Executive Committee

Filed: 2/8/2006

 

 


 

 


 
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1
AMENDMENT TO HOUSE BILL 1577

2     AMENDMENT NO. ______. Amend House Bill 1577 by replacing
3 everything after the enacting clause with the following:
 
4     "Section 1. Short title. This Act may be cited as the
5 Opportunity Scholarship Act.
 
6     Section 5. Findings and declaration of policy. The General
7 Assembly finds and declares the following:
8         (1) By honoring the provision of the Illinois
9     Constitution that a "fundamental goal of the People of the
10     State is the educational development of all persons to the
11     limits of their capacities" and in accepting the
12     responsibilities under the Bill of Rights (Article I) of
13     the Illinois Constitution to protect the personal inherent
14     and inalienable rights of all its citizens to due process
15     of law and equal protection of the laws, the educational
16     development of every elementary and secondary school
17     student serves the public purposes of this State.
18         (2) The freedom of custodians to choose for their
19     children schools acceptable to their personal educational
20     convictions is an inherent and inalienable personal right
21     under the Illinois and federal constitutions; the personal
22     rights of custodians to such academic freedom stands on its
23     own constitutional merits; and the imposition on families
24     of the compulsory education law imposes grave

 

 

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1     responsibilities on the General Assembly to safeguard the
2     academic freedom of choice of schools of custodians and
3     students.
4         (3) There is a crisis in the elementary and secondary
5     education programs in Illinois. Many schools and their
6     pupils are performing significantly below relevant
7     national standards and are unable to access functions of
8     federal and State law designed to improve their
9     performance. Consequently, many pupils are dropping out of
10     school before completing the ordinary course of secondary
11     education or are leaving school without the basic skills
12     and knowledge that will enable them to find and hold a job
13     or otherwise become functioning, productive members of our
14     society.
15         (4) Throughout Illinois there are many public and
16     nonpublic schools and independent education services
17     competently and efficiently educating or contributing to
18     the education of children. Most pupils in those schools or
19     receiving those services perform at or above relevant
20     national standards, complete their secondary education,
21     and matriculate to institutions of higher education at an
22     extremely high rate. These services and schools should be
23     accessible to all and should enjoy a cooperative
24     relationship with public school districts, schools, and
25     employees of this State.
26         (5) Custodians of school age children in Illinois are
27     frequently unable to enroll their children in schools that
28     will provide them a quality education or to access
29     educational programs before or after school. Sometimes
30     this inability is due to laws, rules, or administrative
31     decisions that limit parents' freedom to select schools
32     that they believe can provide their children with a quality
33     education. Sometimes this inability is due to the parents'
34     lack of standing to influence the educational policies and

 

 

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1     procedures of the schools their children attend or lack of
2     funds to pay for a quality education.
3         (6) Adopting a pilot opportunity scholarship program
4     in Illinois would enable parents to select schools or
5     services they believe will provide a quality education for
6     their children, empower them to influence the educational
7     policies and procedures in the schools their children
8     attend, and provide them with at least a portion of the
9     funds necessary to pay for a quality education. Such a
10     program would help alleviate the crisis in the public
11     school system, assist Illinois children in becoming
12     productive members of society, and test a new approach to
13     education.
14         (7) The provisions of this Act are in the public
15     interest, for the public benefit, and serve a secular
16     public purpose.
 
17     Section 10. Definitions. As used in this Act:
18     "Base year" means the 2006-2007 school year.
19     "Custodian" means, with respect to a qualifying pupil, a
20 parent or legal guardian:
21         (1) who is a resident of this State; and
22         (2) whose gross family income does not exceed 300% of
23     the poverty guidelines updated periodically in the Federal
24     Register by the U.S. Department of Health and Human
25     Services.
26     "Qualified education expenses" means costs reasonably
27 incurred on behalf of a qualifying pupil for the services of a
28 participating tutoring agency or for services of a
29 participating school in which the qualifying pupil is enrolled
30 during the regular school year. Qualified education expenses
31 does not include costs incurred for supplies or
32 extra-curricular activities.
33     "Qualifying pupil" means an individual who:

 

 

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1         (1) is a resident of this State;
2         (2) is under the age of 21 at the close of the school
3     year for which a scholarship is sought; and
4         (3) during the school year for which a scholarship is
5     sought, is a full-time pupil enrolled in a kindergarten
6     through 12th grade education program at any school as
7     defined in this Act.
8     "School" means any public or nonpublic elementary or
9 secondary school in this State that elects to participate in
10 the scholarship program established under this Act and does not
11 discriminate on the basis of race, color, or national origin
12 under Title VI of the Civil Rights Act of 1964 and attendance
13 at which satisfies the requirements of Section 26-1 of the
14 School Code, except that nothing in Section 26-1 shall be
15 construed to require a child to attend any particular public or
16 nonpublic school.
17     "School Opportunity Scholarship" means a written
18 instrument issued by the State Board of Education directly to
19 the custodian of a qualifying pupil. The instrument shall be
20 for a sum certain to be paid within a designated period of
21 time. The custodian may present the instrument only to a
22 participating school as payment for qualified education
23 expenses incurred on behalf of the qualifying pupil.
24     "Tutoring agency" means any entity that elects to
25 participate in the scholarship program and is approved by the
26 State Board of Education for providing tutoring to qualifying
27 pupils.
28     "Tutoring Opportunity Scholarship" means a written
29 instrument with which a custodian of a qualifying pupil may pay
30 a participating tutoring agency for qualified education
31 expenses incurred on behalf of the qualifying pupil. The
32 scholarship shall require the State Board of Education to pay
33 the participating tutoring agency a sum certain within a
34 designated time period.
 

 

 

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1     Section 15. Establishment of program. There is established
2 the Opportunity Scholarship Program. Under the program, after
3 the base year, a custodian of a qualifying pupil shall be
4 entitled to his or her choice of a Tutoring Opportunity
5 Scholarship for payment of qualified education expenses
6 incurred on behalf of the qualifying pupil for the services of
7 a participating tutoring agency or a School Opportunity
8 Scholarship for payment of qualified education expenses
9 incurred on behalf of the qualifying pupil at any participating
10 school in which the qualifying pupil is enrolled. A qualifying
11 pupil shall be entitled to enroll at and attend any
12 participating public or nonpublic school of his or her choice.
13 Each school year, no more than half of new Tutoring or School
14 Opportunity Scholarships awarded may go to custodians whose
15 children were previously enrolled in a nonpublic school.
 
16     Section 20. Notification of scholarships. The principal of
17 each school in this State shall notify custodians of qualifying
18 pupils that scholarships under this Act are available for the
19 next school year. Notification shall occur in January of each
20 school year beginning with the base year.
 
21     Section 25. Request for scholarship. A custodian who
22 applies in accordance with procedures established by the State
23 Board of Education shall receive the chosen scholarship under
24 this Act within the dollar limits set out in this Act. The
25 procedure shall require application for the scholarship, with
26 documentation as to eligibility, between March 1 and May 1
27 prior to the school year in which the scholarship is to be
28 used.
 
29     Section 30. Issuance and payment of scholarship. A
30 scholarship may only be issued to a custodian who has made

 

 

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1 proper application pursuant to Section 25 of this Act. The
2 custodian shall present the scholarship to a participating
3 tutoring agency or school of his or her choice as payment for
4 qualified education expenses. Upon presentment, the State
5 Board of Education shall honor the scholarship and, as issuer
6 of the instrument, pay the participating tutoring agency or
7 school in accordance with procedures established by the State
8 Board of Education. The procedures shall require all of the
9 following:
10         (1) that the applying custodian be notified of the
11     scholarship award by August 1 of the school year in which
12     the scholarship is to be used;
13         (2) that the scholarship instrument be issued to the
14     custodian no later than September 15 of the school year in
15     which the scholarship is to be used;
16         (3) that the custodian present the scholarship
17     instrument to the participating tutoring agency or school
18     no later than October 1 of the school year in which the
19     scholarship is to be used;
20         (4) that the participating tutoring agency or school
21     present the scholarship instrument, with proof of service
22     to the custodian of the qualifying pupil, to the State
23     Board of Education no later than October 31 of the school
24     year in which the scholarship is to be used;
25         (5) that the State Board of Education shall honor the
26     scholarship instrument and as issuer pay the participating
27     tutoring agency or school no later than December 31 of the
28     school year in which the scholarship is to be used; and
29         (6) that participating tutoring agencies or schools
30     must not be required to accept scholarships as full payment
31     for services but neither shall they charge scholarship
32     pupils tuition or any other educational expenses at a
33     higher rate than other pupils.
 

 

 

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1     Section 35. Amount of scholarship. A Tutoring Opportunity
2 Scholarship for qualified education expenses incurred through
3 participating tutoring agencies during any school year after
4 the base year shall be for the lesser of (i) $500 or (ii) the
5 actual qualified education expenses related to the qualifying
6 pupil's tutoring. A School Opportunity Scholarship for
7 qualified education expenses incurred through participating
8 schools during any school year after the base year shall be for
9 the lesser of (i) $3,500 or (ii) the actual qualified education
10 expenses related to the qualifying pupil's enrollment.
 
11     Section 40. Renewal of scholarship. Tutoring and School
12 Opportunity Scholarships shall be renewable every year through
13 grade 12 so long as the qualifying pupil and custodian continue
14 to remain eligible pursuant to Section 10 of this Act.
 
15     Section 45. Assessment. All pupils receiving services
16 obtained through Opportunity Scholarships shall be assessed
17 annually. Participating schools shall be responsible for
18 administering the assessments and reporting the results to the
19 State Board of Education.
 
