96TH GENERAL ASSEMBLY
State of Illinois
2009 and 2010
HB5374

 

Introduced 2/5/2010, by Rep. Fred Crespo

 

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

    Amends the Illinois Income Tax Act. Creates a deduction for individual taxpayers in an amount equal to the amount included in the taxpayer's adjusted gross income as a result of a voluntary distribution taken from a 401(k) plan to the extent that those amounts are used to pay tuition costs at an institution of higher education on behalf of the taxpayer's child. Exempts the deduction from the Act's automatic sunset provision.


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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) An amount equal to the amount otherwise
4         allowed as a deduction in computing base income for
5         interest paid, accrued, or incurred, directly or
6         indirectly, (i) for taxable years ending on or after
7         December 31, 2004, to a foreign person who would be a
8         member of the same unitary business group but for the
9         fact that foreign person's business activity outside
10         the United States is 80% or more of the foreign
11         person's total business activity and (ii) for taxable
12         years ending on or after December 31, 2008, to a person
13         who would be a member of the same unitary business
14         group but for the fact that the person is prohibited
15         under Section 1501(a)(27) from being included in the
16         unitary business group because he or she is ordinarily
17         required to apportion business income under different
18         subsections of Section 304. The addition modification
19         required by this subparagraph shall be reduced to the
20         extent that dividends were included in base income of
21         the unitary group for the same taxable year and
22         received by the taxpayer or by a member of the
23         taxpayer's unitary business group (including amounts
24         included in gross income under Sections 951 through 964
25         of the Internal Revenue Code and amounts included in
26         gross income under Section 78 of the Internal Revenue

 

 

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

 

 

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

 

 

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1         unitary business group but for the fact that the
2         foreign person's business activity outside the United
3         States is 80% or more of that person's total business
4         activity and (ii) for taxable years ending on or after
5         December 31, 2008, to a person who would be a member of
6         the same unitary business group but for the fact that
7         the person is prohibited under Section 1501(a)(27)
8         from being included in the unitary business group
9         because he or she is ordinarily required to apportion
10         business income under different subsections of Section
11         304. The addition modification required by this
12         subparagraph shall be reduced to the extent that
13         dividends were included in base income of the unitary
14         group for the same taxable year and received by the
15         taxpayer or by a member of the taxpayer's unitary
16         business group (including amounts included in gross
17         income under Sections 951 through 964 of the Internal
18         Revenue Code and amounts included in gross income under
19         Section 78 of the Internal Revenue Code) with respect
20         to the stock of the same person to whom the intangible
21         expenses and costs were directly or indirectly paid,
22         incurred, or accrued. The preceding sentence does not
23         apply to the extent that the same dividends caused a
24         reduction to the addition modification required under
25         Section 203(a)(2)(D-17) of this Act. As used in this
26         subparagraph, the term "intangible expenses and costs"

 

 

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

 

 

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

 

 

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1             by which the Department will utilize its authority
2             under Section 404 of this Act;
3             (D-19) For taxable years ending on or after
4         December 31, 2008, an amount equal to the amount of
5         insurance premium expenses and costs otherwise allowed
6         as a deduction in computing base income, and that were
7         paid, accrued, or incurred, directly or indirectly, to
8         a person who would be a member of the same unitary
9         business group but for the fact that the person is
10         prohibited under Section 1501(a)(27) from being
11         included in the unitary business group because he or
12         she is ordinarily required to apportion business
13         income under different subsections of Section 304. The
14         addition modification required by this subparagraph
15         shall be reduced to the extent that dividends were
16         included in base income of the unitary group for the
17         same taxable year and received by the taxpayer or by a
18         member of the taxpayer's unitary business group
19         (including amounts included in gross income under
20         Sections 951 through 964 of the Internal Revenue Code
21         and amounts included in gross income under Section 78
22         of the Internal Revenue Code) with respect to the stock
23         of the same person to whom the premiums and costs were
24         directly or indirectly paid, incurred, or accrued. The
25         preceding sentence does not apply to the extent that
26         the same dividends caused a reduction to the addition

 

 

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1         modification required under Section 203(a)(2)(D-17) or
2         Section 203(a)(2)(D-18) of this Act.
3             (D-20) For taxable years beginning on or after
4         January 1, 2002 and ending on or before December 31,
5         2006, in the case of a distribution from a qualified
6         tuition program under Section 529 of the Internal
7         Revenue Code, other than (i) a distribution from a
8         College Savings Pool created under Section 16.5 of the
9         State Treasurer Act or (ii) a distribution from the
10         Illinois Prepaid Tuition Trust Fund, an amount equal to
11         the amount excluded from gross income under Section
12         529(c)(3)(B). For taxable years beginning on or after
13         January 1, 2007, in the case of a distribution from a
14         qualified tuition program under Section 529 of the
15         Internal Revenue Code, other than (i) a distribution
16         from a College Savings Pool created under Section 16.5
17         of the State Treasurer Act, (ii) a distribution from
18         the Illinois Prepaid Tuition Trust Fund, or (iii) a
19         distribution from a qualified tuition program under
20         Section 529 of the Internal Revenue Code that (I)
21         adopts and determines that its offering materials
22         comply with the College Savings Plans Network's
23         disclosure principles and (II) has made reasonable
24         efforts to inform in-state residents of the existence
25         of in-state qualified tuition programs by informing
26         Illinois residents directly and, where applicable, to

 

 

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1         inform financial intermediaries distributing the
2         program to inform in-state residents of the existence
3         of in-state qualified tuition programs at least
4         annually, an amount equal to the amount excluded from
5         gross income under Section 529(c)(3)(B).
6             For the purposes of this subparagraph (D-20), a
7         qualified tuition program has made reasonable efforts
8         if it makes disclosures (which may use the term
9         "in-state program" or "in-state plan" and need not
10         specifically refer to Illinois or its qualified
11         programs by name) (i) directly to prospective
12         participants in its offering materials or makes a
13         public disclosure, such as a website posting; and (ii)
14         where applicable, to intermediaries selling the
15         out-of-state program in the same manner that the
16         out-of-state program distributes its offering
17         materials;
18             (D-21) For taxable years beginning on or after
19         January 1, 2007, in the case of transfer of moneys from
20         a qualified tuition program under Section 529 of the
21         Internal Revenue Code that is administered by the State
22         to an out-of-state program, an amount equal to the
23         amount of moneys previously deducted from base income
24         under subsection (a)(2)(Y) of this Section;
25             (D-22) For taxable years beginning on or after
26         January 1, 2009, in the case of a nonqualified

 

 

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1         withdrawal or refund of moneys from a qualified tuition
2         program under Section 529 of the Internal Revenue Code
3         administered by the State that is not used for
4         qualified expenses at an eligible education
5         institution, an amount equal to the contribution
6         component of the nonqualified withdrawal or refund
7         that was previously deducted from base income under
8         subsection (a)(2)(y) of this Section, provided that
9         the withdrawal or refund did not result from the
10         beneficiary's death or disability;
11             (D-23) An amount equal to the credit allowable to
12         the taxpayer under Section 218(a) of this Act,
13         determined without regard to Section 218(c) of this
14         Act;
15     and by deducting from the total so obtained the sum of the
16     following amounts:
17             (E) For taxable years ending before December 31,
18         2001, any amount included in such total in respect of
19         any compensation (including but not limited to any
20         compensation paid or accrued to a serviceman while a
21         prisoner of war or missing in action) paid to a
22         resident by reason of being on active duty in the Armed
23         Forces of the United States and in respect of any
24         compensation paid or accrued to a resident who as a
25         governmental employee was a prisoner of war or missing
26         in action, and in respect of any compensation paid to a

 

 

