102ND GENERAL ASSEMBLY
State of Illinois
2021 and 2022
HB3477

 

Introduced 2/22/2021, by Rep. Delia C. Ramirez

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 5/304  from Ch. 120, par. 3-304
35 ILCS 5/304.1 new
35 ILCS 5/1501  from Ch. 120, par. 15-1501

    Amends the Illinois Income Tax Act. Provides that all the corporations, wherever incorporated or domiciled, that are members of a unitary business shall file a combined return as a combined group. Makes changes to the definition of "unitary business". Contains provisions concerning a water's edge election. Provides that, with respect to unitary business groups, "United States" means the 50 states of the United States, the District of Columbia, and United States' territories and possessions.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB3477LRB102 14698 HLH 20051 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 Sections 304, 304.1, 1501 as follows:
 
6    (35 ILCS 5/304)  (from Ch. 120, par. 3-304)
7    Sec. 304. Business income of persons other than residents.
8    (a) In general. The business income of a person other than
9a resident shall be allocated to this State if such person's
10business income is derived solely from this State. If a person
11other than a resident derives business income from this State
12and one or more other states, then, for tax years ending on or
13before December 30, 1998, and except as otherwise provided by
14this Section, such person's business income shall be
15apportioned to this State by multiplying the income by a
16fraction, the numerator of which is the sum of the property
17factor (if any), the payroll factor (if any) and 200% of the
18sales factor (if any), and the denominator of which is 4
19reduced by the number of factors other than the sales factor
20which have a denominator of zero and by an additional 2 if the
21sales factor has a denominator of zero. For tax years ending on
22or after December 31, 1998, and except as otherwise provided
23by this Section, persons other than residents who derive

 

 

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1business income from this State and one or more other states
2shall compute their apportionment factor by weighting their
3property, payroll, and sales factors as provided in subsection
4(h) of this Section.
5    (1) Property factor.
6        (A) The property factor is a fraction, the numerator
7    of which is the average value of the person's real and
8    tangible personal property owned or rented and used in the
9    trade or business in this State during the taxable year
10    and the denominator of which is the average value of all
11    the person's real and tangible personal property owned or
12    rented and used in the trade or business during the
13    taxable year.
14        (B) Property owned by the person is valued at its
15    original cost. Property rented by the person is valued at
16    8 times the net annual rental rate. Net annual rental rate
17    is the annual rental rate paid by the person less any
18    annual rental rate received by the person from
19    sub-rentals.
20        (C) The average value of property shall be determined
21    by averaging the values at the beginning and ending of the
22    taxable year but the Director may require the averaging of
23    monthly values during the taxable year if reasonably
24    required to reflect properly the average value of the
25    person's property.
26    (2) Payroll factor.

 

 

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1        (A) The payroll factor is a fraction, the numerator of
2    which is the total amount paid in this State during the
3    taxable year by the person for compensation, and the
4    denominator of which is the total compensation paid
5    everywhere during the taxable year.
6        (B) Compensation is paid in this State if:
7            (i) The individual's service is performed entirely
8        within this State;
9            (ii) The individual's service is performed both
10        within and without this State, but the service
11        performed without this State is incidental to the
12        individual's service performed within this State; or
13            (iii) For tax years ending prior to December 31,
14        2020, some of the service is performed within this
15        State and either the base of operations, or if there is
16        no base of operations, the place from which the
17        service is directed or controlled is within this
18        State, or the base of operations or the place from
19        which the service is directed or controlled is not in
20        any state in which some part of the service is
21        performed, but the individual's residence is in this
22        State. For tax years ending on or after December 31,
23        2020, compensation is paid in this State if some of the
24        individual's service is performed within this State,
25        the individual's service performed within this State
26        is nonincidental to the individual's service performed

 

 

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1        without this State, and the individual's service is
2        performed within this State for more than 30 working
3        days during the tax year. The amount of compensation
4        paid in this State shall include the portion of the
5        individual's total compensation for services performed
6        on behalf of his or her employer during the tax year
7        which the number of working days spent within this
8        State during the tax year bears to the total number of
9        working days spent both within and without this State
10        during the tax year. For purposes of this paragraph:
11                (a) The term "working day" means all days
12            during the tax year in which the individual
13            performs duties on behalf of his or her employer.
14            All days in which the individual performs no
15            duties on behalf of his or her employer (e.g.,
16            weekends, vacation days, sick days, and holidays)
17            are not working days.
18                (b) A working day is spent within this State
19            if:
20                    (1) the individual performs service on
21                behalf of the employer and a greater amount of
22                time on that day is spent by the individual
23                performing duties on behalf of the employer
24                within this State, without regard to time
25                spent traveling, than is spent performing
26                duties on behalf of the employer without this

 

 

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1                State; or
2                    (2) the only service the individual
3                performs on behalf of the employer on that day
4                is traveling to a destination within this
5                State, and the individual arrives on that day.
6                (c) Working days spent within this State do
7            not include any day in which the employee is
8            performing services in this State during a
9            disaster period solely in response to a request
10            made to his or her employer by the government of
11            this State, by any political subdivision of this
12            State, or by a person conducting business in this
13            State to perform disaster or emergency-related
14            services in this State. For purposes of this item
15            (c):
16                    "Declared State disaster or emergency"
17                means a disaster or emergency event (i) for
18                which a Governor's proclamation of a state of
19                emergency has been issued or (ii) for which a
20                Presidential declaration of a federal major
21                disaster or emergency has been issued.
22                    "Disaster period" means a period that
23                begins 10 days prior to the date of the
24                Governor's proclamation or the President's
25                declaration (whichever is earlier) and extends
26                for a period of 60 calendar days after the end

 

 

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1                of the declared disaster or emergency period.
2                    "Disaster or emergency-related services"
3                means repairing, renovating, installing,
4                building, or rendering services or conducting
5                other business activities that relate to
6                infrastructure that has been damaged,
7                impaired, or destroyed by the declared State
8                disaster or emergency.
9                    "Infrastructure" means property and
10                equipment owned or used by a public utility,
11                communications network, broadband and internet
12                service provider, cable and video service
13                provider, electric or gas distribution system,
14                or water pipeline that provides service to
15                more than one customer or person, including
16                related support facilities. "Infrastructure"
17                includes, but is not limited to, real and
18                personal property such as buildings, offices,
19                power lines, cable lines, poles,
20                communications lines, pipes, structures, and
21                equipment.
22            (iv) Compensation paid to nonresident professional
23        athletes.
24            (a) General. The Illinois source income of a
25        nonresident individual who is a member of a
26        professional athletic team includes the portion of the

 

 

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1        individual's total compensation for services performed
2        as a member of a professional athletic team during the
3        taxable year which the number of duty days spent
4        within this State performing services for the team in
5        any manner during the taxable year bears to the total
6        number of duty days spent both within and without this
7        State during the taxable year.
8            (b) Travel days. Travel days that do not involve
9        either a game, practice, team meeting, or other
10        similar team event are not considered duty days spent
11        in this State. However, such travel days are
12        considered in the total duty days spent both within
13        and without this State.
14            (c) Definitions. For purposes of this subpart
15        (iv):
16                (1) The term "professional athletic team"
17            includes, but is not limited to, any professional
18            baseball, basketball, football, soccer, or hockey
19            team.
20                (2) The term "member of a professional
21            athletic team" includes those employees who are
22            active players, players on the disabled list, and
23            any other persons required to travel and who
24            travel with and perform services on behalf of a
25            professional athletic team on a regular basis.
26            This includes, but is not limited to, coaches,

 

 

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1            managers, and trainers.
2                (3) Except as provided in items (C) and (D) of
3            this subpart (3), the term "duty days" means all
4            days during the taxable year from the beginning of
5            the professional athletic team's official
6            pre-season training period through the last game
7            in which the team competes or is scheduled to
8            compete. Duty days shall be counted for the year
9            in which they occur, including where a team's
10            official pre-season training period through the
11            last game in which the team competes or is
12            scheduled to compete, occurs during more than one
13            tax year.
14                    (A) Duty days shall also include days on
15                which a member of a professional athletic team
16                performs service for a team on a date that
17                does not fall within the foregoing period
18                (e.g., participation in instructional leagues,
19                the "All Star Game", or promotional
20                "caravans"). Performing a service for a
21                professional athletic team includes conducting
22                training and rehabilitation activities, when
23                such activities are conducted at team
24                facilities.
25                    (B) Also included in duty days are game
26                days, practice days, days spent at team

 

 

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1                meetings, promotional caravans, preseason
2                training camps, and days served with the team
3                through all post-season games in which the
4                team competes or is scheduled to compete.
5                    (C) Duty days for any person who joins a
6                team during the period from the beginning of
7                the professional athletic team's official
8                pre-season training period through the last
9                game in which the team competes, or is
10                scheduled to compete, shall begin on the day
11                that person joins the team. Conversely, duty
12                days for any person who leaves a team during
13                this period shall end on the day that person
14                leaves the team. Where a person switches teams
15                during a taxable year, a separate duty-day
16                calculation shall be made for the period the
17                person was with each team.
18                    (D) Days for which a member of a
19                professional athletic team is not compensated
20                and is not performing services for the team in
21                any manner, including days when such member of
22                a professional athletic team has been
23                suspended without pay and prohibited from
24                performing any services for the team, shall
25                not be treated as duty days.
26                    (E) Days for which a member of a

 

 

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1                professional athletic team is on the disabled
2                list and does not conduct rehabilitation
3                activities at facilities of the team, and is
4                not otherwise performing services for the team
5                in Illinois, shall not be considered duty days
6                spent in this State. All days on the disabled
7                list, however, are considered to be included
8                in total duty days spent both within and
9                without this State.
10                (4) The term "total compensation for services
11            performed as a member of a professional athletic
12            team" means the total compensation received during
13            the taxable year for services performed:
14                    (A) from the beginning of the official
15                pre-season training period through the last
16                game in which the team competes or is
17                scheduled to compete during that taxable year;
18                and
19                    (B) during the taxable year on a date
20                which does not fall within the foregoing
21                period (e.g., participation in instructional
22                leagues, the "All Star Game", or promotional
23                caravans).
24                This compensation shall include, but is not
25            limited to, salaries, wages, bonuses as described
26            in this subpart, and any other type of

 

 

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1            compensation paid during the taxable year to a
2            member of a professional athletic team for
3            services performed in that year. This compensation
4            does not include strike benefits, severance pay,
5            termination pay, contract or option year buy-out
6            payments, expansion or relocation payments, or any
7            other payments not related to services performed
8            for the team.
9                For purposes of this subparagraph, "bonuses"
10            included in "total compensation for services
11            performed as a member of a professional athletic
12            team" subject to the allocation described in
13            Section 302(c)(1) are: bonuses earned as a result
14            of play (i.e., performance bonuses) during the
15            season, including bonuses paid for championship,
16            playoff or "bowl" games played by a team, or for
17            selection to all-star league or other honorary
18            positions; and bonuses paid for signing a
19            contract, unless the payment of the signing bonus
20            is not conditional upon the signee playing any
21            games for the team or performing any subsequent
22            services for the team or even making the team, the
23            signing bonus is payable separately from the
24            salary and any other compensation, and the signing
25            bonus is nonrefundable.
26    (3) Sales factor.

