HB3157 EngrossedLRB098 10600 HLH 40863 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 Sections 304, 305, 307, 308, 502, and 709.5 as
6follows:
 
7    (35 ILCS 5/304)  (from Ch. 120, par. 3-304)
8    Sec. 304. Business income of persons other than residents.
9    (a) In general. The business income of a person other than
10a resident shall be allocated to this State if such person's
11business income is derived solely from this State. If a person
12other than a resident derives business income from this State
13and one or more other states, then, for tax years ending on or
14before December 30, 1998, and except as otherwise provided by
15this Section, such person's business income shall be
16apportioned to this State by multiplying the income by a
17fraction, the numerator of which is the sum of the property
18factor (if any), the payroll factor (if any) and 200% of the
19sales factor (if any), and the denominator of which is 4
20reduced by the number of factors other than the sales factor
21which have a denominator of zero and by an additional 2 if the
22sales factor has a denominator of zero. For tax years ending on
23or after December 31, 1998, and except as otherwise provided by

 

 

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1this Section, persons other than residents who derive business
2income from this State and one or more other states shall
3compute their apportionment factor by weighting their
4property, payroll, and sales factors as provided in subsection
5(h) of this Section.
6    (1) Property factor.
7        (A) The property factor is a fraction, the numerator of
8    which is the average value of the person's real and
9    tangible personal property owned or rented and used in the
10    trade or business in this State during the taxable year and
11    the denominator of which is the average value of all the
12    person's real and tangible personal property owned or
13    rented and used in the trade or business during the taxable
14    year.
15        (B) Property owned by the person is valued at its
16    original cost. Property rented by the person is valued at 8
17    times the net annual rental rate. Net annual rental rate is
18    the annual rental rate paid by the person less any annual
19    rental rate received by the person from sub-rentals.
20        (C) The average value of property shall be determined
21    by averaging the values at the beginning and ending of the
22    taxable year but the Director may require the averaging of
23    monthly values during the taxable year if reasonably
24    required to reflect properly the average value of the
25    person's property.
26    (2) Payroll factor.

 

 

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1        (A) The payroll factor is a fraction, the numerator of
2    which is the total amount paid in this State during the
3    taxable year by the person for compensation, and the
4    denominator of which is the total compensation paid
5    everywhere during the taxable year.
6        (B) Compensation is paid in this State if:
7            (i) The individual's service is performed entirely
8        within this State;
9            (ii) The individual's service is performed both
10        within and without this State, but the service
11        performed without this State is incidental to the
12        individual's service performed within this State; or
13            (iii) Some of the service is performed within this
14        State and either the base of operations, or if there is
15        no base of operations, the place from which the service
16        is directed or controlled is within this State, or the
17        base of operations or the place from which the service
18        is directed or controlled is not in any state in which
19        some part of the service is performed, but the
20        individual's residence is in this State.
21            (iv) Compensation paid to nonresident professional
22        athletes.
23            (a) General. The Illinois source income of a
24        nonresident individual who is a member of a
25        professional athletic team includes the portion of the
26        individual's total compensation for services performed

 

 

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1        as a member of a professional athletic team during the
2        taxable year which the number of duty days spent within
3        this State performing services for the team in any
4        manner during the taxable year bears to the total
5        number of duty days spent both within and without this
6        State during the taxable year.
7            (b) Travel days. Travel days that do not involve
8        either a game, practice, team meeting, or other similar
9        team event are not considered duty days spent in this
10        State. However, such travel days are considered in the
11        total duty days spent both within and without this
12        State.
13            (c) Definitions. For purposes of this subpart
14        (iv):
15                (1) The term "professional athletic team"
16            includes, but is not limited to, any professional
17            baseball, basketball, football, soccer, or hockey
18            team.
19                (2) The term "member of a professional
20            athletic team" includes those employees who are
21            active players, players on the disabled list, and
22            any other persons required to travel and who travel
23            with and perform services on behalf of a
24            professional athletic team on a regular basis.
25            This includes, but is not limited to, coaches,
26            managers, and trainers.

 

 

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1                (3) Except as provided in items (C) and (D) of
2            this subpart (3), the term "duty days" means all
3            days during the taxable year from the beginning of
4            the professional athletic team's official
5            pre-season training period through the last game
6            in which the team competes or is scheduled to
7            compete. Duty days shall be counted for the year in
8            which they occur, including where a team's
9            official pre-season training period through the
10            last game in which the team competes or is
11            scheduled to compete, occurs during more than one
12            tax year.
13                    (A) Duty days shall also include days on
14                which a member of a professional athletic team
15                performs service for a team on a date that does
16                not fall within the foregoing period (e.g.,
17                participation in instructional leagues, the
18                "All Star Game", or promotional "caravans").
19                Performing a service for a professional
20                athletic team includes conducting training and
21                rehabilitation activities, when such
22                activities are conducted at team facilities.
23                    (B) Also included in duty days are game
24                days, practice days, days spent at team
25                meetings, promotional caravans, preseason
26                training camps, and days served with the team

 

 

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1                through all post-season games in which the team
2                competes or is scheduled to compete.
3                    (C) Duty days for any person who joins a
4                team during the period from the beginning of
5                the professional athletic team's official
6                pre-season training period through the last
7                game in which the team competes, or is
8                scheduled to compete, shall begin on the day
9                that person joins the team. Conversely, duty
10                days for any person who leaves a team during
11                this period shall end on the day that person
12                leaves the team. Where a person switches teams
13                during a taxable year, a separate duty-day
14                calculation shall be made for the period the
15                person was with each team.
16                    (D) Days for which a member of a
17                professional athletic team is not compensated
18                and is not performing services for the team in
19                any manner, including days when such member of
20                a professional athletic team has been
21                suspended without pay and prohibited from
22                performing any services for the team, shall not
23                be treated as duty days.
24                    (E) Days for which a member of a
25                professional athletic team is on the disabled
26                list and does not conduct rehabilitation

 

 

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1                activities at facilities of the team, and is
2                not otherwise performing services for the team
3                in Illinois, shall not be considered duty days
4                spent in this State. All days on the disabled
5                list, however, are considered to be included in
6                total duty days spent both within and without
7                this State.
8                (4) The term "total compensation for services
9            performed as a member of a professional athletic
10            team" means the total compensation received during
11            the taxable year for services performed:
12                    (A) from the beginning of the official
13                pre-season training period through the last
14                game in which the team competes or is scheduled
15                to compete during that taxable year; and
16                    (B) during the taxable year on a date which
17                does not fall within the foregoing period
18                (e.g., participation in instructional leagues,
19                the "All Star Game", or promotional caravans).
20                This compensation shall include, but is not
21            limited to, salaries, wages, bonuses as described
22            in this subpart, and any other type of compensation
23            paid during the taxable year to a member of a
24            professional athletic team for services performed
25            in that year. This compensation does not include
26            strike benefits, severance pay, termination pay,

 

 

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1            contract or option year buy-out payments,
2            expansion or relocation payments, or any other
3            payments not related to services performed for the
4            team.
5                For purposes of this subparagraph, "bonuses"
6            included in "total compensation for services
7            performed as a member of a professional athletic
8            team" subject to the allocation described in
9            Section 302(c)(1) are: bonuses earned as a result
10            of play (i.e., performance bonuses) during the
11            season, including bonuses paid for championship,
12            playoff or "bowl" games played by a team, or for
13            selection to all-star league or other honorary
14            positions; and bonuses paid for signing a
15            contract, unless the payment of the signing bonus
16            is not conditional upon the signee playing any
17            games for the team or performing any subsequent
18            services for the team or even making the team, the
19            signing bonus is payable separately from the
20            salary and any other compensation, and the signing
21            bonus is nonrefundable.
22    (3) Sales factor.
23        (A) The sales factor is a fraction, the numerator of
24    which is the total sales of the person in this State during
25    the taxable year, and the denominator of which is the total
26    sales of the person everywhere during the taxable year.

 

 

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1        (B) Sales of tangible personal property are in this
2    State if:
3            (i) The property is delivered or shipped to a
4        purchaser, other than the United States government,
5        within this State regardless of the f. o. b. point or
6        other conditions of the sale; or
7            (ii) The property is shipped from an office, store,
8        warehouse, factory or other place of storage in this
9        State and either the purchaser is the United States
10        government or the person is not taxable in the state of
11        the purchaser; provided, however, that premises owned
12        or leased by a person who has independently contracted
13        with the seller for the printing of newspapers,
14        periodicals or books shall not be deemed to be an
15        office, store, warehouse, factory or other place of
16        storage for purposes of this Section. Sales of tangible
17        personal property are not in this State if the seller
18        and purchaser would be members of the same unitary
19        business group but for the fact that either the seller
20        or purchaser is a person with 80% or more of total
21        business activity outside of the United States and the
22        property is purchased for resale.
23        (B-1) Patents, copyrights, trademarks, and similar
24    items of intangible personal property.
25            (i) Gross receipts from the licensing, sale, or
26        other disposition of a patent, copyright, trademark,

 

 

