97TH GENERAL ASSEMBLY
State of Illinois
2011 and 2012
HB5755

 

Introduced 2/16/2012, by Rep. Darlene J. Senger and Randy Ramey, Jr.

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 5/203  from Ch. 120, par. 2-203
35 ILCS 5/223 new

    Amends the Illinois Income Tax Act. Creates a credit for contributions to qualified student assistance organizations. Provides that the credit may not exceed $100,000 and may not exceed 90% of each dollar contributed. Provides that the credit is exempt from the Act's automatic sunset provision. Requires certain student assistance organizations to award scholarships to qualifying students. Provides that those scholarships are not included in the taxpayer's base income. Effective immediately.


LRB097 18911 HLH 64149 b

FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB5755LRB097 18911 HLH 64149 b

1    AN ACT concerning revenue.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Income Tax Act is amended by
5changing Section 203 and by adding Section 223 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            (D-23) An amount equal to the credit allowable to
12        the taxpayer under Section 218(a) of this Act,
13        determined without regard to Section 218(c) of this
14        Act;
15    and by deducting from the total so obtained the sum of the
16    following amounts:
17            (E) For taxable years ending before December 31,
18        2001, any amount included in such total in respect of
19        any compensation (including but not limited to any
20        compensation paid or accrued to a serviceman while a
21        prisoner of war or missing in action) paid to a
22        resident by reason of being on active duty in the Armed
23        Forces of the United States and in respect of any
24        compensation paid or accrued to a resident who as a
25        governmental employee was a prisoner of war or missing
26        in action, and in respect of any compensation paid to a

 

 

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1        resident in 1971 or thereafter for annual training
2        performed pursuant to Sections 502 and 503, Title 32,
3        United States Code as a member of the Illinois National
4        Guard or, beginning with taxable years ending on or
5        after December 31, 2007, the National Guard of any
6        other state. For taxable years ending on or after
7        December 31, 2001, any amount included in such total in
8        respect of any compensation (including but not limited
9        to any compensation paid or accrued to a serviceman
10        while a prisoner of war or missing in action) paid to a
11        resident by reason of being a member of any component
12        of the Armed Forces of the United States and in respect
13        of any compensation paid or accrued to a resident who
14        as a governmental employee was a prisoner of war or
15        missing in action, and in respect of any compensation
16        paid to a resident in 2001 or thereafter by reason of
17        being a member of the Illinois National Guard or,
18        beginning with taxable years ending on or after
19        December 31, 2007, the National Guard of any other
20        state. The provisions of this subparagraph (E) are
21        exempt from the provisions of Section 250;
22            (F) An amount equal to all amounts included in such
23        total pursuant to the provisions of Sections 402(a),
24        402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the
25        Internal Revenue Code, or included in such total as
26        distributions under the provisions of any retirement

 

 

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1        or disability plan for employees of any governmental
2        agency or unit, or retirement payments to retired
3        partners, which payments are excluded in computing net
4        earnings from self employment by Section 1402 of the
5        Internal Revenue Code and regulations adopted pursuant
6        thereto;
7            (G) The valuation limitation amount;
8            (H) 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            (I) An amount equal to all amounts included in such
12        total pursuant to the provisions of Section 111 of the
13        Internal Revenue Code as a recovery of items previously
14        deducted from adjusted gross income in the computation
15        of taxable income;
16            (J) 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 (J) is exempt from the
25        provisions of Section 250;
26            (K) An amount equal to those dividends included in

 

 

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1        such total that were paid by a corporation that
2        conducts business operations in a federally designated
3        Foreign Trade Zone or Sub-Zone and that is designated a
4        High Impact Business located in Illinois; provided
5        that dividends eligible for the deduction provided in
6        subparagraph (J) of paragraph (2) of this subsection
7        shall not be eligible for the deduction provided under
8        this subparagraph (K);
9            (L) For taxable years ending after December 31,
10        1983, an amount equal to all social security benefits
11        and railroad retirement benefits included in such
12        total pursuant to Sections 72(r) and 86 of the Internal
13        Revenue Code;
14            (M) With the exception of any amounts subtracted
15        under subparagraph (N), an amount equal to the sum of
16        all amounts disallowed as deductions by (i) Sections
17        171(a) (2), and 265(2) of the Internal Revenue Code,
18        and all amounts of expenses allocable to interest and
19        disallowed as deductions by Section 265(1) of the
20        Internal Revenue Code; and (ii) for taxable years
21        ending on or after August 13, 1999, Sections 171(a)(2),
22        265, 280C, and 832(b)(5)(B)(i) of the Internal Revenue
23        Code, plus, for taxable years ending on or after
24        December 31, 2011, Section 45G(e)(3) of the Internal
25        Revenue Code and, for taxable years ending on or after
26        December 31, 2008, any amount included in gross income

 

 

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1        under Section 87 of the Internal Revenue Code; the
2        provisions of this subparagraph are exempt from the
3        provisions of Section 250;
4            (N) An amount equal to all amounts included in such
5        total which are exempt from taxation by this State
6        either by reason of its statutes or Constitution or by
7        reason of the Constitution, treaties or statutes of the
8        United States; provided that, in the case of any
9        statute of this State that exempts income derived from
10        bonds or other obligations from the tax imposed under
11        this Act, the amount exempted shall be the interest net
12        of bond premium amortization;
13            (O) An amount equal to any contribution made to a
14        job training project established pursuant to the Tax
15        Increment Allocation Redevelopment Act;
16            (P) 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 or of any itemized deduction
21        taken from adjusted gross income in the computation of
22        taxable income for restoration of substantial amounts
23        held under claim of right for the taxable year;
24            (Q) An amount equal to any amounts included in such
25        total, received by the taxpayer as an acceleration in
26        the payment of life, endowment or annuity benefits in

 

 

HB5755- 18 -LRB097 18911 HLH 64149 b

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

 

 

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

 

 

HB5755- 20 -LRB097 18911 HLH 64149 b

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

 

 

HB5755- 21 -LRB097 18911 HLH 64149 b

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

 

 

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

 

 

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

 

 

HB5755- 24 -LRB097 18911 HLH 64149 b

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

 

 

HB5755- 25 -LRB097 18911 HLH 64149 b

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

 