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1         resident in 1971 or thereafter for annual training
2         performed pursuant to Sections 502 and 503, Title 32,
3         United States Code as a member of the Illinois National
4         Guard or, beginning with taxable years ending on or
5         after December 31, 2007, the National Guard of any
6         other state. For taxable years ending on or after
7         December 31, 2001, any amount included in such total in
8         respect of any compensation (including but not limited
9         to any compensation paid or accrued to a serviceman
10         while a prisoner of war or missing in action) paid to a
11         resident by reason of being a member of any component
12         of the Armed Forces of the United States and in respect
13         of any compensation paid or accrued to a resident who
14         as a governmental employee was a prisoner of war or
15         missing in action, and in respect of any compensation
16         paid to a resident in 2001 or thereafter by reason of
17         being a member of the Illinois National Guard or,
18         beginning with taxable years ending on or after
19         December 31, 2007, the National Guard of any other
20         state. The provisions of this amendatory Act of the
21         92nd General Assembly are exempt from the provisions of
22         Section 250;
23             (F) An amount equal to all amounts included in such
24         total pursuant to the provisions of Sections 402(a),
25         402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the
26         Internal Revenue Code, or included in such total as

 

 

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1         distributions under the provisions of any retirement
2         or disability plan for employees of any governmental
3         agency or unit, or retirement payments to retired
4         partners, which payments are excluded in computing net
5         earnings from self employment by Section 1402 of the
6         Internal Revenue Code and regulations adopted pursuant
7         thereto;
8             (G) The valuation limitation amount;
9             (H) 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             (I) An amount equal to all amounts included in such
13         total pursuant to the provisions of Section 111 of the
14         Internal Revenue Code as a recovery of items previously
15         deducted from adjusted gross income in the computation
16         of taxable income;
17             (J) An amount equal to those dividends included in
18         such total which were paid by a corporation which
19         conducts business operations in an Enterprise Zone or
20         zones created under the Illinois Enterprise Zone Act or
21         a River Edge Redevelopment Zone or zones created under
22         the River Edge Redevelopment Zone Act, and conducts
23         substantially all of its operations in an Enterprise
24         Zone or zones or a River Edge Redevelopment Zone or
25         zones. This subparagraph (J) is exempt from the
26         provisions of Section 250;

 

 

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1             (K) An amount equal to those dividends included in
2         such total that were paid by a corporation that
3         conducts business operations in a federally designated
4         Foreign Trade Zone or Sub-Zone and that is designated a
5         High Impact Business located in Illinois; provided
6         that dividends eligible for the deduction provided in
7         subparagraph (J) of paragraph (2) of this subsection
8         shall not be eligible for the deduction provided under
9         this subparagraph (K);
10             (L) For taxable years ending after December 31,
11         1983, an amount equal to all social security benefits
12         and railroad retirement benefits included in such
13         total pursuant to Sections 72(r) and 86 of the Internal
14         Revenue Code;
15             (M) With the exception of any amounts subtracted
16         under subparagraph (N), an amount equal to the sum of
17         all amounts disallowed as deductions by (i) Sections
18         171(a) (2), and 265(2) of the Internal Revenue Code of
19         1954, as now or hereafter amended, and all amounts of
20         expenses allocable to interest and disallowed as
21         deductions by Section 265(1) of the Internal Revenue
22         Code of 1954, as now or hereafter amended; and (ii) for
23         taxable years ending on or after August 13, 1999,
24         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
25         the Internal Revenue Code; the provisions of this
26         subparagraph are exempt from the provisions of Section

 

 

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1         250;
2             (N) An amount equal to all amounts included in such
3         total which are exempt from taxation by this State
4         either by reason of its statutes or Constitution or by
5         reason of the Constitution, treaties or statutes of the
6         United States; provided that, in the case of any
7         statute of this State that exempts income derived from
8         bonds or other obligations from the tax imposed under
9         this Act, the amount exempted shall be the interest net
10         of bond premium amortization;
11             (O) An amount equal to any contribution made to a
12         job training project established pursuant to the Tax
13         Increment Allocation Redevelopment Act;
14             (P) An amount equal to the amount of the deduction
15         used to compute the federal income tax credit for
16         restoration of substantial amounts held under claim of
17         right for the taxable year pursuant to Section 1341 of
18         the Internal Revenue Code of 1986;
19             (Q) An amount equal to any amounts included in such
20         total, received by the taxpayer as an acceleration in
21         the payment of life, endowment or annuity benefits in
22         advance of the time they would otherwise be payable as
23         an indemnity for a terminal illness;
24             (R) An amount equal to the amount of any federal or
25         State bonus paid to veterans of the Persian Gulf War;
26             (S) An amount, to the extent included in adjusted

 

 

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

 

 

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

 

 

HB5374 - 20 - LRB096 19631 HLH 35027 b

1             (X) For taxable year 1999 and thereafter, an amount
2         equal to the amount of any (i) distributions, to the
3         extent includible in gross income for federal income
4         tax purposes, made to the taxpayer because of his or
5         her status as a victim of persecution for racial or
6         religious reasons by Nazi Germany or any other Axis
7         regime or as an heir of the victim and (ii) items of
8         income, to the extent includible in gross income for
9         federal income tax purposes, attributable to, derived
10         from or in any way related to assets stolen from,
11         hidden from, or otherwise lost to a victim of
12         persecution for racial or religious reasons by Nazi
13         Germany or any other Axis regime immediately prior to,
14         during, and immediately after World War II, including,
15         but not limited to, interest on the proceeds receivable
16         as insurance under policies issued to a victim of
17         persecution for racial or religious reasons by Nazi
18         Germany or any other Axis regime by European insurance
19         companies immediately prior to and during World War II;
20         provided, however, this subtraction from federal
21         adjusted gross income does not apply to assets acquired
22         with such assets or with the proceeds from the sale of
23         such assets; provided, further, this paragraph shall
24         only apply to a taxpayer who was the first recipient of
25         such assets after their recovery and who is a victim of
26         persecution for racial or religious reasons by Nazi

 

 

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1         Germany or any other Axis regime or as an heir of the
2         victim. The amount of and the eligibility for any
3         public assistance, benefit, or similar entitlement is
4         not affected by the inclusion of items (i) and (ii) of
5         this paragraph in gross income for federal income tax
6         purposes. This paragraph is exempt from the provisions
7         of Section 250;
8             (Y) For taxable years beginning on or after January
9         1, 2002 and ending on or before December 31, 2004,
10         moneys contributed in the taxable year to a College
11         Savings Pool account under Section 16.5 of the State
12         Treasurer Act, except that amounts excluded from gross
13         income under Section 529(c)(3)(C)(i) of the Internal
14         Revenue Code shall not be considered moneys
15         contributed under this subparagraph (Y). For taxable
16         years beginning on or after January 1, 2005, a maximum
17         of $10,000 contributed in the taxable year to (i) a
18         College Savings Pool account under Section 16.5 of the
19         State Treasurer Act or (ii) the Illinois Prepaid
20         Tuition Trust Fund, except that amounts excluded from
21         gross income under Section 529(c)(3)(C)(i) of the
22         Internal Revenue Code shall not be considered moneys
23         contributed under this subparagraph (Y). For purposes
24         of this subparagraph, contributions made by an
25         employer on behalf of an employee, or matching
26         contributions made by an employee, shall be treated as

 

 

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

 

 

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1                     (ii) for property on which a bonus
2                 depreciation deduction of 50% of the adjusted
3                 basis was taken, "x" equals "y" multiplied by
4                 1.0.
5             The aggregate amount deducted under this
6         subparagraph in all taxable years for any one piece of
7         property may not exceed the amount of the bonus
8         depreciation deduction taken on that property on the
9         taxpayer's federal income tax return under subsection
10         (k) of Section 168 of the Internal Revenue Code. This
11         subparagraph (Z) is exempt from the provisions of
12         Section 250;
13             (AA) If the taxpayer sells, transfers, abandons,
14         or otherwise disposes of property for which the
15         taxpayer was required in any taxable year to make an
16         addition modification under subparagraph (D-15), then
17         an amount equal to that addition modification.
18             If the taxpayer continues to own property through
19         the last day of the last tax year for which the
20         taxpayer may claim a depreciation deduction for
21         federal income tax purposes and for which the taxpayer
22         was required in any taxable year to make an addition
23         modification under subparagraph (D-15), then an amount
24         equal to that addition modification.
25             The taxpayer is allowed to take the deduction under
26         this subparagraph only once with respect to any one