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1        or similar item of intangible personal property, other
2        than gross receipts governed by paragraph (B-7) of this
3        item (3), are in this State to the extent the item is
4        utilized in this State during the year the gross
5        receipts are included in gross income.
6            (ii) Place of utilization.
7                (I) A patent is utilized in a state to the
8            extent that it is employed in production,
9            fabrication, manufacturing, or other processing in
10            the state or to the extent that a patented product
11            is produced in the state. If a patent is utilized
12            in more than one state, the extent to which it is
13            utilized in any one state shall be a fraction equal
14            to the gross receipts of the licensee or purchaser
15            from sales or leases of items produced,
16            fabricated, manufactured, or processed within that
17            state using the patent and of patented items
18            produced within that state, divided by the total of
19            such gross receipts for all states in which the
20            patent is utilized.
21                (II) A copyright is utilized in a state to the
22            extent that printing or other publication
23            originates in the state. If a copyright is utilized
24            in more than one state, the extent to which it is
25            utilized in any one state shall be a fraction equal
26            to the gross receipts from sales or licenses of

 

 

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1            materials printed or published in that state
2            divided by the total of such gross receipts for all
3            states in which the copyright is utilized.
4                (III) Trademarks and other items of intangible
5            personal property governed by this paragraph (B-1)
6            are utilized in the state in which the commercial
7            domicile of the licensee or purchaser is located.
8            (iii) If the state of utilization of an item of
9        property governed by this paragraph (B-1) cannot be
10        determined from the taxpayer's books and records or
11        from the books and records of any person related to the
12        taxpayer within the meaning of Section 267(b) of the
13        Internal Revenue Code, 26 U.S.C. 267, the gross
14        receipts attributable to that item shall be excluded
15        from both the numerator and the denominator of the
16        sales factor.
17        (B-2) Gross receipts from the license, sale, or other
18    disposition of patents, copyrights, trademarks, and
19    similar items of intangible personal property, other than
20    gross receipts governed by paragraph (B-7) of this item
21    (3), may be included in the numerator or denominator of the
22    sales factor only if gross receipts from licenses, sales,
23    or other disposition of such items comprise more than 50%
24    of the taxpayer's total gross receipts included in gross
25    income during the tax year and during each of the 2
26    immediately preceding tax years; provided that, when a

 

 

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1    taxpayer is a member of a unitary business group, such
2    determination shall be made on the basis of the gross
3    receipts of the entire unitary business group.
4        (B-5) For taxable years ending on or after December 31,
5    2008, except as provided in subsections (ii) through (vii),
6    receipts from the sale of telecommunications service or
7    mobile telecommunications service are in this State if the
8    customer's service address is in this State.
9            (i) For purposes of this subparagraph (B-5), the
10        following terms have the following meanings:
11            "Ancillary services" means services that are
12        associated with or incidental to the provision of
13        "telecommunications services", including but not
14        limited to "detailed telecommunications billing",
15        "directory assistance", "vertical service", and "voice
16        mail services".
17            "Air-to-Ground Radiotelephone service" means a
18        radio service, as that term is defined in 47 CFR 22.99,
19        in which common carriers are authorized to offer and
20        provide radio telecommunications service for hire to
21        subscribers in aircraft.
22            "Call-by-call Basis" means any method of charging
23        for telecommunications services where the price is
24        measured by individual calls.
25            "Communications Channel" means a physical or
26        virtual path of communications over which signals are

 

 

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1        transmitted between or among customer channel
2        termination points.
3            "Conference bridging service" means an "ancillary
4        service" that links two or more participants of an
5        audio or video conference call and may include the
6        provision of a telephone number. "Conference bridging
7        service" does not include the "telecommunications
8        services" used to reach the conference bridge.
9            "Customer Channel Termination Point" means the
10        location where the customer either inputs or receives
11        the communications.
12            "Detailed telecommunications billing service"
13        means an "ancillary service" of separately stating
14        information pertaining to individual calls on a
15        customer's billing statement.
16            "Directory assistance" means an "ancillary
17        service" of providing telephone number information,
18        and/or address information.
19            "Home service provider" means the facilities based
20        carrier or reseller with which the customer contracts
21        for the provision of mobile telecommunications
22        services.
23            "Mobile telecommunications service" means
24        commercial mobile radio service, as defined in Section
25        20.3 of Title 47 of the Code of Federal Regulations as
26        in effect on June 1, 1999.

 

 

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1            "Place of primary use" means the street address
2        representative of where the customer's use of the
3        telecommunications service primarily occurs, which
4        must be the residential street address or the primary
5        business street address of the customer. In the case of
6        mobile telecommunications services, "place of primary
7        use" must be within the licensed service area of the
8        home service provider.
9            "Post-paid telecommunication service" means the
10        telecommunications service obtained by making a
11        payment on a call-by-call basis either through the use
12        of a credit card or payment mechanism such as a bank
13        card, travel card, credit card, or debit card, or by
14        charge made to a telephone number which is not
15        associated with the origination or termination of the
16        telecommunications service. A post-paid calling
17        service includes telecommunications service, except a
18        prepaid wireless calling service, that would be a
19        prepaid calling service except it is not exclusively a
20        telecommunication service.
21            "Prepaid telecommunication service" means the
22        right to access exclusively telecommunications
23        services, which must be paid for in advance and which
24        enables the origination of calls using an access number
25        or authorization code, whether manually or
26        electronically dialed, and that is sold in

 

 

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1        predetermined units or dollars of which the number
2        declines with use in a known amount.
3            "Prepaid Mobile telecommunication service" means a
4        telecommunications service that provides the right to
5        utilize mobile wireless service as well as other
6        non-telecommunication services, including but not
7        limited to ancillary services, which must be paid for
8        in advance that is sold in predetermined units or
9        dollars of which the number declines with use in a
10        known amount.
11            "Private communication service" means a
12        telecommunication service that entitles the customer
13        to exclusive or priority use of a communications
14        channel or group of channels between or among
15        termination points, regardless of the manner in which
16        such channel or channels are connected, and includes
17        switching capacity, extension lines, stations, and any
18        other associated services that are provided in
19        connection with the use of such channel or channels.
20            "Service address" means:
21                (a) The location of the telecommunications
22            equipment to which a customer's call is charged and
23            from which the call originates or terminates,
24            regardless of where the call is billed or paid;
25                (b) If the location in line (a) is not known,
26            service address means the origination point of the

 

 

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1            signal of the telecommunications services first
2            identified by either the seller's
3            telecommunications system or in information
4            received by the seller from its service provider
5            where the system used to transport such signals is
6            not that of the seller; and
7                (c) If the locations in line (a) and line (b)
8            are not known, the service address means the
9            location of the customer's place of primary use.
10            "Telecommunications service" means the electronic
11        transmission, conveyance, or routing of voice, data,
12        audio, video, or any other information or signals to a
13        point, or between or among points. The term
14        "telecommunications service" includes such
15        transmission, conveyance, or routing in which computer
16        processing applications are used to act on the form,
17        code or protocol of the content for purposes of
18        transmission, conveyance or routing without regard to
19        whether such service is referred to as voice over
20        Internet protocol services or is classified by the
21        Federal Communications Commission as enhanced or value
22        added. "Telecommunications service" does not include:
23                (a) Data processing and information services
24            that allow data to be generated, acquired, stored,
25            processed, or retrieved and delivered by an
26            electronic transmission to a purchaser when such

 

 

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1            purchaser's primary purpose for the underlying
2            transaction is the processed data or information;
3                (b) Installation or maintenance of wiring or
4            equipment on a customer's premises;
5                (c) Tangible personal property;
6                (d) Advertising, including but not limited to
7            directory advertising.
8                (e) Billing and collection services provided
9            to third parties;
10                (f) Internet access service;
11                (g) Radio and television audio and video
12            programming services, regardless of the medium,
13            including the furnishing of transmission,
14            conveyance and routing of such services by the
15            programming service provider. Radio and television
16            audio and video programming services shall include
17            but not be limited to cable service as defined in
18            47 USC 522(6) and audio and video programming
19            services delivered by commercial mobile radio
20            service providers, as defined in 47 CFR 20.3;
21                (h) "Ancillary services"; or
22                (i) Digital products "delivered
23            electronically", including but not limited to
24            software, music, video, reading materials or ring
25            tones.
26            "Vertical service" means an "ancillary service"

 

 

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1        that is offered in connection with one or more
2        "telecommunications services", which offers advanced
3        calling features that allow customers to identify
4        callers and to manage multiple calls and call
5        connections, including "conference bridging services".
6            "Voice mail service" means an "ancillary service"
7        that enables the customer to store, send or receive
8        recorded messages. "Voice mail service" does not
9        include any "vertical services" that the customer may
10        be required to have in order to utilize the "voice mail
11        service".
12            (ii) Receipts from the sale of telecommunications
13        service sold on an individual call-by-call basis are in
14        this State if either of the following applies:
15                (a) The call both originates and terminates in
16            this State.
17                (b) The call either originates or terminates
18            in this State and the service address is located in
19            this State.
20            (iii) Receipts from the sale of postpaid
21        telecommunications service at retail are in this State
22        if the origination point of the telecommunication
23        signal, as first identified by the service provider's
24        telecommunication system or as identified by
25        information received by the seller from its service
26        provider if the system used to transport

 

 

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1        telecommunication signals is not the seller's, is
2        located in this State.
3            (iv) Receipts from the sale of prepaid
4        telecommunications service or prepaid mobile
5        telecommunications service at retail are in this State
6        if the purchaser obtains the prepaid card or similar
7        means of conveyance at a location in this State.
8        Receipts from recharging a prepaid telecommunications
9        service or mobile telecommunications service is in
10        this State if the purchaser's billing information
11        indicates a location in this State.
12            (v) Receipts from the sale of private
13        communication services are in this State as follows:
14                (a) 100% of receipts from charges imposed at
15            each channel termination point in this State.
16                (b) 100% of receipts from charges for the total
17            channel mileage between each channel termination
18            point in this State.
19                (c) 50% of the total receipts from charges for
20            service segments when those segments are between 2
21            customer channel termination points, 1 of which is
22            located in this State and the other is located
23            outside of this State, which segments are
24            separately charged.
25                (d) The receipts from charges for service
26            segments with a channel termination point located

