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91_SB1118enr SB1118 Enrolled LRB9102874PTpkA 1 AN ACT concerning taxation. 2 Be it enacted by the People of the State of Illinois, 3 represented in the General Assembly: 4 Section 5. The Illinois Income Tax Act is amended by 5 changing Sections 203, 207, 304, 502, 601.1, 905, and 911 and 6 adding Section 405 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 SB1118 Enrolled -2- LRB9102874PTpkA 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income; 14 (D-5) An amount, to the extent not included in 15 adjusted gross income, equal to the amount of money 16 withdrawn by the taxpayer in the taxable year from a 17 medical care savings account and the interest earned 18 on the account in the taxable year of a withdrawal 19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 SB1118 Enrolled -3- LRB9102874PTpkA 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; SB1118 Enrolled -4- LRB9102874PTpkA 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 the effective date of this 26 amendatory Act of the 91st General Assembly, 27 Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) 28 of the Internal Revenue Code; the provisions of this 29 subparagraph are exempt from the provisions of 30 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, SB1118 Enrolled -5- LRB9102874PTpkA 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 SB1118 Enrolled -6- LRB9102874PTpkA 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, 1999, 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 SB1118 Enrolled -7- LRB9102874PTpkA 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; and 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. 13 (b) Corporations. 14 (1) In general. In the case of a corporation, 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 and all 22 distributions received from regulated investment 23 companies during the taxable year to the extent 24 excluded from gross income in the computation of 25 taxable income; 26 (B) An amount equal to the amount of tax 27 imposed by this Act to the extent deducted from 28 gross income in the computation of taxable income 29 for the taxable year; 30 (C) In the case of a regulated investment 31 company, an amount equal to the excess of (i) the 32 net long-term capital gain for the taxable year, 33 over (ii) the amount of the capital gain dividends 34 designated as such in accordance with Section SB1118 Enrolled -8- LRB9102874PTpkA 1 852(b)(3)(C) of the Internal Revenue Code and any 2 amount designated under Section 852(b)(3)(D) of the 3 Internal Revenue Code, attributable to the taxable 4 year.(this amendatory Act of 1995 (Public Act 5 89-89) is declarative of existing law and is not a 6 new enactment);.7 (D) The amount of any net operating loss 8 deduction taken in arriving at taxable income, other 9 than a net operating loss carried forward from a 10 taxable year ending prior to December 31, 1986;and11 (E) For taxable years in which a net operating 12 loss carryback or carryforward from a taxable year 13 ending prior to December 31, 1986 is an element of 14 taxable income under paragraph (1) of subsection (e) 15 or subparagraph (E) of paragraph (2) of subsection 16 (e), the amount by which addition modifications 17 other than those provided by this subparagraph (E) 18 exceeded subtraction modifications in such earlier 19 taxable year, with the following limitations applied 20 in the order that they are listed: 21 (i) the addition modification relating to 22 the net operating loss carried back or forward 23 to the taxable year from any taxable year 24 ending prior to December 31, 1986 shall be 25 reduced by the amount of addition modification 26 under this subparagraph (E) which related to 27 that net operating loss and which was taken 28 into account in calculating the base income of 29 an earlier taxable year, and 30 (ii) the addition modification relating 31 to the net operating loss carried back or 32 forward to the taxable year from any taxable 33 year ending prior to December 31, 1986 shall 34 not exceed the amount of such carryback or SB1118 Enrolled -9- LRB9102874PTpkA 1 carryforward; 2 For taxable years in which there is a net 3 operating loss carryback or carryforward from more 4 than one other taxable year ending prior to December 5 31, 1986, the addition modification provided in this 6 subparagraph (E) shall be the sum of the amounts 7 computed independently under the preceding 8 provisions of this subparagraph (E) for each such 9 taxable year;,and 10 (E-5) For taxable years ending after December 11 31, 1997, an amount equal to any eligible 12 remediation costs that the corporation deducted in 13 computing adjusted gross income and for which the 14 corporation claims a credit under subsection (l) of 15 Section 201; 16 and by deducting from the total so obtained the sum of 17 the following amounts: 18 (F) An amount equal to the amount of any tax 19 imposed by this Act which was refunded to the 20 taxpayer and included in such total for the taxable 21 year; 22 (G) An amount equal to any amount included in 23 such total under Section 78 of the Internal Revenue 24 Code; 25 (H) In the case of a regulated investment 26 company, an amount equal to the amount of exempt 27 interest dividends as defined in subsection (b) (5) 28 of Section 852 of the Internal Revenue Code, paid to 29 shareholders for the taxable year; 30 (I) With the exception of any amounts 31 subtracted under subparagraph (J), an amount equal 32 to the sum of all amounts disallowed as deductions 33 by (i) Sections 171(a)(2), and 265(a)(2) and amounts 34 disallowed as interest expense by Section 291(a)(3) SB1118 Enrolled -10- LRB9102874PTpkA 1 of the Internal Revenue Code, as now or hereafter 2 amended, and all amounts of expenses allocable to 3 interest and disallowed as deductions by Section 4 265(a)(1) of the Internal Revenue Code, as now or 5 hereafter amended; and (ii) for taxable years ending 6 on or after the effective date of this amendatory 7 Act of the 91st General Assembly, Sections 8 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the 9 Internal Revenue Code; the provisions of this 10 subparagraph are exempt from the provisions of 11 Section 250; 12 (J) An amount equal to all amounts included in 13 such total which are exempt from taxation by this 14 State either by reason of its statutes or 15 Constitution or by reason of the Constitution, 16 treaties or statutes of the United States; provided 17 that, in the case of any statute of this State that 18 exempts income derived from bonds or other 19 obligations from the tax imposed under this Act, the 20 amount exempted shall be the interest net of bond 21 premium amortization; 22 (K) An amount equal to those dividends 23 included in such total which were paid by a 24 corporation which conducts business operations in an 25 Enterprise Zone or zones created under the Illinois 26 Enterprise Zone Act and conducts substantially all 27 of its operations in an Enterprise Zone or zones; 28 (L) An amount equal to those dividends 29 included in such total that were paid by a 30 corporation that conducts business operations in a 31 federally designated Foreign Trade Zone or Sub-Zone 32 and that is designated a High Impact Business 33 located in Illinois; provided that dividends 34 eligible for the deduction provided in subparagraph SB1118 Enrolled -11- LRB9102874PTpkA 1 (K) of paragraph 2 of this subsection shall not be 2 eligible for the deduction provided under this 3 subparagraph (L); 4 (M) For any taxpayer that is a financial 5 organization within the meaning of Section 304(c) of 6 this Act, an amount included in such total as 7 interest income from a loan or loans made by such 8 taxpayer to a borrower, to the extent that such a 9 loan is secured by property which is eligible for 10 the Enterprise Zone Investment Credit. To determine 11 the portion of a loan or loans that is secured by 12 property eligible for a Section 201(h) investment 13 credit to the borrower, the entire principal amount 14 of the loan or loans between the taxpayer and the 15 borrower should be divided into the basis of the 16 Section 201(h) investment credit property which 17 secures the loan or loans, using for this purpose 18 the original basis of such property on the date that 19 it was placed in service in the Enterprise Zone. 20 The subtraction modification available to taxpayer 21 in any year under this subsection shall be that 22 portion of the total interest paid by the borrower 23 with respect to such loan attributable to the 24 eligible property as calculated under the previous 25 sentence; 26 (M-1) 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 High Impact Business Investment Credit. To 33 determine the portion of a loan or loans that is 34 secured by property eligible for a Section 201(i) SB1118 Enrolled -12- LRB9102874PTpkA 1 investment credit to the borrower, the entire 2 principal amount of the loan or loans between the 3 taxpayer and the borrower should be divided into the 4 basis of the Section 201(i) investment credit 5 property which secures the loan or loans, using for 6 this purpose the original basis of such property on 7 the date that it was placed in service in a 8 federally designated Foreign Trade Zone or Sub-Zone 9 located in Illinois. No taxpayer that is eligible 10 for the deduction provided in subparagraph (M) of 11 paragraph (2) of this subsection shall be eligible 12 for the deduction provided under this subparagraph 13 (M-1). The subtraction modification available to 14 taxpayers in any year under this subsection shall be 15 that portion of the total interest paid by the 16 borrower with respect to such loan attributable to 17 the eligible property as calculated under the 18 previous sentence; 19 (N) Two times any contribution made during the 20 taxable year to a designated zone organization to 21 the extent that the contribution (i) qualifies as a 22 charitable contribution under subsection (c) of 23 Section 170 of the Internal Revenue Code and (ii) 24 must, by its terms, be used for a project approved 25 by the Department of Commerce and Community Affairs 26 under Section 11 of the Illinois Enterprise Zone 27 Act; 28 (O) An amount equal to: (i) 85% for taxable 29 years ending on or before December 31, 1992, or, a 30 percentage equal to the percentage allowable under 31 Section 243(a)(1) of the Internal Revenue Code of 32 1986 for taxable years ending after December 31, 33 1992, of the amount by which dividends included in 34 taxable income and received from a corporation that SB1118 Enrolled -13- LRB9102874PTpkA 1 is not created or organized under the laws of the 2 United States or any state or political subdivision 3 thereof, including, for taxable years ending on or 4 after December 31, 1988, dividends received or 5 deemed received or paid or deemed paid under 6 Sections 951 through 964 of the Internal Revenue 7 Code, exceed the amount of the modification provided 8 under subparagraph (G) of paragraph (2) of this 9 subsection (b) which is related to such dividends; 10 plus (ii) 100% of the amount by which dividends, 11 included in taxable income and received, including, 12 for taxable years ending on or after December 31, 13 1988, dividends received or deemed received or paid 14 or deemed paid under Sections 951 through 964 of the 15 Internal Revenue Code, from any such corporation 16 specified in clause (i) that would but for the 17 provisions of Section 1504 (b) (3) of the Internal 18 Revenue Code be treated as a member of the 19 affiliated group which includes the dividend 20 recipient, exceed the amount of the modification 21 provided under subparagraph (G) of paragraph (2) of 22 this subsection (b) which is related to such 23 dividends; 24 (P) An amount equal to any contribution made 25 to a job training project established pursuant to 26 the Tax Increment Allocation Redevelopment Act; and 27 (Q) An amount equal to the amount of the 28 deduction used to compute the federal income tax 29 credit for restoration of substantial amounts held 30 under claim of right for the taxable year pursuant 31 to Section 1341 of the Internal Revenue Code of 32 1986. 