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Revenue Committee
Filed: 5/19/2004
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09300SB2208ham001 |
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LRB093 15827 RCE 51236 a |
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| AMENDMENT TO SENATE BILL 2208
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| AMENDMENT NO. ______. Amend Senate Bill 2208 by replacing |
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| everything after the enacting clause with the following:
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| "Section 5. The Illinois Income Tax Act is amended by |
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| changing Section 1501 as follows:
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| (35 ILCS 5/1501) (from Ch. 120, par. 15-1501)
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| Sec. 1501. Definitions.
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| (a) In general. When used in this Act, where not
otherwise |
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| distinctly expressed or manifestly incompatible with the |
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| intent
thereof:
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| (1) Business income. The term "business income" means |
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| income arising from
transactions and activity in the |
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| regular course of the taxpayer's trade
or business, net of |
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| the deductions allocable thereto, and includes income
from |
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| tangible and intangible property if the acquisition, |
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| management, and
disposition of the property constitute |
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| integral parts of the taxpayer's
regular trade or business |
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| operations. Such term does not include compensation
or the |
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| deductions allocable thereto.
For each taxable year |
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| beginning on or after January 1, 2003, a taxpayer may
elect |
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| to treat all income other than compensation as business |
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| income. This
election shall be made in accordance with |
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| rules adopted by the Department and,
once made, shall be |
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| irrevocable.
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LRB093 15827 RCE 51236 a |
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| (2) Commercial domicile. The term "commercial |
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| domicile" means the
principal
place from which the trade or |
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| business of the taxpayer is directed or managed.
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| (3) Compensation. The term "compensation" means wages, |
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| salaries,
commissions
and any other form of remuneration |
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| paid to employees for personal services.
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| (4) Corporation. The term "corporation" includes |
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| associations, joint-stock
companies, insurance companies |
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| and cooperatives. Any entity, including a
limited |
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| liability company formed under the Illinois Limited |
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| Liability Company
Act, shall be treated as a corporation if |
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| it is so classified for federal
income tax purposes.
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| (5) Department. The term "Department" means the |
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| Department of Revenue of
this State.
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| (6) Director. The term "Director" means the Director of |
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| Revenue of this
State.
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| (7) Fiduciary. The term "fiduciary" means a guardian, |
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| trustee, executor,
administrator, receiver, or any person |
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| acting in any fiduciary capacity for any
person.
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| (8) Financial organization.
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| (A) The term "financial organization" means
any
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| bank, bank holding company, trust company, savings |
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| bank, industrial bank,
land bank, safe deposit |
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| company, private banker, savings and loan association,
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| building and loan association, credit union, currency |
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| exchange, cooperative
bank, small loan company, sales |
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| finance company, investment company, or any
person |
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| which is owned by a bank or bank holding company. For |
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| the purpose of
this Section a "person" will include |
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| only those persons which a bank holding
company may |
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| acquire and hold an interest in, directly or |
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| indirectly, under the
provisions of the Bank Holding |
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| Company Act of 1956 (12 U.S.C. 1841, et seq.),
except |
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| where interests in any person must be disposed of |
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LRB093 15827 RCE 51236 a |
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| within certain
required time limits under the Bank |
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| Holding Company Act of 1956.
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| (B) For purposes of subparagraph (A) of this |
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| paragraph, the term
"bank" includes (i) any entity that |
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| is regulated by the Comptroller of the
Currency under |
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| the National Bank Act, or by the Federal Reserve Board, |
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| or by
the
Federal Deposit Insurance Corporation and |
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| (ii) any federally or State chartered
bank
operating as |
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| a credit card bank.
