  depreciation deduction for
    federal income tax purposes.
         (4)  If the basis of the property for federal income
    tax depreciation purposes is increased after it has  been
    placed in service in a federally designated Foreign Trade
    Zone or Sub-Zone located in Illinois by the taxpayer, the
    amount  of  such increase shall be deemed property placed
    in service on the date of such increase in basis.
         (5)  The term "placed in  service"  shall  have  the
    same  meaning as under Section 46 of the Internal Revenue
    Code.
         (6)  If during any taxable year ending on or  before
    December  31,  1996,  any property ceases to be qualified
    property in the hands of the taxpayer  within  48  months
    after  being  placed  in  service,  or  the  situs of any
    qualified property is moved outside  Illinois  within  48
    months  after  being  placed  in service, the tax imposed
    under subsections (a) and (b) of this  Section  for  such
    taxable  year shall be increased.  Such increase shall be
    determined by (i) recomputing the investment credit which
    would have been allowed for the year in which credit  for
    such  property was originally allowed by eliminating such
    property from such computation, and (ii) subtracting such
    recomputed credit from the amount  of  credit  previously
    allowed.   For  the  purposes  of  this  paragraph (6), a
    reduction of the basis of  qualified  property  resulting
    from  a  redetermination  of  the purchase price shall be
    deemed a disposition of qualified property to the  extent
    of such reduction.
         (7)  Beginning  with tax years ending after December
    31, 1996, if a taxpayer qualifies for  the  credit  under
    this   subsection  (h)  and  thereby  is  granted  a  tax
    abatement and the taxpayer relocates its entire  facility
    in  violation  of  the  explicit  terms and length of the
    contract under Section 18-183 of the Property  Tax  Code,
    the  tax  imposed  under  subsections (a) and (b) of this
    Section shall be increased for the taxable year in  which
    the taxpayer relocated its facility by an amount equal to
    the  amount of credit received by the taxpayer under this
    subsection (h).
    (i)  A credit shall be allowed against the tax imposed by
subsections (a) and (b) of this Section for the  tax  imposed
by  subsections  (c)  and  (d)  of this Section.  This credit
shall  be  computed  by  multiplying  the  tax   imposed   by
subsections  (c)  and  (d) of this Section by a fraction, the
numerator of which is base income allocable to  Illinois  and
the denominator of which is Illinois base income, and further
multiplying   the   product   by  the  tax  rate  imposed  by
subsections (a) and (b) of this Section.
    Any credit earned on or after  December  31,  1986  under
this  subsection  which  is  unused in the year the credit is
computed because it exceeds  the  tax  liability  imposed  by
subsections (a) and (b) for that year (whether it exceeds the
original  liability or the liability as later amended) may be
carried forward and applied to the tax liability  imposed  by
subsections  (a) and (b) of the 5 taxable years following the
excess credit year.  This credit shall be  applied  first  to
the  earliest  year for which there is a liability.  If there
is a credit under this subsection from more than one tax year
that is available to offset a liability the  earliest  credit
arising under this subsection shall be applied first.
    If,  during  any taxable year ending on or after December
31, 1986, the tax imposed by subsections (c) and (d) of  this
Section  for which a taxpayer has claimed a credit under this
subsection (i) is reduced, the amount of credit for such  tax
shall also be reduced.  Such reduction shall be determined by
recomputing  the  credit to take into account the reduced tax
imposed by subsection (c) and (d).  If  any  portion  of  the
reduced  amount  of  credit  has  been carried to a different
taxable year, an amended  return  shall  be  filed  for  such
taxable year to reduce the amount of credit claimed.
    (j)  Training  expense  credit.  Beginning with tax years
ending on or after December 31, 1986,  a  taxpayer  shall  be
allowed  a  credit  against the tax imposed by subsection (a)
and (b) under this Section for all amounts paid  or  accrued,
on behalf of all persons employed by the taxpayer in Illinois
or  Illinois  residents  employed  outside  of  Illinois by a
taxpayer,  for  educational   or   vocational   training   in
semi-technical or technical fields or semi-skilled or skilled
fields,   which  were  deducted  from  gross  income  in  the
computation of taxable income.  The credit  against  the  tax
imposed  by  subsections  (a)  and  (b) shall be 1.6% of such
training expenses.  For  partners  and  for  shareholders  of
subchapter  S  corporations,  there shall be allowed a credit
under this subsection (j) to be determined in accordance with
the determination of income and distributive share of  income
under  Sections  702 and 704 and subchapter S of the Internal
Revenue Code.
    Any credit allowed under this subsection which is  unused
in  the  year  the credit is earned may be carried forward to
each of the 5 taxable years following the year for which  the
credit is first computed until it is used.  This credit shall
be  applied  first  to the earliest year for which there is a
liability.  If there is a credit under this  subsection  from
more  than  one  tax  year  that  is  available  to  offset a
liability the earliest credit arising under  this  subsection
shall be applied first.
    (k)  Research and development credit.
    Beginning  with  tax  years  ending after July 1, 1990, a
taxpayer shall be allowed a credit against the tax imposed by
subsections (a)  and  (b)  of  this  Section  for  increasing
research  activities  in  this  State.   The  credit  allowed
against  the  tax imposed by subsections (a) and (b) shall be
equal to 6 1/2% of the qualifying expenditures for increasing
research activities in this State.
    For   purposes   of    this    subsection,    "qualifying
expenditures"  means  the  qualifying expenditures as defined
for the federal credit  for  increasing  research  activities
which  would  be  allowable  under Section 41 of the Internal
Revenue  Code  and  which  are  conducted  in   this   State,
"qualifying  expenditures  for increasing research activities
in this State" means the excess  of  qualifying  expenditures
for  the  taxable  year  in  which  incurred  over qualifying
expenditures for the base  period,  "qualifying  expenditures
for  the  base  period"  means  the average of the qualifying
expenditures for each year in  the  base  period,  and  "base
period"  means  the 3 taxable years immediately preceding the
taxable year for which the determination is being made.
    Any credit in excess of the tax liability for the taxable
year may be carried forward. A taxpayer may elect to have the
unused credit shown on its  final  completed  return  carried
over  as a credit against the tax liability for the following
5 taxable years or until it has been  fully  used,  whichever
occurs first.