33 (3) Special rule. For purposes of paragraph (2) 34 (A), "gross income" in the case of a life insurance SB1118 Enrolled -14- LRB9102874PTpkA 1 company, for tax years ending on and after December 31, 2 1994, shall mean the gross investment income for the 3 taxable year. 4 (c) Trusts and estates. 5 (1) In general. In the case of a trust or estate, 6 base income means an amount equal to the taxpayer's 7 taxable income for the taxable year as modified by 8 paragraph (2). 9 (2) Modifications. Subject to the provisions of 10 paragraph (3), the taxable income referred to in 11 paragraph (1) shall be modified by adding thereto the sum 12 of the following amounts: 13 (A) An amount equal to all amounts paid or 14 accrued to the taxpayer as interest or dividends 15 during the taxable year to the extent excluded from 16 gross income in the computation of taxable income; 17 (B) In the case of (i) an estate, $600; (ii) a 18 trust which, under its governing instrument, is 19 required to distribute all of its income currently, 20 $300; and (iii) any other trust, $100, but in each 21 such case, only to the extent such amount was 22 deducted in the computation of taxable income; 23 (C) An amount equal to the amount of tax 24 imposed by this Act to the extent deducted from 25 gross income in the computation of taxable income 26 for the taxable year; 27 (D) The amount of any net operating loss 28 deduction taken in arriving at taxable income, other 29 than a net operating loss carried forward from a 30 taxable year ending prior to December 31, 1986; 31 (E) For taxable years in which a net operating 32 loss carryback or carryforward from a taxable year 33 ending prior to December 31, 1986 is an element of 34 taxable income under paragraph (1) of subsection (e) SB1118 Enrolled -15- LRB9102874PTpkA 1 or subparagraph (E) of paragraph (2) of subsection 2 (e), the amount by which addition modifications 3 other than those provided by this subparagraph (E) 4 exceeded subtraction modifications in such taxable 5 year, with the following limitations applied in the 6 order that they are listed: 7 (i) the addition modification relating to 8 the net operating loss carried back or forward 9 to the taxable year from any taxable year 10 ending prior to December 31, 1986 shall be 11 reduced by the amount of addition modification 12 under this subparagraph (E) which related to 13 that net operating loss and which was taken 14 into account in calculating the base income of 15 an earlier taxable year, and 16 (ii) the addition modification relating 17 to the net operating loss carried back or 18 forward to the taxable year from any taxable 19 year ending prior to December 31, 1986 shall 20 not exceed the amount of such carryback or 21 carryforward; 22 For taxable years in which there is a net 23 operating loss carryback or carryforward from more 24 than one other taxable year ending prior to December 25 31, 1986, the addition modification provided in this 26 subparagraph (E) shall be the sum of the amounts 27 computed independently under the preceding 28 provisions of this subparagraph (E) for each such 29 taxable year; 30 (F) For taxable years ending on or after 31 January 1, 1989, an amount equal to the tax deducted 32 pursuant to Section 164 of the Internal Revenue Code 33 if the trust or estate is claiming the same tax for 34 purposes of the Illinois foreign tax credit under SB1118 Enrolled -16- LRB9102874PTpkA 1 Section 601 of this Act; 2 (G) An amount equal to the amount of the 3 capital gain deduction allowable under the Internal 4 Revenue Code, to the extent deducted from gross 5 income in the computation of taxable income; and 6 (G-5) For taxable years ending after December 7 31, 1997, an amount equal to any eligible 8 remediation costs that the trust or estate deducted 9 in computing adjusted gross income and for which the 10 trust or estate claims a credit under subsection (l) 11 of Section 201; 12 and by deducting from the total so obtained the sum of 13 the following amounts: 14 (H) An amount equal to all amounts included in 15 such total pursuant to the provisions of Sections 16 402(a), 402(c), 403(a), 403(b), 406(a), 407(a) and 17 408 of the Internal Revenue Code or included in such 18 total as distributions under the provisions of any 19 retirement or disability plan for employees of any 20 governmental agency or unit, or retirement payments 21 to retired partners, which payments are excluded in 22 computing net earnings from self employment by 23 Section 1402 of the Internal Revenue Code and 24 regulations adopted pursuant thereto; 25 (I) The valuation limitation amount; 26 (J) An amount equal to the amount of any tax 27 imposed by this Act which was refunded to the 28 taxpayer and included in such total for the taxable 29 year; 30 (K) An amount equal to all amounts included in 31 taxable income as modified by subparagraphs (A), 32 (B), (C), (D), (E), (F) and (G) which are exempt 33 from taxation by this State either by reason of its 34 statutes or Constitution or by reason of the SB1118 Enrolled -17- LRB9102874PTpkA 1 Constitution, treaties or statutes of the United 2 States; provided that, in the case of any statute of 3 this State that exempts income derived from bonds or 4 other obligations from the tax imposed under this 5 Act, the amount exempted shall be the interest net 6 of bond premium amortization; 7 (L) With the exception of any amounts 8 subtracted under subparagraph (K), an amount equal 9 to the sum of all amounts disallowed as deductions 10 by (i) Sections 171(a)(2) and 265(a)(2) of the 11 Internal Revenue Code, as now or hereafter amended, 12 and all amounts of expenses allocable to interest 13 and disallowed as deductions by Section 265(1) of 14 the Internal Revenue Code of 1954, as now or 15 hereafter amended; and (ii) for taxable years ending 16 on or after the effective date of this amendatory 17 Act of the 91st General Assembly, Sections 18 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the 19 Internal Revenue Code; the provisions of this 20 subparagraph are exempt from the provisions of 21 Section 250; 22 (M) An amount equal to those dividends 23 included in such total which were paid by a 24 corporation which conducts business operations in an 25 Enterprise Zone or zones created under the Illinois 26 Enterprise Zone Act and conducts substantially all 27 of its operations in an Enterprise Zone or Zones; 28 (N) An amount equal to any contribution made 29 to a job training project established pursuant to 30 the Tax Increment Allocation Redevelopment Act; 31 (O) An amount equal to those dividends 32 included in such total that were paid by a 33 corporation that conducts business operations in a 34 federally designated Foreign Trade Zone or Sub-Zone SB1118 Enrolled -18- LRB9102874PTpkA 1 and that is designated a High Impact Business 2 located in Illinois; provided that dividends 3 eligible for the deduction provided in subparagraph 4 (M) of paragraph (2) of this subsection shall not be 5 eligible for the deduction provided under this 6 subparagraph (O); and 7 (P) An amount equal to the amount of the 8 deduction used to compute the federal income tax 9 credit for restoration of substantial amounts held 10 under claim of right for the taxable year pursuant 11 to Section 1341 of the Internal Revenue Code of 12 1986. 13 (3) Limitation. The amount of any modification 14 otherwise required under this subsection shall, under 15 regulations prescribed by the Department, be adjusted by 16 any amounts included therein which were properly paid, 17 credited, or required to be distributed, or permanently 18 set aside for charitable purposes pursuant to Internal 19 Revenue Code Section 642(c) during the taxable year. 20 (d) Partnerships. 21 (1) In general. In the case of a partnership, base 22 income means an amount equal to the taxpayer's taxable 23 income for the taxable year as modified by paragraph (2). 24 (2) Modifications. The taxable income referred to 25 in paragraph (1) shall be modified by adding thereto the 26 sum of the following amounts: 27 (A) An amount equal to all amounts paid or 28 accrued to the taxpayer as interest or dividends 29 during the taxable year to the extent excluded from 30 gross income in the computation of taxable income; 31 (B) An amount equal to the amount of tax 32 imposed by this Act to the extent deducted from 33 gross income for the taxable year;and34 (C) The amount of deductions allowed to the SB1118 Enrolled -19- LRB9102874PTpkA 1 partnership pursuant to Section 707 (c) of the 2 Internal Revenue Code in calculating its taxable 3 income; and 4 (D) An amount equal to the amount of the 5 capital gain deduction allowable under the Internal 6 Revenue Code, to the extent deducted from gross 7 income in the computation of taxable income; 8 and by deducting from the total so obtained the following 9 amounts: 10 (E) The valuation limitation amount; 11 (F) An amount equal to the amount of any tax 12 imposed by this Act which was refunded to the 13 taxpayer and included in such total for the taxable 14 year; 15 (G) An amount equal to all amounts included in 16 taxable income as modified by subparagraphs (A), 17 (B), (C) and (D) which are exempt from taxation by 18 this State either by reason of its statutes or 19 Constitution or by reason of the Constitution, 20 treaties or statutes of the United States; provided 21 that, in the case of any statute of this State that 22 exempts income derived from bonds or other 23 obligations from the tax imposed under this Act, the 24 amount exempted shall be the interest net of bond 25 premium amortization; 26 (H) Any income of the partnership which 27 constitutes personal service income as defined in 28 Section 1348 (b) (1) of the Internal Revenue Code 29 (as in effect December 31, 1981) or a reasonable 30 allowance for compensation paid or accrued for 31 services rendered by partners to the partnership, 32 whichever is greater; 33 (I) An amount equal to all amounts of income 34 distributable to an entity subject to the Personal SB1118 Enrolled -20- LRB9102874PTpkA 1 Property Tax Replacement Income Tax imposed by 2 subsections (c) and (d) of Section 201 of this Act 3 including amounts distributable to organizations 4 exempt from federal income tax by reason of Section 5 501(a) of the Internal Revenue Code; 6 (J) With the exception of any amounts 7 subtracted under subparagraph (G), an amount equal 8 to the sum of all amounts disallowed as deductions 9 by (i) Sections 171(a)(2), and 265(2) of the 10 Internal Revenue Code of 1954, as now or hereafter 11 amended, and all amounts of expenses allocable to 12 interest and disallowed as deductions by Section 13 265(1) of the Internal Revenue Code, as now or 14 hereafter amended; and (ii) for taxable years 15 _ending on or after the effective date of this 16 amendatory Act of the 91st General Assembly, 17 Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) 18 of the Internal Revenue Code; the provisions of this 19 subparagraph are exempt from the provisions of 20 Section 250; 21 (K) An amount equal to those dividends 22 included in such total which were paid by a 23 corporation which conducts business operations in an 24 Enterprise Zone or zones created under the Illinois 25 Enterprise Zone Act, enacted by the 82nd General 26 Assembly, and which does not conduct such operations 27 other than in an Enterprise Zone or Zones; 28 (L) An amount equal to any contribution made 29 to a job training project established pursuant to 30 the Real Property Tax Increment Allocation 31 Redevelopment Act; 32 (M) An amount equal to those dividends 33 included in such total that were paid by a 34 corporation that conducts business operations in a SB1118 Enrolled -21- LRB9102874PTpkA 1 federally designated Foreign Trade Zone or Sub-Zone 2 and that is designated a High Impact Business 3 located in Illinois; provided that dividends 4 eligible for the deduction provided in subparagraph 5 (K) of paragraph (2) of this subsection shall not be 6 eligible for the deduction provided under this 7 subparagraph (M); and 8 (N) An amount equal to the amount of the 9 deduction used to compute the federal income tax 10 credit for restoration of substantial amounts held 11 under claim of right for the taxable year pursuant 12 to Section 1341 of the Internal Revenue Code of 13 1986. 14 (e) Gross income; adjusted gross income; taxable income. 15 (1) In general. Subject to the provisions of 16 paragraph (2) and subsection (b) (3), for purposes of 17 this Section and Section 803(e), a taxpayer's gross 18 income, adjusted gross income, or taxable income for the 19 taxable year shall mean the amount of gross income, 20 adjusted gross income or taxable income properly 21 reportable for federal income tax purposes for the 22 taxable year under the provisions of the Internal Revenue 23 Code. Taxable income may be less than zero. However, for 24 taxable years ending on or after December 31, 1986, net 25 operating loss carryforwards from taxable years ending 26 prior to December 31, 1986, may not exceed the sum of 27 federal taxable income for the taxable year before net 28 operating loss deduction, plus the excess of addition 29 modifications over subtraction modifications for the 30 taxable year. For taxable years ending prior to December 31 31, 1986, taxable income may never be an amount in excess 32 of the net operating loss for the taxable year as defined 33 in subsections (c) and (d) of Section 172 of the Internal 34 Revenue Code, provided that when taxable income of a SB1118 Enrolled -22- LRB9102874PTpkA 1 corporation (other than a Subchapter S corporation), 2 trust, or estate is less than zero and addition 3 modifications, other than those provided by subparagraph 4 (E) of paragraph (2) of subsection (b) for corporations 5 or subparagraph (E) of paragraph (2) of subsection (c) 6 for trusts and estates, exceed subtraction modifications, 7 an addition modification must be made under those 8 subparagraphs for any other taxable year to which the 9 taxable income less than zero (net operating loss) is 10 applied under Section 172 of the Internal Revenue Code or 11 under subparagraph (E) of paragraph (2) of this 12 subsection (e) applied in conjunction with Section 172 of 13 the Internal Revenue Code. 14 (2) Special rule. For purposes of paragraph (1) of 15 this subsection, the taxable income properly reportable 16 for federal income tax purposes shall mean: 17 (A) Certain life insurance companies. In the 18 case of a life insurance company subject to the tax 19 imposed by Section 801 of the Internal Revenue Code, 20 life insurance company taxable income, plus the 21 amount of distribution from pre-1984 policyholder 22 surplus accounts as calculated under Section 815a of 23 the Internal Revenue Code; 24 (B) Certain other insurance companies. In the 25 case of mutual insurance companies subject to the 26 tax imposed by Section 831 of the Internal Revenue 27 Code, insurance company taxable income; 28 (C) Regulated investment companies. In the 29 case of a regulated investment company subject to 30 the tax imposed by Section 852 of the Internal 31 Revenue Code, investment company taxable income; 32 (D) Real estate investment trusts. In the 33 case of a real estate investment trust subject to 34 the tax imposed by Section 857 of the Internal SB1118 Enrolled -23- LRB9102874PTpkA 1 Revenue Code, real estate investment trust taxable 2 income; 3 (E) Consolidated corporations. In the case of 4 a corporation which is a member of an affiliated 5 group of corporations filing a consolidated income 6 tax return for the taxable year for federal income 7 tax purposes, taxable income determined as if such 8 corporation had filed a separate return for federal 9 income tax purposes for the taxable year and each 10 preceding taxable year for which it was a member of 11 an affiliated group. For purposes of this 12 subparagraph, the taxpayer's separate taxable income 13 shall be determined as if the election provided by 14 Section 243(b) (2) of the Internal Revenue Code had 15 been in effect for all such years; 16 (F) Cooperatives. In the case of a 17 cooperative corporation or association, the taxable 18 income of such organization determined in accordance 19 with the provisions of Section 1381 through 1388 of 20 the Internal Revenue Code; 21 (G) Subchapter S corporations. In the case 22 of: (i) a Subchapter S corporation for which there 23 is in effect an election for the taxable year under 24 Section 1362 of the Internal Revenue Code, the 25 taxable income of such corporation determined in 26 accordance with Section 1363(b) of the Internal 27 Revenue Code, except that taxable income shall take 28 into account those items which are required by 29 Section 1363(b)(1) of the Internal Revenue Code to 30 be separately stated; and (ii) a Subchapter S 31 corporation for which there is in effect a federal 32 election to opt out of the provisions of the 33 Subchapter S Revision Act of 1982 and have applied 34 instead the prior federal Subchapter S rules as in SB1118 Enrolled -24- LRB9102874PTpkA 1 effect on July 1, 1982, the taxable income of such 2 corporation determined in accordance with the 3 federal Subchapter S rules as in effect on July 1, 4 1982; and 5 (H) Partnerships. In the case of a 6 partnership, taxable income determined in accordance 7 with Section 703 of the Internal Revenue Code, 8 except that taxable income shall take into account 9 those items which are required by Section 703(a)(1) 10 to be separately stated but which would be taken 11 into account by an individual in calculating his 12 taxable income. 13 (f) Valuation limitation amount. 14 (1) In general. The valuation limitation amount 15 referred to in subsections (a) (2) (G), (c) (2) (I) and 16 (d)(2) (E) is an amount equal to: 17 (A) The sum of the pre-August 1, 1969 18 appreciation amounts (to the extent consisting of 19 gain reportable under the provisions of Section 1245 20 or 1250 of the Internal Revenue Code) for all 21 property in respect of which such gain was reported 22 for the taxable year; plus 23 (B) The lesser of (i) the sum of the 24 pre-August 1, 1969 appreciation amounts (to the 25 extent consisting of capital gain) for all property 26 in respect of which such gain was reported for 27 federal income tax purposes for the taxable year, or 28 (ii) the net capital gain for the taxable year, 29 reduced in either case by any amount of such gain 30 included in the amount determined under subsection 31 (a) (2) (F) or (c) (2) (H). 32 (2) Pre-August 1, 1969 appreciation amount. 33 (A) If the fair market value of property 34 referred to in paragraph (1) was readily SB1118 Enrolled -25- LRB9102874PTpkA 1 ascertainable on August 1, 1969, the pre-August 1, 2 1969 appreciation amount for such property is the 3 lesser of (i) the excess of such fair market value 4 over the taxpayer's basis (for determining gain) for 5 such property on that date (determined under the 6 Internal Revenue Code as in effect on that date), or 7 (ii) the total gain realized and reportable for 8 federal income tax purposes in respect of the sale, 9 exchange or other disposition of such property. 10 (B) If the fair market value of property 11 referred to in paragraph (1) was not readily 12 ascertainable on August 1, 1969, the pre-August 1, 13 1969 appreciation amount for such property is that 14 amount which bears the same ratio to the total gain 15 reported in respect of the property for federal 16 income tax purposes for the taxable year, as the 17 number of full calendar months in that part of the 18 taxpayer's holding period for the property ending 19 July 31, 1969 bears to the number of full calendar 20 months in the taxpayer's entire holding period for 21 the property. 22 (C) The Department shall prescribe such 23 regulations as may be necessary to carry out the 24 purposes of this paragraph. 25 (g) Double deductions. Unless specifically provided 26 otherwise, nothing in this Section shall permit the same item 27 to be deducted more than once. 28 (h) Legislative intention. Except as expressly provided 29 by this Section there shall be no modifications or 30 limitations on the amounts of income, gain, loss or deduction 31 taken into account in determining gross income, adjusted 32 gross income or taxable income for federal income tax 33 purposes for the taxable year, or in the amount of such items SB1118 Enrolled -26- LRB9102874PTpkA 1 entering into the computation of base income and net income 2 under this Act for such taxable year, whether in respect of 3 property values as of August 1, 1969 or otherwise. 4 (Source: P.A. 89-89, eff. 6-30-95; 89-235, eff. 8-4-95; 5 89-418, eff. 11-15-95; 89-460, eff. 5-24-96; 89-626, eff. 6 8-9-96; 90-491, eff. 1-1-98; 90-717, eff. 8-7-98; 90-770, 7 eff. 8-14-98; revised 9-21-98.) 8 (35 ILCS 5/207) (from Ch. 120, par. 2-207) 9 Sec. 207. Net Losses. 