102ND GENERAL ASSEMBLY
State of Illinois
2021 and 2022
HB3425

 

Introduced 2/22/2021, by Rep. Will Guzzardi

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 5/203  from Ch. 120, par. 2-203

    Amends the Illinois Income Tax Act. Creates an addition modification in an amount equal to certain gains attributable to Opportunity Funds under certain provisions of the Internal Revenue Code. Effective immediately.


LRB102 14695 HLH 20048 b

FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB3425LRB102 14695 HLH 20048 b

1    AN ACT concerning revenue.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Income Tax Act is amended by
5changing Section 203 as follows:
 
6    (35 ILCS 5/203)  (from Ch. 120, par. 2-203)
7    Sec. 203. Base income defined.
8    (a) Individuals.
9        (1) In general. In the case of an individual, base
10    income means an amount equal to the taxpayer's adjusted
11    gross income for the taxable year as modified by paragraph
12    (2).
13        (2) Modifications. The adjusted gross income referred
14    to in paragraph (1) shall be modified by adding thereto
15    the sum of the following amounts:
16            (A) An amount equal to all amounts paid or accrued
17        to the taxpayer as interest or dividends during the
18        taxable year to the extent excluded from gross income
19        in the computation of adjusted gross income, except
20        stock dividends of qualified public utilities
21        described in Section 305(e) of the Internal Revenue
22        Code;
23            (B) An amount equal to the amount of tax imposed by

 

 

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1        this Act to the extent deducted from gross income in
2        the computation of adjusted gross income for the
3        taxable year;
4            (C) An amount equal to the amount received during
5        the taxable year as a recovery or refund of real
6        property taxes paid with respect to the taxpayer's
7        principal residence under the Revenue Act of 1939 and
8        for which a deduction was previously taken under
9        subparagraph (L) of this paragraph (2) prior to July
10        1, 1991, the retrospective application date of Article
11        4 of Public Act 87-17. In the case of multi-unit or
12        multi-use structures and farm dwellings, the taxes on
13        the taxpayer's principal residence shall be that
14        portion of the total taxes for the entire property
15        which is attributable to such principal residence;
16            (D) An amount equal to the amount of the capital
17        gain deduction allowable under the Internal Revenue
18        Code, to the extent deducted from gross income in the
19        computation of adjusted gross income;
20            (D-5) An amount, to the extent not included in
21        adjusted gross income, equal to the amount of money
22        withdrawn by the taxpayer in the taxable year from a
23        medical care savings account and the interest earned
24        on the account in the taxable year of a withdrawal
25        pursuant to subsection (b) of Section 20 of the
26        Medical Care Savings Account Act or subsection (b) of

 

 

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1        Section 20 of the Medical Care Savings Account Act of
2        2000;
3            (D-10) For taxable years ending after December 31,
4        1997, an amount equal to any eligible remediation
5        costs that the individual deducted in computing
6        adjusted gross income and for which the individual
7        claims a credit under subsection (l) of Section 201;
8            (D-15) For taxable years 2001 and thereafter, an
9        amount equal to the bonus depreciation deduction taken
10        on the taxpayer's federal income tax return for the
11        taxable year under subsection (k) of Section 168 of
12        the Internal Revenue Code;
13            (D-16) If the taxpayer sells, transfers, abandons,
14        or otherwise disposes of property for which the
15        taxpayer was required in any taxable year to make an
16        addition modification under subparagraph (D-15), then
17        an amount equal to the aggregate amount of the
18        deductions taken in all taxable years under
19        subparagraph (Z) with respect to that property.
20            If the taxpayer continues to own property through
21        the last day of the last tax year for which the
22        taxpayer may claim a depreciation deduction for
23        federal income tax purposes and for which the taxpayer
24        was allowed in any taxable year to make a subtraction
25        modification under subparagraph (Z), then an amount
26        equal to that subtraction modification.

 

 

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1            The taxpayer is required to make the addition
2        modification under this subparagraph only once with
3        respect to any one piece of property;
4            (D-17) An amount equal to the amount otherwise
5        allowed as a deduction in computing base income for
6        interest paid, accrued, or incurred, directly or
7        indirectly, (i) for taxable years ending on or after
8        December 31, 2004, to a foreign person who would be a
9        member of the same unitary business group but for the
10        fact that foreign person's business activity outside
11        the United States is 80% or more of the foreign
12        person's total business activity and (ii) for taxable
13        years ending on or after December 31, 2008, to a person
14        who would be a member of the same unitary business
15        group but for the fact that the person is prohibited
16        under Section 1501(a)(27) from being included in the
17        unitary business group because he or she is ordinarily
18        required to apportion business income under different
19        subsections of Section 304. The addition modification
20        required by this subparagraph shall be reduced to the
21        extent that dividends were included in base income of
22        the unitary group for the same taxable year and
23        received by the taxpayer or by a member of the
24        taxpayer's unitary business group (including amounts
25        included in gross income under Sections 951 through
26        964 of the Internal Revenue Code and amounts included

 

 

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1        in gross income under Section 78 of the Internal
2        Revenue Code) with respect to the stock of the same
3        person to whom the interest was paid, accrued, or
4        incurred.
5            This paragraph shall not apply to the following:
6                (i) an item of interest paid, accrued, or
7            incurred, directly or indirectly, to a person who
8            is subject in a foreign country or state, other
9            than a state which requires mandatory unitary
10            reporting, to a tax on or measured by net income
11            with respect to such interest; or
12                (ii) an item of interest paid, accrued, or
13            incurred, directly or indirectly, to a person if
14            the taxpayer can establish, based on a
15            preponderance of the evidence, both of the
16            following:
17                    (a) the person, during the same taxable
18                year, paid, accrued, or incurred, the interest
19                to a person that is not a related member, and
20                    (b) the transaction giving rise to the
21                interest expense between the taxpayer and the
22                person did not have as a principal purpose the
23                avoidance of Illinois income tax, and is paid
24                pursuant to a contract or agreement that
25                reflects an arm's-length interest rate and
26                terms; or

 

 

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1                (iii) the taxpayer can establish, based on
2            clear and convincing evidence, that the interest
3            paid, accrued, or incurred relates to a contract
4            or agreement entered into at arm's-length rates
5            and terms and the principal purpose for the
6            payment is not federal or Illinois tax avoidance;
7            or
8                (iv) an item of interest paid, accrued, or
9            incurred, directly or indirectly, to a person if
10            the taxpayer establishes by clear and convincing
11            evidence that the adjustments are unreasonable; or
12            if the taxpayer and the Director agree in writing
13            to the application or use of an alternative method
14            of apportionment under Section 304(f).
15                Nothing in this subsection shall preclude the
16            Director from making any other adjustment
17            otherwise allowed under Section 404 of this Act
18            for any tax year beginning after the effective
19            date of this amendment provided such adjustment is
20            made pursuant to regulation adopted by the
21            Department and such regulations provide methods
22            and standards by which the Department will utilize
23            its authority under Section 404 of this Act;
24            (D-18) An amount equal to the amount of intangible
25        expenses and costs otherwise allowed as a deduction in
26        computing base income, and that were paid, accrued, or

 

 

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1        incurred, directly or indirectly, (i) for taxable
2        years ending on or after December 31, 2004, to a
3        foreign person who would be a member of the same
4        unitary business group but for the fact that the
5        foreign person's business activity outside the United
6        States is 80% or more of that person's total business
7        activity and (ii) for taxable years ending on or after
8        December 31, 2008, to a person who would be a member of
9        the same unitary business group but for the fact that
10        the person is prohibited under Section 1501(a)(27)
11        from being included in the unitary business group
12        because he or she is ordinarily required to apportion
13        business income under different subsections of Section
14        304. The addition modification required by this
15        subparagraph shall be reduced to the extent that
16        dividends were included in base income of the unitary
17        group for the same taxable year and received by the
18        taxpayer or by a member of the taxpayer's unitary
19        business group (including amounts included in gross
20        income under Sections 951 through 964 of the Internal
21        Revenue Code and amounts included in gross income
22        under Section 78 of the Internal Revenue Code) with
23        respect to the stock of the same person to whom the
24        intangible expenses and costs were directly or
25        indirectly paid, incurred, or accrued. The preceding
26        sentence does not apply to the extent that the same

 

 

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1        dividends caused a reduction to the addition
2        modification required under Section 203(a)(2)(D-17) of
3        this Act. As used in this subparagraph, the term
4        "intangible expenses and costs" includes (1) expenses,
5        losses, and costs for, or related to, the direct or
6        indirect acquisition, use, maintenance or management,
7        ownership, sale, exchange, or any other disposition of
8        intangible property; (2) losses incurred, directly or
9        indirectly, from factoring transactions or discounting
10        transactions; (3) royalty, patent, technical, and
11        copyright fees; (4) licensing fees; and (5) other
12        similar expenses and costs. For purposes of this
13        subparagraph, "intangible property" includes patents,
14        patent applications, trade names, trademarks, service
15        marks, copyrights, mask works, trade secrets, and
16        similar types of intangible assets.
17            This paragraph shall not apply to the following:
18                (i) any item of intangible expenses or costs
19            paid, accrued, or incurred, directly or
20            indirectly, from a transaction with a person who
21            is subject in a foreign country or state, other
22            than a state which requires mandatory unitary
23            reporting, to a tax on or measured by net income
24            with respect to such item; or
25                (ii) any item of intangible expense or cost
26            paid, accrued, or incurred, directly or

 

 

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1            indirectly, if the taxpayer can establish, based
2            on a preponderance of the evidence, both of the
3            following:
4                    (a) the person during the same taxable
5                year paid, accrued, or incurred, the
6                intangible expense or cost to a person that is
7                not a related member, and
8                    (b) the transaction giving rise to the
9                intangible expense or cost between the
10                taxpayer and the person did not have as a
11                principal purpose the avoidance of Illinois
12                income tax, and is paid pursuant to a contract
13                or agreement that reflects arm's-length terms;
14                or
15                (iii) any item of intangible expense or cost
16            paid, accrued, or incurred, directly or
17            indirectly, from a transaction with a person if
18            the taxpayer establishes by clear and convincing
19            evidence, that the adjustments are unreasonable;
20            or if the taxpayer and the Director agree in
21            writing to the application or use of an
22            alternative method of apportionment under Section
23            304(f);
24                Nothing in this subsection shall preclude the
25            Director from making any other adjustment
26            otherwise allowed under Section 404 of this Act

 

 

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1            for any tax year beginning after the effective
2            date of this amendment provided such adjustment is
3            made pursuant to regulation adopted by the
4            Department and such regulations provide methods
5            and standards by which the Department will utilize
6            its authority under Section 404 of this Act;
7            (D-19) For taxable years ending on or after
8        December 31, 2008, an amount equal to the amount of
9        insurance premium expenses and costs otherwise allowed
10        as a deduction in computing base income, and that were
11        paid, accrued, or incurred, directly or indirectly, to
12        a person who would be a member of the same unitary
13        business group but for the fact that the person is
14        prohibited under Section 1501(a)(27) from being
15        included in the unitary business group because he or
16        she is ordinarily required to apportion business
17        income under different subsections of Section 304. The
18        addition modification required by this subparagraph
19        shall be reduced to the extent that dividends were
20        included in base income of the unitary group for the
21        same taxable year and received by the taxpayer or by a
22        member of the taxpayer's unitary business group
23        (including amounts included in gross income under
24        Sections 951 through 964 of the Internal Revenue Code
25        and amounts included in gross income under Section 78
26        of the Internal Revenue Code) with respect to the

 

 

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1        stock of the same person to whom the premiums and costs
2        were directly or indirectly paid, incurred, or
3        accrued. The preceding sentence does not apply to the
4        extent that the same dividends caused a reduction to
5        the addition modification required under Section
6        203(a)(2)(D-17) or Section 203(a)(2)(D-18) of this
7        Act; .
8            (D-20) For taxable years beginning on or after
9        January 1, 2002 and ending on or before December 31,
10        2006, in the case of a distribution from a qualified
11        tuition program under Section 529 of the Internal
12        Revenue Code, other than (i) a distribution from a
13        College Savings Pool created under Section 16.5 of the
14        State Treasurer Act or (ii) a distribution from the
15        Illinois Prepaid Tuition Trust Fund, an amount equal
16        to the amount excluded from gross income under Section
17        529(c)(3)(B). For taxable years beginning on or after
18        January 1, 2007, in the case of a distribution from a
19        qualified tuition program under Section 529 of the
20        Internal Revenue Code, other than (i) a distribution
21        from a College Savings Pool created under Section 16.5
22        of the State Treasurer Act, (ii) a distribution from
23        the Illinois Prepaid Tuition Trust Fund, or (iii) a
24        distribution from a qualified tuition program under
25        Section 529 of the Internal Revenue Code that (I)
26        adopts and determines that its offering materials

 

 

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1        comply with the College Savings Plans Network's
2        disclosure principles and (II) has made reasonable
3        efforts to inform in-state residents of the existence
4        of in-state qualified tuition programs by informing
5        Illinois residents directly and, where applicable, to
6        inform financial intermediaries distributing the
7        program to inform in-state residents of the existence
8        of in-state qualified tuition programs at least
9        annually, an amount equal to the amount excluded from
10        gross income under Section 529(c)(3)(B).
11            For the purposes of this subparagraph (D-20), a
12        qualified tuition program has made reasonable efforts
13        if it makes disclosures (which may use the term
14        "in-state program" or "in-state plan" and need not
15        specifically refer to Illinois or its qualified
16        programs by name) (i) directly to prospective
17        participants in its offering materials or makes a
18        public disclosure, such as a website posting; and (ii)
19        where applicable, to intermediaries selling the
20        out-of-state program in the same manner that the
21        out-of-state program distributes its offering
22        materials;
23            (D-20.5) For taxable years beginning on or after
24        January 1, 2018, in the case of a distribution from a
25        qualified ABLE program under Section 529A of the
26        Internal Revenue Code, other than a distribution from

 

 

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1        a qualified ABLE program created under Section 16.6 of
2        the State Treasurer Act, an amount equal to the amount
3        excluded from gross income under Section 529A(c)(1)(B)
4        of the Internal Revenue Code;
5            (D-21) For taxable years beginning on or after
6        January 1, 2007, in the case of transfer of moneys from
7        a qualified tuition program under Section 529 of the
8        Internal Revenue Code that is administered by the
9        State to an out-of-state program, an amount equal to
10        the amount of moneys previously deducted from base
11        income under subsection (a)(2)(Y) of this Section;
12            (D-21.5) For taxable years beginning on or after
13        January 1, 2018, in the case of the transfer of moneys
14        from a qualified tuition program under Section 529 or
15        a qualified ABLE program under Section 529A of the
16        Internal Revenue Code that is administered by this
17        State to an ABLE account established under an
18        out-of-state ABLE account program, an amount equal to
19        the contribution component of the transferred amount
20        that was previously deducted from base income under
21        subsection (a)(2)(Y) or subsection (a)(2)(HH) of this
22        Section;
23            (D-22) For taxable years beginning on or after
24        January 1, 2009, and prior to January 1, 2018, in the
25        case of a nonqualified withdrawal or refund of moneys
26        from a qualified tuition program under Section 529 of

