State of Illinois
91st General Assembly
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[ Introduced ][ Enrolled ][ Senate Amendment 001 ]

91_SB0665eng

 
SB665 Engrossed                                LRB9103055PTpk

 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

 
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 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
 
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 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;
 
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 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;
 
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 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
 
SB665 Engrossed             -6-                LRB9103055PTpk
 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; and
 
SB665 Engrossed             -7-                LRB9103055PTpk
 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.

 7        (b)  Corporations.
 8             (1)  In general.  In the case of a corporation, base
 9        income means an amount equal to  the  taxpayer's  taxable
10        income for the taxable year as modified by paragraph (2).
11             (2)  Modifications.   The taxable income referred to
12        in paragraph (1) shall be modified by adding thereto  the
13        sum of the following amounts:
14                  (A)  An  amount  equal  to  all amounts paid or
15             accrued  to  the  taxpayer  as  interest   and   all
16             distributions  received  from  regulated  investment
17             companies  during  the  taxable  year  to the extent
18             excluded from gross income  in  the  computation  of
19             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  in  the computation of taxable income
23             for the taxable year;
24                  (C)  In the  case  of  a  regulated  investment
25             company,  an  amount  equal to the excess of (i) the
26             net long-term capital gain  for  the  taxable  year,
27             over  (ii)  the amount of the capital gain dividends
28             designated  as  such  in  accordance  with   Section
29             852(b)(3)(C)  of  the  Internal Revenue Code and any
30             amount designated under Section 852(b)(3)(D) of  the
31             Internal  Revenue  Code, attributable to the taxable
32             year. (this  amendatory  Act  of  1995  (Public  Act
33             89-89)  is  declarative of existing law and is not a
34             new enactment);.
 
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 1                  (D)  The  amount  of  any  net  operating  loss
 2             deduction taken in arriving at taxable income, other
 3             than a net operating loss  carried  forward  from  a
 4             taxable year ending prior to December 31, 1986; and
 5                  (E)  For taxable years in which a net operating
 6             loss  carryback  or carryforward from a taxable year
 7             ending prior to December 31, 1986 is an  element  of
 8             taxable income under paragraph (1) of subsection (e)
 9             or  subparagraph  (E) of paragraph (2) of subsection
10             (e), the  amount  by  which  addition  modifications
11             other  than  those provided by this subparagraph (E)
12             exceeded subtraction modifications in  such  earlier
13             taxable year, with the following limitations applied
14             in the order that they are listed:
15                       (i)  the addition modification relating to
16                  the  net operating loss carried back or forward
17                  to the  taxable  year  from  any  taxable  year
18                  ending  prior  to  December  31,  1986 shall be
19                  reduced by the amount of addition  modification
20                  under  this  subparagraph  (E) which related to
21                  that net operating loss  and  which  was  taken
22                  into  account in calculating the base income of
23                  an earlier taxable year, and
24                       (ii)  the addition  modification  relating
25                  to  the  net  operating  loss  carried  back or
26                  forward to the taxable year  from  any  taxable
27                  year  ending  prior  to December 31, 1986 shall
28                  not exceed the  amount  of  such  carryback  or
29                  carryforward;
30                  For  taxable  years  in  which  there  is a net
31             operating loss carryback or carryforward  from  more
32             than one other taxable year ending prior to December
33             31, 1986, the addition modification provided in this
34             subparagraph  (E)  shall  be  the sum of the amounts
 
