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Public Act 91-0845
HB2980 Enrolled LRB9107003WHdv
AN ACT in relation to medical care savings accounts.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 1. Short title. This Act may be cited as the
Medical Care Savings Account Act of 2000.
Section 3. Programs under prior Act. Programs
established under the Medical Care Savings Account Act are
subject to and shall be governed by this Act.
Section 5. Definitions. In this Act:
"Account administrator" means any of the following:
(1) A national or state chartered bank, a federal
or state chartered savings and loan association, a
federal or state chartered savings bank, or a federal or
state chartered credit union.
(2) A trust company authorized to act as a
fiduciary.
(3) An insurance company authorized to do business
in this State under the Illinois Insurance Code or a
health maintenance organization authorized to do business
in this State under the Health Maintenance Organization
Act.
(4) A dealer, salesperson, or investment adviser
registered under the Illinois Securities Law of 1953.
(5) An administrator as defined in Section 511.101
of the Illinois Insurance Code who is licensed under
Article XXXI 1/4 of that Code.
(6) A certified public accountant registered under
the Illinois Public Accounting Act.
(7) An attorney licensed to practice in this State.
(8) An employer, if the employer has a self-insured
health plan under the federal Employee Retirement Income
Security Act of 1974 (ERISA).
(9) An employer that participates in the medical
care savings account program.
"Deductible" means the total deductible for an employee
and all the dependents of that employee for a calendar year.
"Dependent" means the spouse of the employee or a child
of the employee if the child is any of the following:
(1) Under 19 years of age, or under 23 years of age
and enrolled as a full-time student at an accredited
college or university.
(2) Legally entitled to the provision of proper or
necessary subsistence, education, medical care, or other
care necessary for his or her health, guidance, or
well-being and not otherwise emancipated,
self-supporting, married, or a member of the armed forces
of the United States.
(3) Mentally or physically incapacitated to the
extent that he or she is not self-sufficient.
"Domicile" means a place where an individual has his or
her true, fixed, and permanent home and principal
establishment, to which, whenever absent, he or she intends
to return. Domicile continues until another permanent home
or principal establishment is established.
"Eligible medical expense" means an expense paid by the
taxpayer for medical care described in Section 213(d) of the
Internal Revenue Code.
"Employee" means the individual for whose benefit or for
the benefit of whose dependents a medical care savings
account is established. Employee includes a self-employed
individual.
"Higher deductible" means a deductible subject to a
minimum and maximum established for 1999 by the Department of
Revenue under the Medical Care Savings Account Act. The
minimum and maximum shall be adjusted for 2000 and annually
thereafter by the Department of Revenue to reflect increases
in the consumer price index for the United States as defined
and officially reported by the United States Department of
Labor.
"Medical care savings account" or "account" means an
account established in this State pursuant to a medical care
savings account program to pay the eligible medical expenses
of an employee and his or her dependents.
"Medical care savings account program" or "program" means
a program that includes all of the following:
(1) The purchase by an employer of a qualified
higher deductible health plan for the benefit of an
employee and his or her dependents.
(2) The contribution on behalf of an employee into
a medical care savings account by his or her employer of
all or part of the premium differential realized by the
employer based on the purchase of a qualified higher
deductible health plan for the benefit of the employee.
An employer that did not previously provide a health
coverage policy, certificate, or contract for his or her
employees may contribute all or part of the deductible of
the plan purchased pursuant to paragraph (1). A
contribution under this paragraph may not exceed the
maximum amounts established for 1999 by the Department of
Revenue for 2 taxpayers filing a joint return, if each
taxpayer has a medical care savings account but neither
is covered by the other's health coverage, and for all
other cases. The maximum amounts shall be adjusted for
2000 and annually thereafter by the Department of Revenue
to reflect increases in the consumer price index for the
United States as defined and officially reported by the
United States Department of Labor.
(3) An account administrator to administer the
medical care savings account from which payment of claims
is made. Not more than 30 days after an account
administrator begins to administer an account, the
administrator shall notify in writing each employee on
whose behalf the administrator administers an account of
the date of the last business day of the administrator's
business year.
"Qualified higher deductible health plan" means a health
coverage policy, certificate, or contract that provides for
payments for covered benefits that exceed the higher
deductible and that is purchased by an employer for the
benefit of an employee for whom the employer makes deposits
into a medical care savings account.
Section 10. Program offer; tax treatment.
(a) For tax years ending on or after December 31, 2000,
an employer, except as otherwise provided by statute,
contract, or a collective bargaining agreement, may offer a
medical care savings account program to the employer's
employees.
(b) Before making any contribution to an account, an
employer that offers a medical care savings account program
shall inform all its employees in writing of the federal tax
status of contributions made pursuant to this Act.
(c) Except as provided in Section 20, principal
contributed to and interest earned on a medical care savings
account and money reimbursed to an employee for eligible
medical expenses are exempt from taxation under the
Illinois Income Tax Act as provided in that Act.
Section 15. Use of account moneys.
(a) The account administrator shall utilize the moneys
held in a medical care savings account solely for the purpose
of paying the medical expenses of the employee or his or her
dependents or to purchase a health coverage policy,
certificate, or contract if the employee does not otherwise
have health insurance coverage. Moneys held in a medical care
savings account may not be used to cover medical expenses of
the employee or his or her dependents that are otherwise
covered, including but not limited to medical expenses
covered pursuant to an automobile insurance policy, workers'
compensation insurance policy or self-insured plan, or
another health coverage policy, certificate, or contract.
(b) The employee may submit documentation of medical
expenses paid by the employee in the tax year to the account
administrator, and the account administrator shall
reimburse the employee from the employee's account for
eligible medical expenses.