    If  an  unused  credit is carried forward to a given year
from 2 or more earlier years,  that  credit  arising  in  the
earliest year will be applied first against the tax liability
for  the  given  year.  If a tax liability for the given year
still remains, the credit from the next  earliest  year  will
then  be applied, and so on, until all credits have been used
or  no  tax  liability  for  the  given  year  remains.   Any
remaining unused credit  or  credits  then  will  be  carried
forward  to  the next following year in which a tax liability
is incurred, except that no credit can be carried forward  to
a year which is more than 5 years after the year in which the
expense for which the credit is given was incurred.
    Unless  extended  by  law,  the  credit shall not include
costs incurred after December  31,  1999,  except  for  costs
incurred  pursuant  to  a binding contract entered into on or
before December 31, 1999.
    (l)  Environmental Remediation Tax Credit.
         (i)  For tax  years ending after December  31,  1997
    and  on  or before December 31, 2001, a taxpayer shall be
    allowed a credit against the tax imposed  by  subsections
    (a)  and (b) of this Section for certain amounts paid for
    unreimbursed eligible remediation costs, as specified  in
    this   subsection.    For   purposes   of  this  Section,
    "unreimbursed eligible  remediation  costs"  means  costs
    approved  by the Illinois Environmental Protection Agency
    ("Agency")  under  Section  58.14  of  the  Environmental
    Protection Act that were paid in performing environmental
    remediation at a site for which a No Further  Remediation
    Letter  was  issued  by  the  Agency  and  recorded under
    Section 58.10 of the Environmental  Protection  Act,  and
    does  not  mean  approved eligible remediation costs that
    are at any time deducted  under  the  provisions  of  the
    Internal  Revenue  Code.   The credit must be claimed for
    the taxable year in which Agency approval of the eligible
    remediation  costs  is  granted.   In  no   event   shall
    unreimbursed eligible remediation costs include any costs
    taken   into  account  in  calculating  an  environmental
    remediation credit granted against a  tax  imposed  under
    the  provisions of the Internal Revenue Code.  The credit
    is not available to any taxpayer if the taxpayer  or  any
    related  party  caused or contributed to, in any material
    respect, a release of regulated  substances  on,  in,  or
    under  the  site that was identified and addressed by the
    remedial action pursuant to the Site Remediation  Program
    of the Environmental Protection Act.  After the Pollution
    Control  Board rules are adopted pursuant to the Illinois
    Administrative Procedure Act for the  administration  and
    enforcement   of   Section   58.9  of  the  Environmental
    Protection Act, determinations as to credit  availability
    for  purposes  of  this  Section shall be made consistent
    with  those  rules.   For  purposes  of   this   Section,
    "taxpayer"  includes  a  person  whose tax attributes the
    taxpayer has  succeeded  to  under  Section  381  of  the
    Internal  Revenue  Code  and "related party" includes the
    persons disallowed a deduction for losses  by  paragraphs
    (b),  (c),  and  (f)(1)  of  Section  267 of the Internal
    Revenue Code by virtue of being a  related  taxpayer,  as
    well  as any of its partners.  The credit allowed against
    the tax imposed by subsections (a) and (b) shall be equal
    to 25% of the unreimbursed eligible remediation costs  in
    excess  of  $100,000  per  site, except that the $100,000
    threshold shall not apply to any  site  contained  in  an
    enterprise  zone  and  located  in a census tract that is
    located in a minor civil division  and  place  or  county
    that  has  been  determined by the Department of Commerce
    and Community Affairs to contain a majority of households
    consisting of low and moderate income persons.  The total
    credit allowed shall not exceed $40,000 per year  with  a
    maximum  total  of  $150,000  per site.  For partners and
    shareholders of subchapter S corporations, there shall be
    allowed a credit under this subsection to  be  determined
    in  accordance  with  the  determination  of  income  and
    distributive  share  of income under Sections 702 and 704
    of subchapter S of the Internal Revenue Code.
         (ii)  A credit allowed under this subsection that is
    unused in the year the credit is earned  may  be  carried
    forward to each of the 5 taxable years following the year
    for  which  the  credit is first earned until it is used.
    The term "unused credit" does not include any amounts  of
    unreimbursed  eligible remediation costs in excess of the
    maximum credit per site authorized under  paragraph  (i).
    This  credit  shall be applied first to the earliest year
    for which there is a liability.  If  there  is  a  credit
    under this subsection from more than one tax year that is
    available  to  offset  a  liability,  the earliest credit
    arising under this subsection shall be applied first.   A
    credit  allowed  under  this  subsection may be sold to a
    buyer as part of a sale of all or part of the remediation
    site for which the credit was granted.  The purchaser  of
    a  remediation  site  and the tax credit shall succeed to
    the unused credit and remaining carry-forward  period  of
    the  seller.  To perfect the transfer, the assignor shall
    record the transfer in the chain of title  for  the  site
    and  provide  written  notice  to  the  Director  of  the
    Illinois  Department  of Revenue of the assignor's intent
    to sell the remediation site and the amount  of  the  tax
    credit to be transferred as a portion of the sale.  In no
    event  may a credit be transferred to any taxpayer if the
    taxpayer or a related party would not be  eligible  under
    the provisions of subsection (i).
         (iii)  For purposes of this Section, the term "site"
    shall  have the same meaning as under Section 58.2 of the
    Environmental Protection Act.
(Source: P.A. 89-235,  eff.  8-4-95;  89-519,  eff.  7-18-96;
89-591,  eff.  8-1-96;  90-123,  eff.  7-21-97;  90-458, eff.
8-17-97; revised 10-16-97.)
    (35 ILCS 5/203) (from Ch. 120, par. 2-203)
    Sec. 203.  Base income defined.
    (a)  Individuals.
         (1)  In general.  In the case of an individual, base
    income means an amount equal to the  taxpayer's  adjusted
    gross   income  for  the  taxable  year  as  modified  by
    paragraph (2).