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 1             computed   independently   under    the    preceding
 2             provisions  of  this  subparagraph (E) for each such
 3             taxable year;, and
 4                  (E-5)  For taxable years ending after  December
 5             31,   1997,   an   amount   equal  to  any  eligible
 6             remediation costs that the corporation  deducted  in
 7             computing  adjusted  gross  income and for which the
 8             corporation claims a credit under subsection (l)  of
 9             Section 201;
10        and  by  deducting  from the total so obtained the sum of
11        the following amounts:
12                  (F)  An amount equal to the amount of  any  tax
13             imposed  by  this  Act  which  was  refunded  to the
14             taxpayer and included in such total for the  taxable
15             year;
16                  (G)  An  amount equal to any amount included in
17             such total under Section 78 of the Internal  Revenue
18             Code;
19                  (H)  In  the  case  of  a  regulated investment
20             company, an amount equal to  the  amount  of  exempt
21             interest  dividends as defined in subsection (b) (5)
22             of Section 852 of the Internal Revenue Code, paid to
23             shareholders for the taxable year;
24                  (I)  With  the   exception   of   any   amounts
25             subtracted  under  subparagraph (J), an amount equal
26             to the sum of all amounts disallowed  as  deductions
27             by  Sections  171(a)  (2), and 265(a)(2) and amounts
28             disallowed as interest expense by Section  291(a)(3)
29             of  the  Internal  Revenue Code, as now or hereafter
30             amended, and all amounts of  expenses  allocable  to
31             interest  and  disallowed  as  deductions by Section
32             265(a)(1) of the Internal Revenue Code,  as  now  or
33             hereafter amended;
34                  (J)  An amount equal to all amounts included in
 
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 1             such  total  which  are exempt from taxation by this
 2             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                  (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 and conducts  substantially  all
15             of its operations in an Enterprise Zone or zones;
16                  (L)  An   amount   equal   to  those  dividends
17             included  in  such  total  that  were  paid   by   a
18             corporation  that  conducts business operations in a
19             federally designated Foreign Trade Zone or  Sub-Zone
20             and  that  is  designated  a  High  Impact  Business
21             located   in   Illinois;   provided  that  dividends
22             eligible for the deduction provided in  subparagraph
23             (K)  of  paragraph 2 of this subsection shall not be
24             eligible  for  the  deduction  provided  under  this
25             subparagraph (L);
26                  (M)  For  any  taxpayer  that  is  a  financial
27             organization within the meaning of Section 304(c) of
28             this Act,  an  amount  included  in  such  total  as
29             interest  income  from  a loan or loans made by such
30             taxpayer to a borrower, to the extent  that  such  a
31             loan  is  secured  by property which is eligible for
32             the Enterprise Zone Investment Credit. To  determine
33             the  portion  of  a loan or loans that is secured by
34             property eligible for a  Section  201(h)  investment
 
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 1             credit  to the borrower, the entire principal amount
 2             of the loan or loans between the  taxpayer  and  the
 3             borrower  should  be  divided  into the basis of the
 4             Section  201(h)  investment  credit  property  which
 5             secures the loan or loans, using  for  this  purpose
 6             the original basis of such property on the date that
 7             it  was  placed  in  service in the Enterprise Zone.
 8             The subtraction modification available  to  taxpayer
 9             in  any  year  under  this  subsection shall be that
10             portion of the total interest paid by  the  borrower
11             with  respect  to  such  loan  attributable  to  the
12             eligible  property  as calculated under the previous
13             sentence;
14                  (M-1)  For any taxpayer  that  is  a  financial
15             organization within the meaning of Section 304(c) of
16             this  Act,  an  amount  included  in  such  total as
17             interest income from a loan or loans  made  by  such
18             taxpayer  to  a  borrower, to the extent that such a
19             loan is secured by property which  is  eligible  for
20             the  High  Impact  Business  Investment  Credit.  To
21             determine the portion of a loan  or  loans  that  is
22             secured  by  property  eligible for a Section 201(i)
23             investment  credit  to  the  borrower,  the   entire
24             principal  amount  of  the loan or loans between the
25             taxpayer and the borrower should be divided into the
26             basis  of  the  Section  201(i)  investment   credit
27             property  which secures the loan or loans, using for
28             this purpose the original basis of such property  on
29             the  date  that  it  was  placed  in  service  in  a
30             federally  designated Foreign Trade Zone or Sub-Zone
31             located in Illinois.  No taxpayer that  is  eligible
32             for  the  deduction  provided in subparagraph (M) of
33             paragraph (2) of this subsection shall  be  eligible
34             for  the  deduction provided under this subparagraph
 
