HB3636 Engrossed LRB096 11653 HLH 22228 b

1     AN ACT concerning revenue.
 
2     Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
 
4     Section 5. The Department of Revenue Law of the Civil
5 Administrative Code of Illinois is amended by changing Section
6 2505-200 as follows:
 
7     (20 ILCS 2505/2505-200)  (was 20 ILCS 2505/39c-1a)
8     Sec. 2505-200. Electronic filing rules.
9     (a) The Department may adopt rules to authorize the
10 electronic filing of any return or document required to be
11 filed under any Act administered by the Department.
12     (b) The Department may adopt rules to require the
13 electronic filing of the income and replacement tax return
14 required to be filed under the Illinois Income Tax Act for a
15 taxable year by any taxpayer (other than an individual) who is
16 required to file its federal income tax return electronically
17 for the taxable year.
18     (c) In the case of an electronically filed return or other
19 document required to be filed with the Department or maintained
20 by any taxpayer, these rules may set forth standards that
21 provide for acceptance of a signature in a form other than in
22 the proper handwriting of the person.
23 (Source: P.A. 91-239, eff. 1-1-00.)
 

 

 

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1     Section 10. The Illinois Income Tax Act is amended by
2 changing Sections 203, 502, 911.1, and 911.2 as follows:
 
3     (35 ILCS 5/203)  (from Ch. 120, par. 2-203)
4     Sec. 203. Base income defined.
5     (a) Individuals.
6         (1) In general. In the case of an individual, base
7     income means an amount equal to the taxpayer's adjusted
8     gross income for the taxable year as modified by paragraph
9     (2).
10         (2) Modifications. The adjusted gross income referred
11     to in paragraph (1) shall be modified by adding thereto the
12     sum of the following amounts:
13             (A) An amount equal to all amounts paid or accrued
14         to the taxpayer as interest or dividends during the
15         taxable year to the extent excluded from gross income
16         in the computation of adjusted gross income, except
17         stock dividends of qualified public utilities
18         described in Section 305(e) of the Internal Revenue
19         Code;
20             (B) An amount equal to the amount of tax imposed by
21         this Act to the extent deducted from gross income in
22         the computation of adjusted gross income for the
23         taxable year;
24             (C) An amount equal to the amount received during

 

 

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1         the taxable year as a recovery or refund of real
2         property taxes paid with respect to the taxpayer's
3         principal residence under the Revenue Act of 1939 and
4         for which a deduction was previously taken under
5         subparagraph (L) of this paragraph (2) prior to July 1,
6         1991, the retrospective application date of Article 4
7         of Public Act 87-17. In the case of multi-unit or
8         multi-use structures and farm dwellings, the taxes on
9         the taxpayer's principal residence shall be that
10         portion of the total taxes for the entire property
11         which is attributable to such principal residence;
12             (D) An amount equal to the amount of the capital
13         gain deduction allowable under the Internal Revenue
14         Code, to the extent deducted from gross income in the
15         computation of adjusted gross income;
16             (D-5) An amount, to the extent not included in
17         adjusted gross income, equal to the amount of money
18         withdrawn by the taxpayer in the taxable year from a
19         medical care savings account and the interest earned on
20         the account in the taxable year of a withdrawal
21         pursuant to subsection (b) of Section 20 of the Medical
22         Care Savings Account Act or subsection (b) of Section
23         20 of the Medical Care Savings Account Act of 2000;
24             (D-10) For taxable years ending after December 31,
25         1997, an amount equal to any eligible remediation costs
26         that the individual deducted in computing adjusted

 

 

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

 

 

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1         interest paid, accrued, or incurred, directly or
2         indirectly, (i) for taxable years ending on or after
3         December 31, 2004, to a foreign person who would be a
4         member of the same unitary business group but for the
5         fact that foreign person's business activity outside
6         the United States is 80% or more of the foreign
7         person's total business activity and (ii) for taxable
8         years ending on or after December 31, 2008, to a person
9         who would be a member of the same unitary business
10         group but for the fact that the person is prohibited
11         under Section 1501(a)(27) from being included in the
12         unitary business group because he or she is ordinarily
13         required to apportion business income under different
14         subsections of Section 304. The addition modification
15         required by this subparagraph shall be reduced to the
16         extent that dividends were included in base income of
17         the unitary group for the same taxable year and
18         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

 

 

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

 

 

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1                 (iv) an item of interest paid, accrued, or
2             incurred, directly or indirectly, to a person if
3             the taxpayer establishes by clear and convincing
4             evidence that the adjustments are unreasonable; or
5             if the taxpayer and the Director agree in writing
6             to the application or use of an alternative method
7             of apportionment under Section 304(f).
8                 Nothing in this subsection shall preclude the
9             Director from making any other adjustment
10             otherwise allowed under Section 404 of this Act for
11             any tax year beginning after the effective date of
12             this amendment provided such adjustment is made
13             pursuant to regulation adopted by the Department
14             and such regulations provide methods and standards
15             by which the Department will utilize its authority
16             under Section 404 of this Act;
17             (D-18) An amount equal to the amount of intangible
18         expenses and costs otherwise allowed as a deduction in
19         computing base income, and that were paid, accrued, or
20         incurred, directly or indirectly, (i) for taxable
21         years ending on or after December 31, 2004, to a
22         foreign person who would be a member of the same
23         unitary business group but for the fact that the
24         foreign person's business activity outside the United
25         States is 80% or more of that person's total business
26         activity and (ii) for taxable years ending on or after

 

 

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1         December 31, 2008, to a person who would be a member of
2         the same unitary business group but for the fact that
3         the person is prohibited under Section 1501(a)(27)
4         from being included in the unitary business group
5         because he or she is ordinarily required to apportion
6         business income under different subsections of Section
7         304. The addition modification required by this
8         subparagraph shall be reduced to the extent that
9         dividends were included in base income of the unitary
10         group for the same taxable year and received by the
11         taxpayer or by a member of the taxpayer's unitary
12         business group (including amounts included in gross
13         income under Sections 951 through 964 of the Internal
14         Revenue Code and amounts included in gross income under
15         Section 78 of the Internal Revenue Code) with respect
16         to the stock of the same person to whom the intangible
17         expenses and costs were directly or indirectly paid,
18         incurred, or accrued. The preceding sentence does not
19         apply to the extent that the same dividends caused a
20         reduction to the addition modification required under
21         Section 203(a)(2)(D-17) of this Act. As used in this
22         subparagraph, the term "intangible expenses and costs"
23         includes (1) expenses, losses, and costs for, or
24         related to, the direct or indirect acquisition, use,
25         maintenance or management, ownership, sale, exchange,
26         or any other disposition of intangible property; (2)

 

 

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

 

 

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1                     (b) the transaction giving rise to the
2                 intangible expense or cost between the
3                 taxpayer and the person did not have as a
4                 principal purpose the avoidance of Illinois
5                 income tax, and is paid pursuant to a contract
6                 or agreement that reflects arm's-length terms;
7                 or
8                 (iii) any item of intangible expense or cost
9             paid, accrued, or incurred, directly or
10             indirectly, from a transaction with a person if the
11             taxpayer establishes by clear and convincing
12             evidence, that the adjustments are unreasonable;
13             or if the taxpayer and the Director agree in
14             writing to the application or use of an alternative
15             method of apportionment under Section 304(f);
16                 Nothing in this subsection shall preclude the
17             Director from making any other adjustment
18             otherwise allowed under Section 404 of this Act for
19             any tax year beginning after the effective date of
20             this amendment provided such adjustment is made
21             pursuant to regulation adopted by the Department
22             and such regulations provide methods and standards
23             by which the Department will utilize its authority
24             under Section 404 of this Act;
25             (D-19) For taxable years ending on or after
26         December 31, 2008, an amount equal to the amount of

 

 

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1         insurance premium expenses and costs otherwise allowed
2         as a deduction in computing base income, and that were
3         paid, accrued, or incurred, directly or indirectly, to
4         a person who would be a member of the same unitary
5         business group but for the fact that the person is
6         prohibited under Section 1501(a)(27) from being
7         included in the unitary business group because he or
8         she is ordinarily required to apportion business
9         income under different subsections of Section 304. The
10         addition modification required by this subparagraph
11         shall be reduced to the extent that dividends were
12         included in base income of the unitary group for the
13         same taxable year and received by the taxpayer or by a
14         member of the taxpayer's unitary business group
15         (including amounts included in gross income under
16         Sections 951 through 964 of the Internal Revenue Code
17         and amounts included in gross income under Section 78
18         of the Internal Revenue Code) with respect to the stock
19         of the same person to whom the premiums and costs were
20         directly or indirectly paid, incurred, or accrued. The
21         preceding sentence does not apply to the extent that
22         the same dividends caused a reduction to the addition
23         modification required under Section 203(a)(2)(D-17) or
24         Section 203(a)(2)(D-18) of this Act.
25             (D-20) For taxable years beginning on or after
26         January 1, 2002 and ending on or before December 31,

 

 

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1         2006, in the case of a distribution from a qualified
2         tuition program under Section 529 of the Internal
3         Revenue Code, other than (i) a distribution from a
4         College Savings Pool created under Section 16.5 of the
5         State Treasurer Act or (ii) a distribution from the
6         Illinois Prepaid Tuition Trust Fund, an amount equal to
7         the amount excluded from gross income under Section
8         529(c)(3)(B). For taxable years beginning on or after
9         January 1, 2007, in the case of a distribution from a
10         qualified tuition program under Section 529 of the
11         Internal Revenue Code, other than (i) a distribution
12         from a College Savings Pool created under Section 16.5
13         of the State Treasurer Act, (ii) a distribution from
14         the Illinois Prepaid Tuition Trust Fund, or (iii) a
15         distribution from a qualified tuition program under
16         Section 529 of the Internal Revenue Code that (I)
17         adopts and determines that its offering materials
18         comply with the College Savings Plans Network's
19         disclosure principles and (II) has made reasonable
20         efforts to inform in-state residents of the existence
21         of in-state qualified tuition programs by informing
22         Illinois residents directly and, where applicable, to
23         inform financial intermediaries distributing the
24         program to inform in-state residents of the existence
25         of in-state qualified tuition programs at least
26         annually, an amount equal to the amount excluded from

 

 

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1         gross income under Section 529(c)(3)(B).
2             For the purposes of this subparagraph (D-20), a
3         qualified tuition program has made reasonable efforts
4         if it makes disclosures (which may use the term
5         "in-state program" or "in-state plan" and need not
6         specifically refer to Illinois or its qualified
7         programs by name) (i) directly to prospective
8         participants in its offering materials or makes a
9         public disclosure, such as a website posting; and (ii)
10         where applicable, to intermediaries selling the
11         out-of-state program in the same manner that the
12         out-of-state program distributes its offering
13         materials;
14             (D-21) For taxable years beginning on or after
15         January 1, 2007, in the case of transfer of moneys from
16         a qualified tuition program under Section 529 of the
17         Internal Revenue Code that is administered by the State
18         to an out-of-state program, an amount equal to the
19         amount of moneys previously deducted from base income
20         under subsection (a)(2)(Y) of this Section.
21     and by deducting from the total so obtained the sum of the
22     following amounts:
23             (E) For taxable years ending before December 31,
24         2001, any amount included in such total in respect of
25         any compensation (including but not limited to any
26         compensation paid or accrued to a serviceman while a

 

 

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

 

 

