Sen. Don Harmon

Filed: 10/24/2005

 

 


 

 


 
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1
AMENDMENT TO HOUSE BILL 2706

2     AMENDMENT NO. ______. Amend House Bill 2706 on page 20, by
3 replacing line 9 with the following:
4 "changing Sections 203 and 902 as follows:
 
5     (35 ILCS 5/203)  (from Ch. 120, par. 2-203)
6     Sec. 203. Base income defined.
7     (a) Individuals.
8         (1) In general. In the case of an individual, base
9     income means an amount equal to the taxpayer's adjusted
10     gross income for the taxable year as modified by paragraph
11     (2).
12         (2) Modifications. The adjusted gross income referred
13     to in paragraph (1) shall be modified by adding thereto the
14     sum of the following amounts:
15             (A) An amount equal to all amounts paid or accrued
16         to the taxpayer as interest or dividends during the
17         taxable year to the extent excluded from gross income
18         in the computation of adjusted gross income, except
19         stock dividends of qualified public utilities
20         described in Section 305(e) of the Internal Revenue
21         Code;
22             (B) An amount equal to the amount of tax imposed by
23         this Act to the extent deducted from gross income in
24         the computation of adjusted gross income for the
25         taxable year;

 

 

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1             (C) An amount equal to the amount received during
2         the taxable year as a recovery or refund of real
3         property taxes paid with respect to the taxpayer's
4         principal residence under the Revenue Act of 1939 and
5         for which a deduction was previously taken under
6         subparagraph (L) of this paragraph (2) prior to July 1,
7         1991, the retrospective application date of Article 4
8         of Public Act 87-17. In the case of multi-unit or
9         multi-use structures and farm dwellings, the taxes on
10         the taxpayer's principal residence shall be that
11         portion of the total taxes for the entire property
12         which is attributable to such principal residence;
13             (D) An amount equal to the amount of the capital
14         gain deduction allowable under the Internal Revenue
15         Code, to the extent deducted from gross income in the
16         computation of adjusted gross income;
17             (D-5) An amount, to the extent not included in
18         adjusted gross income, equal to the amount of money
19         withdrawn by the taxpayer in the taxable year from a
20         medical care savings account and the interest earned on
21         the account in the taxable year of a withdrawal
22         pursuant to subsection (b) of Section 20 of the Medical
23         Care Savings Account Act or subsection (b) of Section
24         20 of the Medical Care Savings Account Act of 2000;
25             (D-10) For taxable years ending after December 31,
26         1997, an amount equal to any eligible remediation costs
27         that the individual deducted in computing adjusted
28         gross income and for which the individual claims a
29         credit under subsection (l) of Section 201;
30             (D-15) For taxable years 2001 and thereafter, an
31         amount equal to the bonus depreciation deduction (30%
32         of the adjusted basis of the qualified property) taken
33         on the taxpayer's federal income tax return for the
34         taxable year under subsection (k) of Section 168 of the

 

 

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

 

 

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

 

 

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1             304(f).
2                 Nothing in this subsection shall preclude the
3             Director from making any other adjustment
4             otherwise allowed under Section 404 of this Act for
5             any tax year beginning after the effective date of
6             this amendment provided such adjustment is made
7             pursuant to regulation adopted by the Department
8             and such regulations provide methods and standards
9             by which the Department will utilize its authority
10             under Section 404 of this Act;
11             (D-18) For taxable years ending on or after
12         December 31, 2004, an amount equal to the amount of
13         intangible expenses and costs otherwise allowed as a
14         deduction in computing base income, and that were paid,
15         accrued, or incurred, directly or indirectly, to a
16         foreign person who would be a member of the same
17         unitary business group but for the fact that the
18         foreign person's business activity outside the United
19         States is 80% or more of that person's total business
20         activity. The addition modification required by this
21         subparagraph shall be reduced to the extent that
22         dividends were included in base income of the unitary
23         group for the same taxable year and received by the
24         taxpayer or by a member of the taxpayer's unitary
25         business group (including amounts included in gross
26         income under Sections 951 through 964 of the Internal
27         Revenue Code and amounts included in gross income under
28         Section 78 of the Internal Revenue Code) with respect
29         to the stock of the same person to whom the intangible
30         expenses and costs were directly or indirectly paid,
31         incurred, or accrued. The preceding sentence does not
32         apply to the extent that the same dividends caused a
33         reduction to the addition modification required under
34         Section 203(a)(2)(D-17) of this Act. As used in this

 

 

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

 

 

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1                 a principal purpose the avoidance of Illinois
2                 income tax, and is paid pursuant to a contract
3                 or agreement that reflects arm's-length terms;
4                 or
5                 (iii) any item of intangible expense or cost
6             paid, accrued, or incurred, directly or
7             indirectly, from a transaction with a foreign
8             person if the taxpayer establishes by clear and
9             convincing evidence, that the adjustments are
10             unreasonable; or if the taxpayer and the Director
11             agree in writing to the application or use of an
12             alternative method of apportionment under Section
13             304(f);
14                 Nothing in this subsection shall preclude the
15             Director from making any other adjustment
16             otherwise allowed under Section 404 of this Act for
17             any tax year beginning after the effective date of
18             this amendment provided such adjustment is made
19             pursuant to regulation adopted by the Department
20             and such regulations provide methods and standards
21             by which the Department will utilize its authority
22             under Section 404 of this Act;
23             (D-20) For taxable years beginning on or after
24         January 1, 2002, in the case of a distribution from a
25         qualified tuition program under Section 529 of the
26         Internal Revenue Code, other than (i) a distribution
27         from a College Savings Pool created under Section 16.5
28         of the State Treasurer Act or (ii) a distribution from
29         the Illinois Prepaid Tuition Trust Fund, an amount
30         equal to the amount excluded from gross income under
31         Section 529(c)(3)(B);
32     and by deducting from the total so obtained the sum of the
33     following amounts:
34             (E) For taxable years ending before December 31,

 

 

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1         2001, any amount included in such total in respect of
2         any compensation (including but not limited to any
3         compensation paid or accrued to a serviceman while a
4         prisoner of war or missing in action) paid to a
5         resident by reason of being on active duty in the Armed
6         Forces of the United States and in respect of any
7         compensation paid or accrued to a resident who as a
8         governmental employee was a prisoner of war or missing
9         in action, and in respect of any compensation paid to a
10         resident in 1971 or thereafter for annual training
11         performed pursuant to Sections 502 and 503, Title 32,
12         United States Code as a member of the Illinois National
13         Guard. For taxable years ending on or after December
14         31, 2001, any amount included in such total in respect
15         of any compensation (including but not limited to any
16         compensation paid or accrued to a serviceman while a
17         prisoner of war or missing in action) paid to a
18         resident by reason of being a member of any component
19         of the Armed Forces of the United States and in respect
20         of any compensation paid or accrued to a resident who
21         as a governmental employee was a prisoner of war or
22         missing in action, and in respect of any compensation
23         paid to a resident in 2001 or thereafter by reason of
24         being a member of the Illinois National Guard. The
25         provisions of this amendatory Act of the 92nd General
26         Assembly are exempt from the provisions of Section 250;
27             (F) An amount equal to all amounts included in such
28         total pursuant to the provisions of Sections 402(a),
29         402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the
30         Internal Revenue Code, or included in such total as
31         distributions under the provisions of any retirement
32         or disability plan for employees of any governmental
33         agency or unit, or retirement payments to retired
34         partners, which payments are excluded in computing net