 

 

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1        (A) The sales factor is a fraction, the numerator of
2    which is the total sales of the person in this State during
3    the taxable year, and the denominator of which is the
4    total sales of the person everywhere during the taxable
5    year.
6        (B) Sales of tangible personal property are in this
7    State if:
8            (i) The property is delivered or shipped to a
9        purchaser, other than the United States government,
10        within this State regardless of the f. o. b. point or
11        other conditions of the sale; or
12            (ii) The property is shipped from an office,
13        store, warehouse, factory or other place of storage in
14        this State and either the purchaser is the United
15        States government or the person is not taxable in the
16        state of the purchaser; provided, however, that
17        premises owned or leased by a person who has
18        independently contracted with the seller for the
19        printing of newspapers, periodicals or books shall not
20        be deemed to be an office, store, warehouse, factory
21        or other place of storage for purposes of this
22        Section. Sales of tangible personal property are not
23        in this State if the seller and purchaser would be
24        members of the same unitary business group but for the
25        fact that either the seller or purchaser is a person
26        with 80% or more of total business activity outside of

 

 

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1        the United States and the property is purchased for
2        resale.
3        (B-1) Patents, copyrights, trademarks, and similar
4    items of intangible personal property.
5            (i) Gross receipts from the licensing, sale, or
6        other disposition of a patent, copyright, trademark,
7        or similar item of intangible personal property, other
8        than gross receipts governed by paragraph (B-7) of
9        this item (3), are in this State to the extent the item
10        is utilized in this State during the year the gross
11        receipts are included in gross income.
12            (ii) Place of utilization.
13                (I) A patent is utilized in a state to the
14            extent that it is employed in production,
15            fabrication, manufacturing, or other processing in
16            the state or to the extent that a patented product
17            is produced in the state. If a patent is utilized
18            in more than one state, the extent to which it is
19            utilized in any one state shall be a fraction
20            equal to the gross receipts of the licensee or
21            purchaser from sales or leases of items produced,
22            fabricated, manufactured, or processed within that
23            state using the patent and of patented items
24            produced within that state, divided by the total
25            of such gross receipts for all states in which the
26            patent is utilized.

 

 

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1                (II) A copyright is utilized in a state to the
2            extent that printing or other publication
3            originates in the state. If a copyright is
4            utilized in more than one state, the extent to
5            which it is utilized in any one state shall be a
6            fraction equal to the gross receipts from sales or
7            licenses of materials printed or published in that
8            state divided by the total of such gross receipts
9            for all states in which the copyright is utilized.
10                (III) Trademarks and other items of intangible
11            personal property governed by this paragraph (B-1)
12            are utilized in the state in which the commercial
13            domicile of the licensee or purchaser is located.
14            (iii) If the state of utilization of an item of
15        property governed by this paragraph (B-1) cannot be
16        determined from the taxpayer's books and records or
17        from the books and records of any person related to the
18        taxpayer within the meaning of Section 267(b) of the
19        Internal Revenue Code, 26 U.S.C. 267, the gross
20        receipts attributable to that item shall be excluded
21        from both the numerator and the denominator of the
22        sales factor.
23        (B-2) Gross receipts from the license, sale, or other
24    disposition of patents, copyrights, trademarks, and
25    similar items of intangible personal property, other than
26    gross receipts governed by paragraph (B-7) of this item

 

 

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1    (3), may be included in the numerator or denominator of
2    the sales factor only if gross receipts from licenses,
3    sales, or other disposition of such items comprise more
4    than 50% of the taxpayer's total gross receipts included
5    in gross income during the tax year and during each of the
6    2 immediately preceding tax years; provided that, when a
7    taxpayer is a member of a unitary business group, such
8    determination shall be made on the basis of the gross
9    receipts of the entire unitary business group.
10        (B-5) For taxable years ending on or after December
11    31, 2008, except as provided in subsections (ii) through
12    (vii), receipts from the sale of telecommunications
13    service or mobile telecommunications service are in this
14    State if the customer's service address is in this State.
15            (i) For purposes of this subparagraph (B-5), the
16        following terms have the following meanings:
17            "Ancillary services" means services that are
18        associated with or incidental to the provision of
19        "telecommunications services", including, but not
20        limited to, "detailed telecommunications billing",
21        "directory assistance", "vertical service", and "voice
22        mail services".
23            "Air-to-Ground Radiotelephone service" means a
24        radio service, as that term is defined in 47 CFR 22.99,
25        in which common carriers are authorized to offer and
26        provide radio telecommunications service for hire to

 

 

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1        subscribers in aircraft.
2            "Call-by-call Basis" means any method of charging
3        for telecommunications services where the price is
4        measured by individual calls.
5            "Communications Channel" means a physical or
6        virtual path of communications over which signals are
7        transmitted between or among customer channel
8        termination points.
9            "Conference bridging service" means an "ancillary
10        service" that links two or more participants of an
11        audio or video conference call and may include the
12        provision of a telephone number. "Conference bridging
13        service" does not include the "telecommunications
14        services" used to reach the conference bridge.
15            "Customer Channel Termination Point" means the
16        location where the customer either inputs or receives
17        the communications.
18            "Detailed telecommunications billing service"
19        means an "ancillary service" of separately stating
20        information pertaining to individual calls on a
21        customer's billing statement.
22            "Directory assistance" means an "ancillary
23        service" of providing telephone number information,
24        and/or address information.
25            "Home service provider" means the facilities based
26        carrier or reseller with which the customer contracts

 

 

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1        for the provision of mobile telecommunications
2        services.
3            "Mobile telecommunications service" means
4        commercial mobile radio service, as defined in Section
5        20.3 of Title 47 of the Code of Federal Regulations as
6        in effect on June 1, 1999.
7            "Place of primary use" means the street address
8        representative of where the customer's use of the
9        telecommunications service primarily occurs, which
10        must be the residential street address or the primary
11        business street address of the customer. In the case
12        of mobile telecommunications services, "place of
13        primary use" must be within the licensed service area
14        of the home service provider.
15            "Post-paid telecommunication service" means the
16        telecommunications service obtained by making a
17        payment on a call-by-call basis either through the use
18        of a credit card or payment mechanism such as a bank
19        card, travel card, credit card, or debit card, or by
20        charge made to a telephone number which is not
21        associated with the origination or termination of the
22        telecommunications service. A post-paid calling
23        service includes telecommunications service, except a
24        prepaid wireless calling service, that would be a
25        prepaid calling service except it is not exclusively a
26        telecommunication service.

 

 

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1            "Prepaid telecommunication service" means the
2        right to access exclusively telecommunications
3        services, which must be paid for in advance and which
4        enables the origination of calls using an access
5        number or authorization code, whether manually or
6        electronically dialed, and that is sold in
7        predetermined units or dollars of which the number
8        declines with use in a known amount.
9            "Prepaid Mobile telecommunication service" means a
10        telecommunications service that provides the right to
11        utilize mobile wireless service as well as other
12        non-telecommunication services, including, but not
13        limited to, ancillary services, which must be paid for
14        in advance that is sold in predetermined units or
15        dollars of which the number declines with use in a
16        known amount.
17            "Private communication service" means a
18        telecommunication service that entitles the customer
19        to exclusive or priority use of a communications
20        channel or group of channels between or among
21        termination points, regardless of the manner in which
22        such channel or channels are connected, and includes
23        switching capacity, extension lines, stations, and any
24        other associated services that are provided in
25        connection with the use of such channel or channels.
26            "Service address" means:

 

 

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1                (a) The location of the telecommunications
2            equipment to which a customer's call is charged
3            and from which the call originates or terminates,
4            regardless of where the call is billed or paid;
5                (b) If the location in line (a) is not known,
6            service address means the origination point of the
7            signal of the telecommunications services first
8            identified by either the seller's
9            telecommunications system or in information
10            received by the seller from its service provider
11            where the system used to transport such signals is
12            not that of the seller; and
13                (c) If the locations in line (a) and line (b)
14            are not known, the service address means the
15            location of the customer's place of primary use.
16            "Telecommunications service" means the electronic
17        transmission, conveyance, or routing of voice, data,
18        audio, video, or any other information or signals to a
19        point, or between or among points. The term
20        "telecommunications service" includes such
21        transmission, conveyance, or routing in which computer
22        processing applications are used to act on the form,
23        code or protocol of the content for purposes of
24        transmission, conveyance or routing without regard to
25        whether such service is referred to as voice over
26        Internet protocol services or is classified by the

 

 

HB3477- 20 -LRB102 14698 HLH 20051 b

1        Federal Communications Commission as enhanced or value
2        added. "Telecommunications service" does not include:
3                (a) Data processing and information services
4            that allow data to be generated, acquired, stored,
5            processed, or retrieved and delivered by an
6            electronic transmission to a purchaser when such
7            purchaser's primary purpose for the underlying
8            transaction is the processed data or information;
9                (b) Installation or maintenance of wiring or
10            equipment on a customer's premises;
11                (c) Tangible personal property;
12                (d) Advertising, including, but not limited
13            to, directory advertising;
14                (e) Billing and collection services provided
15            to third parties;
16                (f) Internet access service;
17                (g) Radio and television audio and video
18            programming services, regardless of the medium,
19            including the furnishing of transmission,
20            conveyance and routing of such services by the
21            programming service provider. Radio and television
22            audio and video programming services shall
23            include, but not be limited to, cable service as
24            defined in 47 USC 522(6) and audio and video
25            programming services delivered by commercial
26            mobile radio service providers, as defined in 47

 

 

HB3477- 21 -LRB102 14698 HLH 20051 b

1            CFR 20.3;
2                (h) "Ancillary services"; or
3                (i) Digital products "delivered
4            electronically", including, but not limited to,
5            software, music, video, reading materials or ring
6            tones.
7            "Vertical service" means an "ancillary service"
8        that is offered in connection with one or more
9        "telecommunications services", which offers advanced
10        calling features that allow customers to identify
11        callers and to manage multiple calls and call
12        connections, including "conference bridging services".
13            "Voice mail service" means an "ancillary service"
14        that enables the customer to store, send or receive
15        recorded messages. "Voice mail service" does not
16        include any "vertical services" that the customer may
17        be required to have in order to utilize the "voice mail
18        service".
19            (ii) Receipts from the sale of telecommunications
20        service sold on an individual call-by-call basis are
21        in this State if either of the following applies:
22                (a) The call both originates and terminates in
23            this State.
24                (b) The call either originates or terminates
25            in this State and the service address is located
26            in this State.

 

 

HB3477- 22 -LRB102 14698 HLH 20051 b

1            (iii) Receipts from the sale of postpaid
2        telecommunications service at retail are in this State
3        if the origination point of the telecommunication
4        signal, as first identified by the service provider's
5        telecommunication system or as identified by
6        information received by the seller from its service
7        provider if the system used to transport
8        telecommunication signals is not the seller's, is
9        located in this State.
10            (iv) Receipts from the sale of prepaid
11        telecommunications service or prepaid mobile
12        telecommunications service at retail are in this State
13        if the purchaser obtains the prepaid card or similar
14        means of conveyance at a location in this State.
15        Receipts from recharging a prepaid telecommunications
16        service or mobile telecommunications service is in
17        this State if the purchaser's billing information
18        indicates a location in this State.
19            (v) Receipts from the sale of private
20        communication services are in this State as follows:
21                (a) 100% of receipts from charges imposed at
22            each channel termination point in this State.
23                (b) 100% of receipts from charges for the
24            total channel mileage between each channel
25            termination point in this State.
26                (c) 50% of the total receipts from charges for

 

 

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1            service segments when those segments are between 2
2            customer channel termination points, 1 of which is
3            located in this State and the other is located
4            outside of this State, which segments are
5            separately charged.
6                (d) The receipts from charges for service
7            segments with a channel termination point located
8            in this State and in two or more other states, and
9            which segments are not separately billed, are in
10            this State based on a percentage determined by
11            dividing the number of customer channel
12            termination points in this State by the total
13            number of customer channel termination points.
14            (vi) Receipts from charges for ancillary services
15        for telecommunications service sold to customers at
16        retail are in this State if the customer's primary
17        place of use of telecommunications services associated
18        with those ancillary services is in this State. If the
19        seller of those ancillary services cannot determine
20        where the associated telecommunications are located,
21        then the ancillary services shall be based on the
22        location of the purchaser.
23            (vii) Receipts to access a carrier's network or
24        from the sale of telecommunication services or
25        ancillary services for resale are in this State as
26        follows:

 

 

HB3477- 24 -LRB102 14698 HLH 20051 b

1                (a) 100% of the receipts from access fees
2            attributable to intrastate telecommunications
3            service that both originates and terminates in
4            this State.
5                (b) 50% of the receipts from access fees
6            attributable to interstate telecommunications
7            service if the interstate call either originates
8            or terminates in this State.
9                (c) 100% of the receipts from interstate end
10            user access line charges, if the customer's
11            service address is in this State. As used in this
12            subdivision, "interstate end user access line
13            charges" includes, but is not limited to, the
14            surcharge approved by the federal communications
15            commission and levied pursuant to 47 CFR 69.
16                (d) Gross receipts from sales of
17            telecommunication services or from ancillary
18            services for telecommunications services sold to
19            other telecommunication service providers for
20            resale shall be sourced to this State using the
21            apportionment concepts used for non-resale
22            receipts of telecommunications services if the
23            information is readily available to make that
24            determination. If the information is not readily
25            available, then the taxpayer may use any other
26            reasonable and consistent method.