 

 

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1        the Internal Revenue Code administered by the State
2        that is not used for qualified expenses at an eligible
3        education institution, an amount equal to the
4        contribution component of the nonqualified withdrawal
5        or refund that was previously deducted from base
6        income under subsection (a)(2)(y) of this Section,
7        provided that the withdrawal or refund did not result
8        from the beneficiary's death or disability. For
9        taxable years beginning on or after January 1, 2018:
10        (1) in the case of a nonqualified withdrawal or
11        refund, as defined under Section 16.5 of the State
12        Treasurer Act, of moneys from a qualified tuition
13        program under Section 529 of the Internal Revenue Code
14        administered by the State, an amount equal to the
15        contribution component of the nonqualified withdrawal
16        or refund that was previously deducted from base
17        income under subsection (a)(2)(Y) of this Section, and
18        (2) in the case of a nonqualified withdrawal or refund
19        from a qualified ABLE program under Section 529A of
20        the Internal Revenue Code administered by the State
21        that is not used for qualified disability expenses, an
22        amount equal to the contribution component of the
23        nonqualified withdrawal or refund that was previously
24        deducted from base income under subsection (a)(2)(HH)
25        of this Section;
26            (D-23) An amount equal to the credit allowable to

 

 

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1        the taxpayer under Section 218(a) of this Act,
2        determined without regard to Section 218(c) of this
3        Act;
4            (D-24) For taxable years ending on or after
5        December 31, 2017, an amount equal to the deduction
6        allowed under Section 199 of the Internal Revenue Code
7        for the taxable year;
8            (D-25) For taxable years beginning on or after
9        January 1, 2021, the amount of gain that would be
10        included for federal income tax purposes without
11        regard to section 1400Z-2(b) of the Internal Revenue
12        Code; the adjustment made in this subparagraph does
13        not result in a difference in basis of the affected
14        assets for State and federal income tax purposes; the
15        purpose of this subparagraph is to decouple from the
16        deferral of gains reinvested into an Opportunity Fund
17        available under federal law; this subparagraph is
18        exempt from the provisions of Section 250;
19            (D-26) For taxable years beginning on or after
20        January 1, 2021, the amount of gain that would be
21        included in the taxpayer's federal taxable income but
22        for the step-up in basis under section 1400Z-2(c) of
23        the Internal Revenue Code; the purpose of this
24        subparagraph is to decouple from the exclusion of
25        gains from the sale or exchange of an investment in an
26        Opportunity Fund available under federal law; this

 

 

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1        subparagraph is exempt from the provisions of Section
2        250;
3    and by deducting from the total so obtained the sum of the
4    following amounts:
5            (E) For taxable years ending before December 31,
6        2001, any amount included in such total in respect of
7        any compensation (including but not limited to any
8        compensation paid or accrued to a serviceman while a
9        prisoner of war or missing in action) paid to a
10        resident by reason of being on active duty in the Armed
11        Forces of the United States and in respect of any
12        compensation paid or accrued to a resident who as a
13        governmental employee was a prisoner of war or missing
14        in action, and in respect of any compensation paid to a
15        resident in 1971 or thereafter for annual training
16        performed pursuant to Sections 502 and 503, Title 32,
17        United States Code as a member of the Illinois
18        National Guard or, beginning with taxable years ending
19        on or after December 31, 2007, the National Guard of
20        any other state. For taxable years ending on or after
21        December 31, 2001, any amount included in such total
22        in respect of any compensation (including but not
23        limited to any compensation paid or accrued to a
24        serviceman while a prisoner of war or missing in
25        action) paid to a resident by reason of being a member
26        of any component of the Armed Forces of the United

 

 

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1        States and in respect of any compensation paid or
2        accrued to a resident who as a governmental employee
3        was a prisoner of war or missing in action, and in
4        respect of any compensation paid to a resident in 2001
5        or thereafter by reason of being a member of the
6        Illinois National Guard or, beginning with taxable
7        years ending on or after December 31, 2007, the
8        National Guard of any other state. The provisions of
9        this subparagraph (E) are exempt from the provisions
10        of Section 250;
11            (F) An amount equal to all amounts included in
12        such total pursuant to the provisions of Sections
13        402(a), 402(c), 403(a), 403(b), 406(a), 407(a), and
14        408 of the Internal Revenue Code, or included in such
15        total as distributions under the provisions of any
16        retirement or disability plan for employees of any
17        governmental agency or unit, or retirement payments to
18        retired partners, which payments are excluded in
19        computing net earnings from self employment by Section
20        1402 of the Internal Revenue Code and regulations
21        adopted pursuant thereto;
22            (G) The valuation limitation amount;
23            (H) An amount equal to the amount of any tax
24        imposed by this Act which was refunded to the taxpayer
25        and included in such total for the taxable year;
26            (I) An amount equal to all amounts included in

 

 

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1        such total pursuant to the provisions of Section 111
2        of the Internal Revenue Code as a recovery of items
3        previously deducted from adjusted gross income in the
4        computation of taxable income;
5            (J) An amount equal to those dividends included in
6        such total which were paid by a corporation which
7        conducts business operations in a River Edge
8        Redevelopment Zone or zones created under the River
9        Edge Redevelopment Zone Act, and conducts
10        substantially all of its operations in a River Edge
11        Redevelopment Zone or zones. This subparagraph (J) is
12        exempt from the provisions of Section 250;
13            (K) An amount equal to those dividends included in
14        such total that were paid by a corporation that
15        conducts business operations in a federally designated
16        Foreign Trade Zone or Sub-Zone and that is designated
17        a High Impact Business located in Illinois; provided
18        that dividends eligible for the deduction provided in
19        subparagraph (J) of paragraph (2) of this subsection
20        shall not be eligible for the deduction provided under
21        this subparagraph (K);
22            (L) For taxable years ending after December 31,
23        1983, an amount equal to all social security benefits
24        and railroad retirement benefits included in such
25        total pursuant to Sections 72(r) and 86 of the
26        Internal Revenue Code;

 

 

HB3425- 19 -LRB102 14695 HLH 20048 b

1            (M) With the exception of any amounts subtracted
2        under subparagraph (N), an amount equal to the sum of
3        all amounts disallowed as deductions by (i) Sections
4        171(a)(2), and 265(a)(2) of the Internal Revenue Code,
5        and all amounts of expenses allocable to interest and
6        disallowed as deductions by Section 265(a)(1) of the
7        Internal Revenue Code; and (ii) for taxable years
8        ending on or after August 13, 1999, Sections
9        171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
10        Internal Revenue Code, plus, for taxable years ending
11        on or after December 31, 2011, Section 45G(e)(3) of
12        the Internal Revenue Code and, for taxable years
13        ending on or after December 31, 2008, any amount
14        included in gross income under Section 87 of the
15        Internal Revenue Code; the provisions of this
16        subparagraph are exempt from the provisions of Section
17        250;
18            (N) An amount equal to all amounts included in
19        such total which are exempt from taxation by this
20        State either by reason of its statutes or Constitution
21        or by reason of the Constitution, treaties or statutes
22        of the United States; provided that, in the case of any
23        statute of this State that exempts income derived from
24        bonds or other obligations from the tax imposed under
25        this Act, the amount exempted shall be the interest
26        net of bond premium amortization;

 

 

HB3425- 20 -LRB102 14695 HLH 20048 b

1            (O) An amount equal to any contribution made to a
2        job training project established pursuant to the Tax
3        Increment Allocation Redevelopment Act;
4            (P) An amount equal to the amount of the deduction
5        used to compute the federal income tax credit for
6        restoration of substantial amounts held under claim of
7        right for the taxable year pursuant to Section 1341 of
8        the Internal Revenue Code or of any itemized deduction
9        taken from adjusted gross income in the computation of
10        taxable income for restoration of substantial amounts
11        held under claim of right for the taxable year;
12            (Q) An amount equal to any amounts included in
13        such total, received by the taxpayer as an
14        acceleration in the payment of life, endowment or
15        annuity benefits in advance of the time they would
16        otherwise be payable as an indemnity for a terminal
17        illness;
18            (R) An amount equal to the amount of any federal or
19        State bonus paid to veterans of the Persian Gulf War;
20            (S) An amount, to the extent included in adjusted
21        gross income, equal to the amount of a contribution
22        made in the taxable year on behalf of the taxpayer to a
23        medical care savings account established under the
24        Medical Care Savings Account Act or the Medical Care
25        Savings Account Act of 2000 to the extent the
26        contribution is accepted by the account administrator

 

 

HB3425- 21 -LRB102 14695 HLH 20048 b

1        as provided in that Act;
2            (T) An amount, to the extent included in adjusted
3        gross income, equal to the amount of interest earned
4        in the taxable year on a medical care savings account
5        established under the Medical Care Savings Account Act
6        or the Medical Care Savings Account Act of 2000 on
7        behalf of the taxpayer, other than interest added
8        pursuant to item (D-5) of this paragraph (2);
9            (U) For one taxable year beginning on or after
10        January 1, 1994, an amount equal to the total amount of
11        tax imposed and paid under subsections (a) and (b) of
12        Section 201 of this Act on grant amounts received by
13        the taxpayer under the Nursing Home Grant Assistance
14        Act during the taxpayer's taxable years 1992 and 1993;
15            (V) Beginning with tax years ending on or after
16        December 31, 1995 and ending with tax years ending on
17        or before December 31, 2004, an amount equal to the
18        amount paid by a taxpayer who is a self-employed
19        taxpayer, a partner of a partnership, or a shareholder
20        in a Subchapter S corporation for health insurance or
21        long-term care insurance for that taxpayer or that
22        taxpayer's spouse or dependents, to the extent that
23        the amount paid for that health insurance or long-term
24        care insurance may be deducted under Section 213 of
25        the Internal Revenue Code, has not been deducted on
26        the federal income tax return of the taxpayer, and

 

 

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1        does not exceed the taxable income attributable to
2        that taxpayer's income, self-employment income, or
3        Subchapter S corporation income; except that no
4        deduction shall be allowed under this item (V) if the
5        taxpayer is eligible to participate in any health
6        insurance or long-term care insurance plan of an
7        employer of the taxpayer or the taxpayer's spouse. The
8        amount of the health insurance and long-term care
9        insurance subtracted under this item (V) shall be
10        determined by multiplying total health insurance and
11        long-term care insurance premiums paid by the taxpayer
12        times a number that represents the fractional
13        percentage of eligible medical expenses under Section
14        213 of the Internal Revenue Code of 1986 not actually
15        deducted on the taxpayer's federal income tax return;
16            (W) For taxable years beginning on or after
17        January 1, 1998, all amounts included in the
18        taxpayer's federal gross income in the taxable year
19        from amounts converted from a regular IRA to a Roth
20        IRA. This paragraph is exempt from the provisions of
21        Section 250;
22            (X) For taxable year 1999 and thereafter, an
23        amount equal to the amount of any (i) distributions,
24        to the extent includible in gross income for federal
25        income tax purposes, made to the taxpayer because of
26        his or her status as a victim of persecution for racial

 

 

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1        or religious reasons by Nazi Germany or any other Axis
2        regime or as an heir of the victim and (ii) items of
3        income, to the extent includible in gross income for
4        federal income tax purposes, attributable to, derived
5        from or in any way related to assets stolen from,
6        hidden from, or otherwise lost to a victim of
7        persecution for racial or religious reasons by Nazi
8        Germany or any other Axis regime immediately prior to,
9        during, and immediately after World War II, including,
10        but not limited to, interest on the proceeds
11        receivable as insurance under policies issued to a
12        victim of persecution for racial or religious reasons
13        by Nazi Germany or any other Axis regime by European
14        insurance companies immediately prior to and during
15        World War II; provided, however, this subtraction from
16        federal adjusted gross income does not apply to assets
17        acquired with such assets or with the proceeds from
18        the sale of such assets; provided, further, this
19        paragraph shall only apply to a taxpayer who was the
20        first recipient of such assets after their recovery
21        and who is a victim of persecution for racial or
22        religious reasons by Nazi Germany or any other Axis
23        regime or as an heir of the victim. The amount of and
24        the eligibility for any public assistance, benefit, or
25        similar entitlement is not affected by the inclusion
26        of items (i) and (ii) of this paragraph in gross income

 

 

HB3425- 24 -LRB102 14695 HLH 20048 b

1        for federal income tax purposes. This paragraph is
2        exempt from the provisions of Section 250;
3            (Y) For taxable years beginning on or after
4        January 1, 2002 and ending on or before December 31,
5        2004, moneys contributed in the taxable year to a
6        College Savings Pool account under Section 16.5 of the
7        State Treasurer Act, except that amounts excluded from
8        gross income under Section 529(c)(3)(C)(i) of the
9        Internal Revenue Code shall not be considered moneys
10        contributed under this subparagraph (Y). For taxable
11        years beginning on or after January 1, 2005, a maximum
12        of $10,000 contributed in the taxable year to (i) a
13        College Savings Pool account under Section 16.5 of the
14        State Treasurer Act or (ii) the Illinois Prepaid
15        Tuition Trust Fund, except that amounts excluded from
16        gross income under Section 529(c)(3)(C)(i) of the
17        Internal Revenue Code shall not be considered moneys
18        contributed under this subparagraph (Y). For purposes
19        of this subparagraph, contributions made by an
20        employer on behalf of an employee, or matching
21        contributions made by an employee, shall be treated as
22        made by the employee. This subparagraph (Y) is exempt
23        from the provisions of Section 250;
24            (Z) For taxable years 2001 and thereafter, for the
25        taxable year in which the bonus depreciation deduction
26        is taken on the taxpayer's federal income tax return

 

 

HB3425- 25 -LRB102 14695 HLH 20048 b

1        under subsection (k) of Section 168 of the Internal
2        Revenue Code and for each applicable taxable year
3        thereafter, an amount equal to "x", where:
4                (1) "y" equals the amount of the depreciation
5            deduction taken for the taxable year on the
6            taxpayer's federal income tax return on property
7            for which the bonus depreciation deduction was
8            taken in any year under subsection (k) of Section
9            168 of the Internal Revenue Code, but not
10            including the bonus depreciation deduction;
11                (2) for taxable years ending on or before
12            December 31, 2005, "x" equals "y" multiplied by 30
13            and then divided by 70 (or "y" multiplied by
14            0.429); and
15                (3) for taxable years ending after December
16            31, 2005:
17                    (i) for property on which a bonus
18                depreciation deduction of 30% of the adjusted
19                basis was taken, "x" equals "y" multiplied by
20                30 and then divided by 70 (or "y" multiplied
21                by 0.429); and
22                    (ii) for property on which a bonus
23                depreciation deduction of 50% of the adjusted
24                basis was taken, "x" equals "y" multiplied by
25                1.0.
26            The aggregate amount deducted under this

 

 