 

 

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1            in this State and in two or more other states, and
2            which segments are not separately billed, are in
3            this State based on a percentage determined by
4            dividing the number of customer channel
5            termination points in this State by the total
6            number of customer channel termination points.
7            (vi) Receipts from charges for ancillary services
8        for telecommunications service sold to customers at
9        retail are in this State if the customer's primary
10        place of use of telecommunications services associated
11        with those ancillary services is in this State. If the
12        seller of those ancillary services cannot determine
13        where the associated telecommunications are located,
14        then the ancillary services shall be based on the
15        location of the purchaser.
16            (vii) Receipts to access a carrier's network or
17        from the sale of telecommunication services or
18        ancillary services for resale are in this State as
19        follows:
20                (a) 100% of the receipts from access fees
21            attributable to intrastate telecommunications
22            service that both originates and terminates in
23            this State.
24                (b) 50% of the receipts from access fees
25            attributable to interstate telecommunications
26            service if the interstate call either originates

 

 

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1            or terminates in this State.
2                (c) 100% of the receipts from interstate end
3            user access line charges, if the customer's
4            service address is in this State. As used in this
5            subdivision, "interstate end user access line
6            charges" includes, but is not limited to, the
7            surcharge approved by the federal communications
8            commission and levied pursuant to 47 CFR 69.
9                (d) Gross receipts from sales of
10            telecommunication services or from ancillary
11            services for telecommunications services sold to
12            other telecommunication service providers for
13            resale shall be sourced to this State using the
14            apportionment concepts used for non-resale
15            receipts of telecommunications services if the
16            information is readily available to make that
17            determination. If the information is not readily
18            available, then the taxpayer may use any other
19            reasonable and consistent method.
20        (B-7) For taxable years ending on or after December 31,
21    2008, receipts from the sale of broadcasting services are
22    in this State if the broadcasting services are received in
23    this State. For purposes of this paragraph (B-7), the
24    following terms have the following meanings:
25            "Advertising revenue" means consideration received
26        by the taxpayer in exchange for broadcasting services

 

 

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1        or allowing the broadcasting of commercials or
2        announcements in connection with the broadcasting of
3        film or radio programming, from sponsorships of the
4        programming, or from product placements in the
5        programming.
6            "Audience factor" means the ratio that the
7        audience or subscribers located in this State of a
8        station, a network, or a cable system bears to the
9        total audience or total subscribers for that station,
10        network, or cable system. The audience factor for film
11        or radio programming shall be determined by reference
12        to the books and records of the taxpayer or by
13        reference to published rating statistics provided the
14        method used by the taxpayer is consistently used from
15        year to year for this purpose and fairly represents the
16        taxpayer's activity in this State.
17            "Broadcast" or "broadcasting" or "broadcasting
18        services" means the transmission or provision of film
19        or radio programming, whether through the public
20        airwaves, by cable, by direct or indirect satellite
21        transmission, or by any other means of communication,
22        either through a station, a network, or a cable system.
23            "Film" or "film programming" means the broadcast
24        on television of any and all performances, events, or
25        productions, including but not limited to news,
26        sporting events, plays, stories, or other literary,

 

 

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1        commercial, educational, or artistic works, either
2        live or through the use of video tape, disc, or any
3        other type of format or medium. Each episode of a
4        series of films produced for television shall
5        constitute separate "film" notwithstanding that the
6        series relates to the same principal subject and is
7        produced during one or more tax periods.
8            "Radio" or "radio programming" means the broadcast
9        on radio of any and all performances, events, or
10        productions, including but not limited to news,
11        sporting events, plays, stories, or other literary,
12        commercial, educational, or artistic works, either
13        live or through the use of an audio tape, disc, or any
14        other format or medium. Each episode in a series of
15        radio programming produced for radio broadcast shall
16        constitute a separate "radio programming"
17        notwithstanding that the series relates to the same
18        principal subject and is produced during one or more
19        tax periods.
20                (i) In the case of advertising revenue from
21            broadcasting, the customer is the advertiser and
22            the service is received in this State if the
23            commercial domicile of the advertiser is in this
24            State.
25                (ii) In the case where film or radio
26            programming is broadcast by a station, a network,

 

 

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1            or a cable system for a fee or other remuneration
2            received from the recipient of the broadcast, the
3            portion of the service that is received in this
4            State is measured by the portion of the recipients
5            of the broadcast located in this State.
6            Accordingly, the fee or other remuneration for
7            such service that is included in the Illinois
8            numerator of the sales factor is the total of those
9            fees or other remuneration received from
10            recipients in Illinois. For purposes of this
11            paragraph, a taxpayer may determine the location
12            of the recipients of its broadcast using the
13            address of the recipient shown in its contracts
14            with the recipient or using the billing address of
15            the recipient in the taxpayer's records.
16                (iii) In the case where film or radio
17            programming is broadcast by a station, a network,
18            or a cable system for a fee or other remuneration
19            from the person providing the programming, the
20            portion of the broadcast service that is received
21            by such station, network, or cable system in this
22            State is measured by the portion of recipients of
23            the broadcast located in this State. Accordingly,
24            the amount of revenue related to such an
25            arrangement that is included in the Illinois
26            numerator of the sales factor is the total fee or

 

 

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1            other total remuneration from the person providing
2            the programming related to that broadcast
3            multiplied by the Illinois audience factor for
4            that broadcast.
5                (iv) In the case where film or radio
6            programming is provided by a taxpayer that is a
7            network or station to a customer for broadcast in
8            exchange for a fee or other remuneration from that
9            customer the broadcasting service is received at
10            the location of the office of the customer from
11            which the services were ordered in the regular
12            course of the customer's trade or business.
13            Accordingly, in such a case the revenue derived by
14            the taxpayer that is included in the taxpayer's
15            Illinois numerator of the sales factor is the
16            revenue from such customers who receive the
17            broadcasting service in Illinois.
18                (v) In the case where film or radio programming
19            is provided by a taxpayer that is not a network or
20            station to another person for broadcasting in
21            exchange for a fee or other remuneration from that
22            person, the broadcasting service is received at
23            the location of the office of the customer from
24            which the services were ordered in the regular
25            course of the customer's trade or business.
26            Accordingly, in such a case the revenue derived by

 

 

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1            the taxpayer that is included in the taxpayer's
2            Illinois numerator of the sales factor is the
3            revenue from such customers who receive the
4            broadcasting service in Illinois.
5        (C) For taxable years ending before December 31, 2008,
6    sales, other than sales governed by paragraphs (B), (B-1),
7    and (B-2), are in this State if:
8            (i) The income-producing activity is performed in
9        this State; or
10            (ii) The income-producing activity is performed
11        both within and without this State and a greater
12        proportion of the income-producing activity is
13        performed within this State than without this State,
14        based on performance costs.
15        (C-5) For taxable years ending on or after December 31,
16    2008, sales, other than sales governed by paragraphs (B),
17    (B-1), (B-2), (B-5), and (B-7), are in this State if any of
18    the following criteria are met:
19            (i) Sales from the sale or lease of real property
20        are in this State if the property is located in this
21        State.
22            (ii) Sales from the lease or rental of tangible
23        personal property are in this State if the property is
24        located in this State during the rental period. Sales
25        from the lease or rental of tangible personal property
26        that is characteristically moving property, including,

 

 

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1        but not limited to, motor vehicles, rolling stock,
2        aircraft, vessels, or mobile equipment are in this
3        State to the extent that the property is used in this
4        State.
5            (iii) In the case of interest, net gains (but not
6        less than zero) and other items of income from
7        intangible personal property, the sale is in this State
8        if:
9                (a) in the case of a taxpayer who is a dealer
10            in the item of intangible personal property within
11            the meaning of Section 475 of the Internal Revenue
12            Code, the income or gain is received from a
13            customer in this State. For purposes of this
14            subparagraph, a customer is in this State if the
15            customer is an individual, trust or estate who is a
16            resident of this State and, for all other
17            customers, if the customer's commercial domicile
18            is in this State. Unless the dealer has actual
19            knowledge of the residence or commercial domicile
20            of a customer during a taxable year, the customer
21            shall be deemed to be a customer in this State if
22            the billing address of the customer, as shown in
23            the records of the dealer, is in this State; or
24                (b) in all other cases, if the
25            income-producing activity of the taxpayer is
26            performed in this State or, if the

 

 

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1            income-producing activity of the taxpayer is
2            performed both within and without this State, if a
3            greater proportion of the income-producing
4            activity of the taxpayer is performed within this
5            State than in any other state, based on performance
6            costs.
7            (iv) Sales of services are in this State if the
8        services are received in this State. For the purposes
9        of this section, gross receipts from the performance of
10        services provided to a corporation, partnership, or
11        trust may only be attributed to a state where that
12        corporation, partnership, or trust has a fixed place of
13        business. If the state where the services are received
14        is not readily determinable or is a state where the
15        corporation, partnership, or trust receiving the
16        service does not have a fixed place of business, the
17        services shall be deemed to be received at the location
18        of the office of the customer from which the services
19        were ordered in the regular course of the customer's
20        trade or business. If the ordering office cannot be
21        determined, the services shall be deemed to be received
22        at the office of the customer to which the services are
23        billed. If the taxpayer is not taxable in the state in
24        which the services are received, the sale must be
25        excluded from both the numerator and the denominator of
26        the sales factor. The Department shall adopt rules