 

 

HB3477- 25 -LRB102 14698 HLH 20051 b

1        (B-7) For taxable years ending on or after December
2    31, 2008, receipts from the sale of broadcasting services
3    are in this State if the broadcasting services are
4    received in this State. For purposes of this paragraph
5    (B-7), the following terms have the following meanings:
6            "Advertising revenue" means consideration received
7        by the taxpayer in exchange for broadcasting services
8        or allowing the broadcasting of commercials or
9        announcements in connection with the broadcasting of
10        film or radio programming, from sponsorships of the
11        programming, or from product placements in the
12        programming.
13            "Audience factor" means the ratio that the
14        audience or subscribers located in this State of a
15        station, a network, or a cable system bears to the
16        total audience or total subscribers for that station,
17        network, or cable system. The audience factor for film
18        or radio programming shall be determined by reference
19        to the books and records of the taxpayer or by
20        reference to published rating statistics provided the
21        method used by the taxpayer is consistently used from
22        year to year for this purpose and fairly represents
23        the taxpayer's activity in this State.
24            "Broadcast" or "broadcasting" or "broadcasting
25        services" means the transmission or provision of film
26        or radio programming, whether through the public

 

 

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1        airwaves, by cable, by direct or indirect satellite
2        transmission, or by any other means of communication,
3        either through a station, a network, or a cable
4        system.
5            "Film" or "film programming" means the broadcast
6        on television of any and all performances, events, or
7        productions, including, but not limited to, news,
8        sporting events, plays, stories, or other literary,
9        commercial, educational, or artistic works, either
10        live or through the use of video tape, disc, or any
11        other type of format or medium. Each episode of a
12        series of films produced for television shall
13        constitute separate "film" notwithstanding that the
14        series relates to the same principal subject and is
15        produced during one or more tax periods.
16            "Radio" or "radio programming" means the broadcast
17        on radio of any and all performances, events, or
18        productions, including, but not limited to, news,
19        sporting events, plays, stories, or other literary,
20        commercial, educational, or artistic works, either
21        live or through the use of an audio tape, disc, or any
22        other format or medium. Each episode in a series of
23        radio programming produced for radio broadcast shall
24        constitute a separate "radio programming"
25        notwithstanding that the series relates to the same
26        principal subject and is produced during one or more

 

 

HB3477- 27 -LRB102 14698 HLH 20051 b

1        tax periods.
2                (i) In the case of advertising revenue from
3            broadcasting, the customer is the advertiser and
4            the service is received in this State if the
5            commercial domicile of the advertiser is in this
6            State.
7                (ii) In the case where film or radio
8            programming is broadcast by a station, a network,
9            or a cable system for a fee or other remuneration
10            received from the recipient of the broadcast, the
11            portion of the service that is received in this
12            State is measured by the portion of the recipients
13            of the broadcast located in this State.
14            Accordingly, the fee or other remuneration for
15            such service that is included in the Illinois
16            numerator of the sales factor is the total of
17            those fees or other remuneration received from
18            recipients in Illinois. For purposes of this
19            paragraph, a taxpayer may determine the location
20            of the recipients of its broadcast using the
21            address of the recipient shown in its contracts
22            with the recipient or using the billing address of
23            the recipient in the taxpayer's records.
24                (iii) In the case where film or radio
25            programming is broadcast by a station, a network,
26            or a cable system for a fee or other remuneration

 

 

HB3477- 28 -LRB102 14698 HLH 20051 b

1            from the person providing the programming, the
2            portion of the broadcast service that is received
3            by such station, network, or cable system in this
4            State is measured by the portion of recipients of
5            the broadcast located in this State. Accordingly,
6            the amount of revenue related to such an
7            arrangement that is included in the Illinois
8            numerator of the sales factor is the total fee or
9            other total remuneration from the person providing
10            the programming related to that broadcast
11            multiplied by the Illinois audience factor for
12            that broadcast.
13                (iv) In the case where film or radio
14            programming is provided by a taxpayer that is a
15            network or station to a customer for broadcast in
16            exchange for a fee or other remuneration from that
17            customer the broadcasting service is received at
18            the location of the office of the customer from
19            which the services were ordered in the regular
20            course of the customer's trade or business.
21            Accordingly, in such a case the revenue derived by
22            the taxpayer that is included in the taxpayer's
23            Illinois numerator of the sales factor is the
24            revenue from such customers who receive the
25            broadcasting service in Illinois.
26                (v) In the case where film or radio

 

 

HB3477- 29 -LRB102 14698 HLH 20051 b

1            programming is provided by a taxpayer that is not
2            a network or station to another person for
3            broadcasting in exchange for a fee or other
4            remuneration from that person, the broadcasting
5            service is received at the location of the office
6            of the customer from which the services were
7            ordered in the regular course of the customer's
8            trade or business. Accordingly, in such a case the
9            revenue derived by the taxpayer that is included
10            in the taxpayer's Illinois numerator of the sales
11            factor is the revenue from such customers who
12            receive the broadcasting service in Illinois.
13        (B-8) Gross receipts from winnings under the Illinois
14    Lottery Law from the assignment of a prize under Section
15    13.1 of the Illinois Lottery Law are received in this
16    State. This paragraph (B-8) applies only to taxable years
17    ending on or after December 31, 2013.
18        (B-9) For taxable years ending on or after December
19    31, 2019, gross receipts from winnings from pari-mutuel
20    wagering conducted at a wagering facility licensed under
21    the Illinois Horse Racing Act of 1975 or from winnings
22    from gambling games conducted on a riverboat or in a
23    casino or organization gaming facility licensed under the
24    Illinois Gambling Act are in this State.
25        (C) For taxable years ending before December 31, 2008,
26    sales, other than sales governed by paragraphs (B), (B-1),

 

 

HB3477- 30 -LRB102 14698 HLH 20051 b

1    (B-2), and (B-8) are in this State if:
2            (i) The income-producing activity is performed in
3        this State; or
4            (ii) The income-producing activity is performed
5        both within and without this State and a greater
6        proportion of the income-producing activity is
7        performed within this State than without this State,
8        based on performance costs.
9        (C-5) For taxable years ending on or after December
10    31, 2008, sales, other than sales governed by paragraphs
11    (B), (B-1), (B-2), (B-5), and (B-7), are in this State if
12    any of the following criteria are met:
13            (i) Sales from the sale or lease of real property
14        are in this State if the property is located in this
15        State.
16            (ii) Sales from the lease or rental of tangible
17        personal property are in this State if the property is
18        located in this State during the rental period. Sales
19        from the lease or rental of tangible personal property
20        that is characteristically moving property, including,
21        but not limited to, motor vehicles, rolling stock,
22        aircraft, vessels, or mobile equipment are in this
23        State to the extent that the property is used in this
24        State.
25            (iii) In the case of interest, net gains (but not
26        less than zero) and other items of income from

 

 

HB3477- 31 -LRB102 14698 HLH 20051 b

1        intangible personal property, the sale is in this
2        State if:
3                (a) in the case of a taxpayer who is a dealer
4            in the item of intangible personal property within
5            the meaning of Section 475 of the Internal Revenue
6            Code, the income or gain is received from a
7            customer in this State. For purposes of this
8            subparagraph, a customer is in this State if the
9            customer is an individual, trust or estate who is
10            a resident of this State and, for all other
11            customers, if the customer's commercial domicile
12            is in this State. Unless the dealer has actual
13            knowledge of the residence or commercial domicile
14            of a customer during a taxable year, the customer
15            shall be deemed to be a customer in this State if
16            the billing address of the customer, as shown in
17            the records of the dealer, is in this State; or
18                (b) in all other cases, if the
19            income-producing activity of the taxpayer is
20            performed in this State or, if the
21            income-producing activity of the taxpayer is
22            performed both within and without this State, if a
23            greater proportion of the income-producing
24            activity of the taxpayer is performed within this
25            State than in any other state, based on
26            performance costs.

 

 

HB3477- 32 -LRB102 14698 HLH 20051 b

1            (iv) Sales of services are in this State if the
2        services are received in this State. For the purposes
3        of this section, gross receipts from the performance
4        of services provided to a corporation, partnership, or
5        trust may only be attributed to a state where that
6        corporation, partnership, or trust has a fixed place
7        of business. If the state where the services are
8        received is not readily determinable or is a state
9        where the corporation, partnership, or trust receiving
10        the service does not have a fixed place of business,
11        the services shall be deemed to be received at the
12        location of the office of the customer from which the
13        services were ordered in the regular course of the
14        customer's trade or business. If the ordering office
15        cannot be determined, the services shall be deemed to
16        be received at the office of the customer to which the
17        services are billed. If the taxpayer is not taxable in
18        the state in which the services are received, the sale
19        must be excluded from both the numerator and the
20        denominator of the sales factor. The Department shall
21        adopt rules prescribing where specific types of
22        service are received, including, but not limited to,
23        publishing, and utility service.
24        (D) For taxable years ending on or after December 31,
25    1995, the following items of income shall not be included
26    in the numerator or denominator of the sales factor:

 

 

HB3477- 33 -LRB102 14698 HLH 20051 b

1    dividends; amounts included under Section 78 of the
2    Internal Revenue Code; and Subpart F income as defined in
3    Section 952 of the Internal Revenue Code. No inference
4    shall be drawn from the enactment of this paragraph (D) in
5    construing this Section for taxable years ending before
6    December 31, 1995.
7        (E) Paragraphs (B-1) and (B-2) shall apply to tax
8    years ending on or after December 31, 1999, provided that
9    a taxpayer may elect to apply the provisions of these
10    paragraphs to prior tax years. Such election shall be made
11    in the form and manner prescribed by the Department, shall
12    be irrevocable, and shall apply to all tax years; provided
13    that, if a taxpayer's Illinois income tax liability for
14    any tax year, as assessed under Section 903 prior to
15    January 1, 1999, was computed in a manner contrary to the
16    provisions of paragraphs (B-1) or (B-2), no refund shall
17    be payable to the taxpayer for that tax year to the extent
18    such refund is the result of applying the provisions of
19    paragraph (B-1) or (B-2) retroactively. In the case of a
20    unitary business group, such election shall apply to all
21    members of such group for every tax year such group is in
22    existence, but shall not apply to any taxpayer for any
23    period during which that taxpayer is not a member of such
24    group.
25    (b) Insurance companies.
26        (1) In general. Except as otherwise provided by

 

 

HB3477- 34 -LRB102 14698 HLH 20051 b

1    paragraph (2), business income of an insurance company for
2    a taxable year shall be apportioned to this State by
3    multiplying such income by a fraction, the numerator of
4    which is the direct premiums written for insurance upon
5    property or risk in this State, and the denominator of
6    which is the direct premiums written for insurance upon
7    property or risk everywhere. For purposes of this
8    subsection, the term "direct premiums written" means the
9    total amount of direct premiums written, assessments and
10    annuity considerations as reported for the taxable year on
11    the annual statement filed by the company with the
12    Illinois Director of Insurance in the form approved by the
13    National Convention of Insurance Commissioners or such
14    other form as may be prescribed in lieu thereof.
15        (2) Reinsurance. If the principal source of premiums
16    written by an insurance company consists of premiums for
17    reinsurance accepted by it, the business income of such
18    company shall be apportioned to this State by multiplying
19    such income by a fraction, the numerator of which is the
20    sum of (i) direct premiums written for insurance upon
21    property or risk in this State, plus (ii) premiums written
22    for reinsurance accepted in respect of property or risk in
23    this State, and the denominator of which is the sum of
24    (iii) direct premiums written for insurance upon property
25    or risk everywhere, plus (iv) premiums written for
26    reinsurance accepted in respect of property or risk

 

 