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1         92nd General Assembly are exempt from the provisions of
2         Section 250;
3             (F) An amount equal to all amounts included in such
4         total pursuant to the provisions of Sections 402(a),
5         402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the
6         Internal Revenue Code, or included in such total as
7         distributions under the provisions of any retirement
8         or disability plan for employees of any governmental
9         agency or unit, or retirement payments to retired
10         partners, which payments are excluded in computing net
11         earnings from self employment by Section 1402 of the
12         Internal Revenue Code and regulations adopted pursuant
13         thereto;
14             (G) The valuation limitation amount;
15             (H) An amount equal to the amount of any tax
16         imposed by this Act which was refunded to the taxpayer
17         and included in such total for the taxable year;
18             (I) An amount equal to all amounts included in such
19         total pursuant to the provisions of Section 111 of the
20         Internal Revenue Code as a recovery of items previously
21         deducted from adjusted gross income in the computation
22         of taxable income;
23             (J) An amount equal to those dividends included in
24         such total which were paid by a corporation which
25         conducts business operations in an Enterprise Zone or
26         zones created under the Illinois Enterprise Zone Act or

 

 

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1         a River Edge Redevelopment Zone or zones created under
2         the River Edge Redevelopment Zone Act, and conducts
3         substantially all of its operations in an Enterprise
4         Zone or zones or a River Edge Redevelopment Zone or
5         zones. This subparagraph (J) is exempt from the
6         provisions of Section 250;
7             (K) An amount equal to those dividends included in
8         such total that were paid by a corporation that
9         conducts business operations in a federally designated
10         Foreign Trade Zone or Sub-Zone and that is designated a
11         High Impact Business located in Illinois; provided
12         that dividends eligible for the deduction provided in
13         subparagraph (J) of paragraph (2) of this subsection
14         shall not be eligible for the deduction provided under
15         this subparagraph (K);
16             (L) For taxable years ending after December 31,
17         1983, an amount equal to all social security benefits
18         and railroad retirement benefits included in such
19         total pursuant to Sections 72(r) and 86 of the Internal
20         Revenue Code;
21             (M) With the exception of any amounts subtracted
22         under subparagraph (N), an amount equal to the sum of
23         all amounts disallowed as deductions by (i) Sections
24         171(a) (2), and 265(2) of the Internal Revenue Code of
25         1954, as now or hereafter amended, and all amounts of
26         expenses allocable to interest and disallowed as

 

 

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1         deductions by Section 265(1) of the Internal Revenue
2         Code of 1954, as now or hereafter amended; and (ii) for
3         taxable years ending on or after August 13, 1999,
4         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
5         the Internal Revenue Code; the provisions of this
6         subparagraph are exempt from the provisions of Section
7         250;
8             (N) An amount equal to all amounts included in such
9         total which are exempt from taxation by this State
10         either by reason of its statutes or Constitution or by
11         reason of the Constitution, treaties or statutes of the
12         United States; provided that, in the case of any
13         statute of this State that exempts income derived from
14         bonds or other obligations from the tax imposed under
15         this Act, the amount exempted shall be the interest net
16         of bond premium amortization;
17             (O) An amount equal to any contribution made to a
18         job training project established pursuant to the Tax
19         Increment Allocation Redevelopment Act;
20             (P) An amount equal to the amount of the deduction
21         used to compute the federal income tax credit for
22         restoration of substantial amounts held under claim of
23         right for the taxable year pursuant to Section 1341 of
24         the Internal Revenue Code of 1986;
25             (Q) An amount equal to any amounts included in such
26         total, received by the taxpayer as an acceleration in

 

 

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1         the payment of life, endowment or annuity benefits in
2         advance of the time they would otherwise be payable as
3         an indemnity for a terminal illness;
4             (R) An amount equal to the amount of any federal or
5         State bonus paid to veterans of the Persian Gulf War;
6             (S) An amount, to the extent included in adjusted
7         gross income, equal to the amount of a contribution
8         made in the taxable year on behalf of the taxpayer to a
9         medical care savings account established under the
10         Medical Care Savings Account Act or the Medical Care
11         Savings Account Act of 2000 to the extent the
12         contribution is accepted by the account administrator
13         as provided in that Act;
14             (T) An amount, to the extent included in adjusted
15         gross income, equal to the amount of interest earned in
16         the taxable year on a medical care savings account
17         established under the Medical Care Savings Account Act
18         or the Medical Care Savings Account Act of 2000 on
19         behalf of the taxpayer, other than interest added
20         pursuant to item (D-5) of this paragraph (2);
21             (U) For one taxable year beginning on or after
22         January 1, 1994, an amount equal to the total amount of
23         tax imposed and paid under subsections (a) and (b) of
24         Section 201 of this Act on grant amounts received by
25         the taxpayer under the Nursing Home Grant Assistance
26         Act during the taxpayer's taxable years 1992 and 1993;

 

 

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1             (V) Beginning with tax years ending on or after
2         December 31, 1995 and ending with tax years ending on
3         or before December 31, 2004, an amount equal to the
4         amount paid by a taxpayer who is a self-employed
5         taxpayer, a partner of a partnership, or a shareholder
6         in a Subchapter S corporation for health insurance or
7         long-term care insurance for that taxpayer or that
8         taxpayer's spouse or dependents, to the extent that the
9         amount paid for that health insurance or long-term care
10         insurance may be deducted under Section 213 of the
11         Internal Revenue Code of 1986, has not been deducted on
12         the federal income tax return of the taxpayer, and does
13         not exceed the taxable income attributable to that
14         taxpayer's income, self-employment income, or
15         Subchapter S corporation income; except that no
16         deduction shall be allowed under this item (V) if the
17         taxpayer is eligible to participate in any health
18         insurance or long-term care insurance plan of an
19         employer of the taxpayer or the taxpayer's spouse. The
20         amount of the health insurance and long-term care
21         insurance subtracted under this item (V) shall be
22         determined by multiplying total health insurance and
23         long-term care insurance premiums paid by the taxpayer
24         times a number that represents the fractional
25         percentage of eligible medical expenses under Section
26         213 of the Internal Revenue Code of 1986 not actually

 

 

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1         deducted on the taxpayer's federal income tax return;
2             (W) For taxable years beginning on or after January
3         1, 1998, all amounts included in the taxpayer's federal
4         gross income in the taxable year from amounts converted
5         from a regular IRA to a Roth IRA. This paragraph is
6         exempt from the provisions of Section 250;
7             (X) For taxable year 1999 and thereafter, an amount
8         equal to the amount of any (i) distributions, to the
9         extent includible in gross income for federal income
10         tax purposes, made to the taxpayer because of his or
11         her status as a victim of persecution for racial or
12         religious reasons by Nazi Germany or any other Axis
13         regime or as an heir of the victim and (ii) items of
14         income, to the extent includible in gross income for
15         federal income tax purposes, attributable to, derived
16         from or in any way related to assets stolen from,
17         hidden from, or otherwise lost to a victim of
18         persecution for racial or religious reasons by Nazi
19         Germany or any other Axis regime immediately prior to,
20         during, and immediately after World War II, including,
21         but not limited to, interest on the proceeds receivable
22         as insurance under policies issued to a victim of
23         persecution for racial or religious reasons by Nazi
24         Germany or any other Axis regime by European insurance
25         companies immediately prior to and during World War II;
26         provided, however, this subtraction from federal

 

 

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1         adjusted gross income does not apply to assets acquired
2         with such assets or with the proceeds from the sale of
3         such assets; provided, further, this paragraph shall
4         only apply to a taxpayer who was the first recipient of
5         such assets after their recovery and who is a victim of
6         persecution for racial or religious reasons by Nazi
7         Germany or any other Axis regime or as an heir of the
8         victim. The amount of and the eligibility for any
9         public assistance, benefit, or similar entitlement is
10         not affected by the inclusion of items (i) and (ii) of
11         this paragraph in gross income for federal income tax
12         purposes. This paragraph is exempt from the provisions
13         of Section 250;
14             (Y) For taxable years beginning on or after January
15         1, 2002 and ending on or before December 31, 2004,
16         moneys contributed in the taxable year to a College
17         Savings Pool account under Section 16.5 of the State
18         Treasurer Act, except that amounts excluded from gross
19         income under Section 529(c)(3)(C)(i) of the Internal
20         Revenue Code shall not be considered moneys
21         contributed under this subparagraph (Y). For taxable
22         years beginning on or after January 1, 2005, a maximum
23         of $10,000 contributed in the taxable year to (i) a
24         College Savings Pool account under Section 16.5 of the
25         State Treasurer Act or (ii) the Illinois Prepaid
26         Tuition Trust Fund, except that amounts excluded from

 

 

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1         gross income under Section 529(c)(3)(C)(i) of the
2         Internal Revenue Code shall not be considered moneys
3         contributed under this subparagraph (Y). This
4         subparagraph (Y) is exempt from the provisions of
5         Section 250;
6             (Z) For taxable years 2001 and thereafter, for the
7         taxable year in which the bonus depreciation deduction
8         is taken on the taxpayer's federal income tax return
9         under subsection (k) of Section 168 of the Internal
10         Revenue Code and for each applicable taxable year
11         thereafter, an amount equal to "x", where:
12                 (1) "y" equals the amount of the depreciation
13             deduction taken for the taxable year on the
14             taxpayer's federal income tax return on property
15             for which the bonus depreciation deduction was
16             taken in any year under subsection (k) of Section
17             168 of the Internal Revenue Code, but not including
18             the bonus depreciation deduction;
19                 (2) for taxable years ending on or before
20             December 31, 2005, "x" equals "y" multiplied by 30
21             and then divided by 70 (or "y" multiplied by
22             0.429); and
23                 (3) for taxable years ending after December
24             31, 2005:
25                     (i) for property on which a bonus
26                 depreciation deduction of 30% of the adjusted

 

 

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

 

 

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1         equal to that addition modification.
2             The taxpayer is allowed to take the deduction under
3         this subparagraph only once with respect to any one
4         piece of property.
5             This subparagraph (AA) is exempt from the
6         provisions of Section 250;
7             (BB) Any amount included in adjusted gross income,
8         other than salary, received by a driver in a
9         ridesharing arrangement using a motor vehicle;
10             (CC) The amount of (i) any interest income (net of
11         the deductions allocable thereto) taken into account
12         for the taxable year with respect to a transaction with
13         a taxpayer that is required to make an addition
14         modification with respect to such transaction under
15         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
16         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
17         the amount of that addition modification, and (ii) any
18         income from intangible property (net of the deductions
19         allocable thereto) taken into account for the taxable
20         year with respect to a transaction with a taxpayer that
21         is required to make an addition modification with
22         respect to such transaction under Section
23         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
24         203(d)(2)(D-8), but not to exceed the amount of that
25         addition modification. This subparagraph (CC) is
26         exempt from the provisions of Section 250;

 

 

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

 

 

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1         outside the United States is 80% or more of that
2         person's total business activity and (ii) for taxable
3         years ending on or after December 31, 2008, to a person
4         who would be a member of the same unitary business
5         group but for the fact that the person is prohibited
6         under Section 1501(a)(27) from being included in the
7         unitary business group because he or she is ordinarily
8         required to apportion business income under different
9         subsections of Section 304, but not to exceed the
10         addition modification required to be made for the same
11         taxable year under Section 203(a)(2)(D-18) for
12         intangible expenses and costs paid, accrued, or
13         incurred, directly or indirectly, to the same foreign
14         person. This subparagraph (EE) is exempt from the
15         provisions of Section 250.
 
