94TH GENERAL ASSEMBLY
State of Illinois
2005 and 2006
HB0184

 

Introduced 1/12/2005, by Rep. Lou Lang

 

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

    Amends the Illinois Income Tax Act to allow individual taxpayers, 65 years of age or older, a deduction for unreimbursed amounts spent on home health care services. Applicable to tax years ending on or after December 31, 2005. Sunsets the deduction after 10 years. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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1     AN ACT in relation to taxes.
 
2     Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
 
4     Section 5. The Illinois Income Tax Act is amended by
5 changing Section 203 as follows:
 
6     (35 ILCS 5/203)  (from Ch. 120, par. 2-203)
7     Sec. 203. Base income defined.
8     (a) Individuals.
9         (1) In general. In the case of an individual, base
10     income means an amount equal to the taxpayer's adjusted
11     gross income for the taxable year as modified by paragraph
12     (2).
13         (2) Modifications. The adjusted gross income referred
14     to in paragraph (1) shall be modified by adding thereto the
15     sum of the following amounts:
16             (A) An amount equal to all amounts paid or accrued
17         to the taxpayer as interest or dividends during the
18         taxable year to the extent excluded from gross income
19         in the computation of adjusted gross income, except
20         stock dividends of qualified public utilities
21         described in Section 305(e) of the Internal Revenue
22         Code;
23             (B) An amount equal to the amount of tax imposed by
24         this Act to the extent deducted from gross income in
25         the computation of adjusted gross income for the
26         taxable year;
27             (C) An amount equal to the amount received during
28         the taxable year as a recovery or refund of real
29         property taxes paid with respect to the taxpayer's
30         principal residence under the Revenue Act of 1939 and
31         for which a deduction was previously taken under
32         subparagraph (L) of this paragraph (2) prior to July 1,

 

 

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1         1991, the retrospective application date of Article 4
2         of Public Act 87-17. In the case of multi-unit or
3         multi-use structures and farm dwellings, the taxes on
4         the taxpayer's principal residence shall be that
5         portion of the total taxes for the entire property
6         which is attributable to such principal residence;
7             (D) An amount equal to the amount of the capital
8         gain deduction allowable under the Internal Revenue
9         Code, to the extent deducted from gross income in the
10         computation of adjusted gross income;
11             (D-5) An amount, to the extent not included in
12         adjusted gross income, equal to the amount of money
13         withdrawn by the taxpayer in the taxable year from a
14         medical care savings account and the interest earned on
15         the account in the taxable year of a withdrawal
16         pursuant to subsection (b) of Section 20 of the Medical
17         Care Savings Account Act or subsection (b) of Section
18         20 of the Medical Care Savings Account Act of 2000;
19             (D-10) For taxable years ending after December 31,
20         1997, an amount equal to any eligible remediation costs
21         that the individual deducted in computing adjusted
22         gross income and for which the individual claims a
23         credit under subsection (l) of Section 201;
24             (D-15) For taxable years 2001 and thereafter, an
25         amount equal to the bonus depreciation deduction (30%
26         of the adjusted basis of the qualified property) taken
27         on the taxpayer's federal income tax return for the
28         taxable year under subsection (k) of Section 168 of the
29         Internal Revenue Code;
30             (D-16) If the taxpayer reports a capital gain or
31         loss on the taxpayer's federal income tax return for
32         the taxable year based on a sale or transfer of
33         property for which the taxpayer was required in any
34         taxable year to make an addition modification under
35         subparagraph (D-15), then an amount equal to the
36         aggregate amount of the deductions taken in all taxable

 

 

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1         years under subparagraph (Z) with respect to that
2         property.
3             The taxpayer is required to make the addition
4         modification under this subparagraph only once with
5         respect to any one piece of property;
6             (D-17) For taxable years ending on or after
7         December 31, 2004, an amount equal to the amount
8         otherwise allowed as a deduction in computing base
9         income for interest paid, accrued, or incurred,
10         directly or indirectly, to a foreign person who would
11         be a member of the same unitary business group but for
12         the fact that foreign person's business activity
13         outside the United States is 80% or more of the foreign
14         person's total business activity. The addition
15         modification required by this subparagraph shall be
16         reduced to the extent that dividends were included in
17         base income of the unitary group for the same taxable
18         year and received by the taxpayer or by a member of the
19         taxpayer's unitary business group (including amounts
20         included in gross income under Sections 951 through 964
21         of the Internal Revenue Code and amounts included in
22         gross income under Section 78 of the Internal Revenue
23         Code) with respect to the stock of the same person to
24         whom the interest was paid, accrued, or incurred.
25             This paragraph shall not apply to the following:
26                 (i) an item of interest paid, accrued, or
27             incurred, directly or indirectly, to a foreign
28             person who is subject in a foreign country or
29             state, other than a state which requires mandatory
30             unitary reporting, to a tax on or measured by net
31             income with respect to such interest; or
32                 (ii) an item of interest paid, accrued, or
33             incurred, directly or indirectly, to a foreign
34             person if the taxpayer can establish, based on a
35             preponderance of the evidence, both of the
36             following:

 

 

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1                     (a) the foreign person, during the same
2                 taxable year, paid, accrued, or incurred, the
3                 interest to a person that is not a related
4                 member, and
5                     (b) the transaction giving rise to the
6                 interest expense between the taxpayer and the
7                 foreign person did not have as a principal
8                 purpose the avoidance of Illinois income tax,
9                 and is paid pursuant to a contract or agreement
10                 that reflects an arm's-length interest rate
11                 and terms; or
12                 (iii) the taxpayer can establish, based on
13             clear and convincing evidence, that the interest
14             paid, accrued, or incurred relates to a contract or
15             agreement entered into at arm's-length rates and
16             terms and the principal purpose for the payment is
17             not federal or Illinois tax avoidance; or
18                 (iv) an item of interest paid, accrued, or
19             incurred, directly or indirectly, to a foreign
20             person if the taxpayer establishes by clear and
21             convincing evidence that the adjustments are
22             unreasonable; or if the taxpayer and the Director
23             agree in writing to the application or use of an
24             alternative method of apportionment under Section
25             304(f).
26                 Nothing in this subsection shall preclude the
27             Director from making any other adjustment
28             otherwise allowed under Section 404 of this Act for
29             any tax year beginning after the effective date of
30             this amendment provided such adjustment is made
31             pursuant to regulation adopted by the Department
32             and such regulations provide methods and standards
33             by which the Department will utilize its authority
34             under Section 404 of this Act;
35             (D-18) For taxable years ending on or after
36         December 31, 2004, an amount equal to the amount of

 

 

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1         intangible expenses and costs otherwise allowed as a
2         deduction in computing base income, and that were paid,
3         accrued, or incurred, directly or indirectly, to a
4         foreign person who would be a member of the same
5         unitary business group but for the fact that the
6         foreign person's business activity outside the United
7         States is 80% or more of that person's total business
8         activity. The addition modification required by this
9         subparagraph shall be reduced to the extent that
10         dividends were included in base income of the unitary
11         group for the same taxable year and received by the
12         taxpayer or by a member of the taxpayer's unitary
13         business group (including amounts included in gross
14         income under Sections 951 through 964 of the Internal
15         Revenue Code and amounts included in gross income under
16         Section 78 of the Internal Revenue Code) with respect
17         to the stock of the same person to whom the intangible
18         expenses and costs were directly or indirectly paid,
19         incurred, or accrued. The preceding sentence does not
20         apply to the extent that the same dividends caused a
21         reduction to the addition modification required under
22         Section 203(a)(2)(D-17) of this Act. As used in this
23         subparagraph, the term "intangible expenses and costs"
24         includes (1) expenses, losses, and costs for, or
25         related to, the direct or indirect acquisition, use,
26         maintenance or management, ownership, sale, exchange,
27         or any other disposition of intangible property; (2)
28         losses incurred, directly or indirectly, from
29         factoring transactions or discounting transactions;
30         (3) royalty, patent, technical, and copyright fees;
31         (4) licensing fees; and (5) other similar expenses and
32         costs. For purposes of this subparagraph, "intangible
33         property" includes patents, patent applications, trade
34         names, trademarks, service marks, copyrights, mask
35         works, trade secrets, and similar types of intangible
36         assets.

 

 

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1             This paragraph shall not apply to the following:
2                 (i) any item of intangible expenses or costs
3             paid, accrued, or incurred, directly or
4             indirectly, from a transaction with a foreign
5             person who is subject in a foreign country or
6             state, other than a state which requires mandatory
7             unitary reporting, to a tax on or measured by net
8             income with respect to such item; or
9                 (ii) any item of intangible expense or cost
10             paid, accrued, or incurred, directly or
11             indirectly, if the taxpayer can establish, based
12             on a preponderance of the evidence, both of the
13             following:
14                     (a) the foreign person during the same
15                 taxable year paid, accrued, or incurred, the
16                 intangible expense or cost to a person that is
17                 not a related member, and
18                     (b) the transaction giving rise to the
19                 intangible expense or cost between the
20                 taxpayer and the foreign person did not have as
21                 a principal purpose the avoidance of Illinois
22                 income tax, and is paid pursuant to a contract
23                 or agreement that reflects arm's-length terms;
24                 or
25                 (iii) any item of intangible expense or cost
26             paid, accrued, or incurred, directly or
27             indirectly, from a transaction with a foreign
28             person if the taxpayer establishes by clear and
29             convincing evidence, that the adjustments are
30             unreasonable; or if the taxpayer and the Director
31             agree in writing to the application or use of an
32             alternative method of apportionment under Section
33             304(f);
34                 Nothing in this subsection shall preclude the
35             Director from making any other adjustment
36             otherwise allowed under Section 404 of this Act for

 

 

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1             any tax year beginning after the effective date of
2             this amendment provided such adjustment is made
3             pursuant to regulation adopted by the Department
4             and such regulations provide methods and standards
5             by which the Department will utilize its authority
6             under Section 404 of this Act;
7             (D-20) For taxable years beginning on or after
8         January 1, 2002, in the case of a distribution from a
9         qualified tuition program under Section 529 of the
10         Internal Revenue Code, other than (i) a distribution
11         from a College Savings Pool created under Section 16.5
12         of the State Treasurer Act or (ii) a distribution from
13         the Illinois Prepaid Tuition Trust Fund, an amount
14         equal to the amount excluded from gross income under
15         Section 529(c)(3)(B);
16     and by deducting from the total so obtained the sum of the
17     following amounts:
18             (E) For taxable years ending before December 31,
19         2001, any amount included in such total in respect of
20         any compensation (including but not limited to any
21         compensation paid or accrued to a serviceman while a
22         prisoner of war or missing in action) paid to a
23         resident by reason of being on active duty in the Armed
24         Forces of the United States and in respect of any
25         compensation paid or accrued to a resident who as a
26         governmental employee was a prisoner of war or missing
27         in action, and in respect of any compensation paid to a
28         resident in 1971 or thereafter for annual training
29         performed pursuant to Sections 502 and 503, Title 32,
30         United States Code as a member of the Illinois National
31         Guard. For taxable years ending on or after December
32         31, 2001, any amount included in such total in respect
33         of any compensation (including but not limited to any
34         compensation paid or accrued to a serviceman while a
35         prisoner of war or missing in action) paid to a
36         resident by reason of being a member of any component

