95TH GENERAL ASSEMBLY
State of Illinois
2007 and 2008
SB0726

 

Introduced 2/8/2007, by Sen. Dale E. Risinger

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 5/203   from Ch. 120, par. 2-203

    Amends the Illinois Income Tax Act. Creates a tax deduction of up to $250 for the purchase of a device that reads prescription labels with audible capability and a deduction of up to $1,000 for the purchase of a device that creates prescription labels with audible capability. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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1     AN ACT concerning revenue.
 
2     Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
 
4     Section 5. The Illinois Income Tax Act is amended by
5 changing Section 203 as follows:
 
6     (35 ILCS 5/203)  (from Ch. 120, par. 2-203)
7     Sec. 203. Base income defined.
8     (a) Individuals.
9         (1) In general. In the case of an individual, base
10     income means an amount equal to the taxpayer's adjusted
11     gross income for the taxable year as modified by paragraph
12     (2).
13         (2) Modifications. The adjusted gross income referred
14     to in paragraph (1) shall be modified by adding thereto the
15     sum of the following amounts:
16             (A) An amount equal to all amounts paid or accrued
17         to the taxpayer as interest or dividends during the
18         taxable year to the extent excluded from gross income
19         in the computation of adjusted gross income, except
20         stock dividends of qualified public utilities
21         described in Section 305(e) of the Internal Revenue
22         Code;
23             (B) An amount equal to the amount of tax imposed by

 

 

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

 

 

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1         20 of the Medical Care Savings Account Act of 2000;
2             (D-10) For taxable years ending after December 31,
3         1997, an amount equal to any eligible remediation costs
4         that the individual deducted in computing adjusted
5         gross income and for which the individual claims a
6         credit under subsection (l) of Section 201;
7             (D-15) For taxable years 2001 and thereafter, an
8         amount equal to the bonus depreciation deduction taken
9         on the taxpayer's federal income tax return for the
10         taxable year under subsection (k) of Section 168 of the
11         Internal Revenue Code;
12             (D-16) If the taxpayer sells, transfers, abandons,
13         or otherwise disposes of property for which the
14         taxpayer was required in any taxable year to make an
15         addition modification under subparagraph (D-15), then
16         an amount equal to the aggregate amount of the
17         deductions taken in all taxable years under
18         subparagraph (Z) with respect to that property.
19             If the taxpayer continues to own property through
20         the last day of the last tax year for which the
21         taxpayer may claim a depreciation deduction for
22         federal income tax purposes and for which the taxpayer
23         was allowed in any taxable year to make a subtraction
24         modification under subparagraph (Z), then an amount
25         equal to that subtraction modification.
26             The taxpayer is required to make the addition

 

 

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1         modification under this subparagraph only once with
2         respect to any one piece of property;
3             (D-17) For taxable years ending on or after
4         December 31, 2004, an amount equal to the amount
5         otherwise allowed as a deduction in computing base
6         income for interest paid, accrued, or incurred,
7         directly or indirectly, to a foreign person who would
8         be a member of the same unitary business group but for
9         the fact that foreign person's business activity
10         outside the United States is 80% or more of the foreign
11         person's total business activity. The addition
12         modification required by this subparagraph shall be
13         reduced to the extent that dividends were included in
14         base income of the unitary group for the same taxable
15         year and received by the taxpayer or by a member of the
16         taxpayer's unitary business group (including amounts
17         included in gross income under Sections 951 through 964
18         of the Internal Revenue Code and amounts included in
19         gross income under Section 78 of the Internal Revenue
20         Code) with respect to the stock of the same person to
21         whom 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

 

 

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1             unitary reporting, to a tax on or measured by net
2             income with respect to such interest; or
3                 (ii) an item of interest paid, accrued, or
4             incurred, directly or indirectly, to a foreign
5             person if the taxpayer can establish, based on a
6             preponderance of the evidence, both of the
7             following:
8                     (a) the foreign person, during the same
9                 taxable year, paid, accrued, or incurred, the
10                 interest to a person that is not a related
11                 member, and
12                     (b) the transaction giving rise to the
13                 interest expense between the taxpayer and the
14                 foreign person did not have as a principal
15                 purpose the avoidance of Illinois income tax,
16                 and is paid pursuant to a contract or agreement
17                 that reflects an arm's-length interest rate
18                 and terms; or
19                 (iii) the taxpayer can establish, based on
20             clear and convincing evidence, that the interest
21             paid, accrued, or incurred relates to a contract or
22             agreement entered into at arm's-length rates and
23             terms and the principal purpose for the payment is
24             not federal or Illinois tax avoidance; or
25                 (iv) an item of interest paid, accrued, or
26             incurred, directly or indirectly, to a foreign

 

 

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1             person if the taxpayer establishes by clear and
2             convincing evidence that the adjustments are
3             unreasonable; or if the taxpayer and the Director
4             agree in writing to the application or use of an
5             alternative method of apportionment under Section
6             304(f).
7                 Nothing in this subsection shall preclude the
8             Director from making any other adjustment
9             otherwise allowed under Section 404 of this Act for
10             any tax year beginning after the effective date of
11             this amendment provided such adjustment is made
12             pursuant to regulation adopted by the Department
13             and such regulations provide methods and standards
14             by which the Department will utilize its authority
15             under Section 404 of this Act;
16             (D-18) For taxable years ending on or after
17         December 31, 2004, an amount equal to the amount of
18         intangible expenses and costs otherwise allowed as a
19         deduction in computing base income, and that were paid,
20         accrued, or incurred, directly or indirectly, to a
21         foreign person who would be a member of the same
22         unitary business group but for the fact that the
23         foreign person's business activity outside the United
24         States is 80% or more of that person's total business
25         activity. The addition modification required by this
26         subparagraph shall be reduced to the extent that

 

 

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

 

 

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1         assets.
2             This paragraph shall not apply to the following:
3                 (i) any item of intangible expenses or costs
4             paid, accrued, or incurred, directly or
5             indirectly, from a transaction with a foreign
6             person who is subject in a foreign country or
7             state, other than a state which requires mandatory
8             unitary reporting, to a tax on or measured by net
9             income with respect to such item; or
10                 (ii) any item of intangible expense or cost
11             paid, accrued, or incurred, directly or
12             indirectly, if the taxpayer can establish, based
13             on a preponderance of the evidence, both of the
14             following:
15                     (a) the foreign person during the same
16                 taxable year paid, accrued, or incurred, the
17                 intangible expense or cost to a person that is
18                 not a related member, and
19                     (b) the transaction giving rise to the
20                 intangible expense or cost between the
21                 taxpayer and the foreign person did not have as
22                 a principal purpose the avoidance of Illinois
23                 income tax, and is paid pursuant to a contract
24                 or agreement that reflects arm's-length terms;
25                 or
26                 (iii) any item of intangible expense or cost

 

 

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

 

 

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1     and by deducting from the total so obtained the sum of the
2     following amounts:
3             (E) For taxable years ending before December 31,
4         2001, any amount included in such total in respect of
5         any compensation (including but not limited to any
6         compensation paid or accrued to a serviceman while a
7         prisoner of war or missing in action) paid to a
8         resident by reason of being on active duty in the Armed
9         Forces of the United States and in respect of any
10         compensation paid or accrued to a resident who as a
11         governmental employee was a prisoner of war or missing
12         in action, and in respect of any compensation paid to a
13         resident in 1971 or thereafter for annual training
14         performed pursuant to Sections 502 and 503, Title 32,
15         United States Code as a member of the Illinois National
16         Guard. For taxable years ending on or after December
17         31, 2001, any amount included in such total in respect
18         of any compensation (including but not limited to any
19         compensation paid or accrued to a serviceman while a
20         prisoner of war or missing in action) paid to a
21         resident by reason of being a member of any component
22         of the Armed Forces of the United States and in respect
23         of any compensation paid or accrued to a resident who
24         as a governmental employee was a prisoner of war or
25         missing in action, and in respect of any compensation
26         paid to a resident in 2001 or thereafter by reason of