 

HB5755- 26 -LRB097 18911 HLH 64149 b

1        member of the taxpayer's unitary business group but for
2        the fact that the foreign person's business activity
3        outside the United States is 80% or more of that
4        person's total business activity and (ii) for taxable
5        years ending on or after December 31, 2008, to a person
6        who would be a member of the same unitary business
7        group but for the fact that the person is prohibited
8        under Section 1501(a)(27) from being included in the
9        unitary business group because he or she is ordinarily
10        required to apportion business income under different
11        subsections of Section 304, but not to exceed the
12        addition modification required to be made for the same
13        taxable year under Section 203(a)(2)(D-18) for
14        intangible expenses and costs paid, accrued, or
15        incurred, directly or indirectly, to the same foreign
16        person. This subparagraph (EE) is exempt from the
17        provisions of Section 250;
18            (FF) An amount equal to any amount awarded to the
19        taxpayer during the taxable year by the Court of Claims
20        under subsection (c) of Section 8 of the Court of
21        Claims Act for time unjustly served in a State prison.
22        This subparagraph (FF) is exempt from the provisions of
23        Section 250; and
24            (GG) For taxable years ending on or after December
25        31, 2011, in the case of a taxpayer who was required to
26        add back any insurance premiums under Section

 

 

HB5755- 27 -LRB097 18911 HLH 64149 b

1        203(a)(2)(D-19), such taxpayer may elect to subtract
2        that part of a reimbursement received from the
3        insurance company equal to the amount of the expense or
4        loss (including expenses incurred by the insurance
5        company) that would have been taken into account as a
6        deduction for federal income tax purposes if the
7        expense or loss had been uninsured. If a taxpayer makes
8        the election provided for by this subparagraph (GG),
9        the insurer to which the premiums were paid must add
10        back to income the amount subtracted by the taxpayer
11        pursuant to this subparagraph (GG). This subparagraph
12        (GG) is exempt from the provisions of Section 250; and
13        .
14            (HH) An amount equal to any scholarship granted to
15        the taxpayer or the taxpayer's child under Section 223
16        of this Act that would otherwise be included in the
17        taxpayer's adjusted gross income; this subparagraph
18        (HH) is exempt from the provisions of Section 250.
 
19    (b) Corporations.
20        (1) In general. In the case of a corporation, base
21    income means an amount equal to the taxpayer's taxable
22    income for the taxable year as modified by paragraph (2).
23        (2) Modifications. The taxable income referred to in
24    paragraph (1) shall be modified by adding thereto the sum
25    of the following amounts:

 

 

HB5755- 28 -LRB097 18911 HLH 64149 b

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

 

 

HB5755- 29 -LRB097 18911 HLH 64149 b

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

 

 

HB5755- 30 -LRB097 18911 HLH 64149 b

1            (E-5) For taxable years ending after December 31,
2        1997, an amount equal to any eligible remediation costs
3        that the corporation deducted in computing adjusted
4        gross income and for which the corporation claims a
5        credit under subsection (l) of Section 201;
6            (E-10) For taxable years 2001 and thereafter, an
7        amount equal to the bonus depreciation deduction taken
8        on the taxpayer's federal income tax return for the
9        taxable year under subsection (k) of Section 168 of the
10        Internal Revenue Code;
11            (E-11) If the taxpayer sells, transfers, abandons,
12        or otherwise disposes of property for which the
13        taxpayer was required in any taxable year to make an
14        addition modification under subparagraph (E-10), then
15        an amount equal to the aggregate amount of the
16        deductions taken in all taxable years under
17        subparagraph (T) with respect to that property.
18            If the taxpayer continues to own property through
19        the last day of the last tax year for which the
20        taxpayer may claim a depreciation deduction for
21        federal income tax purposes and for which the taxpayer
22        was allowed in any taxable year to make a subtraction
23        modification under subparagraph (T), then an amount
24        equal to that subtraction modification.
25            The taxpayer is required to make the addition
26        modification under this subparagraph only once with

 

 

HB5755- 31 -LRB097 18911 HLH 64149 b

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

 

 

HB5755- 32 -LRB097 18911 HLH 64149 b

1        same person to whom the interest was paid, accrued, or
2        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

 

 

HB5755- 33 -LRB097 18911 HLH 64149 b

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            (E-13) 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

 

 

HB5755- 34 -LRB097 18911 HLH 64149 b

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 pursuant to Sections 951 through 964 of the
18        Internal Revenue Code and amounts included in gross
19        income under Section 78 of the Internal Revenue Code)
20        with respect to the stock of the same person to whom
21        the intangible expenses and costs were directly or
22        indirectly paid, incurred, or accrued. The preceding
23        sentence shall not apply to the extent that the same
24        dividends caused a reduction to the addition
25        modification required under Section 203(b)(2)(E-12) of
26        this Act. As used in this subparagraph, the term

 

 

HB5755- 35 -LRB097 18911 HLH 64149 b

1        "intangible expenses and costs" includes (1) expenses,
2        losses, and costs for, or related to, the direct or
3        indirect acquisition, use, maintenance or management,
4        ownership, sale, exchange, or any other disposition of
5        intangible property; (2) losses incurred, directly or
6        indirectly, from factoring transactions or discounting
7        transactions; (3) royalty, patent, technical, and
8        copyright fees; (4) licensing fees; and (5) other
9        similar expenses and costs. For purposes of this
10        subparagraph, "intangible property" includes patents,
11        patent applications, trade names, trademarks, service
12        marks, copyrights, mask works, trade secrets, and
13        similar types of intangible 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:

 

 

HB5755- 36 -LRB097 18911 HLH 64149 b

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

 

 