HB3425- 26 -LRB102 14695 HLH 20048 b

1        subparagraph in all taxable years for any one piece of
2        property may not exceed the amount of the bonus
3        depreciation deduction taken on that property on the
4        taxpayer's federal income tax return under subsection
5        (k) of Section 168 of the Internal Revenue Code. This
6        subparagraph (Z) is exempt from the provisions of
7        Section 250;
8            (AA) If the taxpayer sells, transfers, abandons,
9        or otherwise disposes of property for which the
10        taxpayer was required in any taxable year to make an
11        addition modification under subparagraph (D-15), then
12        an amount equal to that addition modification.
13            If the taxpayer continues to own property through
14        the last day of the last tax year for which the
15        taxpayer may claim a depreciation deduction for
16        federal income tax purposes and for which the taxpayer
17        was required in any taxable year to make an addition
18        modification under subparagraph (D-15), then an amount
19        equal to that addition modification.
20            The taxpayer is allowed to take the deduction
21        under this subparagraph only once with respect to any
22        one piece of property.
23            This subparagraph (AA) is exempt from the
24        provisions of Section 250;
25            (BB) Any amount included in adjusted gross income,
26        other than salary, received by a driver in a

 

 

HB3425- 27 -LRB102 14695 HLH 20048 b

1        ridesharing arrangement using a motor vehicle;
2            (CC) The amount of (i) any interest income (net of
3        the deductions allocable thereto) taken into account
4        for the taxable year with respect to a transaction
5        with a taxpayer that is required to make an addition
6        modification with respect to such transaction under
7        Section 203(a)(2)(D-17), 203(b)(2)(E-12),
8        203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
9        the amount of that addition modification, and (ii) any
10        income from intangible property (net of the deductions
11        allocable thereto) taken into account for the taxable
12        year with respect to a transaction with a taxpayer
13        that is required to make an addition modification with
14        respect to such transaction under Section
15        203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
16        203(d)(2)(D-8), but not to exceed the amount of that
17        addition modification. This subparagraph (CC) is
18        exempt from the provisions of Section 250;
19            (DD) An amount equal to the interest income taken
20        into account for the taxable year (net of the
21        deductions allocable thereto) with respect to
22        transactions with (i) a foreign person who would be a
23        member of the taxpayer's unitary business group but
24        for the fact that the foreign person's business
25        activity outside the United States is 80% or more of
26        that person's total business activity and (ii) for

 

 

HB3425- 28 -LRB102 14695 HLH 20048 b

1        taxable years ending on or after December 31, 2008, to
2        a person who would be a member of the same unitary
3        business group but for the fact that the person is
4        prohibited under Section 1501(a)(27) from being
5        included in the unitary business group because he or
6        she is ordinarily required to apportion business
7        income under different subsections of Section 304, but
8        not to exceed the addition modification required to be
9        made for the same taxable year under Section
10        203(a)(2)(D-17) for interest paid, accrued, or
11        incurred, directly or indirectly, to the same person.
12        This subparagraph (DD) is exempt from the provisions
13        of Section 250;
14            (EE) An amount equal to the income from intangible
15        property taken into account for the taxable year (net
16        of the deductions allocable thereto) with respect to
17        transactions with (i) a foreign person who would be a
18        member of the taxpayer's unitary business group but
19        for the fact that the foreign person's business
20        activity outside the United States is 80% or more of
21        that person's total business activity and (ii) for
22        taxable years ending on or after December 31, 2008, to
23        a person who would be a member of the same unitary
24        business group but for the fact that the person is
25        prohibited under Section 1501(a)(27) from being
26        included in the unitary business group because he or

 

 

HB3425- 29 -LRB102 14695 HLH 20048 b

1        she is ordinarily required to apportion business
2        income under different subsections of Section 304, but
3        not to exceed the addition modification required to be
4        made for the same taxable year under Section
5        203(a)(2)(D-18) for intangible expenses and costs
6        paid, accrued, or incurred, directly or indirectly, to
7        the same foreign person. This subparagraph (EE) is
8        exempt from the provisions of Section 250;
9            (FF) An amount equal to any amount awarded to the
10        taxpayer during the taxable year by the Court of
11        Claims under subsection (c) of Section 8 of the Court
12        of Claims Act for time unjustly served in a State
13        prison. This subparagraph (FF) is exempt from the
14        provisions of Section 250;
15            (GG) For taxable years ending on or after December
16        31, 2011, in the case of a taxpayer who was required to
17        add back any insurance premiums under Section
18        203(a)(2)(D-19), such taxpayer may elect to subtract
19        that part of a reimbursement received from the
20        insurance company equal to the amount of the expense
21        or loss (including expenses incurred by the insurance
22        company) that would have been taken into account as a
23        deduction for federal income tax purposes if the
24        expense or loss had been uninsured. If a taxpayer
25        makes the election provided for by this subparagraph
26        (GG), the insurer to which the premiums were paid must

 

 

HB3425- 30 -LRB102 14695 HLH 20048 b

1        add back to income the amount subtracted by the
2        taxpayer pursuant to this subparagraph (GG). This
3        subparagraph (GG) is exempt from the provisions of
4        Section 250; and
5            (HH) For taxable years beginning on or after
6        January 1, 2018 and prior to January 1, 2023, a maximum
7        of $10,000 contributed in the taxable year to a
8        qualified ABLE account under Section 16.6 of the State
9        Treasurer Act, except that amounts excluded from gross
10        income under Section 529(c)(3)(C)(i) or Section
11        529A(c)(1)(C) of the Internal Revenue Code shall not
12        be considered moneys contributed under this
13        subparagraph (HH). For purposes of this subparagraph
14        (HH), contributions made by an employer on behalf of
15        an employee, or matching contributions made by an
16        employee, shall be treated as made by the employee.
 
17    (b) Corporations.
18        (1) In general. In the case of a corporation, base
19    income means an amount equal to the taxpayer's taxable
20    income for the taxable year as modified by paragraph (2).
21        (2) Modifications. The taxable income referred to in
22    paragraph (1) shall be modified by adding thereto the sum
23    of the following amounts:
24            (A) An amount equal to all amounts paid or accrued
25        to the taxpayer as interest and all distributions

 

 

HB3425- 31 -LRB102 14695 HLH 20048 b

1        received from regulated investment companies during
2        the taxable year to the extent excluded from gross
3        income in the computation of taxable income;
4            (B) An amount equal to the amount of tax imposed by
5        this Act to the extent deducted from gross income in
6        the computation of taxable income for the taxable
7        year;
8            (C) In the case of a regulated investment company,
9        an amount equal to the excess of (i) the net long-term
10        capital gain for the taxable year, over (ii) the
11        amount of the capital gain dividends designated as
12        such in accordance with Section 852(b)(3)(C) of the
13        Internal Revenue Code and any amount designated under
14        Section 852(b)(3)(D) of the Internal Revenue Code,
15        attributable to the taxable year (this amendatory Act
16        of 1995 (Public Act 89-89) is declarative of existing
17        law and is not a new enactment);
18            (D) The amount of any net operating loss deduction
19        taken in arriving at taxable income, other than a net
20        operating loss carried forward from a taxable year
21        ending prior to December 31, 1986;
22            (E) For taxable years in which a net operating
23        loss carryback or carryforward from a taxable year
24        ending prior to December 31, 1986 is an element of
25        taxable income under paragraph (1) of subsection (e)
26        or subparagraph (E) of paragraph (2) of subsection

 

 

HB3425- 32 -LRB102 14695 HLH 20048 b

1        (e), the amount by which addition modifications other
2        than those provided by this subparagraph (E) exceeded
3        subtraction modifications in such earlier taxable
4        year, with the following limitations applied in the
5        order that they are listed:
6                (i) the addition modification relating to the
7            net operating loss carried back or forward to the
8            taxable year from any taxable year ending prior to
9            December 31, 1986 shall be reduced by the amount
10            of addition modification under this subparagraph
11            (E) which related to that net operating loss and
12            which was taken into account in calculating the
13            base income of an earlier taxable year, and
14                (ii) the addition modification relating to the
15            net operating loss carried back or forward to the
16            taxable year from any taxable year ending prior to
17            December 31, 1986 shall not exceed the amount of
18            such carryback or carryforward;
19            For taxable years in which there is a net
20        operating loss carryback or carryforward from more
21        than one other taxable year ending prior to December
22        31, 1986, the addition modification provided in this
23        subparagraph (E) shall be the sum of the amounts
24        computed independently under the preceding provisions
25        of this subparagraph (E) for each such taxable year;
26            (E-5) For taxable years ending after December 31,

 

 

HB3425- 33 -LRB102 14695 HLH 20048 b

1        1997, an amount equal to any eligible remediation
2        costs that the corporation deducted in computing
3        adjusted gross income and for which the corporation
4        claims a credit under subsection (l) of Section 201;
5            (E-10) For taxable years 2001 and thereafter, an
6        amount equal to the bonus depreciation deduction taken
7        on the taxpayer's federal income tax return for the
8        taxable year under subsection (k) of Section 168 of
9        the Internal Revenue Code;
10            (E-11) If the taxpayer sells, transfers, abandons,
11        or otherwise disposes of property for which the
12        taxpayer was required in any taxable year to make an
13        addition modification under subparagraph (E-10), then
14        an amount equal to the aggregate amount of the
15        deductions taken in all taxable years under
16        subparagraph (T) with respect to that property.
17            If the taxpayer continues to own property through
18        the last day of the last tax year for which the
19        taxpayer may claim a depreciation deduction for
20        federal income tax purposes and for which the taxpayer
21        was allowed in any taxable year to make a subtraction
22        modification under subparagraph (T), then an amount
23        equal to that subtraction modification.
24            The taxpayer is required to make the addition
25        modification under this subparagraph only once with
26        respect to any one piece of property;

 

 

HB3425- 34 -LRB102 14695 HLH 20048 b

1            (E-12) An amount equal to the amount otherwise
2        allowed as a deduction in computing base income for
3        interest paid, accrued, or incurred, directly or
4        indirectly, (i) for taxable years ending on or after
5        December 31, 2004, to a foreign person who would be a
6        member of the same unitary business group but for the
7        fact the foreign person's business activity outside
8        the United States is 80% or more of the foreign
9        person's total business activity and (ii) for taxable
10        years ending on or after December 31, 2008, to a person
11        who would be a member of the same unitary business
12        group but for the fact that the person is prohibited
13        under Section 1501(a)(27) from being included in the
14        unitary business group because he or she is ordinarily
15        required to apportion business income under different
16        subsections of Section 304. The addition modification
17        required by this subparagraph shall be reduced to the
18        extent that dividends were included in base income of
19        the unitary group for the same taxable year and
20        received by the taxpayer or by a member of the
21        taxpayer's unitary business group (including amounts
22        included in gross income pursuant to Sections 951
23        through 964 of the Internal Revenue Code and amounts
24        included in gross income under Section 78 of the
25        Internal Revenue Code) with respect to the stock of
26        the same person to whom the interest was paid,

 

 

HB3425- 35 -LRB102 14695 HLH 20048 b

1        accrued, or incurred.
2            This paragraph shall not apply to the following:
3                (i) an item of interest paid, accrued, or
4            incurred, directly or indirectly, to a person who
5            is subject in a foreign country or state, other
6            than a state which requires mandatory unitary
7            reporting, to a tax on or measured by net income
8            with respect to such interest; or
9                (ii) an item of interest paid, accrued, or
10            incurred, directly or indirectly, to a person if
11            the taxpayer can establish, based on a
12            preponderance of the evidence, both of the
13            following:
14                    (a) the person, during the same taxable
15                year, paid, accrued, or incurred, the interest
16                to a person that is not a related member, and
17                    (b) the transaction giving rise to the
18                interest expense between the taxpayer and the
19                person did not have as a principal purpose the
20                avoidance of Illinois income tax, and is paid
21                pursuant to a contract or agreement that
22                reflects an arm's-length interest rate and
23                terms; or
24                (iii) the taxpayer can establish, based on
25            clear and convincing evidence, that the interest
26            paid, accrued, or incurred relates to a contract

 

 

HB3425- 36 -LRB102 14695 HLH 20048 b

1            or agreement entered into at arm's-length rates
2            and terms and the principal purpose for the
3            payment is not federal or Illinois tax avoidance;
4            or
5                (iv) an item of interest paid, accrued, or
6            incurred, directly or indirectly, to a person if
7            the taxpayer establishes by clear and convincing
8            evidence that the adjustments are unreasonable; or
9            if the taxpayer and the Director agree in writing
10            to the application or use of an alternative method
11            of apportionment under Section 304(f).
12                Nothing in this subsection shall preclude the
13            Director from making any other adjustment
14            otherwise allowed under Section 404 of this Act
15            for any tax year beginning after the effective
16            date of this amendment provided such adjustment is
17            made pursuant to regulation adopted by the
18            Department and such regulations provide methods
19            and standards by which the Department will utilize
20            its authority under Section 404 of this Act;
21            (E-13) An amount equal to the amount of intangible
22        expenses and costs otherwise allowed as a deduction in
23        computing base income, and that were paid, accrued, or
24        incurred, directly or indirectly, (i) for taxable
25        years ending on or after December 31, 2004, to a
26        foreign person who would be a member of the same

 

 

HB3425- 37 -LRB102 14695 HLH 20048 b

1        unitary business group but for the fact that the
2        foreign person's business activity outside the United
3        States is 80% or more of that person's total business
4        activity and (ii) for taxable years ending on or after
5        December 31, 2008, to a person who would be a member of
6        the same unitary business group but for the fact that
7        the person is prohibited under Section 1501(a)(27)
8        from being included in the unitary business group
9        because he or she is ordinarily required to apportion
10        business income under different subsections of Section
11        304. The addition modification required by this
12        subparagraph shall be reduced to the extent that
13        dividends were included in base income of the unitary
14        group for the same taxable year and received by the
15        taxpayer or by a member of the taxpayer's unitary
16        business group (including amounts included in gross
17        income pursuant to Sections 951 through 964 of the
18        Internal Revenue Code and amounts included in gross
19        income under Section 78 of the Internal Revenue Code)
20        with respect to the stock of the same person to whom
21        the intangible expenses and costs were directly or
22        indirectly paid, incurred, or accrued. The preceding
23        sentence shall not apply to the extent that the same
24        dividends caused a reduction to the addition
25        modification required under Section 203(b)(2)(E-12) of
26        this Act. As used in this subparagraph, the term

 

 

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1        "intangible expenses and costs" includes (1) expenses,
2        losses, and costs for, or related to, the direct or
3        indirect acquisition, use, maintenance or management,
4        ownership, sale, exchange, or any other disposition of
5        intangible property; (2) losses incurred, directly or
6        indirectly, from factoring transactions or discounting
7        transactions; (3) royalty, patent, technical, and
8        copyright fees; (4) licensing fees; and (5) other
9        similar expenses and costs. For purposes of this
10        subparagraph, "intangible property" includes patents,
11        patent applications, trade names, trademarks, service
12        marks, copyrights, mask works, trade secrets, and
13        similar types of intangible assets.
14            This paragraph shall not apply to the following:
15                (i) any item of intangible expenses or costs
16            paid, accrued, or incurred, directly or
17            indirectly, from a transaction with a person who
18            is subject in a foreign country or state, other
19            than a state which requires mandatory unitary
20            reporting, to a tax on or measured by net income
21            with respect to such item; or
22                (ii) any item of intangible expense or cost
23            paid, accrued, or incurred, directly or
24            indirectly, if the taxpayer can establish, based
25            on a preponderance of the evidence, both of the
26            following:

