94TH GENERAL ASSEMBLY
State of Illinois
2005 and 2006
HB1118

 

Introduced 02/08/05, by Rep. Elizabeth Coulson

 

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 taxable years ending on or after December 31, 2005. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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1     AN ACT in relation to taxation.
 
2     Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
 
4     Section 5. The Illinois Income Tax Act is amended by
5 changing 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) For taxable years ending on or after December
17         31, 2005, all unreimbursed amounts, but not more than a
18         total amount that would result in a tax liability of
19         less than zero for the taxpayer, expended by persons 65
20         years of age or older for home health services, as
21         defined by Section 2.05 of the Home Health Agency
22         Licensing Act, if provided by a public or private
23         organization licensed under that Act, or for services
24         provided to a person at that person's residence by a
25         licensed practical nurse or registered nurse in
26         accordance with a plan of treatment for illness or
27         infirmity prescribed by a physician.
 
28     (b) Corporations.
29         (1) In general. In the case of a corporation, 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. The taxable income referred to in
33     paragraph (1) shall be modified by adding thereto the sum
34     of the following amounts:
35             (A) An amount equal to all amounts paid or accrued

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

HB1118 - 21 - LRB094 04072 BDD 34092 b

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

 

 

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

 

 

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

 

 

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1         with respect to such loan attributable to the eligible
2         property as calculated under the previous sentence;
3             (M-1) For any taxpayer that is a financial
4         organization within the meaning of Section 304(c) of
5         this Act, an amount included in such total as interest
6         income from a loan or loans made by such taxpayer to a
7         borrower, to the extent that such a loan is secured by
8         property which is eligible for the High Impact Business
9         Investment Credit. To determine the portion of a loan
10         or loans that is secured by property eligible for a
11         Section 201(h) investment credit to the borrower, the
12         entire principal amount of the loan or loans between
13         the taxpayer and the borrower should be divided into
14         the basis of the Section 201(h) investment credit
15         property which secures the loan or loans, using for
16         this purpose the original basis of such property on the
17         date that it was placed in service in a federally
18         designated Foreign Trade Zone or Sub-Zone located in
19         Illinois. No taxpayer that is eligible for the
20         deduction provided in subparagraph (M) of paragraph
21         (2) of this subsection shall be eligible for the
22         deduction provided under this subparagraph (M-1). The
23         subtraction modification available to taxpayers in any
24         year under this subsection shall be that portion of the
25         total interest paid by the borrower with respect to
26         such loan attributable to the eligible property as
27         calculated under the previous sentence;
28             (N) Two times any contribution made during the
29         taxable year to a designated zone organization to the
30         extent that the contribution (i) qualifies as a
31         charitable contribution under subsection (c) of
32         Section 170 of the Internal Revenue Code and (ii) must,
33         by its terms, be used for a project approved by the
34         Department of Commerce and Economic Opportunity under
35         Section 11 of the Illinois Enterprise Zone Act;
36             (O) An amount equal to: (i) 85% for taxable years

 

 

HB1118 - 25 - LRB094 04072 BDD 34092 b

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

 

 

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1         to whom an interinsurer or a reciprocal insurer has
2         made the election under Section 835 of the Internal
3         Revenue Code, 26 U.S.C. 835, an amount equal to the
4         excess, if any, of the amounts paid or incurred by that
5         interinsurer or reciprocal insurer in the taxable year
6         to the attorney-in-fact over the deduction allowed to
7         that interinsurer or reciprocal insurer with respect
8         to the attorney-in-fact under Section 835(b) of the
9         Internal Revenue Code for the taxable year;
10             (S) For taxable years ending on or after December
11         31, 1997, in the case of a Subchapter S corporation, an
12         amount equal to all amounts of income allocable to a
13         shareholder subject to the Personal Property Tax
14         Replacement Income Tax imposed by subsections (c) and
15         (d) of Section 201 of this Act, including amounts
16         allocable to organizations exempt from federal income
17         tax by reason of Section 501(a) of the Internal Revenue
18         Code. This subparagraph (S) is exempt from the
19         provisions of Section 250;
20             (T) For taxable years 2001 and thereafter, for the
21         taxable year in which the bonus depreciation deduction
22         (30% of the adjusted basis of the qualified property)
23         is taken on the taxpayer's federal income tax return
24         under subsection (k) of Section 168 of the Internal
25         Revenue Code and for each applicable taxable year
26         thereafter, an amount equal to "x", where:
27                 (1) "y" equals the amount of the depreciation
28             deduction taken for the taxable year on the
29             taxpayer's federal income tax return on property
30             for which the bonus depreciation deduction (30% of
31             the adjusted basis of the qualified property) was
32             taken in any year under subsection (k) of Section
33             168 of the Internal Revenue Code, but not including
34             the bonus depreciation deduction; and
35                 (2) "x" equals "y" multiplied by 30 and then
36             divided by 70 (or "y" multiplied by 0.429).

