HB0864sam001 93RD GENERAL ASSEMBLY

Sen. Terry Link

Filed: 5/31/2004

09300HB0864sam001 LRB093 05709 MKM 52017 a

AMENDMENT TO HOUSE BILL 864

AMENDMENT NO. ______. Amend House Bill 864 by replacing everything after the enacting clause with the following:

"ARTICLE 1

5		Section 1-1. Short title. This Article may be cited as the
6		Tax Shelter Voluntary Compliance Act, and throughout this
7		Article, references to this Act shall mean this Article.

8		Section 1-5. Tax shelter voluntary compliance program.
9		(a) In general. The Department shall establish and
10		administer a tax shelter voluntary compliance program as
11		provided in this Section for eligible taxpayers subject to tax
12		under the Illinois Income Tax Act. The tax shelter voluntary
13		compliance program shall be conducted from October 15, 2004 to
14		November 30, 2004 and shall apply to tax liabilities under
15		Section 201 of the Illinois Income Tax Act attributable to the
16		use of abusive tax avoidance transactions for taxable years
17		beginning before January 1, 2004. The Department shall adopt
18		rules, issue forms and instructions, and take such other
19		actions as it deems necessary to implement the provisions of
20		this Act. Any correspondence mailed by the Department to a
21		taxpayer at the taxpayer's last known address outlining the tax
22		shelter voluntary compliance program constitutes a "contact"

1		within the meaning of Sections 1005(b)(6) and 1005(c) of the
2		Illinois Income Tax Act for taxable years to which this Act
3		applies.
4		(b) Election. An eligible taxpayer that meets the
5		requirements of subsection (c) of this Section with respect to
6		any taxable year to which this Act applies may elect to
7		participate in the tax shelter voluntary compliance program
8		under either (but not both) paragraph (1) or paragraph (2) of
9		this subsection. Such election shall be made separately for
10		each taxable year and in the form and manner prescribed by the
11		Department and, once made, shall be irrevocable.
12		(1) Voluntary compliance without appeal. If a taxpayer
13		elects to participate under this paragraph, then: (i) the
14		Department shall abate and not seek to collect any penalty
15		that may be applicable to the underreporting or
16		underpayment of Illinois income tax attributable to the use
17		of abusive tax avoidance transactions for such taxable
18		year; (ii) except as otherwise provided in this Act, the
19		Department shall not seek civil or criminal prosecution
20		against the taxpayer for such taxable year with respect to
21		abusive tax avoidance transactions; and (iii) the taxpayer
22		may not file a claim for credit or refund of amounts paid
23		for such taxable year in connection with abusive tax
24		avoidance transactions. No penalty may be waived or abated
25		under this Act if the penalty imposed relates to an amount
26		of Illinois income tax assessed prior to October 15, 2004.
27		(2) Voluntary compliance with appeal. If an eligible
28		taxpayer elects to participate under this paragraph, then:
29		(i) the Department shall abate and not seek to collect the
30		penalties imposed under Sections 1005(b) and 1005(c) of the
31		Illinois Income Tax Act with respect to such taxable year;
32		(ii) except as otherwise provided in this Act, the
33		Department shall not seek civil or criminal prosecution
34		against the taxpayer for such taxable year with respect to

1		abusive tax avoidance transactions; and (iii) the taxpayer
2		may file a claim for credit or refund as provided in the
3		Illinois Income Tax Act with respect to such taxable year.
4		Notwithstanding Section 909(e) of the Illinois Income Tax
5		Act, the taxpayer may not file a written protest until
6		after either of the following: (i) the Department issues a
7		notice of denial, or (ii) the earlier of (1) the date which
8		is 180 days after the date of a final determination by the
9		Internal Revenue Service with respect to the transactions
10		at issue, or (2) the date that is 4 years after the date
11		the claim for refund was filed or one year after full
12		payment of all tax, including penalty and interest. No
13		penalty may be waived or abated under this Act if the
14		penalty imposed relates to an amount of Illinois income tax
15		assessed prior to October 15, 2004.
16		(c) Eligible taxpayer. The tax shelter voluntary
17		compliance program applies to any taxpayer who, during the
18		period from October 15, 2004 to November 30, 2004, does both of
19		the following:
20		(1) Files an amended return for the taxable year for
21		which the taxpayer used an abusive tax avoidance
22		transaction to under report the taxpayer's Illinois income
23		tax liability, reporting the total Illinois net income and
24		tax for such taxable year computed without regard to any
25		abusive tax avoidance transactions; and
26		(2) Makes full payment of the entire amount of Illinois
27		income tax and interest due for such taxable year (not
28		including a payment made under protest as provided in
29		Section 2a.1 of the State Officers and Employees Money
30		Disposition Act (30 ILCS 230/2a.1)).

31		Section 1-10. Abusive tax avoidance transaction. For
32		purposes of this Act, the term "abusive tax avoidance
33		transaction" means a plan or arrangement devised for the

1		principal purpose of avoiding federal or Illinois income tax.
2		Abusive tax avoidance transactions include, but are not limited
3		to, "listed transactions", as defined in Treasury Regulations
4		Section 1.6011-4(b)(2), and Illinois listed transactions as
5		defined in Section 501(b)(2)(A)(2) of the Illinois Income Tax
6		Act.

7		Section 1-15. Article 2 Credits. In the event a taxpayer
8		does not participate in the tax shelter voluntary compliance
9		program with respect to a taxable year in which there exists a
10		deficiency attributable in whole or in part to an abusive tax
11		avoidance transaction, the following apply:
12		(1) the taxpayer's liability for such taxable year
13		under Section 201(a) and (b) of this Act, minus any credits
14		allowed under Article 2, shall in no event be less than the
15		increase in net income (or decrease in loss) attributable
16		to the abusive tax shelter times the applicable rate in
17		Section 201(b) of this Act;
18		(2) the taxpayer's liability for such taxable year
19		under Section 201(c) and (d) of this Act, minus any credits
20		allowed under Article 2, shall in no event be less than the
21		increase in net income (or decrease in loss) attributable
22		to the abusive tax shelter times the applicable rate in
23		Section 201(d) of this Act; and
24		(3) the determination of the amount of any Article 2
25		credit available to carry forward to years subsequent to
26		such taxable year shall be made without regard to
27		subsections (1) and (2).

28		Section 1-20. The fact of a taxpayer's participation in
29		the tax shelter voluntary compliance program shall not be
30		considered evidence that the taxpayer in fact engaged in an
31		abusive tax avoidance transaction.

ARTICLE 5

2		Section 5-1. Short title. This Article may be cited as the
3		Watercraft Use Tax Law, and references in this Article to "this
4		Law" mean this Article.

5		Section 5-5. Definitions. For the purposes of this Law:
6		"Department" means the Department of Revenue.
7		"Purchase price" means the reasonable consideration paid
8		for a watercraft valued at $10,000 or more whether received in
9		money or otherwise, including, but not limited to, cash,
10		credits, property, and services, and including the value of any
11		motor sold with, or in conjunction with, the watercraft. Except
12		in the case of transfers between immediate family members,
13		reasonable consideration ordinarily means the fair market
14		value on the date the watercraft or the share of the watercraft
15		was acquired or the date the watercraft was brought into this
16		State, whichever is later, unless the taxpayer can demonstrate
17		that a different value is reasonable. In the case of transfers
18		between immediate family members, reasonable consideration
19		ordinarily means the consideration actually paid, unless it
20		appears from the facts and circumstances that the primary
21		motivation of the transfer was the avoidance of tax.
22		"Watercraft" means:
23		(1) Class 1, Class 2, Class 3, and Class 4 watercraft,
24		as defined in Section 3-2 of the Boat Registration and
25		Safety Act;
26		(2) personal watercraft, as defined in Section 1-2 of
27		the Boat Registration and Safety Act; and
28		(3) any boat equipped with an inboard motor.

29		Section 5-10. Tax imposed. A tax is hereby imposed on the
30		privilege of using, in this State, any watercraft acquired by
31		gift, transfer, or purchase after June 30, 2004. This tax does

1		not apply if: (i) the use of the watercraft is otherwise taxed
2		under the Use Tax Act; (ii) the watercraft is bought and used
3		by a governmental agency or a society, association, foundation,
4		or institution organized and operated exclusively for
5		charitable, religious, or educational purposes and that entity
6		has been issued an exemption identification number under
7		Section 1g of the Retailers' Occupation Tax Act; (iii) the use
8		of the watercraft is not subject to the Use Tax Act by reason
9		of subsection (a), (b), (c), (d), or (e) of Section 3-55 of
10		that Act dealing with the prevention of actual or likely
11		multi-state taxation; or (iv) the transfer is a gift to a
12		beneficiary in the administration of an estate and the
13		beneficiary is a surviving spouse.

14		Section 5-15. Rate of tax.
15		The rate of tax is 6.25% of the purchase price for each
16		purchase of watercraft that is subject to tax under this Law.
17		When an ownership share of a watercraft is acquired, the tax is
18		imposed on the purchase price of that share. All owners are
19		jointly and severally liable for any tax due as a result of the
20		purchase, gift, or transfer of an ownership share of the
21		watercraft.

22		Section 5-20. Returns.
23		(a) The purchaser, transferee, or donee shall file with the
24		Department a return signed by the purchaser, transferee, or
25		donee on a form prescribed by the Department. The return shall
26		contain a verification in substantially the following form and
27		such other information as the Department may reasonably
28		require:
29		VERIFICATION
30		I declare that I have examined this return and, to the best
31		of my knowledge, it is true, correct, and complete. I
32		understand that the penalty for willfully filing a false

1		return is a fine not to exceed $1,000 or imprisonment in a
2		penal institution other than the penitentiary not to exceed
3		one year, or both a fine and imprisonment.
4		(b) The return and payment from the purchaser, transferee,
5		or donee shall be submitted to the Department within 30 days
6		after the date of purchase, donation, or other transfer or the
7		date the watercraft is brought into this State, whichever is
8		later. Payment of tax is a condition to securing certificate of
9		title for the watercraft from the Department of Natural
10		Resources. When a purchaser, transferee, or donee pays the tax
11		imposed by Section 5-10 of this Law, the Department (upon
12		request therefor from the purchaser, transferee, or donee)
13		shall issue an appropriate receipt to the purchaser,
14		transferee, or donee showing that he or she has paid the tax to
15		the Department. The receipt shall be sufficient to relieve the
16		purchaser, transferee, or donee from further liability for the
17		tax to which the receipt may refer.

18		Section 5-25. Filing false or incomplete return. Any person
19		required to file a return under this Law who willfully files a
20		false or incomplete return is guilty of a Class A misdemeanor.

21		Section 5-30. Determining purchase price. For the purpose
22		of assisting in determining the validity of the purchase price
23		reported on returns filed with the Department, the Department
24		may furnish the following information to persons with whom the
25		Department has contracted for service related to making that
26		determination: (i) the purchase price stated on the return;
27		(ii) the watercraft identification number; (iii) the year, the
28		make, and the model name or number of the watercraft; (iv) the
29		purchase date; and (v) the hours of operation.

30		Section 5-35. Powers of Department. The Department has full
31		power to: (i) administer and enforce this Law; (ii) collect all

1		taxes, penalties, and interest due under this Law; (iii)
2		dispose of taxes, penalties, and interest so collected in the
3		manner set forth in this Law; and (iv) determine all rights to
4		credit memoranda or refunds arising on account of the erroneous
5		payment of tax, penalty, or interest under this Law. In the
6		administration of, and compliance with, this Law, the
7		Department and persons who are subject to this Law have the
8		same rights, remedies, privileges, immunities, powers, and
9		duties, and are subject to the same conditions, restrictions,
10		limitations, penalties, and definitions of terms, and employ
11		the same modes of procedure, as are prescribed in the Use Tax
12		Act (except for the provisions of Section 3-70), that are not
13		inconsistent with this Law, as fully as if the provisions of
14		the Use Tax Act were set forth in this Law. In addition to any
15		other penalties imposed under law, any person convicted of
16		violating the provisions of this Law shall be assessed a fine
17		of $1,000.

18		Section 5-40. Payments to Local Government Distributive
19		Fund and General Revenue Fund. The Department shall each month,
20		upon collecting any taxes as provided in this Law, pay 20% of
21		the money collected into the Local Government Distributive
22		Fund, a special fund in the State treasury, and 80% into the
23		General Revenue Fund.

24		Section 5-45. Rules. The Department has the authority to
25		adopt such rules as are reasonable and necessary to implement
26		the provisions of this Law.

27		Section 5-990. The Retailers' Occupation Tax Act is amended
28		by changing Section 1c as follows:
29		(35 ILCS 120/1c) (from Ch. 120, par. 440c)
30		Sec. 1c. A person who is engaged in the business of leasing

1		or renting motor vehicles or, beginning July 1, 2003, aircraft
2		or, beginning July 1, 2004, watercraft to others and who, in
3		connection with such business sells any used motor vehicle, or
4		aircraft, or watercraft to a purchaser for his use and not for
5		the purpose of resale, is a retailer engaged in the business of
6		selling tangible personal property at retail under this Act to
7		the extent of the value of the vehicle or aircraft sold. For
8		the purpose of this Section "motor vehicle" has the meaning
9		prescribed in Section 1-157 of the Illinois Vehicle Code, as
10		now or hereafter amended. For the purpose of this Section
11		"aircraft" has the meaning prescribed in Section 3 of the
12		Illinois Aeronautics Act. For the purpose of this Section,
13		"watercraft" has the meaning prescribed in Section 5-5 of the
14		Watercraft Use Tax Law. (Nothing provided herein shall affect
15		liability incurred under this Act because of the sale at retail
16		of such motor vehicles, or aircraft, or watercraft to a
17		lessor.)
18		(Source: P.A. 93-24, eff. 6-20-03.)

19		Section 5-995. The Boat Registration and Safety Act is
20		amended by changing Section 3A-5 as follows:
21		(625 ILCS 45/3A-5) (from Ch. 95 1/2, par. 313A-5)
22		Sec. 3A-5. Certificate of title - Issuance - Records.
23		(a) The Department of Natural Resources shall file each
24		application received and, when satisfied as to its genuineness
25		and regularity, and that no tax imposed by the "Use Tax Act" or
26		the Watercraft Use Tax Law is owed as evidenced by the receipt
27		for payment or determination of exemption from the Department
28		of Revenue provided for in Section 3A-3 of this Article, and
29		that the applicant is entitled to the issuance of a certificate
30		of title, shall issue a certificate of title.
31		(b) The Department of Natural Resources shall maintain a
32		record of all certificates of title issued under a distinctive

1		title number assigned to the watercraft and, in the discretion
2		of the Department, in any other method determined.
3		(Source: P.A. 89-445, eff. 2-7-96.)

ARTICLE 10

5		Section 10-5. The Public Utilities Act is amended by
6		changing Section 8-403.1 as follows:
7		(220 ILCS 5/8-403.1) (from Ch. 111 2/3, par. 8-403.1)
8		Sec. 8-403.1. Electricity purchased from qualified solid
9		waste energy facility; tax credit; distributions for economic
10		development.
11		(a) It is hereby declared to be the policy of this State to
12		encourage the development of alternate energy production
13		facilities in order to conserve our energy resources and to
14		provide for their most efficient use.
15		(b) For the purpose of this Section and Section 9-215.1,
16		"qualified solid waste energy facility" or "QSWEF" means a
17		facility, regardless of when the facility was financed,
18		constructed, or completed, determined either before or after
19		this amendatory Act of the 93rd General Assembly becomes law by
20		the Illinois Commerce Commission to qualify as such under the
21		Local Solid Waste Disposal Act, to use methane gas generated
22		from landfills as its primary fuel, and to possess
23		characteristics that would enable it to qualify as a
24		cogeneration or small power production facility under federal
25		law, to meet the ownership requirements set forth in this
26		Section, to meet the primary fuel use requirements set forth in
27		this Section, to meet the requirements for the reimbursement of
28		State tax credits set forth in this Section, and to meet all
29		other requirements set forth in this Section. The Commission,
30		in order to promote the development of landfill sites for QSWEF
31		use, shall have the authority to determine the number of QSWEFs

1		approved at a single landfill site. In determining, for the
2		purposes of this Section, whether a facility meets the
3		requirements to become a small power production facility under
4		federal law, the Commission may consider, but is not bound by,
5		any action or inaction of a federal administrative agency or
6		any self-certification of a facility.
7		(c) In furtherance of the policy declared in this Section,
8		the Illinois Commerce Commission shall require electric
9		utilities to enter into long-term contracts, pursuant to a
10		tariff approved by the Commission, to purchase electricity from
11		qualified solid waste energy facilities located in the electric
12		utility's service area, for a period beginning on the date that
13		the facility begins generating electricity and having a
14		duration of not less than 10 years in the case of facilities
15		fueled by landfill-generated methane, or 20 years in the case
16		of facilities fueled by methane generated from a landfill owned
17		by a forest preserve district. The purchase rate contained in
18		such contracts for the period prior to 90 days after the
19		effective date of this amendatory Act of the 93rd General
20		Assembly shall be equal to the average amount per kilowatt-hour
21		paid from time to time by the unit or units of local government
22		in which the electricity generating facilities are located,
23		excluding amounts paid for street lighting and pumping service.
24		Notwithstanding any provision in any contract entered into
25		with a facility that has been approved as or found to be a
26		QSWEF, beginning 90 days after the effective date of this
27		amendatory Act of the 93rd General Assembly, the purchase rate
28		to be paid to the QSWEF by the utility shall be the rate that
29		the utility must purchase the output of qualified facilities
30		pursuant to the federal Public Utility Regulatory Policies Act
31		of 1978 and as determined pursuant to 83 Ill. Adm. Code 430.80,
32		plus an incentive payment (IP). The IP shall be calculated as
33		follows:
34		(1) for all QSWEFs using landfill generated methane as

1		their primary fuel, IP = 0.5 x (RR - AC), or
2		(2) for all QSWEFs using landfill generated methane as
3		their primary fuel from a landfill owned by a forest
4		preserve district, IP = 0.75 x (RR - AC).
5		For the purposes of this subsection, "RR" means the average
6		retail rate for electricity paid by the utility to the QSWEF
7		for all kWhs sold to the utility for the 3 years prior to the
8		effective date of this amendatory Act of the 93rd General
9		Assembly and "AC" means avoided costs or the average rate for
10		the utility that the utility must purchase the output of
11		qualified facilities pursuant to the federal Public Utility
12		Regulatory Policies Act of 1978 and as determined pursuant to
13		83 Ill. Adm. Code 430.80 for the 3 years prior to the effective
14		date of this amendatory Act of the 93rd General Assembly. If
15		there are less than 3 years of data available to calculate RR
16		and AC, then RR and AC shall be calculated over the time period
17		for which the RR data is available.
18		In the event that no data is available to calculate RR,
19		then IP = 2.5 cents per kilowatt-hour for all kilowatt-hours
20		sold for facilities using landfill generated methane, or IP =
21		3.75 cents per kilowatt-hour for all kilowatt-hours sold for
22		facilities fueled by methane generated from a landfill owned by
23		a forest preserve district.
24		The utility shall submit to the Illinois Commerce
25		Commission a monthly calculation of the kilowatt-hours
26		purchased by it from each QSWEF with which it has a contract.
27		These calculations shall be provided in total and according to
28		the amount of purchases made under each rate pursuant to this
29		Section. Contracts between a utility and a QSWEF pursuant to
30		this subsection are not transferable from the petitioning
31		owners to other entities without prior Commission approval.
32		The electric utility shall file a tariff with the Illinois
33		Commerce Commission that sets forth the calculations required
34		by this subsection.

1		The QSWEF owner or operator shall negotiate facility
2		operating conditions with the purchasing utility in accordance
3		with that utility's posted standard terms and conditions for
4		small power producers.
5		(d) With respect to electricity purchased by a public
6		utility pursuant to subsection (c), the public utility whenever
7		a public utility is required to purchase electricity pursuant
8		to subsection (c) above, it shall be entitled to credits in
9		respect of its obligations to remit to the State taxes it has
10		collected under the Electricity Excise Tax Law equal to the
11		amounts, if any, by which payments for such electricity exceed
12		(i) the then current rate at which the utility must purchase
13		the output of qualified facilities pursuant to the federal
14		Public Utility Regulatory Policies Act of 1978, less (ii) any
15		costs, expenses, losses, damages or other amounts incurred by
16		the utility, or for which it becomes liable, arising out of its
17		failure to obtain such electricity from such other sources. The
18		credit provided in this subsection shall be applied against
19		taxes otherwise due or payable for the months in which payment
20		with respect to which the credit is claimed is made by the
21		utility. The amount of any such credit shall, in the first
22		instance, be determined by the utility, which shall make a
23		monthly report of such credits to the Illinois Commerce
24		Commission and, on its monthly tax return, to the Illinois
25		Department of Revenue. If the amount of the credit to which the
26		utility is entitled for any month exceeds the utility's
27		estimated obligation to remit to the State taxes it has
28		collected under the Electricity Excise Tax Law for that month,
29		the excess may be carried forward and applied to the utility's
30		estimated obligation in the immediately succeeding months.
31		Under no circumstances shall a utility be required to purchase
32		electricity from a qualified solid waste energy facility at the
33		rate prescribed in subsection (c) of this Section if such
34		purchase would result in estimated tax credits that exceed, on

1		a monthly basis, the utility's estimated obligation to remit to
2		the State taxes it has collected under the Electricity Excise
3		Tax Law. The owner or operator shall negotiate facility
4		operating conditions with the purchasing utility in accordance
5		with that utility's posted standard terms and conditions for
6		small power producers. If the Department of Revenue disputes
7		the amount of any such credit, such dispute shall be decided by
8		the Illinois Commerce Commission.
9		Notwithstanding any other provision of this Section, the
10		tax credit provided in this subsection (d) is available for
11		purchases of all kWhs from any entity that has received from
12		the Illinois Commerce Commission a determination that it is a
13		QSWEF until such time as the ICC enters and serves on the
14		utility purchasing from such QSWEF an order specifically
15		finding that the entity in question is no longer entitled to
16		receive the incentive payment. Upon the issuance by the
17		Commission of such an order or an order revoking or suspending
18		an entity's status as a QSWEF, the Commission shall cause a
19		copy of the order to be served upon the electric utility
20		purchasing power from that QSWEF or entity. From and after 5
21		business days after the utility's receipt of that order and
22		until such time as the QSWEF's right to receive the incentive
23		payment or the entity's status as a QSWEF is reinstated by a
24		superseding order of the Commission, the utility shall not,
25		notwithstanding anything to the contrary in any contract
26		between the utility and the QSWEF, make the incentive payment
27		to the QSWEF or the entity.
28		Whenever a qualified solid waste energy facility that has
29		sold electricity at rates in effect prior to 90 days after the
30		effective date of this amendatory Act of the 93rd General
31		Assembly has paid or otherwise satisfied in full the capital
32		costs or indebtedness incurred in developing and implementing
33		the qualified facility or at the end of the contract entered
34		into pursuant to subsection (c), whichever occurs first, the

1		QSWEF qualified facility shall reimburse the Public Utility
2		Fund and the General Revenue Fund in the State treasury for the
3		actual reduction in payments to those Funds caused by this
4		subsection (d) for all amounts incurred prior to 90 days after
5		the effective date of this amendatory Act of the 93rd General
6		Assembly in a manner to be determined by the Illinois Commerce
7		Commission and based on the manner in which revenues for those
8		Funds were reduced. Notwithstanding the provisions of this
9		paragraph, whenever the Illinois Commerce Commission, pursuant
10		to a petition or an investigation on its own motion, enters an
11		order that revokes the QSWEF status of a previously approved
12		QSWEF, the Commission shall have the authority to require the
13		immediate reimbursement of the Public Utility Fund and the
14		General Revenue Fund in the State treasury for the actual
15		reduction in payments to those Funds caused by this subsection
16		(d) for all amounts incurred prior to 90 days after the
17		effective date of this amendatory Act of the 93rd General
18		Assembly in a manner to be determined by the Illinois Commerce
19		Commission. The payments required under this subsection shall
20		be made to the Illinois Commerce Commission, which shall
21		determine the appropriate disbursements to the Public Utility
22		Fund and the General Revenue Fund.
23		The Commission has the authority to require a QSWEF to
24		establish a plan to reimburse the State for tax credits
25		resulting from electricity sold prior to 90 days after the
26		effective date of this amendatory Act of the 93rd General
27		Assembly. The Commission also has the authority to require that
28		a QSWEF comply with any reimbursement plan it proposed and that
29		was approved by the Commission as part of any order granting
30		QSWEF status.
31		A QSWEF that lacks a Commission approved plan to reimburse
32		the State for tax credits resulting from electricity sold prior
33		to 90 days after the effective date of this amendatory Act of
34		the 93rd General Assembly, shall submit a proposed

1		reimbursement plan to the Commission for approval within 365
2		days after the effective date of this amendatory Act of the
3		93rd General Assembly. The Commission, in its discretion, may
4		approve such repayment plan if it finds that the repayment plan
5		is reasonably calculated to ensure that all reimbursement
6		obligations of the QSWEF will be satisfied when they become
7		due. If the Commission finds that the repayment plan as
8		proposed by the QSWEF does not meet this standard, it may order
9		its own repayment plan. A reimbursement plan approved by the
10		Commission may include, but is not limited to, creation of a
11		sinking fund, purchase of bonds or other financial instruments,
12		grant of a security interest, third party guarantee, or other
13		similar arrangement. Any account, fund, bond, financial
14		instrument, investment, or other similar investment or
15		set-aside used to fund a QSWEF reimbursement plan, if
16		denominated as such, shall be deemed to be held in trust for
17		the benefit of the Commission for the sole purpose of
18		reimbursing the QSWEF's reimbursement obligations to the State
19		and, absent the consent of the Commission, shall be used
20		exclusively to repay the QSWEF's tax credit reimbursement
21		obligations hereunder. If a QSWEF fails to file a reimbursement
22		plan as required by this subsection, then the Commission,
23		pursuant to an investigation on its own motion or petition,
24		shall order the suspension of the incentive payment provided
25		for in subsection (c). If the incentive payment is suspended
26		pursuant to this subsection, then it can only be reinstated by
27		an order of the Illinois Commerce Commission that finds that a
28		QSWEF is in compliance with the requirements of this
29		subsection.
30		The Commission shall have the authority to reconsider any
31		previously approved reimbursement plan to determine whether it
32		is adequate to meet the requirement that any reimbursement plan
33		be reasonably calculated to ensure that all reimbursement
34		obligations of the QSWEF will be satisfied when they become

1		due. If the Commission determines that the previously approved
2		reimbursement plan is inadequate for any reason, the Commission
3		may order the QSWEF to submit a new reimbursement plan, which
4		shall be approved if the Commission, in its discretion,
5		determines that the new reimbursement plan meets the criteria
6		for approval of an original reimbursement plan as set forth
7		herein. The Commission shall have the authority to modify a new
8		reimbursement plan filed by QSWEF to ensure that the approved
9		plan meets the criteria for approval of an original
10		reimbursement plan as set forth herein.
11		In the event the Commission enters an order determining
12		that a QSWEF has failed to comply with the terms of any
13		reimbursement plan that has been approved or ordered by the
14		Commission or in the event that an order is entered revoking
15		the QSWEF status of any entity, the Commission shall
16		automatically, by operation of law, obtain a lien on all assets
17		of the QSWEF, whether real or personal and whether currently
18		owned or after-acquired, to secure the payment of all
19		reimbursement obligations that the QSWEF has or will have
20		pursuant to this Section. The lien shall have the same force
21		and effect as a tax lien as provided for in Section 5a of the
22		Retailers' Occupation Tax Act. In addition to any other
23		remedies available under law for enforcement of a lien, the
24		lien granted herein in favor of the Commission shall be
25		enforceable, as far as practicable, in accordance with the
26		provisions applicable to enforcement of tax liens as set forth
27		in Sections 5b, 5c, 5d, 5e, 5f, and 5g of the Retailers'
28		Occupation Tax Act. In addition, the provisions of Section 5j
29		of the Retailers' Occupation Tax Act shall apply, as far as
30		practicable, to the repayment of any amounts required to be
31		reimbursed as provided for herein unless the Commission orders
32		otherwise.
33		Any entity that receives payments as provided for in
34		subsection (c) of this Section as if it were a QSWEF, but that

1		is determined not to qualify as a QSWEF, or any entity that is
2		authorized to operate as a QSWEF, but receives payments
3		pursuant to subsection (c) of this Section for the sale of
4		electricity that does not qualify under this Section is liable
5		to the State for all amounts so obtained plus attorneys' fees,
6		costs, and interest at the judgment rate accruing from the date
7		the improper payment was obtained. In addition, any director,
8		officer, partner, employee, or other person who has the
9		control, supervision, or responsibility for overseeing the
10		operations of such entity and who allows such entity to
11		illegally obtain payments pursuant to subsection (c) of this
12		Section shall be personally liable to the State for the amounts
13		received plus attorneys' fees, costs, and interest at the
14		judgment rate from the date the improper payment was obtained.
15		The remedies provided for herein are in addition to any other
16		remedies provided for by law.
17		(e) The Illinois Commerce Commission shall not require an
18		electric utility to purchase electricity from any qualified
19		solid waste energy facility which is directly or indirectly
20		owned or operated by an entity that is primarily engaged in the
21		business of producing or selling electricity, gas, or useful
22		thermal energy from a source other than one or more qualified
23		solid waste energy facilities. To effectuate this subsection
24		and the other requirements of this Act, the QSWEF must disclose
25		any entity with a direct or indirect ownership interest in it
26		as part of its initial petition under subsection (b) of this
27		Section, shall petition the Commission for a new determination
28		of QSWEF status if more than 25% of its direct or indirect
29		ownership changes, and shall not assign or transfer a QSWEF
30		determination without prior approval of the Commission.
31		Commission-approved owners and operators of QSWEFs must meet
32		the requirements of this subsection for the duration of the
33		contract entered into with a utility pursuant to subsection
34		(c). If a QSWEF fails to remain in compliance with this

1		subsection, then the Commission, pursuant to an investigation
2		on its own motion or a petition, shall terminate the payment
3		provided for in subsection (c) that is at a rate that exceeds
4		the then current rate at which the utility must purchase the
5		output of qualified facilities pursuant to the federal Public
6		Utility Regulatory Policies Act of 1978. The termination will
7		not excuse the repayment to the State treasury required by
8		subsection (d) for utility tax credits accumulated prior to 90
9		days after the effective date of this amendatory Act of the
10		93rd General Assembly and up to the time of the termination.
11		(e-5) If a QSWEF uses fuel other than landfill generated
12		methane to generate electricity without first receiving
13		Commission approval to use the other fuel, then the payment
14		from the utility to the QSWEF shall not exceed the then current
15		rate at which the utility must purchase the output of qualified
16		facilities pursuant to the federal Public Utility Regulatory
17		Policies Act of 1978. If the Commission finds, pursuant to an
18		investigation on its own motion or a petition, that a QSWEF
19		uses fuel other than landfill generated methane to generate
20		electricity without first receiving Commission approval, then
21		the Commission shall have the authority to revoke the QSWEF's
22		approval status and to require a QSWEF to repay all past
23		amounts received for electricity sold at a rate that exceeds
24		the then current rate at which the utility must purchase the
25		output of qualified facilities pursuant to the federal Public
26		Utility Regulatory Policies Act of 1978. The Commission shall
27		have the authority to require the QSWEF to repay all such
28		amounts from the date that the Commission determines that the
29		violation commenced. Commission action that revokes prior
30		QSWEF approval does not excuse the repayment to the State
31		treasury required by subsection (d) for utility tax credits
32		accumulated up to the time of the Commission action.
33		If a QSWEF or an entity seeking QSWEF approval petitions
34		the Commission to use fuel other than landfill generated

1		methane to generate electricity, then the Commission shall have
2		the authority to:
3		(1) establish the methodology for determining the
4		amount of electricity that is generated by the use of
5		landfill generated methane and the amount that is generated
6		by the use of other fuel;
7		(2) determine all reporting requirements for the QSWEF
8		that are necessary for the Commission to determine the
9		amount of electricity that is generated by the use of
10		landfill generated methane and the amount that is generated
11		by the use of other fuel and the resulting payments to the
12		QSWEF; and
13		(3) require that the QSWEF, at the QSWEF's expense,
14		install metering equipment that the Commission determines
15		is necessary to enforce compliance with this subsection.
16		If the Commission approves a petition to use fuel other
17		than landfill generated methane for the generation of
18		electricity, the Commission shall establish procedures for
19		calculating the subsection (c) incentive payment that is
20		applicable only to kilowatt-hours generated by the use of
21		landfill generated methane and for submitting these
22		calculations to the utility that purchases power from the
23		QSWEF. The utility shall have the authority to adjust the next
24		month's purchases from a QSWEF to reflect the entire amount of
25		the Commission's calculations. If such an adjustment requires
26		payment from the QSWEF to the utility, then the QSWEF must
27		remit payment in full to the utility within 30 days of
28		receiving the bill from the utility. The utility shall adjust
29		its monthly State tax credits, taken pursuant to subsection
30		(d), accordingly to reflect the Commission's calculations
31		under this subsection, such that the subsection (d) tax credits
32		are taken only for kWhs generated by landfill generated
33		methane.
34		If the Commission approves a petition by a QSWEF or an

1		entity seeking QSWEF approval to use fuel other than landfill
2		generated methane to generate electricity, then the Commission
3		shall restrict the use of such fuel to the minimum amounts of
4		fuel required for ignition, startup, testing, flame
5		stabilization, and control uses, the minimum amounts of fuel
6		required to alleviate or prevent unanticipated equipment
7		outages, and emergencies directly affecting the public health,
8		safety, or welfare that would result from electric power
9		outages. Such fuel use may not, in the aggregate, exceed 25% of
10		the total fuel input, including landfill generated methane,
11		during the 12-month period beginning with the date the QSWEF
12		first produces electric energy and any calendar year subsequent
13		to the year in which the QSWEF first produces electricity.
14		If a QSWEF fails to comply with a Commission order pursuant
15		to this subsection, then the Commission shall, pursuant to an
16		investigation on its own motion or petition, suspend the
17		payment provided for in subsection (c) that exceeds the then
18		current rate at which the utility must purchase the output of
19		qualified facilities pursuant to the federal Public Utility
20		Regulatory Policies Act of 1978. If the payment provided for in
21		subsection (c) is suspended pursuant to this subsection, then
22		it can only be reinstated by an order of the Illinois Commerce
23		Commission that finds that a QSWEF is in compliance with the
24		requirements of this subsection.
25		(f) This Section does not require an electric utility to
26		construct additional facilities unless those facilities are
27		paid for by the owner or operator of the affected qualified
28		solid waste energy facility.
29		(g) The Illinois Commerce Commission shall require that:
30		(1) electric utilities use the electricity purchased from a
31		qualified solid waste energy facility to displace electricity
32		generated from nuclear power or coal mined and purchased
33		outside the boundaries of the State of Illinois before
34		displacing electricity generated from coal mined and purchased

1		within the State of Illinois, to the extent possible, and (2)
2		electric utilities report annually to the Commission on the
3		extent of such displacements.
4		(h) Nothing in this Section is intended to cause an
5		electric utility that is required to purchase power hereunder
6		to incur any economic loss as a result of its purchase. All
7		amounts paid for power which a utility is required to purchase
8		pursuant to subparagraph (c) shall be deemed to be costs
9		prudently incurred for purposes of computing charges under
10		rates authorized by Section 9-220 of this Act. Tax credits
11		provided for herein shall be reflected in charges made pursuant
12		to rates so authorized to the extent such credits are based
13		upon a cost which is also reflected in such charges.
14		(i) Beginning in February 1999 and through January 2009,
15		each qualified solid waste energy facility that sells
16		electricity to an electric utility at the purchase rate
17		described in subsection (c) shall file with the Department of
18		Revenue on or before the 15th of each month a form, prescribed
19		by the Department of Revenue, that states the number of
20		kilowatt hours of electricity for which payment was received at
21		that purchase rate from electric utilities in Illinois during
22		the immediately preceding month. This form shall be accompanied
23		by a payment from the qualified solid waste energy facility in
24		an amount equal to six-tenths of a mill ($0.0006) per kilowatt
25		hour of electricity stated on the form. Beginning on the
26		effective date of this amendatory Act of the 92nd General
27		Assembly, a qualified solid waste energy facility must file the
28		form required under this subsection (i) before the 15th of each
29		month regardless of whether the facility received any payment
30		in the previous month. Payments received by the Department of
31		Revenue shall be deposited into the Municipal Economic
32		Development Fund, a trust fund created outside the State
33		treasury. The State Treasurer may invest the moneys in the Fund
34		in any investment authorized by the Public Funds Investment

1		Act, and investment income shall be deposited into and become
2		part of the Fund. Moneys in the Fund shall be used by the State
3		Treasurer as provided in subsection (j). The obligation of a
4		qualified solid waste energy facility to make payments into the
5		Municipal Economic Development Fund shall terminate upon
6		either: (1) expiration or termination of a facility's contract
7		to sell electricity to an electric utility at the purchase rate
8		described in subsection (c); or (2) entry of an enforceable,
9		final, and non-appealable order by a court of competent
10		jurisdiction that Public Act 89-448 is invalid. Payments by a
11		qualified solid waste energy facility into the Municipal
12		Economic Development Fund do not relieve the qualified solid
13		waste energy facility of its obligation to reimburse the Public
14		Utility Fund and the General Revenue Fund for the actual
15		reduction in payments to those Funds as a result of credits
16		received by electric utilities under subsection (d).
17		A qualified solid waste energy facility that fails to
18		timely file the requisite form and payment as required by this
19		subsection (i) shall be subject to penalties and interest in
20		conformance with the provisions of the Illinois Uniform Penalty
21		and Interest Act.
22		Every qualified solid waste energy facility subject to the
23		provisions of this subsection (i) shall keep and maintain
24		records and books of its sales pursuant to subsection (c),
25		including payments received from those sales and the
26		corresponding tax payments made in accordance with this
27		subsection (i), and for purposes of enforcement of this
28		subsection (i) all such books and records shall be subject to
29		inspection by the Department of Revenue or its duly authorized
30		agents or employees.
31		When a qualified solid waste energy facility fails to file
32		the form or make the payment required under this subsection
33		(i), the Department of Revenue, to the extent that it is
34		practical, may enforce the payment obligation in a manner

1		consistent with Section 5 of the Retailers' Occupation Tax Act,
2		and if necessary may impose and enforce a tax lien in a manner
3		consistent with Sections 5a, 5b, 5c, 5d, 5e, 5f, 5g, and 5i of
4		the Retailers' Occupation Tax Act. No tax lien may be imposed
5		or enforced, however, unless a qualified solid waste energy
6		facility fails to make the payment required under this
7		subsection (i). Only to the extent necessary and for the
8		purpose of enforcing this subsection (i), the Department of
9		Revenue may secure necessary information from a qualified solid
10		waste energy facility in a manner consistent with Section 10 of
11		the Retailers' Occupation Tax Act.
12		All information received by the Department of Revenue in
13		its administration and enforcement of this subsection (i) shall
14		be confidential in a manner consistent with Section 11 of the
15		Retailers' Occupation Tax Act. The Department of Revenue may
16		adopt rules to implement the provisions of this subsection (i).
17		For purposes of implementing the maximum aggregate
18		distribution provisions in subsections (j) and (k), when a
19		qualified solid waste energy facility makes a late payment to
20		the Department of Revenue for deposit into the Municipal
21		Economic Development Fund, that payment and deposit shall be
22		attributed to the month and corresponding quarter in which the
23		payment should have been made, and the Treasurer shall make
24		retroactive distributions or refunds, as the case may be,
25		whenever such late payments so require.
26		(j) The State Treasurer, without appropriation, must make
27		distributions immediately after January 15, April 15, July 15,
28		and October 15 of each year, up to maximum aggregate
29		distributions of $500,000 for the distributions made in the 4
30		quarters beginning with the April distribution and ending with
31		the January distribution, from the Municipal Economic
32		Development Fund to each city, village, or incorporated town
33		that has within its boundaries an incinerator that: (1) uses
34		or, on the effective date of Public Act 90-813, used municipal

1		waste as its primary fuel to generate electricity; (2) was
2		determined by the Illinois Commerce Commission to qualify as a
3		qualified solid waste energy facility prior to the effective
4		date of Public Act 89-448; and (3) commenced operation prior to
5		January 1, 1998. Total distributions in the aggregate to all
6		qualified cities, villages, and incorporated towns in the 4
7		quarters beginning with the April distribution and ending with
8		the January distribution shall not exceed $500,000. The amount
9		of each distribution shall be determined pro rata based on the
10		population of the city, village, or incorporated town compared
11		to the total population of all cities, villages, and
12		incorporated towns eligible to receive a distribution.
13		Distributions received by a city, village, or incorporated town
14		must be held in a separate account and may be used only to
15		promote and enhance industrial, commercial, residential,
16		service, transportation, and recreational activities and
17		facilities within its boundaries, thereby enhancing the
18		employment opportunities, public health and general welfare,
19		and economic development within the community, including
20		administrative expenditures exclusively to further these
21		activities. These funds, however, shall not be used by the
22		city, village, or incorporated town, directly or indirectly, to
23		purchase, lease, operate, or in any way subsidize the operation
24		of any incinerator, and these funds shall not be paid, directly
25		or indirectly, by the city, village, or incorporated town to
26		the owner, operator, lessee, shareholder, or bondholder of any
27		incinerator. Moreover, these funds shall not be used to pay
28		attorneys fees in any litigation relating to the validity of
29		Public Act 89-448. Nothing in this Section prevents a city,
30		village, or incorporated town from using other corporate funds
31		for any legitimate purpose. For purposes of this subsection,
32		the term "municipal waste" has the meaning ascribed to it in
33		Section 3.290 of the Environmental Protection Act.
34		(k) If maximum aggregate distributions of $500,000 under

1		subsection (j) have been made after the January distribution
2		from the Municipal Economic Development Fund, then the balance
3		in the Fund shall be refunded to the qualified solid waste
4		energy facilities that made payments that were deposited into
5		the Fund during the previous 12-month period. The refunds shall
6		be prorated based upon the facility's payments in relation to
7		total payments for that 12-month period.
8		(l) Beginning January 1, 2000, and each January 1
9		thereafter, each city, village, or incorporated town that
10		received distributions from the Municipal Economic Development
11		Fund, continued to hold any of those distributions, or made
12		expenditures from those distributions during the immediately
13		preceding year shall submit to a financial and compliance and
14		program audit of those distributions performed by the Auditor
15		General at no cost to the city, village, or incorporated town
16		that received the distributions. The audit should be completed
17		by June 30 or as soon thereafter as possible. The audit shall
18		be submitted to the State Treasurer and those officers
19		enumerated in Section 3-14 of the Illinois State Auditing Act.
20		If the Auditor General finds that distributions have been
21		expended in violation of this Section, the Auditor General
22		shall refer the matter to the Attorney General. The Attorney
23		General may recover, in a civil action, 3 times the amount of
24		any distributions illegally expended. For purposes of this
25		subsection, the terms "financial audit," "compliance audit",
26		and "program audit" have the meanings ascribed to them in
27		Sections 1-13 and 1-15 of the Illinois State Auditing Act.
28		(m) All QSWEFs are subject to the authority of the Illinois
29		Commerce Commission as provided in Article V of the Public
30		Utilities Act.
31		(n) The Commission shall have the authority, after notice
32		and hearing held on complaint or the Commission's own motion:
33		(1) to suspend or revoke the right to subsection (c)
34		payments that exceeds the then current rate at which the

1		utility must purchase the output of qualified facilities
2		pursuant to the federal Public Utility Regulatory Policies
3		Act of 1978 for a violation of this Section or of any
4		Commission order, decision, or rule concerning QSWEFs;
5		(2) to suspend or revoke an entity's status as a QSWEF;
6		or
7		(3) to impose penalties under Section 5-202.
8		(o) Failure of a QSWEF to make subsection (d) reimbursement
9		payments to the State does not relieve the QSWEF of its
10		obligation to make such payments.
11		In the event that a QSWEF ceases to operate prior to the
12		end of its subsection (c) contract with an electric utility,
13		the QSWEF is nevertheless obligated to reimburse the State as
14		set forth in subsection (d) for all tax credits granted to the
15		utility for generation purchased from the QSWEF. In the event
16		of such a default, the full amount of the reimbursement
17		obligation will become due and owing.
18		In the event that a QSWEF fails to make reimbursement
19		payments at any time after the term of its subsection (c)
20		contract concludes, the State may take action to collect the
21		full amounts owed under this Section. In the event of such a
22		default, the full amount of the reimbursement obligation will
23		become due and owing.
24		(p) For the purposes of enforcement of this Section, the
25		Commission or its duly authorized agents or employees shall
26		have full and complete access to all books, records, studies,
27		and reports of a QSWEF related to this Section. If a QSWEF
28		fails to allow the Commission or its duly authorized agents or
29		employees full and complete access to all books, records,
30		studies, and reports of the QSWEF, then, pursuant to an
31		investigation based upon its own motion or a petition, the
32		Commission shall suspend the incentive payment provided for in
33		subsection (c). If the incentive payment provided for in
34		subsection (c) is suspended pursuant to this subsection, then

1		it can only be reinstated by an order of the Illinois Commerce
2		Commission that finds that a QSWEF is in compliance with the
3		requirements of this subsection.
4		(q) Each QSWEF shall file, no later than the first business
5		day of February of each calendar year, a sworn affidavit with
6		the Commission's Chief Clerk that expressly affirms or denies
7		their compliance with this Section, all applicable Commission
8		rules governing QSWEF status and Qualifying Facility status
9		under federal law, and all orders of the Commission governing
10		QSWEF status.
11		If a QSWEF fails to meet this filing requirement within 15
12		days of the required filing date, then the Commission, pursuant
13		to an investigation on its own motion or petition, shall order
14		the suspension of the incentive payment provided for subsection
15		(c). The requirements of the sworn affidavit may be set forth
16		in an electric utility's tariff approved by the Commission or
17		in the Commission's rules. If the incentive payment provided
18		for in subsection (c) is suspended pursuant to this subsection,
19		then it can only be reinstated by an Order of the Illinois
20		Commerce Commission that finds that a QSWEF is in compliance
21		with the requirements of this subsection.
22		If the Commission, based upon an investigation of its own
23		motion or by petition, finds that the sworn affidavit filed
24		pursuant to this subsection is not supported by fact, then the
25		Commission shall order the suspension of the incentive payment
26		provided for in subsection (c). If the incentive payment
27		provided for in subsection (c) is suspended pursuant to this
28		subsection, then it can only be reinstated by an Order of the
29		Illinois Commerce Commission that finds that a QSWEF is in
30		compliance with the requirements of this subsection.
31		A QSWEF shall pay to the Commission all the costs and
32		expenses, including attorney's fees, incurred by the
33		Commission in any action or proceeding to which the Commission
34		may be made a party by reason of the QSWEF having an obligation

1		to repay to the State tax credits or payments provided for in
2		subsection (c), and the QSWEF shall pay to the Commission all
3		the costs and expenses, including attorney's fees, incurred by
4		the Commission in enforcing any of the terms and provisions of
5		this Section and incurred in any action brought by the
6		Commission against a QSWEF on account of the provisions of this
7		Section. All such costs, expenses, and attorney's fees may be
8		included in and form a part of any judgment entered in any
9		proceeding brought by the Commission against a QSWEF under this
10		Section. Any such costs, expenses, and legal fees recovered
11		from a QSWEF shall be deposited in the Public Utility Fund or
12		in the General Revenue Fund, or both, based upon the ratable
13		share of such costs, expenses, and legal fees borne by each
14		fund.
15		(Source: P.A. 91-901, eff. 1-1-01; 92-435, eff. 8-17-01;
16		92-574, eff. 6-26-02.)