 

 

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1                    (a) the person during the same taxable
2                year paid, accrued, or incurred, the
3                intangible expense or cost to a person that is
4                not a related member, and
5                    (b) the transaction giving rise to the
6                intangible expense or cost between the
7                taxpayer and the person did not have as a
8                principal purpose the avoidance of Illinois
9                income tax, and is paid pursuant to a contract
10                or agreement that reflects arm's-length terms;
11                or
12                (iii) any item of intangible expense or cost
13            paid, accrued, or incurred, directly or
14            indirectly, from a transaction with a person if
15            the taxpayer establishes by clear and convincing
16            evidence, that the adjustments are unreasonable;
17            or if the taxpayer and the Director agree in
18            writing to the application or use of an
19            alternative method of apportionment under Section
20            304(f);
21                Nothing in this subsection shall preclude the
22            Director from making any other adjustment
23            otherwise allowed under Section 404 of this Act
24            for any tax year beginning after the effective
25            date of this amendment provided such adjustment is
26            made pursuant to regulation adopted by the

 

 

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1            Department and such regulations provide methods
2            and standards by which the Department will utilize
3            its authority under Section 404 of this Act;
4            (E-14) For taxable years ending on or after
5        December 31, 2008, an amount equal to the amount of
6        insurance premium expenses and costs otherwise allowed
7        as a deduction in computing base income, and that were
8        paid, accrued, or incurred, directly or indirectly, to
9        a person who would be a member of the same unitary
10        business group but for the fact that the person is
11        prohibited under Section 1501(a)(27) from being
12        included in the unitary business group because he or
13        she is ordinarily required to apportion business
14        income under different subsections of Section 304. The
15        addition modification required by this subparagraph
16        shall be reduced to the extent that dividends were
17        included in base income of the unitary group for the
18        same taxable year and received by the taxpayer or by a
19        member of the taxpayer's unitary business group
20        (including amounts included in gross income under
21        Sections 951 through 964 of the Internal Revenue Code
22        and amounts included in gross income under Section 78
23        of the Internal Revenue Code) with respect to the
24        stock of the same person to whom the premiums and costs
25        were directly or indirectly paid, incurred, or
26        accrued. The preceding sentence does not apply to the

 

 

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1        extent that the same dividends caused a reduction to
2        the addition modification required under Section
3        203(b)(2)(E-12) or Section 203(b)(2)(E-13) of this
4        Act;
5            (E-15) For taxable years beginning after December
6        31, 2008, any deduction for dividends paid by a
7        captive real estate investment trust that is allowed
8        to a real estate investment trust under Section
9        857(b)(2)(B) of the Internal Revenue Code for
10        dividends paid;
11            (E-16) An amount equal to the credit allowable to
12        the taxpayer under Section 218(a) of this Act,
13        determined without regard to Section 218(c) of this
14        Act;
15            (E-17) For taxable years ending on or after
16        December 31, 2017, an amount equal to the deduction
17        allowed under Section 199 of the Internal Revenue Code
18        for the taxable year;
19            (E-18) for taxable years beginning after December
20        31, 2018, an amount equal to the deduction allowed
21        under Section 250(a)(1)(A) of the Internal Revenue
22        Code for the taxable year.
23            (E-19) For taxable years beginning on or after
24        January 1, 2021, the amount of gain that would be
25        included for federal income tax purposes without
26        regard to section 1400Z-2(b) of the Internal Revenue

 

 

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1        Code; the adjustment made in this subparagraph does
2        not result in a difference in basis of the affected
3        assets for State and federal income tax purposes; the
4        purpose of this subparagraph is to decouple from the
5        deferral of gains reinvested into an Opportunity Fund
6        available under federal law; this subparagraph is
7        exempt from the provisions of Section 250;
8            (E-10) For taxable years beginning on or after
9        January 1, 2021, the amount of gain that would be
10        included in the taxpayer's federal taxable income but
11        for the step-up in basis under section 1400Z-2(c) of
12        the Internal Revenue Code; the purpose of this
13        subparagraph is to decouple from the exclusion of
14        gains from the sale or exchange of an investment in an
15        Opportunity Fund available under federal law; this
16        subparagraph is exempt from the provisions of Section
17        250;
18    and by deducting from the total so obtained the sum of the
19    following amounts:
20            (F) An amount equal to the amount of any tax
21        imposed by this Act which was refunded to the taxpayer
22        and included in such total for the taxable year;
23            (G) An amount equal to any amount included in such
24        total under Section 78 of the Internal Revenue Code;
25            (H) In the case of a regulated investment company,
26        an amount equal to the amount of exempt interest

 

 

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1        dividends as defined in subsection (b)(5) of Section
2        852 of the Internal Revenue Code, paid to shareholders
3        for the taxable year;
4            (I) With the exception of any amounts subtracted
5        under subparagraph (J), an amount equal to the sum of
6        all amounts disallowed as deductions by (i) Sections
7        171(a)(2), and 265(a)(2) and amounts disallowed as
8        interest expense by Section 291(a)(3) of the Internal
9        Revenue Code, and all amounts of expenses allocable to
10        interest and disallowed as deductions by Section
11        265(a)(1) of the Internal Revenue Code; and (ii) for
12        taxable years ending on or after August 13, 1999,
13        Sections 171(a)(2), 265, 280C, 291(a)(3), and
14        832(b)(5)(B)(i) of the Internal Revenue Code, plus,
15        for tax years ending on or after December 31, 2011,
16        amounts disallowed as deductions by Section 45G(e)(3)
17        of the Internal Revenue Code and, for taxable years
18        ending on or after December 31, 2008, any amount
19        included in gross income under Section 87 of the
20        Internal Revenue Code and the policyholders' share of
21        tax-exempt interest of a life insurance company under
22        Section 807(a)(2)(B) of the Internal Revenue Code (in
23        the case of a life insurance company with gross income
24        from a decrease in reserves for the tax year) or
25        Section 807(b)(1)(B) of the Internal Revenue Code (in
26        the case of a life insurance company allowed a

 

 

HB3425- 44 -LRB102 14695 HLH 20048 b

1        deduction for an increase in reserves for the tax
2        year); the provisions of this subparagraph are exempt
3        from the provisions of Section 250;
4            (J) An amount equal to all amounts included in
5        such total which are exempt from taxation by this
6        State either by reason of its statutes or Constitution
7        or by reason of the Constitution, treaties or statutes
8        of the United States; provided that, in the case of any
9        statute of this State that exempts income derived from
10        bonds or other obligations from the tax imposed under
11        this Act, the amount exempted shall be the interest
12        net of bond premium amortization;
13            (K) An amount equal to those dividends included in
14        such total which were paid by a corporation which
15        conducts business operations in a River Edge
16        Redevelopment Zone or zones created under the River
17        Edge Redevelopment Zone Act and conducts substantially
18        all of its operations in a River Edge Redevelopment
19        Zone or zones. This subparagraph (K) is exempt from
20        the provisions of Section 250;
21            (L) An amount equal to those dividends included in
22        such total that were paid by a corporation that
23        conducts business operations in a federally designated
24        Foreign Trade Zone or Sub-Zone and that is designated
25        a High Impact Business located in Illinois; provided
26        that dividends eligible for the deduction provided in

 

 

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1        subparagraph (K) of paragraph 2 of this subsection
2        shall not be eligible for the deduction provided under
3        this 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 interest
7        income from a loan or loans made by such taxpayer to a
8        borrower, to the extent that such a loan is secured by
9        property which is eligible for the River Edge
10        Redevelopment Zone Investment Credit. To determine the
11        portion of a loan or loans that is secured by property
12        eligible for a Section 201(f) investment credit to the
13        borrower, the entire principal amount of the loan or
14        loans between the taxpayer and the borrower should be
15        divided into the basis of the Section 201(f)
16        investment credit property which secures the loan or
17        loans, using for this purpose the original basis of
18        such property on the date that it was placed in service
19        in the River Edge Redevelopment Zone. The subtraction
20        modification available to the taxpayer in any year
21        under this subsection shall be that portion of the
22        total interest paid by the borrower with respect to
23        such loan attributable to the eligible property as
24        calculated under the previous sentence. This
25        subparagraph (M) is exempt from the provisions of
26        Section 250;

 

 

HB3425- 46 -LRB102 14695 HLH 20048 b

1            (M-1) For any taxpayer that is a financial
2        organization within the meaning of Section 304(c) of
3        this Act, an amount included in such total as interest
4        income from a loan or loans made by such taxpayer to a
5        borrower, to the extent that such a loan is secured by
6        property which is eligible for the High Impact
7        Business Investment Credit. To determine the portion
8        of a loan or loans that is secured by property eligible
9        for a Section 201(h) investment credit to the
10        borrower, the entire principal amount of the loan or
11        loans between the taxpayer and the borrower should be
12        divided into the basis of the Section 201(h)
13        investment credit property which secures the loan or
14        loans, using for this purpose the original basis of
15        such property on the date that it was placed in service
16        in a federally designated Foreign Trade Zone or
17        Sub-Zone located in Illinois. No taxpayer that is
18        eligible for the deduction provided in subparagraph
19        (M) of paragraph (2) of this subsection shall be
20        eligible for the deduction provided under this
21        subparagraph (M-1). The subtraction modification
22        available to taxpayers in any year under this
23        subsection shall be that portion of the total interest
24        paid by the borrower with respect to such loan
25        attributable to the eligible property as calculated
26        under the previous sentence;

 

 

HB3425- 47 -LRB102 14695 HLH 20048 b

1            (N) Two times any contribution made during the
2        taxable year to a designated zone organization to the
3        extent that the contribution (i) qualifies as a
4        charitable contribution under subsection (c) of
5        Section 170 of the Internal Revenue Code and (ii)
6        must, by its terms, be used for a project approved by
7        the Department of Commerce and Economic Opportunity
8        under Section 11 of the Illinois Enterprise Zone Act
9        or under Section 10-10 of the River Edge Redevelopment
10        Zone Act. This subparagraph (N) is exempt from the
11        provisions of Section 250;
12            (O) An amount equal to: (i) 85% for taxable years
13        ending on or before December 31, 1992, or, a
14        percentage equal to the percentage allowable under
15        Section 243(a)(1) of the Internal Revenue Code of 1986
16        for taxable years ending after December 31, 1992, of
17        the amount by which dividends included in taxable
18        income and received from a corporation that is not
19        created or organized under the laws of the United
20        States or any state or political subdivision thereof,
21        including, for taxable years ending on or after
22        December 31, 1988, dividends received or deemed
23        received or paid or deemed paid under Sections 951
24        through 965 of the Internal Revenue Code, exceed the
25        amount of the modification provided under subparagraph
26        (G) of paragraph (2) of this subsection (b) which is

 

 

HB3425- 48 -LRB102 14695 HLH 20048 b

1        related to such dividends, and including, for taxable
2        years ending on or after December 31, 2008, dividends
3        received from a captive real estate investment trust;
4        plus (ii) 100% of the amount by which dividends,
5        included in taxable income and received, including,
6        for taxable years ending on or after December 31,
7        1988, dividends received or deemed received or paid or
8        deemed paid under Sections 951 through 964 of the
9        Internal Revenue Code and including, for taxable years
10        ending on or after December 31, 2008, dividends
11        received from a captive real estate investment trust,
12        from any such corporation specified in clause (i) that
13        would but for the provisions of Section 1504(b)(3) of
14        the Internal Revenue Code be treated as a member of the
15        affiliated group which includes the dividend
16        recipient, exceed the amount of the modification
17        provided under subparagraph (G) of paragraph (2) of
18        this subsection (b) which is related to such
19        dividends. This subparagraph (O) is exempt from the
20        provisions of Section 250 of this Act;
21            (P) An amount equal to any contribution made to a
22        job training project established pursuant to the Tax
23        Increment Allocation Redevelopment Act;
24            (Q) An amount equal to the amount of the deduction
25        used to compute the federal income tax credit for
26        restoration of substantial amounts held under claim of

 

 

HB3425- 49 -LRB102 14695 HLH 20048 b

1        right for the taxable year pursuant to Section 1341 of
2        the Internal Revenue Code;
3            (R) On and after July 20, 1999, in the case of an
4        attorney-in-fact with respect to whom an interinsurer
5        or a reciprocal insurer has made the election under
6        Section 835 of the Internal Revenue Code, 26 U.S.C.
7        835, an amount equal to the excess, if any, of the
8        amounts paid or incurred by that interinsurer or
9        reciprocal insurer in the taxable year to the
10        attorney-in-fact over the deduction allowed to that
11        interinsurer or reciprocal insurer with respect to the
12        attorney-in-fact under Section 835(b) of the Internal
13        Revenue Code for the taxable year; the provisions of
14        this subparagraph are exempt from the provisions of
15        Section 250;
16            (S) For taxable years ending on or after December
17        31, 1997, in the case of a Subchapter S corporation, an
18        amount equal to all amounts of income allocable to a
19        shareholder subject to the Personal Property Tax
20        Replacement Income Tax imposed by subsections (c) and
21        (d) of Section 201 of this Act, including amounts
22        allocable to organizations exempt from federal income
23        tax by reason of Section 501(a) of the Internal
24        Revenue Code. This subparagraph (S) is exempt from the
25        provisions of Section 250;
26            (T) For taxable years 2001 and thereafter, for the

 

 

HB3425- 50 -LRB102 14695 HLH 20048 b

1        taxable year in which the bonus depreciation deduction
2        is taken on the taxpayer's federal income tax return
3        under subsection (k) of Section 168 of the Internal
4        Revenue Code and for each applicable taxable year
5        thereafter, an amount equal to "x", where:
6                (1) "y" equals the amount of the depreciation
7            deduction taken for the taxable year on the
8            taxpayer's federal income tax return on property
9            for which the bonus depreciation deduction was
10            taken in any year under subsection (k) of Section
11            168 of the Internal Revenue Code, but not
12            including the bonus depreciation deduction;
13                (2) for taxable years ending on or before
14            December 31, 2005, "x" equals "y" multiplied by 30
15            and then divided by 70 (or "y" multiplied by
16            0.429); and
17                (3) for taxable years ending after December
18            31, 2005:
19                    (i) for property on which a bonus
20                depreciation deduction of 30% of the adjusted
21                basis was taken, "x" equals "y" multiplied by
22                30 and then divided by 70 (or "y" multiplied
23                by 0.429); and
24                    (ii) for property on which a bonus
25                depreciation deduction of 50% of the adjusted
26                basis was taken, "x" equals "y" multiplied by

 

 