HB5755- 37 -LRB097 18911 HLH 64149 b

1            by which the Department will utilize its authority
2            under Section 404 of this Act;
3            (E-14) 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(b)(2)(E-12) or
2        Section 203(b)(2)(E-13) of this Act;
3            (E-15) For taxable years beginning after December
4        31, 2008, any deduction for dividends paid by a captive
5        real estate investment trust that is allowed to a real
6        estate investment trust under Section 857(b)(2)(B) of
7        the Internal Revenue Code for dividends paid;
8            (E-16) An amount equal to the credit allowable to
9        the taxpayer under Section 218(a) of this Act,
10        determined without regard to Section 218(c) of this
11        Act;
12    and by deducting from the total so obtained the sum of the
13    following amounts:
14            (F) An amount equal to the amount of any tax
15        imposed by this Act which was refunded to the taxpayer
16        and included in such total for the taxable year;
17            (G) An amount equal to any amount included in such
18        total under Section 78 of the Internal Revenue Code;
19            (H) In the case of a regulated investment company,
20        an amount equal to the amount of exempt interest
21        dividends as defined in subsection (b) (5) of Section
22        852 of the Internal Revenue Code, paid to shareholders
23        for the taxable year;
24            (I) With the exception of any amounts subtracted
25        under subparagraph (J), an amount equal to the sum of
26        all amounts disallowed as deductions by (i) Sections

 

 

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1        171(a) (2), and 265(a)(2) and amounts disallowed as
2        interest expense by Section 291(a)(3) of the Internal
3        Revenue Code, and all amounts of expenses allocable to
4        interest and disallowed as deductions by Section
5        265(a)(1) of the Internal Revenue Code; and (ii) for
6        taxable years ending on or after August 13, 1999,
7        Sections 171(a)(2), 265, 280C, 291(a)(3), and
8        832(b)(5)(B)(i) of the Internal Revenue Code, plus,
9        for tax years ending on or after December 31, 2011,
10        amounts disallowed as deductions by Section 45G(e)(3)
11        of the Internal Revenue Code and, for taxable years
12        ending on or after December 31, 2008, any amount
13        included in gross income under Section 87 of the
14        Internal Revenue Code and the policyholders' share of
15        tax-exempt interest of a life insurance company under
16        Section 807(a)(2)(B) of the Internal Revenue Code (in
17        the case of a life insurance company with gross income
18        from a decrease in reserves for the tax year) or
19        Section 807(b)(1)(B) of the Internal Revenue Code (in
20        the case of a life insurance company allowed a
21        deduction for an increase in reserves for the tax
22        year); the provisions of this subparagraph are exempt
23        from the provisions of Section 250;
24            (J) 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            (K) An amount equal to those dividends included in
8        such total which were paid by a corporation which
9        conducts business operations in an Enterprise Zone or
10        zones created under the Illinois Enterprise Zone Act or
11        a River Edge Redevelopment Zone or zones created under
12        the River Edge Redevelopment Zone Act and conducts
13        substantially all of its operations in an Enterprise
14        Zone or zones or a River Edge Redevelopment Zone or
15        zones. This subparagraph (K) is exempt from the
16        provisions of Section 250;
17            (L) An amount equal to those dividends included in
18        such total that were paid by a corporation that
19        conducts business operations in a federally designated
20        Foreign Trade Zone or Sub-Zone and that is designated a
21        High Impact Business located in Illinois; provided
22        that dividends eligible for the deduction provided in
23        subparagraph (K) of paragraph 2 of this subsection
24        shall not be eligible for the deduction provided under
25        this subparagraph (L);
26            (M) For any taxpayer that is a financial

 

 

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

 

 

HB5755- 42 -LRB097 18911 HLH 64149 b

1        income from a loan or loans made by such taxpayer to a
2        borrower, to the extent that such a loan is secured by
3        property which is eligible for the High Impact Business
4        Investment Credit. To determine the portion of a loan
5        or loans that is secured by property eligible for a
6        Section 201(h) 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(h) 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 a federally
13        designated Foreign Trade Zone or Sub-Zone located in
14        Illinois. No taxpayer that is eligible for the
15        deduction provided in subparagraph (M) of paragraph
16        (2) of this subsection shall be eligible for the
17        deduction provided under this subparagraph (M-1). The
18        subtraction modification available to taxpayers in any
19        year under this subsection shall be that portion of the
20        total interest paid by the borrower with respect to
21        such loan attributable to the eligible property as
22        calculated under the previous sentence;
23            (N) Two times any contribution made during the
24        taxable year to a designated zone organization to the
25        extent that the contribution (i) qualifies as a
26        charitable contribution under subsection (c) of

 

 

HB5755- 43 -LRB097 18911 HLH 64149 b

1        Section 170 of the Internal Revenue Code and (ii) must,
2        by its terms, be used for a project approved by the
3        Department of Commerce and Economic Opportunity under
4        Section 11 of the Illinois Enterprise Zone Act or under
5        Section 10-10 of the River Edge Redevelopment Zone Act.
6        This subparagraph (N) is exempt from the provisions of
7        Section 250;
8            (O) An amount equal to: (i) 85% for taxable years
9        ending on or before December 31, 1992, or, a percentage
10        equal to the percentage allowable under Section
11        243(a)(1) of the Internal Revenue Code of 1986 for
12        taxable years ending after December 31, 1992, of the
13        amount by which dividends included in taxable income
14        and received from a corporation that is not created or
15        organized under the laws of the United States or any
16        state or political subdivision thereof, including, for
17        taxable years ending on or after December 31, 1988,
18        dividends received or deemed received or paid or deemed
19        paid under Sections 951 through 965 of the Internal
20        Revenue Code, exceed the amount of the modification
21        provided under subparagraph (G) of paragraph (2) of
22        this subsection (b) which is related to such dividends,
23        and including, for taxable years ending on or after
24        December 31, 2008, dividends received from a captive
25        real estate investment trust; plus (ii) 100% of the
26        amount by which dividends, included in taxable income

 

 

HB5755- 44 -LRB097 18911 HLH 64149 b

1        and received, including, for taxable years ending on or
2        after December 31, 1988, dividends received or deemed
3        received or paid or deemed paid under Sections 951
4        through 964 of the Internal Revenue Code and including,
5        for taxable years ending on or after December 31, 2008,
6        dividends received from a captive real estate
7        investment trust, from any such corporation specified
8        in clause (i) that would but for the provisions of
9        Section 1504 (b) (3) of the Internal Revenue Code be
10        treated as a member of the affiliated group which
11        includes the dividend recipient, exceed the amount of
12        the modification provided under subparagraph (G) of
13        paragraph (2) of this subsection (b) which is related
14        to such dividends. This subparagraph (O) is exempt from
15        the provisions of Section 250 of this Act;
16            (P) An amount equal to any contribution made to a
17        job training project established pursuant to the Tax
18        Increment Allocation Redevelopment Act;
19            (Q) An amount equal to the amount of the deduction
20        used to compute the federal income tax credit for
21        restoration of substantial amounts held under claim of
22        right for the taxable year pursuant to Section 1341 of
23        the Internal Revenue Code;
24            (R) On and after July 20, 1999, in the case of an
25        attorney-in-fact with respect to whom an interinsurer
26        or a reciprocal insurer has made the election under