ARTICLE 12

18		Section 12-5. The Use Tax Act is amended by changing
19		Section 3-85 as follows:
20		(35 ILCS 105/3-85)
21		Sec. 3-85. Manufacturer's Purchase Credit. For purchases
22		of machinery and equipment made on and after January 1, 1995
23		and through June 30, 2003, and on and after July 1, 2004, a
24		purchaser of manufacturing machinery and equipment that
25		qualifies for the exemption provided by paragraph (18) of
26		Section 3-5 of this Act earns a credit in an amount equal to a
27		fixed percentage of the tax which would have been incurred
28		under this Act on those purchases. For purchases of graphic
29		arts machinery and equipment made on or after July 1, 1996 and
30		through June 30, 2003, and on and after July 1, 2004, a
31		purchaser of graphic arts machinery and equipment that

1		qualifies for the exemption provided by paragraph (6) of
2		Section 3-5 of this Act earns a credit in an amount equal to a
3		fixed percentage of the tax that would have been incurred under
4		this Act on those purchases. The credit earned for purchases of
5		manufacturing machinery and equipment or graphic arts
6		machinery and equipment shall be referred to as the
7		Manufacturer's Purchase Credit. A graphic arts producer is a
8		person engaged in graphic arts production as defined in Section
9		2-30 of the Retailers' Occupation Tax Act. Beginning July 1,
10		1996, all references in this Section to manufacturers or
11		manufacturing shall also be deemed to refer to graphic arts
12		producers or graphic arts production.
13		The amount of credit shall be a percentage of the tax that
14		would have been incurred on the purchase of manufacturing
15		machinery and equipment or graphic arts machinery and equipment
16		if the exemptions provided by paragraph (6) or paragraph (18)
17		of Section 3-5 of this Act had not been applicable. The
18		percentage shall be as follows:
19		(1) 15% for purchases made on or before June 30, 1995.
20		(2) 25% for purchases made after June 30, 1995, and on
21		or before June 30, 1996.
22		(3) 40% for purchases made after June 30, 1996, and on
23		or before June 30, 1997.
24		(4) 50% for purchases made on or after July 1, 1997.
25		(a) Manufacturer's Purchase Credit earned prior to July 1,
26		2003. This subsection (a) applies to Manufacturer's Purchase
27		Credit earned prior to July 1, 2003. A purchaser of production
28		related tangible personal property desiring to use the
29		Manufacturer's Purchase Credit shall certify to the seller
30		prior to October 1, 2003 that the purchaser is satisfying all
31		or part of the liability under the Use Tax Act or the Service
32		Use Tax Act that is due on the purchase of the production
33		related tangible personal property by use of Manufacturer's
34		Purchase Credit. The Manufacturer's Purchase Credit

1		certification must be dated and shall include the name and
2		address of the purchaser, the purchaser's registration number,
3		if registered, the credit being applied, and a statement that
4		the State Use Tax or Service Use Tax liability is being
5		satisfied with the manufacturer's or graphic arts producer's
6		accumulated purchase credit. Certification may be incorporated
7		into the manufacturer's or graphic arts producer's purchase
8		order. Manufacturer's Purchase Credit certification provided
9		by the manufacturer or graphic arts producer prior to October
10		1, 2003 may be used to satisfy the retailer's or serviceman's
11		liability under the Retailers' Occupation Tax Act or Service
12		Occupation Tax Act for the credit claimed, not to exceed 6.25%
13		of the receipts subject to tax from a qualifying purchase, but
14		only if the retailer or serviceman reports the Manufacturer's
15		Purchase Credit claimed as required by the Department. A
16		Manufacturer's Purchase Credit reported on any original or
17		amended return filed under this Act after October 20, 2003
18		shall be disallowed. The Manufacturer's Purchase Credit earned
19		by purchase of exempt manufacturing machinery and equipment or
20		graphic arts machinery and equipment is a non-transferable
21		credit. A manufacturer or graphic arts producer that enters
22		into a contract involving the installation of tangible personal
23		property into real estate within a manufacturing or graphic
24		arts production facility may, prior to October 1, 2003,
25		authorize a construction contractor to utilize credit
26		accumulated by the manufacturer or graphic arts producer to
27		purchase the tangible personal property. A manufacturer or
28		graphic arts producer intending to use accumulated credit to
29		purchase such tangible personal property shall execute a
30		written contract authorizing the contractor to utilize a
31		specified dollar amount of credit. The contractor shall
32		furnish, prior to October 1, 2003, the supplier with the
33		manufacturer's or graphic arts producer's name, registration
34		or resale number, and a statement that a specific amount of the

1		Use Tax or Service Use Tax liability, not to exceed 6.25% of
2		the selling price, is being satisfied with the credit. The
3		manufacturer or graphic arts producer shall remain liable to
4		timely report all information required by the annual Report of
5		Manufacturer's Purchase Credit Used for all credit utilized by
6		a construction contractor.
7		No Manufacturer's Purchase Credits earned prior to July 1,
8		2003 may be used after October 1, 2003. The Manufacturer's
9		Purchase Credit may be used to satisfy liability under the Use
10		Tax Act or the Service Use Tax Act due on the purchase of
11		production related tangible personal property (including
12		purchases by a manufacturer, by a graphic arts producer, or by
13		a lessor who rents or leases the use of the property to a
14		manufacturer or graphic arts producer) that does not otherwise
15		qualify for the manufacturing machinery and equipment
16		exemption or the graphic arts machinery and equipment
17		exemption. "Production related tangible personal property"
18		means (i) all tangible personal property used or consumed by
19		the purchaser in a manufacturing facility in which a
20		manufacturing process described in Section 2-45 of the
21		Retailers' Occupation Tax Act takes place, including tangible
22		personal property purchased for incorporation into real estate
23		within a manufacturing facility and including, but not limited
24		to, tangible personal property used or consumed in activities
25		such as preproduction material handling, receiving, quality
26		control, inventory control, storage, staging, and packaging
27		for shipping and transportation purposes; (ii) all tangible
28		personal property used or consumed by the purchaser in a
29		graphic arts facility in which graphic arts production as
30		described in Section 2-30 of the Retailers' Occupation Tax Act
31		takes place, including tangible personal property purchased
32		for incorporation into real estate within a graphic arts
33		facility and including, but not limited to, all tangible
34		personal property used or consumed in activities such as

1		graphic arts preliminary or pre-press production,
2		pre-production material handling, receiving, quality control,
3		inventory control, storage, staging, sorting, labeling,
4		mailing, tying, wrapping, and packaging; and (iii) all tangible
5		personal property used or consumed by the purchaser for
6		research and development. "Production related tangible
7		personal property" does not include (i) tangible personal
8		property used, within or without a manufacturing facility, in
9		sales, purchasing, accounting, fiscal management, marketing,
10		personnel recruitment or selection, or landscaping or (ii)
11		tangible personal property required to be titled or registered
12		with a department, agency, or unit of federal, state, or local
13		government. The Manufacturer's Purchase Credit may be used,
14		prior to October 1, 2003, to satisfy the tax arising either
15		from the purchase of machinery and equipment on or after
16		January 1, 1995 for which the exemption provided by paragraph
17		(18) of Section 3-5 of this Act was erroneously claimed, or the
18		purchase of machinery and equipment on or after July 1, 1996
19		for which the exemption provided by paragraph (6) of Section
20		3-5 of this Act was erroneously claimed, but not in
21		satisfaction of penalty, if any, and interest for failure to
22		pay the tax when due. A purchaser of production related
23		tangible personal property who is required to pay Illinois Use
24		Tax or Service Use Tax on the purchase directly to the
25		Department may, prior to October 1, 2003, utilize the
26		Manufacturer's Purchase Credit in satisfaction of the tax
27		arising from that purchase, but not in satisfaction of penalty
28		and interest. A purchaser who uses the Manufacturer's Purchase
29		Credit to purchase property which is later determined not to be
30		production related tangible personal property may be liable for
31		tax, penalty, and interest on the purchase of that property as
32		of the date of purchase but shall be entitled to use the
33		disallowed Manufacturer's Purchase Credit, so long as it has
34		not expired and is used prior to October 1, 2003, on qualifying

1		purchases of production related tangible personal property not
2		previously subject to credit usage. The Manufacturer's
3		Purchase Credit earned by a manufacturer or graphic arts
4		producer expires the last day of the second calendar year
5		following the calendar year in which the credit arose. No
6		Manufacturer's Purchase Credit may be used after September 30,
7		2003 regardless of when that credit was earned.
8		A purchaser earning Manufacturer's Purchase Credit shall
9		sign and file an annual Report of Manufacturer's Purchase
10		Credit Earned for each calendar year no later than the last day
11		of the sixth month following the calendar year in which a
12		Manufacturer's Purchase Credit is earned. A Report of
13		Manufacturer's Purchase Credit Earned shall be filed on forms
14		as prescribed or approved by the Department and shall state,
15		for each month of the calendar year: (i) the total purchase
16		price of all purchases of exempt manufacturing or graphic arts
17		machinery on which the credit was earned; (ii) the total State
18		Use Tax or Service Use Tax which would have been due on those
19		items; (iii) the percentage used to calculate the amount of
20		credit earned; (iv) the amount of credit earned; and (v) such
21		other information as the Department may reasonably require. A
22		purchaser earning Manufacturer's Purchase Credit shall
23		maintain records which identify, as to each purchase of
24		manufacturing or graphic arts machinery and equipment on which
25		the purchaser earned Manufacturer's Purchase Credit, the
26		vendor (including, if applicable, either the vendor's
27		registration number or Federal Employer Identification
28		Number), the purchase price, and the amount of Manufacturer's
29		Purchase Credit earned on each purchase.
30		A purchaser using Manufacturer's Purchase Credit shall
31		sign and file an annual Report of Manufacturer's Purchase
32		Credit Used for each calendar year no later than the last day
33		of the sixth month following the calendar year in which a
34		Manufacturer's Purchase Credit is used. A Report of

1		Manufacturer's Purchase Credit Used shall be filed on forms as
2		prescribed or approved by the Department and shall state, for
3		each month of the calendar year: (i) the total purchase price
4		of production related tangible personal property purchased
5		from Illinois suppliers; (ii) the total purchase price of
6		production related tangible personal property purchased from
7		out-of-state suppliers; (iii) the total amount of credit used
8		during such month; and (iv) such other information as the
9		Department may reasonably require. A purchaser using
10		Manufacturer's Purchase Credit shall maintain records that
11		identify, as to each purchase of production related tangible
12		personal property on which the purchaser used Manufacturer's
13		Purchase Credit, the vendor (including, if applicable, either
14		the vendor's registration number or Federal Employer
15		Identification Number), the purchase price, and the amount of
16		Manufacturer's Purchase Credit used on each purchase.
17		No annual report shall be filed before May 1, 1996 or after
18		June 30, 2004. A purchaser that fails to file an annual Report
19		of Manufacturer's Purchase Credit Earned or an annual Report of
20		Manufacturer's Purchase Credit Used by the last day of the
21		sixth month following the end of the calendar year shall
22		forfeit all Manufacturer's Purchase Credit for that calendar
23		year unless it establishes that its failure to file was due to
24		reasonable cause. Manufacturer's Purchase Credit reports may
25		be amended to report and claim credit on qualifying purchases
26		not previously reported at any time before the credit would
27		have expired, unless both the Department and the purchaser have
28		agreed to an extension of the statute of limitations for the
29		issuance of a notice of tax liability as provided in Section 4
30		of the Retailers' Occupation Tax Act. If the time for
31		assessment or refund has been extended, then amended reports
32		for a calendar year may be filed at any time prior to the date
33		to which the statute of limitations for the calendar year or
34		portion thereof has been extended. No Manufacturer's Purchase

1		Credit report filed with the Department for periods prior to
2		January 1, 1995 shall be approved. Manufacturer's Purchase
3		Credit claimed on an amended report may be used, until October
4		1, 2003, to satisfy tax liability under the Use Tax Act or the
5		Service Use Tax Act (i) on qualifying purchases of production
6		related tangible personal property made after the date the
7		amended report is filed or (ii) assessed by the Department on
8		qualifying purchases of production related tangible personal
9		property made in the case of manufacturers on or after January
10		1, 1995, or in the case of graphic arts producers on or after
11		July 1, 1996.
12		If the purchaser is not the manufacturer or a graphic arts
13		producer, but rents or leases the use of the property to a
14		manufacturer or graphic arts producer, the purchaser may earn,
15		report, and use Manufacturer's Purchase Credit in the same
16		manner as a manufacturer or graphic arts producer.
17		A purchaser shall not be entitled to any Manufacturer's
18		Purchase Credit for a purchase that is required to be reported
19		and is not timely reported as provided in this Section. A
20		purchaser remains liable for (i) any tax that was satisfied by
21		use of a Manufacturer's Purchase Credit, as of the date of
22		purchase, if that use is not timely reported as required in
23		this Section and (ii) for any applicable penalties and interest
24		for failing to pay the tax when due. No Manufacturer's Purchase
25		Credit may be used after September 30, 2003 to satisfy any tax
26		liability imposed under this Act, including any audit
27		liability.
28		(b) Manufacturer's Purchase Credit earned on and after July
29		1, 2004. This subsection (b) applies to Manufacturer's Purchase
30		Credit earned on and after July 1, 2004.
31		A purchaser of production related tangible personal
32		property desiring to use the Manufacturer's Purchase Credit
33		shall certify to the seller that the purchaser is satisfying
34		all or part of the liability under the Use Tax Act or the

1		Service Use Tax Act that is due on the purchase of the
2		production related tangible personal property by use of
3		Manufacturer's Purchase Credit. The Manufacturer's Purchase
4		Credit certification must be dated and shall include the name
5		and address of the purchaser, the purchaser's registration
6		number, if registered, the credit being applied, and a
7		statement that the State Use Tax or Service Use Tax liability
8		is being satisfied with the manufacturer's or graphic arts
9		producer's accumulated purchase credit. Certification may be
10		incorporated into the manufacturer's or graphic arts
11		producer's purchase order. Manufacturer's Purchase Credit
12		certification provided by the manufacturer or graphic arts
13		producer may be used to satisfy the retailer's or serviceman's
14		liability under the Retailers' Occupation Tax Act or Service
15		Occupation Tax Act for the credit claimed, not to exceed 6.25%
16		of the receipts subject to tax from a qualifying purchase, but
17		only if the retailer or serviceman reports the Manufacturer's
18		Purchase Credit claimed as required by the Department. The
19		Manufacturer's Purchase Credit earned by purchase of exempt
20		manufacturing machinery and equipment or graphic arts
21		machinery and equipment is a non-transferable credit. A
22		manufacturer or graphic arts producer that enters into a
23		contract involving the installation of tangible personal
24		property into real estate within a manufacturing or graphic
25		arts production facility may, on or after July 1, 2004,
26		authorize a construction contractor to utilize credit
27		accumulated by the manufacturer or graphic arts producer to
28		purchase the tangible personal property. A manufacturer or
29		graphic arts producer intending to use accumulated credit to
30		purchase such tangible personal property shall execute a
31		written contract authorizing the contractor to utilize a
32		specified dollar amount of credit. The contractor shall furnish
33		the supplier with the manufacturer's or graphic arts producer's
34		name, registration or resale number, and a statement that a

1		specific amount of the Use Tax or Service Use Tax liability,
2		not to exceed 6.25% of the selling price, is being satisfied
3		with the credit. The manufacturer or graphic arts producer
4		shall remain liable to timely report all information required
5		by the annual Report of Manufacturer's Purchase Credit Used for
6		all credit utilized by a construction contractor.
7		The Manufacturer's Purchase Credit may be used to satisfy
8		liability under the Use Tax Act or the Service Use Tax Act due
9		on the purchase of production related tangible personal
10		property (including purchases by a manufacturer, by a graphic
11		arts producer, or by a lessor who rents or leases the use of
12		the property to a manufacturer or graphic arts producer) that
13		does not otherwise qualify for the manufacturing machinery and
14		equipment exemption or the graphic arts machinery and equipment
15		exemption. "Production related tangible personal property"
16		means (i) all tangible personal property used or consumed by
17		the purchaser in a manufacturing facility in which a
18		manufacturing process described in Section 2-45 of the
19		Retailers' Occupation Tax Act takes place, including tangible
20		personal property purchased for incorporation into real estate
21		within a manufacturing facility and including, but not limited
22		to, tangible personal property used or consumed in activities
23		such as preproduction material handling, receiving, quality
24		control, inventory control, storage, staging, and packaging
25		for shipping and transportation purposes; (ii) all tangible
26		personal property used or consumed by the purchaser in a
27		graphic arts facility in which graphic arts production as
28		described in Section 2-30 of the Retailers' Occupation Tax Act
29		takes place, including tangible personal property purchased
30		for incorporation into real estate within a graphic arts
31		facility and including, but not limited to, all tangible
32		personal property used or consumed in activities such as
33		graphic arts preliminary or pre-press production,
34		pre-production material handling, receiving, quality control,

1		inventory control, storage, staging, sorting, labeling,
2		mailing, tying, wrapping, and packaging; and (iii) all tangible
3		personal property used or consumed by the purchaser for
4		research and development. "Production related tangible
5		personal property" does not include (i) tangible personal
6		property used, within or without a manufacturing facility, in
7		sales, purchasing, accounting, fiscal management, marketing,
8		personnel recruitment or selection, or landscaping or (ii)
9		tangible personal property required to be titled or registered
10		with a department, agency, or unit of federal, state, or local
11		government. The Manufacturer's Purchase Credit may be used to
12		satisfy the tax arising either from the purchase of machinery
13		and equipment on or after July 1, 2004 for which the exemption
14		provided by paragraph (18) of Section 3-5 of this Act was
15		erroneously claimed, or the purchase of machinery and equipment
16		on or after July 1, 2004 for which the exemption provided by
17		paragraph (6) of Section 3-5 of this Act was erroneously
18		claimed, but not in satisfaction of penalty, if any, and
19		interest for failure to pay the tax when due. A purchaser of
20		production related tangible personal property that is
21		purchased on or after July 1, 2004 who is required to pay
22		Illinois Use Tax or Service Use Tax on the purchase directly to
23		the Department may utilize the Manufacturer's Purchase Credit
24		in satisfaction of the tax arising from that purchase, but not
25		in satisfaction of penalty and interest. A purchaser who uses
26		the Manufacturer's Purchase Credit to purchase property on and
27		after July 1, 2004 which is later determined not to be
28		production related tangible personal property may be liable for
29		tax, penalty, and interest on the purchase of that property as
30		of the date of purchase but shall be entitled to use the
31		disallowed Manufacturer's Purchase Credit, so long as it has
32		not expired and is used on qualifying purchases of production
33		related tangible personal property not previously subject to
34		credit usage. The Manufacturer's Purchase Credit earned by a

1		manufacturer or graphic arts producer expires the last day of
2		the second calendar year following the calendar year in which
3		the credit arose.
4		A purchaser earning Manufacturer's Purchase Credit shall
5		sign and file an annual Report of Manufacturer's Purchase
6		Credit Earned for each calendar year no later than the last day
7		of the sixth month following the calendar year in which a
8		Manufacturer's Purchase Credit is earned. A Report of
9		Manufacturer's Purchase Credit Earned shall be filed on forms
10		as prescribed or approved by the Department and shall state,
11		for each month of the calendar year: (i) the total purchase
12		price of all purchases of exempt manufacturing or graphic arts
13		machinery on which the credit was earned; (ii) the total State
14		Use Tax or Service Use Tax which would have been due on those
15		items; (iii) the percentage used to calculate the amount of
16		credit earned; (iv) the amount of credit earned; and (v) such
17		other information as the Department may reasonably require. A
18		purchaser earning Manufacturer's Purchase Credit shall
19		maintain records which identify, as to each purchase of
20		manufacturing or graphic arts machinery and equipment on which
21		the purchaser earned Manufacturer's Purchase Credit, the
22		vendor (including, if applicable, either the vendor's
23		registration number or Federal Employer Identification
24		Number), the purchase price, and the amount of Manufacturer's
25		Purchase Credit earned on each purchase.
26		A purchaser using Manufacturer's Purchase Credit shall
27		sign and file an annual Report of Manufacturer's Purchase
28		Credit Used for each calendar year no later than the last day
29		of the sixth month following the calendar year in which a
30		Manufacturer's Purchase Credit is used. A Report of
31		Manufacturer's Purchase Credit Used shall be filed on forms as
32		prescribed or approved by the Department and shall state, for
33		each month of the calendar year: (i) the total purchase price
34		of production related tangible personal property purchased

1		from Illinois suppliers; (ii) the total purchase price of
2		production related tangible personal property purchased from
3		out-of-state suppliers; (iii) the total amount of credit used
4		during such month; and (iv) such other information as the
5		Department may reasonably require. A purchaser using
6		Manufacturer's Purchase Credit shall maintain records that
7		identify, as to each purchase of production related tangible
8		personal property on which the purchaser used Manufacturer's
9		Purchase Credit, the vendor (including, if applicable, either
10		the vendor's registration number or Federal Employer
11		Identification Number), the purchase price, and the amount of
12		Manufacturer's Purchase Credit used on each purchase.
13		A purchaser that fails to file an annual Report of
14		Manufacturer's Purchase Credit Earned or an annual Report of
15		Manufacturer's Purchase Credit Used by the last day of the
16		sixth month following the end of the calendar year shall
17		forfeit all Manufacturer's Purchase Credit for that calendar
18		year unless it establishes that its failure to file was due to
19		reasonable cause. Manufacturer's Purchase Credit reports may
20		be amended to report and claim credit on qualifying purchases
21		not previously reported at any time before the credit would
22		have expired, unless both the Department and the purchaser have
23		agreed to an extension of the statute of limitations for the
24		issuance of a notice of tax liability as provided in Section 4
25		of the Retailers' Occupation Tax Act. If the time for
26		assessment or refund has been extended, then amended reports
27		for a calendar year may be filed at any time prior to the date
28		to which the statute of limitations for the calendar year or
29		portion thereof has been extended. Manufacturer's Purchase
30		Credit claimed on an amended report may be used to satisfy tax
31		liability under the Use Tax Act or the Service Use Tax Act (i)
32		on qualifying purchases of production related tangible
33		personal property made after the date the amended report is
34		filed or (ii) assessed by the Department on qualifying

1		purchases of production related tangible personal property
2		made on or after July 1, 2004. If the purchaser is not the
3		manufacturer or a graphic arts producer, but rents or leases
4		the use of the property to a manufacturer or graphic arts
5		producer, the purchaser may earn, report, and use
6		Manufacturer's Purchase Credit in the same manner as a
7		manufacturer or graphic arts producer. A purchaser shall not be
8		entitled to any Manufacturer's Purchase Credit for a purchase
9		that is required to be reported and is not timely reported as
10		provided in this Section. A purchaser remains liable for (i)
11		any tax that was satisfied by use of a Manufacturer's Purchase
12		Credit, as of the date of purchase, if that use is not timely
13		reported as required in this Section and (ii) for any
14		applicable penalties and interest for failing to pay the tax
15		when due.
16		(Source: P.A. 93-24, eff. 6-20-03.)

17		Section 12-10. The Service Use Tax Act is amended by
18		changing Section 3-70 as follows:
19		(35 ILCS 110/3-70)
20		Sec. 3-70. Manufacturer's Purchase Credit. For purchases
21		of machinery and equipment made on and after January 1, 1995
22		and through June 30, 2003, and on and after July 1, 2004, a
23		purchaser of manufacturing machinery and equipment that
24		qualifies for the exemption provided by Section 2 of this Act
25		earns a credit in an amount equal to a fixed percentage of the
26		tax which would have been incurred under this Act on those
27		purchases. For purchases of graphic arts machinery and
28		equipment made on or after July 1, 1996 and through June 30,
29		2003, and on and after July 1, 2004, a purchase of graphic arts
30		machinery and equipment that qualifies for the exemption
31		provided by paragraph (5) of Section 3-5 of this Act earns a
32		credit in an amount equal to a fixed percentage of the tax that

1		would have been incurred under this Act on those purchases. The
2		credit earned for the purchase of manufacturing machinery and
3		equipment and graphic arts machinery and equipment shall be
4		referred to as the Manufacturer's Purchase Credit. A graphic
5		arts producer is a person engaged in graphic arts production as
6		defined in Section 3-30 of the Service Occupation Tax Act.
7		Beginning July 1, 1996, all references in this Section to
8		manufacturers or manufacturing shall also refer to graphic arts
9		producers or graphic arts production.
10		The amount of credit shall be a percentage of the tax that
11		would have been incurred on the purchase of the manufacturing
12		machinery and equipment or graphic arts machinery and equipment
13		if the exemptions provided by Section 2 or paragraph (5) of
14		Section 3-5 of this Act had not been applicable.
15		All purchases prior to October 1, 2003 of manufacturing
16		machinery and equipment and graphic arts machinery and
17		equipment that qualify for the exemptions provided by paragraph
18		(5) of Section 2 or paragraph (5) of Section 3-5 of this Act
19		qualify for the credit without regard to whether the serviceman
20		elected, or could have elected, under paragraph (7) of Section
21		2 of this Act to exclude the transaction from this Act. If the
22		serviceman's billing to the service customer separately states
23		a selling price for the exempt manufacturing machinery or
24		equipment or the exempt graphic arts machinery and equipment,
25		the credit shall be calculated, as otherwise provided herein,
26		based on that selling price. If the serviceman's billing does
27		not separately state a selling price for the exempt
28		manufacturing machinery and equipment or the exempt graphic
29		arts machinery and equipment, the credit shall be calculated,
30		as otherwise provided herein, based on 50% of the entire
31		billing. If the serviceman contracts to design, develop, and
32		produce special order manufacturing machinery and equipment or
33		special order graphic arts machinery and equipment, and the
34		billing does not separately state a selling price for such

1		special order machinery and equipment, the credit shall be
2		calculated, as otherwise provided herein, based on 50% of the
3		entire billing. The provisions of this paragraph are effective
4		for purchases made on or after January 1, 1995.
5		The percentage shall be as follows:
6		(1) 15% for purchases made on or before June 30, 1995.
7		(2) 25% for purchases made after June 30, 1995, and on
8		or before June 30, 1996.
9		(3) 40% for purchases made after June 30, 1996, and on
10		or before June 30, 1997.
11		(4) 50% for purchases made on or after July 1, 1997.
12		(a) Manufacturer's Purchase Credit earned prior to July 1,
13		2003. This subsection (a) applies to Manufacturer's Purchase
14		Credit earned prior to July 1, 2003. A purchaser of production
15		related tangible personal property desiring to use the
16		Manufacturer's Purchase Credit shall certify to the seller
17		prior to October 1, 2003 that the purchaser is satisfying all
18		or part of the liability under the Use Tax Act or the Service
19		Use Tax Act that is due on the purchase of the production
20		related tangible personal property by use of a Manufacturer's
21		Purchase Credit. The Manufacturer's Purchase Credit
22		certification must be dated and shall include the name and
23		address of the purchaser, the purchaser's registration number,
24		if registered, the credit being applied, and a statement that
25		the State Use Tax or Service Use Tax liability is being
26		satisfied with the manufacturer's or graphic arts producer's
27		accumulated purchase credit. Certification may be incorporated
28		into the manufacturer's or graphic arts producer's purchase
29		order. Manufacturer's Purchase Credit certification provided
30		by the manufacturer or graphic arts producer prior to October
31		1, 2003 may be used to satisfy the retailer's or serviceman's
32		liability under the Retailers' Occupation Tax Act or Service
33		Occupation Tax Act for the credit claimed, not to exceed 6.25%
34		of the receipts subject to tax from a qualifying purchase, but

1		only if the retailer or serviceman reports the Manufacturer's
2		Purchase Credit claimed as required by the Department. A
3		Manufacturer's Purchase Credit reported on any original or
4		amended return filed under this Act after October 20, 2003
5		shall be disallowed. The Manufacturer's Purchase Credit earned
6		by purchase of exempt manufacturing machinery and equipment or
7		graphic arts machinery and equipment is a non-transferable
8		credit. A manufacturer or graphic arts producer that enters
9		into a contract involving the installation of tangible personal
10		property into real estate within a manufacturing or graphic
11		arts production facility, prior to October 1, 2003, may
12		authorize a construction contractor to utilize credit
13		accumulated by the manufacturer or graphic arts producer to
14		purchase the tangible personal property. A manufacturer or
15		graphic arts producer intending to use accumulated credit to
16		purchase such tangible personal property shall execute a
17		written contract authorizing the contractor to utilize a
18		specified dollar amount of credit. The contractor shall
19		furnish, prior to October 1, 2003, the supplier with the
20		manufacturer's or graphic arts producer's name, registration
21		or resale number, and a statement that a specific amount of the
22		Use Tax or Service Use Tax liability, not to exceed 6.25% of
23		the selling price, is being satisfied with the credit. The
24		manufacturer or graphic arts producer shall remain liable to
25		timely report all information required by the annual Report of
26		Manufacturer's Purchase Credit Used for credit utilized by a
27		construction contractor.
28		No Manufacturer's Purchase Credit earned prior to July 1,
29		2003 may be used after October 1, 2003. The Manufacturer's
30		Purchase Credit may be used to satisfy liability under the Use
31		Tax Act or the Service Use Tax Act due on the purchase of
32		production related tangible personal property (including
33		purchases by a manufacturer, by a graphic arts producer, or a
34		lessor who rents or leases the use of the property to a

1		manufacturer or graphic arts producer) that does not otherwise
2		qualify for the manufacturing machinery and equipment
3		exemption or the graphic arts machinery and equipment
4		exemption. "Production related tangible personal property"
5		means (i) all tangible personal property used or consumed by
6		the purchaser in a manufacturing facility in which a
7		manufacturing process described in Section 2-45 of the
8		Retailers' Occupation Tax Act takes place, including tangible
9		personal property purchased for incorporation into real estate
10		within a manufacturing facility and including, but not limited
11		to, tangible personal property used or consumed in activities
12		such as pre-production material handling, receiving, quality
13		control, inventory control, storage, staging, and packaging
14		for shipping and transportation purposes; (ii) all tangible
15		personal property used or consumed by the purchaser in a
16		graphic arts facility in which graphic arts production as
17		described in Section 2-30 of the Retailers' Occupation Tax Act
18		takes place, including tangible personal property purchased
19		for incorporation into real estate within a graphic arts
20		facility and including, but not limited to, all tangible
21		personal property used or consumed in activities such as
22		graphic arts preliminary or pre-press production,
23		pre-production material handling, receiving, quality control,
24		inventory control, storage, staging, sorting, labeling,
25		mailing, tying, wrapping, and packaging; and (iii) all tangible
26		personal property used or consumed by the purchaser for
27		research and development. "Production related tangible
28		personal property" does not include (i) tangible personal
29		property used, within or without a manufacturing or graphic
30		arts facility, in sales, purchasing, accounting, fiscal
31		management, marketing, personnel recruitment or selection, or
32		landscaping or (ii) tangible personal property required to be
33		titled or registered with a department, agency, or unit of
34		federal, state, or local government. The Manufacturer's

1		Purchase Credit may be used, prior to October 1, 2003, to
2		satisfy the tax arising either from the purchase of machinery
3		and equipment on or after January 1, 1995 for which the
4		manufacturing machinery and equipment exemption provided by
5		Section 2 of this Act was erroneously claimed, or the purchase
6		of machinery and equipment on or after July 1, 1996 for which
7		the exemption provided by paragraph (5) of Section 3-5 of this
8		Act was erroneously claimed, but not in satisfaction of
9		penalty, if any, and interest for failure to pay the tax when
10		due. A purchaser of production related tangible personal
11		property who is required to pay Illinois Use Tax or Service Use
12		Tax on the purchase directly to the Department may, prior to
13		October 1, 2003, utilize the Manufacturer's Purchase Credit in
14		satisfaction of the tax arising from that purchase, but not in
15		satisfaction of penalty and interest. A purchaser who uses the
16		Manufacturer's Purchase Credit to purchase property which is
17		later determined not to be production related tangible personal
18		property may be liable for tax, penalty, and interest on the
19		purchase of that property as of the date of purchase but shall
20		be entitled to use the disallowed Manufacturer's Purchase
21		Credit, so long as it has not expired and is used prior to
22		October 1, 2003, on qualifying purchases of production related
23		tangible personal property not previously subject to credit
24		usage. The Manufacturer's Purchase Credit earned by a
25		manufacturer or graphic arts producer expires the last day of
26		the second calendar year following the calendar year in which
27		the credit arose. No Manufacturer's Purchase Credit may be used
28		after September 30, 2003 regardless of when that credit was
29		earned.
30		A purchaser earning Manufacturer's Purchase Credit shall
31		sign and file an annual Report of Manufacturer's Purchase
32		Credit Earned for each calendar year no later than the last day
33		of the sixth month following the calendar year in which a
34		Manufacturer's Purchase Credit is earned. A Report of

1		Manufacturer's Purchase Credit Earned shall be filed on forms
2		as prescribed or approved by the Department and shall state,
3		for each month of the calendar year: (i) the total purchase
4		price of all purchases of exempt manufacturing or graphic arts
5		machinery on which the credit was earned; (ii) the total State
6		Use Tax or Service Use Tax which would have been due on those
7		items; (iii) the percentage used to calculate the amount of
8		credit earned; (iv) the amount of credit earned; and (v) such
9		other information as the Department may reasonably require. A
10		purchaser earning Manufacturer's Purchase Credit shall
11		maintain records which identify, as to each purchase of
12		manufacturing or graphic arts machinery and equipment on which
13		the purchaser earned Manufacturer's Purchase Credit, the
14		vendor (including, if applicable, either the vendor's
15		registration number or Federal Employer Identification
16		Number), the purchase price, and the amount of Manufacturer's
17		Purchase Credit earned on each purchase.
18		A purchaser using Manufacturer's Purchase Credit shall
19		sign and file an annual Report of Manufacturer's Purchase
20		Credit Used for each calendar year no later than the last day
21		of the sixth month following the calendar year in which a
22		Manufacturer's Purchase Credit is used. A Report of
23		Manufacturer's Purchase Credit Used shall be filed on forms as
24		prescribed or approved by the Department and shall state, for
25		each month of the calendar year: (i) the total purchase price
26		of production related tangible personal property purchased
27		from Illinois suppliers; (ii) the total purchase price of
28		production related tangible personal property purchased from
29		out-of-state suppliers; (iii) the total amount of credit used
30		during such month; and (iv) such other information as the
31		Department may reasonably require. A purchaser using
32		Manufacturer's Purchase Credit shall maintain records that
33		identify, as to each purchase of production related tangible
34		personal property on which the purchaser used Manufacturer's

1		Purchase Credit, the vendor (including, if applicable, either
2		the vendor's registration number or Federal Employer
3		Identification Number), the purchase price, and the amount of
4		Manufacturer's Purchase Credit used on each purchase.
5		No annual report shall be filed before May 1, 1996 or after
6		June 30, 2004. A purchaser that fails to file an annual Report
7		of Manufacturer's Purchase Credit Earned or an annual Report of
8		Manufacturer's Purchase Credit Used by the last day of the
9		sixth month following the end of the calendar year shall
10		forfeit all Manufacturer's Purchase Credit for that calendar
11		year unless it establishes that its failure to file was due to
12		reasonable cause. Manufacturer's Purchase Credit reports may
13		be amended to report and claim credit on qualifying purchases
14		not previously reported at any time before the credit would
15		have expired, unless both the Department and the purchaser have
16		agreed to an extension of the statute of limitations for the
17		issuance of a notice of tax liability as provided in Section 4
18		of the Retailers' Occupation Tax Act. If the time for
19		assessment or refund has been extended, then amended reports
20		for a calendar year may be filed at any time prior to the date
21		to which the statute of limitations for the calendar year or
22		portion thereof has been extended. No Manufacturer's Purchase
23		Credit report filed with the Department for periods prior to
24		January 1, 1995 shall be approved. Manufacturer's Purchase
25		Credit claimed on an amended report may be used, prior to
26		October 1, 2003, to satisfy tax liability under the Use Tax Act
27		or the Service Use Tax Act (i) on qualifying purchases of
28		production related tangible personal property made after the
29		date the amended report is filed or (ii) assessed by the
30		Department on qualifying purchases of production related
31		tangible personal property made in the case of manufacturers on
32		or after January 1, 1995, or in the case of graphic arts
33		producers on or after July 1, 1996.
34		If the purchaser is not the manufacturer or a graphic arts

1		producer, but rents or leases the use of the property to a
2		manufacturer or a graphic arts producer, the purchaser may
3		earn, report, and use Manufacturer's Purchase Credit in the
4		same manner as a manufacturer or graphic arts producer.
5		A purchaser shall not be entitled to any Manufacturer's
6		Purchase Credit for a purchase that is required to be reported
7		and is not timely reported as provided in this Section. A
8		purchaser remains liable for (i) any tax that was satisfied by
9		use of a Manufacturer's Purchase Credit, as of the date of
10		purchase, if that use is not timely reported as required in
11		this Section and (ii) for any applicable penalties and interest
12		for failing to pay the tax when due. No Manufacturer's Purchase
13		Credit may be used after September 30, 2003 to satisfy any tax
14		liability imposed under this Act, including any audit
15		liability.
16		(b) Manufacturer's Purchase Credit earned on and after July
17		1, 2004. This subsection (b) applies to Manufacturer's Purchase
18		Credit earned on or after July 1, 2004. A purchaser of
19		production related tangible personal property desiring to use
20		the Manufacturer's Purchase Credit shall certify to the seller
21		that the purchaser is satisfying all or part of the liability
22		under the Use Tax Act or the Service Use Tax Act that is due on
23		the purchase of the production related tangible personal
24		property by use of a Manufacturer's Purchase Credit. The
25		Manufacturer's Purchase Credit certification must be dated and
26		shall include the name and address of the purchaser, the
27		purchaser's registration number, if registered, the credit
28		being applied, and a statement that the State Use Tax or
29		Service Use Tax liability is being satisfied with the
30		manufacturer's or graphic arts producer's accumulated purchase
31		credit. Certification may be incorporated into the
32		manufacturer's or graphic arts producer's purchase order.
33		Manufacturer's Purchase Credit certification provided by the
34		manufacturer or graphic arts producer may be used to satisfy

1		the retailer's or serviceman's liability under the Retailers'
2		Occupation Tax Act or Service Occupation Tax Act for the credit
3		claimed, not to exceed 6.25% of the receipts subject to tax
4		from a qualifying purchase, but only if the retailer or
5		serviceman reports the Manufacturer's Purchase Credit claimed
6		as required by the Department. The Manufacturer's Purchase
7		Credit earned by purchase of exempt manufacturing machinery and
8		equipment or graphic arts machinery and equipment is a
9		non-transferable credit. A manufacturer or graphic arts
10		producer that enters into a contract involving the installation
11		of tangible personal property into real estate within a
12		manufacturing or graphic arts production facility may, on or
13		after July 1, 2004, authorize a construction contractor to
14		utilize credit accumulated by the manufacturer or graphic arts
15		producer to purchase the tangible personal property. A
16		manufacturer or graphic arts producer intending to use
17		accumulated credit to purchase such tangible personal property
18		shall execute a written contract authorizing the contractor to
19		utilize a specified dollar amount of credit. The contractor
20		shall furnish the supplier with the manufacturer's or graphic
21		arts producer's name, registration or resale number, and a
22		statement that a specific amount of the Use Tax or Service Use
23		Tax liability, not to exceed 6.25% of the selling price, is
24		being satisfied with the credit. The manufacturer or graphic
25		arts producer shall remain liable to timely report all
26		information required by the annual Report of Manufacturer's
27		Purchase Credit Used for credit utilized by a construction
28		contractor.
29		The Manufacturer's Purchase Credit may be used to satisfy
30		liability under the Use Tax Act or the Service Use Tax Act due
31		on the purchase of production related tangible personal
32		property (including purchases by a manufacturer, by a graphic
33		arts producer, or a lessor who rents or leases the use of the
34		property to a manufacturer or graphic arts producer) that does

1		not otherwise qualify for the manufacturing machinery and
2		equipment exemption or the graphic arts machinery and equipment
3		exemption. "Production related tangible personal property"
4		means (i) all tangible personal property used or consumed by
5		the purchaser in a manufacturing facility in which a
6		manufacturing process described in Section 2-45 of the
7		Retailers' Occupation Tax Act takes place, including tangible
8		personal property purchased for incorporation into real estate
9		within a manufacturing facility and including, but not limited
10		to, tangible personal property used or consumed in activities
11		such as pre-production material handling, receiving, quality
12		control, inventory control, storage, staging, and packaging
13		for shipping and transportation purposes; (ii) all tangible
14		personal property used or consumed by the purchaser in a
15		graphic arts facility in which graphic arts production as
16		described in Section 2-30 of the Retailers' Occupation Tax Act
17		takes place, including tangible personal property purchased
18		for incorporation into real estate within a graphic arts
19		facility and including, but not limited to, all tangible
20		personal property used or consumed in activities such as
21		graphic arts preliminary or pre-press production,
22		pre-production material handling, receiving, quality control,
23		inventory control, storage, staging, sorting, labeling,
24		mailing, tying, wrapping, and packaging; and (iii) all tangible
25		personal property used or consumed by the purchaser for
26		research and development. "Production related tangible
27		personal property" does not include (i) tangible personal
28		property used, within or without a manufacturing or graphic
29		arts facility, in sales, purchasing, accounting, fiscal
30		management, marketing, personnel recruitment or selection, or
31		landscaping or (ii) tangible personal property required to be
32		titled or registered with a department, agency, or unit of
33		federal, state, or local government. The Manufacturer's
34		Purchase Credit may be used to satisfy the tax arising either

1		from the purchase of machinery and equipment on or after July
2		1, 2004 for which the manufacturing machinery and equipment
3		exemption provided by Section 2 of this Act was erroneously
4		claimed, or the purchase of machinery and equipment on or after
5		July 1, 2004 for which the exemption provided by paragraph (5)
6		of Section 3-5 of this Act was erroneously claimed, but not in
7		satisfaction of penalty, if any, and interest for failure to
8		pay the tax when due. A purchaser of production related
9		tangible personal property that is purchased on or after July
10		1, 2004 who is required to pay Illinois Use Tax or Service Use
11		Tax on the purchase directly to the Department may utilize the
12		Manufacturer's Purchase Credit in satisfaction of the tax
13		arising from that purchase, but not in satisfaction of penalty
14		and interest. A purchaser who uses the Manufacturer's Purchase
15		Credit to purchase property on and after July 1, 2004 which is
16		later determined not to be production related tangible personal
17		property may be liable for tax, penalty, and interest on the
18		purchase of that property as of the date of purchase but shall
19		be entitled to use the disallowed Manufacturer's Purchase
20		Credit, so long as it has not expired, on qualifying purchases
21		of production related tangible personal property not
22		previously subject to credit usage. The Manufacturer's
23		Purchase Credit earned by a manufacturer or graphic arts
24		producer expires the last day of the second calendar year
25		following the calendar year in which the credit arose.
26		A purchaser earning Manufacturer's Purchase Credit shall
27		sign and file an annual Report of Manufacturer's Purchase
28		Credit Earned for each calendar year no later than the last day
29		of the sixth month following the calendar year in which a
30		Manufacturer's Purchase Credit is earned. A Report of
31		Manufacturer's Purchase Credit Earned shall be filed on forms
32		as prescribed or approved by the Department and shall state,
33		for each month of the calendar year: (i) the total purchase
34		price of all purchases of exempt manufacturing or graphic arts

1		machinery on which the credit was earned; (ii) the total State
2		Use Tax or Service Use Tax which would have been due on those
3		items; (iii) the percentage used to calculate the amount of
4		credit earned; (iv) the amount of credit earned; and (v) such
5		other information as the Department may reasonably require. A
6		purchaser earning Manufacturer's Purchase Credit shall
7		maintain records which identify, as to each purchase of
8		manufacturing or graphic arts machinery and equipment on which
9		the purchaser earned Manufacturer's Purchase Credit, the
10		vendor (including, if applicable, either the vendor's
11		registration number or Federal Employer Identification
12		Number), the purchase price, and the amount of Manufacturer's
13		Purchase Credit earned on each purchase.
14		A purchaser using Manufacturer's Purchase Credit shall
15		sign and file an annual Report of Manufacturer's Purchase
16		Credit Used for each calendar year no later than the last day
17		of the sixth month following the calendar year in which a
18		Manufacturer's Purchase Credit is used. A Report of
19		Manufacturer's Purchase Credit Used shall be filed on forms as
20		prescribed or approved by the Department and shall state, for
21		each month of the calendar year: (i) the total purchase price
22		of production related tangible personal property purchased
23		from Illinois suppliers; (ii) the total purchase price of
24		production related tangible personal property purchased from
25		out-of-state suppliers; (iii) the total amount of credit used
26		during such month; and (iv) such other information as the
27		Department may reasonably require. A purchaser using
28		Manufacturer's Purchase Credit shall maintain records that
29		identify, as to each purchase of production related tangible
30		personal property on which the purchaser used Manufacturer's
31		Purchase Credit, the vendor (including, if applicable, either
32		the vendor's registration number or Federal Employer
33		Identification Number), the purchase price, and the amount of
34		Manufacturer's Purchase Credit used on each purchase.

1		A purchaser that fails to file an annual Report of
2		Manufacturer's Purchase Credit Earned or an annual Report of
3		Manufacturer's Purchase Credit Used by the last day of the
4		sixth month following the end of the calendar year shall
5		forfeit all Manufacturer's Purchase Credit for that calendar
6		year unless it establishes that its failure to file was due to
7		reasonable cause. Manufacturer's Purchase Credit reports may
8		be amended to report and claim credit on qualifying purchases
9		not previously reported at any time before the credit would
10		have expired, unless both the Department and the purchaser have
11		agreed to an extension of the statute of limitations for the
12		issuance of a notice of tax liability as provided in Section 4
13		of the Retailers' Occupation Tax Act. If the time for
14		assessment or refund has been extended, then amended reports
15		for a calendar year may be filed at any time prior to the date
16		to which the statute of limitations for the calendar year or
17		portion thereof has been extended. Manufacturer's Purchase
18		Credit claimed on an amended report may be used to satisfy tax
19		liability under the Use Tax Act or the Service Use Tax Act (i)
20		on qualifying purchases of production related tangible
21		personal property made after the date the amended report is
22		filed or (ii) assessed by the Department on qualifying
23		purchases of production related tangible personal property
24		made on or after July 1, 2004.
25		If the purchaser is not the manufacturer or a graphic arts
26		producer, but rents or leases the use of the property to a
27		manufacturer or a graphic arts producer, the purchaser may
28		earn, report, and use Manufacturer's Purchase Credit in the
29		same manner as a manufacturer or graphic arts producer. A
30		purchaser shall not be entitled to any Manufacturer's Purchase
31		Credit for a purchase that is required to be reported and is
32		not timely reported as provided in this Section. A purchaser
33		remains liable for (i) any tax that was satisfied by use of a
34		Manufacturer's Purchase Credit, as of the date of purchase, if

1		that use is not timely reported as required in this Section and
2		(ii) for any applicable penalties and interest for failing to
3		pay the tax when due.
4		(Source: P.A. 93-24, eff. 6-20-03.)

