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91_HB1120eng HB1120 Engrossed LRB9100524PTpkA 1 AN ACT to amend the Illinois Income Tax Act by changing 2 Section 203. 3 Be it enacted by the People of the State of Illinois, 4 represented in the General Assembly: 5 Section 5. The Illinois Income Tax Act is amended by 6 changing Section 203 as follows: 7 (35 ILCS 5/203) (from Ch. 120, par. 2-203) 8 Sec. 203. Base income defined. 9 (a) Individuals. 10 (1) In general. In the case of an individual, base 11 income means an amount equal to the taxpayer's adjusted 12 gross income for the taxable year as modified by 13 paragraph (2). 14 (2) Modifications. The adjusted gross income 15 referred to in paragraph (1) shall be modified by adding 16 thereto the sum of the following amounts: 17 (A) An amount equal to all amounts paid or 18 accrued to the taxpayer as interest or dividends 19 during the taxable year to the extent excluded from 20 gross income in the computation of adjusted gross 21 income, except stock dividends of qualified public 22 utilities described in Section 305(e) of the 23 Internal Revenue Code; 24 (B) An amount equal to the amount of tax 25 imposed by this Act to the extent deducted from 26 gross income in the computation of adjusted gross 27 income for the taxable year; 28 (C) An amount equal to the amount received 29 during the taxable year as a recovery or refund of 30 real property taxes paid with respect to the 31 taxpayer's principal residence under the Revenue Act HB1120 Engrossed -2- LRB9100524PTpkA 1 of 1939 and for which a deduction was previously 2 taken under subparagraph (L) of this paragraph (2) 3 prior to July 1, 1991, the retrospective application 4 date of Article 4 of Public Act 87-17. In the case 5 of multi-unit or multi-use structures and farm 6 dwellings, the taxes on the taxpayer's principal 7 residence shall be that portion of the total taxes 8 for the entire property which is attributable to 9 such principal residence; 10 (D) An amount equal to the amount of the 11 capital gain deduction allowable under the Internal 12 Revenue Code, to the extent deducted from gross 13 income in the computation of adjusted gross income; 14 (D-5) An amount, to the extent not included in 15 adjusted gross income, equal to the amount of money 16 withdrawn by the taxpayer in the taxable year from a 17 medical care savings account and the interest earned 18 on the account in the taxable year of a withdrawal 19 pursuant to subsection (b) of Section 20 of the 20 Medical Care Savings Account Act; and 21 (D-10) For taxable years ending after December 22 31, 1997, an amount equal to any eligible 23 remediation costs that the individual deducted in 24 computing adjusted gross income and for which the 25 individual claims a credit under subsection (l) of 26 Section 201; 27 and by deducting from the total so obtained the sum of 28 the following amounts: 29 (E) Any amount included in such total in 30 respect of any compensation (including but not 31 limited to any compensation paid or accrued to a 32 serviceman while a prisoner of war or missing in 33 action) paid to a resident by reason of being on 34 active duty in the Armed Forces of the United States HB1120 Engrossed -3- LRB9100524PTpkA 1 and in respect of any compensation paid or accrued 2 to a resident who as a governmental employee was a 3 prisoner of war or missing in action, and in respect 4 of any compensation paid to a resident in 1971 or 5 thereafter for annual training performed pursuant to 6 Sections 502 and 503, Title 32, United States Code 7 as a member of the Illinois National Guard; 8 (F) An amount equal to all amounts included in 9 such total pursuant to the provisions of Sections 10 402(a), 402(c), 403(a), 403(b), 406(a), 407(a), and 11 408 of the Internal Revenue Code, or included in 12 such total as distributions under the provisions of 13 any retirement or disability plan for employees of 14 any governmental agency or unit, or retirement 15 payments to retired partners, which payments are 16 excluded in computing net earnings from self 17 employment by Section 1402 of the Internal Revenue 18 Code and regulations adopted pursuant thereto; 19 (G) The valuation limitation amount; 20 (H) An amount equal to the amount of any tax 21 imposed by this Act which was refunded to the 22 taxpayer and included in such total for the taxable 23 year; 24 (I) An amount equal to all amounts included in 25 such total pursuant to the provisions of Section 111 26 of the Internal Revenue Code as a recovery of items 27 previously deducted from adjusted gross income in 28 the computation of taxable income; 29 (J) An amount equal to those dividends 30 included in such total which were paid by a 31 corporation which conducts business operations in an 32 Enterprise Zone or zones created under the Illinois 33 Enterprise Zone Act, and conducts substantially all 34 of its operations in an Enterprise Zone or zones; HB1120 Engrossed -4- LRB9100524PTpkA 1 (K) An amount equal to those dividends 2 included in such total that were paid by a 3 corporation that conducts business operations in a 4 federally designated Foreign Trade Zone or Sub-Zone 5 and that is designated a High Impact Business 6 located in Illinois; provided that dividends 7 eligible for the deduction provided in subparagraph 8 (J) of paragraph (2) of this subsection shall not be 9 eligible for the deduction provided under this 10 subparagraph (K); 11 (L) For taxable years ending after December 12 31, 1983, an amount equal to all social security 13 benefits and railroad retirement benefits included 14 in such total