16     (b) Corporations.
17         (1) In general. In the case of a corporation, base
18     income means an amount equal to the taxpayer's taxable
19     income for the taxable year as modified by paragraph (2).
20         (2) Modifications. The taxable income referred to in
21     paragraph (1) shall be modified by adding thereto the sum
22     of the following amounts:
23             (A) An amount equal to all amounts paid or accrued
24         to the taxpayer as interest and all distributions
25         received from regulated investment companies during

 

 

HB3636 Engrossed - 27 - LRB096 11653 HLH 22228 b

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

 

 

HB3636 Engrossed - 28 - LRB096 11653 HLH 22228 b

1         subtraction modifications in such earlier taxable
2         year, with the following limitations applied in the
3         order that they are listed:
4                 (i) 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 be reduced by the amount of
8             addition modification under this subparagraph (E)
9             which related to that net operating loss and which
10             was taken into account in calculating the base
11             income of an earlier taxable year, and
12                 (ii) the addition modification relating to the
13             net operating loss carried back or forward to the
14             taxable year from any taxable year ending prior to
15             December 31, 1986 shall not exceed the amount of
16             such carryback or carryforward;
17             For taxable years in which there is a net operating
18         loss carryback or carryforward from more than one other
19         taxable year ending prior to December 31, 1986, the
20         addition modification provided in this subparagraph
21         (E) shall be the sum of the amounts computed
22         independently under the preceding provisions of this
23         subparagraph (E) for each such taxable year;
24             (E-5) For taxable years ending after December 31,
25         1997, an amount equal to any eligible remediation costs
26         that the corporation deducted in computing adjusted

 

 

HB3636 Engrossed - 29 - LRB096 11653 HLH 22228 b

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

 

 

HB3636 Engrossed - 30 - LRB096 11653 HLH 22228 b

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

 

 

HB3636 Engrossed - 31 - LRB096 11653 HLH 22228 b

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

 

 

HB3636 Engrossed - 32 - LRB096 11653 HLH 22228 b

1             not federal or Illinois tax avoidance; or
2                 (iv) an item of interest paid, accrued, or
3             incurred, directly or indirectly, to a person if
4             the taxpayer establishes by clear and convincing
5             evidence that the adjustments are unreasonable; or
6             if the taxpayer and the Director agree in writing
7             to the application or use of an alternative method
8             of apportionment under Section 304(f).
9                 Nothing in this subsection shall preclude the
10             Director from making any other adjustment
11             otherwise allowed under Section 404 of this Act for
12             any tax year beginning after the effective date of
13             this amendment provided such adjustment is made
14             pursuant to regulation adopted by the Department
15             and such regulations provide methods and standards
16             by which the Department will utilize its authority
17             under Section 404 of this Act;
18             (E-13) An amount equal to the amount of intangible
19         expenses and costs otherwise allowed as a deduction in
20         computing base income, and that were paid, accrued, or
21         incurred, directly or indirectly, (i) for taxable
22         years ending on or after December 31, 2004, to a
23         foreign person who would be a member of the same
24         unitary business group but for the fact that the
25         foreign person's business activity outside the United
26         States is 80% or more of that person's total business

 

 

HB3636 Engrossed - 33 - LRB096 11653 HLH 22228 b

1         activity and (ii) for taxable years ending on or after
2         December 31, 2008, to a person who would be a member of
3         the same unitary business group but for the fact that
4         the person is prohibited under Section 1501(a)(27)
5         from being included in the unitary business group
6         because he or she is ordinarily required to apportion
7         business income under different subsections of Section
8         304. 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 pursuant to Sections 951 through 964 of the
15         Internal Revenue Code and amounts included in gross
16         income under Section 78 of the Internal Revenue Code)
17         with respect to the stock of the same person to whom
18         the intangible expenses and costs were directly or
19         indirectly paid, incurred, or accrued. The preceding
20         sentence shall not apply to the extent that the same
21         dividends caused a reduction to the addition
22         modification required under Section 203(b)(2)(E-12) of
23         this Act. As used in this subparagraph, the term
24         "intangible expenses and costs" includes (1) expenses,
25         losses, and costs for, or related to, the direct or
26         indirect acquisition, use, maintenance or management,

 

 

HB3636 Engrossed - 34 - LRB096 11653 HLH 22228 b

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

 

 

HB3636 Engrossed - 35 - LRB096 11653 HLH 22228 b

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

 

 

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1         December 31, 2008, an amount equal to the amount of
2         insurance premium expenses and costs otherwise allowed
3         as a deduction in computing base income, and that were
4         paid, accrued, or incurred, directly or indirectly, to
5         a person who would be a member of the same unitary
6         business group but for the fact that the person is
7         prohibited under Section 1501(a)(27) from being
8         included in the unitary business group because he or
9         she is ordinarily required to apportion business
10         income under different subsections of Section 304. The
11         addition modification required by this subparagraph
12         shall be reduced to the extent that dividends were
13         included in base income of the unitary group for the
14         same taxable year and received by the taxpayer or by a
15         member of the taxpayer's unitary business group
16         (including amounts included in gross income under
17         Sections 951 through 964 of the Internal Revenue Code
18         and amounts included in gross income under Section 78
19         of the Internal Revenue Code) with respect to the stock
20         of the same person to whom the premiums and costs were
21         directly or indirectly paid, incurred, or accrued. The
22         preceding sentence does not apply to the extent that
23         the same dividends caused a reduction to the addition
24         modification required under Section 203(b)(2)(E-12) or
25         Section 203(b)(2)(E-13) of this Act;
26             (E-15) For taxable years beginning after December

 

 

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1         31, 2008, any deduction for dividends paid by a captive
2         real estate investment trust that is allowed to a real
3         estate investment trust under Section 857(b)(2)(B) of
4         the Internal Revenue Code for dividends paid;
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,

 

 

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1         1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and
2         832(b)(5)(B)(i) of the Internal Revenue Code; the
3         provisions of this subparagraph are exempt from the
4         provisions of Section 250;
5             (J) An amount equal to all amounts included in such
6         total which are exempt from taxation by this State
7         either by reason of its statutes or Constitution or by
8         reason of the Constitution, treaties or statutes of the
9         United States; provided that, in the case of any
10         statute of this State that exempts income derived from
11         bonds or other obligations from the tax imposed under
12         this Act, the amount exempted shall be the interest net
13         of bond premium amortization;
14             (K) An amount equal to those dividends included in
15         such total which were paid by a corporation which
16         conducts business operations in an Enterprise Zone or
17         zones created under the Illinois Enterprise Zone Act or
18         a River Edge Redevelopment Zone or zones created under
19         the River Edge Redevelopment Zone Act and conducts
20         substantially all of its operations in an Enterprise
21         Zone or zones or a River Edge Redevelopment Zone or
22         zones. This subparagraph (K) is exempt from the
23         provisions of Section 250;
24             (L) 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

 

 

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1         Foreign Trade Zone or Sub-Zone and that is designated a
2         High Impact Business located in Illinois; provided
3         that dividends eligible for the deduction provided in
4         subparagraph (K) of paragraph 2 of this subsection
5         shall not be eligible for the deduction provided under
6         this subparagraph (L);
7             (M) For any taxpayer that is a financial
8         organization within the meaning of Section 304(c) of
9         this Act, an amount included in such total as interest
10         income from a loan or loans made by such taxpayer to a
11         borrower, to the extent that such a loan is secured by
12         property which is eligible for the Enterprise Zone
13         Investment Credit or the River Edge Redevelopment Zone
14         Investment Credit. To determine the portion of a loan
15         or loans that is secured by property eligible for a
16         Section 201(f) investment credit to the borrower, the
17         entire principal amount of the loan or loans between
18         the taxpayer and the borrower should be divided into
19         the basis of the Section 201(f) investment credit
20         property which secures the loan or loans, using for
21         this purpose the original basis of such property on the
22         date that it was placed in service in the Enterprise
23         Zone or the River Edge Redevelopment Zone. The
24         subtraction modification available to taxpayer in any
25         year under this subsection shall be that portion of the
26         total interest paid by the borrower with respect to

 

 

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1         such loan attributable to the eligible property as
2         calculated under the previous sentence. This
3         subparagraph (M) is exempt from the provisions of
4         Section 250;
5             (M-1) For any taxpayer that is a financial
6         organization within the meaning of Section 304(c) of
7         this Act, an amount included in such total as interest
8         income from a loan or loans made by such taxpayer to a
9         borrower, to the extent that such a loan is secured by
10         property which is eligible for the High Impact Business
11         Investment Credit. To determine the portion of a loan
12         or loans that is secured by property eligible for a
13         Section 201(h) investment credit to the borrower, the
14         entire principal amount of the loan or loans between
15         the taxpayer and the borrower should be divided into
16         the basis of the Section 201(h) investment credit
17         property which secures the loan or loans, using for
18         this purpose the original basis of such property on the
19         date that it was placed in service in a federally
20         designated Foreign Trade Zone or Sub-Zone located in
21         Illinois. No taxpayer that is eligible for the
22         deduction provided in subparagraph (M) of paragraph
23         (2) of this subsection shall be eligible for the
24         deduction provided under this subparagraph (M-1). The
25         subtraction modification available to taxpayers in any
26         year under this subsection shall be that portion of the

 

 

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1         total interest paid by the borrower with respect to
2         such loan attributable to the eligible property as
3         calculated under the previous sentence;
4             (N) Two times any contribution made during the
5         taxable year to a designated zone organization to the
6         extent that the contribution (i) qualifies as a
7         charitable contribution under subsection (c) of
8         Section 170 of the Internal Revenue Code and (ii) must,
9         by its terms, be used for a project approved by the
10         Department of Commerce and Economic Opportunity under
11         Section 11 of the Illinois Enterprise Zone Act or under
12         Section 10-10 of the River Edge Redevelopment Zone Act.
13         This subparagraph (N) is exempt from the provisions of
14         Section 250;
15             (O) An amount equal to: (i) 85% for taxable years
16         ending on or before December 31, 1992, or, a percentage
17         equal to the percentage allowable under Section
18         243(a)(1) of the Internal Revenue Code of 1986 for
19         taxable years ending after December 31, 1992, of the
20         amount by which dividends included in taxable income
21         and received from a corporation that is not created or
22         organized under the laws of the United States or any
23         state or political subdivision thereof, including, for
24         taxable years ending on or after December 31, 1988,
25         dividends received or deemed received or paid or deemed
26         paid under Sections 951 through 964 of the Internal

 

 

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

 

 

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1         used to compute the federal income tax credit for
2         restoration of substantial amounts held under claim of
3         right for the taxable year pursuant to Section 1341 of
4         the Internal Revenue Code of 1986;
5             (R) On and after July 20, 1999, in the case of an
6         attorney-in-fact with respect to whom an interinsurer
7         or a reciprocal insurer has made the election under
8         Section 835 of the Internal Revenue Code, 26 U.S.C.
9         835, an amount equal to the excess, if any, of the
10         amounts paid or incurred by that interinsurer or
11         reciprocal insurer in the taxable year to the
12         attorney-in-fact over the deduction allowed to that
13         interinsurer or reciprocal insurer with respect to the
14         attorney-in-fact under Section 835(b) of the Internal
15         Revenue Code for the taxable year; the provisions of
16         this subparagraph are exempt from the provisions of
17         Section 250;
18             (S) For taxable years ending on or after December
19         31, 1997, in the case of a Subchapter S corporation, an
20         amount equal to all amounts of income allocable to a
21         shareholder subject to the Personal Property Tax
22         Replacement Income Tax imposed by subsections (c) and
23         (d) of Section 201 of this Act, including amounts
24         allocable to organizations exempt from federal income
25         tax by reason of Section 501(a) of the Internal Revenue
26         Code. This subparagraph (S) is exempt from the