 

 

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

 

 

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1         zones created under the Illinois Enterprise Zone Act or
2         a River Edge Redevelopment Zone or zones created under
3         the River Edge Redevelopment Zone Act, and conducts
4         substantially all of its operations in an Enterprise
5         Zone or zones or a River Edge Redevelopment Zone or
6         zones. This subparagraph (J) is exempt from the
7         provisions of Section 250;
8             (K) An amount equal to those dividends included in
9         such total that were paid by a corporation that
10         conducts business operations in a federally designated
11         Foreign Trade Zone or Sub-Zone and that is designated a
12         High Impact Business located in Illinois; provided
13         that dividends eligible for the deduction provided in
14         subparagraph (J) of paragraph (2) of this subsection
15         shall not be eligible for the deduction provided under
16         this subparagraph (K);
17             (L) For taxable years ending after December 31,
18         1983, an amount equal to all social security benefits
19         and railroad retirement benefits included in such
20         total pursuant to Sections 72(r) and 86 of the Internal
21         Revenue Code;
22             (M) With the exception of any amounts subtracted
23         under subparagraph (N), an amount equal to the sum of
24         all amounts disallowed as deductions by (i) Sections
25         171(a) (2), and 265(2) of the Internal Revenue Code of
26         1954, as now or hereafter amended, and all amounts of

 

 

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1         expenses allocable to interest and disallowed as
2         deductions by Section 265(1) of the Internal Revenue
3         Code of 1954, as now or hereafter amended; and (ii) for
4         taxable years ending on or after August 13, 1999,
5         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
6         the Internal Revenue Code; the provisions of this
7         subparagraph are exempt from the provisions of Section
8         250;
9             (N) An amount equal to all amounts included in such
10         total which are exempt from taxation by this State
11         either by reason of its statutes or Constitution or by
12         reason of the Constitution, treaties or statutes of the
13         United States; provided that, in the case of any
14         statute of this State that exempts income derived from
15         bonds or other obligations from the tax imposed under
16         this Act, the amount exempted shall be the interest net
17         of bond premium amortization;
18             (O) An amount equal to any contribution made to a
19         job training project established pursuant to the Tax
20         Increment Allocation Redevelopment Act;
21             (P) 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             (Q) An amount equal to any amounts included in such

 

 

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1         total, received by the taxpayer as an acceleration in
2         the payment of life, endowment or annuity benefits in
3         advance of the time they would otherwise be payable as
4         an indemnity for a terminal illness;
5             (R) An amount equal to the amount of any federal or
6         State bonus paid to veterans of the Persian Gulf War;
7             (S) An amount, to the extent included in adjusted
8         gross income, equal to the amount of a contribution
9         made in the taxable year on behalf of the taxpayer to a
10         medical care savings account established under the
11         Medical Care Savings Account Act or the Medical Care
12         Savings Account Act of 2000 to the extent the
13         contribution is accepted by the account administrator
14         as provided in that Act;
15             (T) An amount, to the extent included in adjusted
16         gross income, equal to the amount of interest earned in
17         the taxable year on a medical care savings account
18         established under the Medical Care Savings Account Act
19         or the Medical Care Savings Account Act of 2000 on
20         behalf of the taxpayer, other than interest added
21         pursuant to item (D-5) of this paragraph (2);
22             (U) For one taxable year beginning on or after
23         January 1, 1994, an amount equal to the total amount of
24         tax imposed and paid under subsections (a) and (b) of
25         Section 201 of this Act on grant amounts received by
26         the taxpayer under the Nursing Home Grant Assistance

 

 

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1         Act during the taxpayer's taxable years 1992 and 1993;
2             (V) Beginning with tax years ending on or after
3         December 31, 1995 and ending with tax years ending on
4         or before December 31, 2004, an amount equal to the
5         amount paid by a taxpayer who is a self-employed
6         taxpayer, a partner of a partnership, or a shareholder
7         in a Subchapter S corporation for health insurance or
8         long-term care insurance for that taxpayer or that
9         taxpayer's spouse or dependents, to the extent that the
10         amount paid for that health insurance or long-term care
11         insurance may be deducted under Section 213 of the
12         Internal Revenue Code of 1986, has not been deducted on
13         the federal income tax return of the taxpayer, and does
14         not exceed the taxable income attributable to that
15         taxpayer's income, self-employment income, or
16         Subchapter S corporation income; except that no
17         deduction shall be allowed under this item (V) if the
18         taxpayer is eligible to participate in any health
19         insurance or long-term care insurance plan of an
20         employer of the taxpayer or the taxpayer's spouse. The
21         amount of the health insurance and long-term care
22         insurance subtracted under this item (V) shall be
23         determined by multiplying total health insurance and
24         long-term care insurance premiums paid by the taxpayer
25         times a number that represents the fractional
26         percentage of eligible medical expenses under Section

 

 

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

 

 

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

 

 

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1         Tuition Trust Fund, except that amounts excluded from
2         gross income under Section 529(c)(3)(C)(i) of the
3         Internal Revenue Code shall not be considered moneys
4         contributed under this subparagraph (Y). This
5         subparagraph (Y) is exempt from the provisions of
6         Section 250;
7             (Z) For taxable years 2001 and thereafter, for the
8         taxable year in which the bonus depreciation deduction
9         is taken on the taxpayer's federal income tax return
10         under subsection (k) of Section 168 of the Internal
11         Revenue Code and for each applicable taxable year
12         thereafter, an amount equal to "x", where:
13                 (1) "y" equals the amount of the depreciation
14             deduction taken for the taxable year on the
15             taxpayer's federal income tax return on property
16             for which the bonus depreciation deduction was
17             taken in any year under subsection (k) of Section
18             168 of the Internal Revenue Code, but not including
19             the bonus depreciation deduction;
20                 (2) for taxable years ending on or before
21             December 31, 2005, "x" equals "y" multiplied by 30
22             and then divided by 70 (or "y" multiplied by
23             0.429); and
24                 (3) for taxable years ending after December
25             31, 2005:
26                     (i) for property on which a bonus

 

 

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1                 depreciation deduction of 30% of the adjusted
2                 basis was taken, "x" equals "y" multiplied by
3                 30 and then divided by 70 (or "y" multiplied by
4                 0.429); and
5                     (ii) for property on which a bonus
6                 depreciation deduction of 50% of the adjusted
7                 basis was taken, "x" equals "y" multiplied by
8                 1.0.
9             The aggregate amount deducted under this
10         subparagraph in all taxable years for any one piece of
11         property may not exceed the amount of the bonus
12         depreciation deduction 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 (Z) is exempt from the provisions of
16         Section 250;
17             (AA) If the taxpayer sells, transfers, abandons,
18         or otherwise disposes of property for which the
19         taxpayer was required in any taxable year to make an
20         addition modification under subparagraph (D-15), then
21         an amount equal to that addition modification.
22             If the taxpayer continues to own property through
23         the last day of the last tax year for which the
24         taxpayer may claim a depreciation deduction for
25         federal income tax purposes and for which the taxpayer
26         was required in any taxable year to make an addition

 

 