         (2)  Modifications.   The  adjusted   gross   income
    referred  to in paragraph (1) shall be modified by adding
    thereto the sum of the following amounts:
              (A)  An amount equal to  all  amounts  paid  or
         accrued  to  the  taxpayer  as interest or dividends
         during the taxable year to the extent excluded  from
         gross  income  in  the computation of adjusted gross
         income, except stock dividends of  qualified  public
         utilities   described   in  Section  305(e)  of  the
         Internal Revenue Code;
              (B)  An amount  equal  to  the  amount  of  tax
         imposed  by  this  Act  to  the extent deducted from
         gross income in the computation  of  adjusted  gross
         income for the taxable year;
              (C)  An  amount  equal  to  the amount received
         during the taxable year as a recovery or  refund  of
         real   property  taxes  paid  with  respect  to  the
         taxpayer's principal residence under the Revenue Act
         of 1939 and for which  a  deduction  was  previously
         taken  under  subparagraph (L) of this paragraph (2)
         prior to July 1, 1991, the retrospective application
         date of Article 4 of Public Act 87-17.  In the  case
         of  multi-unit  or  multi-use  structures  and  farm
         dwellings,  the  taxes  on  the taxpayer's principal
         residence shall be that portion of the  total  taxes
         for  the  entire  property  which is attributable to
         such principal residence;
              (D)  An amount  equal  to  the  amount  of  the
         capital  gain deduction allowable under the Internal
         Revenue Code, to  the  extent  deducted  from  gross
         income  in the computation of adjusted gross income;
         and
              (D-5)  An amount, to the extent not included in
         adjusted gross income, equal to the amount of  money
         withdrawn by the taxpayer in the taxable year from a
         medical care savings account and the interest earned
         on  the  account in the taxable year of a withdrawal
         pursuant to subsection (b)  of  Section  20  of  the
         Medical Care Savings Account Act; and
              (D-10)  For taxable years ending after December
         31,  1997,  an  amount   equal   to   any   eligible
         remediation  costs  that  the individual deducted in
         computing adjusted gross income and  for  which  the
         individual  claims  a credit under subsection (l) of
         Section 201;
    and by deducting from the total so obtained  the  sum  of
    the following amounts:
              (E)  Any  amount  included  in  such  total  in
         respect  of  any  compensation  (including  but  not
         limited  to  any  compensation  paid or accrued to a
         serviceman while a prisoner of  war  or  missing  in
         action)  paid  to  a  resident by reason of being on
         active duty in the Armed Forces of the United States
         and in respect of any compensation paid  or  accrued
         to  a  resident who as a governmental employee was a
         prisoner of war or missing in action, and in respect
         of any compensation paid to a resident  in  1971  or
         thereafter for annual training performed pursuant to
         Sections  502  and 503, Title 32, United States Code
         as a member of the Illinois National Guard;
              (F)  An amount equal to all amounts included in
         such total pursuant to the  provisions  of  Sections
         402(a),  402(c), 403(a), 403(b), 406(a), 407(a), and
         408 of the Internal Revenue  Code,  or  included  in
         such  total as distributions under the provisions of
         any retirement or disability plan for  employees  of
         any  governmental  agency  or  unit,  or  retirement
         payments  to  retired  partners,  which payments are
         excluded  in  computing  net  earnings   from   self
         employment  by  Section 1402 of the Internal Revenue
         Code and regulations adopted pursuant thereto;
              (G)  The valuation limitation amount;
              (H)  An amount equal to the amount of  any  tax
         imposed  by  this  Act  which  was  refunded  to the
         taxpayer and included in such total for the  taxable
         year;
              (I)  An amount equal to all amounts included in
         such total pursuant to the provisions of Section 111
         of  the Internal Revenue Code as a recovery of items
         previously deducted from adjusted  gross  income  in
         the computation of taxable income;
              (J)  An   amount   equal   to  those  dividends
         included  in  such  total  which  were  paid  by   a
         corporation which conducts business operations in an
         Enterprise  Zone or zones created under the Illinois
         Enterprise Zone Act, and conducts substantially  all
         of its operations in an Enterprise Zone or zones;
              (K)  An   amount   equal   to  those  dividends
         included  in  such  total  that  were  paid   by   a
         corporation  that  conducts business operations in a
         federally designated Foreign Trade Zone or  Sub-Zone
         and  that  is  designated  a  High  Impact  Business
         located   in   Illinois;   provided  that  dividends
         eligible for the deduction provided in  subparagraph
         (J) of paragraph (2) of this subsection shall not be
         eligible  for  the  deduction  provided  under  this
         subparagraph (K);
              (L)  For  taxable  years  ending after December
         31, 1983, an amount equal  to  all  social  security
         benefits  and  railroad retirement benefits included
         in such total pursuant to Sections 72(r) and  86  of
         the Internal Revenue Code;
              (M)  With   the   exception   of   any  amounts
         subtracted under subparagraph (N), an  amount  equal
         to  the  sum of all amounts disallowed as deductions
         by Sections 171(a) (2), and 265(2) of  the  Internal
         Revenue  Code  of 1954, as now or hereafter amended,
         and all amounts of expenses  allocable  to  interest
         and   disallowed  as deductions by Section 265(1) of
         the  Internal  Revenue  Code  of  1954,  as  now  or
         hereafter amended;
              (N)  An amount equal to all amounts included in
         such total which are exempt from  taxation  by  this
         State   either   by   reason   of  its  statutes  or
         Constitution  or  by  reason  of  the  Constitution,
         treaties or statutes of the United States;  provided
         that,  in the case of any statute of this State that
         exempts  income  derived   from   bonds   or   other
         obligations from the tax imposed under this Act, the
         amount  exempted  shall  be the interest net of bond
         premium amortization;
              (O)  An amount equal to any  contribution  made
         to  a  job  training project established pursuant to
         the Tax Increment Allocation Redevelopment Act;
              (P)  An amount  equal  to  the  amount  of  the
         deduction  used  to  compute  the federal income tax
         credit for restoration of substantial  amounts  held
         under  claim  of right for the taxable year pursuant
         to Section 1341 of  the  Internal  Revenue  Code  of
         1986;
              (Q)  An amount equal to any amounts included in
         such   total,   received   by  the  taxpayer  as  an
         acceleration in the payment of  life,  endowment  or
         annuity  benefits  in advance of the time they would
         otherwise be payable as an indemnity for a  terminal
         illness;
              (R)  An  amount  equal  to  the  amount  of any
         federal or State  bonus  paid  to  veterans  of  the
         Persian Gulf War;
              (S)  An  amount,  to  the  extent  included  in