10 (a) If after applying all of the modifications provided 11 for in paragraph (2) of Section 203(b), paragraph (2) of 12 Section 203(c) and paragraph (2) of Section 203(d) and the 13 allocation and apportionment provisions of Article 3 of this 14 Act, the taxpayer's net income results in a loss; 15 (1) for any taxable year ending prior to December 16 31, 1999, such loss shall be allowed as a carryover or 17 carryback deduction in the manner allowed under Section 18 172 of the Internal Revenue Code; and 19 (2) for any taxable year ending on or after 20 December 31, 1999, such loss shall be allowed as a 21 carryback to each of the 2 taxable years preceding the 22 taxable year of such loss and shall be a net operating 23 carryover to each of the 20 taxable years following the 24 taxable year of such loss. 25 (A) The taxpayer may elect to relinquish the 26 entire carryback period with respect to such loss. 27 Such election shall be made in the form and manner 28 prescribed by the Department and shall be made by 29 the due date (including extensions of time) for 30 filing the taxpayer's return for the taxable year in 31 which such loss is incurred, and such election, once 32 made, shall be irrevocable. 33 (B) The entire amount of such loss shall be SB1118 Enrolled -27- LRB9102874PTpkA 1 carried to the earliest taxable year to which such 2 loss may be carried. The amount of such loss which 3 shall be carried to each of the other taxable years 4 shall be the excess, if any, of the amount of such 5 loss over the sum of the deductions for carryback or 6 carryover of such loss allowable for each of the 7 prior taxable years to which such loss may be 8 carried. 9 (b) Any loss determined under subsection (a) of this 10 Section must be carried back or carried forward in the same 11 manner for purposes of subsections (a) and (b) of Section 201 12 of this Act as for purposes of subsections (c) and (d) of 13 Section 201 of this Act. 14 (Source: P.A. 85-731.) 15 (35 ILCS 5/304) (from Ch. 120, par. 3-304) 16 Sec. 304. Business income of persons other than 17 residents. 18 (a) In general. The business income of a person other 19 than a resident shall be allocated to this State if such 20 person's business income is derived solely from this State. 21 If a person other than a resident derives business income 22 from this State and one or more other states, then, for tax 23 years ending on or before December 30, 1998, and except as 24 otherwise provided by this Section, such person's business 25 income shall be apportioned to this State by multiplying the 26 income by a fraction, the numerator of which is the sum of 27 the property factor (if any), the payroll factor (if any) and 28 200% of the sales factor (if any), and the denominator of 29 which is 4 reduced by the number of factors other than the 30 sales factor which have a denominator of zero and by an 31 additional 2 if the sales factor has a denominator of zero. 32 For tax years ending on or after December 31, 1998, and 33 except as otherwise provided by this Section, persons other SB1118 Enrolled -28- LRB9102874PTpkA 1 than residents who derive business income from this State and 2 one or more other states shall compute their apportionment 3 factor by weighting their property, payroll, and sales 4 factors as provided in subsection (h) of this Section. 5 (1) Property factor. 6 (A) The property factor is a fraction, the 7 numerator of which is the average value of the person's 8 real and tangible personal property owned or rented and 9 used in the trade or business in this State during the 10 taxable year and the denominator of which is the average 11 value of all the person's real and tangible personal 12 property owned or rented and used in the trade or 13 business during the taxable year. 14 (B) Property owned by the person is valued at its 15 original cost. Property rented by the person is valued at 16 8 times the net annual rental rate. Net annual rental 17 rate is the annual rental rate paid by the person less 18 any annual rental rate received by the person from 19 sub-rentals. 20 (C) The average value of property shall be 21 determined by averaging the values at the beginning and 22 ending of the taxable year but the Director may require 23 the averaging of monthly values during the taxable year 24 if reasonably required to reflect properly the average 25 value of the person's property. 26 (2) Payroll factor. 27 (A) The payroll factor is a fraction, the numerator 28 of which is the total amount paid in this State during 29 the taxable year by the person for compensation, and the 30 denominator of which is the total compensation paid 31 everywhere during the taxable year. 32 (B) Compensation is paid in this State if: 33 (i) The individual's service is performed 34 entirely within this State; SB1118 Enrolled -29- LRB9102874PTpkA 1 (ii) The individual's service is performed 2 both within and without this State, but the service 3 performed without this State is incidental to the 4 individual's service performed within this State; or 5 (iii) Some of the service is performed within 6 this State and either the base of operations, or if 7 there is no base of operations, the place from which 8 the service is directed or controlled is within this 9 State, or the base of operations or the place from 10 which the service is directed or controlled is not 11 in any state in which some part of the service is 12 performed, but the individual's residence is in this 13 State. 14 Beginning with taxable years ending on or after 15 December 31, 1992, for residents of states that impose a 16 comparable tax liability on residents of this State, for 17 purposes of item (i) of this paragraph (B), in the case 18 of persons who perform personal services under personal 19 service contracts for sports performances, services by 20 that person at a sporting event taking place in Illinois 21 shall be deemed to be a performance entirely within this 22 State. 23 (3) Sales factor. 24 (A) The sales factor is a fraction, the numerator 25 of which is the total sales of the person in this State 26 during the taxable year, and the denominator of which is 27 the total sales of the person everywhere during the 28 taxable year. 29 (B) Sales of tangible personal property are in this 30 State if: 31 (i) The property is delivered or shipped to a 32 purchaser, other than the United States government, 33 within this State regardless of the f. o. b. point 34 or other conditions of the sale; or SB1118 Enrolled -30- LRB9102874PTpkA 1 (ii) The property is shipped from an office, 2 store, warehouse, factory or other place of storage 3 in this State and either the purchaser is the United 4 States government or the person is not taxable in 5 the state of the purchaser; provided, however, that 6 premises owned or leased by a person who has 7 independently contracted with the seller for the 8 printing of newspapers, periodicals or books shall 9 not be deemed to be an office, store, warehouse, 10 factory or other place of storage for purposes of 11 this Section. Sales of tangible personal property 12 are not in this State if the seller and purchaser 13 would be members of the same unitary business group 14 but for the fact that either the seller or purchaser 15 is a person with 80% or more of total business 16 activity outside of the United States and the 17 property is purchased for resale. 18 (B-1) Patents, copyrights, trademarks, and similar 19 items of intangible personal property. 20 (i) Gross receipts from the licensing, sale, 21 or other disposition of a patent, copyright, 22 trademark, or similar item of intangible personal 23 property are in this State to the extent the item is 24 utilized in this State during the year the gross 25 receipts are included in gross income. 26 (ii) Place of utilization. 27 (I) A patent is utilized in a state to 28 the extent that it is employed in production, 29 fabrication, manufacturing, or other processing 30 in the state or to the extent that a patented 31 product is produced in the state. If a patent 32 is utilized in more than one state, the extent 33 to which it is utilized in any one state shall 34 be a fraction equal to the gross receipts of SB1118 Enrolled -31- LRB9102874PTpkA 1 the licensee or purchaser from sales or leases 2 of items produced, fabricated, manufactured, or 3 processed within that state using the patent 4 and of patented items produced within that 5 state, divided by the total of such gross 6 receipts for all states in which the patent is 7 utilized. 8 (II) A copyright is utilized in a state 9 to the extent that printing or other 10 publication originates in the state. If a 11 copyright is utilized in more than one state, 12 the extent to which it is utilized in any one 13 state shall be a fraction equal to the gross 14 receipts from sales or licenses of materials 15 printed or published in that state divided by 16 the total of such gross receipts for all states 17 in which the copyright is utilized. 18 (III) Trademarks and other items of 19 intangible personal property governed by this 20 paragraph (B-1) are utilized in the state in 21 which the commercial domicile of the licensee 22 or purchaser is located. 23 (iii) If the state of utilization of an item 24 of property governed by this paragraph (B-1) cannot 25 be determined from the taxpayer's books and records 26 or from the books and records of any person related 27 to the taxpayer within the meaning of Section 267(b) 28 of the Internal Revenue Code, 26 U.S.C. 267, the 29 gross receipts attributable to that item shall be 30 excluded from both the numerator and the denominator 31 of the sales factor. 32 (B-2) Gross receipts from the license, sale, or 33 other disposition of patents, copyrights, trademarks, and 34 similar items of intangible personal property may be SB1118 Enrolled -32- LRB9102874PTpkA 1 included in the numerator or denominator of the sales 2 factor only if gross receipts from licenses, sales, or 3 other disposition of such items comprise more than 50% of 4 the taxpayer's total gross receipts included in gross 5 income during the tax year and during each of the 2 6 immediately preceding tax years; provided that, when a 7 taxpayer is a member of a unitary business group, such 8 determination shall be made on the basis of the gross 9 receipts of the entire unitary business group. 10 (C) Sales, other than sales governed by paragraphs 11 (B) and (B-1)of tangible personal property, are in this 12 State if: 13 (i) The income-producing activity is performed 14 in this State; or 15 (ii) The income-producing activity is 16 performed both within and without this State and a 17 greater proportion of the income-producing activity 18 is performed within this State than without this 19 State, based on performance costs. 20 (D) For taxable years ending on or after December 21 31, 1995, the following items of income shall not be 22 included in the numerator or denominator of the sales 23 factor: dividends; amounts included under Section 78 of 24 the Internal Revenue Code; and Subpart F income as 25 defined in Section 952 of the Internal Revenue Code. No 26 inference shall be drawn from the enactment of this 27 paragraph (D) in construing this Section for taxable 28 years ending before December 31, 1995. 