State of Illinois
91st General Assembly
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91_HB3384

 
                                               LRB9112069SMdv

 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

 
                            -2-                LRB9112069SMdv
 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
 
                            -3-                LRB9112069SMdv
 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;
 
                            -4-                LRB9112069SMdv
 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 (i)  Sections  171(a)  (2),  and  265(2)  of  the
20             Internal  Revenue  Code of 1954, as now or hereafter
21             amended, and all amounts of  expenses  allocable  to
22             interest  and   disallowed  as deductions by Section
23             265(1) of the Internal Revenue Code of 1954, as  now
24             or  hereafter  amended;  and  (ii) for taxable years
25             ending on or after August  13,  1999  the  effective
26             date  of  this  amendatory  Act  of the 91st General
27             Assembly,  Sections  171(a)(2),   265,   280C,   and
28             832(b)(5)(B)(i)  of  the  Internal Revenue Code; the
29             provisions of this subparagraph are exempt from  the
30             provisions of Section 250;
31                  (N)  An amount equal to all amounts included in
32             such  total  which  are exempt from taxation by this
33             State  either  by  reason   of   its   statutes   or
34             Constitution  or  by  reason  of  the  Constitution,
 
                            -5-                LRB9112069SMdv
 1             treaties  or statutes of the United States; provided
 2             that, in the case of any statute of this State  that
 3             exempts   income   derived   from   bonds  or  other
 4             obligations from the tax imposed under this Act, the
 5             amount exempted shall be the interest  net  of  bond
 6             premium amortization;
 7                  (O)  An  amount  equal to any contribution made
 8             to a job training project  established  pursuant  to
 9             the Tax Increment Allocation Redevelopment Act;
10                  (P)  An  amount  equal  to  the  amount  of the
11             deduction used to compute  the  federal  income  tax
12             credit  for  restoration of substantial amounts held
13             under claim of right for the taxable  year  pursuant
14             to  Section  1341  of  the  Internal Revenue Code of
15             1986;
16                  (Q)  An amount equal to any amounts included in
17             such  total,  received  by  the   taxpayer   as   an
18             acceleration  in  the  payment of life, endowment or
19             annuity benefits in advance of the time  they  would
20             otherwise  be payable as an indemnity for a terminal
21             illness;
22                  (R)  An amount  equal  to  the  amount  of  any
23             federal  or  State  bonus  paid  to  veterans of the
24             Persian Gulf War;
25                  (S)  An  amount,  to  the  extent  included  in
26             adjusted gross income, equal  to  the  amount  of  a
27             contribution  made  in the taxable year on behalf of
28             the taxpayer  to  a  medical  care  savings  account
29             established  under  the Medical Care Savings Account
30             Act to the extent the contribution  is  accepted  by
31             the account administrator as provided in that Act;
32                  (T)  An  amount,  to  the  extent  included  in
33             adjusted  gross  income,  equal  to  the  amount  of
34             interest  earned  in  the  taxable year on a medical
 
                            -6-                LRB9112069SMdv
 1             care savings account established under  the  Medical
 2             Care  Savings Account Act on behalf of the taxpayer,
 3             other than interest added pursuant to item (D-5)  of
 4             this paragraph (2);
 5                  (U)  For one taxable year beginning on or after
 6             January 1, 1994, an amount equal to the total amount
 7             of  tax  imposed  and paid under subsections (a) and
 8             (b) of Section 201 of  this  Act  on  grant  amounts
 9             received  by  the  taxpayer  under  the Nursing Home
10             Grant Assistance Act during the  taxpayer's  taxable
11             years 1992 and 1993;
12                  (V)  Beginning  with  tax  years  ending  on or
13             after December 31, 1995 and ending  with  tax  years
14             ending  on  or  before  December 31, 2004, an amount
15             equal to the amount paid by  a  taxpayer  who  is  a
16             self-employed  taxpayer, a partner of a partnership,
17             or a shareholder in a Subchapter S  corporation  for
18             health  insurance  or  long-term  care insurance for
19             that  taxpayer  or   that   taxpayer's   spouse   or
20             dependents,  to  the extent that the amount paid for
21             that health insurance or  long-term  care  insurance
22             may  be  deducted  under Section 213 of the Internal
23             Revenue Code of 1986, has not been deducted  on  the
24             federal  income tax return of the taxpayer, and does
25             not exceed the taxable income attributable  to  that
26             taxpayer's   income,   self-employment   income,  or
27             Subchapter S  corporation  income;  except  that  no
28             deduction  shall  be  allowed under this item (V) if
29             the taxpayer  is  eligible  to  participate  in  any
30             health insurance or long-term care insurance plan of
31             an  employer  of  the  taxpayer  or  the  taxpayer's
32             spouse.   The  amount  of  the  health insurance and
33             long-term care insurance subtracted under this  item
34             (V)  shall be determined by multiplying total health
 