 

 

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1        prescribing where specific types of service are
2        received, including, but not limited to, publishing,
3        and utility service.
4        (D) For taxable years ending on or after December 31,
5    1995, the following items of income shall not be included
6    in the numerator or denominator of the sales factor:
7    dividends; amounts included under Section 78 of the
8    Internal Revenue Code; and Subpart F income as defined in
9    Section 952 of the Internal Revenue Code. No inference
10    shall be drawn from the enactment of this paragraph (D) in
11    construing this Section for taxable years ending before
12    December 31, 1995.
13        (E) Paragraphs (B-1) and (B-2) shall apply to tax years
14    ending on or after December 31, 1999, provided that a
15    taxpayer may elect to apply the provisions of these
16    paragraphs to prior tax years. Such election shall be made
17    in the form and manner prescribed by the Department, shall
18    be irrevocable, and shall apply to all tax years; provided
19    that, if a taxpayer's Illinois income tax liability for any
20    tax year, as assessed under Section 903 prior to January 1,
21    1999, was computed in a manner contrary to the provisions
22    of paragraphs (B-1) or (B-2), no refund shall be payable to
23    the taxpayer for that tax year to the extent such refund is
24    the result of applying the provisions of paragraph (B-1) or
25    (B-2) retroactively. In the case of a unitary business
26    group, such election shall apply to all members of such

 

 

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1    group for every tax year such group is in existence, but
2    shall not apply to any taxpayer for any period during which
3    that taxpayer is not a member of such group.
4    (b) Insurance companies.
5        (1) In general. Except as otherwise provided by
6    paragraph (2), business income of an insurance company for
7    a taxable year shall be apportioned to this State by
8    multiplying such income by a fraction, the numerator of
9    which is the direct premiums written for insurance upon
10    property or risk in this State, and the denominator of
11    which is the direct premiums written for insurance upon
12    property or risk everywhere. For purposes of this
13    subsection, the term "direct premiums written" means the
14    total amount of direct premiums written, assessments and
15    annuity considerations as reported for the taxable year on
16    the annual statement filed by the company with the Illinois
17    Director of Insurance in the form approved by the National
18    Convention of Insurance Commissioners or such other form as
19    may be prescribed in lieu thereof.
20        (2) Reinsurance. If the principal source of premiums
21    written by an insurance company consists of premiums for
22    reinsurance accepted by it, the business income of such
23    company shall be apportioned to this State by multiplying
24    such income by a fraction, the numerator of which is the
25    sum of (i) direct premiums written for insurance upon
26    property or risk in this State, plus (ii) premiums written

 

 

HB3157 Engrossed- 31 -LRB098 10600 HLH 40863 b

1    for reinsurance accepted in respect of property or risk in
2    this State, and the denominator of which is the sum of
3    (iii) direct premiums written for insurance upon property
4    or risk everywhere, plus (iv) premiums written for
5    reinsurance accepted in respect of property or risk
6    everywhere. For purposes of this paragraph, premiums
7    written for reinsurance accepted in respect of property or
8    risk in this State, whether or not otherwise determinable,
9    may, at the election of the company, be determined on the
10    basis of the proportion which premiums written for
11    reinsurance accepted from companies commercially domiciled
12    in Illinois bears to premiums written for reinsurance
13    accepted from all sources, or, alternatively, in the
14    proportion which the sum of the direct premiums written for
15    insurance upon property or risk in this State by each
16    ceding company from which reinsurance is accepted bears to
17    the sum of the total direct premiums written by each such
18    ceding company for the taxable year. The election made by a
19    company under this paragraph for its first taxable year
20    ending on or after December 31, 2011, shall be binding for
21    that company for that taxable year and for all subsequent
22    taxable years, and may be altered only with the written
23    permission of the Department, which shall not be
24    unreasonably withheld.
25    (c) Financial organizations.
26        (1) In general. For taxable years ending before

 

 

HB3157 Engrossed- 32 -LRB098 10600 HLH 40863 b

1    December 31, 2008, business income of a financial
2    organization shall be apportioned to this State by
3    multiplying such income by a fraction, the numerator of
4    which is its business income from sources within this
5    State, and the denominator of which is its business income
6    from all sources. For the purposes of this subsection, the
7    business income of a financial organization from sources
8    within this State is the sum of the amounts referred to in
9    subparagraphs (A) through (E) following, but excluding the
10    adjusted income of an international banking facility as
11    determined in paragraph (2):
12            (A) Fees, commissions or other compensation for
13        financial services rendered within this State;
14            (B) Gross profits from trading in stocks, bonds or
15        other securities managed within this State;
16            (C) Dividends, and interest from Illinois
17        customers, which are received within this State;
18            (D) Interest charged to customers at places of
19        business maintained within this State for carrying
20        debit balances of margin accounts, without deduction
21        of any costs incurred in carrying such accounts; and
22            (E) Any other gross income resulting from the
23        operation as a financial organization within this
24        State. In computing the amounts referred to in
25        paragraphs (A) through (E) of this subsection, any
26        amount received by a member of an affiliated group

 

 

HB3157 Engrossed- 33 -LRB098 10600 HLH 40863 b

1        (determined under Section 1504(a) of the Internal
2        Revenue Code but without reference to whether any such
3        corporation is an "includible corporation" under
4        Section 1504(b) of the Internal Revenue Code) from
5        another member of such group shall be included only to
6        the extent such amount exceeds expenses of the
7        recipient directly related thereto.
8        (2) International Banking Facility. For taxable years
9    ending before December 31, 2008:
10            (A) Adjusted Income. The adjusted income of an
11        international banking facility is its income reduced
12        by the amount of the floor amount.
13            (B) Floor Amount. The floor amount shall be the
14        amount, if any, determined by multiplying the income of
15        the international banking facility by a fraction, not
16        greater than one, which is determined as follows:
17                (i) The numerator shall be:
18                The average aggregate, determined on a
19            quarterly basis, of the financial organization's
20            loans to banks in foreign countries, to foreign
21            domiciled borrowers (except where secured
22            primarily by real estate) and to foreign
23            governments and other foreign official
24            institutions, as reported for its branches,
25            agencies and offices within the state on its
26            "Consolidated Report of Condition", Schedule A,

 

 

HB3157 Engrossed- 34 -LRB098 10600 HLH 40863 b

1            Lines 2.c., 5.b., and 7.a., which was filed with
2            the Federal Deposit Insurance Corporation and
3            other regulatory authorities, for the year 1980,
4            minus
5                The average aggregate, determined on a
6            quarterly basis, of such loans (other than loans of
7            an international banking facility), as reported by
8            the financial institution for its branches,
9            agencies and offices within the state, on the
10            corresponding Schedule and lines of the
11            Consolidated Report of Condition for the current
12            taxable year, provided, however, that in no case
13            shall the amount determined in this clause (the
14            subtrahend) exceed the amount determined in the
15            preceding clause (the minuend); and
16                (ii) the denominator shall be the average
17            aggregate, determined on a quarterly basis, of the
18            international banking facility's loans to banks in
19            foreign countries, to foreign domiciled borrowers
20            (except where secured primarily by real estate)
21            and to foreign governments and other foreign
22            official institutions, which were recorded in its
23            financial accounts for the current taxable year.
24            (C) Change to Consolidated Report of Condition and
25        in Qualification. In the event the Consolidated Report
26        of Condition which is filed with the Federal Deposit

 

 

HB3157 Engrossed- 35 -LRB098 10600 HLH 40863 b

1        Insurance Corporation and other regulatory authorities
2        is altered so that the information required for
3        determining the floor amount is not found on Schedule
4        A, lines 2.c., 5.b. and 7.a., the financial institution
5        shall notify the Department and the Department may, by
6        regulations or otherwise, prescribe or authorize the
7        use of an alternative source for such information. The
8        financial institution shall also notify the Department
9        should its international banking facility fail to
10        qualify as such, in whole or in part, or should there
11        be any amendment or change to the Consolidated Report
12        of Condition, as originally filed, to the extent such
13        amendment or change alters the information used in
14        determining the floor amount.
15        (3) For taxable years ending on or after December 31,
16    2008, the business income of a financial organization shall
17    be apportioned to this State by multiplying such income by
18    a fraction, the numerator of which is its gross receipts
19    from sources in this State or otherwise attributable to
20    this State's marketplace and the denominator of which is
21    its gross receipts everywhere during the taxable year.
22    "Gross receipts" for purposes of this subparagraph (3)
23    means gross income, including net taxable gain on
24    disposition of assets, including securities and money
25    market instruments, when derived from transactions and
26    activities in the regular course of the financial

 

 

HB3157 Engrossed- 36 -LRB098 10600 HLH 40863 b

1    organization's trade or business. The following examples
2    are illustrative:
3            (i) Receipts from the lease or rental of real or
4        tangible personal property are in this State if the
5        property is located in this State during the rental
6        period. Receipts from the lease or rental of tangible
7        personal property that is characteristically moving
8        property, including, but not limited to, motor
9        vehicles, rolling stock, aircraft, vessels, or mobile
10        equipment are from sources in this State to the extent
11        that the property is used in this State.
12            (ii) Interest income, commissions, fees, gains on
13        disposition, and other receipts from assets in the
14        nature of loans that are secured primarily by real
15        estate or tangible personal property are from sources
16        in this State if the security is located in this State.
17            (iii) Interest income, commissions, fees, gains on
18        disposition, and other receipts from consumer loans
19        that are not secured by real or tangible personal
20        property are from sources in this State if the debtor
21        is a resident of this State.
22            (iv) Interest income, commissions, fees, gains on
23        disposition, and other receipts from commercial loans
24        and installment obligations that are not secured by
25        real or tangible personal property are from sources in
26        this State if the proceeds of the loan are to be