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 1             (M-1).  The subtraction  modification  available  to
 2             taxpayers in any year under this subsection shall be
 3             that  portion  of  the  total  interest  paid by the
 4             borrower with respect to such loan  attributable  to
 5             the   eligible  property  as  calculated  under  the
 6             previous sentence;
 7                  (N)  Two times any contribution made during the
 8             taxable year to a designated  zone  organization  to
 9             the  extent that the contribution (i) qualifies as a
10             charitable  contribution  under  subsection  (c)  of
11             Section 170 of the Internal Revenue  Code  and  (ii)
12             must,  by  its terms, be used for a project approved
13             by the Department of Commerce and Community  Affairs
14             under  Section  11  of  the Illinois Enterprise Zone
15             Act;
16                  (O)  An amount equal to: (i)  85%  for  taxable
17             years  ending  on or before December 31, 1992, or, a
18             percentage equal to the percentage  allowable  under
19             Section  243(a)(1)  of  the Internal Revenue Code of
20             1986 for taxable years  ending  after  December  31,
21             1992,  of  the amount by which dividends included in
22             taxable income and received from a corporation  that
23             is  not  created  or organized under the laws of the
24             United States or any state or political  subdivision
25             thereof,  including,  for taxable years ending on or
26             after  December  31,  1988,  dividends  received  or
27             deemed  received  or  paid  or  deemed  paid   under
28             Sections  951  through  964  of the Internal Revenue
29             Code, exceed the amount of the modification provided
30             under subparagraph (G)  of  paragraph  (2)  of  this
31             subsection  (b)  which is related to such dividends;
32             plus (ii) 100% of the  amount  by  which  dividends,
33             included  in taxable income and received, including,
34             for taxable years ending on or  after  December  31,
 
SB665 Engrossed             -13-               LRB9103055PTpk
 1             1988,  dividends received or deemed received or paid
 2             or deemed paid under Sections 951 through 964 of the
 3             Internal Revenue Code,  from  any  such  corporation
 4             specified  in  clause  (i)  that  would  but for the
 5             provisions of Section 1504 (b) (3) of  the  Internal
 6             Revenue   Code   be  treated  as  a  member  of  the
 7             affiliated  group  which   includes   the   dividend
 8             recipient,  exceed  the  amount  of the modification
 9             provided under subparagraph (G) of paragraph (2)  of
10             this   subsection  (b)  which  is  related  to  such
11             dividends;
12                  (P)  An amount equal to any  contribution  made
13             to  a  job  training project established pursuant to
14             the Tax Increment Allocation Redevelopment Act; and
15                  (Q)  An amount  equal  to  the  amount  of  the
16             deduction  used  to  compute  the federal income tax
17             credit for restoration of substantial  amounts  held
18             under  claim  of right for the taxable year pursuant
19             to Section 1341 of the Internal Revenue Code of 1986
20             ; and.
21                  (R)  In the case of  an  attorney-in-fact  with
22             respect  to  whom  an  interinsurer  or a reciprocal
23             insurer has made the election under Section  835  of
24             the  Internal Revenue Code, 26 U.S.C. 835, an amount
25             equal to the excess, if any, of the amounts paid  or
26             incurred  by that interinsurer or reciprocal insurer
27             in the taxable year to the attorney-in-fact over the
28             deduction allowed to that interinsurer or reciprocal
29             insurer with respect to the  attorney-in-fact  under
30             Section  835(b) of the Internal Revenue Code for the
31             taxable year.
32             (3)  Special rule.  For purposes  of  paragraph  (2)
33        (A),  "gross  income"  in  the  case  of a life insurance
34        company, for tax years ending on and after  December  31,
 
SB665 Engrossed             -14-               LRB9103055PTpk
 1        1994,  shall  mean  the  gross  investment income for the
 2        taxable year.