29 (E) Paragraphs (B-1) and (B-2) shall apply to tax 30 years ending on or after December 31, 1999, provided that 31 a taxpayer may elect to apply the provisions of these 32 paragraphs to prior tax years. Such election shall be 33 made in the form and manner prescribed by the Department, 34 shall be irrevocable, and shall apply to all tax years; SB1118 Enrolled -33- LRB9102874PTpkA 1 provided that, if a taxpayer's Illinois income tax 2 liability for any tax year, as assessed under Section 903 3 prior to January 1, 1999, was computed in a manner 4 contrary to the provisions of paragraphs (B-1) or (B-2), 5 no refund shall be payable to the taxpayer for that tax 6 year to the extent such refund is the result of applying 7 the provisions of paragraph (B-1) or (B-2) retroactively. 8 In the case of a unitary business group, such election 9 shall apply to all members of such group for every tax 10 year such group is in existence, but shall not apply to 11 any taxpayer for any period during which that taxpayer is 12 not a member of such group. 13 (b) Insurance companies. 14 (1) In general. Except as otherwise provided by 15 paragraph (2), business income of an insurance company 16 for a taxable year shall be apportioned to this State by 17 multiplying such income by a fraction, the numerator of 18 which is the direct premiums written for insurance upon 19 property or risk in this State, and the denominator of 20 which is the direct premiums written for insurance upon 21 property or risk everywhere. For purposes of this 22 subsection, the term "direct premiums written" means the 23 total amount of direct premiums written, assessments and 24 annuity considerations as reported for the taxable year 25 on the annual statement filed by the company with the 26 Illinois Director of Insurance in the form approved by 27 the National Convention of Insurance Commissioners or 28 such other form as may be prescribed in lieu thereof. 29 (2) Reinsurance. If the principal source of 30 premiums written by an insurance company consists of 31 premiums for reinsurance accepted by it, the business 32 income of such company shall be apportioned to this State 33 by multiplying such income by a fraction, the numerator 34 of which is the sum of (i) direct premiums written for SB1118 Enrolled -34- LRB9102874PTpkA 1 insurance upon property or risk in this State, plus (ii) 2 premiums written for reinsurance accepted in respect of 3 property or risk in this State, and the denominator of 4 which is the sum of (iii) direct premiums written for 5 insurance upon property or risk everywhere, plus (iv) 6 premiums written for reinsurance accepted in respect of 7 property or risk everywhere. For purposes of this 8 paragraph, premiums written for reinsurance accepted in 9 respect of property or risk in this State, whether or not 10 otherwise determinable, may, at the election of the 11 company, be determined on the basis of the proportion 12 which premiums written for reinsurance accepted from 13 companies commercially domiciled in Illinois bears to 14 premiums written for reinsurance accepted from all 15 sources, or, alternatively, in the proportion which the 16 sum of the direct premiums written for insurance upon 17 property or risk in this State by each ceding company 18 from which reinsurance is accepted bears to the sum of 19 the total direct premiums written by each such ceding 20 company for the taxable year. 21 (c) Financial organizations. 22 (1) In general. Business income of a financial 23 organization shall be apportioned to this State by 24 multiplying such income by a fraction, the numerator of 25 which is its business income from sources within this 26 State, and the denominator of which is its business 27 income from all sources. For the purposes of this 28 subsection, the business income of a financial 29 organization from sources within this State is the sum of 30 the amounts referred to in subparagraphs (A) through (E) 31 following, but excluding the adjusted income of an 32 international banking facility as determined in paragraph 33 (2): 34 (A) Fees, commissions or other compensation SB1118 Enrolled -35- LRB9102874PTpkA 1 for financial services rendered within this State; 2 (B) Gross profits from trading in stocks, 3 bonds or other securities managed within this State; 4 (C) Dividends, and interest from Illinois 5 customers, which are received within this State; 6 (D) Interest charged to customers at places of 7 business maintained within this State for carrying 8 debit balances of margin accounts, without deduction 9 of any costs incurred in carrying such accounts; and 10 (E) Any other gross income resulting from the 11 operation as a financial organization within this 12 State. In computing the amounts referred to in 13 paragraphs (A) through (E) of this subsection, any 14 amount received by a member of an affiliated group 15 (determined under Section 1504(a) of the Internal 16 Revenue Code but without reference to whether any 17 such corporation is an "includible corporation" 18 under Section 1504(b) of the Internal Revenue Code) 19 from another member of such group shall be included 20 only to the extent such amount exceeds expenses of 21 the recipient directly related thereto. 22 (2) International Banking Facility. 23 (A) Adjusted Income. The adjusted income of 24 an international banking facility is its income 25 reduced by the amount of the floor amount. 26 (B) Floor Amount. The floor amount shall be 27 the amount, if any, determined by multiplying the 28 income of the international banking facility by a 29 fraction, not greater than one, which is determined 30 as follows: 31 (i) The numerator shall be: 32 The average aggregate, determined on a 33 quarterly basis, of the financial 34 organization's loans to banks in foreign SB1118 Enrolled -36- LRB9102874PTpkA 1 countries, to foreign domiciled borrowers 2 (except where secured primarily by real estate) 3 and to foreign governments and other foreign 4 official institutions, as reported for its 5 branches, agencies and offices within the state 6 on its "Consolidated Report of Condition", 7 Schedule A, Lines 2.c., 5.b., and 7.a., which 8 was filed with the Federal Deposit Insurance 9 Corporation and other regulatory authorities, 10 for the year 1980, minus 11 The average aggregate, determined on a 12 quarterly basis, of such loans (other than 13 loans of an international banking facility), as 14 reported by the financial institution for its 15 branches, agencies and offices within the 16 state, on the corresponding Schedule and lines 17 of the Consolidated Report of Condition for the 18 current taxable year, provided, however, that 19 in no case shall the amount determined in this 20 clause (the subtrahend) exceed the amount 21 determined in the preceding clause (the 22 minuend); and 23 (ii) the denominator shall be the average 24 aggregate, determined on a quarterly basis, of 25 the international banking facility's loans to 26 banks in foreign countries, to foreign 27 domiciled borrowers (except where secured 28 primarily by real estate) and to foreign 29 governments and other foreign official 30 institutions, which were recorded in its 31 financial accounts for the current taxable 32 year. 33 (C) Change to Consolidated Report of Condition 34 and in Qualification. In the event the Consolidated SB1118 Enrolled -37- LRB9102874PTpkA 1 Report of Condition which is filed with the Federal 2 Deposit Insurance Corporation and other regulatory 3 authorities is altered so that the information 4 required for determining the floor amount is not 5 found on Schedule A, lines 2.c., 5.b. and 7.a., the 6 financial institution shall notify the Department 7 and the Department may, by regulations or otherwise, 8 prescribe or authorize the use of an alternative 9 source for such information. The financial 10 institution shall also notify the Department should 11 its international banking facility fail to qualify 12 as such, in whole or in part, or should there be any 13 amendment or change to the Consolidated Report of 14 Condition, as originally filed, to the extent such 15 amendment or change alters the information used in 16 determining the floor amount. 17 (d) Transportation services. Business income derived 18 from furnishing transportation services shall be apportioned 19 to this State in accordance with paragraphs (1) and (2): 20 (1) Such business income (other than that derived 21 from transportation by pipeline) shall be apportioned to 22 this State by multiplying such income by a fraction, the 23 numerator of which is the revenue miles of the person in 24 this State, and the denominator of which is the revenue 25 miles of the person everywhere. For purposes of this 26 paragraph, a revenue mile is the transportation of 1 27 passenger or 1 net ton of freight the distance of 1 mile 28 for a consideration. Where a person is engaged in the 29 transportation of both passengers and freight, the 30 fraction above referred to shall be determined by means 31 of an average of the passenger revenue mile fraction and 32 the freight revenue mile fraction, weighted to reflect 33 the person's 34 (A) relative railway operating income from SB1118 Enrolled -38- LRB9102874PTpkA 1 total passenger and total freight service, as 2 reported to the Interstate Commerce Commission, in 3 the case of transportation by railroad, and 4 (B) relative gross receipts from passenger and 5 freight transportation, in case of transportation 6 other than by railroad. 7 (2) Such business income derived from 8 transportation by pipeline shall be apportioned to this 9 State by multiplying such income by a fraction, the 10 numerator of which is the revenue miles of the person in 11 this State, and the denominator of which is the revenue 12 miles of the person everywhere. For the purposes of this 13 paragraph, a revenue mile is the transportation by 14 pipeline of 1 barrel of oil, 1,000 cubic feet of gas, or 15 of any specified quantity of any other substance, the 16 distance of 1 mile for a consideration. 17 (e) Combined apportionment. Where 2 or more persons are 18 engaged in a unitary business as described in subsection 19 (a)(27) of Section 1501, a part of which is conducted in this 20 State by one or more members of the group, the business 21 income attributable to this State by any such member or 22 members shall be apportioned by means of the combined 23 apportionment method. 24 (f) Alternative allocation. If the allocation and 25 apportionment provisions of subsections (a) through (e) and 26 of subsection (h) do not fairly represent the extent of a 27 person's business activity in this State, the person may 28 petition for, or the Director may require, in respect of all 29 or any part of the person's business activity, if reasonable: 30 (1) Separate accounting; 31 (2) The exclusion of any one or more factors; 32 (3) The inclusion of one or more additional factors 33 which will fairly represent the person's business 34 activities in this State; or SB1118 Enrolled -39- LRB9102874PTpkA 1 (4) The employment of any other method to 2 effectuate an equitable allocation and apportionment of 3 the person's business income. 