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1         modification under subparagraph (D-15), then an amount
2         equal to that addition modification.
3             The taxpayer is allowed to take the deduction under
4         this subparagraph only once with respect to any one
5         piece of property.
6             This subparagraph (AA) is exempt from the
7         provisions of Section 250;
8             (BB) Any amount included in adjusted gross income,
9         other than salary, received by a driver in a
10         ridesharing arrangement using a motor vehicle;
11             (CC) The amount of (i) any interest income (net of
12         the deductions allocable thereto) taken into account
13         for the taxable year with respect to a transaction with
14         a taxpayer that is required to make an addition
15         modification with respect to such transaction under
16         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
17         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
18         the amount of that addition modification, and (ii) any
19         income from intangible property (net of the deductions
20         allocable thereto) taken into account for the taxable
21         year with respect to a transaction with a taxpayer that
22         is required to make an addition modification with
23         respect to such transaction under Section
24         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
25         203(d)(2)(D-8), but not to exceed the amount of that
26         addition modification;

 

 

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1             (DD) An amount equal to the interest income taken
2         into account for the taxable year (net of the
3         deductions allocable thereto) with respect to
4         transactions with a foreign person who would be a
5         member of the taxpayer's unitary business group but for
6         the fact that the foreign person's business activity
7         outside the United States is 80% or more of that
8         person's total business activity, but not to exceed the
9         addition modification required to be made for the same
10         taxable year under Section 203(a)(2)(D-17) for
11         interest paid, accrued, or incurred, directly or
12         indirectly, to the same foreign person; and
13             (EE) An amount equal to the income from intangible
14         property taken into account for the taxable year (net
15         of the deductions allocable thereto) with respect to
16         transactions with a foreign person who would be a
17         member of the taxpayer's unitary business group but for
18         the fact that the foreign person's business activity
19         outside the United States is 80% or more of that
20         person's total business activity, but not to exceed the
21         addition modification required to be made for the same
22         taxable year under Section 203(a)(2)(D-18) for
23         intangible expenses and costs paid, accrued, or
24         incurred, directly or indirectly, to the same foreign
25         person;
26             (FF) For taxable years ending on or after December

 

 

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1         31, 2007 and on or before December 30, 2012, an amount,
2         to the extent not deducted from the taxpayer's federal
3         in adjusted gross income and not to exceed $250, equal
4         to the expenses incurred for purchasing a device that
5         reads a prescription label with audible capability;
6         and
7             (GG) For taxable years ending on or after December
8         31, 2007 and on or before December 30, 2012, an amount,
9         to the extent not deducted from the taxpayer's federal
10         in adjusted gross income and not to exceed $1,000,
11         equal to the expenses incurred for purchasing a device
12         that creates a prescription label with audible
13         capability.
 
14     (b) Corporations.
15         (1) In general. In the case of a corporation, base
16     income means an amount equal to the taxpayer's taxable
17     income for the taxable year as modified by paragraph (2).
18         (2) Modifications. The taxable income referred to in
19     paragraph (1) shall be modified by adding thereto the sum
20     of the following amounts:
21             (A) An amount equal to all amounts paid or accrued
22         to the taxpayer as interest and all distributions
23         received from regulated investment companies during
24         the taxable year to the extent excluded from gross
25         income in the computation of taxable income;

 

 

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

 

 

SB0726 - 24 - LRB095 10872 BDD 31152 b

1         order that they are listed:
2                 (i) the addition modification relating to the
3             net operating loss carried back or forward to the
4             taxable year from any taxable year ending prior to
5             December 31, 1986 shall be reduced by the amount of
6             addition modification under this subparagraph (E)
7             which related to that net operating loss and which
8             was taken into account in calculating the base
9             income of an earlier taxable year, and
10                 (ii) the addition modification relating to the
11             net operating loss carried back or forward to the
12             taxable year from any taxable year ending prior to
13             December 31, 1986 shall not exceed the amount of
14             such carryback or carryforward;
15             For taxable years in which there is a net operating
16         loss carryback or carryforward from more than one other
17         taxable year ending prior to December 31, 1986, the
18         addition modification provided in this subparagraph
19         (E) shall be the sum of the amounts computed
20         independently under the preceding provisions of this
21         subparagraph (E) for each such taxable year;
22             (E-5) For taxable years ending after December 31,
23         1997, an amount equal to any eligible remediation costs
24         that the corporation deducted in computing adjusted
25         gross income and for which the corporation claims a
26         credit under subsection (l) of Section 201;

 

 

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1             (E-10) For taxable years 2001 and thereafter, an
2         amount equal to the bonus depreciation deduction taken
3         on the taxpayer's federal income tax return for the
4         taxable year under subsection (k) of Section 168 of the
5         Internal Revenue Code; and
6             (E-11) If the taxpayer sells, transfers, abandons,
7         or otherwise disposes of property for which the
8         taxpayer was required in any taxable year to make an
9         addition modification under subparagraph (E-10), then
10         an amount equal to the aggregate amount of the
11         deductions taken in all taxable years under
12         subparagraph (T) with respect to that property.
13             If the taxpayer continues to own property through
14         the last day of the last tax year for which the
15         taxpayer may claim a depreciation deduction for
16         federal income tax purposes and for which the taxpayer
17         was allowed in any taxable year to make a subtraction
18         modification under subparagraph (T), then an amount
19         equal to that subtraction modification.
20             The taxpayer is required to make the addition
21         modification under this subparagraph only once with
22         respect to any one piece of property;
23             (E-12) For taxable years ending on or after
24         December 31, 2004, an amount equal to the amount
25         otherwise allowed as a deduction in computing base
26         income for interest paid, accrued, or incurred,

 

 

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

 

 

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1             preponderance of the evidence, both of the
2             following:
3                     (a) the foreign person, during the same
4                 taxable year, paid, accrued, or incurred, the
5                 interest to a person that is not a related
6                 member, and
7                     (b) the transaction giving rise to the
8                 interest expense between the taxpayer and the
9                 foreign person did not have as a principal
10                 purpose the avoidance of Illinois income tax,
11                 and is paid pursuant to a contract or agreement
12                 that reflects an arm's-length interest rate
13                 and terms; or
14                 (iii) the taxpayer can establish, based on
15             clear and convincing evidence, that the interest
16             paid, accrued, or incurred relates to a contract or
17             agreement entered into at arm's-length rates and
18             terms and the principal purpose for the payment is
19             not federal or Illinois tax avoidance; or
20                 (iv) an item of interest paid, accrued, or
21             incurred, directly or indirectly, to a foreign
22             person if the taxpayer establishes by clear and
23             convincing evidence that the adjustments are
24             unreasonable; or if the taxpayer and the Director
25             agree in writing to the application or use of an
26             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             (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

 

 

SB0726 - 29 - LRB095 10872 BDD 31152 b

1         Internal Revenue Code and amounts included in gross
2         income under Section 78 of the Internal Revenue Code)
3         with respect to the stock of the same person to whom
4         the intangible expenses and costs were directly or
5         indirectly paid, incurred, or accrued. The preceding
6         sentence shall not apply to the extent that the same
7         dividends caused a reduction to the addition
8         modification required under Section 203(b)(2)(E-12) of
9         this Act. As used in this subparagraph, the term
10         "intangible expenses and costs" includes (1) expenses,
11         losses, and costs for, or related to, the direct or
12         indirect acquisition, use, maintenance or management,
13         ownership, sale, exchange, or any other disposition of
14         intangible property; (2) losses incurred, directly or
15         indirectly, from factoring transactions or discounting
16         transactions; (3) royalty, patent, technical, and
17         copyright fees; (4) licensing fees; and (5) other
18         similar expenses and costs. For purposes of this
19         subparagraph, "intangible property" includes patents,
20         patent applications, trade names, trademarks, service
21         marks, copyrights, mask works, trade secrets, and
22         similar types of intangible assets.
23             This paragraph shall not apply to the following:
24                 (i) any item of intangible expenses or costs
25             paid, accrued, or incurred, directly or
26             indirectly, from a transaction with a foreign