20     Section 50. Funding. In no year may the total amount of
21 scholarships paid under the provisions of this Act exceed
22 $15,000,000. If the amount needed to fund scholarships for all
23 qualifying pupils exceeds $15,000,000 in any year, the State
24 Board of Education shall determine an equitable way to allocate
25 the $15,000,000 among the qualifying pupils consistent with the
26 stated purpose and policy of this Act.
 
27     Section 55. Not base income. The amount of any scholarship
28 redeemed under this Act shall not be considered base income
29 under subsection (a) of Section 203 of the Illinois Income Tax
30 Act and shall not be taxable for Illinois income tax purposes.
 

 

 

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1     Section 65. Penalties. It shall be a Class 3 felony to use
2 or attempt to use a scholarship under this Act for any purpose
3 other than those permitted by this Act. It shall also be a
4 Class 3 felony for any person, with intent to defraud, to
5 knowingly forge, alter, or misrepresent information on a
6 scholarship application or on any documents submitted in
7 application for a scholarship, to deliver any such document
8 knowing it to have been thus forged, altered, or based on
9 misrepresentation, or to possess, with intent to issue or
10 deliver, any such document knowing it to have been thus forged,
11 altered, or based on misrepresentation.
 
12     Section 70. Rules. The State Board of Education shall adopt
13 rules to implement this Act. The creation of the Opportunity
14 Scholarship Program does not expand the regulatory authority of
15 the State, its officers, or any school district to impose any
16 additional regulation of nonpublic schools beyond those
17 reasonably necessary to enforce the requirements of the
18 program.
 
19     Section 900. The Illinois Income Tax Act is amended by
20 changing Section 203 as follows:
 
21     (35 ILCS 5/203)  (from Ch. 120, par. 2-203)
22     Sec. 203. Base income defined.
23     (a) Individuals.
24         (1) In general. In the case of an individual, base
25     income means an amount equal to the taxpayer's adjusted
26     gross income for the taxable year as modified by paragraph
27     (2).
28         (2) Modifications. The adjusted gross income referred
29     to in paragraph (1) shall be modified by adding thereto the
30     sum of the following amounts:

 

 

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

 

 

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1         20 of the Medical Care Savings Account Act of 2000;
2             (D-10) For taxable years ending after December 31,
3         1997, an amount equal to any eligible remediation costs
4         that the individual deducted in computing adjusted
5         gross income and for which the individual claims a
6         credit under subsection (l) of Section 201;
7             (D-15) 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;
13             (D-16) 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-15), then an amount equal to the
19         aggregate amount of the deductions taken in all taxable
20         years under subparagraph (Z) 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-17) 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 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

 

 

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1         reduced to the extent that dividends were included in
2         base income of the unitary group for the same taxable
3         year and received by the taxpayer or by a member of the
4         taxpayer's unitary business group (including amounts
5         included in gross income under Sections 951 through 964
6         of the Internal Revenue Code and amounts included in
7         gross income under Section 78 of the Internal Revenue
8         Code) with respect to the stock of the same person to
9         whom the interest was paid, accrued, or incurred.
10             This paragraph shall not apply to the following:
11                 (i) an item of interest paid, accrued, or
12             incurred, directly or indirectly, to a foreign
13             person who is subject in a foreign country or
14             state, other than a state which requires mandatory
15             unitary reporting, to a tax on or measured by net
16             income with respect to such interest; or
17                 (ii) an item of interest paid, accrued, or
18             incurred, directly or indirectly, to a foreign
19             person if the taxpayer can establish, based on a
20             preponderance of the evidence, both of the
21             following:
22                     (a) the foreign person, during the same
23                 taxable year, paid, accrued, or incurred, the
24                 interest to a person that is not a related
25                 member, and
26                     (b) the transaction giving rise to the
27                 interest expense between the taxpayer and the
28                 foreign person did not have as a principal
29                 purpose the avoidance of Illinois income tax,
30                 and is paid pursuant to a contract or agreement
31                 that reflects an arm's-length interest rate
32                 and terms; or
33                 (iii) the taxpayer can establish, based on
34             clear and convincing evidence, that the interest

 

 

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1             paid, accrued, or incurred relates to a contract or
2             agreement entered into at arm's-length rates and
3             terms and the principal purpose for the payment is
4             not federal or Illinois tax avoidance; or
5                 (iv) an item of interest paid, accrued, or
6             incurred, directly or indirectly, to a foreign
7             person if the taxpayer establishes by clear and
8             convincing evidence that the adjustments are
9             unreasonable; or if the taxpayer and the Director
10             agree in writing to the application or use of an
11             alternative method of apportionment under Section
12             304(f).
13                 Nothing in this subsection shall preclude the
14             Director from making any other adjustment
15             otherwise allowed under Section 404 of this Act for
16             any tax year beginning after the effective date of
17             this amendment provided such adjustment is made
18             pursuant to regulation adopted by the Department
19             and such regulations provide methods and standards
20             by which the Department will utilize its authority
21             under Section 404 of this Act;
22             (D-18) For taxable years ending on or after
23         December 31, 2004, an amount equal to the amount of
24         intangible expenses and costs otherwise allowed as a
25         deduction in computing base income, and that were paid,
26         accrued, or incurred, directly or indirectly, to a
27         foreign person who would be a member of the same
28         unitary business group but for the fact that the
29         foreign person's business activity outside the United
30         States is 80% or more of that person's total business
31         activity. The addition modification required by this
32         subparagraph shall be reduced to the extent that
33         dividends were included in base income of the unitary
34         group for the same taxable year and received by the

 

 

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

 

 

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1             paid, accrued, or incurred, directly or
2             indirectly, if the taxpayer can establish, based
3             on a preponderance of the evidence, both of the
4             following:
5                     (a) the foreign person during the same
6                 taxable year paid, accrued, or incurred, the
7                 intangible expense or cost to a person that is
8                 not a related member, and
9                     (b) the transaction giving rise to the
10                 intangible expense or cost between the
11                 taxpayer and the foreign person did not have as
12                 a principal purpose the avoidance of Illinois
13                 income tax, and is paid pursuant to a contract
14                 or agreement that reflects arm's-length terms;
15                 or
16                 (iii) any item of intangible expense or cost
17             paid, accrued, or incurred, directly or
18             indirectly, from a transaction with a foreign
19             person if the taxpayer establishes by clear and
20             convincing evidence, that the adjustments are
21             unreasonable; or if the taxpayer and the Director
22             agree in writing to the application or use of an
23             alternative method of apportionment under Section
24             304(f);
25                 Nothing in this subsection shall preclude the
26             Director from making any other adjustment
27             otherwise allowed under Section 404 of this Act for
28             any tax year beginning after the effective date of
29             this amendment provided such adjustment is made
30             pursuant to regulation adopted by the Department
31             and such regulations provide methods and standards
32             by which the Department will utilize its authority
33             under Section 404 of this Act;
34             (D-20) For taxable years beginning on or after

 

 

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1         January 1, 2002, in the case of a distribution from a
2         qualified tuition program under Section 529 of the
3         Internal Revenue Code, other than (i) a distribution
4         from a College Savings Pool created under Section 16.5
5         of the State Treasurer Act or (ii) a distribution from
6         the Illinois Prepaid Tuition Trust Fund, an amount
7         equal to the amount excluded from gross income under
8         Section 529(c)(3)(B);
9     and by deducting from the total so obtained the sum of the
10     following amounts:
11             (E) For taxable years ending before December 31,
12         2001, any amount included in such total in respect of
13         any compensation (including but not limited to any
14         compensation paid or accrued to a serviceman while a
15         prisoner of war or missing in action) paid to a
16         resident by reason of being on active duty in the Armed
17         Forces of the United States and in respect of any
18         compensation paid or accrued to a resident who as a
19         governmental employee was a prisoner of war or missing
20         in action, and in respect of any compensation paid to a
21         resident in 1971 or thereafter for annual training
22         performed pursuant to Sections 502 and 503, Title 32,
23         United States Code as a member of the Illinois National
24         Guard. For taxable years ending on or after December
25         31, 2001, any amount included in such total in respect
26         of any compensation (including but not limited to any
27         compensation paid or accrued to a serviceman while a
28         prisoner of war or missing in action) paid to a
29         resident by reason of being a member of any component
30         of the Armed Forces of the United States and in respect
31         of any compensation paid or accrued to a resident who
32         as a governmental employee was a prisoner of war or
33         missing in action, and in respect of any compensation
34         paid to a resident in 2001 or thereafter by reason of

 

 

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1         being a member of the Illinois National Guard. The
2         provisions of this amendatory Act of the 92nd General
3         Assembly are exempt from the provisions of Section 250;
4             (F) An amount equal to all amounts included in such
5         total pursuant to the provisions of Sections 402(a),
6         402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the
7         Internal Revenue Code, or included in such total as
8         distributions under the provisions of any retirement
9         or disability plan for employees of any governmental
10         agency or unit, or retirement payments to retired
11         partners, which payments are excluded in computing net
12         earnings from self employment by Section 1402 of the
13         Internal Revenue Code and regulations adopted pursuant
14         thereto;
15             (G) The valuation limitation amount;
16             (H) An amount equal to the amount of any tax
17         imposed by this Act which was refunded to the taxpayer
18         and included in such total for the taxable year;
19             (I) An amount equal to all amounts included in such
20         total pursuant to the provisions of Section 111 of the
21         Internal Revenue Code as a recovery of items previously
22         deducted from adjusted gross income in the computation
23         of taxable income;
24             (J) An amount equal to those dividends included in
25         such total which were paid by a corporation which
26         conducts business operations in an Enterprise Zone or
27         zones created under the Illinois Enterprise Zone Act,
28         and conducts substantially all of its operations in an
29         Enterprise Zone or zones;
30             (K) An amount equal to those dividends included in
31         such total that were paid by a corporation that
32         conducts business operations in a federally designated
33         Foreign Trade Zone or Sub-Zone and that is designated a
34         High Impact Business located in Illinois; provided