 

 

HB5755- 45 -LRB097 18911 HLH 64149 b

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

 

 

HB5755- 46 -LRB097 18911 HLH 64149 b

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

 

 

HB5755- 47 -LRB097 18911 HLH 64149 b

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

 

 

HB5755- 48 -LRB097 18911 HLH 64149 b

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

 

 

HB5755- 49 -LRB097 18911 HLH 64149 b

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

 

 

HB5755- 50 -LRB097 18911 HLH 64149 b

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(b)(2)(E-13) for
6        intangible expenses and costs paid, accrued, or
7        incurred, directly or indirectly, to the same foreign
8        person. This subparagraph (X) is exempt from the
9        provisions of Section 250;
10            (Y) For taxable years ending on or after December
11        31, 2011, in the case of a taxpayer who was required to
12        add back any insurance premiums under Section
13        203(b)(2)(E-14), such taxpayer may elect to subtract
14        that part of a reimbursement received from the
15        insurance company equal to the amount of the expense or
16        loss (including expenses incurred by the insurance
17        company) that would have been taken into account as a
18        deduction for federal income tax purposes if the
19        expense or loss had been uninsured. If a taxpayer makes
20        the election provided for by this subparagraph (Y), the
21        insurer to which the premiums were paid must add back
22        to income the amount subtracted by the taxpayer
23        pursuant to this subparagraph (Y). This subparagraph
24        (Y) is exempt from the provisions of Section 250; and
25            (Z) The difference between the nondeductible
26        controlled foreign corporation dividends under Section

 

 

HB5755- 51 -LRB097 18911 HLH 64149 b

1        965(e)(3) of the Internal Revenue Code over the taxable
2        income of the taxpayer, computed without regard to
3        Section 965(e)(2)(A) of the Internal Revenue Code, and
4        without regard to any net operating loss deduction.
5        This subparagraph (Z) is exempt from the provisions of
6        Section 250.
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, and prior
10    to December 31, 2011, shall mean the gross investment
11    income for the taxable year and, for tax years ending on or
12    after December 31, 2011, shall mean all amounts included in
13    life insurance gross income under Section 803(a)(3) of the
14    Internal Revenue Code.
 
15    (c) Trusts and estates.
16        (1) In general. In the case of a trust or estate, base
17    income means an amount equal to the taxpayer's taxable
18    income for the taxable year as modified by paragraph (2).
19        (2) Modifications. Subject to the provisions of
20    paragraph (3), the taxable income referred to in paragraph
21    (1) shall be modified by adding thereto the sum of the
22    following amounts:
23            (A) An amount equal to all amounts paid or accrued
24        to the taxpayer as interest or dividends during the
25        taxable year to the extent excluded from gross income

 

 

HB5755- 52 -LRB097 18911 HLH 64149 b

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

 

 

HB5755- 53 -LRB097 18911 HLH 64149 b

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

 

 

HB5755- 54 -LRB097 18911 HLH 64149 b

1        Code, to the extent deducted from gross income in the
2        computation of taxable income;
3            (G-5) For taxable years ending after December 31,
4        1997, an amount equal to any eligible remediation costs
5        that the trust or estate deducted in computing adjusted
6        gross income and for which the trust or estate claims a
7        credit under subsection (l) of Section 201;
8            (G-10) 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; and
13            (G-11) 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 (G-10), then
17        an amount equal to the aggregate amount of the
18        deductions taken in all taxable years under
19        subparagraph (R) 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 (R), then an amount
26        equal to that subtraction modification.

 

 

HB5755- 55 -LRB097 18911 HLH 64149 b

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            (G-12) 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 that the foreign person's business activity
11        outside 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

 

 

HB5755- 56 -LRB097 18911 HLH 64149 b

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;
23            (G-13) 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(c)(2)(G-12) of
2        this Act. As used in this subparagraph, the term
3        "intangible expenses and costs" includes: (1)
4        expenses, losses, and costs for or related to the
5        direct or indirect acquisition, use, maintenance or
6        management, ownership, sale, exchange, or any other
7        disposition of intangible property; (2) losses
8        incurred, directly or indirectly, from factoring
9        transactions or discounting transactions; (3) royalty,
10        patent, technical, and copyright fees; (4) licensing
11        fees; and (5) other similar expenses and costs. For
12        purposes of this subparagraph, "intangible property"
13        includes patents, patent applications, trade names,
14        trademarks, service marks, copyrights, mask works,
15        trade secrets, and 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            (G-14) For taxable years ending on or after
6        December 31, 2008, an amount equal to the amount of
7        insurance premium expenses and costs otherwise allowed
8        as a deduction in computing base income, and that were
9        paid, accrued, or incurred, directly or indirectly, to
10        a 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(c)(2)(G-12) or
4        Section 203(c)(2)(G-13) of this Act;
5            (G-15) An amount equal to the credit allowable to
6        the taxpayer under Section 218(a) of this Act,
7        determined without regard to Section 218(c) of this
8        Act;
9    and by deducting from the total so obtained the sum of the
10    following amounts:
11            (H) An amount equal to all amounts included in such
12        total pursuant to the provisions of Sections 402(a),
13        402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
14        Internal Revenue Code or included in such total as
15        distributions under the provisions of any retirement
16        or disability plan for employees of any governmental
17        agency or unit, or retirement payments to retired
18        partners, which payments are excluded in computing net
19        earnings from self employment by Section 1402 of the
20        Internal Revenue Code and regulations adopted pursuant
21        thereto;
22            (I) The valuation limitation amount;
23            (J) 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            (K) An amount equal to all amounts included in

 

 