(c) If an employer makes contributions to a medical
care savings account program on a periodic installment
basis, the employer may advance to an employee, interest
free, an amount necessary to cover medical expenses incurred
that exceed the amount in the employee's medical care savings
account when the expense is incurred if the employee agrees
to repay the advance from future installments or when he or
she ceases to be an employee of the employer.
Section 20. Withdrawals from account.
(a) Notwithstanding subsection (b) and subject to
subsection (c), an employee may withdraw money from his or
her medical care savings account for any purpose other than a
purpose described in subsection (a) of Section 15 only on the
last business day of the account administrator's business
year. Money withdrawn pursuant to this subsection is income
for purposes of the Illinois Income Tax Act in the taxable
year of the withdrawal, as provided in that Act.
(b) Subject to subsection (c), if the employee withdraws
money for any purpose other than a purpose described in
subsection (a) of Section 15 at any other time, all of the
following apply:
(1) The amount of the withdrawal is income for
purposes of the Illinois Income Tax Act in the taxable
year of the withdrawal, as provided in that Act.
(2) The administrator shall withhold and on behalf
of the employee shall pay a penalty to the Department of
Revenue equal to 10% of the amount of the withdrawal.
(3) Interest earned on the account during the
taxable year in which a withdrawal under this subsection
is made is income for purposes of the Illinois Income Tax
Act, as provided in that Act.
(c) The amount of a disbursement of any assets of a
medical care savings account pursuant to a filing for
protection under Title 11 of the United States Code, 11
U.S.C. 101 to 1330, by an employee or person for whose
benefit the account was established is not considered a
withdrawal for purposes of this Section. The amount of a
disbursement is not subject to taxation under the Illinois
Income Tax Act, and subsection (b) does not apply.
(d) Upon the death of the employee, the account
administrator shall distribute the principal and accumulated
interest of the medical care savings account to the estate
of the employee.
(e) If (i) an employee is no longer employed by an
employer that participates in a medical care savings account
program, (ii) the employee, not more than 60 days after his
or her final day of employment, transfers the account to a
new account administrator or requests in writing to the
former employer's account administrator that the account
remain with that administrator, and (iii) that account
administrator agrees to retain the account, then the money in
the medical care savings account may be utilized for the
benefit of the employee or his or her dependents subject to
this Act and remains exempt from taxation pursuant to this
Act. Not more than 30 days after the expiration of the 60
days, if an account administrator has not accepted the
former employee's account, the employer shall mail a check to
the former employee, at the employee's last known address,
for an amount equal to the amount in the account on that day,
and that amount is subject to taxation pursuant to subsection
(a) of this Section but is not subject to the penalty
under paragraph (2) of subsection (b) of this Section. If an
employee becomes employed with a different employer that
participates in a medical care savings account program, the
employee may transfer his or her medical care savings
account to that new employer's account administrator.
Section 30. Administrator; fiduciary duty. An account
administrator shall discharge his or her duties as a
fiduciary in a manner consistent with the fiduciary standards
required by 29 U.S.C 1104 and shall not engage in any
self-dealing transactions in the investment of account
assets.
Section 85. Repealer. This Act is repealed on January
1, 2010.
Section 90. The Illinois Income Tax Act is amended by
changing Section 203 as follows:
(35 ILCS 5/203) (from Ch. 120, par. 2-203)
Sec. 203. Base income defined.
(a) Individuals.
(1) In general. In the case of an individual, base
income means an amount equal to the taxpayer's adjusted
gross income for the taxable year as modified by
paragraph (2).
(2) Modifications. The adjusted gross income
referred to in paragraph (1) shall be modified by adding
thereto the sum of the following amounts:
(A) An amount equal to all amounts paid or
accrued to the taxpayer as interest or dividends
during the taxable year to the extent excluded from
gross income in the computation of adjusted gross
income, except stock dividends of qualified public
utilities described in Section 305(e) of the
Internal Revenue Code;
(B) An amount equal to the amount of tax
imposed by this Act to the extent deducted from
gross income in the computation of adjusted gross
income for the taxable year;
(C) An amount equal to the amount received
during the taxable year as a recovery or refund of
real property taxes paid with respect to the
taxpayer's principal residence under the Revenue Act
of 1939 and for which a deduction was previously
taken under subparagraph (L) of this paragraph (2)
prior to July 1, 1991, the retrospective application
date of Article 4 of Public Act 87-17. In the case
of multi-unit or multi-use structures and farm
dwellings, the taxes on the taxpayer's principal
residence shall be that portion of the total taxes
for the entire property which is attributable to
such principal residence;
(D) An amount equal to the amount of the
capital gain deduction allowable under the Internal
Revenue Code, to the extent deducted from gross
income in the computation of adjusted gross income;
(D-5) An amount, to the extent not included in
adjusted gross income, equal to the amount of money
withdrawn by the taxpayer in the taxable year from a
medical care savings account and the interest earned
on the account in the taxable year of a withdrawal
pursuant to subsection (b) of Section 20 of the
Medical Care Savings Account Act or subsection (b)
of Section 20 of the Medical Care Savings Account
Act of 2000; and
(D-10) For taxable years ending after December
31, 1997, an amount equal to any eligible
remediation costs that the individual deducted in
computing adjusted gross income and for which the
individual claims a credit under subsection (l) of
Section 201;
and by deducting from the total so obtained the sum of
the following amounts:
(E) Any amount included in such total in
respect of any compensation (including but not
limited to any compensation paid or accrued to a
serviceman while a prisoner of war or missing in
action) paid to a resident by reason of being on
active duty in the Armed Forces of the United States
and in respect of any compensation paid or accrued
to a resident who as a governmental employee was a
prisoner of war or missing in action, and in respect
of any compensation paid to a resident in 1971 or
thereafter for annual training performed pursuant to
Sections 502 and 503, Title 32, United States Code
as a member of the Illinois National Guard;
(F) An amount equal to all amounts included in
such total pursuant to the provisions of Sections
402(a), 402(c), 403(a), 403(b), 406(a), 407(a), and
408 of the Internal Revenue Code, or included in
such total as distributions under the provisions of
any retirement or disability plan for employees of
any governmental agency or unit, or retirement
payments to retired partners, which payments are
excluded in computing net earnings from self
employment by Section 1402 of the Internal Revenue
Code and regulations adopted pursuant thereto;
(G) The valuation limitation amount;