                            -7-                LRB9112069SMdv
 1             insurance and long-term care insurance premiums paid
 2             by the taxpayer times a number that  represents  the
 3             fractional  percentage  of eligible medical expenses
 4             under Section 213 of the Internal  Revenue  Code  of
 5             1986 not actually deducted on the taxpayer's federal
 6             income tax return;
 7                  (W)  For  taxable  years  beginning on or after
 8             January  1,  1998,  all  amounts  included  in   the
 9             taxpayer's  federal gross income in the taxable year
10             from amounts converted from a regular IRA to a  Roth
11             IRA. This paragraph is exempt from the provisions of
12             Section 250; and
13                  (X)  For  taxable  year 1999 and thereafter, an
14             amount equal to the amount of any (i) distributions,
15             to the extent includible in gross income for federal
16             income tax purposes, made to the taxpayer because of
17             his or her status as a  victim  of  persecution  for
18             racial  or  religious reasons by Nazi Germany or any
19             other Axis regime or as an heir of  the  victim  and
20             (ii)  items  of  income, to the extent includible in
21             gross  income  for  federal  income  tax   purposes,
22             attributable  to, derived from or in any way related
23             to assets stolen from,  hidden  from,  or  otherwise
24             lost  to  a  victim  of  persecution  for  racial or
25             religious reasons by Nazi Germany or any other  Axis
26             regime immediately prior to, during, and immediately
27             after  World  War II, including, but not limited to,
28             interest on the  proceeds  receivable  as  insurance
29             under policies issued to a victim of persecution for
30             racial  or  religious reasons by Nazi Germany or any
31             other Axis regime by  European  insurance  companies
32             immediately  prior  to  and  during  World  War  II;
33             provided,  however,  this  subtraction  from federal
34             adjusted gross  income  does  not  apply  to  assets
 
                            -8-                LRB9112069SMdv
 1             acquired  with such assets or with the proceeds from
 2             the sale of such  assets;  provided,  further,  this
 3             paragraph shall only apply to a taxpayer who was the
 4             first  recipient of such assets after their recovery
 5             and who is 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.  The  amount  of
 8             and  the  eligibility  for  any  public  assistance,
 9             benefit,  or  similar entitlement is not affected by
10             the  inclusion  of  items  (i)  and  (ii)  of   this
11             paragraph  in  gross  income  for federal income tax
12             purposes.    This  paragraph  is  exempt  from   the
13             provisions of Section 250; and
14                  (Y)  Beginning  with taxable years ending on or
15             after December 31, 2000, for taxpayers 62  years  of
16             age  and  older,  an amount equal to all amounts the
17             taxpayer pays during the taxable year  for  Medicare
18             Part  B  benefits  under  Title XVIII of the federal
19             Social Security Act for costs of, including but  not
20             limited  to, physician services, outpatient hospital
21             services, medical equipment and supplies, and  other
22             health services and supplies.  This subparagraph (Y)
23             is exempt from the provisions of Section 250.

24        (b)  Corporations.
25             (1)  In general.  In the case of a corporation, base
26        income  means  an  amount equal to the taxpayer's taxable
27        income for the taxable year as modified by paragraph (2).
28             (2)  Modifications.  The taxable income referred  to
29        in  paragraph (1) shall be modified by adding thereto the
30        sum of the following amounts:
31                  (A)  An amount equal to  all  amounts  paid  or
32             accrued   to   the  taxpayer  as  interest  and  all
33             distributions  received  from  regulated  investment
34             companies during the  taxable  year  to  the  extent
 
                            -9-                LRB9112069SMdv
 1             excluded  from  gross  income  in the computation of
 2             taxable income;
 3                  (B)  An amount  equal  to  the  amount  of  tax
 4             imposed  by  this  Act  to  the extent deducted from
 5             gross income in the computation  of  taxable  income
 6             for the taxable year;
 7                  (C)  In  the  case  of  a  regulated investment
 8             company, an amount equal to the excess  of  (i)  the
 9             net  long-term  capital  gain  for the taxable year,
10             over (ii) the amount of the capital  gain  dividends
11             designated   as  such  in  accordance  with  Section
12             852(b)(3)(C) of the Internal Revenue  Code  and  any
13             amount  designated under Section 852(b)(3)(D) of the
14             Internal Revenue Code, attributable to  the  taxable
15             year (this amendatory Act of 1995 (Public Act 89-89)
16             is  declarative  of  existing  law  and is not a new
17             enactment);
18                  (D)  The  amount  of  any  net  operating  loss
19             deduction taken in arriving at taxable income, other
20             than a net operating loss  carried  forward  from  a
21             taxable year ending prior to December 31, 1986;
22                  (E)  For taxable years in which a net operating
23             loss  carryback  or carryforward from a taxable year
24             ending prior to December 31, 1986 is an  element  of
25             taxable income under paragraph (1) of subsection (e)
26             or  subparagraph  (E) of paragraph (2) of subsection
27             (e), the  amount  by  which  addition  modifications
28             other  than  those provided by this subparagraph (E)
29             exceeded subtraction modifications in  such  earlier
30             taxable year, with the following limitations applied
31             in the order that they are listed:
32                       (i)  the addition modification relating to
33                  the  net operating loss carried back or forward
34                  to the  taxable  year  from  any  taxable  year
 
                            -10-               LRB9112069SMdv
 1                  ending  prior  to  December  31,  1986 shall be
 2                  reduced by the amount of addition  modification
 3                  under  this  subparagraph  (E) which related to
 4                  that net operating loss  and  which  was  taken
 5                  into  account in calculating the base income of
 6                  an earlier taxable year, and
 7                       (ii)  the addition  modification  relating
 8                  to  the  net  operating  loss  carried  back or
 9                  forward to the taxable year  from  any  taxable
10                  year  ending  prior  to December 31, 1986 shall
11                  not exceed the  amount  of  such  carryback  or
12                  carryforward;
13                  For  taxable  years  in  which  there  is a net
14             operating loss carryback or carryforward  from  more
15             than one other taxable year ending prior to December
16             31, 1986, the addition modification provided in this
17             subparagraph  (E)  shall  be  the sum of the amounts
18             computed   independently   under    the    preceding
19             provisions  of  this  subparagraph (E) for each such
20             taxable year; and
21                  (E-5)  For taxable years ending after  December
22             31,   1997,   an   amount   equal  to  any  eligible
23             remediation costs that the corporation  deducted  in
24             computing  adjusted  gross  income and for which the
25             corporation 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                  (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 any amount included in
34             such total under Section 78 of the Internal  Revenue
 