 

 

09400HB1577ham001 - 17 - LRB094 09191 NHT 54424 a

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

 

 

09400HB1577ham001 - 18 - LRB094 09191 NHT 54424 a

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) An amount equal to any amounts included in such
7         total, received by the taxpayer as an acceleration in
8         the payment of life, endowment or annuity benefits in
9         advance of the time they would otherwise be payable as
10         an indemnity for a terminal illness;
11             (R) An amount equal to the amount of any federal or
12         State bonus paid to veterans of the Persian Gulf War;
13             (S) An amount, to the extent included in adjusted
14         gross income, equal to the amount of a contribution
15         made in the taxable year on behalf of the taxpayer to a
16         medical care savings account established under the
17         Medical Care Savings Account Act or the Medical Care
18         Savings Account Act of 2000 to the extent the
19         contribution is accepted by the account administrator
20         as provided in that Act;
21             (T) An amount, to the extent included in adjusted
22         gross income, equal to the amount of interest earned in
23         the taxable year on a medical care savings account
24         established under the Medical Care Savings Account Act
25         or the Medical Care Savings Account Act of 2000 on
26         behalf of the taxpayer, other than interest added
27         pursuant to item (D-5) of this paragraph (2);
28             (U) For one taxable year beginning on or after
29         January 1, 1994, an amount equal to the total amount of
30         tax imposed and paid under subsections (a) and (b) of
31         Section 201 of this Act on grant amounts received by
32         the taxpayer under the Nursing Home Grant Assistance
33         Act during the taxpayer's taxable years 1992 and 1993;
34             (V) Beginning with tax years ending on or after

 

 

09400HB1577ham001 - 19 - LRB094 09191 NHT 54424 a

1         December 31, 1995 and ending with tax years ending on
2         or before December 31, 2004, an amount equal to the
3         amount paid by a taxpayer who is a self-employed
4         taxpayer, a partner of a partnership, or a shareholder
5         in a Subchapter S corporation for health insurance or
6         long-term care insurance for that taxpayer or that
7         taxpayer's spouse or dependents, to the extent that the
8         amount paid for that health insurance or long-term care
9         insurance may be deducted under Section 213 of the
10         Internal Revenue Code of 1986, has not been deducted on
11         the federal income tax return of the taxpayer, and does
12         not exceed the taxable income attributable to that
13         taxpayer's income, self-employment income, or
14         Subchapter S corporation income; except that no
15         deduction shall be allowed under this item (V) if the
16         taxpayer is eligible to participate in any health
17         insurance or long-term care insurance plan of an
18         employer of the taxpayer or the taxpayer's spouse. The
19         amount of the health insurance and long-term care
20         insurance subtracted under this item (V) shall be
21         determined by multiplying total health insurance and
22         long-term care insurance premiums paid by the taxpayer
23         times a number that represents the fractional
24         percentage of eligible medical expenses under Section
25         213 of the Internal Revenue Code of 1986 not actually
26         deducted on the taxpayer's federal income tax return;
27             (W) For taxable years beginning on or after January
28         1, 1998, all amounts included in the taxpayer's federal
29         gross income in the taxable year from amounts converted
30         from a regular IRA to a Roth IRA. This paragraph is
31         exempt from the provisions of Section 250;
32             (X) For taxable year 1999 and thereafter, an amount
33         equal to the amount of any (i) distributions, to the
34         extent includible in gross income for federal income

 

 

09400HB1577ham001 - 20 - LRB094 09191 NHT 54424 a

1         tax purposes, made to the taxpayer because of his or
2         her status as a victim of persecution for racial or
3         religious reasons by Nazi Germany or any other Axis
4         regime or as an heir of the victim and (ii) items of
5         income, to the extent includible in gross income for
6         federal income tax purposes, attributable to, derived
7         from or in any way related to assets stolen from,
8         hidden from, or otherwise lost to a victim of
9         persecution for racial or religious reasons by Nazi
10         Germany or any other Axis regime immediately prior to,
11         during, and immediately after World War II, including,
12         but not limited to, interest on the proceeds receivable
13         as insurance under policies issued to a victim of
14         persecution for racial or religious reasons by Nazi
15         Germany or any other Axis regime by European insurance
16         companies immediately prior to and during World War II;
17         provided, however, this subtraction from federal
18         adjusted gross income does not apply to assets acquired
19         with such assets or with the proceeds from the sale of
20         such assets; provided, further, this paragraph shall
21         only apply to a taxpayer who was the first recipient of
22         such assets after their recovery and who is a victim of
23         persecution for racial or religious reasons by Nazi
24         Germany or any other Axis regime or as an heir of the
25         victim. The amount of and the eligibility for any
26         public assistance, benefit, or similar entitlement is
27         not affected by the inclusion of items (i) and (ii) of
28         this paragraph in gross income for federal income tax
29         purposes. This paragraph is exempt from the provisions
30         of Section 250;
31             (Y) For taxable years beginning on or after January
32         1, 2002 and ending on or before December 31, 2004,
33         moneys contributed in the taxable year to a College
34         Savings Pool account under Section 16.5 of the State

 

 

09400HB1577ham001 - 21 - LRB094 09191 NHT 54424 a

1         Treasurer Act, except that amounts excluded from gross
2         income under Section 529(c)(3)(C)(i) of the Internal
3         Revenue Code shall not be considered moneys
4         contributed under this subparagraph (Y). For taxable
5         years beginning on or after January 1, 2005, a maximum
6         of $10,000 contributed in the taxable year to (i) a
7         College Savings Pool account under Section 16.5 of the
8         State Treasurer Act or (ii) the Illinois Prepaid
9         Tuition Trust Fund, except that amounts excluded from
10         gross income under Section 529(c)(3)(C)(i) of the
11         Internal Revenue Code shall not be considered moneys
12         contributed under this subparagraph (Y). This
13         subparagraph (Y) is exempt from the provisions of
14         Section 250;
15             (Z) For taxable years 2001 and thereafter, for the
16         taxable year in which the bonus depreciation deduction
17         (30% of the adjusted basis of the qualified property)
18         is taken on the taxpayer's federal income tax return
19         under subsection (k) of Section 168 of the Internal
20         Revenue Code and for each applicable taxable year
21         thereafter, an amount equal to "x", where:
22                 (1) "y" equals the amount of the depreciation
23             deduction taken for the taxable year on the
24             taxpayer's federal income tax return on property
25             for which the bonus depreciation deduction (30% of
26             the adjusted basis of the qualified property) was
27             taken in any year under subsection (k) of Section
28             168 of the Internal Revenue Code, but not including
29             the bonus depreciation deduction; and
30                 (2) "x" equals "y" multiplied by 30 and then
31             divided by 70 (or "y" multiplied by 0.429).
32             The aggregate amount deducted under this
33         subparagraph in all taxable years for any one piece of
34         property may not exceed the amount of the bonus

 

 

09400HB1577ham001 - 22 - LRB094 09191 NHT 54424 a

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

 

 

09400HB1577ham001 - 23 - LRB094 09191 NHT 54424 a

1         into account for the taxable year (net of the
2         deductions allocable thereto) with respect to
3         transactions with a foreign person who would be a
4         member of the taxpayer's unitary business group but for
5         the fact that the foreign person's business activity
6         outside the United States is 80% or more of that
7         person's total business activity, but not to exceed the
8         addition modification required to be made for the same
9         taxable year under Section 203(a)(2)(D-17) for
10         interest paid, accrued, or incurred, directly or
11         indirectly, to the same foreign person; and
12             (EE) An amount equal to the income from intangible
13         property taken into account for the taxable year (net
14         of the deductions allocable thereto) with respect to
15         transactions with a foreign person who would be a
16         member of the taxpayer's unitary business group but for
17         the fact that the foreign person's business activity
18         outside the United States is 80% or more of that
19         person's total business activity, but not to exceed the
20         addition modification required to be made for the same
21         taxable year under Section 203(a)(2)(D-18) for
22         intangible expenses and costs paid, accrued, or
23         incurred, directly or indirectly, to the same foreign
24         person.
25             (FF) For taxable years ending on or after December
26         31, 2006, an amount, to the extent that it is included
27         in adjusted gross income, equal to any scholarship
28         redeemed under the Opportunity Scholarship Act. This
29         subparagraph is exempt from the provisions of Section
30         250.
 
31     (b) Corporations.
32         (1) In general. In the case of a corporation, base
33     income means an amount equal to the taxpayer's taxable

 

 

09400HB1577ham001 - 24 - LRB094 09191 NHT 54424 a

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

 

 

09400HB1577ham001 - 25 - LRB094 09191 NHT 54424 a

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

 

 

09400HB1577ham001 - 26 - LRB094 09191 NHT 54424 a

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

 

 

09400HB1577ham001 - 27 - LRB094 09191 NHT 54424 a

1             person who is subject in a foreign country or
2             state, other than a state which requires mandatory
3             unitary reporting, to a tax on or measured by net
4             income with respect to such interest; or
5                 (ii) an item of interest paid, accrued, or
6             incurred, directly or indirectly, to a foreign
7             person if the taxpayer can establish, based on a
8             preponderance of the evidence, both of the
9             following:
10                     (a) the foreign person, during the same
11                 taxable year, paid, accrued, or incurred, the
12                 interest to a person that is not a related
13                 member, and
14                     (b) the transaction giving rise to the
15                 interest expense between the taxpayer and the
16                 foreign person did not have as a principal
17                 purpose the avoidance of Illinois income tax,
18                 and is paid pursuant to a contract or agreement
19                 that reflects an arm's-length interest rate
20                 and terms; or
21                 (iii) the taxpayer can establish, based on
22             clear and convincing evidence, that the interest
23             paid, accrued, or incurred relates to a contract or
24             agreement entered into at arm's-length rates and
25             terms and the principal purpose for the payment is
26             not federal or Illinois tax avoidance; or
27                 (iv) an item of interest paid, accrued, or
28             incurred, directly or indirectly, to a foreign
29             person if the taxpayer establishes by clear and
30             convincing evidence that the adjustments are
31             unreasonable; or if the taxpayer and the Director
32             agree in writing to the application or use of an
33             alternative method of apportionment under Section
34             304(f).