HB3477- 35 -LRB102 14698 HLH 20051 b

1    everywhere. For purposes of this paragraph, premiums
2    written for reinsurance accepted in respect of property or
3    risk in this State, whether or not otherwise determinable,
4    may, at the election of the company, be determined on the
5    basis of the proportion which premiums written for
6    reinsurance accepted from companies commercially domiciled
7    in Illinois bears to premiums written for reinsurance
8    accepted from all sources, or, alternatively, in the
9    proportion which the sum of the direct premiums written
10    for insurance upon property or risk in this State by each
11    ceding company from which reinsurance is accepted bears to
12    the sum of the total direct premiums written by each such
13    ceding company for the taxable year. The election made by
14    a company under this paragraph for its first taxable year
15    ending on or after December 31, 2011, shall be binding for
16    that company for that taxable year and for all subsequent
17    taxable years, and may be altered only with the written
18    permission of the Department, which shall not be
19    unreasonably withheld.
20    (c) Financial organizations.
21        (1) In general. For taxable years ending before
22    December 31, 2008, business income of a financial
23    organization shall be apportioned to this State by
24    multiplying such income by a fraction, the numerator of
25    which is its business income from sources within this
26    State, and the denominator of which is its business income

 

 

HB3477- 36 -LRB102 14698 HLH 20051 b

1    from all sources. For the purposes of this subsection, the
2    business income of a financial organization from sources
3    within this State is the sum of the amounts referred to in
4    subparagraphs (A) through (E) following, but excluding the
5    adjusted income of an international banking facility as
6    determined in paragraph (2):
7            (A) Fees, commissions or other compensation for
8        financial services rendered within this State;
9            (B) Gross profits from trading in stocks, bonds or
10        other securities managed within this State;
11            (C) Dividends, and interest from Illinois
12        customers, which are received within this State;
13            (D) Interest charged to customers at places of
14        business maintained within this State for carrying
15        debit balances of margin accounts, without deduction
16        of any costs incurred in carrying such accounts; and
17            (E) Any other gross income resulting from the
18        operation as a financial organization within this
19        State.
20        In computing the amounts referred to in paragraphs (A)
21    through (E) of this subsection, any amount received by a
22    member of an affiliated group (determined under Section
23    1504(a) of the Internal Revenue Code but without reference
24    to whether any such corporation is an "includible
25    corporation" under Section 1504(b) of the Internal Revenue
26    Code) from another member of such group shall be included

 

 

HB3477- 37 -LRB102 14698 HLH 20051 b

1    only to the extent such amount exceeds expenses of the
2    recipient directly related thereto.
3        (2) International Banking Facility. For taxable years
4    ending before December 31, 2008:
5            (A) Adjusted Income. The adjusted income of an
6        international banking facility is its income reduced
7        by the amount of the floor amount.
8            (B) Floor Amount. The floor amount shall be the
9        amount, if any, determined by multiplying the income
10        of the international banking facility by a fraction,
11        not greater than one, which is determined as follows:
12                (i) The numerator shall be:
13                The average aggregate, determined on a
14            quarterly basis, of the financial organization's
15            loans to banks in foreign countries, to foreign
16            domiciled borrowers (except where secured
17            primarily by real estate) and to foreign
18            governments and other foreign official
19            institutions, as reported for its branches,
20            agencies and offices within the state on its
21            "Consolidated Report of Condition", Schedule A,
22            Lines 2.c., 5.b., and 7.a., which was filed with
23            the Federal Deposit Insurance Corporation and
24            other regulatory authorities, for the year 1980,
25            minus
26                The average aggregate, determined on a

 

 

HB3477- 38 -LRB102 14698 HLH 20051 b

1            quarterly basis, of such loans (other than loans
2            of an international banking facility), as reported
3            by the financial institution for its branches,
4            agencies and offices within the state, on the
5            corresponding Schedule and lines of the
6            Consolidated Report of Condition for the current
7            taxable year, provided, however, that in no case
8            shall the amount determined in this clause (the
9            subtrahend) exceed the amount determined in the
10            preceding clause (the minuend); and
11                (ii) the denominator shall be the average
12            aggregate, determined on a quarterly basis, of the
13            international banking facility's loans to banks in
14            foreign countries, to foreign domiciled borrowers
15            (except where secured primarily by real estate)
16            and to foreign governments and other foreign
17            official institutions, which were recorded in its
18            financial accounts for the current taxable year.
19            (C) Change to Consolidated Report of Condition and
20        in Qualification. In the event the Consolidated Report
21        of Condition which is filed with the Federal Deposit
22        Insurance Corporation and other regulatory authorities
23        is altered so that the information required for
24        determining the floor amount is not found on Schedule
25        A, lines 2.c., 5.b. and 7.a., the financial
26        institution shall notify the Department and the

 

 

HB3477- 39 -LRB102 14698 HLH 20051 b

1        Department may, by regulations or otherwise, prescribe
2        or authorize the use of an alternative source for such
3        information. The financial institution shall also
4        notify the Department should its international banking
5        facility fail to qualify as such, in whole or in part,
6        or should there be any amendment or change to the
7        Consolidated Report of Condition, as originally filed,
8        to the extent such amendment or change alters the
9        information used in determining the floor amount.
10        (3) For taxable years ending on or after December 31,
11    2008, the business income of a financial organization
12    shall be apportioned to this State by multiplying such
13    income by a fraction, the numerator of which is its gross
14    receipts from sources in this State or otherwise
15    attributable to this State's marketplace and the
16    denominator of which is its gross receipts everywhere
17    during the taxable year. "Gross receipts" for purposes of
18    this subparagraph (3) means gross income, including net
19    taxable gain on disposition of assets, including
20    securities and money market instruments, when derived from
21    transactions and activities in the regular course of the
22    financial organization's trade or business. The following
23    examples are illustrative:
24            (i) Receipts from the lease or rental of real or
25        tangible personal property are in this State if the
26        property is located in this State during the rental

 

 

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1        period. Receipts from the lease or rental of tangible
2        personal property that is characteristically moving
3        property, including, but not limited to, motor
4        vehicles, rolling stock, aircraft, vessels, or mobile
5        equipment are from sources in this State to the extent
6        that the property is used in this State.
7            (ii) Interest income, commissions, fees, gains on
8        disposition, and other receipts from assets in the
9        nature of loans that are secured primarily by real
10        estate or tangible personal property are from sources
11        in this State if the security is located in this State.
12            (iii) Interest income, commissions, fees, gains on
13        disposition, and other receipts from consumer loans
14        that are not secured by real or tangible personal
15        property are from sources in this State if the debtor
16        is a resident of this State.
17            (iv) Interest income, commissions, fees, gains on
18        disposition, and other receipts from commercial loans
19        and installment obligations that are not secured by
20        real or tangible personal property are from sources in
21        this State if the proceeds of the loan are to be
22        applied in this State. If it cannot be determined
23        where the funds are to be applied, the income and
24        receipts are from sources in this State if the office
25        of the borrower from which the loan was negotiated in
26        the regular course of business is located in this

 

 

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1        State. If the location of this office cannot be
2        determined, the income and receipts shall be excluded
3        from the numerator and denominator of the sales
4        factor.
5            (v) Interest income, fees, gains on disposition,
6        service charges, merchant discount income, and other
7        receipts from credit card receivables are from sources
8        in this State if the card charges are regularly billed
9        to a customer in this State.
10            (vi) Receipts from the performance of services,
11        including, but not limited to, fiduciary, advisory,
12        and brokerage services, are in this State if the
13        services are received in this State within the meaning
14        of subparagraph (a)(3)(C-5)(iv) of this Section.
15            (vii) Receipts from the issuance of travelers
16        checks and money orders are from sources in this State
17        if the checks and money orders are issued from a
18        location within this State.
19            (viii) Receipts from investment assets and
20        activities and trading assets and activities are
21        included in the receipts factor as follows:
22                (1) Interest, dividends, net gains (but not
23            less than zero) and other income from investment
24            assets and activities from trading assets and
25            activities shall be included in the receipts
26            factor. Investment assets and activities and

 

 

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1            trading assets and activities include, but are not
2            limited to: investment securities; trading account
3            assets; federal funds; securities purchased and
4            sold under agreements to resell or repurchase;
5            options; futures contracts; forward contracts;
6            notional principal contracts such as swaps;
7            equities; and foreign currency transactions. With
8            respect to the investment and trading assets and
9            activities described in subparagraphs (A) and (B)
10            of this paragraph, the receipts factor shall
11            include the amounts described in such
12            subparagraphs.
13                    (A) The receipts factor shall include the
14                amount by which interest from federal funds
15                sold and securities purchased under resale
16                agreements exceeds interest expense on federal
17                funds purchased and securities sold under
18                repurchase agreements.
19                    (B) The receipts factor shall include the
20                amount by which interest, dividends, gains and
21                other income from trading assets and
22                activities, including, but not limited to,
23                assets and activities in the matched book, in
24                the arbitrage book, and foreign currency
25                transactions, exceed amounts paid in lieu of
26                interest, amounts paid in lieu of dividends,

 

 

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1                and losses from such assets and activities.
2                (2) The numerator of the receipts factor
3            includes interest, dividends, net gains (but not
4            less than zero), and other income from investment
5            assets and activities and from trading assets and
6            activities described in paragraph (1) of this
7            subsection that are attributable to this State.
8                    (A) The amount of interest, dividends, net
9                gains (but not less than zero), and other
10                income from investment assets and activities
11                in the investment account to be attributed to
12                this State and included in the numerator is
13                determined by multiplying all such income from
14                such assets and activities by a fraction, the
15                numerator of which is the gross income from
16                such assets and activities which are properly
17                assigned to a fixed place of business of the
18                taxpayer within this State and the denominator
19                of which is the gross income from all such
20                assets and activities.
21                    (B) The amount of interest from federal
22                funds sold and purchased and from securities
23                purchased under resale agreements and
24                securities sold under repurchase agreements
25                attributable to this State and included in the
26                numerator is determined by multiplying the

 

 

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1                amount described in subparagraph (A) of
2                paragraph (1) of this subsection from such
3                funds and such securities by a fraction, the
4                numerator of which is the gross income from
5                such funds and such securities which are
6                properly assigned to a fixed place of business
7                of the taxpayer within this State and the
8                denominator of which is the gross income from
9                all such funds and such securities.
10                    (C) The amount of interest, dividends,
11                gains, and other income from trading assets
12                and activities, including, but not limited to,
13                assets and activities in the matched book, in
14                the arbitrage book and foreign currency
15                transactions (but excluding amounts described
16                in subparagraphs (A) or (B) of this
17                paragraph), attributable to this State and
18                included in the numerator is determined by
19                multiplying the amount described in
20                subparagraph (B) of paragraph (1) of this
21                subsection by a fraction, the numerator of
22                which is the gross income from such trading
23                assets and activities which are properly
24                assigned to a fixed place of business of the
25                taxpayer within this State and the denominator
26                of which is the gross income from all such

 

 

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1                assets and activities.
2                    (D) Properly assigned, for purposes of
3                this paragraph (2) of this subsection, means
4                the investment or trading asset or activity is
5                assigned to the fixed place of business with
6                which it has a preponderance of substantive
7                contacts. An investment or trading asset or
8                activity assigned by the taxpayer to a fixed
9                place of business without the State shall be
10                presumed to have been properly assigned if:
11                        (i) the taxpayer has assigned, in the
12                    regular course of its business, such asset
13                    or activity on its records to a fixed
14                    place of business consistent with federal
15                    or state regulatory requirements;
16                        (ii) such assignment on its records is
17                    based upon substantive contacts of the
18                    asset or activity to such fixed place of
19                    business; and
20                        (iii) the taxpayer uses such records
21                    reflecting assignment of such assets or
22                    activities for the filing of all state and
23                    local tax returns for which an assignment
24                    of such assets or activities to a fixed
25                    place of business is required.
26                    (E) The presumption of proper assignment

 

 

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1                of an investment or trading asset or activity
2                provided in subparagraph (D) of paragraph (2)
3                of this subsection may be rebutted upon a
4                showing by the Department, supported by a
5                preponderance of the evidence, that the
6                preponderance of substantive contacts
7                regarding such asset or activity did not occur
8                at the fixed place of business to which it was
9                assigned on the taxpayer's records. If the
10                fixed place of business that has a
11                preponderance of substantive contacts cannot
12                be determined for an investment or trading
13                asset or activity to which the presumption in
14                subparagraph (D) of paragraph (2) of this
15                subsection does not apply or with respect to
16                which that presumption has been rebutted, that
17                asset or activity is properly assigned to the
18                state in which the taxpayer's commercial
19                domicile is located. For purposes of this
20                subparagraph (E), it shall be presumed,
21                subject to rebuttal, that taxpayer's
22                commercial domicile is in the state of the
23                United States or the District of Columbia to
24                which the greatest number of employees are
25                regularly connected with the management of the
26                investment or trading income or out of which

 

 

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1                they are working, irrespective of where the
2                services of such employees are performed, as
3                of the last day of the taxable year.
4        (4) (Blank).
5        (5) (Blank).
6    (c-1) Federally regulated exchanges. For taxable years
7ending on or after December 31, 2012, business income of a
8federally regulated exchange shall, at the option of the
9federally regulated exchange, be apportioned to this State by
10multiplying such income by a fraction, the numerator of which
11is its business income from sources within this State, and the
12denominator of which is its business income from all sources.
13For purposes of this subsection, the business income within
14this State of a federally regulated exchange is the sum of the
15following:
16        (1) Receipts attributable to transactions executed on
17    a physical trading floor if that physical trading floor is
18    located in this State.
19        (2) Receipts attributable to all other matching,
20    execution, or clearing transactions, including without
21    limitation receipts from the provision of matching,
22    execution, or clearing services to another entity,
23    multiplied by (i) for taxable years ending on or after
24    December 31, 2012 but before December 31, 2013, 63.77%;
25    and (ii) for taxable years ending on or after December 31,
26    2013, 27.54%.