(H) An amount equal to the amount of any tax
imposed by this Act which was refunded to the
taxpayer and included in such total for the taxable
year;
(I) An amount equal to all amounts included in
such total pursuant to the provisions of Section 111
of the Internal Revenue Code as a recovery of items
previously deducted from adjusted gross income in
the computation of taxable income;
(J) An amount equal to those dividends
included in such total which were paid by a
corporation which conducts business operations in an
Enterprise Zone or zones created under the Illinois
Enterprise Zone Act, and conducts substantially all
of its operations in an Enterprise Zone or zones;
(K) An amount equal to those dividends
included in such total that were paid by a
corporation that conducts business operations in a
federally designated Foreign Trade Zone or Sub-Zone
and that is designated a High Impact Business
located in Illinois; provided that dividends
eligible for the deduction provided in subparagraph
(J) of paragraph (2) of this subsection shall not be
eligible for the deduction provided under this
subparagraph (K);
(L) For taxable years ending after December
31, 1983, an amount equal to all social security
benefits and railroad retirement benefits included
in such total pursuant to Sections 72(r) and 86 of
the Internal Revenue Code;
(M) With the exception of any amounts
subtracted under subparagraph (N), an amount equal
to the sum of all amounts disallowed as deductions
by (i) Sections 171(a) (2), and 265(2) of the
Internal Revenue Code of 1954, as now or hereafter
amended, and all amounts of expenses allocable to
interest and disallowed as deductions by Section
265(1) of the Internal Revenue Code of 1954, as now
or hereafter amended; and (ii) for taxable years
ending on or after August 13, 1999 the effective
date of this amendatory Act of the 91st General
Assembly, Sections 171(a)(2), 265, 280C, and
832(b)(5)(B)(i) of the Internal Revenue Code; the
provisions of this subparagraph are exempt from the
provisions of Section 250;
(N) An amount equal to all amounts included in
such total which are exempt from taxation by this
State either by reason of its statutes or
Constitution or by reason of the Constitution,
treaties or statutes of the United States; provided
that, in the case of any statute of this State that
exempts income derived from bonds or other
obligations from the tax imposed under this Act, the
amount exempted shall be the interest net of bond
premium amortization;
(O) An amount equal to any contribution made
to a job training project established pursuant to
the Tax Increment Allocation Redevelopment Act;
(P) An amount equal to the amount of the
deduction used to compute the federal income tax
credit for restoration of substantial amounts held
under claim of right for the taxable year pursuant
to Section 1341 of the Internal Revenue Code of
1986;
(Q) An amount equal to any amounts included in
such total, received by the taxpayer as an
acceleration in the payment of life, endowment or
annuity benefits in advance of the time they would
otherwise be payable as an indemnity for a terminal
illness;
(R) An amount equal to the amount of any
federal or State bonus paid to veterans of the
Persian Gulf War;
(S) An amount, to the extent included in
adjusted gross income, equal to the amount of a
contribution made in the taxable year on behalf of
the taxpayer to a medical care savings account
established under the Medical Care Savings Account
Act or the Medical Care Savings Account Act of 2000
to the extent the contribution is accepted by the
account administrator as provided in that Act;
(T) An amount, to the extent included in
adjusted gross income, equal to the amount of
interest earned in the taxable year on a medical
care savings account established under the Medical
Care Savings Account Act or the Medical Care Savings
Account Act of 2000 on behalf of the taxpayer, other
than interest added pursuant to item (D-5) of this
paragraph (2);
(U) For one taxable year beginning on or after
January 1, 1994, an amount equal to the total amount
of tax imposed and paid under subsections (a) and
(b) of Section 201 of this Act on grant amounts
received by the taxpayer under the Nursing Home
Grant Assistance Act during the taxpayer's taxable
years 1992 and 1993;
(V) Beginning with tax years ending on or
after December 31, 1995 and ending with tax years
ending on or before December 31, 2004, an amount
equal to the amount paid by a taxpayer who is a
self-employed taxpayer, a partner of a partnership,
or a shareholder in a Subchapter S corporation for
health insurance or long-term care insurance for
that taxpayer or that taxpayer's spouse or
dependents, to the extent that the amount paid for
that health insurance or long-term care insurance
may be deducted under Section 213 of the Internal
Revenue Code of 1986, has not been deducted on the
federal income tax return of the taxpayer, and does
not exceed the taxable income attributable to that
taxpayer's income, self-employment income, or
Subchapter S corporation income; except that no
deduction shall be allowed under this item (V) if
the taxpayer is eligible to participate in any
health insurance or long-term care insurance plan of
an employer of the taxpayer or the taxpayer's
spouse. The amount of the health insurance and
long-term care insurance subtracted under this item
(V) shall be determined by multiplying total health
insurance and long-term care insurance premiums paid
by the taxpayer times a number that represents the
fractional percentage of eligible medical expenses
under Section 213 of the Internal Revenue Code of
1986 not actually deducted on the taxpayer's federal
income tax return;
(W) For taxable years beginning on or after
January 1, 1998, all amounts included in the
taxpayer's federal gross income in the taxable year
from amounts converted from a regular IRA to a Roth
IRA. This paragraph is exempt from the provisions of
Section 250; and
(X) For taxable year 1999 and thereafter, an
amount equal to the amount of any (i) distributions,
to the extent includible in gross income for federal
income tax purposes, made to the taxpayer because of
his or her status as a victim of persecution for
racial or religious reasons by Nazi Germany or any
other Axis regime or as an heir of the victim and
(ii) items of income, to the extent includible in
gross income for federal income tax purposes,
attributable to, derived from or in any way related
to assets stolen from, hidden from, or otherwise
lost to a victim of persecution for racial or
religious reasons by Nazi Germany or any other Axis
regime immediately prior to, during, and immediately
after World War II, including, but not limited to,
interest on the proceeds receivable as insurance
under policies issued to a victim of persecution for
racial or religious reasons by Nazi Germany or any
other Axis regime by European insurance companies
immediately prior to and during World War II;
provided, however, this subtraction from federal
adjusted gross income does not apply to assets
acquired with such assets or with the proceeds from
the sale of such assets; provided, further, this
paragraph shall only apply to a taxpayer who was the
first recipient of such assets after their recovery
and who is a victim of persecution for racial or
religious reasons by Nazi Germany or any other Axis
regime or as an heir of the victim. The amount of
and the eligibility for any public assistance,
benefit, or similar entitlement is not affected by
the inclusion of items (i) and (ii) of this
paragraph in gross income for federal income tax
purposes. This paragraph is exempt from the
provisions of Section 250.
