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

 

 

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22         withdrawn by the taxpayer in the taxable year from a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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1                     (a) the person during the same taxable
2                 year paid, accrued, or incurred, the
3                 intangible expense or cost to a person that is
4                 not a related member, and
5                     (b) the transaction giving rise to the
6                 intangible expense or cost between the
7                 taxpayer and the person did not have as a
8                 principal purpose the avoidance of Illinois
9                 income tax, and is paid pursuant to a contract
10                 or agreement that reflects arm's-length terms;
11                 or
12                 (iii) any item of intangible expense or cost
13             paid, accrued, or incurred, directly or
14             indirectly, from a transaction with a person if the
15             taxpayer establishes by clear and convincing
16             evidence, that the adjustments are unreasonable;
17             or if the taxpayer and the Director agree in
18             writing to the application or use of an alternative
19             method 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             (D-19) For taxable years ending on or after
4         December 31, 2008, an amount equal to the amount of
5         insurance premium expenses and costs otherwise allowed
6         as a deduction in computing base income, and that were
7         paid, accrued, or incurred, directly or indirectly, to
8         a person who would be a member of the same unitary
9         business group but for the fact that the person is
10         prohibited under Section 1501(a)(27) from being
11         included in the unitary business group because he or
12         she is ordinarily required to apportion business
13         income under different subsections of Section 304. The
14         addition modification required by this subparagraph
15         shall be reduced to the extent that dividends were
16         included in base income of the unitary group for the
17         same taxable year and received by the taxpayer or by a
18         member of the taxpayer's unitary business group
19         (including amounts included in gross income under
20         Sections 951 through 964 of the Internal Revenue Code
21         and amounts included in gross income under Section 78
22         of the Internal Revenue Code) with respect to the stock
23         of the same person to whom the premiums and costs were
24         directly or indirectly paid, incurred, or accrued. The
25         preceding sentence does not apply to the extent that
26         the same dividends caused a reduction to the addition

 

 

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1         modification required under Section 203(a)(2)(D-17) or
2         Section 203(a)(2)(D-18) of this Act.
3             (D-20) For taxable years beginning on or after
4         January 1, 2002 and ending on or before December 31,
5         2006, in the case of a distribution from a qualified
6         tuition program under Section 529 of the Internal
7         Revenue Code, other than (i) a distribution from a
8         College Savings Pool created under Section 16.5 of the
9         State Treasurer Act or (ii) a distribution from the
10         Illinois Prepaid Tuition Trust Fund, an amount equal to
11         the amount excluded from gross income under Section
12         529(c)(3)(B). For taxable years beginning on or after
13         January 1, 2007, in the case of a distribution from a
14         qualified tuition program under Section 529 of the
15         Internal Revenue Code, other than (i) a distribution
16         from a College Savings Pool created under Section 16.5
17         of the State Treasurer Act, (ii) a distribution from
18         the Illinois Prepaid Tuition Trust Fund, or (iii) a
19         distribution from a qualified tuition program under
20         Section 529 of the Internal Revenue Code that (I)
21         adopts and determines that its offering materials
22         comply with the College Savings Plans Network's
23         disclosure principles and (II) has made reasonable
24         efforts to inform in-state residents of the existence
25         of in-state qualified tuition programs by informing
26         Illinois residents directly and, where applicable, to

 

 

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1         inform financial intermediaries distributing the
2         program to inform in-state residents of the existence
3         of in-state qualified tuition programs at least
4         annually, an amount equal to the amount excluded from
5         gross income under Section 529(c)(3)(B).
6             For the purposes of this subparagraph (D-20), a
7         qualified tuition program has made reasonable efforts
8         if it makes disclosures (which may use the term
9         "in-state program" or "in-state plan" and need not
10         specifically refer to Illinois or its qualified
11         programs by name) (i) directly to prospective
12         participants in its offering materials or makes a
13         public disclosure, such as a website posting; and (ii)
14         where applicable, to intermediaries selling the
15         out-of-state program in the same manner that the
16         out-of-state program distributes its offering
17         materials;
18             (D-21) For taxable years beginning on or after
19         January 1, 2007, in the case of transfer of moneys from
20         a qualified tuition program under Section 529 of the
21         Internal Revenue Code that is administered by the State
22         to an out-of-state program, an amount equal to the
23         amount of moneys previously deducted from base income
24         under subsection (a)(2)(Y) of this Section; .
25             (D-22) For taxable years beginning on or after
26         January 1, 2009, in the case of a nonqualified

 

 

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1         withdrawal or refund of moneys from a qualified tuition
2         program under Section 529 of the Internal Revenue Code
3         administered by the State that is not used for
4         qualified expenses at an eligible education
5         institution, an amount equal to the contribution
6         component of the nonqualified withdrawal or refund
7         that was previously deducted from base income under
8         subsection (a)(2)(y) of this Section, provided that
9         the withdrawal or refund did not result from the
10         beneficiary's death or disability.
11     and by deducting from the total so obtained the sum of the
12     following amounts:
13             (E) For taxable years ending before December 31,
14         2001, any amount included in such total in respect of
15         any compensation (including but not limited to any
16         compensation paid or accrued to a serviceman while a
17         prisoner of war or missing in action) paid to a
18         resident by reason of being on active duty in the Armed
19         Forces of the United States and in respect of any
20         compensation paid or accrued to a resident who as a
21         governmental employee was a prisoner of war or missing
22         in action, and in respect of any compensation paid to a
23         resident in 1971 or thereafter for annual training
24         performed pursuant to Sections 502 and 503, Title 32,
25         United States Code as a member of the Illinois National
26         Guard or, beginning with taxable years ending on or

 

 