HB3425- 51 -LRB102 14695 HLH 20048 b

1                1.0.
2            The aggregate amount deducted under this
3        subparagraph in all taxable years for any one piece of
4        property may not exceed the amount of the bonus
5        depreciation deduction taken on that property on the
6        taxpayer's federal income tax return under subsection
7        (k) of Section 168 of the Internal Revenue Code. This
8        subparagraph (T) is exempt from the provisions of
9        Section 250;
10            (U) If the taxpayer sells, transfers, abandons, or
11        otherwise disposes of property for which the taxpayer
12        was required in any taxable year to make an addition
13        modification under subparagraph (E-10), then an amount
14        equal to that addition modification.
15            If the taxpayer continues to own property through
16        the last day of the last tax year for which the
17        taxpayer may claim a depreciation deduction for
18        federal income tax purposes and for which the taxpayer
19        was required in any taxable year to make an addition
20        modification under subparagraph (E-10), then an amount
21        equal to that addition modification.
22            The taxpayer is allowed to take the deduction
23        under this subparagraph only once with respect to any
24        one piece of property.
25            This subparagraph (U) is exempt from the
26        provisions of Section 250;

 

 

HB3425- 52 -LRB102 14695 HLH 20048 b

1            (V) The amount of: (i) any interest income (net of
2        the deductions allocable thereto) taken into account
3        for the taxable year with respect to a transaction
4        with a taxpayer that is required to make an addition
5        modification with respect to such transaction under
6        Section 203(a)(2)(D-17), 203(b)(2)(E-12),
7        203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
8        the amount of such addition modification, (ii) any
9        income from intangible property (net of the deductions
10        allocable thereto) taken into account for the taxable
11        year with respect to a transaction with a taxpayer
12        that is required to make an addition modification with
13        respect to such transaction under Section
14        203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
15        203(d)(2)(D-8), but not to exceed the amount of such
16        addition modification, and (iii) any insurance premium
17        income (net of deductions allocable thereto) taken
18        into account for the taxable year with respect to a
19        transaction with a taxpayer that is required to make
20        an addition modification with respect to such
21        transaction under Section 203(a)(2)(D-19), Section
22        203(b)(2)(E-14), Section 203(c)(2)(G-14), or Section
23        203(d)(2)(D-9), but not to exceed the amount of that
24        addition modification. This subparagraph (V) is exempt
25        from the provisions of Section 250;
26            (W) An amount equal to the interest income taken

 

 

HB3425- 53 -LRB102 14695 HLH 20048 b

1        into account for the taxable year (net of the
2        deductions allocable thereto) with respect to
3        transactions with (i) a foreign person who would be a
4        member of the taxpayer's unitary business group but
5        for the fact that the foreign person's business
6        activity outside the United States is 80% or more of
7        that person's total business activity and (ii) for
8        taxable years ending on or after December 31, 2008, to
9        a person who would be a member of the same unitary
10        business group but for the fact that the person is
11        prohibited under Section 1501(a)(27) from being
12        included in the unitary business group because he or
13        she is ordinarily required to apportion business
14        income under different subsections of Section 304, but
15        not to exceed the addition modification required to be
16        made for the same taxable year under Section
17        203(b)(2)(E-12) for interest paid, accrued, or
18        incurred, directly or indirectly, to the same person.
19        This subparagraph (W) is exempt from the provisions of
20        Section 250;
21            (X) An amount equal to the income from intangible
22        property taken into account for the taxable year (net
23        of the deductions allocable thereto) with respect to
24        transactions with (i) a foreign person who would be a
25        member of the taxpayer's unitary business group but
26        for the fact that the foreign person's business

 

 

HB3425- 54 -LRB102 14695 HLH 20048 b

1        activity outside the United States is 80% or more of
2        that person's total business activity and (ii) for
3        taxable years ending on or after December 31, 2008, to
4        a person who would be a member of the same unitary
5        business group but for the fact that the person is
6        prohibited under Section 1501(a)(27) from being
7        included in the unitary business group because he or
8        she is ordinarily required to apportion business
9        income under different subsections of Section 304, but
10        not to exceed the addition modification required to be
11        made for the same taxable year under Section
12        203(b)(2)(E-13) for intangible expenses and costs
13        paid, accrued, or incurred, directly or indirectly, to
14        the same foreign person. This subparagraph (X) is
15        exempt from the provisions of Section 250;
16            (Y) For taxable years ending on or after December
17        31, 2011, in the case of a taxpayer who was required to
18        add back any insurance premiums under Section
19        203(b)(2)(E-14), such taxpayer may elect to subtract
20        that part of a reimbursement received from the
21        insurance company equal to the amount of the expense
22        or loss (including expenses incurred by the insurance
23        company) that would have been taken into account as a
24        deduction for federal income tax purposes if the
25        expense or loss had been uninsured. If a taxpayer
26        makes the election provided for by this subparagraph

 

 

HB3425- 55 -LRB102 14695 HLH 20048 b

1        (Y), the insurer to which the premiums were paid must
2        add back to income the amount subtracted by the
3        taxpayer pursuant to this subparagraph (Y). This
4        subparagraph (Y) is exempt from the provisions of
5        Section 250; and
6            (Z) The difference between the nondeductible
7        controlled foreign corporation dividends under Section
8        965(e)(3) of the Internal Revenue Code over the
9        taxable income of the taxpayer, computed without
10        regard to Section 965(e)(2)(A) of the Internal Revenue
11        Code, and without regard to any net operating loss
12        deduction. This subparagraph (Z) is exempt from the
13        provisions of Section 250.
14        (3) Special rule. For purposes of paragraph (2)(A),
15    "gross income" in the case of a life insurance company,
16    for tax years ending on and after December 31, 1994, and
17    prior to December 31, 2011, shall mean the gross
18    investment income for the taxable year and, for tax years
19    ending on or after December 31, 2011, shall mean all
20    amounts included in life insurance gross income under
21    Section 803(a)(3) of the Internal Revenue Code.
 
22    (c) Trusts and estates.
23        (1) In general. In the case of a trust or estate, base
24    income means an amount equal to the taxpayer's taxable
25    income for the taxable year as modified by paragraph (2).

 

 

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1        (2) Modifications. Subject to the provisions of
2    paragraph (3), the taxable income referred to in paragraph
3    (1) shall be modified by adding thereto the sum of the
4    following amounts:
5            (A) An amount equal to all amounts paid or accrued
6        to the taxpayer as interest or dividends during the
7        taxable year to the extent excluded from gross income
8        in the computation of taxable income;
9            (B) In the case of (i) an estate, $600; (ii) a
10        trust which, under its governing instrument, is
11        required to distribute all of its income currently,
12        $300; and (iii) any other trust, $100, but in each such
13        case, only to the extent such amount was deducted in
14        the computation of taxable income;
15            (C) An amount equal to the amount of tax imposed by
16        this Act to the extent deducted from gross income in
17        the computation of taxable income for the taxable
18        year;
19            (D) The amount of any net operating loss deduction
20        taken in arriving at taxable income, other than a net
21        operating loss carried forward from a taxable year
22        ending prior to December 31, 1986;
23            (E) For taxable years in which a net operating
24        loss carryback or carryforward from a taxable year
25        ending prior to December 31, 1986 is an element of
26        taxable income under paragraph (1) of subsection (e)

 

 

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1        or subparagraph (E) of paragraph (2) of subsection
2        (e), the amount by which addition modifications other
3        than those provided by this subparagraph (E) exceeded
4        subtraction modifications in such taxable year, with
5        the following limitations applied in the order that
6        they are listed:
7                (i) the addition modification relating to the
8            net operating loss carried back or forward to the
9            taxable year from any taxable year ending prior to
10            December 31, 1986 shall be reduced by the amount
11            of addition modification under this subparagraph
12            (E) which related to that net operating loss and
13            which was taken into account in calculating the
14            base income of an earlier taxable year, and
15                (ii) the addition modification relating to the
16            net operating loss carried back or forward to the
17            taxable year from any taxable year ending prior to
18            December 31, 1986 shall not exceed the amount of
19            such carryback or carryforward;
20            For taxable years in which there is a net
21        operating loss carryback or carryforward from more
22        than one other taxable year ending prior to December
23        31, 1986, the addition modification provided in this
24        subparagraph (E) shall be the sum of the amounts
25        computed independently under the preceding provisions
26        of this subparagraph (E) for each such taxable year;

 

 

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1            (F) For taxable years ending on or after January
2        1, 1989, an amount equal to the tax deducted pursuant
3        to Section 164 of the Internal Revenue Code if the
4        trust or estate is claiming the same tax for purposes
5        of the Illinois foreign tax credit under Section 601
6        of this Act;
7            (G) An amount equal to the amount of the capital
8        gain deduction allowable under the Internal Revenue
9        Code, to the extent deducted from gross income in the
10        computation of taxable income;
11            (G-5) For taxable years ending after December 31,
12        1997, an amount equal to any eligible remediation
13        costs that the trust or estate deducted in computing
14        adjusted gross income and for which the trust or
15        estate claims a credit under subsection (l) of Section
16        201;
17            (G-10) For taxable years 2001 and thereafter, an
18        amount equal to the bonus depreciation deduction taken
19        on the taxpayer's federal income tax return for the
20        taxable year under subsection (k) of Section 168 of
21        the Internal Revenue Code; and
22            (G-11) If the taxpayer sells, transfers, abandons,
23        or otherwise disposes of property for which the
24        taxpayer was required in any taxable year to make an
25        addition modification under subparagraph (G-10), then
26        an amount equal to the aggregate amount of the

 

 

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1        deductions taken in all taxable years under
2        subparagraph (R) with respect to that property.
3            If the taxpayer continues to own property through
4        the last day of the last tax year for which the
5        taxpayer may claim a depreciation deduction for
6        federal income tax purposes and for which the taxpayer
7        was allowed in any taxable year to make a subtraction
8        modification under subparagraph (R), then an amount
9        equal to that subtraction modification.
10            The taxpayer is required to make the addition
11        modification under this subparagraph only once with
12        respect to any one piece of property;
13            (G-12) An amount equal to the amount otherwise
14        allowed as a deduction in computing base income for
15        interest paid, accrued, or incurred, directly or
16        indirectly, (i) for taxable years ending on or after
17        December 31, 2004, to a foreign person who would be a
18        member of the same unitary business group but for the
19        fact that the foreign person's business activity
20        outside the United States is 80% or more of the foreign
21        person's total business activity and (ii) for taxable
22        years ending on or after December 31, 2008, to a person
23        who would be a member of the same unitary business
24        group but for the fact that the person is prohibited
25        under Section 1501(a)(27) from being included in the
26        unitary business group because he or she is ordinarily

 

 

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1        required to apportion business income under different
2        subsections of Section 304. The addition modification
3        required by this subparagraph shall be reduced to the
4        extent that dividends were included in base income of
5        the unitary group for the same taxable year and
6        received by the taxpayer or by a member of the
7        taxpayer's unitary business group (including amounts
8        included in gross income pursuant to Sections 951
9        through 964 of the Internal Revenue Code and amounts
10        included in gross income under Section 78 of the
11        Internal Revenue Code) with respect to the stock of
12        the same person to whom the interest was paid,
13        accrued, or incurred.
14            This paragraph shall not apply to the following:
15                (i) an item of interest paid, accrued, or
16            incurred, directly or indirectly, to a person who
17            is subject in a foreign country or state, other
18            than a state which requires mandatory unitary
19            reporting, to a tax on or measured by net income
20            with respect to such interest; or
21                (ii) an item of interest paid, accrued, or
22            incurred, directly or indirectly, to a person if
23            the taxpayer can establish, based on a
24            preponderance of the evidence, both of the
25            following:
26                    (a) the person, during the same taxable

 

 

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1                year, paid, accrued, or incurred, the interest
2                to a person that is not a related member, and
3                    (b) the transaction giving rise to the
4                interest expense between the taxpayer and the
5                person did not have as a principal purpose the
6                avoidance of Illinois income tax, and is paid
7                pursuant to a contract or agreement that
8                reflects an arm's-length interest rate and
9                terms; or
10                (iii) the taxpayer can establish, based on
11            clear and convincing evidence, that the interest
12            paid, accrued, or incurred relates to a contract
13            or agreement entered into at arm's-length rates
14            and terms and the principal purpose for the
15            payment is not federal or Illinois tax avoidance;
16            or
17                (iv) an item of interest paid, accrued, or
18            incurred, directly or indirectly, to a person if
19            the taxpayer establishes by clear and convincing
20            evidence that the adjustments are unreasonable; or
21            if the taxpayer and the Director agree in writing
22            to the application or use of an alternative method
23            of apportionment under Section 304(f).
24                Nothing in this subsection shall preclude the
25            Director from making any other adjustment
26            otherwise allowed under Section 404 of this Act

 

 

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1            for any tax year beginning after the effective
2            date of this amendment provided such adjustment is
3            made pursuant to regulation adopted by the
4            Department and such regulations provide methods
5            and standards by which the Department will utilize
6            its authority under Section 404 of this Act;
7            (G-13) An amount equal to the amount of intangible
8        expenses and costs otherwise allowed as a deduction in
9        computing base income, and that were paid, accrued, or
10        incurred, directly or indirectly, (i) for taxable
11        years ending on or after December 31, 2004, to a
12        foreign person who would be a member of the same
13        unitary business group but for the fact that the
14        foreign person's business activity outside the United
15        States is 80% or more of that person's total business
16        activity and (ii) for taxable years ending on or after
17        December 31, 2008, to a person who would be a member of
18        the same unitary business group but for the fact that
19        the person is prohibited under Section 1501(a)(27)
20        from being included in the unitary business group
21        because he or she is ordinarily required to apportion
22        business income under different subsections of Section
23        304. The addition modification required by this
24        subparagraph shall be reduced to the extent that
25        dividends were included in base income of the unitary
26        group for the same taxable year and received by the

 

 

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1        taxpayer or by a member of the taxpayer's unitary
2        business group (including amounts included in gross
3        income pursuant to Sections 951 through 964 of the
4        Internal Revenue Code and amounts included in gross
5        income under Section 78 of the Internal Revenue Code)
6        with respect to the stock of the same person to whom
7        the intangible expenses and costs were directly or
8        indirectly paid, incurred, or accrued. The preceding
9        sentence shall not apply to the extent that the same
10        dividends caused a reduction to the addition
11        modification required under Section 203(c)(2)(G-12) of
12        this Act. As used in this subparagraph, the term
13        "intangible expenses and costs" includes: (1)
14        expenses, losses, and costs for or related to the
15        direct or indirect acquisition, use, maintenance or
16        management, ownership, sale, exchange, or any other
17        disposition of intangible property; (2) losses
18        incurred, directly or indirectly, from factoring
19        transactions or discounting transactions; (3) royalty,
20        patent, technical, and copyright fees; (4) licensing
21        fees; and (5) other similar expenses and costs. For
22        purposes of this subparagraph, "intangible property"
23        includes patents, patent applications, trade names,
24        trademarks, service marks, copyrights, mask works,
25        trade secrets, and similar types of intangible assets.
26            This paragraph shall not apply to the following:

 

 