5		Section 12-15. The Service Occupation Tax Act is amended by
6		changing Section 9 as follows:
7		(35 ILCS 115/9) (from Ch. 120, par. 439.109)
8		Sec. 9. Each serviceman required or authorized to collect
9		the tax herein imposed shall pay to the Department the amount
10		of such tax at the time when he is required to file his return
11		for the period during which such tax was collectible, less a
12		discount of 2.1% prior to January 1, 1990, and 1.75% on and
13		after January 1, 1990, or $5 per calendar year, whichever is
14		greater, which is allowed to reimburse the serviceman for
15		expenses incurred in collecting the tax, keeping records,
16		preparing and filing returns, remitting the tax and supplying
17		data to the Department on request.
18		Where such tangible personal property is sold under a
19		conditional sales contract, or under any other form of sale
20		wherein the payment of the principal sum, or a part thereof, is
21		extended beyond the close of the period for which the return is
22		filed, the serviceman, in collecting the tax may collect, for
23		each tax return period, only the tax applicable to the part of
24		the selling price actually received during such tax return
25		period.
26		Except as provided hereinafter in this Section, on or
27		before the twentieth day of each calendar month, such
28		serviceman shall file a return for the preceding calendar month
29		in accordance with reasonable rules and regulations to be
30		promulgated by the Department of Revenue. Such return shall be
31		filed on a form prescribed by the Department and shall contain
32		such information as the Department may reasonably require.

1		The Department may require returns to be filed on a
2		quarterly basis. If so required, a return for each calendar
3		quarter shall be filed on or before the twentieth day of the
4		calendar month following the end of such calendar quarter. The
5		taxpayer shall also file a return with the Department for each
6		of the first two months of each calendar quarter, on or before
7		the twentieth day of the following calendar month, stating:
8		1. The name of the seller;
9		2. The address of the principal place of business from
10		which he engages in business as a serviceman in this State;
11		3. The total amount of taxable receipts received by him
12		during the preceding calendar month, including receipts
13		from charge and time sales, but less all deductions allowed
14		by law;
15		4. The amount of credit provided in Section 2d of this
16		Act;
17		5. The amount of tax due;
18		5-5. The signature of the taxpayer; and
19		6. Such other reasonable information as the Department
20		may require.
21		If a taxpayer fails to sign a return within 30 days after
22		the proper notice and demand for signature by the Department,
23		the return shall be considered valid and any amount shown to be
24		due on the return shall be deemed assessed.
25		Prior to October 1, 2003 and on and after July 1, 2004, a
26		serviceman may accept a Manufacturer's Purchase Credit
27		certification from a purchaser in satisfaction of Service Use
28		Tax as provided in Section 3-70 of the Service Use Tax Act if
29		the purchaser provides the appropriate documentation as
30		required by Section 3-70 of the Service Use Tax Act. A
31		Manufacturer's Purchase Credit certification, accepted prior
32		to October 1, 2003 and on and after July 1, 2004 by a
33		serviceman as provided in Section 3-70 of the Service Use Tax
34		Act, may be used by that serviceman to satisfy Service

1		Occupation Tax liability in the amount claimed in the
2		certification, not to exceed 6.25% of the receipts subject to
3		tax from a qualifying purchase. A Manufacturer's Purchase
4		Credit reported on any original or amended return filed under
5		this Act after October 20, 2003 for reporting periods prior to
6		July 1, 2004 shall be disallowed. Manufacturer's Purchase
7		Credit reported on annual returns due on or after January 1,
8		2005 will be disallowed for periods prior to July 1, 2004. No
9		Manufacturer's Purchase Credit may be used after September 30,
10		2003 through June 30, 2004 to satisfy any tax liability imposed
11		under this Act, including any audit liability.
12		If the serviceman's average monthly tax liability to the
13		Department does not exceed $200, the Department may authorize
14		his returns to be filed on a quarter annual basis, with the
15		return for January, February and March of a given year being
16		due by April 20 of such year; with the return for April, May
17		and June of a given year being due by July 20 of such year; with
18		the return for July, August and September of a given year being
19		due by October 20 of such year, and with the return for
20		October, November and December of a given year being due by
21		January 20 of the following year.
22		If the serviceman's average monthly tax liability to the
23		Department does not exceed $50, the Department may authorize
24		his returns to be filed on an annual basis, with the return for
25		a given year being due by January 20 of the following year.
26		Such quarter annual and annual returns, as to form and
27		substance, shall be subject to the same requirements as monthly
28		returns.
29		Notwithstanding any other provision in this Act concerning
30		the time within which a serviceman may file his return, in the
31		case of any serviceman who ceases to engage in a kind of
32		business which makes him responsible for filing returns under
33		this Act, such serviceman shall file a final return under this
34		Act with the Department not more than 1 month after

1		discontinuing such business.
2		Beginning October 1, 1993, a taxpayer who has an average
3		monthly tax liability of $150,000 or more shall make all
4		payments required by rules of the Department by electronic
5		funds transfer. Beginning October 1, 1994, a taxpayer who has
6		an average monthly tax liability of $100,000 or more shall make
7		all payments required by rules of the Department by electronic
8		funds transfer. Beginning October 1, 1995, a taxpayer who has
9		an average monthly tax liability of $50,000 or more shall make
10		all payments required by rules of the Department by electronic
11		funds transfer. Beginning October 1, 2000, a taxpayer who has
12		an annual tax liability of $200,000 or more shall make all
13		payments required by rules of the Department by electronic
14		funds transfer. The term "annual tax liability" shall be the
15		sum of the taxpayer's liabilities under this Act, and under all
16		other State and local occupation and use tax laws administered
17		by the Department, for the immediately preceding calendar year.
18		The term "average monthly tax liability" means the sum of the
19		taxpayer's liabilities under this Act, and under all other
20		State and local occupation and use tax laws administered by the
21		Department, for the immediately preceding calendar year
22		divided by 12. Beginning on October 1, 2002, a taxpayer who has
23		a tax liability in the amount set forth in subsection (b) of
24		Section 2505-210 of the Department of Revenue Law shall make
25		all payments required by rules of the Department by electronic
26		funds transfer.
27		Before August 1 of each year beginning in 1993, the
28		Department shall notify all taxpayers required to make payments
29		by electronic funds transfer. All taxpayers required to make
30		payments by electronic funds transfer shall make those payments
31		for a minimum of one year beginning on October 1.
32		Any taxpayer not required to make payments by electronic
33		funds transfer may make payments by electronic funds transfer
34		with the permission of the Department.

1		All taxpayers required to make payment by electronic funds
2		transfer and any taxpayers authorized to voluntarily make
3		payments by electronic funds transfer shall make those payments
4		in the manner authorized by the Department.
5		The Department shall adopt such rules as are necessary to
6		effectuate a program of electronic funds transfer and the
7		requirements of this Section.
8		Where a serviceman collects the tax with respect to the
9		selling price of tangible personal property which he sells and
10		the purchaser thereafter returns such tangible personal
11		property and the serviceman refunds the selling price thereof
12		to the purchaser, such serviceman shall also refund, to the
13		purchaser, the tax so collected from the purchaser. When filing
14		his return for the period in which he refunds such tax to the
15		purchaser, the serviceman may deduct the amount of the tax so
16		refunded by him to the purchaser from any other Service
17		Occupation Tax, Service Use Tax, Retailers' Occupation Tax or
18		Use Tax which such serviceman may be required to pay or remit
19		to the Department, as shown by such return, provided that the
20		amount of the tax to be deducted shall previously have been
21		remitted to the Department by such serviceman. If the
22		serviceman shall not previously have remitted the amount of
23		such tax to the Department, he shall be entitled to no
24		deduction hereunder upon refunding such tax to the purchaser.
25		If experience indicates such action to be practicable, the
26		Department may prescribe and furnish a combination or joint
27		return which will enable servicemen, who are required to file
28		returns hereunder and also under the Retailers' Occupation Tax
29		Act, the Use Tax Act or the Service Use Tax Act, to furnish all
30		the return information required by all said Acts on the one
31		form.
32		Where the serviceman has more than one business registered
33		with the Department under separate registrations hereunder,
34		such serviceman shall file separate returns for each registered

1		business.
2		Beginning January 1, 1990, each month the Department shall
3		pay into the Local Government Tax Fund the revenue realized for
4		the preceding month from the 1% tax on sales of food for human
5		consumption which is to be consumed off the premises where it
6		is sold (other than alcoholic beverages, soft drinks and food
7		which has been prepared for immediate consumption) and
8		prescription and nonprescription medicines, drugs, medical
9		appliances and insulin, urine testing materials, syringes and
10		needles used by diabetics.
11		Beginning January 1, 1990, each month the Department shall
12		pay into the County and Mass Transit District Fund 4% of the
13		revenue realized for the preceding month from the 6.25% general
14		rate.
15		Beginning August 1, 2000, each month the Department shall
16		pay into the County and Mass Transit District Fund 20% of the
17		net revenue realized for the preceding month from the 1.25%
18		rate on the selling price of motor fuel and gasohol.
19		Beginning January 1, 1990, each month the Department shall
20		pay into the Local Government Tax Fund 16% of the revenue
21		realized for the preceding month from the 6.25% general rate on
22		transfers of tangible personal property.
23		Beginning August 1, 2000, each month the Department shall
24		pay into the Local Government Tax Fund 80% of the net revenue
25		realized for the preceding month from the 1.25% rate on the
26		selling price of motor fuel and gasohol.
27		Of the remainder of the moneys received by the Department
28		pursuant to this Act, (a) 1.75% thereof shall be paid into the
29		Build Illinois Fund and (b) prior to July 1, 1989, 2.2% and on
30		and after July 1, 1989, 3.8% thereof shall be paid into the
31		Build Illinois Fund; provided, however, that if in any fiscal
32		year the sum of (1) the aggregate of 2.2% or 3.8%, as the case
33		may be, of the moneys received by the Department and required
34		to be paid into the Build Illinois Fund pursuant to Section 3

1		of the Retailers' Occupation Tax Act, Section 9 of the Use Tax
2		Act, Section 9 of the Service Use Tax Act, and Section 9 of the
3		Service Occupation Tax Act, such Acts being hereinafter called
4		the "Tax Acts" and such aggregate of 2.2% or 3.8%, as the case
5		may be, of moneys being hereinafter called the "Tax Act
6		Amount", and (2) the amount transferred to the Build Illinois
7		Fund from the State and Local Sales Tax Reform Fund shall be
8		less than the Annual Specified Amount (as defined in Section 3
9		of the Retailers' Occupation Tax Act), an amount equal to the
10		difference shall be immediately paid into the Build Illinois
11		Fund from other moneys received by the Department pursuant to
12		the Tax Acts; and further provided, that if on the last
13		business day of any month the sum of (1) the Tax Act Amount
14		required to be deposited into the Build Illinois Account in the
15		Build Illinois Fund during such month and (2) the amount
16		transferred during such month to the Build Illinois Fund from
17		the State and Local Sales Tax Reform Fund shall have been less
18		than 1/12 of the Annual Specified Amount, an amount equal to
19		the difference shall be immediately paid into the Build
20		Illinois Fund from other moneys received by the Department
21		pursuant to the Tax Acts; and, further provided, that in no
22		event shall the payments required under the preceding proviso
23		result in aggregate payments into the Build Illinois Fund
24		pursuant to this clause (b) for any fiscal year in excess of
25		the greater of (i) the Tax Act Amount or (ii) the Annual
26		Specified Amount for such fiscal year; and, further provided,
27		that the amounts payable into the Build Illinois Fund under
28		this clause (b) shall be payable only until such time as the
29		aggregate amount on deposit under each trust indenture securing
30		Bonds issued and outstanding pursuant to the Build Illinois
31		Bond Act is sufficient, taking into account any future
32		investment income, to fully provide, in accordance with such
33		indenture, for the defeasance of or the payment of the
34		principal of, premium, if any, and interest on the Bonds

1		secured by such indenture and on any Bonds expected to be
2		issued thereafter and all fees and costs payable with respect
3		thereto, all as certified by the Director of the Bureau of the
4		Budget (now Governor's Office of Management and Budget). If on
5		the last business day of any month in which Bonds are
6		outstanding pursuant to the Build Illinois Bond Act, the
7		aggregate of the moneys deposited in the Build Illinois Bond
8		Account in the Build Illinois Fund in such month shall be less
9		than the amount required to be transferred in such month from
10		the Build Illinois Bond Account to the Build Illinois Bond
11		Retirement and Interest Fund pursuant to Section 13 of the
12		Build Illinois Bond Act, an amount equal to such deficiency
13		shall be immediately paid from other moneys received by the
14		Department pursuant to the Tax Acts to the Build Illinois Fund;
15		provided, however, that any amounts paid to the Build Illinois
16		Fund in any fiscal year pursuant to this sentence shall be
17		deemed to constitute payments pursuant to clause (b) of the
18		preceding sentence and shall reduce the amount otherwise
19		payable for such fiscal year pursuant to clause (b) of the
20		preceding sentence. The moneys received by the Department
21		pursuant to this Act and required to be deposited into the
22		Build Illinois Fund are subject to the pledge, claim and charge
23		set forth in Section 12 of the Build Illinois Bond Act.
24		Subject to payment of amounts into the Build Illinois Fund
25		as provided in the preceding paragraph or in any amendment
26		thereto hereafter enacted, the following specified monthly
27		installment of the amount requested in the certificate of the
28		Chairman of the Metropolitan Pier and Exposition Authority
29		provided under Section 8.25f of the State Finance Act, but not
30		in excess of the sums designated as "Total Deposit", shall be
31		deposited in the aggregate from collections under Section 9 of
32		the Use Tax Act, Section 9 of the Service Use Tax Act, Section
33		9 of the Service Occupation Tax Act, and Section 3 of the
34		Retailers' Occupation Tax Act into the McCormick Place

1		Expansion Project Fund in the specified fiscal years.

8		Beginning July 20, 1993 and in each month of each fiscal
9		year thereafter, one-eighth of the amount requested in the
10		certificate of the Chairman of the Metropolitan Pier and
11		Exposition Authority for that fiscal year, less the amount
12		deposited into the McCormick Place Expansion Project Fund by
13		the State Treasurer in the respective month under subsection
14		(g) of Section 13 of the Metropolitan Pier and Exposition
15		Authority Act, plus cumulative deficiencies in the deposits
16		required under this Section for previous months and years,
17		shall be deposited into the McCormick Place Expansion Project
18		Fund, until the full amount requested for the fiscal year, but
19		not in excess of the amount specified above as "Total Deposit",
20		has been deposited.
21		Subject to payment of amounts into the Build Illinois Fund
22		and the McCormick Place Expansion Project Fund pursuant to the
23		preceding paragraphs or in any amendments thereto hereafter
24		enacted, beginning July 1, 1993, the Department shall each
25		month pay into the Illinois Tax Increment Fund 0.27% of 80% of
26		the net revenue realized for the preceding month from the 6.25%
27		general rate on the selling price of tangible personal
28		property.
29		Subject to payment of amounts into the Build Illinois Fund
30		and the McCormick Place Expansion Project Fund pursuant to the
31		preceding paragraphs or in any amendments thereto hereafter
32		enacted, beginning with the receipt of the first report of
33		taxes paid by an eligible business and continuing for a 25-year
34		period, the Department shall each month pay into the Energy

1		Infrastructure Fund 80% of the net revenue realized from the
2		6.25% general rate on the selling price of Illinois-mined coal
3		that was sold to an eligible business. For purposes of this
4		paragraph, the term "eligible business" means a new electric
5		generating facility certified pursuant to Section 605-332 of
6		the Department of Commerce and Economic Opportunity Community
7		Affairs Law of the Civil Administrative Code of Illinois.
8		Remaining moneys received by the Department pursuant to
9		this Act shall be paid into the General Revenue Fund of the
10		State Treasury.
11		The Department may, upon separate written notice to a
12		taxpayer, require the taxpayer to prepare and file with the
13		Department on a form prescribed by the Department within not
14		less than 60 days after receipt of the notice an annual
15		information return for the tax year specified in the notice.
16		Such annual return to the Department shall include a statement
17		of gross receipts as shown by the taxpayer's last Federal
18		income tax return. If the total receipts of the business as
19		reported in the Federal income tax return do not agree with the
20		gross receipts reported to the Department of Revenue for the
21		same period, the taxpayer shall attach to his annual return a
22		schedule showing a reconciliation of the 2 amounts and the
23		reasons for the difference. The taxpayer's annual return to the
24		Department shall also disclose the cost of goods sold by the
25		taxpayer during the year covered by such return, opening and
26		closing inventories of such goods for such year, cost of goods
27		used from stock or taken from stock and given away by the
28		taxpayer during such year, pay roll information of the
29		taxpayer's business during such year and any additional
30		reasonable information which the Department deems would be
31		helpful in determining the accuracy of the monthly, quarterly
32		or annual returns filed by such taxpayer as hereinbefore
33		provided for in this Section.
34		If the annual information return required by this Section

1		is not filed when and as required, the taxpayer shall be liable
2		as follows:
3		(i) Until January 1, 1994, the taxpayer shall be liable
4		for a penalty equal to 1/6 of 1% of the tax due from such
5		taxpayer under this Act during the period to be covered by
6		the annual return for each month or fraction of a month
7		until such return is filed as required, the penalty to be
8		assessed and collected in the same manner as any other
9		penalty provided for in this Act.
10		(ii) On and after January 1, 1994, the taxpayer shall
11		be liable for a penalty as described in Section 3-4 of the
12		Uniform Penalty and Interest Act.
13		The chief executive officer, proprietor, owner or highest
14		ranking manager shall sign the annual return to certify the
15		accuracy of the information contained therein. Any person who
16		willfully signs the annual return containing false or
17		inaccurate information shall be guilty of perjury and punished
18		accordingly. The annual return form prescribed by the
19		Department shall include a warning that the person signing the
20		return may be liable for perjury.
21		The foregoing portion of this Section concerning the filing
22		of an annual information return shall not apply to a serviceman
23		who is not required to file an income tax return with the
24		United States Government.
25		As soon as possible after the first day of each month, upon
26		certification of the Department of Revenue, the Comptroller
27		shall order transferred and the Treasurer shall transfer from
28		the General Revenue Fund to the Motor Fuel Tax Fund an amount
29		equal to 1.7% of 80% of the net revenue realized under this Act
30		for the second preceding month. Beginning April 1, 2000, this
31		transfer is no longer required and shall not be made.
32		Net revenue realized for a month shall be the revenue
33		collected by the State pursuant to this Act, less the amount
34		paid out during that month as refunds to taxpayers for

1		overpayment of liability.
2		For greater simplicity of administration, it shall be
3		permissible for manufacturers, importers and wholesalers whose
4		products are sold by numerous servicemen in Illinois, and who
5		wish to do so, to assume the responsibility for accounting and
6		paying to the Department all tax accruing under this Act with
7		respect to such sales, if the servicemen who are affected do
8		not make written objection to the Department to this
9		arrangement.
10		(Source: P.A. 92-12, eff. 7-1-01; 92-208, eff. 8-2-01; 92-492,
11		eff. 1-1-02; 92-600, eff. 6-28-02; 92-651, eff. 7-11-02; 93-24,
12		eff. 6-20-03; revised 10-15-03.)

13		Section 12-20. The Retailers' Occupation Tax Act is amended
14		by changing Section 3 as follows:
15		(35 ILCS 120/3) (from Ch. 120, par. 442)
16		Sec. 3. Except as provided in this Section, on or before
17		the twentieth day of each calendar month, every person engaged
18		in the business of selling tangible personal property at retail
19		in this State during the preceding calendar month shall file a
20		return with the Department, stating:
21		1. The name of the seller;
22		2. His residence address and the address of his
23		principal place of business and the address of the
24		principal place of business (if that is a different
25		address) from which he engages in the business of selling
26		tangible personal property at retail in this State;
27		3. Total amount of receipts received by him during the
28		preceding calendar month or quarter, as the case may be,
29		from sales of tangible personal property, and from services
30		furnished, by him during such preceding calendar month or
31		quarter;
32		4. Total amount received by him during the preceding

1		calendar month or quarter on charge and time sales of
2		tangible personal property, and from services furnished,
3		by him prior to the month or quarter for which the return
4		is filed;
5		5. Deductions allowed by law;
6		6. Gross receipts which were received by him during the
7		preceding calendar month or quarter and upon the basis of
8		which the tax is imposed;
9		7. The amount of credit provided in Section 2d of this
10		Act;
11		8. The amount of tax due;
12		9. The signature of the taxpayer; and
13		10. Such other reasonable information as the
14		Department may require.
15		If a taxpayer fails to sign a return within 30 days after
16		the proper notice and demand for signature by the Department,
17		the return shall be considered valid and any amount shown to be
18		due on the return shall be deemed assessed.
19		Each return shall be accompanied by the statement of
20		prepaid tax issued pursuant to Section 2e for which credit is
21		claimed.
22		Prior to October 1, 2003 and on and after July 1, 2004, a
23		retailer may accept a Manufacturer's Purchase Credit
24		certification from a purchaser in satisfaction of Use Tax as
25		provided in Section 3-85 of the Use Tax Act if the purchaser
26		provides the appropriate documentation as required by Section
27		3-85 of the Use Tax Act. A Manufacturer's Purchase Credit
28		certification, accepted by a retailer prior to October 1, 2003
29		and on and after July 1, 2004, as provided in Section 3-85 of
30		the Use Tax Act, may be used by that retailer to satisfy
31		Retailers' Occupation Tax liability in the amount claimed in
32		the certification, not to exceed 6.25% of the receipts subject
33		to tax from a qualifying purchase. A Manufacturer's Purchase
34		Credit reported on any original or amended return filed under

1		this Act after October 20, 2003 for reporting periods prior to
2		July 1, 2004 shall be disallowed. Manufacturer's Purchase
3		Credit reported on annual returns due on or after January 1,
4		2005 will be disallowed for periods prior to July 1, 2004. No
5		Manufacturer's Purchase Credit may be used after September 30,
6		2003 through June 30, 2004 to satisfy any tax liability imposed
7		under this Act, including any audit liability.
8		The Department may require returns to be filed on a
9		quarterly basis. If so required, a return for each calendar
10		quarter shall be filed on or before the twentieth day of the
11		calendar month following the end of such calendar quarter. The
12		taxpayer shall also file a return with the Department for each
13		of the first two months of each calendar quarter, on or before
14		the twentieth day of the following calendar month, stating:
15		1. The name of the seller;
16		2. The address of the principal place of business from
17		which he engages in the business of selling tangible
18		personal property at retail in this State;
19		3. The total amount of taxable receipts received by him
20		during the preceding calendar month from sales of tangible
21		personal property by him during such preceding calendar
22		month, including receipts from charge and time sales, but
23		less all deductions allowed by law;
24		4. The amount of credit provided in Section 2d of this
25		Act;
26		5. The amount of tax due; and
27		6. Such other reasonable information as the Department
28		may require.
29		Beginning on October 1, 2003, any person who is not a
30		licensed distributor, importing distributor, or manufacturer,
31		as defined in the Liquor Control Act of 1934, but is engaged in
32		the business of selling, at retail, alcoholic liquor shall file
33		a statement with the Department of Revenue, in a format and at
34		a time prescribed by the Department, showing the total amount

1		paid for alcoholic liquor purchased during the preceding month
2		and such other information as is reasonably required by the
3		Department. The Department may adopt rules to require that this
4		statement be filed in an electronic or telephonic format. Such
5		rules may provide for exceptions from the filing requirements
6		of this paragraph. For the purposes of this paragraph, the term
7		"alcoholic liquor" shall have the meaning prescribed in the
8		Liquor Control Act of 1934.
9		Beginning on October 1, 2003, every distributor, importing
10		distributor, and manufacturer of alcoholic liquor as defined in
11		the Liquor Control Act of 1934, shall file a statement with the
12		Department of Revenue, no later than the 10th day of the month
13		for the preceding month during which transactions occurred, by
14		electronic means, showing the total amount of gross receipts
15		from the sale of alcoholic liquor sold or distributed during
16		the preceding month to purchasers; identifying the purchaser to
17		whom it was sold or distributed; the purchaser's tax
18		registration number; and such other information reasonably
19		required by the Department. A copy of the monthly statement
20		shall be sent to the retailer no later than the 10th day of the
21		month for the preceding month during which transactions
22		occurred.
23		If a total amount of less than $1 is payable, refundable or
24		creditable, such amount shall be disregarded if it is less than
25		50 cents and shall be increased to $1 if it is 50 cents or more.
26		Beginning October 1, 1993, a taxpayer who has an average
27		monthly tax liability of $150,000 or more shall make all
28		payments required by rules of the Department by electronic
29		funds transfer. Beginning October 1, 1994, a taxpayer who has
30		an average monthly tax liability of $100,000 or more shall make
31		all payments required by rules of the Department by electronic
32		funds transfer. Beginning October 1, 1995, a taxpayer who has
33		an average monthly tax liability of $50,000 or more shall make
34		all payments required by rules of the Department by electronic

1		funds transfer. Beginning October 1, 2000, a taxpayer who has
2		an annual tax liability of $200,000 or more shall make all
3		payments required by rules of the Department by electronic
4		funds transfer. The term "annual tax liability" shall be the
5		sum of the taxpayer's liabilities under this Act, and under all
6		other State and local occupation and use tax laws administered
7		by the Department, for the immediately preceding calendar year.
8		The term "average monthly tax liability" shall be the sum of
9		the taxpayer's liabilities under this Act, and under all other
10		State and local occupation and use tax laws administered by the
11		Department, for the immediately preceding calendar year
12		divided by 12. Beginning on October 1, 2002, a taxpayer who has
13		a tax liability in the amount set forth in subsection (b) of
14		Section 2505-210 of the Department of Revenue Law shall make
15		all payments required by rules of the Department by electronic
16		funds transfer.
17		Before August 1 of each year beginning in 1993, the
18		Department shall notify all taxpayers required to make payments
19		by electronic funds transfer. All taxpayers required to make
20		payments by electronic funds transfer shall make those payments
21		for a minimum of one year beginning on October 1.
22		Any taxpayer not required to make payments by electronic
23		funds transfer may make payments by electronic funds transfer
24		with the permission of the Department.
25		All taxpayers required to make payment by electronic funds
26		transfer and any taxpayers authorized to voluntarily make
27		payments by electronic funds transfer shall make those payments
28		in the manner authorized by the Department.
29		The Department shall adopt such rules as are necessary to
30		effectuate a program of electronic funds transfer and the
31		requirements of this Section.
32		Any amount which is required to be shown or reported on any
33		return or other document under this Act shall, if such amount
34		is not a whole-dollar amount, be increased to the nearest

1		whole-dollar amount in any case where the fractional part of a
2		dollar is 50 cents or more, and decreased to the nearest
3		whole-dollar amount where the fractional part of a dollar is
4		less than 50 cents.
5		If the retailer is otherwise required to file a monthly
6		return and if the retailer's average monthly tax liability to
7		the Department does not exceed $200, the Department may
8		authorize his returns to be filed on a quarter annual basis,
9		with the return for January, February and March of a given year
10		being due by April 20 of such year; with the return for April,
11		May and June of a given year being due by July 20 of such year;
12		with the return for July, August and September of a given year
13		being due by October 20 of such year, and with the return for
14		October, November and December of a given year being due by
15		January 20 of the following year.
16		If the retailer is otherwise required to file a monthly or
17		quarterly return and if the retailer's average monthly tax
18		liability with the Department does not exceed $50, the
19		Department may authorize his returns to be filed on an annual
20		basis, with the return for a given year being due by January 20
21		of the following year.
22		Such quarter annual and annual returns, as to form and
23		substance, shall be subject to the same requirements as monthly
24		returns.
25		Notwithstanding any other provision in this Act concerning
26		the time within which a retailer may file his return, in the
27		case of any retailer who ceases to engage in a kind of business
28		which makes him responsible for filing returns under this Act,
29		such retailer shall file a final return under this Act with the
30		Department not more than one month after discontinuing such
31		business.
32		Where the same person has more than one business registered
33		with the Department under separate registrations under this
34		Act, such person may not file each return that is due as a

1		single return covering all such registered businesses, but
2		shall file separate returns for each such registered business.
3		In addition, with respect to motor vehicles, watercraft,
4		aircraft, and trailers that are required to be registered with
5		an agency of this State, every retailer selling this kind of
6		tangible personal property shall file, with the Department,
7		upon a form to be prescribed and supplied by the Department, a
8		separate return for each such item of tangible personal
9		property which the retailer sells, except that if, in the same
10		transaction, (i) a retailer of aircraft, watercraft, motor
11		vehicles or trailers transfers more than one aircraft,
12		watercraft, motor vehicle or trailer to another aircraft,
13		watercraft, motor vehicle retailer or trailer retailer for the
14		purpose of resale or (ii) a retailer of aircraft, watercraft,
15		motor vehicles, or trailers transfers more than one aircraft,
16		watercraft, motor vehicle, or trailer to a purchaser for use as
17		a qualifying rolling stock as provided in Section 2-5 of this
18		Act, then that seller may report the transfer of all aircraft,
19		watercraft, motor vehicles or trailers involved in that
20		transaction to the Department on the same uniform
21		invoice-transaction reporting return form. For purposes of
22		this Section, "watercraft" means a Class 2, Class 3, or Class 4
23		watercraft as defined in Section 3-2 of the Boat Registration
24		and Safety Act, a personal watercraft, or any boat equipped
25		with an inboard motor.
26		Any retailer who sells only motor vehicles, watercraft,
27		aircraft, or trailers that are required to be registered with
28		an agency of this State, so that all retailers' occupation tax
29		liability is required to be reported, and is reported, on such
30		transaction reporting returns and who is not otherwise required
31		to file monthly or quarterly returns, need not file monthly or
32		quarterly returns. However, those retailers shall be required
33		to file returns on an annual basis.
34		The transaction reporting return, in the case of motor

1		vehicles or trailers that are required to be registered with an
2		agency of this State, shall be the same document as the Uniform
3		Invoice referred to in Section 5-402 of The Illinois Vehicle
4		Code and must show the name and address of the seller; the name
5		and address of the purchaser; the amount of the selling price
6		including the amount allowed by the retailer for traded-in
7		property, if any; the amount allowed by the retailer for the
8		traded-in tangible personal property, if any, to the extent to
9		which Section 1 of this Act allows an exemption for the value
10		of traded-in property; the balance payable after deducting such
11		trade-in allowance from the total selling price; the amount of
12		tax due from the retailer with respect to such transaction; the
13		amount of tax collected from the purchaser by the retailer on
14		such transaction (or satisfactory evidence that such tax is not
15		due in that particular instance, if that is claimed to be the
16		fact); the place and date of the sale; a sufficient
17		identification of the property sold; such other information as
18		is required in Section 5-402 of The Illinois Vehicle Code, and
19		such other information as the Department may reasonably
20		require.
21		The transaction reporting return in the case of watercraft
22		or aircraft must show the name and address of the seller; the
23		name and address of the purchaser; the amount of the selling
24		price including the amount allowed by the retailer for
25		traded-in property, if any; the amount allowed by the retailer
26		for the traded-in tangible personal property, if any, to the
27		extent to which Section 1 of this Act allows an exemption for
28		the value of traded-in property; the balance payable after
29		deducting such trade-in allowance from the total selling price;
30		the amount of tax due from the retailer with respect to such
31		transaction; the amount of tax collected from the purchaser by
32		the retailer on such transaction (or satisfactory evidence that
33		such tax is not due in that particular instance, if that is
34		claimed to be the fact); the place and date of the sale, a

1		sufficient identification of the property sold, and such other
2		information as the Department may reasonably require.
3		Such transaction reporting return shall be filed not later
4		than 20 days after the day of delivery of the item that is
5		being sold, but may be filed by the retailer at any time sooner
6		than that if he chooses to do so. The transaction reporting
7		return and tax remittance or proof of exemption from the
8		Illinois use tax may be transmitted to the Department by way of
9		the State agency with which, or State officer with whom the
10		tangible personal property must be titled or registered (if
11		titling or registration is required) if the Department and such
12		agency or State officer determine that this procedure will
13		expedite the processing of applications for title or
14		registration.
15		With each such transaction reporting return, the retailer
16		shall remit the proper amount of tax due (or shall submit
17		satisfactory evidence that the sale is not taxable if that is
18		the case), to the Department or its agents, whereupon the
19		Department shall issue, in the purchaser's name, a use tax
20		receipt (or a certificate of exemption if the Department is
21		satisfied that the particular sale is tax exempt) which such
22		purchaser may submit to the agency with which, or State officer
23		with whom, he must title or register the tangible personal
24		property that is involved (if titling or registration is
25		required) in support of such purchaser's application for an
26		Illinois certificate or other evidence of title or registration
27		to such tangible personal property.
28		No retailer's failure or refusal to remit tax under this
29		Act precludes a user, who has paid the proper tax to the
30		retailer, from obtaining his certificate of title or other
31		evidence of title or registration (if titling or registration
32		is required) upon satisfying the Department that such user has
33		paid the proper tax (if tax is due) to the retailer. The
34		Department shall adopt appropriate rules to carry out the

1		mandate of this paragraph.
2		If the user who would otherwise pay tax to the retailer
3		wants the transaction reporting return filed and the payment of
4		the tax or proof of exemption made to the Department before the
5		retailer is willing to take these actions and such user has not
6		paid the tax to the retailer, such user may certify to the fact
7		of such delay by the retailer and may (upon the Department
8		being satisfied of the truth of such certification) transmit
9		the information required by the transaction reporting return
10		and the remittance for tax or proof of exemption directly to
11		the Department and obtain his tax receipt or exemption
12		determination, in which event the transaction reporting return
13		and tax remittance (if a tax payment was required) shall be
14		credited by the Department to the proper retailer's account
15		with the Department, but without the 2.1% or 1.75% discount
16		provided for in this Section being allowed. When the user pays
17		the tax directly to the Department, he shall pay the tax in the
18		same amount and in the same form in which it would be remitted
19		if the tax had been remitted to the Department by the retailer.
20		Refunds made by the seller during the preceding return
21		period to purchasers, on account of tangible personal property
22		returned to the seller, shall be allowed as a deduction under
23		subdivision 5 of his monthly or quarterly return, as the case
24		may be, in case the seller had theretofore included the
25		receipts from the sale of such tangible personal property in a
26		return filed by him and had paid the tax imposed by this Act
27		with respect to such receipts.
28		Where the seller is a corporation, the return filed on
29		behalf of such corporation shall be signed by the president,
30		vice-president, secretary or treasurer or by the properly
31		accredited agent of such corporation.
32		Where the seller is a limited liability company, the return
33		filed on behalf of the limited liability company shall be
34		signed by a manager, member, or properly accredited agent of

1		the limited liability company.
2		Except as provided in this Section, the retailer filing the
3		return under this Section shall, at the time of filing such
4		return, pay to the Department the amount of tax imposed by this
5		Act less a discount of 2.1% prior to January 1, 1990 and 1.75%
6		on and after January 1, 1990, or $5 per calendar year,
7		whichever is greater, which is allowed to reimburse the
8		retailer for the expenses incurred in keeping records,
9		preparing and filing returns, remitting the tax and supplying
10		data to the Department on request. Any prepayment made pursuant
11		to Section 2d of this Act shall be included in the amount on
12		which such 2.1% or 1.75% discount is computed. In the case of
13		retailers who report and pay the tax on a transaction by
14		transaction basis, as provided in this Section, such discount
15		shall be taken with each such tax remittance instead of when
16		such retailer files his periodic return.
17		Before October 1, 2000, if the taxpayer's average monthly
18		tax liability to the Department under this Act, the Use Tax
19		Act, the Service Occupation Tax Act, and the Service Use Tax
20		Act, excluding any liability for prepaid sales tax to be
21		remitted in accordance with Section 2d of this Act, was $10,000
22		or more during the preceding 4 complete calendar quarters, he
23		shall file a return with the Department each month by the 20th
24		day of the month next following the month during which such tax
25		liability is incurred and shall make payments to the Department
26		on or before the 7th, 15th, 22nd and last day of the month
27		during which such liability is incurred. On and after October
28		1, 2000, if the taxpayer's average monthly tax liability to the
29		Department under this Act, the Use Tax Act, the Service
30		Occupation Tax Act, and the Service Use Tax Act, excluding any
31		liability for prepaid sales tax to be remitted in accordance
32		with Section 2d of this Act, was $20,000 or more during the
33		preceding 4 complete calendar quarters, he shall file a return
34		with the Department each month by the 20th day of the month

1		next following the month during which such tax liability is
2		incurred and shall make payment to the Department on or before
3		the 7th, 15th, 22nd and last day of the month during which such
4		liability is incurred. If the month during which such tax
5		liability is incurred began prior to January 1, 1985, each
6		payment shall be in an amount equal to 1/4 of the taxpayer's
7		actual liability for the month or an amount set by the
8		Department not to exceed 1/4 of the average monthly liability
9		of the taxpayer to the Department for the preceding 4 complete
10		calendar quarters (excluding the month of highest liability and
11		the month of lowest liability in such 4 quarter period). If the
12		month during which such tax liability is incurred begins on or
13		after January 1, 1985 and prior to January 1, 1987, each
14		payment shall be in an amount equal to 22.5% of the taxpayer's
15		actual liability for the month or 27.5% of the taxpayer's
16		liability for the same calendar month of the preceding year. If
17		the month during which such tax liability is incurred begins on
18		or after January 1, 1987 and prior to January 1, 1988, each
19		payment shall be in an amount equal to 22.5% of the taxpayer's
20		actual liability for the month or 26.25% of the taxpayer's
21		liability for the same calendar month of the preceding year. If
22		the month during which such tax liability is incurred begins on
23		or after January 1, 1988, and prior to January 1, 1989, or
24		begins on or after January 1, 1996, each payment shall be in an
25		amount equal to 22.5% of the taxpayer's actual liability for
26		the month or 25% of the taxpayer's liability for the same
27		calendar month of the preceding year. If the month during which
28		such tax liability is incurred begins on or after January 1,
29		1989, and prior to January 1, 1996, each payment shall be in an
30		amount equal to 22.5% of the taxpayer's actual liability for
31		the month or 25% of the taxpayer's liability for the same
32		calendar month of the preceding year or 100% of the taxpayer's
33		actual liability for the quarter monthly reporting period. The
34		amount of such quarter monthly payments shall be credited

1		against the final tax liability of the taxpayer's return for
2		that month. Before October 1, 2000, once applicable, the
3		requirement of the making of quarter monthly payments to the
4		Department by taxpayers having an average monthly tax liability
5		of $10,000 or more as determined in the manner provided above
6		shall continue until such taxpayer's average monthly liability
7		to the Department during the preceding 4 complete calendar
8		quarters (excluding the month of highest liability and the
9		month of lowest liability) is less than $9,000, or until such
10		taxpayer's average monthly liability to the Department as
11		computed for each calendar quarter of the 4 preceding complete
12		calendar quarter period is less than $10,000. However, if a
13		taxpayer can show the Department that a substantial change in
14		the taxpayer's business has occurred which causes the taxpayer
15		to anticipate that his average monthly tax liability for the
16		reasonably foreseeable future will fall below the $10,000
17		threshold stated above, then such taxpayer may petition the
18		Department for a change in such taxpayer's reporting status. On
19		and after October 1, 2000, once applicable, the requirement of
20		the making of quarter monthly payments to the Department by
21		taxpayers having an average monthly tax liability of $20,000 or
22		more as determined in the manner provided above shall continue
23		until such taxpayer's average monthly liability to the
24		Department during the preceding 4 complete calendar quarters
25		(excluding the month of highest liability and the month of
26		lowest liability) is less than $19,000 or until such taxpayer's
27		average monthly liability to the Department as computed for
28		each calendar quarter of the 4 preceding complete calendar
29		quarter period is less than $20,000. However, if a taxpayer can
30		show the Department that a substantial change in the taxpayer's
31		business has occurred which causes the taxpayer to anticipate
32		that his average monthly tax liability for the reasonably
33		foreseeable future will fall below the $20,000 threshold stated
34		above, then such taxpayer may petition the Department for a

1		change in such taxpayer's reporting status. The Department
2		shall change such taxpayer's reporting status unless it finds
3		that such change is seasonal in nature and not likely to be
4		long term. If any such quarter monthly payment is not paid at
5		the time or in the amount required by this Section, then the
6		taxpayer shall be liable for penalties and interest on the
7		difference between the minimum amount due as a payment and the
8		amount of such quarter monthly payment actually and timely
9		paid, except insofar as the taxpayer has previously made
10		payments for that month to the Department in excess of the
11		minimum payments previously due as provided in this Section.
12		The Department shall make reasonable rules and regulations to
13		govern the quarter monthly payment amount and quarter monthly
14		payment dates for taxpayers who file on other than a calendar
15		monthly basis.
16		The provisions of this paragraph apply before October 1,
17		2001. Without regard to whether a taxpayer is required to make
18		quarter monthly payments as specified above, any taxpayer who
19		is required by Section 2d of this Act to collect and remit
20		prepaid taxes and has collected prepaid taxes which average in
21		excess of $25,000 per month during the preceding 2 complete
22		calendar quarters, shall file a return with the Department as
23		required by Section 2f and shall make payments to the
24		Department on or before the 7th, 15th, 22nd and last day of the
25		month during which such liability is incurred. If the month
26		during which such tax liability is incurred began prior to the
27		effective date of this amendatory Act of 1985, each payment
28		shall be in an amount not less than 22.5% of the taxpayer's
29		actual liability under Section 2d. If the month during which
30		such tax liability is incurred begins on or after January 1,
31		1986, each payment shall be in an amount equal to 22.5% of the
32		taxpayer's actual liability for the month or 27.5% of the
33		taxpayer's liability for the same calendar month of the
34		preceding calendar year. If the month during which such tax

1		liability is incurred begins on or after January 1, 1987, each
2		payment shall be in an amount equal to 22.5% of the taxpayer's
3		actual liability for the month or 26.25% of the taxpayer's
4		liability for the same calendar month of the preceding year.
5		The amount of such quarter monthly payments shall be credited
6		against the final tax liability of the taxpayer's return for
7		that month filed under this Section or Section 2f, as the case
8		may be. Once applicable, the requirement of the making of
9		quarter monthly payments to the Department pursuant to this
10		paragraph shall continue until such taxpayer's average monthly
11		prepaid tax collections during the preceding 2 complete
12		calendar quarters is $25,000 or less. If any such quarter
13		monthly payment is not paid at the time or in the amount
14		required, the taxpayer shall be liable for penalties and
15		interest on such difference, except insofar as the taxpayer has
16		previously made payments for that month in excess of the
17		minimum payments previously due.
18		The provisions of this paragraph apply on and after October
19		1, 2001. Without regard to whether a taxpayer is required to
20		make quarter monthly payments as specified above, any taxpayer
21		who is required by Section 2d of this Act to collect and remit
22		prepaid taxes and has collected prepaid taxes that average in
23		excess of $20,000 per month during the preceding 4 complete
24		calendar quarters shall file a return with the Department as
25		required by Section 2f and shall make payments to the
26		Department on or before the 7th, 15th, 22nd and last day of the
27		month during which the liability is incurred. Each payment
28		shall be in an amount equal to 22.5% of the taxpayer's actual
29		liability for the month or 25% of the taxpayer's liability for
30		the same calendar month of the preceding year. The amount of
31		the quarter monthly payments shall be credited against the
32		final tax liability of the taxpayer's return for that month
33		filed under this Section or Section 2f, as the case may be.
34		Once applicable, the requirement of the making of quarter

1		monthly payments to the Department pursuant to this paragraph
2		shall continue until the taxpayer's average monthly prepaid tax
3		collections during the preceding 4 complete calendar quarters
4		(excluding the month of highest liability and the month of
5		lowest liability) is less than $19,000 or until such taxpayer's
6		average monthly liability to the Department as computed for
7		each calendar quarter of the 4 preceding complete calendar
8		quarters is less than $20,000. If any such quarter monthly
9		payment is not paid at the time or in the amount required, the
10		taxpayer shall be liable for penalties and interest on such
11		difference, except insofar as the taxpayer has previously made
12		payments for that month in excess of the minimum payments
13		previously due.
14		If any payment provided for in this Section exceeds the
15		taxpayer's liabilities under this Act, the Use Tax Act, the
16		Service Occupation Tax Act and the Service Use Tax Act, as
17		shown on an original monthly return, the Department shall, if
18		requested by the taxpayer, issue to the taxpayer a credit
19		memorandum no later than 30 days after the date of payment. The
20		credit evidenced by such credit memorandum may be assigned by
21		the taxpayer to a similar taxpayer under this Act, the Use Tax
22		Act, the Service Occupation Tax Act or the Service Use Tax Act,
23		in accordance with reasonable rules and regulations to be
24		prescribed by the Department. If no such request is made, the
25		taxpayer may credit such excess payment against tax liability
26		subsequently to be remitted to the Department under this Act,
27		the Use Tax Act, the Service Occupation Tax Act or the Service
28		Use Tax Act, in accordance with reasonable rules and
29		regulations prescribed by the Department. If the Department
30		subsequently determined that all or any part of the credit
31		taken was not actually due to the taxpayer, the taxpayer's 2.1%
32		and 1.75% vendor's discount shall be reduced by 2.1% or 1.75%
33		of the difference between the credit taken and that actually
34		due, and that taxpayer shall be liable for penalties and

1		interest on such difference.
2		If a retailer of motor fuel is entitled to a credit under
3		Section 2d of this Act which exceeds the taxpayer's liability
4		to the Department under this Act for the month which the
5		taxpayer is filing a return, the Department shall issue the
6		taxpayer a credit memorandum for the excess.
7		Beginning January 1, 1990, each month the Department shall
8		pay into the Local Government Tax Fund, a special fund in the
9		State treasury which is hereby created, the net revenue
10		realized for the preceding month from the 1% tax on sales of
11		food for human consumption which is to be consumed off the
12		premises where it is sold (other than alcoholic beverages, soft
13		drinks and food which has been prepared for immediate
14		consumption) and prescription and nonprescription medicines,
15		drugs, medical appliances and insulin, urine testing
16		materials, syringes and needles used by diabetics.
17		Beginning January 1, 1990, each month the Department shall
18		pay into the County and Mass Transit District Fund, a special
19		fund in the State treasury which is hereby created, 4% of the
20		net revenue realized for the preceding month from the 6.25%
21		general rate.
22		Beginning August 1, 2000, each month the Department shall
23		pay into the County and Mass Transit District Fund 20% of the
24		net revenue realized for the preceding month from the 1.25%
25		rate on the selling price of motor fuel and gasohol.
26		Beginning January 1, 1990, each month the Department shall
27		pay into the Local Government Tax Fund 16% of the net revenue
28		realized for the preceding month from the 6.25% general rate on
29		the selling price of tangible personal property.
30		Beginning August 1, 2000, each month the Department shall
31		pay into the Local Government Tax Fund 80% of the net revenue
32		realized for the preceding month from the 1.25% rate on the
33		selling price of motor fuel and gasohol.
34		Of the remainder of the moneys received by the Department

1		pursuant to this Act, (a) 1.75% thereof shall be paid into the
2		Build Illinois Fund and (b) prior to July 1, 1989, 2.2% and on
3		and after July 1, 1989, 3.8% thereof shall be paid into the
4		Build Illinois Fund; provided, however, that if in any fiscal
5		year the sum of (1) the aggregate of 2.2% or 3.8%, as the case
6		may be, of the moneys received by the Department and required
7		to be paid into the Build Illinois Fund pursuant to this Act,
8		Section 9 of the Use Tax Act, Section 9 of the Service Use Tax
9		Act, and Section 9 of the Service Occupation Tax Act, such Acts
10		being hereinafter called the "Tax Acts" and such aggregate of
11		2.2% or 3.8%, as the case may be, of moneys being hereinafter
12		called the "Tax Act Amount", and (2) the amount transferred to
13		the Build Illinois Fund from the State and Local Sales Tax
14		Reform Fund shall be less than the Annual Specified Amount (as
15		hereinafter defined), an amount equal to the difference shall
16		be immediately paid into the Build Illinois Fund from other
17		moneys received by the Department pursuant to the Tax Acts; the
18		"Annual Specified Amount" means the amounts specified below for
19		fiscal years 1986 through 1993:
29		and means the Certified Annual Debt Service Requirement (as
30		defined in Section 13 of the Build Illinois Bond Act) or the
31		Tax Act Amount, whichever is greater, for fiscal year 1994 and
32		each fiscal year thereafter; and further provided, that if on
33		the last business day of any month the sum of (1) the Tax Act
34		Amount required to be deposited into the Build Illinois Bond

1		Account in the Build Illinois Fund during such month and (2)
2		the amount transferred to the Build Illinois Fund from the
3		State and Local Sales Tax Reform Fund shall have been less than
4		1/12 of the Annual Specified Amount, an amount equal to the
5		difference shall be immediately paid into the Build Illinois
6		Fund from other moneys received by the Department pursuant to
7		the Tax Acts; and, further provided, that in no event shall the
8		payments required under the preceding proviso result in
9		aggregate payments into the Build Illinois Fund pursuant to
10		this clause (b) for any fiscal year in excess of the greater of
11		(i) the Tax Act Amount or (ii) the Annual Specified Amount for
12		such fiscal year. The amounts payable into the Build Illinois
13		Fund under clause (b) of the first sentence in this paragraph
14		shall be payable only until such time as the aggregate amount
15		on deposit under each trust indenture securing Bonds issued and
16		outstanding pursuant to the Build Illinois Bond Act is
17		sufficient, taking into account any future investment income,
18		to fully provide, in accordance with such indenture, for the
19		defeasance of or the payment of the principal of, premium, if
20		any, and interest on the Bonds secured by such indenture and on
21		any Bonds expected to be issued thereafter and all fees and
22		costs payable with respect thereto, all as certified by the
23		Director of the Bureau of the Budget (now Governor's Office of
24		Management and Budget). If on the last business day of any
25		month in which Bonds are outstanding pursuant to the Build
26		Illinois Bond Act, the aggregate of moneys deposited in the
27		Build Illinois Bond Account in the Build Illinois Fund in such
28		month shall be less than the amount required to be transferred
29		in such month from the Build Illinois Bond Account to the Build
30		Illinois Bond Retirement and Interest Fund pursuant to Section
31		13 of the Build Illinois Bond Act, an amount equal to such
32		deficiency shall be immediately paid from other moneys received
33		by the Department pursuant to the Tax Acts to the Build
34		Illinois Fund; provided, however, that any amounts paid to the

1		Build Illinois Fund in any fiscal year pursuant to this
2		sentence shall be deemed to constitute payments pursuant to
3		clause (b) of the first sentence of this paragraph and shall
4		reduce the amount otherwise payable for such fiscal year
5		pursuant to that clause (b). The moneys received by the
6		Department pursuant to this Act and required to be deposited
7		into the Build Illinois Fund are subject to the pledge, claim
8		and charge set forth in Section 12 of the Build Illinois Bond
9		Act.
10		Subject to payment of amounts into the Build Illinois Fund
11		as provided in the preceding paragraph or in any amendment
12		thereto hereafter enacted, the following specified monthly
13		installment of the amount requested in the certificate of the
14		Chairman of the Metropolitan Pier and Exposition Authority
15		provided under Section 8.25f of the State Finance Act, but not
16		in excess of sums designated as "Total Deposit", shall be
17		deposited in the aggregate from collections under Section 9 of
18		the Use Tax Act, Section 9 of the Service Use Tax Act, Section
19		9 of the Service Occupation Tax Act, and Section 3 of the
20		Retailers' Occupation Tax Act into the McCormick Place
21		Expansion Project Fund in the specified fiscal years.