         adjusted  gross  income,  equal  to  the amount of a
         contribution made in the taxable year on  behalf  of
         the  taxpayer  to  a  medical  care  savings account
         established under the Medical Care  Savings  Account
         Act  to  the  extent the contribution is accepted by
         the account administrator as provided in that Act;
              (T)  An  amount,  to  the  extent  included  in
         adjusted  gross  income,  equal  to  the  amount  of
         interest earned in the taxable  year  on  a  medical
         care  savings  account established under the Medical
         Care Savings Account Act on behalf of the  taxpayer,
         other  than interest added pursuant to item (D-5) of
         this paragraph (2);
              (U)  For one taxable year beginning on or after
         January 1, 1994, an amount equal to the total amount
         of tax imposed and paid under  subsections  (a)  and
         (b)  of  Section  201  of  this Act on grant amounts
         received by the  taxpayer  under  the  Nursing  Home
         Grant  Assistance  Act during the taxpayer's taxable
         years 1992 and 1993; and
              (V)  Beginning with  tax  years  ending  on  or
         after  December  31,  1995 and ending with tax years
         ending on or before December  31,  1999,  an  amount
         equal  to  the  amount  paid  by a taxpayer who is a
         self-employed taxpayer, a partner of a  partnership,
         or  a  shareholder in a Subchapter S corporation for
         health insurance or  long-term  care  insurance  for
         that   taxpayer   or   that   taxpayer's  spouse  or
         dependents, to the extent that the amount  paid  for
         that  health  insurance  or long-term care insurance
         may be deducted under Section 213  of  the  Internal
         Revenue  Code  of 1986, has not been deducted on the
         federal income tax return of the taxpayer, and  does
         not  exceed  the taxable income attributable to that
         taxpayer's  income,   self-employment   income,   or
         Subchapter  S  corporation  income;  except  that no
         deduction shall be allowed under this  item  (V)  if
         the  taxpayer  is  eligible  to  participate  in any
         health insurance or long-term care insurance plan of
         an  employer  of  the  taxpayer  or  the  taxpayer's
         spouse.  The amount  of  the  health  insurance  and
         long-term  care insurance subtracted under this item
         (V) shall be determined by multiplying total  health
         insurance and long-term care insurance premiums paid
         by  the  taxpayer times a number that represents the
         fractional percentage of eligible  medical  expenses
         under  Section  213  of the Internal Revenue Code of
         1986 not actually deducted on the taxpayer's federal
         income tax return.
    (b)  Corporations.
         (1)  In general.  In the case of a corporation, base
    income means an amount equal to  the  taxpayer's  taxable
    income for the taxable year as modified by paragraph (2).
         (2)  Modifications.   The taxable income referred to
    in paragraph (1) shall be modified by adding thereto  the
    sum of the following amounts:
              (A)  An  amount  equal  to  all amounts paid or
         accrued  to  the  taxpayer  as  interest   and   all
         distributions  received  from  regulated  investment
         companies  during  the  taxable  year  to the extent
         excluded from gross income  in  the  computation  of
         taxable income;
              (B)  An  amount  equal  to  the  amount  of tax
         imposed by this Act  to  the  extent  deducted  from
         gross  income  in  the computation of taxable income
         for the taxable year;
              (C)  In the  case  of  a  regulated  investment
         company,  an  amount  equal to the excess of (i) the
         net long-term capital gain  for  the  taxable  year,
         over  (ii)  the amount of the capital gain dividends
         designated  as  such  in  accordance  with   Section
         852(b)(3)(C)  of  the  Internal Revenue Code and any
         amount designated under Section 852(b)(3)(D) of  the
         Internal  Revenue  Code, attributable to the taxable
         year.
    This amendatory Act of 1995 is  declarative  of  existing
law and is not a new enactment.
              (D)  The  amount  of  any  net  operating  loss
         deduction taken in arriving at taxable income, other
         than  a  net  operating  loss carried forward from a
         taxable year ending prior to December 31, 1986; and
              (E)  For taxable years in which a net operating
         loss carryback or carryforward from a  taxable  year
         ending  prior  to December 31, 1986 is an element of
         taxable income under paragraph (1) of subsection (e)
         or subparagraph (E) of paragraph (2)  of  subsection
         (e),  the  amount  by  which  addition modifications
         other than those provided by this  subparagraph  (E)
         exceeded  subtraction  modifications in such earlier
         taxable year, with the following limitations applied
         in the order that they are listed:
                   (i)  the addition modification relating to
              the net operating loss carried back or  forward
              to  the  taxable  year  from  any  taxable year
              ending prior to  December  31,  1986  shall  be
              reduced  by the amount of addition modification
              under this subparagraph (E)  which  related  to
              that  net  operating  loss  and which was taken
              into account in calculating the base income  of
              an earlier taxable year, and
                   (ii)  the  addition  modification relating
              to the  net  operating  loss  carried  back  or
              forward  to  the  taxable year from any taxable
              year ending prior to December  31,  1986  shall
              not  exceed  the  amount  of  such carryback or
              carryforward;
              For taxable years  in  which  there  is  a  net
         operating  loss  carryback or carryforward from more
         than one other taxable year ending prior to December
         31, 1986, the addition modification provided in this
         subparagraph (E) shall be the  sum  of  the  amounts
         computed    independently    under   the   preceding
         provisions of this subparagraph (E)  for  each  such
         taxable year, and
              (E-5)  For  taxable years ending after December
         31,  1997,  an  amount   equal   to   any   eligible
         remediation  costs  that the corporation deducted in
         computing adjusted gross income and  for  which  the
         corporation  claims a credit under subsection (l) of
         Section 201;
    and by deducting from the total so obtained  the  sum  of
    the following amounts:
              (F)  An  amount  equal to the amount of any tax
         imposed by  this  Act  which  was  refunded  to  the
         taxpayer  and included in such total for the taxable
         year;
              (G)  An amount equal to any amount included  in
         such  total under Section 78 of the Internal Revenue
         Code;
              (H)  In the  case  of  a  regulated  investment
         company,  an  amount  equal  to the amount of exempt
         interest dividends as defined in subsection (b)  (5)
         of Section 852 of the Internal Revenue Code, paid to
         shareholders for the taxable year;
              (I)  With   the   exception   of   any  amounts
         subtracted under subparagraph (J), an  amount  equal
         to  the  sum of all amounts disallowed as deductions
         by Sections 171(a) (2), and  265(a)(2)  and  amounts
         disallowed  as interest expense by Section 291(a)(3)
         of the Internal Revenue Code, as  now  or  hereafter
