State of Illinois
90th General Assembly
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90_HB1314

      35 ILCS 5/203             from Ch. 120, par. 2-203
          Amends the Illinois Income Tax Act  to  allow  individual
      taxpayers,  65  years  of  age  or  older,  a  deduction  for
      unreimbursed  amounts  spent  on  home  health care services.
      Applicable to taxable years ending on or after  December  31,
      1997.  Effective immediately.
                                                     LRB9003323KDcd
                                               LRB9003323KDcd
 1        AN  ACT  to amend the Illinois Income Tax Act by changing
 2    Section 203.
 3        Be it enacted by the People of  the  State  of  Illinois,
 4    represented in the General Assembly:
 5        Section  5.   The  Illinois  Income Tax Act is amended by
 6    changing Section 203 as follows:
 7        (35 ILCS 5/203) (from Ch. 120, par. 2-203)
 8        Sec. 203.  Base income defined.
 9        (a)  Individuals.
10             (1)  In general.  In the case of an individual, base
11        income means an amount equal to the  taxpayer's  adjusted
12        gross   income  for  the  taxable  year  as  modified  by
13        paragraph (2).
14             (2)  Modifications.   The  adjusted   gross   income
15        referred  to in paragraph (1) shall be modified by adding
16        thereto the sum of the following amounts:
17                  (A)  An amount equal to  all  amounts  paid  or
18             accrued  to  the  taxpayer  as interest or dividends
19             during the taxable year to the extent excluded  from
20             gross  income  in  the computation of adjusted gross
21             income, except stock dividends of  qualified  public
22             utilities   described   in  Section  305(e)  of  the
23             Internal Revenue Code;
24                  (B)  An amount  equal  to  the  amount  of  tax
25             imposed  by  this  Act  to  the extent deducted from
26             gross income in the computation  of  adjusted  gross
27             income for the taxable year;
28                  (C)  An  amount  equal  to  the amount received
29             during the taxable year as a recovery or  refund  of
30             real   property  taxes  paid  with  respect  to  the
31             taxpayer's principal residence under the Revenue Act
                            -2-                LRB9003323KDcd
 1             of 1939 and for which  a  deduction  was  previously
 2             taken  under  subparagraph (L) of this paragraph (2)
 3             prior to July 1, 1991, the retrospective application
 4             date of Article 4 of Public Act 87-17.  In the  case
 5             of  multi-unit  or  multi-use  structures  and  farm
 6             dwellings,  the  taxes  on  the taxpayer's principal
 7             residence shall be that portion of the  total  taxes
 8             for  the  entire  property  which is attributable to
 9             such principal residence;
10                  (D)  An amount  equal  to  the  amount  of  the
11             capital  gain deduction allowable under the Internal
12             Revenue Code, to  the  extent  deducted  from  gross
13             income  in the computation of adjusted gross income;
14             and
15                  (D-5)  An amount, to the extent not included in
16             adjusted gross income, equal to the amount of  money
17             withdrawn by the taxpayer in the taxable year from a
18             medical care savings account and the interest earned
19             on  the  account in the taxable year of a withdrawal
20             pursuant to subsection (b)  of  Section  20  of  the
21             Medical Care Savings Account Act;
22        and  by  deducting  from the total so obtained the sum of
23        the following amounts:
24                  (E)  Any  amount  included  in  such  total  in
25             respect  of  any  compensation  (including  but  not
26             limited to any compensation paid  or  accrued  to  a
27             serviceman  while  a  prisoner  of war or missing in
28             action) paid to a resident by  reason  of  being  on
29             active duty in the Armed Forces of the United States
30             and  in  respect of any compensation paid or accrued
31             to a resident who as a governmental employee  was  a
32             prisoner of war or missing in action, and in respect
33             of  any  compensation  paid to a resident in 1971 or
34             thereafter for annual training performed pursuant to
                            -3-                LRB9003323KDcd
 1             Sections 502 and 503, Title 32, United  States  Code
 2             as a member of the Illinois National Guard;
 3                  (F)  An amount equal to all amounts included in
 4             such  total  pursuant  to the provisions of Sections
 5             402(a), 402(c), 403(a), 403(b), 406(a), 407(a),  and
 6             408  of  the  Internal  Revenue Code, or included in
 7             such total as distributions under the provisions  of
 8             any  retirement  or disability plan for employees of
 9             any  governmental  agency  or  unit,  or  retirement
10             payments to retired  partners,  which  payments  are
11             excluded   in   computing  net  earnings  from  self
12             employment by Section 1402 of the  Internal  Revenue
13             Code and regulations adopted pursuant thereto;
14                  (G)  The valuation limitation amount;
15                  (H)  An  amount  equal to the amount of any tax
16             imposed by  this  Act  which  was  refunded  to  the
17             taxpayer  and included in such total for the taxable
18             year;
19                  (I)  An amount equal to all amounts included in
20             such total pursuant to the provisions of Section 111
21             of the Internal Revenue Code as a recovery of  items
22             previously  deducted  from  adjusted gross income in
23             the computation of taxable income;
24                  (J)  An  amount  equal   to   those   dividends
25             included   in  such  total  which  were  paid  by  a
26             corporation which conducts business operations in an
27             Enterprise Zone or zones created under the  Illinois
28             Enterprise  Zone Act, and conducts substantially all
29             of its operations in an Enterprise Zone or zones;
30                  (K)  An  amount  equal   to   those   dividends