28		Beginning July 20, 1993 and in each month of each fiscal
29		year thereafter, one-eighth of the amount requested in the
30		certificate of the Chairman of the Metropolitan Pier and
31		Exposition Authority for that fiscal year, less the amount
32		deposited into the McCormick Place Expansion Project Fund by
33		the State Treasurer in the respective month under subsection
34		(g) of Section 13 of the Metropolitan Pier and Exposition

1		Authority Act, plus cumulative deficiencies in the deposits
2		required under this Section for previous months and years,
3		shall be deposited into the McCormick Place Expansion Project
4		Fund, until the full amount requested for the fiscal year, but
5		not in excess of the amount specified above as "Total Deposit",
6		has been deposited.
7		Subject to payment of amounts into the Build Illinois Fund
8		and the McCormick Place Expansion Project Fund pursuant to the
9		preceding paragraphs or in any amendments thereto hereafter
10		enacted, beginning July 1, 1993, the Department shall each
11		month pay into the Illinois Tax Increment Fund 0.27% of 80% of
12		the net revenue realized for the preceding month from the 6.25%
13		general rate on the selling price of tangible personal
14		property.
15		Subject to payment of amounts into the Build Illinois Fund
16		and the McCormick Place Expansion Project Fund pursuant to the
17		preceding paragraphs or in any amendments thereto hereafter
18		enacted, beginning with the receipt of the first report of
19		taxes paid by an eligible business and continuing for a 25-year
20		period, the Department shall each month pay into the Energy
21		Infrastructure Fund 80% of the net revenue realized from the
22		6.25% general rate on the selling price of Illinois-mined coal
23		that was sold to an eligible business. For purposes of this
24		paragraph, the term "eligible business" means a new electric
25		generating facility certified pursuant to Section 605-332 of
26		the Department of Commerce and Economic Opportunity Community
27		Affairs Law of the Civil Administrative Code of Illinois.
28		Of the remainder of the moneys received by the Department
29		pursuant to this Act, 75% thereof shall be paid into the State
30		Treasury and 25% shall be reserved in a special account and
31		used only for the transfer to the Common School Fund as part of
32		the monthly transfer from the General Revenue Fund in
33		accordance with Section 8a of the State Finance Act.
34		The Department may, upon separate written notice to a

1		taxpayer, require the taxpayer to prepare and file with the
2		Department on a form prescribed by the Department within not
3		less than 60 days after receipt of the notice an annual
4		information return for the tax year specified in the notice.
5		Such annual return to the Department shall include a statement
6		of gross receipts as shown by the retailer's last Federal
7		income tax return. If the total receipts of the business as
8		reported in the Federal income tax return do not agree with the
9		gross receipts reported to the Department of Revenue for the
10		same period, the retailer shall attach to his annual return a
11		schedule showing a reconciliation of the 2 amounts and the
12		reasons for the difference. The retailer's annual return to the
13		Department shall also disclose the cost of goods sold by the
14		retailer during the year covered by such return, opening and
15		closing inventories of such goods for such year, costs of goods
16		used from stock or taken from stock and given away by the
17		retailer during such year, payroll information of the
18		retailer's business during such year and any additional
19		reasonable information which the Department deems would be
20		helpful in determining the accuracy of the monthly, quarterly
21		or annual returns filed by such retailer as provided for in
22		this Section.
23		If the annual information return required by this Section
24		is not filed when and as required, the taxpayer shall be liable
25		as follows:
26		(i) Until January 1, 1994, the taxpayer shall be liable
27		for a penalty equal to 1/6 of 1% of the tax due from such
28		taxpayer under this Act during the period to be covered by
29		the annual return for each month or fraction of a month
30		until such return is filed as required, the penalty to be
31		assessed and collected in the same manner as any other
32		penalty provided for in this Act.
33		(ii) On and after January 1, 1994, the taxpayer shall
34		be liable for a penalty as described in Section 3-4 of the

1		Uniform Penalty and Interest Act.
2		The chief executive officer, proprietor, owner or highest
3		ranking manager shall sign the annual return to certify the
4		accuracy of the information contained therein. Any person who
5		willfully signs the annual return containing false or
6		inaccurate information shall be guilty of perjury and punished
7		accordingly. The annual return form prescribed by the
8		Department shall include a warning that the person signing the
9		return may be liable for perjury.
10		The provisions of this Section concerning the filing of an
11		annual information return do not apply to a retailer who is not
12		required to file an income tax return with the United States
13		Government.
14		As soon as possible after the first day of each month, upon
15		certification of the Department of Revenue, the Comptroller
16		shall order transferred and the Treasurer shall transfer from
17		the General Revenue Fund to the Motor Fuel Tax Fund an amount
18		equal to 1.7% of 80% of the net revenue realized under this Act
19		for the second preceding month. Beginning April 1, 2000, this
20		transfer is no longer required and shall not be made.
21		Net revenue realized for a month shall be the revenue
22		collected by the State pursuant to this Act, less the amount
23		paid out during that month as refunds to taxpayers for
24		overpayment of liability.
25		For greater simplicity of administration, manufacturers,
26		importers and wholesalers whose products are sold at retail in
27		Illinois by numerous retailers, and who wish to do so, may
28		assume the responsibility for accounting and paying to the
29		Department all tax accruing under this Act with respect to such
30		sales, if the retailers who are affected do not make written
31		objection to the Department to this arrangement.
32		Any person who promotes, organizes, provides retail
33		selling space for concessionaires or other types of sellers at
34		the Illinois State Fair, DuQuoin State Fair, county fairs,

1		local fairs, art shows, flea markets and similar exhibitions or
2		events, including any transient merchant as defined by Section
3		2 of the Transient Merchant Act of 1987, is required to file a
4		report with the Department providing the name of the merchant's
5		business, the name of the person or persons engaged in
6		merchant's business, the permanent address and Illinois
7		Retailers Occupation Tax Registration Number of the merchant,
8		the dates and location of the event and other reasonable
9		information that the Department may require. The report must be
10		filed not later than the 20th day of the month next following
11		the month during which the event with retail sales was held.
12		Any person who fails to file a report required by this Section
13		commits a business offense and is subject to a fine not to
14		exceed $250.
15		Any person engaged in the business of selling tangible
16		personal property at retail as a concessionaire or other type
17		of seller at the Illinois State Fair, county fairs, art shows,
18		flea markets and similar exhibitions or events, or any
19		transient merchants, as defined by Section 2 of the Transient
20		Merchant Act of 1987, may be required to make a daily report of
21		the amount of such sales to the Department and to make a daily
22		payment of the full amount of tax due. The Department shall
23		impose this requirement when it finds that there is a
24		significant risk of loss of revenue to the State at such an
25		exhibition or event. Such a finding shall be based on evidence
26		that a substantial number of concessionaires or other sellers
27		who are not residents of Illinois will be engaging in the
28		business of selling tangible personal property at retail at the
29		exhibition or event, or other evidence of a significant risk of
30		loss of revenue to the State. The Department shall notify
31		concessionaires and other sellers affected by the imposition of
32		this requirement. In the absence of notification by the
33		Department, the concessionaires and other sellers shall file
34		their returns as otherwise required in this Section.

1		(Source: P.A. 92-12, eff. 7-1-01; 92-16, eff. 6-28-01; 92-208,
2		eff. 8-2-01; 92-484, eff. 8-23-01; 92-492, eff. 1-1-02; 92-600,
3		eff. 6-28-02; 92-651, eff. 7-11-02; 93-22, eff. 6-20-03; 93-24,
4		eff. 6-20-03; revised 10-15-03.)

ARTICLE 15

6		Section 15-5. The Illinois Insurance Code is amended by
7		changing Section 416 as follows:
8		(215 ILCS 5/416)
9		Sec. 416. Industrial Commission Operations Fund Surcharge.
10		(a) As of the effective date of this amendatory Act of the
11		93rd General Assembly, every company licensed or authorized by
12		the Illinois Department of Insurance and insuring employers'
13		liabilities arising under the Workers' Compensation Act or the
14		Workers' Occupational Diseases Act shall remit to the Director
15		a surcharge based upon the annual direct written premium, as
16		reported under Section 136 of this Act, of the company in the
17		manner provided in this Section. Such proceeds shall be
18		deposited into the Industrial Commission Operations Fund as
19		established in the Workers' Compensation Act. If a company
20		survives or was formed by a merger, consolidation,
21		reorganization, or reincorporation, the direct written
22		premiums of all companies party to the merger, consolidation,
23		reorganization, or reincorporation shall, for purposes of
24		determining the amount of the fee imposed by this Section, be
25		regarded as those of the surviving or new company.
26		(b)(1) Except as provided in subsection (b)(2) of this
27		Section, beginning on July 1, 2004 and each year thereafter,
28		the Director shall charge an annual Industrial Commission
29		Operations Fund Surcharge from every company subject to
30		subsection (a) of this Section equal to 1.125% 1.5% of its
31		direct written premium for insuring employers' liabilities

1		arising under the Workers' Compensation Act or Workers'
2		Occupational Diseases Act as reported in each company's annual
3		statement filed for the previous year as required by Section
4		136. The Industrial Commission Operations Fund Surcharge shall
5		be collected by companies subject to subsection (a) of this
6		Section as a separately stated surcharge on insured employers
7		at the rate of 1.125% 1.5% of direct written premium. All sums
8		collected by the Department of Insurance under the provisions
9		of this Section shall be paid promptly after the receipt of the
10		same, accompanied by a detailed statement thereof, into the
11		Industrial Commission Operations Fund in the State treasury.
12		(b)(2) Prior to July 1, 2004, the Director shall charge and
13		collect the surcharge set forth in subparagraph (b)(1) of this
14		Section on or before September 1, 2003, December 1, 2003, March
15		1, 2004 and June 1, 2004. For purposes of this subsection
16		(b)(2), the company shall remit the amounts to the Director
17		based on estimated direct premium for each quarter beginning on
18		July 1, 2003, together with a sworn statement attesting to the
19		reasonableness of the estimate, and the estimated amount of
20		direct premium written forming the bases of the remittance.
21		(c) In addition to the authority specifically granted under
22		Article XXV of this Code, the Director shall have such
23		authority to adopt rules or establish forms as may be
24		reasonably necessary for purposes of enforcing this Section.
25		The Director shall also have authority to defer, waive, or
26		abate the surcharge or any penalties imposed by this Section if
27		in the Director's opinion the company's solvency and ability to
28		meet its insured obligations would be immediately threatened by
29		payment of the surcharge due.
30		(d) When a company fails to pay the full amount of any
31		annual Industrial Commission Operations Fund Surcharge of $100
32		or more due under this Section, there shall be added to the
33		amount due as a penalty the greater of $1,000 or an amount
34		equal to 5% of the deficiency for each month or part of a month

1		that the deficiency remains unpaid.
2		(e) The Department of Insurance may enforce the collection
3		of any delinquent payment, penalty, or portion thereof by legal
4		action or in any other manner by which the collection of debts
5		due the State of Illinois may be enforced under the laws of
6		this State.
7		(f) Whenever it appears to the satisfaction of the Director
8		that a company has paid pursuant to this Act an Industrial
9		Commission Operations Fund Surcharge in an amount in excess of
10		the amount legally collectable from the company, the Director
11		shall issue a credit memorandum for an amount equal to the
12		amount of such overpayment. A credit memorandum may be applied
13		for the 2-year period from the date of issuance, against the
14		payment of any amount due during that period under the
15		surcharge imposed by this Section or, subject to reasonable
16		rule of the Department of Insurance including requirement of
17		notification, may be assigned to any other company subject to
18		regulation under this Act. Any application of credit memoranda
19		after the period provided for in this Section is void.
20		(g) Annually, the Governor may direct a transfer of up to
21		2% of all moneys collected under this Section to the Insurance
22		Financial Regulation Fund.
23		(Source: P.A. 93-32, eff. 6-20-03.)

24		Section 15-10. The Workers' Compensation Act is amended by
25		changing Section 4d as follows:
26		(820 ILCS 305/4d)
27		Sec. 4d. Industrial Commission Operations Fund Fee.
28		(a) As of the effective date of this amendatory Act of the
29		93rd General Assembly, each employer that self-insures its
30		liabilities arising under this Act or Workers' Occupational
31		Diseases Act shall pay a fee measured by the annual actual
32		wages paid in this State of such an employer in the manner

1		provided in this Section. Such proceeds shall be deposited in
2		the Industrial Commission Operations Fund. If an employer
3		survives or was formed by a merger, consolidation,
4		reorganization, or reincorporation, the actual wages paid in
5		this State of all employers party to the merger, consolidation,
6		reorganization, or reincorporation shall, for purposes of
7		determining the amount of the fee imposed by this Section, be
8		regarded as those of the surviving or new employer.
9		(b) Beginning on the effective date of this amendatory Act
10		of the 93rd General Assembly and on July 1 of each year
11		thereafter prior to July 1, 2004, the Chairman shall charge and
12		collect an annual Industrial Commission Operations Fund Fee
13		from every employer subject to subsection (a) of this Section
14		equal to 0.045% of its annual actual wages paid in this State
15		as reported in each employer's annual self-insurance renewal
16		filed for the previous year as required by Section 4 of this
17		Act and Section 4 of the Workers' Occupational Diseases Act. No
18		fee shall be charged on or after July 1, 2004. All sums
19		collected by the Commission under the provisions of this
20		Section shall be paid promptly after the receipt of the same,
21		accompanied by a detailed statement thereof, into the
22		Industrial Commission Operations Fund.
23		(c) In addition to the authority specifically granted under
24		Section 16, the Chairman shall have such authority to adopt
25		rules or establish forms as may be reasonably necessary for
26		purposes of enforcing this Section. The Commission shall have
27		authority to defer, waive, or abate the fee or any penalties
28		imposed by this Section if in the Commission's opinion the
29		employer's solvency and ability to meet its obligations to pay
30		workers' compensation benefits would be immediately threatened
31		by payment of the fee due.
32		(d) When an employer fails to pay the full amount of any
33		annual Industrial Commission Operations Fund Fee of $100 or
34		more due under this Section, there shall be added to the amount

1		due as a penalty the greater of $1,000 or an amount equal to 5%
2		of the deficiency for each month or part of a month that the
3		deficiency remains unpaid.
4		(e) The Commission may enforce the collection of any
5		delinquent payment, penalty or portion thereof by legal action
6		or in any other manner by which the collection of debts due the
7		State of Illinois may be enforced under the laws of this State.
8		(f) Whenever it appears to the satisfaction of the Chairman
9		that an employer has paid pursuant to this Act an Industrial
10		Commission Operations Fund Fee in an amount in excess of the
11		amount legally collectable from the employer, the Chairman
12		shall issue a credit memorandum for an amount equal to the
13		amount of such overpayment. A credit memorandum may be applied
14		for the 2-year period from the date of issuance against the
15		payment of any amount due during that period under the fee
16		imposed by this Section or, subject to reasonable rule of the
17		Commission including requirement of notification, may be
18		assigned to any other employer subject to regulation under this
19		Act. Any application of credit memoranda after the period
20		provided for in this Section is void.
21		(Source: P.A. 93-32, eff. 6-20-03.)

ARTICLE 900

23		Section 905. The Statute on Statutes is amended by changing
24		Section 1.23 as follows:
25		(5 ILCS 70/1.23) (from Ch. 1, par. 1024)
26		Sec. 1.23. General Revenue Law of Illinois; economic
27		substance doctrine.
28		(a) The "General Revenue Law of Illinois", or any
29		equivalent expression, when used with reference to revenue,
30		shall be deemed to refer to the Property Tax Code and all
31		existing and future amendments thereto and modifications

1		thereof, and all rules now or hereafter adopted pursuant
2		thereto.
3		(b) Economic substance doctrine. In applying the
4		provisions of Chapter 35 (relating to revenue), the economic
5		substance doctrine shall apply.
6		The economic substance doctrine means the common law
7		doctrine under which tax benefits with respect to a transaction
8		or arrangement are not allowable if the transaction or
9		arrangement does not have economic substance or lacks a
10		business purpose (including a transaction or arrangement in
11		which an entity is disregarded as lacking economic substance).
12		For purposes of applying the economic substance doctrine, a
13		transaction or arrangement shall be considered as having
14		economic substance only if (i) the transaction changes in a
15		meaningful way (apart from its tax effects), the taxpayer's
16		economic position, and (ii) the taxpayer has a substantial
17		nontax purpose for entering into such transaction and the
18		transaction is a reasonable means of accomplishing such
19		purpose.
20		(Source: P.A. 88-670, eff. 12-2-94.)

21		Section 910. The Illinois Income Tax Act is amended by
22		changing Sections 203, 205, 207, 304, 305, 501, 502, 711, 712,
23		713, 804, 905, 911, 1001, 1002, 1005, and 1501 and by adding
24		Sections 709.5, 1007, 1008, 1405.5, and 1405.6 as follows:
25		(35 ILCS 5/203) (from Ch. 120, par. 2-203)
26		Sec. 203. Base income defined.
27		(a) Individuals.
28		(1) In general. In the case of an individual, base
29		income means an amount equal to the taxpayer's adjusted
30		gross income for the taxable year as modified by paragraph
31		(2).
32		(2) Modifications. The adjusted gross income referred

1		to in paragraph (1) shall be modified by adding thereto the
2		sum of the following amounts:
3		(A) An amount equal to all amounts paid or accrued
4		to the taxpayer as interest or dividends during the
5		taxable year to the extent excluded from gross income
6		in the computation of adjusted gross income, except
7		stock dividends of qualified public utilities
8		described in Section 305(e) of the Internal Revenue
9		Code;
10		(B) An amount equal to the amount of tax imposed by
11		this Act to the extent deducted from gross income in
12		the computation of adjusted gross income for the
13		taxable year;
14		(C) An amount equal to the amount received during
15		the taxable year as a recovery or refund of real
16		property taxes paid with respect to the taxpayer's
17		principal residence under the Revenue Act of 1939 and
18		for which a deduction was previously taken under
19		subparagraph (L) of this paragraph (2) prior to July 1,
20		1991, the retrospective application date of Article 4
21		of Public Act 87-17. In the case of multi-unit or
22		multi-use structures and farm dwellings, the taxes on
23		the taxpayer's principal residence shall be that
24		portion of the total taxes for the entire property
25		which is attributable to such principal residence;
26		(D) An amount equal to the amount of the capital
27		gain deduction allowable under the Internal Revenue
28		Code, to the extent deducted from gross income in the
29		computation of adjusted gross income;
30		(D-5) An amount, to the extent not included in
31		adjusted gross income, equal to the amount of money
32		withdrawn by the taxpayer in the taxable year from a
33		medical care savings account and the interest earned on
34		the account in the taxable year of a withdrawal

1		pursuant to subsection (b) of Section 20 of the Medical
2		Care Savings Account Act or subsection (b) of Section
3		20 of the Medical Care Savings Account Act of 2000;
4		(D-10) For taxable years ending after December 31,
5		1997, an amount equal to any eligible remediation costs
6		that the individual deducted in computing adjusted
7		gross income and for which the individual claims a
8		credit under subsection (l) of Section 201;
9		(D-15) For taxable years 2001 and thereafter, an
10		amount equal to the bonus depreciation deduction (30%
11		of the adjusted basis of the qualified property) taken
12		on the taxpayer's federal income tax return for the
13		taxable year under subsection (k) of Section 168 of the
14		Internal Revenue Code; and
15		(D-16) If the taxpayer reports a capital gain or
16		loss on the taxpayer's federal income tax return for
17		the taxable year based on a sale or transfer of
18		property for which the taxpayer was required in any
19		taxable year to make an addition modification under
20		subparagraph (D-15), then an amount equal to the
21		aggregate amount of the deductions taken in all taxable
22		years under subparagraph (Z) with respect to that
23		property. ;
24		The taxpayer is required to make the addition
25		modification under this subparagraph only once with
26		respect to any one piece of property; . and
27		(D-17)(i) For taxable years ending on or after
28		December 31, 2004, an amount equal to the amount
29		otherwise allowed as a deduction in computing base
30		income for interest paid, accrued, or incurred,
31		directly or indirectly, to a foreign person who would
32		be a member of the same unitary business group but for
33		the fact that the foreign person's business activity
34		outside the United States is 80% or more of the foreign

1		person's total business activity. The addition
2		modification required by this subparagraph shall be
3		reduced to the extent that dividends were included in
4		base income for the same taxable year and received by
5		the taxpayer or by a member of the taxpayer's unitary
6		business group (including amounts included in gross
7		income under Sections 951 through 964 of the Internal
8		Revenue Code and amounts included in gross income under
9		Section 78 of the Internal Revenue Code) with respect
10		to the stock of the same person to whom the interest
11		was paid, accrued, or incurred. (ii) This subparagraph
12		does not apply to:
13
14		(1) an item of interest paid, accrued, or
15		incurred, directly or indirectly, to a foreign
16		person that is subject in a foreign country to a
17		tax on or measured by net income with respect to
18		such interest;
19		(2) an item of interest, to the extent that the
20		interest expense of the foreign person receiving
21		such interest during the same taxable year that is
22		directly or indirectly paid, accrued or incurred
23		to any person that is not a related party of either
24		the taxpayer or the foreign person exceeds that
25		foreign person's interest income (excluding the
26		interest receivable from the taxpayer) for the
27		taxable year, but only if the taxpayer establishes
28		by a preponderance of the evidence that the
29		transaction giving rise to the interest expense
30		between the taxpayer and the foreign person did not
31		have as a principal purpose the avoidance of any
32		portion of the tax that would otherwise be due;
33		(3) an item of interest paid, accrued, or
34		incurred pursuant to a contract that was binding

1		prior to the time the parties to the contract
2		became related parties, was not entered into as
3		part of the process by which the parties became
4		related parties, and has continually been enforced
5		according to its terms by each party;
6		(4) an item of interest if the taxpayer
7		establishes by clear and convincing evidence, as
8		determined by the Department, that the adjustments
9		are unreasonable; or if the taxpayer and the
10		Director agree in writing to the application or use
11		of an alternative method of apportionment under
12		section 304(f); or
13		(5) a taxpayer who is a small business person.
14		For purposes of this subparagraph, "related
15		parties" include persons disallowed a deduction for
16		losses by paragraphs (b), (c), and (f)(1) of Section
17		267 of the Internal Revenue Code by virtue of being a
18		related taxpayer, as well as a partner and its
19		partnership and each of the other partners in that
20		partnership;
21		(D-18) For taxable years ending on or after
22		December 31, 2004, an amount equal to the amount of
23		intangible expenses and costs otherwise allowed as a
24		deduction in computing base income, and that were paid,
25		accrued, or incurred, directly or indirectly, to a
26		foreign person who would be a member of the same
27		unitary business group but for the fact that the
28		foreign person's business activity outside the United
29		States is 80% or more of that person's total business
30		activity. The addition modification required by this
31		subparagraph shall be reduced to the extent that
32		dividends were included in base income for the same
33		taxable year and received by the taxpayer or by a
34		member of the taxpayer's unitary business group

1		(including amounts included in gross income under
2		Sections 951 through 964 of the Internal Revenue Code
3		and amounts included in gross income under Section 78
4		of the Internal Revenue Code) with respect to the stock
5		of the same person to whom the intangible expenses and
6		costs were directly or indirectly paid, incurred, or
7		accrued. The preceding sentence does not apply to the
8		extent that the same dividends caused a reduction to
9		the addition modification required under Section
10		203(a)(2)(D-17) of this Act. This subparagraph shall
11		not apply to any item of intangible expenses or costs
12		paid, accrued, or incurred, directly or indirectly,
13		from a transaction with a foreign person that is
14		subject in a foreign country to a tax on or measured by
15		net income with respect to such item. As used in this
16		subparagraph, the term "intangible expenses and costs"
17		includes (1) expenses, losses, and costs for, or
18		related to, the direct or indirect acquisition, use,
19		maintenance or management, ownership, sale, exchange,
20		or any other disposition of intangible property; (2)
21		losses incurred, directly or indirectly, from
22		factoring transactions or discounting transactions;
23		(3) royalty, patent, technical, and copyright fees;
24		(4) licensing fees; and (5) other similar expenses and
25		costs. For purposes of this subparagraph, "intangible
26		property" includes patents, patent applications, trade
27		names, trademarks, service marks, copyrights, mask
28		works, trade secrets, and similar types of intangible
29		assets. This subparagraph (D-18) shall not apply to a
30		taxpayer who is a small business person;
31		(D-20) (D-15) For taxable years beginning on or
32		after January 1, 2002, in the case of a distribution
33		from a qualified tuition program under Section 529 of
34		the Internal Revenue Code, other than (i) a

1		distribution from a College Savings Pool created under
2		Section 16.5 of the State Treasurer Act or (ii) a
3		distribution from the Illinois Prepaid Tuition Trust
4		Fund, an amount equal to the amount excluded from gross
5		income under Section 529(c)(3)(B). ;
6		and by deducting from the total so obtained the sum of the
7		following amounts:
8		(E) For taxable years ending before December 31,
9		2001, any amount included in such total in respect of
10		any compensation (including but not limited to any
11		compensation paid or accrued to a serviceman while a
12		prisoner of war or missing in action) paid to a
13		resident by reason of being on active duty in the Armed
14		Forces of the United States and in respect of any
15		compensation paid or accrued to a resident who as a
16		governmental employee was a prisoner of war or missing
17		in action, and in respect of any compensation paid to a
18		resident in 1971 or thereafter for annual training
19		performed pursuant to Sections 502 and 503, Title 32,
20		United States Code as a member of the Illinois National
21		Guard. For taxable years ending on or after December
22		31, 2001, any amount included in such total in respect
23		of any compensation (including but not limited to any
24		compensation paid or accrued to a serviceman while a
25		prisoner of war or missing in action) paid to a
26		resident by reason of being a member of any component
27		of the Armed Forces of the United States and in respect
28		of any compensation paid or accrued to a resident who
29		as a governmental employee was a prisoner of war or
30		missing in action, and in respect of any compensation
31		paid to a resident in 2001 or thereafter by reason of
32		being a member of the Illinois National Guard. The
33		provisions of this amendatory Act of the 92nd General
34		Assembly are exempt from the provisions of Section 250;

1		(F) An amount equal to all amounts included in such
2		total pursuant to the provisions of Sections 402(a),
3		402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the
4		Internal Revenue Code, or included in such total as
5		distributions under the provisions of any retirement
6		or disability plan for employees of any governmental
7		agency or unit, or retirement payments to retired
8		partners, which payments are excluded in computing net
9		earnings from self employment by Section 1402 of the
10		Internal Revenue Code and regulations adopted pursuant
11		thereto;
12		(G) The valuation limitation amount;
13		(H) An amount equal to the amount of any tax
14		imposed by this Act which was refunded to the taxpayer
15		and included in such total for the taxable year;
16		(I) An amount equal to all amounts included in such
17		total pursuant to the provisions of Section 111 of the
18		Internal Revenue Code as a recovery of items previously
19		deducted from adjusted gross income in the computation
20		of taxable income;
21		(J) An amount equal to those dividends included in
22		such total which were paid by a corporation which
23		conducts business operations in an Enterprise Zone or
24		zones created under the Illinois Enterprise Zone Act,
25		and conducts substantially all of its operations in an
26		Enterprise Zone or zones;
27		(K) An amount equal to those dividends included in
28		such total that were paid by a corporation that
29		conducts business operations in a federally designated
30		Foreign Trade Zone or Sub-Zone and that is designated a
31		High Impact Business located in Illinois; provided
32		that dividends eligible for the deduction provided in
33		subparagraph (J) of paragraph (2) of this subsection
34		shall not be eligible for the deduction provided under

1		this subparagraph (K);
2		(L) For taxable years ending after December 31,
3		1983, an amount equal to all social security benefits
4		and railroad retirement benefits included in such
5		total pursuant to Sections 72(r) and 86 of the Internal
6		Revenue Code;
7		(M) With the exception of any amounts subtracted
8		under subparagraph (N), an amount equal to the sum of
9		all amounts disallowed as deductions by (i) Sections
10		171(a) (2), and 265(2) of the Internal Revenue Code of
11		1954, as now or hereafter amended, and all amounts of
12		expenses allocable to interest and disallowed as
13		deductions by Section 265(1) of the Internal Revenue
14		Code of 1954, as now or hereafter amended; and (ii) for
15		taxable years ending on or after August 13, 1999,
16		Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
17		the Internal Revenue Code; the provisions of this
18		subparagraph are exempt from the provisions of Section
19		250;
20		(N) An amount equal to all amounts included in such
21		total which are exempt from taxation by this State
22		either by reason of its statutes or Constitution or by
23		reason of the Constitution, treaties or statutes of the
24		United States; provided that, in the case of any
25		statute of this State or the United States, any treaty
26		of the United States, the Illinois Constitution, or the
27		United States Constitution that exempts income derived
28		from bonds or other obligations from the tax imposed
29		under this Act, the amount exempted shall be the income
30		interest net of bond premium amortization, interest
31		expense incurred on indebtedness to carry the bond or
32		other obligation, expenses incurred in producing the
33		income to be deducted and any other expenses deducted
34		on the federal return that would not have been allowed

1		under Internal Revenue Code Section 265 if the interest
2		were exempt from federal tax. The amount of expenses to
3		be taken into account under this provision cannot
4		exceed the amount of income which is exempted. The
5		changes made to this subparagraph (N) by this
6		amendatory Act of the 93rd General Assembly shall not
7		apply to a small business person;
8		(O) An amount equal to any contribution made to a
9		job training project established pursuant to the Tax
10		Increment Allocation Redevelopment Act;
11		(P) An amount equal to the amount of the deduction
12		used to compute the federal income tax credit for
13		restoration of substantial amounts held under claim of
14		right for the taxable year pursuant to Section 1341 of
15		the Internal Revenue Code of 1986;
16		(Q) An amount equal to any amounts included in such
17		total, received by the taxpayer as an acceleration in
18		the payment of life, endowment or annuity benefits in
19		advance of the time they would otherwise be payable as
20		an indemnity for a terminal illness;
21		(R) An amount equal to the amount of any federal or
22		State bonus paid to veterans of the Persian Gulf War;
23		(S) An amount, to the extent included in adjusted
24		gross income, equal to the amount of a contribution
25		made in the taxable year on behalf of the taxpayer to a
26		medical care savings account established under the
27		Medical Care Savings Account Act or the Medical Care
28		Savings Account Act of 2000 to the extent the
29		contribution is accepted by the account administrator
30		as provided in that Act;
31		(T) An amount, to the extent included in adjusted
32		gross income, equal to the amount of interest earned in
33		the taxable year on a medical care savings account
34		established under the Medical Care Savings Account Act

1		or the Medical Care Savings Account Act of 2000 on
2		behalf of the taxpayer, other than interest added
3		pursuant to item (D-5) of this paragraph (2);
4		(U) For one taxable year beginning on or after
5		January 1, 1994, an amount equal to the total amount of
6		tax imposed and paid under subsections (a) and (b) of
7		Section 201 of this Act on grant amounts received by
8		the taxpayer under the Nursing Home Grant Assistance
9		Act during the taxpayer's taxable years 1992 and 1993;
10		(V) Beginning with tax years ending on or after
11		December 31, 1995 and ending with tax years ending on
12		or before December 31, 2004, an amount equal to the
13		amount paid by a taxpayer who is a self-employed
14		taxpayer, a partner of a partnership, or a shareholder
15		in a Subchapter S corporation for health insurance or
16		long-term care insurance for that taxpayer or that
17		taxpayer's spouse or dependents, to the extent that the
18		amount paid for that health insurance or long-term care
19		insurance may be deducted under Section 213 of the
20		Internal Revenue Code of 1986, has not been deducted on
21		the federal income tax return of the taxpayer, and does
22		not exceed the taxable income attributable to that
23		taxpayer's income, self-employment income, or
24		Subchapter S corporation income; except that no
25		deduction shall be allowed under this item (V) if the
26		taxpayer is eligible to participate in any health
27		insurance or long-term care insurance plan of an
28		employer of the taxpayer or the taxpayer's spouse. The
29		amount of the health insurance and long-term care
30		insurance subtracted under this item (V) shall be
31		determined by multiplying total health insurance and
32		long-term care insurance premiums paid by the taxpayer
33		times a number that represents the fractional
34		percentage of eligible medical expenses under Section

1		213 of the Internal Revenue Code of 1986 not actually
2		deducted on the taxpayer's federal income tax return;
3		(W) For taxable years beginning on or after January
4		1, 1998, all amounts included in the taxpayer's federal
5		gross income in the taxable year from amounts converted
6		from a regular IRA to a Roth IRA. This paragraph is
7		exempt from the provisions of Section 250;
8		(X) For taxable year 1999 and thereafter, an amount
9		equal to the amount of any (i) distributions, to the
10		extent includible in gross income for federal income
11		tax purposes, made to the taxpayer because of his or
12		her status as a victim of persecution for racial or
13		religious reasons by Nazi Germany or any other Axis
14		regime or as an heir of the victim and (ii) items of
15		income, to the extent includible in gross income for
16		federal income tax purposes, attributable to, derived
17		from or in any way related to assets stolen from,
18		hidden from, or otherwise lost to a victim of
19		persecution for racial or religious reasons by Nazi
20		Germany or any other Axis regime immediately prior to,
21		during, and immediately after World War II, including,
22		but not limited to, interest on the proceeds receivable
23		as insurance under policies issued to a victim of
24		persecution for racial or religious reasons by Nazi
25		Germany or any other Axis regime by European insurance
26		companies immediately prior to and during World War II;
27		provided, however, this subtraction from federal
28		adjusted gross income does not apply to assets acquired
29		with such assets or with the proceeds from the sale of
30		such assets; provided, further, this paragraph shall
31		only apply to a taxpayer who was the first recipient of
32		such assets after their recovery and who is a victim of
33		persecution for racial or religious reasons by Nazi
34		Germany or any other Axis regime or as an heir of the

1		victim. The amount of and the eligibility for any
2		public assistance, benefit, or similar entitlement is
3		not affected by the inclusion of items (i) and (ii) of
4		this paragraph in gross income for federal income tax
5		purposes. This paragraph is exempt from the provisions
6		of Section 250;
7		(Y) For taxable years beginning on or after January
8		1, 2002, moneys contributed in the taxable year to a
9		College Savings Pool account under Section 16.5 of the
10		State Treasurer Act, except that amounts excluded from
11		gross income under Section 529(c)(3)(C)(i) of the
12		Internal Revenue Code shall not be considered moneys
13		contributed under this subparagraph (Y). This
14		subparagraph (Y) is exempt from the provisions of
15		Section 250;
16		(Z) For taxable years 2001 and thereafter, for the
17		taxable year in which the bonus depreciation deduction
18		(30% of the adjusted basis of the qualified property)
19		is taken on the taxpayer's federal income tax return
20		under subsection (k) of Section 168 of the Internal
21		Revenue Code and for each applicable taxable year
22		thereafter, an amount equal to "x", where:
23		(1) "y" equals the amount of the depreciation
24		deduction taken for the taxable year on the
25		taxpayer's federal income tax return on property
26		for which the bonus depreciation deduction (30% of
27		the adjusted basis of the qualified property) was
28		taken in any year under subsection (k) of Section
29		168 of the Internal Revenue Code, but not including
30		the bonus depreciation deduction; and
31		(2) "x" equals "y" multiplied by 30 and then
32		divided by 70 (or "y" multiplied by 0.429).
33		The aggregate amount deducted under this
34		subparagraph in all taxable years for any one piece of

1		property may not exceed the amount of the bonus
2		depreciation deduction (30% of the adjusted basis of
3		the qualified property) taken on that property on the
4		taxpayer's federal income tax return under subsection
5		(k) of Section 168 of the Internal Revenue Code; and
6		(AA) If the taxpayer reports a capital gain or loss
7		on the taxpayer's federal income tax return for the
8		taxable year based on a sale or transfer of property
9		for which the taxpayer was required in any taxable year
10		to make an addition modification under subparagraph
11		(D-15), then an amount equal to that addition
12		modification.
13		The taxpayer is allowed to take the deduction under
14		this subparagraph only once with respect to any one
15		piece of property; and
16		(BB) (Z) Any amount included in adjusted gross
17		income, other than salary, received by a driver in a
18		ridesharing arrangement using a motor vehicle; .
19		(CC) The amount of (i) any interest income (net of
20		the deductions allocable thereto) taken into account
21		for the taxable year with respect to a transaction with
22		a taxpayer that is required to make an addition
23		modification with respect to such transaction under
24		Section 203(a)(2)(D-17), 203(b)(2)(E-13),
25		203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
26		the amount of that addition modification, and (ii) any
27		income from intangible property (net of the deductions
28		allocable thereto) taken into account for the taxable
29		year with respect to a transaction with a taxpayer that
30		is required to make an addition modification with
31		respect to such transaction under Section
32		203(a)(2)(D-18), 203(b)(2)(E-14), 203(c)(2)(G-13), or
33		203(d)(2)(D-8), but not to exceed the amount of that
34		addition modification;

1		(DD) An amount equal to the interest income taken
2		into account for the taxable year (net of the
3		deductions allocable thereto) with respect to
4		transactions with a foreign person who would be a
5		member of the taxpayer's unitary business group but for
6		the fact that the foreign person's business activity
7		outside the United States is 80% or more of that
8		person's total business activity, but not to exceed the
9		addition modification required to be made for the same
10		taxable year under Section 203(a)(2)(D-17) for
11		interest paid, accrued, or incurred, directly or
12		indirectly, to the same foreign person; and
13		(EE) An amount equal to the income from intangible
14		property taken into account for the taxable year (net
15		of the deductions allocable thereto) with respect to
16		transactions with a foreign person who would be a
17		member of the taxpayer's unitary business group but for
18		the fact that the foreign person's business activity
19		outside the United States is 80% or more of that
20		person's total business activity, but not to exceed the
21		addition modification required to be made for the same
22		taxable year under Section 203(a)(2)(D-18) for
23		intangible expenses and costs paid, accrued, or
24		incurred, directly or indirectly, to the same foreign
25		person.
26		(b) Corporations.
27		(1) In general. In the case of a corporation, base
28		income means an amount equal to the taxpayer's taxable
29		income for the taxable year as modified by paragraph (2).
30		(2) Modifications. The taxable income referred to in
31		paragraph (1) shall be modified by adding thereto the sum
32		of the following amounts:
33		(A) An amount equal to all amounts paid or accrued

1		to the taxpayer as interest and all distributions
2		received from regulated investment companies during
3		the taxable year to the extent excluded from gross
4		income in the computation of taxable income;
5		(B) An amount equal to the amount of tax imposed by
6		this Act to the extent deducted from gross income in
7		the computation of taxable income for the taxable year;
8		(C) In the case of a regulated investment company,
9		an amount equal to the excess of (i) the net long-term
10		capital gain for the taxable year, over (ii) the amount
11		of the capital gain dividends designated as such in
12		accordance with Section 852(b)(3)(C) of the Internal
13		Revenue Code and any amount designated under Section
14		852(b)(3)(D) of the Internal Revenue Code,
15		attributable to the taxable year (this amendatory Act
16		of 1995 (Public Act 89-89) is declarative of existing
17		law and is not a new enactment);
18		(D) The amount of any net operating loss deduction
19		taken in arriving at taxable income, other than a net
20		operating loss carried forward from a taxable year
21		ending prior to December 31, 1986;
22		(E) For taxable years in which a net operating loss
23		carryback or carryforward from a taxable year ending
24		prior to December 31, 1986 is an element of taxable
25		income under paragraph (1) of subsection (e) or
26		subparagraph (E) of paragraph (2) of subsection (e),
27		the amount by which addition modifications other than
28		those provided by this subparagraph (E) exceeded
29		subtraction modifications in such earlier taxable
30		year, with the following limitations applied in the
31		order that they are listed:
32		(i) the addition modification relating to the
33		net operating loss carried back or forward to the
34		taxable year from any taxable year ending prior to

1		December 31, 1986 shall be reduced by the amount of
2		addition modification under this subparagraph (E)
3		which related to that net operating loss and which
4		was taken into account in calculating the base
5		income of an earlier taxable year, and
6		(ii) the addition modification relating to the
7		net operating loss carried back or forward to the
8		taxable year from any taxable year ending prior to
9		December 31, 1986 shall not exceed the amount of
10		such carryback or carryforward;
11		For taxable years in which there is a net operating
12		loss carryback or carryforward from more than one other
13		taxable year ending prior to December 31, 1986, the
14		addition modification provided in this subparagraph
15		(E) shall be the sum of the amounts computed
16		independently under the preceding provisions of this
17		subparagraph (E) for each such taxable year;
18		(E-5) For taxable years ending after December 31,
19		1997, an amount equal to any eligible remediation costs
20		that the corporation deducted in computing adjusted
21		gross income and for which the corporation claims a
22		credit under subsection (l) of Section 201;
23		(E-10) For taxable years 2001 and thereafter, an
24		amount equal to the bonus depreciation deduction (30%
25		of the adjusted basis of the qualified property) taken
26		on the taxpayer's federal income tax return for the
27		taxable year under subsection (k) of Section 168 of the
28		Internal Revenue Code; and
29		(E-11) If the taxpayer reports a capital gain or
30		loss on the taxpayer's federal income tax return for
31		the taxable year based on a sale or transfer of
32		property for which the taxpayer was required in any
33		taxable year to make an addition modification under
34		subparagraph (E-10), then an amount equal to the

1		aggregate amount of the deductions taken in all taxable
2		years under subparagraph (T) with respect to that
3		property. ;
4		The taxpayer is required to make the addition
5		modification under this subparagraph only once with
6		respect to any one piece of property;
7		(E-12) For taxable years ending on or after
8		December 31, 2004, to the extent not otherwise included
9		in base income, an amount equal to the amount of
10		dividends received, directly or indirectly, (including
11		amounts included in gross income pursuant to Sections
12		951 through 964 of the Internal Revenue Code and
13		amounts included in gross income under Section 78 of
14		the Internal Revenue Code) with respect to the stock of
15		a passive income affiliate, as defined in Section
16		1501(a)(29) of this Act. This subparagraph (E-12)
17		shall not apply to a small business person;
18		(E-13)(i) For taxable years ending on or after
19		December 31, 2004, an amount equal to the amount
20		otherwise allowed as a deduction in computing base
21		income for interest paid, accrued, or incurred,
22		directly or indirectly, to a foreign person who would
23		be a member of the same unitary business group but for
24		the fact that the foreign person's business activity
25		outside the United States is 80% or more of the foreign
26		person's total business activity. The addition
27		modification required by this subparagraph shall be
28		reduced to the extent that dividends were included in
29		base income for the same taxable year and received by
30		the taxpayer or by a member of the taxpayer's unitary
31		business group (including amounts included in gross
32		income pursuant to Sections 951 through 964 of the
33		Internal Revenue Code and amounts included in gross
34		income under Section 78 of the Internal Revenue Code)

1		with respect to the stock of the same person to whom
2		the interest was paid, accrued, or incurred. (ii) This
3		subparagraph does not apply to:
4		(1) an item of interest paid, accrued, or
5		incurred, directly or indirectly, to a foreign
6		person that is subject in a foreign country to
7		a tax on or measured by net income with respect
8		to such interest;
9		(2) an item of interest, to the extent that the
10		interest expense of the foreign person
11		receiving such interest during the same
12		taxable year that is directly or indirectly
13		paid, accrued or incurred to any person that is
14		not a related party of either the taxpayer or
15		the foreign person exceeds that foreign
16		person's interest income (excluding the
17		interest receivable from the taxpayer) for the
18		taxable year, but only if the taxpayer
19		establishes by a preponderance of the evidence
20		that the transaction giving rise to the
21		interest expense between the taxpayer and the
22		foreign person did not have as a principal
23		purpose the avoidance of any portion of the tax
24		that would otherwise be due.
25		(3) an item of interest paid, accrued, or
26		incurred pursuant to a contract that was
27		binding prior to the time the parties to the
28		contract became related parties, was not
29		entered into as part of the process by which
30		the parties became related parties, and has
31		continually been enforced according to its
32		terms by each party;
33		(4) an item of interest if the taxpayer
34		establishes by clear and convincing evidence,