 

 

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1         earnings from self employment by Section 1402 of the
2         Internal Revenue Code and regulations adopted pursuant
3         thereto;
4             (G) The valuation limitation amount;
5             (H) An amount equal to the amount of any tax
6         imposed by this Act which was refunded to the taxpayer
7         and included in such total for the taxable year;
8             (I) An amount equal to all amounts included in such
9         total pursuant to the provisions of Section 111 of the
10         Internal Revenue Code as a recovery of items previously
11         deducted from adjusted gross income in the computation
12         of taxable income;
13             (J) An amount equal to those dividends included in
14         such total which were paid by a corporation which
15         conducts business operations in an Enterprise Zone or
16         zones created under the Illinois Enterprise Zone Act,
17         and conducts substantially all of its operations in an
18         Enterprise Zone or zones;
19             (K) An amount equal to those dividends included in
20         such total that were paid by a corporation that
21         conducts business operations in a federally designated
22         Foreign Trade Zone or Sub-Zone and that is designated a
23         High Impact Business located in Illinois; provided
24         that dividends eligible for the deduction provided in
25         subparagraph (J) of paragraph (2) of this subsection
26         shall not be eligible for the deduction provided under
27         this subparagraph (K);
28             (L) For taxable years ending after December 31,
29         1983, an amount equal to all social security benefits
30         and railroad retirement benefits included in such
31         total pursuant to Sections 72(r) and 86 of the Internal
32         Revenue Code;
33             (M) With the exception of any amounts subtracted
34         under subparagraph (N), an amount equal to the sum of

 

 

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1         all amounts disallowed as deductions by (i) Sections
2         171(a) (2), and 265(2) of the Internal Revenue Code of
3         1954, as now or hereafter amended, and all amounts of
4         expenses allocable to interest and disallowed as
5         deductions by Section 265(1) of the Internal Revenue
6         Code of 1954, as now or hereafter amended; and (ii) for
7         taxable years ending on or after August 13, 1999,
8         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
9         the Internal Revenue Code; the provisions of this
10         subparagraph are exempt from the provisions of Section
11         250;
12             (N) An amount equal to all amounts included in such
13         total which are exempt from taxation by this State
14         either by reason of its statutes or Constitution or by
15         reason of the Constitution, treaties or statutes of the
16         United States; provided that, in the case of any
17         statute of this State that exempts income derived from
18         bonds or other obligations from the tax imposed under
19         this Act, the amount exempted shall be the interest net
20         of bond premium amortization;
21             (O) An amount equal to any contribution made to a
22         job training project established pursuant to the Tax
23         Increment Allocation Redevelopment Act;
24             (P) An amount equal to the amount of the deduction
25         used to compute the federal income tax credit for
26         restoration of substantial amounts held under claim of
27         right for the taxable year pursuant to Section 1341 of
28         the Internal Revenue Code of 1986;
29             (Q) An amount equal to any amounts included in such
30         total, received by the taxpayer as an acceleration in
31         the payment of life, endowment or annuity benefits in
32         advance of the time they would otherwise be payable as
33         an indemnity for a terminal illness;
34             (R) An amount equal to the amount of any federal or

 

 

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1         State bonus paid to veterans of the Persian Gulf War;
2             (S) An amount, to the extent included in adjusted
3         gross income, equal to the amount of a contribution
4         made in the taxable year on behalf of the taxpayer to a
5         medical care savings account established under the
6         Medical Care Savings Account Act or the Medical Care
7         Savings Account Act of 2000 to the extent the
8         contribution is accepted by the account administrator
9         as provided in that Act;
10             (T) An amount, to the extent included in adjusted
11         gross income, equal to the amount of interest earned in
12         the taxable year on a medical care savings account
13         established under the Medical Care Savings Account Act
14         or the Medical Care Savings Account Act of 2000 on
15         behalf of the taxpayer, other than interest added
16         pursuant to item (D-5) of this paragraph (2);
17             (U) For one taxable year beginning on or after
18         January 1, 1994, an amount equal to the total amount of
19         tax imposed and paid under subsections (a) and (b) of
20         Section 201 of this Act on grant amounts received by
21         the taxpayer under the Nursing Home Grant Assistance
22         Act during the taxpayer's taxable years 1992 and 1993;
23             (V) Beginning with tax years ending on or after
24         December 31, 1995 and ending with tax years ending on
25         or before December 31, 2004, an amount equal to the
26         amount paid by a taxpayer who is a self-employed
27         taxpayer, a partner of a partnership, or a shareholder
28         in a Subchapter S corporation for health insurance or
29         long-term care insurance for that taxpayer or that
30         taxpayer's spouse or dependents, to the extent that the
31         amount paid for that health insurance or long-term care
32         insurance may be deducted under Section 213 of the
33         Internal Revenue Code of 1986, has not been deducted on
34         the federal income tax return of the taxpayer, and does

 

 

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1         not exceed the taxable income attributable to that
2         taxpayer's income, self-employment income, or
3         Subchapter S corporation income; except that no
4         deduction shall be allowed under this item (V) if the
5         taxpayer is eligible to participate in any health
6         insurance or long-term care insurance plan of an
7         employer of the taxpayer or the taxpayer's spouse. The
8         amount of the health insurance and long-term care
9         insurance subtracted under this item (V) shall be
10         determined by multiplying total health insurance and
11         long-term care insurance premiums paid by the taxpayer
12         times a number that represents the fractional
13         percentage of eligible medical expenses under Section
14         213 of the Internal Revenue Code of 1986 not actually
15         deducted on the taxpayer's federal income tax return;
16             (W) For taxable years beginning on or after January
17         1, 1998, all amounts included in the taxpayer's federal
18         gross income in the taxable year from amounts converted
19         from a regular IRA to a Roth IRA. This paragraph is
20         exempt from the provisions of Section 250;
21             (X) For taxable year 1999 and thereafter, an amount
22         equal to the amount of any (i) distributions, to the
23         extent includible in gross income for federal income
24         tax purposes, made to the taxpayer because of his or
25         her status as a victim of persecution for racial or
26         religious reasons by Nazi Germany or any other Axis
27         regime or as an heir of the victim and (ii) items of
28         income, to the extent includible in gross income for
29         federal income tax purposes, attributable to, derived
30         from or in any way related to assets stolen from,
31         hidden from, or otherwise lost to a victim of
32         persecution for racial or religious reasons by Nazi
33         Germany or any other Axis regime immediately prior to,
34         during, and immediately after World War II, including,