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1         after December 31, 2007, the National Guard of any
2         other state. For taxable years ending on or after
3         December 31, 2001, any amount included in such total in
4         respect of any compensation (including but not limited
5         to any compensation paid or accrued to a serviceman
6         while a prisoner of war or missing in action) paid to a
7         resident by reason of being a member of any component
8         of the Armed Forces of the United States and in respect
9         of any compensation paid or accrued to a resident who
10         as a governmental employee was a prisoner of war or
11         missing in action, and in respect of any compensation
12         paid to a resident in 2001 or thereafter by reason of
13         being a member of the Illinois National Guard or,
14         beginning with taxable years ending on or after
15         December 31, 2007, the National Guard of any other
16         state. The provisions of this amendatory Act of the
17         92nd General Assembly are exempt from the provisions of
18         Section 250;
19             (F) An amount equal to all amounts included in such
20         total pursuant to the provisions of Sections 402(a),
21         402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the
22         Internal Revenue Code, or included in such total as
23         distributions under the provisions of any retirement
24         or disability plan for employees of any governmental
25         agency or unit, or retirement payments to retired
26         partners, which payments are excluded in computing net

 

 

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1         earnings from self employment by Section 1402 of the
2         Internal Revenue Code and regulations adopted pursuant
3         thereto;
4             (G) The valuation limitation amount;
5             (H) An amount equal to the amount of any tax
6         imposed by this Act which was refunded to the taxpayer
7         and included in such total for the taxable year;
8             (I) An amount equal to all amounts included in such
9         total pursuant to the provisions of Section 111 of the
10         Internal Revenue Code as a recovery of items previously
11         deducted from adjusted gross income in the computation
12         of taxable income;
13             (J) An amount equal to those dividends included in
14         such total which were paid by a corporation which
15         conducts business operations in an Enterprise Zone or
16         zones created under the Illinois Enterprise Zone Act or
17         a River Edge Redevelopment Zone or zones created under
18         the River Edge Redevelopment Zone Act, and conducts
19         substantially all of its operations in an Enterprise
20         Zone or zones or a River Edge Redevelopment Zone or
21         zones. This subparagraph (J) is exempt from the
22         provisions of Section 250;
23             (K) 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 (J) of paragraph (2) of this subsection
4         shall not be eligible for the deduction provided under
5         this subparagraph (K);
6             (L) For taxable years ending after December 31,
7         1983, an amount equal to all social security benefits
8         and railroad retirement benefits included in such
9         total pursuant to Sections 72(r) and 86 of the Internal
10         Revenue Code;
11             (M) With the exception of any amounts subtracted
12         under subparagraph (N), an amount equal to the sum of
13         all amounts disallowed as deductions by (i) Sections
14         171(a) (2), and 265(2) of the Internal Revenue Code of
15         1954, as now or hereafter amended, and all amounts of
16         expenses allocable to interest and disallowed as
17         deductions by Section 265(1) of the Internal Revenue
18         Code of 1954, as now or hereafter amended; and (ii) for
19         taxable years ending on or after August 13, 1999,
20         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
21         the Internal Revenue Code; the provisions of this
22         subparagraph are exempt from the provisions of Section
23         250;
24             (N) An amount equal to all amounts included in such
25         total which are exempt from taxation by this State
26         either by reason of its statutes or Constitution or by

 

 

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1         reason of the Constitution, treaties or statutes of the
2         United States; provided that, in the case of any
3         statute of this State that exempts income derived from
4         bonds or other obligations from the tax imposed under
5         this Act, the amount exempted shall be the interest net
6         of bond premium amortization;
7             (O) An amount equal to any contribution made to a
8         job training project established pursuant to the Tax
9         Increment Allocation Redevelopment Act;
10             (P) An amount equal to the amount of the deduction
11         used to compute the federal income tax credit for
12         restoration of substantial amounts held under claim of
13         right for the taxable year pursuant to Section 1341 of
14         the Internal Revenue Code of 1986;
15             (Q) An amount equal to any amounts included in such
16         total, received by the taxpayer as an acceleration in
17         the payment of life, endowment or annuity benefits in
18         advance of the time they would otherwise be payable as
19         an indemnity for a terminal illness;
20             (R) An amount equal to the amount of any federal or
21         State bonus paid to veterans of the Persian Gulf War;
22             (S) An amount, to the extent included in adjusted
23         gross income, equal to the amount of a contribution
24         made in the taxable year on behalf of the taxpayer to a
25         medical care savings account established under the
26         Medical Care Savings Account Act or the Medical Care

 

 

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

 

 

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

 

 

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

 

 

SB0081 Engrossed - 21 - LRB096 01733 HLH 11742 b

1         this paragraph in gross income for federal income tax
2         purposes. This paragraph is exempt from the provisions
3         of Section 250;
4             (Y) For taxable years beginning on or after January
5         1, 2002 and ending on or before December 31, 2004,
6         moneys contributed in the taxable year to a College
7         Savings Pool account under Section 16.5 of the State
8         Treasurer Act, except that amounts excluded from gross
9         income under Section 529(c)(3)(C)(i) of the Internal
10         Revenue Code shall not be considered moneys
11         contributed under this subparagraph (Y). For taxable
12         years beginning on or after January 1, 2005, a maximum
13         of $10,000 contributed in the taxable year to (i) a
14         College Savings Pool account under Section 16.5 of the
15         State Treasurer Act or (ii) the Illinois Prepaid
16         Tuition Trust Fund, except that amounts excluded from
17         gross income under Section 529(c)(3)(C)(i) of the
18         Internal Revenue Code shall not be considered moneys
19         contributed under this subparagraph (Y). This
20         subparagraph (Y) is exempt from the provisions of
21         Section 250;
22             (Z) For taxable years 2001 and thereafter, for the
23         taxable year in which the bonus depreciation deduction
24         is taken on the taxpayer's federal income tax return
25         under subsection (k) of Section 168 of the Internal
26         Revenue Code and for each applicable taxable year