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| (C) For purposes of subparagraph (A) of this |
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| paragraph, the term
"sales finance company" has the |
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| meaning provided in the following item (i) or
(ii):
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| (i) A person primarily engaged in one or more |
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| of the following
businesses: the business of |
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| purchasing customer receivables, the business
of |
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| making loans upon the security of customer |
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| receivables, the
business of making loans for the |
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| express purpose of funding purchases of
tangible |
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| personal property or services by the borrower, or |
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| the business of
finance leasing. For purposes of |
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| this item (i), "customer receivable"
means:
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| (a) a retail installment contract or |
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| retail charge agreement within
the
meaning
of |
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| the Sales Finance Agency Act, the Retail |
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| Installment Sales Act, or the
Motor Vehicle |
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| Retail Installment Sales Act;
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| (b) an installment, charge, credit, or |
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| similar contract or agreement
arising from
the |
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| sale of tangible personal property or services |
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| in a transaction involving
a deferred payment |
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| price payable in one or more installments |
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| subsequent
to the sale; or
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| (c) the outstanding balance of a contract |
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| or agreement described in
provisions
(a) or (b) |
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LRB093 15827 RCE 51236 a |
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| of this item (i).
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| A customer receivable need not provide for |
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| payment of interest on
deferred
payments. A sales |
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| finance company may purchase a customer receivable |
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| from, or
make a loan secured by a customer |
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| receivable to, the seller in the original
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| transaction or to a person who purchased the |
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| customer receivable directly or
indirectly from |
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| that seller.
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| (ii) A corporation meeting each of the |
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| following criteria:
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| (a) the corporation must be a member of an |
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| "affiliated group" within
the
meaning of |
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| Section 1504(a) of the Internal Revenue Code, |
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| determined
without regard to Section 1504(b) |
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| of the Internal Revenue Code;
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| (b) more than 50% of the gross income of |
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| the corporation for the
taxable
year
must be |
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| interest income derived from qualifying loans. |
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| A "qualifying
loan" is a loan made to a member |
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| of the corporation's affiliated group that
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| originates customer receivables (within the |
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| meaning of item (i)) or to whom
customer |
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| receivables originated by a member of the |
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| affiliated group have been
transferred, to
the |
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| extent the average outstanding balance of |
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| loans from that corporation
to members of its |
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| affiliated group during the taxable year do not |
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| exceed
the limitation amount for that |
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| corporation. The "limitation amount" for a
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| corporation is the average outstanding |
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| balances during the taxable year of
customer |
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| receivables (within the meaning of item (i)) |
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| originated by
all members of the affiliated |
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LRB093 15827 RCE 51236 a |
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| group.
If the average outstanding balances of |
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| the
loans made by a corporation to members of |
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| its affiliated group exceed the
limitation |
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| amount, the interest income of that |
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| corporation from qualifying
loans shall be |
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| equal to its interest income from loans to |
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| members of its
affiliated groups times a |
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| fraction equal to the limitation amount |
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| divided by
the average outstanding balances of |
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| the loans made by that corporation to
members |
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| of its affiliated group;
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| (c) the total of all shareholder's equity |
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| (including, without
limitation,
paid-in
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| capital on common and preferred stock and |
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| retained earnings) of the
corporation plus the |
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| total of all of its loans, advances, and other
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| obligations payable or owed to members of its |
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| affiliated group may not
exceed 20% of the |
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| total assets of the corporation at any time |
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| during the tax
year; and
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| (d) more than 50% of all interest-bearing |
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| obligations of the
affiliated group payable to |
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| persons outside the group determined in |
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| accordance
with generally accepted accounting |
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| principles must be obligations of the
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| corporation.
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| This amendatory Act of the 91st General Assembly is |
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| declaratory of
existing
law.
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| (D) Subparagraphs
(B) and (C) of this paragraph are |
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| declaratory of
existing law and apply retroactively, |
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| for all tax years beginning on or before
December 31, |
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| 1996,
to all original returns, to all amended returns |
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| filed no later than 30
days after the effective date of |
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| this amendatory Act of 1996, and to all
notices issued |
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LRB093 15827 RCE 51236 a |
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| on or before the effective date of this amendatory Act |
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| of 1996
under subsection (a) of Section 903, subsection |
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| (a) of Section 904,
subsection (e) of Section 909, or |
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| Section 912.