1		as determined by the Department, that the
2		adjustments are unreasonable; or if the
3		taxpayer and the Director agree in writing to
4		the application or use of an alternative method
5		of apportionment under section 304(f), or
6		(5) a taxpayer who is a small business person.
7		For purposes of this subparagraph, "related
8		parties" include persons disallowed a deduction for
9		losses by paragraphs (b), (c), and (f)(1) of Section
10		267 of the Internal Revenue Code by virtue of being a
11		related taxpayer, as well as a partner and its
12		partnership and each of the other partners in that
13		partnership; and
14		(E-14) For taxable years ending on or after
15		December 31, 2004, an amount equal to the amount of
16		intangible expenses and costs otherwise allowed as a
17		deduction in computing base income, and that were paid,
18		accrued, or incurred, directly or indirectly, to a
19		foreign person who would be a member of the same
20		unitary business group but for the fact that the
21		foreign person's business activity outside the United
22		States is 80% or more of that person's total business
23		activity. The addition modification required by this
24		subparagraph shall be reduced to the extent that
25		dividends were included in base income for the same
26		taxable year and received by the taxpayer or by a
27		member of the taxpayer's unitary business group
28		(including amounts included in gross income pursuant
29		to Sections 951 through 964 of the Internal Revenue
30		Code and amounts included in gross income under Section
31		78 of the Internal Revenue Code) with respect to the
32		stock of the same person to whom the intangible
33		expenses and costs were directly or indirectly paid,
34		incurred, or accrued. The preceding sentence shall not

1		apply to the extent that the same dividends caused a
2		reduction to the addition modification required under
3		Section 203(b)(2)(E-13) of this Act. This subparagraph
4		shall not apply to any item of intangible expenses or
5		costs paid, accrued, or incurred, directly or
6		indirectly, from a transaction with a foreign person
7		who is subject in a foreign country to a tax on or
8		measured by net income with respect to such item. As
9		used in this subparagraph, the term "intangible
10		expenses and costs" includes (1) expenses, losses, and
11		costs for, or related to, the direct or indirect
12		acquisition, use, maintenance or management,
13		ownership, sale, exchange, or any other disposition of
14		intangible property; (2) losses incurred, directly or
15		indirectly, from factoring transactions or discounting
16		transactions; (3) royalty, patent, technical, and
17		copyright fees; (4) licensing fees; and (5) other
18		similar expenses and costs. For purposes of this
19		subparagraph, "intangible property" includes patents,
20		patent applications, trade names, trademarks, service
21		marks, copyrights, mask works, trade secrets, and
22		similar types of intangible assets. This subparagraph
23		(E-14) shall not apply to a taxpayer who is a small
24		business person.
25		and by deducting from the total so obtained the sum of the
26		following amounts:
27		(F) An amount equal to the amount of any tax
28		imposed by this Act which was refunded to the taxpayer
29		and included in such total for the taxable year;
30		(G) An amount equal to any amount included in such
31		total under Section 78 of the Internal Revenue Code;
32		(H) In the case of a regulated investment company,
33		an amount equal to the amount of exempt interest
34		dividends as defined in subsection (b) (5) of Section

1		852 of the Internal Revenue Code, paid to shareholders
2		for the taxable year;
3		(I) With the exception of any amounts subtracted
4		under subparagraph (J), an amount equal to the sum of
5		all amounts disallowed as deductions by (i) Sections
6		171(a) (2), and 265(a)(2) and amounts disallowed as
7		interest expense by Section 291(a)(3) of the Internal
8		Revenue Code, as now or hereafter amended, and all
9		amounts of expenses allocable to interest and
10		disallowed as deductions by Section 265(a)(1) of the
11		Internal Revenue Code, as now or hereafter amended; and
12		(ii) for taxable years ending on or after August 13,
13		1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and
14		832(b)(5)(B)(i) of the Internal Revenue Code; the
15		provisions of this subparagraph are exempt from the
16		provisions of Section 250;
17		(J) An amount equal to all amounts included in such
18		total which are exempt from taxation by this State
19		either by reason of its statutes or Constitution or by
20		reason of the Constitution, treaties or statutes of the
21		United States; provided that, in the case of any
22		statute of this State or the United States, any treaty
23		of the United States, the Illinois Constitution, or the
24		United States Constitution that exempts income derived
25		from bonds or other obligations from the tax imposed
26		under this Act, the amount exempted shall be the income
27		interest net of bond premium amortization, interest
28		expense incurred on indebtedness to carry the bond or
29		other obligation, expenses incurred in producing the
30		income to be deducted and any other expenses deducted
31		on the federal return that would not have been allowed
32		under Internal Revenue Code Section 265 if the interest
33		were exempt from federal tax. The amount of expenses to
34		be taken into account under this provision cannot

1		exceed the amount of income which is exempted. The
2		changes made to this subparagraph (J) by this
3		amendatory Act of the 93rd General Assembly shall not
4		apply to a small business person;
5		(K) An amount equal to those dividends included in
6		such total which were paid by a corporation which
7		conducts business operations in an Enterprise Zone or
8		zones created under the Illinois Enterprise Zone Act
9		and conducts substantially all of its operations in an
10		Enterprise Zone or zones;
11		(L) An amount equal to those dividends included in
12		such total that were paid by a corporation that
13		conducts business operations in a federally designated
14		Foreign Trade Zone or Sub-Zone and that is designated a
15		High Impact Business located in Illinois; provided
16		that dividends eligible for the deduction provided in
17		subparagraph (K) of paragraph 2 of this subsection
18		shall not be eligible for the deduction provided under
19		this subparagraph (L);
20		(M) For any taxpayer that is a financial
21		organization within the meaning of Section 304(c) of
22		this Act, an amount included in such total as interest
23		income from a loan or loans made by such taxpayer to a
24		borrower, to the extent that such a loan is secured by
25		property which is eligible for the Enterprise Zone
26		Investment Credit. To determine the portion of a loan
27		or loans that is secured by property eligible for a
28		Section 201(f) investment credit to the borrower, the
29		entire principal amount of the loan or loans between
30		the taxpayer and the borrower should be divided into
31		the basis of the Section 201(f) investment credit
32		property which secures the loan or loans, using for
33		this purpose the original basis of such property on the
34		date that it was placed in service in the Enterprise

1		Zone. The subtraction modification available to
2		taxpayer in any year under this subsection shall be
3		that portion of the total interest paid by the borrower
4		with respect to such loan attributable to the eligible
5		property as calculated under the previous sentence;
6		(M-1) For any taxpayer that is a financial
7		organization within the meaning of Section 304(c) of
8		this Act, an amount included in such total as interest
9		income from a loan or loans made by such taxpayer to a
10		borrower, to the extent that such a loan is secured by
11		property which is eligible for the High Impact Business
12		Investment Credit. To determine the portion of a loan
13		or loans that is secured by property eligible for a
14		Section 201(h) investment credit to the borrower, the
15		entire principal amount of the loan or loans between
16		the taxpayer and the borrower should be divided into
17		the basis of the Section 201(h) investment credit
18		property which secures the loan or loans, using for
19		this purpose the original basis of such property on the
20		date that it was placed in service in a federally
21		designated Foreign Trade Zone or Sub-Zone located in
22		Illinois. No taxpayer that is eligible for the
23		deduction provided in subparagraph (M) of paragraph
24		(2) of this subsection shall be eligible for the
25		deduction provided under this subparagraph (M-1). The
26		subtraction modification available to taxpayers in any
27		year under this subsection shall be that portion of the
28		total interest paid by the borrower with respect to
29		such loan attributable to the eligible property as
30		calculated under the previous sentence;
31		(N) Two times any contribution made during the
32		taxable year to a designated zone organization to the
33		extent that the contribution (i) qualifies as a
34		charitable contribution under subsection (c) of

1		Section 170 of the Internal Revenue Code and (ii) must,
2		by its terms, be used for a project approved by the
3		Department of Commerce and Economic Opportunity
4		Community Affairs under Section 11 of the Illinois
5		Enterprise Zone Act;
6		(O) An amount equal to: (i) 85% for taxable years
7		ending on or before December 31, 1992, or, a percentage
8		equal to the percentage allowable under Section
9		243(a)(1) of the Internal Revenue Code of 1986 for
10		taxable years ending after December 31, 1992, of the
11		amount by which dividends included in taxable income
12		and received from a corporation that is not created or
13		organized under the laws of the United States or any
14		state or political subdivision thereof, including, for
15		taxable years ending on or after December 31, 1988,
16		dividends received or deemed received or paid or deemed
17		paid under Sections 951 through 964 of the Internal
18		Revenue Code, exceed the amount of the modification
19		provided under subparagraph (G) of paragraph (2) of
20		this subsection (b) which is related to such dividends;
21		plus (ii) 100% of the amount by which dividends,
22		included in taxable income and received, including,
23		for taxable years ending on or after December 31, 1988,
24		dividends received or deemed received or paid or deemed
25		paid under Sections 951 through 964 of the Internal
26		Revenue Code, from any such corporation specified in
27		clause (i) that would but for the provisions of Section
28		1504 (b) (3) of the Internal Revenue Code be treated as
29		a member of the affiliated group which includes the
30		dividend recipient, exceed the amount of the
31		modification provided under subparagraph (G) of
32		paragraph (2) of this subsection (b) which is related
33		to such dividends;
34		(P) An amount equal to any contribution made to a

1		job training project established pursuant to the Tax
2		Increment Allocation Redevelopment Act;
3		(Q) An amount equal to the amount of the deduction
4		used to compute the federal income tax credit for
5		restoration of substantial amounts held under claim of
6		right for the taxable year pursuant to Section 1341 of
7		the Internal Revenue Code of 1986;
8		(R) In the case of an attorney-in-fact with respect
9		to whom an interinsurer or a reciprocal insurer has
10		made the election under Section 835 of the Internal
11		Revenue Code, 26 U.S.C. 835, an amount equal to the
12		excess, if any, of the amounts paid or incurred by that
13		interinsurer or reciprocal insurer in the taxable year
14		to the attorney-in-fact over the deduction allowed to
15		that interinsurer or reciprocal insurer with respect
16		to the attorney-in-fact under Section 835(b) of the
17		Internal Revenue Code for the taxable year;
18		(S) For taxable years ending on or after December
19		31, 1997, in the case of a Subchapter S corporation, an
20		amount equal to all amounts of income allocable to a
21		shareholder subject to the Personal Property Tax
22		Replacement Income Tax imposed by subsections (c) and
23		(d) of Section 201 of this Act, including amounts
24		allocable to organizations exempt from federal income
25		tax by reason of Section 501(a) of the Internal Revenue
26		Code. This subparagraph (S) is exempt from the
27		provisions of Section 250;
28		(T) For taxable years 2001 and thereafter, for the
29		taxable year in which the bonus depreciation deduction
30		(30% of the adjusted basis of the qualified property)
31		is taken on the taxpayer's federal income tax return
32		under subsection (k) of Section 168 of the Internal
33		Revenue Code and for each applicable taxable year
34		thereafter, an amount equal to "x", where:

1		(1) "y" equals the amount of the depreciation
2		deduction taken for the taxable year on the
3		taxpayer's federal income tax return on property
4		for which the bonus depreciation deduction (30% of
5		the adjusted basis of the qualified property) was
6		taken in any year under subsection (k) of Section
7		168 of the Internal Revenue Code, but not including
8		the bonus depreciation deduction; and
9		(2) "x" equals "y" multiplied by 30 and then
10		divided by 70 (or "y" multiplied by 0.429).
11		The aggregate amount deducted under this
12		subparagraph in all taxable years for any one piece of
13		property may not exceed the amount of the bonus
14		depreciation deduction (30% of the adjusted basis of
15		the qualified property) taken on that property on the
16		taxpayer's federal income tax return under subsection
17		(k) of Section 168 of the Internal Revenue Code; and
18		(U) If the taxpayer reports a capital gain or loss
19		on the taxpayer's federal income tax return for the
20		taxable year based on a sale or transfer of property
21		for which the taxpayer was required in any taxable year
22		to make an addition modification under subparagraph
23		(E-10), then an amount equal to that addition
24		modification.
25		The taxpayer is allowed to take the deduction under
26		this subparagraph only once with respect to any one
27		piece of property; .
28		(V) The amount of: (i) any interest income (net of
29		the deductions allocable thereto) taken into account
30		for the taxable year with respect to a transaction with
31		a taxpayer that is required to make an addition
32		modification with respect to such transaction under
33		Section 203(a)(2)(D-17), 203(b)(2)(E-13),
34		203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed

1		the amount of such addition modification and (ii) any
2		income from intangible property (net of the deductions
3		allocable thereto) taken into account for the taxable
4		year with respect to a transaction with a taxpayer that
5		is required to make an addition modification with
6		respect to such transaction under Section
7		203(a)(2)(D-18), 203(b)(2)(E-14), 203(c)(2)(G-13), or
8		203(d)(2)(D-8), but not to exceed the amount of such
9		addition modification;
10		(W) An amount equal to the interest income taken
11		into account for the taxable year (net of the
12		deductions allocable thereto) with respect to
13		transactions with a foreign person who would be a
14		member of the taxpayer's unitary business group but for
15		the fact that the foreign person's business activity
16		outside the United States is 80% or more of that
17		person's total business activity, but not to exceed the
18		addition modification required to be made for the same
19		taxable year under Section 203(b)(2)(E-13) for
20		interest paid, accrued, or incurred, directly or
21		indirectly, to the same foreign person; and
22		(X) An amount equal to the income from intangible
23		property taken into account for the taxable year (net
24		of the deductions allocable thereto) with respect to
25		transactions with a foreign person who would be a
26		member of the taxpayer's unitary business group but for
27		the fact that the foreign person's business activity
28		outside the United States is 80% or more of that
29		person's total business activity, but not to exceed the
30		addition modification required to be made for the same
31		taxable year under Section 203(b)(2)(E-14) for
32		intangible expenses and costs paid, accrued, or
33		incurred, directly or indirectly, to the same foreign
34		person.

1		(3) Special rule. For purposes of paragraph (2) (A),
2		"gross income" in the case of a life insurance company, for
3		tax years ending on and after December 31, 1994, shall mean
4		the gross investment income for the taxable year.
5		(c) Trusts and estates.
6		(1) In general. In the case of a trust or estate, base
7		income means an amount equal to the taxpayer's taxable
8		income for the taxable year as modified by paragraph (2).
9		(2) Modifications. Subject to the provisions of
10		paragraph (3), the taxable income referred to in paragraph
11		(1) shall be modified by adding thereto the sum of the
12		following amounts:
13		(A) An amount equal to all amounts paid or accrued
14		to the taxpayer as interest or dividends during the
15		taxable year to the extent excluded from gross income
16		in the computation of taxable income;
17		(B) In the case of (i) an estate, $600; (ii) a
18		trust which, under its governing instrument, is
19		required to distribute all of its income currently,
20		$300; and (iii) any other trust, $100, but in each such
21		case, only to the extent such amount was deducted in
22		the computation of taxable income;
23		(C) An amount equal to the amount of tax imposed by
24		this Act to the extent deducted from gross income in
25		the computation of taxable income for the taxable year;
26		(D) The amount of any net operating loss deduction
27		taken in arriving at taxable income, other than a net
28		operating loss carried forward from a taxable year
29		ending prior to December 31, 1986;
30		(E) For taxable years in which a net operating loss
31		carryback or carryforward from a taxable year ending
32		prior to December 31, 1986 is an element of taxable
33		income under paragraph (1) of subsection (e) or

1		subparagraph (E) of paragraph (2) of subsection (e),
2		the amount by which addition modifications other than
3		those provided by this subparagraph (E) exceeded
4		subtraction modifications in such taxable year, with
5		the following limitations applied in the order that
6		they are listed:
7		(i) the addition modification relating to the
8		net operating loss carried back or forward to the
9		taxable year from any taxable year ending prior to
10		December 31, 1986 shall be reduced by the amount of
11		addition modification under this subparagraph (E)
12		which related to that net operating loss and which
13		was taken into account in calculating the base
14		income of an earlier taxable year, and
15		(ii) the addition modification relating to the
16		net operating loss carried back or forward to the
17		taxable year from any taxable year ending prior to
18		December 31, 1986 shall not exceed the amount of
19		such carryback or carryforward;
20		For taxable years in which there is a net operating
21		loss carryback or carryforward from more than one other
22		taxable year ending prior to December 31, 1986, the
23		addition modification provided in this subparagraph
24		(E) shall be the sum of the amounts computed
25		independently under the preceding provisions of this
26		subparagraph (E) for each such taxable year;
27		(F) For taxable years ending on or after January 1,
28		1989, an amount equal to the tax deducted pursuant to
29		Section 164 of the Internal Revenue Code if the trust
30		or estate is claiming the same tax for purposes of the
31		Illinois foreign tax credit under Section 601 of this
32		Act;
33		(G) An amount equal to the amount of the capital
34		gain deduction allowable under the Internal Revenue

1		Code, to the extent deducted from gross income in the
2		computation of taxable income;
3		(G-5) For taxable years ending after December 31,
4		1997, an amount equal to any eligible remediation costs
5		that the trust or estate deducted in computing adjusted
6		gross income and for which the trust or estate claims a
7		credit under subsection (l) of Section 201;
8		(G-10) For taxable years 2001 and thereafter, an
9		amount equal to the bonus depreciation deduction (30%
10		of the adjusted basis of the qualified property) taken
11		on the taxpayer's federal income tax return for the
12		taxable year under subsection (k) of Section 168 of the
13		Internal Revenue Code; and
14		(G-11) If the taxpayer reports a capital gain or
15		loss on the taxpayer's federal income tax return for
16		the taxable year based on a sale or transfer of
17		property for which the taxpayer was required in any
18		taxable year to make an addition modification under
19		subparagraph (G-10), then an amount equal to the
20		aggregate amount of the deductions taken in all taxable
21		years under subparagraph (R) with respect to that
22		property. ;
23		The taxpayer is required to make the addition
24		modification under this subparagraph only once with
25		respect to any one piece of property;
26		(G-12)(i) For taxable years ending on or after
27		December 31, 2004, an amount equal to the amount
28		otherwise allowed as a deduction in computing base
29		income for interest paid, accrued, or incurred,
30		directly or indirectly, to a foreign person who would
31		be a member of the same unitary business group but for
32		the fact that the foreign person's business activity
33		outside the United States is 80% or more of the foreign
34		person's total business activity. The addition

1		modification required by this subparagraph shall be
2		reduced to the extent that dividends were included in
3		base income for the same taxable year and received by
4		the taxpayer or by a member of the taxpayer's unitary
5		business group (including amounts included in gross
6		income pursuant to Sections 951 through 964 of the
7		Internal Revenue Code and amounts included in gross
8		income under Section 78 of the Internal Revenue Code)
9		with respect to the stock of the same person to whom
10		the interest was paid, accrued, or incurred. (ii) This
11		subparagraph does not apply to:
12
13		(1) an item of interest paid, accrued, or
14		incurred, directly or indirectly, to a foreign
15		person that is subject in a foreign country to a
16		tax on or measured by net income with respect to
17		such interest;
18		(2) an item of interest, to the extent that the
19		interest expense of the foreign person receiving
20		such interest during the same taxable year that is
21		directly or indirectly paid, accrued or incurred
22		to any person that is not a related party of either
23		the taxpayer or the foreign person exceeds that
24		foreign person's interest income (excluding the
25		interest receivable from the taxpayer) for the
26		taxable year, but only if the taxpayer establishes
27		by a preponderance of the evidence that the
28		transaction giving rise to the interest expense
29		between the taxpayer and the foreign person did not
30		have as a principal purpose the avoidance of any
31		portion of the tax that would otherwise be due.
32		(3) an item of interest paid, accrued, or
33		incurred pursuant to a contract that was binding
34		prior to the time the parties to the contract

1		became related parties, was not entered into as
2		part of the process by which the parties became
3		related parties, and has continually been enforced
4		according to its terms by each party;
5		(4) an item of interest if the taxpayer
6		establishes by clear and convincing evidence, as
7		determined by the Department, that the adjustments
8		are unreasonable; or if the taxpayer and the
9		Director agree in writing to the application or use
10		of an alternative method of apportionment under
11		section 304(f), or
12		(5) a taxpayer who is a small business person.
13		For purposes of this subparagraph, "related
14		parties" include persons disallowed a deduction for
15		losses by paragraphs (b), (c), and (f)(1) of Section
16		267 of the Internal Revenue Code by virtue of being a
17		related taxpayer, as well as a partner and its
18		partnership and each of the other partners in that
19		partnership; and
20		(G-13) For taxable years ending on or after
21		December 31, 2004, an amount equal to the amount of
22		intangible expenses and costs otherwise allowed as a
23		deduction in computing base income, and that were paid,
24		accrued, or incurred, directly or indirectly, to a
25		foreign person who would be a member of the same
26		unitary business group but for the fact that the
27		foreign person's business activity outside the United
28		States is 80% or more of that person's total business
29		activity. The addition modification required by this
30		subparagraph shall be reduced to the extent that
31		dividends were included in base income for the same
32		taxable year and received by the taxpayer or by a
33		member of the taxpayer's unitary business group
34		(including amounts included in gross income pursuant

1		to Sections 951 through 964 of the Internal Revenue
2		Code and amounts included in gross income under Section
3		78 of the Internal Revenue Code) with respect to the
4		stock of the same person to whom the intangible
5		expenses and costs were directly or indirectly paid,
6		incurred, or accrued. The preceding sentence shall not
7		apply to the extent that the same dividends caused a
8		reduction to the addition modification required under
9		Section 203 (c)(2)(G-12) of this Act. This
10		subparagraph shall not apply to any item of intangible
11		expenses or costs paid, accrued, or incurred, directly
12		or indirectly, from a transaction with a foreign person
13		who is subject in a foreign country to a tax on or
14		measured by net income with respect to such item. As
15		used in this subparagraph, the term "intangible
16		expenses and costs" includes: (1) expenses, losses,
17		and costs for or related to the direct or indirect
18		acquisition, use, maintenance or management,
19		ownership, sale, exchange, or any other disposition of
20		intangible property; (2) losses incurred, directly or
21		indirectly, from factoring transactions or discounting
22		transactions; (3) royalty, patent, technical, and
23		copyright fees; (4) licensing fees; and (5) other
24		similar expenses and costs. For purposes of this
25		subparagraph, "intangible property" includes patents,
26		patent applications, trade names, trademarks, service
27		marks, copyrights, mask works, trade secrets, and
28		similar types of intangible assets. This subparagraph
29		(G-13) shall not apply to a taxpayer who is a small
30		business person.
31		and by deducting from the total so obtained the sum of the
32		following amounts:
33		(H) An amount equal to all amounts included in such
34		total pursuant to the provisions of Sections 402(a),

1		402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
2		Internal Revenue Code or included in such total as
3		distributions under the provisions of any retirement
4		or disability plan for employees of any governmental
5		agency or unit, or retirement payments to retired
6		partners, which payments are excluded in computing net
7		earnings from self employment by Section 1402 of the
8		Internal Revenue Code and regulations adopted pursuant
9		thereto;
10		(I) The valuation limitation amount;
11		(J) An amount equal to the amount of any tax
12		imposed by this Act which was refunded to the taxpayer
13		and included in such total for the taxable year;
14		(K) An amount equal to all amounts included in
15		taxable income as modified by subparagraphs (A), (B),
16		(C), (D), (E), (F) and (G) which are exempt from
17		taxation by this State either by reason of its statutes
18		or Constitution or by reason of the Constitution,
19		treaties or statutes of the United States; provided
20		that, in the case of any statute of this State or the
21		United States, any treaty of the United States, the
22		Illinois Constitution, or the United States
23		Constitution that exempts income derived from bonds or
24		other obligations from the tax imposed under this Act,
25		the amount exempted shall be the income interest net of
26		bond premium amortization, interest expense incurred
27		on indebtedness to carry the bond or other obligation,
28		expenses incurred in producing the income to be
29		deducted and any other expenses deducted on the federal
30		return that would not have been allowed under Internal
31		Revenue Code Section 265 if the interest were exempt
32		from federal tax. The amount of expenses to be taken
33		into account under this provision cannot exceed the
34		amount of income which is exempted. The changes made to

1		this subparagraph (K) by this amendatory Act of the
2		93rd General Assembly shall not apply to a small
3		business person;
4		(L) With the exception of any amounts subtracted
5		under subparagraph (K), an amount equal to the sum of
6		all amounts disallowed as deductions by (i) Sections
7		171(a) (2) and 265(a)(2) of the Internal Revenue Code,
8		as now or hereafter amended, and all amounts of
9		expenses allocable to interest and disallowed as
10		deductions by Section 265(1) of the Internal Revenue
11		Code of 1954, as now or hereafter amended; and (ii) for
12		taxable years ending on or after August 13, 1999,
13		Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
14		the Internal Revenue Code; the provisions of this
15		subparagraph are exempt from the provisions of Section
16		250;
17		(M) An amount equal to those dividends included in
18		such total which were paid by a corporation which
19		conducts business operations in an Enterprise Zone or
20		zones created under the Illinois Enterprise Zone Act
21		and conducts substantially all of its operations in an
22		Enterprise Zone or Zones;
23		(N) An amount equal to any contribution made to a
24		job training project established pursuant to the Tax
25		Increment Allocation Redevelopment Act;
26		(O) An amount equal to those dividends included in
27		such total that were paid by a corporation that
28		conducts business operations in a federally designated
29		Foreign Trade Zone or Sub-Zone and that is designated a
30		High Impact Business located in Illinois; provided
31		that dividends eligible for the deduction provided in
32		subparagraph (M) of paragraph (2) of this subsection
33		shall not be eligible for the deduction provided under
34		this subparagraph (O);

1		(P) An amount equal to the amount of the deduction
2		used to compute the federal income tax credit for
3		restoration of substantial amounts held under claim of
4		right for the taxable year pursuant to Section 1341 of
5		the Internal Revenue Code of 1986;
6		(Q) For taxable year 1999 and thereafter, an amount
7		equal to the amount of any (i) distributions, to the
8		extent includible in gross income for federal income
9		tax purposes, made to the taxpayer because of his or
10		her status as a victim of persecution for racial or
11		religious reasons by Nazi Germany or any other Axis
12		regime or as an heir of the victim and (ii) items of
13		income, to the extent includible in gross income for
14		federal income tax purposes, attributable to, derived
15		from or in any way related to assets stolen from,
16		hidden from, or otherwise lost to a victim of
17		persecution for racial or religious reasons by Nazi
18		Germany or any other Axis regime immediately prior to,
19		during, and immediately after World War II, including,
20		but not limited to, interest on the proceeds receivable
21		as insurance under policies issued to a victim of
22		persecution for racial or religious reasons by Nazi
23		Germany or any other Axis regime by European insurance
24		companies immediately prior to and during World War II;
25		provided, however, this subtraction from federal
26		adjusted gross income does not apply to assets acquired
27		with such assets or with the proceeds from the sale of
28		such assets; provided, further, this paragraph shall
29		only apply to a taxpayer who was the first recipient of
30		such assets after their recovery and who is a victim of
31		persecution for racial or religious reasons by Nazi
32		Germany or any other Axis regime or as an heir of the
33		victim. The amount of and the eligibility for any
34		public assistance, benefit, or similar entitlement is

1		not affected by the inclusion of items (i) and (ii) of
2		this paragraph in gross income for federal income tax
3		purposes. This paragraph is exempt from the provisions
4		of Section 250;
5		(R) For taxable years 2001 and thereafter, for the
6		taxable year in which the bonus depreciation deduction
7		(30% of the adjusted basis of the qualified property)
8		is taken on the taxpayer's federal income tax return
9		under subsection (k) of Section 168 of the Internal
10		Revenue Code and for each applicable taxable year
11		thereafter, an amount equal to "x", where:
12		(1) "y" equals the amount of the depreciation
13		deduction taken for the taxable year on the
14		taxpayer's federal income tax return on property
15		for which the bonus depreciation deduction (30% of
16		the adjusted basis of the qualified property) was
17		taken in any year under subsection (k) of Section
18		168 of the Internal Revenue Code, but not including
19		the bonus depreciation deduction; and
20		(2) "x" equals "y" multiplied by 30 and then
21		divided by 70 (or "y" multiplied by 0.429).
22		The aggregate amount deducted under this
23		subparagraph in all taxable years for any one piece of
24		property may not exceed the amount of the bonus
25		depreciation deduction (30% of the adjusted basis of
26		the qualified property) taken on that property on the
27		taxpayer's federal income tax return under subsection
28		(k) of Section 168 of the Internal Revenue Code; and
29		(S) If the taxpayer reports a capital gain or loss
30		on the taxpayer's federal income tax return for the
31		taxable year based on a sale or transfer of property
32		for which the taxpayer was required in any taxable year
33		to make an addition modification under subparagraph
34		(G-10), then an amount equal to that addition

1		modification.
2		The taxpayer is allowed to take the deduction under
3		this subparagraph only once with respect to any one
4		piece of property; .
5		(T) The amount of (i) any interest income (net of
6		the deductions allocable thereto) taken into account
7		for the taxable year with respect to a transaction with
8		a taxpayer that is required to make an addition
9		modification with respect to such transaction under
10		Section 203(a)(2)(D-17), 203(b)(2)(E-13),
11		203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
12		the amount of such addition modification and (ii) any
13		income from intangible property (net of the deductions
14		allocable thereto) taken into account for the taxable
15		year with respect to a transaction with a taxpayer that
16		is required to make an addition modification with
17		respect to such transaction under Section
18		203(a)(2)(D-18), 203(b)(2)(E-14), 203(c)(2)(G-13), or
19		203(d)(2)(D-8), but not to exceed the amount of such
20		addition modification;
21		(U) An amount equal to the interest income taken
22		into account for the taxable year (net of the
23		deductions allocable thereto) with respect to
24		transactions with a foreign person who would be a
25		member of the taxpayer's unitary business group but for
26		the fact the foreign person's business activity
27		outside the United States is 80% or more of that
28		person's total business activity, but not to exceed the
29		addition modification required to be made for the same
30		taxable year under Section 203(c)(2)(G-12) for
31		interest paid, accrued, or incurred, directly or
32		indirectly, to the same foreign person; and
33		(V) An amount equal to the income from intangible
34		property taken into account for the taxable year (net

1		of the deductions allocable thereto) with respect to
2		transactions with a foreign person who would be a
3		member of the taxpayer's unitary business group but for
4		the fact that the foreign person's business activity
5		outside the United States is 80% or more of that
6		person's total business activity, but not to exceed the
7		addition modification required to be made for the same
8		taxable year under Section 203(c)(2)(G-13) for
9		intangible expenses and costs paid, accrued, or
10		incurred, directly or indirectly, to the same foreign
11		person.
12		(3) Limitation. The amount of any modification
13		otherwise required under this subsection shall, under
14		regulations prescribed by the Department, be adjusted by
15		any amounts included therein which were properly paid,
16		credited, or required to be distributed, or permanently set
17		aside for charitable purposes pursuant to Internal Revenue
18		Code Section 642(c) during the taxable year.
19		(d) Partnerships.
20		(1) In general. In the case of a partnership, base
21		income means an amount equal to the taxpayer's taxable
22		income for the taxable year as modified by paragraph (2).
23		(2) Modifications. The taxable income referred to in
24		paragraph (1) shall be modified by adding thereto the sum
25		of the following amounts:
26		(A) An amount equal to all amounts paid or accrued
27		to the taxpayer as interest or dividends during the
28		taxable year to the extent excluded from gross income
29		in the computation of taxable income;
30		(B) An amount equal to the amount of tax imposed by
31		this Act to the extent deducted from gross income for
32		the taxable year;
33		(C) The amount of deductions allowed to the

1		partnership pursuant to Section 707 (c) of the Internal
2		Revenue Code in calculating its taxable income;
3		(D) An amount equal to the amount of the capital
4		gain deduction allowable under the Internal Revenue
5		Code, to the extent deducted from gross income in the
6		computation of taxable income;
7		(D-5) For taxable years 2001 and thereafter, an
8		amount equal to the bonus depreciation deduction (30%
9		of the adjusted basis of the qualified property) taken
10		on the taxpayer's federal income tax return for the
11		taxable year under subsection (k) of Section 168 of the
12		Internal Revenue Code; and
13		(D-6) If the taxpayer reports a capital gain or
14		loss on the taxpayer's federal income tax return for
15		the taxable year based on a sale or transfer of
16		property for which the taxpayer was required in any
17		taxable year to make an addition modification under
18		subparagraph (D-5), then an amount equal to the
19		aggregate amount of the deductions taken in all taxable
20		years under subparagraph (O) with respect to that
21		property. ;
22		The taxpayer is required to make the addition
23		modification under this subparagraph only once with
24		respect to any one piece of property;
25		(D-7)(i) For taxable years ending on or after
26		December 31, 2004, an amount equal to the amount
27		otherwise allowed as a deduction in computing base
28		income for interest paid, accrued, or incurred,
29		directly or indirectly, to a foreign person who would
30		be a member of the same unitary business group but for
31		the fact that the foreign person's business activity
32		outside the United States is 80% or more of the foreign
33		person's total business activity. The addition
34		modification required by this subparagraph shall be

1		reduced to the extent that dividends were included in
2		base income for the same taxable year and received by
3		the taxpayer or by a member of the taxpayer's unitary
4		business group (including amounts included in gross
5		income pursuant to Sections 951 through 964 of the
6		Internal Revenue Code and amounts included in gross
7		income under Section 78 of the Internal Revenue Code)
8		with respect to the stock of the same person to whom
9		the interest was paid, accrued, or incurred. (ii) This
10		subparagraph does not apply to:
11		(1) an item of interest paid, accrued, or
12		incurred, directly or indirectly, to a foreign
13		person that is subject in a foreign country to a
14		tax on or measured by net income with respect to
15		such interest;
16		(2) an item of interest, to the extent that the
17		interest expense of the foreign person receiving
18		such interest during the same taxable year that is
19		directly or indirectly paid, accrued or incurred
20		to any person that is not a related party of either
21		the taxpayer or the foreign person exceeds that
22		foreign person's interest income (excluding the
23		interest receivable from the taxpayer) for the
24		taxable year, but only if the taxpayer establishes
25		by a preponderance of the evidence that the
26		transaction giving rise to the interest expense
27		between the taxpayer and the foreign person did not
28		have as a principal purpose the avoidance of any
29		portion of the tax that would otherwise be due;
30		(3) an item of interest paid, accrued, or
31		incurred pursuant to a contract that was binding
32		prior to the time the parties to the contract
33		became related parties, was not entered into as
34		part of the process by which the parties became

1		related parties, and has continually been enforced
2		according to its terms by each party;
3		(4) an item of interest if the taxpayer
4		establishes by clear and convincing evidence, as
5		determined by the Department, that the adjustments
6		are unreasonable; or if the taxpayer and the
7		Director agree in writing to the application or use
8		of an alternative method of apportionment under
9		section 304(f); or
10		(5) a taxpayer who is a small business person.
11		For purposes of this subparagraph, "related
12		parties" include persons disallowed a deduction for
13		losses by paragraphs (b), (c), and (f)(1) of Section
14		267 of the Internal Revenue Code by virtue of being a
15		related taxpayer, as well as a partner and its
16		partnership and each of the other partners in that
17		partnership; and
18		(D-8) For taxable years ending on or after December
19		31, 2004, an amount equal to the amount of intangible
20		expenses and costs otherwise allowed as a deduction in
21		computing base income, and that were paid, accrued, or
22		incurred, directly or indirectly, to a foreign person
23		who would be a member of the same unitary business
24		group but for the fact that the foreign person's
25		business activity outside the United States is 80% or
26		more of that person's total business activity. The
27		addition modification required by this subparagraph
28		shall be reduced to the extent that dividends were
29		included in base income for the same taxable year and
30		received by the taxpayer or by a member of the
31		taxpayer's unitary business group (including amounts
32		included in gross income pursuant to Sections 951
33		through 964 of the Internal Revenue Code and amounts
34		included in gross income under Section 78 of the

1		Internal Revenue Code) with respect to the stock of the
2		same person to whom the intangible expenses and costs
3		were directly or indirectly paid, incurred or accrued.
4		The preceding sentence shall not apply to the extent
5		that the same dividends caused a reduction to the
6		addition modification required under Section 203
7		(d)(2)(D-7) of this Act. This subparagraph shall not
8		apply to any item of intangible expenses or costs paid,
9		accrued, or incurred, directly or indirectly, from a
10		transaction with a foreign person that is subject in a
11		foreign country to a tax on or measured by net income
12		with respect to such item. As used in this
13		subparagraph, the term "intangible expenses and costs"
14		includes (1) expenses, losses, and costs for, or
15		related to, the direct or indirect acquisition, use,
16		maintenance or management, ownership, sale, exchange,
17		or any other disposition of intangible property; (2)
18		losses incurred, directly or indirectly, from
19		factoring transactions or discounting transactions;
20		(3) royalty, patent, technical, and copyright fees;
21		(4) licensing fees; and (5) other similar expenses and
22		costs. For purposes of this subparagraph, "intangible
23		property" includes patents, patent applications, trade
24		names, trademarks, service marks, copyrights, mask
25		works, trade secrets, and similar types of intangible
26		assets. This subparagraph shall not apply to a taxpayer
27		who is a small business person.
28		and by deducting from the total so obtained the following
29		amounts:
30		(E) The valuation limitation amount;
31		(F) An amount equal to the amount of any tax
32		imposed by this Act which was refunded to the taxpayer
33		and included in such total for the taxable year;
34		(G) An amount equal to all amounts included in

1		taxable income as modified by subparagraphs (A), (B),
2		(C) and (D) which are exempt from taxation by this
3		State either by reason of its statutes or Constitution
4		or by reason of the Constitution, treaties or statutes
5		of the United States; provided that, in the case of any
6		statute of this State or the United States, any treaty
7		of the United States, the Illinois Constitution, or the
8		United States Constitution that exempts income derived
9		from bonds or other obligations from the tax imposed
10		under this Act, the amount exempted shall be the
11		interest net of bond premium amortization, interest
12		expense incurred on indebtedness to carry the bond or
13		other obligation, expenses incurred in producing the
14		income to be deducted and any other expenses deducted
15		on the federal return that would not have been allowed
16		under Internal Revenue Code Section 265 if the interest
17		were exempt from federal tax. The amount of expenses to
18		be taken into account under this provision cannot
19		exceed the amount of income which is exempted. The
20		changes made to this subparagraph (G) by this
21		amendatory Act of the 93rd General Assembly shall not
22		apply to a small business person;
23		(H) Any income of the partnership which
24		constitutes personal service income as defined in
25		Section 1348 (b) (1) of the Internal Revenue Code (as
26		in effect December 31, 1981) or a reasonable allowance
27		for compensation paid or accrued for services rendered
28		by partners to the partnership, whichever is greater;
29		(I) An amount equal to all amounts of income
30		distributable to an entity subject to the Personal
31		Property Tax Replacement Income Tax imposed by
32		subsections (c) and (d) of Section 201 of this Act
33		including amounts distributable to organizations
34		exempt from federal income tax by reason of Section

1		501(a) of the Internal Revenue Code;
2		(J) With the exception of any amounts subtracted
3		under subparagraph (G), an amount equal to the sum of
4		all amounts disallowed as deductions by (i) Sections
5		171(a) (2), and 265(2) of the Internal Revenue Code of
6		1954, as now or hereafter amended, and all amounts of
7		expenses allocable to interest and disallowed as
8		deductions by Section 265(1) of the Internal Revenue
9		Code, as now or hereafter amended; and (ii) for taxable
10		years ending on or after August 13, 1999, Sections
11		171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
12		Internal Revenue Code; the provisions of this
13		subparagraph are exempt from the provisions of Section
14		250;
15		(K) An amount equal to those dividends included in
16		such total which were paid by a corporation which
17		conducts business operations in an Enterprise Zone or
18		zones created under the Illinois Enterprise Zone Act,
19		enacted by the 82nd General Assembly, and conducts
20		substantially all of its operations in an Enterprise
21		Zone or Zones;
22		(L) An amount equal to any contribution made to a
23		job training project established pursuant to the Real
24		Property Tax Increment Allocation Redevelopment Act;
25		(M) An amount equal to those dividends included in
26		such total that were paid by a corporation that
27		conducts business operations in a federally designated
28		Foreign Trade Zone or Sub-Zone and that is designated a
29		High Impact Business located in Illinois; provided
30		that dividends eligible for the deduction provided in
31		subparagraph (K) of paragraph (2) of this subsection
32		shall not be eligible for the deduction provided under
33		this subparagraph (M);
34		(N) An amount equal to the amount of the deduction

1		used to compute the federal income tax credit for
2		restoration of substantial amounts held under claim of
3		right for the taxable year pursuant to Section 1341 of
4		the Internal Revenue Code of 1986;
5		(O) For taxable years 2001 and thereafter, for the
6		taxable year in which the bonus depreciation deduction
7		(30% of the adjusted basis of the qualified property)
8		is taken on the taxpayer's federal income tax return
9		under subsection (k) of Section 168 of the Internal
10		Revenue Code and for each applicable taxable year
11		thereafter, an amount equal to "x", where:
12		(1) "y" equals the amount of the depreciation
13		deduction taken for the taxable year on the
14		taxpayer's federal income tax return on property
15		for which the bonus depreciation deduction (30% of
16		the adjusted basis of the qualified property) was
17		taken in any year under subsection (k) of Section
18		168 of the Internal Revenue Code, but not including
19		the bonus depreciation deduction; and
20		(2) "x" equals "y" multiplied by 30 and then
21		divided by 70 (or "y" multiplied by 0.429).
22		The aggregate amount deducted under this
23		subparagraph in all taxable years for any one piece of
24		property may not exceed the amount of the bonus
25		depreciation deduction (30% of the adjusted basis of
26		the qualified property) taken on that property on the
27		taxpayer's federal income tax return under subsection
28		(k) of Section 168 of the Internal Revenue Code; and
29		(P) If the taxpayer reports a capital gain or loss
30		on the taxpayer's federal income tax return for the
31		taxable year based on a sale or transfer of property
32		for which the taxpayer was required in any taxable year
33		to make an addition modification under subparagraph
34		(D-5), then an amount equal to that addition

1		modification.
2		The taxpayer is allowed to take the deduction under
3		this subparagraph only once with respect to any one
4		piece of property; .
5		(Q) The amount of (i) any interest income (net of
6		the deductions allocable thereto) taken into account
7		for the taxable year with respect to a transaction with
8		a taxpayer that is required to make an addition
9		modification with respect to such transaction under
10		Section 203(a)(2)(D-17), 203(b)(2)(E-13),
11		203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
12		the amount of such addition modification and (ii) any
13		income from intangible property (net of the deductions
14		allocable thereto) taken into account for the taxable
15		year with respect to a transaction with a taxpayer that
16		is required to make an addition modification with
17		respect to such transaction under Section
18		203(a)(2)(D-18), 203(b)(2)(E-14), 203(c)(2)(G-13), or
19		203(d)(2)(D-8), but not to exceed the amount of such
20		addition modification;
21		(R) An amount equal to the interest income taken
22		into account for the taxable year (net of the
23		deductions allocable thereto) with respect to
24		transactions with a foreign person who would be a
25		member of the taxpayer's unitary business group but for
26		the fact that the foreign person's business activity
27		outside the United States is 80% or more of that
28		person's total business activity, but not to exceed the
29		addition modification required to be made for the same
30		taxable year under Section 203(d)(2)(D-7) for interest
31		paid, accrued, or incurred, directly or indirectly, to
32		the same foreign person; and
33		(S) An amount equal to the income from intangible
34		property taken into account for the taxable year (net

1		of the deductions allocable thereto) with respect to
2		transactions with a foreign person who would be a
3		member of the taxpayer's unitary business group but for
4		the fact that the foreign person's business activity
5		outside the United States is 80% or more of that
6		person's total business activity, but not to exceed the
7		addition modification required to be made for the same
8		taxable year under Section 203(d)(2)(D-8) for
9		intangible expenses and costs paid, accrued, or
10		incurred, directly or indirectly, to the same foreign
11		person.
12		(e) Gross income; adjusted gross income; taxable income.
13		(1) In general. Subject to the provisions of paragraph
14		(2) and subsection (b) (3), for purposes of this Section
15		and Section 803(e), a taxpayer's gross income, adjusted
16		gross income, or taxable income for the taxable year shall
17		mean the amount of gross income, adjusted gross income or
18		taxable income properly reportable for federal income tax
19		purposes for the taxable year under the provisions of the
20		Internal Revenue Code. Taxable income may be less than
21		zero. However, for taxable years ending on or after
22		December 31, 1986, net operating loss carryforwards from
23		taxable years ending prior to December 31, 1986, may not
24		exceed the sum of federal taxable income for the taxable
25		year before net operating loss deduction, plus the excess
26		of addition modifications over subtraction modifications
27		for the taxable year. For taxable years ending prior to
28		December 31, 1986, taxable income may never be an amount in
29		excess of the net operating loss for the taxable year as
30		defined in subsections (c) and (d) of Section 172 of the
31		Internal Revenue Code, provided that when taxable income of
32		a corporation (other than a Subchapter S corporation),
33		trust, or estate is less than zero and addition

1		modifications, other than those provided by subparagraph
2		(E) of paragraph (2) of subsection (b) for corporations or
3		subparagraph (E) of paragraph (2) of subsection (c) for
4		trusts and estates, exceed subtraction modifications, an
5		addition modification must be made under those
6		subparagraphs for any other taxable year to which the
7		taxable income less than zero (net operating loss) is
8		applied under Section 172 of the Internal Revenue Code or
9		under subparagraph (E) of paragraph (2) of this subsection
10		(e) applied in conjunction with Section 172 of the Internal
11		Revenue Code.
12		(2) Special rule. For purposes of paragraph (1) of this
13		subsection, the taxable income properly reportable for
14		federal income tax purposes shall mean:
15		(A) Certain life insurance companies. In the case
16		of a life insurance company subject to the tax imposed
17		by Section 801 of the Internal Revenue Code, life
18		insurance company taxable income, plus the amount of
19		distribution from pre-1984 policyholder surplus
20		accounts as calculated under Section 815a of the
21		Internal Revenue Code;
22		(B) Certain other insurance companies. In the case
23		of mutual insurance companies subject to the tax
24		imposed by Section 831 of the Internal Revenue Code,
25		insurance company taxable income;
26		(C) Regulated investment companies. In the case of
27		a regulated investment company subject to the tax
28		imposed by Section 852 of the Internal Revenue Code,
29		investment company taxable income;
30		(D) Real estate investment trusts. In the case of a
31		real estate investment trust subject to the tax imposed
32		by Section 857 of the Internal Revenue Code, real
33		estate investment trust taxable income;
34		(E) Consolidated corporations. In the case of a

1		corporation which is a member of an affiliated group of
2		corporations filing a consolidated income tax return
3		for the taxable year for federal income tax purposes,
4		taxable income determined as if such corporation had
5		filed a separate return for federal income tax purposes
6		for the taxable year and each preceding taxable year
7		for which it was a member of an affiliated group. For
8		purposes of this subparagraph, the taxpayer's separate
9		taxable income shall be determined as if the election
10		provided by Section 243(b) (2) of the Internal Revenue
11		Code had been in effect for all such years;
12		(F) Cooperatives. In the case of a cooperative
13		corporation or association, the taxable income of such
14		organization determined in accordance with the
15		provisions of Section 1381 through 1388 of the Internal
16		Revenue Code;
17		(G) Subchapter S corporations. In the case of: (i)
18		a Subchapter S corporation for which there is in effect
19		an election for the taxable year under Section 1362 of
20		the Internal Revenue Code, the taxable income of such
21		corporation determined in accordance with Section
22		1363(b) of the Internal Revenue Code, except that
23		taxable income shall take into account those items
24		which are required by Section 1363(b)(1) of the
25		Internal Revenue Code to be separately stated; and (ii)
26		a Subchapter S corporation for which there is in effect
27		a federal election to opt out of the provisions of the
28		Subchapter S Revision Act of 1982 and have applied
29		instead the prior federal Subchapter S rules as in
30		effect on July 1, 1982, the taxable income of such
31		corporation determined in accordance with the federal
32		Subchapter S rules as in effect on July 1, 1982; and
33		(H) Partnerships. In the case of a partnership,
34		taxable income determined in accordance with Section