(b) Corporations.
(1) In general. In the case of a corporation, base
income means an amount equal to the taxpayer's taxable
income for the taxable year as modified by paragraph (2).
(2) Modifications. The taxable income referred to
in paragraph (1) shall be modified by adding thereto the
sum of the following amounts:
(A) An amount equal to all amounts paid or
accrued to the taxpayer as interest and all
distributions received from regulated investment
companies during the taxable year to the extent
excluded from gross income in the computation of
taxable income;
(B) An amount equal to the amount of tax
imposed by this Act to the extent deducted from
gross income in the computation of taxable income
for the taxable year;
(C) In the case of a regulated investment
company, an amount equal to the excess of (i) the
net long-term capital gain for the taxable year,
over (ii) the amount of the capital gain dividends
designated as such in accordance with Section
852(b)(3)(C) of the Internal Revenue Code and any
amount designated under Section 852(b)(3)(D) of the
Internal Revenue Code, attributable to the taxable
year (this amendatory Act of 1995 (Public Act 89-89)
is declarative of existing law and is not a new
enactment);
(D) The amount of any net operating loss
deduction taken in arriving at taxable income, other
than a net operating loss carried forward from a
taxable year ending prior to December 31, 1986;
(E) For taxable years in which a net operating
loss carryback or carryforward from a taxable year
ending prior to December 31, 1986 is an element of
taxable income under paragraph (1) of subsection (e)
or subparagraph (E) of paragraph (2) of subsection
(e), the amount by which addition modifications
other than those provided by this subparagraph (E)
exceeded subtraction modifications in such earlier
taxable year, with the following limitations applied
in the order that they are listed:
(i) the addition modification relating to
the net operating loss carried back or forward
to the taxable year from any taxable year
ending prior to December 31, 1986 shall be
reduced by the amount of addition modification
under this subparagraph (E) which related to
that net operating loss and which was taken
into account in calculating the base income of
an earlier taxable year, and
(ii) the addition modification relating
to the net operating loss carried back or
forward to the taxable year from any taxable
year ending prior to December 31, 1986 shall
not exceed the amount of such carryback or
carryforward;
For taxable years in which there is a net
operating loss carryback or carryforward from more
than one other taxable year ending prior to December
31, 1986, the addition modification provided in this
subparagraph (E) shall be the sum of the amounts
computed independently under the preceding
provisions of this subparagraph (E) for each such
taxable year; and
(E-5) For taxable years ending after December
31, 1997, an amount equal to any eligible
remediation costs that the corporation deducted in
computing adjusted gross income and for which the
corporation claims a credit under subsection (l) of
Section 201;
and by deducting from the total so obtained the sum of
the following amounts:
(F) An amount equal to the amount of any tax
imposed by this Act which was refunded to the
taxpayer and included in such total for the taxable
year;
(G) An amount equal to any amount included in
such total under Section 78 of the Internal Revenue
Code;
(H) In the case of a regulated investment
company, an amount equal to the amount of exempt
interest dividends as defined in subsection (b) (5)
of Section 852 of the Internal Revenue Code, paid to
shareholders for the taxable year;
(I) With the exception of any amounts
subtracted under subparagraph (J), an amount equal
to the sum of all amounts disallowed as deductions
by (i) Sections 171(a) (2), and 265(a)(2) and
amounts disallowed as interest expense by Section
291(a)(3) of the Internal Revenue Code, as now or
hereafter amended, and all amounts of expenses
allocable to interest and disallowed as deductions
by Section 265(a)(1) of the Internal Revenue Code,
as now or hereafter amended; and (ii) for taxable
years ending on or after August 13, 1999 the
effective date of this amendatory Act of the 91st
General Assembly, Sections 171(a)(2), 265, 280C, and
832(b)(5)(B)(i) of the Internal Revenue Code; the
provisions of this subparagraph are exempt from the
provisions of Section 250;
(J) An amount equal to all amounts included in
such total which are exempt from taxation by this
State either by reason of its statutes or
Constitution or by reason of the Constitution,
treaties or statutes of the United States; provided
that, in the case of any statute of this State that
exempts income derived from bonds or other
obligations from the tax imposed under this Act, the
amount exempted shall be the interest net of bond
premium amortization;
(K) An amount equal to those dividends
included in such total which were paid by a
corporation which conducts business operations in an
Enterprise Zone or zones created under the Illinois
Enterprise Zone Act and conducts substantially all
of its operations in an Enterprise Zone or zones;
(L) An amount equal to those dividends
included in such total that were paid by a
corporation that conducts business operations in a
federally designated Foreign Trade Zone or Sub-Zone
and that is designated a High Impact Business
located in Illinois; provided that dividends
eligible for the deduction provided in subparagraph
(K) of paragraph 2 of this subsection shall not be
eligible for the deduction provided under this
subparagraph (L);
(M) For any taxpayer that is a financial
organization within the meaning of Section 304(c) of
this Act, an amount included in such total as
interest income from a loan or loans made by such
taxpayer to a borrower, to the extent that such a
loan is secured by property which is eligible for
the Enterprise Zone Investment Credit. To determine
the portion of a loan or loans that is secured by
property eligible for a Section 201(h) investment
credit to the borrower, the entire principal amount
of the loan or loans between the taxpayer and the
borrower should be divided into the basis of the
Section 201(h) investment credit property which
secures the loan or loans, using for this purpose
the original basis of such property on the date that
it was placed in service in the Enterprise Zone.