4 (g) Cross reference. For allocation of business income 5 by residents, see Section 301(a). 6 (h) For tax years ending on or after December 31, 1998, 7 the apportionment factor of persons who apportion their 8 business income to this State under subsection (a) shall be 9 equal to: 10 (1) for tax years ending on or after December 31, 11 1998 and before December 31, 1999, 16 2/3% of the 12 property factor plus 16 2/3% of the payroll factor plus 13 66 2/3% of the sales factor; 14 (2) for tax years ending on or after December 31, 15 1999 and before December 31, 2000, 8 1/3% of the property 16 factor plus 8 1/3% of the payroll factor plus 83 1/3% of 17 the sales factor; 18 (3) for tax years ending on or after December 31, 19 2000, the sales factor. 20 If, in any tax year ending on or after December 31, 1998 and 21 before December 31, 2000, the denominator of the payroll, 22 property, or sales factor is zero, the apportionment factor 23 computed in paragraph (1) or (2) of this subsection for that 24 year shall be divided by an amount equal to 100% minus the 25 percentage weight given to each factor whose denominator is 26 equal to zero. 27 (Source: P.A. 89-379, eff. 1-1-96; 89-399, eff. 8-20-95; 28 89-626, eff. 8-9-96; 90-562, eff. 12-16-97; 90-613, eff. 29 7-9-98.) 30 (35 ILCS 5/405 new) 31 Sec. 405. Carryovers in certain acquisitions. 32 (a) In the case of the acquisition of assets of a 33 corporation by another corporation described in Section SB1118 Enrolled -40- LRB9102874PTpkA 1 381(a) of the Internal Revenue Code, the acquiring 2 corporation shall succeed to and take into account, as of the 3 close of the day of distribution or transfer, all Article 2 4 credits and net losses under Section 207 of the corporation 5 from which the assets where acquired, without limitation 6 under Section 382 of the Internal Revenue Code or the 7 separate return limitation year regulations promulgated under 8 Section 1502 of the Internal Revenue Code. 9 (b) In the case of the acquisition of assets of a 10 partnership by another partnership in a transaction in which 11 the acquiring partnership is considered to be a continuation 12 of the partnership from which the assets were acquired under 13 the provisions of Section 708 of the Internal Revenue Code 14 and any regulations promulgated under that Section, the 15 acquiring partnership shall succeed to and take into account, 16 as of the close of the day of distribution or transfer, all 17 Article 2 credits and net losses under Section 207 of the 18 partnership from which the assets were acquired. 19 (c) The provisions of this amendatory Act of the 91st 20 General Assembly shall apply to all acquisitions occurring in 21 taxable years ending on or after December 31, 1986; provided 22 that if a taxpayer's Illinois income tax liability for any 23 taxable year, as assessed under Section 903 prior to January 24 1, 1999, was computed without taking into account all of the 25 Article 2 credits and net losses under Section 207 as allowed 26 by this Section: 27 (1) no refund shall be payable to the taxpayer for 28 that taxable year as the result of allowing any portion 29 of the Article 2 credits or net losses under Section 207 30 that were not taken into account in computing the tax 31 assessed prior to January 1, 1999; 32 (2) any deficiency which has not been paid may be 33 reduced (but not below zero) by the allowance of some or 34 all of the Article 2 credits or net losses under Section SB1118 Enrolled -41- LRB9102874PTpkA 1 207 that were not taken into account in computing the tax 2 assessed prior to January 1, 1999; and 3 (3) in the case of any Article 2 credit or net loss 4 under Section 207 that, pursuant to this subsection (c), 5 could not be taken into account either in computing the 6 tax assessed prior to January 1, 1999 for a taxable year 7 or in reducing a deficiency for that taxable year under 8 paragraph (2) of subsection (c), the allowance of such 9 credit or loss in any other taxable year shall not be 10 denied on the grounds that such credit or loss should 11 properly have been claimed in that taxable year under 12 subsection (a) or (b). 13 (35 ILCS 5/502) (from Ch. 120, par. 5-502) 14 Sec. 502. Returns and notices. 15 (a) In general. A return with respect to the taxes 16 imposed by this Act shall be made by every person for any 17 taxable year: 18 (1) For which such person is liable for a tax 19 imposed by this Act, or 20 (2) In the case of a resident or in the case of a 21 corporation which is qualified to do business in this 22 State, for which such person is required to make a 23 federal income tax return, regardless of whether such 24 person is liable for a tax imposed by this Act. However, 25 this paragraph shall not require a resident to make a 26 return if such person has an Illinois base income of the 27 basic amount in Section 204(b) or less and is either 28 claimed as a dependent on another person's tax return 29 under the Internal Revenue Code of 1986, or is claimed as 30 a dependent on another person's tax return under this 31 Act. 32 (b) Fiduciaries and receivers. 33 (1) Decedents. If an individual is deceased, any SB1118 Enrolled -42- LRB9102874PTpkA 1 return or notice required of such individual under this 2 Act shall be made by his executor, administrator, or 3 other person charged with the property of such decedent. 4 (2) Individuals under a disability. If an 5 individual is unable to make a return or notice required 6 under this Act, the return or notice required of such 7 individual shall be made by his duly authorized agent, 8 guardian, fiduciary or other person charged with the care 9 of the person or property of such individual. 10 (3) Estates and trusts. Returns or notices required 11 of an estate or a trust shall be made by the fiduciary 12 thereof. 13 (4) Receivers, trustees and assignees for 14 corporations. In a case where a receiver, trustee in 15 bankruptcy, or assignee, by order of a court of competent 16 jurisdiction, by operation of law, or otherwise, has 17 possession of or holds title to all or substantially all 18 the property or business of a corporation, whether or not 19 such property or business is being operated, such 20 receiver, trustee, or assignee shall make the returns and 21 notices required of such corporation in the same manner 22 and form as corporations are required to make such 23 returns and notices. 24 (c) Joint returns by husband and wife. 25 (1) Except as provided in paragraph (3), if a 26 husband and wife file a joint federal income tax return 27 for a taxable year they shall file a joint return under 28 this Act for such taxable year and their liabilities 29 shall be joint and several, but if the federal income tax 30 liability of either spouse is determined on a separate 31 federal income tax return, they shall file separate 32 returns under this Act. 33 (2) If neither spouse is required to file a federal 34 income tax return and either or both are required to file SB1118 Enrolled -43- LRB9102874PTpkA 1 a return under this Act, they may elect to file separate 2 or joint returns and pursuant to such election their 3 liabilities shall be separate or joint and several. 4 (3) If either husband or wife is a resident and the 5 other is a nonresident, they shall file separate returns 6 in this State on such forms as may be required by the 7 Department in which event their tax liabilities shall be 8 separate; but they may elect to determine their joint net 9 income and file a joint return as if both were residents 10 and in such case, their liabilities shall be joint and 11 several. 12 (4) Innocent spouses. 13 (A) However, for tax liabilities arising and 14 paid prior to the effective date of this amendatory 15 Act of the 91st General Assembly, an innocent spouse 16 shall be relieved of liability for tax (including 17 interest and penalties) for any taxable year for 18 which a joint return has been made, upon submission 19 of proof that the Internal Revenue Service has made 20 a determination under Section 6013(e) of the 21 Internal Revenue Code, for the same taxable year, 22 which determination relieved the spouse from 23 liability for federal income taxes. If there is no 24 federal income tax liability at issue for the same 25 taxable year, the Department shall rely on the 26 provisions of Section 6013(e) to determine whether 27 the person requesting innocent spouse abatement of 28 tax, penalty, and interest is entitled to that 29 relief. 30 (B) For tax liabilities arising after the 31 effective date of this amendatory Act of the 91st 32 General Assembly or which arose prior to that 33 effective date, but remain unpaid as of the 34 effective date, if an individual who filed a joint SB1118 Enrolled -44- LRB9102874PTpkA 1 return for any taxable year has made an election 2 under this paragraph, the individual's liability for 3 any tax shown on the joint return shall not exceed 4 the individual's separate return amount and the 5 individual's liability for any deficiency assessed 6 for that taxable year shall not exceed the portion 7 of the deficiency properly allocable to the 8 individual. For purposes of this paragraph: 9 (i) An election properly made pursuant to 10 Section 6015 of the Internal Revenue Code shall 11 constitute an election under this paragraph, 12 provided that the election shall not be 13 effective until the individual has notified the 14 Department of the election in the form and 15 manner prescribed by the Department. 16 (ii) If no election has been made under 17 Section 6015, the individual may make an 18 election under this paragraph in the form and 19 manner prescribed by the Department, provided 20 that no election may be made if the Department 21 finds that assets were transferred between 22 individuals filing a joint return as part of a 23 scheme by such individuals to avoid payment of 24 Illinois income tax and the election shall not 25 eliminate the individual's liability for any 26 portion of a deficiency attributable to an 27 error on the return of which the individual had 28 actual knowledge as of the date of filing. 29 (iii) In determining the separate return 30 amount or portion of any deficiency 31 attributable to an individual, the Department 32 shall follow the provisions in Section 6015(b) 33 and (c) of the Internal Revenue Code. 34 (iv) In determining the validity of an SB1118 Enrolled -45- LRB9102874PTpkA 1 individual's election under subparagraph (ii) 2 and in determining an electing individual's 3 separate return amount or portion of any 4 deficiency under subparagraph (iii), any 5 determination made by the Secretary of the 6 Treasury under Section 6015(a) of the Internal 7 Revenue Code regarding criteria for eligibility 8 or under Section 6015(b) or (c) of the Internal 9 Revenue Code regarding the allocation of any 10 item of income, deduction, payment, or credit 11 between an individual making the federal 12 election and that individual's spouse shall be 13 conclusively presumed to be correct. With 14 respect to any item that is not the subject of 15 a determination by the Secretary of the 16 Treasury, in any proceeding involving this 17 subsection, the individual making the election 18 shall have the burden of proof with respect to 19 any item except that the Department shall have 20 the burden of proof with respect to items in 21 subdivision (ii). 