 

 

09400HB1577ham001 - 28 - LRB094 09191 NHT 54424 a

1                 Nothing in this subsection shall preclude the
2             Director from making any other adjustment
3             otherwise allowed under Section 404 of this Act for
4             any tax year beginning after the effective date of
5             this amendment provided such adjustment is made
6             pursuant to regulation adopted by the Department
7             and such regulations provide methods and standards
8             by which the Department will utilize its authority
9             under Section 404 of this Act;
10             (E-13) For taxable years ending on or after
11         December 31, 2004, an amount equal to the amount of
12         intangible expenses and costs otherwise allowed as a
13         deduction in computing base income, and that were paid,
14         accrued, or incurred, directly or indirectly, to a
15         foreign person who would be a member of the same
16         unitary business group but for the fact that the
17         foreign person's business activity outside the United
18         States is 80% or more of that person's total business
19         activity. The addition modification required by this
20         subparagraph shall be reduced to the extent that
21         dividends were included in base income of the unitary
22         group for the same taxable year and received by the
23         taxpayer or by a member of the taxpayer's unitary
24         business group (including amounts included in gross
25         income pursuant to Sections 951 through 964 of the
26         Internal Revenue Code and amounts included in gross
27         income under Section 78 of the Internal Revenue Code)
28         with respect to the stock of the same person to whom
29         the intangible expenses and costs were directly or
30         indirectly paid, incurred, or accrued. The preceding
31         sentence shall not apply to the extent that the same
32         dividends caused a reduction to the addition
33         modification required under Section 203(b)(2)(E-12) of
34         this Act. As used in this subparagraph, the term

 

 

09400HB1577ham001 - 29 - LRB094 09191 NHT 54424 a

1         "intangible expenses and costs" includes (1) expenses,
2         losses, and costs for, or related to, the direct or
3         indirect acquisition, use, maintenance or management,
4         ownership, sale, exchange, or any other disposition of
5         intangible property; (2) losses incurred, directly or
6         indirectly, from factoring transactions or discounting
7         transactions; (3) royalty, patent, technical, and
8         copyright fees; (4) licensing fees; and (5) other
9         similar expenses and costs. For purposes of this
10         subparagraph, "intangible property" includes patents,
11         patent applications, trade names, trademarks, service
12         marks, copyrights, mask works, trade secrets, and
13         similar types of intangible assets.
14             This paragraph shall not apply to the following:
15                 (i) any item of intangible expenses or costs
16             paid, accrued, or incurred, directly or
17             indirectly, from a transaction with a foreign
18             person who is subject in a foreign country or
19             state, other than a state which requires mandatory
20             unitary reporting, to a tax on or measured by net
21             income with respect to such item; or
22                 (ii) any item of intangible expense or cost
23             paid, accrued, or incurred, directly or
24             indirectly, if the taxpayer can establish, based
25             on a preponderance of the evidence, both of the
26             following:
27                     (a) the foreign person during the same
28                 taxable year paid, accrued, or incurred, the
29                 intangible expense or cost to a person that is
30                 not a related member, and
31                     (b) the transaction giving rise to the
32                 intangible expense or cost between the
33                 taxpayer and the foreign person did not have as
34                 a principal purpose the avoidance of Illinois

 

 

09400HB1577ham001 - 30 - LRB094 09191 NHT 54424 a

1                 income tax, and is paid pursuant to a contract
2                 or agreement that reflects arm's-length terms;
3                 or
4                 (iii) any item of intangible expense or cost
5             paid, accrued, or incurred, directly or
6             indirectly, from a transaction with a foreign
7             person if the taxpayer establishes by clear and
8             convincing evidence, that the adjustments are
9             unreasonable; or if the taxpayer and the Director
10             agree in writing to the application or use of an
11             alternative method of apportionment under Section
12             304(f);
13                 Nothing in this subsection shall preclude the
14             Director from making any other adjustment
15             otherwise allowed under Section 404 of this Act for
16             any tax year beginning after the effective date of
17             this amendment provided such adjustment is made
18             pursuant to regulation adopted by the Department
19             and such regulations provide methods and standards
20             by which the Department will utilize its authority
21             under Section 404 of this Act;
22     and by deducting from the total so obtained the sum of the
23     following amounts:
24             (F) An amount equal to the amount of any tax
25         imposed by this Act which was refunded to the taxpayer
26         and included in such total for the taxable year;
27             (G) An amount equal to any amount included in such
28         total under Section 78 of the Internal Revenue Code;
29             (H) In the case of a regulated investment company,
30         an amount equal to the amount of exempt interest
31         dividends as defined in subsection (b) (5) of Section
32         852 of the Internal Revenue Code, paid to shareholders
33         for the taxable year;
34             (I) With the exception of any amounts subtracted

 

 

09400HB1577ham001 - 31 - LRB094 09191 NHT 54424 a

1         under subparagraph (J), an amount equal to the sum of
2         all amounts disallowed as deductions by (i) Sections
3         171(a) (2), and 265(a)(2) and amounts disallowed as
4         interest expense by Section 291(a)(3) of the Internal
5         Revenue Code, as now or hereafter amended, and all
6         amounts of expenses allocable to interest and
7         disallowed as deductions by Section 265(a)(1) of the
8         Internal Revenue Code, as now or hereafter amended; and
9         (ii) for taxable years ending on or after August 13,
10         1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and
11         832(b)(5)(B)(i) of the Internal Revenue Code; the
12         provisions of this subparagraph are exempt from the
13         provisions of Section 250;
14             (J) An amount equal to all amounts included in such
15         total which are exempt from taxation by this State
16         either by reason of its statutes or Constitution or by
17         reason of the Constitution, treaties or statutes of the
18         United States; provided that, in the case of any
19         statute of this State that exempts income derived from
20         bonds or other obligations from the tax imposed under
21         this Act, the amount exempted shall be the interest net
22         of bond premium amortization;
23             (K) An amount equal to those dividends included in
24         such total which were paid by a corporation which
25         conducts business operations in an Enterprise Zone or
26         zones created under the Illinois Enterprise Zone Act
27         and conducts substantially all of its operations in an
28         Enterprise Zone or zones;
29             (L) An amount equal to those dividends included in
30         such total that were paid by a corporation that
31         conducts business operations in a federally designated
32         Foreign Trade Zone or Sub-Zone and that is designated a
33         High Impact Business located in Illinois; provided
34         that dividends eligible for the deduction provided in

 

 

09400HB1577ham001 - 32 - LRB094 09191 NHT 54424 a

1         subparagraph (K) of paragraph 2 of this subsection
2         shall not be eligible for the deduction provided under
3         this subparagraph (L);
4             (M) For any taxpayer that is a financial
5         organization within the meaning of Section 304(c) of
6         this Act, an amount included in such total as interest
7         income from a loan or loans made by such taxpayer to a
8         borrower, to the extent that such a loan is secured by
9         property which is eligible for the Enterprise Zone
10         Investment Credit. To determine the portion of a loan
11         or loans that is secured by property eligible for a
12         Section 201(f) investment credit to the borrower, the
13         entire principal amount of the loan or loans between
14         the taxpayer and the borrower should be divided into
15         the basis of the Section 201(f) investment credit
16         property which secures the loan or loans, using for
17         this purpose the original basis of such property on the
18         date that it was placed in service in the Enterprise
19         Zone. The subtraction modification available to
20         taxpayer in any year under this subsection shall be
21         that portion of the total interest paid by the borrower
22         with respect to such loan attributable to the eligible
23         property as calculated under the previous sentence;
24             (M-1) For any taxpayer that is a financial
25         organization within the meaning of Section 304(c) of
26         this Act, an amount included in such total as interest
27         income from a loan or loans made by such taxpayer to a
28         borrower, to the extent that such a loan is secured by
29         property which is eligible for the High Impact Business
30         Investment Credit. To determine the portion of a loan
31         or loans that is secured by property eligible for a
32         Section 201(h) investment credit to the borrower, the
33         entire principal amount of the loan or loans between
34         the taxpayer and the borrower should be divided into

 

 

09400HB1577ham001 - 33 - LRB094 09191 NHT 54424 a

1         the basis of the Section 201(h) investment credit
2         property which secures the loan or loans, using for
3         this purpose the original basis of such property on the
4         date that it was placed in service in a federally
5         designated Foreign Trade Zone or Sub-Zone located in
6         Illinois. No taxpayer that is eligible for the
7         deduction provided in subparagraph (M) of paragraph
8         (2) of this subsection shall be eligible for the
9         deduction provided under this subparagraph (M-1). The
10         subtraction modification available to taxpayers in any
11         year under this subsection shall be that portion of the
12         total interest paid by the borrower with respect to
13         such loan attributable to the eligible property as
14         calculated under the previous sentence;
15             (N) Two times any contribution made during the
16         taxable year to a designated zone organization to the
17         extent that the contribution (i) qualifies as a
18         charitable contribution under subsection (c) of
19         Section 170 of the Internal Revenue Code and (ii) must,
20         by its terms, be used for a project approved by the
21         Department of Commerce and Economic Opportunity under
22         Section 11 of the Illinois Enterprise Zone Act;
23             (O) An amount equal to: (i) 85% for taxable years
24         ending on or before December 31, 1992, or, a percentage
25         equal to the percentage allowable under Section
26         243(a)(1) of the Internal Revenue Code of 1986 for
27         taxable years ending after December 31, 1992, of the
28         amount by which dividends included in taxable income
29         and received from a corporation that is not created or
30         organized under the laws of the United States or any
31         state or political subdivision thereof, including, for
32         taxable years ending on or after December 31, 1988,
33         dividends received or deemed received or paid or deemed
34         paid under Sections 951 through 964 of the Internal