 

 

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1        (3) All other receipts not governed by subparagraphs
2    (1) or (2) of this subsection (c-1), to the extent the
3    receipts would be characterized as "sales in this State"
4    under item (3) of subsection (a) of this Section.
5    "Federally regulated exchange" means (i) a "registered
6entity" within the meaning of 7 U.S.C. Section 1a(40)(A), (B),
7or (C), (ii) an "exchange" or "clearing agency" within the
8meaning of 15 U.S.C. Section 78c (a)(1) or (23), (iii) any such
9entities regulated under any successor regulatory structure to
10the foregoing, and (iv) all taxpayers who are members of the
11same unitary business group as a federally regulated exchange,
12determined without regard to the prohibition in Section
131501(a)(27) of this Act against including in a unitary
14business group taxpayers who are ordinarily required to
15apportion business income under different subsections of this
16Section; provided that this subparagraph (iv) shall apply only
17if 50% or more of the business receipts of the unitary business
18group determined by application of this subparagraph (iv) for
19the taxable year are attributable to the matching, execution,
20or clearing of transactions conducted by an entity described
21in subparagraph (i), (ii), or (iii) of this paragraph.
22    In no event shall the Illinois apportionment percentage
23computed in accordance with this subsection (c-1) for any
24taxpayer for any tax year be less than the Illinois
25apportionment percentage computed under this subsection (c-1)
26for that taxpayer for the first full tax year ending on or

 

 

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1after December 31, 2013 for which this subsection (c-1)
2applied to the taxpayer.
3    (d) Transportation services. For taxable years ending
4before December 31, 2008, business income derived from
5furnishing transportation services shall be apportioned to
6this State in accordance with paragraphs (1) and (2):
7        (1) Such business income (other than that derived from
8    transportation by pipeline) shall be apportioned to this
9    State by multiplying such income by a fraction, the
10    numerator of which is the revenue miles of the person in
11    this State, and the denominator of which is the revenue
12    miles of the person everywhere. For purposes of this
13    paragraph, a revenue mile is the transportation of 1
14    passenger or 1 net ton of freight the distance of 1 mile
15    for a consideration. Where a person is engaged in the
16    transportation of both passengers and freight, the
17    fraction above referred to shall be determined by means of
18    an average of the passenger revenue mile fraction and the
19    freight revenue mile fraction, weighted to reflect the
20    person's
21            (A) relative railway operating income from total
22        passenger and total freight service, as reported to
23        the Interstate Commerce Commission, in the case of
24        transportation by railroad, and
25            (B) relative gross receipts from passenger and
26        freight transportation, in case of transportation

 

 

HB3477- 50 -LRB102 14698 HLH 20051 b

1        other than by railroad.
2        (2) Such business income derived from transportation
3    by pipeline shall be apportioned to this State by
4    multiplying such income by a fraction, the numerator of
5    which is the revenue miles of the person in this State, and
6    the denominator of which is the revenue miles of the
7    person everywhere. For the purposes of this paragraph, a
8    revenue mile is the transportation by pipeline of 1 barrel
9    of oil, 1,000 cubic feet of gas, or of any specified
10    quantity of any other substance, the distance of 1 mile
11    for a consideration.
12        (3) For taxable years ending on or after December 31,
13    2008, business income derived from providing
14    transportation services other than airline services shall
15    be apportioned to this State by using a fraction, (a) the
16    numerator of which shall be (i) all receipts from any
17    movement or shipment of people, goods, mail, oil, gas, or
18    any other substance (other than by airline) that both
19    originates and terminates in this State, plus (ii) that
20    portion of the person's gross receipts from movements or
21    shipments of people, goods, mail, oil, gas, or any other
22    substance (other than by airline) that originates in one
23    state or jurisdiction and terminates in another state or
24    jurisdiction, that is determined by the ratio that the
25    miles traveled in this State bears to total miles
26    everywhere and (b) the denominator of which shall be all

 

 

HB3477- 51 -LRB102 14698 HLH 20051 b

1    revenue derived from the movement or shipment of people,
2    goods, mail, oil, gas, or any other substance (other than
3    by airline). Where a taxpayer is engaged in the
4    transportation of both passengers and freight, the
5    fraction above referred to shall first be determined
6    separately for passenger miles and freight miles. Then an
7    average of the passenger miles fraction and the freight
8    miles fraction shall be weighted to reflect the
9    taxpayer's:
10            (A) relative railway operating income from total
11        passenger and total freight service, as reported to
12        the Surface Transportation Board, in the case of
13        transportation by railroad; and
14            (B) relative gross receipts from passenger and
15        freight transportation, in case of transportation
16        other than by railroad.
17        (4) For taxable years ending on or after December 31,
18    2008, business income derived from furnishing airline
19    transportation services shall be apportioned to this State
20    by multiplying such income by a fraction, the numerator of
21    which is the revenue miles of the person in this State, and
22    the denominator of which is the revenue miles of the
23    person everywhere. For purposes of this paragraph, a
24    revenue mile is the transportation of one passenger or one
25    net ton of freight the distance of one mile for a
26    consideration. If a person is engaged in the

 

 

HB3477- 52 -LRB102 14698 HLH 20051 b

1    transportation of both passengers and freight, the
2    fraction above referred to shall be determined by means of
3    an average of the passenger revenue mile fraction and the
4    freight revenue mile fraction, weighted to reflect the
5    person's relative gross receipts from passenger and
6    freight airline transportation.
7    (e) Combined apportionment. Where 2 or more persons are
8engaged in a unitary business as described in subsection
9(a)(27) of Section 1501, a part of which is conducted in this
10State by one or more members of the group, the business income
11attributable to this State by any such member or members shall
12be apportioned by means of the combined apportionment method
13set forth in Section 304.1.
14    (f) Alternative allocation. If the allocation and
15apportionment provisions of subsections (a) through (e) and of
16subsection (h) do not, for taxable years ending before
17December 31, 2008, fairly represent the extent of a person's
18business activity in this State, or, for taxable years ending
19on or after December 31, 2008, fairly represent the market for
20the person's goods, services, or other sources of business
21income, the person may petition for, or the Director may,
22without a petition, permit or require, in respect of all or any
23part of the person's business activity, if reasonable:
24        (1) Separate accounting;
25        (2) The exclusion of any one or more factors;
26        (3) The inclusion of one or more additional factors

 

 

HB3477- 53 -LRB102 14698 HLH 20051 b

1    which will fairly represent the person's business
2    activities or market in this State; or
3        (4) The employment of any other method to effectuate
4    an equitable allocation and apportionment of the person's
5    business income.
6    (g) Cross reference. For allocation of business income by
7residents, see Section 301(a).
8    (h) For tax years ending on or after December 31, 1998, the
9apportionment factor of persons who apportion their business
10income to this State under subsection (a) shall be equal to:
11        (1) for tax years ending on or after December 31, 1998
12    and before December 31, 1999, 16 2/3% of the property
13    factor plus 16 2/3% of the payroll factor plus 66 2/3% of
14    the sales factor;
15        (2) for tax years ending on or after December 31, 1999
16    and before December 31, 2000, 8 1/3% of the property
17    factor plus 8 1/3% of the payroll factor plus 83 1/3% of
18    the sales factor;
19        (3) for tax years ending on or after December 31,
20    2000, the sales factor.
21If, in any tax year ending on or after December 31, 1998 and
22before December 31, 2000, the denominator of the payroll,
23property, or sales factor is zero, the apportionment factor
24computed in paragraph (1) or (2) of this subsection for that
25year shall be divided by an amount equal to 100% minus the
26percentage weight given to each factor whose denominator is

 

 

HB3477- 54 -LRB102 14698 HLH 20051 b

1equal to zero.
2(Source: P.A. 100-201, eff. 8-18-17; 101-31, eff. 6-28-19;
3101-585, eff. 8-26-19; revised 9-12-19.)
 
4    (35 ILCS 5/304.1 new)
5    Sec. 304.1. Requirement to file a combined return; joint
6and several liability.
7    (a) Except as otherwise provided, for taxable years
8beginning on or after January 1, 2022, all the corporations,
9wherever incorporated or domiciled, that are members of a
10unitary business shall file a combined return as a combined
11group. That return must include the income and apportionment
12factors, and other information required by the Department for
13all members of the combined group wherever located or doing
14business. The combined return must be filed under the name and
15federal employer identification number of the parent
16corporation if the parent is a member of the combined group. If
17there is no parent corporation, or if the parent is not a group
18member, the members of the combined group shall choose a
19member to file the return. The filing member must remain the
20same in subsequent years unless the filing member is no longer
21the parent corporation or is no longer a member of the combined
22group. The return must be signed by a responsible officer of
23the filing member on behalf of the combined group members.
24Members of the combined group are jointly and severally liable
25for the tax liability of the combined group included in the

 

 

HB3477- 55 -LRB102 14698 HLH 20051 b

1combined return.
2    (b) The Department, by rule, may require that the combined
3return include the income and associated apportionment factors
4of persons that are not included pursuant to subsection (a),
5but that are members of a unitary business, in order to reflect
6proper apportionment of income of the entire unitary business.
7Authority to require combination by rule under this subsection
8(b) includes authority to require combination of the income
9and associated apportionment factors of persons that are not
10subject to the Illinois Income Tax Act or would not be subject
11to the Illinois Income Tax Act if doing business in this State.
12    (c) In addition, if the Department determines that the
13reported income or loss of a taxpayer engaged in a unitary
14business with a person not included pursuant to subsection (a)
15or pursuant to an election under subsection (e) represents an
16avoidance or evasion of tax by such taxpayer, the Department
17may, on a case by case basis, require all or part of the income
18and associated apportionment factors of such person be
19included in the taxpayer's combined return.
20    (d) With respect to inclusion of associated apportionment
21factors pursuant to this Section, the Department may require
22the exclusion of one or more of the factors, the inclusion of
23one or more additional factors that will fairly represent the
24taxpayer's business activity in this State, or the employment
25of any other method to effectuate a proper reflection of the
26total amount of income subject to apportionment and an

 

 