A taxpayer that is a "financial |
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| organization" that engages in any transaction
with an |
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| affiliate shall be a "financial organization" for all |
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| purposes of this
Act.
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| (E) For all tax years beginning on or
before |
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| December 31, 1996, a taxpayer that falls within the |
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| definition
of a
"financial organization" under |
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| subparagraphs (B) or (C) of this paragraph, but
who |
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| does
not fall within the definition of a "financial |
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| organization" under the Proposed
Regulations issued by |
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| the Department of Revenue on July 19, 1996, may
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| irrevocably elect to apply the Proposed Regulations |
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| for all of those years as
though the Proposed |
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| Regulations had been lawfully promulgated, adopted, |
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| and in
effect for all of those years. For purposes of |
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| applying subparagraphs (B) or
(C) of
this
paragraph to |
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| all of those years, the election allowed by this |
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| subparagraph
applies only to the taxpayer making the |
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| election and to those members of the
taxpayer's unitary |
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| business group who are ordinarily required to |
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| apportion
business income under the same subsection of |
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| Section 304 of this Act as the
taxpayer making the |
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| election. No election allowed by this subparagraph |
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| shall
be made under a claim
filed under subsection (d) |
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| of Section 909 more than 30 days after the
effective |
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| date of this amendatory Act of 1996.
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| (F) Finance Leases. For purposes of this |
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| subsection, a finance lease
shall be treated as a loan |
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| or other extension of credit, rather than as a
lease,
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| regardless of how the transaction is characterized for |
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| any other purpose,
including the purposes of any |
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| regulatory agency to which the lessor is subject.
A |
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| finance lease is any transaction in the form of a lease |
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| in which the lessee
is treated as the owner of the |
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| leased asset entitled to any deduction for
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| depreciation allowed under Section 167 of the Internal |
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| Revenue Code.
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| (9) Fiscal year. The term "fiscal year" means an |
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| accounting period of
12 months ending on the last day of |
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| any month other than December.
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| (10) Includes and including. The terms "includes" and |
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| "including" when
used in a definition contained in this Act |
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| shall not be deemed to exclude
other things otherwise |
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| within the meaning of the term defined.
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| (11) Internal Revenue Code. The term "Internal Revenue |
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| Code" means the
United States Internal Revenue Code of 1954 |
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| or any successor law or laws
relating to federal income |
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| taxes in effect for the taxable year.
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| (12) Mathematical error. The term "mathematical error" |
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| includes the
following types of errors, omissions, or |
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| defects in a return filed by a
taxpayer which prevents |
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| acceptance of the return as filed for processing:
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| (A) arithmetic errors or incorrect computations on |
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| the return or
supporting schedules;
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| (B) entries on the wrong lines;
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| (C) omission of required supporting forms or |
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| schedules or the omission
of the information in whole |
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| or in part called for thereon; and
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| (D) an attempt to claim, exclude, deduct, or |
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| improperly report, in a
manner
directly contrary to the |
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| provisions of the Act and regulations thereunder
any |
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| item of income, exemption, deduction, or credit.
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| (13) Nonbusiness income. The term "nonbusiness income" |
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| means all income
other than business income or |
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| compensation.
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LRB093 15827 RCE 51236 a |
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| (14) Nonresident. The term "nonresident" means a |
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| person who is not a
resident.
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| (15) Paid, incurred and accrued. The terms "paid", |
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| "incurred" and
"accrued"
shall be construed according to |
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| the method of accounting upon the basis
of which the |
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| person's base income is computed under this Act.
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| (16) Partnership and partner. The term "partnership" |
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| includes a syndicate,
group, pool, joint venture or other |
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| unincorporated organization, through
or by means of which |
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| any business, financial operation, or venture is carried
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| on, and which is not, within the meaning of this Act, a |
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| trust or estate
or a corporation; and the term "partner" |
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| includes a member in such syndicate,
group, pool, joint |
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| venture or organization.