 

 

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1         of the Armed Forces of the United States and in respect
2         of any compensation paid or accrued to a resident who
3         as a governmental employee was a prisoner of war or
4         missing in action, and in respect of any compensation
5         paid to a resident in 2001 or thereafter by reason of
6         being a member of the Illinois National Guard. The
7         provisions of this amendatory Act of the 92nd General
8         Assembly are exempt from the provisions of Section 250;
9             (F) An amount equal to all amounts included in such
10         total pursuant to the provisions of Sections 402(a),
11         402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the
12         Internal Revenue Code, or included in such total as
13         distributions under the provisions of any retirement
14         or disability plan for employees of any governmental
15         agency or unit, or retirement payments to retired
16         partners, which payments are excluded in computing net
17         earnings from self employment by Section 1402 of the
18         Internal Revenue Code and regulations adopted pursuant
19         thereto;
20             (G) The valuation limitation amount;
21             (H) An amount equal to the amount of any tax
22         imposed by this Act which was refunded to the taxpayer
23         and included in such total for the taxable year;
24             (I) An amount equal to all amounts included in such
25         total pursuant to the provisions of Section 111 of the
26         Internal Revenue Code as a recovery of items previously
27         deducted from adjusted gross income in the computation
28         of taxable income;
29             (J) An amount equal to those dividends included in
30         such total which were paid by a corporation which
31         conducts business operations in an Enterprise Zone or
32         zones created under the Illinois Enterprise Zone Act,
33         and conducts substantially all of its operations in an
34         Enterprise Zone or zones;
35             (K) An amount equal to those dividends included in
36         such total that were paid by a corporation that

 

 

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1         conducts business operations in a federally designated
2         Foreign Trade Zone or Sub-Zone and that is designated a
3         High Impact Business located in Illinois; provided
4         that dividends eligible for the deduction provided in
5         subparagraph (J) of paragraph (2) of this subsection
6         shall not be eligible for the deduction provided under
7         this subparagraph (K);
8             (L) For taxable years ending after December 31,
9         1983, an amount equal to all social security benefits
10         and railroad retirement benefits included in such
11         total pursuant to Sections 72(r) and 86 of the Internal
12         Revenue Code;
13             (M) With the exception of any amounts subtracted
14         under subparagraph (N), an amount equal to the sum of
15         all amounts disallowed as deductions by (i) Sections
16         171(a) (2), and 265(2) of the Internal Revenue Code of
17         1954, as now or hereafter amended, and all amounts of
18         expenses allocable to interest and disallowed as
19         deductions by Section 265(1) of the Internal Revenue
20         Code of 1954, as now or hereafter amended; and (ii) for
21         taxable years ending on or after August 13, 1999,
22         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
23         the Internal Revenue Code; the provisions of this
24         subparagraph are exempt from the provisions of Section
25         250;
26             (N) An amount equal to all amounts included in such
27         total which are exempt from taxation by this State
28         either by reason of its statutes or Constitution or by
29         reason of the Constitution, treaties or statutes of the
30         United States; provided that, in the case of any
31         statute of this State that exempts income derived from
32         bonds or other obligations from the tax imposed under
33         this Act, the amount exempted shall be the interest net
34         of bond premium amortization;
35             (O) An amount equal to any contribution made to a
36         job training project established pursuant to the Tax

 

 

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1         Increment Allocation Redevelopment Act;
2             (P) An amount equal to the amount of the deduction
3         used to compute the federal income tax credit for
4         restoration of substantial amounts held under claim of
5         right for the taxable year pursuant to Section 1341 of
6         the Internal Revenue Code of 1986;
7             (Q) An amount equal to any amounts included in such
8         total, received by the taxpayer as an acceleration in
9         the payment of life, endowment or annuity benefits in
10         advance of the time they would otherwise be payable as
11         an indemnity for a terminal illness;
12             (R) An amount equal to the amount of any federal or
13         State bonus paid to veterans of the Persian Gulf War;
14             (S) An amount, to the extent included in adjusted
15         gross income, equal to the amount of a contribution
16         made in the taxable year on behalf of the taxpayer to a
17         medical care savings account established under the
18         Medical Care Savings Account Act or the Medical Care
19         Savings Account Act of 2000 to the extent the
20         contribution is accepted by the account administrator
21         as provided in that Act;
22             (T) An amount, to the extent included in adjusted
23         gross income, equal to the amount of interest earned in
24         the taxable year on a medical care savings account
25         established under the Medical Care Savings Account Act
26         or the Medical Care Savings Account Act of 2000 on
27         behalf of the taxpayer, other than interest added
28         pursuant to item (D-5) of this paragraph (2);
29             (U) For one taxable year beginning on or after
30         January 1, 1994, an amount equal to the total amount of
31         tax imposed and paid under subsections (a) and (b) of
32         Section 201 of this Act on grant amounts received by
33         the taxpayer under the Nursing Home Grant Assistance
34         Act during the taxpayer's taxable years 1992 and 1993;
35             (V) Beginning with tax years ending on or after
36         December 31, 1995 and ending with tax years ending on

 

 

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1         or before December 31, 2004, an amount equal to the
2         amount paid by a taxpayer who is a self-employed
3         taxpayer, a partner of a partnership, or a shareholder
4         in a Subchapter S corporation for health insurance or
5         long-term care insurance for that taxpayer or that
6         taxpayer's spouse or dependents, to the extent that the
7         amount paid for that health insurance or long-term care
8         insurance may be deducted under Section 213 of the
9         Internal Revenue Code of 1986, has not been deducted on
10         the federal income tax return of the taxpayer, and does
11         not exceed the taxable income attributable to that
12         taxpayer's income, self-employment income, or
13         Subchapter S corporation income; except that no
14         deduction shall be allowed under this item (V) if the
15         taxpayer is eligible to participate in any health
16         insurance or long-term care insurance plan of an
17         employer of the taxpayer or the taxpayer's spouse. The
18         amount of the health insurance and long-term care
19         insurance subtracted under this item (V) shall be
20         determined by multiplying total health insurance and
21         long-term care insurance premiums paid by the taxpayer
22         times a number that represents the fractional
23         percentage of eligible medical expenses under Section
24         213 of the Internal Revenue Code of 1986 not actually
25         deducted on the taxpayer's federal income tax return;
26             (W) For taxable years beginning on or after January
27         1, 1998, all amounts included in the taxpayer's federal
28         gross income in the taxable year from amounts converted
29         from a regular IRA to a Roth IRA. This paragraph is
30         exempt from the provisions of Section 250;
31             (X) For taxable year 1999 and thereafter, an amount
32         equal to the amount of any (i) distributions, to the
33         extent includible in gross income for federal income
34         tax purposes, made to the taxpayer because of his or
35         her status as a victim of persecution for racial or
36         religious reasons by Nazi Germany or any other Axis

 

 

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1         regime or as an heir of the victim and (ii) items of
2         income, to the extent includible in gross income for
3         federal income tax purposes, attributable to, derived
4         from or in any way related to assets stolen from,
5         hidden from, or otherwise lost to a victim of
6         persecution for racial or religious reasons by Nazi
7         Germany or any other Axis regime immediately prior to,
8         during, and immediately after World War II, including,
9         but not limited to, interest on the proceeds receivable
10         as insurance under policies issued to a victim of
11         persecution for racial or religious reasons by Nazi
12         Germany or any other Axis regime by European insurance
13         companies immediately prior to and during World War II;
14         provided, however, this subtraction from federal
15         adjusted gross income does not apply to assets acquired
16         with such assets or with the proceeds from the sale of
17         such assets; provided, further, this paragraph shall
18         only apply to a taxpayer who was the first recipient of
19         such assets after their recovery and who is a victim of
20         persecution for racial or religious reasons by Nazi
21         Germany or any other Axis regime or as an heir of the
22         victim. The amount of and the eligibility for any
23         public assistance, benefit, or similar entitlement is
24         not affected by the inclusion of items (i) and (ii) of
25         this paragraph in gross income for federal income tax
26         purposes. This paragraph is exempt from the provisions
27         of Section 250;
28             (Y) For taxable years beginning on or after January
29         1, 2002 and ending on or before December 31, 2004,
30         moneys contributed in the taxable year to a College
31         Savings Pool account under Section 16.5 of the State
32         Treasurer Act, except that amounts excluded from gross
33         income under Section 529(c)(3)(C)(i) of the Internal
34         Revenue Code shall not be considered moneys
35         contributed under this subparagraph (Y). For taxable
36         years beginning on or after January 1, 2005, a maximum

 

 

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1         of $10,000 contributed in the taxable year to (i) a
2         College Savings Pool account under Section 16.5 of the
3         State Treasurer Act or (ii) the Illinois Prepaid
4         Tuition Trust Fund, except that amounts excluded from
5         gross income under Section 529(c)(3)(C)(i) of the
6         Internal Revenue Code shall not be considered moneys
7         contributed under this subparagraph (Y). This
8         subparagraph (Y) is exempt from the provisions of
9         Section 250;
10             (Z) For taxable years 2001 and thereafter, for the
11         taxable year in which the bonus depreciation deduction
12         (30% of the adjusted basis of the qualified property)
13         is taken on the taxpayer's federal income tax return
14         under subsection (k) of Section 168 of the Internal
15         Revenue Code and for each applicable taxable year
16         thereafter, an amount equal to "x", where:
17                 (1) "y" equals the amount of the depreciation
18             deduction taken for the taxable year on the
19             taxpayer's federal income tax return on property
20             for which the bonus depreciation deduction (30% of
21             the adjusted basis of the qualified property) was
22             taken in any year under subsection (k) of Section
23             168 of the Internal Revenue Code, but not including
24             the bonus depreciation deduction; and
25                 (2) "x" equals "y" multiplied by 30 and then
26             divided by 70 (or "y" multiplied by 0.429).
27             The aggregate amount deducted under this
28         subparagraph in all taxable years for any one piece of
29         property may not exceed the amount of the bonus
30         depreciation deduction (30% of the adjusted basis of
31         the qualified property) taken on that property on the
32         taxpayer's federal income tax return under subsection
33         (k) of Section 168 of the Internal Revenue Code;
34             (AA) If the taxpayer reports a capital gain or loss
35         on the taxpayer's federal income tax return for the
36         taxable year based on a sale or transfer of property

 

 