 

 

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

 

 

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1         transactions with (i) a foreign person who would be a
2         member of the taxpayer's unitary business group but for
3         the fact that the foreign person's business activity
4         outside the United States is 80% or more of that
5         person's total business activity and (ii) for taxable
6         years ending on or after December 31, 2008, to a person
7         who would be a member of the same unitary business
8         group but for the fact that the person is prohibited
9         under Section 1501(a)(27) from being included in the
10         unitary business group because he or she is ordinarily
11         required to apportion business income under different
12         subsections of Section 304, but not to exceed the
13         addition modification required to be made for the same
14         taxable year under Section 203(a)(2)(D-17) for
15         interest paid, accrued, or incurred, directly or
16         indirectly, to the same person. This subparagraph (DD)
17         is exempt from the provisions of Section 250; and
18             (EE) An amount equal to the income from intangible
19         property taken into account for the taxable year (net
20         of the deductions allocable thereto) with respect to
21         transactions with (i) a foreign person who would be a
22         member of the taxpayer's unitary business group but for
23         the fact that the foreign person's business activity
24         outside the United States is 80% or more of that
25         person's total business activity and (ii) for taxable
26         years ending on or after December 31, 2008, to a person

 

 

HB5374 - 26 - LRB096 19631 HLH 35027 b

1         who would be a member of the same unitary business
2         group but for the fact that the person is prohibited
3         under Section 1501(a)(27) from being included in the
4         unitary business group because he or she is ordinarily
5         required to apportion business income under different
6         subsections of Section 304, but not to exceed the
7         addition modification required to be made for the same
8         taxable year under Section 203(a)(2)(D-18) for
9         intangible expenses and costs paid, accrued, or
10         incurred, directly or indirectly, to the same foreign
11         person. This subparagraph (EE) is exempt from the
12         provisions of Section 250; and .
13             (FF) For taxable years ending on or after December
14         31, 2010, an amount equal to the amount included in the
15         taxpayer's adjusted gross income as a result of a
16         voluntary distribution taken from a retirement plan
17         described in Section 401(k) of the Internal Revenue
18         Code to the extent that those amounts are used to pay
19         tuition costs at an institution of higher education on
20         behalf of the taxpayer's child. This subparagraph (FF)
21         is exempt from the provisions of Section 250.
 
22     (b) Corporations.
23         (1) In general. In the case of a corporation, base
24     income means an amount equal to the taxpayer's taxable
25     income for the taxable year as modified by paragraph (2).

 

 

HB5374 - 27 - LRB096 19631 HLH 35027 b

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

 

 

HB5374 - 28 - LRB096 19631 HLH 35027 b

1         carryback or carryforward from a taxable year ending
2         prior to December 31, 1986 is an element of taxable
3         income under paragraph (1) of subsection (e) or
4         subparagraph (E) of paragraph (2) of subsection (e),
5         the amount by which addition modifications other than
6         those provided by this subparagraph (E) exceeded
7         subtraction modifications in such earlier taxable
8         year, with the following limitations applied in the
9         order that they are listed:
10                 (i) 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 be reduced by the amount of
14             addition modification under this subparagraph (E)
15             which related to that net operating loss and which
16             was taken into account in calculating the base
17             income of an earlier taxable year, and
18                 (ii) the addition modification relating to the
19             net operating loss carried back or forward to the
20             taxable year from any taxable year ending prior to
21             December 31, 1986 shall not exceed the amount of
22             such carryback or carryforward;
23             For taxable years in which there is a net operating
24         loss carryback or carryforward from more than one other
25         taxable year ending prior to December 31, 1986, the
26         addition modification provided in this subparagraph

 

 

HB5374 - 29 - LRB096 19631 HLH 35027 b

1         (E) shall be the sum of the amounts computed
2         independently under the preceding provisions of this
3         subparagraph (E) for each such taxable year;
4             (E-5) For taxable years ending after December 31,
5         1997, an amount equal to any eligible remediation costs
6         that the corporation deducted in computing adjusted
7         gross income and for which the corporation claims a
8         credit under subsection (l) of Section 201;
9             (E-10) For taxable years 2001 and thereafter, an
10         amount equal to the bonus depreciation deduction taken
11         on the taxpayer's federal income tax return for the
12         taxable year under subsection (k) of Section 168 of the
13         Internal Revenue Code;
14             (E-11) If the taxpayer sells, transfers, abandons,
15         or otherwise disposes of property for which the
16         taxpayer was required in any taxable year to make an
17         addition modification under subparagraph (E-10), then
18         an amount equal to the aggregate amount of the
19         deductions taken in all taxable years under
20         subparagraph (T) with respect to that property.
21             If the taxpayer continues to own property through
22         the last day of the last tax year for which the
23         taxpayer may claim a depreciation deduction for
24         federal income tax purposes and for which the taxpayer
25         was allowed in any taxable year to make a subtraction
26         modification under subparagraph (T), then an amount

 

 

HB5374 - 30 - LRB096 19631 HLH 35027 b

1         equal to that subtraction modification.
2             The taxpayer is required to make the addition
3         modification under this subparagraph only once with
4         respect to any one piece of property;
5             (E-12) An amount equal to the amount otherwise
6         allowed as a deduction in computing base income for
7         interest paid, accrued, or incurred, directly or
8         indirectly, (i) for taxable years ending on or after
9         December 31, 2004, to a foreign person who would be a
10         member of the same unitary business group but for the
11         fact the foreign person's business activity outside
12         the United States is 80% or more of the foreign
13         person's total business activity and (ii) for taxable
14         years ending on or after December 31, 2008, to a person
15         who would be a member of the same unitary business
16         group but for the fact that the person is prohibited
17         under Section 1501(a)(27) from being included in the
18         unitary business group because he or she is ordinarily
19         required to apportion business income under different
20         subsections of Section 304. The addition modification
21         required by this subparagraph shall be reduced to the
22         extent that dividends were included in base income of
23         the unitary group for the same taxable year and
24         received by the taxpayer or by a member of the
25         taxpayer's unitary business group (including amounts
26         included in gross income pursuant to Sections 951

 

 

HB5374 - 31 - LRB096 19631 HLH 35027 b

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

 

 

HB5374 - 32 - LRB096 19631 HLH 35027 b

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

 

 

HB5374 - 33 - LRB096 19631 HLH 35027 b

1         incurred, directly or indirectly, (i) for taxable
2         years ending on or after December 31, 2004, to a
3         foreign person who would be a member of the same
4         unitary business group but for the fact that the
5         foreign person's business activity outside the United
6         States is 80% or more of that person's total business
7         activity and (ii) for taxable years ending on or after
8         December 31, 2008, to a person who would be a member of
9         the same unitary business group but for the fact that
10         the person is prohibited under Section 1501(a)(27)
11         from being included in the unitary business group
12         because he or she is ordinarily required to apportion
13         business income under different subsections of Section
14         304. The addition modification required by this
15         subparagraph shall be reduced to the extent that
16         dividends were included in base income of the unitary
17         group for the same taxable year and received by the
18         taxpayer or by a member of the taxpayer's unitary
19         business group (including amounts included in gross
20         income pursuant to Sections 951 through 964 of the
21         Internal Revenue Code and amounts included in gross
22         income under Section 78 of the Internal Revenue Code)
23         with respect to the stock of the same person to whom
24         the intangible expenses and costs were directly or
25         indirectly paid, incurred, or accrued. The preceding
26         sentence shall not apply to the extent that the same

 

 

HB5374 - 34 - LRB096 19631 HLH 35027 b

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

 

 