The subtraction modification available to taxpayer
in any year under this subsection shall be that
portion of the total interest paid by the borrower
with respect to such loan attributable to the
eligible property as calculated under the previous
sentence;
(M-1) For any taxpayer that is a financial
organization within the meaning of Section 304(c) of
this Act, an amount included in such total as
interest income from a loan or loans made by such
taxpayer to a borrower, to the extent that such a
loan is secured by property which is eligible for
the High Impact Business Investment Credit. To
determine the portion of a loan or loans that is
secured by property eligible for a Section 201(i)
investment credit to the borrower, the entire
principal amount of the loan or loans between the
taxpayer and the borrower should be divided into the
basis of the Section 201(i) investment credit
property which secures the loan or loans, using for
this purpose the original basis of such property on
the date that it was placed in service in a
federally designated Foreign Trade Zone or Sub-Zone
located in Illinois. No taxpayer that is eligible
for the deduction provided in subparagraph (M) of
paragraph (2) of this subsection shall be eligible
for the deduction provided under this subparagraph
(M-1). The subtraction modification available to
taxpayers in any year under this subsection shall be
that portion of the total interest paid by the
borrower with respect to such loan attributable to
the eligible property as calculated under the
previous sentence;
(N) Two times any contribution made during the
taxable year to a designated zone organization to
the extent that the contribution (i) qualifies as a
charitable contribution under subsection (c) of
Section 170 of the Internal Revenue Code and (ii)
must, by its terms, be used for a project approved
by the Department of Commerce and Community Affairs
under Section 11 of the Illinois Enterprise Zone
Act;
(O) An amount equal to: (i) 85% for taxable
years ending on or before December 31, 1992, or, a
percentage equal to the percentage allowable under
Section 243(a)(1) of the Internal Revenue Code of
1986 for taxable years ending after December 31,
1992, of the amount by which dividends included in
taxable income and received from a corporation that
is not created or organized under the laws of the
United States or any state or political subdivision
thereof, including, for taxable years ending on or
after December 31, 1988, dividends received or
deemed received or paid or deemed paid under
Sections 951 through 964 of the Internal Revenue
Code, exceed the amount of the modification provided
under subparagraph (G) of paragraph (2) of this
subsection (b) which is related to such dividends;
plus (ii) 100% of the amount by which dividends,
included in taxable income and received, including,
for taxable years ending on or after December 31,
1988, dividends received or deemed received or paid
or deemed paid under Sections 951 through 964 of the
Internal Revenue Code, from any such corporation
specified in clause (i) that would but for the
provisions of Section 1504 (b) (3) of the Internal
Revenue Code be treated as a member of the
affiliated group which includes the dividend
recipient, exceed the amount of the modification
provided under subparagraph (G) of paragraph (2) of
this subsection (b) which is related to such
dividends;
(P) An amount equal to any contribution made
to a job training project established pursuant to
the Tax Increment Allocation Redevelopment Act;
(Q) An amount equal to the amount of the
deduction used to compute the federal income tax
credit for restoration of substantial amounts held
under claim of right for the taxable year pursuant
to Section 1341 of the Internal Revenue Code of
1986; and
(R) In the case of an attorney-in-fact with
respect to whom an interinsurer or a reciprocal
insurer has made the election under Section 835 of
the Internal Revenue Code, 26 U.S.C. 835, an amount
equal to the excess, if any, of the amounts paid or
incurred by that interinsurer or reciprocal insurer
in the taxable year to the attorney-in-fact over the
deduction allowed to that interinsurer or reciprocal
insurer with respect to the attorney-in-fact under
Section 835(b) of the Internal Revenue Code for the
taxable year.
(3) Special rule. For purposes of paragraph (2)
(A), "gross income" in the case of a life insurance
company, for tax years ending on and after December 31,
1994, shall mean the gross investment income for the
taxable year.
(c) Trusts and estates.
(1) In general. In the case of a trust or estate,
base income means an amount equal to the taxpayer's
taxable income for the taxable year as modified by
paragraph (2).