31             included   in   such  total  that  were  paid  by  a
32             corporation that conducts business operations  in  a
33             federally  designated Foreign Trade Zone or Sub-Zone
34             and  that  is  designated  a  High  Impact  Business
                            -4-                LRB9003323KDcd
 1             located  in  Illinois;   provided   that   dividends
 2             eligible  for the deduction provided in subparagraph
 3             (J) of paragraph (2) of this subsection shall not be
 4             eligible  for  the  deduction  provided  under  this
 5             subparagraph (K);
 6                  (L)  For taxable years  ending  after  December
 7             31,  1983,  an  amount  equal to all social security
 8             benefits and railroad retirement  benefits  included
 9             in  such  total pursuant to Sections 72(r) and 86 of
10             the Internal Revenue Code;
11                  (M)  With  the   exception   of   any   amounts
12             subtracted  under  subparagraph (N), an amount equal
13             to the sum of all amounts disallowed  as  deductions
14             by  Sections  171(a) (2), and 265(2) of the Internal
15             Revenue Code of 1954, as now or  hereafter  amended,
16             and  all  amounts  of expenses allocable to interest
17             and  disallowed as deductions by Section  265(1)  of
18             the  Internal  Revenue  Code  of  1954,  as  now  or
19             hereafter amended;
20                  (N)  An amount equal to all amounts included in
21             such  total  which  are exempt from taxation by this
22             State  either  by  reason   of   its   statutes   or
23             Constitution  or  by  reason  of  the  Constitution,
24             treaties  or statutes of the United States; provided
25             that, in the case of any statute of this State  that
26             exempts   income   derived   from   bonds  or  other
27             obligations from the tax imposed under this Act, the
28             amount exempted shall be the interest  net  of  bond
29             premium amortization;
30                  (O)  An  amount  equal to any contribution made
31             to a job training project  established  pursuant  to
32             the Tax Increment Allocation Redevelopment Act;
33                  (P)  An  amount  equal  to  the  amount  of the
34             deduction used to compute  the  federal  income  tax
                            -5-                LRB9003323KDcd
 1             credit  for  restoration of substantial amounts held
 2             under claim of right for the taxable  year  pursuant
 3             to  Section  1341  of  the  Internal Revenue Code of
 4             1986;
 5                  (Q)  An amount equal to any amounts included in
 6             such  total,  received  by  the   taxpayer   as   an
 7             acceleration  in  the  payment of life, endowment or
 8             annuity benefits in advance of the time  they  would
 9             otherwise  be payable as an indemnity for a terminal
10             illness;
11                  (R)  An amount  equal  to  the  amount  of  any
12             federal  or  State  bonus  paid  to  veterans of the
13             Persian Gulf War;
14                  (S)  An  amount,  to  the  extent  included  in
15             adjusted gross income, equal  to  the  amount  of  a
16             contribution  made  in the taxable year on behalf of
17             the taxpayer  to  a  medical  care  savings  account
18             established  under  the Medical Care Savings Account
19             Act to the extent the contribution  is  accepted  by
20             the account administrator as provided in that Act;
21                  (T)  An  amount,  to  the  extent  included  in
22             adjusted  gross  income,  equal  to  the  amount  of
23             interest  earned  in  the  taxable year on a medical
24             care savings account established under  the  Medical
25             Care  Savings Account Act on behalf of the taxpayer,
26             other than interest added pursuant to item (D-5)  of
27             this paragraph (2);
28                  (U)  For one taxable year beginning on or after
29             January 1, 1994, an amount equal to the total amount
30             of  tax  imposed  and paid under subsections (a) and
31             (b) of Section 201 of  this  Act  on  grant  amounts
32             received  by  the  taxpayer  under  the Nursing Home
33             Grant Assistance Act during the  taxpayer's  taxable
34             years 1992 and 1993; and
                            -6-                LRB9003323KDcd
 1                  (V)  Beginning  with  tax  years  ending  on or
 2             after December 31, 1995 and ending  with  tax  years
 3             ending  on  or  before  December 31, 1999, an amount
 4             equal to the amount paid by  a  taxpayer  who  is  a
 5             self-employed  taxpayer, a partner of a partnership,
 6             or a shareholder in a Subchapter S  corporation  for
 7             health  insurance  or  long-term  care insurance for
 8             that  taxpayer  or   that   taxpayer's   spouse   or
 9             dependents,  to  the extent that the amount paid for
10             that health insurance or  long-term  care  insurance
11             may  be  deducted  under Section 213 of the Internal
12             Revenue Code of 1986, has not been deducted  on  the
13             federal  income tax return of the taxpayer, and does
14             not exceed the taxable income attributable  to  that
15             taxpayer's   income,   self-employment   income,  or
16             Subchapter S  corporation  income;  except  that  no
17             deduction  shall  be  allowed under this item (V) if
18             the taxpayer  is  eligible  to  participate  in  any
19             health insurance or long-term care insurance plan of
20             an  employer  of  the  taxpayer  or  the  taxpayer's
21             spouse.   The  amount  of  the  health insurance and
22             long-term care insurance subtracted under this  item
23             (V)  shall be determined by multiplying total health
24             insurance and long-term care insurance premiums paid
25             by the taxpayer times a number that  represents  the
26             fractional  percentage  of eligible medical expenses
27             under Section 213 of the Internal  Revenue  Code  of
28             1986 not actually deducted on the taxpayer's federal
29             income tax return; and.