pursuant to Sections 72(r) and 86 of 15 the Internal Revenue Code; 16 (M) With the exception of any amounts 17 subtracted under subparagraph (N), an amount equal 18 to the sum of all amounts disallowed as deductions 19 by Sections 171(a) (2), and 265(2) of the Internal 20 Revenue Code of 1954, as now or hereafter amended, 21 and all amounts of expenses allocable to interest 22 and disallowed as deductions by Section 265(1) of 23 the Internal Revenue Code of 1954, as now or 24 hereafter amended; 25 (N) An amount equal to all amounts included in 26 such total which are exempt from taxation by this 27 State either by reason of its statutes or 28 Constitution or by reason of the Constitution, 29 treaties or statutes of the United States; provided 30 that, in the case of any statute of this State that 31 exempts income derived from bonds or other 32 obligations from the tax imposed under this Act, the 33 amount exempted shall be the interest net of bond 34 premium amortization; HB1120 Engrossed -5- LRB9100524PTpkA 1 (O) An amount equal to any contribution made 2 to a job training project established pursuant to 3 the Tax Increment Allocation Redevelopment Act; 4 (P) An amount equal to the amount of the 5 deduction used to compute the federal income tax 6 credit for restoration of substantial amounts held 7 under claim of right for the taxable year pursuant 8 to Section 1341 of the Internal Revenue Code of 9 1986; 10 (Q) An amount equal to any amounts included in 11 such total, received by the taxpayer as an 12 acceleration in the payment of life, endowment or 13 annuity benefits in advance of the time they would 14 otherwise be payable as an indemnity for a terminal 15 illness; 16 (R) An amount equal to the amount of any 17 federal or State bonus paid to veterans of the 18 Persian Gulf War; 19 (S) An amount, to the extent included in 20 adjusted gross income, equal to the amount of a 21 contribution made in the taxable year on behalf of 22 the taxpayer to a medical care savings account 23 established under the Medical Care Savings Account 24 Act to the extent the contribution is accepted by 25 the account administrator as provided in that Act; 26 (T) An amount, to the extent included in 27 adjusted gross income, equal to the amount of 28 interest earned in the taxable year on a medical 29 care savings account established under the Medical 30 Care Savings Account Act on behalf of the taxpayer, 31 other than interest added pursuant to item (D-5) of 32 this paragraph (2); 33 (U) For one taxable year beginning on or after 34 January 1, 1994, an amount equal to the total amount HB1120 Engrossed -6- LRB9100524PTpkA 1 of tax imposed and paid under subsections (a) and 2 (b) of Section 201 of this Act on grant amounts 3 received by the taxpayer under the Nursing Home 4 Grant Assistance Act during the taxpayer's taxable 5 years 1992 and 1993; 6 (V) Beginning with tax years ending on or 7 after December 31, 1995 and ending with tax years 8 ending on or before December 31, 1999, an amount 9 equal to the amount paid by a taxpayer who is a 10 self-employed taxpayer, a partner of a partnership, 11 or a shareholder in a Subchapter S corporation for 12 health insurance or long-term care insurance for 13 that taxpayer or that taxpayer's spouse or 14 dependents, to the extent that the amount paid for 15 that health insurance or long-term care insurance 16 may be deducted under Section 213 of the Internal 17 Revenue Code of 1986, has not been deducted on the 18 federal income tax return of the taxpayer, and does 19 not exceed the taxable income attributable to that 20 taxpayer's income, self-employment income, or 21 Subchapter S corporation income; except that no 22 deduction shall be allowed under this item (V) if 23 the taxpayer is eligible to participate in any 24 health insurance or long-term care insurance plan of 25 an employer of the taxpayer or the taxpayer's 26 spouse. The amount of the health insurance and 27 long-term care insurance subtracted under this item 28 (V) shall be determined by multiplying total health 29 insurance and long-term care insurance premiums paid 30 by the taxpayer times a number that represents the 31 fractional percentage of eligible medical expenses 32 under Section 213 of the Internal Revenue Code of 33 1986 not actually deducted on the taxpayer's federal 34 income tax return;andHB1120 Engrossed -7- LRB9100524PTpkA 1 (W) For taxable years beginning on or after 2 January 1, 1998, all amounts included in the 3 taxpayer's federal gross income in the taxable year 4 from amounts converted from a regular IRA to a Roth 5 IRA. This paragraph is exempt from the provisions of 6 Section 250; and.7 (X) For taxable year 1999 and thereafter, an 8 amount equal to the amount of any (i) distributions, 9 to the extent includible in gross income for federal 10 income tax purposes, made to the taxpayer because of 11 his or her status as a victim of persecution for 12 racial or religious reasons by Nazi Germany or any 13 other Axis regime or as an heir of the victim and 14 (ii) items of income, to the extent includible in 15 gross income for federal income tax purposes, 16 attributable to, derived from or in any way related 17 to assets stolen from, hidden from, or otherwise 18 lost to a victim of persecution for racial or 19 religious reasons by Nazi Germany or any other Axis 20 regime immediately prior to, during, and immediately 21 after World War II, including, but not limited to, 22 interest on the proceeds receivable as insurance 23 under policies issued to a victim of persecution for 24 racial or religious reasons by Nazi