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1        taxable income as modified by subparagraphs (A), (B),
2        (C), (D), (E), (F) and (G) which are exempt from
3        taxation by this State either by reason of its statutes
4        or Constitution or by reason of the Constitution,
5        treaties or statutes of the United States; provided
6        that, in the case of any statute of this State that
7        exempts income derived from bonds or other obligations
8        from the tax imposed under this Act, the amount
9        exempted shall be the interest net of bond premium
10        amortization;
11            (L) With the exception of any amounts subtracted
12        under subparagraph (K), an amount equal to the sum of
13        all amounts disallowed as deductions by (i) Sections
14        171(a) (2) and 265(a)(2) of the Internal Revenue Code,
15        and all amounts of expenses allocable to interest and
16        disallowed as deductions by Section 265(1) of the
17        Internal Revenue Code; and (ii) for taxable years
18        ending on or after August 13, 1999, Sections 171(a)(2),
19        265, 280C, and 832(b)(5)(B)(i) of the Internal Revenue
20        Code, plus, (iii) for taxable years ending on or after
21        December 31, 2011, Section 45G(e)(3) of the Internal
22        Revenue Code and, for taxable years ending on or after
23        December 31, 2008, any amount included in gross income
24        under Section 87 of the Internal Revenue Code; the
25        provisions of this subparagraph are exempt from the
26        provisions of Section 250;

 

 

HB5755- 64 -LRB097 18911 HLH 64149 b

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

 

 

HB5755- 65 -LRB097 18911 HLH 64149 b

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

 

 

HB5755- 66 -LRB097 18911 HLH 64149 b

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

 

 

HB5755- 67 -LRB097 18911 HLH 64149 b

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

 

 

HB5755- 68 -LRB097 18911 HLH 64149 b

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

 

 

HB5755- 69 -LRB097 18911 HLH 64149 b

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

 

 

HB5755- 70 -LRB097 18911 HLH 64149 b

1        outside the United States is 80% or more of that
2        person's total business activity and (ii) for taxable
3        years ending on or after December 31, 2008, to a person
4        who would be a member of the same unitary business
5        group but for the fact that the person is prohibited
6        under Section 1501(a)(27) from being included in the
7        unitary business group because he or she is ordinarily
8        required to apportion business income under different
9        subsections of Section 304, but not to exceed the
10        addition modification required to be made for the same
11        taxable year under Section 203(c)(2)(G-13) for
12        intangible expenses and costs paid, accrued, or
13        incurred, directly or indirectly, to the same foreign
14        person. This subparagraph (V) is exempt from the
15        provisions of Section 250;
16            (W) in the case of an estate, an amount equal to
17        all amounts included in such total pursuant to the
18        provisions of Section 111 of the Internal Revenue Code
19        as a recovery of items previously deducted by the
20        decedent from adjusted gross income in the computation
21        of taxable income. This subparagraph (W) is exempt from
22        Section 250;
23            (X) an amount equal to the refund included in such
24        total of any tax deducted for federal income tax
25        purposes, to the extent that deduction was added back
26        under subparagraph (F). This subparagraph (X) is

 

 

HB5755- 71 -LRB097 18911 HLH 64149 b

1        exempt from the provisions of Section 250; and
2            (Y) For taxable years ending on or after December
3        31, 2011, in the case of a taxpayer who was required to
4        add back any insurance premiums under Section
5        203(c)(2)(G-14), such taxpayer may elect to subtract
6        that part of a reimbursement received from the
7        insurance company equal to the amount of the expense or
8        loss (including expenses incurred by the insurance
9        company) that would have been taken into account as a
10        deduction for federal income tax purposes if the
11        expense or loss had been uninsured. If a taxpayer makes
12        the election provided for by this subparagraph (Y), the
13        insurer to which the premiums were paid must add back
14        to income the amount subtracted by the taxpayer
15        pursuant to this subparagraph (Y). This subparagraph
16        (Y) is exempt from the provisions of Section 250.
17        (3) Limitation. The amount of any modification
18    otherwise required under this subsection shall, under
19    regulations prescribed by the Department, be adjusted by
20    any amounts included therein which were properly paid,
21    credited, or required to be distributed, or permanently set
22    aside for charitable purposes pursuant to Internal Revenue
23    Code Section 642(c) during the taxable year.
 
24    (d) Partnerships.
25        (1) In general. In the case of a partnership, base

 

 

HB5755- 72 -LRB097 18911 HLH 64149 b

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

 

 

HB5755- 73 -LRB097 18911 HLH 64149 b

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1        income under different subsections of Section 304. The
2        addition modification required by this subparagraph
3        shall be reduced to the extent that dividends were
4        included in base income of the unitary group for the
5        same taxable year and received by the taxpayer or by a
6        member of the taxpayer's unitary business group
7        (including amounts included in gross income under
8        Sections 951 through 964 of the Internal Revenue Code
9        and amounts included in gross income under Section 78
10        of the Internal Revenue Code) with respect to the stock
11        of the same person to whom the premiums and costs were
12        directly or indirectly paid, incurred, or accrued. The
13        preceding sentence does not apply to the extent that
14        the same dividends caused a reduction to the addition
15        modification required under Section 203(d)(2)(D-7) or
16        Section 203(d)(2)(D-8) of this Act;
17            (D-10) An amount equal to the credit allowable to
18        the taxpayer under Section 218(a) of this Act,
19        determined without regard to Section 218(c) of this
20        Act;
21    and by deducting from the total so obtained the following
22    amounts:
23            (E) The valuation limitation amount;
24            (F) An amount equal to the amount of any tax
25        imposed by this Act which was refunded to the taxpayer
26        and included in such total for the taxable year;

 

 