 

 

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

 

 

SB0081 Engrossed - 23 - LRB096 01733 HLH 11742 b

1         depreciation deduction taken on that property on the
2         taxpayer's federal income tax return under subsection
3         (k) of Section 168 of the Internal Revenue Code. This
4         subparagraph (Z) is exempt from the provisions of
5         Section 250;
6             (AA) If the taxpayer sells, transfers, abandons,
7         or otherwise disposes of property for which the
8         taxpayer was required in any taxable year to make an
9         addition modification under subparagraph (D-15), then
10         an amount equal to that addition modification.
11             If the taxpayer continues to own property through
12         the last day of the last tax year for which the
13         taxpayer may claim a depreciation deduction for
14         federal income tax purposes and for which the taxpayer
15         was required in any taxable year to make an addition
16         modification under subparagraph (D-15), then an amount
17         equal to that addition modification.
18             The taxpayer is allowed to take the deduction under
19         this subparagraph only once with respect to any one
20         piece of property.
21             This subparagraph (AA) is exempt from the
22         provisions of Section 250;
23             (BB) Any amount included in adjusted gross income,
24         other than salary, received by a driver in a
25         ridesharing arrangement using a motor vehicle;
26             (CC) The amount of (i) any interest income (net of

 

 

SB0081 Engrossed - 24 - LRB096 01733 HLH 11742 b

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

 

 

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

 

 

SB0081 Engrossed - 26 - LRB096 01733 HLH 11742 b

1         taxable year under Section 203(a)(2)(D-18) for
2         intangible expenses and costs paid, accrued, or
3         incurred, directly or indirectly, to the same foreign
4         person. This subparagraph (EE) is exempt from the
5         provisions of Section 250.
 
6     (b) Corporations.
7         (1) In general. In the case of a corporation, base
8     income means an amount equal to the taxpayer's taxable
9     income for the taxable year as modified by paragraph (2).
10         (2) Modifications. The taxable income referred to in
11     paragraph (1) shall be modified by adding thereto the sum
12     of the following amounts:
13             (A) An amount equal to all amounts paid or accrued
14         to the taxpayer as interest and all distributions
15         received from regulated investment companies during
16         the taxable year to the extent excluded from gross
17         income in the computation of taxable income;
18             (B) An amount equal to the amount of tax imposed by
19         this Act to the extent deducted from gross income in
20         the computation of taxable income for the taxable year;
21             (C) In the case of a regulated investment company,
22         an amount equal to the excess of (i) the net long-term
23         capital gain for the taxable year, over (ii) the amount
24         of the capital gain dividends designated as such in
25         accordance with Section 852(b)(3)(C) of the Internal

 

 

SB0081 Engrossed - 27 - LRB096 01733 HLH 11742 b

1         Revenue Code and any amount designated under Section
2         852(b)(3)(D) of the Internal Revenue Code,
3         attributable to the taxable year (this amendatory Act
4         of 1995 (Public Act 89-89) is declarative of existing
5         law and is not a new enactment);
6             (D) The amount of any net operating loss deduction
7         taken in arriving at taxable income, other than a net
8         operating loss carried forward from a taxable year
9         ending prior to December 31, 1986;
10             (E) For taxable years in which a net operating loss
11         carryback or carryforward from a taxable year ending
12         prior to December 31, 1986 is an element of taxable
13         income under paragraph (1) of subsection (e) or
14         subparagraph (E) of paragraph (2) of subsection (e),
15         the amount by which addition modifications other than
16         those provided by this subparagraph (E) exceeded
17         subtraction modifications in such earlier taxable
18         year, with the following limitations applied in the
19         order that they are listed:
20                 (i) the addition modification relating to the
21             net operating loss carried back or forward to the
22             taxable year from any taxable year ending prior to
23             December 31, 1986 shall be reduced by the amount of
24             addition modification under this subparagraph (E)
25             which related to that net operating loss and which
26             was taken into account in calculating the base

 

 

SB0081 Engrossed - 28 - LRB096 01733 HLH 11742 b

1             income of an earlier taxable year, and
2                 (ii) the addition modification relating to the
3             net operating loss carried back or forward to the
4             taxable year from any taxable year ending prior to
5             December 31, 1986 shall not exceed the amount of
6             such carryback or carryforward;
7             For taxable years in which there is a net operating
8         loss carryback or carryforward from more than one other
9         taxable year ending prior to December 31, 1986, the
10         addition modification provided in this subparagraph
11         (E) shall be the sum of the amounts computed
12         independently under the preceding provisions of this
13         subparagraph (E) for each such taxable year;
14             (E-5) For taxable years ending after December 31,
15         1997, an amount equal to any eligible remediation costs
16         that the corporation deducted in computing adjusted
17         gross income and for which the corporation claims a
18         credit under subsection (l) of Section 201;
19             (E-10) For taxable years 2001 and thereafter, an
20         amount equal to the bonus depreciation deduction taken
21         on the taxpayer's federal income tax return for the
22         taxable year under subsection (k) of Section 168 of the
23         Internal Revenue Code;
24             (E-11) If the taxpayer sells, transfers, abandons,
25         or otherwise disposes of property for which the
26         taxpayer was required in any taxable year to make an

 

 