Germany or any 25 other Axis regime by European insurance companies 26 immediately prior to and during World War II; 27 provided, however, this subtraction from federal 28 adjusted gross income does not apply to assets 29 acquired with such assets or with the proceeds from 30 the sale of such assets; provided, further, this 31 paragraph shall only apply to a taxpayer who was the 32 first recipient of such assets after their recovery 33 and who is a victim of persecution for racial or 34 religious reasons by Nazi Germany or any other Axis HB1120 Engrossed -8- LRB9100524PTpkA 1 regime or as an heir of the victim. The amount of 2 and the eligibility for any public assistance, 3 benefit, or similar entitlement is not affected by 4 the inclusion of items (i) and (ii) of this 5 paragraph in gross income for federal income tax 6 purposes. This paragraph is exempt from the 7 provisions of Section 250. 8 (b) Corporations. 9 (1) In general. In the case of a corporation, base 10 income means an amount equal to the taxpayer's taxable 11 income for the taxable year as modified by paragraph (2). 12 (2) Modifications. The taxable income referred to 13 in paragraph (1) shall be modified by adding thereto the 14 sum of the following amounts: 15 (A) An amount equal to all amounts paid or 16 accrued to the taxpayer as interest and all 17 distributions received from regulated investment 18 companies during the taxable year to the extent 19 excluded from gross income in the computation of 20 taxable income; 21 (B) An amount equal to the amount of tax 22 imposed by this Act to the extent deducted from 23 gross income in the computation of taxable income 24 for the taxable year; 25 (C) In the case of a regulated investment 26 company, an amount equal to the excess of (i) the 27 net long-term capital gain for the taxable year, 28 over (ii) the amount of the capital gain dividends 29 designated as such in accordance with Section 30 852(b)(3)(C) of the Internal Revenue Code and any 31 amount designated under Section 852(b)(3)(D) of the 32 Internal Revenue Code, attributable to the taxable 33 year.(this amendatory Act of 1995 (Public Act 34 89-89) is declarative of existing law and is not a HB1120 Engrossed -9- LRB9100524PTpkA 1 new enactment);.2 (D) The amount of any net operating loss 3 deduction taken in arriving at taxable income, other 4 than a net operating loss carried forward from a 5 taxable year ending prior to December 31, 1986;and6 (E) For taxable years in which a net operating 7 loss carryback or carryforward from a taxable year 8 ending prior to December 31, 1986 is an element of 9 taxable income under paragraph (1) of subsection (e) 10 or subparagraph (E) of paragraph (2) of subsection 11 (e), the amount by which addition modifications 12 other than those provided by this subparagraph (E) 13 exceeded subtraction modifications in such earlier 14 taxable year, with the following limitations applied 15 in the order that they are listed: 16 (i) the addition modification relating to 17 the net operating loss carried back or forward 18 to the taxable year from any taxable year 19 ending prior to December 31, 1986 shall be 20 reduced by the amount of addition modification 21 under this subparagraph (E) which related to 22 that net operating loss and which was taken 23 into account in calculating the base income of 24 an earlier taxable year, and 25 (ii) the addition modification relating 26 to the net operating loss carried back or 27 forward to the taxable year from any taxable 28 year ending prior to December 31, 1986 shall 29 not exceed the amount of such carryback or 30 carryforward; 31 For taxable years in which there is a net 32 operating loss carryback or carryforward from more 33 than one other taxable year ending prior to December 34 31, 1986, the addition modification provided in this HB1120 Engrossed -10- LRB9100524PTpkA 1 subparagraph (E) shall be the sum of the amounts 2 computed independently under the preceding 3 provisions of this subparagraph (E) for each such 4 taxable year;,and 5 (E-5) For taxable years ending after December 6 31, 1997, an amount equal to any eligible 7 remediation costs that the corporation deducted in 8 computing adjusted gross income and for which the 9 corporation claims a credit under subsection (l) of 10 Section 201; 11 and by deducting from the total so obtained the sum of 12 the following amounts: 13 (F) An amount equal to the amount of any tax 14 imposed by this Act which was refunded to the 15 taxpayer and included in such total for the taxable 16 year; 17 (G) An amount equal to any amount included in 18 such total under Section 78 of the Internal Revenue 19 Code; 20 (H) In the case of a regulated investment 21 company, an amount equal to the amount of exempt 22 interest dividends as defined in subsection (b) (5) 23 of Section 852 of the Internal Revenue Code, paid to 24 shareholders for the taxable year; 25 (I) With the exception of any amounts 26 subtracted under subparagraph (J), an amount equal 27 to the sum of all amounts disallowed as deductions 28 by Sections 171(a) (2), and 265(a)(2) and amounts 29 disallowed as interest expense by Section 291(a)(3) 30 of the Internal Revenue Code, as now or hereafter 31 amended, and all amounts of expenses allocable to 32 interest and disallowed as deductions by Section 33 265(a)(1) of the Internal Revenue Code, as now or 34 hereafter amended; HB1120 Engrossed -11- LRB9100524PTpkA 1 (J) An amount equal to all amounts included in 2 such total which are exempt from taxation by this 3 State either by reason of its statutes or 4 Constitution or by reason of