                            -11-               LRB9112069SMdv
 1             Code;
 2                  (H)  In  the  case  of  a  regulated investment
 3             company, an amount equal to  the  amount  of  exempt
 4             interest  dividends as defined in subsection (b) (5)
 5             of Section 852 of the Internal Revenue Code, paid to
 6             shareholders for the taxable year;
 7                  (I)  With  the   exception   of   any   amounts
 8             subtracted  under  subparagraph (J), an amount equal
 9             to the sum of all amounts disallowed  as  deductions
10             by  (i)  Sections  171(a)  (2),  and  265(a)(2)  and
11             amounts  disallowed  as  interest expense by Section
12             291(a)(3) of the Internal Revenue Code,  as  now  or
13             hereafter  amended,  and  all  amounts  of  expenses
14             allocable  to  interest and disallowed as deductions
15             by Section 265(a)(1) of the Internal  Revenue  Code,
16             as  now  or  hereafter amended; and (ii) for taxable
17             years  ending  on  or  after  August  13,  1999  the
18             effective date of this amendatory Act  of  the  91st
19             General Assembly, Sections 171(a)(2), 265, 280C, and
20             832(b)(5)(B)(i)  of  the  Internal Revenue Code; the
21             provisions of this subparagraph are exempt from  the
22             provisions of Section 250;
23                  (J)  An amount equal to all amounts included in
24             such  total  which  are exempt from taxation by this
25             State  either  by  reason   of   its   statutes   or
26             Constitution  or  by  reason  of  the  Constitution,
27             treaties  or statutes of the United States; provided
28             that, in the case of any statute of this State  that
29             exempts   income   derived   from   bonds  or  other
30             obligations from the tax imposed under this Act, the
31             amount exempted shall be the interest  net  of  bond
32             premium amortization;
33                  (K)  An   amount   equal   to  those  dividends
34             included  in  such  total  which  were  paid  by   a
 
                            -12-               LRB9112069SMdv
 1             corporation which conducts business operations in an
 2             Enterprise  Zone or zones created under the Illinois
 3             Enterprise Zone Act and conducts  substantially  all
 4             of its operations in an Enterprise Zone or zones;
 5                  (L)  An   amount   equal   to  those  dividends
 6             included  in  such  total  that  were  paid   by   a
 7             corporation  that  conducts business operations in a
 8             federally designated Foreign Trade Zone or  Sub-Zone
 9             and  that  is  designated  a  High  Impact  Business
10             located   in   Illinois;   provided  that  dividends
11             eligible for the deduction provided in  subparagraph
12             (K)  of  paragraph 2 of this subsection shall not be
13             eligible  for  the  deduction  provided  under  this
14             subparagraph (L);
15                  (M)  For  any  taxpayer  that  is  a  financial
16             organization within the meaning of Section 304(c) of
17             this Act,  an  amount  included  in  such  total  as
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 Enterprise Zone Investment Credit. To  determine
22             the  portion  of  a loan or loans that is secured by
23             property eligible for a  Section  201(h)  investment
24             credit  to the borrower, the entire principal amount
25             of the loan or loans between the  taxpayer  and  the
26             borrower  should  be  divided  into the basis of the
27             Section  201(h)  investment  credit  property  which
28             secures the loan or loans, using  for  this  purpose
29             the original basis of such property on the date that
30             it  was  placed  in  service in the Enterprise Zone.
31             The subtraction modification available  to  taxpayer
32             in  any  year  under  this  subsection shall be that
33             portion of the total interest paid by  the  borrower
34             with  respect  to  such  loan  attributable  to  the
 
                            -13-               LRB9112069SMdv
 1             eligible  property  as calculated under the previous
 2             sentence;
 3                  (M-1)  For any taxpayer  that  is  a  financial
 4             organization within the meaning of Section 304(c) of
 5             this  Act,  an  amount  included  in  such  total as
 6             interest income from a loan or loans  made  by  such
 7             taxpayer  to  a  borrower, to the extent that such a
 8             loan is secured by property which  is  eligible  for
 9             the  High  Impact  Business  Investment  Credit.  To
10             determine the portion of a loan  or  loans  that  is
11             secured  by  property  eligible for a Section 201(i)
12             investment  credit  to  the  borrower,  the   entire
13             principal  amount  of  the loan or loans between the
14             taxpayer and the borrower should be divided into the
15             basis  of  the  Section  201(i)  investment   credit
16             property  which secures the loan or loans, using for
17             this purpose the original basis of such property  on
18             the  date  that  it  was  placed  in  service  in  a
19             federally  designated Foreign Trade Zone or Sub-Zone
20             located in Illinois.  No taxpayer that  is  eligible
21             for  the  deduction  provided in subparagraph (M) of
22             paragraph (2) of this subsection shall  be  eligible
23             for  the  deduction provided under this subparagraph
24             (M-1).  The subtraction  modification  available  to
25             taxpayers in any year under this subsection shall be
26             that  portion  of  the  total  interest  paid by the
27             borrower with respect to such loan  attributable  to
28             the   eligible  property  as  calculated  under  the
29             previous sentence;
30                  (N)  Two times any contribution made during the
31             taxable year to a designated  zone  organization  to
32             the  extent that the contribution (i) qualifies as a
33             charitable  contribution  under  subsection  (c)  of
34             Section 170 of the Internal Revenue  Code  and  (ii)
 