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1         for which the taxpayer was required in any taxable year
2         to make an addition modification under subparagraph
3         (D-15), then an amount equal to that addition
4         modification.
5             The taxpayer is allowed to take the deduction under
6         this subparagraph only once with respect to any one
7         piece of property;
8             (BB) Any amount included in adjusted gross income,
9         other than salary, received by a driver in a
10         ridesharing arrangement using a motor vehicle;
11             (CC) The amount of (i) any interest income (net of
12         the deductions allocable thereto) taken into account
13         for the taxable year with respect to a transaction with
14         a taxpayer that is required to make an addition
15         modification with respect to such transaction under
16         Section 203(a)(2)(D-17), 203(b)(2)(E-13),
17         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
18         the amount of that addition modification, and (ii) any
19         income from intangible property (net of the deductions
20         allocable thereto) taken into account for the taxable
21         year with respect to a transaction with a taxpayer that
22         is required to make an addition modification with
23         respect to such transaction under Section
24         203(a)(2)(D-18), 203(b)(2)(E-14), 203(c)(2)(G-13), or
25         203(d)(2)(D-8), but not to exceed the amount of that
26         addition modification;
27             (DD) An amount equal to the interest income taken
28         into account for the taxable year (net of the
29         deductions allocable thereto) with respect to
30         transactions with a foreign person who would be a
31         member of the taxpayer's unitary business group but for
32         the fact that the foreign person's business activity
33         outside the United States is 80% or more of that
34         person's total business activity, but not to exceed the
35         addition modification required to be made for the same
36         taxable year under Section 203(a)(2)(D-17) for

 

 

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1         interest paid, accrued, or incurred, directly or
2         indirectly, to the same foreign person; and
3             (EE) An amount equal to the income from intangible
4         property taken into account for the taxable year (net
5         of the deductions allocable thereto) with respect to
6         transactions with a foreign person who would be a
7         member of the taxpayer's unitary business group but for
8         the fact that the foreign person's business activity
9         outside the United States is 80% or more of that
10         person's total business activity, but not to exceed the
11         addition modification required to be made for the same
12         taxable year under Section 203(a)(2)(D-18) for
13         intangible expenses and costs paid, accrued, or
14         incurred, directly or indirectly, to the same foreign
15         person; and
16             (FF) Beginning with tax years ending on or after
17         December 31, 2005, and ending with tax years ending on
18         or before December 30, 2015, all unreimbursed amounts,
19         but not more than a total amount that would result in a
20         tax liability of less than zero for the taxpayer,
21         expended by persons 65 years of age or older for home
22         health services, as defined by Section 2.05 of the Home
23         Health Agency Licensing Act, if provided by a public or
24         private organization licensed under that Act, or for
25         services provided to a person at that person's
26         residence by a licensed practical nurse or registered
27         nurse in accordance with a plan of treatment for
28         illness or infirmity prescribed by a physician.
 
29     (b) Corporations.
30         (1) In general. In the case of a corporation, base
31     income means an amount equal to the taxpayer's taxable
32     income for the taxable year as modified by paragraph (2).
33         (2) Modifications. The taxable income referred to in
34     paragraph (1) shall be modified by adding thereto the sum
35     of the following amounts:

 

 

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1             (A) An amount equal to all amounts paid or accrued
2         to the taxpayer as interest and all distributions
3         received from regulated investment companies during
4         the taxable year to the extent excluded from gross
5         income in the computation of taxable income;
6             (B) An amount equal to the amount of tax imposed by
7         this Act to the extent deducted from gross income in
8         the computation of taxable income for the taxable year;
9             (C) In the case of a regulated investment company,
10         an amount equal to the excess of (i) the net long-term
11         capital gain for the taxable year, over (ii) the amount
12         of the capital gain dividends designated as such in
13         accordance with Section 852(b)(3)(C) of the Internal
14         Revenue Code and any amount designated under Section
15         852(b)(3)(D) of the Internal Revenue Code,
16         attributable to the taxable year (this amendatory Act
17         of 1995 (Public Act 89-89) is declarative of existing
18         law and is not a new enactment);
19             (D) The amount of any net operating loss deduction
20         taken in arriving at taxable income, other than a net
21         operating loss carried forward from a taxable year
22         ending prior to December 31, 1986;
23             (E) For taxable years in which a net operating loss
24         carryback or carryforward from a taxable year ending
25         prior to December 31, 1986 is an element of taxable
26         income under paragraph (1) of subsection (e) or
27         subparagraph (E) of paragraph (2) of subsection (e),
28         the amount by which addition modifications other than
29         those provided by this subparagraph (E) exceeded
30         subtraction modifications in such earlier taxable
31         year, with the following limitations applied in the
32         order that they are listed:
33                 (i) the addition modification relating to the
34             net operating loss carried back or forward to the
35             taxable year from any taxable year ending prior to
36             December 31, 1986 shall be reduced by the amount of

 

 

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1             addition modification under this subparagraph (E)
2             which related to that net operating loss and which
3             was taken into account in calculating the base
4             income of an earlier taxable year, and
5                 (ii) the addition modification relating to the
6             net operating loss carried back or forward to the
7             taxable year from any taxable year ending prior to
8             December 31, 1986 shall not exceed the amount of
9             such carryback or carryforward;
10             For taxable years in which there is a net operating
11         loss carryback or carryforward from more than one other
12         taxable year ending prior to December 31, 1986, the
13         addition modification provided in this subparagraph
14         (E) shall be the sum of the amounts computed
15         independently under the preceding provisions of this
16         subparagraph (E) for each such taxable year;
17             (E-5) For taxable years ending after December 31,
18         1997, an amount equal to any eligible remediation costs
19         that the corporation deducted in computing adjusted
20         gross income and for which the corporation claims a
21         credit under subsection (l) of Section 201;
22             (E-10) For taxable years 2001 and thereafter, an
23         amount equal to the bonus depreciation deduction (30%
24         of the adjusted basis of the qualified property) taken
25         on the taxpayer's federal income tax return for the
26         taxable year under subsection (k) of Section 168 of the
27         Internal Revenue Code; and
28             (E-11) If the taxpayer reports a capital gain or
29         loss on the taxpayer's federal income tax return for
30         the taxable year based on a sale or transfer of
31         property for which the taxpayer was required in any
32         taxable year to make an addition modification under
33         subparagraph (E-10), then an amount equal to the
34         aggregate amount of the deductions taken in all taxable
35         years under subparagraph (T) with respect to that
36         property.

 

 

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1             The taxpayer is required to make the addition
2         modification under this subparagraph only once with
3         respect to any one piece of property;
4             (E-12) For taxable years ending on or after
5         December 31, 2004, an amount equal to the amount
6         otherwise allowed as a deduction in computing base
7         income for interest paid, accrued, or incurred,
8         directly or indirectly, to a foreign person who would
9         be a member of the same unitary business group but for
10         the fact the foreign person's business activity
11         outside the United States is 80% or more of the foreign
12         person's total business activity. The addition
13         modification required by this subparagraph shall be
14         reduced to the extent that dividends were included in
15         base income of the unitary group for the same taxable
16         year and received by the taxpayer or by a member of the
17         taxpayer's unitary business group (including amounts
18         included in gross income pursuant to Sections 951
19         through 964 of the Internal Revenue Code and amounts
20         included in gross income under Section 78 of the
21         Internal Revenue Code) with respect to the stock of the
22         same person to whom the interest was paid, accrued, or
23         incurred.
24             This paragraph shall not apply to the following:
25                 (i) an item of interest paid, accrued, or
26             incurred, directly or indirectly, to a foreign
27             person who is subject in a foreign country or
28             state, other than a state which requires mandatory
29             unitary reporting, to a tax on or measured by net
30             income with respect to such interest; or
31                 (ii) an item of interest paid, accrued, or
32             incurred, directly or indirectly, to a foreign
33             person if the taxpayer can establish, based on a
34             preponderance of the evidence, both of the
35             following:
36                     (a) the foreign person, during the same

 

 

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1                 taxable year, paid, accrued, or incurred, the
2                 interest to a person that is not a related
3                 member, and
4                     (b) the transaction giving rise to the
5                 interest expense between the taxpayer and the
6                 foreign person did not have as a principal
7                 purpose the avoidance of Illinois income tax,
8                 and is paid pursuant to a contract or agreement
9                 that reflects an arm's-length interest rate
10                 and terms; or
11                 (iii) the taxpayer can establish, based on
12             clear and convincing evidence, that the interest
13             paid, accrued, or incurred relates to a contract or
14             agreement entered into at arm's-length rates and
15             terms and the principal purpose for the payment is
16             not federal or Illinois tax avoidance; or
17                 (iv) an item of interest paid, accrued, or
18             incurred, directly or indirectly, to a foreign
19             person if the taxpayer establishes by clear and
20             convincing evidence that the adjustments are
21             unreasonable; or if the taxpayer and the Director
22             agree in writing to the application or use of an
23             alternative method of apportionment under Section
24             304(f).
25                 Nothing in this subsection shall preclude the
26             Director from making any other adjustment
27             otherwise allowed under Section 404 of this Act for
28             any tax year beginning after the effective date of
29             this amendment provided such adjustment is made
30             pursuant to regulation adopted by the Department
31             and such regulations provide methods and standards
32             by which the Department will utilize its authority
33             under Section 404 of this Act;
34             (E-13) For taxable years ending on or after
35         December 31, 2004, an amount equal to the amount of
36         intangible expenses and costs otherwise allowed as a

 

 

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1         deduction in computing base income, and that were paid,
2         accrued, or incurred, directly or indirectly, to a
3         foreign person who would be a member of the same
4         unitary business group but for the fact that the
5         foreign person's business activity outside the United
6         States is 80% or more of that person's total business
7         activity. The addition modification required by this
8         subparagraph shall be reduced to the extent that
9         dividends were included in base income of the unitary
10         group for the same taxable year and received by the
11         taxpayer or by a member of the taxpayer's unitary
12         business group (including amounts included in gross
13         income pursuant to Sections 951 through 964 of the
14         Internal Revenue Code and amounts included in gross
15         income under Section 78 of the Internal Revenue Code)
16         with respect to the stock of the same person to whom
17         the intangible expenses and costs were directly or
18         indirectly paid, incurred, or accrued. The preceding
19         sentence shall not apply to the extent that the same
20         dividends caused a reduction to the addition
21         modification required under Section 203(b)(2)(E-12) of
22         this Act. As used in this subparagraph, the term
23         "intangible expenses and costs" includes (1) expenses,
24         losses, and costs for, or related to, the direct or
25         indirect acquisition, use, maintenance or management,
26         ownership, sale, exchange, or any other disposition of
27         intangible property; (2) losses incurred, directly or
28         indirectly, from factoring transactions or discounting
29         transactions; (3) royalty, patent, technical, and
30         copyright fees; (4) licensing fees; and (5) other
31         similar expenses and costs. For purposes of this
32         subparagraph, "intangible property" includes patents,
33         patent applications, trade names, trademarks, service
34         marks, copyrights, mask works, trade secrets, and
35         similar types of intangible assets.
36             This paragraph shall not apply to the following:

 

 

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1                 (i) any item of intangible expenses or costs
2             paid, accrued, or incurred, directly or
3             indirectly, from a transaction with a foreign
4             person who is subject in a foreign country or
5             state, other than a state which requires mandatory
6             unitary reporting, to a tax on or measured by net
7             income with respect to such item; or
8                 (ii) any item of intangible expense or cost
9             paid, accrued, or incurred, directly or
10             indirectly, if the taxpayer can establish, based
11             on a preponderance of the evidence, both of the
12             following:
13                     (a) the foreign person during the same
14                 taxable year paid, accrued, or incurred, the
15                 intangible expense or cost to a person that is
16                 not a related member, and
17                     (b) the transaction giving rise to the
18                 intangible expense or cost between the
19                 taxpayer and the foreign person did not have as
20                 a principal purpose the avoidance of Illinois
21                 income tax, and is paid pursuant to a contract
22                 or agreement that reflects arm's-length terms;
23                 or
24                 (iii) any item of intangible expense or cost
25             paid, accrued, or incurred, directly or
26             indirectly, from a transaction with a foreign
27             person if the taxpayer establishes by clear and
28             convincing evidence, that the adjustments are
29             unreasonable; or if the taxpayer and the Director
30             agree in writing to the application or use of an
31             alternative method of apportionment under Section
32             304(f);
33                 Nothing in this subsection shall preclude the
34             Director from making any other adjustment
35             otherwise allowed under Section 404 of this Act for
36             any tax year beginning after the effective date of

 

 

HB0184 - 22 - LRB094 02585 BDD 32586 b

1             this amendment provided such adjustment is made
2             pursuant to regulation adopted by the Department
3             and such regulations provide methods and standards
4             by which the Department will utilize its authority
5             under Section 404 of this Act;
6     and by deducting from the total so obtained the sum of the
7     following amounts:
8             (F) An amount equal to the amount of any tax
9         imposed by this Act which was refunded to the taxpayer
10         and included in such total for the taxable year;
11             (G) An amount equal to any amount included in such
12         total under Section 78 of the Internal Revenue Code;
13             (H) In the case of a regulated investment company,
14         an amount equal to the amount of exempt interest
15         dividends as defined in subsection (b) (5) of Section
16         852 of the Internal Revenue Code, paid to shareholders
17         for the taxable year;
18             (I) With the exception of any amounts subtracted
19         under subparagraph (J), an amount equal to the sum of
20         all amounts disallowed as deductions by (i) Sections
21         171(a) (2), and 265(a)(2) and amounts disallowed as
22         interest expense by Section 291(a)(3) of the Internal
23         Revenue Code, as now or hereafter amended, and all
24         amounts of expenses allocable to interest and
25         disallowed as deductions by Section 265(a)(1) of the
26         Internal Revenue Code, as now or hereafter amended; and
27         (ii) for taxable years ending on or after August 13,
28         1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and
29         832(b)(5)(B)(i) of the Internal Revenue Code; the
30         provisions of this subparagraph are exempt from the
31         provisions of Section 250;
32             (J) An amount equal to all amounts included in such
33         total which are exempt from taxation by this State
34         either by reason of its statutes or Constitution or by
35         reason of the Constitution, treaties or statutes of the
36         United States; provided that, in the case of any

 

 

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1         statute of this State that exempts income derived from
2         bonds or other obligations from the tax imposed under
3         this Act, the amount exempted shall be the interest net
4         of bond premium amortization;
5             (K) An amount equal to those dividends included in
6         such total which were paid by a corporation which
7         conducts business operations in an Enterprise Zone or
8         zones created under the Illinois Enterprise Zone Act
9         and conducts substantially all of its operations in an
10         Enterprise Zone or zones;
11             (L) An amount equal to those dividends included in
12         such total that were paid by a corporation that
13         conducts business operations in a federally designated
14         Foreign Trade Zone or Sub-Zone and that is designated a
15         High Impact Business located in Illinois; provided
16         that dividends eligible for the deduction provided in
17         subparagraph (K) of paragraph 2 of this subsection
18         shall not be eligible for the deduction provided under
19         this subparagraph (L);
20             (M) For any taxpayer that is a financial
21         organization within the meaning of Section 304(c) of
22         this Act, an amount included in such total as interest
23         income from a loan or loans made by such taxpayer to a
24         borrower, to the extent that such a loan is secured by
25         property which is eligible for the Enterprise Zone
26         Investment Credit. To determine the portion of a loan
27         or loans that is secured by property eligible for a
28         Section 201(f) investment credit to the borrower, the
29         entire principal amount of the loan or loans between
30         the taxpayer and the borrower should be divided into
31         the basis of the Section 201(f) investment credit
32         property which secures the loan or loans, using for
33         this purpose the original basis of such property on the
34         date that it was placed in service in the Enterprise
35         Zone. The subtraction modification available to
36         taxpayer in any year under this subsection shall be

 

 

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1         that portion of the total interest paid by the borrower
2         with respect to such loan attributable to the eligible
3         property as calculated under the previous sentence;
4             (M-1) For any taxpayer that is a financial
5         organization within the meaning of Section 304(c) of
6         this Act, an amount included in such total as interest
7         income from a loan or loans made by such taxpayer to a
8         borrower, to the extent that such a loan is secured by
9         property which is eligible for the High Impact Business
10         Investment Credit. To determine the portion of a loan
11         or loans that is secured by property eligible for a
12         Section 201(h) investment credit to the borrower, the
13         entire principal amount of the loan or loans between
14         the taxpayer and the borrower should be divided into
15         the basis of the Section 201(h) investment credit
16         property which secures the loan or loans, using for
17         this purpose the original basis of such property on the
18         date that it was placed in service in a federally
19         designated Foreign Trade Zone or Sub-Zone located in
20         Illinois. No taxpayer that is eligible for the
21         deduction provided in subparagraph (M) of paragraph
22         (2) of this subsection shall be eligible for the
23         deduction provided under this subparagraph (M-1). The
24         subtraction modification available to taxpayers in any
25         year under this subsection shall be that portion of the
26         total interest paid by the borrower with respect to
27         such loan attributable to the eligible property as
28         calculated under the previous sentence;
29             (N) Two times any contribution made during the
30         taxable year to a designated zone organization to the
31         extent that the contribution (i) qualifies as a
32         charitable contribution under subsection (c) of
33         Section 170 of the Internal Revenue Code and (ii) must,
34         by its terms, be used for a project approved by the
35         Department of Commerce and Economic Opportunity under
36         Section 11 of the Illinois Enterprise Zone Act;

 

 

HB0184 - 25 - LRB094 02585 BDD 32586 b

1             (O) An amount equal to: (i) 85% for taxable years
2         ending on or before December 31, 1992, or, a percentage
3         equal to the percentage allowable under Section
4         243(a)(1) of the Internal Revenue Code of 1986 for
5         taxable years ending after December 31, 1992, of the
6         amount by which dividends included in taxable income
7         and received from a corporation that is not created or
8         organized under the laws of the United States or any
9         state or political subdivision thereof, including, for
10         taxable years ending on or after December 31, 1988,
11         dividends received or deemed received or paid or deemed
12         paid under Sections 951 through 964 of the Internal
13         Revenue Code, exceed the amount of the modification
14         provided under subparagraph (G) of paragraph (2) of
15         this subsection (b) which is related to such dividends;
16         plus (ii) 100% of the amount by which dividends,
17         included in taxable income and received, including,
18         for taxable years ending on or after December 31, 1988,
19         dividends received or deemed received or paid or deemed
20         paid under Sections 951 through 964 of the Internal
21         Revenue Code, from any such corporation specified in
22         clause (i) that would but for the provisions of Section
23         1504 (b) (3) of the Internal Revenue Code be treated as
24         a member of the affiliated group which includes the
25         dividend recipient, exceed the amount of the
26         modification provided under subparagraph (G) of
27         paragraph (2) of this subsection (b) which is related
28         to such dividends;
29             (P) An amount equal to any contribution made to a
30         job training project established pursuant to the Tax
31         Increment Allocation Redevelopment Act;
32             (Q) An amount equal to the amount of the deduction
33         used to compute the federal income tax credit for
34         restoration of substantial amounts held under claim of
35         right for the taxable year pursuant to Section 1341 of
36         the Internal Revenue Code of 1986;

 

 

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1             (R) In the case of an attorney-in-fact with respect
2         to whom an interinsurer or a reciprocal insurer has
3         made the election under Section 835 of the Internal
4         Revenue Code, 26 U.S.C. 835, an amount equal to the
5         excess, if any, of the amounts paid or incurred by that
6         interinsurer or reciprocal insurer in the taxable year
7         to the attorney-in-fact over the deduction allowed to
8         that interinsurer or reciprocal insurer with respect
9         to the attorney-in-fact under Section 835(b) of the
10         Internal Revenue Code for the taxable year;
11             (S) For taxable years ending on or after December
12         31, 1997, in the case of a Subchapter S corporation, an
13         amount equal to all amounts of income allocable to a
14         shareholder subject to the Personal Property Tax
15         Replacement Income Tax imposed by subsections (c) and
16         (d) of Section 201 of this Act, including amounts
17         allocable to organizations exempt from federal income
18         tax by reason of Section 501(a) of the Internal Revenue
19         Code. This subparagraph (S) is exempt from the
20         provisions of Section 250;
21             (T) For taxable years 2001 and thereafter, for the
22         taxable year in which the bonus depreciation deduction
23         (30% of the adjusted basis of the qualified property)
24         is taken on the taxpayer's federal income tax return
25         under subsection (k) of Section 168 of the Internal
26         Revenue Code and for each applicable taxable year
27         thereafter, an amount equal to "x", where:
28                 (1) "y" equals the amount of the depreciation
29             deduction taken for the taxable year on the
30             taxpayer's federal income tax return on property
31             for which the bonus depreciation deduction (30% of
32             the adjusted basis of the qualified property) was
33             taken in any year under subsection (k) of Section
34             168 of the Internal Revenue Code, but not including
35             the bonus depreciation deduction; and
36                 (2) "x" equals "y" multiplied by 30 and then

 

 