the Constitution, 5 treaties or statutes of the United States; provided 6 that, in the case of any statute of this State that 7 exempts income derived from bonds or other 8 obligations from the tax imposed under this Act, the 9 amount exempted shall be the interest net of bond 10 premium amortization; 11 (K) An amount equal to those dividends 12 included in such total which were paid by a 13 corporation which conducts business operations in an 14 Enterprise Zone or zones created under the Illinois 15 Enterprise Zone Act and conducts substantially all 16 of its operations in an Enterprise Zone or zones; 17 (L) An amount equal to those dividends 18 included in such total that were paid by a 19 corporation that conducts business operations in a 20 federally designated Foreign Trade Zone or Sub-Zone 21 and that is designated a High Impact Business 22 located in Illinois; provided that dividends 23 eligible for the deduction provided in subparagraph 24 (K) of paragraph 2 of this subsection shall not be 25 eligible for the deduction provided under this 26 subparagraph (L); 27 (M) For any taxpayer that is a financial 28 organization within the meaning of Section 304(c) of 29 this Act, an amount included in such total as 30 interest income from a loan or loans made by such 31 taxpayer to a borrower, to the extent that such a 32 loan is secured by property which is eligible for 33 the Enterprise Zone Investment Credit. To determine 34 the portion of a loan or loans that is secured by HB1120 Engrossed -12- LRB9100524PTpkA 1 property eligible for a Section 201(h) investment 2 credit to the borrower, the entire principal amount 3 of the loan or loans between the taxpayer and the 4 borrower should be divided into the basis of the 5 Section 201(h) investment credit property which 6 secures the loan or loans, using for this purpose 7 the original basis of such property on the date that 8 it was placed in service in the Enterprise Zone. 9 The subtraction modification available to taxpayer 10 in any year under this subsection shall be that 11 portion of the total interest paid by the borrower 12 with respect to such loan attributable to the 13 eligible property as calculated under the previous 14 sentence; 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 18 interest income from a loan or loans made by such 19 taxpayer to a borrower, to the extent that such a 20 loan is secured by property which is eligible for 21 the High Impact Business Investment Credit. To 22 determine the portion of a loan or loans that is 23 secured by property eligible for a Section 201(i) 24 investment credit to the borrower, the entire 25 principal amount of the loan or loans between the 26 taxpayer and the borrower should be divided into the 27 basis of the Section 201(i) investment credit 28 property which secures the loan or loans, using for 29 this purpose the original basis of such property on 30 the date that it was placed in service in a 31 federally designated Foreign Trade Zone or Sub-Zone 32 located in Illinois. No taxpayer that is eligible 33 for the deduction provided in subparagraph (M) of 34 paragraph (2) of this subsection shall be eligible HB1120 Engrossed -13- LRB9100524PTpkA 1 for the deduction provided under this subparagraph 2 (M-1). The subtraction modification available to 3 taxpayers in any year under this subsection shall be 4 that portion of the total interest paid by the 5 borrower with respect to such loan attributable to 6 the eligible property as calculated under the 7 previous sentence; 8 (N) Two times any contribution made during the 9 taxable year to a designated zone organization to 10 the extent that the contribution (i) qualifies as a 11 charitable contribution under subsection (c) of 12 Section 170 of the Internal Revenue Code and (ii) 13 must, by its terms, be used for a project approved 14 by the Department of Commerce and Community Affairs 15 under Section 11 of the Illinois Enterprise Zone 16 Act; 17 (O) An amount equal to: (i) 85% for taxable 18 years ending on or before December 31, 1992, or, a 19 percentage equal to the percentage allowable under 20 Section 243(a)(1) of the Internal Revenue Code of 21 1986 for taxable years ending after December 31, 22 1992, of the amount by which dividends included in 23 taxable income and received from a corporation that 24 is not created or organized under the laws of the 25 United States or any state or political subdivision 26 thereof, including, for taxable years ending on or 27 after December 31, 1988, dividends received or 28 deemed received or paid or deemed paid under 29 Sections 951 through 964 of the Internal Revenue 30 Code, exceed the amount of the modification provided 31 under subparagraph (G) of paragraph (2) of this 32 subsection (b) which is related to such dividends; 33 plus (ii) 100% of the amount by which dividends, 34 included in taxable income and received, including, HB1120 Engrossed -14- LRB9100524PTpkA 1 for taxable years ending on or after December 31, 2 1988, dividends received or deemed received or paid 3 or deemed paid under Sections 951 through 964 of the 4 Internal Revenue Code, from any such corporation 5 specified in clause (i) that would but for the 6 provisions of Section 1504 (b) (3) of the Internal 7 Revenue Code be treated as a member of the 8 affiliated group which includes the dividend 9 recipient, exceed the amount of the modification 10 provided under subparagraph (G) of paragraph (2) of 11 this subsection (b) which is related to such 12 dividends; 13 (P) An amount equal to any contribution made 14 to a job training project established pursuant to 15 the Tax Increment Allocation Redevelopment Act; and 16 (Q) An amount equal to the amount of the 17 deduction used to compute the federal income tax 18 credit for restoration of substantial amounts held 19 under claim of right for the taxable year pursuant 20 to Section 1341 of the Internal Revenue Code of 21 1986. 