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| The term "partnership" includes any entity, including |
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| a limited
liability company formed under the Illinois
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| Limited Liability Company Act, classified as a partnership |
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| for federal income tax purposes.
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| The term "partnership" does not include a syndicate, |
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| group, pool,
joint venture, or other unincorporated |
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| organization established for the
sole purpose of playing |
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| the Illinois State Lottery.
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| (17) Part-year resident. The term "part-year resident" |
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| means an individual
who became a resident during the |
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| taxable year or ceased to be a resident
during the taxable |
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| year. Under Section 1501(a)(20)(A)(i) residence
commences |
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| with presence in this State for other than a temporary or |
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| transitory
purpose and ceases with absence from this State |
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| for other than a temporary or
transitory purpose. Under |
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| Section 1501(a)(20)(A)(ii) residence commences
with the |
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| establishment of domicile in this State and ceases with the
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| establishment of domicile in another State.
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| (18) Person. The term "person" shall be construed to |
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| mean and include
an individual, a trust, estate, |
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| partnership, association, firm, company,
corporation, |
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| limited liability company, or fiduciary. For purposes of |
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| Section
1301 and 1302 of this Act, a "person" means (i) an |
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| individual, (ii) a
corporation, (iii) an officer, agent, or |
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| employee of a
corporation, (iv) a member, agent or employee |
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| of a partnership, or (v)
a member,
manager, employee, |
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| officer, director, or agent of a limited liability company
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| who in such capacity commits an offense specified in |
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| Section 1301 and 1302.
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| (18A) Records. The term "records" includes all data |
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| maintained by the
taxpayer, whether on paper, microfilm, |
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| microfiche, or any type of
machine-sensible data |
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| compilation.
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| (19) Regulations. The term "regulations" includes |
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| rules promulgated and
forms prescribed by the Department.
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| (20) Resident. The term "resident" means:
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| (A) an individual (i) who is
in this State for |
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| other than a temporary or transitory purpose during the
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| taxable year; or (ii) who is domiciled in this State |
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| but is absent from
the State for a temporary or |
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| transitory purpose during the taxable year;
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| (B) The estate of a decedent who at his or her |
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| death was domiciled in
this
State;
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| (C) A trust created by a will of a decedent who at |
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| his death was
domiciled
in this State; and
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| (D) An irrevocable trust, the grantor of which was |
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| domiciled in this
State
at the time such trust became |
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| irrevocable. For purpose of this subparagraph,
a trust |
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| shall be considered irrevocable to the extent that the |
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| grantor is
not treated as the owner thereof under |
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| Sections 671 through 678 of the Internal
Revenue Code.
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| (21) Sales. The term "sales" means all gross receipts |
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| of the taxpayer
not allocated under Sections 301, 302 and |
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| 303.
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| (22) State. The term "state" when applied to a |
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| jurisdiction other than
this State means any state of the |
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| United States, the District of Columbia,
the Commonwealth |
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| of Puerto Rico, any Territory or Possession of the United
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| States, and any foreign country, or any political |
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| subdivision of any of the
foregoing. For purposes of the |
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| foreign tax credit under Section 601, the
term "state" |
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| means any state of the United States, the District of |
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| Columbia,
the Commonwealth of Puerto Rico, and any |
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| territory or possession of the
United States, or any |
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| political subdivision of any of the foregoing,
effective |
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| for tax years ending on or after December 31, 1989.
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| (23) Taxable year. The term "taxable year" means the |
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| calendar year, or
the fiscal year ending during such |
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| calendar year, upon the basis of which
the base income is |
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| computed under this Act. "Taxable year" means, in the
case |
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| of a return made for a fractional part of a year under the |
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| provisions
of this Act, the period for which such return is |
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| made.
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| (24) Taxpayer. The term "taxpayer" means any person |
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| subject to the tax
imposed by this Act.