 

 

09400HB1577ham001 - 34 - LRB094 09191 NHT 54424 a

1         Revenue Code, exceed the amount of the modification
2         provided under subparagraph (G) of paragraph (2) of
3         this subsection (b) which is related to such dividends;
4         plus (ii) 100% of the amount by which dividends,
5         included in taxable income and received, including,
6         for taxable years ending on or after December 31, 1988,
7         dividends received or deemed received or paid or deemed
8         paid under Sections 951 through 964 of the Internal
9         Revenue Code, from any such corporation specified in
10         clause (i) that would but for the provisions of Section
11         1504 (b) (3) of the Internal Revenue Code be treated as
12         a member of the affiliated group which includes the
13         dividend recipient, exceed the amount of the
14         modification provided under subparagraph (G) of
15         paragraph (2) of this subsection (b) which is related
16         to such dividends;
17             (P) An amount equal to any contribution made to a
18         job training project established pursuant to the Tax
19         Increment Allocation Redevelopment Act;
20             (Q) An amount equal to the amount of the deduction
21         used to compute the federal income tax credit for
22         restoration of substantial amounts held under claim of
23         right for the taxable year pursuant to Section 1341 of
24         the Internal Revenue Code of 1986;
25             (R) In the case of an attorney-in-fact with respect
26         to whom an interinsurer or a reciprocal insurer has
27         made the election under Section 835 of the Internal
28         Revenue Code, 26 U.S.C. 835, an amount equal to the
29         excess, if any, of the amounts paid or incurred by that
30         interinsurer or reciprocal insurer in the taxable year
31         to the attorney-in-fact over the deduction allowed to
32         that interinsurer or reciprocal insurer with respect
33         to the attorney-in-fact under Section 835(b) of the
34         Internal Revenue Code for the taxable year;

 

 

09400HB1577ham001 - 35 - LRB094 09191 NHT 54424 a

1             (S) For taxable years ending on or after December
2         31, 1997, in the case of a Subchapter S corporation, an
3         amount equal to all amounts of income allocable to a
4         shareholder subject to the Personal Property Tax
5         Replacement Income Tax imposed by subsections (c) and
6         (d) of Section 201 of this Act, including amounts
7         allocable to organizations exempt from federal income
8         tax by reason of Section 501(a) of the Internal Revenue
9         Code. This subparagraph (S) is exempt from the
10         provisions of Section 250;
11             (T) For taxable years 2001 and thereafter, for the
12         taxable year in which the bonus depreciation deduction
13         (30% of the adjusted basis of the qualified property)
14         is taken on the taxpayer's federal income tax return
15         under subsection (k) of Section 168 of the Internal
16         Revenue Code and for each applicable taxable year
17         thereafter, an amount equal to "x", where:
18                 (1) "y" equals the amount of the depreciation
19             deduction taken for the taxable year on the
20             taxpayer's federal income tax return on property
21             for which the bonus depreciation deduction (30% of
22             the adjusted basis of the qualified property) was
23             taken in any year under subsection (k) of Section
24             168 of the Internal Revenue Code, but not including
25             the bonus depreciation deduction; and
26                 (2) "x" equals "y" multiplied by 30 and then
27             divided by 70 (or "y" multiplied by 0.429).
28             The aggregate amount deducted under this
29         subparagraph in all taxable years for any one piece of
30         property may not exceed the amount of the bonus
31         depreciation deduction (30% of the adjusted basis of
32         the qualified property) taken on that property on the
33         taxpayer's federal income tax return under subsection
34         (k) of Section 168 of the Internal Revenue Code;

 

 

09400HB1577ham001 - 36 - LRB094 09191 NHT 54424 a

1             (U) If the taxpayer reports a capital gain or loss
2         on the taxpayer's federal income tax return for the
3         taxable year based on a sale or transfer of property
4         for which the taxpayer was required in any taxable year
5         to make an addition modification under subparagraph
6         (E-10), then an amount equal to that addition
7         modification.
8             The taxpayer is allowed to take the deduction under
9         this subparagraph only once with respect to any one
10         piece of property;
11             (V) The amount of: (i) any interest income (net of
12         the deductions allocable thereto) taken into account
13         for the taxable year with respect to a transaction with
14         a taxpayer that is required to make an addition
15         modification with respect to such transaction under
16         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
17         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
18         the amount of such addition modification and (ii) any
19         income from intangible property (net of the deductions
20         allocable thereto) taken into account for the taxable
21         year with respect to a transaction with a taxpayer that
22         is required to make an addition modification with
23         respect to such transaction under Section
24         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
25         203(d)(2)(D-8), but not to exceed the amount of such
26         addition modification;
27             (W) An amount equal to the interest income taken
28         into account for the taxable year (net of the
29         deductions allocable thereto) with respect to
30         transactions with a foreign person who would be a
31         member of the taxpayer's 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 that
34         person's total business activity, but not to exceed the

 

 

09400HB1577ham001 - 37 - LRB094 09191 NHT 54424 a

1         addition modification required to be made for the same
2         taxable year under Section 203(b)(2)(E-12) for
3         interest paid, accrued, or incurred, directly or
4         indirectly, to the same foreign person; and
5             (X) An amount equal to the income from intangible
6         property taken into account for the taxable year (net
7         of the deductions allocable thereto) with respect to
8         transactions with a foreign person who would be a
9         member of the taxpayer's unitary business group but for
10         the fact that the foreign person's business activity
11         outside the United States is 80% or more of that
12         person's total business activity, but not to exceed the
13         addition modification required to be made for the same
14         taxable year under Section 203(b)(2)(E-13) for
15         intangible expenses and costs paid, accrued, or
16         incurred, directly or indirectly, to the same foreign
17         person.
18         (3) Special rule. For purposes of paragraph (2) (A),
19     "gross income" in the case of a life insurance company, for
20     tax years ending on and after December 31, 1994, shall mean
21     the gross investment income for the taxable year.
 
22     (c) Trusts and estates.
23         (1) In general. In the case of a trust or estate, base
24     income means an amount equal to the taxpayer's taxable
25     income for the taxable year as modified by paragraph (2).
26         (2) Modifications. Subject to the provisions of
27     paragraph (3), the taxable income referred to in paragraph
28     (1) shall be modified by adding thereto the sum of the
29     following amounts:
30             (A) An amount equal to all amounts paid or accrued
31         to the taxpayer as interest or dividends during the
32         taxable year to the extent excluded from gross income
33         in the computation of taxable income;

 

 

09400HB1577ham001 - 38 - LRB094 09191 NHT 54424 a

1             (B) In the case of (i) an estate, $600; (ii) a
2         trust which, under its governing instrument, is
3         required to distribute all of its income currently,
4         $300; and (iii) any other trust, $100, but in each such
5         case, only to the extent such amount was deducted in
6         the computation of taxable income;
7             (C) An amount equal to the amount of tax imposed by
8         this Act to the extent deducted from gross income in
9         the computation of taxable income for the taxable year;
10             (D) The amount of any net operating loss deduction
11         taken in arriving at taxable income, other than a net
12         operating loss carried forward from a taxable year
13         ending prior to December 31, 1986;
14             (E) For taxable years in which a net operating loss
15         carryback or carryforward from a taxable year ending
16         prior to December 31, 1986 is an element of taxable
17         income under paragraph (1) of subsection (e) or
18         subparagraph (E) of paragraph (2) of subsection (e),
19         the amount by which addition modifications other than
20         those provided by this subparagraph (E) exceeded
21         subtraction modifications in such taxable year, with
22         the following limitations applied in the order that
23         they are listed:
24                 (i) the addition modification relating to the
25             net operating loss carried back or forward to the
26             taxable year from any taxable year ending prior to
27             December 31, 1986 shall be reduced by the amount of
28             addition modification under this subparagraph (E)
29             which related to that net operating loss and which
30             was taken into account in calculating the base
31             income of an earlier taxable year, and
32                 (ii) 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

 

 

09400HB1577ham001 - 39 - LRB094 09191 NHT 54424 a

1             December 31, 1986 shall not exceed the amount of
2             such carryback or carryforward;
3             For taxable years in which there is a net operating
4         loss carryback or carryforward from more than one other
5         taxable year ending prior to December 31, 1986, the
6         addition modification provided in this subparagraph
7         (E) shall be the sum of the amounts computed
8         independently under the preceding provisions of this
9         subparagraph (E) for each such taxable year;
10             (F) For taxable years ending on or after January 1,
11         1989, an amount equal to the tax deducted pursuant to
12         Section 164 of the Internal Revenue Code if the trust
13         or estate is claiming the same tax for purposes of the
14         Illinois foreign tax credit under Section 601 of this
15         Act;
16             (G) An amount equal to the amount of the capital
17         gain deduction allowable under the Internal Revenue
18         Code, to the extent deducted from gross income in the
19         computation of taxable income;
20             (G-5) For taxable years ending after December 31,
21         1997, an amount equal to any eligible remediation costs
22         that the trust or estate deducted in computing adjusted
23         gross income and for which the trust or estate claims a
24         credit under subsection (l) of Section 201;
25             (G-10) For taxable years 2001 and thereafter, an
26         amount equal to the bonus depreciation deduction (30%
27         of the adjusted basis of the qualified property) taken
28         on the taxpayer's federal income tax return for the
29         taxable year under subsection (k) of Section 168 of the
30         Internal Revenue Code; and
31             (G-11) If the taxpayer reports a capital gain or
32         loss on the taxpayer's federal income tax return for
33         the taxable year based on a sale or transfer of
34         property for which the taxpayer was required in any