22 (3) Special rule. For purposes of paragraph (2) 23 (A), "gross income" in the case of a life insurance 24 company, for tax years ending on and after December 31, 25 1994, shall mean the gross investment income for the 26 taxable year. 27 (c) Trusts and estates. 28 (1) In general. In the case of a trust or estate, 29 base income means an amount equal to the taxpayer's 30 taxable income for the taxable year as modified by 31 paragraph (2). 32 (2) Modifications. Subject to the provisions of 33 paragraph (3), the taxable income referred to in 34 paragraph (1) shall be modified by adding thereto the sum HB1120 Engrossed -15- LRB9100524PTpkA 1 of the following amounts: 2 (A) An amount equal to all amounts paid or 3 accrued to the taxpayer as interest or dividends 4 during the taxable year to the extent excluded from 5 gross income in the computation of taxable income; 6 (B) In the case of (i) an estate, $600; (ii) a 7 trust which, under its governing instrument, is 8 required to distribute all of its income currently, 9 $300; and (iii) any other trust, $100, but in each 10 such case, only to the extent such amount was 11 deducted in the computation of taxable income; 12 (C) An amount equal to the amount of tax 13 imposed by this Act to the extent deducted from 14 gross income in the computation of taxable income 15 for the taxable year; 16 (D) The amount of any net operating loss 17 deduction taken in arriving at taxable income, other 18 than a net operating loss carried forward from a 19 taxable year ending prior to December 31, 1986; 20 (E) For taxable years in which a net operating 21 loss carryback or carryforward from a taxable year 22 ending prior to December 31, 1986 is an element of 23 taxable income under paragraph (1) of subsection (e) 24 or subparagraph (E) of paragraph (2) of subsection 25 (e), the amount by which addition modifications 26 other than those provided by this subparagraph (E) 27 exceeded subtraction modifications in such taxable 28 year, with the following limitations applied in the 29 order that they are listed: 30 (i) the addition modification relating to 31 the net operating loss carried back or forward 32 to the taxable year from any taxable year 33 ending prior to December 31, 1986 shall be 34 reduced by the amount of addition modification HB1120 Engrossed -16- LRB9100524PTpkA 1 under this subparagraph (E) which related to 2 that net operating loss and which was taken 3 into account in calculating the base income of 4 an earlier taxable year, and 5 (ii) the addition modification relating 6 to the net operating loss carried back or 7 forward to the taxable year from any taxable 8 year ending prior to December 31, 1986 shall 9 not exceed the amount of such carryback or 10 carryforward; 11 For taxable years in which there is a net 12 operating loss carryback or carryforward from more 13 than one other taxable year ending prior to December 14 31, 1986, the addition modification provided in this 15 subparagraph (E) shall be the sum of the amounts 16 computed independently under the preceding 17 provisions of this subparagraph (E) for each such 18 taxable year; 19 (F) For taxable years ending on or after 20 January 1, 1989, an amount equal to the tax deducted 21 pursuant to Section 164 of the Internal Revenue Code 22 if the trust or estate is claiming the same tax for 23 purposes of the Illinois foreign tax credit under 24 Section 601 of this Act; 25 (G) An amount equal to the amount of the 26 capital gain deduction allowable under the Internal 27 Revenue Code, to the extent deducted from gross 28 income in the computation of taxable income; and 29 (G-5) For taxable years ending after December 30 31, 1997, an amount equal to any eligible 31 remediation costs that the trust or estate deducted 32 in computing adjusted gross income and for which the 33 trust or estate claims a credit under subsection (l) 34 of Section 201; HB1120 Engrossed -17- LRB9100524PTpkA 1 and by deducting from the total so obtained the sum of 2 the following amounts: 3 (H) An amount equal to all amounts included in 4 such total pursuant to the provisions of Sections 5 402(a), 402(c), 403(a), 403(b), 406(a), 407(a) and 6 408 of the Internal Revenue Code or included in such 7 total as distributions under the provisions of any 8 retirement or disability plan for employees of any 9 governmental agency or unit, or retirement payments 10 to retired partners, which payments are excluded in 11 computing net earnings from self employment by 12 Section 1402 of the Internal Revenue Code and 13 regulations adopted pursuant thereto; 14 (I) The valuation limitation amount; 15 (J) An amount equal to the amount of any tax 16 imposed by this Act which was refunded to the 17 taxpayer and included in such total for the taxable 18 year; 19 (K) An amount equal to all amounts included in 20 taxable income as modified by subparagraphs (A), 21 (B), (C), (D), (E), (F) and (G) which are exempt 22 from taxation by this State either by reason of its 23 statutes or Constitution or by reason of the 24 Constitution, treaties or statutes of the United 25 States; provided that, in the case of any statute of 26 this State that exempts income derived from bonds or 27 other obligations from the tax imposed under this 28 Act, the amount exempted