HB5374 - 35 - LRB096 19631 HLH 35027 b

1             indirectly, if the taxpayer can establish, based
2             on a preponderance of the evidence, both of the
3             following:
4                     (a) the person during the same taxable
5                 year paid, accrued, or incurred, the
6                 intangible expense or cost to a person that is
7                 not a related member, and
8                     (b) the transaction giving rise to the
9                 intangible expense or cost between the
10                 taxpayer and the person did not have as a
11                 principal purpose the avoidance of Illinois
12                 income tax, and is paid pursuant to a contract
13                 or agreement that reflects arm's-length terms;
14                 or
15                 (iii) any item of intangible expense or cost
16             paid, accrued, or incurred, directly or
17             indirectly, from a transaction with a person if the
18             taxpayer establishes by clear and convincing
19             evidence, that the adjustments are unreasonable;
20             or if the taxpayer and the Director agree in
21             writing to the application or use of an alternative
22             method of apportionment under Section 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             (E-14) For taxable years ending on or after
7         December 31, 2008, an amount equal to the amount of
8         insurance premium expenses and costs otherwise allowed
9         as a deduction in computing base income, and that were
10         paid, accrued, or incurred, directly or indirectly, to
11         a person who would be a member of the same unitary
12         business group but for the fact that the person is
13         prohibited under Section 1501(a)(27) from being
14         included in the unitary business group because he or
15         she is ordinarily required to apportion business
16         income under different subsections of Section 304. The
17         addition modification required by this subparagraph
18         shall be reduced to the extent that dividends were
19         included in base income of the unitary group for the
20         same taxable year and received by the taxpayer or by a
21         member of the taxpayer's unitary business group
22         (including amounts included in gross income under
23         Sections 951 through 964 of the Internal Revenue Code
24         and amounts included in gross income under Section 78
25         of the Internal Revenue Code) with respect to the stock
26         of the same person to whom the premiums and costs were

 

 

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1         directly or indirectly paid, incurred, or accrued. The
2         preceding sentence does not apply to the extent that
3         the same dividends caused a reduction to the addition
4         modification required under Section 203(b)(2)(E-12) or
5         Section 203(b)(2)(E-13) of this Act;
6             (E-15) For taxable years beginning after December
7         31, 2008, any deduction for dividends paid by a captive
8         real estate investment trust that is allowed to a real
9         estate investment trust under Section 857(b)(2)(B) of
10         the Internal Revenue Code for dividends paid;
11             (E-16) An amount equal to the credit allowable to
12         the taxpayer under Section 218(a) of this Act,
13         determined without regard to Section 218(c) of this
14         Act;
15     and by deducting from the total so obtained the sum of the
16     following amounts:
17             (F) An amount equal to the amount of any tax
18         imposed by this Act which was refunded to the taxpayer
19         and included in such total for the taxable year;
20             (G) An amount equal to any amount included in such
21         total under Section 78 of the Internal Revenue Code;
22             (H) In the case of a regulated investment company,
23         an amount equal to the amount of exempt interest
24         dividends as defined in subsection (b) (5) of Section
25         852 of the Internal Revenue Code, paid to shareholders
26         for the taxable year;

 

 

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

 

 

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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 (K) is exempt from the
7         provisions of Section 250;
8             (L) 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 (K) of paragraph 2 of this subsection
15         shall not be eligible for the deduction provided under
16         this subparagraph (L);
17             (M) For any taxpayer that is a financial
18         organization within the meaning of Section 304(c) of
19         this Act, an amount included in such total as interest
20         income from a loan or loans made by such taxpayer to a
21         borrower, to the extent that such a loan is secured by
22         property which is eligible for the Enterprise Zone
23         Investment Credit or the River Edge Redevelopment Zone
24         Investment Credit. To determine the portion of a loan
25         or loans that is secured by property eligible for a
26         Section 201(f) investment credit to the borrower, the

 

 

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

 

 

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

 

 

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1         equal to the percentage allowable under Section
2         243(a)(1) of the Internal Revenue Code of 1986 for
3         taxable years ending after December 31, 1992, of the
4         amount by which dividends included in taxable income
5         and received from a corporation that is not created or
6         organized under the laws of the United States or any
7         state or political subdivision thereof, including, for
8         taxable years ending on or after December 31, 1988,
9         dividends received or deemed received or paid or deemed
10         paid under Sections 951 through 964 of the Internal
11         Revenue Code, exceed the amount of the modification
12         provided under subparagraph (G) of paragraph (2) of
13         this subsection (b) which is related to such dividends,
14         and including, for taxable years ending on or after
15         December 31, 2008, dividends received from a captive
16         real estate investment trust; plus (ii) 100% of the
17         amount by which dividends, included in taxable income
18         and received, including, for taxable years ending on or
19         after December 31, 1988, dividends received or deemed
20         received or paid or deemed paid under Sections 951
21         through 964 of the Internal Revenue Code and including,
22         for taxable years ending on or after December 31, 2008,
23         dividends received from a captive real estate
24         investment trust, from any such corporation specified
25         in clause (i) that would but for the provisions of
26         Section 1504 (b) (3) of the Internal Revenue Code be

 

 

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1         treated as a member of the affiliated group which
2         includes the dividend recipient, exceed the amount of
3         the modification provided under subparagraph (G) of
4         paragraph (2) of this subsection (b) which is related
5         to such dividends. This subparagraph (O) is exempt from
6         the provisions of Section 250 of this Act;
7             (P) An amount equal to any contribution made to a
8         job training project established pursuant to the Tax
9         Increment Allocation Redevelopment Act;
10             (Q) An amount equal to the amount of the deduction
11         used to compute the federal income tax credit for
12         restoration of substantial amounts held under claim of
13         right for the taxable year pursuant to Section 1341 of
14         the Internal Revenue Code of 1986;
15             (R) On and after July 20, 1999, in the case of an
16         attorney-in-fact with respect to whom an interinsurer
17         or a reciprocal insurer has made the election under
18         Section 835 of the Internal Revenue Code, 26 U.S.C.
19         835, an amount equal to the excess, if any, of the
20         amounts paid or incurred by that interinsurer or
21         reciprocal insurer in the taxable year to the
22         attorney-in-fact over the deduction allowed to that
23         interinsurer or reciprocal insurer with respect to the
24         attorney-in-fact under Section 835(b) of the Internal
25         Revenue Code for the taxable year; the provisions of
26         this subparagraph are exempt from the provisions of

 

 

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

 

 

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

 

 

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

 

 

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1         203(d)(2)(D-8), but not to exceed the amount of such
2         addition modification, and (iii) any insurance premium
3         income (net of deductions allocable thereto) taken
4         into account for the taxable year with respect to a
5         transaction with a taxpayer that is required to make an
6         addition modification with respect to such transaction
7         under Section 203(a)(2)(D-19), Section
8         203(b)(2)(E-14), Section 203(c)(2)(G-14), or Section
9         203(d)(2)(D-9), but not to exceed the amount of that
10         addition modification. This subparagraph (V) is exempt
11         from the provisions of Section 250;
12             (W) An amount equal to the interest income taken
13         into account for the taxable year (net of the
14         deductions allocable thereto) with respect to
15         transactions with (i) a foreign person who would be a
16         member of the taxpayer's unitary business group but for
17         the fact that the foreign person's business activity
18         outside the United States is 80% or more of that
19         person's total business activity and (ii) for taxable
20         years ending on or after December 31, 2008, to a person
21         who would be a member of the same unitary business
22         group but for the fact that the person is prohibited
23         under Section 1501(a)(27) from being included in the
24         unitary business group because he or she is ordinarily
25         required to apportion business income under different
26         subsections of Section 304, but not to exceed the

 

 

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1         addition modification required to be made for the same
2         taxable year under Section 203(b)(2)(E-12) for
3         interest paid, accrued, or incurred, directly or
4         indirectly, to the same person. This subparagraph (W)
5         is exempt from the provisions of Section 250; and
6             (X) An amount equal to the income from intangible
7         property taken into account for the taxable year (net
8         of the deductions allocable thereto) with respect to
9         transactions with (i) a foreign person who would be a
10         member of the taxpayer's unitary business group but for
11         the fact that the foreign person's business activity
12         outside the United States is 80% or more of that
13         person's total business activity and (ii) for taxable
14         years ending on or after December 31, 2008, to a person
15         who would be a member of the same unitary business
16         group but for the fact that the person is prohibited
17         under Section 1501(a)(27) from being included in the
18         unitary business group because he or she is ordinarily
19         required to apportion business income under different
20         subsections of Section 304, but not to exceed the
21         addition modification required to be made for the same
22         taxable year under Section 203(b)(2)(E-13) for
23         intangible expenses and costs paid, accrued, or
24         incurred, directly or indirectly, to the same foreign
25         person. This subparagraph (X) is exempt from the
26         provisions of Section 250.