 

 

09400HB1577ham001 - 40 - LRB094 09191 NHT 54424 a

1         taxable year to make an addition modification under
2         subparagraph (G-10), then an amount equal to the
3         aggregate amount of the deductions taken in all taxable
4         years under subparagraph (R) with respect to that
5         property.
6             The taxpayer is required to make the addition
7         modification under this subparagraph only once with
8         respect to any one piece of property;
9             (G-12) For taxable years ending on or after
10         December 31, 2004, an amount equal to the amount
11         otherwise allowed as a deduction in computing base
12         income for interest paid, accrued, or incurred,
13         directly or indirectly, to a foreign person who would
14         be a member of the same 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 the foreign
17         person's total business activity. The addition
18         modification required by this subparagraph shall be
19         reduced to the extent that dividends were included in
20         base income of the unitary group for the same taxable
21         year and received by the taxpayer or by a member of the
22         taxpayer's unitary business group (including amounts
23         included in gross income pursuant to Sections 951
24         through 964 of the Internal Revenue Code and amounts
25         included in gross income under Section 78 of the
26         Internal Revenue Code) with respect to the stock of the
27         same person to whom the interest was paid, accrued, or
28         incurred.
29             This paragraph shall not apply to the following:
30                 (i) an item of interest paid, accrued, or
31             incurred, directly or indirectly, to a foreign
32             person who is subject in a foreign country or
33             state, other than a state which requires mandatory
34             unitary reporting, to a tax on or measured by net

 

 

09400HB1577ham001 - 41 - LRB094 09191 NHT 54424 a

1             income with respect to such interest; or
2                 (ii) an item of interest paid, accrued, or
3             incurred, directly or indirectly, to a foreign
4             person if the taxpayer can establish, based on a
5             preponderance of the evidence, both of the
6             following:
7                     (a) the foreign person, during the same
8                 taxable year, paid, accrued, or incurred, the
9                 interest to a person that is not a related
10                 member, and
11                     (b) the transaction giving rise to the
12                 interest expense between the taxpayer and the
13                 foreign person did not have as a principal
14                 purpose the avoidance of Illinois income tax,
15                 and is paid pursuant to a contract or agreement
16                 that reflects an arm's-length interest rate
17                 and terms; or
18                 (iii) the taxpayer can establish, based on
19             clear and convincing evidence, that the interest
20             paid, accrued, or incurred relates to a contract or
21             agreement entered into at arm's-length rates and
22             terms and the principal purpose for the payment is
23             not federal or Illinois tax avoidance; or
24                 (iv) an item of interest paid, accrued, or
25             incurred, directly or indirectly, to a foreign
26             person if the taxpayer establishes by clear and
27             convincing evidence that the adjustments are
28             unreasonable; or if the taxpayer and the Director
29             agree in writing to the application or use of an
30             alternative method of apportionment under Section
31             304(f).
32                 Nothing in this subsection shall preclude the
33             Director from making any other adjustment
34             otherwise allowed under Section 404 of this Act for

 

 

09400HB1577ham001 - 42 - LRB094 09191 NHT 54424 a

1             any tax year beginning after the effective date of
2             this amendment provided such adjustment is made
3             pursuant to regulation adopted by the Department
4             and such regulations provide methods and standards
5             by which the Department will utilize its authority
6             under Section 404 of this Act;
7             (G-13) For taxable years ending on or after
8         December 31, 2004, an amount equal to the amount of
9         intangible expenses and costs otherwise allowed as a
10         deduction in computing base income, and that were paid,
11         accrued, or incurred, directly or indirectly, to a
12         foreign person who would be a member of the same
13         unitary business group but for the fact that the
14         foreign person's business activity outside the United
15         States is 80% or more of that person's total business
16         activity. The addition modification required by this
17         subparagraph shall be reduced to the extent that
18         dividends were included in base income of the unitary
19         group for the same taxable year and received by the
20         taxpayer or by a member of the taxpayer's unitary
21         business group (including amounts included in gross
22         income pursuant to Sections 951 through 964 of the
23         Internal Revenue Code and amounts included in gross
24         income under Section 78 of the Internal Revenue Code)
25         with respect to the stock of the same person to whom
26         the intangible expenses and costs were directly or
27         indirectly paid, incurred, or accrued. The preceding
28         sentence shall not apply to the extent that the same
29         dividends caused a reduction to the addition
30         modification required under Section 203(c)(2)(G-12) of
31         this Act. As used in this subparagraph, the term
32         "intangible expenses and costs" includes: (1)
33         expenses, losses, and costs for or related to the
34         direct or indirect acquisition, use, maintenance or

 

 

09400HB1577ham001 - 43 - LRB094 09191 NHT 54424 a

1         management, ownership, sale, exchange, or any other
2         disposition of intangible property; (2) losses
3         incurred, directly or indirectly, from factoring
4         transactions or discounting transactions; (3) royalty,
5         patent, technical, and copyright fees; (4) licensing
6         fees; and (5) other similar expenses and costs. For
7         purposes of this subparagraph, "intangible property"
8         includes patents, patent applications, trade names,
9         trademarks, service marks, copyrights, mask works,
10         trade secrets, and similar types of intangible assets.
11             This paragraph shall not apply to the following:
12                 (i) any item of intangible expenses or costs
13             paid, accrued, or incurred, directly or
14             indirectly, from a transaction with a foreign
15             person who is subject in a foreign country or
16             state, other than a state which requires mandatory
17             unitary reporting, to a tax on or measured by net
18             income with respect to such item; or
19                 (ii) any item of intangible expense or cost
20             paid, accrued, or incurred, directly or
21             indirectly, if the taxpayer can establish, based
22             on a preponderance of the evidence, both of the
23             following:
24                     (a) the foreign person during the same
25                 taxable year paid, accrued, or incurred, the
26                 intangible expense or cost to a person that is
27                 not a related member, and
28                     (b) the transaction giving rise to the
29                 intangible expense or cost between the
30                 taxpayer and the foreign person did not have as
31                 a principal purpose the avoidance of Illinois
32                 income tax, and is paid pursuant to a contract
33                 or agreement that reflects arm's-length terms;
34                 or

 

 

09400HB1577ham001 - 44 - LRB094 09191 NHT 54424 a

1                 (iii) any item of intangible expense or cost
2             paid, accrued, or incurred, directly or
3             indirectly, from a transaction with a foreign
4             person if the taxpayer establishes by clear and
5             convincing evidence, that the adjustments are
6             unreasonable; or if the taxpayer and the Director
7             agree in writing to the application or use of an
8             alternative method of apportionment under Section
9             304(f);
10                 Nothing in this subsection shall preclude the
11             Director from making any other adjustment
12             otherwise allowed under Section 404 of this Act for
13             any tax year beginning after the effective date of
14             this amendment provided such adjustment is made
15             pursuant to regulation adopted by the Department
16             and such regulations provide methods and standards
17             by which the Department will utilize its authority
18             under Section 404 of this Act;
19     and by deducting from the total so obtained the sum of the
20     following amounts:
21             (H) An amount equal to all amounts included in such
22         total pursuant to the provisions of Sections 402(a),
23         402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
24         Internal Revenue Code or included in such total as
25         distributions under the provisions of any retirement
26         or disability plan for employees of any governmental
27         agency or unit, or retirement payments to retired
28         partners, which payments are excluded in computing net
29         earnings from self employment by Section 1402 of the
30         Internal Revenue Code and regulations adopted pursuant
31         thereto;
32             (I) The valuation limitation amount;
33             (J) An amount equal to the amount of any tax
34         imposed by this Act which was refunded to the taxpayer

 

 

09400HB1577ham001 - 45 - LRB094 09191 NHT 54424 a

1         and included in such total for the taxable year;
2             (K) An amount equal to all amounts included in
3         taxable income as modified by subparagraphs (A), (B),
4         (C), (D), (E), (F) and (G) which are exempt from
5         taxation by this State either by reason of its statutes
6         or Constitution or by reason of the Constitution,
7         treaties or statutes of the United States; provided
8         that, in the case of any statute of this State that
9         exempts income derived from bonds or other obligations
10         from the tax imposed under this Act, the amount
11         exempted shall be the interest net of bond premium
12         amortization;
13             (L) With the exception of any amounts subtracted
14         under subparagraph (K), an amount equal to the sum of
15         all amounts disallowed as deductions by (i) Sections
16         171(a) (2) and 265(a)(2) of the Internal Revenue Code,
17         as now or hereafter amended, and all amounts of
18         expenses allocable to interest and disallowed as
19         deductions by Section 265(1) of the Internal Revenue
20         Code of 1954, as now or hereafter amended; and (ii) for
21         taxable years ending on or after August 13, 1999,
22         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
23         the Internal Revenue Code; the provisions of this
24         subparagraph are exempt from the provisions of Section
25         250;
26             (M) An amount equal to those dividends included in
27         such total which were paid by a corporation which
28         conducts business operations in an Enterprise Zone or
29         zones created under the Illinois Enterprise Zone Act
30         and conducts substantially all of its operations in an
31         Enterprise Zone or Zones;
32             (N) An amount equal to any contribution made to a
33         job training project established pursuant to the Tax
34         Increment Allocation Redevelopment Act;