 3        (c)  Trusts and estates.
 4             (1)  In general.  In the case of a trust or  estate,
 5        base  income  means  an  amount  equal  to the taxpayer's
 6        taxable income  for  the  taxable  year  as  modified  by
 7        paragraph (2).
 8             (2)  Modifications.   Subject  to  the provisions of
 9        paragraph  (3),  the  taxable  income  referred   to   in
10        paragraph (1) shall be modified by adding thereto the sum
11        of the following amounts:
12                  (A)  An  amount  equal  to  all amounts paid or
13             accrued to the taxpayer  as  interest  or  dividends
14             during  the taxable year to the extent excluded from
15             gross income in the computation of taxable income;
16                  (B)  In the case of (i) an estate, $600; (ii) a
17             trust which,  under  its  governing  instrument,  is
18             required  to distribute all of its income currently,
19             $300; and (iii) any other trust, $100, but  in  each
20             such  case,  only  to  the  extent  such  amount was
21             deducted in the computation of taxable income;
22                  (C)  An amount  equal  to  the  amount  of  tax
23             imposed  by  this  Act  to  the extent deducted from
24             gross income in the computation  of  taxable  income
25             for the taxable year;
26                  (D)  The  amount  of  any  net  operating  loss
27             deduction taken in arriving at taxable income, other
28             than  a  net  operating  loss carried forward from a
29             taxable year ending prior to December 31, 1986;
30                  (E)  For taxable years in which a net operating
31             loss carryback or carryforward from a  taxable  year
32             ending  prior  to December 31, 1986 is an element of
33             taxable income under paragraph (1) of subsection (e)
34             or subparagraph (E) of paragraph (2)  of  subsection
 
SB665 Engrossed             -15-               LRB9103055PTpk
 1             (e),  the  amount  by  which  addition modifications
 2             other than those provided by this  subparagraph  (E)
 3             exceeded  subtraction  modifications in such taxable
 4             year, with the following limitations applied in  the
 5             order that they are listed:
 6                       (i)  the addition modification relating to
 7                  the  net operating loss carried back or forward
 8                  to the  taxable  year  from  any  taxable  year
 9                  ending  prior  to  December  31,  1986 shall be
10                  reduced by the amount of addition  modification
11                  under  this  subparagraph  (E) which related to
12                  that net operating loss  and  which  was  taken
13                  into  account in calculating the base income of
14                  an earlier taxable year, and
15                       (ii)  the addition  modification  relating
16                  to  the  net  operating  loss  carried  back or
17                  forward to the taxable year  from  any  taxable
18                  year  ending  prior  to December 31, 1986 shall
19                  not exceed the  amount  of  such  carryback  or
20                  carryforward;
21                  For  taxable  years  in  which  there  is a net
22             operating loss carryback or carryforward  from  more
23             than one other taxable year ending prior to December
24             31, 1986, the addition modification provided in this
25             subparagraph  (E)  shall  be  the sum of the amounts
26             computed   independently   under    the    preceding
27             provisions  of  this  subparagraph (E) for each such
28             taxable year;
29                  (F)  For  taxable  years  ending  on  or  after
30             January 1, 1989, an amount equal to the tax deducted
31             pursuant to Section 164 of the Internal Revenue Code
32             if the trust or estate is claiming the same tax  for
33             purposes  of  the  Illinois foreign tax credit under
34             Section 601 of this Act;
 
SB665 Engrossed             -16-               LRB9103055PTpk
 1                  (G)  An amount  equal  to  the  amount  of  the
 2             capital  gain deduction allowable under the Internal
 3             Revenue Code, to  the  extent  deducted  from  gross
 4             income in the computation of taxable income; and
 5                  (G-5)  For  taxable years ending after December
 6             31,  1997,  an  amount   equal   to   any   eligible
 7             remediation  costs that the trust or estate deducted
 8             in computing adjusted gross income and for which the
 9             trust or estate claims a credit under subsection (l)
10             of Section 201;
11        and by deducting from the total so obtained  the  sum  of
12        the following amounts:
13                  (H)  An amount equal to all amounts included in
14             such  total  pursuant  to the provisions of Sections
15             402(a), 402(c), 403(a), 403(b), 406(a),  407(a)  and
16             408 of the Internal Revenue Code or included in such
17             total  as  distributions under the provisions of any
18             retirement or disability plan for employees  of  any
19             governmental  agency or unit, or retirement payments
20             to retired partners, which payments are excluded  in
21             computing  net  earnings  from  self  employment  by
22             Section  1402  of  the  Internal  Revenue  Code  and
23             regulations adopted pursuant thereto;
24                  (I)  The valuation limitation amount;
25                  (J)  An  amount  equal to the amount of any tax
26             imposed by  this  Act  which  was  refunded  to  the
27             taxpayer  and included in such total for the taxable
28             year;
29                  (K)  An amount equal to all amounts included in
30             taxable income as  modified  by  subparagraphs  (A),
31             (B),  (C),  (D),  (E),  (F) and (G) which are exempt
32             from taxation by this State either by reason of  its
33             statutes   or  Constitution  or  by  reason  of  the
34             Constitution, treaties or  statutes  of  the  United
 