 

 

SB0726 - 30 - LRB095 10872 BDD 31152 b

1             person who is subject in a foreign country or
2             state, other than a state which requires mandatory
3             unitary reporting, to a tax on or measured by net
4             income with respect to such item; or
5                 (ii) any item of intangible expense or cost
6             paid, accrued, or incurred, directly or
7             indirectly, if the taxpayer can establish, based
8             on a preponderance of the evidence, both of the
9             following:
10                     (a) the foreign person during the same
11                 taxable year paid, accrued, or incurred, the
12                 intangible expense or cost to a person that is
13                 not a related member, and
14                     (b) the transaction giving rise to the
15                 intangible expense or cost between the
16                 taxpayer and the foreign person did not have as
17                 a principal purpose the avoidance of Illinois
18                 income tax, and is paid pursuant to a contract
19                 or agreement that reflects arm's-length terms;
20                 or
21                 (iii) any item of intangible expense or cost
22             paid, accrued, or incurred, directly or
23             indirectly, from a transaction with a foreign
24             person if the taxpayer establishes by clear and
25             convincing evidence, that the adjustments are
26             unreasonable; or if the taxpayer and the Director

 

 

SB0726 - 31 - LRB095 10872 BDD 31152 b

1             agree in writing to the application or use of an
2             alternative method of apportionment under Section
3             304(f);
4                 Nothing in this subsection shall preclude the
5             Director from making any other adjustment
6             otherwise allowed under Section 404 of this Act for
7             any tax year beginning after the effective date of
8             this amendment provided such adjustment is made
9             pursuant to regulation adopted by the Department
10             and such regulations provide methods and standards
11             by which the Department will utilize its authority
12             under Section 404 of this Act;
13     and by deducting from the total so obtained the sum of the
14     following amounts:
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 any amount included in such
19         total under Section 78 of the Internal Revenue Code;
20             (H) In the case of a regulated investment company,
21         an amount equal to the amount of exempt interest
22         dividends as defined in subsection (b) (5) of Section
23         852 of the Internal Revenue Code, paid to shareholders
24         for the taxable year;
25             (I) With the exception of any amounts subtracted
26         under subparagraph (J), an amount equal to the sum of

 

 

SB0726 - 32 - LRB095 10872 BDD 31152 b

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

 

 

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1         the River Edge Redevelopment Zone Act and conducts
2         substantially all of its operations in an Enterprise
3         Zone or zones or a River Edge Redevelopment Zone or
4         zones. This subparagraph (K) is exempt from the
5         provisions of Section 250;
6             (L) An amount equal to those dividends included in
7         such total that were paid by a corporation that
8         conducts business operations in a federally designated
9         Foreign Trade Zone or Sub-Zone and that is designated a
10         High Impact Business located in Illinois; provided
11         that dividends eligible for the deduction provided in
12         subparagraph (K) of paragraph 2 of this subsection
13         shall not be eligible for the deduction provided under
14         this subparagraph (L);
15             (M) For any taxpayer that is a financial
16         organization within the meaning of Section 304(c) of
17         this Act, an amount included in such total as interest
18         income from a loan or loans made by such taxpayer to a
19         borrower, to the extent that such a loan is secured by
20         property which is eligible for the Enterprise Zone
21         Investment Credit or the River Edge Redevelopment Zone
22         Investment Credit. To determine the portion of a loan
23         or loans that is secured by property eligible for a
24         Section 201(f) investment credit to the borrower, the
25         entire principal amount of the loan or loans between
26         the taxpayer and the borrower should be divided into

 

 

SB0726 - 34 - LRB095 10872 BDD 31152 b

1         the basis of the Section 201(f) investment credit
2         property which secures the loan or loans, using for
3         this purpose the original basis of such property on the
4         date that it was placed in service in the Enterprise
5         Zone or the River Edge Redevelopment Zone. The
6         subtraction modification available to taxpayer in any
7         year under this subsection shall be that portion of the
8         total interest paid by the borrower with respect to
9         such loan attributable to the eligible property as
10         calculated under the previous sentence. This
11         subparagraph (M) is exempt from the provisions of
12         Section 250;
13             (M-1) For any taxpayer that is a financial
14         organization within the meaning of Section 304(c) of
15         this Act, an amount included in such total as interest
16         income from a loan or loans made by such taxpayer to a
17         borrower, to the extent that such a loan is secured by
18         property which is eligible for the High Impact Business
19         Investment Credit. To determine the portion of a loan
20         or loans that is secured by property eligible for a
21         Section 201(h) investment credit to the borrower, the
22         entire principal amount of the loan or loans between
23         the taxpayer and the borrower should be divided into
24         the basis of the Section 201(h) investment credit
25         property which secures the loan or loans, using for
26         this purpose the original basis of such property on the

 

 

SB0726 - 35 - LRB095 10872 BDD 31152 b

1         date that it was placed in service in a federally
2         designated Foreign Trade Zone or Sub-Zone located in
3         Illinois. No taxpayer that is eligible for the
4         deduction provided in subparagraph (M) of paragraph
5         (2) of this subsection shall be eligible for the
6         deduction provided under this subparagraph (M-1). The
7         subtraction modification available to taxpayers in any
8         year under this subsection shall be that portion of the
9         total interest paid by the borrower with respect to
10         such loan attributable to the eligible property as
11         calculated under the previous sentence;
12             (N) Two times any contribution made during the
13         taxable year to a designated zone organization to the
14         extent that the contribution (i) qualifies as a
15         charitable contribution under subsection (c) of
16         Section 170 of the Internal Revenue Code and (ii) must,
17         by its terms, be used for a project approved by the
18         Department of Commerce and Economic Opportunity under
19         Section 11 of the Illinois Enterprise Zone Act or under
20         Section 10-10 of the Illinois River Edge Redevelopment
21         Zone Act. This subparagraph (N) is exempt from the
22         provisions of Section 250;
23             (O) An amount equal to: (i) 85% for taxable years
24         ending on or before December 31, 1992, or, a percentage
25         equal to the percentage allowable under Section
26         243(a)(1) of the Internal Revenue Code of 1986 for

 

 

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1         taxable years ending after December 31, 1992, of the
2         amount by which dividends included in taxable income
3         and received from a corporation that is not created or
4         organized under the laws of the United States or any
5         state or political subdivision thereof, including, for
6         taxable years ending on or after December 31, 1988,
7         dividends received or deemed received or paid or deemed
8         paid under Sections 951 through 964 of the Internal
9         Revenue Code, exceed the amount of the modification
10         provided under subparagraph (G) of paragraph (2) of
11         this subsection (b) which is related to such dividends;
12         plus (ii) 100% of the amount by which dividends,
13         included in taxable income and received, including,
14         for taxable years ending on or after December 31, 1988,
15         dividends received or deemed received or paid or deemed
16         paid under Sections 951 through 964 of the Internal
17         Revenue Code, from any such corporation specified in
18         clause (i) that would but for the provisions of Section
19         1504 (b) (3) of the Internal Revenue Code be treated as
20         a member of the affiliated group which includes the
21         dividend recipient, exceed the amount of the
22         modification provided under subparagraph (G) of
23         paragraph (2) of this subsection (b) which is related
24         to such dividends;
25             (P) An amount equal to any contribution made to a
26         job training project established pursuant to the Tax