1		703 of the Internal Revenue Code, except that taxable
2		income shall take into account those items which are
3		required by Section 703(a)(1) to be separately stated
4		but which would be taken into account by an individual
5		in calculating his taxable income.
6		(3) Recapture of business expenses on disposition of
7		asset or business. Notwithstanding any other law to the
8		contrary, if in prior years income from an asset or
9		business has been classified as business income and in a
10		later year is demonstrated to be non-business income, then
11		all expenses, without limitation, deducted in prior years
12		related to that asset or business that generated the
13		non-business income shall be added back and recaptured as
14		business income in the year of the disposition of the asset
15		or business. Such amount shall be apportioned to Illinois
16		using the greater of the apportionment fraction computed
17		for the business under Section 304 of this Act for the
18		taxable year or the average of the apportionment fractions
19		computed for the business under Section 304 of this Act for
20		the taxable year and for the 2 immediately preceding
21		taxable years.
22		(f) Valuation limitation amount.
23		(1) In general. The valuation limitation amount
24		referred to in subsections (a) (2) (G), (c) (2) (I) and
25		(d)(2) (E) is an amount equal to:
26		(A) The sum of the pre-August 1, 1969 appreciation
27		amounts (to the extent consisting of gain reportable
28		under the provisions of Section 1245 or 1250 of the
29		Internal Revenue Code) for all property in respect of
30		which such gain was reported for the taxable year; plus
31		(B) The lesser of (i) the sum of the pre-August 1,
32		1969 appreciation amounts (to the extent consisting of
33		capital gain) for all property in respect of which such

1		gain was reported for federal income tax purposes for
2		the taxable year, or (ii) the net capital gain for the
3		taxable year, reduced in either case by any amount of
4		such gain included in the amount determined under
5		subsection (a) (2) (F) or (c) (2) (H).
6		(2) Pre-August 1, 1969 appreciation amount.
7		(A) If the fair market value of property referred
8		to in paragraph (1) was readily ascertainable on August
9		1, 1969, the pre-August 1, 1969 appreciation amount for
10		such property is the lesser of (i) the excess of such
11		fair market value over the taxpayer's basis (for
12		determining gain) for such property on that date
13		(determined under the Internal Revenue Code as in
14		effect on that date), or (ii) the total gain realized
15		and reportable for federal income tax purposes in
16		respect of the sale, exchange or other disposition of
17		such property.
18		(B) If the fair market value of property referred
19		to in paragraph (1) was not readily ascertainable on
20		August 1, 1969, the pre-August 1, 1969 appreciation
21		amount for such property is that amount which bears the
22		same ratio to the total gain reported in respect of the
23		property for federal income tax purposes for the
24		taxable year, as the number of full calendar months in
25		that part of the taxpayer's holding period for the
26		property ending July 31, 1969 bears to the number of
27		full calendar months in the taxpayer's entire holding
28		period for the property.
29		(C) The Department shall prescribe such
30		regulations as may be necessary to carry out the
31		purposes of this paragraph.
32		(g) Double deductions. Unless specifically provided
33		otherwise, nothing in this Section shall permit the same item

1		to be deducted more than once.
2		(h) Legislative intention. Except as expressly provided by
3		this Section there shall be no modifications or limitations on
4		the amounts of income, gain, loss or deduction taken into
5		account in determining gross income, adjusted gross income or
6		taxable income for federal income tax purposes for the taxable
7		year, or in the amount of such items entering into the
8		computation of base income and net income under this Act for
9		such taxable year, whether in respect of property values as of
10		August 1, 1969 or otherwise.
11		(Source: P.A. 91-192, eff. 7-20-99; 91-205, eff. 7-20-99;
12		91-357, eff. 7-29-99; 91-541, eff. 8-13-99; 91-676, eff.
13		12-23-99; 91-845, eff. 6-22-00; 91-913, eff. 1-1-01; 92-16,
14		eff. 6-28-01; 92-244, eff. 8-3-01; 92-439, eff. 8-17-01;
15		92-603, eff. 6-28-02; 92-626, eff. 7-11-02; 92-651, eff.
16		7-11-02; 92-846, eff. 8-23-02; revised 10-15-03.)
17		(35 ILCS 5/205) (from Ch. 120, par. 2-205)
18		Sec. 205. Exempt organizations.
19		(a) Charitable, etc. organizations. The base income of an
20		organization which is exempt from the federal income tax by
21		reason of Section 501(a) of the Internal Revenue Code shall not
22		be determined under section 203 of this Act, but shall be its
23		unrelated business taxable income as determined under section
24		512 of the Internal Revenue Code, without any deduction for the
25		tax imposed by this Act. The standard exemption provided by
26		section 204 of this Act shall not be allowed in determining the
27		net income of an organization to which this subsection applies.
28		(b) Partnerships. A partnership as such shall not be
29		subject to the tax imposed by subsection 201 (a) and (b) of
30		this Act, but shall be subject to the replacement tax imposed
31		by subsection 201 (c) and (d) of this Act and shall compute its
32		base income as described in subsection (d) of Section 203 of

1		this Act. For taxable years ending on or after December 31,
2		2004, an investment partnership, as defined in Section
3		1501(a)(11.5) of this Act, shall not be subject to the tax
4		imposed by subsections (c) and (d) of Section 201 of this Act.
5		A partnership shall file such returns and other information at
6		such time and in such manner as may be required under Article 5
7		of this Act. The partners in a partnership shall be liable for
8		the replacement tax imposed by subsection 201 (c) and (d) of
9		this Act on such partnership, to the extent such tax is not
10		paid by the partnership, as provided under the laws of Illinois
11		governing the liability of partners for the obligations of a
12		partnership. Persons carrying on business as partners shall be
13		liable for the tax imposed by subsection 201 (a) and (b) of
14		this Act only in their separate or individual capacities.
15		(c) Subchapter S corporations. A Subchapter S corporation
16		shall not be subject to the tax imposed by subsection 201 (a)
17		and (b) of this Act but shall be subject to the replacement tax
18		imposed by subsection 201 (c) and (d) of this Act and shall
19		file such returns and other information at such time and in
20		such manner as may be required under Article 5 of this Act.
21		(d) Combat zone death. An individual relieved from the
22		federal income tax for any taxable year by reason of section
23		692 of the Internal Revenue Code shall not be subject to the
24		tax imposed by this Act for such taxable year.
25		(e) Certain trusts. A common trust fund described in
26		Section 584 of the Internal Revenue Code, and any other trust
27		to the extent that the grantor is treated as the owner thereof
28		under sections 671 through 678 of the Internal Revenue Code
29		shall not be subject to the tax imposed by this Act.
30		(f) Certain business activities. A person not otherwise
31		subject to the tax imposed by this Act shall not become subject
32		to the tax imposed by this Act by reason of:
33		(1) that person's ownership of tangible personal
34		property located at the premises of a printer in this State

1		with which the person has contracted for printing, or
2		(2) activities of the person's employees or agents
3		located solely at the premises of a printer and related to
4		quality control, distribution, or printing services
5		performed by a printer in the State with which the person
6		has contracted for printing.
7		(Source: P.A. 88-361.)
8		(35 ILCS 5/207) (from Ch. 120, par. 2-207)
9		Sec. 207. Net Losses.
10		(a) If after applying all of the (i) modifications provided
11		for in paragraph (2) of Section 203(b), paragraph (2) of
12		Section 203(c) and paragraph (2) of Section 203(d) and (ii) the
13		allocation and apportionment provisions of Article 3 of this
14		Act and subsection (c) of this Section, the taxpayer's net
15		income results in a loss;
16		(1) for any taxable year ending prior to December 31,
17		1999, such loss shall be allowed as a carryover or
18		carryback deduction in the manner allowed under Section 172
19		of the Internal Revenue Code;
20		(2) for any taxable year ending on or after December
21		31, 1999 and prior to December 31, 2003, such loss shall be
22		allowed as a carryback to each of the 2 taxable years
23		preceding the taxable year of such loss and shall be a net
24		operating loss carryover to each of the 20 taxable years
25		following the taxable year of such loss; and
26		(3) for any taxable year ending on or after December
27		31, 2003, such loss shall be allowed as a net operating
28		loss carryover to each of the 12 taxable years following
29		the taxable year of such loss.
30		(a-5) Election to relinquish carryback and order of
31		application of losses.
32		(A) For losses incurred in tax years ending prior
33		to December 31, 2003, the taxpayer may elect to

1		relinquish the entire carryback period with respect to
2		such loss. Such election shall be made in the form and
3		manner prescribed by the Department and shall be made
4		by the due date (including extensions of time) for
5		filing the taxpayer's return for the taxable year in
6		which such loss is incurred, and such election, once
7		made, shall be irrevocable.
8		(B) The entire amount of such loss shall be carried
9		to the earliest taxable year to which such loss may be
10		carried. The amount of such loss which shall be carried
11		to each of the other taxable years shall be the excess,
12		if any, of the amount of such loss over the sum of the
13		deductions for carryback or carryover of such loss
14		allowable for each of the prior taxable years to which
15		such loss may be carried.
16		(b) Any loss determined under subsection (a) of this
17		Section must be carried back or carried forward in the same
18		manner for purposes of subsections (a) and (b) of Section 201
19		of this Act as for purposes of subsections (c) and (d) of
20		Section 201 of this Act.
21		(c) Notwithstanding any other provision of this Act, for
22		each taxable year ending on or after December 31, 2004, for
23		purposes of computing the loss for the taxable year under
24		subsection (a) of this Section and the deduction taken into
25		account for the taxable year for a net operating loss carryover
26		under paragraphs (1), (2), and (3) of subsection (a) of this
27		Section, the loss and net operating loss carryover shall be
28		reduced in an amount equal to the reduction to the net
29		operating loss and net operating loss carryover to the taxable
30		year, respectively, required under Section 108(b)(2)(A) of the
31		Internal Revenue Code, multiplied by a fraction, the numerator
32		of which is the amount of discharge of indebtedness income that
33		is excluded from gross income for the taxable year (but only if
34		the taxable year ends on or after December 31, 2004) under

1		Section 108(a) of the Internal Revenue Code and that would have
2		been allocated and apportioned to this State under Article 3 of
3		this Act but for that exclusion, and the denominator of which
4		is the total amount of discharge of indebtedness income
5		excluded from gross income under Section 108(a) of the Internal
6		Revenue Code for the taxable year. The reduction required under
7		this subsection (c) shall be made after the determination of
8		Illinois net income for the taxable year in which the
9		indebtedness is discharged. This subsection (c) shall not apply
10		to a taxpayer who is a small business person in the taxable
11		year of the discharge of indebtedness.
12		(Source: P.A. 93-29, eff. 6-20-03.)
13		(35 ILCS 5/304) (from Ch. 120, par. 3-304)
14		Sec. 304. Business income of persons other than residents.
15		(a) In general. The business income of a person other than
16		a resident shall be allocated to this State if such person's
17		business income is derived solely from this State. If a person
18		other than a resident derives business income from this State
19		and one or more other states, then, for tax years ending on or
20		before December 30, 1998, and except as otherwise provided by
21		this Section, such person's business income shall be
22		apportioned to this State by multiplying the income by a
23		fraction, the numerator of which is the sum of the property
24		factor (if any), the payroll factor (if any) and 200% of the
25		sales factor (if any), and the denominator of which is 4
26		reduced by the number of factors other than the sales factor
27		which have a denominator of zero and by an additional 2 if the
28		sales factor has a denominator of zero. For tax years ending on
29		or after December 31, 1998, and except as otherwise provided by
30		this Section, persons other than residents who derive business
31		income from this State and one or more other states shall
32		compute their apportionment factor by weighting their
33		property, payroll, and sales factors as provided in subsection

1		(h) of this Section.
2		(1) Property factor.
3		(A) The property factor is a fraction, the numerator of
4		which is the average value of the person's real and
5		tangible personal property owned or rented and used in the
6		trade or business in this State during the taxable year and
7		the denominator of which is the average value of all the
8		person's real and tangible personal property owned or
9		rented and used in the trade or business during the taxable
10		year.
11		(B) Property owned by the person is valued at its
12		original cost. Property rented by the person is valued at 8
13		times the net annual rental rate. Net annual rental rate is
14		the annual rental rate paid by the person less any annual
15		rental rate received by the person from sub-rentals.
16		(C) The average value of property shall be determined
17		by averaging the values at the beginning and ending of the
18		taxable year but the Director may require the averaging of
19		monthly values during the taxable year if reasonably
20		required to reflect properly the average value of the
21		person's property.
22		(2) Payroll factor.
23		(A) The payroll factor is a fraction, the numerator of
24		which is the total amount paid in this State during the
25		taxable year by the person for compensation, and the
26		denominator of which is the total compensation paid
27		everywhere during the taxable year.
28		(B) Compensation is paid in this State if:
29		(i) The individual's service is performed entirely
30		within this State;
31		(ii) The individual's service is performed both
32		within and without this State, but the service
33		performed without this State is incidental to the
34		individual's service performed within this State; or

1		(iii) Some of the service is performed within this
2		State and either the base of operations, or if there is
3		no base of operations, the place from which the service
4		is directed or controlled is within this State, or the
5		base of operations or the place from which the service
6		is directed or controlled is not in any state in which
7		some part of the service is performed, but the
8		individual's residence is in this State.
9		Beginning with taxable years ending on or after
10		December 31, 1992, for residents of states that impose a
11		comparable tax liability on residents of this State, for
12		purposes of item (i) of this paragraph (B), in the case of
13		persons who perform personal services under personal
14		service contracts for sports performances, services by
15		that person at a sporting event taking place in Illinois
16		shall be deemed to be a performance entirely within this
17		State.
18		(3) Sales factor.
19		(A) The sales factor is a fraction, the numerator of
20		which is the total sales of the person in this State during
21		the taxable year, and the denominator of which is the total
22		sales of the person everywhere during the taxable year.
23		(B) Sales of tangible personal property are in this
24		State if:
25		(i) The property is delivered or shipped to a
26		purchaser, other than the United States government,
27		within this State regardless of the f. o. b. point or
28		other conditions of the sale; or
29		(ii) The property is shipped from an office, store,
30		warehouse, factory or other place of storage in this
31		State and either the purchaser is the United States
32		government or the person is not taxable in the state of
33		the purchaser; provided, however, that premises owned
34		or leased by a person who has independently contracted

1		with the seller for the printing of newspapers,
2		periodicals or books shall not be deemed to be an
3		office, store, warehouse, factory or other place of
4		storage for purposes of this Section. For taxable years
5		ending before December 31, 2004, sales Sales of
6		tangible personal property are not in this State if the
7		seller and purchaser would be members of the same
8		unitary business group but for the fact that either the
9		seller or purchaser is a person with 80% or more of
10		total business activity outside of the United States
11		and the property is purchased for resale.
12		(B-1) Patents, copyrights, trademarks, and similar
13		items of intangible personal property.
14		(i) Gross receipts from the licensing, sale, or
15		other disposition of a patent, copyright, trademark,
16		or similar item of intangible personal property are in
17		this State to the extent the item is utilized in this
18		State during the year the gross receipts are included
19		in gross income.
20		(ii) Place of utilization.
21		(I) A patent is utilized in a state to the
22		extent that it is employed in production,
23		fabrication, manufacturing, or other processing in
24		the state or to the extent that a patented product
25		is produced in the state. If a patent is utilized
26		in more than one state, the extent to which it is
27		utilized in any one state shall be a fraction equal
28		to the gross receipts of the licensee or purchaser
29		from sales or leases of items produced,
30		fabricated, manufactured, or processed within that
31		state using the patent and of patented items
32		produced within that state, divided by the total of
33		such gross receipts for all states in which the
34		patent is utilized.

1		(II) A copyright is utilized in a state to the
2		extent that printing or other publication
3		originates in the state. If a copyright is utilized
4		in more than one state, the extent to which it is
5		utilized in any one state shall be a fraction equal
6		to the gross receipts from sales or licenses of
7		materials printed or published in that state
8		divided by the total of such gross receipts for all
9		states in which the copyright is utilized.
10		(III) Trademarks and other items of intangible
11		personal property governed by this paragraph (B-1)
12		are utilized in the state in which the commercial
13		domicile of the licensee or purchaser is located.
14		(iii) If the state of utilization of an item of
15		property governed by this paragraph (B-1) cannot be
16		determined from the taxpayer's books and records or
17		from the books and records of any person related to the
18		taxpayer within the meaning of Section 267(b) of the
19		Internal Revenue Code, 26 U.S.C. 267, the gross
20		receipts attributable to that item shall be excluded
21		from both the numerator and the denominator of the
22		sales factor.
23		(B-2) Gross receipts from the license, sale, or other
24		disposition of patents, copyrights, trademarks, and
25		similar items of intangible personal property may be
26		included in the numerator or denominator of the sales
27		factor only if gross receipts from licenses, sales, or
28		other disposition of such items comprise more than 50% of
29		the taxpayer's total gross receipts included in gross
30		income during the tax year and during each of the 2
31		immediately preceding tax years; provided that, when a
32		taxpayer is a member of a unitary business group, such
33		determination shall be made on the basis of the gross
34		receipts of the entire unitary business group.

1		(C) For taxable years ending before December 31, 2004,
2		sales Sales, other than sales governed by paragraphs (B),
3		and (B-1), and (B-2), are in this State if:
4		(i) The income-producing activity is performed in
5		this State; or
6		(ii) The income-producing activity is performed
7		both within and without this State and a greater
8		proportion of the income-producing activity is
9		performed within this State than without this State,
10		based on performance costs.
11		(C-5) For taxable years ending on or after December 31,
12		2004, sales, other than sales governed by paragraphs (B),
13		(B-1), and (B-2), are in this State if the purchaser is in
14		this State or the sale is otherwise attributable to this
15		State's marketplace. The following examples are
16		illustrative:
17		(i) Sales from the sale or lease of real property
18		are in this State if the property is located in this
19		State.
20		(ii) Sales from the lease or rental of tangible
21		personal property are in this State if the property is
22		located in this State during the rental period. Sales
23		from the lease or rental of tangible personal property
24		that is characteristically moving property, including,
25		but not limited to, motor vehicles, rolling stock,
26		aircraft, vessels, or mobile equipment are in this
27		State to the extent that the property is used in this
28		State.
29		(iii) Sales of intangible personal property are in
30		this State if the purchaser uses or realizes benefit
31		from the property in this State. If the purchaser uses
32		or realizes benefit from the the property both within
33		and without this State, the gross receipts from the
34		sale shall be divided among those states having

1		jurisdiction to tax the sale in proportion to the use
2		or benefit in each state. If the proportionate use or
3		benefit in this State cannot be determined, the sale
4		shall be excluded from both the numerator and the
5		denominator of the sales factor.
6		(iv) Sales of services are in this State if the
7		benefit of the service is enjoyed or realized in this
8		State. If the benefit of the service is enjoyed or
9		realized both within and without this State, the gross
10		receipts from the sale shall be divided among those
11		states having jurisdiction to tax the sale in
12		proportion to the benefit of service enjoyed or
13		realized in each state. If the proportionate benefit in
14		this State cannot be determined, the sale shall be
15		excluded from both the numerator and the denominator of
16		the sales factor. The Department may adopt rules
17		prescribing where the benefit of specific types of
18		service, including, but not limited to,
19		telecommunications, broadcast, cable, advertising,
20		publishing, and utility service, is enjoyed or
21		realized.
22		(D) For taxable years ending on or after December 31,
23		1995, the following items of income shall not be included
24		in the numerator or denominator of the sales factor:
25		dividends; amounts included under Section 78 of the
26		Internal Revenue Code; and Subpart F income as defined in
27		Section 952 of the Internal Revenue Code. No inference
28		shall be drawn from the enactment of this paragraph (D) in
29		construing this Section for taxable years ending before
30		December 31, 1995.
31		(E) Paragraphs (B-1) and (B-2) shall apply to tax years
32		ending on or after December 31, 1999, provided that a
33		taxpayer may elect to apply the provisions of these
34		paragraphs to prior tax years. Such election shall be made

1		in the form and manner prescribed by the Department, shall
2		be irrevocable, and shall apply to all tax years; provided
3		that, if a taxpayer's Illinois income tax liability for any
4		tax year, as assessed under Section 903 prior to January 1,
5		1999, was computed in a manner contrary to the provisions
6		of paragraphs (B-1) or (B-2), no refund shall be payable to
7		the taxpayer for that tax year to the extent such refund is
8		the result of applying the provisions of paragraph (B-1) or
9		(B-2) retroactively. In the case of a unitary business
10		group, such election shall apply to all members of such
11		group for every tax year such group is in existence, but
12		shall not apply to any taxpayer for any period during which
13		that taxpayer is not a member of such group.
14		(b) Insurance companies.
15		(1) In general. Except as otherwise provided by
16		paragraph (2), business income of an insurance company for
17		a taxable year shall be apportioned to this State by
18		multiplying such income by a fraction, the numerator of
19		which is the direct premiums written for insurance upon
20		property or risk in this State, and the denominator of
21		which is the direct premiums written for insurance upon
22		property or risk everywhere. For purposes of this
23		subsection, the term "direct premiums written" means the
24		total amount of direct premiums written, assessments and
25		annuity considerations, and surplus line contracts, but
26		excluding deposit-type funds, as reported for the taxable
27		year on the annual statement filed by the company with the
28		Illinois Director of Insurance in the form approved by the
29		National Convention of Insurance Commissioners as filed by
30		the taxpayer with the Illinois Department of Insurance or,
31		if no report is filed with the Illinois Department of
32		Insurance, as filed by the taxpayer with its state of
33		domicile. If no such annual report is filed with any of the
34		United States for a particular year, "direct premiums

1		written" shall be determined by applying the instructions
2		to the Illinois annual report form for that year or such
3		other form as may be prescribed in lieu thereof.
4		(2) Reinsurance. If the principal source of premiums
5		written by an insurance company consists of premiums for
6		reinsurance accepted by it, the business income of such
7		company shall be apportioned to this State by multiplying
8		such income by a fraction, the numerator of which is the
9		sum of (i) direct premiums written for insurance upon
10		property or risk in this State, plus (ii) premiums written
11		for reinsurance accepted in respect of property or risk in
12		this State, and the denominator of which is the sum of
13		(iii) direct premiums written for insurance upon property
14		or risk everywhere, plus (iv) premiums written for
15		reinsurance accepted in respect of property or risk
16		everywhere. For taxable years ending before December 31,
17		2004, for purposes of this paragraph, premiums written for
18		reinsurance accepted in respect of property or risk in this
19		State, whether or not otherwise determinable, may, at the
20		election of the company, be determined on the basis of the
21		proportion which premiums written for reinsurance accepted
22		from companies commercially domiciled in Illinois bears to
23		premiums written for reinsurance accepted from all
24		sources, or, alternatively, in the proportion which the sum
25		of the direct premiums written for insurance upon property
26		or risk in this State by each ceding company from which
27		reinsurance is accepted bears to the sum of the total
28		direct premiums written by each such ceding company for the
29		taxable year.
30		(c) Financial organizations.
31		(1) In general. For taxable years ending before
32		December 31, 2004, business Business income of a financial
33		organization shall be apportioned to this State by
34		multiplying such income by a fraction, the numerator of

1		which is its business income from sources within this
2		State, and the denominator of which is its business income
3		from all sources. For the purposes of this subsection, the
4		business income of a financial organization from sources
5		within this State is the sum of the amounts referred to in
6		subparagraphs (A) through (E) following, but excluding the
7		adjusted income of an international banking facility as
8		determined in paragraph (2):
9		(A) Fees, commissions or other compensation for
10		financial services rendered within this State;
11		(B) Gross profits from trading in stocks, bonds or
12		other securities managed within this State;
13		(C) Dividends, and interest from Illinois
14		customers, which are received within this State;
15		(D) Interest charged to customers at places of
16		business maintained within this State for carrying
17		debit balances of margin accounts, without deduction
18		of any costs incurred in carrying such accounts; and
19		(E) Any other gross income resulting from the
20		operation as a financial organization within this
21		State. In computing the amounts referred to in
22		paragraphs (A) through (E) of this subsection, any
23		amount received by a member of an affiliated group
24		(determined under Section 1504(a) of the Internal
25		Revenue Code but without reference to whether any such
26		corporation is an "includible corporation" under
27		Section 1504(b) of the Internal Revenue Code) from
28		another member of such group shall be included only to
29		the extent such amount exceeds expenses of the
30		recipient directly related thereto.
31		(2) International Banking Facility. For taxable years
32		ending before December 31, 2004:
33		(A) Adjusted Income. The adjusted income of an
34		international banking facility is its income reduced

1		by the amount of the floor amount.
2		(B) Floor Amount. The floor amount shall be the
3		amount, if any, determined by multiplying the income of
4		the international banking facility by a fraction, not
5		greater than one, which is determined as follows:
6		(i) The numerator shall be:
7		The average aggregate, determined on a
8		quarterly basis, of the financial organization's
9		loans to banks in foreign countries, to foreign
10		domiciled borrowers (except where secured
11		primarily by real estate) and to foreign
12		governments and other foreign official
13		institutions, as reported for its branches,
14		agencies and offices within the state on its
15		"Consolidated Report of Condition", Schedule A,
16		Lines 2.c., 5.b., and 7.a., which was filed with
17		the Federal Deposit Insurance Corporation and
18		other regulatory authorities, for the year 1980,
19		minus
20		The average aggregate, determined on a
21		quarterly basis, of such loans (other than loans of
22		an international banking facility), as reported by
23		the financial institution for its branches,
24		agencies and offices within the state, on the
25		corresponding Schedule and lines of the
26		Consolidated Report of Condition for the current
27		taxable year, provided, however, that in no case
28		shall the amount determined in this clause (the
29		subtrahend) exceed the amount determined in the
30		preceding clause (the minuend); and
31		(ii) the denominator shall be the average
32		aggregate, determined on a quarterly basis, of the
33		international banking facility's loans to banks in
34		foreign countries, to foreign domiciled borrowers

1		(except where secured primarily by real estate)
2		and to foreign governments and other foreign
3		official institutions, which were recorded in its
4		financial accounts for the current taxable year.
5		(C) Change to Consolidated Report of Condition and
6		in Qualification. In the event the Consolidated Report
7		of Condition which is filed with the Federal Deposit
8		Insurance Corporation and other regulatory authorities
9		is altered so that the information required for
10		determining the floor amount is not found on Schedule
11		A, lines 2.c., 5.b. and 7.a., the financial institution
12		shall notify the Department and the Department may, by
13		regulations or otherwise, prescribe or authorize the
14		use of an alternative source for such information. The
15		financial institution shall also notify the Department
16		should its international banking facility fail to
17		qualify as such, in whole or in part, or should there
18		be any amendment or change to the Consolidated Report
19		of Condition, as originally filed, to the extent such
20		amendment or change alters the information used in
21		determining the floor amount.
22		(3) For taxable years ending on or after December 31,
23		2004, the business income of a financial organization shall
24		be apportioned to this State by multiplying such income by
25		a fraction, the numerator of which is its gross receipts
26		from sources in this State or otherwise attributable to
27		this State's marketplace and the denominator of which is
28		its gross receipts everywhere during the taxable year.
29		"Gross receipts" for purposes of this subparagraph (3)
30		means gross income, including net taxable gain on
31		disposition of assets, including securities and money
32		market instruments, when derived from transactions and
33		activities in the regular course of the financial
34		organization's trade or business. The following examples

1		are illustrative:
2		(i) Receipts from the lease or rental of real or
3		tangible personal property are in this State if the
4		property is located in this State during the rental
5		period. Receipts from the lease or rental of tangible
6		personal property that is characteristically moving
7		property, including, but not limited to, motor
8		vehicles, rolling stock, aircraft, vessels, or mobile
9		equipment are in this State to the extent that the
10		property is used in this State.
11		(ii) Interest income, commissions, fees, gains on
12		disposition, and other receipts from assets in the
13		nature of loans that are secured primarily by real
14		estate or tangible personal property are attributable
15		to this State's marketplace if the security is located
16		in this State.
17		(iii) Interest income, commissions, fees, gains on
18		disposition, and other receipts from consumer loans
19		that are not secured by real or tangible personal
20		property are this State if the debtor is a resident of
21		this State.
22		(iv) Interest income, commissions, fees, gains on
23		disposition, and other receipts from commercial loans
24		and installment obligations that are not unsecured by
25		real or tangible personal property are in this State if
26		the proceeds of the loan are to be applied in this
27		State. If it cannot be determined where the funds are
28		to be applied, the income and receipts are attributable
29		to this State's marketplace if the office of the
30		borrower from which the loan was procured in the
31		regular course of business is located in this State. If
32		the location of this office cannot be determined, such
33		receipts shall be excluded from the numerator and
34		denominator of the sales factor.

1		(v) Interest income, fees, gains on disposition,
2		service charges, and other receipts from credit card
3		receivables are in this State if the card charges are
4		regularly billed to a customer in this State.
5		(vi) Receipts from the performance of fiduciary
6		and other services are in this State if the benefit of
7		the service is enjoyed or realized in this State. If
8		the benefit of the service is enjoyed or realized both
9		within and without this State, the gross receipts from
10		the sale shall be divided among those states having
11		jurisdiction to tax the sale in proportion to the
12		benefit of service enjoyed or realized in each state.
13		If the proportionate benefit in this State cannot be
14		determined, the sale shall be excluded from both the
15		numerator and the denominator of the gross receipts
16		factor.
17		(vii) Receipts from the issuance of travelers
18		checks and money orders are in this State if the checks
19		and money orders are issued from a location within this
20		State.
21		(viii) In the case of a financial organization that
22		accepts deposits, receipts from investments and from
23		money market instruments are apportioned to this State
24		based on the ratio that the total deposits of the
25		financial organization (including all members of the
26		financial organization's unitary group) from this
27		State, its residents, any business with an office or
28		other place of business in this State, and its
29		political subdivisions, agencies, and
30		instrumentalities bear to total deposits everywhere.
31		For purposes of this subdivision, deposits must be
32		attributed to this State under the preceding sentence,
33		whether or not the deposits are accepted or maintained
34		by the financial organization at locations within this

1		State. In the case of a financial organization that
2		does not accept deposits, receipts from investments in
3		securities and from money market instruments shall be
4		excluded from the numerator and the denominator of the
5		gross receipts factor.
6		(4) As used in subparagraph (3), "deposit" includes but
7		is not limited to:
8		(i) the unpaid balance of money or its equivalent
9		received or held by a financial institution in the
10		usual course of business and for which it has given or
11		is obligated to give credit, either conditionally or
12		unconditionally, to a commercial, checking, savings,
13		time, or thrift account whether or not advance notice
14		is required to withdraw the credited funds, or which is
15		evidenced by its certificate of deposit, thrift
16		certificate, investment certificate, or certificate of
17		indebtedness, or other similar name, or a check or
18		draft drawn against a deposit account and certified by
19		the financial organization, or a letter of credit or a
20		traveler's check on which the financial organization
21		is primarily liable. However, without limiting the
22		generality of the term "money or its equivalent", any
23		such account or instrument must be regarded as
24		evidencing the receipt of the equivalent of money when
25		credited or issued in exchange for checks or drafts or
26		for a promissory note upon which the person obtaining
27		the credit or instrument is primarily or secondarily
28		liable, or for a charge against a deposit account, or
29		in settlement of checks, drafts, or other instruments
30		forwarded to the bank for collection;
31		(ii) trust funds received or held by the financial
32		organization, whether held in the trust department or
33		held or deposited in any other department of the
34		financial organization;

1		(iii) money received or held by a financial
2		organization, or the credit given for money or its
3		equivalent received or held by a financial
4		organization, in the usual course of business for a
5		special or specific purpose, regardless of the legal
6		relationship so established. Under this paragraph,
7		"deposit" includes, but is not limited to, escrow
8		funds, funds held as security for an obligation due to
9		the financial organization or others, including funds
10		held as dealers reserves, or for securities loaned by
11		the financial organization, funds deposited by a
12		debtor to meet maturing obligations, funds deposited
13		as advance payment on subscriptions to United States
14		government securities, funds held for distribution or
15		purchase of securities, funds held to meet its
16		acceptances or letters of credit, and withheld taxes.
17		It does not include funds received by the financial
18		organization for immediate application to the
19		reduction of an indebtedness to the receiving
20		financial organization, or under condition that the
21		receipt of the funds immediately reduces or
22		extinguishes the indebtedness;
23		(iv) outstanding drafts, including advice of
24		another financial organization, cashier's checks,
25		money orders, or other officer's checks issued in the
26		usual course of business for any purpose, but not
27		including those issued in payment for services,
28		dividends, or purchases or other costs or expenses of
29		the financial organization itself; and
30		(v) money or its equivalent held as a credit
31		balance by a financial organization on behalf of its
32		customer if the entity is engaged in soliciting and
33		holding such balances in the regular course of its
34		business.

1		(5) As used in subparagraph (3), "money market
2		instruments" includes but is not limited to:
3		(i) Interest-bearing deposits, federal funds sold
4		and securities purchased under agreements to resell,
5		commercial paper, banker's acceptances, and purchased
6		certificates of deposit and similar instruments to the
7		extent that the instruments are reflected as assets
8		under generally accepted accounting principles.
9		"Securities" means United States Treasury
10		securities, obligations of United States government
11		agencies and corporations, obligations of state and
12		political subdivisions, corporate stock, bonds, and
13		other securities, participations in securities backed
14		by mortgages held by United States or state government
15		agencies, loan-backed securities and similar
16		investments to the extent the investments are
17		reflected as assets under generally accepted
18		accounting principles.
19		(ii) For purposes of subparagraph (3), "money
20		market instruments shall include investments in
21		investment partnerships, trusts, pools, funds,
22		investment companies, or any similar entity in
23		proportion to the investment of such entity in money
24		market instruments, and "securities" shall include
25		investments in investment partnerships, trusts, pools,
26		funds, investment companies, or any similar entity in
27		proportion to the investment of such entity in
28		securities.
29		(d) Transportation services. For taxable years ending
30		before December 31, 2004, business Business income derived from
31		furnishing transportation services shall be apportioned to
32		this State in accordance with paragraphs (1) and (2):
33		(1) Such business income (other than that derived from
34		transportation by pipeline) shall be apportioned to this

1		State by multiplying such income by a fraction, the
2		numerator of which is the revenue miles of the person in
3		this State, and the denominator of which is the revenue
4		miles of the person everywhere. For purposes of this
5		paragraph, a revenue mile is the transportation of 1
6		passenger or 1 net ton of freight the distance of 1 mile
7		for a consideration. Where a person is engaged in the
8		transportation of both passengers and freight, the
9		fraction above referred to shall be determined by means of
10		an average of the passenger revenue mile fraction and the
11		freight revenue mile fraction, weighted to reflect the
12		person's
13		(A) relative railway operating income from total
14		passenger and total freight service, as reported to the
15		Interstate Commerce Commission, in the case of
16		transportation by railroad, and
17		(B) relative gross receipts from passenger and
18		freight transportation, in case of transportation
19		other than by railroad.
20		(2) Such business income derived from transportation
21		by pipeline shall be apportioned to this State by
22		multiplying such income by a fraction, the numerator of
23		which is the revenue miles of the person in this State, and
24		the denominator of which is the revenue miles of the person
25		everywhere. For the purposes of this paragraph, a revenue
26		mile is the transportation by pipeline of 1 barrel of oil,
27		1,000 cubic feet of gas, or of any specified quantity of
28		any other substance, the distance of 1 mile for a
29		consideration.
30		(3) For taxable years ending on or after December 31,
31		2004, business income derived from providing
32		transportation services other than airline services shall
33		be apportioned to this State by using a fraction, (a) the
34		numerator of which shall be (i) all receipts from any

1		movement or shipment of people, goods, mail , oil, gas, or
2		any other substance that both originates and terminates in
3		this State, plus (ii) that portion of the person's gross
4		receipts from movements or shipments of people, goods,
5		mail, oil, gas, or any other substance passing through,
6		into, or out of this State, that is determined by the ratio
7		that the miles traveled in this State bears to total miles
8		from point of origin to point of destination and (b) the
9		denominator of which shall be all revenue derived from the
10		movement or shipment of people, goods, mail, oil, gas, or
11		any other substance. If a person derives business income
12		from activities other than the provision of transportation
13		services, only its business income from transportation
14		services shall be apportioned according to this
15		subsection.
16		(4) For taxable years ending on or after December 31,
17		2004, business income derived from providing airline
18		services shall be apportioned to this State by using a
19		fraction, (a) the numerator of which shall be all receipts
20		from any movement or shipment of people, goods, or mail,
21		multiplied by the ratio equal to arrivals of aircraft to
22		and departures from this State weighted as to cost of
23		aircraft by type divided by total arrivals and departures
24		of aircraft weighted as to cost of aircraft by type and (b)
25		the denominator of which shall be all revenue derived from
26		the movement or shipment of people, goods, or mail. If a
27		person derives business income from activities other than
28		the provision of airline services only, its business income
29		from airline services shall be apportioned according to
30		this subsection.
31		(e) Combined apportionment. Where 2 or more persons are
32		engaged in a unitary business as described in subsection
33		(a)(27) of Section 1501, a part of which is conducted in this
34		State by one or more members of the group, the business income

1		attributable to this State by any such member or members shall
2		be apportioned by means of the combined apportionment method.
3		(f) Alternative allocation. If the allocation and
4		apportionment provisions of subsections (a) through (e) and of
5		subsection (h) do not fairly represent the extent of a person's
6		business activity in this State, the person may petition for,
7		or the Director may, without a petition, permit or require, in
8		respect of all or any part of the person's business activity,
9		if reasonable:
10		(1) Separate accounting;
11		(2) The exclusion of any one or more factors;
12		(3) The inclusion of one or more additional factors
13		which will fairly represent the person's business
14		activities in this State; or
15		(4) The employment of any other method to effectuate an
16		equitable allocation and apportionment of the person's
17		business income.
18		(g) Cross reference. For allocation of business income by
19		residents, see Section 301(a).
20		(h) For tax years ending on or after December 31, 1998, the
21		apportionment factor of persons who apportion their business
22		income to this State under subsection (a) shall be equal to:
23		(1) for tax years ending on or after December 31, 1998
24		and before December 31, 1999, 16 2/3% of the property
25		factor plus 16 2/3% of the payroll factor plus 66 2/3% of
26		the sales factor;
27		(2) for tax years ending on or after December 31, 1999
28		and before December 31, 2000, 8 1/3% of the property factor
29		plus 8 1/3% of the payroll factor plus 83 1/3% of the sales
30		factor;
31		(3) for tax years ending on or after December 31, 2000,
32		the sales factor.
33		If, in any tax year ending on or after December 31, 1998 and
34		before December 31, 2000, the denominator of the payroll,

1		property, or sales factor is zero, the apportionment factor
2		computed in paragraph (1) or (2) of this subsection for that
3		year shall be divided by an amount equal to 100% minus the
4		percentage weight given to each factor whose denominator is
5		equal to zero.
6		(i) The changes made to this Section by this amendatory Act
7		of the 93rd General Assembly do not apply to any small business
8		person.
9		(Source: P.A. 90-562, eff. 12-16-97; 90-613, eff. 7-9-98;
10		91-541, eff. 8-13-99.)
11		(35 ILCS 5/305) (from Ch. 120, par. 3-305)
12		Sec. 305. Allocation of Partnership Income by partnerships
13		and partners other than residents. (a) Allocation of
14		partnership business income by partners other than residents.
15		The respective shares of partners other than residents in so
16		much of the business income of the partnership as is allocated
17		or apportioned to this State in the possession of the
18		partnership shall be taken into account by such partners pro
19		rata in accordance with their respective distributive shares of
20		such partnership income for the partnership's taxable year and
21		allocated to this State.
22		(b) Allocation of partnership nonbusiness income by
23		partners other than residents. The respective shares of
24		partners other than residents in the items of partnership
25		income and deduction not taken into account in computing the
26		business income of a partnership shall be taken into account by
27		such partners pro rata in accordance with their respective
28		distributive shares of such partnership income for the
29		partnership's taxable year, and allocated as if such items had
30		been paid, incurred or accrued directly to such partners in
31		their separate capacities.
32		(c) Allocation or apportionment of base income by
33		partnership. Base income of a partnership shall be allocated or

1		apportioned to this State pursuant to Article 3, in the same
2		manner as it is allocated or apportioned for any other
3		nonresident.
4		(c-5) Taxable income of an investment partnership, as
5		defined in Section 1501(a)(11.5) of this Act, that is
6		distributable to a nonresident partner shall be treated as
7		nonbusiness income and shall be allocated to the partner's
8		state of residence (in the case of an individual) or commercial
9		domicile (in the case of any other person). However, any income
10		distributable to a nonresident partner shall be treated as
11		business income and apportioned as if such income had been
12		received directly by the partner if the partner has made an
13		election under Section 1501(a)(1) of this Act to treat all
14		income as business income or if such income is from investment
15		activity:
16		(1) that is directly or integrally related to any other
17		business activity conducted in this State by the
18		nonresident partner (or any member of that partner's
19		unitary business group);
20		(2) that serves an operational function to any other
21		business activity of the nonresident partner (or any member
22		of that partner's unitary business group) in this State; or
23		(3) where assets of the investment partnership were
24		acquired with working capital from a trade or business
25		activity conducted in this State in which the nonresident
26		partner (or any member of that partner's unitary business
27		group) owns an interest.
28		(d) Cross reference. For allocation of partnership income
29		or deductions by residents, see Section 301(a).
30		(Source: P.A. 84-550.)
31		(35 ILCS 5/501) (from Ch. 120, par. 5-501)
32		Sec. 501. Notice or Regulations Requiring Records,
33		Statements and Special Returns.

1		(a) In general. Every person liable for any tax imposed by
2		this Act shall keep such records, render such statements, make
3		such returns and notices, and comply with such rules and
4		regulations as the Department may from time to time prescribe.
5		Whenever in the judgment of the Director it is necessary, he
6		may require any person, by notice served upon such person or by
7		regulations, to make such returns and notices, render such
8		statements, or keep such records, as the Director deems
9		sufficient to show whether or not such person is liable for tax
10		under this Act.
11		(b) Reportable transactions.
12		(1) Federal transactions. For each taxable year in which a
13		taxpayer is required to make a disclosure statement under
14		Treasury Regulations Section 1.6011-4 (26 CFR 1.6011-4)
15		(including any taxpayer that is a member of a consolidated
16		group required to make such disclosure) with respect to a
17		reportable transaction (including a listed transaction) in
18		which the taxpayer participated in a taxable year for which a
19		return is required under Section 502 of this Act, such taxpayer
20		shall file a copy of such disclosure with the Department.
21		Disclosure under this paragraph (1) is required to be made by
22		any taxpayer that is a member of a unitary business group that
23		includes any person required to make a disclosure statement
24		under Treasury Regulations Section 1.6011-4. Disclosure under
25		this paragraph (1) is required with respect to any transaction
26		entered into after February 28, 2000 that becomes a listed
27		transaction at any time and shall be made in the manner
28		prescribed by the Department. With respect to listed
29		transactions in which the taxpayer participated for taxable
30		years ending before December 31, 2004, disclosure shall be made
31		by the due date (including extensions) of the first return
32		required under Section 502 of this Act due after the effective
33		date of this Public Act of the 93rd General Assembly. With
34		respect to transactions in which the taxpayer participated for

1		taxable years ending on and after December 31, 2004, disclosure
2		shall be made at the time disclosure is required under Treasury
3		regulations (Section 1.6011-4).
4		(2) Illinois transactions. Any taxpayer that has
5		participated in an "Illinois reportable transaction" is
6		required to disclose such transaction on a return or statement
7		at the time, and in the form and manner prescribed by the
8		Department. Disclosure is required for each taxable year in
9		which the taxpayer participates in an Illinois reportable
10		transaction. If such reportable transaction results in a loss
11		which is carried back to a prior year, such disclosure must be
12		attached to the taxpayer's amended tax return for that prior
13		year.
14		(A) Definitions.
15		(i) Illinois reportable transaction. The term
16		"Illinois reportable transaction" means any
17		transaction of a type that the Department shall by
18		regulation determine as having a potential for
19		avoidance or evasion of the tax imposed by this Act,
20		including deductions, basis, credits, entity
21		classification, dividend elimination, or ommission of
22		income. An Illinois reportable transaction includes
23		(but is not limited to) "Illinois listed transactions"
24		as defined in this subparagraph (A), "confidential
25		transactions" as defined under Treasury Regulations
26		Section 1.6011-4(b)(3) and "transactions with
27		contractual protection" as defined under Treasury
28		Regulations Section 1.6011-4(b)(4).
29		(ii) Illinois listed transactions. The term
30		"Illinois listed transaction" means a reportable
31		transaction that is the same as, or substantially
32		similar to, one of the types of reportable transactions
33		and that has been specifically identified by the
34		Department as a tax avoidance transaction.

1		(iii) Participated. For purposes of paragraph (2)
2		of this subsection (b), the term "participated" shall
3		be defined for each type of Illinois reportable
4		transaction in the regulation or other published
5		guidance identifying that type of reportable
6		transaction or listed transaction.
7		(B) The Department shall identify and publish Illinois
8		listed transactions through the use of Informational
9		Bulletins or other published guidance.
10		(c) Inconsistent return position. Pursuant to regulations
11		prescribed by the Department, any taxpayer that reports for any
12		taxable year any item for Illinois income tax purposes in a
13		manner inconsistent with the manner in which the same item is
14		reported or reflected on any return filed for the same taxable
15		year with another state with respect to a tax on or measured by
16		net income or with the manner in which a substantially
17		identical item was reported or reflected for Illinois income
18		tax purposes for the immediately preceding taxable year
19		(inconsistent return position), shall disclose such
20		inconsistent return position on a return or statement in the
21		form and manner prescribed by the Department. An inconsistent
22		return position shall include, but shall not be limited to, the
23		following:
24		(1) The reporting of the same item as business
25		income on the Illinois return and as nonbusiness income
26		on the return filed in another state, or as nonbusiness
27		income on the Illinois return and as business income on
28		the return filed in another state (except that an item
29		reported as business income in Illinois by virtue of
30		the election provided under Section 1501(a)(1) of this
31		Act shall not be deemed to give rise to an inconsistent
32		return position).
33		(2) The reporting of the same item of gross
34		receipts as attributable to another state on the

1		Illinois return and as attributable to Illinois on the
2		return filed in another state.
3		(3) The reporting of the same person as a member of
4		the taxpayer's unitary business on the Illinois return
5		and as not a member of the unitary business on the
6		return filed in another state or the reporting of the
7		same person as not a member of the taxpayer's unitary
8		business on the Illinois return and as a member of the
9		unitary business on the return filed in another state.
10		(Source: P.A. 76-261.)
11		(35 ILCS 5/502) (from Ch. 120, par. 5-502)
12		Sec. 502. Returns and notices.
13		(a) In general. A return with respect to the taxes imposed
14		by this Act shall be made by every person for any taxable year:
15		(1) for which such person is liable for a tax imposed
16		by this Act, or
17		(2) in the case of a resident or in the case of a
18		corporation which is qualified to do business in this
19		State, for which such person is required to make a federal
20		income tax return, regardless of whether such person is
21		liable for a tax imposed by this Act. However, this
22		paragraph shall not require a resident to make a return if
23		such person has an Illinois base income of the basic amount
24		in Section 204(b) or less and is either claimed as a
25		dependent on another person's tax return under the Internal
26		Revenue Code of 1986, or is claimed as a dependent on
27		another person's tax return under this Act.
28		Notwithstanding the provisions of paragraph (1), a
29		nonresident whose Illinois income tax liability under
30		subsections (a), (b), (c), and (d) of Section 201 of this Act
31		is paid in full after taking into account the credits allowed
32		under subsection (f) of this Section or allowed under Section
33		709.5 of this Act shall not be required to file a return under

1		this subsection (a).
2		(b) Fiduciaries and receivers.
3		(1) Decedents. If an individual is deceased, any return
4		or notice required of such individual under this Act shall
5		be made by his executor, administrator, or other person
6		charged with the property of such decedent.
7		(2) Individuals under a disability. If an individual is
8		unable to make a return or notice required under this Act,
9		the return or notice required of such individual shall be
10		made by his duly authorized agent, guardian, fiduciary or
11		other person charged with the care of the person or
12		property of such individual.
13		(3) Estates and trusts. Returns or notices required of
14		an estate or a trust shall be made by the fiduciary
15		thereof.
16		(4) Receivers, trustees and assignees for
17		corporations. In a case where a receiver, trustee in
18		bankruptcy, or assignee, by order of a court of competent
19		jurisdiction, by operation of law, or otherwise, has
20		possession of or holds title to all or substantially all
21		the property or business of a corporation, whether or not
22		such property or business is being operated, such receiver,
23		trustee, or assignee shall make the returns and notices
24		required of such corporation in the same manner and form as
25		corporations are required to make such returns and notices.
26		(c) Joint returns by husband and wife.
27		(1) Except as provided in paragraph (3), if a husband
28		and wife file a joint federal income tax return for a
29		taxable year they shall file a joint return under this Act
30		for such taxable year and their liabilities shall be joint
31		and several, but if the federal income tax liability of
32		either spouse is determined on a separate federal income
33		tax return, they shall file separate returns under this
34		Act.