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| (25) International banking facility. The term |
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| international banking
facility shall have the same meaning |
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| as is set forth in the Illinois Banking
Act or as is set |
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| forth in the laws of the United States or regulations of
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| the Board of Governors of the Federal Reserve System.
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| (26) Income Tax Return Preparer.
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| (A) The term "income tax return preparer"
means any |
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| person who prepares for compensation, or who employs |
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| one or more
persons to prepare for compensation, any |
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| return of tax imposed by this Act
or any claim for |
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| refund of tax imposed by this Act. The preparation of a
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| substantial portion of a return or claim for refund |
34 |
| shall be treated as
the preparation of that return or |
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| claim for refund.
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| (B) A person is not an income tax return preparer |
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| if all he or she does
is
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| (i) furnish typing, reproducing, or other |
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| mechanical assistance;
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| (ii) prepare returns or claims for refunds for |
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| the employer by whom he
or she is regularly and |
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| continuously employed;
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| (iii) prepare as a fiduciary returns or claims |
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| for refunds for any
person; or
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| (iv) prepare claims for refunds for a taxpayer |
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| in response to any
notice
of deficiency issued to |
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| that taxpayer or in response to any waiver of
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| restriction after the commencement of an audit of |
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| that taxpayer or of another
taxpayer if a |
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| determination in the audit of the other taxpayer |
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| directly or
indirectly affects the tax liability |
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| of the taxpayer whose claims he or she is
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| preparing.
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| (27) Unitary business group. The term "unitary |
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| business group" means
a group of persons related through |
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| common ownership whose business activities
are integrated |
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| with, dependent upon and contribute to each other. The |
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| group
will not include those members whose business |
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| activity outside the United
States is 80% or more of any |
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| such member's total business activity; for
purposes of this |
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| paragraph and clause (a)(3)(B)(ii) of Section 304,
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| business
activity within the United States shall be |
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| measured by means of the factors
ordinarily applicable |
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| under subsections (a), (b), (c), (d), or (h)
of Section
304 |
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| except that, in the case of members ordinarily required to |
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| apportion
business income by means of the 3 factor formula |
33 |
| of property, payroll and sales
specified in subsection (a) |
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| of Section 304, including the
formula as weighted in |
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| subsection (h) of Section 304, such members shall
not use |
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| the sales factor in the computation and the results of the |
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| property
and payroll factor computations of subsection (a) |
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| of Section 304 shall be
divided by 2 (by one if either
the |
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| property or payroll factor has a denominator of zero). The |
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| computation
required by the preceding sentence shall, in |
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| each case, involve the division of
the member's property, |
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| payroll, or revenue miles in the United States,
insurance |
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| premiums on property or risk in the United States, or |
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| financial
organization business income from sources within |