 

 

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1         provisions of Section 250;
2             (T) For taxable years 2001 and thereafter, for the
3         taxable year in which the bonus depreciation deduction
4         is taken on the taxpayer's federal income tax return
5         under subsection (k) of Section 168 of the Internal
6         Revenue Code and for each applicable taxable year
7         thereafter, an amount equal to "x", where:
8                 (1) "y" equals the amount of the depreciation
9             deduction taken for the taxable year on the
10             taxpayer's federal income tax return on property
11             for which the bonus depreciation deduction was
12             taken in any year under subsection (k) of Section
13             168 of the Internal Revenue Code, but not including
14             the bonus depreciation deduction;
15                 (2) for taxable years ending on or before
16             December 31, 2005, "x" equals "y" multiplied by 30
17             and then divided by 70 (or "y" multiplied by
18             0.429); and
19                 (3) for taxable years ending after December
20             31, 2005:
21                     (i) for property on which a bonus
22                 depreciation deduction of 30% of the adjusted
23                 basis was taken, "x" equals "y" multiplied by
24                 30 and then divided by 70 (or "y" multiplied by
25                 0.429); and
26                     (ii) for property on which a bonus

 

 

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

 

 

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

 

 

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

 

 

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1         the fact that the foreign person's business activity
2         outside the United States is 80% or more of that
3         person's total business activity and (ii) for taxable
4         years ending on or after December 31, 2008, to a person
5         who would be a member of the same unitary business
6         group but for the fact that the person is prohibited
7         under Section 1501(a)(27) from being included in the
8         unitary business group because he or she is ordinarily
9         required to apportion business income under different
10         subsections of Section 304, but not to exceed the
11         addition modification required to be made for the same
12         taxable year under Section 203(b)(2)(E-13) for
13         intangible expenses and costs paid, accrued, or
14         incurred, directly or indirectly, to the same foreign
15         person. This subparagraph (X) is exempt from the
16         provisions of Section 250. (Y)
17         (3) Special rule. For purposes of paragraph (2) (A),
18     "gross income" in the case of a life insurance company, for
19     tax years ending on and after December 31, 1994, shall mean
20     the gross investment income for the taxable year.
 
21     (c) Trusts and estates.
22         (1) In general. In the case of a trust or estate, base
23     income means an amount equal to the taxpayer's taxable
24     income for the taxable year as modified by paragraph (2).
25         (2) Modifications. Subject to the provisions of

 

 

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

 

 

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1         those provided by this subparagraph (E) exceeded
2         subtraction modifications in such taxable year, with
3         the following limitations applied in the order that
4         they are listed:
5                 (i) the addition modification relating to the
6             net operating loss carried back or forward to the
7             taxable year from any taxable year ending prior to
8             December 31, 1986 shall be reduced by the amount of
9             addition modification under this subparagraph (E)
10             which related to that net operating loss and which
11             was taken into account in calculating the base
12             income of an earlier taxable year, and
13                 (ii) the addition modification relating to the
14             net operating loss carried back or forward to the
15             taxable year from any taxable year ending prior to
16             December 31, 1986 shall not exceed the amount of
17             such carryback or carryforward;
18             For taxable years in which there is a net operating
19         loss carryback or carryforward from more than one other
20         taxable year ending prior to December 31, 1986, the
21         addition modification provided in this subparagraph
22         (E) shall be the sum of the amounts computed
23         independently under the preceding provisions of this
24         subparagraph (E) for each such taxable year;
25             (F) For taxable years ending on or after January 1,
26         1989, an amount equal to the tax deducted pursuant to

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1             by which the Department will utilize its authority
2             under Section 404 of this Act;
3             (G-13) An amount equal to the amount of intangible
4         expenses and costs otherwise allowed as a deduction in
5         computing base income, and that were paid, accrued, or
6         incurred, directly or indirectly, (i) for taxable
7         years ending on or after December 31, 2004, to a
8         foreign person who would be a member of the same
9         unitary business group but for the fact that the
10         foreign person's business activity outside the United
11         States is 80% or more of that person's total business
12         activity and (ii) for taxable years ending on or after
13         December 31, 2008, to a person who would be a member of
14         the same unitary business group but for the fact that
15         the person is prohibited under Section 1501(a)(27)
16         from being included in the unitary business group
17         because he or she is ordinarily required to apportion
18         business income under different subsections of Section
19         304. The addition modification required by this
20         subparagraph shall be reduced to the extent that
21         dividends were included in base income of the unitary
22         group for the same taxable year and received by the
23         taxpayer or by a member of the taxpayer's unitary
24         business group (including amounts included in gross
25         income pursuant to Sections 951 through 964 of the
26         Internal Revenue Code and amounts included in gross

 

 

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

 

 

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

 

 

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

 

 

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1         (including amounts included in gross income under
2         Sections 951 through 964 of the Internal Revenue Code
3         and amounts included in gross income under Section 78
4         of the Internal Revenue Code) with respect to the stock
5         of the same person to whom the premiums and costs were
6         directly or indirectly paid, incurred, or accrued. The
7         preceding sentence does not apply to the extent that
8         the same dividends caused a reduction to the addition
9         modification required under Section 203(c)(2)(G-12) or
10         Section 203(c)(2)(G-13) of this Act.
11     and by deducting from the total so obtained the sum of the
12     following amounts:
13             (H) An amount equal to all amounts included in such
14         total pursuant to the provisions of Sections 402(a),
15         402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
16         Internal Revenue Code or included in such total as
17         distributions under the provisions of any retirement
18         or disability plan for employees of any governmental
19         agency or unit, or retirement payments to retired
20         partners, which payments are excluded in computing net
21         earnings from self employment by Section 1402 of the
22         Internal Revenue Code and regulations adopted pursuant
23         thereto;
24             (I) The valuation limitation amount;
25             (J) An amount equal to the amount of any tax
26         imposed by this Act which was refunded to the taxpayer

 

 

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1         and included in such total for the taxable year;
2             (K) An amount equal to all amounts included in
3         taxable income as modified by subparagraphs (A), (B),
4         (C), (D), (E), (F) and (G) which are exempt from
5         taxation by this State either by reason of its statutes
6         or Constitution or by reason of the Constitution,
7         treaties or statutes of the United States; provided
8         that, in the case of any statute of this State that
9         exempts income derived from bonds or other obligations
10         from the tax imposed under this Act, the amount
11         exempted shall be the interest net of bond premium
12         amortization;
13             (L) With the exception of any amounts subtracted
14         under subparagraph (K), an amount equal to the sum of
15         all amounts disallowed as deductions by (i) Sections
16         171(a) (2) and 265(a)(2) of the Internal Revenue Code,
17         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             (M) An amount equal to those dividends included in

 

 

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1         such total which were paid by a corporation which
2         conducts business operations in an Enterprise Zone or
3         zones created under the Illinois Enterprise Zone Act or
4         a River Edge Redevelopment Zone or zones created under
5         the River Edge Redevelopment Zone Act and conducts
6         substantially all of its operations in an Enterprise
7         Zone or Zones or a River Edge Redevelopment Zone or
8         zones. This subparagraph (M) is exempt from the
9         provisions of Section 250;
10             (N) An amount equal to any contribution made to a
11         job training project established pursuant to the Tax
12         Increment Allocation Redevelopment Act;
13             (O) An amount equal to those dividends included in
14         such total that were paid by a corporation that
15         conducts business operations in a federally designated
16         Foreign Trade Zone or Sub-Zone and that is designated a
17         High Impact Business located in Illinois; provided
18         that dividends eligible for the deduction provided in
19         subparagraph (M) of paragraph (2) of this subsection
20         shall not be eligible for the deduction provided under
21         this subparagraph (O);
22             (P) An amount equal to the amount of the deduction
23         used to compute the federal income tax credit for
24         restoration of substantial amounts held under claim of
25         right for the taxable year pursuant to Section 1341 of
26         the Internal Revenue Code of 1986;

 

 

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1             (Q) For taxable year 1999 and thereafter, an amount
2         equal to the amount of any (i) distributions, to the
3         extent includible in gross income for federal income
4         tax purposes, made to the taxpayer because of his or
5         her status as a victim of persecution for racial or
6         religious reasons by Nazi Germany or any other Axis
7         regime or as an heir of the victim and (ii) items of
8         income, to the extent includible in gross income for
9         federal income tax purposes, attributable to, derived
10         from or in any way related to assets stolen from,
11         hidden from, or otherwise lost to a victim of
12         persecution for racial or religious reasons by Nazi
13         Germany or any other Axis regime immediately prior to,
14         during, and immediately after World War II, including,
15         but not limited to, interest on the proceeds receivable
16         as insurance under policies issued to a victim of
17         persecution for racial or religious reasons by Nazi
18         Germany or any other Axis regime by European insurance
19         companies immediately prior to and during World War II;
20         provided, however, this subtraction from federal
21         adjusted gross income does not apply to assets acquired
22         with such assets or with the proceeds from the sale of
23         such assets; provided, further, this paragraph shall
24         only apply to a taxpayer who was the first recipient of
25         such assets after their recovery and who is a victim of
26         persecution for racial or religious reasons by Nazi

 

 

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1         Germany or any other Axis regime or as an heir of the
2         victim. The amount of and the eligibility for any
3         public assistance, benefit, or similar entitlement is
4         not affected by the inclusion of items (i) and (ii) of
5         this paragraph in gross income for federal income tax
6         purposes. This paragraph is exempt from the provisions
7         of Section 250;
8             (R) For taxable years 2001 and thereafter, for the
9         taxable year in which the bonus depreciation deduction
10         is taken on the taxpayer's federal income tax return
11         under subsection (k) of Section 168 of the Internal
12         Revenue Code and for each applicable taxable year
13         thereafter, an amount equal to "x", where:
14                 (1) "y" equals the amount of the depreciation
15             deduction taken for the taxable year on the
16             taxpayer's federal income tax return on property
17             for which the bonus depreciation deduction was
18             taken in any year under subsection (k) of Section
19             168 of the Internal Revenue Code, but not including
20             the bonus depreciation deduction;
21                 (2) for taxable years ending on or before
22             December 31, 2005, "x" equals "y" multiplied by 30
23             and then divided by 70 (or "y" multiplied by
24             0.429); and
25                 (3) for taxable years ending after December
26             31, 2005:

 

 

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

 

 

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

 

 

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

 

 

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1         person's total business activity and (ii) for taxable
2         years ending on or after December 31, 2008, to a person
3         who would be a member of the same unitary business
4         group but for the fact that the person is prohibited
5         under Section 1501(a)(27) from being included in the
6         unitary business group because he or she is ordinarily
7         required to apportion business income under different
8         subsections of Section 304, but not to exceed the
9         addition modification required to be made for the same
10         taxable year under Section 203(c)(2)(G-13) for
11         intangible expenses and costs paid, accrued, or
12         incurred, directly or indirectly, to the same foreign
13         person. This subparagraph (V) is exempt from the
14         provisions of Section 250. (W)
15         (3) Limitation. The amount of any modification
16     otherwise required under this subsection shall, under
17     regulations prescribed by the Department, be adjusted by
18     any amounts included therein which were properly paid,
19     credited, or required to be distributed, or permanently set
20     aside for charitable purposes pursuant to Internal Revenue
21     Code Section 642(c) during the taxable year.
 