shall be the interest net 29 of bond premium amortization; 30 (L) With the exception of any amounts 31 subtracted under subparagraph (K), an amount equal 32 to the sum of all amounts disallowed as deductions 33 by Sections 171(a) (2) and 265(a)(2) of the Internal 34 Revenue Code, as now or hereafter amended, and all HB1120 Engrossed -18- LRB9100524PTpkA 1 amounts of expenses allocable to interest and 2 disallowed as deductions by Section 265(1) of the 3 Internal Revenue Code of 1954, as now or hereafter 4 amended; 5 (M) An amount equal to those dividends 6 included in such total which were paid by a 7 corporation which conducts business operations in an 8 Enterprise Zone or zones created under the Illinois 9 Enterprise Zone Act and conducts substantially all 10 of its operations in an Enterprise Zone or Zones; 11 (N) An amount equal to any contribution made 12 to a job training project established pursuant to 13 the Tax Increment Allocation Redevelopment Act; 14 (O) An amount equal to those dividends 15 included in such total that were paid by a 16 corporation that conducts business operations in a 17 federally designated Foreign Trade Zone or Sub-Zone 18 and that is designated a High Impact Business 19 located in Illinois; provided that dividends 20 eligible for the deduction provided in subparagraph 21 (M) of paragraph (2) of this subsection shall not be 22 eligible for the deduction provided under this 23 subparagraph (O);and24 (P) An amount equal to the amount of the 25 deduction used to compute the federal income tax 26 credit for restoration of substantial amounts held 27 under claim of right for the taxable year pursuant 28 to Section 1341 of the Internal Revenue Code of 29 1986; and.30 (Q) For taxable year 1999 and thereafter, an 31 amount equal to the amount of any (i) distributions, 32 to the extent includible in gross income for federal 33 income tax purposes, made to the taxpayer because of 34 his or her status as a victim of persecution for HB1120 Engrossed -19- LRB9100524PTpkA 1 racial or religious reasons by Nazi Germany or any 2 other Axis regime or as an heir of the victim and 3 (ii) items of income, to the extent includible in 4 gross income for federal income tax purposes, 5 attributable to, derived from or in any way related 6 to assets stolen from, hidden from, or otherwise 7 lost to a victim of persecution for racial or 8 religious reasons by Nazi Germany or any other Axis 9 regime immediately prior to, during, and immediately 10 after World War II, including, but not limited to, 11 interest on the proceeds receivable as insurance 12 under policies issued to a victim of persecution for 13 racial or religious reasons by Nazi Germany or any 14 other Axis regime by European insurance companies 15 immediately prior to and during World War II; 16 provided, however, this subtraction from federal 17 adjusted gross income does not apply to assets 18 acquired with such assets or with the proceeds from 19 the sale of such assets; provided, further, this 20 paragraph shall only apply to a taxpayer who was the 21 first recipient of such assets after their recovery 22 and who is a victim of persecution for racial or 23 religious reasons by Nazi Germany or any other Axis 24 regime or as an heir of the victim. The amount of 25 and the eligibility for any public assistance, 26 benefit, or similar entitlement is not affected by 27 the inclusion of items (i) and (ii) of this 28 paragraph in gross income for federal income tax 29 purposes. This paragraph is exempt from the 30 provisions of Section 250. 31 (3) Limitation. The amount of any modification 32 otherwise required under this subsection shall, under 33 regulations prescribed by the Department, be adjusted by 34 any amounts included therein which were properly paid, HB1120 Engrossed -20- LRB9100524PTpkA 1 credited, or required to be distributed, or permanently 2 set aside for charitable purposes pursuant to Internal 3 Revenue Code Section 642(c) during the taxable year. 4 (d) Partnerships. 5 (1) In general. In the case of a partnership, base 6 income means an amount equal to the taxpayer's taxable 7 income for the taxable year as modified by paragraph (2). 8 (2) Modifications. The taxable income referred to 9 in paragraph (1) shall be modified by adding thereto the 10 sum of the following amounts: 11 (A) An amount equal to all amounts paid or 12 accrued to the taxpayer as interest or dividends 13 during the taxable year to the extent excluded from 14 gross income in the computation of taxable income; 15 (B) An amount equal to the amount of tax 16 imposed by this Act to the extent deducted from 17 gross income for the taxable year;and18 (C) The amount of deductions allowed to the 19 partnership pursuant to Section 707 (c) of the 20 Internal Revenue Code in calculating its taxable 21 income; and 22 (D) An amount equal to the amount of the 23 capital gain deduction allowable under the Internal 24 Revenue Code, to the extent deducted from gross 25 income in the computation of taxable income; 26 and by deducting from the total so obtained the following 27 amounts: 28 (E) The valuation limitation amount; 29 (F) An amount equal to the amount of any tax 30 imposed by this Act which was refunded to the 31 taxpayer and included in such total for the taxable 32 year; 33 (G) An amount equal to all amounts included in 34 taxable income as modified by subparagraphs (A), HB1120 Engrossed -21- LRB9100524PTpkA 1 (B), (C) and (D) which are exempt from taxation by 2 this State either by reason of its statutes or 3 Constitution or by reason of the Constitution, 4 treaties or statutes