1		(2) If neither spouse is required to file a federal
2		income tax return and either or both are required to file a
3		return under this Act, they may elect to file separate or
4		joint returns and pursuant to such election their
5		liabilities shall be separate or joint and several.
6		(3) If either husband or wife is a resident and the
7		other is a nonresident, they shall file separate returns in
8		this State on such forms as may be required by the
9		Department in which event their tax liabilities shall be
10		separate; but they may elect to determine their joint net
11		income and file a joint return as if both were residents
12		and in such case, their liabilities shall be joint and
13		several.
14		(4) Innocent spouses.
15		(A) However, for tax liabilities arising and paid
16		prior to August 13, 1999, an innocent spouse shall be
17		relieved of liability for tax (including interest and
18		penalties) for any taxable year for which a joint
19		return has been made, upon submission of proof that the
20		Internal Revenue Service has made a determination
21		under Section 6013(e) of the Internal Revenue Code, for
22		the same taxable year, which determination relieved
23		the spouse from liability for federal income taxes. If
24		there is no federal income tax liability at issue for
25		the same taxable year, the Department shall rely on the
26		provisions of Section 6013(e) to determine whether the
27		person requesting innocent spouse abatement of tax,
28		penalty, and interest is entitled to that relief.
29		(B) For tax liabilities arising on and after August
30		13, 1999 or which arose prior to that date, but remain
31		unpaid as of that date, if an individual who filed a
32		joint return for any taxable year has made an election
33		under this paragraph, the individual's liability for
34		any tax shown on the joint return shall not exceed the

1		individual's separate return amount and the
2		individual's liability for any deficiency assessed for
3		that taxable year shall not exceed the portion of the
4		deficiency properly allocable to the individual. For
5		purposes of this paragraph:
6		(i) An election properly made pursuant to
7		Section 6015 of the Internal Revenue Code shall
8		constitute an election under this paragraph,
9		provided that the election shall not be effective
10		until the individual has notified the Department
11		of the election in the form and manner prescribed
12		by the Department.
13		(ii) If no election has been made under Section
14		6015, the individual may make an election under
15		this paragraph in the form and manner prescribed by
16		the Department, provided that no election may be
17		made if the Department finds that assets were
18		transferred between individuals filing a joint
19		return as part of a scheme by such individuals to
20		avoid payment of Illinois income tax and the
21		election shall not eliminate the individual's
22		liability for any portion of a deficiency
23		attributable to an error on the return of which the
24		individual had actual knowledge as of the date of
25		filing.
26		(iii) In determining the separate return
27		amount or portion of any deficiency attributable
28		to an individual, the Department shall follow the
29		provisions in subsections (c) and (d) of Section
30		6015 of the Internal Revenue Code.
31		(iv) In determining the validity of an
32		individual's election under subparagraph (ii) and
33		in determining an electing individual's separate
34		return amount or portion of any deficiency under

1		subparagraph (iii), any determination made by the
2		Secretary of the Treasury, by the United States Tax
3		Court on petition for review of a determination by
4		the Secretary of the Treasury, or on appeal from
5		the United States Tax Court under Section 6015 of
6		the Internal Revenue Code regarding criteria for
7		eligibility or under subsection (d) of Section
8		6015 of the Internal Revenue Code regarding the
9		allocation of any item of income, deduction,
10		payment, or credit between an individual making
11		the federal election and that individual's spouse
12		shall be conclusively presumed to be correct. With
13		respect to any item that is not the subject of a
14		determination by the Secretary of the Treasury or
15		the federal courts, in any proceeding involving
16		this subsection, the individual making the
17		election shall have the burden of proof with
18		respect to any item except that the Department
19		shall have the burden of proof with respect to
20		items in subdivision (ii).
21		(v) Any election made by an individual under
22		this subsection shall apply to all years for which
23		that individual and the spouse named in the
24		election have filed a joint return.
25		(vi) After receiving a notice that the federal
26		election has been made or after receiving an
27		election under subdivision (ii), the Department
28		shall take no collection action against the
29		electing individual for any liability arising from
30		a joint return covered by the election until the
31		Department has notified the electing individual in
32		writing that the election is invalid or of the
33		portion of the liability the Department has
34		allocated to the electing individual. Within 60

1		days (150 days if the individual is outside the
2		United States) after the issuance of such
3		notification, the individual may file a written
4		protest of the denial of the election or of the
5		Department's determination of the liability
6		allocated to him or her and shall be granted a
7		hearing within the Department under the provisions
8		of Section 908. If a protest is filed, the
9		Department shall take no collection action against
10		the electing individual until the decision
11		regarding the protest has become final under
12		subsection (d) of Section 908 or, if
13		administrative review of the Department's decision
14		is requested under Section 1201, until the
15		decision of the court becomes final.
16		(d) Partnerships. Every partnership having any base income
17		allocable to this State in accordance with section 305(c) shall
18		retain information concerning all items of income, gain, loss
19		and deduction; the names and addresses of all of the partners,
20		or names and addresses of members of a limited liability
21		company, or other persons who would be entitled to share in the
22		base income of the partnership if distributed; the amount of
23		the distributive share of each; and such other pertinent
24		information as the Department may by forms or regulations
25		prescribe. The partnership shall make that information
26		available to the Department when requested by the Department.
27		(e) For taxable years ending on or after December 31, 1985,
28		and before December 31, 1993, taxpayers that are corporations
29		(other than Subchapter S corporations) having the same taxable
30		year and that are members of the same unitary business group
31		may elect to be treated as one taxpayer for purposes of any
32		original return, amended return which includes the same
33		taxpayers of the unitary group which joined in the election to
34		file the original return, extension, claim for refund,

1		assessment, collection and payment and determination of the
2		group's tax liability under this Act. This subsection (e) does
3		not permit the election to be made for some, but not all, of
4		the purposes enumerated above. For taxable years ending on or
5		after December 31, 1987, corporate members (other than
6		Subchapter S corporations) of the same unitary business group
7		making this subsection (e) election are not required to have
8		the same taxable year.
9		For taxable years ending on or after December 31, 1993,
10		taxpayers that are corporations (other than Subchapter S
11		corporations) and that are members of the same unitary business
12		group shall be treated as one taxpayer for purposes of any
13		original return, amended return which includes the same
14		taxpayers of the unitary group which joined in filing the
15		original return, extension, claim for refund, assessment,
16		collection and payment and determination of the group's tax
17		liability under this Act.
18		(f) The Department may promulgate regulations to permit
19		nonresident individual partners of the same partnership,
20		nonresident Subchapter S corporation shareholders of the same
21		Subchapter S corporation, and nonresident individuals
22		transacting an insurance business in Illinois under a Lloyds
23		plan of operation, and nonresident individual members of the
24		same limited liability company that is treated as a partnership
25		under Section 1501 (a)(16) of this Act, to file composite
26		individual income tax returns reflecting the composite income
27		of such individuals allocable to Illinois and to make composite
28		individual income tax payments. The Department may by
29		regulation also permit such composite returns to include the
30		income tax owed by Illinois residents attributable to their
31		income from partnerships, Subchapter S corporations, insurance
32		businesses organized under a Lloyds plan of operation, or
33		limited liability companies that are treated as partnership
34		under Section 1501(a)(16) of this Act, in which case such

1		Illinois residents will be permitted to claim credits on their
2		individual returns for their shares of the composite tax
3		payments. This paragraph of subsection (f) applies to taxable
4		years ending on or after December 31, 1987.
5		For taxable years ending on or after December 31, 1999, the
6		Department may, by regulation, also permit any persons
7		transacting an insurance business organized under a Lloyds plan
8		of operation to file composite returns reflecting the income of
9		such persons allocable to Illinois and the tax rates applicable
10		to such persons under Section 201 and to make composite tax
11		payments and shall, by regulation, also provide that the income
12		and apportionment factors attributable to the transaction of an
13		insurance business organized under a Lloyds plan of operation
14		by any person joining in the filing of a composite return
15		shall, for purposes of allocating and apportioning income under
16		Article 3 of this Act and computing net income under Section
17		202 of this Act, be excluded from any other income and
18		apportionment factors of that person or of any unitary business
19		group, as defined in subdivision (a)(27) of Section 1501, to
20		which that person may belong.
21		For taxable years ending on or after December 31, 2004,
22		every nonresident shall be allowed a credit against his or her
23		liability under subsections (a) and (b) of Section 201 for any
24		amount of tax reported on a composite return and paid on his or
25		her behalf under this subsection (f). Residents (other than
26		persons transacting an insurance business organized under a
27		Lloyds plan of operation) may claim a credit for taxes reported
28		on a composite return and paid on their behalf under this
29		subsection (f) only as permitted by the Department by rule.
30		(f-5) For taxable years ending on or after December 31,
31		2004, the Department may promulgate rules to provide that, when
32		a partnership or Subchapter S corporation has made an error in
33		determining the amount of any item of income, deduction,
34		addition, subtraction, or credit required to be reported on its

1		return that affects the liability imposed under this Act on a
2		partner or shareholder, the partnership or Subchapter S
3		corporation may report the changes in liabilities of its
4		partners or shareholders and claim a refund of the resulting
5		overpayments, or pay the resulting underpayments, on behalf of
6		its partners and shareholders.
7		(g) The Department may adopt rules to authorize the
8		electronic filing of any return required to be filed under this
9		Section.
10		(Source: P.A. 91-541, eff. 8-13-99; 91-913, eff. 1-1-01;
11		92-846, eff. 8-23-02.)
12		(35 ILCS 5/709.5 new)
13		Sec. 709.5. Withholding by partnerships, Subchapter S
14		corporations, and trusts.
15		(a) In general. For each taxable year ending on or after
16		December 31, 2004, every partnership (other than a publicly
17		traded partnership under Section 7704 of the Internal Revenue
18		Code), Subchapter S corporation, and trust who is not a small
19		business person must withhold from each nonresident partner,
20		shareholder, or beneficiary (other than a partner,
21		shareholder, or beneficiary included on a composite return
22		filed by the partnership or Subchapter S corporation for the
23		taxable year under subsection (f) of Section 502 of this Act)
24		an amount equal to the distributable share of the business
25		income apportionable to Illinois of that partner, shareholder,
26		or beneficiary under Sections 702 and 704 and Subchapter S of
27		the Internal Revenue Code, whether or not distributed,
28		multiplied by the applicable rates of tax for that partner or
29		shareholder under subsections (a) through (d) of Section 201 of
30		this Act.
31		(b) Credit for taxes withheld. Any amount withheld under
32		subsection (a) of this Section and paid to the Department shall
33		be treated as a payment of the estimated tax liability or of

1		the liability for withholding under this Section of the
2		partner, shareholder, or beneficiary to whom the income is
3		distributable for the taxable year in which that person
4		incurred a liability under this Act with respect to that
5		income.
6		(35 ILCS 5/711) (from Ch. 120, par. 7-711)
7		Sec. 711. Payor's Return and Payment of Tax Withheld. (a)
8		In general. Every payor required to deduct and withhold tax
9		under Section 710 (and until January 1, 1989, Sections 708 and
10		709) shall be subject to the same reporting requirements
11		regarding taxes withheld and the same monthly and quarter
12		monthly (weekly) payment requirements as an employer subject to
13		the provisions of Section 701. For purposes of monthly and
14		quarter monthly (weekly) payments, the total tax withheld under
15		Sections 701, 708, 709 and 710 shall be considered in the
16		aggregate.
17		(a-5) Every partnership, Subchapter S corporation, or
18		trust required to withhold tax under Section 709.5 shall report
19		the amounts withheld and the partners, shareholders, or
20		beneficiaries from whom the amounts were withheld, and pay over
21		the amount withheld, no later than the due date (without regard
22		to extensions) of the tax return of the partnership, Subchapter
23		S corporation, or trust for the taxable year.
24		(b) Information statement. Every payor required to deduct
25		and withhold tax under Section 710 (and until January 1, 1989,
26		Sections 708 and 709) shall furnish in duplicate to each party
27		entitled to the credit for such withholding under subsection
28		(b) of Section 709.5 (c) of Section 708, subsection (c) of
29		Section 709, and subsection (b) of Section 710, respectively,
30		on or before January 31 of the succeeding calendar year for
31		amounts withheld under Section 710 or the due date (without
32		regard to extensions) of the return of the partnership,
33		Subchapter S corporation, or trust for the taxable year for

1		amounts withheld under Section 709.5 for the taxable year, a
2		written statement in such form as the Department may by
3		regulation prescribe showing the amount of the payments, the
4		amount deducted and withheld as tax, and such other information
5		as the Department may prescribe. A copy of such statement shall
6		be filed by the party entitled to the credit for the
7		withholding under subsection (b) of Section 709.5 (c) of
8		Section 708, subsection (c) of Section 709, or subsection (b)
9		of Section 710 with his return for the taxable year to which it
10		relates.
11		(Source: P.A. 85-299; 85-982.)
12		(35 ILCS 5/712) (from Ch. 120, par. 7-712)
13		Sec. 712. Payor's Liability For Withheld Taxes. Every payor
14		who deducts and withholds or is required to deduct and withhold
15		tax under Sections 709.5 or Section 710 (and until January 1,
16		1989, Sections 708 and 709) is liable for such tax. For
17		purposes of assessment and collection, any amount withheld or
18		required to be withheld and paid over to the Department, and
19		any penalties and interest with respect thereto, shall be
20		considered the tax of the payor. Any amount of tax actually
21		deducted and withheld under Sections 709.5 or Section 710 (and
22		until January 1, 1989, Sections 708 and 709) shall be held to
23		be a special fund in trust for the Department. No payee shall
24		have any right of action against his payor in respect of any
25		money deducted and withheld and paid over to the Department in
26		compliance or in intended compliance with Sections and 709.5 or
27		Section 710 (and until January 1, 1989, Sections 708 and 709).
28		(Source: P.A. 85-299; 85-982.)
29		(35 ILCS 5/713) (from Ch. 120, par. 7-713)
30		Sec. 713. Payor's Failure To Withhold. If a payor fails to
31		deduct and withhold any amount of tax as required under
32		Sections and 709.5 or Section 710 (and until January 1, 1989,

1		Sections 708 and 709) and thereafter the tax on account of
2		which such amount was required to be deducted and withheld is
3		paid, such amount of tax shall not be collected from the payor,
4		but the payor shall not be relieved from liability for
5		penalties or interest otherwise applicable in respect of such
6		failure to deduct and withhold. For purposes of this Section,
7		the tax on account of which an amount is required to be
8		deducted and withheld is the tax of the individual or
9		individuals who are entitled to a credit under subsection (b)
10		of Section 709.5 (c) of Section 708, subsection (c) of Section
11		709, or subsection (b) of Section 710 for the withheld tax.
12		(Source: P.A. 85-299; 85-982.)
13		(35 ILCS 5/804) (from Ch. 120, par. 8-804)
14		Sec. 804. Failure to Pay Estimated Tax.
15		(a) In general. In case of any underpayment of estimated
16		tax by a taxpayer, except as provided in subsection (d) or (e),
17		the taxpayer shall be liable to a penalty in an amount
18		determined at the rate prescribed by Section 3-3 of the Uniform
19		Penalty and Interest Act upon the amount of the underpayment
20		(determined under subsection (b)) for each required
21		installment.
22		(b) Amount of underpayment. For purposes of subsection (a),
23		the amount of the underpayment shall be the excess of:
24		(1) the amount of the installment which would be
25		required to be paid under subsection (c), over
26		(2) the amount, if any, of the installment paid on or
27		before the last date prescribed for payment.
28		(c) Amount of Required Installments.
29		(1) Amount.
30		(A) In General. Except as provided in paragraph
31		(2), the amount of any required installment shall be
32		25% of the required annual payment.
33		(B) Required Annual Payment. For purposes of

1		subparagraph (A), the term "required annual payment"
2		means the lesser of
3		(i) 90% of the tax shown on the return for the
4		taxable year, or if no return is filed, 90% of the
5		tax for such year, or
6		(ii) 100% of the tax shown on the return of the
7		taxpayer for the preceding taxable year if a return
8		showing a liability for tax was filed by the
9		taxpayer for the preceding taxable year and such
10		preceding year was a taxable year of 12 months.
11		(2) Lower Required Installment where Annualized Income
12		Installment is Less Than Amount Determined Under Paragraph
13		(1).
14		(A) In General. In the case of any required
15		installment if a taxpayer establishes that the
16		annualized income installment is less than the amount
17		determined under paragraph (1),
18		(i) the amount of such required installment
19		shall be the annualized income installment, and
20		(ii) any reduction in a required installment
21		resulting from the application of this
22		subparagraph shall be recaptured by increasing the
23		amount of the next required installment determined
24		under paragraph (1) by the amount of such
25		reduction, and by increasing subsequent required
26		installments to the extent that the reduction has
27		not previously been recaptured under this clause.
28		(B) Determination of Annualized Income
29		Installment. In the case of any required installment,
30		the annualized income installment is the excess, if
31		any, of
32		(i) an amount equal to the applicable
33		percentage of the tax for the taxable year computed
34		by placing on an annualized basis the net income

1		for months in the taxable year ending before the
2		due date for the installment, over
3		(ii) the aggregate amount of any prior
4		required installments for the taxable year.
5		(C) Applicable Percentage.
12		(D) Annualized Net Income; Individuals. For
13		individuals, net income shall be placed on an
14		annualized basis by:
15		(i) multiplying by 12, or in the case of a
16		taxable year of less than 12 months, by the number
17		of months in the taxable year, the net income
18		computed without regard to the standard exemption
19		for the months in the taxable year ending before
20		the month in which the installment is required to
21		be paid;
22		(ii) dividing the resulting amount by the
23		number of months in the taxable year ending before
24		the month in which such installment date falls; and
25		(iii) deducting from such amount the standard
26		exemption allowable for the taxable year, such
27		standard exemption being determined as of the last
28		date prescribed for payment of the installment.
29		(E) Annualized Net Income; Corporations. For
30		corporations, net income shall be placed on an
31		annualized basis by multiplying by 12 the taxable
32		income
33		(i) for the first 3 months of the taxable year,
34		in the case of the installment required to be paid

1		in the 4th month,
2		(ii) for the first 3 months or for the first 5
3		months of the taxable year, in the case of the
4		installment required to be paid in the 6th month,
5		(iii) for the first 6 months or for the first 8
6		months of the taxable year, in the case of the
7		installment required to be paid in the 9th month,
8		and
9		(iv) for the first 9 months or for the first 11
10		months of the taxable year, in the case of the
11		installment required to be paid in the 12th month
12		of the taxable year,
13		then dividing the resulting amount by the number of
14		months in the taxable year (3, 5, 6, 8, 9, or 11 as the
15		case may be).
16		(d) Exceptions. Notwithstanding the provisions of the
17		preceding subsections, the penalty imposed by subsection (a)
18		shall not be imposed if the taxpayer was not required to file
19		an Illinois income tax return for the preceding taxable year,
20		or, for individuals, if the taxpayer had no tax liability for
21		the preceding taxable year and such year was a taxable year of
22		12 months. The penalty imposed by subsection (a) shall also not
23		be imposed on any underpayments of estimated tax due before the
24		effective date of this amendatory Act of 1998 which
25		underpayments are solely attributable to the change in
26		apportionment from subsection (a) to subsection (h) of Section
27		304. The provisions of this amendatory Act of 1998 apply to tax
28		years ending on or after December 31, 1998.
29		(e) The penalty imposed for underpayment of estimated tax
30		by subsection (a) of this Section shall not be imposed to the
31		extent that the Director Department or his or her designate
32		determines, pursuant to Section 3-8 of the Uniform Penalty and
33		Interest Act that the penalty should not be imposed.
34		(f) Definition of tax. For purposes of subsections (b) and

1		(c), the term "tax" means the excess of the tax imposed under
2		Article 2 of this Act, over the amounts credited against such
3		tax under Sections 601(b) (3) and (4).
4		(g) Application of Section in case of tax withheld under
5		Article 7 on compensation. For purposes of applying this
6		Section :
7		(1) in the case of an individual, tax withheld from
8		compensation under Article 7 for the taxable year shall be
9		deemed a payment of estimated tax, and an equal part of
10		such amount shall be deemed paid on each installment date
11		for such taxable year, unless the taxpayer establishes the
12		dates on which all amounts were actually withheld, in which
13		case the amounts so withheld shall be deemed payments of
14		estimated tax on the dates on which such amounts were
15		actually withheld; .
16		(2) amounts timely paid by a partnership, Subchapter S
17		corporation, or trust on behalf of a partner, shareholder,
18		or beneficiary pursuant to subsection (f) of Section 502 or
19		Section 709.5 and claimed as a payment of estimated tax
20		shall be deemed a payment of estimated tax made on the last
21		day of the taxable year of the partnership, Subchapter S
22		corporation, or trust for which the income from the
23		withholding is made was computed; and
24		(3) all other amounts pursuant to Article 7 shall be
25		deemed a payment of estimated tax on the date the payment
26		is made to the taxpayer of the amount from which the tax is
27		withheld.
28		(g-5) Amounts withheld under the State Salary and Annuity
29		Withholding Act. An individual who has amounts withheld under
30		paragraph (10) of Section 4 of the State Salary and Annuity
31		Withholding Act may elect to have those amounts treated as
32		payments of estimated tax made on the dates on which those
33		amounts are actually withheld.
34		(i) Short taxable year. The application of this Section to

1		taxable years of less than 12 months shall be in accordance
2		with regulations prescribed by the Department.
3		The changes in this Section made by Public Act 84-127 shall
4		apply to taxable years ending on or after January 1, 1986.
5		(Source: P.A. 90-448, eff. 8-16-97; 90-613, eff. 7-9-98.)
6		(35 ILCS 5/905) (from Ch. 120, par. 9-905)
7		Sec. 905. Limitations on Notices of Deficiency.
8		(a) In general. Except as otherwise provided in this Act:
9		(1) A notice of deficiency shall be issued not later
10		than 3 years after the date the return was filed, and
11		(2) No deficiency shall be assessed or collected with
12		respect to the year for which the return was filed unless
13		such notice is issued within such period.
14		(b) Substantial omission of items.
15		(1) Omission of more than 25% of income. If the
16		taxpayer omits from base income an amount properly
17		includible therein which is in excess of 25% of the amount
18		of base income stated in the return, a notice of deficiency
19		may be issued not later than 6 years after the return was
20		filed. For purposes of this paragraph, there shall not be
21		taken into account any amount which is omitted in the
22		return if such amount is disclosed in the return, or in a
23		statement attached to the return, in a manner adequate to
24		apprise the Department of the nature and the amount of such
25		item.
26		(2) Reportable transactions. If a taxpayer fails to
27		include on any return or statement for any taxable year any
28		information with respect to a reportable transaction or
29		Illinois reportable transaction, as required under Section
30		501(b) of this Act, or fails to disclose an inconsistent
31		return position, as required under Section 501(c) of this
32		Act, a notice of deficiency may be issued not later than 6
33		years after the return is filed with respect to the taxable

1		year in which the taxpayer participated in the reportable
2		transaction or was required to disclose an inconsistent
3		return position.
4		(c) No return or fraudulent return. If no return is filed
5		or a false and fraudulent return is filed with intent to evade
6		the tax imposed by this Act, a notice of deficiency may be
7		issued at any time.
8		(d) Failure to report federal change. If a taxpayer fails
9		to notify the Department in any case where notification is
10		required by Section 304(c) or 506(b), or fails to report a
11		change or correction which is treated in the same manner as if
12		it were a deficiency for federal income tax purposes, a notice
13		of deficiency may be issued (i) at any time or (ii) on or after
14		August 13, 1999, at any time for the taxable year for which the
15		notification is required or for any taxable year to which the
16		taxpayer may carry an Article 2 credit, or a Section 207 loss,
17		earned, incurred, or used in the year for which the
18		notification is required; provided, however, that the amount of
19		any proposed assessment set forth in the notice shall be
20		limited to the amount of any deficiency resulting under this
21		Act from the recomputation of the taxpayer's net income,
22		Article 2 credits, or Section 207 loss earned, incurred, or
23		used in the taxable year for which the notification is required
24		after giving effect to the item or items required to be
25		reported.
26		(e) Report of federal change.
27		(1) Before August 13, 1999, in any case where
28		notification of an alteration is given as required by
29		Section 506(b), a notice of deficiency may be issued at any
30		time within 2 years after the date such notification is
31		given, provided, however, that the amount of any proposed
32		assessment set forth in such notice shall be limited to the
33		amount of any deficiency resulting under this Act from
34		recomputation of the taxpayer's net income, net loss, or

1		Article 2 credits for the taxable year after giving effect
2		to the item or items reflected in the reported alteration.
3		(2) On and after August 13, 1999, in any case where
4		notification of an alteration is given as required by
5		Section 506(b), a notice of deficiency may be issued at any
6		time within 2 years after the date such notification is
7		given for the taxable year for which the notification is
8		given or for any taxable year to which the taxpayer may
9		carry an Article 2 credit, or a Section 207 loss, earned,
10		incurred, or used in the year for which the notification is
11		given, provided, however, that the amount of any proposed
12		assessment set forth in such notice shall be limited to the
13		amount of any deficiency resulting under this Act from
14		recomputation of the taxpayer's net income, Article 2
15		credits, or Section 207 loss earned, incurred, or used in
16		the taxable year for which the notification is given after
17		giving effect to the item or items reflected in the
18		reported alteration.
19		(f) Extension by agreement. Where, before the expiration of
20		the time prescribed in this Section for the issuance of a
21		notice of deficiency, both the Department and the taxpayer
22		shall have consented in writing to its issuance after such
23		time, such notice may be issued at any time prior to the
24		expiration of the period agreed upon. In the case of a taxpayer
25		who is a partnership, Subchapter S corporation, or trust and
26		who enters into an agreement with the Department pursuant to
27		this subsection on or after January 1, 2003, a notice of
28		deficiency may be issued to the partners, shareholders, or
29		beneficiaries of the taxpayer at any time prior to the
30		expiration of the period agreed upon. Any proposed assessment
31		set forth in the notice, however, shall be limited to the
32		amount of any deficiency resulting under this Act from
33		recomputation of items of income, deduction, credits, or other
34		amounts of the taxpayer that are taken into account by the

1		partner, shareholder, or beneficiary in computing its
2		liability under this Act. The period so agreed upon may be
3		extended by subsequent agreements in writing made before the
4		expiration of the period previously agreed upon.
5		(g) Erroneous refunds. In any case in which there has been
6		an erroneous refund of tax payable under this Act, a notice of
7		deficiency may be issued at any time within 2 years from the
8		making of such refund, or within 5 years from the making of
9		such refund if it appears that any part of the refund was
10		induced by fraud or the misrepresentation of a material fact,
11		provided, however, that the amount of any proposed assessment
12		set forth in such notice shall be limited to the amount of such
13		erroneous refund.
14		Beginning July 1, 1993, in any case in which there has been
15		a refund of tax payable under this Act attributable to a net
16		loss carryback as provided for in Section 207, and that refund
17		is subsequently determined to be an erroneous refund due to a
18		reduction in the amount of the net loss which was originally
19		carried back, a notice of deficiency for the erroneous refund
20		amount may be issued at any time during the same time period in
21		which a notice of deficiency can be issued on the loss year
22		creating the carryback amount and subsequent erroneous refund.
23		The amount of any proposed assessment set forth in the notice
24		shall be limited to the amount of such erroneous refund.
25		(h) Time return deemed filed. For purposes of this Section
26		a tax return filed before the last day prescribed by law
27		(including any extension thereof) shall be deemed to have been
28		filed on such last day.
29		(i) Request for prompt determination of liability. For
30		purposes of subsection (a)(1), in the case of a tax return
31		required under this Act in respect of a decedent, or by his
32		estate during the period of administration, or by a
33		corporation, the period referred to in such Subsection shall be
34		18 months after a written request for prompt determination of

1		liability is filed with the Department (at such time and in
2		such form and manner as the Department shall by regulations
3		prescribe) by the executor, administrator, or other fiduciary
4		representing the estate of such decedent, or by such
5		corporation, but not more than 3 years after the date the
6		return was filed. This subsection shall not apply in the case
7		of a corporation unless:
8		(1) (A) such written request notifies the Department
9		that the corporation contemplates dissolution at or before
10		the expiration of such 18-month period, (B) the dissolution
11		is begun in good faith before the expiration of such
12		18-month period, and (C) the dissolution is completed;
13		(2) (A) such written request notifies the Department
14		that a dissolution has in good faith been begun, and (B)
15		the dissolution is completed; or
16		(3) a dissolution has been completed at the time such
17		written request is made.
18		(j) Withholding tax. In the case of returns required under
19		Article 7 of this Act (with respect to any amounts withheld as
20		tax or any amounts required to have been withheld as tax) a
21		notice of deficiency shall be issued not later than 3 years
22		after the 15th day of the 4th month following the close of the
23		calendar year in which such withholding was required.
24		(k) Penalties for failure to make information reports. A
25		notice of deficiency for the penalties provided by Subsection
26		1405.1(c) of this Act may not be issued more than 3 years after
27		the due date of the reports with respect to which the penalties
28		are asserted.
29		(l) Penalty for failure to file withholding returns. A
30		notice of deficiency for penalties provided by Section 1004 of
31		this Act for taxpayer's failure to file withholding returns may
32		not be issued more than three years after the 15th day of the
33		4th month following the close of the calendar year in which the
34		withholding giving rise to taxpayer's obligation to file those

1		returns occurred.
2		(m) Transferee liability. A notice of deficiency may be
3		issued to a transferee relative to a liability asserted under
4		Section 1405 during time periods defined as follows:
5		1) Initial Transferee. In the case of the liability of
6		an initial transferee, up to 2 years after the expiration
7		of the period of limitation for assessment against the
8		transferor, except that if a court proceeding for review of
9		the assessment against the transferor has begun, then up to
10		2 years after the return of the certified copy of the
11		judgment in the court proceeding.
12		2) Transferee of Transferee. In the case of the
13		liability of a transferee, up to 2 years after the
14		expiration of the period of limitation for assessment
15		against the preceding transferee, but not more than 3 years
16		after the expiration of the period of limitation for
17		assessment against the initial transferor; except that if,
18		before the expiration of the period of limitation for the
19		assessment of the liability of the transferee, a court
20		proceeding for the collection of the tax or liability in
21		respect thereof has been begun against the initial
22		transferor or the last preceding transferee, as the case
23		may be, then the period of limitation for assessment of the
24		liability of the transferee shall expire 2 years after the
25		return of the certified copy of the judgment in the court
26		proceeding.
27		(n) Notice of decrease in net loss. On and after the
28		effective date of this amendatory Act of the 92nd General
29		Assembly, no notice of deficiency shall be issued as the result
30		of a decrease determined by the Department in the net loss
31		incurred by a taxpayer under Section 207 of this Act unless the
32		Department has notified the taxpayer of the proposed decrease
33		within 3 years after the return reporting the loss was filed or
34		within one year after an amended return reporting an increase

1		in the loss was filed, provided that in the case of an amended
2		return, a decrease proposed by the Department more than 3 years
3		after the original return was filed may not exceed the increase
4		claimed by the taxpayer on the original return.
5		(Source: P.A. 91-541, eff. 8-13-99; 92-846, eff. 8-23-02.)
6		(35 ILCS 5/911) (from Ch. 120, par. 9-911)
7		Sec. 911. Limitations on Claims for Refund.
8		(a) In general. Except as otherwise provided in this Act:
9		(1) A claim for refund shall be filed not later than 3
10		years after the date the return was filed (in the case of
11		returns required under Article 7 of this Act respecting any
12		amounts withheld as tax, not later than 3 years after the
13		15th day of the 4th month following the close of the
14		calendar year in which such withholding was made), or one
15		year after the date the tax was paid, whichever is the
16		later; and
17		(2) No credit or refund shall be allowed or made with
18		respect to the year for which the claim was filed unless
19		such claim is filed within such period.
20		(b) Federal changes.
21		(1) In general. In any case where notification of an
22		alteration is required by Section 506(b), a claim for
23		refund may be filed within 2 years after the date on which
24		such notification was due (regardless of whether such
25		notice was given), but the amount recoverable pursuant to a
26		claim filed under this Section shall be limited to the
27		amount of any overpayment resulting under this Act from
28		recomputation of the taxpayer's net income, net loss, or
29		Article 2 credits for the taxable year after giving effect
30		to the item or items reflected in the alteration required
31		to be reported.
32		(2) Tentative carryback adjustments paid before
33		January 1, 1974. If, as the result of the payment before

1		January 1, 1974 of a federal tentative carryback
2		adjustment, a notification of an alteration is required
3		under Section 506(b), a claim for refund may be filed at
4		any time before January 1, 1976, but the amount recoverable
5		pursuant to a claim filed under this Section shall be
6		limited to the amount of any overpayment resulting under
7		this Act from recomputation of the taxpayer's base income
8		for the taxable year after giving effect to the federal
9		alteration resulting from the tentative carryback
10		adjustment irrespective of any limitation imposed in
11		paragraph (l) of this subsection.
12		(c) Extension by agreement. Where, before the expiration of
13		the time prescribed in this section for the filing of a claim
14		for refund, both the Department and the claimant shall have
15		consented in writing to its filing after such time, such claim
16		may be filed at any time prior to the expiration of the period
17		agreed upon. The period so agreed upon may be extended by
18		subsequent agreements in writing made before the expiration of
19		the period previously agreed upon. In the case of a taxpayer
20		who is a partnership, Subchapter S corporation, or trust and
21		who enters into an agreement with the Department pursuant to
22		this subsection on or after January 1, 2003, a claim for refund
23		may be issued to the partners, shareholders, or beneficiaries
24		of the taxpayer at any time prior to the expiration of the
25		period agreed upon. Any refund allowed pursuant to the claim,
26		however, shall be limited to the amount of any overpayment of
27		tax due under this Act that results from recomputation of items
28		of income, deduction, credits, or other amounts of the taxpayer
29		that are taken into account by the partner, shareholder, or
30		beneficiary in computing its liability under this Act.
31		(d) Limit on amount of credit or refund.
32		(1) Limit where claim filed within 3-year period. If
33		the claim was filed by the claimant during the 3-year
34		period prescribed in subsection (a), the amount of the

1		credit or refund shall not exceed the portion of the tax
2		paid within the period, immediately preceding the filing of
3		the claim, equal to 3 years plus the period of any
4		extension of time for filing the return.
5		(2) Limit where claim not filed within 3-year period.
6		If the claim was not filed within such 3-year period, the
7		amount of the credit or refund shall not exceed the portion
8		of the tax paid during the one year immediately preceding
9		the filing of the claim.
10		(e) Time return deemed filed. For purposes of this section
11		a tax return filed before the last day prescribed by law for
12		the filing of such return (including any extensions thereof)
13		shall be deemed to have been filed on such last day.
14		(f) No claim for refund based on the taxpayer's taking a
15		credit for estimated tax payments as provided by Section
16		601(b)(2) or for any amount paid by a taxpayer pursuant to
17		Section 602(a) or for any amount of credit for tax withheld
18		pursuant to Article 7 Section 701 may be filed more than 3
19		years after the due date, as provided by Section 505, of the
20		return which was required to be filed relative to the taxable
21		year for which the payments were made or for which the tax was
22		withheld. The changes in this subsection (f) made by this
23		amendatory Act of 1987 shall apply to all taxable years ending
24		on or after December 31, 1969.
25		(g) Special Period of Limitation with Respect to Net Loss
26		Carrybacks. If the claim for refund relates to an overpayment
27		attributable to a net loss carryback as provided by Section
28		207, in lieu of the 3 year period of limitation prescribed in
29		subsection (a), the period shall be that period which ends 3
30		years after the time prescribed by law for filing the return
31		(including extensions thereof) for the taxable year of the net
32		loss which results in such carryback (or, on and after August
33		13, 1999, with respect to a change in the carryover of an
34		Article 2 credit to a taxable year resulting from the carryback

1		of a Section 207 loss incurred in a taxable year beginning on
2		or after January 1, 2000, the period shall be that period that
3		ends 3 years after the time prescribed by law for filing the
4		return (including extensions of that time) for that subsequent
5		taxable year), or the period prescribed in subsection (c) in
6		respect of such taxable year, whichever expires later. In the
7		case of such a claim, the amount of the refund may exceed the
8		portion of the tax paid within the period provided in
9		subsection (d) to the extent of the amount of the overpayment
10		attributable to such carryback. On and after August 13, 1999,
11		if the claim for refund relates to an overpayment attributable
12		to the carryover of an Article 2 credit, or of a Section 207
13		loss, earned, incurred (in a taxable year beginning on or after
14		January 1, 2000), or used in a year for which a notification of
15		a change affecting federal taxable income must be filed under
16		subsection (b) of Section 506, the claim may be filed within
17		the period prescribed in paragraph (1) of subsection (b) in
18		respect of the year for which the notification is required. In
19		the case of such a claim, the amount of the refund may exceed
20		the portion of the tax paid within the period provided in
21		subsection (d) to the extent of the amount of the overpayment
22		attributable to the recomputation of the taxpayer's Article 2
23		credits, or Section 207 loss, earned, incurred, or used in the
24		taxable year for which the notification is given.
25		(h) Claim for refund based on net loss. On and after the
26		effective date of this amendatory Act of the 92nd General
27		Assembly, no claim for refund shall be allowed to the extent
28		the refund is the result of an amount of net loss incurred
29		under Section 207 of this Act that was not reported to the
30		Department within 3 years of the due date (including
31		extensions) of the return for the loss year on either the
32		original return filed by the taxpayer or on amended return.
33		(Source: P.A. 91-541, eff. 8-13-99; 92-846, eff. 8-23-02.)

1		(35 ILCS 5/1001) (from Ch. 120, par. 10-1001)
2		Sec. 1001. Failure to File Tax Returns.
3		(a) In case of failure to file any tax return required
4		under this Act on the date prescribed therefor, (determined
5		with regard to any extensions of time for filing) there shall
6		be added as a penalty the amount prescribed by Section 3-3 of
7		the Uniform Penalty and Interest Act.
8		(b) Failure to disclose reportable transaction. Any
9		taxpayer who fails to comply with the requirements of Section
10		501(b)(1) of this Act or who fails to include on a return or
11		statement any information with respect to an Illinois
12		reportable transaction required under Section 501(b)(2) of
13		this Act and regulations promulgated thereunder to be included
14		with that return or statement shall pay a penalty in the amount
15		determined under this subsection. Such penalty shall be deemed
16		assessed upon the date of filing of the return for the taxable
17		year in which the taxpayer participates in the reportable
18		transaction. A taxpayer shall not be considered to have
19		complied with the requirements of Section 501(b)(1) of this Act
20		unless the disclosure statement filed with the Department
21		includes all of the information required to be disclosed with
22		respect to a reportable transaction pursuant to Treasury
23		Regulations Section 1.6011-4 (26 CFR 1.6011-4) and regulations
24		promulgated by the Department under Section 501(b)(1) of this
25		Act. A taxpayer shall not be considered to have complied with
26		the requirements of Section 501(b)(2) of this Act unless the
27		disclosure required under such Section includes all of the
28		information required to be disclosed under regulations
29		promulgated by the Department pursuant to such Section.
30		(1) Amount of penalty. Except as provided in paragraph (2),
31		the amount of the penalty under this subsection shall be
32		$15,000 for each failure to comply with the requirements of
33		Section 501(b)(1) or Section 501(b)(2).
34		(2) Increase in penalty for listed transactions. In the

1		case of a failure to comply with the requirements of Section
2		501(b)(1) with respect to a "listed transaction", or in the
3		case of failure to properly disclose participation an Illinois
4		listed transaction as defined under Section 501(b)(2) of this
5		Act, the penalty under this subsection shall be $30,000 for
6		each failure.
7		(3) Authority to Rescind Penalty. The Board of Appeals may
8		rescind all or any portion of any penalty imposed by this
9		subsection with respect to any violation, if all of the
10		following apply:
11		(A) The violation is with respect to a reportable
12		transaction or Illinois reportable transaction other than
13		a listed transaction or Illinois listed transaction;
14		(B) The person on whom the penalty is imposed has a
15		history of complying with the requirements of this Act;
16		(C) It is shown that the violation is due to an
17		unintentional mistake of fact;
18		(D) Imposing the penalty would be against equity and
19		good conscience; and
20		(E) Rescinding the penalty would promote compliance
21		with the requirements of this Act and effective tax
22		administration.
23		The exercise of authority under this subparagraph (3) shall
24		be at the sole discretion of the Board of Appeals and the
25		Director. Notwithstanding any other law or rule of law, any
26		determination under this subparagraph (3) may not be reviewed
27		in any administrative or judicial proceeding.
28		(4) Coordination with other penalties. The penalty imposed
29		by this subsection is in addition to any penalty imposed by
30		this Act or the Uniform Penalty and Interest Act.
31		(c) Penalty for failure to disclose inconsistent return
32		position. Any taxpayer that fails to properly disclose an
33		inconsistent return position with respect to any taxable year,
34		as required under Section 501(c) of this Act, shall incur a

1		penalty of $15,000 for each position not reported. Such penalty
2		shall be deemed assessed upon the date of filing of the return
3		for the taxable year with respect to which the taxpayer was
4		required to disclose the inconsistent return position. The
5		penalty imposed by this subsection is in addition to any
6		penalty imposed by this Act or the Uniform Penalty and Interest
7		Act. The Board of Appeals may rescind all or any portion of the
8		penalty imposed under this subsection (c) if it is shown that
9		there was a reasonable cause for the failure to disclose and
10		that the taxpayer acted in good faith.
11		(d) The total penalty imposed under subsection (b) or
12		subsection (c) of this Section with respect to any taxable year
13		shall not exceed 10% of the increase in net income (or
14		reduction in Illinois net loss under Section 207 of this Act)
15		that would result had the taxpayer not participated in any
16		reportable transaction or Illinois reportable transaction
17		affecting its net income for such taxable year and reported
18		each inconsistent return position in a manner that would cause
19		it to report the greatest net income (or smallest Illinois net
20		loss) on its Illinois income tax return for the taxable year.
21		(Source: P.A. 87-205.)
22		(35 ILCS 5/1002) (from Ch. 120, par. 10-1002)
23		Sec. 1002. Failure to Pay Tax.
24		(a) Negligence. If any part of a deficiency is due to
25		negligence or intentional disregard of rules and regulations
26		(but without intent to defraud) there shall be added to the tax
27		as a penalty the amount prescribed by Section 3-5 of the
28		Uniform Penalty and Interest Act.
29		(b) Fraud. If any part of a deficiency is due to fraud,
30		there shall be added to the tax as a penalty the amount
31		prescribed by Section 3-6 of the Uniform Penalty and Interest
32		Act.
33		(c) Nonwillful failure to pay withholding tax. If any

1		employer, without intent to evade or defeat any tax imposed by
2		this Act or the payment thereof, shall fail to make a return
3		and pay a tax withheld by him at the time required by or under
4		the provisions of this Act, such employer shall be liable for
5		such taxes and shall pay the same together with the interest
6		and the penalty provided by Sections 3-2 and 3-3, respectively,
7		of the Uniform Penalty and Interest Act and such interest and
8		penalty shall not be charged to or collected from the employee
9		by the employer.
10		(d) Willful failure to collect and pay over tax. Any person
11		required to collect, truthfully account for, and pay over the
12		tax imposed by this Act who willfully fails to collect such tax
13		or truthfully account for and pay over such tax or willfully
14		attempts in any manner to evade or defeat the tax or the
15		payment thereof, shall, in addition to other penalties provided
16		by law, be liable for the penalty imposed by Section 3-7 of the
17		Uniform Penalty and Interest Act.
18		(e) Penalties assessable.
19		(1) In general. Except as otherwise provided in this
20		Act provided in paragraphs (2), (3) and (4), the penalties
21		provided by this Act shall be paid upon notice and demand
22		and shall be assessed, collected, and paid in the same
23		manner as taxes and any reference in this Act to the tax
24		imposed by this Act shall be deemed also to refer to
25		penalties provided by this Act.
26		(2) Procedure for assessing certain penalties. For the
27		purposes of Article 9 any penalty under Section 804(a) or
28		Section 1001 shall be deemed assessed upon the filing of
29		the return for the taxable year.
30		(3) Procedure for assessing the penalty for failure to
31		file withholding returns or annual transmittal forms for
32		wage and tax statements. The penalty imposed by Section
33		1004 will be asserted by the Department's issuance of a
34		notice of deficiency. If taxpayer files a timely protest,

1		the procedures of Section 908 will be followed. If taxpayer
2		does not file a timely protest, the notice of deficiency
3		will constitute an assessment pursuant to subsection (c) of
4		Section 904.
5		(4) Assessment of penalty under Section 1005(a). The
6		penalty imposed under Section 1005(a) shall be deemed
7		assessed upon the assessment of the tax to which such
8		penalty relates and shall be collected and paid on notice
9		and demand in the same manner as the tax.
10		(f) Determination of deficiency. For purposes of
11		subsections (a) and (b), the amount shown as the tax by the
12		taxpayer upon his return shall be taken into account in
13		determining the amount of the deficiency only if such return
14		was filed on or before the last day prescribed by law for the
15		filing of such return, including any extensions of the time for
16		such filing.
17		(Source: P.A. 89-379, eff. 1-1-96.)
18		(35 ILCS 5/1005) (from Ch. 120, par. 10-1005)
19		Sec. 1005. Penalty for Underpayment of Tax.
20		(a) In general. If any amount of tax required to be shown
21		on a return prescribed by this Act is not paid on or before the
22		date required for filing such return (determined without regard
23		to any extension of time to file), a penalty shall be imposed
24		in the manner and at the rate prescribed by the Uniform Penalty
25		and Interest Act. The provisions of this subsection shall apply
26		to all taxable years ending on or after January 1, 1986.
27		(b) Reportable transaction penalty. If a taxpayer has a
28		reportable transaction understatement for any taxable year,
29		there shall be added to the tax an amount equal to 20% of the
30		amount of that understatement. Such penalty shall be deemed
31		assessed upon the assessment of the tax to which such penalty
32		relates and shall be collected and paid on notice and demand in
33		the same manner as the tax.