 

 

HB3157 Engrossed- 37 -LRB098 10600 HLH 40863 b

1        applied in this State. If it cannot be determined where
2        the funds are to be applied, the income and receipts
3        are from sources in this State if the office of the
4        borrower from which the loan was negotiated in the
5        regular course of business is located in this State. If
6        the location of this office cannot be determined, the
7        income and receipts shall be excluded from the
8        numerator and denominator of the sales factor.
9            (v) Interest income, fees, gains on disposition,
10        service charges, merchant discount income, and other
11        receipts from credit card receivables are from sources
12        in this State if the card charges are regularly billed
13        to a customer in this State.
14            (vi) Receipts from the performance of services,
15        including, but not limited to, fiduciary, advisory,
16        and brokerage services, are in this State if the
17        services are received in this State within the meaning
18        of subparagraph (a)(3)(C-5)(iv) of this Section.
19            (vii) Receipts from the issuance of travelers
20        checks and money orders are from sources in this State
21        if the checks and money orders are issued from a
22        location within this State.
23            (viii) Receipts from investment assets and
24        activities and trading assets and activities are
25        included in the receipts factor as follows:
26                (1) Interest, dividends, net gains (but not

 

 

HB3157 Engrossed- 38 -LRB098 10600 HLH 40863 b

1            less than zero) and other income from investment
2            assets and activities from trading assets and
3            activities shall be included in the receipts
4            factor. Investment assets and activities and
5            trading assets and activities include but are not
6            limited to: investment securities; trading account
7            assets; federal funds; securities purchased and
8            sold under agreements to resell or repurchase;
9            options; futures contracts; forward contracts;
10            notional principal contracts such as swaps;
11            equities; and foreign currency transactions. With
12            respect to the investment and trading assets and
13            activities described in subparagraphs (A) and (B)
14            of this paragraph, the receipts factor shall
15            include the amounts described in such
16            subparagraphs.
17                    (A) The receipts factor shall include the
18                amount by which interest from federal funds
19                sold and securities purchased under resale
20                agreements exceeds interest expense on federal
21                funds purchased and securities sold under
22                repurchase agreements.
23                    (B) The receipts factor shall include the
24                amount by which interest, dividends, gains and
25                other income from trading assets and
26                activities, including but not limited to

 

 

HB3157 Engrossed- 39 -LRB098 10600 HLH 40863 b

1                assets and activities in the matched book, in
2                the arbitrage book, and foreign currency
3                transactions, exceed amounts paid in lieu of
4                interest, amounts paid in lieu of dividends,
5                and losses from such assets and activities.
6                (2) The numerator of the receipts factor
7            includes interest, dividends, net gains (but not
8            less than zero), and other income from investment
9            assets and activities and from trading assets and
10            activities described in paragraph (1) of this
11            subsection that are attributable to this State.
12                    (A) The amount of interest, dividends, net
13                gains (but not less than zero), and other
14                income from investment assets and activities
15                in the investment account to be attributed to
16                this State and included in the numerator is
17                determined by multiplying all such income from
18                such assets and activities by a fraction, the
19                numerator of which is the gross income from
20                such assets and activities which are properly
21                assigned to a fixed place of business of the
22                taxpayer within this State and the denominator
23                of which is the gross income from all such
24                assets and activities.
25                    (B) The amount of interest from federal
26                funds sold and purchased and from securities

 

 

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1                purchased under resale agreements and
2                securities sold under repurchase agreements
3                attributable to this State and included in the
4                numerator is determined by multiplying the
5                amount described in subparagraph (A) of
6                paragraph (1) of this subsection from such
7                funds and such securities by a fraction, the
8                numerator of which is the gross income from
9                such funds and such securities which are
10                properly assigned to a fixed place of business
11                of the taxpayer within this State and the
12                denominator of which is the gross income from
13                all such funds and such securities.
14                    (C) The amount of interest, dividends,
15                gains, and other income from trading assets and
16                activities, including but not limited to
17                assets and activities in the matched book, in
18                the arbitrage book and foreign currency
19                transactions (but excluding amounts described
20                in subparagraphs (A) or (B) of this paragraph),
21                attributable to this State and included in the
22                numerator is determined by multiplying the
23                amount described in subparagraph (B) of
24                paragraph (1) of this subsection by a fraction,
25                the numerator of which is the gross income from
26                such trading assets and activities which are

 

 

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1                properly assigned to a fixed place of business
2                of the taxpayer within this State and the
3                denominator of which is the gross income from
4                all such assets and activities.
5                    (D) Properly assigned, for purposes of
6                this paragraph (2) of this subsection, means
7                the investment or trading asset or activity is
8                assigned to the fixed place of business with
9                which it has a preponderance of substantive
10                contacts. An investment or trading asset or
11                activity assigned by the taxpayer to a fixed
12                place of business without the State shall be
13                presumed to have been properly assigned if:
14                        (i) the taxpayer has assigned, in the
15                    regular course of its business, such asset
16                    or activity on its records to a fixed place
17                    of business consistent with federal or
18                    state regulatory requirements;
19                        (ii) such assignment on its records is
20                    based upon substantive contacts of the
21                    asset or activity to such fixed place of
22                    business; and
23                        (iii) the taxpayer uses such records
24                    reflecting assignment of such assets or
25                    activities for the filing of all state and
26                    local tax returns for which an assignment

 

 

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1                    of such assets or activities to a fixed
2                    place of business is required.
3                    (E) The presumption of proper assignment
4                of an investment or trading asset or activity
5                provided in subparagraph (D) of paragraph (2)
6                of this subsection may be rebutted upon a
7                showing by the Department, supported by a
8                preponderance of the evidence, that the
9                preponderance of substantive contacts
10                regarding such asset or activity did not occur
11                at the fixed place of business to which it was
12                assigned on the taxpayer's records. If the
13                fixed place of business that has a
14                preponderance of substantive contacts cannot
15                be determined for an investment or trading
16                asset or activity to which the presumption in
17                subparagraph (D) of paragraph (2) of this
18                subsection does not apply or with respect to
19                which that presumption has been rebutted, that
20                asset or activity is properly assigned to the
21                state in which the taxpayer's commercial
22                domicile is located. For purposes of this
23                subparagraph (E), it shall be presumed,
24                subject to rebuttal, that taxpayer's
25                commercial domicile is in the state of the
26                United States or the District of Columbia to

 

 

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1                which the greatest number of employees are
2                regularly connected with the management of the
3                investment or trading income or out of which
4                they are working, irrespective of where the
5                services of such employees are performed, as of
6                the last day of the taxable year.
7        (4) (Blank).
8        (5) (Blank).
9    (c-1) Federally regulated exchanges. For taxable years
10ending on or after December 31, 2012, business income of a
11federally regulated exchange shall, at the option of the
12federally regulated exchange, be apportioned to this State by
13multiplying such income by a fraction, the numerator of which
14is its business income from sources within this State, and the
15denominator of which is its business income from all sources.
16For purposes of this subsection, the business income within
17this State of a federally regulated exchange is the sum of the
18following:
19        (1) Receipts attributable to transactions executed on
20    a physical trading floor if that physical trading floor is
21    located in this State.
22        (2) Receipts attributable to all other matching,
23    execution, or clearing transactions, including without
24    limitation receipts from the provision of matching,
25    execution, or clearing services to another entity,
26    multiplied by (i) for taxable years ending on or after

 

 

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1    December 31, 2012 but before December 31, 2013, 63.77%; and
2    (ii) for taxable years ending on or after December 31,
3    2013, 27.54%.
4        (3) All other receipts not governed by subparagraphs
5    (1) or (2) of this subsection (c-1), to the extent the
6    receipts would be characterized as "sales in this State"
7    under item (3) of subsection (a) of this Section.
8    "Federally regulated exchange" means (i) a "registered
9entity" within the meaning of 7 U.S.C. Section 1a(40)(A), (B),
10or (C), (ii) an "exchange" or "clearing agency" within the
11meaning of 15 U.S.C. Section 78c (a)(1) or (23), (iii) any such
12entities regulated under any successor regulatory structure to
13the foregoing, and (iv) all taxpayers who are members of the
14same unitary business group as a federally regulated exchange,
15determined without regard to the prohibition in Section
161501(a)(27) of this Act against including in a unitary business
17group taxpayers who are ordinarily required to apportion
18business income under different subsections of this Section;
19provided that this subparagraph (iv) shall apply only if 50% or
20more of the business receipts of the unitary business group
21determined by application of this subparagraph (iv) for the
22taxable year are attributable to the matching, execution, or
23clearing of transactions conducted by an entity described in
24subparagraph (i), (ii), or (iii) of this paragraph.
25    In no event shall the Illinois apportionment percentage
26computed in accordance with this subsection (c-1) for any

 

 