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1             divided by 70 (or "y" multiplied by 0.429).
2             The aggregate amount deducted under this
3         subparagraph in all taxable years for any one piece of
4         property may not exceed the amount of the bonus
5         depreciation deduction (30% of the adjusted basis of
6         the qualified property) taken on that property on the
7         taxpayer's federal income tax return under subsection
8         (k) of Section 168 of the Internal Revenue Code;
9             (U) If the taxpayer reports a capital gain or loss
10         on the taxpayer's federal income tax return for the
11         taxable year based on a sale or transfer of property
12         for which the taxpayer was required in any taxable year
13         to make an addition modification under subparagraph
14         (E-10), then an amount equal to that addition
15         modification.
16             The taxpayer is allowed to take the deduction under
17         this subparagraph only once with respect to any one
18         piece of property;
19             (V) The amount of: (i) any interest income (net of
20         the deductions allocable thereto) taken into account
21         for the taxable year with respect to a transaction with
22         a taxpayer that is required to make an addition
23         modification with respect to such transaction under
24         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
25         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
26         the amount of such addition modification and (ii) any
27         income from intangible property (net of the deductions
28         allocable thereto) taken into account for the taxable
29         year with respect to a transaction with a taxpayer that
30         is required to make an addition modification with
31         respect to such transaction under Section
32         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
33         203(d)(2)(D-8), but not to exceed the amount of such
34         addition modification;
35             (W) An amount equal to the interest income taken
36         into account for the taxable year (net of the

 

 

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1         deductions allocable thereto) with respect to
2         transactions with a foreign person who would be a
3         member of the taxpayer's unitary business group but for
4         the fact that the foreign person's business activity
5         outside the United States is 80% or more of that
6         person's total business activity, but not to exceed the
7         addition modification required to be made for the same
8         taxable year under Section 203(b)(2)(E-12) for
9         interest paid, accrued, or incurred, directly or
10         indirectly, to the same foreign person; and
11             (X) An amount equal to the income from intangible
12         property taken into account for the taxable year (net
13         of the deductions allocable thereto) with respect to
14         transactions with a foreign person who would be a
15         member of the taxpayer's unitary business group but for
16         the fact that the foreign person's business activity
17         outside the United States is 80% or more of that
18         person's total business activity, but not to exceed the
19         addition modification required to be made for the same
20         taxable year under Section 203(b)(2)(E-13) for
21         intangible expenses and costs paid, accrued, or
22         incurred, directly or indirectly, to the same foreign
23         person.
24         (3) Special rule. For purposes of paragraph (2) (A),
25     "gross income" in the case of a life insurance company, for
26     tax years ending on and after December 31, 1994, shall mean
27     the gross investment income for the taxable year.
 
28     (c) Trusts and estates.
29         (1) In general. In the case of a trust or estate, base
30     income means an amount equal to the taxpayer's taxable
31     income for the taxable year as modified by paragraph (2).
32         (2) Modifications. Subject to the provisions of
33     paragraph (3), the taxable income referred to in paragraph
34     (1) shall be modified by adding thereto the sum of the
35     following amounts:

 

 

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1             (A) An amount equal to all amounts paid or accrued
2         to the taxpayer as interest or dividends during the
3         taxable year to the extent excluded from gross income
4         in the computation of taxable income;
5             (B) In the case of (i) an estate, $600; (ii) a
6         trust which, under its governing instrument, is
7         required to distribute all of its income currently,
8         $300; and (iii) any other trust, $100, but in each such
9         case, only to the extent such amount was deducted in
10         the computation of taxable income;
11             (C) An amount equal to the amount of tax imposed by
12         this Act to the extent deducted from gross income in
13         the computation of taxable income for the taxable year;
14             (D) The amount of any net operating loss deduction
15         taken in arriving at taxable income, other than a net
16         operating loss carried forward from a taxable year
17         ending prior to December 31, 1986;
18             (E) For taxable years in which a net operating loss
19         carryback or carryforward from a taxable year ending
20         prior to December 31, 1986 is an element of taxable
21         income under paragraph (1) of subsection (e) or
22         subparagraph (E) of paragraph (2) of subsection (e),
23         the amount by which addition modifications other than
24         those provided by this subparagraph (E) exceeded
25         subtraction modifications in such taxable year, with
26         the following limitations applied in the order that
27         they are listed:
28                 (i) the addition modification relating to the
29             net operating loss carried back or forward to the
30             taxable year from any taxable year ending prior to
31             December 31, 1986 shall be reduced by the amount of
32             addition modification under this subparagraph (E)
33             which related to that net operating loss and which
34             was taken into account in calculating the base
35             income of an earlier taxable year, and
36                 (ii) the addition modification relating to the

 

 

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1             net operating loss carried back or forward to the
2             taxable year from any taxable year ending prior to
3             December 31, 1986 shall not exceed the amount of
4             such carryback or carryforward;
5             For taxable years in which there is a net operating
6         loss carryback or carryforward from more than one other
7         taxable year ending prior to December 31, 1986, the
8         addition modification provided in this subparagraph
9         (E) shall be the sum of the amounts computed
10         independently under the preceding provisions of this
11         subparagraph (E) for each such taxable year;
12             (F) For taxable years ending on or after January 1,
13         1989, an amount equal to the tax deducted pursuant to
14         Section 164 of the Internal Revenue Code if the trust
15         or estate is claiming the same tax for purposes of the
16         Illinois foreign tax credit under Section 601 of this
17         Act;
18             (G) An amount equal to the amount of the capital
19         gain deduction allowable under the Internal Revenue
20         Code, to the extent deducted from gross income in the
21         computation of taxable income;
22             (G-5) For taxable years ending after December 31,
23         1997, an amount equal to any eligible remediation costs
24         that the trust or estate deducted in computing adjusted
25         gross income and for which the trust or estate claims a
26         credit under subsection (l) of Section 201;
27             (G-10) For taxable years 2001 and thereafter, an
28         amount equal to the bonus depreciation deduction (30%
29         of the adjusted basis of the qualified property) taken
30         on the taxpayer's federal income tax return for the
31         taxable year under subsection (k) of Section 168 of the
32         Internal Revenue Code; and
33             (G-11) If the taxpayer reports a capital gain or
34         loss on the taxpayer's federal income tax return for
35         the taxable year based on a sale or transfer of
36         property for which the taxpayer was required in any

 

 

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1         taxable year to make an addition modification under
2         subparagraph (G-10), then an amount equal to the
3         aggregate amount of the deductions taken in all taxable
4         years under subparagraph (R) with respect to that
5         property.
6             The taxpayer is required to make the addition
7         modification under this subparagraph only once with
8         respect to any one piece of property;
9             (G-12) For taxable years ending on or after
10         December 31, 2004, an amount equal to the amount
11         otherwise allowed as a deduction in computing base
12         income for interest paid, accrued, or incurred,
13         directly or indirectly, to a foreign person who would
14         be a member of the same unitary business group but for
15         the fact that the foreign person's business activity
16         outside the United States is 80% or more of the foreign
17         person's total business activity. The addition
18         modification required by this subparagraph shall be
19         reduced to the extent that dividends were included in
20         base income of the unitary group for the same taxable
21         year and received by the taxpayer or by a member of the
22         taxpayer's unitary business group (including amounts
23         included in gross income pursuant to Sections 951
24         through 964 of the Internal Revenue Code and amounts
25         included in gross income under Section 78 of the
26         Internal Revenue Code) with respect to the stock of the
27         same person to whom the interest was paid, accrued, or
28         incurred.
29             This paragraph shall not apply to the following:
30                 (i) an item of interest paid, accrued, or
31             incurred, directly or indirectly, to a foreign
32             person who is subject in a foreign country or
33             state, other than a state which requires mandatory
34             unitary reporting, to a tax on or measured by net
35             income with respect to such interest; or
36                 (ii) an item of interest paid, accrued, or

 

 

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1             incurred, directly or indirectly, to a foreign
2             person if the taxpayer can establish, based on a
3             preponderance of the evidence, both of the
4             following:
5                     (a) the foreign person, during the same
6                 taxable year, paid, accrued, or incurred, the
7                 interest to a person that is not a related
8                 member, and
9                     (b) the transaction giving rise to the
10                 interest expense between the taxpayer and the
11                 foreign person did not have as a principal
12                 purpose the avoidance of Illinois income tax,
13                 and is paid pursuant to a contract or agreement
14                 that reflects an arm's-length interest rate
15                 and terms; or
16                 (iii) the taxpayer can establish, based on
17             clear and convincing evidence, that the interest
18             paid, accrued, or incurred relates to a contract or
19             agreement entered into at arm's-length rates and
20             terms and the principal purpose for the payment is
21             not federal or Illinois tax avoidance; or
22                 (iv) an item of interest paid, accrued, or
23             incurred, directly or indirectly, to a foreign
24             person if the taxpayer establishes by clear and
25             convincing evidence that the adjustments are
26             unreasonable; or if the taxpayer and the Director
27             agree in writing to the application or use of an
28             alternative method of apportionment under Section
29             304(f).
30                 Nothing in this subsection shall preclude the
31             Director from making any other adjustment
32             otherwise allowed under Section 404 of this Act for
33             any tax year beginning after the effective date of
34             this amendment provided such adjustment is made
35             pursuant to regulation adopted by the Department
36             and such regulations provide methods and standards

 

 

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1             by which the Department will utilize its authority
2             under Section 404 of this Act;
3             (G-13) For taxable years ending on or after
4         December 31, 2004, an amount equal to the amount of
5         intangible expenses and costs otherwise allowed as a
6         deduction in computing base income, and that were paid,
7         accrued, or incurred, directly or indirectly, to a
8         foreign person who would be a member of the same
9         unitary business group but for the fact that the
10         foreign person's business activity outside the United
11         States is 80% or more of that person's total business
12         activity. The addition modification required by this
13         subparagraph shall be reduced to the extent that
14         dividends were included in base income of the unitary
15         group for the same taxable year and received by the
16         taxpayer or by a member of the taxpayer's unitary
17         business group (including amounts included in gross
18         income pursuant to Sections 951 through 964 of the
19         Internal Revenue Code and amounts included in gross
20         income under Section 78 of the Internal Revenue Code)
21         with respect to the stock of the same person to whom
22         the intangible expenses and costs were directly or
23         indirectly paid, incurred, or accrued. The preceding
24         sentence shall not apply to the extent that the same
25         dividends caused a reduction to the addition
26         modification required under Section 203(c)(2)(G-12) of
27         this Act. As used in this subparagraph, the term
28         "intangible expenses and costs" includes: (1)
29         expenses, losses, and costs for or related to the
30         direct or indirect acquisition, use, maintenance or
31         management, ownership, sale, exchange, or any other
32         disposition of intangible property; (2) losses
33         incurred, directly or indirectly, from factoring
34         transactions or discounting transactions; (3) royalty,
35         patent, technical, and copyright fees; (4) licensing
36         fees; and (5) other similar expenses and costs. For

 

 