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1                (i) any item of intangible expenses or costs
2            paid, accrued, or incurred, directly or
3            indirectly, from a transaction with a person who
4            is subject in a foreign country or state, other
5            than a state which requires mandatory unitary
6            reporting, to a tax on or measured by net income
7            with respect to such item; or
8                (ii) any item of intangible expense or cost
9            paid, accrued, or incurred, directly or
10            indirectly, if the taxpayer can establish, based
11            on a preponderance of the evidence, both of the
12            following:
13                    (a) the person during the same taxable
14                year paid, accrued, or incurred, the
15                intangible expense or cost to a person that is
16                not a related member, and
17                    (b) the transaction giving rise to the
18                intangible expense or cost between the
19                taxpayer and the person did not have as a
20                principal purpose the avoidance of Illinois
21                income tax, and is paid pursuant to a contract
22                or agreement that reflects arm's-length terms;
23                or
24                (iii) any item of intangible expense or cost
25            paid, accrued, or incurred, directly or
26            indirectly, from a transaction with a person if

 

 

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1            the taxpayer establishes by clear and convincing
2            evidence, that the adjustments are unreasonable;
3            or if the taxpayer and the Director agree in
4            writing to the application or use of an
5            alternative method of apportionment under Section
6            304(f);
7                Nothing in this subsection shall preclude the
8            Director from making any other adjustment
9            otherwise allowed under Section 404 of this Act
10            for any tax year beginning after the effective
11            date of this amendment provided such adjustment is
12            made pursuant to regulation adopted by the
13            Department and such regulations provide methods
14            and standards by which the Department will utilize
15            its authority under Section 404 of this Act;
16            (G-14) For taxable years ending on or after
17        December 31, 2008, an amount equal to the amount of
18        insurance premium expenses and costs otherwise allowed
19        as a deduction in computing base income, and that were
20        paid, accrued, or incurred, directly or indirectly, to
21        a person who would be a member of the same unitary
22        business group but for the fact that the person is
23        prohibited under Section 1501(a)(27) from being
24        included in the unitary business group because he or
25        she is ordinarily required to apportion business
26        income under different subsections of Section 304. The

 

 

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1        addition modification required by this subparagraph
2        shall be reduced to the extent that dividends were
3        included in base income of the unitary group for the
4        same taxable year and received by the taxpayer or by a
5        member of the taxpayer's unitary business group
6        (including amounts included in gross income under
7        Sections 951 through 964 of the Internal Revenue Code
8        and amounts included in gross income under Section 78
9        of the Internal Revenue Code) with respect to the
10        stock of the same person to whom the premiums and costs
11        were directly or indirectly paid, incurred, or
12        accrued. The preceding sentence does not apply to the
13        extent that the same dividends caused a reduction to
14        the addition modification required under Section
15        203(c)(2)(G-12) or Section 203(c)(2)(G-13) of this
16        Act;
17            (G-15) An amount equal to the credit allowable to
18        the taxpayer under Section 218(a) of this Act,
19        determined without regard to Section 218(c) of this
20        Act;
21            (G-16) For taxable years ending on or after
22        December 31, 2017, an amount equal to the deduction
23        allowed under Section 199 of the Internal Revenue Code
24        for the taxable year;
25            (G-17) For taxable years beginning on or after
26        January 1, 2021, the amount of gain that would be

 

 

HB3425- 67 -LRB102 14695 HLH 20048 b

1        included for federal income tax purposes without
2        regard to section 1400Z-2(b) of the Internal Revenue
3        Code; the adjustment made in this subparagraph does
4        not result in a difference in basis of the affected
5        assets for State and federal income tax purposes; the
6        purpose of this subparagraph is to decouple from the
7        deferral of gains reinvested into an Opportunity Fund
8        available under federal law; this subparagraph is
9        exempt from the provisions of Section 250;
10            (G-18) For taxable years beginning on or after
11        January 1, 2021, the amount of gain that would be
12        included in the taxpayer's federal taxable income but
13        for the step-up in basis under section 1400Z-2(c) of
14        the Internal Revenue Code; the purpose of this
15        subparagraph is to decouple from the exclusion of
16        gains from the sale or exchange of an investment in an
17        Opportunity Fund available under federal law; this
18        subparagraph is exempt from the provisions of Section
19        250;
20    and by deducting from the total so obtained the sum of the
21    following amounts:
22            (H) An amount equal to all amounts included in
23        such total pursuant to the provisions of Sections
24        402(a), 402(c), 403(a), 403(b), 406(a), 407(a) and 408
25        of the Internal Revenue Code or included in such total
26        as distributions under the provisions of any

 

 

HB3425- 68 -LRB102 14695 HLH 20048 b

1        retirement or disability plan for employees of any
2        governmental agency or unit, or retirement payments to
3        retired partners, which payments are excluded in
4        computing net earnings from self employment by Section
5        1402 of the Internal Revenue Code and regulations
6        adopted pursuant thereto;
7            (I) The valuation limitation amount;
8            (J) An amount equal to the amount of any tax
9        imposed by this Act which was refunded to the taxpayer
10        and included in such total for the taxable year;
11            (K) An amount equal to all amounts included in
12        taxable income as modified by subparagraphs (A), (B),
13        (C), (D), (E), (F) and (G) which are exempt from
14        taxation by this State either by reason of its
15        statutes or Constitution or by reason of the
16        Constitution, treaties or statutes of the United
17        States; provided that, in the case of any statute of
18        this State that exempts income derived from bonds or
19        other obligations from the tax imposed under this Act,
20        the amount exempted shall be the interest net of bond
21        premium amortization;
22            (L) With the exception of any amounts subtracted
23        under subparagraph (K), an amount equal to the sum of
24        all amounts disallowed as deductions by (i) Sections
25        171(a)(2) and 265(a)(2) of the Internal Revenue Code,
26        and all amounts of expenses allocable to interest and

 

 

HB3425- 69 -LRB102 14695 HLH 20048 b

1        disallowed as deductions by Section 265(a)(1) of the
2        Internal Revenue Code; and (ii) for taxable years
3        ending on or after August 13, 1999, Sections
4        171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
5        Internal Revenue Code, plus, (iii) for taxable years
6        ending on or after December 31, 2011, Section
7        45G(e)(3) of the Internal Revenue Code and, for
8        taxable years ending on or after December 31, 2008,
9        any amount included in gross income under Section 87
10        of the Internal Revenue Code; the provisions of this
11        subparagraph are exempt from the provisions of Section
12        250;
13            (M) An amount equal to those dividends included in
14        such total which were paid by a corporation which
15        conducts business operations in a River Edge
16        Redevelopment Zone or zones created under the River
17        Edge Redevelopment Zone Act and conducts substantially
18        all of its operations in a River Edge Redevelopment
19        Zone or zones. This subparagraph (M) is exempt from
20        the provisions of Section 250;
21            (N) An amount equal to any contribution made to a
22        job training project established pursuant to the Tax
23        Increment Allocation Redevelopment Act;
24            (O) An amount equal to those dividends included in
25        such total that were paid by a corporation that
26        conducts business operations in a federally designated

 

 

HB3425- 70 -LRB102 14695 HLH 20048 b

1        Foreign Trade Zone or Sub-Zone and that is designated
2        a High Impact Business located in Illinois; provided
3        that dividends eligible for the deduction provided in
4        subparagraph (M) of paragraph (2) of this subsection
5        shall not be eligible for the deduction provided under
6        this subparagraph (O);
7            (P) An amount equal to the amount of the deduction
8        used to compute the federal income tax credit for
9        restoration of substantial amounts held under claim of
10        right for the taxable year pursuant to Section 1341 of
11        the Internal Revenue Code;
12            (Q) For taxable year 1999 and thereafter, an
13        amount equal to the amount of any (i) distributions,
14        to the extent includible in gross income for federal
15        income tax purposes, made to the taxpayer because of
16        his or her status as a victim of persecution for racial
17        or religious reasons by Nazi Germany or any other Axis
18        regime or as an heir of the victim and (ii) items of
19        income, to the extent includible in gross income for
20        federal income tax purposes, attributable to, derived
21        from or in any way related to assets stolen from,
22        hidden from, or otherwise lost to a victim of
23        persecution for racial or religious reasons by Nazi
24        Germany or any other Axis regime immediately prior to,
25        during, and immediately after World War II, including,
26        but not limited to, interest on the proceeds

 

 

HB3425- 71 -LRB102 14695 HLH 20048 b

1        receivable as insurance under policies issued to a
2        victim of persecution for racial or religious reasons
3        by Nazi Germany or any other Axis regime by European
4        insurance companies immediately prior to and during
5        World War II; provided, however, this subtraction from
6        federal adjusted gross income does not apply to assets
7        acquired with such assets or with the proceeds from
8        the sale of such assets; provided, further, this
9        paragraph shall only apply to a taxpayer who was the
10        first recipient of such assets after their recovery
11        and who is a victim of persecution for racial or
12        religious reasons by Nazi Germany or any other Axis
13        regime or as an heir of the victim. The amount of and
14        the eligibility for any public assistance, benefit, or
15        similar entitlement is not affected by the inclusion
16        of items (i) and (ii) of this paragraph in gross income
17        for federal income tax purposes. This paragraph is
18        exempt from the provisions of Section 250;
19            (R) For taxable years 2001 and thereafter, for the
20        taxable year in which the bonus depreciation deduction
21        is taken on the taxpayer's federal income tax return
22        under subsection (k) of Section 168 of the Internal
23        Revenue Code and for each applicable taxable year
24        thereafter, an amount equal to "x", where:
25                (1) "y" equals the amount of the depreciation
26            deduction taken for the taxable year on the

 

 

HB3425- 72 -LRB102 14695 HLH 20048 b

1            taxpayer's federal income tax return on property
2            for which the bonus depreciation deduction was
3            taken in any year under subsection (k) of Section
4            168 of the Internal Revenue Code, but not
5            including the bonus depreciation deduction;
6                (2) for taxable years ending on or before
7            December 31, 2005, "x" equals "y" multiplied by 30
8            and then divided by 70 (or "y" multiplied by
9            0.429); and
10                (3) for taxable years ending after December
11            31, 2005:
12                    (i) for property on which a bonus
13                depreciation deduction of 30% of the adjusted
14                basis was taken, "x" equals "y" multiplied by
15                30 and then divided by 70 (or "y" multiplied
16                by 0.429); and
17                    (ii) for property on which a bonus
18                depreciation deduction of 50% of the adjusted
19                basis was taken, "x" equals "y" multiplied by
20                1.0.
21            The aggregate amount deducted under this
22        subparagraph in all taxable years for any one piece of
23        property may not exceed the amount of the bonus
24        depreciation deduction taken on that property on the
25        taxpayer's federal income tax return under subsection
26        (k) of Section 168 of the Internal Revenue Code. This

 

 

HB3425- 73 -LRB102 14695 HLH 20048 b

1        subparagraph (R) is exempt from the provisions of
2        Section 250;
3            (S) If the taxpayer sells, transfers, abandons, or
4        otherwise disposes of property for which the taxpayer
5        was required in any taxable year to make an addition
6        modification under subparagraph (G-10), then an amount
7        equal to that addition modification.
8            If the taxpayer continues to own property through
9        the last day of the last tax year for which the
10        taxpayer may claim a depreciation deduction for
11        federal income tax purposes and for which the taxpayer
12        was required in any taxable year to make an addition
13        modification under subparagraph (G-10), then an amount
14        equal to that addition modification.
15            The taxpayer is allowed to take the deduction
16        under this subparagraph only once with respect to any
17        one piece of property.
18            This subparagraph (S) is exempt from the
19        provisions of Section 250;
20            (T) The amount of (i) any interest income (net of
21        the deductions allocable thereto) taken into account
22        for the taxable year with respect to a transaction
23        with a taxpayer that is required to make an addition
24        modification with respect to such transaction under
25        Section 203(a)(2)(D-17), 203(b)(2)(E-12),
26        203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed

 

 

HB3425- 74 -LRB102 14695 HLH 20048 b

1        the amount of such addition modification and (ii) any
2        income from intangible property (net of the deductions
3        allocable thereto) taken into account for the taxable
4        year with respect to a transaction with a taxpayer
5        that is required to make an addition modification with
6        respect to such transaction under Section
7        203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
8        203(d)(2)(D-8), but not to exceed the amount of such
9        addition modification. This subparagraph (T) is exempt
10        from the provisions of Section 250;
11            (U) An amount equal to the interest income taken
12        into account for the taxable year (net of the
13        deductions allocable thereto) with respect to
14        transactions with (i) a foreign person who would be a
15        member of the taxpayer's unitary business group but
16        for the fact the foreign person's business activity
17        outside the United States is 80% or more of that
18        person's total business activity and (ii) for taxable
19        years ending on or after December 31, 2008, to a person
20        who would be a member of the same unitary business
21        group but for the fact that the person is prohibited
22        under Section 1501(a)(27) from being included in the
23        unitary business group because he or she is ordinarily
24        required to apportion business income under different
25        subsections of Section 304, but not to exceed the
26        addition modification required to be made for the same

 

 

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1        taxable year under Section 203(c)(2)(G-12) for
2        interest paid, accrued, or incurred, directly or
3        indirectly, to the same person. This subparagraph (U)
4        is exempt from the provisions of Section 250;
5            (V) An amount equal to the income from intangible
6        property taken into account for the taxable year (net
7        of the deductions allocable thereto) with respect to
8        transactions with (i) a foreign person who would be a
9        member of the taxpayer's unitary business group but
10        for the fact that the foreign person's business
11        activity outside the United States is 80% or more of
12        that person's total business activity and (ii) for
13        taxable years ending on or after December 31, 2008, to
14        a person who would be a member of the same unitary
15        business group but for the fact that the person is
16        prohibited under Section 1501(a)(27) from being
17        included in the unitary business group because he or
18        she is ordinarily required to apportion business
19        income under different subsections of Section 304, but
20        not to exceed the addition modification required to be
21        made for the same taxable year under Section
22        203(c)(2)(G-13) for intangible expenses and costs
23        paid, accrued, or incurred, directly or indirectly, to
24        the same foreign person. This subparagraph (V) is
25        exempt from the provisions of Section 250;
26            (W) in the case of an estate, an amount equal to

 

 

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1        all amounts included in such total pursuant to the
2        provisions of Section 111 of the Internal Revenue Code
3        as a recovery of items previously deducted by the
4        decedent from adjusted gross income in the computation
5        of taxable income. This subparagraph (W) is exempt
6        from Section 250;
7            (X) an amount equal to the refund included in such
8        total of any tax deducted for federal income tax
9        purposes, to the extent that deduction was added back
10        under subparagraph (F). This subparagraph (X) is
11        exempt from the provisions of Section 250;
12            (Y) For taxable years ending on or after December
13        31, 2011, in the case of a taxpayer who was required to
14        add back any insurance premiums under Section
15        203(c)(2)(G-14), such taxpayer may elect to subtract
16        that part of a reimbursement received from the
17        insurance company equal to the amount of the expense
18        or loss (including expenses incurred by the insurance
19        company) that would have been taken into account as a
20        deduction for federal income tax purposes if the
21        expense or loss had been uninsured. If a taxpayer
22        makes the election provided for by this subparagraph
23        (Y), the insurer to which the premiums were paid must
24        add back to income the amount subtracted by the
25        taxpayer pursuant to this subparagraph (Y). This
26        subparagraph (Y) is exempt from the provisions of

 

 

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1        Section 250; and
2            (Z) For taxable years beginning after December 31,
3        2018 and before January 1, 2026, the amount of excess
4        business loss of the taxpayer disallowed as a
5        deduction by Section 461(l)(1)(B) of the Internal
6        Revenue Code.
7        (3) Limitation. The amount of any modification
8    otherwise required under this subsection shall, under
9    regulations prescribed by the Department, be adjusted by
10    any amounts included therein which were properly paid,
11    credited, or required to be distributed, or permanently
12    set aside for charitable purposes pursuant to Internal
13    Revenue Code Section 642(c) during the taxable year.
 