SB665 Engrossed             -17-               LRB9103055PTpk
 1             States; provided that, in the case of any statute of
 2             this State that exempts income derived from bonds or
 3             other  obligations  from  the tax imposed under this
 4             Act, the amount exempted shall be the  interest  net
 5             of bond premium amortization;
 6                  (L)  With   the   exception   of   any  amounts
 7             subtracted under subparagraph (K), an  amount  equal
 8             to  the  sum of all amounts disallowed as deductions
 9             by Sections 171(a) (2) and 265(a)(2) of the Internal
10             Revenue Code, as now or hereafter amended,  and  all
11             amounts   of  expenses  allocable  to  interest  and
12             disallowed as deductions by Section  265(1)  of  the
13             Internal  Revenue  Code of 1954, as now or hereafter
14             amended;
15                  (M)  An  amount  equal   to   those   dividends
16             included   in  such  total  which  were  paid  by  a
17             corporation which conducts business operations in an
18             Enterprise Zone or zones created under the  Illinois
19             Enterprise  Zone  Act and conducts substantially all
20             of its operations in an Enterprise Zone or Zones;
21                  (N)  An amount equal to any  contribution  made
22             to  a  job  training project established pursuant to
23             the Tax Increment Allocation Redevelopment Act;
24                  (O)  An  amount  equal   to   those   dividends
25             included   in   such  total  that  were  paid  by  a
26             corporation that conducts business operations  in  a
27             federally  designated Foreign Trade Zone or Sub-Zone
28             and  that  is  designated  a  High  Impact  Business
29             located  in  Illinois;   provided   that   dividends
30             eligible  for the deduction provided in subparagraph
31             (M) of paragraph (2) of this subsection shall not be
32             eligible  for  the  deduction  provided  under  this
33             subparagraph (O); and
34                  (P)  An amount  equal  to  the  amount  of  the
 
SB665 Engrossed             -18-               LRB9103055PTpk
 1             deduction  used  to  compute  the federal income tax
 2             credit for restoration of substantial  amounts  held
 3             under  claim  of right for the taxable year pursuant
 4             to Section 1341 of  the  Internal  Revenue  Code  of
 5             1986.
 6             (3)  Limitation.   The  amount  of  any modification
 7        otherwise required under  this  subsection  shall,  under
 8        regulations  prescribed by the Department, be adjusted by
 9        any amounts included therein which  were  properly  paid,
10        credited,  or  required to be distributed, or permanently
11        set aside for charitable purposes pursuant   to  Internal
12        Revenue Code Section 642(c) during the taxable year.

13        (d)  Partnerships.
14             (1)  In  general. In the case of a partnership, base
15        income means an amount equal to  the  taxpayer's  taxable
16        income for the taxable year as modified by paragraph (2).
17             (2)  Modifications.  The  taxable income referred to
18        in paragraph (1) shall be modified by adding thereto  the
19        sum of the following amounts:
20                  (A)  An  amount  equal  to  all amounts paid or
21             accrued to the taxpayer  as  interest  or  dividends
22             during  the taxable year to the extent excluded from
23             gross income in the computation of taxable income;
24                  (B)  An amount  equal  to  the  amount  of  tax
25             imposed  by  this  Act  to  the extent deducted from
26             gross income for the taxable year; and
27                  (C)  The amount of deductions  allowed  to  the
28             partnership  pursuant  to  Section  707  (c)  of the
29             Internal Revenue Code  in  calculating  its  taxable
30             income; and
31                  (D)  An  amount  equal  to  the  amount  of the
32             capital gain deduction allowable under the  Internal
33             Revenue  Code,  to  the  extent  deducted from gross
34             income in the computation of taxable income;
 