 

 

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1         Increment Allocation Redevelopment Act;
2             (Q) An amount equal to the amount of the deduction
3         used to compute the federal income tax credit for
4         restoration of substantial amounts held under claim of
5         right for the taxable year pursuant to Section 1341 of
6         the Internal Revenue Code of 1986;
7             (R) On and after July 20, 1999, in the case of an
8         attorney-in-fact with respect to whom an interinsurer
9         or a reciprocal insurer has made the election under
10         Section 835 of the Internal Revenue Code, 26 U.S.C.
11         835, an amount equal to the excess, if any, of the
12         amounts paid or incurred by that interinsurer or
13         reciprocal insurer in the taxable year to the
14         attorney-in-fact over the deduction allowed to that
15         interinsurer or reciprocal insurer with respect to the
16         attorney-in-fact under Section 835(b) of the Internal
17         Revenue Code for the taxable year; the provisions of
18         this subparagraph are exempt from the provisions of
19         Section 250;
20             (S) For taxable years ending on or after December
21         31, 1997, in the case of a Subchapter S corporation, an
22         amount equal to all amounts of income allocable to a
23         shareholder subject to the Personal Property Tax
24         Replacement Income Tax imposed by subsections (c) and
25         (d) of Section 201 of this Act, including amounts
26         allocable to organizations exempt from federal income

 

 

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1         tax by reason of Section 501(a) of the Internal Revenue
2         Code. This subparagraph (S) is exempt from the
3         provisions of Section 250;
4             (T) For taxable years 2001 and thereafter, for the
5         taxable year in which the bonus depreciation deduction
6         is taken on the taxpayer's federal income tax return
7         under subsection (k) of Section 168 of the Internal
8         Revenue Code and for each applicable taxable year
9         thereafter, an amount equal to "x", where:
10                 (1) "y" equals the amount of the depreciation
11             deduction taken for the taxable year on the
12             taxpayer's federal income tax return on property
13             for which the bonus depreciation deduction was
14             taken in any year under subsection (k) of Section
15             168 of the Internal Revenue Code, but not including
16             the bonus depreciation deduction;
17                 (2) for taxable years ending on or before
18             December 31, 2005, "x" equals "y" multiplied by 30
19             and then divided by 70 (or "y" multiplied by
20             0.429); and
21                 (3) for taxable years ending after December
22             31, 2005:
23                     (i) for property on which a bonus
24                 depreciation deduction of 30% of the adjusted
25                 basis was taken, "x" equals "y" multiplied by
26                 30 and then divided by 70 (or "y" multiplied by

 

 

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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 taken on that property on the
10         taxpayer's federal income tax return under subsection
11         (k) of Section 168 of the Internal Revenue Code. This
12         subparagraph (T) is exempt from the provisions of
13         Section 250;
14             (U) If the taxpayer sells, transfers, abandons, or
15         otherwise disposes of property for which the taxpayer
16         was required in any taxable year to make an addition
17         modification under subparagraph (E-10), then an amount
18         equal to that addition modification.
19             If the taxpayer continues to own property through
20         the last day of the last tax year for which the
21         taxpayer may claim a depreciation deduction for
22         federal income tax purposes and for which the taxpayer
23         was required in any taxable year to make an addition
24         modification under subparagraph (E-10), then an amount
25         equal to that addition modification.
26             The taxpayer is allowed to take the deduction under

 

 

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1         this subparagraph only once with respect to any one
2         piece of property.
3             This subparagraph (U) is exempt from the
4         provisions of Section 250;
5             (V) The amount of: (i) any interest income (net of
6         the deductions allocable thereto) taken into account
7         for the taxable year with respect to a transaction with
8         a taxpayer that is required to make an addition
9         modification with respect to such transaction under
10         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
11         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
12         the amount of such addition modification and (ii) any
13         income from intangible property (net of the deductions
14         allocable thereto) taken into account for the taxable
15         year with respect to a transaction with a taxpayer that
16         is required to make an addition modification with
17         respect to such transaction under Section
18         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
19         203(d)(2)(D-8), but not to exceed the amount of such
20         addition modification;
21             (W) An amount equal to the interest income taken
22         into account for the taxable year (net of the
23         deductions allocable thereto) with respect to
24         transactions with a foreign person who would be a
25         member of the taxpayer's unitary business group but for
26         the fact that the foreign person's business activity

 

 

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1         outside the United States is 80% or more of that
2         person's total business activity, but not to exceed the
3         addition modification required to be made for the same
4         taxable year under Section 203(b)(2)(E-12) for
5         interest paid, accrued, or incurred, directly or
6         indirectly, to the same foreign person; and
7             (X) An amount equal to the income from intangible
8         property taken into account for the taxable year (net
9         of the 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(b)(2)(E-13) for
17         intangible expenses and costs paid, accrued, or
18         incurred, directly or indirectly, to the same foreign
19         person; .
20             (Y) For taxable years ending on or after December
21         31, 2007 and on or before December 30, 2012, an amount,
22         to the extent not deducted from the taxpayer's federal
23         in adjusted gross income and not to exceed $250, equal
24         to the expenses incurred for purchasing a device that
25         reads a prescription label with audible capability;
26         and

 

 

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1             (Z) For taxable years ending on or after December
2         31, 2007 and on or before December 30, 2012, an amount,
3         to the extent not deducted from the taxpayer's federal
4         in adjusted gross income and not to exceed $1,000,
5         equal to the expenses incurred for purchasing a device
6         that creates a prescription label with audible
7         capability.
8         (3) Special rule. For purposes of paragraph (2) (A),
9     "gross income" in the case of a life insurance company, for
10     tax years ending on and after December 31, 1994, shall mean
11     the gross investment income for the taxable year.
 
12     (c) Trusts and estates.
13         (1) In general. In the case of a trust or estate, base
14     income means an amount equal to the taxpayer's taxable
15     income for the taxable year as modified by paragraph (2).
16         (2) Modifications. Subject to the provisions of
17     paragraph (3), the taxable income referred to in paragraph
18     (1) shall be modified by adding thereto the sum of the
19     following amounts:
20             (A) An amount equal to all amounts paid or accrued
21         to the taxpayer as interest or dividends during the
22         taxable year to the extent excluded from gross income
23         in the computation of taxable income;
24             (B) In the case of (i) an estate, $600; (ii) a
25         trust which, under its governing instrument, is

 

 

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

 

 

SB0726 - 44 - LRB095 10872 BDD 31152 b

1             which related to that net operating loss and which
2             was taken into account in calculating the base
3             income of an earlier taxable year, and
4                 (ii) 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 not exceed the amount of
8             such carryback or carryforward;
9             For taxable years in which there is a net operating
10         loss carryback or carryforward from more than one other
11         taxable year ending prior to December 31, 1986, the
12         addition modification provided in this subparagraph
13         (E) shall be the sum of the amounts computed
14         independently under the preceding provisions of this
15         subparagraph (E) for each such taxable year;
16             (F) For taxable years ending on or after January 1,
17         1989, an amount equal to the tax deducted pursuant to
18         Section 164 of the Internal Revenue Code if the trust
19         or estate is claiming the same tax for purposes of the
20         Illinois foreign tax credit under Section 601 of this
21         Act;
22             (G) An amount equal to the amount of the capital
23         gain deduction allowable under the Internal Revenue
24         Code, to the extent deducted from gross income in the
25         computation of taxable income;
26             (G-5) For taxable years ending after December 31,

 

 