SB0081 Engrossed - 29 - LRB096 01733 HLH 11742 b

1         addition modification under subparagraph (E-10), then
2         an amount equal to the aggregate amount of the
3         deductions taken in all taxable years under
4         subparagraph (T) with respect to that property.
5             If the taxpayer continues to own property through
6         the last day of the last tax year for which the
7         taxpayer may claim a depreciation deduction for
8         federal income tax purposes and for which the taxpayer
9         was allowed in any taxable year to make a subtraction
10         modification under subparagraph (T), then an amount
11         equal to that subtraction modification.
12             The taxpayer is required to make the addition
13         modification under this subparagraph only once with
14         respect to any one piece of property;
15             (E-12) An amount equal to the amount otherwise
16         allowed as a deduction in computing base income for
17         interest paid, accrued, or incurred, directly or
18         indirectly, (i) for taxable years ending on or after
19         December 31, 2004, to a foreign person who would be a
20         member of the same unitary business group but for the
21         fact the foreign person's business activity outside
22         the United States is 80% or more of the foreign
23         person's total business activity and (ii) for taxable
24         years ending on or after December 31, 2008, to a person
25         who would be a member of the same unitary business
26         group but for the fact that the person is prohibited

 

 

SB0081 Engrossed - 30 - LRB096 01733 HLH 11742 b

1         under Section 1501(a)(27) from being included in the
2         unitary business group because he or she is ordinarily
3         required to apportion business income under different
4         subsections of Section 304. The addition modification
5         required by this subparagraph shall be reduced to the
6         extent that dividends were included in base income of
7         the unitary group for the same taxable year and
8         received by the taxpayer or by a member of the
9         taxpayer's unitary business group (including amounts
10         included in gross income pursuant to Sections 951
11         through 964 of the Internal Revenue Code and amounts
12         included in gross income under Section 78 of the
13         Internal Revenue Code) with respect to the stock of the
14         same person to whom the interest was paid, accrued, or
15         incurred.
16             This paragraph shall not apply to the following:
17                 (i) an item of interest paid, accrued, or
18             incurred, directly or indirectly, to a person who
19             is subject in a foreign country or state, other
20             than a state which requires mandatory unitary
21             reporting, to a tax on or measured by net income
22             with respect to such interest; or
23                 (ii) an item of interest paid, accrued, or
24             incurred, directly or indirectly, to a person if
25             the taxpayer can establish, based on a
26             preponderance of the evidence, both of the

 

 

SB0081 Engrossed - 31 - LRB096 01733 HLH 11742 b

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

 

 

SB0081 Engrossed - 32 - LRB096 01733 HLH 11742 b

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

 

 

SB0081 Engrossed - 33 - LRB096 01733 HLH 11742 b

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

 

 

SB0081 Engrossed - 34 - LRB096 01733 HLH 11742 b

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

 

 

SB0081 Engrossed - 35 - LRB096 01733 HLH 11742 b

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

 

 

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1         addition modification required by this subparagraph
2         shall be reduced to the extent that dividends were
3         included in base income of the unitary group for the
4         same taxable year and received by the taxpayer or by a
5         member of the taxpayer's unitary business group
6         (including amounts included in gross income under
7         Sections 951 through 964 of the Internal Revenue Code
8         and amounts included in gross income under Section 78
9         of the Internal Revenue Code) with respect to the stock
10         of the same person to whom the premiums and costs were
11         directly or indirectly paid, incurred, or accrued. The
12         preceding sentence does not apply to the extent that
13         the same dividends caused a reduction to the addition
14         modification required under Section 203(b)(2)(E-12) or
15         Section 203(b)(2)(E-13) of this Act;
16             (E-15) For taxable years beginning after December
17         31, 2008, any deduction for dividends paid by a captive
18         real estate investment trust that is allowed to a real
19         estate investment trust under Section 857(b)(2)(B) of
20         the Internal Revenue Code for dividends paid;
21     and by deducting from the total so obtained the sum of the
22     following amounts:
23             (F) An amount equal to the amount of any tax
24         imposed by this Act which was refunded to the taxpayer
25         and included in such total for the taxable year;
26             (G) An amount equal to any amount included in such

 

 

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1         total under Section 78 of the Internal Revenue Code;
2             (H) In the case of a regulated investment company,
3         an amount equal to the amount of exempt interest
4         dividends as defined in subsection (b) (5) of Section
5         852 of the Internal Revenue Code, paid to shareholders
6         for the taxable year;
7             (I) With the exception of any amounts subtracted
8         under subparagraph (J), an amount equal to the sum of
9         all amounts disallowed as deductions by (i) Sections
10         171(a) (2), and 265(a)(2) and amounts disallowed as
11         interest expense by Section 291(a)(3) of the Internal
12         Revenue Code, as now or hereafter amended, and all
13         amounts of expenses allocable to interest and
14         disallowed as deductions by Section 265(a)(1) of the
15         Internal Revenue Code, as now or hereafter amended; and
16         (ii) for taxable years ending on or after August 13,
17         1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and
18         832(b)(5)(B)(i) of the Internal Revenue Code; the
19         provisions of this subparagraph are exempt from the
20         provisions of Section 250;
21             (J) An amount equal to all amounts included in such
22         total which are exempt from taxation by this State
23         either by reason of its statutes or Constitution or by
24         reason of the Constitution, treaties or statutes of the
25         United States; provided that, in the case of any
26         statute of this State that exempts income derived from

 

 

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1         bonds or other obligations from the tax imposed under
2         this Act, the amount exempted shall be the interest net
3         of bond premium amortization;
4             (K) An amount equal to those dividends included in
5         such total which were paid by a corporation which
6         conducts business operations in an Enterprise Zone or
7         zones created under the Illinois Enterprise Zone Act or
8         a River Edge Redevelopment Zone or zones created under
9         the River Edge Redevelopment Zone Act and conducts
10         substantially all of its operations in an Enterprise
11         Zone or zones or a River Edge Redevelopment Zone or
12         zones. This subparagraph (K) is exempt from the
13         provisions of Section 250;
14             (L) An amount equal to those dividends included in
15         such total that were paid by a corporation that
16         conducts business operations in a federally designated
17         Foreign Trade Zone or Sub-Zone and that is designated a
18         High Impact Business located in Illinois; provided
19         that dividends eligible for the deduction provided in
20         subparagraph (K) of paragraph 2 of this subsection
21         shall not be eligible for the deduction provided under
22         this subparagraph (L);
23             (M) For any taxpayer that is a financial
24         organization within the meaning of Section 304(c) of
25         this Act, an amount included in such total as interest
26         income from a loan or loans made by such taxpayer to a