                            -14-               LRB9112069SMdv
 1             must,  by  its terms, be used for a project approved
 2             by the Department of Commerce and Community  Affairs
 3             under  Section  11  of  the Illinois Enterprise Zone
 4             Act;
 5                  (O)  An amount equal to: (i)  85%  for  taxable
 6             years  ending  on or before December 31, 1992, or, a
 7             percentage equal to the percentage  allowable  under
 8             Section  243(a)(1)  of  the Internal Revenue Code of
 9             1986 for taxable years  ending  after  December  31,
10             1992,  of  the amount by which dividends included in
11             taxable income and received from a corporation  that
12             is  not  created  or organized under the laws of the
13             United States or any state or political  subdivision
14             thereof,  including,  for taxable years ending on or
15             after  December  31,  1988,  dividends  received  or
16             deemed  received  or  paid  or  deemed  paid   under
17             Sections  951  through  964  of the Internal Revenue
18             Code, exceed the amount of the modification provided
19             under subparagraph (G)  of  paragraph  (2)  of  this
20             subsection  (b)  which is related to such dividends;
21             plus (ii) 100% of the  amount  by  which  dividends,
22             included  in taxable income and received, including,
23             for taxable years ending on or  after  December  31,
24             1988,  dividends received or deemed received or paid
25             or deemed paid under Sections 951 through 964 of the
26             Internal Revenue Code,  from  any  such  corporation
27             specified  in  clause  (i)  that  would  but for the
28             provisions of Section 1504 (b) (3) of  the  Internal
29             Revenue   Code   be  treated  as  a  member  of  the
30             affiliated  group  which   includes   the   dividend
31             recipient,  exceed  the  amount  of the modification
32             provided under subparagraph (G) of paragraph (2)  of
33             this   subsection  (b)  which  is  related  to  such
34             dividends;
 
                            -15-               LRB9112069SMdv
 1                  (P)  An amount equal to any  contribution  made
 2             to  a  job  training project established pursuant to
 3             the Tax Increment Allocation Redevelopment Act;
 4                  (Q)  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; and
10                  (R)  In  the  case  of an attorney-in-fact with
11             respect to whom  an  interinsurer  or  a  reciprocal
12             insurer  has  made the election under Section 835 of
13             the Internal Revenue Code, 26 U.S.C. 835, an  amount
14             equal  to the excess, if any, of the amounts paid or
15             incurred by that interinsurer or reciprocal  insurer
16             in the taxable year to the attorney-in-fact over the
17             deduction allowed to that interinsurer or reciprocal
18             insurer  with  respect to the attorney-in-fact under
19             Section 835(b) of the Internal Revenue Code for  the
20             taxable year.
21             (3)  Special  rule.   For  purposes of paragraph (2)
22        (A), "gross income" in  the  case  of  a  life  insurance
23        company,  for  tax years ending on and after December 31,
24        1994, shall mean the  gross  investment  income  for  the
25        taxable year.

26        (c)  Trusts and estates.
27             (1)  In  general.  In the case of a trust or estate,
28        base income means  an  amount  equal  to  the  taxpayer's
29        taxable  income  for  the  taxable  year  as  modified by
30        paragraph (2).
31             (2)  Modifications.  Subject to  the  provisions  of
32        paragraph   (3),   the  taxable  income  referred  to  in
33        paragraph (1) shall be modified by adding thereto the sum
34        of the following amounts:
 
                            -16-               LRB9112069SMdv
 1                  (A)  An amount equal to  all  amounts  paid  or
 2             accrued  to  the  taxpayer  as interest or dividends
 3             during the taxable year to the extent excluded  from
 4             gross income in the computation of taxable income;
 5                  (B)  In the case of (i) an estate, $600; (ii) a
 6             trust  which,  under  its  governing  instrument, is
 7             required to distribute all of its income  currently,
 8             $300;  and  (iii) any other trust, $100, but in each
 9             such case,  only  to  the  extent  such  amount  was
10             deducted in the computation of taxable income;
11                  (C)  An  amount  equal  to  the  amount  of tax
12             imposed by this Act  to  the  extent  deducted  from
13             gross  income  in  the computation of taxable income
14             for the taxable year;
15                  (D)  The  amount  of  any  net  operating  loss
16             deduction taken in arriving at taxable income, other
17             than a net operating loss  carried  forward  from  a
18             taxable year ending prior to December 31, 1986;
19                  (E)  For taxable years in which a net operating
20             loss  carryback  or carryforward from a taxable year
21             ending prior to December 31, 1986 is an  element  of
22             taxable income under paragraph (1) of subsection (e)
23             or  subparagraph  (E) of paragraph (2) of subsection
24             (e), the  amount  by  which  addition  modifications
25             other  than  those provided by this subparagraph (E)
26             exceeded subtraction modifications in  such  taxable
27             year,  with the following limitations applied in the
28             order that they are listed:
29                       (i)  the addition modification relating to
30                  the net operating loss carried back or  forward
31                  to  the  taxable  year  from  any  taxable year
32                  ending prior to  December  31,  1986  shall  be
33                  reduced  by the amount of addition modification
34                  under this subparagraph (E)  which  related  to
 