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1taxpayer for any tax year be less than the Illinois
2apportionment percentage computed under this subsection (c-1)
3for that taxpayer for the first full tax year ending on or
4after December 31, 2013 for which this subsection (c-1) applied
5to the taxpayer.
6    (d) Transportation services. For taxable years ending
7before December 31, 2008, business income derived from
8furnishing transportation services shall be apportioned to
9this State in accordance with paragraphs (1) and (2):
10        (1) Such business income (other than that derived from
11    transportation by pipeline) shall be apportioned to this
12    State by multiplying such income by a fraction, the
13    numerator of which is the revenue miles of the person in
14    this State, and the denominator of which is the revenue
15    miles of the person everywhere. For purposes of this
16    paragraph, a revenue mile is the transportation of 1
17    passenger or 1 net ton of freight the distance of 1 mile
18    for a consideration. Where a person is engaged in the
19    transportation of both passengers and freight, the
20    fraction above referred to shall be determined by means of
21    an average of the passenger revenue mile fraction and the
22    freight revenue mile fraction, weighted to reflect the
23    person's
24            (A) relative railway operating income from total
25        passenger and total freight service, as reported to the
26        Interstate Commerce Commission, in the case of

 

 

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1        transportation by railroad, and
2            (B) relative gross receipts from passenger and
3        freight transportation, in case of transportation
4        other than by railroad.
5        (2) Such business income derived from transportation
6    by pipeline shall be apportioned to this State by
7    multiplying such income by a fraction, the numerator of
8    which is the revenue miles of the person in this State, and
9    the denominator of which is the revenue miles of the person
10    everywhere. For the purposes of this paragraph, a revenue
11    mile is the transportation by pipeline of 1 barrel of oil,
12    1,000 cubic feet of gas, or of any specified quantity of
13    any other substance, the distance of 1 mile for a
14    consideration.
15        (3) For taxable years ending on or after December 31,
16    2008, business income derived from providing
17    transportation services other than airline services shall
18    be apportioned to this State by using a fraction, (a) the
19    numerator of which shall be (i) all receipts from any
20    movement or shipment of people, goods, mail, oil, gas, or
21    any other substance (other than by airline) that both
22    originates and terminates in this State, plus (ii) that
23    portion of the person's gross receipts from movements or
24    shipments of people, goods, mail, oil, gas, or any other
25    substance (other than by airline) that originates in one
26    state or jurisdiction and terminates in another state or

 

 

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1    jurisdiction, that is determined by the ratio that the
2    miles traveled in this State bears to total miles
3    everywhere and (b) the denominator of which shall be all
4    revenue derived from the movement or shipment of people,
5    goods, mail, oil, gas, or any other substance (other than
6    by airline). Where a taxpayer is engaged in the
7    transportation of both passengers and freight, the
8    fraction above referred to shall first be determined
9    separately for passenger miles and freight miles. Then an
10    average of the passenger miles fraction and the freight
11    miles fraction shall be weighted to reflect the taxpayer's:
12            (A) relative railway operating income from total
13        passenger and total freight service, as reported to the
14        Surface Transportation Board, in the case of
15        transportation by railroad; and
16            (B) relative gross receipts from passenger and
17        freight transportation, in case of transportation
18        other than by railroad.
19        (4) For taxable years ending on or after December 31,
20    2008, business income derived from furnishing airline
21    transportation services shall be apportioned to this State
22    by multiplying such income by a fraction, the numerator of
23    which is the revenue miles of the person in this State, and
24    the denominator of which is the revenue miles of the person
25    everywhere. For purposes of this paragraph, a revenue mile
26    is the transportation of one passenger or one net ton of

 

 

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1    freight the distance of one mile for a consideration. If a
2    person is engaged in the transportation of both passengers
3    and freight, the fraction above referred to shall be
4    determined by means of an average of the passenger revenue
5    mile fraction and the freight revenue mile fraction,
6    weighted to reflect the person's relative gross receipts
7    from passenger and freight airline transportation.
8    (e) Combined apportionment. Where 2 or more persons are
9engaged in a unitary business as described in subsection
10(a)(27) of Section 1501, a part of which is conducted in this
11State by one or more members of the group, the business income
12attributable to this State by any such member or members shall
13be apportioned by means of the combined apportionment method.
14    (f) Alternative allocation. If the allocation and
15apportionment provisions of subsections (a) through (e) and of
16subsection (h) do not, for taxable years ending before December
1731, 2008, fairly represent the extent of a person's business
18activity in this State, or, for taxable years ending on or
19after December 31, 2008, fairly represent the market for the
20person's goods, services, or other sources of business income,
21the person may petition for, or the Director may, without a
22petition, permit or require, in respect of all or any part of
23the person's business activity, if reasonable:
24        (1) Separate accounting;
25        (2) The exclusion of any one or more factors;
26        (3) The inclusion of one or more additional factors

 

 

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1    which will fairly represent the person's business
2    activities or market in this State; or
3        (4) The employment of any other method to effectuate an
4    equitable allocation and apportionment of the person's
5    business income.
6    (g) Cross reference. For allocation of business income by
7residents, see Section 301(a).
8    (h) For tax years ending on or after December 31, 1998, the
9apportionment factor of persons who apportion their business
10income to this State under subsection (a) shall be equal to:
11        (1) for tax years ending on or after December 31, 1998
12    and before December 31, 1999, 16 2/3% of the property
13    factor plus 16 2/3% of the payroll factor plus 66 2/3% of
14    the sales factor;
15        (2) for tax years ending on or after December 31, 1999
16    and before December 31, 2000, 8 1/3% of the property factor
17    plus 8 1/3% of the payroll factor plus 83 1/3% of the sales
18    factor;
19        (3) for tax years ending on or after December 31, 2000,
20    the sales factor.
21If, in any tax year ending on or after December 31, 1998 and
22before December 31, 2000, the denominator of the payroll,
23property, or sales factor is zero, the apportionment factor
24computed in paragraph (1) or (2) of this subsection for that
25year shall be divided by an amount equal to 100% minus the
26percentage weight given to each factor whose denominator is

 

 

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1equal to zero.
2(Source: P.A. 96-763, eff. 8-25-09; 97-507, eff. 8-23-11;
397-636, eff. 6-1-12.)
 
4    (35 ILCS 5/305)  (from Ch. 120, par. 3-305)
5    Sec. 305. Allocation of Partnership Income by partnerships
6and partners other than residents.
7    (a) Allocation of partnership business income by partners
8other than residents. The respective shares of partners other
9than residents in so much of the business income of the
10partnership as is allocated or apportioned to this State in the
11possession of the partnership shall be taken into account by
12such partners pro rata in accordance with their respective
13distributive shares of such partnership income for the
14partnership's taxable year and allocated to this State.
15    (b) Allocation of partnership nonbusiness income by
16partners other than residents. The respective shares of
17partners other than residents in the items of partnership
18income and deduction not taken into account in computing the
19business income of a partnership shall be taken into account by
20such partners pro rata in accordance with their respective
21distributive shares of such partnership income for the
22partnership's taxable year, and allocated as if such items had
23been paid, incurred or accrued directly to such partners in
24their separate capacities.
25    (c) Allocation or apportionment of base income by

 

 

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1partnership. Base income of a partnership shall be allocated or
2apportioned to this State pursuant to Article 3, in the same
3manner as it is allocated or apportioned for any other
4nonresident.
5    (c-5) Taxable income of an investment partnership, as
6defined in Section 1501(a)(11.5) of this Act, that is
7distributable to a nonresident partner shall be treated as
8nonbusiness income and shall be allocated to the partner's
9state of residence (in the case of an individual) or commercial
10domicile (in the case of any other person). However, any income
11distributable to a nonresident partner shall be treated as
12business income and apportioned as if such income had been
13received directly by the partner if the partner has made an
14election under Section 1501(a)(1) of this Act to treat all
15income as business income or if such income is from investment
16activity:
17        (1) that is directly or integrally related to any other
18    business activity conducted in this State by the
19    nonresident partner (or any member of that partner's
20    unitary business group);
21        (2) that serves an operational function to any other
22    business activity of the nonresident partner (or any member
23    of that partner's unitary business group) in this State; or
24        (3) where assets of the investment partnership were
25    acquired with working capital from a trade or business
26    activity conducted in this State in which the nonresident

 

 

HB3157 Engrossed- 52 -LRB098 10600 HLH 40863 b

1    partner (or any member of that partner's unitary business
2    group) owns an interest.
3    (c-10) Gain or loss on partnership interest. The amount of
4gain or loss realized by a nonresident partner upon the sale,
5exchange, abandonment, liquidation, or other disposition of an
6interest in a partnership (other than an investment
7partnership) included in net income of that partner shall be
8the total gain or loss multiplied by the apportionment factor
9of the partnership determined under Section 304 of this Act for
10the taxable year of the partnership in which the sale,
11exchange, abandonment, liquidation or other disposition
12occurs.
13    (d) Cross reference. For allocation of partnership income
14or deductions by residents, see Section 301(a).
15(Source: P.A. 93-840, eff. 7-30-04.)
 