30                  (W)  For  taxable  years  ending  on  or  after
31             December 31, 1997, all unreimbursed amounts, but not
32             more  than a total amount that would result in a tax
33             liability  of  less  than  zero  for  the  taxpayer,
34             expended by persons 65 years of  age  or  older  for
                            -7-                LRB9003323KDcd
 1             home  health services, as defined by Section 2.05 of
 2             the Home Health Agency Licensing Act, if provided by
 3             a public or private organization licensed under that
 4             Act, or for services provided to a  person  at  that
 5             person's  residence by a licensed practical nurse or
 6             registered  nurse  in  accordance  with  a  plan  of
 7             treatment for illness or infirmity prescribed  by  a
 8             physician.
 9        (b)  Corporations.
10             (1)  In general.  In the case of a corporation, base
11        income  means  an  amount equal to the taxpayer's taxable
12        income for the taxable year as modified by paragraph (2).
13             (2)  Modifications.  The taxable income referred  to
14        in  paragraph (1) shall be modified by adding thereto the
15        sum of the following amounts:
16                  (A)  An amount equal to  all  amounts  paid  or
17             accrued   to   the  taxpayer  as  interest  and  all
18             distributions  received  from  regulated  investment
19             companies during the  taxable  year  to  the  extent
20             excluded  from  gross  income  in the computation of
21             taxable income;
22                  (B)  An amount  equal  to  the  amount  of  tax
23             imposed  by  this  Act  to  the extent deducted from
24             gross income in the computation  of  taxable  income
25             for the taxable year;
26                  (C)  In  the  case  of  a  regulated investment
27             company or real estate investment trust,  an  amount
28             equal to the excess of (i) the net long-term capital
29             gain  for  the taxable year, over (ii) the amount of
30             the capital gain dividends  designated  as  such  in
31             accordance  with  Section  852(b)(3)(C)  or  Section
32             857(b)(3)(C)  of  the  Internal Revenue Code and any
33             amount designated under Section 852(b)(3)(D) of  the
34             Internal  Revenue  Code, attributable to the taxable
                            -8-                LRB9003323KDcd
 1             year.
 2        This amendatory Act of 1995 is  declarative  of  existing
 3    law and is not a new enactment.
 4                  (D)  The  amount  of  any  net  operating  loss
 5             deduction taken in arriving at taxable income, other
 6             than  a  net  operating  loss carried forward from a
 7             taxable year ending prior to December 31, 1986; and
 8                  (E)  For taxable years in which a net operating
 9             loss carryback or carryforward from a  taxable  year
10             ending  prior  to December 31, 1986 is an element of
11             taxable income under paragraph (1) of subsection (e)
12             or subparagraph (E) of paragraph (2)  of  subsection
13             (e),  the  amount  by  which  addition modifications
14             other than those provided by this  subparagraph  (E)
15             exceeded  subtraction  modifications in such earlier
16             taxable year, with the following limitations applied
17             in the order that they are listed:
18                       (i)  the addition modification relating to
19                  the net operating loss carried back or  forward
20                  to  the  taxable  year  from  any  taxable year
21                  ending prior to  December  31,  1986  shall  be
22                  reduced  by the amount of addition modification
23                  under this subparagraph (E)  which  related  to
24                  that  net  operating  loss  and which was taken
25                  into account in calculating the base income  of
26                  an earlier taxable year, and
27                       (ii)  the  addition  modification relating
28                  to the  net  operating  loss  carried  back  or
29                  forward  to  the  taxable year from any taxable
30                  year ending prior to December  31,  1986  shall
31                  not  exceed  the  amount  of  such carryback or
32                  carryforward;
33                  For taxable years  in  which  there  is  a  net
34             operating  loss  carryback or carryforward from more
                            -9-                LRB9003323KDcd
 1             than one other taxable year ending prior to December
 2             31, 1986, the addition modification provided in this
 3             subparagraph (E) shall be the  sum  of  the  amounts
 4             computed    independently    under   the   preceding
 5             provisions of this subparagraph (E)  for  each  such
 6             taxable year,
 7        and  by  deducting  from the total so obtained the sum of
 8        the following amounts:
 9                  (F)  An amount equal to the amount of  any  tax
10             imposed  by  this  Act  which  was  refunded  to the
11             taxpayer and included in such total for the  taxable
12             year;
13                  (G)  An  amount equal to any amount included in
14             such total under Section 78 of the Internal  Revenue
15             Code;
16                  (H)  In  the  case  of  a  regulated investment
17             company, an amount equal to  the  amount  of  exempt
18             interest  dividends as defined in subsection (b) (5)
19             of Section 852 of the Internal Revenue Code, paid to
20             shareholders for the taxable year;
21                  (I)  With  the   exception   of   any   amounts
22             subtracted  under  subparagraph (J), an amount equal
23             to the sum of all amounts disallowed  as  deductions
24             by  Sections  171(a)  (2), and 265(a)(2) and amounts
25             disallowed as interest expense by Section  291(a)(3)
26             of  the  Internal  Revenue Code, as now or hereafter
27             amended, and all amounts of  expenses  allocable  to
28             interest  and  disallowed  as  deductions by Section
29             265(a)(1) of the Internal Revenue Code,  as  now  or
30             hereafter amended;
31                  (J)  An amount equal to all amounts included in
32             such  total  which  are exempt from taxation by this
33             State  either  by  reason   of   its   statutes   or
34             Constitution  or  by  reason  of  the  Constitution,
                            -10-               LRB9003323KDcd
 1             treaties  or statutes of the United States; provided
 2             that, in the case of any statute of this State  that
 3             exempts   income   derived   from   bonds  or  other
 4             obligations from the tax imposed under this Act, the
 5             amount exempted shall be the interest  net  of  bond
 6             premium amortization;
 7                  (K)  An   amount   equal   to  those  dividends
 8             included  in  such  total  which  were  paid  by   a