14    (d) Partnerships.
15        (1) In general. In the case of a partnership, base
16    income means an amount equal to the taxpayer's taxable
17    income for the taxable year as modified by paragraph (2).
18        (2) Modifications. The taxable income referred to in
19    paragraph (1) shall be modified by adding thereto the sum
20    of the following amounts:
21            (A) An amount equal to all amounts paid or accrued
22        to the taxpayer as interest or dividends during the
23        taxable year to the extent excluded from gross income
24        in the computation of taxable income;
25            (B) An amount equal to the amount of tax imposed by

 

 

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1        this Act to the extent deducted from gross income for
2        the taxable year;
3            (C) The amount of deductions allowed to the
4        partnership pursuant to Section 707 (c) of the
5        Internal Revenue Code in calculating its taxable
6        income;
7            (D) An amount equal to the amount of the capital
8        gain deduction allowable under the Internal Revenue
9        Code, to the extent deducted from gross income in the
10        computation of taxable income;
11            (D-5) For taxable years 2001 and thereafter, an
12        amount equal to the bonus depreciation deduction taken
13        on the taxpayer's federal income tax return for the
14        taxable year under subsection (k) of Section 168 of
15        the Internal Revenue Code;
16            (D-6) If the taxpayer sells, transfers, abandons,
17        or otherwise disposes of property for which the
18        taxpayer was required in any taxable year to make an
19        addition modification under subparagraph (D-5), then
20        an amount equal to the aggregate amount of the
21        deductions taken in all taxable years under
22        subparagraph (O) with respect to that property.
23            If the taxpayer continues to own property through
24        the last day of the last tax year for which the
25        taxpayer may claim a depreciation deduction for
26        federal income tax purposes and for which the taxpayer

 

 

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1        was allowed in any taxable year to make a subtraction
2        modification under subparagraph (O), then an amount
3        equal to that subtraction modification.
4            The taxpayer is required to make the addition
5        modification under this subparagraph only once with
6        respect to any one piece of property;
7            (D-7) An amount equal to the amount otherwise
8        allowed as a deduction in computing base income for
9        interest paid, accrued, or incurred, directly or
10        indirectly, (i) for taxable years ending on or after
11        December 31, 2004, to a foreign person who would be a
12        member of the same unitary business group but for the
13        fact the foreign person's business activity outside
14        the United States is 80% or more of the foreign
15        person's total business activity and (ii) for taxable
16        years ending on or after December 31, 2008, to a person
17        who would be a member of the same unitary business
18        group but for the fact that the person is prohibited
19        under Section 1501(a)(27) from being included in the
20        unitary business group because he or she is ordinarily
21        required to apportion business income under different
22        subsections of Section 304. The addition modification
23        required by this subparagraph shall be reduced to the
24        extent that dividends were included in base income of
25        the unitary group for the same taxable year and
26        received by the taxpayer or by a member of the

 

 

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1        taxpayer's unitary business group (including amounts
2        included in gross income pursuant to Sections 951
3        through 964 of the Internal Revenue Code and amounts
4        included in gross income under Section 78 of the
5        Internal Revenue Code) with respect to the stock of
6        the same person to whom the interest was paid,
7        accrued, or incurred.
8            This paragraph shall not apply to the following:
9                (i) an item of interest paid, accrued, or
10            incurred, directly or indirectly, to a person who
11            is subject in a foreign country or state, other
12            than a state which requires mandatory unitary
13            reporting, to a tax on or measured by net income
14            with respect to such interest; or
15                (ii) an item of interest paid, accrued, or
16            incurred, directly or indirectly, to a person if
17            the taxpayer can establish, based on a
18            preponderance of the evidence, both of the
19            following:
20                    (a) the person, during the same taxable
21                year, paid, accrued, or incurred, the interest
22                to a person that is not a related member, and
23                    (b) the transaction giving rise to the
24                interest expense between the taxpayer and the
25                person did not have as a principal purpose the
26                avoidance of Illinois income tax, and is paid

 

 

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1                pursuant to a contract or agreement that
2                reflects an arm's-length interest rate and
3                terms; or
4                (iii) the taxpayer can establish, based on
5            clear and convincing evidence, that the interest
6            paid, accrued, or incurred relates to a contract
7            or agreement entered into at arm's-length rates
8            and terms and the principal purpose for the
9            payment is not federal or Illinois tax avoidance;
10            or
11                (iv) an item of interest paid, accrued, or
12            incurred, directly or indirectly, to a person if
13            the taxpayer establishes by clear and convincing
14            evidence that the adjustments are unreasonable; or
15            if the taxpayer and the Director agree in writing
16            to the application or use of an alternative method
17            of apportionment under Section 304(f).
18                Nothing in this subsection shall preclude the
19            Director from making any other adjustment
20            otherwise allowed under Section 404 of this Act
21            for any tax year beginning after the effective
22            date of this amendment provided such adjustment is
23            made pursuant to regulation adopted by the
24            Department and such regulations provide methods
25            and standards by which the Department will utilize
26            its authority under Section 404 of this Act; and

 

 

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1            (D-8) An amount equal to the amount of intangible
2        expenses and costs otherwise allowed as a deduction in
3        computing base income, and that were paid, accrued, or
4        incurred, directly or indirectly, (i) for taxable
5        years ending on or after December 31, 2004, to a
6        foreign person who would be a member of the same
7        unitary business group but for the fact that the
8        foreign person's business activity outside the United
9        States is 80% or more of that person's total business
10        activity and (ii) for taxable years ending on or after
11        December 31, 2008, to a person who would be a member of
12        the same unitary business group but for the fact that
13        the person is prohibited under Section 1501(a)(27)
14        from being included in the unitary business group
15        because he or she is ordinarily required to apportion
16        business income under different subsections of Section
17        304. The addition modification required by this
18        subparagraph shall be reduced to the extent that
19        dividends were included in base income of the unitary
20        group for the same taxable year and received by the
21        taxpayer or by a member of the taxpayer's unitary
22        business group (including amounts included in gross
23        income pursuant to Sections 951 through 964 of the
24        Internal Revenue Code and amounts included in gross
25        income under Section 78 of the Internal Revenue Code)
26        with respect to the stock of the same person to whom

 

 

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1        the intangible expenses and costs were directly or
2        indirectly paid, incurred or accrued. The preceding
3        sentence shall not apply to the extent that the same
4        dividends caused a reduction to the addition
5        modification required under Section 203(d)(2)(D-7) of
6        this Act. As used in this subparagraph, the term
7        "intangible expenses and costs" includes (1) expenses,
8        losses, and costs for, or related to, the direct or
9        indirect acquisition, use, maintenance or management,
10        ownership, sale, exchange, or any other disposition of
11        intangible property; (2) losses incurred, directly or
12        indirectly, from factoring transactions or discounting
13        transactions; (3) royalty, patent, technical, and
14        copyright fees; (4) licensing fees; and (5) other
15        similar expenses and costs. For purposes of this
16        subparagraph, "intangible property" includes patents,
17        patent applications, trade names, trademarks, service
18        marks, copyrights, mask works, trade secrets, and
19        similar types of intangible assets;
20            This paragraph shall not apply to the following:
21                (i) any item of intangible expenses or costs
22            paid, accrued, or incurred, directly or
23            indirectly, from a transaction with a person who
24            is subject in a foreign country or state, other
25            than a state which requires mandatory unitary
26            reporting, to a tax on or measured by net income

 

 

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1            with respect to such item; or
2                (ii) any item of intangible expense or cost
3            paid, accrued, or incurred, directly or
4            indirectly, if the taxpayer can establish, based
5            on a preponderance of the evidence, both of the
6            following:
7                    (a) the person during the same taxable
8                year paid, accrued, or incurred, the
9                intangible expense or cost to a person that is
10                not a related member, and
11                    (b) the transaction giving rise to the
12                intangible expense or cost between the
13                taxpayer and the person did not have as a
14                principal purpose the avoidance of Illinois
15                income tax, and is paid pursuant to a contract
16                or agreement that reflects arm's-length terms;
17                or
18                (iii) any item of intangible expense or cost
19            paid, accrued, or incurred, directly or
20            indirectly, from a transaction with a person if
21            the taxpayer establishes by clear and convincing
22            evidence, that the adjustments are unreasonable;
23            or if the taxpayer and the Director agree in
24            writing to the application or use of an
25            alternative method of apportionment under Section
26            304(f);

 

 

HB3425- 85 -LRB102 14695 HLH 20048 b

1                Nothing in this subsection shall preclude the
2            Director from making any other adjustment
3            otherwise allowed under Section 404 of this Act
4            for any tax year beginning after the effective
5            date of this amendment provided such adjustment is
6            made pursuant to regulation adopted by the
7            Department and such regulations provide methods
8            and standards by which the Department will utilize
9            its authority under Section 404 of this Act;
10            (D-9) For taxable years ending on or after
11        December 31, 2008, an amount equal to the amount of
12        insurance premium expenses and costs otherwise allowed
13        as a deduction in computing base income, and that were
14        paid, accrued, or incurred, directly or indirectly, to
15        a person who would be a member of the same unitary
16        business group but for the fact that the person is
17        prohibited under Section 1501(a)(27) from being
18        included in the unitary business group because he or
19        she is ordinarily required to apportion business
20        income under different subsections of Section 304. The
21        addition modification required by this subparagraph
22        shall be reduced to the extent that dividends were
23        included in base income of the unitary group for the
24        same taxable year and received by the taxpayer or by a
25        member of the taxpayer's unitary business group
26        (including amounts included in gross income under

 

 

HB3425- 86 -LRB102 14695 HLH 20048 b

1        Sections 951 through 964 of the Internal Revenue Code
2        and amounts included in gross income under Section 78
3        of the Internal Revenue Code) with respect to the
4        stock of the same person to whom the premiums and costs
5        were directly or indirectly paid, incurred, or
6        accrued. The preceding sentence does not apply to the
7        extent that the same dividends caused a reduction to
8        the addition modification required under Section
9        203(d)(2)(D-7) or Section 203(d)(2)(D-8) of this Act;
10            (D-10) An amount equal to the credit allowable to
11        the taxpayer under Section 218(a) of this Act,
12        determined without regard to Section 218(c) of this
13        Act;
14            (D-11) For taxable years ending on or after
15        December 31, 2017, an amount equal to the deduction
16        allowed under Section 199 of the Internal Revenue Code
17        for the taxable year;
18            (D-12) For taxable years beginning on or after
19        January 1, 2021, the amount of gain that would be
20        included for federal income tax purposes without
21        regard to section 1400Z-2(b) of the Internal Revenue
22        Code; the adjustment made in this subparagraph does
23        not result in a difference in basis of the affected
24        assets for State and federal income tax purposes; the
25        purpose of this subparagraph is to decouple from the
26        deferral of gains reinvested into an Opportunity Fund

 

 

HB3425- 87 -LRB102 14695 HLH 20048 b

1        available under federal law; this subparagraph is
2        exempt from the provisions of Section 250;
3            (D-13) For taxable years beginning on or after
4        January 1, 2021, the amount of gain that would be
5        included in the taxpayer's federal taxable income but
6        for the step-up in basis under section 1400Z-2(c) of
7        the Internal Revenue Code; the purpose of this
8        subparagraph is to decouple from the exclusion of
9        gains from the sale or exchange of an investment in an
10        Opportunity Fund available under federal law; this
11        subparagraph is exempt from the provisions of Section
12        250;
13    and by deducting from the total so obtained the following
14    amounts:
15            (E) The valuation limitation amount;
16            (F) An amount equal to the amount of any tax
17        imposed by this Act which was refunded to the taxpayer
18        and included in such total for the taxable year;
19            (G) An amount equal to all amounts included in
20        taxable income as modified by subparagraphs (A), (B),
21        (C) and (D) which are exempt from taxation by this
22        State either by reason of its statutes or Constitution
23        or by reason of the Constitution, treaties or statutes
24        of the United States; provided that, in the case of any
25        statute of this State that exempts income derived from
26        bonds or other obligations from the tax imposed under

 

 

HB3425- 88 -LRB102 14695 HLH 20048 b

1        this Act, the amount exempted shall be the interest
2        net of bond premium amortization;
3            (H) Any income of the partnership which
4        constitutes personal service income as defined in
5        Section 1348(b)(1) of the Internal Revenue Code (as in
6        effect December 31, 1981) or a reasonable allowance
7        for compensation paid or accrued for services rendered
8        by partners to the partnership, whichever is greater;
9        this subparagraph (H) is exempt from the provisions of
10        Section 250;
11            (I) An amount equal to all amounts of income
12        distributable to an entity subject to the Personal
13        Property Tax Replacement Income Tax imposed by
14        subsections (c) and (d) of Section 201 of this Act
15        including amounts distributable to organizations
16        exempt from federal income tax by reason of Section
17        501(a) of the Internal Revenue Code; this subparagraph
18        (I) is exempt from the provisions of Section 250;
19            (J) With the exception of any amounts subtracted
20        under subparagraph (G), an amount equal to the sum of
21        all amounts disallowed as deductions by (i) Sections
22        171(a)(2), and 265(a)(2) of the Internal Revenue Code,
23        and all amounts of expenses allocable to interest and
24        disallowed as deductions by Section 265(a)(1) of the
25        Internal Revenue Code; and (ii) for taxable years
26        ending on or after August 13, 1999, Sections

 

 

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1        171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
2        Internal Revenue Code, plus, (iii) for taxable years
3        ending on or after December 31, 2011, Section
4        45G(e)(3) of the Internal Revenue Code and, for
5        taxable years ending on or after December 31, 2008,
6        any amount included in gross income under Section 87
7        of the Internal Revenue Code; the provisions of this
8        subparagraph are exempt from the provisions of Section
9        250;
10            (K) An amount equal to those dividends included in
11        such total which were paid by a corporation which
12        conducts business operations in a River Edge
13        Redevelopment Zone or zones created under the River
14        Edge Redevelopment Zone Act and conducts substantially
15        all of its operations from a River Edge Redevelopment
16        Zone or zones. This subparagraph (K) is exempt from
17        the provisions of Section 250;
18            (L) An amount equal to any contribution made to a
19        job training project established pursuant to the Real
20        Property Tax Increment Allocation Redevelopment Act;
21            (M) An amount equal to those dividends included in
22        such total that were paid by a corporation that
23        conducts business operations in a federally designated
24        Foreign Trade Zone or Sub-Zone and that is designated
25        a High Impact Business located in Illinois; provided
26        that dividends eligible for the deduction provided in