 

 

09400HB1577ham001 - 46 - LRB094 09191 NHT 54424 a

1             (O) An amount equal to those dividends included in
2         such total that were paid by a corporation that
3         conducts business operations in a federally designated
4         Foreign Trade Zone or Sub-Zone and that is designated a
5         High Impact Business located in Illinois; provided
6         that dividends eligible for the deduction provided in
7         subparagraph (M) of paragraph (2) of this subsection
8         shall not be eligible for the deduction provided under
9         this subparagraph (O);
10             (P) An amount equal to the amount of the deduction
11         used to compute the federal income tax credit for
12         restoration of substantial amounts held under claim of
13         right for the taxable year pursuant to Section 1341 of
14         the Internal Revenue Code of 1986;
15             (Q) For taxable year 1999 and thereafter, an amount
16         equal to the amount of any (i) distributions, to the
17         extent includible in gross income for federal income
18         tax purposes, made to the taxpayer because of his or
19         her status as a victim of persecution for racial or
20         religious reasons by Nazi Germany or any other Axis
21         regime or as an heir of the victim and (ii) items of
22         income, to the extent includible in gross income for
23         federal income tax purposes, attributable to, derived
24         from or in any way related to assets stolen from,
25         hidden from, or otherwise lost to a victim of
26         persecution for racial or religious reasons by Nazi
27         Germany or any other Axis regime immediately prior to,
28         during, and immediately after World War II, including,
29         but not limited to, interest on the proceeds receivable
30         as insurance under policies issued to a victim of
31         persecution for racial or religious reasons by Nazi
32         Germany or any other Axis regime by European insurance
33         companies immediately prior to and during World War II;
34         provided, however, this subtraction from federal

 

 

09400HB1577ham001 - 47 - LRB094 09191 NHT 54424 a

1         adjusted gross income does not apply to assets acquired
2         with such assets or with the proceeds from the sale of
3         such assets; provided, further, this paragraph shall
4         only apply to a taxpayer who was the first recipient of
5         such assets after their recovery and who is a victim of
6         persecution for racial or religious reasons by Nazi
7         Germany or any other Axis regime or as an heir of the
8         victim. The amount of and the eligibility for any
9         public assistance, benefit, or similar entitlement is
10         not affected by the inclusion of items (i) and (ii) of
11         this paragraph in gross income for federal income tax
12         purposes. This paragraph is exempt from the provisions
13         of Section 250;
14             (R) For taxable years 2001 and thereafter, for the
15         taxable year in which the bonus depreciation deduction
16         (30% of the adjusted basis of the qualified property)
17         is taken on the taxpayer's federal income tax return
18         under subsection (k) of Section 168 of the Internal
19         Revenue Code and for each applicable taxable year
20         thereafter, an amount equal to "x", where:
21                 (1) "y" equals the amount of the depreciation
22             deduction taken for the taxable year on the
23             taxpayer's federal income tax return on property
24             for which the bonus depreciation deduction (30% of
25             the adjusted basis of the qualified property) was
26             taken in any year under subsection (k) of Section
27             168 of the Internal Revenue Code, but not including
28             the bonus depreciation deduction; and
29                 (2) "x" equals "y" multiplied by 30 and then
30             divided by 70 (or "y" multiplied by 0.429).
31             The aggregate amount deducted under this
32         subparagraph in all taxable years for any one piece of
33         property may not exceed the amount of the bonus
34         depreciation deduction (30% of the adjusted basis of

 

 

09400HB1577ham001 - 48 - LRB094 09191 NHT 54424 a

1         the qualified property) taken on that property on the
2         taxpayer's federal income tax return under subsection
3         (k) of Section 168 of the Internal Revenue Code;
4             (S) If the taxpayer reports a capital gain or loss
5         on the taxpayer's federal income tax return for the
6         taxable year based on a sale or transfer of property
7         for which the taxpayer was required in any taxable year
8         to make an addition modification under subparagraph
9         (G-10), then an amount equal to that addition
10         modification.
11             The taxpayer is allowed to take the deduction under
12         this subparagraph only once with respect to any one
13         piece of property;
14             (T) The amount of (i) any interest income (net of
15         the deductions allocable thereto) taken into account
16         for the taxable year with respect to a transaction with
17         a taxpayer that is required to make an addition
18         modification with respect to such transaction under
19         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
20         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
21         the amount of such addition modification and (ii) any
22         income from intangible property (net of the deductions
23         allocable thereto) taken into account for the taxable
24         year with respect to a transaction with a taxpayer that
25         is required to make an addition modification with
26         respect to such transaction under Section
27         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
28         203(d)(2)(D-8), but not to exceed the amount of such
29         addition modification;
30             (U) An amount equal to the interest income taken
31         into account for the taxable year (net of the
32         deductions allocable thereto) with respect to
33         transactions with a foreign person who would be a
34         member of the taxpayer's unitary business group but for

 

 

09400HB1577ham001 - 49 - LRB094 09191 NHT 54424 a

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

 

 

09400HB1577ham001 - 50 - LRB094 09191 NHT 54424 a

1     of the following amounts:
2             (A) An amount equal to all amounts paid or accrued
3         to the taxpayer as interest or dividends during the
4         taxable year to the extent excluded from gross income
5         in the computation of taxable income;
6             (B) An amount equal to the amount of tax imposed by
7         this Act to the extent deducted from gross income for
8         the taxable year;
9             (C) The amount of deductions allowed to the
10         partnership pursuant to Section 707 (c) of the Internal
11         Revenue Code in calculating its taxable income;
12             (D) An amount equal to the amount of the capital
13         gain deduction allowable under the Internal Revenue
14         Code, to the extent deducted from gross income in the
15         computation of taxable income;
16             (D-5) For taxable years 2001 and thereafter, an
17         amount equal to the bonus depreciation deduction (30%
18         of the adjusted basis of the qualified property) taken
19         on the taxpayer's federal income tax return for the
20         taxable year under subsection (k) of Section 168 of the
21         Internal Revenue Code;
22             (D-6) If the taxpayer reports a capital gain or
23         loss on the taxpayer's federal income tax return for
24         the taxable year based on a sale or transfer of
25         property for which the taxpayer was required in any
26         taxable year to make an addition modification under
27         subparagraph (D-5), then an amount equal to the
28         aggregate amount of the deductions taken in all taxable
29         years under subparagraph (O) with respect to that
30         property.
31             The taxpayer is required to make the addition
32         modification under this subparagraph only once with
33         respect to any one piece of property;
34             (D-7) For taxable years ending on or after December

 

 

09400HB1577ham001 - 51 - LRB094 09191 NHT 54424 a

1         31, 2004, an amount equal to the amount otherwise
2         allowed as a deduction in computing base income for
3         interest paid, accrued, or incurred, directly or
4         indirectly, to a foreign person who would be a member
5         of the same unitary business group but for the fact the
6         foreign person's business activity outside the United
7         States is 80% or more of the foreign person's total
8         business activity. The addition modification required
9         by this subparagraph shall be reduced to the extent
10         that dividends were included in base income of the
11         unitary group for the same taxable year and received by
12         the taxpayer or by a member of the taxpayer's unitary
13         business group (including amounts included in gross
14         income pursuant to Sections 951 through 964 of the
15         Internal Revenue Code and amounts included in gross
16         income under Section 78 of the Internal Revenue Code)
17         with respect to the stock of the same person to whom
18         the interest was paid, accrued, or incurred.
19             This paragraph shall not apply to the following:
20                 (i) an item of interest paid, accrued, or
21             incurred, directly or indirectly, to a foreign
22             person who is subject in a foreign country or
23             state, other than a state which requires mandatory
24             unitary reporting, to a tax on or measured by net
25             income with respect to such interest; or
26                 (ii) an item of interest paid, accrued, or
27             incurred, directly or indirectly, to a foreign
28             person if the taxpayer can establish, based on a
29             preponderance of the evidence, both of the
30             following:
31                     (a) the foreign person, during the same
32                 taxable year, paid, accrued, or incurred, the
33                 interest to a person that is not a related
34                 member, and

 

 

09400HB1577ham001 - 52 - LRB094 09191 NHT 54424 a

1                     (b) the transaction giving rise to the
2                 interest expense between the taxpayer and the
3                 foreign person did not have as a principal
4                 purpose the avoidance of Illinois income tax,
5                 and is paid pursuant to a contract or agreement
6                 that reflects an arm's-length interest rate
7                 and terms; or
8                 (iii) the taxpayer can establish, based on
9             clear and convincing evidence, that the interest
10             paid, accrued, or incurred relates to a contract or
11             agreement entered into at arm's-length rates and
12             terms and the principal purpose for the payment is
13             not federal or Illinois tax avoidance; or
14                 (iv) an item of interest paid, accrued, or
15             incurred, directly or indirectly, to a foreign
16             person if the taxpayer establishes by clear and
17             convincing evidence that the adjustments are
18             unreasonable; or if the taxpayer and the Director
19             agree in writing to the application or use of an
20             alternative method of apportionment under Section
21             304(f).
22                 Nothing in this subsection shall preclude the
23             Director from making any other adjustment
24             otherwise allowed under Section 404 of this Act for
25             any tax year beginning after the effective date of
26             this amendment provided such adjustment is made
27             pursuant to regulation adopted by the Department
28             and such regulations provide methods and standards
29             by which the Department will utilize its authority
30             under Section 404 of this Act; and
31             (D-8) For taxable years ending on or after December
32         31, 2004, an amount equal to the amount of intangible
33         expenses and costs otherwise allowed as a deduction in
34         computing base income, and that were paid, accrued, or

 

 