         amended,  and  all  amounts of expenses allocable to
         interest and disallowed  as  deductions  by  Section
         265(a)(1)  of  the  Internal Revenue Code, as now or
         hereafter amended;
              (J)  An amount equal to all amounts included in
         such total which are exempt from  taxation  by  this
         State   either   by   reason   of  its  statutes  or
         Constitution  or  by  reason  of  the  Constitution,
         treaties or statutes of the United States;  provided
         that,  in the case of any statute of this State that
         exempts  income  derived   from   bonds   or   other
         obligations from the tax imposed under this Act, the
         amount  exempted  shall  be the interest net of bond
         premium amortization;
              (K)  An  amount  equal   to   those   dividends
         included   in  such  total  which  were  paid  by  a
         corporation which conducts business operations in an
         Enterprise Zone or zones created under the  Illinois
         Enterprise  Zone  Act and conducts substantially all
         of its operations in an Enterprise Zone or zones;
              (L)  An  amount  equal   to   those   dividends
         included   in   such  total  that  were  paid  by  a
         corporation that conducts business operations  in  a
         federally  designated Foreign Trade Zone or Sub-Zone
         and  that  is  designated  a  High  Impact  Business
         located  in  Illinois;   provided   that   dividends
         eligible  for the deduction provided in subparagraph
         (K) of paragraph 2 of this subsection shall  not  be
         eligible  for  the  deduction  provided  under  this
         subparagraph (L);
              (M)  For  any  taxpayer  that  is  a  financial
         organization within the meaning of Section 304(c) of
         this  Act,  an  amount  included  in  such  total as
         interest income from a loan or loans  made  by  such
         taxpayer  to  a  borrower, to the extent that such a
         loan is secured by property which  is  eligible  for
         the  Enterprise Zone Investment Credit. To determine
         the portion of a loan or loans that  is  secured  by
         property  eligible  for  a Section 201(h) investment
         credit to the borrower, the entire principal  amount
         of  the  loan  or loans between the taxpayer and the
         borrower should be divided into  the  basis  of  the
         Section  201(h)  investment  credit  property  which
         secures  the  loan  or loans, using for this purpose
         the original basis of such property on the date that
         it was placed in service  in  the  Enterprise  Zone.
         The  subtraction  modification available to taxpayer
         in any year under  this  subsection  shall  be  that
         portion  of  the total interest paid by the borrower
         with  respect  to  such  loan  attributable  to  the
         eligible property as calculated under  the  previous
         sentence;
              (M-1)  For  any  taxpayer  that  is a financial
         organization within the meaning of Section 304(c) of
         this Act,  an  amount  included  in  such  total  as
         interest  income  from  a loan or loans made by such
         taxpayer to a borrower, to the extent  that  such  a
         loan  is  secured  by property which is eligible for
         the High  Impact  Business  Investment  Credit.   To
         determine  the  portion  of  a loan or loans that is
         secured by property eligible for  a  Section  201(i)
         investment   credit  to  the  borrower,  the  entire
         principal amount of the loan or  loans  between  the
         taxpayer and the borrower should be divided into the
         basis   of  the  Section  201(i)  investment  credit
         property which secures the loan or loans, using  for
         this  purpose the original basis of such property on
         the  date  that  it  was  placed  in  service  in  a
         federally designated Foreign Trade Zone or  Sub-Zone
         located  in  Illinois.  No taxpayer that is eligible
         for the deduction provided in  subparagraph  (M)  of
         paragraph  (2)  of this subsection shall be eligible
         for the deduction provided under  this  subparagraph
         (M-1).   The  subtraction  modification available to
         taxpayers in any year under this subsection shall be
         that portion of  the  total  interest  paid  by  the
         borrower  with  respect to such loan attributable to
         the  eligible  property  as  calculated  under   the
         previous sentence;
              (N)  Two times any contribution made during the
         taxable  year  to  a designated zone organization to
         the extent that the contribution (i) qualifies as  a
         charitable  contribution  under  subsection  (c)  of
         Section  170  of  the Internal Revenue Code and (ii)
         must, by its terms, be used for a  project  approved
         by  the Department of Commerce and Community Affairs
         under Section 11 of  the  Illinois  Enterprise  Zone
         Act;
              (O)  An  amount  equal  to: (i) 85% for taxable
         years ending on or before December 31, 1992,  or,  a
         percentage  equal  to the percentage allowable under
         Section 243(a)(1) of the Internal  Revenue  Code  of
         1986  for  taxable  years  ending after December 31,
         1992, of the amount by which dividends  included  in
         taxable  income and received from a corporation that
         is not created or organized under the  laws  of  the
         United  States or any state or political subdivision
         thereof, including, for taxable years ending  on  or
         after  December  31,  1988,  dividends  received  or
         deemed   received  or  paid  or  deemed  paid  under
         Sections 951 through 964  of  the  Internal  Revenue
         Code, exceed the amount of the modification provided
         under  subparagraph  (G)  of  paragraph  (2) of this
         subsection (b) which is related to  such  dividends;
         plus  (ii)  100%  of  the amount by which dividends,
         included in taxable income and received,  including,
         for  taxable  years  ending on or after December 31,
         1988, dividends received or deemed received or  paid
         or deemed paid under Sections 951 through 964 of the
         Internal  Revenue  Code,  from  any such corporation
         specified in clause  (i)  that  would  but  for  the
         provisions  of  Section 1504 (b) (3) of the Internal
         Revenue  Code  be  treated  as  a  member   of   the
         affiliated   group   which   includes  the  dividend
         recipient, exceed the  amount  of  the  modification
         provided  under subparagraph (G) of paragraph (2) of
         this  subsection  (b)  which  is  related  to   such
         dividends;
              (P)  An  amount  equal to any contribution made
         to a job training project  established  pursuant  to
         the Tax Increment Allocation Redevelopment Act; and
              (Q)  An  amount  equal  to  the  amount  of the
         deduction used to compute  the  federal  income  tax
         credit  for  restoration of substantial amounts held
         under claim of right for the taxable  year  pursuant
         to  Section  1341  of  the  Internal Revenue Code of
         1986.
         (3)  Special rule.  For purposes  of  paragraph  (2)
    (A),  "gross  income"  in  the  case  of a life insurance
    company, for tax years ending on and after  December  31,
    1994,  shall  mean  the  gross  investment income for the
    taxable year.
    (c)  Trusts and estates.
         (1)  In general.  In the case of a trust or  estate,
    base  income  means  an  amount  equal  to the taxpayer's
    taxable income  for  the  taxable  year  as  modified  by
    paragraph (2).