(2) Modifications. Subject to the provisions of
paragraph (3), the taxable income referred to in
paragraph (1) shall be modified by adding thereto the sum
of the following amounts:
(A) An amount equal to all amounts paid or
accrued to the taxpayer as interest or dividends
during the taxable year to the extent excluded from
gross income in the computation of taxable income;
(B) In the case of (i) an estate, $600; (ii) a
trust which, under its governing instrument, is
required to distribute all of its income currently,
$300; and (iii) any other trust, $100, but in each
such case, only to the extent such amount was
deducted in the computation of taxable income;
(C) An amount equal to the amount of tax
imposed by this Act to the extent deducted from
gross income in the computation of taxable income
for the taxable year;
(D) The amount of any net operating loss
deduction taken in arriving at taxable income, other
than a net operating loss carried forward from a
taxable year ending prior to December 31, 1986;
(E) For taxable years in which a net operating
loss carryback or carryforward from a taxable year
ending prior to December 31, 1986 is an element of
taxable income under paragraph (1) of subsection (e)
or subparagraph (E) of paragraph (2) of subsection
(e), the amount by which addition modifications
other than those provided by this subparagraph (E)
exceeded subtraction modifications in such taxable
year, with the following limitations applied in the
order that they are listed:
(i) the addition modification relating to
the net operating loss carried back or forward
to the taxable year from any taxable year
ending prior to December 31, 1986 shall be
reduced by the amount of addition modification
under this subparagraph (E) which related to
that net operating loss and which was taken
into account in calculating the base income of
an earlier taxable year, and
(ii) the addition modification relating
to the net operating loss carried back or
forward to the taxable year from any taxable
year ending prior to December 31, 1986 shall
not exceed the amount of such carryback or
carryforward;
For taxable years in which there is a net
operating loss carryback or carryforward from more
than one other taxable year ending prior to December
31, 1986, the addition modification provided in this
subparagraph (E) shall be the sum of the amounts
computed independently under the preceding
provisions of this subparagraph (E) for each such
taxable year;
(F) For taxable years ending on or after
January 1, 1989, an amount equal to the tax deducted
pursuant to Section 164 of the Internal Revenue Code
if the trust or estate is claiming the same tax for
purposes of the Illinois foreign tax credit under
Section 601 of this Act;
(G) An amount equal to the amount of the
capital gain deduction allowable under the Internal
Revenue Code, to the extent deducted from gross
income in the computation of taxable income; and
(G-5) For taxable years ending after December
31, 1997, an amount equal to any eligible
remediation costs that the trust or estate deducted
in computing adjusted gross income and for which the
trust or estate claims a credit under subsection (l)
of Section 201;
and by deducting from the total so obtained the sum of
the following amounts:
(H) An amount equal to all amounts included in
such total pursuant to the provisions of Sections
402(a), 402(c), 403(a), 403(b), 406(a), 407(a) and
408 of the Internal Revenue Code or included in such
total as distributions under the provisions of any
retirement or disability plan for employees of any
governmental agency or unit, or retirement payments
to retired partners, which payments are excluded in
computing net earnings from self employment by
Section 1402 of the Internal Revenue Code and
regulations adopted pursuant thereto;
(I) The valuation limitation amount;
(J) An amount equal to the amount of any tax
imposed by this Act which was refunded to the
taxpayer and included in such total for the taxable
year;
(K) An amount equal to all amounts included in
taxable income as modified by subparagraphs (A),
(B), (C), (D), (E), (F) and (G) which are exempt
from taxation by this State either by reason of its
statutes or Constitution or by reason of the
Constitution, treaties or statutes of the United
States; provided that, in the case of any statute of
this State that exempts income derived from bonds or
other obligations from the tax imposed under this
Act, the amount exempted shall be the interest net
of bond premium amortization;
(L) With the exception of any amounts
subtracted under subparagraph (K), an amount equal
to the sum of all amounts disallowed as deductions
by (i) Sections 171(a) (2) and 265(a)(2) of the
Internal Revenue Code, as now or hereafter amended,
and all amounts of expenses allocable to interest
and disallowed as deductions by Section 265(1) of
the Internal Revenue Code of 1954, as now or
hereafter amended; and (ii) for taxable years ending
on or after August 13, 1999 the effective date of
this amendatory Act of the 91st General Assembly,
Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i)
of the Internal Revenue Code; the provisions of this
subparagraph are exempt from the provisions of
Section 250;
(M) An amount equal to those dividends
included in such total which were paid by a
corporation which conducts business operations in an
Enterprise Zone or zones created under the Illinois
Enterprise Zone Act and conducts substantially all
of its operations in an Enterprise Zone or Zones;
(N) An amount equal to any contribution made
to a job training project established pursuant to
the Tax Increment Allocation Redevelopment Act;
(O) An amount equal to those dividends
included in such total that were paid by a
corporation that conducts business operations in a
federally designated Foreign Trade Zone or Sub-Zone
and that is designated a High Impact Business
located in Illinois; provided that dividends
eligible for the deduction provided in subparagraph
(M) of paragraph (2) of this subsection shall not be
eligible for the deduction provided under this
subparagraph (O);
(P) An amount equal to the amount of the
deduction used to compute the federal income tax
credit for restoration of substantial amounts held
under claim of right for the taxable year pursuant
to Section 1341 of the Internal Revenue Code of
1986; and
(Q) For taxable year 1999 and thereafter, an
amount equal to the amount of any (i) distributions,
to the extent includible in gross income for federal
income tax purposes, made to the taxpayer because of
his or her status as a victim of persecution for
racial or religious reasons by Nazi Germany or any
other Axis regime or as an heir of the victim and
(ii) items of income, to the extent includible in
gross income for federal income tax purposes,
attributable to, derived from or in any way related
to assets stolen from, hidden from, or otherwise
lost to a victim of persecution for racial or
religious reasons by Nazi Germany or any other Axis
regime immediately prior to, during, and immediately
after World War II, including, but not limited to,
interest on the proceeds receivable as insurance
under policies issued to a victim of persecution for
racial or religious reasons by Nazi Germany or any
other Axis regime by European insurance companies
immediately prior to and during World War II;
provided, however, this subtraction from federal
adjusted gross income does not apply to assets
acquired with such assets or with the proceeds from
the sale of such assets; provided, further, this
paragraph shall only apply to a taxpayer who was the
first recipient of such assets after their recovery
and who is a victim of persecution for racial or
religious reasons by Nazi Germany or any other Axis
regime or as an heir of the victim. The amount of
and the eligibility for any public assistance,
benefit, or similar entitlement is not affected by
the inclusion of items (i) and (ii) of this
paragraph in gross income for federal income tax
purposes. This paragraph is exempt from the
provisions of Section 250.