 9             corporation which conducts business operations in an
10             Enterprise  Zone or zones created under the Illinois
11             Enterprise Zone Act and conducts  substantially  all
12             of its operations in an Enterprise Zone or zones;
13                  (L)  An   amount   equal   to  those  dividends
14             included  in  such  total  that  were  paid   by   a
15             corporation  that  conducts business operations in a
16             federally designated Foreign Trade Zone or  Sub-Zone
17             and  that  is  designated  a  High  Impact  Business
18             located   in   Illinois;   provided  that  dividends
19             eligible for the deduction provided in  subparagraph
20             (K)  of  paragraph 2 of this subsection shall not be
21             eligible  for  the  deduction  provided  under  this
22             subparagraph (L);
23                  (M)  For  any  taxpayer  that  is  a  financial
24             organization within the meaning of Section 304(c) of
25             this Act,  an  amount  included  in  such  total  as
26             interest  income  from  a loan or loans made by such
27             taxpayer to a borrower, to the extent  that  such  a
28             loan  is  secured  by property which is eligible for
29             the Enterprise Zone Investment Credit. To  determine
30             the  portion  of  a loan or loans that is secured by
31             property eligible for a  Section  201(h)  investment
32             credit  to the borrower, the entire principal amount
33             of the loan or loans between the  taxpayer  and  the
34             borrower  should  be  divided  into the basis of the
                            -11-               LRB9003323KDcd
 1             Section  201(h)  investment  credit  property  which
 2             secures the loan or loans, using  for  this  purpose
 3             the original basis of such property on the date that
 4             it  was  placed  in  service in the Enterprise Zone.
 5             The subtraction modification available  to  taxpayer
 6             in  any  year  under  this  subsection shall be that
 7             portion of the total interest paid by  the  borrower
 8             with  respect  to  such  loan  attributable  to  the
 9             eligible  property  as calculated under the previous
10             sentence;
11                  (M-1)  For any taxpayer  that  is  a  financial
12             organization within the meaning of Section 304(c) of
13             this  Act,  an  amount  included  in  such  total as
14             interest income from a loan or loans  made  by  such
15             taxpayer  to  a  borrower, to the extent that such a
16             loan is secured by property which  is  eligible  for
17             the  High  Impact  Business  Investment  Credit.  To
18             determine the portion of a loan  or  loans  that  is
19             secured  by  property  eligible for a Section 201(i)
20             investment  credit  to  the  borrower,  the   entire
21             principal  amount  of  the loan or loans between the
22             taxpayer and the borrower should be divided into the
23             basis  of  the  Section  201(i)  investment   credit
24             property  which secures the loan or loans, using for
25             this purpose the original basis of such property  on
26             the  date  that  it  was  placed  in  service  in  a
27             federally  designated Foreign Trade Zone or Sub-Zone
28             located in Illinois.  No taxpayer that  is  eligible
29             for  the  deduction  provided in subparagraph (M) of
30             paragraph (2) of this subsection shall  be  eligible
31             for  the  deduction provided under this subparagraph
32             (M-1).  The subtraction  modification  available  to
33             taxpayers in any year under this subsection shall be
34             that  portion  of  the  total  interest  paid by the
                            -12-               LRB9003323KDcd
 1             borrower with respect to such loan  attributable  to
 2             the   eligible  property  as  calculated  under  the
 3             previous sentence;
 4                  (N)  Two times any contribution made during the
 5             taxable year to a designated  zone  organization  to
 6             the  extent that the contribution (i) qualifies as a
 7             charitable  contribution  under  subsection  (c)  of
 8             Section 170 of the Internal Revenue  Code  and  (ii)
 9             must,  by  its terms, be used for a project approved
10             by the Department of Commerce and Community  Affairs
11             under  Section  11  of  the Illinois Enterprise Zone
12             Act;
13                  (O)  An amount equal to: (i)  85%  for  taxable
14             years  ending  on or before December 31, 1992, or, a
15             percentage equal to the percentage  allowable  under
16             Section  243(a)(1)  of  the Internal Revenue Code of
17             1986 for taxable years  ending  after  December  31,
18             1992,  of  the amount by which dividends included in
19             taxable income and received from a corporation  that
20             is  not  created  or organized under the laws of the
21             United States or any state or political  subdivision
22             thereof,  including,  for taxable years ending on or
23             after  December  31,  1988,  dividends  received  or
24             deemed  received  or  paid  or  deemed  paid   under
25             Sections  951  through  964  of the Internal Revenue
26             Code, exceed the amount of the modification provided
27             under subparagraph (G)  of  paragraph  (2)  of  this
28             subsection  (b)  which is related to such dividends;
29             plus (ii) 100% of the  amount  by  which  dividends,
30             included  in taxable income and received, including,
31             for taxable years ending on or  after  December  31,
32             1988,  dividends received or deemed received or paid
33             or deemed paid under Sections 951 through 964 of the
34             Internal Revenue Code,  from  any  such  corporation
                            -13-               LRB9003323KDcd
 1             specified  in  clause  (i)  that  would  but for the
 2             provisions of Section 1504 (b) (3) of  the  Internal
 3             Revenue   Code   be  treated  as  a  member  of  the
 4             affiliated  group  which   includes   the   dividend
 5             recipient,  exceed  the  amount  of the modification
 6             provided under subparagraph (G) of paragraph (2)  of
 7             this   subsection  (b)  which  is  related  to  such
 8             dividends;
 9                  (P)  An amount equal to any  contribution  made
10             to  a  job  training project established pursuant to
11             the Tax Increment Allocation Redevelopment Act; and
12                  (Q)  An amount  equal  to  the  amount  of  the
13             deduction  used  to  compute  the federal income tax
14             credit for restoration of substantial  amounts  held
15             under  claim  of right for the taxable year pursuant
16             to Section 1341 of  the  Internal  Revenue  Code  of
17             1986.