 

 

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

 

 

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1             (D) The amount of any net operating loss deduction
2         taken in arriving at taxable income, other than a net
3         operating loss carried forward from a taxable year
4         ending prior to December 31, 1986;
5             (E) For taxable years in which a net operating loss
6         carryback or carryforward from a taxable year ending
7         prior to December 31, 1986 is an element of taxable
8         income under paragraph (1) of subsection (e) or
9         subparagraph (E) of paragraph (2) of subsection (e),
10         the amount by which addition modifications other than
11         those provided by this subparagraph (E) exceeded
12         subtraction modifications in such taxable year, with
13         the following limitations applied in the order that
14         they are listed:
15                 (i) the addition modification relating to the
16             net operating loss carried back or forward to the
17             taxable year from any taxable year ending prior to
18             December 31, 1986 shall be reduced by the amount of
19             addition modification under this subparagraph (E)
20             which related to that net operating loss and which
21             was taken into account in calculating the base
22             income of an earlier taxable year, and
23                 (ii) the addition modification relating to the
24             net operating loss carried back or forward to the
25             taxable year from any taxable year ending prior to
26             December 31, 1986 shall not exceed the amount of

 

 

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1             such carryback or carryforward;
2             For taxable years in which there is a net operating
3         loss carryback or carryforward from more than one other
4         taxable year ending prior to December 31, 1986, the
5         addition modification provided in this subparagraph
6         (E) shall be the sum of the amounts computed
7         independently under the preceding provisions of this
8         subparagraph (E) for each such taxable year;
9             (F) For taxable years ending on or after January 1,
10         1989, an amount equal to the tax deducted pursuant to
11         Section 164 of the Internal Revenue Code if the trust
12         or estate is claiming the same tax for purposes of the
13         Illinois foreign tax credit under Section 601 of this
14         Act;
15             (G) An amount equal to the amount of the capital
16         gain deduction allowable under the Internal Revenue
17         Code, to the extent deducted from gross income in the
18         computation of taxable income;
19             (G-5) For taxable years ending after December 31,
20         1997, an amount equal to any eligible remediation costs
21         that the trust or estate deducted in computing adjusted
22         gross income and for which the trust or estate claims a
23         credit under subsection (l) of Section 201;
24             (G-10) For taxable years 2001 and thereafter, an
25         amount equal to the bonus depreciation deduction taken
26         on the taxpayer's federal income tax return for the

 

 

HB5374 - 52 - LRB096 19631 HLH 35027 b

1         taxable year under subsection (k) of Section 168 of the
2         Internal Revenue Code; and
3             (G-11) If the taxpayer sells, transfers, abandons,
4         or otherwise disposes of property for which the
5         taxpayer was required in any taxable year to make an
6         addition modification under subparagraph (G-10), then
7         an amount equal to the aggregate amount of the
8         deductions taken in all taxable years under
9         subparagraph (R) with respect to that property.
10             If the taxpayer continues to own property through
11         the last day of the last tax year for which the
12         taxpayer may claim a depreciation deduction for
13         federal income tax purposes and for which the taxpayer
14         was allowed in any taxable year to make a subtraction
15         modification under subparagraph (R), then an amount
16         equal to that subtraction modification.
17             The taxpayer is required to make the addition
18         modification under this subparagraph only once with
19         respect to any one piece of property;
20             (G-12) An amount equal to the amount otherwise
21         allowed as a deduction in computing base income for
22         interest paid, accrued, or incurred, directly or
23         indirectly, (i) for taxable years ending on or after
24         December 31, 2004, to a foreign person who would be a
25         member of the same unitary business group but for the
26         fact that the foreign person's business activity

 

 

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1         outside the United States is 80% or more of the foreign
2         person's total business activity and (ii) for taxable
3         years ending on or after December 31, 2008, to a person
4         who would be a member of the same unitary business
5         group but for the fact that the person is prohibited
6         under Section 1501(a)(27) from being included in the
7         unitary business group because he or she is ordinarily
8         required to apportion business income under different
9         subsections of Section 304. The addition modification
10         required by this subparagraph shall be reduced to the
11         extent that dividends were included in base income of
12         the unitary group for the same taxable year and
13         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 person who
24             is subject in a foreign country or state, other
25             than a state which requires mandatory unitary
26             reporting, to a tax on or measured by net income

 

 

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

 

 

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1             if the taxpayer and the Director agree in writing
2             to the application or use of an alternative method
3             of apportionment under Section 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             (G-13) An amount equal to the amount of intangible
14         expenses and costs otherwise allowed as a deduction in
15         computing base income, and that were paid, accrued, or
16         incurred, directly or indirectly, (i) for taxable
17         years ending on or after December 31, 2004, to a
18         foreign person who would be a member of the same
19         unitary business group but for the fact that the
20         foreign person's business activity outside the United
21         States is 80% or more of that person's total business
22         activity and (ii) for taxable years ending on or after
23         December 31, 2008, to a person who would be a member of
24         the same unitary business group but for the fact that
25         the person is prohibited under Section 1501(a)(27)
26         from being included in the unitary business group

 

 

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

 

 

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

 

 

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1                 income tax, and is paid pursuant to a contract
2                 or agreement that reflects arm's-length terms;
3                 or
4                 (iii) any item of intangible expense or cost
5             paid, accrued, or incurred, directly or
6             indirectly, from a transaction with a person if the
7             taxpayer establishes by clear and convincing
8             evidence, that the adjustments are unreasonable;
9             or if the taxpayer and the Director agree in
10             writing to the application or use of an alternative
11             method of apportionment under Section 304(f);
12                 Nothing in this subsection shall preclude the
13             Director from making any other adjustment
14             otherwise allowed under Section 404 of this Act for
15             any tax year beginning after the effective date of
16             this amendment provided such adjustment is made
17             pursuant to regulation adopted by the Department
18             and such regulations provide methods and standards
19             by which the Department will utilize its authority
20             under Section 404 of this Act;
21             (G-14) For taxable years ending on or after
22         December 31, 2008, an amount equal to the amount of
23         insurance premium expenses and costs otherwise allowed
24         as a deduction in computing base income, and that were
25         paid, accrued, or incurred, directly or indirectly, to
26         a person who would be a member of the same unitary

 

 

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1         business group but for the fact that the person is
2         prohibited under Section 1501(a)(27) from being
3         included in the unitary business group because he or
4         she is ordinarily required to apportion business
5         income under different subsections of Section 304. The
6         addition modification required by this subparagraph
7         shall be reduced to the extent that dividends were
8         included in base income of the unitary group for the
9         same taxable year and received by the taxpayer or by a
10         member of the taxpayer's unitary business group
11         (including amounts included in gross income under
12         Sections 951 through 964 of the Internal Revenue Code
13         and amounts included in gross income under Section 78
14         of the Internal Revenue Code) with respect to the stock
15         of the same person to whom the premiums and costs were
16         directly or indirectly paid, incurred, or accrued. The
17         preceding sentence does not apply to the extent that
18         the same dividends caused a reduction to the addition
19         modification required under Section 203(c)(2)(G-12) or
20         Section 203(c)(2)(G-13) of this Act;
21             (G-15) An amount equal to the credit allowable to
22         the taxpayer under Section 218(a) of this Act,
23         determined without regard to Section 218(c) of this
24         Act;
25     and by deducting from the total so obtained the sum of the
26     following amounts:

 

 

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

 

 

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1             (L) With the exception of any amounts subtracted
2         under subparagraph (K), an amount equal to the sum of
3         all amounts disallowed as deductions by (i) Sections
4         171(a) (2) and 265(a)(2) of the Internal Revenue Code,
5         as now or hereafter amended, and all amounts of
6         expenses allocable to interest and disallowed as
7         deductions by Section 265(1) of the Internal Revenue
8         Code of 1954, as now or hereafter amended; and (ii) for
9         taxable years ending on or after August 13, 1999,
10         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
11         the Internal Revenue Code; the provisions of this
12         subparagraph are exempt from the provisions of Section
13         250;
14             (M) An amount equal to those dividends included in
15         such total which were paid by a corporation which
16         conducts business operations in an Enterprise Zone or
17         zones created under the Illinois Enterprise Zone Act or
18         a River Edge Redevelopment Zone or zones created under
19         the River Edge Redevelopment Zone Act and conducts
20         substantially all of its operations in an Enterprise
21         Zone or Zones or a River Edge Redevelopment Zone or
22         zones. This subparagraph (M) is exempt from the
23         provisions of Section 250;
24             (N) An amount equal to any contribution made to a
25         job training project established pursuant to the Tax
26         Increment Allocation Redevelopment Act;

 

 

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

 

 

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

 

 

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

 

 

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1         depreciation deduction taken on that property on the
2         taxpayer's federal income tax return under subsection
3         (k) of Section 168 of the Internal Revenue Code. This
4         subparagraph (R) is exempt from the provisions of
5         Section 250;
6             (S) If the taxpayer sells, transfers, abandons, or
7         otherwise disposes of property for which the taxpayer
8         was required in any taxable year to make an addition
9         modification under subparagraph (G-10), then an amount
10         equal to that addition modification.
11             If the taxpayer continues to own property through
12         the last day of the last tax year for which the
13         taxpayer may claim a depreciation deduction for
14         federal income tax purposes and for which the taxpayer
15         was required in any taxable year to make an addition
16         modification under subparagraph (G-10), then an amount
17         equal to that addition modification.
18             The taxpayer is allowed to take the deduction under
19         this subparagraph only once with respect to any one
20         piece of property.
21             This subparagraph (S) is exempt from the
22         provisions of Section 250;
23             (T) The amount of (i) any interest income (net of
24         the deductions allocable thereto) taken into account
25         for the taxable year with respect to a transaction with
26         a taxpayer that is required to make an addition

 

 

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1         modification with respect to such transaction under
2         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
3         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
4         the amount of such addition modification and (ii) any
5         income from intangible property (net of the deductions
6         allocable thereto) taken into account for the taxable
7         year with respect to a transaction with a taxpayer that
8         is required to make an addition modification with
9         respect to such transaction under Section
10         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
11         203(d)(2)(D-8), but not to exceed the amount of such
12         addition modification. This subparagraph (T) is exempt
13         from the provisions of Section 250;
14             (U) An amount equal to the interest income taken
15         into account for the taxable year (net of the
16         deductions allocable thereto) with respect to
17         transactions with (i) a foreign person who would be a
18         member of the taxpayer's unitary business group but for
19         the fact the foreign person's business activity
20         outside the United States is 80% or more of that
21         person's total business activity and (ii) for taxable
22         years ending on or after December 31, 2008, to a person
23         who would be a member of the same unitary business
24         group but for the fact that the person is prohibited
25         under Section 1501(a)(27) from being included in the
26         unitary business group because he or she is ordinarily

 

 

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1         required to apportion business income under different
2         subsections of Section 304, but not to exceed the
3         addition modification required to be made for the same
4         taxable year under Section 203(c)(2)(G-12) for
5         interest paid, accrued, or incurred, directly or
6         indirectly, to the same person. This subparagraph (U)
7         is exempt from the provisions of Section 250; and
8             (V) An amount equal to the income from intangible
9         property taken into account for the taxable year (net
10         of the deductions allocable thereto) with respect to
11         transactions with (i) a foreign person who would be a
12         member of the taxpayer's unitary business group but for
13         the fact that the foreign person's business activity
14         outside the United States is 80% or more of that
15         person's total business activity and (ii) for taxable
16         years ending on or after December 31, 2008, to a person
17         who would be a member of the same unitary business
18         group but for the fact that the person is prohibited
19         under Section 1501(a)(27) from being included in the
20         unitary business group because he or she is ordinarily
21         required to apportion business income under different
22         subsections of Section 304, but not to exceed the
23         addition modification required to be made for the same
24         taxable year under Section 203(c)(2)(G-13) for
25         intangible expenses and costs paid, accrued, or
26         incurred, directly or indirectly, to the same foreign

 

 

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1         person. This subparagraph (V) is exempt from the
2         provisions of Section 250.
3         (3) Limitation. The amount of any modification
4     otherwise required under this subsection shall, under
5     regulations prescribed by the Department, be adjusted by
6     any amounts included therein which were properly paid,
7     credited, or required to be distributed, or permanently set
8     aside for charitable purposes pursuant to Internal Revenue
9     Code Section 642(c) during the taxable year.
 
10     (d) Partnerships.
11         (1) In general. In the case of a partnership, base
12     income means an amount equal to the taxpayer's taxable
13     income for the taxable year as modified by paragraph (2).
14         (2) Modifications. The taxable income referred to in
15     paragraph (1) shall be modified by adding thereto the sum
16     of the following amounts:
17             (A) An amount equal to all amounts paid or accrued
18         to the taxpayer as interest or dividends during the
19         taxable year to the extent excluded from gross income
20         in the computation of taxable income;
21             (B) An amount equal to the amount of tax imposed by
22         this Act to the extent deducted from gross income for
23         the taxable year;
24             (C) The amount of deductions allowed to the
25         partnership pursuant to Section 707 (c) of the Internal

 

 

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

 

 

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1         respect to any one piece of property;
2             (D-7) An amount equal to the amount otherwise
3         allowed as a deduction in computing base income for
4         interest paid, accrued, or incurred, directly or
5         indirectly, (i) for taxable years ending on or after
6         December 31, 2004, to a foreign person who would be a
7         member of the same unitary business group but for the
8         fact the foreign person's business activity outside
9         the United States is 80% or more of the foreign
10         person's total business activity and (ii) for taxable
11         years ending on or after December 31, 2008, to a person
12         who would be a member of the same unitary business
13         group but for the fact that the person is prohibited
14         under Section 1501(a)(27) from being included in the
15         unitary business group because he or she is ordinarily
16         required to apportion business income under different
17         subsections of Section 304. The addition modification
18         required by this subparagraph shall be reduced to the
19         extent that dividends were included in base income of
20         the unitary group for the same taxable year and
21         received by the taxpayer or by a member of the
22         taxpayer's unitary business group (including amounts
23         included in gross income pursuant to Sections 951
24         through 964 of the Internal Revenue Code and amounts
25         included in gross income under Section 78 of the
26         Internal Revenue Code) with respect to the stock of the

 

 

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

 

 

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

 

 

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1         unitary business group but for the fact that the
2         foreign person's business activity outside the United
3         States is 80% or more of that person's total business
4         activity and (ii) for taxable years ending on or after
5         December 31, 2008, to a person who would be a member of
6         the same unitary business group but for the fact that
7         the person is prohibited under Section 1501(a)(27)
8         from being included in the unitary business group
9         because he or she is ordinarily required to apportion
10         business income under different subsections of Section
11         304. The addition modification required by this
12         subparagraph shall be reduced to the extent that
13         dividends were included in base income of the unitary
14         group for the same taxable year and received by the
15         taxpayer or by a member of the taxpayer's unitary
16         business group (including amounts included in gross
17         income pursuant to Sections 951 through 964 of the
18         Internal Revenue Code and amounts included in gross
19         income under Section 78 of the Internal Revenue Code)
20         with respect to the stock of the same person to whom
21         the intangible expenses and costs were directly or
22         indirectly paid, incurred or accrued. The preceding
23         sentence shall not apply to the extent that the same
24         dividends caused a reduction to the addition
25         modification required under Section 203(d)(2)(D-7) of
26         this Act. As used in this subparagraph, the term