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1         1997, an amount equal to any eligible remediation costs
2         that the trust or estate deducted in computing adjusted
3         gross income and for which the trust or estate claims a
4         credit under subsection (l) of Section 201;
5             (G-10) For taxable years 2001 and thereafter, an
6         amount equal to the bonus depreciation deduction taken
7         on the taxpayer's federal income tax return for the
8         taxable year under subsection (k) of Section 168 of the
9         Internal Revenue Code; and
10             (G-11) If the taxpayer sells, transfers, abandons,
11         or otherwise disposes of property for which the
12         taxpayer was required in any taxable year to make an
13         addition modification under subparagraph (G-10), then
14         an amount equal to the aggregate amount of the
15         deductions taken in all taxable years under
16         subparagraph (R) with respect to that property.
17             If the taxpayer continues to own property through
18         the last day of the last tax year for which the
19         taxpayer may claim a depreciation deduction for
20         federal income tax purposes and for which the taxpayer
21         was allowed in any taxable year to make a subtraction
22         modification under subparagraph (R), then an amount
23         equal to that subtraction modification.
24             The taxpayer is required to make the addition
25         modification under this subparagraph only once with
26         respect to any one piece of property;

 

 

SB0726 - 46 - LRB095 10872 BDD 31152 b

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

 

 

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1             income with respect to such interest; or
2                 (ii) an item of interest paid, accrued, or
3             incurred, directly or indirectly, to a foreign
4             person if the taxpayer can establish, based on a
5             preponderance of the evidence, both of the
6             following:
7                     (a) the foreign person, during the same
8                 taxable year, paid, accrued, or incurred, the
9                 interest to a person that is not a related
10                 member, and
11                     (b) the transaction giving rise to the
12                 interest expense between the taxpayer and the
13                 foreign person did not have as a principal
14                 purpose the avoidance of Illinois income tax,
15                 and is paid pursuant to a contract or agreement
16                 that reflects an arm's-length interest rate
17                 and terms; or
18                 (iii) the taxpayer can establish, based on
19             clear and convincing evidence, that the interest
20             paid, accrued, or incurred relates to a contract or
21             agreement entered into at arm's-length rates and
22             terms and the principal purpose for the payment is
23             not federal or Illinois tax avoidance; or
24                 (iv) an item of interest paid, accrued, or
25             incurred, directly or indirectly, to a foreign
26             person if the taxpayer establishes by clear and

 

 

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1             convincing evidence that the adjustments are
2             unreasonable; or if the taxpayer and the Director
3             agree in writing to the application or use of an
4             alternative method of apportionment under Section
5             304(f).
6                 Nothing in this subsection shall preclude the
7             Director from making any other adjustment
8             otherwise allowed under Section 404 of this Act for
9             any tax year beginning after the effective date of
10             this amendment provided such adjustment is made
11             pursuant to regulation adopted by the Department
12             and such regulations provide methods and standards
13             by which the Department will utilize its authority
14             under Section 404 of this Act;
15             (G-13) For taxable years ending on or after
16         December 31, 2004, an amount equal to the amount of
17         intangible expenses and costs otherwise allowed as a
18         deduction in computing base income, and that were paid,
19         accrued, or incurred, directly or indirectly, to a
20         foreign person who would be a member of the same
21         unitary business group but for the fact that the
22         foreign person's business activity outside the United
23         States is 80% or more of that person's total business
24         activity. The addition modification required by this
25         subparagraph shall be reduced to the extent that
26         dividends were included in base income of the unitary

 

 

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

 

 

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1             This paragraph shall not apply to the following:
2                 (i) any item of intangible expenses or costs
3             paid, accrued, or incurred, directly or
4             indirectly, from a transaction with a foreign
5             person who is subject in a foreign country or
6             state, other than a state which requires mandatory
7             unitary reporting, to a tax on or measured by net
8             income with respect to such item; or
9                 (ii) any item of intangible expense or cost
10             paid, accrued, or incurred, directly or
11             indirectly, if the taxpayer can establish, based
12             on a preponderance of the evidence, both of the
13             following:
14                     (a) the foreign person during the same
15                 taxable year paid, accrued, or incurred, the
16                 intangible expense or cost to a person that is
17                 not a related member, and
18                     (b) the transaction giving rise to the
19                 intangible expense or cost between the
20                 taxpayer and the foreign person did not have as
21                 a principal purpose the avoidance of Illinois
22                 income tax, and is paid pursuant to a contract
23                 or agreement that reflects arm's-length terms;
24                 or
25                 (iii) any item of intangible expense or cost
26             paid, accrued, or incurred, directly or

 

 

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

 

 

SB0726 - 52 - LRB095 10872 BDD 31152 b

1         earnings from self employment by Section 1402 of the
2         Internal Revenue Code and regulations adopted pursuant
3         thereto;
4             (I) The valuation limitation amount;
5             (J) 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             (K) An amount equal to all amounts included in
9         taxable income as modified by subparagraphs (A), (B),
10         (C), (D), (E), (F) and (G) which are exempt from
11         taxation by this State either by reason of its statutes
12         or Constitution or by reason of the Constitution,
13         treaties or statutes of the United States; provided
14         that, in the case of any statute of this State that
15         exempts income derived from bonds or other obligations
16         from the tax imposed under this Act, the amount
17         exempted shall be the interest net of bond premium
18         amortization;
19             (L) With the exception of any amounts subtracted
20         under subparagraph (K), an amount equal to the sum of
21         all amounts disallowed as deductions by (i) Sections
22         171(a) (2) and 265(a)(2) of the Internal Revenue Code,
23         as now or hereafter amended, and all amounts of
24         expenses allocable to interest and disallowed as
25         deductions by Section 265(1) of the Internal Revenue
26         Code of 1954, as now or hereafter amended; and (ii) for

 

 

SB0726 - 53 - LRB095 10872 BDD 31152 b

1         taxable years ending on or after August 13, 1999,
2         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
3         the Internal Revenue Code; the provisions of this
4         subparagraph are exempt from the provisions of Section
5         250;
6             (M) An amount equal to those dividends included in
7         such total which were paid by a corporation which
8         conducts business operations in an Enterprise Zone or
9         zones created under the Illinois Enterprise Zone Act or
10         a River Edge Redevelopment Zone or zones created under
11         the River Edge Redevelopment Zone Act and conducts
12         substantially all of its operations in an Enterprise
13         Zone or Zones or a River Edge Redevelopment Zone or
14         zones. This subparagraph (M) is exempt from the
15         provisions of Section 250;
16             (N) An amount equal to any contribution made to a
17         job training project established pursuant to the Tax
18         Increment Allocation Redevelopment Act;
19             (O) 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 (M) of paragraph (2) of this subsection
26         shall not be eligible for the deduction provided under

 

 

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1         this subparagraph (O);
2             (P) An amount equal to the amount of the deduction
3         used to compute the federal income tax credit for
4         restoration of substantial amounts held under claim of
5         right for the taxable year pursuant to Section 1341 of
6         the Internal Revenue Code of 1986;
7             (Q) For taxable year 1999 and thereafter, an amount
8         equal to the amount of any (i) distributions, to the
9         extent includible in gross income for federal income
10         tax purposes, made to the taxpayer because of his or
11         her status as a victim of persecution for racial or
12         religious reasons by Nazi Germany or any other Axis
13         regime or as an heir of the victim and (ii) items of
14         income, to the extent includible in gross income for
15         federal income tax purposes, attributable to, derived
16         from or in any way related to assets stolen from,
17         hidden from, or otherwise lost to a victim of
18         persecution for racial or religious reasons by Nazi
19         Germany or any other Axis regime immediately prior to,
20         during, and immediately after World War II, including,
21         but not limited to, interest on the proceeds receivable
22         as insurance under policies issued to a victim of
23         persecution for racial or religious reasons by Nazi
24         Germany or any other Axis regime by European insurance
25         companies immediately prior to and during World War II;
26         provided, however, this subtraction from federal