18             (3)  Special  rule.   For  purposes of paragraph (2)
19        (A), "gross income" in  the  case  of  a  life  insurance
20        company,  for  tax years ending on and after December 31,
21        1994, shall mean the  gross  investment  income  for  the
22        taxable year.
23        (c)  Trusts and estates.
24             (1)  In  general.  In the case of a trust or estate,
25        base income means  an  amount  equal  to  the  taxpayer's
26        taxable  income  for  the  taxable  year  as  modified by
27        paragraph (2).
28             (2)  Modifications.  Subject to  the  provisions  of
29        paragraph   (3),   the  taxable  income  referred  to  in
30        paragraph (1) shall be modified by adding thereto the sum
31        of the following amounts:
32                  (A)  An amount equal to  all  amounts  paid  or
33             accrued  to  the  taxpayer  as interest or dividends
34             during the taxable year to the extent excluded  from
                            -14-               LRB9003323KDcd
 1             gross income in the computation of taxable income;
 2                  (B)  In the case of (i) an estate, $600; (ii) a
 3             trust  which,  under  its  governing  instrument, is
 4             required to distribute all of its income  currently,
 5             $300;  and  (iii) any other trust, $100, but in each
 6             such case,  only  to  the  extent  such  amount  was
 7             deducted in the computation of taxable income;
 8                  (C)  An  amount  equal  to  the  amount  of tax
 9             imposed by this Act  to  the  extent  deducted  from
10             gross  income  in  the computation of taxable income
11             for the taxable year;
12                  (D)  The  amount  of  any  net  operating  loss
13             deduction taken in arriving at taxable income, other
14             than a net operating loss  carried  forward  from  a
15             taxable year ending prior to December 31, 1986;
16                  (E)  For taxable years in which a net operating
17             loss  carryback  or carryforward from a taxable year
18             ending prior to December 31, 1986 is an  element  of
19             taxable income under paragraph (1) of subsection (e)
20             or  subparagraph  (E) of paragraph (2) of subsection
21             (e), the  amount  by  which  addition  modifications
22             other  than  those provided by this subparagraph (E)
23             exceeded subtraction modifications in  such  taxable
24             year,  with the following limitations applied in the
25             order that they are listed:
26                       (i)  the addition modification relating to
27                  the net operating loss carried back or  forward
28                  to  the  taxable  year  from  any  taxable year
29                  ending prior to  December  31,  1986  shall  be
30                  reduced  by the amount of addition modification
31                  under this subparagraph (E)  which  related  to
32                  that  net  operating  loss  and which was taken
33                  into account in calculating the base income  of
34                  an earlier taxable year, and
                            -15-               LRB9003323KDcd
 1                       (ii)  the  addition  modification relating
 2                  to the  net  operating  loss  carried  back  or
 3                  forward  to  the  taxable year from any taxable
 4                  year ending prior to December  31,  1986  shall
 5                  not  exceed  the  amount  of  such carryback or
 6                  carryforward;
 7                  For taxable years  in  which  there  is  a  net
 8             operating  loss  carryback or carryforward from more
 9             than one other taxable year ending prior to December
10             31, 1986, the addition modification provided in this
11             subparagraph (E) shall be the  sum  of  the  amounts
12             computed    independently    under   the   preceding
13             provisions of this subparagraph (E)  for  each  such
14             taxable year;
15                  (F)  For  taxable  years  ending  on  or  after
16             January 1, 1989, an amount equal to the tax deducted
17             pursuant to Section 164 of the Internal Revenue Code
18             if  the trust or estate is claiming the same tax for
19             purposes of the Illinois foreign  tax  credit  under
20             Section 601 of this Act; and
21                  (G)  An  amount  equal  to  the  amount  of the
22             capital gain deduction allowable under the  Internal
23             Revenue  Code,  to  the  extent  deducted from gross
24             income in the computation of taxable income;
25        and by deducting from the total so obtained  the  sum  of
26        the following amounts:
27                  (H)  An amount equal to all amounts included in
28             such  total  pursuant  to the provisions of Sections
29             402(a), 402(c), 403(a), 403(b), 406(a),  407(a)  and
30             408 of the Internal Revenue Code or included in such
31             total  as  distributions under the provisions of any
32             retirement or disability plan for employees  of  any
33             governmental  agency or unit, or retirement payments
34             to retired partners, which payments are excluded  in
                            -16-               LRB9003323KDcd
 1             computing  net  earnings  from  self  employment  by
 2             Section  1402  of  the  Internal  Revenue  Code  and
 3             regulations adopted pursuant thereto;
 4                  (I)  The valuation limitation amount;
 5                  (J)  An  amount  equal to the amount of any tax