HB3477- 56 -LRB102 14698 HLH 20051 b

1equitable allocation and apportionment of the taxpayer's
2income.
3    (e) Water's-edge election; initiation and withdrawal.
4    Members of a unitary group that meet the requirements of
5this subsection may elect to file as a combined group pursuant
6to a water's-edge election. Under such election, the combined
7group takes into account all or a portion of the income and
8apportionment factors of only the following members:
9        (1) the entire income and apportionment factors of a
10    member incorporated in the United States or formed under
11    the laws of any state, the District of Columbia, or any
12    territory or possession of the United States;
13        (2) the entire income and apportionment factors of a
14    member, regardless of the place incorporated or formed, if
15    the average of its property, payroll, and receipts factors
16    within the United States is 20% or more;
17        (3) the entire income and apportionment factors of a
18    member which is a domestic international sales
19    corporations as described in Internal Revenue Code
20    Sections 991 to 994, inclusive; a foreign sales
21    corporation as described in Internal Revenue Code Sections
22    921 to 927, inclusive; or a member which is an export trade
23    corporation, as described in Internal Revenue Code
24    Sections 970 to 971, inclusive;
25        (4) for a member not described in paragraphs (1)
26    through (3), include the portion of its income derived

 

 

HB3477- 57 -LRB102 14698 HLH 20051 b

1    from or attributable to sources within the United States,
2    as determined under the Internal Revenue Code without
3    regard to federal treaties, and its apportionment factors
4    related thereto;
5        (5) for a member that is a "controlled foreign
6    corporation," as defined in Internal Revenue Code Section
7    957, include income to the extent of the income of that
8    member that is defined in Section 952 of Subpart F of the
9    Internal Revenue Code ("Subpart F income") not excluding
10    lower-tier subsidiaries' distributions of such income
11    which were previously taxed, determined without regard to
12    federal treaties, and the apportionment factors related to
13    that income; any item of income received by a controlled
14    foreign corporation is excluded if such income was subject
15    to an effective rate of income tax imposed by a foreign
16    country greater than 90% of the maximum rate of tax
17    specified in Internal Revenue Code Section 11;
18        (6) for a member that earns more than 20% of its
19    income, directly or indirectly, from intangible property
20    or service related activities that are deductible against
21    the apportionable income of other members of the combined
22    group, include the related income and the apportionment
23    factors; and
24        (7) the entire income and apportionment factors of a
25    member that is doing business in a tax haven, where "doing
26    business in a tax haven" is defined as being engaged in

 

 

HB3477- 58 -LRB102 14698 HLH 20051 b

1    activity sufficient for that tax haven jurisdiction to
2    impose a tax under United States constitutional standards.
3    If the member's business activity within a tax haven is
4    entirely outside the scope of the laws, provisions and
5    practices that cause the jurisdiction to meet the criteria
6    of a tax haven, the activity of the member shall be treated
7    as not having been conducted in a tax haven.
8    A water's-edge election is effective only if made on a
9timely-filed, original return for a tax year by the members of
10the unitary business. The Department shall adopt rules
11governing the impact, if any, on the scope or application of a
12water's-edge election, including the procedures for election
13and termination or deemed election, resulting from a change in
14the composition of the unitary group, the combined group, the
15members, and any other similar change.
16    In the discretion of the Department, a water's-edge
17election may be disregarded in part or in whole, and the income
18and apportionment factors of any member of the unitary group
19may be included in the combined report without regard to the
20provisions of this Section, if any member of the unitary group
21fails to comply with any provision of this Act or if a person
22otherwise not included in the water's-edge combined group was
23availed of with a substantial objective of avoiding state
24income tax.
25    A water's edge election has no effect on whether entities
26that are excluded from the water's edge combined group may be

 

 

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1separately liable for tax under this Act. Those entities must
2separately file and pay tax in the State, if applicable.
 
3    (35 ILCS 5/1501)  (from Ch. 120, par. 15-1501)
4    Sec. 1501. Definitions.
5    (a) In general. When used in this Act, where not otherwise
6distinctly expressed or manifestly incompatible with the
7intent thereof:
8        (1) Business income. The term "business income" means
9    all income that may be treated as apportionable business
10    income under the Constitution of the United States.
11    Business income is net of the deductions allocable
12    thereto. Such term does not include compensation or the
13    deductions allocable thereto. For each taxable year
14    beginning on or after January 1, 2003, a taxpayer may
15    elect to treat all income other than compensation as
16    business income. This election shall be made in accordance
17    with rules adopted by the Department and, once made, shall
18    be irrevocable.
19        (1.5) Captive real estate investment trust:
20            (A) The term "captive real estate investment
21        trust" means a corporation, trust, or association:
22                (i) that is considered a real estate
23            investment trust for the taxable year under
24            Section 856 of the Internal Revenue Code;
25                (ii) the certificates of beneficial interest

 

 

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1            or shares of which are not regularly traded on an
2            established securities market; and
3                (iii) of which more than 50% of the voting
4            power or value of the beneficial interest or
5            shares, at any time during the last half of the
6            taxable year, is owned or controlled, directly,
7            indirectly, or constructively, by a single
8            corporation.
9            (B) The term "captive real estate investment
10        trust" does not include:
11                (i) a real estate investment trust of which
12            more than 50% of the voting power or value of the
13            beneficial interest or shares is owned or
14            controlled, directly, indirectly, or
15            constructively, by:
16                    (a) a real estate investment trust, other
17                than a captive real estate investment trust;
18                    (b) a person who is exempt from taxation
19                under Section 501 of the Internal Revenue
20                Code, and who is not required to treat income
21                received from the real estate investment trust
22                as unrelated business taxable income under
23                Section 512 of the Internal Revenue Code;
24                    (c) a listed Australian property trust, if
25                no more than 50% of the voting power or value
26                of the beneficial interest or shares of that

 

 

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1                trust, at any time during the last half of the
2                taxable year, is owned or controlled, directly
3                or indirectly, by a single person;
4                    (d) an entity organized as a trust,
5                provided a listed Australian property trust
6                described in subparagraph (c) owns or
7                controls, directly or indirectly, or
8                constructively, 75% or more of the voting
9                power or value of the beneficial interests or
10                shares of such entity; or
11                    (e) an entity that is organized outside of
12                the laws of the United States and that
13                satisfies all of the following criteria:
14                        (1) at least 75% of the entity's total
15                    asset value at the close of its taxable
16                    year is represented by real estate assets
17                    (as defined in Section 856(c)(5)(B) of the
18                    Internal Revenue Code, thereby including
19                    shares or certificates of beneficial
20                    interest in any real estate investment
21                    trust), cash and cash equivalents, and
22                    U.S. Government securities;
23                        (2) the entity is not subject to tax
24                    on amounts that are distributed to its
25                    beneficial owners or is exempt from
26                    entity-level taxation;

 

 

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1                        (3) the entity distributes at least
2                    85% of its taxable income (as computed in
3                    the jurisdiction in which it is organized)
4                    to the holders of its shares or
5                    certificates of beneficial interest on an
6                    annual basis;
7                        (4) either (i) the shares or
8                    beneficial interests of the entity are
9                    regularly traded on an established
10                    securities market or (ii) not more than
11                    10% of the voting power or value in the
12                    entity is held, directly, indirectly, or
13                    constructively, by a single entity or
14                    individual; and
15                        (5) the entity is organized in a
16                    country that has entered into a tax treaty
17                    with the United States; or
18                (ii) during its first taxable year for which
19            it elects to be treated as a real estate
20            investment trust under Section 856(c)(1) of the
21            Internal Revenue Code, a real estate investment
22            trust the certificates of beneficial interest or
23            shares of which are not regularly traded on an
24            established securities market, but only if the
25            certificates of beneficial interest or shares of
26            the real estate investment trust are regularly

 

 

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1            traded on an established securities market prior
2            to the earlier of the due date (including
3            extensions) for filing its return under this Act
4            for that first taxable year or the date it
5            actually files that return.
6            (C) For the purposes of this subsection (1.5), the
7        constructive ownership rules prescribed under Section
8        318(a) of the Internal Revenue Code, as modified by
9        Section 856(d)(5) of the Internal Revenue Code, apply
10        in determining the ownership of stock, assets, or net
11        profits of any person.
12            (D) For the purposes of this item (1.5), for
13        taxable years ending on or after August 16, 2007, the
14        voting power or value of the beneficial interest or
15        shares of a real estate investment trust does not
16        include any voting power or value of beneficial
17        interest or shares in a real estate investment trust
18        held directly or indirectly in a segregated asset
19        account by a life insurance company (as described in
20        Section 817 of the Internal Revenue Code) to the
21        extent such voting power or value is for the benefit of
22        entities or persons who are either immune from
23        taxation or exempt from taxation under subtitle A of
24        the Internal Revenue Code.
25        (2) Commercial domicile. The term "commercial
26    domicile" means the principal place from which the trade

 

 

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1    or business of the taxpayer is directed or managed.
2        (3) Compensation. The term "compensation" means wages,
3    salaries, commissions and any other form of remuneration
4    paid to employees for personal services.
5        (4) Corporation. The term "corporation" includes
6    associations, joint-stock companies, insurance companies
7    and cooperatives. Any entity, including a limited
8    liability company formed under the Illinois Limited
9    Liability Company Act, shall be treated as a corporation
10    if it is so classified for federal income tax purposes.
11        (5) Department. The term "Department" means the
12    Department of Revenue of this State.
13        (6) Director. The term "Director" means the Director
14    of Revenue of this State.
15        (7) Fiduciary. The term "fiduciary" means a guardian,
16    trustee, executor, administrator, receiver, or any person
17    acting in any fiduciary capacity for any person.
18        (8) Financial organization.
19            (A) The term "financial organization" means any
20        bank, bank holding company, trust company, savings
21        bank, industrial bank, land bank, safe deposit
22        company, private banker, savings and loan association,
23        building and loan association, credit union, currency
24        exchange, cooperative bank, small loan company, sales
25        finance company, investment company, or any person
26        which is owned by a bank or bank holding company. For

 

 

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1        the purpose of this Section a "person" will include
2        only those persons which a bank holding company may
3        acquire and hold an interest in, directly or
4        indirectly, under the provisions of the Bank Holding
5        Company Act of 1956 (12 U.S.C. 1841, et seq.), except
6        where interests in any person must be disposed of
7        within certain required time limits under the Bank
8        Holding Company Act of 1956.
9            (B) For purposes of subparagraph (A) of this
10        paragraph, the term "bank" includes (i) any entity
11        that is regulated by the Comptroller of the Currency
12        under the National Bank Act, or by the Federal Reserve
13        Board, or by the Federal Deposit Insurance Corporation
14        and (ii) any federally or State chartered bank
15        operating as a credit card bank.
16            (C) For purposes of subparagraph (A) of this
17        paragraph, the term "sales finance company" has the
18        meaning provided in the following item (i) or (ii):
19                (i) A person primarily engaged in one or more
20            of the following businesses: the business of
21            purchasing customer receivables, the business of
22            making loans upon the security of customer
23            receivables, the business of making loans for the
24            express purpose of funding purchases of tangible
25            personal property or services by the borrower, or
26            the business of finance leasing. For purposes of

 

 

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1            this item (i), "customer receivable" means:
2                    (a) a retail installment contract or
3                retail charge agreement within the meaning of
4                the Sales Finance Agency Act, the Retail
5                Installment Sales Act, or the Motor Vehicle
6                Retail Installment Sales Act;
7                    (b) an installment, charge, credit, or
8                similar contract or agreement arising from the
9                sale of tangible personal property or services
10                in a transaction involving a deferred payment
11                price payable in one or more installments
12                subsequent to the sale; or
13                    (c) the outstanding balance of a contract
14                or agreement described in provisions (a) or
15                (b) of this item (i).
16                A customer receivable need not provide for
17            payment of interest on deferred payments. A sales
18            finance company may purchase a customer receivable
19            from, or make a loan secured by a customer
20            receivable to, the seller in the original
21            transaction or to a person who purchased the
22            customer receivable directly or indirectly from
23            that seller.
24                (ii) A corporation meeting each of the
25            following criteria:
26                    (a) the corporation must be a member of an

 

 

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1                "affiliated group" within the meaning of
2                Section 1504(a) of the Internal Revenue Code,
3                determined without regard to Section 1504(b)
4                of the Internal Revenue Code;
5                    (b) more than 50% of the gross income of
6                the corporation for the taxable year must be
7                interest income derived from qualifying loans.
8                A "qualifying loan" is a loan made to a member
9                of the corporation's affiliated group that
10                originates customer receivables (within the
11                meaning of item (i)) or to whom customer
12                receivables originated by a member of the
13                affiliated group have been transferred, to the
14                extent the average outstanding balance of
15                loans from that corporation to members of its
16                affiliated group during the taxable year do
17                not exceed the limitation amount for that
18                corporation. The "limitation amount" for a
19                corporation is the average outstanding
20                balances during the taxable year of customer
21                receivables (within the meaning of item (i))
22                originated by all members of the affiliated
23                group. If the average outstanding balances of
24                the loans made by a corporation to members of
25                its affiliated group exceed the limitation
26                amount, the interest income of that