 

 

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

 

 

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

 

 

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1             by which the Department will utilize its authority
2             under Section 404 of this Act;
3             (D-9) For taxable years ending on or after December
4         31, 2008, an amount equal to the amount of insurance
5         premium expenses and costs otherwise allowed as a
6         deduction in computing base income, and that were paid,
7         accrued, or incurred, directly or indirectly, to a
8         person who would be a member of the same unitary
9         business group but for the fact that the person is
10         prohibited under Section 1501(a)(27) from being
11         included in the unitary business group because he or
12         she is ordinarily required to apportion business
13         income under different subsections of Section 304. The
14         addition modification required by this subparagraph
15         shall be reduced to the extent that dividends were
16         included in base income of the unitary group for the
17         same taxable year and received by the taxpayer or by a
18         member of the taxpayer's unitary business group
19         (including amounts included in gross income under
20         Sections 951 through 964 of the Internal Revenue Code
21         and amounts included in gross income under Section 78
22         of the Internal Revenue Code) with respect to the stock
23         of the same person to whom the premiums and costs were
24         directly or indirectly paid, incurred, or accrued. The
25         preceding sentence does not apply to the extent that
26         the same dividends caused a reduction to the addition

 

 

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1         modification required under Section 203(d)(2)(D-7) or
2         Section 203(d)(2)(D-8) of this Act;
3             (D-10) An amount equal to the credit allowable to
4         the taxpayer under Section 218(a) of this Act,
5         determined without regard to Section 218(c) of this
6         Act;
7     and by deducting from the total so obtained the following
8     amounts:
9             (E) The valuation limitation amount;
10             (F) An amount equal to the amount of any tax
11         imposed by this Act which was refunded to the taxpayer
12         and included in such total for the taxable year;
13             (G) An amount equal to all amounts included in
14         taxable income as modified by subparagraphs (A), (B),
15         (C) and (D) which are exempt from taxation by this
16         State either by reason of its statutes or Constitution
17         or by reason of the Constitution, treaties or statutes
18         of the United States; provided that, in the case of any
19         statute of this State that exempts income derived from
20         bonds or other obligations from the tax imposed under
21         this Act, the amount exempted shall be the interest net
22         of bond premium amortization;
23             (H) Any income of the partnership which
24         constitutes personal service income as defined in
25         Section 1348 (b) (1) of the Internal Revenue Code (as
26         in effect December 31, 1981) or a reasonable allowance

 

 

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1         for compensation paid or accrued for services rendered
2         by partners to the partnership, whichever is greater;
3             (I) An amount equal to all amounts of income
4         distributable to an entity subject to the Personal
5         Property Tax Replacement Income Tax imposed by
6         subsections (c) and (d) of Section 201 of this Act
7         including amounts distributable to organizations
8         exempt from federal income tax by reason of Section
9         501(a) of the Internal Revenue Code, provided that the
10         deduction under this subparagraph (I) shall not be
11         allowed to a publicly traded partnership under Section
12         7704 of the Internal Revenue Code for any taxable year
13         ending on or after December 31, 2009;
14             (J) With the exception of any amounts subtracted
15         under subparagraph (G), an amount equal to the sum of
16         all amounts disallowed as deductions by (i) Sections
17         171(a) (2), and 265(2) of the Internal Revenue Code of
18         1954, as now or hereafter amended, and all amounts of
19         expenses allocable to interest and disallowed as
20         deductions by Section 265(1) of the Internal Revenue
21         Code, as now or hereafter amended; and (ii) for taxable
22         years ending on or after August 13, 1999, Sections
23         171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
24         Internal Revenue Code; the provisions of this
25         subparagraph are exempt from the provisions of Section
26         250;

 

 

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1             (K) An amount equal to those dividends included in
2         such total which were paid by a corporation which
3         conducts business operations in an Enterprise Zone or
4         zones created under the Illinois Enterprise Zone Act,
5         enacted by the 82nd General Assembly, or a River Edge
6         Redevelopment Zone or zones created under the River
7         Edge Redevelopment Zone Act and conducts substantially
8         all of its operations in an Enterprise Zone or Zones or
9         from a River Edge Redevelopment Zone or zones. This
10         subparagraph (K) is exempt from the provisions of
11         Section 250;
12             (L) An amount equal to any contribution made to a
13         job training project established pursuant to the Real
14         Property Tax Increment Allocation Redevelopment Act;
15             (M) An amount equal to those dividends included in
16         such total that were paid by a corporation that
17         conducts business operations in a federally designated
18         Foreign Trade Zone or Sub-Zone and that is designated a
19         High Impact Business located in Illinois; provided
20         that dividends eligible for the deduction provided in
21         subparagraph (K) of paragraph (2) of this subsection
22         shall not be eligible for the deduction provided under
23         this subparagraph (M);
24             (N) An amount equal to the amount of the deduction
25         used to compute the federal income tax credit for
26         restoration of substantial amounts held under claim of

 

 

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1         right for the taxable year pursuant to Section 1341 of
2         the Internal Revenue Code of 1986;
3             (O) For taxable years 2001 and thereafter, for the
4         taxable year in which the bonus depreciation deduction
5         is taken on the taxpayer's federal income tax return
6         under subsection (k) of Section 168 of the Internal
7         Revenue Code and for each applicable taxable year
8         thereafter, an amount equal to "x", where:
9                 (1) "y" equals the amount of the depreciation
10             deduction taken for the taxable year on the
11             taxpayer's federal income tax return on property
12             for which the bonus depreciation deduction was
13             taken in any year under subsection (k) of Section
14             168 of the Internal Revenue Code, but not including
15             the bonus depreciation deduction;
16                 (2) for taxable years ending on or before
17             December 31, 2005, "x" equals "y" multiplied by 30
18             and then divided by 70 (or "y" multiplied by
19             0.429); and
20                 (3) for taxable years ending after December
21             31, 2005:
22                     (i) for property on which a bonus
23                 depreciation deduction of 30% of the adjusted
24                 basis was taken, "x" equals "y" multiplied by
25                 30 and then divided by 70 (or "y" multiplied by
26                 0.429); and

 

 

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

 

 

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1         piece of property.
2             This subparagraph (P) is exempt from the
3         provisions of Section 250;
4             (Q) The amount of (i) any interest income (net of
5         the deductions allocable thereto) taken into account
6         for the taxable year with respect to a transaction with
7         a taxpayer that is required to make an addition
8         modification with respect to such transaction under
9         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
10         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
11         the amount of such addition modification and (ii) any
12         income from intangible property (net of the deductions
13         allocable thereto) taken into account for the taxable
14         year with respect to a transaction with a taxpayer that
15         is required to make an addition modification with
16         respect to such transaction under Section
17         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
18         203(d)(2)(D-8), but not to exceed the amount of such
19         addition modification. This subparagraph (Q) is exempt
20         from Section 250;
21             (R) An amount equal to the interest income taken
22         into account for the taxable year (net of the
23         deductions allocable thereto) with respect to
24         transactions with (i) 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 and (ii) for taxable
3         years ending on or after December 31, 2008, to a person
4         who would be a member of the same unitary business
5         group but for the fact that the person is prohibited
6         under Section 1501(a)(27) from being included in the
7         unitary business group because he or she is ordinarily
8         required to apportion business income under different
9         subsections of Section 304, but not to exceed the
10         addition modification required to be made for the same
11         taxable year under Section 203(d)(2)(D-7) for interest
12         paid, accrued, or incurred, directly or indirectly, to
13         the same person. This subparagraph (R) is exempt from
14         Section 250; and
15             (S) An amount equal to the income from intangible
16         property taken into account for the taxable year (net
17         of the deductions allocable thereto) with respect to
18         transactions with (i) 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 and (ii) for taxable
23         years ending on or after December 31, 2008, to a person
24         who would be a member of the same unitary business
25         group but for the fact that the person is prohibited
26         under Section 1501(a)(27) from being included in the

 

 

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1         unitary business group because he or she is ordinarily
2         required to apportion business income under different
3         subsections of Section 304, but not to exceed the
4         addition modification required to be made for the same
5         taxable year under Section 203(d)(2)(D-8) for
6         intangible expenses and costs paid, accrued, or
7         incurred, directly or indirectly, to the same person.
8         This subparagraph (S) is exempt from Section 250.
 