 

 

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1         but not limited to, interest on the proceeds receivable
2         as insurance under policies issued to a victim of
3         persecution for racial or religious reasons by Nazi
4         Germany or any other Axis regime by European insurance
5         companies immediately prior to and during World War II;
6         provided, however, this subtraction from federal
7         adjusted gross income does not apply to assets acquired
8         with such assets or with the proceeds from the sale of
9         such assets; provided, further, this paragraph shall
10         only apply to a taxpayer who was the first recipient of
11         such assets after their recovery and who is a victim of
12         persecution for racial or religious reasons by Nazi
13         Germany or any other Axis regime or as an heir of the
14         victim. The amount of and the eligibility for any
15         public assistance, benefit, or similar entitlement is
16         not affected by the inclusion of items (i) and (ii) of
17         this paragraph in gross income for federal income tax
18         purposes. This paragraph is exempt from the provisions
19         of Section 250;
20             (Y) For taxable years beginning on or after January
21         1, 2002 and ending on or before December 31, 2004,
22         moneys contributed in the taxable year to a College
23         Savings Pool account under Section 16.5 of the State
24         Treasurer Act, except that amounts excluded from gross
25         income under Section 529(c)(3)(C)(i) of the Internal
26         Revenue Code shall not be considered moneys
27         contributed under this subparagraph (Y). For taxable
28         years beginning on or after January 1, 2005, a maximum
29         of $10,000 contributed in the taxable year to (i) a
30         College Savings Pool account under Section 16.5 of the
31         State Treasurer Act or (ii) the Illinois Prepaid
32         Tuition Trust Fund, except that amounts excluded from
33         gross income under Section 529(c)(3)(C)(i) of the
34         Internal Revenue Code shall not be considered moneys

 

 

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1         contributed under this subparagraph (Y). This
2         subparagraph (Y) is exempt from the provisions of
3         Section 250;
4             (Z) For taxable years 2001 and thereafter, for the
5         taxable year in which the bonus depreciation deduction
6         (30% of the adjusted basis of the qualified property)
7         is taken on the taxpayer's federal income tax return
8         under subsection (k) of Section 168 of the Internal
9         Revenue Code and for each applicable taxable year
10         thereafter, an amount equal to "x", where:
11                 (1) "y" equals the amount of the depreciation
12             deduction taken for the taxable year on the
13             taxpayer's federal income tax return on property
14             for which the bonus depreciation deduction (30% of
15             the adjusted basis of the qualified property) was
16             taken in any year under subsection (k) of Section
17             168 of the Internal Revenue Code, but not including
18             the bonus depreciation deduction; and
19                 (2) for taxable years ending on or before
20             December 31, 2005, "x" equals "y" multiplied by 30
21             and then divided by 70 (or "y" multiplied by
22             0.429); and
23                 (3) for taxable years ending after December
24             31, 2005:
25                     (i) for property on which a bonus
26                 depreciation deduction of 30% of the adjusted
27                 basis was taken, "x" equals "y" multiplied by
28                 30 and then divided by 70 (or "y" multiplied by
29                 0.429); and
30                     (ii) for property on which a bonus
31                 depreciation deduction of 50% of the adjusted
32                 basis was taken, "x" equals "y" multiplied by
33                 1.0.
34             The aggregate amount deducted under this

 

 

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1         subparagraph in all taxable years for any one piece of
2         property may not exceed the amount of the bonus
3         depreciation deduction (30% of the adjusted basis of
4         the qualified property) taken on that property on the
5         taxpayer's federal income tax return under subsection
6         (k) of Section 168 of the Internal Revenue Code. This
7         subparagraph (Z) is exempt from the provisions of
8         Section 250;
9             (AA) If the taxpayer sells, transfers, abandons,
10         or otherwise disposes of reports a capital gain or loss
11         on the taxpayer's federal income tax return for the
12         taxable year based on a sale or transfer of property
13         for which the taxpayer was required in any taxable year
14         to make an addition modification under subparagraph
15         (D-15), then an amount equal to that addition
16         modification.
17             The taxpayer is allowed to take the deduction under
18         this subparagraph only once with respect to any one
19         piece of property.
20             This subparagraph (AA) is exempt from the
21         provisions of Section 250;
22             (BB) Any amount included in adjusted gross income,
23         other than salary, received by a driver in a
24         ridesharing arrangement using a motor vehicle;
25             (CC) The amount of (i) any interest income (net of
26         the deductions allocable thereto) taken into account
27         for the taxable year with respect to a transaction with
28         a taxpayer that is required to make an addition
29         modification with respect to such transaction under
30         Section 203(a)(2)(D-17), 203(b)(2)(E-12) (E-13),
31         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
32         the amount of that addition modification, and (ii) any
33         income from intangible property (net of the deductions
34         allocable thereto) taken into account for the taxable

 

 

09400HB2706sam001 - 16 - LRB094 03732 BDD 49710 a

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

 

 

09400HB2706sam001 - 17 - LRB094 03732 BDD 49710 a

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

 

 

09400HB2706sam001 - 18 - LRB094 03732 BDD 49710 a

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

 

 

09400HB2706sam001 - 19 - LRB094 03732 BDD 49710 a

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

 

 

09400HB2706sam001 - 20 - LRB094 03732 BDD 49710 a

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

 

 

09400HB2706sam001 - 21 - LRB094 03732 BDD 49710 a

1             304(f).
2                 Nothing in this subsection shall preclude the
3             Director from making any other adjustment
4             otherwise allowed under Section 404 of this Act for
5             any tax year beginning after the effective date of
6             this amendment provided such adjustment is made
7             pursuant to regulation adopted by the Department
8             and such regulations provide methods and standards
9             by which the Department will utilize its authority
10             under Section 404 of this Act;
11             (E-13) For taxable years ending on or after
12         December 31, 2004, an amount equal to the amount of
13         intangible expenses and costs otherwise allowed as a
14         deduction in computing base income, and that were paid,
15         accrued, or incurred, directly or indirectly, to a
16         foreign person who would be a member of the same
17         unitary business group but for the fact that the
18         foreign person's business activity outside the United
19         States is 80% or more of that person's total business
20         activity. The addition modification required by this
21         subparagraph shall be reduced to the extent that
22         dividends were included in base income of the unitary
23         group for the same taxable year and received by the
24         taxpayer or by a member of the taxpayer's unitary
25         business group (including amounts included in gross
26         income pursuant to Sections 951 through 964 of the
27         Internal Revenue Code and amounts included in gross
28         income under Section 78 of the Internal Revenue Code)
29         with respect to the stock of the same person to whom
30         the intangible expenses and costs were directly or
31         indirectly paid, incurred, or accrued. The preceding
32         sentence shall not apply to the extent that the same
33         dividends caused a reduction to the addition
34         modification required under Section 203(b)(2)(E-12) of