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         includes patents, patent applications, trade names,
2         trademarks, service marks, copyrights, mask works,
3         trade secrets, and similar types of intangible assets.
4             This paragraph shall not apply to the following:
5                 (i) any item of intangible expenses or costs
6             paid, accrued, or incurred, directly or
7             indirectly, from a transaction with a foreign
8             person who is subject in a foreign country or
9             state, other than a state which requires mandatory
10             unitary reporting, to a tax on or measured by net
11             income with respect to such item; or
12                 (ii) any item of intangible expense or cost
13             paid, accrued, or incurred, directly or
14             indirectly, if the taxpayer can establish, based
15             on a preponderance of the evidence, both of the
16             following:
17                     (a) the foreign person during the same
18                 taxable year paid, accrued, or incurred, the
19                 intangible expense or cost to a person that is
20                 not a related member, and
21                     (b) the transaction giving rise to the
22                 intangible expense or cost between the
23                 taxpayer and the foreign person did not have as
24                 a principal purpose the avoidance of Illinois
25                 income tax, and is paid pursuant to a contract
26                 or agreement that reflects arm's-length terms;
27                 or
28                 (iii) any item of intangible expense or cost
29             paid, accrued, or incurred, directly or
30             indirectly, from a transaction with a foreign
31             person if the taxpayer establishes by clear and
32             convincing evidence, that the adjustments are
33             unreasonable; or if the taxpayer and the Director
34             agree in writing to the application or use of an
35             alternative method of apportionment under Section
36             304(f);

 

 

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

 

 

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1         amortization;
2             (L) With the exception of any amounts subtracted
3         under subparagraph (K), an amount equal to the sum of
4         all amounts disallowed as deductions by (i) Sections
5         171(a) (2) and 265(a)(2) of the Internal Revenue Code,
6         as now or hereafter amended, and all amounts of
7         expenses allocable to interest and disallowed as
8         deductions by Section 265(1) of the Internal Revenue
9         Code of 1954, as now or hereafter amended; and (ii) for
10         taxable years ending on or after August 13, 1999,
11         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
12         the Internal Revenue Code; the provisions of this
13         subparagraph are exempt from the provisions of Section
14         250;
15             (M) An amount equal to those dividends included in
16         such total which were paid by a corporation which
17         conducts business operations in an Enterprise Zone or
18         zones created under the Illinois Enterprise Zone Act
19         and conducts substantially all of its operations in an
20         Enterprise Zone or Zones;
21             (N) An amount equal to any contribution made to a
22         job training project established pursuant to the Tax
23         Increment Allocation Redevelopment Act;
24             (O) An amount equal to those dividends included in
25         such total that were paid by a corporation that
26         conducts business operations in a federally designated
27         Foreign Trade Zone or Sub-Zone and that is designated a
28         High Impact Business located in Illinois; provided
29         that dividends eligible for the deduction provided in
30         subparagraph (M) of paragraph (2) of this subsection
31         shall not be eligible for the deduction provided under
32         this subparagraph (O);
33             (P) An amount equal to the amount of the deduction
34         used to compute the federal income tax credit for
35         restoration of substantial amounts held under claim of
36         right for the taxable year pursuant to Section 1341 of

 

 

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

 

 

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

 

 

HB1118 - 39 - LRB094 04072 BDD 34092 b

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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