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1         purposes of this subparagraph, "intangible property"
2         includes patents, patent applications, trade names,
3         trademarks, service marks, copyrights, mask works,
4         trade secrets, and similar types of intangible assets.
5             This paragraph shall not apply to the following:
6                 (i) any item of intangible expenses or costs
7             paid, accrued, or incurred, directly or
8             indirectly, from a transaction with a foreign
9             person who is subject in a foreign country or
10             state, other than a state which requires mandatory
11             unitary reporting, to a tax on or measured by net
12             income with respect to such item; or
13                 (ii) any item of intangible expense or cost
14             paid, accrued, or incurred, directly or
15             indirectly, if the taxpayer can establish, based
16             on a preponderance of the evidence, both of the
17             following:
18                     (a) the foreign person during the same
19                 taxable year paid, accrued, or incurred, the
20                 intangible expense or cost to a person that is
21                 not a related member, and
22                     (b) the transaction giving rise to the
23                 intangible expense or cost between the
24                 taxpayer and the foreign person did not have as
25                 a principal purpose the avoidance of Illinois
26                 income tax, and is paid pursuant to a contract
27                 or agreement that reflects arm's-length terms;
28                 or
29                 (iii) any item of intangible expense or cost
30             paid, accrued, or incurred, directly or
31             indirectly, from a transaction with a foreign
32             person if the taxpayer establishes by clear and
33             convincing evidence, that the adjustments are
34             unreasonable; or if the taxpayer and the Director
35             agree in writing to the application or use of an
36             alternative method of apportionment under Section

 

 

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1             304(f);
2                 Nothing in this subsection shall preclude the
3             Director from making any other adjustment
4             otherwise allowed under Section 404 of this Act for
5             any tax year beginning after the effective date of
6             this amendment provided such adjustment is made
7             pursuant to regulation adopted by the Department
8             and such regulations provide methods and standards
9             by which the Department will utilize its authority
10             under Section 404 of this Act;
11     and by deducting from the total so obtained the sum of the
12     following amounts:
13             (H) An amount equal to all amounts included in such
14         total pursuant to the provisions of Sections 402(a),
15         402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
16         Internal Revenue Code or included in such total as
17         distributions under the provisions of any retirement
18         or disability plan for employees of any governmental
19         agency or unit, or retirement payments to retired
20         partners, which payments are excluded in computing net
21         earnings from self employment by Section 1402 of the
22         Internal Revenue Code and regulations adopted pursuant
23         thereto;
24             (I) The valuation limitation amount;
25             (J) An amount equal to the amount of any tax
26         imposed by this Act which was refunded to the taxpayer
27         and included in such total for the taxable year;
28             (K) An amount equal to all amounts included in
29         taxable income as modified by subparagraphs (A), (B),
30         (C), (D), (E), (F) and (G) which are exempt from
31         taxation by this State either by reason of its statutes
32         or Constitution or by reason of the Constitution,
33         treaties or statutes of the United States; provided
34         that, in the case of any statute of this State that
35         exempts income derived from bonds or other obligations
36         from the tax imposed under this Act, the amount

 

 

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1         exempted shall be the interest net of bond premium
2         amortization;
3             (L) With the exception of any amounts subtracted
4         under subparagraph (K), an amount equal to the sum of
5         all amounts disallowed as deductions by (i) Sections
6         171(a) (2) and 265(a)(2) of the Internal Revenue Code,
7         as now or hereafter amended, and all amounts of
8         expenses allocable to interest and disallowed as
9         deductions by Section 265(1) of the Internal Revenue
10         Code of 1954, as now or hereafter amended; and (ii) for
11         taxable years ending on or after August 13, 1999,
12         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
13         the Internal Revenue Code; the provisions of this
14         subparagraph are exempt from the provisions of Section
15         250;
16             (M) An amount equal to those dividends included in
17         such total which were paid by a corporation which
18         conducts business operations in an Enterprise Zone or
19         zones created under the Illinois Enterprise Zone Act
20         and conducts substantially all of its operations in an
21         Enterprise Zone or Zones;
22             (N) An amount equal to any contribution made to a
23         job training project established pursuant to the Tax
24         Increment Allocation Redevelopment Act;
25             (O) An amount equal to those dividends included in
26         such total that were paid by a corporation that
27         conducts business operations in a federally designated
28         Foreign Trade Zone or Sub-Zone and that is designated a
29         High Impact Business located in Illinois; provided
30         that dividends eligible for the deduction provided in
31         subparagraph (M) of paragraph (2) of this subsection
32         shall not be eligible for the deduction provided under
33         this subparagraph (O);
34             (P) An amount equal to the amount of the deduction
35         used to compute the federal income tax credit for
36         restoration of substantial amounts held under claim of

 

 

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1         right for the taxable year pursuant to Section 1341 of
2         the Internal Revenue Code of 1986;
3             (Q) For taxable year 1999 and thereafter, an amount
4         equal to the amount of any (i) distributions, to the
5         extent includible in gross income for federal income
6         tax purposes, made to the taxpayer because of his or
7         her status as a victim of persecution for racial or
8         religious reasons by Nazi Germany or any other Axis
9         regime or as an heir of the victim and (ii) items of
10         income, to the extent includible in gross income for
11         federal income tax purposes, attributable to, derived
12         from or in any way related to assets stolen from,
13         hidden from, or otherwise lost to a victim of
14         persecution for racial or religious reasons by Nazi
15         Germany or any other Axis regime immediately prior to,
16         during, and immediately after World War II, including,
17         but not limited to, interest on the proceeds receivable
18         as insurance under policies issued to a victim of
19         persecution for racial or religious reasons by Nazi
20         Germany or any other Axis regime by European insurance
21         companies immediately prior to and during World War II;
22         provided, however, this subtraction from federal
23         adjusted gross income does not apply to assets acquired
24         with such assets or with the proceeds from the sale of
25         such assets; provided, further, this paragraph shall
26         only apply to a taxpayer who was the first recipient of
27         such assets after their recovery and who is a victim of
28         persecution for racial or religious reasons by Nazi
29         Germany or any other Axis regime or as an heir of the
30         victim. The amount of and the eligibility for any
31         public assistance, benefit, or similar entitlement is
32         not affected by the inclusion of items (i) and (ii) of
33         this paragraph in gross income for federal income tax
34         purposes. This paragraph is exempt from the provisions
35         of Section 250;
36             (R) For taxable years 2001 and thereafter, for the

 

 

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1         taxable year in which the bonus depreciation deduction
2         (30% of the adjusted basis of the qualified property)
3         is taken on the taxpayer's federal income tax return
4         under subsection (k) of Section 168 of the Internal
5         Revenue Code and for each applicable taxable year
6         thereafter, an amount equal to "x", where:
7                 (1) "y" equals the amount of the depreciation
8             deduction taken for the taxable year on the
9             taxpayer's federal income tax return on property
10             for which the bonus depreciation deduction (30% of
11             the adjusted basis of the qualified property) was
12             taken in any year under subsection (k) of Section
13             168 of the Internal Revenue Code, but not including
14             the bonus depreciation deduction; and
15                 (2) "x" equals "y" multiplied by 30 and then
16             divided by 70 (or "y" multiplied by 0.429).
17             The aggregate amount deducted under this
18         subparagraph in all taxable years for any one piece of
19         property may not exceed the amount of the bonus
20         depreciation deduction (30% of the adjusted basis of
21         the qualified property) taken on that property on the
22         taxpayer's federal income tax return under subsection
23         (k) of Section 168 of the Internal Revenue Code;
24             (S) If the taxpayer reports a capital gain or loss
25         on the taxpayer's federal income tax return for the
26         taxable year based on a sale or transfer of property
27         for which the taxpayer was required in any taxable year
28         to make an addition modification under subparagraph
29         (G-10), then an amount equal to that addition
30         modification.
31             The taxpayer is allowed to take the deduction under
32         this subparagraph only once with respect to any one
33         piece of property;
34             (T) The amount of (i) any interest income (net of
35         the deductions allocable thereto) taken into account
36         for the taxable year with respect to a transaction with

 

 

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1         a taxpayer that is required to make an addition
2         modification with respect to such transaction under
3         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
4         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
5         the amount of such addition modification and (ii) any
6         income from intangible property (net of the deductions
7         allocable thereto) taken into account for the taxable
8         year with respect to a transaction with a taxpayer that
9         is required to make an addition modification with
10         respect to such transaction under Section
11         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
12         203(d)(2)(D-8), but not to exceed the amount of such
13         addition modification;
14             (U) An amount equal to the interest income taken
15         into account for the taxable year (net of the
16         deductions allocable thereto) with respect to
17         transactions with a foreign person who would be a
18         member of the taxpayer's unitary business group but for
19         the fact the foreign person's business activity
20         outside the United States is 80% or more of that
21         person's total business activity, but not to exceed the
22         addition modification required to be made for the same
23         taxable year under Section 203(c)(2)(G-12) for
24         interest paid, accrued, or incurred, directly or
25         indirectly, to the same foreign person; and
26             (V) An amount equal to the income from intangible
27         property taken into account for the taxable year (net
28         of the deductions allocable thereto) with respect to
29         transactions with a foreign person who would be a
30         member of the taxpayer's unitary business group but for
31         the fact that the foreign person's business activity
32         outside the United States is 80% or more of that
33         person's total business activity, but not to exceed the
34         addition modification required to be made for the same
35         taxable year under Section 203(c)(2)(G-13) for
36         intangible expenses and costs paid, accrued, or

 

 

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1         incurred, directly or indirectly, to the same foreign
2         person.
3         (3) Limitation. The amount of any modification
4     otherwise required under this subsection shall, under
5     regulations prescribed by the Department, be adjusted by
6     any amounts included therein which were properly paid,
7     credited, or required to be distributed, or permanently set
8     aside for charitable purposes pursuant to Internal Revenue
9     Code Section 642(c) during the taxable year.
 