                            -17-               LRB9112069SMdv
 1                  that  net  operating  loss  and which was taken
 2                  into account in calculating the base income  of
 3                  an earlier taxable year, and
 4                       (ii)  the  addition  modification relating
 5                  to the  net  operating  loss  carried  back  or
 6                  forward  to  the  taxable year from any taxable
 7                  year ending prior to December  31,  1986  shall
 8                  not  exceed  the  amount  of  such carryback or
 9                  carryforward;
10                  For taxable years  in  which  there  is  a  net
11             operating  loss  carryback or carryforward from more
12             than one other taxable year ending prior to December
13             31, 1986, the addition modification provided in this
14             subparagraph (E) shall be the  sum  of  the  amounts
15             computed    independently    under   the   preceding
16             provisions of this subparagraph (E)  for  each  such
17             taxable year;
18                  (F)  For  taxable  years  ending  on  or  after
19             January 1, 1989, an amount equal to the tax deducted
20             pursuant to Section 164 of the Internal Revenue Code
21             if  the trust or estate is claiming the same tax for
22             purposes of the Illinois foreign  tax  credit  under
23             Section 601 of this Act;
24                  (G)  An  amount  equal  to  the  amount  of the
25             capital gain deduction allowable under the  Internal
26             Revenue  Code,  to  the  extent  deducted from gross
27             income in the computation of taxable income; and
28                  (G-5)  For taxable years ending after  December
29             31,   1997,   an   amount   equal  to  any  eligible
30             remediation costs that the trust or estate  deducted
31             in computing adjusted gross income and for which the
32             trust or estate claims a credit under subsection (l)
33             of Section 201;
34        and  by  deducting  from the total so obtained the sum of
 
                            -18-               LRB9112069SMdv
 1        the following amounts:
 2                  (H)  An amount equal to all amounts included in
 3             such total pursuant to the  provisions  of  Sections
 4             402(a),  402(c),  403(a), 403(b), 406(a), 407(a) and
 5             408 of the Internal Revenue Code or included in such
 6             total as distributions under the provisions  of  any
 7             retirement  or  disability plan for employees of any
 8             governmental agency or unit, or retirement  payments
 9             to  retired partners, which payments are excluded in
10             computing  net  earnings  from  self  employment  by
11             Section  1402  of  the  Internal  Revenue  Code  and
12             regulations adopted pursuant thereto;
13                  (I)  The valuation limitation amount;
14                  (J)  An amount equal to the amount of  any  tax
15             imposed  by  this  Act  which  was  refunded  to the
16             taxpayer and included in such total for the  taxable
17             year;
18                  (K)  An amount equal to all amounts included in
19             taxable  income  as  modified  by subparagraphs (A),
20             (B), (C), (D), (E), (F) and  (G)  which  are  exempt
21             from  taxation by this State either by reason of its
22             statutes  or  Constitution  or  by  reason  of   the
23             Constitution,  treaties  or  statutes  of the United
24             States; provided that, in the case of any statute of
25             this State that exempts income derived from bonds or
26             other obligations from the tax  imposed  under  this
27             Act,  the  amount exempted shall be the interest net
28             of bond premium amortization;
29                  (L)  With  the   exception   of   any   amounts
30             subtracted  under  subparagraph (K), an amount equal
31             to the sum of all amounts disallowed  as  deductions
32             by  (i)  Sections  171(a)  (2)  and 265(a)(2) of the
33             Internal Revenue Code, as now or hereafter  amended,
34             and  all  amounts  of expenses allocable to interest
 
                            -19-               LRB9112069SMdv
 1             and disallowed as deductions by  Section  265(1)  of
 2             the  Internal  Revenue  Code  of  1954,  as  now  or
 3             hereafter amended; and (ii) for taxable years ending
 4             on  or  after  August 13, 1999 the effective date of
 5             this amendatory Act of the  91st  General  Assembly,
 6             Sections  171(a)(2),  265, 280C, and 832(b)(5)(B)(i)
 7             of the Internal Revenue Code; the provisions of this
 8             subparagraph  are  exempt  from  the  provisions  of
 9             Section 250;
10                  (M)  An  amount  equal   to   those   dividends
11             included   in  such  total  which  were  paid  by  a
12             corporation which conducts business operations in an
13             Enterprise Zone or zones created under the  Illinois
14             Enterprise  Zone  Act and conducts substantially all
15             of its operations in an Enterprise Zone or Zones;
16                  (N)  An amount equal to any  contribution  made
17             to  a  job  training project established pursuant to
18             the Tax Increment Allocation Redevelopment Act;
19                  (O)  An  amount  equal   to   those   dividends
20             included   in   such  total  that  were  paid  by  a
21             corporation that conducts business operations  in  a
22             federally  designated Foreign Trade Zone or Sub-Zone
23             and  that  is  designated  a  High  Impact  Business
24             located  in  Illinois;   provided   that   dividends
25             eligible  for the deduction provided in subparagraph
26             (M) of paragraph (2) of this subsection shall not be
27             eligible  for  the  deduction  provided  under  this
28             subparagraph (O);
29                  (P)  An amount  equal  to  the  amount  of  the
30             deduction  used  to  compute  the federal income tax
31             credit for restoration of substantial  amounts  held
32             under  claim  of right for the taxable year pursuant
33             to Section 1341 of  the  Internal  Revenue  Code  of
34             1986; and
 