22 (v) Any election made by an individual 23 under this subsection shall apply to all years 24 for which that individual and the spouse named 25 in the election have filed a joint return. 26 (vi) After receiving a notice that the 27 federal election has been made or after 28 receiving an election under subdivision (ii), 29 the Department shall take no collection action 30 against the electing individual for any 31 liability arising from a joint return covered 32 by the election until the Department has 33 notified the electing individual in writing 34 that the election is invalid or of the portion SB1118 Enrolled -46- LRB9102874PTpkA 1 of the liability the Department has allocated 2 to the electing individual. Within 60 days 3 (150 days if the individual is outside the 4 United States) after the issuance of such 5 notification, the individual may file a written 6 protest of the denial of the election or of the 7 Department's determination of the liability 8 allocated to him or her and shall be granted a 9 hearing within the Department under the 10 provisions of Section 908. If a protest is 11 filed, the Department shall take no collection 12 action against the electing individual until 13 the decision regarding the protest has become 14 final under subsection (d) of Section 908 or, 15 if administrative review of the Department's 16 decision is requested under Section 1201, until 17 the decision of the court becomes final. 18 (d) Partnerships. Every partnership having any base 19 income allocable to this State in accordance with section 20 305(c) shall retain information concerning all items of 21 income, gain, loss and deduction; the names and addresses of 22 all of the partners, or names and addresses of members of a 23 limited liability company, or other persons who would be 24 entitled to share in the base income of the partnership if 25 distributed; the amount of the distributive share of each; 26 and such other pertinent information as the Department may by 27 forms or regulations prescribe. The partnership shall make 28 that information available to the Department when requested 29 by the Department. 30 (e) For taxable years ending on or after December 31, 31 1985, and before December 31, 1993, taxpayers that are 32 corporations (other than Subchapter S corporations) having 33 the same taxable year and that are members of the same 34 unitary business group may elect to be treated as one SB1118 Enrolled -47- LRB9102874PTpkA 1 taxpayer for purposes of any original return, amended return 2 which includes the same taxpayers of the unitary group which 3 joined in the election to file the original return, 4 extension, claim for refund, assessment, collection and 5 payment and determination of the group's tax liability under 6 this Act. This subsection (e) does not permit the election to 7 be made for some, but not all, of the purposes enumerated 8 above. For taxable years ending on or after December 31, 9 1987, corporate members (other than Subchapter S 10 corporations) of the same unitary business group making this 11 subsection (e) election are not required to have the same 12 taxable year. 13 For taxable years ending on or after December 31, 1993, 14 taxpayers that are corporations (other than Subchapter S 15 corporations) and that are members of the same unitary 16 business group shall be treated as one taxpayer for purposes 17 of any original return, amended return which includes the 18 same taxpayers of the unitary group which joined in filing 19 the original return, extension, claim for refund, assessment, 20 collection and payment and determination of the group's tax 21 liability under this Act. 22 (f) The Department may promulgate regulations to permit 23 nonresident individual partners of the same partnership, 24 nonresident Subchapter S corporation shareholders of the same 25 Subchapter S corporation, and nonresident individuals 26 transacting an insurance business in Illinois under a Lloyds 27 plan of operation, and nonresident individual members of the 28 same limited liability company that is treated as a 29 partnership under Section 1501 (a)(16) of this Act, to file 30 composite individual income tax returns reflecting the 31 composite income of such individuals allocable to Illinois 32 and to make composite individual income tax payments. The 33 Department may by regulation also permit such composite 34 returns to include the income tax owed by Illinois residents SB1118 Enrolled -48- LRB9102874PTpkA 1 attributable to their income from partnerships, Subchapter S 2 corporations, insurance businesses organized under a Lloyds 3 plan of operation, or limited liability companies that are 4 treated as partnership under Section 1501 (a)(16) of this 5 Act, in which case such Illinois residents will be permitted 6 to claim credits on their individual returns for their shares 7 of the composite tax payments. This subsection (f) applies 8 to taxable years ending on or after December 31, 1987. 9 (g) The Department may adopt rules to authorize the 10 electronic filing of any return required to be filed under 11 this Section. 12 (Source: P.A. 90-613, eff. 7-9-98.) 13 (35 ILCS 5/601.1) (Ch. 120, par. 6-601.1) 14 Sec. 601.1. (a) Beginning on October 1, 1993, a taxpayer 15 who has an average monthly tax liability of $150,000 or more 16 under Article 7 of this Act shall make all payments required 17 by rules of the Department by electronic funds transfer. 18 Beginning October 1, 1993, a taxpayer who has an average 19 quarterly estimated tax payment obligation of $450,000 or 20 more under Article 8 of this Act shall make all payments 21 required by rules of the Department by electronic funds 22 transfer. Beginning on October 1, 1994, a taxpayer who has 23 an average monthly tax liability of $100,000 or more under 24 Article 7 of this Act shall make all payments required by 25 rules of the Department by electronic funds transfer. 26 Beginning October 1, 1994, a taxpayer who has an average 27 quarterly estimated tax payment obligation of $300,000 or 28 more under Article 8 of this Act shall make all payments 29 required by rules of the Department by electronic funds 30 transfer. Beginning on October 1, 1995, a taxpayer who has 31 an average monthly tax liability of $50,000 or more under 32 Article 7 of this Act shall make all payments required by 33 rules of the Department by electronic funds transfer. SB1118 Enrolled -49- LRB9102874PTpkA 1 Beginning October 1, 1995, a taxpayer who has an average 2 quarterly estimated tax payment obligation of $150,000 or 3 more under Article 8 of this Act shall make all payments 4 required by rules of the Department by electronic funds 5 transfer. Beginning on October 1, 2000, and for all liability 6 periods thereafter, a taxpayer who has an average annual tax 7 liability of $200,000 or more under Article 7 of this Act 8 shall make all payments required by rules of the Department 9 by electronic funds transfer. Beginning October 1, 2000, a 10 taxpayer who has an average quarterly estimated tax payment 11 obligation of $50,000 or more under Article 8 of this Act 12 shall make all payments required by rules of the Department 13 by electronic funds transfer. 14 (b) Any taxpayer who is not required to make payments by 15 electronic funds transfer may make payments by electronic 16 funds transfer with the permission of the Department. 17 (c) All taxpayers required to make payments by 18 electronic funds transfer and any taxpayers who wish to 19 voluntarily make payments by electronic funds transfer shall 20 make those payments in the manner authorized by the 21 Department. 22 (d) The Department shall notify all taxpayers required 23 to make payments by electronic funds transfer. All 24 taxpayers notified by the Department shall make payments by 25 electronic funds transfer for a minimum of one year beginning 26 on October 1. In determining the threshold amounts under 27 subsection (a), the Department shall calculate the averages 28 as follows: 29 (1) the total liability under Article 7 for the 30 preceding tax year (and, prior to October 1, 2000, 31 divided by 12); or 32 (2) for purposes of estimated payments under 33 Article 8, the total tax obligation of the taxpayer for 34 the previous tax year divided by 4. SB1118 Enrolled -50- LRB9102874PTpkA 1 (e) The Department shall adopt such rules as are 2 necessary to effectuate a program of electronic funds 3 transfer and the requirements of this Section. 4 (Source: P.A. 87-1132; 87-1246.) 5 (35 ILCS 5/905) (from Ch. 120, par. 9-905) 6 Sec. 905. Limitations on Notices of Deficiency. 7 (a) In general. Except as otherwise provided in this 8 Act: 9 (1) A notice of deficiency shall be issued not 10 later than 3 years after the date the return was filed, 11 and 12 (2) No deficiency shall be assessed or collected 13 with respect to the year for which the return was filed 14 unless such notice is issued within such period. 15 (b) Omission of more than 25% of income. If the taxpayer 16 omits from base income an amount properly includible therein 17 which is in excess of 25% of the amount of base income stated 18 in the return, a notice of deficiency may be issued not later 19 than 6 years after the return was filed. For purposes of this 20 paragraph, there shall not be taken into account any amount 21 which is omitted in the return if such amount is disclosed in 22 the return, or in a statement attached to the return, in a 23 manner adequate to apprise the Department of the nature and 24 the amount of such item. 25 (c) No return or fraudulent return. If no return is 26 filed or a false and fraudulent return is filed with intent 27 to evade the tax imposed by this Act, a notice of deficiency 28 may be issued at any time. 29 (d) Failure to report federal change. If a taxpayer 30 fails to notify the Department in any case where notification 31 is required by Section 304(c) or 506(b), or fails to report a 32 change or correction which is treated in the same manner as 33 if it were a deficiency for federal income tax purposes, a SB1118 Enrolled -51- LRB9102874PTpkA 1 notice of deficiency may be issued (i) at any time or (ii) on 2 or after the effective date of this amendatory Act of the 3 91st General Assembly, at any time for the taxable year for 4 which the notification is required or for any taxable year to 5 which the taxpayer may carry an Article 2 credit, or a 6 Section 207 loss, earned, incurred, or used in the year for 7 which the notification is required; provided, however, that 8 the amount of any proposed assessment set forth in the notice 9 shall be limited to the amount of any deficiency resulting 10 under this Act from the recomputation of the taxpayer's net 11 income, Article 2 credits, or Section 207 loss earned, 12 incurred, or used in the taxable year for which the 13 notification is required after giving effect to the item or 14 items required to be reported. 