1		(1) Reportable Transaction Understatement. For
2		purposes of this Section, the term "reportable transaction
3		understatement" means the sum of subparagraphs (A) and (B):
4		(A) The product of (i) the amount of the increase
5		(if any) in Illinois net income (or decrease in
6		Illinois net loss under Section 207 of this Act) that
7		results from a difference between the proper tax
8		treatment of an item to which this subsection applies
9		and the taxpayer's treatment of that item (as shown on
10		the taxpayer's return of tax), and (ii) the applicable
11		tax rates under Section 201 of this Act.
12		(B) The amount of the decrease (if any) in the
13		aggregate amount of credits determined under this Act
14		(including credits that may be carried forward to other
15		taxable years) that results from a difference between
16		the taxpayer's treatment of an item to which this
17		subsection applies (as shown on the taxpayer's return
18		of tax) and the proper tax treatment of that item.
19		(2) Items to which subsection applies. This subsection
20		applies to any item that is attributable to any listed
21		transaction, as defined in Treasury Regulations, Section
22		1.6011-4, or Illinois listed transaction, as defined in
23		Section 501(b)(2), and to any item that is attributable to
24		any reportable transaction, as defined in Treasury
25		Regulations, Section 1.6011-4, or Illinois reportable
26		transaction, as defined in Section 501(b)(2) (other than a
27		listed transaction or Illinois listed transaction) if a
28		significant purpose of the transaction is the avoidance or
29		evasion of federal or Illinois income tax.
30		(3) Subsection (b) shall be applied by substituting
31		"30%" for "20%" with respect to the portion of any
32		reportable transaction understatement with respect to the
33		relevant facts affecting the tax treatment of the item that
34		are not adequately disclosed in accordance with Section

1		501(b) of this Act. A taxpayer shall be treated as making
2		adequate disclosure if the penalty for failure to disclose
3		is rescinded under Section 1001(b)(3) of this Act.
4		(4) Reasonable Cause Exception.
5		(A) In general. No penalty shall be imposed under
6		this subsection with respect to any portion of a
7		reportable transaction understatement if it is shown
8		that there was a reasonable cause for such portion and
9		that the taxpayer acted in good faith with respect to
10		such portion.
11		(B) Special rules. If the taxpayer has been
12		contacted by the Department regarding the use of a
13		potentially abusive tax shelter, subparagraph (A) does
14		not apply unless all of the following requirements are
15		met:
16		(i) There is or was substantial authority for
17		such treatment; and
18		(ii) The taxpayer reasonably believed that
19		such treatment was more likely than not the proper
20		treatment.
21		(C) Rules relating to reasonable belief. For
22		purposes of subparagraph (B), a taxpayer shall be
23		treated as having a reasonable belief with respect to
24		the tax treatment of an item only if such belief meets
25		the requirements of this subparagraph (C):
26		(i) Such belief must be based on the facts and
27		law that exist at the time the return of tax that
28		includes that tax treatment is filed;
29		(ii) Such belief must relate solely to the
30		taxpayer's chances of success on the merits of that
31		treatment and does not take into account the
32		possibility that the return will not be audited,
33		that the treatment will not be raised on audit, or
34		that the treatment will be resolved through

1		settlement if it is raised; and
2		(iii) Such belief is not based, in whole or in
3		part, on the opinion of a disqualified tax advisor
4		or on a disqualified opinion.
5		(5) Definitions.
6		(i) Disqualified tax advisor. The term
7		"disqualified tax advisor" is a tax advisor that meets
8		any of the following conditions:
9		(I) Is a material advisor who participates in
10		the organization, management, promotion, or sale
11		of the transaction or who is related (within the
12		meaning of Sections 267(b) or 707(b)(1) of the
13		Internal Revenue Code) to any person who so
14		participates;
15		(II) Is compensated directly or indirectly by
16		a material advisor with respect to the
17		transaction;
18		(III) Has a fee arrangement with respect to the
19		transaction that is contingent on all or part of
20		the intended tax benefits from the transaction
21		being sustained; or
22		(IV) As determined under regulations
23		prescribed by either the Secretary of the Treasury
24		for federal income tax purposes or the Department,
25		has a continuing financial interest with respect
26		to the transaction.
27		(ii) Disqualified opinion. The term "disqualified
28		opinion" means an opinion that meets any of the
29		following conditions:
30		(I) Is based on unreasonable factual or legal
31		assumptions (including assumptions as to future
32		events);
33		(II) Unreasonably relies on representations,
34		statements, findings, or agreements of the

1		taxpayer or any other person;
2		(III) Does not identify and consider all
3		relevant facts; or
4		(IV) Fails to meet any other requirement as
5		either the Secretary of the Treasury for federal
6		income tax purposes or the Department may
7		prescribe.
8		(iii) Material Advisor. The term "material
9		advisor" shall have substantially the same meaning as
10		the same term is defined under Treasury Regulations
11		Section 301.6112-1, (26 CFR 301.6112-1) and shall
12		include any person that is a material advisor for
13		federal income tax purposes under such regulation.
14		(6) Amended returns. Except as provided in Department
15		Regulations, in no event may any tax treatment included
16		with an amendment or supplement to a return of tax be taken
17		into account in determining the amount of any reportable
18		transaction understatement if the amendment or supplement
19		is filed after the date the taxpayer is first contacted by
20		either the Internal Revenue Service for federal income tax
21		purposes or by the Department regarding the examination of
22		the return or such later date as specified by the
23		Department by regulation.
24		(7) Effective date. This subsection shall apply to
25		taxable years ending on and after December 31, 2004, except
26		that a reportable transaction understatement shall include
27		an understatement (as determined under paragraph (1)) with
28		respect to any taxable year for which the limitations
29		period on assessment has not expired that is attributable
30		to a transaction in which the taxpayer has invested after
31		February 28, 2000 that becomes a listed transaction (as
32		defined in Treasury Regulations Section 1.6011-4(b)(2)) or
33		Illinois listed transaction (as defined in Section
34		501(b)(2)(A)(2)) at any time.

1		(c) 100% Interest Penalty. If a taxpayer has been contacted
2		by the Internal Revenue Service or the Department regarding the
3		use of a potentially abusive tax shelter with respect to any
4		taxable year for which the limitations period on assessment has
5		not expired, and has a deficiency attributable to a potentially
6		abusive tax shelter with respect to such taxable year or years,
7		there shall be added to the tax an amount equal to 100% of the
8		interest assessed under the Uniform Penalty and Interest Act
9		for the period beginning on the last date prescribed by law for
10		the payment of such tax and ending on the date of the notice of
11		deficiency. Such penalty shall be deemed assessed upon the
12		assessment of the interest to which such penalty relates and
13		shall be collected and paid in the same manner as such
14		interest. The penalty imposed by this subsection is in addition
15		to any penalty imposed by this Act or the Uniform Penalty and
16		Interest Act. For purposes of this subsection and subsection
17		(d) of this Section, the term "potentially abusive tax shelter"
18		means (i) any tax shelter (as defined in Section 6111 of the
19		Internal Revenue Code) with respect to which registration is
20		required under Section 6111 of the Internal Revenue Code and
21		(ii) any entity, investment plan, arrangement, or other plan or
22		arrangement that is of a type that the Internal Revenue Service
23		or the Department determines by rule has a potential for tax
24		avoidance or evasion (including, but not limited to, listed
25		transactions and Illinois listed transactions).
26		(d) 150% Interest Rate. For taxable years ending on and
27		after July 1, 2002, for any notice of deficiency issued before
28		the taxpayer is contacted by the Internal Revenue Service or
29		the Department regarding a potentially abusive tax shelter, the
30		taxpayer is subject to interest as provided under Section 3-2
31		of the Uniform Penalty and Interest Act, but with respect to
32		any deficiency attributable to a potentially abusive tax
33		shelter, the taxpayer is subject to interest at a rate of 150%
34		of the otherwise applicable rate.

1		(e) Coordination with other penalties. Except as provided
2		in regulations, the penalties imposed by this Section are in
3		addition to any other penalty imposed by this Act or the
4		Uniform Penalty and Interest Act.
5		The provisions of this Section shall apply to all taxable years
6		ending on or after January 1, 1986.
7		(Source: P.A. 87-205.)
8		(35 ILCS 5/1007 new)
9		Sec. 1007. Failure to register tax shelter or maintain
10		list.
11		(a) Penalty Imposed. Any person that fails to comply with
12		the requirements of Section 1405.5 or Section 1405.6 of this
13		Act shall incur a penalty as provided in this Section. A person
14		is not in compliance with the requirements of Section 1405.5
15		unless and until the required registration has been filed and
16		contains all of the information required to be included with
17		such registration under Section 6111 of the Internal Revenue
18		Code or such Section 1405.5. A person is not in compliance with
19		the requirements of Section 1405.6 unless, at the time the
20		required list is made available to the Department, such list
21		contains all of the information required to be maintained under
22		Section 6112 of the Internal Revenue Code or such Section
23		1405.6.
24		(b) Amount of Penalty. The following penalties apply:
25		(1) In the case of each failure to comply with
26		the requirements of subsection (a), subsection (b), or
27		subsection (e) of Section 1405.5, the penalty shall be
28		$15,000.
29		(2) If the failure is with respect to a listed
30		transaction or Illinois listed transaction under
31		subsection (c) of Section 1405.5, the penalty shall be
32		$100,000.
33		(3) In the case of each failure to comply with

1		the requirements of subsection (a) or subsection (b) of
2		Section 1405.6, the penalty shall be $15,000.
3		(4) If the failure is with respect to a listed
4		transaction or Illinois listed transaction under
5		subsection (c) of Section 1405.6, the penalty shall be
6		$100,000.
7		(c) Authority to rescind penalty. The Board of Appeals may
8		rescind all or any portion of any penalty imposed by this
9		Section with respect to any violation, if all of the following
10		apply:
11		(1) The violation is not with respect to a listed
12		transaction or Illinois listed transaction;
13		(2) The person on whom the penalty is imposed has a
14		history of complying with the requirements of this Act;
15		(3) It is shown that the violation is due to an
16		unintentional mistake of fact;
17		(4) Imposing the penalty would be against equity
18		and good conscience; and
19		(5) Rescinding the penalty would promote
20		compliance with the requirements of this Act and
21		effective tax administration. The exercise of
22		authority under this subsection shall be at the sole
23		discretion of the Director. Notwithstanding any other
24		law or rule of law, any determination under this
25		subsection may not be reviewed in any administrative or
26		judicial proceeding.
27		(d) Coordination with other penalties. The penalty imposed
28		by this Section is in addition to any penalty imposed by this
29		Act or the Uniform Penalty and Interest Act.
30		(35 ILCS 5/1008 new)
31		Sec. 1008. Promoting abusive tax shelters. Except as herein
32		provided, the provisions of Section 6700 of the Internal
33		Revenue Code shall apply for purposes of this Act as if such

1		section applied to an Illinois deduction, credit, exclusion
2		from income, allocation or apportionment rule, or other
3		Illinois tax benefit. Notwithstanding Section 6700(a) of the
4		Internal Revenue Code, if an activity with respect to which a
5		penalty imposed under Section 6700(a) of the Internal Revenue
6		Code, as applied for purposes of this Act, involves a statement
7		described in Section 6700(a)(2)(A) of the Internal Revenue
8		Code, as applied for purposes of this Act, the amount of the
9		penalty imposed under this Section shall be the greater of
10		$10,000 or 50% of the gross income received (or to be received)
11		from any person to whom such statement is furnished that is
12		required to file a return under Section 502 of this Act.
13		(35 ILCS 5/1405.5 new)
14		Sec. 1405.5.Registration of tax shelters.
15		(a) Federal tax shelter. Any tax shelter organizer required
16		to register a tax shelter under Section 6111 of the Internal
17		Revenue Code after the effective date of this amendatory Act of
18		the 93rd General Assembly shall send a duplicate of the federal
19		registration information (and any additional information
20		required by the Department) to the Department not later than
21		the day on which registration is required under federal law.
22		Any person required to register under Section 6111 of the
23		Internal Revenue Code who receives a tax registration number
24		from the Secretary of the Treasury shall, within 30 days after
25		request by the Department, file a statement of that
26		registration number.
27		(b) Illinois tax shelter. Registration with the Department
28		shall be required with respect to (i) any investment that would
29		be considered a "tax shelter" under Section 6111 of the
30		Internal Revenue Code if the definition of "tax shelter ratio"
31		in subsection (c) of such section included the provisions of
32		this Act for deductions, credits, apportionment and
33		allocation, or that would be considered a tax shelter under

1		subsection (d) of such Section but for the fact that a
2		significant purpose is the avoidance or evasion of the tax
3		imposed by this Act rather than avoidance or evasion of federal
4		income tax and (ii) any listed transaction or Illinois listed
5		transaction as defined under Section 501(b) of this Act. The
6		tax shelter organizer shall make the registration required
7		under this subsection with respect to tax shelters in which
8		interests are first offered for sale after the effective date
9		of this amendatory Act of the 93rd General Assembly in the form
10		and manner prescribed by the Department, which shall include
11		the same information required for federal tax shelters and any
12		other information required by the Department, and shall be made
13		not later than the day on which the first offering for sale of
14		interests in the shelter occurs or, if the tax shelter
15		organizer reasonably believes as of the day of such first
16		offering that the tax shelter will not satisfy the conditions
17		of subsection (d) of this Section, within 60 days after the tax
18		shelter meets any of the conditions of subsection (d) of this
19		Section.
20		(c) Additional requirements for listed transactions and
21		Illinois listed transactions.
22		(1) In addition to the requirements of this
23		Section, for any transactions entered into on or after
24		February 28, 2000 that become listed transactions (as
25		defined under Treasury Regulations Section 1.6011-4)
26		at any time, those transactions shall be registered
27		with the Department (in the form and manner prescribed
28		by the Department) by the later of (i) 60 days after
29		entering into the transaction, (ii) 60 days after the
30		transaction becomes a listed transaction, or (iii)
31		December 31, 2004;
32		(2) In addition to the requirements of this
33		Section, for any transactions entered into on or after
34		January 1, 2004 that become Illinois listed

1		transactions (as defined under Section 501(b) of this
2		Act) at any time, those transactions shall be
3		registered with the Department by the later of (i) 60
4		days after entering into the transaction, (ii) 60 days
5		after the transaction becomes an Illinois listed
6		transaction, or (iii) December 31, 2004.
7		(d) Tax Shelters subject to this Section. The provisions of
8		this section apply to any tax shelter herein described that
9		additionally satisfies any of the following conditions: (1)
10		organized in this State; (2) doing business in this State; (3)
11		deriving income from sources in this State; or (4) at least one
12		of its investors is an Illinois taxpayer.
13		(e) Tax Shelter Identification Number.
14		(1) Any person who sells (or otherwise transfers)
15		an interest in an Illinois tax shelter shall (at such
16		times and in such manner as required by the Department)
17		furnish to each investor who purchases (or otherwise
18		acquires) an interest in such shelter from such person
19		the identification number assigned by the Department
20		to such tax shelter.
21		(2) Any person required to file a return under this
22		Act and required to include on the person's federal tax
23		return a tax shelter identification number pursuant to
24		Section 6111 of the Internal Revenue Code, shall
25		furnish such number upon filing of the person's
26		Illinois return.
27		(3) Any person claiming any deduction, credit, or
28		other tax benefit by reason of an Illinois tax shelter
29		shall include (in such manner as the Department may
30		prescribe) on the return of tax on which such
31		deduction, credit, or other benefit is claimed the
32		identification number assigned by the Department to
33		such tax shelter.

1		(35 ILCS 5/1405.6 new)
2		Sec. 1405.6. Investor lists.
3		(a) Federal abusive tax shelter. Any person required to
4		maintain a list under Section 6112 of the Internal Revenue Code
5		and Treasury Regulations Section 301.6112-1 with respect to a
6		potentially abusive tax shelter shall furnish such list to the
7		Department not later than the time such list is required to be
8		furnished to the Internal Revenue Service under federal income
9		tax law.
10		(b) Illinois abusive tax shelter. Each organizer and seller
11		of an Illinois potentially abusive tax shelter shall maintain a
12		list identifying each person who was sold an interest in such
13		shelter. Any person required to maintain a list under this
14		subsection shall make such list available to the Department
15		upon request by the Department, and except as otherwise
16		provided under regulations prescribed by the Department, shall
17		retain any information required to be included on such list for
18		7 years.
19		(1) Definitions.
20		(A) Illinois potentially abusive tax shelter. The
21		term "Illinois potentially abusive tax shelter" means
22		(i) any Illinois tax shelter (as defined in Section
23		1405.5) required to be registered under Section 1405.5
24		and (ii) any entity, investment, plan or arrangement,
25		or other plan or arrangement that is of a type that the
26		Department determines by regulation as having a
27		potential for avoidance or evasion of the tax imposed
28		by this Act (including an Illinois listed transaction
29		as defined under Section 501(b)). The term shall have
30		substantially the same meaning as a "potentially
31		abusive tax shelter" described in Treasury Regulations
32		Section 301.6112-1(b).
33		(B) Organizer or seller. An organizer or seller of
34		an Illinois potentially abusive tax shelter includes

1		any person that is a material adviser under Treasury
2		Regulations Section 301.6112-1 with respect to the
3		transaction that is an Illinois potentially abusive
4		tax shelter or would be considered a material adviser
5		under Treasury Regulations Section 301.6112-1 with
6		respect to the transaction if such transaction
7		constituted a potentially abusive tax shelter under
8		Treasury Regulations Section 301.6112-1.
9		(2) The list required under this Section shall include
10		the same information required with respect to a potentially
11		abusive tax shelter under Treasury Regulations Section
12		301.6112-1 and any other information as the Department may
13		require. Unless otherwise prescribed by the Department,
14		the list required under this Section shall be maintained in
15		the same form and manner as required with respect to a
16		potentially abusive tax shelter under Treasury Regulations
17		Section 301.6112-1.
18		(c) Additional requirements for listed transactions and
19		Illinois listed transactions.
20		(1) For transactions entered into on or after February
21		28, 2000, that become listed transactions (as defined under
22		Treasury Regulations Section 1.6011-4) at any time, the
23		list shall be furnished to the Department by the later of
24		(i) 60 days after entering into the transaction, (ii) 60
25		days after the transaction becomes a listed transaction, or
26		(iii) December 31, 2004.
27		(2) For transactions entered into on or after January
28		1, 2004 that become Illinois listed transactions (as
29		defined under Section 501(b) of this Act) at any time, the
30		list shall be furnished to the Department by the later of
31		(i) 60 days after entering into the transaction, (ii) 60
32		days after the transaction becomes an Illinois listed
33		transaction, or (iii) December 31, 2004.
34		(d) Tax Shelters subject to this Section. The provisions of

1		this section apply to any tax shelter herein described that
2		additionally satisfies any of the following conditions:
3		(1) Organized in this State;
4		(2) Doing business in this State;
5		(3) Deriving income from sources in this State; or
6		(4) At least one of its investors is an Illinois
7		taxpayer.
8		(35 ILCS 5/1501) (from Ch. 120, par. 15-1501)
9		Sec. 1501. Definitions.
10		(a) In general. When used in this Act, where not otherwise
11		distinctly expressed or manifestly incompatible with the
12		intent thereof:
13		(1) Business income. The term "business income" means
14		all income that may be treated as apportionable business
15		income under the Constitution of the United States.
16		Business income is net of the deductions allocable thereto
17		income arising from transactions and activity in the
18		regular course of the taxpayer's trade or business, net of
19		the deductions allocable thereto, and includes income from
20		tangible and intangible property if the acquisition,
21		management, and disposition of the property constitute
22		integral parts of the taxpayer's regular trade or business
23		operations. Such term does not include compensation or the
24		deductions allocable thereto. For each taxable year
25		beginning on or after January 1, 2003, a taxpayer may elect
26		to treat all income other than compensation as business
27		income. This election shall be made in accordance with
28		rules adopted by the Department and, once made, shall be
29		irrevocable.
30		(2) Commercial domicile. The term "commercial
31		domicile" means the principal place from which the trade or
32		business of the taxpayer is directed or managed.
33		(3) Compensation. The term "compensation" means wages,

1		salaries, commissions and any other form of remuneration
2		paid to employees for personal services.
3		(4) Corporation. The term "corporation" includes
4		associations, joint-stock companies, insurance companies
5		and cooperatives. Any entity, including a limited
6		liability company formed under the Illinois Limited
7		Liability Company Act, shall be treated as a corporation if
8		it is so classified for federal income tax purposes.
9		(5) Department. The term "Department" means the
10		Department of Revenue of this State.
11		(6) Director. The term "Director" means the Director of
12		Revenue of this State.
13		(7) Fiduciary. The term "fiduciary" means a guardian,
14		trustee, executor, administrator, receiver, or any person
15		acting in any fiduciary capacity for any person.
16		(8) Financial organization.
17		(A) The term "financial organization" means any
18		bank, bank holding company, trust company, savings
19		bank, industrial bank, land bank, safe deposit
20		company, private banker, savings and loan association,
21		building and loan association, credit union, currency
22		exchange, cooperative bank, small loan company, sales
23		finance company, investment company, or any person
24		which is owned by a bank or bank holding company. For
25		the purpose of this Section a "person" will include
26		only those persons which a bank holding company may
27		acquire and hold an interest in, directly or
28		indirectly, under the provisions of the Bank Holding
29		Company Act of 1956 (12 U.S.C. 1841, et seq.), except
30		where interests in any person must be disposed of
31		within certain required time limits under the Bank
32		Holding Company Act of 1956.
33		(B) For purposes of subparagraph (A) of this
34		paragraph, the term "bank" includes (i) any entity that

1		is regulated by the Comptroller of the Currency under
2		the National Bank Act, or by the Federal Reserve Board,
3		or by the Federal Deposit Insurance Corporation and
4		(ii) any federally or State chartered bank operating as
5		a credit card bank.
6		(C) For purposes of subparagraph (A) of this
7		paragraph, the term "sales finance company" has the
8		meaning provided in the following item (i) or (ii):
9		(i) A person primarily engaged in one or more
10		of the following businesses: the business of
11		purchasing customer receivables, the business of
12		making loans upon the security of customer
13		receivables, the business of making loans for the
14		express purpose of funding purchases of tangible
15		personal property or services by the borrower, or
16		the business of finance leasing. For purposes of
17		this item (i), "customer receivable" means:
18		(a) a retail installment contract or
19		retail charge agreement within the meaning of
20		the Sales Finance Agency Act, the Retail
21		Installment Sales Act, or the Motor Vehicle
22		Retail Installment Sales Act;
23		(b) an installment, charge, credit, or
24		similar contract or agreement arising from the
25		sale of tangible personal property or services
26		in a transaction involving a deferred payment
27		price payable in one or more installments
28		subsequent to the sale; or
29		(c) the outstanding balance of a contract
30		or agreement described in provisions (a) or (b)
31		of this item (i).
32		A customer receivable need not provide for
33		payment of interest on deferred payments. A sales
34		finance company may purchase a customer receivable

1		from, or make a loan secured by a customer
2		receivable to, the seller in the original
3		transaction or to a person who purchased the
4		customer receivable directly or indirectly from
5		that seller.
6		(ii) A corporation meeting each of the
7		following criteria:
8		(a) the corporation must be a member of an
9		"affiliated group" within the meaning of
10		Section 1504(a) of the Internal Revenue Code,
11		determined without regard to Section 1504(b)
12		of the Internal Revenue Code;
13		(b) more than 50% of the gross income of
14		the corporation for the taxable year must be
15		interest income derived from qualifying loans.
16		A "qualifying loan" is a loan made to a member
17		of the corporation's affiliated group that
18		originates customer receivables (within the
19		meaning of item (i)) or to whom customer
20		receivables originated by a member of the
21		affiliated group have been transferred, to the
22		extent the average outstanding balance of
23		loans from that corporation to members of its
24		affiliated group during the taxable year do not
25		exceed the limitation amount for that
26		corporation. The "limitation amount" for a
27		corporation is the average outstanding
28		balances during the taxable year of customer
29		receivables (within the meaning of item (i))
30		originated by all members of the affiliated
31		group. If the average outstanding balances of
32		the loans made by a corporation to members of
33		its affiliated group exceed the limitation
34		amount, the interest income of that

1		corporation from qualifying loans shall be
2		equal to its interest income from loans to
3		members of its affiliated groups times a
4		fraction equal to the limitation amount
5		divided by the average outstanding balances of
6		the loans made by that corporation to members
7		of its affiliated group;
8		(c) the total of all shareholder's equity
9		(including, without limitation, paid-in
10		capital on common and preferred stock and
11		retained earnings) of the corporation plus the
12		total of all of its loans, advances, and other
13		obligations payable or owed to members of its
14		affiliated group may not exceed 20% of the
15		total assets of the corporation at any time
16		during the tax year; and
17		(d) more than 50% of all interest-bearing
18		obligations of the affiliated group payable to
19		persons outside the group determined in
20		accordance with generally accepted accounting
21		principles must be obligations of the
22		corporation.
23		This amendatory Act of the 91st General Assembly is
24		declaratory of existing law.
25		(D) Subparagraphs (B) and (C) of this paragraph are
26		declaratory of existing law and apply retroactively,
27		for all tax years beginning on or before December 31,
28		1996, to all original returns, to all amended returns
29		filed no later than 30 days after the effective date of
30		this amendatory Act of 1996, and to all notices issued
31		on or before the effective date of this amendatory Act
32		of 1996 under subsection (a) of Section 903, subsection
33		(a) of Section 904, subsection (e) of Section 909, or
34		Section 912. A taxpayer that is a "financial

1		organization" that engages in any transaction with an
2		affiliate shall be a "financial organization" for all
3		purposes of this Act.
4		(E) For all tax years beginning on or before
5		December 31, 1996, a taxpayer that falls within the
6		definition of a "financial organization" under
7		subparagraphs (B) or (C) of this paragraph, but who
8		does not fall within the definition of a "financial
9		organization" under the Proposed Regulations issued by
10		the Department of Revenue on July 19, 1996, may
11		irrevocably elect to apply the Proposed Regulations
12		for all of those years as though the Proposed
13		Regulations had been lawfully promulgated, adopted,
14		and in effect for all of those years. For purposes of
15		applying subparagraphs (B) or (C) of this paragraph to
16		all of those years, the election allowed by this
17		subparagraph applies only to the taxpayer making the
18		election and to those members of the taxpayer's unitary
19		business group who are ordinarily required to
20		apportion business income under the same subsection of
21		Section 304 of this Act as the taxpayer making the
22		election. No election allowed by this subparagraph
23		shall be made under a claim filed under subsection (d)
24		of Section 909 more than 30 days after the effective
25		date of this amendatory Act of 1996.
26		(F) Finance Leases. For purposes of this
27		subsection, a finance lease shall be treated as a loan
28		or other extension of credit, rather than as a lease,
29		regardless of how the transaction is characterized for
30		any other purpose, including the purposes of any
31		regulatory agency to which the lessor is subject. A
32		finance lease is any transaction in the form of a lease
33		in which the lessee is treated as the owner of the
34		leased asset entitled to any deduction for

1		depreciation allowed under Section 167 of the Internal
2		Revenue Code.
3		(9) Fiscal year. The term "fiscal year" means an
4		accounting period of 12 months ending on the last day of
5		any month other than December.
6		(10) Includes and including. The terms "includes" and
7		"including" when used in a definition contained in this Act
8		shall not be deemed to exclude other things otherwise
9		within the meaning of the term defined.
10		(11) Internal Revenue Code. The term "Internal Revenue
11		Code" means the United States Internal Revenue Code of 1954
12		or any successor law or laws relating to federal income
13		taxes in effect for the taxable year.
14		(11.5) Investment partnership.
15		(A) The term "investment partnership" means any
16		entity that is treated as a partnership for federal
17		income tax purposes that meets the following
18		requirements:
19		(i) no less than 90% of the partnership's cost
20		of its total assets consists of qualifying
21		investment securities, deposits at banks or other
22		financial institutions, and office space and
23		equipment reasonably necessary to carry on its
24		activities as an investment partnership;
25		(ii) no less than 90% of its gross income
26		consists of interest, dividends, and gains from
27		the sale or exchange of qualifying investment
28		securities; and
29		(iii) the partnership is not a dealer in
30		qualifying investment securities.
31		(B) For purposes of this paragraph (11.5), the term
32		â?oqualifying investment securitiesâ? includes all
33		of the following:
34		(i) common stock, including preferred or debt

1		securities convertible into common stock, and
2		preferred stock;
3		(ii) bonds, debentures, and other debt
4		securities;
5		(iii) foreign and domestic currency deposits
6		secured by federal, state, or local governmental
7		agencies;
8		(iv) mortgage or asset-backed securities
9		secured by federal, state, or local governmental
10		agencies;
11		(v) repurchase agreements and loan
12		participations;
13		(vi) foreign currency exchange contracts and
14		forward and futures contracts on foreign
15		currencies;
16		(vii) stock and bond index securities and
17		futures contracts and other similar financial
18		securities and futures contracts on those
19		securities;
20		(viii) options for the purchase or sale of any
21		of the securities, currencies, contracts, or
22		financial instruments described in items (i) to
23		(vii), inclusive;
24		(ix) regulated futures contracts;
25		(x) commodities (not described in Section
26		1221(a)(1) of the Internal Revenue Code) or
27		futures, forwards, and options with respect to
28		such commodities, provided, however, that any item
29		of a physical commodity to which title is actually
30		acquired in the partnership's capacity as a dealer
31		in such commodity shall not be a qualifying
32		investment security;
33		(xi) derivatives; and
34		(xii) a partnership interest in another

1		partnership that is an investment partnership.
2		(12) Mathematical error. The term "mathematical error"
3		includes the following types of errors, omissions, or
4		defects in a return filed by a taxpayer which prevents
5		acceptance of the return as filed for processing:
6		(A) arithmetic errors or incorrect computations on
7		the return or supporting schedules;
8		(B) entries on the wrong lines;
9		(C) omission of required supporting forms or
10		schedules or the omission of the information in whole
11		or in part called for thereon; and
12		(D) an attempt to claim, exclude, deduct, or
13		improperly report, in a manner directly contrary to the
14		provisions of the Act and regulations thereunder any
15		item of income, exemption, deduction, or credit.
16		(13) Nonbusiness income. The term "nonbusiness income"
17		means all income other than business income or
18		compensation.
19		(14) Nonresident. The term "nonresident" means a
20		person who is not a resident.
21		(15) Paid, incurred and accrued. The terms "paid",
22		"incurred" and "accrued" shall be construed according to
23		the method of accounting upon the basis of which the
24		person's base income is computed under this Act.
25		(16) Partnership and partner. The term "partnership"
26		includes a syndicate, group, pool, joint venture or other
27		unincorporated organization, through or by means of which
28		any business, financial operation, or venture is carried
29		on, and which is not, within the meaning of this Act, a
30		trust or estate or a corporation; and the term "partner"
31		includes a member in such syndicate, group, pool, joint
32		venture or organization.
33		The term "partnership" includes any entity, including
34		a limited liability company formed under the Illinois

1		Limited Liability Company Act, classified as a partnership
2		for federal income tax purposes.
3		The term "partnership" does not include a syndicate,
4		group, pool, joint venture, or other unincorporated
5		organization established for the sole purpose of playing
6		the Illinois State Lottery.
7		(17) Part-year resident. The term "part-year resident"
8		means an individual who became a resident during the
9		taxable year or ceased to be a resident during the taxable
10		year. Under Section 1501(a)(20)(A)(i) residence commences
11		with presence in this State for other than a temporary or
12		transitory purpose and ceases with absence from this State
13		for other than a temporary or transitory purpose. Under
14		Section 1501(a)(20)(A)(ii) residence commences with the
15		establishment of domicile in this State and ceases with the
16		establishment of domicile in another State.
17		(18) Person. The term "person" shall be construed to
18		mean and include an individual, a trust, estate,
19		partnership, association, firm, company, corporation,
20		limited liability company, or fiduciary. For purposes of
21		Section 1301 and 1302 of this Act, a "person" means (i) an
22		individual, (ii) a corporation, (iii) an officer, agent, or
23		employee of a corporation, (iv) a member, agent or employee
24		of a partnership, or (v) a member, manager, employee,
25		officer, director, or agent of a limited liability company
26		who in such capacity commits an offense specified in
27		Section 1301 and 1302.
28		(18A) Records. The term "records" includes all data
29		maintained by the taxpayer, whether on paper, microfilm,
30		microfiche, or any type of machine-sensible data
31		compilation.
32		(19) Regulations. The term "regulations" includes
33		rules promulgated and forms prescribed by the Department.
34		(20) Resident. The term "resident" means:

1		(A) an individual (i) who is in this State for
2		other than a temporary or transitory purpose during the
3		taxable year; or (ii) who is domiciled in this State
4		but is absent from the State for a temporary or
5		transitory purpose during the taxable year;
6		(B) The estate of a decedent who at his or her
7		death was domiciled in this State;
8		(C) A trust created by a will of a decedent who at
9		his death was domiciled in this State; and
10		(D) An irrevocable trust, the grantor of which was
11		domiciled in this State at the time such trust became
12		irrevocable. For purpose of this subparagraph, a trust
13		shall be considered irrevocable to the extent that the
14		grantor is not treated as the owner thereof under
15		Sections 671 through 678 of the Internal Revenue Code.
16		(21) Sales. The term "sales" means all gross receipts
17		of the taxpayer not allocated under Sections 301, 302 and
18		303.
19		(22) State. The term "state" when applied to a
20		jurisdiction other than this State means any state of the
21		United States, the District of Columbia, the Commonwealth
22		of Puerto Rico, any Territory or Possession of the United
23		States, and any foreign country, or any political
24		subdivision of any of the foregoing. For purposes of the
25		foreign tax credit under Section 601, the term "state"
26		means any state of the United States, the District of
27		Columbia, the Commonwealth of Puerto Rico, and any
28		territory or possession of the United States, or any
29		political subdivision of any of the foregoing, effective
30		for tax years ending on or after December 31, 1989.
31		(23) Taxable year. The term "taxable year" means the
32		calendar year, or the fiscal year ending during such
33		calendar year, upon the basis of which the base income is
34		computed under this Act. "Taxable year" means, in the case

1		of a return made for a fractional part of a year under the
2		provisions of this Act, the period for which such return is
3		made.
4		(24) Taxpayer. The term "taxpayer" means any person
5		subject to the tax imposed by this Act.
6		(25) International banking facility. The term
7		international banking facility shall have the same meaning
8		as is set forth in the Illinois Banking Act or as is set
9		forth in the laws of the United States or regulations of
10		the Board of Governors of the Federal Reserve System.
11		(26) Income Tax Return Preparer.
12		(A) The term "income tax return preparer" means any
13		person who prepares for compensation, or who employs
14		one or more persons to prepare for compensation, any
15		return of tax imposed by this Act or any claim for
16		refund of tax imposed by this Act. The preparation of a
17		substantial portion of a return or claim for refund
18		shall be treated as the preparation of that return or
19		claim for refund.
20		(B) A person is not an income tax return preparer
21		if all he or she does is
22		(i) furnish typing, reproducing, or other
23		mechanical assistance;
24		(ii) prepare returns or claims for refunds for
25		the employer by whom he or she is regularly and
26		continuously employed;
27		(iii) prepare as a fiduciary returns or claims
28		for refunds for any person; or
29		(iv) prepare claims for refunds for a taxpayer
30		in response to any notice of deficiency issued to
31		that taxpayer or in response to any waiver of
32		restriction after the commencement of an audit of
33		that taxpayer or of another taxpayer if a
34		determination in the audit of the other taxpayer

1		directly or indirectly affects the tax liability
2		of the taxpayer whose claims he or she is
3		preparing.
4		(27) Unitary business group. The term "unitary
5		business group" means a group of persons related through
6		common ownership whose business activities are integrated
7		with, dependent upon and contribute to each other. The
8		group will not include those members who, in taxable years
9		on or after December 31, 2004, are foreign persons and
10		whose business activity outside the United States is 80% or
11		more of any such member's total business activity; for
12		purposes of this paragraph and clause (a)(3)(B)(ii) of
13		Section 304, business activity within the United States
14		shall be measured by means of the factors ordinarily
15		applicable under subsections (a), (b), (c), (d), or (h) of
16		Section 304 except that, in the case of members ordinarily
17		required to apportion business income by means of the 3
18		factor formula of property, payroll and sales specified in
19		subsection (a) of Section 304, including the formula as
20		weighted in subsection (h) of Section 304, such members
21		shall not use the sales factor in the computation and the
22		results of the property and payroll factor computations of
23		subsection (a) of Section 304 shall be divided by 2 (by one
24		if either the property or payroll factor has a denominator
25		of zero). The computation required by the preceding
26		sentence shall, in each case, involve the division of the
27		member's property, payroll, or revenue miles in the United
28		States, insurance premiums on property or risk in the
29		United States, or financial organization business income
30		from sources within the United States, as the case may be,
31		by the respective worldwide figures for such items. Common
32		ownership in the case of corporations is the direct or
33		indirect control or ownership of more than 50% of the
34		outstanding voting stock of the persons carrying on unitary

1		business activity. Unitary business activity can
2		ordinarily be illustrated where the activities of the
3		members are: (1) in the same general line (such as
4		manufacturing, wholesaling, retailing of tangible personal
5		property, insurance, transportation or finance); or (2)
6		are steps in a vertically structured enterprise or process
7		(such as the steps involved in the production of natural
8		resources, which might include exploration, mining,
9		refining, and marketing); and, in either instance, the
10		members are functionally integrated through the exercise
11		of strong centralized management (where, for example,
12		authority over such matters as purchasing, financing, tax
13		compliance, product line, personnel, marketing and capital
14		investment is not left to each member). For taxable years
15		ending before December 31, 2004, a In no event, however,
16		will any unitary business group shall not include members
17		which are ordinarily required to apportion business income
18		under different subsections of Section 304, except that for
19		tax years ending on or after December 31, 1987 and before
20		December 31, 2004, this prohibition shall not apply to a
21		unitary business group composed of one or more taxpayers
22		all of which apportion business income pursuant to
23		subsection (b) of Section 304, or all of which apportion
24		business income pursuant to subsection (d) of Section 304,
25		and a holding company of such single-factor taxpayers (see
26		definition of "financial organization" for rule regarding
27		holding companies of financial organizations). If a
28		unitary business group would, but for the preceding
29		sentence, include members that are ordinarily required to
30		apportion business income under different subsections of
31		Section 304, then for each subsection of Section 304 for
32		which there are two or more members, there shall be a
33		separate unitary business group composed of such members.
34		For purposes of the preceding two sentences, a member is

1		"ordinarily required to apportion business income" under a
2		particular subsection of Section 304 if it would be
3		required to use the apportionment method prescribed by such
4		subsection except for the fact that it derives business
5		income solely from Illinois. Pursuant to rules adopted by
6		the Department, the members of a unitary business group (as
7		defined in this Section) may jointly elect to include in
8		the group for any taxable year ending on or after December
9		31, 2004, a passive income affiliate, as defined in
10		paragraph (29) of this subsection. Where the election is
11		made to include a passive income affiliate in the unitary
12		business group, for purposes of computing the affiliate's
13		base income under Section 203 of this Act, the affiliate's
14		federal taxable income shall be deemed to consist solely of
15		its passive income, as defined in subparagraph (B) of
16		paragraph (29) of this subsection, net of related expenses.
17		As used in this paragraph, for taxable years ending on or
18		after December 31, 2004, the phrase "United States" means
19		the 50 states, the District of Columbia, any territory or
20		possession of the United States, and any area over which
21		the United States has asserted jurisdiction or claimed
22		exclusive rights with respect to the exploration for or
23		exploitation of natural resources. This definition
24		includes, but is not limited to, Puerto Rico and the outer
25		continental shelf and any artificial islands and
26		structures therein.
27		If the unitary business group members' accounting
28		periods differ, the common parent's accounting period or,
29		if there is no common parent, the accounting period of the
30		member that is expected to have, on a recurring basis, the
31		greatest Illinois income tax liability must be used to
32		determine whether to use the apportionment method provided
33		in subsection (a) or subsection (h) of Section 304. The
34		prohibition against membership in a unitary business group

1		for taxpayers ordinarily required to apportion income
2		under different subsections of Section 304 does not apply
3		to taxpayers required to apportion income under subsection
4		(a) and subsection (h) of Section 304. The provisions of
5		this amendatory Act of 1998 apply to tax years ending on or
6		after December 31, 1998.
7		(28) Subchapter S corporation. The term "Subchapter S
8		corporation" means a corporation for which there is in
9		effect an election under Section 1362 of the Internal
10		Revenue Code, or for which there is a federal election to
11		opt out of the provisions of the Subchapter S Revision Act
12		of 1982 and have applied instead the prior federal
13		Subchapter S rules as in effect on July 1, 1982.
14		(29) Passive income affiliate.
15		(A) In general. The term "passive income
16		affiliate" means any person if (i) the person would be
17		a member of a unitary business group under paragraph
18		(27) of this subsection except for the fact that the
19		person is a foreign person and 80% or more of the
20		person's business activity is outside the United
21		States (as determined under paragraph (27)) and (ii) at
22		least 50% of the person's total gross income (as
23		defined in this Section) for the taxable year consists
24		of "passive income" as set forth in subparagraph (B) of
25		this paragraph.
26		(B) Passive income. For purpose of subparagraph
27		(A), "passive income" includes the following items
28		(whether or not business income):
29		(i) dividends, interest, annuities, and
30		royalties (except that "royalties" does not
31		include "active business computer software
32		royalties", as defined in Section 543(d) of the
33		Internal Revenue Code);
34		(ii) gains from the sale or exchange of stock

1		or securities;
2		(iii) gains from futures transactions in any
3		commodity on or subject to the rules of a board of
4		trade or commodity exchange (except that, pursuant
5		to rules adopted by the Department, gains by a
6		producer, processor, merchant, or handler of the
7		commodity that arise out of bona fide hedging
8		transactions reasonably necessary to the conduct
9		of its business in the manner in which the business
10		is customarily and usually conducted by others
11		shall not be included);
12		(iv) amounts included in income under part I of
13		subchapter J of the Internal Revenue Code and gains
14		from the sale of other disposition of any interest
15		in an estate or trust;
16		(v) amounts received as compensation (however
17		designated and from whomever received) for the use
18		of, or the right to use, property of the person in
19		any case where the party entitled to the use of the
20		property (whether the right is obtained directly
21		from the person or by means of a sublease or other
22		arrangement) would be a member of the person's
23		unitary business group under paragraph (27) of
24		this subsection but for the fact that the person's
25		business activity outside the United States is 80%
26		or more of total business activity as determined
27		under paragraph (27);
28		(vi) rents, unless constituting 50% or more of
29		the gross income. The term "rents" as used in this
30		subparagraph means compensation, however
31		designated, for the use of, or right to use,
32		property but does not include amounts described in
33		subparagraph (v); and
34		(vii) pursuant to rules adopted by the

1		Department, amounts similar to the items set forth
2		in (i) through (vi) above.
3		(C) Gross income and special rules.
4		(i) Gross income. The term "gross income"
5		means the gross income of the person computed under
6		Section 61 of the Internal Revenue Code (without
7		regard to the provisions of subchapter N of the
8		Internal Revenue Code) in any case as if such
9		person were a domestic corporation, partnership,
10		or trust, as applicable. Gross income determined
11		with respect to transactions described in
12		subparagraphs (ii) and (iii) of subparagraph (B)
13		of this paragraph shall include only the excess of
14		gains over losses from such transactions.
15		(ii) 80/20 dividends. Dividends received by a
16		person, directly or indirectly, with respect to
17		the stock of a corporation that is not a passive
18		income affiliate (as defined in this paragraph)
19		and that would be a member of that person's unitary
20		business group under paragraph (27) of this
21		subsection but for the fact that the corporation or
22		person conducts 80% or more of their business
23		activities outside the United States (as
24		determined under paragraph (27) of this
25		subsection) shall not be considered passive income
26		under subparagraph (B) of this paragraph.
27		(iii) Exclusion of banks. A person that is
28		organized and doing business under the banking or
29		credit laws of a state or foreign country shall not
30		be considered a passive income affiliate if it is
31		established to the satisfaction of the Director
32		that the person is not formed or availed of for the
33		purpose of avoiding federal income tax or Illinois
34		income tax. If the Director is satisfied that the

1		person is not so formed or availed of, the Director
2		shall issue to the person annually or at other
3		periodic intervals a certification that the person
4		is not a passive income affiliate.
5		(30) Foreign person. The term "foreign person" means
6		any person who is a nonresident alien individual and any
7		nonindividual other than a person created or organized in
8		the United States or under the law of the United States or
9		of any State.
10		(31) Small Business Person. As used in this Act, the
11		term "small business person" means any person who, with
12		respect to the taxable year:
13		(A) Is considered a small corporation for purposes
14		of the exemption under Section 55(e)(1) of the Internal
15		Revenue Code from the alternative minimum tax
16		(including a corporation that qualifies for the
17		exemption under Section 55(e)(1)(C)); or
18		(B) Would be considered a small corporation for
19		purposes of Section 55(e)(1) (including Section
20		55(e)(1)(C)) of the Internal Revenue Code if such
21		Section applied to individuals, S corporations,
22		trusts, estates, and partnerships. A partner
23		(including an owner of a limited liability company that
24		is treated as a partnership for purposes of federal and
25		State income taxation) or S corporation shareholder
26		shall not be considered a small business person with
27		respect to its distributive share or pro rata share
28		items passed through from the partnership or S
29		corporation for a taxable year unless the partnership
30		or S corporation constitutes a small business person
31		for the taxable year of the Partnership of S
32		corporation to which the items relate. The Department
33		shall promulgate rules to carry out the purposes of
34		this subparagraph.

1		(C) In the case of any person that is a member of a
2		unitary business group, as defined in Section
3		1501(a)(27) of this Act, the determination of whether
4		such person is a small business person under this
5		Section shall be made by applying the principles of
6		this Section to the unitary business group of which
7		such person is a part. For purposes of this
8		subparagraph, the unitary business group shall be
9		determined without regard to whether 80% or more of any
10		member's total business activity is outside the United
11		States and without regard to whether any member is
12		required to apportion business income under a
13		different subsection of Section 304.
14		(b) Other definitions.
15		(1) Words denoting number, gender, and so forth, when
16		used in this Act, where not otherwise distinctly expressed
17		or manifestly incompatible with the intent thereof:
18		(A) Words importing the singular include and apply
19		to several persons, parties or things;
20		(B) Words importing the plural include the
21		singular; and
22		(C) Words importing the masculine gender include
23		the feminine as well.
24		(2) "Company" or "association" as including successors
25		and assigns. The word "company" or "association", when used
26		in reference to a corporation, shall be deemed to embrace
27		the words "successors and assigns of such company or
28		association", and in like manner as if these last-named
29		words, or words of similar import, were expressed.
30		(3) Other terms. Any term used in any Section of this
31		Act with respect to the application of, or in connection
32		with, the provisions of any other Section of this Act shall
33		have the same meaning as in such other Section.

1		(Source: P.A. 91-535, eff. 1-1-00; 91-913, eff. 1-1-01; 92-846,
2		eff. 8-23-02.)

Section 999. Effective date. This Act takes effect July 1, 2004, except that Article 10 and this Section take effect upon becoming law, and except that this entire Amendatory Act of the 93rd General Assembly is of no force and effect unless and until House Bill 4266 of the 93rd General Assembly becomes law in the same form as it passed both houses of the General Assembly on April 29, 2004.".