SB665 Engrossed             -19-               LRB9103055PTpk
 1        and by deducting from the total so obtained the following
 2        amounts:
 3                  (E)  The valuation limitation amount;
 4                  (F)  An amount equal to the amount of  any  tax
 5             imposed  by  this  Act  which  was  refunded  to the
 6             taxpayer and included in such total for the  taxable
 7             year;
 8                  (G)  An amount equal to all amounts included in
 9             taxable  income  as  modified  by subparagraphs (A),
10             (B), (C) and (D) which are exempt from  taxation  by
11             this  State  either  by  reason  of  its statutes or
12             Constitution  or  by  reason  of  the  Constitution,
13             treaties or statutes of the United States;  provided
14             that,  in the case of any statute of this State that
15             exempts  income  derived   from   bonds   or   other
16             obligations from the tax imposed under this Act, the
17             amount  exempted  shall  be the interest net of bond
18             premium amortization;
19                  (H)  Any  income  of  the   partnership   which
20             constitutes  personal  service  income as defined in
21             Section 1348 (b) (1) of the  Internal  Revenue  Code
22             (as  in  effect  December  31, 1981) or a reasonable
23             allowance  for  compensation  paid  or  accrued  for
24             services rendered by partners  to  the  partnership,
25             whichever is greater;
26                  (I)  An  amount  equal to all amounts of income
27             distributable to an entity subject to  the  Personal
28             Property  Tax  Replacement  Income  Tax  imposed  by
29             subsections  (c)  and (d) of Section 201 of this Act
30             including  amounts  distributable  to  organizations
31             exempt from federal income tax by reason of  Section
32             501(a) of the Internal Revenue Code;
33                  (J)  With   the   exception   of   any  amounts
34             subtracted under subparagraph (G), an  amount  equal
 
SB665 Engrossed             -20-               LRB9103055PTpk
 1             to  the  sum of all amounts disallowed as deductions
 2             by Sections 171(a) (2), and 265(2) of  the  Internal
 3             Revenue  Code  of 1954, as now or hereafter amended,
 4             and all amounts of expenses  allocable  to  interest
 5             and  disallowed  as  deductions by Section 265(1) of
 6             the Internal  Revenue  Code,  as  now  or  hereafter
 7             amended;
 8                  (K)  An   amount   equal   to  those  dividends
 9             included  in  such  total  which  were  paid  by   a
10             corporation which conducts business operations in an
11             Enterprise  Zone or zones created under the Illinois
12             Enterprise Zone Act, enacted  by  the  82nd  General
13             Assembly, and which does not conduct such operations
14             other than in an Enterprise Zone or Zones;
15                  (L)  An  amount  equal to any contribution made
16             to a job training project  established  pursuant  to
17             the   Real   Property   Tax   Increment   Allocation
18             Redevelopment Act;
19                  (M)  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             (K) of paragraph (2) of this subsection shall not be
27             eligible  for  the  deduction  provided  under  this
28             subparagraph (M); and
29                  (N)  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.
 