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1            (G) An amount equal to all amounts included in
2        taxable income as modified by subparagraphs (A), (B),
3        (C) and (D) which are exempt from taxation by this
4        State either by reason of its statutes or Constitution
5        or by reason of the Constitution, treaties or statutes
6        of the United States; provided that, in the case of any
7        statute of this State that exempts income derived from
8        bonds or other obligations from the tax imposed under
9        this Act, the amount exempted shall be the interest net
10        of bond premium amortization;
11            (H) Any income of the partnership which
12        constitutes personal service income as defined in
13        Section 1348 (b) (1) of the Internal Revenue Code (as
14        in effect December 31, 1981) or a reasonable allowance
15        for compensation paid or accrued for services rendered
16        by partners to the partnership, whichever is greater;
17        this subparagraph (H) is exempt from the provisions of
18        Section 250;
19            (I) An amount equal to all amounts of income
20        distributable to an entity subject to the Personal
21        Property Tax Replacement Income Tax imposed by
22        subsections (c) and (d) of Section 201 of this Act
23        including amounts distributable to organizations
24        exempt from federal income tax by reason of Section
25        501(a) of the Internal Revenue Code; this subparagraph
26        (I) is exempt from the provisions of Section 250;

 

 

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1            (J) With the exception of any amounts subtracted
2        under subparagraph (G), an amount equal to the sum of
3        all amounts disallowed as deductions by (i) Sections
4        171(a) (2), and 265(2) of the Internal Revenue Code,
5        and all amounts of expenses allocable to interest and
6        disallowed as deductions by Section 265(1) of the
7        Internal Revenue Code; and (ii) for taxable years
8        ending on or after August 13, 1999, Sections 171(a)(2),
9        265, 280C, and 832(b)(5)(B)(i) of the Internal Revenue
10        Code, plus, (iii) for taxable years ending on or after
11        December 31, 2011, Section 45G(e)(3) of the Internal
12        Revenue Code and, for taxable years ending on or after
13        December 31, 2008, any amount included in gross income
14        under Section 87 of the Internal Revenue Code; the
15        provisions of this subparagraph are exempt from the
16        provisions of Section 250;
17            (K) An amount equal to those dividends included in
18        such total which were paid by a corporation which
19        conducts business operations in an Enterprise Zone or
20        zones created under the Illinois Enterprise Zone Act,
21        enacted by the 82nd General Assembly, or a River Edge
22        Redevelopment Zone or zones created under the River
23        Edge Redevelopment Zone Act and conducts substantially
24        all of its operations in an Enterprise Zone or Zones or
25        from a River Edge Redevelopment Zone or zones. This
26        subparagraph (K) is exempt from the provisions of

 

 

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

 

 

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

 

 

HB5755- 85 -LRB097 18911 HLH 64149 b

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

 

 

HB5755- 86 -LRB097 18911 HLH 64149 b

1        the amount of such addition modification and (ii) any
2        income from intangible property (net of the deductions
3        allocable thereto) taken into account for the taxable
4        year with respect to a transaction with a taxpayer that
5        is required to make an addition modification with
6        respect to such transaction under Section
7        203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
8        203(d)(2)(D-8), but not to exceed the amount of such
9        addition modification. This subparagraph (Q) is exempt
10        from Section 250;
11            (R) An amount equal to the interest income taken
12        into account for the taxable year (net of the
13        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

 

 

HB5755- 87 -LRB097 18911 HLH 64149 b

1        taxable year under Section 203(d)(2)(D-7) for interest
2        paid, accrued, or incurred, directly or indirectly, to
3        the same person. This subparagraph (R) is exempt from
4        Section 250;
5            (S) An amount equal to the income from intangible
6        property taken into account for the taxable year (net
7        of the deductions allocable thereto) with respect to
8        transactions with (i) a foreign person who would be a
9        member of the taxpayer's unitary business group but for
10        the fact that the foreign person's business activity
11        outside the United States is 80% or more of that
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, but not to exceed the
20        addition modification required to be made for the same
21        taxable year under Section 203(d)(2)(D-8) for
22        intangible expenses and costs paid, accrued, or
23        incurred, directly or indirectly, to the same person.
24        This subparagraph (S) is exempt from Section 250; and
25            (T) For taxable years ending on or after December
26        31, 2011, in the case of a taxpayer who was required to

 

 

HB5755- 88 -LRB097 18911 HLH 64149 b

1        add back any insurance premiums under Section
2        203(d)(2)(D-9), such taxpayer may elect to subtract
3        that part of a reimbursement received from the
4        insurance company equal to the amount of the expense or
5        loss (including expenses incurred by the insurance
6        company) that would have been taken into account as a
7        deduction for federal income tax purposes if the
8        expense or loss had been uninsured. If a taxpayer makes
9        the election provided for by this subparagraph (T), the
10        insurer to which the premiums were paid must add back
11        to income the amount subtracted by the taxpayer
12        pursuant to this subparagraph (T). This subparagraph
13        (T) is exempt from the provisions of Section 250.
 
14    (e) Gross income; adjusted gross income; taxable income.
15        (1) In general. Subject to the provisions of paragraph
16    (2) and subsection (b) (3), for purposes of this Section
17    and Section 803(e), a taxpayer's gross income, adjusted
18    gross income, or taxable income for the taxable year shall
19    mean the amount of gross income, adjusted gross income or
20    taxable income properly reportable for federal income tax
21    purposes for the taxable year under the provisions of the
22    Internal Revenue Code. Taxable income may be less than
23    zero. However, for taxable years ending on or after
24    December 31, 1986, net operating loss carryforwards from
25    taxable years ending prior to December 31, 1986, may not

 

 

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1    exceed the sum of federal taxable income for the taxable
2    year before net operating loss deduction, plus the excess
3    of addition modifications over subtraction modifications
4    for the taxable year. For taxable years ending prior to
5    December 31, 1986, taxable income may never be an amount in
6    excess of the net operating loss for the taxable year as
7    defined in subsections (c) and (d) of Section 172 of the
8    Internal Revenue Code, provided that when taxable income of
9    a corporation (other than a Subchapter S corporation),
10    trust, or estate is less than zero and addition
11    modifications, other than those provided by subparagraph
12    (E) of paragraph (2) of subsection (b) for corporations or
13    subparagraph (E) of paragraph (2) of subsection (c) for
14    trusts and estates, exceed subtraction modifications, an
15    addition modification must be made under those
16    subparagraphs for any other taxable year to which the
17    taxable income less than zero (net operating loss) is
18    applied under Section 172 of the Internal Revenue Code or
19    under subparagraph (E) of paragraph (2) of this subsection
20    (e) applied in conjunction with Section 172 of the Internal
21    Revenue Code.
22        (2) Special rule. For purposes of paragraph (1) of this
23    subsection, the taxable income properly reportable for
24    federal income tax purposes shall mean:
25            (A) Certain life insurance companies. In the case
26        of a life insurance company subject to the tax imposed