 6             imposed by  this  Act  which  was  refunded  to  the
 7             taxpayer  and included in such total for the taxable
 8             year;
 9                  (K)  An amount equal to all amounts included in
10             taxable income as  modified  by  subparagraphs  (A),
11             (B),  (C),  (D),  (E),  (F) and (G) which are exempt
12             from taxation by this State either by reason of  its
13             statutes   or  Constitution  or  by  reason  of  the
14             Constitution, treaties or  statutes  of  the  United
15             States; provided that, in the case of any statute of
16             this State that exempts income derived from bonds or
17             other  obligations  from  the tax imposed under this
18             Act, the amount exempted shall be the  interest  net
19             of bond premium amortization;
20                  (L)  With   the   exception   of   any  amounts
21             subtracted under subparagraph (K), an  amount  equal
22             to  the  sum of all amounts disallowed as deductions
23             by Sections 171(a) (2) and 265(a)(2) of the Internal
24             Revenue Code, as now or hereafter amended,  and  all
25             amounts   of  expenses  allocable  to  interest  and
26             disallowed as deductions by Section  265(1)  of  the
27             Internal  Revenue  Code of 1954, as now or hereafter
28             amended;
29                  (M)  An  amount  equal   to   those   dividends
30             included   in  such  total  which  were  paid  by  a
31             corporation which conducts business operations in an
32             Enterprise Zone or zones created under the  Illinois
33             Enterprise  Zone  Act and conducts substantially all
34             of its operations in an Enterprise Zone or Zones;
                            -17-               LRB9003323KDcd
 1                  (N)  An amount equal to any  contribution  made
 2             to  a  job  training project established pursuant to
 3             the Tax Increment Allocation Redevelopment Act;
 4                  (O)  An  amount  equal   to   those   dividends
 5             included   in   such  total  that  were  paid  by  a
 6             corporation that conducts business operations  in  a
 7             federally  designated Foreign Trade Zone or Sub-Zone
 8             and  that  is  designated  a  High  Impact  Business
 9             located  in  Illinois;   provided   that   dividends
10             eligible  for the deduction provided in subparagraph
11             (M) of paragraph (2) of this subsection shall not be
12             eligible  for  the  deduction  provided  under  this
13             subparagraph (O); and
14                  (P)  An amount  equal  to  the  amount  of  the
15             deduction  used  to  compute  the federal income tax
16             credit for restoration of substantial  amounts  held
17             under  claim  of right for the taxable year pursuant
18             to Section 1341 of  the  Internal  Revenue  Code  of
19             1986.
20             (3)  Limitation.   The  amount  of  any modification
21        otherwise required under  this  subsection  shall,  under
22        regulations  prescribed by the Department, be adjusted by
23        any amounts included therein which  were  properly  paid,
24        credited,  or  required to be distributed, or permanently
25        set aside for charitable purposes pursuant   to  Internal
26        Revenue Code Section 642(c) during the taxable year.
27        (d)  Partnerships.
28             (1)  In  general. In the case of a partnership, base
29        income means an amount equal to  the  taxpayer's  taxable
30        income for the taxable year as modified by paragraph (2).
31             (2)  Modifications.  The  taxable income referred to
32        in paragraph (1) shall be modified by adding thereto  the
33        sum of the following amounts:
34                  (A)  An  amount  equal  to  all amounts paid or
                            -18-               LRB9003323KDcd
 1             accrued to the taxpayer  as  interest  or  dividends
 2             during  the taxable year to the extent excluded from
 3             gross income in the computation of taxable income;
 4                  (B)  An amount  equal  to  the  amount  of  tax
 5             imposed  by  this  Act  to  the extent deducted from
 6             gross income for the taxable year; and
 7                  (C)  The amount of deductions  allowed  to  the
 8             partnership  pursuant  to  Section  707  (c)  of the
 9             Internal Revenue Code  in  calculating  its  taxable
10             income;
11                  (D)  An  amount  equal  to  the  amount  of the
12             capital gain deduction allowable under the  Internal
13             Revenue  Code,  to  the  extent  deducted from gross
14             income in the computation of taxable income;
15        and by deducting from the total so obtained the following
16        amounts:
17                  (E)  The valuation limitation amount;
18                  (F)  An amount equal to the amount of  any  tax
19             imposed  by  this  Act  which  was  refunded  to the
20             taxpayer and included in such total for the  taxable
21             year;
22                  (G)  An amount equal to all amounts included in
23             taxable  income  as  modified  by subparagraphs (A),
24             (B), (C) and (D) which are exempt from  taxation  by
25             this  State  either  by  reason  of  its statutes or
26             Constitution  or  by  reason  of  the  Constitution,
27             treaties or statutes of the United States;  provided
28             that,  in the case of any statute of this State that