22     (d) Partnerships.
23         (1) In general. In the case of a partnership, base
24     income means an amount equal to the taxpayer's taxable
25     income for the taxable year as modified by paragraph (2).

 

 

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1         (2) Modifications. The taxable income referred to in
2     paragraph (1) shall be modified by adding thereto the sum
3     of the following amounts:
4             (A) An amount equal to all amounts paid or accrued
5         to the taxpayer as interest or dividends during the
6         taxable year to the extent excluded from gross income
7         in the computation of taxable income;
8             (B) An amount equal to the amount of tax imposed by
9         this Act to the extent deducted from gross income for
10         the taxable year;
11             (C) The amount of deductions allowed to the
12         partnership pursuant to Section 707 (c) of the Internal
13         Revenue Code in calculating its taxable income;
14             (D) An amount equal to the amount of the capital
15         gain deduction allowable under the Internal Revenue
16         Code, to the extent deducted from gross income in the
17         computation of taxable income;
18             (D-5) For taxable years 2001 and thereafter, an
19         amount equal to the bonus depreciation deduction taken
20         on the taxpayer's federal income tax return for the
21         taxable year under subsection (k) of Section 168 of the
22         Internal Revenue Code;
23             (D-6) If the taxpayer sells, transfers, abandons,
24         or otherwise disposes of property for which the
25         taxpayer was required in any taxable year to make an
26         addition modification under subparagraph (D-5), then

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         shall be reduced to the extent that dividends were
2         included in base income of the unitary group for the
3         same taxable year and received by the taxpayer or by a
4         member of the taxpayer's unitary business group
5         (including amounts included in gross income under
6         Sections 951 through 964 of the Internal Revenue Code
7         and amounts included in gross income under Section 78
8         of the Internal Revenue Code) with respect to the stock
9         of the same person to whom the premiums and costs were
10         directly or indirectly paid, incurred, or accrued. The
11         preceding sentence does not apply to the extent that
12         the same dividends caused a reduction to the addition
13         modification required under Section 203(d)(2)(D-7) or
14         Section 203(d)(2)(D-8) of this Act.
15     and by deducting from the total so obtained the following
16     amounts:
17             (E) The valuation limitation amount;
18             (F) An amount equal to the amount of any tax
19         imposed by this Act which was refunded to the taxpayer
20         and included in such total for the taxable year;
21             (G) An amount equal to all amounts included in
22         taxable income as modified by subparagraphs (A), (B),
23         (C) and (D) which are exempt from taxation by this
24         State either by reason of its statutes or Constitution
25         or by reason of the Constitution, treaties or statutes
26         of the United States; provided that, in the case of any

 

 

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1         statute of this State that exempts income derived from
2         bonds or other obligations from the tax imposed under
3         this Act, the amount exempted shall be the interest net
4         of bond premium amortization;
5             (H) Any income of the partnership which
6         constitutes personal service income as defined in
7         Section 1348 (b) (1) of the Internal Revenue Code (as
8         in effect December 31, 1981) or a reasonable allowance
9         for compensation paid or accrued for services rendered
10         by partners to the partnership, whichever is greater;
11             (I) An amount equal to all amounts of income
12         distributable to an entity subject to the Personal
13         Property Tax Replacement Income Tax imposed by
14         subsections (c) and (d) of Section 201 of this Act
15         including amounts distributable to organizations
16         exempt from federal income tax by reason of Section
17         501(a) of the Internal Revenue Code, provided that the
18         deduction under this subparagraph (I) shall not be
19         allowed to a publicly traded partnership under Section
20         7704 of the Internal Revenue Code for any taxable year
21         ending on or after December 31, 2009;
22             (J) With the exception of any amounts subtracted
23         under subparagraph (G), an amount equal to the sum of
24         all amounts disallowed as deductions by (i) Sections
25         171(a) (2), and 265(2) of the Internal Revenue Code of
26         1954, as now or hereafter amended, and all amounts of

 

 

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1         expenses allocable to interest and disallowed as
2         deductions by Section 265(1) of the Internal Revenue
3         Code, as now or hereafter amended; and (ii) for taxable
4         years ending on or after August 13, 1999, Sections
5         171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
6         Internal Revenue Code; the provisions of this
7         subparagraph are exempt from the provisions of Section
8         250;
9             (K) An amount equal to those dividends included in
10         such total which were paid by a corporation which
11         conducts business operations in an Enterprise Zone or
12         zones created under the Illinois Enterprise Zone Act,
13         enacted by the 82nd General Assembly, or a River Edge
14         Redevelopment Zone or zones created under the River
15         Edge Redevelopment Zone Act and conducts substantially
16         all of its operations in an Enterprise Zone or Zones or
17         from a River Edge Redevelopment Zone or zones. This
18         subparagraph (K) is exempt from the provisions of
19         Section 250;
20             (L) An amount equal to any contribution made to a
21         job training project established pursuant to the Real
22         Property Tax Increment Allocation Redevelopment Act;
23             (M) An amount equal to those dividends included in
24         such total that were paid by a corporation that
25         conducts business operations in a federally designated
26         Foreign Trade Zone or Sub-Zone and that is designated a

 

 

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1         High Impact Business located in Illinois; provided
2         that dividends eligible for the deduction provided in
3         subparagraph (K) of paragraph (2) of this subsection
4         shall not be eligible for the deduction provided under
5         this subparagraph (M);
6             (N) An amount equal to the amount of the deduction
7         used to compute the federal income tax credit for
8         restoration of substantial amounts held under claim of
9         right for the taxable year pursuant to Section 1341 of
10         the Internal Revenue Code of 1986;
11             (O) For taxable years 2001 and thereafter, for the
12         taxable year in which the bonus depreciation deduction
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 was
21             taken in any year under subsection (k) of Section
22             168 of the Internal Revenue Code, but not including
23             the bonus depreciation deduction;
24                 (2) for taxable years ending on or before
25             December 31, 2005, "x" equals "y" multiplied by 30
26             and then divided by 70 (or "y" multiplied by

 

 

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

 

 

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

 

 

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

 

 

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1         member of the taxpayer's unitary business group but for
2         the fact that the foreign person's business activity
3         outside the United States is 80% or more of that
4         person's total business activity and (ii) for taxable
5         years ending on or after December 31, 2008, to a person
6         who would be a member of the same unitary business
7         group but for the fact that the person is prohibited
8         under Section 1501(a)(27) from being included in the
9         unitary business group because he or she is ordinarily
10         required to apportion business income under different
11         subsections of Section 304, but not to exceed the
12         addition modification required to be made for the same
13         taxable year under Section 203(d)(2)(D-8) for
14         intangible expenses and costs paid, accrued, or
15         incurred, directly or indirectly, to the same person.
16         This subparagraph (S) is exempt from Section 250. (T)
 
17     (e) Gross income; adjusted gross income; taxable income.
18         (1) In general. Subject to the provisions of paragraph
19     (2) and subsection (b) (3), for purposes of this Section
20     and Section 803(e), a taxpayer's gross income, adjusted
21     gross income, or taxable income for the taxable year shall
22     mean the amount of gross income, adjusted gross income or
23     taxable income properly reportable for federal income tax
24     purposes for the taxable year under the provisions of the
25     Internal Revenue Code. Taxable income may be less than

 

 

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1     zero. However, for taxable years ending on or after
2     December 31, 1986, net operating loss carryforwards from
3     taxable years ending prior to December 31, 1986, may not
4     exceed the sum of federal taxable income for the taxable
5     year before net operating loss deduction, plus the excess
6     of addition modifications over subtraction modifications
7     for the taxable year. For taxable years ending prior to
8     December 31, 1986, taxable income may never be an amount in
9     excess of the net operating loss for the taxable year as
10     defined in subsections (c) and (d) of Section 172 of the
11     Internal Revenue Code, provided that when taxable income of
12     a corporation (other than a Subchapter S corporation),
13     trust, or estate is less than zero and addition
14     modifications, other than those provided by subparagraph
15     (E) of paragraph (2) of subsection (b) for corporations or
16     subparagraph (E) of paragraph (2) of subsection (c) for
17     trusts and estates, exceed subtraction modifications, an
18     addition modification must be made under those
19     subparagraphs for any other taxable year to which the
20     taxable income less than zero (net operating loss) is
21     applied under Section 172 of the Internal Revenue Code or
22     under subparagraph (E) of paragraph (2) of this subsection
23     (e) applied in conjunction with Section 172 of the Internal
24     Revenue Code.
25         (2) Special rule. For purposes of paragraph (1) of this
26     subsection, the taxable income properly reportable for

 

 

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1     federal income tax purposes shall mean:
2             (A) Certain life insurance companies. In the case
3         of a life insurance company subject to the tax imposed
4         by Section 801 of the Internal Revenue Code, life
5         insurance company taxable income, plus the amount of
6         distribution from pre-1984 policyholder surplus
7         accounts as calculated under Section 815a of the
8         Internal Revenue Code;
9             (B) Certain other insurance companies. In the case
10         of mutual insurance companies subject to the tax
11         imposed by Section 831 of the Internal Revenue Code,
12         insurance company taxable income;
13             (C) Regulated investment companies. In the case of
14         a regulated investment company subject to the tax
15         imposed by Section 852 of the Internal Revenue Code,
16         investment company taxable income;
17             (D) Real estate investment trusts. In the case of a
18         real estate investment trust subject to the tax imposed
19         by Section 857 of the Internal Revenue Code, real
20         estate investment trust taxable income;
21             (E) Consolidated corporations. In the case of a
22         corporation which is a member of an affiliated group of
23         corporations filing a consolidated income tax return
24         for the taxable year for federal income tax purposes,
25         taxable income determined as if such corporation had
26         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

 

 

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1         Subchapter S rules as in effect on July 1, 1982; and
2             (H) Partnerships. In the case of a partnership,
3         taxable income determined in accordance with Section
4         703 of the Internal Revenue Code, except that taxable
5         income shall take into account those items which are
6         required by Section 703(a)(1) to be separately stated
7         but which would be taken into account by an individual
8         in calculating his taxable income.
9         (3) Recapture of business expenses on disposition of
10     asset or business. Notwithstanding any other law to the
11     contrary, if in prior years income from an asset or
12     business has been classified as business income and in a
13     later year is demonstrated to be non-business income, then
14     all expenses, without limitation, deducted in such later
15     year and in the 2 immediately preceding taxable years
16     related to that asset or business that generated the
17     non-business income shall be added back and recaptured as
18     business income in the year of the disposition of the asset
19     or business. Such amount shall be apportioned to Illinois
20     using the greater of the apportionment fraction computed
21     for the business under Section 304 of this Act for the
22     taxable year or the average of the apportionment fractions
23     computed for the business under Section 304 of this Act for
24     the taxable year and for the 2 immediately preceding
25     taxable years.
 