 

 

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1         borrower, to the extent that such a loan is secured by
2         property which is eligible for the Enterprise Zone
3         Investment Credit or the River Edge Redevelopment Zone
4         Investment Credit. To determine the portion of a loan
5         or loans that is secured by property eligible for a
6         Section 201(f) investment credit to the borrower, the
7         entire principal amount of the loan or loans between
8         the taxpayer and the borrower should be divided into
9         the basis of the Section 201(f) investment credit
10         property which secures the loan or loans, using for
11         this purpose the original basis of such property on the
12         date that it was placed in service in the Enterprise
13         Zone or the River Edge Redevelopment Zone. The
14         subtraction modification available to taxpayer in any
15         year under this subsection shall be that portion of the
16         total interest paid by the borrower with respect to
17         such loan attributable to the eligible property as
18         calculated under the previous sentence. This
19         subparagraph (M) is exempt from the provisions of
20         Section 250;
21             (M-1) For any taxpayer that is a financial
22         organization within the meaning of Section 304(c) of
23         this Act, an amount included in such total as interest
24         income from a loan or loans made by such taxpayer to a
25         borrower, to the extent that such a loan is secured by
26         property which is eligible for the High Impact Business

 

 

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

 

 

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1         Section 11 of the Illinois Enterprise Zone Act or under
2         Section 10-10 of the River Edge Redevelopment Zone Act.
3         This subparagraph (N) is exempt from the provisions of
4         Section 250;
5             (O) An amount equal to: (i) 85% for taxable years
6         ending on or before December 31, 1992, or, a percentage
7         equal to the percentage allowable under Section
8         243(a)(1) of the Internal Revenue Code of 1986 for
9         taxable years ending after December 31, 1992, of the
10         amount by which dividends included in taxable income
11         and received from a corporation that is not created or
12         organized under the laws of the United States or any
13         state or political subdivision thereof, including, for
14         taxable years ending on or after December 31, 1988,
15         dividends received or deemed received or paid or deemed
16         paid under Sections 951 through 964 of the Internal
17         Revenue Code, exceed the amount of the modification
18         provided under subparagraph (G) of paragraph (2) of
19         this subsection (b) which is related to such dividends,
20         and including, for taxable years ending on or after
21         December 31, 2008, dividends received from a captive
22         real estate investment trust; plus (ii) 100% of the
23         amount by which dividends, included in taxable income
24         and received, including, for taxable years ending on or
25         after December 31, 1988, dividends received or deemed
26         received or paid or deemed paid under Sections 951

 

 

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1         through 964 of the Internal Revenue Code and including,
2         for taxable years ending on or after December 31, 2008,
3         dividends received from a captive real estate
4         investment trust, from any such corporation specified
5         in clause (i) that would but for the provisions of
6         Section 1504 (b) (3) of the Internal Revenue Code be
7         treated as a member of the affiliated group which
8         includes the dividend recipient, exceed the amount of
9         the modification provided under subparagraph (G) of
10         paragraph (2) of this subsection (b) which is related
11         to such dividends. This subparagraph (O) is exempt from
12         the provisions of Section 250 of this Act;
13             (P) An amount equal to any contribution made to a
14         job training project established pursuant to the Tax
15         Increment Allocation Redevelopment Act;
16             (Q) An amount equal to the amount of the deduction
17         used to compute the federal income tax credit for
18         restoration of substantial amounts held under claim of
19         right for the taxable year pursuant to Section 1341 of
20         the Internal Revenue Code of 1986;
21             (R) On and after July 20, 1999, in the case of an
22         attorney-in-fact with respect to whom an interinsurer
23         or a reciprocal insurer has made the election under
24         Section 835 of the Internal Revenue Code, 26 U.S.C.
25         835, an amount equal to the excess, if any, of the
26         amounts paid or incurred by that interinsurer or

 

 

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

 

 

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

 

 

SB0081 Engrossed - 45 - LRB096 01733 HLH 11742 b

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

 

 

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

 

 

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

 

 

SB0081 Engrossed - 48 - LRB096 01733 HLH 11742 b

1         addition modification required to be made for the same
2         taxable year under Section 203(b)(2)(E-13) for
3         intangible expenses and costs paid, accrued, or
4         incurred, directly or indirectly, to the same foreign
5         person. This subparagraph (X) is exempt from the
6         provisions of Section 250. (Y)
7         (3) Special rule. For purposes of paragraph (2) (A),
8     "gross income" in the case of a life insurance company, for
9     tax years ending on and after December 31, 1994, shall mean
10     the gross investment income for the taxable year.
 