9     (e) Gross income; adjusted gross income; taxable income.
10         (1) In general. Subject to the provisions of paragraph
11     (2) and subsection (b) (3), for purposes of this Section
12     and Section 803(e), a taxpayer's gross income, adjusted
13     gross income, or taxable income for the taxable year shall
14     mean the amount of gross income, adjusted gross income or
15     taxable income properly reportable for federal income tax
16     purposes for the taxable year under the provisions of the
17     Internal Revenue Code. Taxable income may be less than
18     zero. However, for taxable years ending on or after
19     December 31, 1986, net operating loss carryforwards from
20     taxable years ending prior to December 31, 1986, may not
21     exceed the sum of federal taxable income for the taxable
22     year before net operating loss deduction, plus the excess
23     of addition modifications over subtraction modifications
24     for the taxable year. For taxable years ending prior to
25     December 31, 1986, taxable income may never be an amount in

 

 

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

 

 

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1             (B) Certain other insurance companies. In the case
2         of mutual insurance companies subject to the tax
3         imposed by Section 831 of the Internal Revenue Code,
4         insurance company taxable income;
5             (C) Regulated investment companies. In the case of
6         a regulated investment company subject to the tax
7         imposed by Section 852 of the Internal Revenue Code,
8         investment company taxable income;
9             (D) Real estate investment trusts. In the case of a
10         real estate investment trust subject to the tax imposed
11         by Section 857 of the Internal Revenue Code, real
12         estate investment trust taxable income;
13             (E) Consolidated corporations. In the case of a
14         corporation which is a member of an affiliated group of
15         corporations filing a consolidated income tax return
16         for the taxable year for federal income tax purposes,
17         taxable income determined as if such corporation had
18         filed a separate return for federal income tax purposes
19         for the taxable year and each preceding taxable year
20         for which it was a member of an affiliated group. For
21         purposes of this subparagraph, the taxpayer's separate
22         taxable income shall be determined as if the election
23         provided by Section 243(b) (2) of the Internal Revenue
24         Code had been in effect for all such years;
25             (F) Cooperatives. In the case of a cooperative
26         corporation or association, the taxable income of such

 

 

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1         organization determined in accordance with the
2         provisions of Section 1381 through 1388 of the Internal
3         Revenue Code;
4             (G) Subchapter S corporations. In the case of: (i)
5         a Subchapter S corporation for which there is in effect
6         an election for the taxable year under Section 1362 of
7         the Internal Revenue Code, the taxable income of such
8         corporation determined in accordance with Section
9         1363(b) of the Internal Revenue Code, except that
10         taxable income shall take into account those items
11         which are required by Section 1363(b)(1) of the
12         Internal Revenue Code to be separately stated; and (ii)
13         a Subchapter S corporation for which there is in effect
14         a federal election to opt out of the provisions of the
15         Subchapter S Revision Act of 1982 and have applied
16         instead the prior federal Subchapter S rules as in
17         effect on July 1, 1982, the taxable income of such
18         corporation determined in accordance with the federal
19         Subchapter S rules as in effect on July 1, 1982; and
20             (H) Partnerships. In the case of a partnership,
21         taxable income determined in accordance with Section
22         703 of the Internal Revenue Code, except that taxable
23         income shall take into account those items which are
24         required by Section 703(a)(1) to be separately stated
25         but which would be taken into account by an individual
26         in calculating his taxable income.

 

 

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1         (3) Recapture of business expenses on disposition of
2     asset or business. Notwithstanding any other law to the
3     contrary, if in prior years income from an asset or
4     business has been classified as business income and in a
5     later year is demonstrated to be non-business income, then
6     all expenses, without limitation, deducted in such later
7     year and in the 2 immediately preceding taxable years
8     related to that asset or business that generated the
9     non-business income shall be added back and recaptured as
10     business income in the year of the disposition of the asset
11     or business. Such amount shall be apportioned to Illinois
12     using the greater of the apportionment fraction computed
13     for the business under Section 304 of this Act for the
14     taxable year or the average of the apportionment fractions
15     computed for the business under Section 304 of this Act for
16     the taxable year and for the 2 immediately preceding
17     taxable years.
 
18     (f) Valuation limitation amount.
19         (1) In general. The valuation limitation amount
20     referred to in subsections (a) (2) (G), (c) (2) (I) and
21     (d)(2) (E) is an amount equal to:
22             (A) The sum of the pre-August 1, 1969 appreciation
23         amounts (to the extent consisting of gain reportable
24         under the provisions of Section 1245 or 1250 of the
25         Internal Revenue Code) for all property in respect of

 

 

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1         which such gain was reported for the taxable year; plus
2             (B) The lesser of (i) the sum of the pre-August 1,
3         1969 appreciation amounts (to the extent consisting of
4         capital gain) for all property in respect of which such
5         gain was reported for federal income tax purposes for
6         the taxable year, or (ii) the net capital gain for the
7         taxable year, reduced in either case by any amount of
8         such gain included in the amount determined under
9         subsection (a) (2) (F) or (c) (2) (H).
10         (2) Pre-August 1, 1969 appreciation amount.
11             (A) If the fair market value of property referred
12         to in paragraph (1) was readily ascertainable on August
13         1, 1969, the pre-August 1, 1969 appreciation amount for
14         such property is the lesser of (i) the excess of such
15         fair market value over the taxpayer's basis (for
16         determining gain) for such property on that date
17         (determined under the Internal Revenue Code as in
18         effect on that date), or (ii) the total gain realized
19         and reportable for federal income tax purposes in
20         respect of the sale, exchange or other disposition of
21         such property.
22             (B) If the fair market value of property referred
23         to in paragraph (1) was not readily ascertainable on
24         August 1, 1969, the pre-August 1, 1969 appreciation
25         amount for such property is that amount which bears the
26         same ratio to the total gain reported in respect of the

 

 

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1         property for federal income tax purposes for the
2         taxable year, as the number of full calendar months in
3         that part of the taxpayer's holding period for the
4         property ending July 31, 1969 bears to the number of
5         full calendar months in the taxpayer's entire holding
6         period for the property.
7             (C) The Department shall prescribe such
8         regulations as may be necessary to carry out the
9         purposes of this paragraph.
 
10     (g) Double deductions. Unless specifically provided
11 otherwise, nothing in this Section shall permit the same item
12 to be deducted more than once.
 
13     (h) Legislative intention. Except as expressly provided by
14 this Section there shall be no modifications or limitations on
15 the amounts of income, gain, loss or deduction taken into
16 account in determining gross income, adjusted gross income or
17 taxable income for federal income tax purposes for the taxable
18 year, or in the amount of such items entering into the
19 computation of base income and net income under this Act for
20 such taxable year, whether in respect of property values as of
21 August 1, 1969 or otherwise.
22 (Source: P.A. 95-23, eff. 8-3-07; 95-233, eff. 8-16-07; 95-286,
23 eff. 8-20-07; 95-331, eff. 8-21-07; 95-707, eff. 1-11-08;
24 95-876, eff. 8-21-08; 96-45, eff. 7-15-09; 96-120, eff. 8-4-09;

 

 

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1 96-198, eff. 8-10-09; 96-328, eff. 8-11-09; 96-520, eff.
2 8-14-09; 96-835, eff. 12-16-09.)