09400HB1577ham001 - 53 - LRB094 09191 NHT 54424 a

1         incurred, directly or indirectly, to a foreign person
2         who would be a member of the same unitary business
3         group but for the fact that the foreign person's
4         business activity outside the United States is 80% or
5         more of that person's total business activity. The
6         addition modification required by this subparagraph
7         shall be reduced to the extent that dividends were
8         included in base income of the unitary group for the
9         same taxable year and received by the taxpayer or by a
10         member of the taxpayer's unitary business group
11         (including amounts included in gross income pursuant
12         to Sections 951 through 964 of the Internal Revenue
13         Code and amounts included in gross income under Section
14         78 of the Internal Revenue Code) with respect to the
15         stock of the same person to whom the intangible
16         expenses and costs were directly or indirectly paid,
17         incurred or accrued. The preceding sentence shall not
18         apply to the extent that the same dividends caused a
19         reduction to the addition modification required under
20         Section 203(d)(2)(D-7) of this Act. As used in this
21         subparagraph, the term "intangible expenses and costs"
22         includes (1) expenses, losses, and costs for, or
23         related to, the direct or indirect acquisition, use,
24         maintenance or management, ownership, sale, exchange,
25         or any other disposition of intangible property; (2)
26         losses incurred, directly or indirectly, from
27         factoring transactions or discounting transactions;
28         (3) royalty, patent, technical, and copyright fees;
29         (4) licensing fees; and (5) other similar expenses and
30         costs. For purposes of this subparagraph, "intangible
31         property" includes patents, patent applications, trade
32         names, trademarks, service marks, copyrights, mask
33         works, trade secrets, and similar types of intangible
34         assets;

 

 

09400HB1577ham001 - 54 - LRB094 09191 NHT 54424 a

1             This paragraph shall not apply to the following:
2                 (i) any item of intangible expenses or costs
3             paid, accrued, or incurred, directly or
4             indirectly, from a transaction with a foreign
5             person who is subject in a foreign country or
6             state, other than a state which requires mandatory
7             unitary reporting, to a tax on or measured by net
8             income with respect to such item; or
9                 (ii) any item of intangible expense or cost
10             paid, accrued, or incurred, directly or
11             indirectly, if the taxpayer can establish, based
12             on a preponderance of the evidence, both of the
13             following:
14                     (a) the foreign person during the same
15                 taxable year paid, accrued, or incurred, the
16                 intangible expense or cost to a person that is
17                 not a related member, and
18                     (b) the transaction giving rise to the
19                 intangible expense or cost between the
20                 taxpayer and the foreign person did not have as
21                 a principal purpose the avoidance of Illinois
22                 income tax, and is paid pursuant to a contract
23                 or agreement that reflects arm's-length terms;
24                 or
25                 (iii) any item of intangible expense or cost
26             paid, accrued, or incurred, directly or
27             indirectly, from a transaction with a foreign
28             person if the taxpayer establishes by clear and
29             convincing evidence, that the adjustments are
30             unreasonable; or if the taxpayer and the Director
31             agree in writing to the application or use of an
32             alternative method of apportionment under Section
33             304(f);
34                 Nothing in this subsection shall preclude the

 

 

09400HB1577ham001 - 55 - LRB094 09191 NHT 54424 a

1             Director from making any other adjustment
2             otherwise allowed under Section 404 of this Act for
3             any tax year beginning after the effective date of
4             this amendment provided such adjustment is made
5             pursuant to regulation adopted by the Department
6             and such regulations provide methods and standards
7             by which the Department will utilize its authority
8             under Section 404 of this Act;
9     and by deducting from the total so obtained the following
10     amounts:
11             (E) The valuation limitation amount;
12             (F) An amount equal to the amount of any tax
13         imposed by this Act which was refunded to the taxpayer
14         and included in such total for the taxable year;
15             (G) An amount equal to all amounts included in
16         taxable income as modified by subparagraphs (A), (B),
17         (C) and (D) which are exempt from taxation by this
18         State either by reason of its statutes or Constitution
19         or by reason of the Constitution, treaties or statutes
20         of the United States; provided that, in the case of any
21         statute of this State that exempts income derived from
22         bonds or other obligations from the tax imposed under
23         this Act, the amount exempted shall be the interest net
24         of bond premium amortization;
25             (H) Any income of the partnership which
26         constitutes personal service income as defined in
27         Section 1348 (b) (1) of the Internal Revenue Code (as
28         in effect December 31, 1981) or a reasonable allowance
29         for compensation paid or accrued for services rendered
30         by partners to the partnership, whichever is greater;
31             (I) An amount equal to all amounts of income
32         distributable to an entity subject to the Personal
33         Property Tax Replacement Income Tax imposed by
34         subsections (c) and (d) of Section 201 of this Act

 

 

09400HB1577ham001 - 56 - LRB094 09191 NHT 54424 a

1         including amounts distributable to organizations
2         exempt from federal income tax by reason of Section
3         501(a) of the Internal Revenue Code;
4             (J) With the exception of any amounts subtracted
5         under subparagraph (G), an amount equal to the sum of
6         all amounts disallowed as deductions by (i) Sections
7         171(a) (2), and 265(2) of the Internal Revenue Code of
8         1954, 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, as now or hereafter amended; and (ii) for taxable
12         years ending on or after August 13, 1999, Sections
13         171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
14         Internal Revenue Code; the provisions of this
15         subparagraph are exempt from the provisions of Section
16         250;
17             (K) 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         enacted by the 82nd General Assembly, and conducts
22         substantially all of its operations in an Enterprise
23         Zone or Zones;
24             (L) An amount equal to any contribution made to a
25         job training project established pursuant to the Real
26         Property Tax Increment Allocation Redevelopment Act;
27             (M) 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 (K) of paragraph (2) of this subsection
34         shall not be eligible for the deduction provided under

 

 

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

 

 

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

 

 

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1             (S) An amount equal to the income from intangible
2         property taken into account for the taxable year (net
3         of the 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(d)(2)(D-8) for
11         intangible expenses and costs paid, accrued, or
12         incurred, directly or indirectly, to the same foreign
13         person.
 
14     (e) Gross income; adjusted gross income; taxable income.
15         (1) In general. Subject to the provisions of paragraph
16     (2) and subsection (b) (3), for purposes of this Section
17     and Section 803(e), a taxpayer's gross income, adjusted
18     gross income, or taxable income for the taxable year shall
19     mean the amount of gross income, adjusted gross income or
20     taxable income properly reportable for federal income tax
21     purposes for the taxable year under the provisions of the
22     Internal Revenue Code. Taxable income may be less than
23     zero. However, for taxable years ending on or after
24     December 31, 1986, net operating loss carryforwards from
25     taxable years ending prior to December 31, 1986, may not
26     exceed the sum of federal taxable income for the taxable
27     year before net operating loss deduction, plus the excess
28     of addition modifications over subtraction modifications
29     for the taxable year. For taxable years ending prior to
30     December 31, 1986, taxable income may never be an amount in
31     excess of the net operating loss for the taxable year as
32     defined in subsections (c) and (d) of Section 172 of the
33     Internal Revenue Code, provided that when taxable income of

 

 

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

 

 

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

 

 

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

 

 

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1         1969 appreciation amounts (to the extent consisting of
2         capital gain) for all property in respect of which such
3         gain was reported for federal income tax purposes for
4         the taxable year, or (ii) the net capital gain for the
5         taxable year, reduced in either case by any amount of
6         such gain included in the amount determined under
7         subsection (a) (2) (F) or (c) (2) (H).
8         (2) Pre-August 1, 1969 appreciation amount.
9             (A) If the fair market value of property referred
10         to in paragraph (1) was readily ascertainable on August
11         1, 1969, the pre-August 1, 1969 appreciation amount for
12         such property is the lesser of (i) the excess of such
13         fair market value over the taxpayer's basis (for
14         determining gain) for such property on that date
15         (determined under the Internal Revenue Code as in
16         effect on that date), or (ii) the total gain realized
17         and reportable for federal income tax purposes in
18         respect of the sale, exchange or other disposition of
19         such property.
20             (B) If the fair market value of property referred
21         to in paragraph (1) was not readily ascertainable on
22         August 1, 1969, the pre-August 1, 1969 appreciation
23         amount for such property is that amount which bears the
24         same ratio to the total gain reported in respect of the
25         property for federal income tax purposes for the
26         taxable year, as the number of full calendar months in
27         that part of the taxpayer's holding period for the
28         property ending July 31, 1969 bears to the number of
29         full calendar months in the taxpayer's entire holding
30         period for the property.
31             (C) The Department shall prescribe such
32         regulations as may be necessary to carry out the
33         purposes of this paragraph.
 

 

 

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1     (g) Double deductions. Unless specifically provided
2 otherwise, nothing in this Section shall permit the same item
3 to be deducted more than once.
 
4     (h) Legislative intention. Except as expressly provided by
5 this Section there shall be no modifications or limitations on
6 the amounts of income, gain, loss or deduction taken into
7 account in determining gross income, adjusted gross income or
8 taxable income for federal income tax purposes for the taxable
9 year, or in the amount of such items entering into the
10 computation of base income and net income under this Act for
11 such taxable year, whether in respect of property values as of
12 August 1, 1969 or otherwise.
13 (Source: P.A. 92-16, eff. 6-28-01; 92-244, eff. 8-3-01; 92-439,
14 eff. 8-17-01; 92-603, eff. 6-28-02; 92-626, eff. 7-11-02;
15 92-651, eff. 7-11-02; 92-846, eff. 8-23-02; 93-812, eff.
16 7-26-04; 93-840, eff. 7-30-04; revised 10-12-04.)
 
17     Section 999. Effective date. This Act takes effect upon
18 becoming law.".