 

 

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1     (f) Valuation limitation amount.
2         (1) In general. The valuation limitation amount
3     referred to in subsections (a) (2) (G), (c) (2) (I) and
4     (d)(2) (E) is an amount equal to:
5             (A) The sum of the pre-August 1, 1969 appreciation
6         amounts (to the extent consisting of gain reportable
7         under the provisions of Section 1245 or 1250 of the
8         Internal Revenue Code) for all property in respect of
9         which such gain was reported for the taxable year; plus
10             (B) The lesser of (i) the sum of the pre-August 1,
11         1969 appreciation amounts (to the extent consisting of
12         capital gain) for all property in respect of which such
13         gain was reported for federal income tax purposes for
14         the taxable year, or (ii) the net capital gain for the
15         taxable year, reduced in either case by any amount of
16         such gain included in the amount determined under
17         subsection (a) (2) (F) or (c) (2) (H).
18         (2) Pre-August 1, 1969 appreciation amount.
19             (A) If the fair market value of property referred
20         to in paragraph (1) was readily ascertainable on August
21         1, 1969, the pre-August 1, 1969 appreciation amount for
22         such property is the lesser of (i) the excess of such
23         fair market value over the taxpayer's basis (for
24         determining gain) for such property on that date
25         (determined under the Internal Revenue Code as in
26         effect on that date), or (ii) the total gain realized

 

 

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

 

 

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1 taxable income for federal income tax purposes for the taxable
2 year, or in the amount of such items entering into the
3 computation of base income and net income under this Act for
4 such taxable year, whether in respect of property values as of
5 August 1, 1969 or otherwise.
6 (Source: P.A. 94-776, eff. 5-19-06; 94-789, eff. 5-19-06;
7 94-1021, eff. 7-12-06; 94-1074, eff. 12-26-06; 95-23, eff.
8 8-3-07; 95-233, eff. 8-16-07; 95-286, eff. 8-20-07; 95-331,
9 eff. 8-21-07; 95-707, eff. 1-11-08; 95-876, eff. 8-21-08;
10 revised 10-15-08.)
 
11     (35 ILCS 5/502)  (from Ch. 120, par. 5-502)
12     Sec. 502. Returns and notices.
13     (a) In general. A return with respect to the taxes imposed
14 by this Act shall be made by every person for any taxable year:
15         (1) for which such person is liable for a tax imposed
16     by this Act, or
17         (2) in the case of a resident or in the case of a
18     corporation which is qualified to do business in this
19     State, for which such person is required to make a federal
20     income tax return, regardless of whether such person is
21     liable for a tax imposed by this Act. However, this
22     paragraph shall not require a resident to make a return if
23     such person has an Illinois base income of the basic amount
24     in Section 204(b) or less and is either claimed as a
25     dependent on another person's tax return under the Internal

 

 

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1     Revenue Code of 1986, or is claimed as a dependent on
2     another person's tax return under this Act.
3     Notwithstanding the provisions of paragraph (1), a
4 nonresident whose Illinois income tax liability under
5 subsections (a), (b), (c), and (d) of Section 201 of this Act
6 is paid in full after taking into account the credits allowed
7 under subsection (f) of this Section or allowed under Section
8 709.5 of this Act shall not be required to file a return under
9 this subsection (a).
10     (b) Fiduciaries and receivers.
11         (1) Decedents. If an individual is deceased, any return
12     or notice required of such individual under this Act shall
13     be made by his executor, administrator, or other person
14     charged with the property of such decedent.
15         (2) Individuals under a disability. If an individual is
16     unable to make a return or notice required under this Act,
17     the return or notice required of such individual shall be
18     made by his duly authorized agent, guardian, fiduciary or
19     other person charged with the care of the person or
20     property of such individual.
21         (3) Estates and trusts. Returns or notices required of
22     an estate or a trust shall be made by the fiduciary
23     thereof.
24         (4) Receivers, trustees and assignees for
25     corporations. In a case where a receiver, trustee in
26     bankruptcy, or assignee, by order of a court of competent

 

 

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1     jurisdiction, by operation of law, or otherwise, has
2     possession of or holds title to all or substantially all
3     the property or business of a corporation, whether or not
4     such property or business is being operated, such receiver,
5     trustee, or assignee shall make the returns and notices
6     required of such corporation in the same manner and form as
7     corporations are required to make such returns and notices.
8     (c) Joint returns by husband and wife.
9         (1) Except as provided in paragraph (3): ,
10             (A) if a husband and wife file a joint federal
11         income tax return for a taxable year ending before
12         December 31, 2009, they shall file a joint return under
13         this Act for such taxable year and their liabilities
14         shall be joint and several; , but
15             (B) if a husband and wife file a joint federal
16         income tax return for a taxable year ending on or after
17         December 31, 2009, they may elect to file separate
18         returns under this Act for such taxable year. The
19         election under this paragraph must be made on or before
20         the due date (including extensions) of the return and,
21         once made, shall be irrevocable. If no election is
22         timely made under this paragraph for a taxable year:
23                 (i) the couple must file a joint return under
24             this Act for such taxable year,
25                 (ii) their liabilities shall be joint and
26             several, and

 

 

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1                 (iii) any overpayment for that taxable year
2             may be withheld under Section 909 of this Act or
3             under Section 2505-275 of the Civil Administrative
4             Code of Illinois and applied against a debt of
5             either spouse without regard to the amount of the
6             overpayment attributable to the other spouse; and
7             (C) if the federal income tax liability of either
8         spouse is determined on a separate federal income tax
9         return, they shall file separate returns under this
10         Act.
11         (2) If neither spouse is required to file a federal
12     income tax return and either or both are required to file a
13     return under this Act, they may elect to file separate or
14     joint returns and pursuant to such election their
15     liabilities shall be separate or joint and several.
16         (3) If either husband or wife is a resident and the
17     other is a nonresident, they shall file separate returns in
18     this State on such forms as may be required by the
19     Department in which event their tax liabilities shall be
20     separate; but if they file a joint federal income tax
21     return for a taxable year, they may elect to determine
22     their joint net income and file a joint return for that
23     taxable year under the provisions of paragraph (1) of this
24     subsection as if both were residents and in such case,
25     their liabilities shall be joint and several.
26         (4) Innocent spouses.

 

 

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1             (A) However, for tax liabilities arising and paid
2         prior to August 13, 1999, an innocent spouse shall be
3         relieved of liability for tax (including interest and
4         penalties) for any taxable year for which a joint
5         return has been made, upon submission of proof that the
6         Internal Revenue Service has made a determination
7         under Section 6013(e) of the Internal Revenue Code, for
8         the same taxable year, which determination relieved
9         the spouse from liability for federal income taxes. If
10         there is no federal income tax liability at issue for
11         the same taxable year, the Department shall rely on the
12         provisions of Section 6013(e) to determine whether the
13         person requesting innocent spouse abatement of tax,
14         penalty, and interest is entitled to that relief.
15             (B) For tax liabilities arising on and after August
16         13, 1999 or which arose prior to that date, but remain
17         unpaid as of that date, if an individual who filed a
18         joint return for any taxable year has made an election
19         under this paragraph, the individual's liability for
20         any tax shown on the joint return shall not exceed the
21         individual's separate return amount and the
22         individual's liability for any deficiency assessed for
23         that taxable year shall not exceed the portion of the
24         deficiency properly allocable to the individual. For
25         purposes of this paragraph:
26                 (i) An election properly made pursuant to

 

 

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1             Section 6015 of the Internal Revenue Code shall
2             constitute an election under this paragraph,
3             provided that the election shall not be effective
4             until the individual has notified the Department
5             of the election in the form and manner prescribed
6             by the Department.
7                 (ii) If no election has been made under Section
8             6015, the individual may make an election under
9             this paragraph in the form and manner prescribed by
10             the Department, provided that no election may be
11             made if the Department finds that assets were
12             transferred between individuals filing a joint
13             return as part of a scheme by such individuals to
14             avoid payment of Illinois income tax and the
15             election shall not eliminate the individual's
16             liability for any portion of a deficiency
17             attributable to an error on the return of which the
18             individual had actual knowledge as of the date of
19             filing.
20                 (iii) In determining the separate return
21             amount or portion of any deficiency attributable
22             to an individual, the Department shall follow the
23             provisions in subsections (c) and (d) of Section
24             6015 of the Internal Revenue Code.
25                 (iv) In determining the validity of an
26             individual's election under subparagraph (ii) and

 

 

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1             in determining an electing individual's separate
2             return amount or portion of any deficiency under
3             subparagraph (iii), any determination made by the
4             Secretary of the Treasury, by the United States Tax
5             Court on petition for review of a determination by
6             the Secretary of the Treasury, or on appeal from
7             the United States Tax Court under Section 6015 of
8             the Internal Revenue Code regarding criteria for
9             eligibility or under subsection (d) of Section
10             6015 of the Internal Revenue Code regarding the
11             allocation of any item of income, deduction,
12             payment, or credit between an individual making
13             the federal election and that individual's spouse
14             shall be conclusively presumed to be correct. With
15             respect to any item that is not the subject of a
16             determination by the Secretary of the Treasury or
17             the federal courts, in any proceeding involving
18             this subsection, the individual making the
19             election shall have the burden of proof with
20             respect to any item except that the Department
21             shall have the burden of proof with respect to
22             items in subdivision (ii).
23                 (v) Any election made by an individual under
24             this subsection shall apply to all years for which
25             that individual and the spouse named in the
26             election have filed a joint return.

 

 

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1                 (vi) After receiving a notice that the federal
2             election has been made or after receiving an
3             election under subdivision (ii), the Department
4             shall take no collection action against the
5             electing individual for any liability arising from
6             a joint return covered by the election until the
7             Department has notified the electing individual in
8             writing that the election is invalid or of the
9             portion of the liability the Department has
10             allocated to the electing individual. Within 60
11             days (150 days if the individual is outside the
12             United States) after the issuance of such
13             notification, the individual may file a written
14             protest of the denial of the election or of the
15             Department's determination of the liability
16             allocated to him or her and shall be granted a
17             hearing within the Department under the provisions
18             of Section 908. If a protest is filed, the
19             Department shall take no collection action against
20             the electing individual until the decision
21             regarding the protest has become final under
22             subsection (d) of Section 908 or, if
23             administrative review of the Department's decision
24             is requested under Section 1201, until the
25             decision of the court becomes final.
26     (d) Partnerships. Every partnership having any base income

 

 

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1 allocable to this State in accordance with section 305(c) shall
2 retain information concerning all items of income, gain, loss
3 and deduction; the names and addresses of all of the partners,
4 or names and addresses of members of a limited liability
5 company, or other persons who would be entitled to share in the
6 base income of the partnership if distributed; the amount of
7 the distributive share of each; and such other pertinent
8 information as the Department may by forms or regulations
9 prescribe. The partnership shall make that information
10 available to the Department when requested by the Department.
11     (e) For taxable years ending on or after December 31, 1985,
12 and before December 31, 1993, taxpayers that are corporations
13 (other than Subchapter S corporations) having the same taxable
14 year and that are members of the same unitary business group
15 may elect to be treated as one taxpayer for purposes of any
16 original return, amended return which includes the same
17 taxpayers of the unitary group which joined in the election to
18 file the original return, extension, claim for refund,
19 assessment, collection and payment and determination of the
20 group's tax liability under this Act. This subsection (e) does
21 not permit the election to be made for some, but not all, of
22 the purposes enumerated above. For taxable years ending on or
23 after December 31, 1987, corporate members (other than
24 Subchapter S corporations) of the same unitary business group
25 making this subsection (e) election are not required to have
26 the same taxable year.