 

 

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

 

 

HB5755- 91 -LRB097 18911 HLH 64149 b

1        taxable income shall be determined as if the election
2        provided by Section 243(b) (2) of the Internal Revenue
3        Code had been in effect for all such years;
4            (F) Cooperatives. In the case of a cooperative
5        corporation or association, the taxable income of such
6        organization determined in accordance with the
7        provisions of Section 1381 through 1388 of the Internal
8        Revenue Code, but without regard to the prohibition
9        against offsetting losses from patronage activities
10        against income from nonpatronage activities; except
11        that a cooperative corporation or association may make
12        an election to follow its federal income tax treatment
13        of patronage losses and nonpatronage losses. In the
14        event such election is made, such losses shall be
15        computed and carried over in a manner consistent with
16        subsection (a) of Section 207 of this Act and
17        apportioned by the apportionment factor reported by
18        the cooperative on its Illinois income tax return filed
19        for the taxable year in which the losses are incurred.
20        The election shall be effective for all taxable years
21        with original returns due on or after the date of the
22        election. In addition, the cooperative may file an
23        amended return or returns, as allowed under this Act,
24        to provide that the election shall be effective for
25        losses incurred or carried forward for taxable years
26        occurring prior to the date of the election. Once made,

 

 

HB5755- 92 -LRB097 18911 HLH 64149 b

1        the election may only be revoked upon approval of the
2        Director. The Department shall adopt rules setting
3        forth requirements for documenting the elections and
4        any resulting Illinois net loss and the standards to be
5        used by the Director in evaluating requests to revoke
6        elections. Public Act 96-932 is declaratory of
7        existing law;
8            (G) Subchapter S corporations. In the case of: (i)
9        a Subchapter S corporation for which there is in effect
10        an election for the taxable year under Section 1362 of
11        the Internal Revenue Code, the taxable income of such
12        corporation determined in accordance with Section
13        1363(b) of the Internal Revenue Code, except that
14        taxable income shall take into account those items
15        which are required by Section 1363(b)(1) of the
16        Internal Revenue Code to be separately stated; and (ii)
17        a Subchapter S corporation for which there is in effect
18        a federal election to opt out of the provisions of the
19        Subchapter S Revision Act of 1982 and have applied
20        instead the prior federal Subchapter S rules as in
21        effect on July 1, 1982, the taxable income of such
22        corporation determined in accordance with the federal
23        Subchapter S rules as in effect on July 1, 1982; and
24            (H) Partnerships. In the case of a partnership,
25        taxable income determined in accordance with Section
26        703 of the Internal Revenue Code, except that taxable

 

 

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1        income shall take into account those items which are
2        required by Section 703(a)(1) to be separately stated
3        but which would be taken into account by an individual
4        in calculating his taxable income.
5        (3) Recapture of business expenses on disposition of
6    asset or business. Notwithstanding any other law to the
7    contrary, if in prior years income from an asset or
8    business has been classified as business income and in a
9    later year is demonstrated to be non-business income, then
10    all expenses, without limitation, deducted in such later
11    year and in the 2 immediately preceding taxable years
12    related to that asset or business that generated the
13    non-business income shall be added back and recaptured as
14    business income in the year of the disposition of the asset
15    or business. Such amount shall be apportioned to Illinois
16    using the greater of the apportionment fraction computed
17    for the business under Section 304 of this Act for the
18    taxable year or the average of the apportionment fractions
19    computed for the business under Section 304 of this Act for
20    the taxable year and for the 2 immediately preceding
21    taxable years.
 
22    (f) Valuation limitation amount.
23        (1) In general. The valuation limitation amount
24    referred to in subsections (a) (2) (G), (c) (2) (I) and
25    (d)(2) (E) is an amount equal to:

 

 

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

 

 

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

 

 

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1August 1, 1969 or otherwise.
2(Source: P.A. 96-45, eff. 7-15-09; 96-120, eff. 8-4-09; 96-198,
3eff. 8-10-09; 96-328, eff. 8-11-09; 96-520, eff. 8-14-09;
496-835, eff. 12-16-09; 96-932, eff. 1-1-11; 96-935, eff.
56-21-10; 96-1214, eff. 7-22-10; 97-333, eff. 8-12-11; 97-507,
6eff. 8-23-11.)
 
7    (35 ILCS 5/223 new)
8    Sec. 223. Educational Improvement Tax Credit.
9    (a) The General Assembly finds and declares that the
10Constitution of the State of Illinois provides that a
11"fundamental goal of the People of the State is the educational
12development of all persons to the limits of their capacities",
13and that the educational development of every school student
14serves the public purposes of the State. In order to enable
15Illinois students to develop "to the limit of their
16capacities", all students must have access to expanded
17educational opportunities. This Section is in the public
18interest, for the public benefit, and serves a secular purpose.
19    (b) An educational improvement tax credit program is hereby
20established to enhance the educational opportunities available
21to all students in this State. For tax years beginning on or
22after January 1, 2012, a taxpayer shall be allowed a credit,
23not in excess of $100,000, against the tax imposed by
24subsections (a) and (b) of Section 201 of this Act for
25contributions to a qualified student assistance organization

 

 

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1in the taxable year in which the contribution is made. The
2credit shall not exceed 90% of each dollar contributed during
3the taxable year by the taxpayer. For partners, shareholders of
4Subchapter S corporations, and owners of limited liability
5companies, if the limited liability company is treated as a
6partnership for purposes of federal and State income taxation,
7there shall be allowed a credit under this Section to be
8determined in accordance with the determination of income and
9distributive share of income under Section 702 and 704 and
10Subchapter S of the Internal Revenue Code.
11    (c) In no event may any credit be claimed for amounts
12deducted pursuant to Section 170 of the Internal Revenue Code
13in arriving at taxable income.
14    (d) In no event shall a credit under this Section reduce
15the taxpayer's liability to less than zero.
16    (e) No tax credit established by this Section is allowed if
17the taxpayer designates a contribution to a student assistance
18organization for the direct benefit of any particular
19qualifying student.
20    (f) Qualified student assistance organizations shall
21provide scholarships or funding for enhanced educational
22options without limiting availability to only students of one
23school.
24    (g) By December 31 of each year, student assistance
25organizations shall report to the Illinois State Board of
26Education the number of qualifying students receiving