 

 

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

 

 

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1                 (2) for taxable years ending on or before
2             December 31, 2005, "x" equals "y" multiplied by 30
3             and then divided by 70 (or "y" multiplied by
4             0.429); and
5                 (3) for taxable years ending after December
6             31, 2005:
7                     (i) for property on which a bonus
8                 depreciation deduction of 30% of the adjusted
9                 basis was taken, "x" equals "y" multiplied by
10                 30 and then divided by 70 (or "y" multiplied by
11                 0.429); and
12                     (ii) for property on which a bonus
13                 depreciation deduction of 50% of the adjusted
14                 basis was taken, "x" equals "y" multiplied by
15                 1.0.
16             The aggregate amount deducted under this
17         subparagraph in all taxable years for any one piece of
18         property may not exceed the amount of the bonus
19         depreciation deduction taken on that property on the
20         taxpayer's federal income tax return under subsection
21         (k) of Section 168 of the Internal Revenue Code. This
22         subparagraph (R) is exempt from the provisions of
23         Section 250;
24             (S) If the taxpayer sells, transfers, abandons, or
25         otherwise disposes of property for which the taxpayer
26         was required in any taxable year to make an addition

 

 

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1         modification under subparagraph (G-10), then an amount
2         equal to that addition modification.
3             If the taxpayer continues to own property through
4         the last day of the last tax year for which the
5         taxpayer may claim a depreciation deduction for
6         federal income tax purposes and for which the taxpayer
7         was required in any taxable year to make an addition
8         modification under subparagraph (G-10), then an amount
9         equal to that addition modification.
10             The taxpayer is allowed to take the deduction under
11         this subparagraph only once with respect to any one
12         piece of property.
13             This subparagraph (S) is exempt from the
14         provisions of Section 250;
15             (T) The amount of (i) any interest income (net of
16         the deductions allocable thereto) taken into account
17         for the taxable year with respect to a transaction with
18         a taxpayer that is required to make an addition
19         modification with respect to such transaction under
20         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
21         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
22         the amount of such addition modification and (ii) any
23         income from intangible property (net of the deductions
24         allocable thereto) taken into account for the taxable
25         year with respect to a transaction with a taxpayer that
26         is required to make an addition modification with

 

 

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

 

 

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1         intangible expenses and costs paid, accrued, or
2         incurred, directly or indirectly, to the same foreign
3         person; .
4             (W) For taxable years ending on or after December
5         31, 2007 and on or before December 30, 2012, an amount,
6         to the extent not deducted from the taxpayer's federal
7         in adjusted gross income and not to exceed $250, equal
8         to the expenses incurred for purchasing a device that
9         reads a prescription label with audible capability;
10         and
11             (X) For taxable years ending on or after December
12         31, 2007 and on or before December 30, 2012, an amount,
13         to the extent not deducted from the taxpayer's federal
14         in adjusted gross income and not to exceed $1,000,
15         equal to the expenses incurred for purchasing a device
16         that creates a prescription label with audible
17         capability.
18         (3) Limitation. The amount of any modification
19     otherwise required under this subsection shall, under
20     regulations prescribed by the Department, be adjusted by
21     any amounts included therein which were properly paid,
22     credited, or required to be distributed, or permanently set
23     aside for charitable purposes pursuant to Internal Revenue
24     Code Section 642(c) during the taxable year.
 
25     (d) Partnerships.

 

 

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1         (1) In general. In the case of a partnership, base
2     income means an amount equal to the taxpayer's taxable
3     income for the taxable year as modified by paragraph (2).
4         (2) Modifications. The taxable income referred to in
5     paragraph (1) shall be modified by adding thereto the sum
6     of the following amounts:
7             (A) An amount equal to all amounts paid or accrued
8         to the taxpayer as interest or dividends during the
9         taxable year to the extent excluded from gross income
10         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 for
13         the taxable year;
14             (C) The amount of deductions allowed to the
15         partnership pursuant to Section 707 (c) of the Internal
16         Revenue Code in calculating its taxable income;
17             (D) An amount equal to the amount of the capital
18         gain deduction allowable under the Internal Revenue
19         Code, to the extent deducted from gross income in the
20         computation of taxable income;
21             (D-5) For taxable years 2001 and thereafter, an
22         amount equal to the bonus depreciation deduction taken
23         on the taxpayer's federal income tax return for the
24         taxable year under subsection (k) of Section 168 of the
25         Internal Revenue Code;
26             (D-6) If the taxpayer sells, transfers, abandons,

 

 

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1         or otherwise disposes of property for which the
2         taxpayer was required in any taxable year to make an
3         addition modification under subparagraph (D-5), then
4         an amount equal to the aggregate amount of the
5         deductions taken in all taxable years under
6         subparagraph (O) with respect to that property.
7             If the taxpayer continues to own property through
8         the last day of the last tax year for which the
9         taxpayer may claim a depreciation deduction for
10         federal income tax purposes and for which the taxpayer
11         was allowed in any taxable year to make a subtraction
12         modification under subparagraph (O), then an amount
13         equal to that subtraction modification.
14             The taxpayer is required to make the addition
15         modification under this subparagraph only once with
16         respect to any one piece of property;
17             (D-7) For taxable years ending on or after December
18         31, 2004, an amount equal to the amount otherwise
19         allowed as a deduction in computing base income for
20         interest paid, accrued, or incurred, directly or
21         indirectly, to a foreign person who would be a member
22         of the same unitary business group but for the fact the
23         foreign person's business activity outside the United
24         States is 80% or more of the foreign person's total
25         business activity. The addition modification required
26         by this subparagraph shall be reduced to the extent

 

 

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

 

 

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1                 interest expense between the taxpayer and the
2                 foreign person did not have as a principal
3                 purpose the avoidance of Illinois income tax,
4                 and is paid pursuant to a contract or agreement
5                 that reflects an arm's-length interest rate
6                 and terms; or
7                 (iii) the taxpayer can establish, based on
8             clear and convincing evidence, that the interest
9             paid, accrued, or incurred relates to a contract or
10             agreement entered into at arm's-length rates and
11             terms and the principal purpose for the payment is
12             not federal or Illinois tax avoidance; or
13                 (iv) an item of interest paid, accrued, or
14             incurred, directly or indirectly, to a foreign
15             person if the taxpayer establishes by clear and
16             convincing evidence that the adjustments are
17             unreasonable; or if the taxpayer and the Director
18             agree in writing to the application or use of an
19             alternative method of apportionment under Section
20             304(f).
21                 Nothing in this subsection shall preclude the
22             Director from making any other adjustment
23             otherwise allowed under Section 404 of this Act for
24             any tax year beginning after the effective date of
25             this amendment provided such adjustment is made
26             pursuant to regulation adopted by the Department

 

 

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

 

 