 

 

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1     For taxable years ending on or after December 31, 1993,
2 taxpayers that are corporations (other than Subchapter S
3 corporations) and that are members of the same unitary business
4 group shall be treated as one taxpayer for purposes of any
5 original return, amended return which includes the same
6 taxpayers of the unitary group which joined in filing the
7 original return, extension, claim for refund, assessment,
8 collection and payment and determination of the group's tax
9 liability under this Act.
10     (f) The Department may promulgate regulations to permit
11 nonresident individual partners of the same partnership,
12 nonresident Subchapter S corporation shareholders of the same
13 Subchapter S corporation, and nonresident individuals
14 transacting an insurance business in Illinois under a Lloyds
15 plan of operation, and nonresident individual members of the
16 same limited liability company that is treated as a partnership
17 under Section 1501 (a)(16) of this Act, to file composite
18 individual income tax returns reflecting the composite income
19 of such individuals allocable to Illinois and to make composite
20 individual income tax payments. The Department may by
21 regulation also permit such composite returns to include the
22 income tax owed by Illinois residents attributable to their
23 income from partnerships, Subchapter S corporations, insurance
24 businesses organized under a Lloyds plan of operation, or
25 limited liability companies that are treated as partnership
26 under Section 1501(a)(16) of this Act, in which case such

 

 

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1 Illinois residents will be permitted to claim credits on their
2 individual returns for their shares of the composite tax
3 payments. This paragraph of subsection (f) applies to taxable
4 years ending on or after December 31, 1987.
5     For taxable years ending on or after December 31, 1999, the
6 Department may, by regulation, also permit any persons
7 transacting an insurance business organized under a Lloyds plan
8 of operation to file composite returns reflecting the income of
9 such persons allocable to Illinois and the tax rates applicable
10 to such persons under Section 201 and to make composite tax
11 payments and shall, by regulation, also provide that the income
12 and apportionment factors attributable to the transaction of an
13 insurance business organized under a Lloyds plan of operation
14 by any person joining in the filing of a composite return
15 shall, for purposes of allocating and apportioning income under
16 Article 3 of this Act and computing net income under Section
17 202 of this Act, be excluded from any other income and
18 apportionment factors of that person or of any unitary business
19 group, as defined in subdivision (a)(27) of Section 1501, to
20 which that person may belong.
21     For taxable years ending on or after December 31, 2008,
22 every nonresident shall be allowed a credit against his or her
23 liability under subsections (a) and (b) of Section 201 for any
24 amount of tax reported on a composite return and paid on his or
25 her behalf under this subsection (f). Residents (other than
26 persons transacting an insurance business organized under a

 

 

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1 Lloyds plan of operation) may claim a credit for taxes reported
2 on a composite return and paid on their behalf under this
3 subsection (f) only as permitted by the Department by rule.
4     (f-5) For taxable years ending on or after December 31,
5 2008, the Department may adopt rules to provide that, when a
6 partnership or Subchapter S corporation has made an error in
7 determining the amount of any item of income, deduction,
8 addition, subtraction, or credit required to be reported on its
9 return that affects the liability imposed under this Act on a
10 partner or shareholder, the partnership or Subchapter S
11 corporation may report the changes in liabilities of its
12 partners or shareholders and claim a refund of the resulting
13 overpayments, or pay the resulting underpayments, on behalf of
14 its partners and shareholders.
15     (g) The Department may adopt rules to authorize the
16 electronic filing of any return required to be filed under this
17 Section.
18 (Source: P.A. 94-1074, eff. 12-26-06; 95-233, eff. 8-16-07.)
 
19     (35 ILCS 5/911.1)  (from Ch. 120, par. 9-911.1)
20     Sec. 911.1. If the Department withholds any refund due
21 under this Act because of any other liability to the State and
22 if the return for which such refund is due is a joint return
23 for a taxable year ending before December 31, 2009, the
24 taxpayer who jointly filed such return and who is not liable to
25 the State shall be entitled to that portion of the refund

 

 

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1 attributable to himself or herself.
2 (Source: P.A. 85-473.)
 
3     (35 ILCS 5/911.2)
4     Sec. 911.2. Refunds withheld; tax claims of other states.
5     (a) Definitions. In this Section the following terms have
6 the meanings indicated.
7     "Claimant state" means any state or the District of
8 Columbia that requests the withholding of a refund pursuant to
9 this Section and that extends a like comity for the collection
10 of taxes owed to this State.
11     "Income tax" means any amount of income tax imposed on
12 taxpayers under the laws of the State of Illinois or the
13 claimant state, including additions to tax for penalties and
14 interest.
15     "Refund" means a refund of overpaid income taxes imposed by
16 the State of Illinois or the claimant state.
17     "Tax officer" means a unit or official of the claimant
18 state, or the duly authorized agent of that unit or official,
19 charged with the imposition, assessment, or collection of state
20 income taxes.
21     "Taxpayer" means any individual person identified by a
22 claimant state under this Section as owing taxes to that
23 claimant state, and in the case of a refund arising from the
24 filing of a joint return, the taxpayer's spouse.
25     (b) In general. Except as provided in subsection (c) of

 

 

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1 this Section, a tax officer may:
2         (1) certify to the Director the existence of a
3     taxpayer's delinquent income tax liability; and
4         (2) request the Director to withhold any refund to
5     which the taxpayer is entitled.
6     (c) Comity. A tax officer may not certify or request the
7 Director to withhold a refund unless the laws of the claimant
8 state:
9         (1) allow the Director to certify an income tax
10     liability;
11         (2) allow the Director to request the tax officer to
12     withhold the taxpayer's tax refund; and
13         (3) provide for the payment of the refund to the State
14     of Illinois.
15     (d) Certification. A certification by a tax officer to the
16 Director shall include:
17         (1) the full name and address of the taxpayer and any
18     other names known to be used by the taxpayer;
19         (2) the social security number or federal tax
20     identification number of the taxpayer;
21         (3) the amount of the income tax liability; and
22         (4) a statement that all administrative and judicial
23     remedies and appeals have been exhausted or have lapsed and
24     that the assessment of tax, interest, and penalty has
25     become final.
26     (e) Notification. As to any taxpayer due a refund, the

 

 

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1 Director shall:
2         (1) notify the taxpayer that a claimant state has
3     provided certification of the existence of an income tax
4     liability;
5         (2) inform the taxpayer of the tax liability certified,
6     including a detailed statement for each taxable year
7     showing tax, interest, and penalty;
8         (3) inform the taxpayer that failure to file a protest
9     in accordance with subsection (f) of this Section shall
10     constitute a waiver of any demand against this State for
11     the amount certified;
12         (3.5) inform the taxpayer that the refund has been
13     withheld and that the tax liability has been paid to the
14     claimant state as provided in subsection (i) of this
15     Section;
16         (4) provide the taxpayer with notice of an opportunity
17     to request a hearing to challenge the certification; and
18         (5) inform the taxpayer that the hearing may be
19     requested (i) pursuant to Section 910 of this Act, or (ii)
20     with the tax officer, in accordance with the laws of the
21     claimant state.
22     (f) Protest of withholding. A taxpayer may protest the
23 withholding of a refund pursuant to Section 910 of this Act
24 (except that the protest shall be filed within 30 days after
25 the date of the Director's notice of certification pursuant to
26 subsection (e) of this Section).

 

 

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1     (g) Certification as prima facie evidence. If the taxpayer
2 requests a hearing pursuant to Section 910 of this Act, the
3 certification of the tax officer shall be prima facie evidence
4 of the correctness of the taxpayer's delinquent income tax
5 liability to the certifying state.
6     (h) Rights of spouses to refunds from joint returns. If a
7 certification is based upon the tax debt of only one taxpayer
8 and if the refund is based upon a joint personal income tax
9 return for a taxable year ending before December 31, 2009, the
10 nondebtor spouse shall have the right to:
11         (1) notification, as provided in subsection (e) of this
12     Section;
13         (2) protest, as to the withholding of such spouse's
14     share of the refund, as provided in subsection (f) of this
15     Section; and
16         (3) payment of his or her share of the refund, provided
17     the amount of the overpayment refunded to the spouse shall
18     not exceed the amount of the joint overpayment.
19     (i) Withholding and payment of refund. Upon receipt of a
20 request for withholding in accordance with subsection (b) of
21 this Section, the Director shall:
22         (1) withhold any refund that is certified by the tax
23     officer;
24         (2) pay to the claimant state the entire refund or the
25     amount certified, whichever is less;
26         (3) pay any refund in excess of the amount certified to

 

 

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1     the taxpayer; and
2         (4) if a refund is less than the amount certified,
3     withhold amounts from subsequent refunds due the taxpayer,
4     if the laws of the claimant state provide that the claimant
5     state shall withhold subsequent refunds of taxpayers
6     certified to that state by the Director.
7     (j) Determination that withholding cannot be made. After
8 receiving a certification from a tax officer, the Director
9 shall notify the claimant state if the Director determines that
10 a withholding cannot be made.
11     (k) Director's authority. The Director shall have the
12 authority to enter into agreements with the tax officers of
13 claimant state relating to:
14         (1) procedures and methods to be employed by a claimant
15     state with respect to the operation of this Section;
16         (2) safeguards against the disclosure or inappropriate
17     use of any information obtained or maintained pursuant to
18     this Section that identifies, directly or indirectly, a
19     particular taxpayer;
20         (3) a minimum tax debt, amounts below which, in light
21     of administrative expenses and efficiency, shall, in the
22     Director's discretion, not be subject to the withholding
23     procedures set forth in this Section.
24     (l) Remedy not exclusive. The collection procedures
25 prescribed by this Section are in addition to, and not in
26 substitution for, any other remedy available by law.

 

 

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1 (Source: P.A. 92-492, eff. 1-1-02; 92-826, eff. 8-21-02.)
 
2     Section 15. The Use Tax Act is amended by changing Section
3 10 as follows:
 
4     (35 ILCS 105/10)  (from Ch. 120, par. 439.10)
5     Sec. 10. Except as to motor vehicles, aircraft, watercraft,
6 and trailers, and except as to cigarettes as defined in the
7 Cigarette Use Tax, when tangible personal property is purchased
8 from a retailer for use in this State by a purchaser who did
9 not pay the tax imposed by this Act to the retailer, and who
10 does not file returns with the Department as a retailer under
11 Section 9 of this Act, such purchaser (by the last day of the
12 month following the calendar month in which such purchaser
13 makes any payment upon the selling price of such property)
14 shall, except as provided in this Section, file a return with
15 the Department and pay the tax upon that portion of the selling
16 price so paid by the purchaser during the preceding calendar
17 month. When tangible personal property, including but not
18 limited to motor vehicles and aircraft, is purchased by a
19 lessor, under a lease for one year or longer, executed or in
20 effect at the time of purchase to an interstate carrier for
21 hire, who did not pay the tax imposed by this Act to the
22 retailer, such lessor (by the last day of the month following
23 the calendar month in which such property reverts to the use of
24 such lessor) shall file a return with the Department and pay

 

 

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1 the tax upon the fair market value of such property on the date
2 of such reversion. However, in determining the fair market
3 value at the time of reversion, the fair market value of such
4 property shall not exceed the original purchase price of the
5 property that was paid by the lessor at the time of purchase.
6 Such return shall be filed on a form prescribed by the
7 Department and shall contain such information as the Department
8 may reasonably require. Such return and payment from the
9 purchaser shall be submitted to the Department sooner than the
10 last day of the month after the month in which the purchase is
11 made to the extent that that may be necessary in order to
12 secure the title to a motor vehicle or the certificate of
13 registration for an aircraft. However, except as to motor
14 vehicles and aircraft, and except as to cigarettes as defined
15 in the Cigarette Use Tax Act, if the purchaser's annual use tax
16 liability does not exceed $600, the purchaser may file the
17 return on an annual basis on or before April 15th of the year
18 following the year use tax liability was incurred.
19     If cigarettes, as defined in the Cigarette Use Tax Act, are
20 purchased from a retailer for use in this State by a purchaser
21 who did not pay the tax imposed by this Act to the retailer,
22 and who does not file returns with the Department as a retailer
23 under Section 9 of this Act, such purchaser must, within 30
24 days after acquiring the cigarettes, file a return with the
25 Department and pay the tax upon that portion of the selling
26 price so paid by the purchaser for the cigarettes.