                            -20-               LRB9112069SMdv
 1                  (Q)  For  taxable  year 1999 and thereafter, an
 2             amount equal to the amount of any (i) distributions,
 3             to the extent includible in gross income for federal
 4             income tax purposes, made to the taxpayer because of
 5             his or her status as a  victim  of  persecution  for
 6             racial  or  religious reasons by Nazi Germany or any
 7             other Axis regime or as an heir of  the  victim  and
 8             (ii)  items  of  income, to the extent includible in
 9             gross  income  for  federal  income  tax   purposes,
10             attributable  to, derived from or in any way related
11             to assets stolen from,  hidden  from,  or  otherwise
12             lost  to  a  victim  of  persecution  for  racial or
13             religious reasons by Nazi Germany or any other  Axis
14             regime immediately prior to, during, and immediately
15             after  World  War II, including, but not limited to,
16             interest on the  proceeds  receivable  as  insurance
17             under policies issued to a victim of persecution for
18             racial  or  religious reasons by Nazi Germany or any
19             other Axis regime by  European  insurance  companies
20             immediately  prior  to  and  during  World  War  II;
21             provided,  however,  this  subtraction  from federal
22             adjusted gross  income  does  not  apply  to  assets
23             acquired  with such assets or with the proceeds from
24             the sale of such  assets;  provided,  further,  this
25             paragraph shall only apply to a taxpayer who was the
26             first  recipient of such assets after their recovery
27             and who is a victim of  persecution  for  racial  or
28             religious  reasons by Nazi Germany or any other Axis
29             regime or as an heir of the victim.  The  amount  of
30             and  the  eligibility  for  any  public  assistance,
31             benefit,  or  similar entitlement is not affected by
32             the  inclusion  of  items  (i)  and  (ii)  of   this
33             paragraph  in  gross  income  for federal income tax
34             purposes.  This  paragraph  is   exempt   from   the
 
                            -21-               LRB9112069SMdv
 1             provisions of Section 250.
 2             (3)  Limitation.   The  amount  of  any modification
 3        otherwise required under  this  subsection  shall,  under
 4        regulations  prescribed by the Department, be adjusted by
 5        any amounts included therein which  were  properly  paid,
 6        credited,  or  required to be distributed, or permanently
 7        set aside for charitable purposes pursuant   to  Internal
 8        Revenue Code Section 642(c) during the taxable year.

 9        (d)  Partnerships.
10             (1)  In  general. In the case of a partnership, base
11        income means an amount equal to  the  taxpayer's  taxable
12        income for the taxable year as modified by paragraph (2).
13             (2)  Modifications.  The  taxable income referred to
14        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
17             accrued to the taxpayer  as  interest  or  dividends
18             during  the taxable year to the extent excluded from
19             gross income in the computation of taxable income;
20                  (B)  An amount  equal  to  the  amount  of  tax
21             imposed  by  this  Act  to  the extent deducted from
22             gross income for the taxable year;
23                  (C)  The amount of deductions  allowed  to  the
24             partnership  pursuant  to  Section  707  (c)  of the
25             Internal Revenue Code  in  calculating  its  taxable
26             income; and
27                  (D)  An  amount  equal  to  the  amount  of the
28             capital gain deduction allowable under the  Internal
29             Revenue  Code,  to  the  extent  deducted from gross
30             income in the computation of taxable income;
31        and by deducting from the total so obtained the following
32        amounts:
33                  (E)  The valuation limitation amount;
34                  (F)  An amount equal to the amount of  any  tax
 
                            -22-               LRB9112069SMdv
 1             imposed  by  this  Act  which  was  refunded  to the
 2             taxpayer and included in such total for the  taxable
 3             year;
 4                  (G)  An amount equal to all amounts included in
 5             taxable  income  as  modified  by subparagraphs (A),
 6             (B), (C) and (D) which are exempt from  taxation  by
 7             this  State  either  by  reason  of  its statutes or
 8             Constitution  or  by  reason  of  the  Constitution,
 9             treaties or statutes of the United States;  provided
10             that,  in the case of any statute of this State that
11             exempts  income  derived   from   bonds   or   other
12             obligations from the tax imposed under this Act, the
13             amount  exempted  shall  be the interest net of bond
14             premium amortization;
15                  (H)  Any  income  of  the   partnership   which
16             constitutes  personal  service  income as defined in
17             Section 1348 (b) (1) of the  Internal  Revenue  Code
18             (as  in  effect  December  31, 1981) or a reasonable
19             allowance  for  compensation  paid  or  accrued  for
20             services rendered by partners  to  the  partnership,
21             whichever is greater;
22                  (I)  An  amount  equal to all amounts of income
23             distributable to an entity subject to  the  Personal
24             Property  Tax  Replacement  Income  Tax  imposed  by
25             subsections  (c)  and (d) of Section 201 of this Act
26             including  amounts  distributable  to  organizations
27             exempt from federal income tax by reason of  Section
28             501(a) of the Internal Revenue Code;
29                  (J)  With   the   exception   of   any  amounts
30             subtracted under subparagraph (G), an  amount  equal
31             to  the  sum of all amounts disallowed as deductions
32             by (i)  Sections  171(a)  (2),  and  265(2)  of  the
33             Internal  Revenue  Code of 1954, as now or hereafter
34             amended, and all amounts of  expenses  allocable  to
 