(3) Limitation. The amount of any modification
otherwise required under this subsection shall, under
regulations prescribed by the Department, be adjusted by
any amounts included therein which were properly paid,
credited, or required to be distributed, or permanently
set aside for charitable purposes pursuant to Internal
Revenue Code Section 642(c) during the taxable year.
(d) Partnerships.
(1) In general. In the case of a partnership, base
income means an amount equal to the taxpayer's taxable
income for the taxable year as modified by paragraph (2).
(2) Modifications. The taxable income referred to
in paragraph (1) shall be modified by adding thereto the
sum of the following amounts:
(A) An amount equal to all amounts paid or
accrued to the taxpayer as interest or dividends
during the taxable year to the extent excluded from
gross income in the computation of taxable income;
(B) An amount equal to the amount of tax
imposed by this Act to the extent deducted from
gross income for the taxable year;
(C) The amount of deductions allowed to the
partnership pursuant to Section 707 (c) of the
Internal Revenue Code in calculating its taxable
income; and
(D) An amount equal to the amount of the
capital gain deduction allowable under the Internal
Revenue Code, to the extent deducted from gross
income in the computation of taxable income;
and by deducting from the total so obtained the following
amounts:
(E) The valuation limitation amount;
(F) An amount equal to the amount of any tax
imposed by this Act which was refunded to the
taxpayer and included in such total for the taxable
year;
(G) An amount equal to all amounts included in
taxable income as modified by subparagraphs (A),
(B), (C) and (D) which are exempt from taxation by
this State either by reason of its statutes or
Constitution or by reason of the Constitution,
treaties or statutes of the United States; provided
that, in the case of any statute of this State that
exempts income derived from bonds or other
obligations from the tax imposed under this Act, the
amount exempted shall be the interest net of bond
premium amortization;
(H) Any income of the partnership which
constitutes personal service income as defined in
Section 1348 (b) (1) of the Internal Revenue Code
(as in effect December 31, 1981) or a reasonable
allowance for compensation paid or accrued for
services rendered by partners to the partnership,
whichever is greater;
(I) An amount equal to all amounts of income
distributable to an entity subject to the Personal
Property Tax Replacement Income Tax imposed by
subsections (c) and (d) of Section 201 of this Act
including amounts distributable to organizations
exempt from federal income tax by reason of Section
501(a) of the Internal Revenue Code;
(J) With the exception of any amounts
subtracted under subparagraph (G), an amount equal
to the sum of all amounts disallowed as deductions
by (i) Sections 171(a) (2), and 265(2) of the
Internal Revenue Code of 1954, as now or hereafter
amended, and all amounts of expenses allocable to
interest and disallowed as deductions by Section
265(1) of the Internal Revenue Code, as now or
hereafter amended; and (ii) for taxable years ending
on or after August 13, 1999 the effective date of
this amendatory Act of the 91st General Assembly,
Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i)
of the Internal Revenue Code; the provisions of this
subparagraph are exempt from the provisions of
Section 250;
(K) An amount equal to those dividends
included in such total which were paid by a
corporation which conducts business operations in an
Enterprise Zone or zones created under the Illinois
Enterprise Zone Act, enacted by the 82nd General
Assembly, and which does not conduct such operations
other than in an Enterprise Zone or Zones;
(L) An amount equal to any contribution made
to a job training project established pursuant to
the Real Property Tax Increment Allocation
Redevelopment Act;
(M) An amount equal to those dividends
included in such total that were paid by a
corporation that conducts business operations in a
federally designated Foreign Trade Zone or Sub-Zone
and that is designated a High Impact Business
located in Illinois; provided that dividends
eligible for the deduction provided in subparagraph
(K) of paragraph (2) of this subsection shall not be
eligible for the deduction provided under this
subparagraph (M); and
(N) An amount equal to the amount of the
deduction used to compute the federal income tax
credit for restoration of substantial amounts held
under claim of right for the taxable year pursuant
to Section 1341 of the Internal Revenue Code of
1986.
(e) Gross income; adjusted gross income; taxable income.
(1) In general. Subject to the provisions of
paragraph (2) and subsection (b) (3), for purposes of
this Section and Section 803(e), a taxpayer's gross
income, adjusted gross income, or taxable income for the
taxable year shall mean the amount of gross income,
adjusted gross income or taxable income properly
reportable for federal income tax purposes for the
taxable year under the provisions of the Internal Revenue
Code. Taxable income may be less than zero. However, for
taxable years ending on or after December 31, 1986, net
operating loss carryforwards from taxable years ending
prior to December 31, 1986, may not exceed the sum of
federal taxable income for the taxable year before net
operating loss deduction, plus the excess of addition
modifications over subtraction modifications for the
taxable year. For taxable years ending prior to December
31, 1986, taxable income may never be an amount in excess
of the net operating loss for the taxable year as defined
in subsections (c) and (d) of Section 172 of the Internal
Revenue Code, provided that when taxable income of a
corporation (other than a Subchapter S corporation),
trust, or estate is less than zero and addition
modifications, other than those provided by subparagraph
(E) of paragraph (2) of subsection (b) for corporations
or subparagraph (E) of paragraph (2) of subsection (c)
for trusts and estates, exceed subtraction modifications,
an addition modification must be made under those
subparagraphs for any other taxable year to which the
taxable income less than zero (net operating loss) is
applied under Section 172 of the Internal Revenue Code or
under subparagraph (E) of paragraph (2) of this
subsection (e) applied in conjunction with Section 172 of
the Internal Revenue Code.