 

 

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1scholarships for qualified education expenses, the amount of
2each scholarship, and the school district in which each
3qualifying student in receipt of a scholarship resides.
4    (h) Student assistance organizations shall not award
5scholarships that exceed the amount of qualified educational
6expenses at the school attended.
7    (i) Student assistance organizations shall give priority
8in scholarship awards to qualifying students who received a
9scholarship the previous year, up through grade 12.
10    (j) Qualifying students receiving and using a scholarships
11awarded by a student assistance organization to attend a
12nonpublic school shall be assessed annually by a
13nationally-normed standardized test in the subjects of
14reading, math, and science, the results of which shall be made
15public while protecting the identity of individual students.
16    (k) A tax credit granted under this Section that is not
17used in the taxable year in which the contribution was made
18shall not be carried forward or carried back and is not
19refundable or transferable.
20    (l) A taxpayer must apply annually to the Department of
21Revenue and receive approval for a tax credit under this
22Section prior to making a contribution to a student assistance
23organization. Applicants must be submitted to the Department of
24Revenue no later than March 31 each year for contributions to
25be made for tax years ending on or after July 1 of that same
26year. On May 1 of each year, the Department of Revenue shall,

 

 

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1on a random basis, select applications until the total
2aggregate amount of all requested tax credits equals the
3maximum provided for in subsection (m). The Department of
4Revenue shall adopt rules pursuant to the requirements of the
5Illinois Administrative Procedure Act that set forth the
6information the Department of Revenue can require on the tax
7credit application and the manner in which the tax credit
8lottery is to be conducted.
9    (m) The total aggregate amount of all approved tax credits
10shall not exceed $30,000,000 in any State fiscal year.
11    (n) For the purposes of this Section, qualifying students
12receiving and using a scholarship awarded by a student
13assistance organization to attend a nonpublic school are
14considered nonpublic school students who have been voluntarily
15placed in a private setting by the parent or guardian.
16    (o) Funding for each school district from which a
17qualifying student uses a scholarship awarded by a student
18assistance organization to attend a nonpublic school shall be
19adjusted to account for the costs of the Educational
20Improvement Tax Credit established under this Section.
21Beginning in Fiscal Year 2012 and thereafter, the total cost of
22such scholarships used in each district shall be deducted from
23the portion of general state aid the district receives for that
24fiscal year.
25    (p) For purposes of this Section:
26    "Contribution" means a donation of cash.

 

 

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1    "Qualified student assistance organization" means a
2nonprofit entity that:
3        (1) is exempt from federal taxation under Section
4    501(c)(3) of the Internal Revenue Code of 1986, as amended;
5    and
6        (2) contributes at least 90% of its annual receipts, as
7    required by the by-laws of the organization and as
8    documented by the nonprofit organization's annual AG990-IL
9    Charitable Organization Annual Report, or, if the
10    organization is exempt from filing such a report, by a
11    report containing identical information to that contained
12    in the AG990-IL and certified by the President and
13    Treasurer of the organization, or alternatively, certified
14    by 2 trustees of the organization, either to scholarships
15    for qualifying students at a school or to enhance
16    educational options for qualifying students by providing
17    qualifying students access to secular, neutral,
18    non-ideological programs or activities outside of the
19    curriculum or academic program of a school, as long as the
20    program or activities meet the requirements set forth in
21    rules promulgated by the Illinois State Board of Education.
22    An entity that has been in existence less than 2 years
23    prior to the filing of an application under subsection (f)
24    of this Section shall meet the requirements of this
25    subsection if its charter, bylaws, or other governing
26    instrument requires that it contribute 90% of its annual

 

 

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1    receipts for the purposes described in this subsection; and
2        (3) directs at least half of its contributions to serve
3    qualifying students who reside within the boundaries of a
4    low-performing or overcrowded public school.
5    "Qualifying student" means an individual who:
6        (1) is a resident of the State of Illinois;
7        (2) is under the age of 21 during the calendar year for
8    which a credit is sought;
9        (3) is a full-time pupil enrolled in a kindergarten
10    through 12th grade education program at any school during
11    the calendar year for which a credit is sought; and
12        (4) is a child of a parent or parents, or is under the
13    legal guardianship of an individual or individuals, with a
14    base income of not more than $50,000 and resides in the
15    household with those parents or guardians, provided that if
16    there is more than one dependent member of the household
17    under the age of 21, counting the qualifying student, then
18    this annual income requirement shall be increased by
19    $10,000 for each dependent member of the household under
20    the age of 21 in excess of the one qualifying student.
21    Qualified student assistant organizations shall be
22    responsible for determining whether a student is a
23    qualifying student.
24    "School" means any public or State-recognized non-public
25elementary or secondary school in Illinois that is in
26compliance with Title VI of the Civil Rights Act of 1964 and

 

 

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1attendance at which satisfies the requirements of Section 26-1
2of the School Code.
3    "Low-performing school" means a public school that enrolls
4students in any grades kindergarten through 12, and that is
5ranked within the lowest 25% of schools statewide in terms of
6the percentage of students meeting or exceeding standards on
7the Illinois Standards Achievement Test.
8    "Overcrowded school" means a public school that:
9        (1)enrolls students in any of grades kindergarten
10    through 12;
11        (2)has a percentage of low-income students of 70% or
12    more, as identified in the most recently available School
13    Report Card published by the State Board of Education; and
14        (3)is determined by the Illinois State Board of
15    Education to be in the most severely overcrowded 10% of
16    schools in the State.
17    On or before February 1 of each year, the Illinois State
18Board of Education shall publish a list of schools that meet
19the definition of "overcrowded school".
20    "Qualified educational expenses" means a participating
21State-recognized nonpublic school's uniform tuition rate and
22fees for registration, books, and technology.
23    (q) This Section is exempt from the provisions of Section
24250.
 
25    Section 99. Effective date. This Act takes effect upon
26becoming law.