29             exempts  income  derived   from   bonds   or   other
30             obligations from the tax imposed under this Act, the
31             amount  exempted  shall  be the interest net of bond
32             premium amortization;
33                  (H)  Any  income  of  the   partnership   which
34             constitutes  personal  service  income as defined in
                            -19-               LRB9003323KDcd
 1             Section 1348 (b) (1) of the  Internal  Revenue  Code
 2             (as  in  effect  December  31, 1981) or a reasonable
 3             allowance  for  compensation  paid  or  accrued  for
 4             services rendered by partners  to  the  partnership,
 5             whichever is greater;
 6                  (I)  An  amount  equal to all amounts of income
 7             distributable to an entity subject to  the  Personal
 8             Property  Tax  Replacement  Income  Tax  imposed  by
 9             subsections  (c)  and (d) of Section 201 of this Act
10             including  amounts  distributable  to  organizations
11             exempt from federal income tax by reason of  Section
12             501(a) of the Internal Revenue Code;
13                  (J)  With   the   exception   of   any  amounts
14             subtracted under subparagraph (G), an  amount  equal
15             to  the  sum of all amounts disallowed as deductions
16             by Sections 171(a) (2), and 265(2) of  the  Internal
17             Revenue  Code  of 1954, as now or hereafter amended,
18             and all amounts of expenses  allocable  to  interest
19             and  disallowed  as  deductions by Section 265(1) of
20             the Internal  Revenue  Code,  as  now  or  hereafter
21             amended;
22                  (K)  An   amount   equal   to  those  dividends
23             included  in  such  total  which  were  paid  by   a
24             corporation which conducts business operations in an
25             Enterprise  Zone or zones created under the Illinois
26             Enterprise Zone Act, enacted  by  the  82nd  General
27             Assembly, and which does not conduct such operations
28             other than in an Enterprise Zone or Zones;
29                  (L)  An  amount  equal to any contribution made
30             to a job training project  established  pursuant  to
31             the   Real   Property   Tax   Increment   Allocation
32             Redevelopment Act;
33                  (M)  An   amount   equal   to  those  dividends
34             included  in  such  total  that  were  paid   by   a
                            -20-               LRB9003323KDcd
 1             corporation  that  conducts business operations in a
 2             federally designated Foreign Trade Zone or  Sub-Zone
 3             and  that  is  designated  a  High  Impact  Business
 4             located   in   Illinois;   provided  that  dividends
 5             eligible for the deduction provided in  subparagraph
 6             (K) of paragraph (2) of this subsection shall not be
 7             eligible  for  the  deduction  provided  under  this
 8             subparagraph (M); and
 9                  (N)  An  amount  equal  to  the  amount  of the
10             deduction used to compute  the  federal  income  tax
11             credit  for  restoration of substantial amounts held
12             under claim of right for the taxable  year  pursuant
13             to  Section  1341  of  the  Internal Revenue Code of
14             1986.
15        (e)  Gross income; adjusted gross income; taxable income.
16             (1)  In  general.   Subject  to  the  provisions  of
17        paragraph (2) and subsection (b)  (3),  for  purposes  of
18        this  Section  and  Section  803(e),  a  taxpayer's gross
19        income, adjusted gross income, or taxable income for  the
20        taxable  year  shall  mean  the  amount  of gross income,
21        adjusted  gross  income  or   taxable   income   properly
22        reportable  for  federal  income  tax  purposes  for  the
23        taxable year under the provisions of the Internal Revenue
24        Code.  Taxable income may be less than zero. However, for
25        taxable years ending on or after December 31,  1986,  net
26        operating  loss  carryforwards  from taxable years ending
27        prior to December 31, 1986, may not  exceed  the  sum  of
28        federal  taxable  income  for the taxable year before net
29        operating loss deduction, plus  the  excess  of  addition
30        modifications  over  subtraction  modifications  for  the
31        taxable year.  For taxable years ending prior to December
32        31, 1986, taxable income may never be an amount in excess
33        of the net operating loss for the taxable year as defined
34        in subsections (c) and (d) of Section 172 of the Internal
                            -21-               LRB9003323KDcd
 1        Revenue  Code,  provided  that  when  taxable income of a
 2        corporation (other  than  a  Subchapter  S  corporation),
 3        trust,   or   estate  is  less  than  zero  and  addition
 4        modifications, other than those provided by  subparagraph
 5        (E)  of  paragraph (2) of subsection (b) for corporations
 6        or subparagraph (E) of paragraph (2)  of  subsection  (c)
 7        for trusts and estates, exceed subtraction modifications,
 8        an   addition  modification  must  be  made  under  those
 9        subparagraphs for any other taxable  year  to  which  the
10        taxable  income  less  than  zero (net operating loss) is
11        applied under Section 172 of the Internal Revenue Code or
12        under  subparagraph  (E)  of  paragraph   (2)   of   this
13        subsection (e) applied in conjunction with Section 172 of
14        the Internal Revenue Code.