16    (35 ILCS 5/307)  (from Ch. 120, par. 3-307)
17    Sec. 307. Allocation of income by estate or trust
18beneficiaries other than residents. (a) Allocation of business
19income by beneficiaries other than residents. To the extent the
20business income of an estate or trust allocated or apportioned
21to this State in the possession of the estate or trust is
22deemed to have been paid, credited or distributed by the estate
23or trust under Section 306, the respective shares of
24beneficiaries of the estate or trust, other than residents, in
25such business income shall be taken into account by such

 

 

HB3157 Engrossed- 53 -LRB098 10600 HLH 40863 b

1beneficiaries in proportion to their respective shares of the
2distributable net income of the estate or trust for its taxable
3year and allocated to this State.
4    (b) Allocation of nonbusiness income by beneficiaries
5other than residents. To the extent items of estate or trust
6income and deduction not taken into account in computing the
7business income of an estate or trust are deemed to have been
8paid, credited or distributed by the estate or trust under
9Section 306, the respective shares of beneficiaries of the
10estate or trust, other than residents, in such items shall be
11taken into account by such beneficiaries in proportion to their
12respective shares of the distributable net income of the estate
13or trust for its taxable year, and allocated as if such items
14had been paid, incurred or accrued directly to such
15beneficiaries in their separate capacities.
16    (c) Accumulation and capital gain distributions. In the
17event that, in any taxable year of a trust, the trust makes an
18accumulation distribution or a capital gain distribution (both
19as defined in Section 665 of the Internal Revenue Code), the
20total of the amounts which are included in the income of each
21beneficiary of such trust, other than a resident, under
22Sections 668 and 669 of the Internal Revenue Code shall be
23allocated to this State to the extent that the items of income
24included in such distribution were allocated or apportioned to
25this State in the hands of the trust.
26    (c-5) Gain or loss on interest in trust. The amount of gain

 

 

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1or loss realized by a nonresident beneficiary upon the sale,
2exchange, abandonment, liquidation or other disposition of an
3interest in a trust included in net income of that beneficiary
4shall be the total gain or loss multiplied by the apportionment
5factor of the trust determined under Section 304 of this Act
6for the taxable year of the trust in which the sale, exchange,
7abandonment, liquidation or other disposition occurs.
8    (d) Cross references. (1) For allocation of amounts
9received by nonresidents from certain employee trusts, see
10Section 301 (b) (2).
11    (2) For allocation of estate or trust income or deductions
12by residents, see Section 301 (a).
13(Source: P.A. 84-550.)
 
14    (35 ILCS 5/308)  (from Ch. 120, par. 3-308)
15    Sec. 308. Allocation of Subchapter S Corporation Income by
16Subchapter S Corporations and Shareholders Other Than
17Residents. (a) Allocation of Subchapter S corporation business
18income by shareholders other than residents. The respective
19shares of shareholders other than residents in so much of the
20business income of the Subchapter S corporation as is allocated
21or apportioned to this State in the hands of the Subchapter S
22corporation shall be taken into account by such shareholder pro
23rata in accordance with the requirements of Section 1366 of the
24Internal Revenue Code for the Subchapter S corporation's
25taxable year and allocated to this State.

 

 

HB3157 Engrossed- 55 -LRB098 10600 HLH 40863 b

1    (b) Allocation of Subchapter S corporation nonbusiness
2income by shareholders other than residents. The respective
3share of shareholders other than residents in the items of
4Subchapter S corporation income and deduction not taken into
5account in computing the business income of the Subchapter S
6corporation shall be taken into account by such shareholders
7pro rata in accordance with the requirements of Section 1366 of
8the Internal Revenue Code for the corporation's taxable year,
9and allocated as if such items had been paid, incurred or
10accrued directly to such shareholders in their separate
11capacities.
12    (c) Allocation or apportionment of base income by the
13Subchapter S corporation. Base income of a Subchapter S
14corporation shall be allocated or apportioned to this State
15pursuant to this Article 3 in the same manner as it is
16allocated or apportioned for any other nonresident.
17    (c-5) Gain or loss on stock in a Subchapter S corporation.
18The amount of gain or loss realized by a nonresident
19shareholder upon the sale, exchange, abandonment, liquidation
20or other disposition of stock in a Subchapter S corporation
21included in net income of that shareholder shall be the total
22gain or loss multiplied by the apportionment factor of the
23Subchapter S corporation determined under Section 304 of this
24Act for the taxable year of the Subchapter S corporation in
25which the sale, exchange, abandonment, liquidation or other
26disposition occurs.

 

 

HB3157 Engrossed- 56 -LRB098 10600 HLH 40863 b

1    (d) This Section shall not apply to any corporation for
2which there is in effect a federal election to opt out of the
3provisions of the Subchapter S Revision Act of 1982 and have
4applied instead the prior federal Subchapter S rules as in
5effect on July 1, 1982.
6(Source: P.A. 83-1352.)
 
7    (35 ILCS 5/502)  (from Ch. 120, par. 5-502)
8    Sec. 502. Returns and notices.
9    (a) In general. A return with respect to the taxes imposed
10by this Act shall be made by every person for any taxable year:
11        (1) for which such person is liable for a tax imposed
12    by this Act, or
13        (2) in the case of a resident or in the case of a
14    corporation which is qualified to do business in this
15    State, for which such person is required to make a federal
16    income tax return, regardless of whether such person is
17    liable for a tax imposed by this Act. However, this
18    paragraph shall not require a resident to make a return if
19    such person has an Illinois base income of the basic amount
20    in Section 204(b) or less and is either claimed as a
21    dependent on another person's tax return under the Internal
22    Revenue Code, or is claimed as a dependent on another
23    person's tax return under this Act.
24    Notwithstanding the provisions of paragraph (1), a
25nonresident (other than, for taxable years ending on or after

 

 

HB3157 Engrossed- 57 -LRB098 10600 HLH 40863 b

1December 31, 2011, a nonresident required to withhold tax under
2Section 709.5) whose Illinois income tax liability under
3subsections (a), (b), (c), and (d) of Section 201 of this Act
4is paid in full after taking into account the credits allowed
5under subsection (f) of this Section or allowed under Section
6709.5 of this Act shall not be required to file a return under
7this subsection (a).
8    (b) Fiduciaries and receivers.
9        (1) Decedents. If an individual is deceased, any return
10    or notice required of such individual under this Act shall
11    be made by his executor, administrator, or other person
12    charged with the property of such decedent.
13        (2) Individuals under a disability. If an individual is
14    unable to make a return or notice required under this Act,
15    the return or notice required of such individual shall be
16    made by his duly authorized agent, guardian, fiduciary or
17    other person charged with the care of the person or
18    property of such individual.
19        (3) Estates and trusts. Returns or notices required of
20    an estate or a trust shall be made by the fiduciary
21    thereof.
22        (4) Receivers, trustees and assignees for
23    corporations. In a case where a receiver, trustee in
24    bankruptcy, or assignee, by order of a court of competent
25    jurisdiction, by operation of law, or otherwise, has
26    possession of or holds title to all or substantially all

 

 

HB3157 Engrossed- 58 -LRB098 10600 HLH 40863 b

1    the property or business of a corporation, whether or not
2    such property or business is being operated, such receiver,
3    trustee, or assignee shall make the returns and notices
4    required of such corporation in the same manner and form as
5    corporations are required to make such returns and notices.
6    (c) Joint returns by husband and wife.
7        (1) Except as provided in paragraph (3):
8            (A) if a husband and wife file a joint federal
9        income tax return for a taxable year ending before
10        December 31, 2009, they shall file a joint return under
11        this Act for such taxable year and their liabilities
12        shall be joint and several;
13            (B) if a husband and wife file a joint federal
14        income tax return for a taxable year ending on or after
15        December 31, 2009, they may elect to file separate
16        returns under this Act for such taxable year. The
17        election under this paragraph must be made on or before
18        the due date (including extensions) of the return and,
19        once made, shall be irrevocable. If no election is
20        timely made under this paragraph for a taxable year:
21                (i) the couple must file a joint return under
22            this Act for such taxable year,
23                (ii) their liabilities shall be joint and
24            several, and
25                (iii) any overpayment for that taxable year
26            may be withheld under Section 909 of this Act or

 

 

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1            under Section 2505-275 of the Civil Administrative
2            Code of Illinois and applied against a debt of
3            either spouse without regard to the amount of the
4            overpayment attributable to the other spouse; and
5            (C) if the federal income tax liability of either
6        spouse is determined on a separate federal income tax
7        return, they shall file separate returns under this
8        Act.
9        (2) If neither spouse is required to file a federal
10    income tax return and either or both are required to file a
11    return under this Act, they may elect to file separate or
12    joint returns and pursuant to such election their
13    liabilities shall be separate or joint and several.
14        (3) If either husband or wife is a resident and the
15    other is a nonresident, they shall file separate returns in
16    this State on such forms as may be required by the
17    Department in which event their tax liabilities shall be
18    separate; but if they file a joint federal income tax
19    return for a taxable year, they may elect to determine
20    their joint net income and file a joint return for that
21    taxable year under the provisions of paragraph (1) of this
22    subsection as if both were residents and in such case,
23    their liabilities shall be joint and several.
24        (4) Innocent spouses.
25            (A) However, for tax liabilities arising and paid
26        prior to August 13, 1999, an innocent spouse shall be

 

 

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1        relieved of liability for tax (including interest and
2        penalties) for any taxable year for which a joint
3        return has been made, upon submission of proof that the
4        Internal Revenue Service has made a determination
5        under Section 6013(e) of the Internal Revenue Code, for
6        the same taxable year, which determination relieved
7        the spouse from liability for federal income taxes. If
8        there is no federal income tax liability at issue for
9        the same taxable year, the Department shall rely on the
10        provisions of Section 6013(e) to determine whether the
11        person requesting innocent spouse abatement of tax,
12        penalty, and interest is entitled to that relief.
13            (B) For tax liabilities arising on and after August
14        13, 1999 or which arose prior to that date, but remain
15        unpaid as of that date, if an individual who filed a
16        joint return for any taxable year has made an election
17        under this paragraph, the individual's liability for
18        any tax shown on the joint return shall not exceed the
19        individual's separate return amount and the
20        individual's liability for any deficiency assessed for
21        that taxable year shall not exceed the portion of the
22        deficiency properly allocable to the individual. For
23        purposes of this paragraph:
24                (i) An election properly made pursuant to
25            Section 6015 of the Internal Revenue Code shall
26            constitute an election under this paragraph,