of the United States; provided 5 that, in the case of any statute of this State that 6 exempts income derived from bonds or other 7 obligations from the tax imposed under this Act, the 8 amount exempted shall be the interest net of bond 9 premium amortization; 10 (H) Any income of the partnership which 11 constitutes personal service income as defined in 12 Section 1348 (b) (1) of the Internal Revenue Code 13 (as in effect December 31, 1981) or a reasonable 14 allowance for compensation paid or accrued for 15 services rendered by partners to the partnership, 16 whichever is greater; 17 (I) An amount equal to all amounts of income 18 distributable to an entity subject to the Personal 19 Property Tax Replacement Income Tax imposed by 20 subsections (c) and (d) of Section 201 of this Act 21 including amounts distributable to organizations 22 exempt from federal income tax by reason of Section 23 501(a) of the Internal Revenue Code; 24 (J) With the exception of any amounts 25 subtracted under subparagraph (G), an amount equal 26 to the sum of all amounts disallowed as deductions 27 by Sections 171(a) (2), and 265(2) of the Internal 28 Revenue Code of 1954, as now or hereafter amended, 29 and all amounts of expenses allocable to interest 30 and disallowed as deductions by Section 265(1) of 31 the Internal Revenue Code, as now or hereafter 32 amended; 33 (K) An amount equal to those dividends 34 included in such total which were paid by a HB1120 Engrossed -22- LRB9100524PTpkA 1 corporation which conducts business operations in an 2 Enterprise Zone or zones created under the Illinois 3 Enterprise Zone Act, enacted by the 82nd General 4 Assembly, and which does not conduct such operations 5 other than in an Enterprise Zone or Zones; 6 (L) An amount equal to any contribution made 7 to a job training project established pursuant to 8 the Real Property Tax Increment Allocation 9 Redevelopment Act; 10 (M) An amount equal to those dividends 11 included in such total that were paid by a 12 corporation that conducts business operations in a 13 federally designated Foreign Trade Zone or Sub-Zone 14 and that is designated a High Impact Business 15 located in Illinois; provided that dividends 16 eligible for the deduction provided in subparagraph 17 (K) of paragraph (2) of this subsection shall not be 18 eligible for the deduction provided under this 19 subparagraph (M); and 20 (N) An amount equal to the amount of the 21 deduction used to compute the federal income tax 22 credit for restoration of substantial amounts held 23 under claim of right for the taxable year pursuant 24 to Section 1341 of the Internal Revenue Code of 25 1986. 26 (e) Gross income; adjusted gross income; taxable income. 27 (1) In general. Subject to the provisions of 28 paragraph (2) and subsection (b) (3), for purposes of 29 this Section and Section 803(e), a taxpayer's gross 30 income, adjusted gross income, or taxable income for the 31 taxable year shall mean the amount of gross income, 32 adjusted gross income or taxable income properly 33 reportable for federal income tax purposes for the 34 taxable year under the provisions of the Internal Revenue HB1120 Engrossed -23- LRB9100524PTpkA 1 Code. Taxable income may be less than zero. However, for 2 taxable years ending on or after December 31, 1986, net 3 operating loss carryforwards from taxable years ending 4 prior to December 31, 1986, may not exceed the sum of 5 federal taxable income for the taxable year before net 6 operating loss deduction, plus the excess of addition 7 modifications over subtraction modifications for the 8 taxable year. For taxable years ending prior to December 9 31, 1986, taxable income may never be an amount in excess 10 of the net operating loss for the taxable year as defined 11 in subsections (c) and (d) of Section 172 of the Internal 12 Revenue Code, provided that when taxable income of a 13 corporation (other than a Subchapter S corporation), 14 trust, or estate is less than zero and addition 15 modifications, other than those provided by subparagraph 16 (E) of paragraph (2) of subsection (b) for corporations 17 or subparagraph (E) of paragraph (2) of subsection (c) 18 for trusts and estates, exceed subtraction modifications, 19 an addition modification must be made under those 20 subparagraphs for any other taxable year to which the 21 taxable income less than zero (net operating loss) is 22 applied under Section 172 of the Internal Revenue Code or 23 under subparagraph (E) of paragraph (2) of this 24 subsection (e) applied in conjunction with Section 172 of 25 the Internal Revenue Code. 26 (2) Special rule. For purposes of paragraph (1) of 27 this subsection, the taxable income properly reportable 28 for federal income tax purposes shall mean: 29 (A) Certain life insurance companies. In the 30 case of a life insurance company subject to the tax 31 imposed by Section 801 of the Internal Revenue Code, 32 life insurance company taxable income, plus the 33 amount of distribution from pre-1984 policyholder 34 surplus accounts as calculated under Section 815a of HB1120 Engrossed -24- LRB9100524PTpkA 1 the Internal Revenue Code; 2 (B) Certain other insurance companies. In the 3 case of mutual insurance companies subject to the 4 tax imposed by Section 831 of the Internal Revenue 5 Code, insurance company taxable income; 6 (C) Regulated investment companies. In the 7 case of a regulated investment company subject to 8 the tax imposed by Section 852 of the Internal 9 Revenue Code, investment company taxable income; 10 (D) Real estate investment trusts. In the 11 case of a real estate investment