 

 

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1                corporation from qualifying loans shall be
2                equal to its interest income from loans to
3                members of its affiliated groups times a
4                fraction equal to the limitation amount
5                divided by the average outstanding balances of
6                the loans made by that corporation to members
7                of its affiliated group;
8                    (c) the total of all shareholder's equity
9                (including, without limitation, paid-in
10                capital on common and preferred stock and
11                retained earnings) of the corporation plus the
12                total of all of its loans, advances, and other
13                obligations payable or owed to members of its
14                affiliated group may not exceed 20% of the
15                total assets of the corporation at any time
16                during the tax year; and
17                    (d) more than 50% of all interest-bearing
18                obligations of the affiliated group payable to
19                persons outside the group determined in
20                accordance with generally accepted accounting
21                principles must be obligations of the
22                corporation.
23            This amendatory Act of the 91st General Assembly
24        is declaratory of existing law.
25            (D) Subparagraphs (B) and (C) of this paragraph
26        are declaratory of existing law and apply

 

 

HB3477- 69 -LRB102 14698 HLH 20051 b

1        retroactively, for all tax years beginning on or
2        before December 31, 1996, to all original returns, to
3        all amended returns filed no later than 30 days after
4        the effective date of this amendatory Act of 1996, and
5        to all notices issued on or before the effective date
6        of this amendatory Act of 1996 under subsection (a) of
7        Section 903, subsection (a) of Section 904, subsection
8        (e) of Section 909, or Section 912. A taxpayer that is
9        a "financial organization" that engages in any
10        transaction with an affiliate shall be a "financial
11        organization" for all purposes of this Act.
12            (E) For all tax years beginning on or before
13        December 31, 1996, a taxpayer that falls within the
14        definition of a "financial organization" under
15        subparagraphs (B) or (C) of this paragraph, but who
16        does not fall within the definition of a "financial
17        organization" under the Proposed Regulations issued by
18        the Department of Revenue on July 19, 1996, may
19        irrevocably elect to apply the Proposed Regulations
20        for all of those years as though the Proposed
21        Regulations had been lawfully promulgated, adopted,
22        and in effect for all of those years. For purposes of
23        applying subparagraphs (B) or (C) of this paragraph to
24        all of those years, the election allowed by this
25        subparagraph applies only to the taxpayer making the
26        election and to those members of the taxpayer's

 

 

HB3477- 70 -LRB102 14698 HLH 20051 b

1        unitary business group who are ordinarily required to
2        apportion business income under the same subsection of
3        Section 304 of this Act as the taxpayer making the
4        election. No election allowed by this subparagraph
5        shall be made under a claim filed under subsection (d)
6        of Section 909 more than 30 days after the effective
7        date of this amendatory Act of 1996.
8            (F) Finance Leases. For purposes of this
9        subsection, a finance lease shall be treated as a loan
10        or other extension of credit, rather than as a lease,
11        regardless of how the transaction is characterized for
12        any other purpose, including the purposes of any
13        regulatory agency to which the lessor is subject. A
14        finance lease is any transaction in the form of a lease
15        in which the lessee is treated as the owner of the
16        leased asset entitled to any deduction for
17        depreciation allowed under Section 167 of the Internal
18        Revenue Code.
19        (9) Fiscal year. The term "fiscal year" means an
20    accounting period of 12 months ending on the last day of
21    any month other than December.
22        (9.5) Fixed place of business. The term "fixed place
23    of business" has the same meaning as that term is given in
24    Section 864 of the Internal Revenue Code and the related
25    Treasury regulations.
26        (10) Includes and including. The terms "includes" and

 

 

HB3477- 71 -LRB102 14698 HLH 20051 b

1    "including" when used in a definition contained in this
2    Act shall not be deemed to exclude other things otherwise
3    within the meaning of the term defined.
4        (11) Internal Revenue Code. The term "Internal Revenue
5    Code" means the United States Internal Revenue Code of
6    1954 or any successor law or laws relating to federal
7    income taxes in effect for the taxable year.
8        (11.5) Investment partnership.
9            (A) The term "investment partnership" means any
10        entity that is treated as a partnership for federal
11        income tax purposes that meets the following
12        requirements:
13                (i) no less than 90% of the partnership's cost
14            of its total assets consists of qualifying
15            investment securities, deposits at banks or other
16            financial institutions, and office space and
17            equipment reasonably necessary to carry on its
18            activities as an investment partnership;
19                (ii) no less than 90% of its gross income
20            consists of interest, dividends, and gains from
21            the sale or exchange of qualifying investment
22            securities; and
23                (iii) the partnership is not a dealer in
24            qualifying investment securities.
25            (B) For purposes of this paragraph (11.5), the
26        term "qualifying investment securities" includes all

 

 

HB3477- 72 -LRB102 14698 HLH 20051 b

1        of the following:
2                (i) common stock, including preferred or debt
3            securities convertible into common stock, and
4            preferred stock;
5                (ii) bonds, debentures, and other debt
6            securities;
7                (iii) foreign and domestic currency deposits
8            secured by federal, state, or local governmental
9            agencies;
10                (iv) mortgage or asset-backed securities
11            secured by federal, state, or local governmental
12            agencies;
13                (v) repurchase agreements and loan
14            participations;
15                (vi) foreign currency exchange contracts and
16            forward and futures contracts on foreign
17            currencies;
18                (vii) stock and bond index securities and
19            futures contracts and other similar financial
20            securities and futures contracts on those
21            securities;
22                (viii) options for the purchase or sale of any
23            of the securities, currencies, contracts, or
24            financial instruments described in items (i) to
25            (vii), inclusive;
26                (ix) regulated futures contracts;

 

 

HB3477- 73 -LRB102 14698 HLH 20051 b

1                (x) commodities (not described in Section
2            1221(a)(1) of the Internal Revenue Code) or
3            futures, forwards, and options with respect to
4            such commodities, provided, however, that any item
5            of a physical commodity to which title is actually
6            acquired in the partnership's capacity as a dealer
7            in such commodity shall not be a qualifying
8            investment security;
9                (xi) derivatives; and
10                (xii) a partnership interest in another
11            partnership that is an investment partnership.
12        (12) Mathematical error. The term "mathematical error"
13    includes the following types of errors, omissions, or
14    defects in a return filed by a taxpayer which prevents
15    acceptance of the return as filed for processing:
16            (A) arithmetic errors or incorrect computations on
17        the return or supporting schedules;
18            (B) entries on the wrong lines;
19            (C) omission of required supporting forms or
20        schedules or the omission of the information in whole
21        or in part called for thereon; and
22            (D) an attempt to claim, exclude, deduct, or
23        improperly report, in a manner directly contrary to
24        the provisions of the Act and regulations thereunder
25        any item of income, exemption, deduction, or credit.
26        (13) Nonbusiness income. The term "nonbusiness income"

 

 

HB3477- 74 -LRB102 14698 HLH 20051 b

1    means all income other than business income or
2    compensation.
3        (14) Nonresident. The term "nonresident" means a
4    person who is not a resident.
5        (15) Paid, incurred and accrued. The terms "paid",
6    "incurred" and "accrued" shall be construed according to
7    the method of accounting upon the basis of which the
8    person's base income is computed under this Act.
9        (16) Partnership and partner. The term "partnership"
10    includes a syndicate, group, pool, joint venture or other
11    unincorporated organization, through or by means of which
12    any business, financial operation, or venture is carried
13    on, and which is not, within the meaning of this Act, a
14    trust or estate or a corporation; and the term "partner"
15    includes a member in such syndicate, group, pool, joint
16    venture or organization.
17        The term "partnership" includes any entity, including
18    a limited liability company formed under the Illinois
19    Limited Liability Company Act, classified as a partnership
20    for federal income tax purposes.
21        The term "partnership" does not include a syndicate,
22    group, pool, joint venture, or other unincorporated
23    organization established for the sole purpose of playing
24    the Illinois State Lottery.
25        (17) Part-year resident. The term "part-year resident"
26    means an individual who became a resident during the

 

 

HB3477- 75 -LRB102 14698 HLH 20051 b

1    taxable year or ceased to be a resident during the taxable
2    year. Under Section 1501(a)(20)(A)(i) residence commences
3    with presence in this State for other than a temporary or
4    transitory purpose and ceases with absence from this State
5    for other than a temporary or transitory purpose. Under
6    Section 1501(a)(20)(A)(ii) residence commences with the
7    establishment of domicile in this State and ceases with
8    the establishment of domicile in another State.
9        (18) Person. The term "person" shall be construed to
10    mean and include an individual, a trust, estate,
11    partnership, association, firm, company, corporation,
12    limited liability company, or fiduciary. For purposes of
13    Section 1301 and 1302 of this Act, a "person" means (i) an
14    individual, (ii) a corporation, (iii) an officer, agent,
15    or employee of a corporation, (iv) a member, agent or
16    employee of a partnership, or (v) a member, manager,
17    employee, officer, director, or agent of a limited
18    liability company who in such capacity commits an offense
19    specified in Section 1301 and 1302.
20        (18A) Records. The term "records" includes all data
21    maintained by the taxpayer, whether on paper, microfilm,
22    microfiche, or any type of machine-sensible data
23    compilation.
24        (19) Regulations. The term "regulations" includes
25    rules promulgated and forms prescribed by the Department.
26        (20) Resident. The term "resident" means:

 

 

HB3477- 76 -LRB102 14698 HLH 20051 b

1            (A) an individual (i) who is in this State for
2        other than a temporary or transitory purpose during
3        the taxable year; or (ii) who is domiciled in this
4        State but is absent from the State for a temporary or
5        transitory purpose during the taxable year;
6            (B) The estate of a decedent who at his or her
7        death was domiciled in this State;
8            (C) A trust created by a will of a decedent who at
9        his death was domiciled in this State; and
10            (D) An irrevocable trust, the grantor of which was
11        domiciled in this State at the time such trust became
12        irrevocable. For purpose of this subparagraph, a trust
13        shall be considered irrevocable to the extent that the
14        grantor is not treated as the owner thereof under
15        Sections 671 through 678 of the Internal Revenue Code.
16        (21) Sales. The term "sales" means all gross receipts
17    of the taxpayer not allocated under Sections 301, 302 and
18    303.
19        (22) State. The term "state" when applied to a
20    jurisdiction other than this State means any state of the
21    United States, the District of Columbia, the Commonwealth
22    of Puerto Rico, any Territory or Possession of the United
23    States, and any foreign country, or any political
24    subdivision of any of the foregoing. For purposes of the
25    foreign tax credit under Section 601, the term "state"
26    means any state of the United States, the District of

 

 

HB3477- 77 -LRB102 14698 HLH 20051 b

1    Columbia, the Commonwealth of Puerto Rico, and any
2    territory or possession of the United States, or any
3    political subdivision of any of the foregoing, effective
4    for tax years ending on or after December 31, 1989.
5        (23) Taxable year. The term "taxable year" means the
6    calendar year, or the fiscal year ending during such
7    calendar year, upon the basis of which the base income is
8    computed under this Act. "Taxable year" means, in the case
9    of a return made for a fractional part of a year under the
10    provisions of this Act, the period for which such return
11    is made.
12        (24) Taxpayer. The term "taxpayer" means any person
13    subject to the tax imposed by this Act.
14        (25) International banking facility. The term
15    international banking facility shall have the same meaning
16    as is set forth in the Illinois Banking Act or as is set
17    forth in the laws of the United States or regulations of
18    the Board of Governors of the Federal Reserve System.
19        (26) Income Tax Return Preparer.
20            (A) The term "income tax return preparer" means
21        any person who prepares for compensation, or who
22        employs one or more persons to prepare for
23        compensation, any return of tax imposed by this Act or
24        any claim for refund of tax imposed by this Act. The
25        preparation of a substantial portion of a return or
26        claim for refund shall be treated as the preparation