11     (c) Trusts and estates.
12         (1) In general. In the case of a trust or estate, base
13     income means an amount equal to the taxpayer's taxable
14     income for the taxable year as modified by paragraph (2).
15         (2) Modifications. Subject to the provisions of
16     paragraph (3), the taxable income referred to in paragraph
17     (1) shall be modified by adding thereto the sum of the
18     following amounts:
19             (A) An amount equal to all amounts paid or accrued
20         to the taxpayer as interest or dividends during the
21         taxable year to the extent excluded from gross income
22         in the computation of taxable income;
23             (B) In the case of (i) an estate, $600; (ii) a
24         trust which, under its governing instrument, is
25         required to distribute all of its income currently,

 

 

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1         $300; and (iii) any other trust, $100, but in each such
2         case, only to the extent such amount was deducted in
3         the computation of taxable income;
4             (C) An amount equal to the amount of tax imposed by
5         this Act to the extent deducted from gross income in
6         the computation of taxable income for the taxable year;
7             (D) The amount of any net operating loss deduction
8         taken in arriving at taxable income, other than a net
9         operating loss carried forward from a taxable year
10         ending prior to December 31, 1986;
11             (E) For taxable years in which a net operating loss
12         carryback or carryforward from a taxable year ending
13         prior to December 31, 1986 is an element of taxable
14         income under paragraph (1) of subsection (e) or
15         subparagraph (E) of paragraph (2) of subsection (e),
16         the amount by which addition modifications other than
17         those provided by this subparagraph (E) exceeded
18         subtraction modifications in such taxable year, with
19         the following limitations applied in the order that
20         they are listed:
21                 (i) the addition modification relating to the
22             net operating loss carried back or forward to the
23             taxable year from any taxable year ending prior to
24             December 31, 1986 shall be reduced by the amount of
25             addition modification under this subparagraph (E)
26             which related to that net operating loss and which

 

 

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1             was taken into account in calculating the base
2             income of an earlier taxable year, and
3                 (ii) the addition modification relating to the
4             net operating loss carried back or forward to the
5             taxable year from any taxable year ending prior to
6             December 31, 1986 shall not exceed the amount of
7             such carryback or carryforward;
8             For taxable years in which there is a net operating
9         loss carryback or carryforward from more than one other
10         taxable year ending prior to December 31, 1986, the
11         addition modification provided in this subparagraph
12         (E) shall be the sum of the amounts computed
13         independently under the preceding provisions of this
14         subparagraph (E) for each such taxable year;
15             (F) For taxable years ending on or after January 1,
16         1989, an amount equal to the tax deducted pursuant to
17         Section 164 of the Internal Revenue Code if the trust
18         or estate is claiming the same tax for purposes of the
19         Illinois foreign tax credit under Section 601 of this
20         Act;
21             (G) An amount equal to the amount of the capital
22         gain deduction allowable under the Internal Revenue
23         Code, to the extent deducted from gross income in the
24         computation of taxable income;
25             (G-5) For taxable years ending after December 31,
26         1997, an amount equal to any eligible remediation costs

 

 

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

 

 

SB0081 Engrossed - 52 - LRB096 01733 HLH 11742 b

1         allowed as a deduction in computing base income for
2         interest paid, accrued, or incurred, directly or
3         indirectly, (i) for taxable years ending on or after
4         December 31, 2004, to a foreign person who would be a
5         member of the same unitary business group but for the
6         fact that the foreign person's business activity
7         outside the United States is 80% or more of the foreign
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. The addition modification
16         required by this subparagraph shall be reduced to the
17         extent that dividends were included in base income of
18         the unitary group for the same taxable year and
19         received by the taxpayer or by a member of the
20         taxpayer's unitary business group (including amounts
21         included in gross income pursuant to Sections 951
22         through 964 of the Internal Revenue Code and amounts
23         included in gross income under Section 78 of the
24         Internal Revenue Code) with respect to the stock of the
25         same person to whom the interest was paid, accrued, or
26         incurred.

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1     and by deducting from the total so obtained the sum of the
2     following amounts:
3             (H) 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             (I) The valuation limitation amount;
15             (J) 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             (K) An amount equal to all amounts included in
19         taxable income as modified by subparagraphs (A), (B),
20         (C), (D), (E), (F) and (G) which are exempt from
21         taxation by this State either by reason of its statutes
22         or Constitution or by reason of the Constitution,
23         treaties or statutes of the United States; provided
24         that, in the case of any statute of this State that
25         exempts income derived from bonds or other obligations
26         from the tax imposed under this Act, the amount

 

 

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1         exempted shall be the interest net of bond premium
2         amortization;
3             (L) With the exception of any amounts subtracted
4         under subparagraph (K), an amount equal to the sum of
5         all amounts disallowed as deductions by (i) Sections
6         171(a) (2) and 265(a)(2) of the Internal Revenue Code,
7         as now or hereafter amended, and all amounts of
8         expenses allocable to interest and disallowed as
9         deductions by Section 265(1) of the Internal Revenue
10         Code of 1954, as now or hereafter amended; and (ii) for
11         taxable years ending on or after August 13, 1999,
12         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
13         the Internal Revenue Code; the provisions of this
14         subparagraph are exempt from the provisions of Section
15         250;
16             (M) An amount equal to those dividends included in
17         such total which were paid by a corporation which
18         conducts business operations in an Enterprise Zone or
19         zones created under the Illinois Enterprise Zone Act or
20         a River Edge Redevelopment Zone or zones created under
21         the River Edge Redevelopment Zone Act and conducts
22         substantially all of its operations in an Enterprise
23         Zone or Zones or a River Edge Redevelopment Zone or
24         zones. This subparagraph (M) is exempt from the
25         provisions of Section 250;
26             (N) An amount equal to any contribution made to a

 

 

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1         job training project established pursuant to the Tax
2         Increment Allocation Redevelopment Act;
3             (O) An amount equal to those dividends included in
4         such total that were paid by a corporation that
5         conducts business operations in a federally designated
6         Foreign Trade Zone or Sub-Zone and that is designated a
7         High Impact Business located in Illinois; provided
8         that dividends eligible for the deduction provided in
9         subparagraph (M) of paragraph (2) of this subsection
10         shall not be eligible for the deduction provided under
11         this subparagraph (O);
12             (P) An amount equal to the amount of the deduction
13         used to compute the federal income tax credit for
14         restoration of substantial amounts held under claim of
15         right for the taxable year pursuant to Section 1341 of
16         the Internal Revenue Code of 1986;
17             (Q) For taxable year 1999 and thereafter, an amount
18         equal to the amount of any (i) distributions, to the
19         extent includible in gross income for federal income
20         tax purposes, made to the taxpayer because of his or
21         her status as a victim of persecution for racial or
22         religious reasons by Nazi Germany or any other Axis
23         regime or as an heir of the victim and (ii) items of
24         income, to the extent includible in gross income for
25         federal income tax purposes, attributable to, derived
26         from or in any way related to assets stolen from,