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| the United States, as the
case may be, by the respective |
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| worldwide figures for such items. Common
ownership in the |
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| case of corporations is the direct or indirect control or
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| ownership of more than 50% of the outstanding voting stock |
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| of the persons
carrying on unitary business activity. |
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| Unitary business activity can
ordinarily be illustrated |
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| where the activities of the members are: (1) in the
same |
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| general line (such as manufacturing, wholesaling, |
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| retailing of tangible
personal property, insurance, |
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| transportation or finance); or (2) are steps in a
|
21 |
| vertically structured enterprise or process (such as the |
22 |
| steps involved in the
production of natural resources, |
23 |
| which might include exploration, mining,
refining, and |
24 |
| marketing); and, in either instance, the members are |
25 |
| functionally
integrated through the exercise of strong |
26 |
| centralized management (where, for
example, authority over |
27 |
| such matters as purchasing, financing, tax compliance,
|
28 |
| product line, personnel, marketing and capital investment |
29 |
| is not left to each
member). For tax years ending before |
30 |
| December 31, 2004, no
In no event, however, will any
|
31 |
| unitary business group may include members
which are |
32 |
| ordinarily required to apportion business income under |
33 |
| different
subsections of Section 304 except that for tax |
34 |
| years ending on or after
December 31, 1987 and before |
|
|
|
09300SB2208ham001 |
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LRB093 15827 RCE 51236 a |
|
|
1 |
| December 31, 2004, this prohibition shall not apply to a |
2 |
| unitary business group
composed of one or more taxpayers |
3 |
| all of which apportion business income
pursuant to |
4 |
| subsection (b) of Section 304, or all of which apportion |
5 |
| business
income pursuant to subsection (d) of Section 304, |
6 |
| and a holding company of such
single-factor taxpayers (see |
7 |
| definition of "financial organization" for rule
regarding |
8 |
| holding companies of financial organizations). If a |
9 |
| unitary business
group would, but for the preceding |
10 |
| sentence, include members that are
ordinarily required to |
11 |
| apportion business income under different subsections of
|
12 |
| Section 304, then for each subsection of Section 304 for |
13 |
| which there are two or
more members, there shall be a |
14 |
| separate unitary business group composed of such
members. |
15 |
| For purposes of the preceding two sentences, a member is |
16 |
| "ordinarily
required to apportion business income" under a |
17 |
| particular subsection of Section
304 if it would be |
18 |
| required to use the apportionment method prescribed by such
|
19 |
| subsection except for the fact that it derives business |
20 |
| income solely from
Illinois. If the unitary business group |
21 |
| members' accounting periods differ,
the common parent's |
22 |
| accounting period or, if there is no common parent, the
|
23 |
| accounting period of the member that is expected to have, |
24 |
| on a recurring basis,
the greatest Illinois income tax |
25 |
| liability must be used to determine whether to
use the |
26 |
| apportionment method provided in subsection (a) or |
27 |
| subsection (h) of
Section 304. The
prohibition against |
28 |
| membership in a unitary business group for taxpayers
|
29 |
| ordinarily required to apportion income under different |
30 |
| subsections of Section
304 does not apply to taxpayers |
31 |
| required to apportion income under subsection
(a) and |
32 |
| subsection (h) of Section
304. The provisions of this |
33 |
| amendatory Act of 1998 apply to tax
years ending on or |
34 |
| after December 31, 1998.
|
|
|
|
09300SB2208ham001 |
- 14 - |
LRB093 15827 RCE 51236 a |
|
|
1 |
| (28) Subchapter S corporation. The term "Subchapter S |
2 |
| corporation"
means a corporation for which there is in |
3 |
| effect an election under Section
1362 of the Internal |
4 |
| Revenue Code, or for which there is a federal election
to |
5 |
| opt out of the provisions of the Subchapter S Revision Act |
6 |
| of 1982 and
have applied instead the prior federal |
7 |
| Subchapter S rules as in effect on July
1, 1982.
|
8 |
| (b) Other definitions.
|
9 |
| (1) Words denoting number, gender, and so forth,
when |
10 |
| used in this Act, where not otherwise distinctly expressed |
11 |
| or manifestly
incompatible with the intent thereof:
|
12 |
| (A) Words importing the singular include and apply |
13 |
| to several persons,
parties or things;
|
14 |
| (B) Words importing the plural include the |
15 |
| singular; and
|
16 |
| (C) Words importing the masculine gender include |
17 |
| the feminine as well.
|
18 |
| (2) "Company" or "association" as including successors |
19 |
| and assigns. The
word "company" or "association", when used |
20 |
| in reference to a corporation,
shall be deemed to embrace |
21 |
| the words "successors and assigns of such company
or |
22 |
| association", and in like manner as if these last-named |
23 |
| words, or words
of similar import, were expressed.
|
24 |
| (3) Other terms. Any term used in any Section of this |
25 |
| Act with respect
to the application of, or in connection |
26 |
| with, the provisions of any other
Section of this Act shall |
27 |
| have the same meaning as in such other Section.
|
28 |
| (Source: P.A. 91-535, eff. 1-1-00; 91-913, eff.
1-1-01; 92-846, |
29 |
| eff. 8-23-02.)".
|