15 (e) Report of federal change. 16 (1) Before the effective date of this amendatory 17 Act of the 91st General Assembly, in any case where 18 notification of an alteration is given as required by 19 Section 506(b), a notice of deficiency may be issued at 20 any time within 2 years after the date such notification 21 is given, provided, however, that the amount of any 22 proposed assessment set forth in such notice shall be 23 limited to the amount of any deficiency resulting under 24 this Act from recomputation of the taxpayer's net income, 25 net loss, or Article 2 credits for the taxable year after 26 giving effect to the item or items reflected in the 27 reported alteration. 28 (2) On and after the effective date of this 29 amendatory Act of the 91st General Assembly, in any case 30 where notification of an alteration is given as required 31 by Section 506(b), a notice of deficiency may be issued 32 at any time within 2 years after the date such 33 notification is given for the taxable year for which the 34 notification is given or for any taxable year to which SB1118 Enrolled -52- LRB9102874PTpkA 1 the taxpayer may carry an Article 2 credit, or a Section 2 207 loss, earned, incurred, or used in the year for which 3 the notification is given, provided, however, that the 4 amount of any proposed assessment set forth in such 5 notice shall be limited to the amount of any deficiency 6 resulting under this Act from recomputation of the 7 taxpayer's net income, Article 2 credits, or Section 207 8 loss earned, incurred, or used in the taxable year for 9 which the notification is given after giving effect to 10 the item or items reflected in the reported alteration. 11 (f) Extension by agreement. Where, before the expiration 12 of the time prescribed in this section for the issuance of a 13 notice of deficiency, both the Department and the taxpayer 14 shall have consented in writing to its issuance after such 15 time, such notice may be issued at any time prior to the 16 expiration of the period agreed upon. The period so agreed 17 upon may be extended by subsequent agreements in writing made 18 before the expiration of the period previously agreed upon. 19 (g) Erroneous refunds. In any case in which there has 20 been an erroneous refund of tax payable under this Act, a 21 notice of deficiency may be issued at any time within 2 years 22 from the making of such refund, or within 5 years from the 23 making of such refund if it appears that any part of the 24 refund was induced by fraud or the misrepresentation of a 25 material fact, provided, however, that the amount of any 26 proposed assessment set forth in such notice shall be limited 27 to the amount of such erroneous refund. 28 Beginning July 1, 1993, in any case in which there has 29 been a refund of tax payable under this Act attributable to a 30 net loss carryback as provided for in Section 207, and that 31 refund is subsequently determined to be an erroneous refund 32 due to a reduction in the amount of the net loss which was 33 originally carried back, a notice of deficiency for the 34 erroneous refund amount may be issued at any time during the SB1118 Enrolled -53- LRB9102874PTpkA 1 same time period in which a notice of deficiency can be 2 issued on the loss year creating the carryback amount and 3 subsequent erroneous refund. The amount of any proposed 4 assessment set forth in the notice shall be limited to the 5 amount of such erroneous refund. 6 (h) Time return deemed filed. For purposes of this 7 Section a tax return filed before the last day prescribed by 8 law (including any extension thereof) shall be deemed to have 9 been filed on such last day. 10 (i) Request for prompt determination of liability. For 11 purposes of Subsection (a)(1), in the case of a tax return 12 required under this Act in respect of a decedent, or by his 13 estate during the period of administration, or by a 14 corporation, the period referred to in such Subsection shall 15 be 18 months after a written request for prompt determination 16 of liability is filed with the Department (at such time and 17 in such form and manner as the Department shall by 18 regulations prescribe) by the executor, administrator, or 19 other fiduciary representing the estate of such decedent, or 20 by such corporation, but not more than 3 years after the date 21 the return was filed. This Subsection shall not apply in the 22 case of a corporation unless: 23 (1) (A) Such written request notifies the 24 Department that the corporation contemplates dissolution 25 at or before the expiration of such 18-month period, (B) 26 the dissolution is begun in good faith before the 27 expiration of such 18-month period, and (C) the 28 dissolution is completed; 29 (2) (A) Such written request notifies the 30 Department that a dissolution has in good faith been 31 begun, and (B) the dissolution is completed; or 32 (3) A dissolution has been completed at the time 33 such written request is made. 34 (j) Withholding tax. In the case of returns required SB1118 Enrolled -54- LRB9102874PTpkA 1 under Article 7 of this Act (with respect to any amounts 2 withheld as tax or any amounts required to have been withheld 3 as tax) a notice of deficiency shall be issued not later than 4 3 years after the 15th day of the 4th month following the 5 close of the calendar year in which such withholding was 6 required. 7 (k) Penalties for failure to make information reports. 8 A notice of deficiency for the penalties provided by 9 Subsection 1405.1(c) of this Act may not be issued more than 10 3 years after the due date of the reports with respect to 11 which the penalties are asserted. 12 (l) Penalty for failure to file withholding returns. A 13 notice of deficiency for penalties provided by Section 1004 14 of this Act for taxpayer's failure to file withholding 15 returns may not be issued more than three years after the 16 15th day of the 4th month following the close of the calendar 17 year in which the withholding giving rise to taxpayer's 18 obligation to file those returns occurred. 19 (m) Transferee liability. A notice of deficiency may be 20 issued to a transferee relative to a liability asserted under 21 Section 1405 during time periods defined as follows: 22 1) Initial Transferee. In the case of the 23 liability of an initial transferee, up to 2 years after 24 the expiration of the period of limitation for assessment 25 against the transferor, except that if a court proceeding 26 for review of the assessment against the transferor has 27 begun, then up to 2 years after the return of the 28 certified copy of the judgment in the court proceeding. 29 2) Transferee of Transferee. In the case of the 30 liability of a transferee, up to 2 years after the 31 expiration of the period of limitation for assessment 32 against the preceding transferee, but not more than 3 33 years after the expiration of the period of limitation 34 for assessment against the initial transferor; except SB1118 Enrolled -55- LRB9102874PTpkA 1 that if, before the expiration of the period of 2 limitation for the assessment of the liability of the 3 transferee, a court proceeding for the collection of the 4 tax or liability in respect thereof has been begun 5 against the initial transferor or the last preceding 6 transferee, as the case may be, then the period of 7 limitation for assessment of the liability of the 8 transferee shall expire 2 years after the return of the 9 certified copy of the judgment in the court proceeding. 10 (Source: P.A. 90-491, eff. 1-1-98.) 11 (35 ILCS 5/911) (from Ch. 120, par. 9-911) 12 Sec. 911. Limitations on Claims for Refund. 13 (a) In general. Except as otherwise provided in this 14 Act: 15 (1) A claim for refund shall be filed not later 16 than 3 years after the date the return was filed (in the 17 case of returns required under Article 7 of this Act 18 respecting any amounts withheld as tax, not later than 3 19 years after the 15th day of the 4th month following the 20 close of the calendar year in which such withholding was 21 made), or one year after the date the tax was paid, 22 whichever is the later; and 23 (2) No credit or refund shall be allowed or made 24 with respect to the year for which the claim was filed 25 unless such claim is filed within such period. 26 (b) Federal changes. 27 (1) In general. In any case where notification of 28 an alteration is required by Section 506 (b), a claim for 29 refund may be filed within 2 years after the date on 30 which such notification was due (regardless of whether 31 such notice was given), but the amount recoverable 32 pursuant to a claim filed under this Section shall be 33 limited to the amount of any overpayment resulting under SB1118 Enrolled -56- LRB9102874PTpkA 1 this Act from recomputation of the taxpayer's net income, 2 net loss, or Article 2 credits for the taxable year after 3 giving effect to the item or items reflected in the 4 alteration required to be reported. 5 (2) Tentative carryback adjustments paid before 6 January 1, 1974. If, as the result of the payment before 7 January 1, 1974 of a federal tentative carryback 8 adjustment, a notification of an alteration is required 9 under Section 506 (b), a claim for refund may be filed at 10 any time before January 1, 1976, but the amount 11 recoverable pursuant to a claim filed under this Section 12 shall be limited to the amount of any overpayment 13 resulting under this Act from recomputation of the 14 taxpayer's base income for the taxable year after giving 15 effect to the federal alteration resulting from the 16 tentative carryback adjustment irrespective of any 17 limitation imposed in paragraph (l) of this subsection. 18 (c) Extension by agreement. Where, before the 19 expiration of the time prescribed in this section for the 20 filing of a claim for refund, both the Department and the 21 claimant shall have consented in writing to its filing after 22 such time, such claim may be filed at any time prior to the 23 expiration of the period agreed upon. The period so agreed 24 upon may be extended by subsequent agreements in writing made 25 before the expiration of the period previously agreed upon. 26 (d) Limit on amount of credit or refund. 27 (1) Limit where claim filed within 3-year period. 28 If the claim was filed by the claimant during the 3-year 29 period prescribed in subsection (a), the amount of the 30 credit or refund shall not exceed the portion of the tax 31 paid within the period, immediately preceding the filing 32 of the claim, equal to 3 years plus the period of any 33 extension of time for filing the return. 34 (2) Limit where claim not filed within 3-year SB1118 Enrolled -57- LRB9102874PTpkA 1 period. If the claim was not filed within