 

 

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1        of that return or claim for refund.
2            (B) A person is not an income tax return preparer
3        if all he or she does is
4                (i) furnish typing, reproducing, or other
5            mechanical assistance;
6                (ii) prepare returns or claims for refunds for
7            the employer by whom he or she is regularly and
8            continuously employed;
9                (iii) prepare as a fiduciary returns or claims
10            for refunds for any person; or
11                (iv) prepare claims for refunds for a taxpayer
12            in response to any notice of deficiency issued to
13            that taxpayer or in response to any waiver of
14            restriction after the commencement of an audit of
15            that taxpayer or of another taxpayer if a
16            determination in the audit of the other taxpayer
17            directly or indirectly affects the tax liability
18            of the taxpayer whose claims he or she is
19            preparing.
20        (26.5) Unitary business. "Unitary business" means a
21    single economic enterprise made up either of separate
22    parts of a single business entity or of a commonly
23    controlled group of business entities that are
24    sufficiently interdependent, integrated, and interrelated
25    through their activities so as to provide a synergy and
26    mutual benefit that produces a sharing or exchange of

 

 

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1    value among them and a significant flow of value to the
2    separate parts. A unitary business includes that part of
3    the business that meets the definition in this paragraph
4    (26.5) and is conducted by a taxpayer through the
5    taxpayer's interest in a partnership, whether the interest
6    in that partnership is held directly or indirectly through
7    a series of partnerships or other pass-through entities.
8        (27) Unitary business group.
9            (A) The term "unitary business group" means a
10        group of persons related through common ownership
11        whose business activities are integrated with,
12        dependent upon and contribute to each other. The group
13        will not include those members whose business activity
14        outside the United States is 80% or more of any such
15        member's total business activity; for purposes of this
16        paragraph and clause (a)(3)(B)(ii) of Section 304,
17        business activity within the United States shall be
18        measured by means of the factors ordinarily applicable
19        under subsections (a), (b), (c), (d), or (h) of
20        Section 304 except that, in the case of members
21        ordinarily required to apportion business income by
22        means of the 3 factor formula of property, payroll and
23        sales specified in subsection (a) of Section 304,
24        including the formula as weighted in subsection (h) of
25        Section 304, such members shall not use the sales
26        factor in the computation and the results of the

 

 

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1        property and payroll factor computations of subsection
2        (a) of Section 304 shall be divided by 2 (by one if
3        either the property or payroll factor has a
4        denominator of zero). The computation required by the
5        preceding sentence shall, in each case, involve the
6        division of the member's property, payroll, or revenue
7        miles in the United States, insurance premiums on
8        property or risk in the United States, or financial
9        organization business income from sources within the
10        United States, as the case may be, by the respective
11        worldwide figures for such items. Common ownership in
12        the case of corporations is the direct or indirect
13        control or ownership of more than 50% of the
14        outstanding voting stock of the persons carrying on
15        unitary business activity. Unitary business activity
16        can ordinarily be illustrated where the activities of
17        the members are: (1) in the same general line (such as
18        manufacturing, wholesaling, retailing of tangible
19        personal property, insurance, transportation or
20        finance); or (2) are steps in a vertically structured
21        enterprise or process (such as the steps involved in
22        the production of natural resources, which might
23        include exploration, mining, refining, and marketing);
24        and, in either instance, the members are functionally
25        integrated through the exercise of strong centralized
26        management (where, for example, authority over such

 

 

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1        matters as purchasing, financing, tax compliance,
2        product line, personnel, marketing and capital
3        investment is not left to each member).
4            (B) In no event, for taxable years ending prior to
5        December 31, 2017, shall any unitary business group
6        include members which are ordinarily required to
7        apportion business income under different subsections
8        of Section 304 except that for tax years ending on or
9        after December 31, 1987 this prohibition shall not
10        apply to a holding company that would otherwise be a
11        member of a unitary business group with taxpayers that
12        apportion business income under any of subsections
13        (b), (c), (c-1), or (d) of Section 304. If a unitary
14        business group would, but for the preceding sentence,
15        include members that are ordinarily required to
16        apportion business income under different subsections
17        of Section 304, then for each subsection of Section
18        304 for which there are two or more members, there
19        shall be a separate unitary business group composed of
20        such members. For purposes of the preceding two
21        sentences, a member is "ordinarily required to
22        apportion business income" under a particular
23        subsection of Section 304 if it would be required to
24        use the apportionment method prescribed by such
25        subsection except for the fact that it derives
26        business income solely from Illinois. As used in this

 

 

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1        paragraph, for taxable years ending before December
2        31, 2017, the phrase "United States" means only the 50
3        states and the District of Columbia, but does not
4        include any territory or possession of the United
5        States or any area over which the United States has
6        asserted jurisdiction or claimed exclusive rights with
7        respect to the exploration for or exploitation of
8        natural resources. For taxable years ending on or
9        after December 31, 2017 and beginning prior to January
10        1, 2022, the phrase "United States", as used in this
11        paragraph, means only the 50 states, the District of
12        Columbia, and any area over which the United States
13        has asserted jurisdiction or claimed exclusive rights
14        with respect to the exploration for or exploitation of
15        natural resources, but does not include any territory
16        or possession of the United States. For taxable years
17        beginning on or after January 1, 2022, "United States"
18        means the 50 states of the United States, the District
19        of Columbia, and United States' territories and
20        possessions.
21            (C) Holding companies.
22                (i) For purposes of this subparagraph, a
23            "holding company" is a corporation (other than a
24            corporation that is a financial organization under
25            paragraph (8) of this subsection (a) of Section
26            1501 because it is a bank holding company under

 

 

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1            the provisions of the Bank Holding Company Act of
2            1956 (12 U.S.C. 1841, et seq.) or because it is
3            owned by a bank or a bank holding company) that
4            owns a controlling interest in one or more other
5            taxpayers ("controlled taxpayers"); that, during
6            the period that includes the taxable year and the
7            2 immediately preceding taxable years or, if the
8            corporation was formed during the current or
9            immediately preceding taxable year, the taxable
10            years in which the corporation has been in
11            existence, derived substantially all its gross
12            income from dividends, interest, rents, royalties,
13            fees or other charges received from controlled
14            taxpayers for the provision of services, and gains
15            on the sale or other disposition of interests in
16            controlled taxpayers or in property leased or
17            licensed to controlled taxpayers or used by the
18            taxpayer in providing services to controlled
19            taxpayers; and that incurs no substantial expenses
20            other than expenses (including interest and other
21            costs of borrowing) incurred in connection with
22            the acquisition and holding of interests in
23            controlled taxpayers and in the provision of
24            services to controlled taxpayers or in the leasing
25            or licensing of property to controlled taxpayers.
26                (ii) The income of a holding company which is

 

 

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1            a member of more than one unitary business group
2            shall be included in each unitary business group
3            of which it is a member on a pro rata basis, by
4            including in each unitary business group that
5            portion of the base income of the holding company
6            that bears the same proportion to the total base
7            income of the holding company as the gross
8            receipts of the unitary business group bears to
9            the combined gross receipts of all unitary
10            business groups (in both cases without regard to
11            the holding company) or on any other reasonable
12            basis, consistently applied.
13                (iii) A holding company shall apportion its
14            business income under the subsection of Section
15            304 used by the other members of its unitary
16            business group. The apportionment factors of a
17            holding company which would be a member of more
18            than one unitary business group shall be included
19            with the apportionment factors of each unitary
20            business group of which it is a member on a pro
21            rata basis using the same method used in clause
22            (ii).
23                (iv) The provisions of this subparagraph (C)
24            are intended to clarify existing law.
25            (D) If including the base income and factors of a
26        holding company in more than one unitary business

 

 

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1        group under subparagraph (C) does not fairly reflect
2        the degree of integration between the holding company
3        and one or more of the unitary business groups, the
4        dependence of the holding company and one or more of
5        the unitary business groups upon each other, or the
6        contributions between the holding company and one or
7        more of the unitary business groups, the holding
8        company may petition the Director, under the
9        procedures provided under Section 304(f), for
10        permission to include all base income and factors of
11        the holding company only with members of a unitary
12        business group apportioning their business income
13        under one subsection of subsections (a), (b), (c), or
14        (d) of Section 304. If the petition is granted, the
15        holding company shall be included in a unitary
16        business group only with persons apportioning their
17        business income under the selected subsection of
18        Section 304 until the Director grants a petition of
19        the holding company either to be included in more than
20        one unitary business group under subparagraph (C) or
21        to include its base income and factors only with
22        members of a unitary business group apportioning their
23        business income under a different subsection of
24        Section 304.
25            (E) If the unitary business group members'
26        accounting periods differ, the common parent's

 

 

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1        accounting period or, if there is no common parent,
2        the accounting period of the member that is expected
3        to have, on a recurring basis, the greatest Illinois
4        income tax liability must be used to determine whether
5        to use the apportionment method provided in subsection
6        (a) or subsection (h) of Section 304. The prohibition
7        against membership in a unitary business group for
8        taxpayers ordinarily required to apportion income
9        under different subsections of Section 304 does not
10        apply to taxpayers required to apportion income under
11        subsection (a) and subsection (h) of Section 304. The
12        provisions of this amendatory Act of 1998 apply to tax
13        years ending on or after December 31, 1998.
14        (28) Subchapter S corporation. The term "Subchapter S
15    corporation" means a corporation for which there is in
16    effect an election under Section 1362 of the Internal
17    Revenue Code, or for which there is a federal election to
18    opt out of the provisions of the Subchapter S Revision Act
19    of 1982 and have applied instead the prior federal
20    Subchapter S rules as in effect on July 1, 1982.
21        (28.1) Tax haven. The term "tax haven" means a
22    jurisdiction that, during the tax year in question, has no
23    or nominal effective tax on the relevant income and:
24            (A) has laws or practices that prevent effective
25        exchange of information for tax purposes with other
26        governments on taxpayers benefiting from the tax

 

 

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1        regime;
2            (B) has a tax regime that lacks transparency; a
3        tax regime lacks transparency if the details of
4        legislative, legal, or administrative provisions are
5        not open and apparent or are not consistently applied
6        among similarly situated taxpayers, or if the
7        information needed by tax authorities to determine a
8        taxpayer's correct tax liability, such as accounting
9        records and underlying documentation, is not
10        adequately available;
11            (C) facilitates the establishment of foreign-owned
12        entities without the need for a local substantive
13        presence or prohibits these entities from having any
14        commercial impact on the local economy;
15            (D) explicitly or implicitly excludes the
16        jurisdiction's resident taxpayers from taking
17        advantage of the tax regime's benefits or prohibits
18        enterprises that benefit from the regime from
19        operating in the jurisdiction's domestic market; or
20            (E) has created a tax regime that is favorable for
21        tax avoidance, based upon an overall assessment of
22        relevant factors, including whether the jurisdiction
23        has a significant untaxed offshore financial or other
24        services sector relative to its overall economy.
25        (30) Foreign person. The term "foreign person" means
26    any person who is a nonresident alien individual and any

 

 

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1    nonindividual entity, regardless of where created or
2    organized, whose business activity outside the United
3    States is 80% or more of the entity's total business
4    activity.
 
5    (b) Other definitions.
6        (1) Words denoting number, gender, and so forth, when
7    used in this Act, where not otherwise distinctly expressed
8    or manifestly incompatible with the intent thereof:
9            (A) Words importing the singular include and apply
10        to several persons, parties or things;
11            (B) Words importing the plural include the
12        singular; and
13            (C) Words importing the masculine gender include
14        the feminine as well.
15        (2) "Company" or "association" as including successors
16    and assigns. The word "company" or "association", when
17    used in reference to a corporation, shall be deemed to
18    embrace the words "successors and assigns of such company
19    or association", and in like manner as if these last-named
20    words, or words of similar import, were expressed.
21        (3) Other terms. Any term used in any Section of this
22    Act with respect to the application of, or in connection
23    with, the provisions of any other Section of this Act
24    shall have the same meaning as in such other Section.
25(Source: P.A. 99-213, eff. 7-31-15; 100-22, eff. 7-6-17.)