 

 

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1        subparagraph (K) of paragraph (2) of this subsection
2        shall not be eligible for the deduction provided under
3        this subparagraph (M);
4            (N) An amount equal to the amount of the deduction
5        used to compute the federal income tax credit for
6        restoration of substantial amounts held under claim of
7        right for the taxable year pursuant to Section 1341 of
8        the Internal Revenue Code;
9            (O) For taxable years 2001 and thereafter, for the
10        taxable year in which the bonus depreciation deduction
11        is taken on the taxpayer's federal income tax return
12        under subsection (k) of Section 168 of the Internal
13        Revenue Code and for each applicable taxable year
14        thereafter, an amount equal to "x", where:
15                (1) "y" equals the amount of the depreciation
16            deduction taken for the taxable year on the
17            taxpayer's federal income tax return on property
18            for which the bonus depreciation deduction was
19            taken in any year under subsection (k) of Section
20            168 of the Internal Revenue Code, but not
21            including the bonus depreciation deduction;
22                (2) for taxable years ending on or before
23            December 31, 2005, "x" equals "y" multiplied by 30
24            and then divided by 70 (or "y" multiplied by
25            0.429); and
26                (3) for taxable years ending after December

 

 

HB3425- 91 -LRB102 14695 HLH 20048 b

1            31, 2005:
2                    (i) for property on which a bonus
3                depreciation deduction of 30% of the adjusted
4                basis was taken, "x" equals "y" multiplied by
5                30 and then divided by 70 (or "y" multiplied
6                by 0.429); and
7                    (ii) for property on which a bonus
8                depreciation deduction of 50% of the adjusted
9                basis was taken, "x" equals "y" multiplied by
10                1.0.
11            The aggregate amount deducted under this
12        subparagraph in all taxable years for any one piece of
13        property may not exceed the amount of the bonus
14        depreciation deduction taken on that property on the
15        taxpayer's federal income tax return under subsection
16        (k) of Section 168 of the Internal Revenue Code. This
17        subparagraph (O) is exempt from the provisions of
18        Section 250;
19            (P) If the taxpayer sells, transfers, abandons, or
20        otherwise disposes of property for which the taxpayer
21        was required in any taxable year to make an addition
22        modification under subparagraph (D-5), then an amount
23        equal to that addition modification.
24            If the taxpayer continues to own property through
25        the last day of the last tax year for which the
26        taxpayer may claim a depreciation deduction for

 

 

HB3425- 92 -LRB102 14695 HLH 20048 b

1        federal income tax purposes and for which the taxpayer
2        was required in any taxable year to make an addition
3        modification under subparagraph (D-5), then an amount
4        equal to that addition modification.
5            The taxpayer is allowed to take the deduction
6        under this subparagraph only once with respect to any
7        one piece of property.
8            This subparagraph (P) is exempt from the
9        provisions of Section 250;
10            (Q) The amount of (i) any interest income (net of
11        the deductions allocable thereto) taken into account
12        for the taxable year with respect to a transaction
13        with a taxpayer that is required to make an addition
14        modification with respect to such transaction under
15        Section 203(a)(2)(D-17), 203(b)(2)(E-12),
16        203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
17        the amount of such addition modification and (ii) any
18        income from intangible property (net of the deductions
19        allocable thereto) taken into account for the taxable
20        year with respect to a transaction with a taxpayer
21        that is required to make an addition modification with
22        respect to such transaction under Section
23        203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
24        203(d)(2)(D-8), but not to exceed the amount of such
25        addition modification. This subparagraph (Q) is exempt
26        from Section 250;

 

 

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1            (R) An amount equal to the interest income taken
2        into account for the taxable year (net of the
3        deductions allocable thereto) with respect to
4        transactions with (i) a foreign person who would be a
5        member of the taxpayer's unitary business group but
6        for the fact that the foreign person's business
7        activity outside the United States is 80% or more of
8        that person's total business activity and (ii) for
9        taxable years ending on or after December 31, 2008, to
10        a person who would be a member of the same unitary
11        business group but for the fact that the person is
12        prohibited under Section 1501(a)(27) from being
13        included in the unitary business group because he or
14        she is ordinarily required to apportion business
15        income under different subsections of Section 304, but
16        not to exceed the addition modification required to be
17        made for the same taxable year under Section
18        203(d)(2)(D-7) for interest paid, accrued, or
19        incurred, directly or indirectly, to the same person.
20        This subparagraph (R) is exempt from Section 250;
21            (S) An amount equal to the income from intangible
22        property taken into account for the taxable year (net
23        of the deductions allocable thereto) with respect to
24        transactions with (i) a foreign person who would be a
25        member of the taxpayer's unitary business group but
26        for the fact that the foreign person's business

 

 

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1        activity outside the United States is 80% or more of
2        that person's total business activity and (ii) for
3        taxable years ending on or after December 31, 2008, to
4        a person who would be a member of the same unitary
5        business group but for the fact that the person is
6        prohibited under Section 1501(a)(27) from being
7        included in the unitary business group because he or
8        she is ordinarily required to apportion business
9        income under different subsections of Section 304, but
10        not to exceed the addition modification required to be
11        made for the same taxable year under Section
12        203(d)(2)(D-8) for intangible expenses and costs paid,
13        accrued, or incurred, directly or indirectly, to the
14        same person. This subparagraph (S) is exempt from
15        Section 250; and
16            (T) For taxable years ending on or after December
17        31, 2011, in the case of a taxpayer who was required to
18        add back any insurance premiums under Section
19        203(d)(2)(D-9), such taxpayer may elect to subtract
20        that part of a reimbursement received from the
21        insurance company equal to the amount of the expense
22        or loss (including expenses incurred by the insurance
23        company) that would have been taken into account as a
24        deduction for federal income tax purposes if the
25        expense or loss had been uninsured. If a taxpayer
26        makes the election provided for by this subparagraph

 

 

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1        (T), the insurer to which the premiums were paid must
2        add back to income the amount subtracted by the
3        taxpayer pursuant to this subparagraph (T). This
4        subparagraph (T) is exempt from the provisions of
5        Section 250.
 
6    (e) Gross income; adjusted gross income; taxable income.
7        (1) In general. Subject to the provisions of paragraph
8    (2) and subsection (b)(3), for purposes of this Section
9    and Section 803(e), a taxpayer's gross income, adjusted
10    gross income, or taxable income for the taxable year shall
11    mean the amount of gross income, adjusted gross income or
12    taxable income properly reportable for federal income tax
13    purposes for the taxable year under the provisions of the
14    Internal Revenue Code. Taxable income may be less than
15    zero. However, for taxable years ending on or after
16    December 31, 1986, net operating loss carryforwards from
17    taxable years ending prior to December 31, 1986, may not
18    exceed the sum of federal taxable income for the taxable
19    year before net operating loss deduction, plus the excess
20    of addition modifications over subtraction modifications
21    for the taxable year. For taxable years ending prior to
22    December 31, 1986, taxable income may never be an amount
23    in excess of the net operating loss for the taxable year as
24    defined in subsections (c) and (d) of Section 172 of the
25    Internal Revenue Code, provided that when taxable income

 

 

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1    of a 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 or
5    subparagraph (E) of paragraph (2) of subsection (c) for
6    trusts and estates, exceed subtraction modifications, an
7    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 subsection
12    (e) applied in conjunction with Section 172 of the
13    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 case
18        of a life insurance company subject to the tax imposed
19        by Section 801 of the Internal Revenue Code, life
20        insurance company taxable income, plus the amount of
21        distribution from pre-1984 policyholder surplus
22        accounts as calculated under Section 815a of the
23        Internal Revenue Code;
24            (B) Certain other insurance companies. In the case
25        of mutual insurance companies subject to the tax
26        imposed by Section 831 of the Internal Revenue Code,

 

 

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1        insurance company taxable income;
2            (C) Regulated investment companies. In the case of
3        a regulated investment company subject to the tax
4        imposed by Section 852 of the Internal Revenue Code,
5        investment company taxable income;
6            (D) Real estate investment trusts. In the case of
7        a real estate investment trust subject to the tax
8        imposed by Section 857 of the Internal Revenue Code,
9        real estate investment trust taxable income;
10            (E) Consolidated corporations. In the case of a
11        corporation which is a member of an affiliated group
12        of corporations filing a consolidated income tax
13        return for the taxable year for federal income tax
14        purposes, taxable income determined as if such
15        corporation had filed a separate return for federal
16        income tax purposes for the taxable year and each
17        preceding taxable year for which it was a member of an
18        affiliated group. For purposes of this subparagraph,
19        the taxpayer's separate taxable income shall be
20        determined as if the election provided by Section
21        243(b)(2) of the Internal Revenue Code had been in
22        effect for all such years;
23            (F) Cooperatives. In the case of a cooperative
24        corporation or association, the taxable income of such
25        organization determined in accordance with the
26        provisions of Section 1381 through 1388 of the

 

 

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1        Internal Revenue Code, but without regard to the
2        prohibition against offsetting losses from patronage
3        activities against income from nonpatronage
4        activities; except that a cooperative corporation or
5        association may make an election to follow its federal
6        income tax treatment of patronage losses and
7        nonpatronage losses. In the event such election is
8        made, such losses shall be computed and carried over
9        in a manner consistent with subsection (a) of Section
10        207 of this Act and apportioned by the apportionment
11        factor reported by the cooperative on its Illinois
12        income tax return filed for the taxable year in which
13        the losses are incurred. The election shall be
14        effective for all taxable years with original returns
15        due on or after the date of the election. In addition,
16        the cooperative may file an amended return or returns,
17        as allowed under this Act, to provide that the
18        election shall be effective for losses incurred or
19        carried forward for taxable years occurring prior to
20        the date of the election. Once made, the election may
21        only be revoked upon approval of the Director. The
22        Department shall adopt rules setting forth
23        requirements for documenting the elections and any
24        resulting Illinois net loss and the standards to be
25        used by the Director in evaluating requests to revoke
26        elections. Public Act 96-932 is declaratory of

 

 

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1        existing law;
2            (G) Subchapter S corporations. In the case of: (i)
3        a Subchapter S corporation for which there is in
4        effect an election for the taxable year under Section
5        1362 of the Internal Revenue Code, the taxable income
6        of such corporation determined in accordance with
7        Section 1363(b) of the Internal Revenue Code, except
8        that taxable income shall take into account those
9        items which are required by Section 1363(b)(1) of the
10        Internal Revenue Code to be separately stated; and
11        (ii) a Subchapter S corporation for which there is in
12        effect a federal election to opt out of the provisions
13        of the Subchapter S Revision Act of 1982 and have
14        applied instead the prior federal Subchapter S rules
15        as in effect on July 1, 1982, the taxable income of
16        such corporation determined in accordance with the
17        federal Subchapter S rules as in effect on July 1,
18        1982; and
19            (H) Partnerships. In the case of a partnership,
20        taxable income determined in accordance with Section
21        703 of the Internal Revenue Code, except that taxable
22        income shall take into account those items which are
23        required by Section 703(a)(1) to be separately stated
24        but which would be taken into account by an individual
25        in calculating his taxable income.
26        (3) Recapture of business expenses on disposition of

 

 

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1    asset or business. Notwithstanding any other law to the
2    contrary, if in prior years income from an asset or
3    business has been classified as business income and in a
4    later year is demonstrated to be non-business income, then
5    all expenses, without limitation, deducted in such later
6    year and in the 2 immediately preceding taxable years
7    related to that asset or business that generated the
8    non-business income shall be added back and recaptured as
9    business income in the year of the disposition of the
10    asset or business. Such amount shall be apportioned to
11    Illinois using the greater of the apportionment fraction
12    computed for the business under Section 304 of this Act
13    for the taxable year or the average of the apportionment
14    fractions computed for the business under Section 304 of
15    this Act for the taxable year and for the 2 immediately
16    preceding taxable years.
 
17    (f) Valuation limitation amount.
18        (1) In general. The valuation limitation amount
19    referred to in subsections (a)(2)(G), (c)(2)(I) and
20    (d)(2)(E) is an amount equal to:
21            (A) The sum of the pre-August 1, 1969 appreciation
22        amounts (to the extent consisting of gain reportable
23        under the provisions of Section 1245 or 1250 of the
24        Internal Revenue Code) for all property in respect of
25        which such gain was reported for the taxable year;

 

 

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1        plus
2            (B) The lesser of (i) the sum of the pre-August 1,
3        1969 appreciation amounts (to the extent consisting of
4        capital gain) for all property in respect of which
5        such gain was reported for federal income tax purposes
6        for the taxable year, or (ii) the net capital gain for
7        the taxable year, reduced in either case by any amount
8        of such gain included in the amount determined under
9        subsection (a)(2)(F) or (c)(2)(H).
10        (2) Pre-August 1, 1969 appreciation amount.
11            (A) If the fair market value of property referred
12        to in paragraph (1) was readily ascertainable on
13        August 1, 1969, the pre-August 1, 1969 appreciation
14        amount for such property is the lesser of (i) the
15        excess of such fair market value over the taxpayer's
16        basis (for determining gain) for such property on that
17        date (determined under the Internal Revenue Code as in
18        effect on that date), or (ii) the total gain realized
19        and reportable for federal income tax purposes in
20        respect of the sale, exchange or other disposition of
21        such property.
22            (B) If the fair market value of property referred
23        to in paragraph (1) was not readily ascertainable on
24        August 1, 1969, the pre-August 1, 1969 appreciation
25        amount for such property is that amount which bears
26        the same ratio to the total gain reported in respect of

 

 

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1        the property for federal income tax purposes for the
2        taxable year, as the number of full calendar months in
3        that part of the taxpayer's holding period for the
4        property ending July 31, 1969 bears to the number of
5        full calendar months in the taxpayer's entire holding
6        period for the property.
7            (C) The Department shall prescribe such
8        regulations as may be necessary to carry out the
9        purposes of this paragraph.
 
10    (g) Double deductions. Unless specifically provided
11otherwise, nothing in this Section shall permit the same item
12to be deducted more than once.
 
13    (h) Legislative intention. Except as expressly provided by
14this Section there shall be no modifications or limitations on
15the amounts of income, gain, loss or deduction taken into
16account in determining gross income, adjusted gross income or
17taxable income for federal income tax purposes for the taxable
18year, or in the amount of such items entering into the
19computation of base income and net income under this Act for
20such taxable year, whether in respect of property values as of
21August 1, 1969 or otherwise.
22(Source: P.A. 100-22, eff. 7-6-17; 100-905, eff. 8-17-18;
23101-9, eff. 6-5-19; 101-81, eff. 7-12-19; revised 9-20-19.)
 
24    Section 99. Effective date. This Act takes effect upon

 

 

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1becoming law.