 

 

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

 

 

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

 

 

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1            election under subdivision (ii), the Department
2            shall take no collection action against the
3            electing individual for any liability arising from
4            a joint return covered by the election until the
5            Department has notified the electing individual in
6            writing that the election is invalid or of the
7            portion of the liability the Department has
8            allocated to the electing individual. Within 60
9            days (150 days if the individual is outside the
10            United States) after the issuance of such
11            notification, the individual may file a written
12            protest of the denial of the election or of the
13            Department's determination of the liability
14            allocated to him or her and shall be granted a
15            hearing within the Department under the provisions
16            of Section 908. If a protest is filed, the
17            Department shall take no collection action against
18            the electing individual until the decision
19            regarding the protest has become final under
20            subsection (d) of Section 908 or, if
21            administrative review of the Department's decision
22            is requested under Section 1201, until the
23            decision of the court becomes final.
24    (d) Partnerships. Every partnership having any base income
25allocable to this State in accordance with section 305(c) shall
26retain information concerning all items of income, gain, loss

 

 

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

 

 

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1corporations) and that are members of the same unitary business
2group shall be treated as one taxpayer for purposes of any
3original return, amended return which includes the same
4taxpayers of the unitary group which joined in filing the
5original return, extension, claim for refund, assessment,
6collection and payment and determination of the group's tax
7liability under this Act.
8    (f) For taxable years ending prior to December 31, 2014,
9the The Department may promulgate regulations to permit
10nonresident individual partners of the same partnership,
11nonresident Subchapter S corporation shareholders of the same
12Subchapter S corporation, and nonresident individuals
13transacting an insurance business in Illinois under a Lloyds
14plan of operation, and nonresident individual members of the
15same limited liability company that is treated as a partnership
16under Section 1501 (a)(16) of this Act, to file composite
17individual income tax returns reflecting the composite income
18of such individuals allocable to Illinois and to make composite
19individual income tax payments. For taxable years ending prior
20to December 31, 2014, the The Department may by regulation also
21permit such composite returns to include the income tax owed by
22Illinois residents attributable to their income from
23partnerships, Subchapter S corporations, insurance businesses
24organized under a Lloyds plan of operation, or limited
25liability companies that are treated as partnership under
26Section 1501(a)(16) of this Act, in which case such Illinois

 

 

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1residents will be permitted to claim credits on their
2individual returns for their shares of the composite tax
3payments. This paragraph of subsection (f) applies to taxable
4years ending on or after December 31, 1987 and ending prior to
5December 31, 2014.
6    For taxable years ending on or after December 31, 1999, the
7Department may, by regulation, also permit any persons
8transacting an insurance business organized under a Lloyds plan
9of operation to file composite returns reflecting the income of
10such persons allocable to Illinois and the tax rates applicable
11to such persons under Section 201 and to make composite tax
12payments and shall, by regulation, also provide that the income
13and apportionment factors attributable to the transaction of an
14insurance business organized under a Lloyds plan of operation
15by any person joining in the filing of a composite return
16shall, for purposes of allocating and apportioning income under
17Article 3 of this Act and computing net income under Section
18202 of this Act, be excluded from any other income and
19apportionment factors of that person or of any unitary business
20group, as defined in subdivision (a)(27) of Section 1501, to
21which that person may belong.
22    For taxable years ending on or after December 31, 2008,
23every nonresident shall be allowed a credit against his or her
24liability under subsections (a) and (b) of Section 201 for any
25amount of tax reported on a composite return and paid on his or
26her behalf under this subsection (f). Residents (other than

 

 

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1persons transacting an insurance business organized under a
2Lloyds plan of operation) may claim a credit for taxes reported
3on a composite return and paid on their behalf under this
4subsection (f) only as permitted by the Department by rule.
5    (f-5) For taxable years ending on or after December 31,
62008, the Department may adopt rules to provide that, when a
7partnership or Subchapter S corporation has made an error in
8determining the amount of any item of income, deduction,
9addition, subtraction, or credit required to be reported on its
10return that affects the liability imposed under this Act on a
11partner or shareholder, the partnership or Subchapter S
12corporation may report the changes in liabilities of its
13partners or shareholders and claim a refund of the resulting
14overpayments, or pay the resulting underpayments, on behalf of
15its partners and shareholders.
16    (g) The Department may adopt rules to authorize the
17electronic filing of any return required to be filed under this
18Section.
19(Source: P.A. 96-520, eff. 8-14-09; 97-507, eff. 8-23-11.)
 
20    (35 ILCS 5/709.5)
21    Sec. 709.5. Withholding by partnerships, Subchapter S
22corporations, and trusts.
23    (a) In general. For each taxable year ending on or after
24December 31, 2008, every partnership (other than a publicly
25traded partnership under Section 7704 of the Internal Revenue

 

 

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1Code or investment partnership), Subchapter S corporation, and
2trust must withhold from each nonresident partner,
3shareholder, or beneficiary (other than a partner,
4shareholder, or beneficiary who is exempt from tax under
5Section 501(a) of the Internal Revenue Code or under Section
6205 of this Act, who is included on a composite return filed by
7the partnership or Subchapter S corporation for the taxable
8year under subsection (f) of Section 502 of this Act), or who
9is a retired partner, to the extent that partner's
10distributions are exempt from tax under Section 203(a)(2)(F) of
11this Act) an amount equal to the sum distributable share of (i)
12the share of business income of the partnership, Subchapter S
13corporation, or trust apportionable to Illinois plus (ii) for
14taxable years ending on or after December 31, 2014, the share
15of nonbusiness income of the partnership, Subchapter S
16corporation, or trust allocated to Illinois under Section 303
17of this Act (other than an amount allocated to the commercial
18domicile of the taxpayer under Section 303 of this Act) that is
19distributable to of that partner, shareholder, or beneficiary
20under Sections 702 and 704 and Subchapter S of the Internal
21Revenue Code, whether or not distributed, (iii) multiplied by
22the applicable rates of tax for that partner, or shareholder,
23or beneficiary under subsections (a) through (d) of Section 201
24of this Act, and (iv) net of the share of any credit under
25Article 2 of this Act that is distributable by the partnership,
26Subchapter S corporation, or trust and allowable against the

 

 

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1tax liability of that partner, shareholder, or beneficiary for
2a taxable year ending on or after December 31, 2014.
3    (b) Credit for taxes withheld. Any amount withheld under
4subsection (a) of this Section and paid to the Department shall
5be treated as a payment of the estimated tax liability or of
6the liability for withholding under this Section of the
7partner, shareholder, or beneficiary to whom the income is
8distributable for the taxable year in which that person
9incurred a liability under this Act with respect to that
10income. The Department shall adopt rules pursuant to which a
11partner, shareholder, or beneficiary may claim a credit against
12its obligation for withholding under this Section for amounts
13withheld under this Section with respect to income
14distributable to it by a partnership, Subchapter S corporation,
15or trust and allowing its partners, shareholders, or
16beneficiaries to claim a credit under this subsection (b) for
17those withheld amounts.
18    (c) Exemption from withholding.
19        (1) A partnership, Subchapter S corporation, or trust
20    shall not be required to withhold tax under subsection (a)
21    of this Section with respect to any nonresident partner,
22    shareholder, or beneficiary (other than an individual)
23    from whom the partnership, S corporation, or trust has
24    received a certificate, completed in the form and manner
25    prescribed by the Department, stating that such
26    nonresident partner, shareholder, or beneficiary shall:

 

 

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1            (A) file all returns that the partner,
2        shareholder, or beneficiary is required to file under
3        Section 502 of this Act and make timely payment of all
4        taxes imposed under Section 201 of this Act or under
5        this Section on the partner, shareholder, or
6        beneficiary with respect to income of the partnership,
7        S corporation, or trust; and
8            (B) be subject to personal jurisdiction in this
9        State for purposes of the collection of income taxes,
10        together with related interest and penalties, imposed
11        on the partner, shareholder, or beneficiary with
12        respect to the income of the partnership, S
13        corporation, or trust.
14        (2) The Department may revoke the exemption provided by
15    this subsection (c) at any time that it determines that the
16    nonresident partner, shareholder, or beneficiary is not
17    abiding by the terms of the certificate. The Department
18    shall notify the partnership, S corporation, or trust that
19    it has revoked a certificate by notice left at the usual
20    place of business of the partnership, S corporation, or
21    trust or by mail to the last known address of the
22    partnership, S corporation, or trust.
23        (3) A partnership, S corporation, or trust that
24    receives a certificate under this subsection (c) properly
25    completed by a nonresident partner, shareholder, or
26    beneficiary shall not be required to withhold any amount

 

 

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1    from that partner, shareholder, or beneficiary, the
2    payment of which would be due under Section 711(a-5) of
3    this Act after the receipt of the certificate and no
4    earlier than 60 days after the Department has notified the
5    partnership, S corporation, or trust that the certificate
6    has been revoked.
7        (4) Certificates received by a the partnership, S
8    corporation, or trust under this subsection (c) must be
9    retained by the partnership, S corporation, or trust and a
10    record of such certificates must be provided to the
11    Department, in a format in which the record is available
12    for review by the Department, upon request by the
13    Department. The Department may, by rule, require the record
14    of certificates to be maintained and provided to the
15    Department electronically.
16(Source: P.A. 97-507, eff. 8-23-11.)