(2) Special rule. For purposes of paragraph (1) of
this subsection, the taxable income properly reportable
for federal income tax purposes shall mean:
(A) Certain life insurance companies. In the
case of a life insurance company subject to the tax
imposed by Section 801 of the Internal Revenue Code,
life insurance company taxable income, plus the
amount of distribution from pre-1984 policyholder
surplus accounts as calculated under Section 815a of
the Internal Revenue Code;
(B) Certain other insurance companies. In the
case of mutual insurance companies subject to the
tax imposed by Section 831 of the Internal Revenue
Code, insurance company taxable income;
(C) Regulated investment companies. In the
case of a regulated investment company subject to
the tax imposed by Section 852 of the Internal
Revenue Code, investment company taxable income;
(D) Real estate investment trusts. In the
case of a real estate investment trust subject to
the tax imposed by Section 857 of the Internal
Revenue Code, real estate investment trust taxable
income;
(E) Consolidated corporations. In the case of
a corporation which is a member of an affiliated
group of corporations filing a consolidated income
tax return for the taxable year for federal income
tax purposes, taxable income determined as if such
corporation had filed a separate return for federal
income tax purposes for the taxable year and each
preceding taxable year for which it was a member of
an affiliated group. For purposes of this
subparagraph, the taxpayer's separate taxable income
shall be determined as if the election provided by
Section 243(b) (2) of the Internal Revenue Code had
been in effect for all such years;
(F) Cooperatives. In the case of a
cooperative corporation or association, the taxable
income of such organization determined in accordance
with the provisions of Section 1381 through 1388 of
the Internal Revenue Code;
(G) Subchapter S corporations. In the case
of: (i) a Subchapter S corporation for which there
is in effect an election for the taxable year under
Section 1362 of the Internal Revenue Code, the
taxable income of such corporation determined in
accordance with Section 1363(b) of the Internal
Revenue Code, except that taxable income shall take
into account those items which are required by
Section 1363(b)(1) of the Internal Revenue Code to
be separately stated; and (ii) a Subchapter S
corporation for which there is in effect a federal
election to opt out of the provisions of the
Subchapter S Revision Act of 1982 and have applied
instead the prior federal Subchapter S rules as in
effect on July 1, 1982, the taxable income of such
corporation determined in accordance with the
federal Subchapter S rules as in effect on July 1,
1982; and
(H) Partnerships. In the case of a
partnership, taxable income determined in accordance
with Section 703 of the Internal Revenue Code,
except that taxable income shall take into account
those items which are required by Section 703(a)(1)
to be separately stated but which would be taken
into account by an individual in calculating his
taxable income.
(f) Valuation limitation amount.
(1) In general. The valuation limitation amount
referred to in subsections (a) (2) (G), (c) (2) (I) and
(d)(2) (E) is an amount equal to:
(A) The sum of the pre-August 1, 1969
appreciation amounts (to the extent consisting of
gain reportable under the provisions of Section 1245
or 1250 of the Internal Revenue Code) for all
property in respect of which such gain was reported
for the taxable year; plus
(B) The lesser of (i) the sum of the
pre-August 1, 1969 appreciation amounts (to the
extent consisting of capital gain) for all property
in respect of which such gain was reported for
federal income tax purposes for the taxable year, or
(ii) the net capital gain for the taxable year,
reduced in either case by any amount of such gain
included in the amount determined under subsection
(a) (2) (F) or (c) (2) (H).
(2) Pre-August 1, 1969 appreciation amount.
(A) If the fair market value of property
referred to in paragraph (1) was readily
ascertainable on August 1, 1969, the pre-August 1,
1969 appreciation amount for such property is the
lesser of (i) the excess of such fair market value
over the taxpayer's basis (for determining gain) for
such property on that date (determined under the
Internal Revenue Code as in effect on that date), or
(ii) the total gain realized and reportable for
federal income tax purposes in respect of the sale,
exchange or other disposition of such property.
(B) If the fair market value of property
referred to in paragraph (1) was not readily
ascertainable on August 1, 1969, the pre-August 1,
1969 appreciation amount for such property is that
amount which bears the same ratio to the total gain
reported in respect of the property for federal
income tax purposes for the taxable year, as the
number of full calendar months in that part of the
taxpayer's holding period for the property ending
July 31, 1969 bears to the number of full calendar
months in the taxpayer's entire holding period for
the property.
(C) The Department shall prescribe such
regulations as may be necessary to carry out the
purposes of this paragraph.
(g) Double deductions. Unless specifically provided
otherwise, nothing in this Section shall permit the same item
to be deducted more than once.
(h) Legislative intention. Except as expressly provided
by this Section there shall be no modifications or
limitations on the amounts of income, gain, loss or deduction
taken into account in determining gross income, adjusted
gross income or taxable income for federal income tax
purposes for the taxable year, or in the amount of such items
entering into the computation of base income and net income
under this Act for such taxable year, whether in respect of
property values as of August 1, 1969 or otherwise.
(Source: P.A. 90-491, eff. 1-1-98; 90-717, eff. 8-7-98;
90-770, eff. 8-14-98; 91-192, eff. 7-20-99; 91-205, eff.
7-20-99; 91-357, eff. 7-29-99; 91-541, eff. 8-13-99; 91-676,
eff. 12-23-99; revised 1-5-00.)
Section 99. Effective date. This Act takes effect upon
becoming law.
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