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1         Section 203(d)(2)(D-7) of this Act. As used in this
2         subparagraph, the term "intangible expenses and costs"
3         includes (1) expenses, losses, and costs for, or
4         related to, the direct or indirect acquisition, use,
5         maintenance or management, ownership, sale, exchange,
6         or any other disposition of intangible property; (2)
7         losses incurred, directly or indirectly, from
8         factoring transactions or discounting transactions;
9         (3) royalty, patent, technical, and copyright fees;
10         (4) licensing fees; and (5) other similar expenses and
11         costs. For purposes of this subparagraph, "intangible
12         property" includes patents, patent applications, trade
13         names, trademarks, service marks, copyrights, mask
14         works, trade secrets, and similar types of intangible
15         assets;
16             This paragraph shall not apply to the following:
17                 (i) any item of intangible expenses or costs
18             paid, accrued, or incurred, directly or
19             indirectly, from a transaction with a foreign
20             person who is subject in a foreign country or
21             state, other than a state which requires mandatory
22             unitary reporting, to a tax on or measured by net
23             income with respect to such item; or
24                 (ii) any item of intangible expense or cost
25             paid, accrued, or incurred, directly or
26             indirectly, if the taxpayer can establish, based

 

 

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

 

 

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

 

 

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

 

 

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1         Redevelopment Zone or zones created under the River
2         Edge Redevelopment Zone Act and conducts substantially
3         all of its operations in an Enterprise Zone or Zones or
4         from a River Edge Redevelopment Zone or zones. This
5         subparagraph (K) is exempt from the provisions of
6         Section 250;
7             (L) An amount equal to any contribution made to a
8         job training project established pursuant to the Real
9         Property Tax Increment Allocation Redevelopment Act;
10             (M) An amount equal to those dividends included in
11         such total that were paid by a corporation that
12         conducts business operations in a federally designated
13         Foreign Trade Zone or Sub-Zone and that is designated a
14         High Impact Business located in Illinois; provided
15         that dividends eligible for the deduction provided in
16         subparagraph (K) of paragraph (2) of this subsection
17         shall not be eligible for the deduction provided under
18         this subparagraph (M);
19             (N) An amount equal to the amount of the deduction
20         used to compute the federal income tax credit for
21         restoration of substantial amounts held under claim of
22         right for the taxable year pursuant to Section 1341 of
23         the Internal Revenue Code of 1986;
24             (O) For taxable years 2001 and thereafter, for the
25         taxable year in which the bonus depreciation deduction
26         is taken on the taxpayer's federal income tax return

 

 

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1         under subsection (k) of Section 168 of the Internal
2         Revenue Code and for each applicable taxable year
3         thereafter, an amount equal to "x", where:
4                 (1) "y" equals the amount of the depreciation
5             deduction taken for the taxable year on the
6             taxpayer's federal income tax return on property
7             for which the bonus depreciation deduction was
8             taken in any year under subsection (k) of Section
9             168 of the Internal Revenue Code, but not including
10             the bonus depreciation deduction;
11                 (2) for taxable years ending on or before
12             December 31, 2005, "x" equals "y" multiplied by 30
13             and then divided by 70 (or "y" multiplied by
14             0.429); and
15                 (3) for taxable years ending after December
16             31, 2005:
17                     (i) for property on which a bonus
18                 depreciation deduction of 30% of the adjusted
19                 basis was taken, "x" equals "y" multiplied by
20                 30 and then divided by 70 (or "y" multiplied by
21                 0.429); and
22                     (ii) for property on which a bonus
23                 depreciation deduction of 50% of the adjusted
24                 basis was taken, "x" equals "y" multiplied by
25                 1.0.
26             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 taken on that property on the
4         taxpayer's federal income tax return under subsection
5         (k) of Section 168 of the Internal Revenue Code. This
6         subparagraph (O) is exempt from the provisions of
7         Section 250;
8             (P) If the taxpayer sells, transfers, abandons, or
9         otherwise disposes of property for which the taxpayer
10         was required in any taxable year to make an addition
11         modification under subparagraph (D-5), then an amount
12         equal to that addition modification.
13             If the taxpayer continues to own property through
14         the last day of the last tax year for which the
15         taxpayer may claim a depreciation deduction for
16         federal income tax purposes and for which the taxpayer
17         was required in any taxable year to make an addition
18         modification under subparagraph (D-5), then an amount
19         equal to that addition modification.
20             The taxpayer is allowed to take the deduction under
21         this subparagraph only once with respect to any one
22         piece of property.
23             This subparagraph (P) is exempt from the
24         provisions of Section 250;
25             (Q) The amount of (i) any interest income (net of
26         the deductions allocable thereto) taken into account

 

 

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

 

 

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1             (S) An amount equal to the income from intangible
2         property taken into account for the taxable year (net
3         of the deductions allocable thereto) with respect to
4         transactions with a foreign person who would be a
5         member of the taxpayer's unitary business group but for
6         the fact that the foreign person's business activity
7         outside the United States is 80% or more of that
8         person's total business activity, but not to exceed the
9         addition modification required to be made for the same
10         taxable year under Section 203(d)(2)(D-8) for
11         intangible expenses and costs paid, accrued, or
12         incurred, directly or indirectly, to the same foreign
13         person; .
14             (T) For taxable years ending on or after December
15         31, 2007 and on or before December 30, 2012, an amount,
16         to the extent not deducted from the taxpayer's federal
17         in adjusted gross income and not to exceed $250, equal
18         to the expenses incurred for purchasing a device that
19         reads a prescription label with audible capability;
20         and
21             (U) For taxable years ending on or after December
22         31, 2007 and on or before December 30, 2012, an amount,
23         to the extent not deducted from the taxpayer's federal
24         in adjusted gross income and not to exceed $1,000,
25         equal to the expenses incurred for purchasing a device
26         that creates a prescription label with audible

 

 

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

 

 

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

 

 

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1         investment company taxable income;
2             (D) Real estate investment trusts. In the case of a
3         real estate investment trust subject to the tax imposed
4         by Section 857 of the Internal Revenue Code, real
5         estate investment trust taxable income;
6             (E) Consolidated corporations. In the case of a
7         corporation which is a member of an affiliated group of
8         corporations filing a consolidated income tax return
9         for the taxable year for federal income tax purposes,
10         taxable income determined as if such corporation had
11         filed a separate return for federal income tax purposes
12         for the taxable year and each preceding taxable year
13         for which it was a member of an affiliated group. For
14         purposes of this subparagraph, the taxpayer's separate
15         taxable income shall be determined as if the election
16         provided by Section 243(b) (2) of the Internal Revenue
17         Code had been in effect for all such years;
18             (F) Cooperatives. In the case of a cooperative
19         corporation or association, the taxable income of such
20         organization determined in accordance with the
21         provisions of Section 1381 through 1388 of the Internal
22         Revenue Code;
23             (G) Subchapter S corporations. In the case of: (i)
24         a Subchapter S corporation for which there is in effect
25         an election for the taxable year under Section 1362 of
26         the Internal Revenue Code, the taxable income of such

 

 

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

 

 

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

 

 

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

 

 

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1         purposes of this paragraph.
 
2     (g) Double deductions. Unless specifically provided
3 otherwise, nothing in this Section shall permit the same item
4 to be deducted more than once.
 
5     (h) Legislative intention. Except as expressly provided by
6 this Section there shall be no modifications or limitations on
7 the amounts of income, gain, loss or deduction taken into
8 account in determining gross income, adjusted gross income or
9 taxable income for federal income tax purposes for the taxable
10 year, or in the amount of such items entering into the
11 computation of base income and net income under this Act for
12 such taxable year, whether in respect of property values as of
13 August 1, 1969 or otherwise.
14 (Source: P.A. 93-812, eff. 7-26-04; 93-840, eff. 7-30-04;
15 94-776, eff. 5-19-06; 94-789, eff. 5-19-06; 94-1021, eff.
16 7-12-06; 94-1074, eff. 12-26-06; revised 1-2-07.)
 
17     Section 99. Effective date. This Act takes effect upon
18 becoming law.