SB665 Engrossed             -21-               LRB9103055PTpk
 1        (e)  Gross income; adjusted gross income; taxable income.
 2             (1)  In  general.   Subject  to  the  provisions  of
 3        paragraph (2) and subsection (b)  (3),  for  purposes  of
 4        this  Section  and  Section  803(e),  a  taxpayer's gross
 5        income, adjusted gross income, or taxable income for  the
 6        taxable  year  shall  mean  the  amount  of gross income,
 7        adjusted  gross  income  or   taxable   income   properly
 8        reportable  for  federal  income  tax  purposes  for  the
 9        taxable year under the provisions of the Internal Revenue
10        Code.  Taxable income may be less than zero. However, for
11        taxable years ending on or after December 31,  1986,  net
12        operating  loss  carryforwards  from taxable years ending
13        prior to December 31, 1986, may not  exceed  the  sum  of
14        federal  taxable  income  for the taxable year before net
15        operating loss deduction, plus  the  excess  of  addition
16        modifications  over  subtraction  modifications  for  the
17        taxable year.  For taxable years ending prior to December
18        31, 1986, taxable income may never be an amount in excess
19        of the net operating loss for the taxable year as defined
20        in subsections (c) and (d) of Section 172 of the Internal
21        Revenue  Code,  provided  that  when  taxable income of a
22        corporation (other  than  a  Subchapter  S  corporation),
23        trust,   or   estate  is  less  than  zero  and  addition
24        modifications, other than those provided by  subparagraph
25        (E)  of  paragraph (2) of subsection (b) for corporations
26        or subparagraph (E) of paragraph (2)  of  subsection  (c)
27        for trusts and estates, exceed subtraction modifications,
28        an   addition  modification  must  be  made  under  those
29        subparagraphs for any other taxable  year  to  which  the
30        taxable  income  less  than  zero (net operating loss) is
31        applied under Section 172 of the Internal Revenue Code or
32        under  subparagraph  (E)  of  paragraph   (2)   of   this
33        subsection (e) applied in conjunction with Section 172 of
34        the Internal Revenue Code.
 
SB665 Engrossed             -22-               LRB9103055PTpk
 1             (2)  Special rule.  For purposes of paragraph (1) of
 2        this  subsection,  the taxable income properly reportable
 3        for federal income tax purposes shall mean:
 4                  (A)  Certain life insurance companies.  In  the
 5             case  of a life insurance company subject to the tax
 6             imposed by Section 801 of the Internal Revenue Code,
 7             life insurance  company  taxable  income,  plus  the
 8             amount  of  distribution  from pre-1984 policyholder
 9             surplus accounts as calculated under Section 815a of
10             the Internal Revenue Code;
11                  (B)  Certain other insurance companies.  In the
12             case of mutual insurance companies  subject  to  the
13             tax  imposed  by Section 831 of the Internal Revenue
14             Code, insurance company taxable income;
15                  (C)  Regulated investment  companies.   In  the
16             case  of  a  regulated investment company subject to
17             the tax imposed  by  Section  852  of  the  Internal
18             Revenue Code, investment company taxable income;
19                  (D)  Real  estate  investment  trusts.   In the
20             case of a real estate investment  trust  subject  to
21             the  tax  imposed  by  Section  857  of the Internal
22             Revenue Code, real estate investment  trust  taxable
23             income;
24                  (E)  Consolidated corporations.  In the case of
25             a  corporation  which  is  a member of an affiliated
26             group of corporations filing a  consolidated  income
27             tax  return  for the taxable year for federal income
28             tax purposes, taxable income determined as  if  such
29             corporation  had filed a separate return for federal
30             income tax purposes for the taxable  year  and  each
31             preceding  taxable year for which it was a member of
32             an  affiliated   group.   For   purposes   of   this
33             subparagraph, the taxpayer's separate taxable income
34             shall  be  determined as if the election provided by
 
SB665 Engrossed             -23-               LRB9103055PTpk
 1             Section 243(b) (2) of the Internal Revenue Code  had
 2             been in effect for all such years;
 3                  (F)  Cooperatives.     In   the   case   of   a
 4             cooperative corporation or association, the  taxable
 5             income of such organization determined in accordance
 6             with  the provisions of Section 1381 through 1388 of
 7             the Internal Revenue Code;
 8                  (G)  Subchapter S corporations.   In  the  case
 9             of:  (i)  a Subchapter S corporation for which there
10             is in effect an election for the taxable year  under
11             Section  1362  of  the  Internal  Revenue  Code, the
12             taxable income of  such  corporation  determined  in
13             accordance  with  Section  1363(b)  of  the Internal
14             Revenue Code, except that taxable income shall  take
15             into  account  those  items  which  are  required by
16             Section 1363(b)(1) of the Internal Revenue  Code  to
17             be  separately  stated;  and  (ii)  a  Subchapter  S
18             corporation  for  which there is in effect a federal
19             election  to  opt  out  of  the  provisions  of  the
20             Subchapter S Revision Act of 1982 and  have  applied
21             instead  the  prior federal Subchapter S rules as in
22             effect on July 1, 1982, the taxable income  of  such
23             corporation   determined   in  accordance  with  the
24             federal Subchapter S rules as in effect on  July  1,
25             1982; and
26                  (H)  Partnerships.     In   the   case   of   a
27             partnership, taxable income determined in accordance
28             with Section  703  of  the  Internal  Revenue  Code,
29             except  that  taxable income shall take into account
30             those items which are required by Section  703(a)(1)
31             to  be  separately  stated  but which would be taken
32             into account by an  individual  in  calculating  his
33             taxable income.