                            -23-               LRB9112069SMdv
 1             interest  and  disallowed  as  deductions by Section
 2             265(1) of the  Internal  Revenue  Code,  as  now  or
 3             hereafter amended; and (ii) for taxable years ending
 4             on  or  after  August 13, 1999 the effective date of
 5             this amendatory Act of the  91st  General  Assembly,
 6             Sections  171(a)(2),  265, 280C, and 832(b)(5)(B)(i)
 7             of the Internal Revenue Code; the provisions of this
 8             subparagraph  are  exempt  from  the  provisions  of
 9             Section 250;
10                  (K)  An  amount  equal   to   those   dividends
11             included   in  such  total  which  were  paid  by  a
12             corporation which conducts business operations in an
13             Enterprise Zone or zones created under the  Illinois
14             Enterprise  Zone  Act,  enacted  by the 82nd General
15             Assembly, and which does not conduct such operations
16             other than in an Enterprise Zone or Zones;
17                  (L)  An amount equal to any  contribution  made
18             to  a  job  training project established pursuant to
19             the   Real   Property   Tax   Increment   Allocation
20             Redevelopment Act;
21                  (M)  An  amount  equal   to   those   dividends
22             included   in   such  total  that  were  paid  by  a
23             corporation that conducts business operations  in  a
24             federally  designated Foreign Trade Zone or Sub-Zone
25             and  that  is  designated  a  High  Impact  Business
26             located  in  Illinois;   provided   that   dividends
27             eligible  for the deduction provided in subparagraph
28             (K) of paragraph (2) of this subsection shall not be
29             eligible  for  the  deduction  provided  under  this
30             subparagraph (M); and
31                  (N)  An amount  equal  to  the  amount  of  the
32             deduction  used  to  compute  the federal income tax
33             credit for restoration of substantial  amounts  held
34             under  claim  of right for the taxable year pursuant
 
                            -24-               LRB9112069SMdv
 1             to Section 1341 of  the  Internal  Revenue  Code  of
 2             1986.

 3        (e)  Gross income; adjusted gross income; taxable income.
 4             (1)  In  general.   Subject  to  the  provisions  of
 5        paragraph  (2)  and  subsection  (b) (3), for purposes of
 6        this Section  and  Section  803(e),  a  taxpayer's  gross
 7        income,  adjusted gross income, or taxable income for the
 8        taxable year shall  mean  the  amount  of  gross  income,
 9        adjusted   gross   income   or  taxable  income  properly
10        reportable  for  federal  income  tax  purposes  for  the
11        taxable year under the provisions of the Internal Revenue
12        Code. Taxable income may be less than zero. However,  for
13        taxable  years  ending on or after December 31, 1986, net
14        operating loss carryforwards from  taxable  years  ending
15        prior  to  December  31,  1986, may not exceed the sum of
16        federal taxable income for the taxable  year  before  net
17        operating  loss  deduction,  plus  the excess of addition
18        modifications  over  subtraction  modifications  for  the
19        taxable year.  For taxable years ending prior to December
20        31, 1986, taxable income may never be an amount in excess
21        of the net operating loss for the taxable year as defined
22        in subsections (c) and (d) of Section 172 of the Internal
23        Revenue Code, provided that  when  taxable  income  of  a
24        corporation  (other  than  a  Subchapter  S corporation),
25        trust,  or  estate  is  less  than  zero   and   addition
26        modifications,  other than those provided by subparagraph
27        (E) of paragraph (2) of subsection (b)  for  corporations
28        or  subparagraph  (E)  of paragraph (2) of subsection (c)
29        for trusts and estates, exceed subtraction modifications,
30        an  addition  modification  must  be  made  under   those
31        subparagraphs  for  any  other  taxable year to which the
32        taxable income less than zero  (net  operating  loss)  is
33        applied under Section 172 of the Internal Revenue Code or
34        under   subparagraph   (E)   of  paragraph  (2)  of  this
 
                            -25-               LRB9112069SMdv
 1        subsection (e) applied in conjunction with Section 172 of
 2        the Internal Revenue Code.
 3             (2)  Special rule.  For purposes of paragraph (1) of
 4        this subsection, the taxable income  properly  reportable
 5        for federal income tax purposes shall mean:
 6                  (A)  Certain  life insurance companies.  In the
 7             case of a life insurance company subject to the  tax
 8             imposed by Section 801 of the Internal Revenue Code,
 9             life  insurance  company  taxable  income,  plus the
10             amount of distribution  from  pre-1984  policyholder
11             surplus accounts as calculated under Section 815a of
12             the Internal Revenue Code;
13                  (B)  Certain other insurance companies.  In the
14             case  of  mutual  insurance companies subject to the
15             tax imposed by Section 831 of the  Internal  Revenue
16             Code, insurance company taxable income;
17                  (C)  Regulated  investment  companies.   In the
18             case of a regulated investment  company  subject  to
19             the  tax  imposed  by  Section  852  of the Internal
20             Revenue Code, investment company taxable income;
21                  (D)  Real estate  investment  trusts.   In  the
22             case  of  a  real estate investment trust subject to
23             the tax imposed  by  Section  857  of  the  Internal
24             Revenue  Code,  real estate investment trust taxable
25             income;
26                  (E)  Consolidated corporations.  In the case of
27             a corporation which is a  member  of  an  affiliated
28             group  of  corporations filing a consolidated income
29             tax return for the taxable year for  federal  income
30             tax  purposes,  taxable income determined as if such
31             corporation had filed a separate return for  federal
32             income  tax  purposes  for the taxable year and each
33             preceding taxable year for which it was a member  of
34             an   affiliated   group.   For   purposes   of  this
 