 

 

09400HB2706sam001 - 22 - LRB094 03732 BDD 49710 a

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

 

 

09400HB2706sam001 - 23 - LRB094 03732 BDD 49710 a

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

 

 

09400HB2706sam001 - 24 - LRB094 03732 BDD 49710 a

1             (I) With the exception of any amounts subtracted
2         under subparagraph (J), an amount equal to the sum of
3         all amounts disallowed as deductions by (i) Sections
4         171(a) (2), and 265(a)(2) and amounts disallowed as
5         interest expense by Section 291(a)(3) of the Internal
6         Revenue Code, as now or hereafter amended, and all
7         amounts of expenses allocable to interest and
8         disallowed as deductions by Section 265(a)(1) of the
9         Internal Revenue Code, as now or hereafter amended; and
10         (ii) for taxable years ending on or after August 13,
11         1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and
12         832(b)(5)(B)(i) of the Internal Revenue Code; the
13         provisions of this subparagraph are exempt from the
14         provisions of Section 250;
15             (J) An amount equal to all amounts included in such
16         total which are exempt from taxation by this State
17         either by reason of its statutes or Constitution or by
18         reason of the Constitution, treaties or statutes of the
19         United States; provided that, in the case of any
20         statute of this State that exempts income derived from
21         bonds or other obligations from the tax imposed under
22         this Act, the amount exempted shall be the interest net
23         of bond premium amortization;
24             (K) 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             (L) 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

 

 

09400HB2706sam001 - 25 - LRB094 03732 BDD 49710 a

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

 

 

09400HB2706sam001 - 26 - LRB094 03732 BDD 49710 a

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

 

 

09400HB2706sam001 - 27 - LRB094 03732 BDD 49710 a

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

 

 

09400HB2706sam001 - 28 - LRB094 03732 BDD 49710 a

1         Internal Revenue Code for the taxable year;
2             (S) For taxable years ending on or after December
3         31, 1997, in the case of a Subchapter S corporation, an
4         amount equal to all amounts of income allocable to a
5         shareholder subject to the Personal Property Tax
6         Replacement Income Tax imposed by subsections (c) and
7         (d) of Section 201 of this Act, including amounts
8         allocable to organizations exempt from federal income
9         tax by reason of Section 501(a) of the Internal Revenue
10         Code. This subparagraph (S) is exempt from the
11         provisions of Section 250;
12             (T) For taxable years 2001 and thereafter, for the
13         taxable year in which the bonus depreciation deduction
14         (30% of the adjusted basis of the qualified property)
15         is taken on the taxpayer's federal income tax return
16         under subsection (k) of Section 168 of the Internal
17         Revenue Code and for each applicable taxable year
18         thereafter, an amount equal to "x", where:
19                 (1) "y" equals the amount of the depreciation
20             deduction taken for the taxable year on the
21             taxpayer's federal income tax return on property
22             for which the bonus depreciation deduction (30% of
23             the adjusted basis of the qualified property) was
24             taken in any year under subsection (k) of Section
25             168 of the Internal Revenue Code, but not including
26             the bonus depreciation deduction; and
27                 (2) for taxable years ending on or before on or
28             before December 31, 2005, "x" equals "y"
29             multiplied by 30 and then divided by 70 (or "y"
30             multiplied by 0.429); and
31                 (3) for taxable years ending after December
32             31, 2005:
33                     (i) for property on which a bonus
34                 depreciation deduction of 30% of the adjusted

 

 

09400HB2706sam001 - 29 - LRB094 03732 BDD 49710 a

1                 basis was taken, "x" equals "y" multiplied by
2                 30 and then divided by 70 (or "y" multiplied by
3                 0.429); and
4                     (ii) for property on which a bonus
5                 depreciation deduction of 50% of the adjusted
6                 basis was taken, "x" equals "y" multiplied by
7                 1.0.
8             The aggregate amount deducted under this
9         subparagraph in all taxable years for any one piece of
10         property may not exceed the amount of the bonus
11         depreciation deduction (30% of the adjusted basis of
12         the qualified property) taken on that property on the
13         taxpayer's federal income tax return under subsection
14         (k) of Section 168 of the Internal Revenue Code. This
15         subparagraph (T) is exempt from the provisions of
16         Section 250;
17             (U) If the taxpayer sells, transfers, abandons, or
18         otherwise disposes of reports a capital gain or loss on
19         the taxpayer's federal income tax return for the
20         taxable year based on a sale or transfer of property
21         for which the taxpayer was required in any taxable year
22         to make an addition modification under subparagraph
23         (E-10), then an amount equal to that addition
24         modification.
25             The taxpayer is allowed to take the deduction under
26         this subparagraph only once with respect to any one
27         piece of property.
28             This subparagraph (U) is exempt from the
29         provisions of Section 250;
30             (V) The amount of: (i) any interest income (net of
31         the deductions allocable thereto) taken into account
32         for the taxable year with respect to a transaction with
33         a taxpayer that is required to make an addition
34         modification with respect to such transaction under

 

 

09400HB2706sam001 - 30 - LRB094 03732 BDD 49710 a

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

 

 

09400HB2706sam001 - 31 - LRB094 03732 BDD 49710 a

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

 

 

09400HB2706sam001 - 32 - LRB094 03732 BDD 49710 a

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

 

 

09400HB2706sam001 - 33 - LRB094 03732 BDD 49710 a

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

 

 

09400HB2706sam001 - 34 - LRB094 03732 BDD 49710 a

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

 

 

09400HB2706sam001 - 35 - LRB094 03732 BDD 49710 a

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

 

 

09400HB2706sam001 - 36 - LRB094 03732 BDD 49710 a

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

 

 

09400HB2706sam001 - 37 - LRB094 03732 BDD 49710 a

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

 

 

09400HB2706sam001 - 38 - LRB094 03732 BDD 49710 a

1             and such regulations provide methods and standards
2             by which the Department will utilize its authority
3             under Section 404 of this Act;
4     and by deducting from the total so obtained the sum of the
5     following amounts:
6             (H) An amount equal to all amounts included in such
7         total pursuant to the provisions of Sections 402(a),
8         402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
9         Internal Revenue Code or included in such total as
10         distributions under the provisions of any retirement
11         or disability plan for employees of any governmental
12         agency or unit, or retirement payments to retired
13         partners, which payments are excluded in computing net
14         earnings from self employment by Section 1402 of the
15         Internal Revenue Code and regulations adopted pursuant
16         thereto;
17             (I) The valuation limitation amount;
18             (J) An amount equal to the amount of any tax
19         imposed by this Act which was refunded to the taxpayer
20         and included in such total for the taxable year;
21             (K) An amount equal to all amounts included in
22         taxable income as modified by subparagraphs (A), (B),
23         (C), (D), (E), (F) and (G) which are exempt from
24         taxation by this State either by reason of its statutes
25         or Constitution or by reason of the Constitution,
26         treaties or statutes of the United States; provided
27         that, in the case of any statute of this State that
28         exempts income derived from bonds or other obligations
29         from the tax imposed under this Act, the amount
30         exempted shall be the interest net of bond premium
31         amortization;
32             (L) With the exception of any amounts subtracted
33         under subparagraph (K), an amount equal to the sum of
34         all amounts disallowed as deductions by (i) Sections