         (2)  Modifications.   Subject  to  the provisions of
    paragraph  (3),  the  taxable  income  referred   to   in
    paragraph (1) shall be modified by adding thereto the sum
    of the following amounts:
              (A)  An  amount  equal  to  all amounts paid or
         accrued to the taxpayer  as  interest  or  dividends
         during  the taxable year to the extent excluded from
         gross income in the computation of taxable income;
              (B)  In the case of (i) an estate, $600; (ii) a
         trust which,  under  its  governing  instrument,  is
         required  to distribute all of its income currently,
         $300; and (iii) any other trust, $100, but  in  each
         such  case,  only  to  the  extent  such  amount was
         deducted in the computation of taxable income;
              (C)  An amount  equal  to  the  amount  of  tax
         imposed  by  this  Act  to  the extent deducted from
         gross income in the computation  of  taxable  income
         for the taxable year;
              (D)  The  amount  of  any  net  operating  loss
         deduction taken in arriving at taxable income, other
         than  a  net  operating  loss carried forward from a
         taxable year ending prior to December 31, 1986;
              (E)  For taxable years in which a net operating
         loss carryback or carryforward from a  taxable  year
         ending  prior  to December 31, 1986 is an element of
         taxable income under paragraph (1) of subsection (e)
         or subparagraph (E) of paragraph (2)  of  subsection
         (e),  the  amount  by  which  addition modifications
         other than those provided by this  subparagraph  (E)
         exceeded  subtraction  modifications in such taxable
         year, with the following limitations applied in  the
         order that they are listed:
                   (i)  the addition modification relating to
              the  net operating loss carried back or forward
              to the  taxable  year  from  any  taxable  year
              ending  prior  to  December  31,  1986 shall be
              reduced by the amount of addition  modification
              under  this  subparagraph  (E) which related to
              that net operating loss  and  which  was  taken
              into  account in calculating the base income of
              an earlier taxable year, and
                   (ii)  the addition  modification  relating
              to  the  net  operating  loss  carried  back or
              forward to the taxable year  from  any  taxable
              year  ending  prior  to December 31, 1986 shall
              not exceed the  amount  of  such  carryback  or
              carryforward;
              For  taxable  years  in  which  there  is a net
         operating loss carryback or carryforward  from  more
         than one other taxable year ending prior to December
         31, 1986, the addition modification provided in this
         subparagraph  (E)  shall  be  the sum of the amounts
         computed   independently   under    the    preceding
         provisions  of  this  subparagraph (E) for each such
         taxable year;
              (F)  For  taxable  years  ending  on  or  after
         January 1, 1989, an amount equal to the tax deducted
         pursuant to Section 164 of the Internal Revenue Code
         if the trust or estate is claiming the same tax  for
         purposes  of  the  Illinois foreign tax credit under
         Section 601 of this Act; and
              (G)  An amount  equal  to  the  amount  of  the
         capital  gain deduction allowable under the Internal
         Revenue Code, to  the  extent  deducted  from  gross
         income in the computation of taxable income; and
              (G-5)  For  taxable years ending after December
         31,  1997,  an  amount   equal   to   any   eligible
         remediation  costs that the trust or estate deducted
         in computing adjusted gross income and for which the
         trust or estate claims a credit under subsection (l)
         of Section 201;
    and by deducting from the total so obtained  the  sum  of
    the following amounts:
              (H)  An amount equal to all amounts included in
         such  total  pursuant  to the provisions of Sections
         402(a), 402(c), 403(a), 403(b), 406(a),  407(a)  and
         408 of the Internal Revenue Code or included in such
         total  as  distributions under the provisions of any
         retirement or disability plan for employees  of  any
         governmental  agency or unit, or retirement payments
         to retired partners, which payments are excluded  in
         computing  net  earnings  from  self  employment  by
         Section  1402  of  the  Internal  Revenue  Code  and
         regulations adopted pursuant thereto;
              (I)  The valuation limitation amount;
              (J)  An  amount  equal to the amount of any tax
         imposed by  this  Act  which  was  refunded  to  the
         taxpayer  and included in such total for the taxable
         year;
              (K)  An amount equal to all amounts included in
         taxable income as  modified  by  subparagraphs  (A),
         (B),  (C),  (D),  (E),  (F) and (G) which are exempt
         from taxation by this State either by reason of  its
         statutes   or  Constitution  or  by  reason  of  the
         Constitution, treaties or  statutes  of  the  United
         States; provided that, in the case of any statute of
         this State that exempts income derived from bonds or
         other  obligations  from  the tax imposed under this
         Act, the amount exempted shall be the  interest  net
         of bond premium amortization;
              (L)  With   the   exception   of   any  amounts
         subtracted under subparagraph (K), an  amount  equal
         to  the  sum of all amounts disallowed as deductions
         by Sections 171(a) (2) and 265(a)(2) of the Internal
         Revenue Code, as now or hereafter amended,  and  all
         amounts   of  expenses  allocable  to  interest  and
         disallowed as deductions by Section  265(1)  of  the
         Internal  Revenue  Code of 1954, as now or hereafter
         amended;
              (M)  An  amount  equal   to   those   dividends
         included   in  such  total  which  were  paid  by  a
         corporation which conducts business operations in an
         Enterprise Zone or zones created under the  Illinois
         Enterprise  Zone  Act and conducts substantially all
         of its operations in an Enterprise Zone or Zones;
              (N)  An amount equal to any  contribution  made
         to  a  job  training project established pursuant to
         the Tax Increment Allocation Redevelopment Act;
              (O)  An  amount  equal   to   those   dividends
         included   in   such  total  that  were  paid  by  a
         corporation that conducts business operations  in  a
         federally  designated Foreign Trade Zone or Sub-Zone
         and  that  is  designated  a  High  Impact  Business
         located  in  Illinois;   provided   that   dividends
         eligible  for the deduction provided in subparagraph
         (M) of paragraph (2) of this subsection shall not be
         eligible  for  the  deduction  provided  under  this
         subparagraph (O); and
              (P)  An amount  equal  to  the  amount  of  the
         deduction  used  to  compute  the federal income tax
         credit for restoration of substantial  amounts  held
         under  claim  of right for the taxable year pursuant
         to Section 1341 of  the  Internal  Revenue  Code  of
         1986.