                            -26-               LRB9112069SMdv
 1             subparagraph, the taxpayer's separate taxable income
 2             shall be determined as if the election  provided  by
 3             Section  243(b) (2) of the Internal Revenue Code had
 4             been in effect for all such years;
 5                  (F)  Cooperatives.    In   the   case   of    a
 6             cooperative  corporation or association, the taxable
 7             income of such organization determined in accordance
 8             with the provisions of Section 1381 through 1388  of
 9             the Internal Revenue Code;
10                  (G)  Subchapter  S  corporations.   In the case
11             of: (i) a Subchapter S corporation for  which  there
12             is  in effect an election for the taxable year under
13             Section 1362  of  the  Internal  Revenue  Code,  the
14             taxable  income  of  such  corporation determined in
15             accordance with  Section  1363(b)  of  the  Internal
16             Revenue  Code, except that taxable income shall take
17             into account  those  items  which  are  required  by
18             Section  1363(b)(1)  of the Internal Revenue Code to
19             be  separately  stated;  and  (ii)  a  Subchapter  S
20             corporation for which there is in effect  a  federal
21             election  to  opt  out  of  the  provisions  of  the
22             Subchapter  S  Revision Act of 1982 and have applied
23             instead the prior federal Subchapter S rules  as  in
24             effect  on  July 1, 1982, the taxable income of such
25             corporation  determined  in  accordance   with   the
26             federal  Subchapter  S rules as in effect on July 1,
27             1982; and
28                  (H)  Partnerships.    In   the   case   of    a
29             partnership, taxable income determined in accordance
30             with  Section  703  of  the  Internal  Revenue Code,
31             except that taxable income shall take  into  account
32             those  items which are required by Section 703(a)(1)
33             to be separately stated but  which  would  be  taken
34             into  account  by  an  individual in calculating his
 
                            -27-               LRB9112069SMdv
 1             taxable income.

 2        (f)  Valuation limitation amount.
 3             (1)  In general.  The  valuation  limitation  amount
 4        referred  to  in subsections (a) (2) (G), (c) (2) (I) and
 5        (d)(2) (E) is an amount equal to:
 6                  (A)  The  sum  of  the   pre-August   1,   1969
 7             appreciation  amounts  (to  the extent consisting of
 8             gain reportable under the provisions of Section 1245
 9             or 1250  of  the  Internal  Revenue  Code)  for  all
10             property  in respect of which such gain was reported
11             for the taxable year; plus
12                  (B)  The  lesser  of  (i)  the   sum   of   the
13             pre-August  1,  1969  appreciation  amounts  (to the
14             extent consisting of capital gain) for all  property
15             in  respect  of  which  such  gain  was reported for
16             federal income tax purposes for the taxable year, or
17             (ii) the net capital  gain  for  the  taxable  year,
18             reduced  in  either  case by any amount of such gain
19             included in the amount determined  under  subsection
20             (a) (2) (F) or (c) (2) (H).
21             (2)  Pre-August 1, 1969 appreciation amount.
22                  (A)  If  the  fair  market  value  of  property
23             referred   to   in   paragraph   (1)   was   readily
24             ascertainable  on  August 1, 1969, the pre-August 1,
25             1969 appreciation amount for such  property  is  the
26             lesser  of  (i) the excess of such fair market value
27             over the taxpayer's basis (for determining gain) for
28             such property on that  date  (determined  under  the
29             Internal Revenue Code as in effect on that date), or
30             (ii)  the  total  gain  realized  and reportable for
31             federal income tax purposes in respect of the  sale,
32             exchange or other disposition of such property.
33                  (B)  If  the  fair  market  value  of  property
34             referred   to  in  paragraph  (1)  was  not  readily
 
                            -28-               LRB9112069SMdv
 1             ascertainable on August 1, 1969, the  pre-August  1,
 2             1969  appreciation  amount for such property is that
 3             amount which bears the same ratio to the total  gain
 4             reported  in  respect  of  the  property for federal
 5             income tax purposes for the  taxable  year,  as  the
 6             number  of  full calendar months in that part of the
 7             taxpayer's holding period for  the  property  ending
 8             July  31,  1969 bears to the number of full calendar
 9             months in the taxpayer's entire holding  period  for
10             the property.
11                  (C)  The   Department   shall   prescribe  such
12             regulations as may be necessary  to  carry  out  the
13             purposes of this paragraph.

14        (g)  Double  deductions.   Unless  specifically  provided
15    otherwise, nothing in this Section shall permit the same item
16    to be deducted more than once.

17        (h)  Legislative intention.  Except as expressly provided
18    by   this   Section   there  shall  be  no  modifications  or
19    limitations on the amounts of income, gain, loss or deduction
20    taken into account  in  determining  gross  income,  adjusted
21    gross  income  or  taxable  income  for  federal  income  tax
22    purposes for the taxable year, or in the amount of such items
23    entering  into  the computation of base income and net income
24    under this Act for such taxable year, whether in  respect  of
25    property values as of August 1, 1969 or otherwise.
26    (Source:  P.A.  90-491,  eff.  1-1-98;  90-717,  eff. 8-7-98;
27    90-770, eff. 8-14-98;  91-192,  eff.  7-20-99;  91-205,  eff.
28    7-20-99;  91-357, eff. 7-29-99; 91-541, eff. 8-13-99; 91-676,
29    eff. 12-23-99; revised 1-5-00.)

30        Section 99.  Effective date.  This Act takes effect  upon
31    becoming law.

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