 

 

09400HB2706sam001 - 39 - LRB094 03732 BDD 49710 a

1         171(a) (2) and 265(a)(2) of the Internal Revenue Code,
2         as now or hereafter amended, and all amounts of
3         expenses allocable to interest and disallowed as
4         deductions by Section 265(1) of the Internal Revenue
5         Code of 1954, as now or hereafter amended; and (ii) for
6         taxable years ending on or after August 13, 1999,
7         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
8         the Internal Revenue Code; the provisions of this
9         subparagraph are exempt from the provisions of Section
10         250;
11             (M) An amount equal to those dividends included in
12         such total which were paid by a corporation which
13         conducts business operations in an Enterprise Zone or
14         zones created under the Illinois Enterprise Zone Act
15         and conducts substantially all of its operations in an
16         Enterprise Zone or Zones;
17             (N) An amount equal to any contribution made to a
18         job training project established pursuant to the Tax
19         Increment Allocation Redevelopment Act;
20             (O) An amount equal to those dividends included in
21         such total that were paid by a corporation that
22         conducts business operations in a federally designated
23         Foreign Trade Zone or Sub-Zone and that is designated a
24         High Impact Business located in Illinois; provided
25         that dividends eligible for the deduction provided in
26         subparagraph (M) of paragraph (2) of this subsection
27         shall not be eligible for the deduction provided under
28         this subparagraph (O);
29             (P) An amount equal to the amount of the deduction
30         used to compute the federal income tax credit for
31         restoration of substantial amounts held under claim of
32         right for the taxable year pursuant to Section 1341 of
33         the Internal Revenue Code of 1986;
34             (Q) For taxable year 1999 and thereafter, an amount

 

 

09400HB2706sam001 - 40 - LRB094 03732 BDD 49710 a

1         equal to the amount of any (i) distributions, to the
2         extent includible in gross income for federal income
3         tax purposes, made to the taxpayer because of his or
4         her status as a victim of persecution for racial or
5         religious reasons by Nazi Germany or any other Axis
6         regime or as an heir of the victim and (ii) items of
7         income, to the extent includible in gross income for
8         federal income tax purposes, attributable to, derived
9         from or in any way related to assets stolen from,
10         hidden from, or otherwise lost to a victim of
11         persecution for racial or religious reasons by Nazi
12         Germany or any other Axis regime immediately prior to,
13         during, and immediately after World War II, including,
14         but not limited to, interest on the proceeds receivable
15         as insurance under policies issued to a victim of
16         persecution for racial or religious reasons by Nazi
17         Germany or any other Axis regime by European insurance
18         companies immediately prior to and during World War II;
19         provided, however, this subtraction from federal
20         adjusted gross income does not apply to assets acquired
21         with such assets or with the proceeds from the sale of
22         such assets; provided, further, this paragraph shall
23         only apply to a taxpayer who was the first recipient of
24         such assets after their recovery and who is a victim of
25         persecution for racial or religious reasons by Nazi
26         Germany or any other Axis regime or as an heir of the
27         victim. The amount of and the eligibility for any
28         public assistance, benefit, or similar entitlement is
29         not affected by the inclusion of items (i) and (ii) of
30         this paragraph in gross income for federal income tax
31         purposes. This paragraph is exempt from the provisions
32         of Section 250;
33             (R) For taxable years 2001 and thereafter, for the
34         taxable year in which the bonus depreciation deduction

 

 

09400HB2706sam001 - 41 - LRB094 03732 BDD 49710 a

1         (30% of the adjusted basis of the qualified property)
2         is taken on the taxpayer's federal income tax return
3         under subsection (k) of Section 168 of the Internal
4         Revenue Code and for each applicable taxable year
5         thereafter, an amount equal to "x", where:
6                 (1) "y" equals the amount of the depreciation
7             deduction taken for the taxable year on the
8             taxpayer's federal income tax return on property
9             for which the bonus depreciation deduction (30% of
10             the adjusted basis of the qualified property) was
11             taken in any year under subsection (k) of Section
12             168 of the Internal Revenue Code, but not including
13             the bonus depreciation deduction; and
14                 (2) for taxable years ending on or before
15             December 31, 2005, "x" equals "y" multiplied by 30
16             and then divided by 70 (or "y" multiplied by
17             0.429); and
18                 (3) for taxable years ending after December
19             31, 2005:
20                     (i) for property on which a bonus
21                 depreciation deduction of 30% of the adjusted
22                 basis was taken, "x" equals "y" multiplied by
23                 30 and then divided by 70 (or "y" multiplied by
24                 0.429); and
25                     (ii) for property on which a bonus
26                 depreciation deduction of 50% of the adjusted
27                 basis was taken, "x" equals "y" multiplied by
28                 1.0.
29             The aggregate amount deducted under this
30         subparagraph in all taxable years for any one piece of
31         property may not exceed the amount of the bonus
32         depreciation deduction (30% of the adjusted basis of
33         the qualified property) taken on that property on the
34         taxpayer's federal income tax return under subsection

 

 

09400HB2706sam001 - 42 - LRB094 03732 BDD 49710 a

1         (k) of Section 168 of the Internal Revenue Code. This
2         subparagraph (R) is exempt from the provisions of
3         Section 250;
4             (S) If the taxpayer sells, transfers, abandons, or
5         otherwise disposes of reports a capital gain or loss on
6         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         (G-10), 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             This subparagraph (S) is exempt from the
16         provisions of Section 250;
17             (T) The amount of (i) any interest income (net of
18         the deductions allocable thereto) taken into account
19         for the taxable year with respect to a transaction with
20         a taxpayer that is required to make an addition
21         modification with respect to such transaction under
22         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
23         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
24         the amount of such addition modification and (ii) any
25         income from intangible property (net of the deductions
26         allocable thereto) taken into account for the taxable
27         year with respect to a transaction with a taxpayer that
28         is required to make an addition modification with
29         respect to such transaction under Section
30         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
31         203(d)(2)(D-8), but not to exceed the amount of such
32         addition modification;
33             (U) An amount equal to the interest income taken
34         into account for the taxable year (net of the

 

 