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         intangible expenses and costs paid, accrued, or
2         incurred, directly or indirectly, to the same foreign
3         person. This subparagraph (V) is exempt from the
4         provisions of Section 250. (W)
5         (3) Limitation. The amount of any modification
6     otherwise required under this subsection shall, under
7     regulations prescribed by the Department, be adjusted by
8     any amounts included therein which were properly paid,
9     credited, or required to be distributed, or permanently set
10     aside for charitable purposes pursuant to Internal Revenue
11     Code Section 642(c) during the taxable year.
 
12     (d) Partnerships.
13         (1) In general. In the case of a partnership, base
14     income means an amount equal to the taxpayer's taxable
15     income for the taxable year as modified by paragraph (2).
16         (2) Modifications. The taxable income referred to in
17     paragraph (1) shall be modified by adding thereto the sum
18     of the following amounts:
19             (A) An amount equal to all amounts paid or accrued
20         to the taxpayer as interest or dividends during the
21         taxable year to the extent excluded from gross income
22         in the computation of taxable income;
23             (B) An amount equal to the amount of tax imposed by
24         this Act to the extent deducted from gross income for
25         the taxable year;

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         preceding sentence does not apply to the extent that
2         the same dividends caused a reduction to the addition
3         modification required under Section 203(d)(2)(D-7) or
4         Section 203(d)(2)(D-8) of this Act.
5     and by deducting from the total so obtained the following
6     amounts:
7             (E) The valuation limitation amount;
8             (F) An amount equal to the amount of any tax
9         imposed by this Act which was refunded to the taxpayer
10         and included in such total for the taxable year;
11             (G) An amount equal to all amounts included in
12         taxable income as modified by subparagraphs (A), (B),
13         (C) and (D) which are exempt from taxation by this
14         State either by reason of its statutes or Constitution
15         or by reason of the Constitution, treaties or statutes
16         of the United States; provided that, in the case of any
17         statute of this State that exempts income derived from
18         bonds or other obligations from the tax imposed under
19         this Act, the amount exempted shall be the interest net
20         of bond premium amortization;
21             (H) Any income of the partnership which
22         constitutes personal service income as defined in
23         Section 1348 (b) (1) of the Internal Revenue Code (as
24         in effect December 31, 1981) or a reasonable allowance
25         for compensation paid or accrued for services rendered
26         by partners to the partnership, whichever is greater;

 

 

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1             (I) An amount equal to all amounts of income
2         distributable to an entity subject to the Personal
3         Property Tax Replacement Income Tax imposed by
4         subsections (c) and (d) of Section 201 of this Act
5         including amounts distributable to organizations
6         exempt from federal income tax by reason of Section
7         501(a) of the Internal Revenue Code;
8             (J) With the exception of any amounts subtracted
9         under subparagraph (G), an amount equal to the sum of
10         all amounts disallowed as deductions by (i) Sections
11         171(a) (2), and 265(2) of the Internal Revenue Code of
12         1954, as now or hereafter amended, and all amounts of
13         expenses allocable to interest and disallowed as
14         deductions by Section 265(1) of the Internal Revenue
15         Code, as now or hereafter amended; and (ii) for taxable
16         years ending on or after August 13, 1999, Sections
17         171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
18         Internal Revenue Code; the provisions of this
19         subparagraph are exempt from the provisions of Section
20         250;
21             (K) An amount equal to those dividends included in
22         such total which were paid by a corporation which
23         conducts business operations in an Enterprise Zone or
24         zones created under the Illinois Enterprise Zone Act,
25         enacted by the 82nd General Assembly, or a River Edge
26         Redevelopment Zone or zones created under the River

 

 

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1         Edge Redevelopment Zone Act and conducts substantially
2         all of its operations in an Enterprise Zone or Zones or
3         from a River Edge Redevelopment Zone or zones. This
4         subparagraph (K) is exempt from the provisions of
5         Section 250;
6             (L) An amount equal to any contribution made to a
7         job training project established pursuant to the Real
8         Property Tax Increment Allocation Redevelopment Act;
9             (M) An amount equal to those dividends included in
10         such total that were paid by a corporation that
11         conducts business operations in a federally designated
12         Foreign Trade Zone or Sub-Zone and that is designated a
13         High Impact Business located in Illinois; provided
14         that dividends eligible for the deduction provided in
15         subparagraph (K) of paragraph (2) of this subsection
16         shall not be eligible for the deduction provided under
17         this subparagraph (M);
18             (N) An amount equal to the amount of the deduction
19         used to compute the federal income tax credit for
20         restoration of substantial amounts held under claim of
21         right for the taxable year pursuant to Section 1341 of
22         the Internal Revenue Code of 1986;
23             (O) For taxable years 2001 and thereafter, for the
24         taxable year in which the bonus depreciation deduction
25         is taken on the taxpayer's federal income tax return
26         under subsection (k) of Section 168 of the Internal