15             (2)  Special rule.  For purposes of paragraph (1) of
16        this  subsection,  the taxable income properly reportable
17        for federal income tax purposes shall mean:
18                  (A)  Certain life insurance companies.  In  the
19             case  of a life insurance company subject to the tax
20             imposed by Section 801 of the Internal Revenue Code,
21             life insurance  company  taxable  income,  plus  the
22             amount  of  distribution  from pre-1984 policyholder
23             surplus accounts as calculated under Section 815a of
24             the Internal Revenue Code;
25                  (B)  Certain other insurance companies.  In the
26             case of mutual insurance companies  subject  to  the
27             tax  imposed  by Section 831 of the Internal Revenue
28             Code, insurance company taxable income;
29                  (C)  Regulated investment  companies.   In  the
30             case  of  a  regulated investment company subject to
31             the tax imposed  by  Section  852  of  the  Internal
32             Revenue Code, investment company taxable income;
33                  (D)  Real  estate  investment  trusts.   In the
34             case of a real estate investment  trust  subject  to
                            -22-               LRB9003323KDcd
 1             the  tax  imposed  by  Section  857  of the Internal
 2             Revenue Code, real estate investment  trust  taxable
 3             income;
 4                  (E)  Consolidated corporations.  In the case of
 5             a  corporation  which  is  a member of an affiliated
 6             group of corporations filing a  consolidated  income
 7             tax  return  for the taxable year for federal income
 8             tax purposes, taxable income determined as  if  such
 9             corporation  had filed a separate return for federal
10             income tax purposes for the taxable  year  and  each
11             preceding  taxable year for which it was a member of
12             an  affiliated   group.   For   purposes   of   this
13             subparagraph, the taxpayer's separate taxable income
14             shall  be  determined as if the election provided by
15             Section 243(b) (2) of the Internal Revenue Code  had
16             been in effect for all such years;
17                  (F)  Cooperatives.     In   the   case   of   a
18             cooperative corporation or association, the  taxable
19             income of such organization determined in accordance
20             with  the provisions of Section 1381 through 1388 of
21             the Internal Revenue Code;
22                  (G)  Subchapter S corporations.   In  the  case
23             of:  (i)  a Subchapter S corporation for which there
24             is in effect an election for the taxable year  under
25             Section  1362  of  the  Internal  Revenue  Code, the
26             taxable income of  such  corporation  determined  in
27             accordance  with  Section  1363(b)  of  the Internal
28             Revenue Code, except that taxable income shall  take
29             into  account  those  items  which  are  required by
30             Section 1363(b)(1) of the Internal Revenue  Code  to
31             be  separately  stated;  and  (ii)  a  Subchapter  S
32             corporation  for  which there is in effect a federal
33             election  to  opt  out  of  the  provisions  of  the
34             Subchapter S Revision Act of 1982 and  have  applied
                            -23-               LRB9003323KDcd
 1             instead  the  prior federal Subchapter S rules as in
 2             effect on July 1, 1982, the taxable income  of  such
 3             corporation   determined   in  accordance  with  the
 4             federal Subchapter S rules as in effect on  July  1,
 5             1982; and
 6                  (H)  Partnerships.     In   the   case   of   a
 7             partnership, taxable income determined in accordance
 8             with Section  703  of  the  Internal  Revenue  Code,
 9             except  that  taxable income shall take into account
10             those items which are required by Section  703(a)(1)
11             to  be  separately  stated  but which would be taken
12             into account by an  individual  in  calculating  his
13             taxable income.
14        (f)  Valuation limitation amount.
15             (1)  In  general.   The  valuation limitation amount
16        referred to in subsections (a) (2) (G), (c) (2)  (I)  and
17        (d)(2) (E) is an amount equal to:
18                  (A)  The   sum   of   the  pre-August  1,  1969
19             appreciation amounts (to the  extent  consisting  of
20             gain reportable under the provisions of Section 1245
21             or  1250  of  the  Internal  Revenue  Code)  for all
22             property in respect of which such gain was  reported
23             for the taxable year; plus
24                  (B)  The   lesser   of   (i)  the  sum  of  the
25             pre-August 1,  1969  appreciation  amounts  (to  the
26             extent  consisting of capital gain) for all property
27             in respect of  which  such  gain  was  reported  for
28             federal income tax purposes for the taxable year, or
29             (ii)  the  net  capital  gain  for the taxable year,
30             reduced in either case by any amount  of  such  gain
31             included  in  the amount determined under subsection
32             (a) (2) (F) or (c) (2) (H).
33        (2)  Pre-August 1, 1969 appreciation amount.
34                  (A)  If  the  fair  market  value  of  property
                            -24-               LRB9003323KDcd
 1             referred   to   in   paragraph   (1)   was   readily
 2             ascertainable on August 1, 1969, the  pre-August  1,
 3             1969  appreciation  amount  for such property is the
 4             lesser of (i) the excess of such fair  market  value
 5             over the taxpayer's basis (for determining gain) for
 6             such  property  on  that  date (determined under the
 7             Internal Revenue Code as in effect on that date), or
 8             (ii) the total  gain  realized  and  reportable  for
 9             federal  income tax purposes in respect of the sale,
10             exchange or other disposition of such property.
11                  (B)  If  the  fair  market  value  of  property
12             referred  to  in  paragraph  (1)  was  not   readily
13             ascertainable  on  August 1, 1969, the pre-August 1,
14             1969 appreciation amount for such property  is  that
15             amount  which bears the same ratio to the total gain
16             reported in respect  of  the  property  for  federal
17             income  tax  purposes  for  the taxable year, as the
18             number of full calendar months in that part  of  the
19             taxpayer's  holding  period  for the property ending
20             July 31, 1969 bears to the number of  full  calendar
21             months  in  the taxpayer's entire holding period for
22             the property.
23                  (C)  The  Department   shall   prescribe   such
24             regulations  as  may  be  necessary to carry out the
25             purposes of this paragraph.
26        (g)  Double  deductions.   Unless  specifically  provided
27    otherwise, nothing in this Section shall permit the same item
28    to be deducted more than once.
29        (h)  Legislative intention.  Except as expressly provided
30    by  this  Section  there  shall  be   no   modifications   or
31    limitations on the amounts of income, gain, loss or deduction
32    taken  into  account  in  determining  gross income, adjusted
33    gross  income  or  taxable  income  for  federal  income  tax
34    purposes for the taxable year, or in the amount of such items
                            -25-               LRB9003323KDcd
 1    entering into the computation of base income and  net  income
 2    under  this  Act for such taxable year, whether in respect of
 3    property values as of August 1, 1969 or otherwise.
 4    (Source: P.A. 88-195;  88-648,  eff.  9-16-94;  88-669,  eff.
 5    11-29-94;  88-670, eff. 12-2-94; 89-89, eff. 6-30-95; 89-235,
 6    eff. 8-4-95; 89-418, eff.  11-15-95;  89-460,  eff.  5-24-96;
 7    89-626, eff. 8-9-96.)
 8        Section  99.  Effective date.  This Act takes effect upon
 9    becoming law.

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