09400HB2706sam001 - 43 - LRB094 03732 BDD 49710 a

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

 

 

09400HB2706sam001 - 44 - LRB094 03732 BDD 49710 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 or dividends during the
7         taxable year to the extent excluded from gross income
8         in the computation of taxable income;
9             (B) An amount equal to the amount of tax imposed by
10         this Act to the extent deducted from gross income for
11         the taxable year;
12             (C) The amount of deductions allowed to the
13         partnership pursuant to Section 707 (c) of the Internal
14         Revenue Code in calculating its taxable income;
15             (D) An amount equal to the amount of the capital
16         gain deduction allowable under the Internal Revenue
17         Code, to the extent deducted from gross income in the
18         computation of taxable income;
19             (D-5) For taxable years 2001 and thereafter, an
20         amount equal to the bonus depreciation deduction (30%
21         of the adjusted basis of the qualified property) taken
22         on the taxpayer's federal income tax return for the
23         taxable year under subsection (k) of Section 168 of the
24         Internal Revenue Code;
25             (D-6) If the taxpayer sells, transfers, abandons,
26         or otherwise disposes of reports a capital gain or loss
27         on the taxpayer's federal income tax return for the
28         taxable year based on a sale or transfer of property
29         for which the taxpayer was required in any taxable year
30         to make an addition modification under subparagraph
31         (D-5), then an amount equal to the aggregate amount of
32         the deductions taken in all taxable years under
33         subparagraph (O) with respect to that property.
34             The taxpayer is required to make the addition

 

 

09400HB2706sam001 - 45 - LRB094 03732 BDD 49710 a

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

 

 

09400HB2706sam001 - 46 - LRB094 03732 BDD 49710 a

1                 taxable year, paid, accrued, or incurred, the
2                 interest to a person that is not a related
3                 member, and
4                     (b) the transaction giving rise to the
5                 interest expense between the taxpayer and the
6                 foreign person did not have as a principal
7                 purpose the avoidance of Illinois income tax,
8                 and is paid pursuant to a contract or agreement
9                 that reflects an arm's-length interest rate
10                 and terms; or
11                 (iii) the taxpayer can establish, based on
12             clear and convincing evidence, that the interest
13             paid, accrued, or incurred relates to a contract or
14             agreement entered into at arm's-length rates and
15             terms and the principal purpose for the payment is
16             not federal or Illinois tax avoidance; or
17                 (iv) an item of interest paid, accrued, or
18             incurred, directly or indirectly, to 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; and
34             (D-8) For taxable years ending on or after December

 

 

09400HB2706sam001 - 47 - LRB094 03732 BDD 49710 a

1         31, 2004, an amount equal to the amount of intangible
2         expenses and costs otherwise allowed as a deduction in
3         computing base income, and that were paid, accrued, or
4         incurred, directly or indirectly, to a foreign person
5         who would be a member of the same unitary business
6         group but for the fact that the foreign person's
7         business activity outside the United States is 80% or
8         more of that person's total business activity. The
9         addition modification required by this subparagraph
10         shall be reduced to the extent that dividends were
11         included in base income of the unitary group for the
12         same taxable year and received by the taxpayer or by a
13         member of the taxpayer's unitary business group
14         (including amounts included in gross income pursuant
15         to Sections 951 through 964 of the Internal Revenue
16         Code and amounts included in gross income under Section
17         78 of the Internal Revenue Code) with respect to the
18         stock of the same person to whom the intangible
19         expenses and costs were directly or indirectly paid,
20         incurred or accrued. The preceding sentence shall not
21         apply to the extent that the same dividends caused a
22         reduction to the addition modification required under
23         Section 203(d)(2)(D-7) of this Act. As used in this
24         subparagraph, the term "intangible expenses and costs"
25         includes (1) expenses, losses, and costs for, or
26         related to, the direct or indirect acquisition, use,
27         maintenance or management, ownership, sale, exchange,
28         or any other disposition of intangible property; (2)
29         losses incurred, directly or indirectly, from
30         factoring transactions or discounting transactions;
31         (3) royalty, patent, technical, and copyright fees;
32         (4) licensing fees; and (5) other similar expenses and
33         costs. For purposes of this subparagraph, "intangible
34         property" includes patents, patent applications, trade

 

 

09400HB2706sam001 - 48 - LRB094 03732 BDD 49710 a

1         names, trademarks, service marks, copyrights, mask
2         works, trade secrets, and similar types of intangible
3         assets;
4             This paragraph shall not apply to the following:
5                 (i) any item of intangible expenses or costs
6             paid, accrued, or incurred, directly or
7             indirectly, from a transaction with a foreign
8             person who is subject in a foreign country or
9             state, other than a state which requires mandatory
10             unitary reporting, to a tax on or measured by net
11             income with respect to such item; or
12                 (ii) any item of intangible expense or cost
13             paid, accrued, or incurred, directly or
14             indirectly, if the taxpayer can establish, based
15             on a preponderance of the evidence, both of the
16             following:
17                     (a) the foreign person during the same
18                 taxable year paid, accrued, or incurred, the
19                 intangible expense or cost to a person that is
20                 not a related member, and
21                     (b) the transaction giving rise to the
22                 intangible expense or cost between the
23                 taxpayer and the foreign person did not have as
24                 a principal purpose the avoidance of Illinois
25                 income tax, and is paid pursuant to a contract
26                 or agreement that reflects arm's-length terms;
27                 or
28                 (iii) any item of intangible expense or cost
29             paid, accrued, or incurred, directly or
30             indirectly, from a transaction with a foreign
31             person if the taxpayer establishes by clear and
32             convincing evidence, that the adjustments are
33             unreasonable; or if the taxpayer and the Director
34             agree in writing to the application or use of an

 

 

09400HB2706sam001 - 49 - LRB094 03732 BDD 49710 a

1             alternative method of apportionment under Section
2             304(f);
3                 Nothing in this subsection shall preclude the
4             Director from making any other adjustment
5             otherwise allowed under Section 404 of this Act for
6             any tax year beginning after the effective date of
7             this amendment provided such adjustment is made
8             pursuant to regulation adopted by the Department
9             and such regulations provide methods and standards
10             by which the Department will utilize its authority
11             under Section 404 of this Act;
12     and by deducting from the total so obtained the following
13     amounts:
14             (E) The valuation limitation amount;
15             (F) An amount equal to the amount of any tax
16         imposed by this Act which was refunded to the taxpayer
17         and included in such total for the taxable year;
18             (G) An amount equal to all amounts included in
19         taxable income as modified by subparagraphs (A), (B),
20         (C) and (D) which are exempt from taxation by this
21         State either by reason of its statutes or Constitution
22         or by reason of the Constitution, treaties or statutes
23         of the United States; provided that, in the case of any
24         statute of this State that exempts income derived from
25         bonds or other obligations from the tax imposed under
26         this Act, the amount exempted shall be the interest net
27         of bond premium amortization;
28             (H) Any income of the partnership which
29         constitutes personal service income as defined in
30         Section 1348 (b) (1) of the Internal Revenue Code (as
31         in effect December 31, 1981) or a reasonable allowance
32         for compensation paid or accrued for services rendered
33         by partners to the partnership, whichever is greater;
34             (I) An amount equal to all amounts of income