trust subject to 12 the tax imposed by Section 857 of the Internal 13 Revenue Code, real estate investment trust taxable 14 income; 15 (E) Consolidated corporations. In the case of 16 a corporation which is a member of an affiliated 17 group of corporations filing a consolidated income 18 tax return for the taxable year for federal income 19 tax purposes, taxable income determined as if such 20 corporation had filed a separate return for federal 21 income tax purposes for the taxable year and each 22 preceding taxable year for which it was a member of 23 an affiliated group. For purposes of this 24 subparagraph, the taxpayer's separate taxable income 25 shall be determined as if the election provided by 26 Section 243(b) (2) of the Internal Revenue Code had 27 been in effect for all such years; 28 (F) Cooperatives. In the case of a 29 cooperative corporation or association, the taxable 30 income of such organization determined in accordance 31 with the provisions of Section 1381 through 1388 of 32 the Internal Revenue Code; 33 (G) Subchapter S corporations. In the case 34 of: (i) a Subchapter S corporation for which there HB1120 Engrossed -25- LRB9100524PTpkA 1 is in effect an election for the taxable year under 2 Section 1362 of the Internal Revenue Code, the 3 taxable income of such corporation determined in 4 accordance with Section 1363(b) of the Internal 5 Revenue Code, except that taxable income shall take 6 into account those items which are required by 7 Section 1363(b)(1) of the Internal Revenue Code to 8 be separately stated; and (ii) a Subchapter S 9 corporation for which there is in effect a federal 10 election to opt out of the provisions of the 11 Subchapter S Revision Act of 1982 and have applied 12 instead the prior federal Subchapter S rules as in 13 effect on July 1, 1982, the taxable income of such 14 corporation determined in accordance with the 15 federal Subchapter S rules as in effect on July 1, 16 1982; and 17 (H) Partnerships. In the case of a 18 partnership, taxable income determined in accordance 19 with Section 703 of the Internal Revenue Code, 20 except that taxable income shall take into account 21 those items which are required by Section 703(a)(1) 22 to be separately stated but which would be taken 23 into account by an individual in calculating his 24 taxable income. 25 (f) Valuation limitation amount. 26 (1) In general. The valuation limitation amount 27 referred to in subsections (a) (2) (G), (c) (2) (I) and 28 (d)(2) (E) is an amount equal to: 29 (A) The sum of the pre-August 1, 1969 30 appreciation amounts (to the extent consisting of 31 gain reportable under the provisions of Section 1245 32 or 1250 of the Internal Revenue Code) for all 33 property in respect of which such gain was reported 34 for the taxable year; plus HB1120 Engrossed -26- LRB9100524PTpkA 1 (B) The lesser of (i) the sum of the 2 pre-August 1, 1969 appreciation amounts (to the 3 extent consisting of capital gain) for all property 4 in respect of which such gain was reported for 5 federal income tax purposes for the taxable year, or 6 (ii) the net capital gain for the taxable year, 7 reduced in either case by any amount of such gain 8 included in the amount determined under subsection 9 (a) (2) (F) or (c) (2) (H). 10 (2) Pre-August 1, 1969 appreciation amount. 11 (A) If the fair market value of property 12 referred to in paragraph (1) was readily 13 ascertainable on August 1, 1969, the pre-August 1, 14 1969 appreciation amount for such property is the 15 lesser of (i) the excess of such fair market value 16 over the taxpayer's basis (for determining gain) for 17 such property on that date (determined under the 18 Internal Revenue Code as in effect on that date), or 19 (ii) the total gain realized and reportable for 20 federal income tax purposes in respect of the sale, 21 exchange or other disposition of such property. 22 (B) If the fair market value of property 23 referred to in paragraph (1) was not readily 24 ascertainable on August 1, 1969, the pre-August 1, 25 1969 appreciation amount for such property is that 26 amount which bears the same ratio to the total gain 27 reported in respect of the property for federal 28 income tax purposes for the taxable year, as the 29 number of full calendar months in that part of the 30 taxpayer's holding period for the property ending 31 July 31, 1969 bears to the number of full calendar 32 months in the taxpayer's entire holding period for 33 the property. 34 (C) The Department shall prescribe such HB1120 Engrossed -27- LRB9100524PTpkA 1 regulations as may be necessary to carry out the 2 purposes of this paragraph. 3 (g) Double deductions. Unless specifically provided 4 otherwise, nothing in this Section shall permit the same item 5 to be deducted more than once. 6 (h) Legislative intention. Except as expressly provided 7 by this Section there shall be no modifications or 8 limitations on the amounts of income, gain, loss or deduction 9 taken into account in determining gross income, adjusted 10 gross income or taxable income for federal income tax 11 purposes for the taxable year, or in the amount of such items 12 entering into the computation of base income and net income 13 under this Act for such taxable year, whether in respect of 14 property values as of August 1, 1969 or otherwise. 15 (Source: P.A. 89-89, eff. 6-30-95; 89-235, eff. 8-4-95; 16 89-418, eff. 11-15-95; 89-460, eff. 5-24-96; 89-626, eff. 17 8-9-96; 90-491, eff. 1-1-98; 90-717, eff. 8-7-98; 90-770, 18 eff. 8-14-98; revised 9-21-98.) 19 Section 99. Effective date. This Act takes effect upon 20 becoming law.