 

 

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1     In addition with respect to motor vehicles, aircraft,
2 watercraft, and trailers, a purchaser of such tangible personal
3 property for use in this State, who purchases such tangible
4 personal property from an out-of-state retailer, shall file
5 with the Department, upon a form to be prescribed and supplied
6 by the Department, a return for each such item of tangible
7 personal property purchased, except that if, in the same
8 transaction, (i) a purchaser of motor vehicles, aircraft,
9 watercraft, or trailers who is a retailer of motor vehicles,
10 aircraft, watercraft, or trailers purchases more than one motor
11 vehicle, aircraft, watercraft, or trailer for the purpose of
12 resale or (ii) a purchaser of motor vehicles, aircraft,
13 watercraft, or trailers purchases more than one motor vehicle,
14 aircraft, watercraft, or trailer for use as qualifying rolling
15 stock as provided in Section 3-55 of this Act, then the
16 purchaser may report the purchase of all motor vehicles,
17 aircraft, watercraft, or trailers involved in that transaction
18 to the Department on a single return prescribed by the
19 Department. Such return in the case of motor vehicles and
20 aircraft must show the name and address of the seller, the
21 name, address of purchaser, the amount of the selling price
22 including the amount allowed by the retailer for traded in
23 property, if any; the amount allowed by the retailer for the
24 traded-in tangible personal property, if any, to the extent to
25 which Section 2 of this Act allows an exemption for the value
26 of traded-in property; the balance payable after deducting such

 

 

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1 trade-in allowance from the total selling price; the amount of
2 tax due from the purchaser with respect to such transaction;
3 the amount of tax collected from the purchaser by the retailer
4 on such transaction (or satisfactory evidence that such tax is
5 not due in that particular instance if that is claimed to be
6 the fact); the place and date of the sale, a sufficient
7 identification of the property sold, and such other information
8 as the Department may reasonably require.
9     Such return shall be filed not later than 30 days after
10 such motor vehicle or aircraft is brought into this State for
11 use.
12     For purposes of this Section, "watercraft" means a Class 2,
13 Class 3, or Class 4 watercraft as defined in Section 3-2 of the
14 Boat Registration and Safety Act, a personal watercraft, or any
15 boat equipped with an inboard motor.
16     The return and tax remittance or proof of exemption from
17 the tax that is imposed by this Act may be transmitted to the
18 Department by way of the State agency with which, or State
19 officer with whom, the tangible personal property must be
20 titled or registered (if titling or registration is required)
21 if the Department and such agency or State officer determine
22 that this procedure will expedite the processing of
23 applications for title or registration.
24     With each such return, the purchaser shall remit the proper
25 amount of tax due (or shall submit satisfactory evidence that
26 the sale is not taxable if that is the case), to the Department

 

 

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1 or its agents, whereupon the Department shall issue, in the
2 purchaser's name, a tax receipt (or a certificate of exemption
3 if the Department is satisfied that the particular sale is tax
4 exempt) which such purchaser may submit to the agency with
5 which, or State officer with whom, he must title or register
6 the tangible personal property that is involved (if titling or
7 registration is required) in support of such purchaser's
8 application for an Illinois certificate or other evidence of
9 title or registration to such tangible personal property.
10     When a purchaser pays a tax imposed by this Act directly to
11 the Department, the Department (upon request therefor from such
12 purchaser) shall issue an appropriate receipt to such purchaser
13 showing that he has paid such tax to the Department. Such
14 receipt shall be sufficient to relieve the purchaser from
15 further liability for the tax to which such receipt may refer.
16     A user who is liable to pay use tax directly to the
17 Department only occasionally and not on a frequently recurring
18 basis, and who is not required to file returns with the
19 Department as a retailer under Section 9 of this Act, or under
20 the "Retailers' Occupation Tax Act", or as a registrant with
21 the Department under the "Service Occupation Tax Act" or the
22 "Service Use Tax Act", need not register with the Department.
23 However, if such a user has a frequently recurring direct use
24 tax liability to pay to the Department, such user shall be
25 required to register with the Department on forms prescribed by
26 the Department and to obtain and display a certificate of

 

 

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1 registration from the Department. In that event, all of the
2 provisions of Section 9 of this Act concerning the filing of
3 regular monthly, quarterly or annual tax returns and all of the
4 provisions of Section 2a of the "Retailers' Occupation Tax Act"
5 concerning the requirements for registrants to post bond or
6 other security with the Department, as the provisions of such
7 sections now exist or may hereafter be amended, shall apply to
8 such users to the same extent as if such provisions were
9 included herein.
10 (Source: P.A. 91-541, eff. 8-13-99; 91-901, eff. 1-1-01.)
 
11     Section 20. The Environmental Protection Act is amended by
12 changing Sections 55.8 and 55.10 as follows:
 
13     (415 ILCS 5/55.8)  (from Ch. 111 1/2, par. 1055.8)
14     Sec. 55.8. Tire retailers.
15     (a) Any person selling new or used tires at retail or
16 offering new or used tires for retail sale in this State shall:
17         (1) beginning on June 20, 2003 (the effective date of
18     Public Act 93-32), collect from retail customers a fee of
19     $2 per new or used tire sold and delivered in this State,
20     to be paid to the Department of Revenue and deposited into
21     the Used Tire Management Fund, less a collection allowance
22     of 10 cents per tire to be retained by the retail seller
23     and a collection allowance of 10 cents per tire to be
24     retained by the Department of Revenue and paid into the

 

 

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1     General Revenue Fund; the collection allowance for retail
2     sellers, however, shall be allowed only if the return is
3     filed timely and only for the amount that is paid timely in
4     accordance with this Title XIV;
5         (1.5) beginning on July 1, 2003, collect from retail
6     customers an additional 50 cents per new or used tire sold
7     and delivered in this State; the money collected from this
8     fee shall be deposited into the Emergency Public Health
9     Fund;
10         (2) accept for recycling used tires from customers, at
11     the point of transfer, in a quantity equal to the number of
12     new tires purchased; and
13         (3) post in a conspicuous place a written notice at
14     least 8.5 by 11 inches in size that includes the universal
15     recycling symbol and the following statements: "DO NOT put
16     used tires in the trash."; "Recycle your used tires."; and
17     "State law requires us to accept used tires for recycling,
18     in exchange for new tires purchased.".
19     (b) A person who accepts used tires for recycling under
20 subsection (a) shall not allow the tires to accumulate for
21 periods of more than 90 days.
22     (c) The requirements of subsection (a) of this Section do
23 not apply to mail order sales nor shall the retail sale of a
24 motor vehicle be considered to be the sale of tires at retail
25 or offering of tires for retail sale. Instead of filing
26 returns, retailers of tires may remit the tire user fee of

 

 

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1 $1.00 per tire to their suppliers of tires if the supplier of
2 tires is a registered retailer of tires and agrees or otherwise
3 arranges to collect and remit the tire fee to the Department of
4 Revenue, notwithstanding the fact that the sale of the tire is
5 a sale for resale and not a sale at retail. A tire supplier who
6 enters into such an arrangement with a tire retailer shall be
7 liable for the tax on all tires sold to the tire retailer and
8 must (i) provide the tire retailer with a receipt that
9 separately reflects the tire tax collected from the retailer on
10 each transaction and (ii) accept used tires for recycling from
11 the retailer's customers. The tire supplier shall be entitled
12 to the collection allowance of 10 cents per tire.
13     The retailer of the tires must maintain in its books and
14 records evidence that the appropriate fee was paid to the tire
15 supplier and that the tire supplier has agreed to remit the fee
16 to the Department of Revenue for each tire sold by the
17 retailer. Otherwise, the tire retailer shall be directly liable
18 for the fee on all tires sold at retail. Tire retailers paying
19 the fee to their suppliers are not entitled to the collection
20 allowance of 10 cents per tire.
21     (d) The requirements of subsection (a) of this Section
22 shall apply exclusively to tires to be used for vehicles
23 defined in Section 1-217 of the Illinois Vehicle Code, aircraft
24 tires, special mobile equipment, and implements of husbandry.
25     (e) The requirements of paragraph (1) of subsection (a) do
26 not apply to the sale of reprocessed tires. For purposes of

 

 

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1 this Section, "reprocessed tire" means a used tire that has
2 been recapped, retreaded, or regrooved and that has not been
3 placed on a vehicle wheel rim.
4 (Source: P.A. 95-49, eff. 8-10-07; 95-331, eff. 8-21-07;
5 95-876, eff. 8-21-08.)
 
6     (415 ILCS 5/55.10)  (from Ch. 111 1/2, par. 1055.10)
7     Sec. 55.10. Tax returns by retailer.
8     (a) Except as otherwise provided in this Section, for
9 returns due on or before January 31, 2010, each Each retailer
10 of tires maintaining a place of business in this State shall
11 make a return to the Department of Revenue on a quarter annual
12 basis, with the return for January, February and March of a
13 given year being due by April 30 of that year; with the return
14 for April, May and June of a given year being due by July 31 of
15 that year; with the return for July, August and September of a
16 given year being due by October 31 of that year; and with the
17 return for October, November and December of a given year being
18 due by January 31 of the following year.
19     For returns due after January 31, 2010, each retailer of
20 tires maintaining a place of business in this State shall make
21 a return to the Department of Revenue on a quarter annual
22 basis, with the return for January, February, and March of a
23 given year being due by April 20 of that year; with the return
24 for April, May, and June of a given year being due by July 20 of
25 that year; with the return for July, August, and September of a

 

 

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1 given year being due by October 20 of that year; and with the
2 return for October, November, and December of a given year
3 being due by January 20 of the following year.
4     Notwithstanding any other provision of this Section to the
5 contrary, the return for October, November, and December of
6 2009 is due by February 20, 2010.
7     (b) Each return made to the Department of Revenue shall
8 state:
9         (1) the name of the retailer;
10         (2) the address of the retailer's principal place of
11     business, and the address of the principal place of
12     business (if that is a different address) from which the
13     retailer engages in the business of making retail sales of
14     tires;
15         (3) total number of tires sold at retail for the
16     preceding calendar quarter;
17         (4) the amount of tax due; and
18         (5) such other reasonable information as the
19     Department of Revenue may require.
20     Notwithstanding any other provision of this Act concerning
21 the time within which a retailer may file his return, in the
22 case of any retailer who ceases to engage in the retail sale of
23 tires, the retailer shall file a final return under this Act
24 with the Department of Revenue not more than one month after
25 discontinuing that business.
26 (Source: P.A. 87-727.)
 

 

 

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1     Section 99. Effective date. This Act takes effect upon
2 becoming law.