34        (f)  Valuation limitation amount.
 
SB665 Engrossed             -24-               LRB9103055PTpk
 1             (1)  In  general.   The  valuation limitation amount
 2        referred to in subsections (a) (2) (G), (c) (2)  (I)  and
 3        (d)(2) (E) is an amount equal to:
 4                  (A)  The   sum   of   the  pre-August  1,  1969
 5             appreciation amounts (to the  extent  consisting  of
 6             gain reportable under the provisions of Section 1245
 7             or  1250  of  the  Internal  Revenue  Code)  for all
 8             property in respect of which such gain was  reported
 9             for the taxable year; plus
10                  (B)  The   lesser   of   (i)  the  sum  of  the
11             pre-August 1,  1969  appreciation  amounts  (to  the
12             extent  consisting of capital gain) for all property
13             in respect of  which  such  gain  was  reported  for
14             federal income tax purposes for the taxable year, or
15             (ii)  the  net  capital  gain  for the taxable year,
16             reduced in either case by any amount  of  such  gain
17             included  in  the amount determined under subsection
18             (a) (2) (F) or (c) (2) (H).
19        (2)  Pre-August 1, 1969 appreciation amount.
20                  (A)  If  the  fair  market  value  of  property
21             referred   to   in   paragraph   (1)   was   readily
22             ascertainable on August 1, 1969, the  pre-August  1,
23             1969  appreciation  amount  for such property is the
24             lesser of (i) the excess of such fair  market  value
25             over the taxpayer's basis (for determining gain) for
26             such  property  on  that  date (determined under the
27             Internal Revenue Code as in effect on that date), or
28             (ii) the total  gain  realized  and  reportable  for
29             federal  income tax purposes in respect of the sale,
30             exchange or other disposition of such property.
31                  (B)  If  the  fair  market  value  of  property
32             referred  to  in  paragraph  (1)  was  not   readily
33             ascertainable  on  August 1, 1969, the pre-August 1,
34             1969 appreciation amount for such property  is  that
 
SB665 Engrossed             -25-               LRB9103055PTpk
 1             amount  which bears the same ratio to the total gain
 2             reported in respect  of  the  property  for  federal
 3             income  tax  purposes  for  the taxable year, as the
 4             number of full calendar months in that part  of  the
 5             taxpayer's  holding  period  for the property ending
 6             July 31, 1969 bears to the number of  full  calendar
 7             months  in  the taxpayer's entire holding period for
 8             the property.
 9                  (C)  The  Department   shall   prescribe   such
10             regulations  as  may  be  necessary to carry out the
11             purposes of this paragraph.

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

15        (h)  Legislative intention.  Except as expressly provided
16    by  this  Section  there  shall  be   no   modifications   or
17    limitations on the amounts of income, gain, loss or deduction
18    taken  into  account  in  determining  gross income, adjusted
19    gross  income  or  taxable  income  for  federal  income  tax
20    purposes for the taxable year, or in the amount of such items
21    entering into the computation of base income and  net  income
22    under  this  Act for such taxable year, whether in respect of
23    property values as of August 1, 1969 or otherwise.
24    (Source: P.A.  89-89,  eff.  6-30-95;  89-235,  eff.  8-4-95;
25    89-418,  eff.  11-15-95;  89-460,  eff. 5-24-96; 89-626, eff.
26    8-9-96; 90-491, eff. 1-1-98;  90-717,  eff.  8-7-98;  90-770,
27    eff. 8-14-98; revised 9-21-98.)

28        Section  99.  Effective date.  This Act takes effect upon
29    becoming law.

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