 

 

09400HB2706sam001 - 50 - LRB094 03732 BDD 49710 a

1         distributable to an entity subject to the Personal
2         Property Tax Replacement Income Tax imposed by
3         subsections (c) and (d) of Section 201 of this Act
4         including amounts distributable to organizations
5         exempt from federal income tax by reason of Section
6         501(a) of the Internal Revenue Code;
7             (J) With the exception of any amounts subtracted
8         under subparagraph (G), an amount equal to the sum of
9         all amounts disallowed as deductions by (i) Sections
10         171(a) (2), and 265(2) of the Internal Revenue Code of
11         1954, as now or hereafter amended, and all amounts of
12         expenses allocable to interest and disallowed as
13         deductions by Section 265(1) of the Internal Revenue
14         Code, as now or hereafter amended; and (ii) for taxable
15         years ending on or after August 13, 1999, Sections
16         171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
17         Internal Revenue Code; the provisions of this
18         subparagraph are exempt from the provisions of Section
19         250;
20             (K) An amount equal to those dividends included in
21         such total which were paid by a corporation which
22         conducts business operations in an Enterprise Zone or
23         zones created under the Illinois Enterprise Zone Act,
24         enacted by the 82nd General Assembly, and conducts
25         substantially all of its operations in an Enterprise
26         Zone or Zones;
27             (L) An amount equal to any contribution made to a
28         job training project established pursuant to the Real
29         Property Tax Increment Allocation Redevelopment Act;
30             (M) 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

 

 

09400HB2706sam001 - 51 - LRB094 03732 BDD 49710 a

1         that dividends eligible for the deduction provided in
2         subparagraph (K) of paragraph (2) of this subsection
3         shall not be eligible for the deduction provided under
4         this subparagraph (M);
5             (N) An amount equal to the amount of the deduction
6         used to compute the federal income tax credit for
7         restoration of substantial amounts held under claim of
8         right for the taxable year pursuant to Section 1341 of
9         the Internal Revenue Code of 1986;
10             (O) For taxable years 2001 and thereafter, for the
11         taxable year in which the bonus depreciation deduction
12         (30% of the adjusted basis of the qualified property)
13         is taken on the taxpayer's federal income tax return
14         under subsection (k) of Section 168 of the Internal
15         Revenue Code and for each applicable taxable year
16         thereafter, an amount equal to "x", where:
17                 (1) "y" equals the amount of the depreciation
18             deduction taken for the taxable year on the
19             taxpayer's federal income tax return on property
20             for which the bonus depreciation deduction (30% of
21             the adjusted basis of the qualified property) was
22             taken in any year under subsection (k) of Section
23             168 of the Internal Revenue Code, but not including
24             the bonus depreciation deduction; and
25                 (2) for taxable years ending on or before
26             December 31, 2005, "x" equals "y" multiplied by 30
27             and then divided by 70 (or "y" multiplied by
28             0.429); and
29                 (3) for taxable years ending after December
30             31, 2005:
31                     (i) for property on which a bonus
32                 depreciation deduction of 30% of the adjusted
33                 basis was taken, "x" equals "y" multiplied by
34                 30 and then divided by 70 (or "y" multiplied by

 

 

09400HB2706sam001 - 52 - LRB094 03732 BDD 49710 a

1                 0.429); and
2                     (ii) for property on which a bonus
3                 depreciation deduction of 50% of the adjusted
4                 basis was taken, "x" equals "y" multiplied by
5                 1.0.
6             The aggregate amount deducted under this
7         subparagraph in all taxable years for any one piece of
8         property may not exceed the amount of the bonus
9         depreciation deduction (30% of the adjusted basis of
10         the qualified property) taken on that property on the
11         taxpayer's federal income tax return under subsection
12         (k) of Section 168 of the Internal Revenue Code. This
13         subparagraph (O) is exempt from the provisions of
14         Section 250;
15             (P) If the taxpayer sells, transfers, abandons, or
16         otherwise disposes of reports a capital gain or loss on
17         the taxpayer's federal income tax return for the
18         taxable year based on a sale or transfer of property
19         for which the taxpayer was required in any taxable year
20         to make an addition modification under subparagraph
21         (D-5), then an amount equal to that addition
22         modification.
23             The taxpayer is allowed to take the deduction under
24         this subparagraph only once with respect to any one
25         piece of property.
26             This subparagraph (P) is exempt from the
27         provisions of Section 250;
28             (Q) The amount of (i) any interest income (net of
29         the deductions allocable thereto) taken into account
30         for the taxable year with respect to a transaction with
31         a taxpayer that is required to make an addition
32         modification with respect to such transaction under
33         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
34         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed

 

 

09400HB2706sam001 - 53 - LRB094 03732 BDD 49710 a

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

 

 

09400HB2706sam001 - 54 - LRB094 03732 BDD 49710 a

1     (e) Gross income; adjusted gross income; taxable income.
2         (1) In general. Subject to the provisions of paragraph
3     (2) and subsection (b) (3), for purposes of this Section
4     and Section 803(e), a taxpayer's gross income, adjusted
5     gross income, or taxable income for the taxable year shall
6     mean the amount of gross income, adjusted gross income or
7     taxable income properly reportable for federal income tax
8     purposes for the taxable year under the provisions of the
9     Internal Revenue Code. Taxable income may be less than
10     zero. However, for taxable years ending on or after
11     December 31, 1986, net operating loss carryforwards from
12     taxable years ending prior to December 31, 1986, may not
13     exceed the sum of federal taxable income for the taxable
14     year before net operating loss deduction, plus the excess
15     of addition modifications over subtraction modifications
16     for the taxable year. For taxable years ending prior to
17     December 31, 1986, taxable income may never be an amount in
18     excess of the net operating loss for the taxable year as
19     defined in subsections (c) and (d) of Section 172 of the
20     Internal Revenue Code, provided that when taxable income of
21     a corporation (other than a Subchapter S corporation),
22     trust, or estate is less than zero and addition
23     modifications, other than those provided by subparagraph
24     (E) of paragraph (2) of subsection (b) for corporations or
25     subparagraph (E) of paragraph (2) of subsection (c) for
26     trusts and estates, exceed subtraction modifications, an
27     addition modification must be made under those
28     subparagraphs for any other taxable year to which the
29     taxable income less than zero (net operating loss) is
30     applied under Section 172 of the Internal Revenue Code or
31     under subparagraph (E) of paragraph (2) of this subsection
32     (e) applied in conjunction with Section 172 of the Internal
33     Revenue Code.