10     (d) Partnerships.
11         (1) In general. In the case of a partnership, base
12     income means an amount equal to the taxpayer's taxable
13     income for the taxable year as modified by paragraph (2).
14         (2) Modifications. The taxable income referred to in
15     paragraph (1) shall be modified by adding thereto the sum
16     of the following amounts:
17             (A) An amount equal to all amounts paid or accrued
18         to the taxpayer as interest or dividends during the
19         taxable year to the extent excluded from gross income
20         in the computation of taxable income;
21             (B) An amount equal to the amount of tax imposed by
22         this Act to the extent deducted from gross income for
23         the taxable year;
24             (C) The amount of deductions allowed to the
25         partnership pursuant to Section 707 (c) of the Internal
26         Revenue Code in calculating its taxable income;
27             (D) An amount equal to the amount of the capital
28         gain deduction allowable under the Internal Revenue
29         Code, to the extent deducted from gross income in the
30         computation of taxable income;
31             (D-5) For taxable years 2001 and thereafter, an
32         amount equal to the bonus depreciation deduction (30%
33         of the adjusted basis of the qualified property) taken
34         on the taxpayer's federal income tax return for the
35         taxable year under subsection (k) of Section 168 of the

 

 

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1         Internal Revenue Code;
2             (D-6) If the taxpayer reports a capital gain or
3         loss on the taxpayer's federal income tax return for
4         the taxable year based on a sale or transfer of
5         property for which the taxpayer was required in any
6         taxable year to make an addition modification under
7         subparagraph (D-5), then an amount equal to the
8         aggregate amount of the deductions taken in all taxable
9         years under subparagraph (O) with respect to that
10         property.
11             The taxpayer is required to make the addition
12         modification under this subparagraph only once with
13         respect to any one piece of property;
14             (D-7) For taxable years ending on or after December
15         31, 2004, an amount equal to the amount otherwise
16         allowed as a deduction in computing base income for
17         interest paid, accrued, or incurred, directly or
18         indirectly, to a foreign person who would be a member
19         of the same unitary business group but for the fact the
20         foreign person's business activity outside the United
21         States is 80% or more of the foreign person's total
22         business activity. The addition modification required
23         by this subparagraph shall be reduced to the extent
24         that dividends were included in base income of the
25         unitary group for the same taxable year and received by
26         the taxpayer or by a member of the taxpayer's unitary
27         business group (including amounts included in gross
28         income pursuant to Sections 951 through 964 of the
29         Internal Revenue Code and amounts included in gross
30         income under Section 78 of the Internal Revenue Code)
31         with respect to the stock of the same person to whom
32         the interest was paid, accrued, or incurred.
33             This paragraph shall not apply to the following:
34                 (i) an item of interest paid, accrued, or
35             incurred, directly or indirectly, to a foreign
36             person who is subject in a foreign country or

 

 

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1             state, other than a state which requires mandatory
2             unitary reporting, to a tax on or measured by net
3             income with respect to such interest; or
4                 (ii) an item of interest paid, accrued, or
5             incurred, directly or indirectly, to a foreign
6             person if the taxpayer can establish, based on a
7             preponderance of the evidence, both of the
8             following:
9                     (a) the foreign person, during the same
10                 taxable year, paid, accrued, or incurred, the
11                 interest to a person that is not a related
12                 member, and
13                     (b) the transaction giving rise to the
14                 interest expense between the taxpayer and the
15                 foreign person did not have as a principal
16                 purpose the avoidance of Illinois income tax,
17                 and is paid pursuant to a contract or agreement
18                 that reflects an arm's-length interest rate
19                 and terms; or
20                 (iii) the taxpayer can establish, based on
21             clear and convincing evidence, that the interest
22             paid, accrued, or incurred relates to a contract or
23             agreement entered into at arm's-length rates and
24             terms and the principal purpose for the payment is
25             not federal or Illinois tax avoidance; or
26                 (iv) an item of interest paid, accrued, or
27             incurred, directly or indirectly, to a foreign
28             person if the taxpayer establishes by clear and
29             convincing evidence that the adjustments are
30             unreasonable; or if the taxpayer and the Director
31             agree in writing to the application or use of an
32             alternative method of apportionment under Section
33             304(f).
34                 Nothing in this subsection shall preclude the
35             Director from making any other adjustment
36             otherwise allowed under Section 404 of this Act for

 

 

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1             any tax year beginning after the effective date of
2             this amendment provided such adjustment is made
3             pursuant to regulation adopted by the Department
4             and such regulations provide methods and standards
5             by which the Department will utilize its authority
6             under Section 404 of this Act; and
7             (D-8) For taxable years ending on or after December
8         31, 2004, an amount equal to the amount of intangible
9         expenses and costs otherwise allowed as a deduction in
10         computing base income, and that were paid, accrued, or
11         incurred, directly or indirectly, to a foreign person
12         who would be a member of the same unitary business
13         group but for the fact that the foreign person's
14         business activity outside the United States is 80% or
15         more of that person's total business activity. The
16         addition modification required by this subparagraph
17         shall be reduced to the extent that dividends were
18         included in base income of the unitary group for the
19         same taxable year and received by the taxpayer or by a
20         member of the taxpayer's unitary business group
21         (including amounts included in gross income pursuant
22         to Sections 951 through 964 of the Internal Revenue
23         Code and amounts included in gross income under Section
24         78 of the Internal Revenue Code) with respect to the
25         stock of the same person to whom the intangible
26         expenses and costs were directly or indirectly paid,
27         incurred or accrued. The preceding sentence shall not
28         apply to the extent that the same dividends caused a
29         reduction to the addition modification required under
30         Section 203(d)(2)(D-7) of this Act. As used in this
31         subparagraph, the term "intangible expenses and costs"
32         includes (1) expenses, losses, and costs for, or
33         related to, the direct or indirect acquisition, use,
34         maintenance or management, ownership, sale, exchange,
35         or any other disposition of intangible property; (2)
36         losses incurred, directly or indirectly, from

 

 

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1         factoring transactions or discounting transactions;
2         (3) royalty, patent, technical, and copyright fees;
3         (4) licensing fees; and (5) other similar expenses and
4         costs. For purposes of this subparagraph, "intangible
5         property" includes patents, patent applications, trade
6         names, trademarks, service marks, copyrights, mask
7         works, trade secrets, and similar types of intangible
8         assets;
9             This paragraph shall not apply to the following:
10                 (i) any item of intangible expenses or costs
11             paid, accrued, or incurred, directly or
12             indirectly, from a transaction with a foreign
13             person who is subject in a foreign country or
14             state, other than a state which requires mandatory
15             unitary reporting, to a tax on or measured by net
16             income with respect to such item; or
17                 (ii) any item of intangible expense or cost
18             paid, accrued, or incurred, directly or
19             indirectly, if the taxpayer can establish, based
20             on a preponderance of the evidence, both of the
21             following:
22                     (a) the foreign person during the same
23                 taxable year paid, accrued, or incurred, the
24                 intangible expense or cost to a person that is
25                 not a related member, and
26                     (b) the transaction giving rise to the
27                 intangible expense or cost between the
28                 taxpayer and the foreign person did not have as
29                 a principal purpose the avoidance of Illinois
30                 income tax, and is paid pursuant to a contract
31                 or agreement that reflects arm's-length terms;
32                 or
33                 (iii) any item of intangible expense or cost
34             paid, accrued, or incurred, directly or
35             indirectly, from a transaction with a foreign
36             person if the taxpayer establishes by clear and

 

 

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1             convincing evidence, that the adjustments are
2             unreasonable; or if the taxpayer and the Director
3             agree in writing to the application or use of an
4             alternative method of apportionment under Section
5             304(f);
6                 Nothing in this subsection shall preclude the
7             Director from making any other adjustment
8             otherwise allowed under Section 404 of this Act for
9             any tax year beginning after the effective date of
10             this amendment provided such adjustment is made
11             pursuant to regulation adopted by the Department
12             and such regulations provide methods and standards
13             by which the Department will utilize its authority
14             under Section 404 of this Act;
15     and by deducting from the total so obtained the following
16     amounts:
17             (E) The valuation limitation amount;
18             (F) An amount equal to the amount of any tax
19         imposed by this Act which was refunded to the taxpayer
20         and included in such total for the taxable year;
21             (G) An amount equal to all amounts included in
22         taxable income as modified by subparagraphs (A), (B),
23         (C) and (D) which are exempt from taxation by this
24         State either by reason of its statutes or Constitution
25         or by reason of the Constitution, treaties or statutes
26         of the United States; provided that, in the case of any
27         statute of this State that exempts income derived from
28         bonds or other obligations from the tax imposed under
29         this Act, the amount exempted shall be the interest net
30         of bond premium amortization;
31             (H) Any income of the partnership which
32         constitutes personal service income as defined in
33         Section 1348 (b) (1) of the Internal Revenue Code (as
34         in effect December 31, 1981) or a reasonable allowance
35         for compensation paid or accrued for services rendered
36         by partners to the partnership, whichever is greater;

 

 

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1             (I) An amount equal to all amounts of income
2         distributable to an entity subject to the Personal
3         Property Tax Replacement Income Tax imposed by
4         subsections (c) and (d) of Section 201 of this Act
5         including amounts distributable to organizations
6         exempt from federal income tax by reason of Section
7         501(a) of the Internal Revenue Code;
8             (J) With the exception of any amounts subtracted
9         under subparagraph (G), an amount equal to the sum of
10         all amounts disallowed as deductions by (i) Sections
11         171(a) (2), and 265(2) of the Internal Revenue Code of
12         1954, as now or hereafter amended, and all amounts of
13         expenses allocable to interest and disallowed as
14         deductions by Section 265(1) of the Internal Revenue
15         Code, as now or hereafter amended; and (ii) for taxable
16         years ending on or after August 13, 1999, Sections
17         171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
18         Internal Revenue Code; the provisions of this
19         subparagraph are exempt from the provisions of Section
20         250;
21             (K) An amount equal to those dividends included in
22         such total which were paid by a corporation which
23         conducts business operations in an Enterprise Zone or
24         zones created under the Illinois Enterprise Zone Act,
25         enacted by the 82nd General Assembly, and conducts
26         substantially all of its operations in an Enterprise
27         Zone or Zones;
28             (L) An amount equal to any contribution made to a
29         job training project established pursuant to the Real
30         Property Tax Increment Allocation Redevelopment Act;
31             (M) An amount equal to those dividends included in
32         such total that were paid by a corporation that
33         conducts business operations in a federally designated
34         Foreign Trade Zone or Sub-Zone and that is designated a
35         High Impact Business located in Illinois; provided
36         that dividends eligible for the deduction provided in

 

 

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1         subparagraph (K) of paragraph (2) of this subsection
2         shall not be eligible for the deduction provided under
3         this subparagraph (M);
4             (N) An amount equal to the amount of the deduction
5         used to compute the federal income tax credit for
6         restoration of substantial amounts held under claim of
7         right for the taxable year pursuant to Section 1341 of
8         the Internal Revenue Code of 1986;
9             (O) For taxable years 2001 and thereafter, for the
10         taxable year in which the bonus depreciation deduction
11         (30% of the adjusted basis of the qualified property)
12         is taken on the taxpayer's federal income tax return
13         under subsection (k) of Section 168 of the Internal
14         Revenue Code and for each applicable taxable year
15         thereafter, an amount equal to "x", where:
16                 (1) "y" equals the amount of the depreciation
17             deduction taken for the taxable year on the
18             taxpayer's federal income tax return on property
19             for which the bonus depreciation deduction (30% of
20             the adjusted basis of the qualified property) was
21             taken in any year under subsection (k) of Section
22             168 of the Internal Revenue Code, but not including
23             the bonus depreciation deduction; and
24                 (2) "x" equals "y" multiplied by 30 and then
25             divided by 70 (or "y" multiplied by 0.429).
26             The aggregate amount deducted under this
27         subparagraph in all taxable years for any one piece of
28         property may not exceed the amount of the bonus
29         depreciation deduction (30% of the adjusted basis of
30         the qualified property) taken on that property on the
31         taxpayer's federal income tax return under subsection
32         (k) of Section 168 of the Internal Revenue Code;
33             (P) If the taxpayer reports a capital gain or loss
34         on the taxpayer's federal income tax return for the
35         taxable year based on a sale or transfer of property
36         for which the taxpayer was required in any taxable year