         (3)  Limitation.   The  amount  of  any modification
    otherwise required under  this  subsection  shall,  under
    regulations  prescribed by the Department, be adjusted by
    any amounts included therein which  were  properly  paid,
    credited,  or  required to be distributed, or permanently
    set aside for charitable purposes pursuant   to  Internal
    Revenue Code Section 642(c) during the taxable year.
    (d)  Partnerships.
         (1)  In  general. In the case of a partnership, base
    income means an amount equal to  the  taxpayer's  taxable
    income for the taxable year as modified by paragraph (2).
         (2)  Modifications.  The  taxable income referred to
    in paragraph (1) shall be modified by adding thereto  the
    sum of the following amounts:
              (A)  An  amount  equal  to  all amounts paid or
         accrued to the taxpayer  as  interest  or  dividends
         during  the taxable year to the extent excluded from
         gross income in the computation of taxable income;
              (B)  An amount  equal  to  the  amount  of  tax
         imposed  by  this  Act  to  the extent deducted from
         gross income for the taxable year; and
              (C)  The amount of deductions  allowed  to  the
         partnership  pursuant  to  Section  707  (c)  of the
         Internal Revenue Code  in  calculating  its  taxable
         income;
              (D)  An  amount  equal  to  the  amount  of the
         capital gain deduction allowable under the  Internal
         Revenue  Code,  to  the  extent  deducted from gross
         income in the computation of taxable income;
    and by deducting from the total so obtained the following
    amounts:
              (E)  The valuation limitation amount;
              (F)  An amount equal to the amount of  any  tax
         imposed  by  this  Act  which  was  refunded  to the
         taxpayer and included in such total for the  taxable
         year;
              (G)  An amount equal to all amounts included in
         taxable  income  as  modified  by subparagraphs (A),
         (B), (C) and (D) which are exempt from  taxation  by
         this  State  either  by  reason  of  its statutes or
         Constitution  or  by  reason  of  the  Constitution,
         treaties or statutes of the United States;  provided
         that,  in the case of any statute of this State that
         exempts  income  derived   from   bonds   or   other
         obligations from the tax imposed under this Act, the
         amount  exempted  shall  be the interest net of bond
         premium amortization;
              (H)  Any  income  of  the   partnership   which
         constitutes  personal  service  income as defined in
         Section 1348 (b) (1) of the  Internal  Revenue  Code
         (as  in  effect  December  31, 1981) or a reasonable
         allowance  for  compensation  paid  or  accrued  for
         services rendered by partners  to  the  partnership,
         whichever is greater;
              (I)  An  amount  equal to all amounts of income
         distributable to an entity subject to  the  Personal
         Property  Tax  Replacement  Income  Tax  imposed  by
         subsections  (c)  and (d) of Section 201 of this Act
         including  amounts  distributable  to  organizations
         exempt from federal income tax by reason of  Section
         501(a) of the Internal Revenue Code;
              (J)  With   the   exception   of   any  amounts
         subtracted under subparagraph (G), an  amount  equal
         to  the  sum of all amounts disallowed as deductions
         by Sections 171(a) (2), and 265(2) of  the  Internal
         Revenue  Code  of 1954, as now or hereafter amended,
         and all amounts of expenses  allocable  to  interest
         and  disallowed  as  deductions by Section 265(1) of
         the Internal  Revenue  Code,  as  now  or  hereafter
         amended;
              (K)  An   amount   equal   to  those  dividends
         included  in  such  total  which  were  paid  by   a
         corporation which conducts business operations in an
         Enterprise  Zone or zones created under the Illinois
         Enterprise Zone Act, enacted  by  the  82nd  General
         Assembly, and which does not conduct such operations
         other than in an Enterprise Zone or Zones;
              (L)  An  amount  equal to any contribution made
         to a job training project  established  pursuant  to
         the   Real   Property   Tax   Increment   Allocation
         Redevelopment Act;
              (M)  An   amount   equal   to  those  dividends
         included  in  such  total  that  were  paid   by   a
         corporation  that  conducts business operations in a
         federally designated Foreign Trade Zone or  Sub-Zone
         and  that  is  designated  a  High  Impact  Business
         located   in   Illinois;   provided  that  dividends
         eligible for the deduction provided in  subparagraph
         (K) of paragraph (2) of this subsection shall not be
         eligible  for  the  deduction  provided  under  this
         subparagraph (M); and
              (N)  An  amount  equal  to  the  amount  of the
         deduction used to compute  the  federal  income  tax
         credit  for  restoration of substantial amounts held
         under claim of right for the taxable  year  pursuant
         to  Section  1341  of  the  Internal Revenue Code of
         1986.
    (e)  Gross income; adjusted gross income; taxable income.
         (1)  In  general.   Subject  to  the  provisions  of
    paragraph (2) and subsection (b)  (3),  for  purposes  of
    this  Section  and  Section  803(e),  a  taxpayer's gross
    income, adjusted gross income, or taxable income for  the
    taxable  year  shall  mean  the  amount  of gross income,
    adjusted  gross  income  or   taxable   income   properly
    reportable  for  federal  income  tax  purposes  for  the
    taxable year under the provisions of the Internal Revenue
    Code.  Taxable income may be less than zero. However, for
    taxable years ending on or after December 31,  1986,  net
    operating  loss  carryforwards  from taxable years ending
    prior to December 31, 1986, may not  exceed  the  sum  of
    federal  taxable  income  for the taxable year before net
    operating loss deduction, plus  the  excess  of  addition
    modifications  over  subtraction  modifications  for  the
    taxable year.  For taxable years ending prior to December
    31, 1986, taxable income may never be an amount in excess
    of the net operating loss for the taxable year as defined
    in subsections (c) and (d) of Section 172 of the Internal
    Revenue  Code,  provided  that  when  taxable income of a
    corporation (other  than  a  Subchapter  S  corporation),
    trust,   or   estate  is  less  than  zero  and  addition
    modifications, other than those provided by  subparagraph
    (E)  of  paragraph (2) of subsection (b) for corporations
    or subparagraph (E) of paragraph (2)  of  subsection  (c)
    for trusts and estates, exceed subtraction modifications,
    an   addition  modification  must  be  made  under  those
    subparagraphs for any other taxable  year  to  which  the
    taxable  income  less  than  zero (net operating loss) is
    applied under Section 172 of the Internal Revenue Code or
    under  subparagraph  (E)  of  paragraph   (2)   of   this
    subsection (e) applied in conjunction with Section 172 of
    the Internal Revenue Code.