 

 

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1         (2) Special rule. For purposes of paragraph (1) of this
2     subsection, the taxable income properly reportable for
3     federal income tax purposes shall mean:
4             (A) Certain life insurance companies. In the case
5         of a life insurance company subject to the tax imposed
6         by Section 801 of the Internal Revenue Code, life
7         insurance company taxable income, plus the amount of
8         distribution from pre-1984 policyholder surplus
9         accounts as calculated under Section 815a of the
10         Internal Revenue Code;
11             (B) Certain other insurance companies. In the case
12         of mutual insurance companies subject to the tax
13         imposed by Section 831 of the Internal Revenue Code,
14         insurance company taxable income;
15             (C) Regulated investment companies. In the case of
16         a regulated investment company subject to the tax
17         imposed by Section 852 of the Internal Revenue Code,
18         investment company taxable income;
19             (D) Real estate investment trusts. In the case of a
20         real estate investment trust subject to the tax imposed
21         by Section 857 of the Internal Revenue Code, real
22         estate investment trust taxable income;
23             (E) Consolidated corporations. In the case of a
24         corporation which is a member of an affiliated group of
25         corporations filing a consolidated income tax return
26         for the taxable year for federal income tax purposes,
27         taxable income determined as if such corporation had
28         filed a separate return for federal income tax purposes
29         for the taxable year and each preceding taxable year
30         for which it was a member of an affiliated group. For
31         purposes of this subparagraph, the taxpayer's separate
32         taxable income shall be determined as if the election
33         provided by Section 243(b) (2) of the Internal Revenue
34         Code had been in effect for all such years;

 

 

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1             (F) Cooperatives. In the case of a cooperative
2         corporation or association, the taxable income of such
3         organization determined in accordance with the
4         provisions of Section 1381 through 1388 of the Internal
5         Revenue Code;
6             (G) Subchapter S corporations. In the case of: (i)
7         a Subchapter S corporation for which there is in effect
8         an election for the taxable year under Section 1362 of
9         the Internal Revenue Code, the taxable income of such
10         corporation determined in accordance with Section
11         1363(b) of the Internal Revenue Code, except that
12         taxable income shall take into account those items
13         which are required by Section 1363(b)(1) of the
14         Internal Revenue Code to be separately stated; and (ii)
15         a Subchapter S corporation for which there is in effect
16         a federal election to opt out of the provisions of the
17         Subchapter S Revision Act of 1982 and have applied
18         instead the prior federal Subchapter S rules as in
19         effect on July 1, 1982, the taxable income of such
20         corporation determined in accordance with the federal
21         Subchapter S rules as in effect on July 1, 1982; and
22             (H) Partnerships. In the case of a partnership,
23         taxable income determined in accordance with Section
24         703 of the Internal Revenue Code, except that taxable
25         income shall take into account those items which are
26         required by Section 703(a)(1) to be separately stated
27         but which would be taken into account by an individual
28         in calculating his taxable income.
29         (3) Recapture of business expenses on disposition of
30     asset or business. Notwithstanding any other law to the
31     contrary, if in prior years income from an asset or
32     business has been classified as business income and in a
33     later year is demonstrated to be non-business income, then
34     all expenses, without limitation, deducted in such later

 

 

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1     year and in the 2 immediately preceding taxable years
2     related to that asset or business that generated the
3     non-business income shall be added back and recaptured as
4     business income in the year of the disposition of the asset
5     or business. Such amount shall be apportioned to Illinois
6     using the greater of the apportionment fraction computed
7     for the business under Section 304 of this Act for the
8     taxable year or the average of the apportionment fractions
9     computed for the business under Section 304 of this Act for
10     the taxable year and for the 2 immediately preceding
11     taxable years.
12     (f) Valuation limitation amount.
13         (1) In general. The valuation limitation amount
14     referred to in subsections (a) (2) (G), (c) (2) (I) and
15     (d)(2) (E) is an amount equal to:
16             (A) The sum of the pre-August 1, 1969 appreciation
17         amounts (to the extent consisting of gain reportable
18         under the provisions of Section 1245 or 1250 of the
19         Internal Revenue Code) for all property in respect of
20         which such gain was reported for the taxable year; plus
21             (B) The lesser of (i) the sum of the pre-August 1,
22         1969 appreciation amounts (to the extent consisting of
23         capital gain) for all property in respect of which such
24         gain was reported for federal income tax purposes for
25         the taxable year, or (ii) the net capital gain for the
26         taxable year, reduced in either case by any amount of
27         such gain included in the amount determined under
28         subsection (a) (2) (F) or (c) (2) (H).
29         (2) Pre-August 1, 1969 appreciation amount.
30             (A) If the fair market value of property referred
31         to in paragraph (1) was readily ascertainable on August
32         1, 1969, the pre-August 1, 1969 appreciation amount for
33         such property is the lesser of (i) the excess of such
34         fair market value over the taxpayer's basis (for

 

 

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1         determining gain) for such property on that date
2         (determined under the Internal Revenue Code as in
3         effect on that date), or (ii) the total gain realized
4         and reportable for federal income tax purposes in
5         respect of the sale, exchange or other disposition of
6         such property.
7             (B) If the fair market value of property referred
8         to in paragraph (1) was not readily ascertainable on
9         August 1, 1969, the pre-August 1, 1969 appreciation
10         amount for such property is that amount which bears the
11         same ratio to the total gain reported in respect of the
12         property for federal income tax purposes for the
13         taxable year, as the number of full calendar months in
14         that part of the taxpayer's holding period for the
15         property ending July 31, 1969 bears to the number of
16         full calendar months in the taxpayer's entire holding
17         period for the property.
18             (C) The Department shall prescribe such
19         regulations as may be necessary to carry out the
20         purposes of this paragraph.
 
21     (g) Double deductions. Unless specifically provided
22 otherwise, nothing in this Section shall permit the same item
23 to be deducted more than once.
 
24     (h) Legislative intention. Except as expressly provided by
25 this Section there shall be no modifications or limitations on
26 the amounts of income, gain, loss or deduction taken into
27 account in determining gross income, adjusted gross income or
28 taxable income for federal income tax purposes for the taxable
29 year, or in the amount of such items entering into the
30 computation of base income and net income under this Act for
31 such taxable year, whether in respect of property values as of
32 August 1, 1969 or otherwise.

 

 

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1 (Source: P.A. 92-16, eff. 6-28-01; 92-244, eff. 8-3-01; 92-439,
2 eff. 8-17-01; 92-603, eff. 6-28-02; 92-626, eff. 7-11-02;
3 92-651, eff. 7-11-02; 92-846, eff. 8-23-02; 93-812, eff.
4 7-26-04; 93-840, eff. 7-30-04; revised 10-12-04.)".