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         imposed by Section 852 of the Internal Revenue Code,
2         investment company taxable income;
3             (D) Real estate investment trusts. In the case of a
4         real estate investment trust subject to the tax imposed
5         by Section 857 of the Internal Revenue Code, real
6         estate investment trust taxable income;
7             (E) Consolidated corporations. In the case of a
8         corporation which is a member of an affiliated group of
9         corporations filing a consolidated income tax return
10         for the taxable year for federal income tax purposes,
11         taxable income determined as if such corporation had
12         filed a separate return for federal income tax purposes
13         for the taxable year and each preceding taxable year
14         for which it was a member of an affiliated group. For
15         purposes of this subparagraph, the taxpayer's separate
16         taxable income shall be determined as if the election
17         provided by Section 243(b) (2) of the Internal Revenue
18         Code had been in effect for all such years;
19             (F) Cooperatives. In the case of a cooperative
20         corporation or association, the taxable income of such
21         organization determined in accordance with the
22         provisions of Section 1381 through 1388 of the Internal
23         Revenue Code;
24             (G) Subchapter S corporations. In the case of: (i)
25         a Subchapter S corporation for which there is in effect
26         an election for the taxable year under Section 1362 of

 

 

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1         the Internal Revenue Code, the taxable income of such
2         corporation determined in accordance with Section
3         1363(b) of the Internal Revenue Code, except that
4         taxable income shall take into account those items
5         which are required by Section 1363(b)(1) of the
6         Internal Revenue Code to be separately stated; and (ii)
7         a Subchapter S corporation for which there is in effect
8         a federal election to opt out of the provisions of the
9         Subchapter S Revision Act of 1982 and have applied
10         instead the prior federal Subchapter S rules as in
11         effect on July 1, 1982, the taxable income of such
12         corporation determined in accordance with the federal
13         Subchapter S rules as in effect on July 1, 1982; and
14             (H) Partnerships. In the case of a partnership,
15         taxable income determined in accordance with Section
16         703 of the Internal Revenue Code, except that taxable
17         income shall take into account those items which are
18         required by Section 703(a)(1) to be separately stated
19         but which would be taken into account by an individual
20         in calculating his taxable income.
21         (3) Recapture of business expenses on disposition of
22     asset or business. Notwithstanding any other law to the
23     contrary, if in prior years income from an asset or
24     business has been classified as business income and in a
25     later year is demonstrated to be non-business income, then
26     all expenses, without limitation, deducted in such later

 

 

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1     year and in the 2 immediately preceding taxable years
2     related to that asset or business that generated the
3     non-business income shall be added back and recaptured as
4     business income in the year of the disposition of the asset
5     or business. Such amount shall be apportioned to Illinois
6     using the greater of the apportionment fraction computed
7     for the business under Section 304 of this Act for the
8     taxable year or the average of the apportionment fractions
9     computed for the business under Section 304 of this Act for
10     the taxable year and for the 2 immediately preceding
11     taxable years.
 
12     (f) Valuation limitation amount.
13         (1) In general. The valuation limitation amount
14     referred to in subsections (a) (2) (G), (c) (2) (I) and
15     (d)(2) (E) is an amount equal to:
16             (A) The sum of the pre-August 1, 1969 appreciation
17         amounts (to the extent consisting of gain reportable
18         under the provisions of Section 1245 or 1250 of the
19         Internal Revenue Code) for all property in respect of
20         which such gain was reported for the taxable year; plus
21             (B) The lesser of (i) the sum of the pre-August 1,
22         1969 appreciation amounts (to the extent consisting of
23         capital gain) for all property in respect of which such
24         gain was reported for federal income tax purposes for
25         the taxable year, or (ii) the net capital gain for the

 

 

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1         taxable year, reduced in either case by any amount of
2         such gain included in the amount determined under
3         subsection (a) (2) (F) or (c) (2) (H).
4         (2) Pre-August 1, 1969 appreciation amount.
5             (A) If the fair market value of property referred
6         to in paragraph (1) was readily ascertainable on August
7         1, 1969, the pre-August 1, 1969 appreciation amount for
8         such property is the lesser of (i) the excess of such
9         fair market value over the taxpayer's basis (for
10         determining gain) for such property on that date
11         (determined under the Internal Revenue Code as in
12         effect on that date), or (ii) the total gain realized
13         and reportable for federal income tax purposes in
14         respect of the sale, exchange or other disposition of
15         such property.
16             (B) If the fair market value of property referred
17         to in paragraph (1) was not readily ascertainable on
18         August 1, 1969, the pre-August 1, 1969 appreciation
19         amount for such property is that amount which bears the
20         same ratio to the total gain reported in respect of the
21         property for federal income tax purposes for the
22         taxable year, as the number of full calendar months in
23         that part of the taxpayer's holding period for the
24         property ending July 31, 1969 bears to the number of
25         full calendar months in the taxpayer's entire holding
26         period for the property.

 

 

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1             (C) The Department shall prescribe such
2         regulations as may be necessary to carry out the
3         purposes of this paragraph.
 
4     (g) Double deductions. Unless specifically provided
5 otherwise, nothing in this Section shall permit the same item
6 to be deducted more than once.
 
7     (h) Legislative intention. Except as expressly provided by
8 this Section there shall be no modifications or limitations on
9 the amounts of income, gain, loss or deduction taken into
10 account in determining gross income, adjusted gross income or
11 taxable income for federal income tax purposes for the taxable
12 year, or in the amount of such items entering into the
13 computation of base income and net income under this Act for
14 such taxable year, whether in respect of property values as of
15 August 1, 1969 or otherwise.
16 (Source: P.A. 94-776, eff. 5-19-06; 94-789, eff. 5-19-06;
17 94-1021, eff. 7-12-06; 94-1074, eff. 12-26-06; 95-23, eff.
18 8-3-07; 95-233, eff. 8-16-07; 95-286, eff. 8-20-07; 95-331,
19 eff. 8-21-07; 95-707, eff. 1-11-08; 95-876, eff. 8-21-08;
20 revised 10-15-08.)
 
21     Section 99. Effective date. This Act takes effect upon
22 becoming law.