         (2)  Special rule.  For purposes of paragraph (1) of
    this  subsection,  the taxable income properly reportable
    for federal income tax purposes shall mean:
              (A)  Certain life insurance companies.  In  the
         case  of a life insurance company subject to the tax
         imposed by Section 801 of the Internal Revenue Code,
         life insurance  company  taxable  income,  plus  the
         amount  of  distribution  from pre-1984 policyholder
         surplus accounts as calculated under Section 815a of
         the Internal Revenue Code;
              (B)  Certain other insurance companies.  In the
         case of mutual insurance companies  subject  to  the
         tax  imposed  by Section 831 of the Internal Revenue
         Code, insurance company taxable income;
              (C)  Regulated investment  companies.   In  the
         case  of  a  regulated investment company subject to
         the tax imposed  by  Section  852  of  the  Internal
         Revenue Code, investment company taxable income;
              (D)  Real  estate  investment  trusts.   In the
         case of a real estate investment  trust  subject  to
         the  tax  imposed  by  Section  857  of the Internal
         Revenue Code, real estate investment  trust  taxable
         income;
              (E)  Consolidated corporations.  In the case of
         a  corporation  which  is  a member of an affiliated
         group of corporations filing a  consolidated  income
         tax  return  for the taxable year for federal income
         tax purposes, taxable income determined as  if  such
         corporation  had filed a separate return for federal
         income tax purposes for the taxable  year  and  each
         preceding  taxable year for which it was a member of
         an  affiliated   group.   For   purposes   of   this
         subparagraph, the taxpayer's separate taxable income
         shall  be  determined as if the election provided by
         Section 243(b) (2) of the Internal Revenue Code  had
         been in effect for all such years;
              (F)  Cooperatives.     In   the   case   of   a
         cooperative corporation or association, the  taxable
         income of such organization determined in accordance
         with  the provisions of Section 1381 through 1388 of
         the Internal Revenue Code;
              (G)  Subchapter S corporations.   In  the  case
         of:  (i)  a Subchapter S corporation for which there
         is in effect an election for the taxable year  under
         Section  1362  of  the  Internal  Revenue  Code, the
         taxable income of  such  corporation  determined  in
         accordance  with  Section  1363(b)  of  the Internal
         Revenue Code, except that taxable income shall  take
         into  account  those  items  which  are  required by
         Section 1363(b)(1) of the Internal Revenue  Code  to
         be  separately  stated;  and  (ii)  a  Subchapter  S
         corporation  for  which there is in effect a federal
         election  to  opt  out  of  the  provisions  of  the
         Subchapter S Revision Act of 1982 and  have  applied
         instead  the  prior federal Subchapter S rules as in
         effect on July 1, 1982, the taxable income  of  such
         corporation   determined   in  accordance  with  the
         federal Subchapter S rules as in effect on  July  1,
         1982; and
              (H)  Partnerships.     In   the   case   of   a
         partnership, taxable income determined in accordance
         with Section  703  of  the  Internal  Revenue  Code,
         except  that  taxable income shall take into account
         those items which are required by Section  703(a)(1)
         to  be  separately  stated  but which would be taken
         into account by an  individual  in  calculating  his
         taxable income.
    (f)  Valuation limitation amount.
         (1)  In  general.   The  valuation limitation amount
    referred to in subsections (a) (2) (G), (c) (2)  (I)  and
    (d)(2) (E) is an amount equal to:
              (A)  The   sum   of   the  pre-August  1,  1969
         appreciation amounts (to the  extent  consisting  of
         gain reportable under the provisions of Section 1245
         or  1250  of  the  Internal  Revenue  Code)  for all
         property in respect of which such gain was  reported
         for the taxable year; plus
              (B)  The   lesser   of   (i)  the  sum  of  the
         pre-August 1,  1969  appreciation  amounts  (to  the
         extent  consisting of capital gain) for all property
         in respect of  which  such  gain  was  reported  for
         federal income tax purposes for the taxable year, or
         (ii)  the  net  capital  gain  for the taxable year,
         reduced in either case by any amount  of  such  gain
         included  in  the amount determined under subsection
         (a) (2) (F) or (c) (2) (H).
    (2)  Pre-August 1, 1969 appreciation amount.
              (A)  If  the  fair  market  value  of  property
         referred   to   in   paragraph   (1)   was   readily
         ascertainable on August 1, 1969, the  pre-August  1,
         1969  appreciation  amount  for such property is the
         lesser of (i) the excess of such fair  market  value
         over the taxpayer's basis (for determining gain) for
         such  property  on  that  date (determined under the
         Internal Revenue Code as in effect on that date), or
         (ii) the total  gain  realized  and  reportable  for
         federal  income tax purposes in respect of the sale,
         exchange or other disposition of such property.
              (B)  If  the  fair  market  value  of  property
         referred  to  in  paragraph  (1)  was  not   readily
         ascertainable  on  August 1, 1969, the pre-August 1,
         1969 appreciation amount for such property  is  that
         amount  which bears the same ratio to the total gain
         reported in respect  of  the  property  for  federal
         income  tax  purposes  for  the taxable year, as the
         number of full calendar months in that part  of  the
         taxpayer's  holding  period  for the property ending
         July 31, 1969 bears to the number of  full  calendar
         months  in  the taxpayer's entire holding period for
         the property.
              (C)  The  Department   shall   prescribe   such
         regulations  as  may  be  necessary to carry out the
         purposes of this paragraph.
    (g)  Double  deductions.   Unless  specifically  provided
otherwise, nothing in this Section shall permit the same item
to be deducted more than once.
    (h)  Legislative intention.  Except as expressly provided
by  this  Section  there  shall  be   no   modifications   or
limitations on the amounts of income, gain, loss or deduction
taken  into  account  in  determining  gross income, adjusted
gross  income  or  taxable  income  for  federal  income  tax
purposes for the taxable year, or in the amount of such items
entering into the computation of base income and  net  income
under  this  Act for such taxable year, whether in respect of
property values as of August 1, 1969 or otherwise.
(Source: P.A.  89-89,  eff.  6-30-95;  89-235,  eff.  8-4-95;
89-418,  eff.  11-15-95;  89-460,  eff. 5-24-96; 89-626, eff.
8-9-96; 90-491, eff. 1-1-98.)

    Section 99.  Effective date.  This Act takes effect  upon
becoming law.

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