 

 

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1         to make an addition modification under subparagraph
2         (D-5), then an amount equal to that addition
3         modification.
4             The taxpayer is allowed to take the deduction under
5         this subparagraph only once with respect to any one
6         piece of property;
7             (Q) The amount of (i) any interest income (net of
8         the deductions allocable thereto) taken into account
9         for the taxable year with respect to a transaction with
10         a taxpayer that is required to make an addition
11         modification with respect to such transaction under
12         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
13         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
14         the amount of such addition modification and (ii) any
15         income from intangible property (net of the deductions
16         allocable thereto) taken into account for the taxable
17         year with respect to a transaction with a taxpayer that
18         is required to make an addition modification with
19         respect to such transaction under Section
20         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
21         203(d)(2)(D-8), but not to exceed the amount of such
22         addition modification;
23             (R) An amount equal to the interest income taken
24         into account for the taxable year (net of the
25         deductions allocable thereto) with respect to
26         transactions with a foreign person who would be a
27         member of the taxpayer's unitary business group but for
28         the fact that the foreign person's business activity
29         outside the United States is 80% or more of that
30         person's total business activity, but not to exceed the
31         addition modification required to be made for the same
32         taxable year under Section 203(d)(2)(D-7) for interest
33         paid, accrued, or incurred, directly or indirectly, to
34         the same foreign person; and
35             (S) An amount equal to the income from intangible
36         property taken into account for the taxable year (net

 

 

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1         of the deductions allocable thereto) with respect to
2         transactions with a foreign person who would be a
3         member of the taxpayer's unitary business group but for
4         the fact that the foreign person's business activity
5         outside the United States is 80% or more of that
6         person's total business activity, but not to exceed the
7         addition modification required to be made for the same
8         taxable year under Section 203(d)(2)(D-8) for
9         intangible expenses and costs paid, accrued, or
10         incurred, directly or indirectly, to the same foreign
11         person.
 
12     (e) Gross income; adjusted gross income; taxable income.
13         (1) In general. Subject to the provisions of paragraph
14     (2) and subsection (b) (3), for purposes of this Section
15     and Section 803(e), a taxpayer's gross income, adjusted
16     gross income, or taxable income for the taxable year shall
17     mean the amount of gross income, adjusted gross income or
18     taxable income properly reportable for federal income tax
19     purposes for the taxable year under the provisions of the
20     Internal Revenue Code. Taxable income may be less than
21     zero. However, for taxable years ending on or after
22     December 31, 1986, net operating loss carryforwards from
23     taxable years ending prior to December 31, 1986, may not
24     exceed the sum of federal taxable income for the taxable
25     year before net operating loss deduction, plus the excess
26     of addition modifications over subtraction modifications
27     for the taxable year. For taxable years ending prior to
28     December 31, 1986, taxable income may never be an amount in
29     excess of the net operating loss for the taxable year as
30     defined in subsections (c) and (d) of Section 172 of the
31     Internal Revenue Code, provided that when taxable income of
32     a corporation (other than a Subchapter S corporation),
33     trust, or estate is less than zero and addition
34     modifications, other than those provided by subparagraph
35     (E) of paragraph (2) of subsection (b) for corporations or

 

 

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1     subparagraph (E) of paragraph (2) of subsection (c) for
2     trusts and estates, exceed subtraction modifications, an
3     addition modification must be made under those
4     subparagraphs for any other taxable year to which the
5     taxable income less than zero (net operating loss) is
6     applied under Section 172 of the Internal Revenue Code or
7     under subparagraph (E) of paragraph (2) of this subsection
8     (e) applied in conjunction with Section 172 of the Internal
9     Revenue Code.
10         (2) Special rule. For purposes of paragraph (1) of this
11     subsection, the taxable income properly reportable for
12     federal income tax purposes shall mean:
13             (A) Certain life insurance companies. In the case
14         of a life insurance company subject to the tax imposed
15         by Section 801 of the Internal Revenue Code, life
16         insurance company taxable income, plus the amount of
17         distribution from pre-1984 policyholder surplus
18         accounts as calculated under Section 815a of the
19         Internal Revenue Code;
20             (B) Certain other insurance companies. In the case
21         of mutual insurance companies subject to the tax
22         imposed by Section 831 of the Internal Revenue Code,
23         insurance company taxable income;
24             (C) Regulated investment companies. In the case of
25         a regulated investment company subject to the tax
26         imposed by Section 852 of the Internal Revenue Code,
27         investment company taxable income;
28             (D) Real estate investment trusts. In the case of a
29         real estate investment trust subject to the tax imposed
30         by Section 857 of the Internal Revenue Code, real
31         estate investment trust taxable income;
32             (E) Consolidated corporations. In the case of a
33         corporation which is a member of an affiliated group of
34         corporations filing a consolidated income tax return
35         for the taxable year for federal income tax purposes,
36         taxable income determined as if such corporation had

 

 

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1         filed a separate return for federal income tax purposes
2         for the taxable year and each preceding taxable year
3         for which it was a member of an affiliated group. For
4         purposes of this subparagraph, the taxpayer's separate
5         taxable income shall be determined as if the election
6         provided by Section 243(b) (2) of the Internal Revenue
7         Code had been in effect for all such years;
8             (F) Cooperatives. In the case of a cooperative
9         corporation or association, the taxable income of such
10         organization determined in accordance with the
11         provisions of Section 1381 through 1388 of the Internal
12         Revenue Code;
13             (G) Subchapter S corporations. In the case of: (i)
14         a Subchapter S corporation for which there is in effect
15         an election for the taxable year under Section 1362 of
16         the Internal Revenue Code, the taxable income of such
17         corporation determined in accordance with Section
18         1363(b) of the Internal Revenue Code, except that
19         taxable income shall take into account those items
20         which are required by Section 1363(b)(1) of the
21         Internal Revenue Code to be separately stated; and (ii)
22         a Subchapter S corporation for which there is in effect
23         a federal election to opt out of the provisions of the
24         Subchapter S Revision Act of 1982 and have applied
25         instead the prior federal Subchapter S rules as in
26         effect on July 1, 1982, the taxable income of such
27         corporation determined in accordance with the federal
28         Subchapter S rules as in effect on July 1, 1982; and
29             (H) Partnerships. In the case of a partnership,
30         taxable income determined in accordance with Section
31         703 of the Internal Revenue Code, except that taxable
32         income shall take into account those items which are
33         required by Section 703(a)(1) to be separately stated
34         but which would be taken into account by an individual
35         in calculating his taxable income.
36         (3) Recapture of business expenses on disposition of

 

 

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1     asset or business. Notwithstanding any other law to the
2     contrary, if in prior years income from an asset or
3     business has been classified as business income and in a
4     later year is demonstrated to be non-business income, then
5     all expenses, without limitation, deducted in such later
6     year and in the 2 immediately preceding taxable years
7     related to that asset or business that generated the
8     non-business income shall be added back and recaptured as
9     business income in the year of the disposition of the asset
10     or business. Such amount shall be apportioned to Illinois
11     using the greater of the apportionment fraction computed
12     for the business under Section 304 of this Act for the
13     taxable year or the average of the apportionment fractions
14     computed for the business under Section 304 of this Act for
15     the taxable year and for the 2 immediately preceding
16     taxable years.
17     (f) Valuation limitation amount.
18         (1) In general. The valuation limitation amount
19     referred to in subsections (a) (2) (G), (c) (2) (I) and
20     (d)(2) (E) is an amount equal to:
21             (A) The sum of the pre-August 1, 1969 appreciation
22         amounts (to the extent consisting of gain reportable
23         under the provisions of Section 1245 or 1250 of the
24         Internal Revenue Code) for all property in respect of
25         which such gain was reported for the taxable year; plus
26             (B) The lesser of (i) the sum of the pre-August 1,
27         1969 appreciation amounts (to the extent consisting of
28         capital gain) for all property in respect of which such
29         gain was reported for federal income tax purposes for
30         the taxable year, or (ii) the net capital gain for the
31         taxable year, reduced in either case by any amount of
32         such gain included in the amount determined under
33         subsection (a) (2) (F) or (c) (2) (H).
34         (2) Pre-August 1, 1969 appreciation amount.
35             (A) If the fair market value of property referred
36         to in paragraph (1) was readily ascertainable on August

 

 

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1         1, 1969, the pre-August 1, 1969 appreciation amount for
2         such property is the lesser of (i) the excess of such
3         fair market value over the taxpayer's basis (for
4         determining gain) for such property on that date
5         (determined under the Internal Revenue Code as in
6         effect on that date), or (ii) the total gain realized
7         and reportable for federal income tax purposes in
8         respect of the sale, exchange or other disposition of
9         such property.
10             (B) If the fair market value of property referred
11         to in paragraph (1) was not readily ascertainable on
12         August 1, 1969, the pre-August 1, 1969 appreciation
13         amount for such property is that amount which bears the
14         same ratio to the total gain reported in respect of the
15         property for federal income tax purposes for the
16         taxable year, as the number of full calendar months in
17         that part of the taxpayer's holding period for the
18         property ending July 31, 1969 bears to the number of
19         full calendar months in the taxpayer's entire holding
20         period for the property.
21             (C) The Department shall prescribe such
22         regulations as may be necessary to carry out the
23         purposes of this paragraph.
 
24     (g) Double deductions. Unless specifically provided
25 otherwise, nothing in this Section shall permit the same item
26 to be deducted more than once.
 
27     (h) Legislative intention. Except as expressly provided by
28 this Section there shall be no modifications or limitations on
29 the amounts of income, gain, loss or deduction taken into
30 account in determining gross income, adjusted gross income or
31 taxable income for federal income tax purposes for the taxable
32 year, or in the amount of such items entering into the
33 computation of base income and net income under this Act for
34 such taxable year, whether in respect of property values as of

 

 

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1 August 1, 1969 or otherwise.
2 (Source: P.A. 92-16, eff. 6-28-01; 92-244, eff. 8-3-01; 92-439,
3 eff. 8-17-01; 92-603, eff. 6-28-02; 92-626, eff. 7-11-02;
4 92-651, eff. 7-11-02; 92-846, eff. 8-23-02; 93-812, eff.
5 7-26-04; 93-840, eff. 7-30-04; revised 10-12-04.)
 
6     Section 99. Effective date. This Act takes effect upon
7 becoming law.