State of Illinois
90th General Assembly
Legislation

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90_SB1308

      35 ILCS 5/203
          Amends  the  Illinois  Income  Tax  Act.   Provides  that
      beginning with taxable years beginning on or after January 1,
      1998 and ending  with  taxable  years  ending  on  or  before
      December  30,  2003,  an  income  tax deduction not to exceed
      $100,000  is  available  to  individuals,  corporations,  and
      trusts  and  estates  in  an  amount  equal  to  the   amount
      contributed  for  educational purposes by the taxpayer to any
      public or private elementary or secondary school in Illinois,
      as certified by the  recipient  school.   Provides  that  the
      deduction  shall  be  available  for  foundations established
      under Section 501(c)(3) of the Internal Revenue Code to raise
      moneys for schools.
                                                     LRB9007866KDks
                                               LRB9007866KDks
 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-                LRB9007866KDks
 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-                LRB9007866KDks
 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-                LRB9007866KDks
 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-                LRB9007866KDks
 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-                LRB9007866KDks
 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)  Beginning with taxable years beginning  on
31             or  after  January  1,  1998 and ending with taxable
32             years ending on or  before  December  31,  2003,  an
33             amount,  not to exceed $100,000, equal to the amount
34             contributed for educational purposes by the taxpayer
                            -7-                LRB9007866KDks
 1             to any public or  private  elementary  or  secondary
 2             school  in Illinois or to any foundation established
 3             under Section 501(c)(3) of the Internal Revenue Code
 4             to raise moneys for any public or private elementary
 5             or secondary school in  Illinois,  as  certified  by
 6             the recipient school.
 7        (b)  Corporations.
 8             (1)  In general.  In the case of a corporation, base
 9        income  means  an  amount equal to the taxpayer's taxable
10        income for the taxable year as modified by paragraph (2).
11             (2)  Modifications.  The taxable income referred  to
12        in  paragraph (1) shall be modified by adding thereto the
13        sum of the following amounts:
14                  (A)  An amount equal to  all  amounts  paid  or
15             accrued   to   the  taxpayer  as  interest  and  all
16             distributions  received  from  regulated  investment
17             companies during the  taxable  year  to  the  extent
18             excluded  from  gross  income  in the computation of
19             taxable income;
20                  (B)  An amount  equal  to  the  amount  of  tax
21             imposed  by  this  Act  to  the extent deducted from
22             gross income in the computation  of  taxable  income
23             for the taxable year;
24                  (C)  In  the  case  of  a  regulated investment
25             company, an amount equal to the excess  of  (i)  the
26             net  long-term  capital  gain  for the taxable year,
27             over (ii) the amount of the capital  gain  dividends
28             designated   as  such  in  accordance  with  Section
29             852(b)(3)(C) of the Internal Revenue  Code  and  any
30             amount  designated under Section 852(b)(3)(D) of the
31             Internal Revenue Code, attributable to  the  taxable
32             year.
33        This  amendatory  Act  of 1995 is declarative of existing
34    law and is not a new enactment.
                            -8-                LRB9007866KDks
 1                  (D)  The  amount  of  any  net  operating  loss
 2             deduction taken in arriving at taxable income, other
 3             than a net operating loss  carried  forward  from  a
 4             taxable year ending prior to December 31, 1986; and
 5                  (E)  For taxable years in which a net operating
 6             loss  carryback  or carryforward from a taxable year
 7             ending prior to December 31, 1986 is an  element  of
 8             taxable income under paragraph (1) of subsection (e)
 9             or  subparagraph  (E) of paragraph (2) of subsection
10             (e), the  amount  by  which  addition  modifications
11             other  than  those provided by this subparagraph (E)
12             exceeded subtraction modifications in  such  earlier
13             taxable year, with the following limitations applied
14             in the order that they are listed:
15                       (i)  the addition modification relating to
16                  the  net operating loss carried back or forward
17                  to the  taxable  year  from  any  taxable  year
18                  ending  prior  to  December  31,  1986 shall be
19                  reduced by the amount of addition  modification
20                  under  this  subparagraph  (E) which related to
21                  that net operating loss  and  which  was  taken
22                  into  account in calculating the base income of
23                  an earlier taxable year, and
24                       (ii)  the addition  modification  relating
25                  to  the  net  operating  loss  carried  back or
26                  forward to the taxable year  from  any  taxable
27                  year  ending  prior  to December 31, 1986 shall
28                  not exceed the  amount  of  such  carryback  or
29                  carryforward;
30                  For  taxable  years  in  which  there  is a net
31             operating loss carryback or carryforward  from  more
32             than one other taxable year ending prior to December
33             31, 1986, the addition modification provided in this
34             subparagraph  (E)  shall  be  the sum of the amounts
                            -9-                LRB9007866KDks
 1             computed   independently   under    the    preceding
 2             provisions  of  this  subparagraph (E) for each such
 3             taxable year,
 4        and by deducting from the total so obtained  the  sum  of
 5        the following amounts:
 6                  (F)  An  amount  equal to the amount of any tax
 7             imposed by  this  Act  which  was  refunded  to  the
 8             taxpayer  and included in such total for the taxable
 9             year;
10                  (G)  An amount equal to any amount included  in
11             such  total under Section 78 of the Internal Revenue
12             Code;
13                  (H)  In the  case  of  a  regulated  investment
14             company,  an  amount  equal  to the amount of exempt
15             interest dividends as defined in subsection (b)  (5)
16             of Section 852 of the Internal Revenue Code, paid to
17             shareholders for the taxable year;
18                  (I)  With   the   exception   of   any  amounts
19             subtracted under subparagraph (J), an  amount  equal
20             to  the  sum of all amounts disallowed as deductions
21             by Sections 171(a) (2), and  265(a)(2)  and  amounts
22             disallowed  as interest expense by Section 291(a)(3)
23             of the Internal Revenue Code, as  now  or  hereafter
24             amended,  and  all  amounts of expenses allocable to
25             interest and disallowed  as  deductions  by  Section
26             265(a)(1)  of  the  Internal Revenue Code, as now or
27             hereafter amended;
28                  (J)  An amount equal to all amounts included in
29             such total which are exempt from  taxation  by  this
30             State   either   by   reason   of  its  statutes  or
31             Constitution  or  by  reason  of  the  Constitution,
32             treaties or statutes of the United States;  provided
33             that,  in the case of any statute of this State that
34             exempts  income  derived   from   bonds   or   other
                            -10-               LRB9007866KDks
 1             obligations from the tax imposed under this Act, the
 2             amount  exempted  shall  be the interest net of bond
 3             premium amortization;
 4                  (K)  An  amount  equal   to   those   dividends
 5             included   in  such  total  which  were  paid  by  a
 6             corporation which conducts business operations in an
 7             Enterprise Zone or zones created under the  Illinois
 8             Enterprise  Zone  Act and conducts substantially all
 9             of its operations in an Enterprise Zone or zones;
10                  (L)  An  amount  equal   to   those   dividends
11             included   in   such  total  that  were  paid  by  a
12             corporation that conducts business operations  in  a
13             federally  designated Foreign Trade Zone or Sub-Zone
14             and  that  is  designated  a  High  Impact  Business
15             located  in  Illinois;   provided   that   dividends
16             eligible  for the deduction provided in subparagraph
17             (K) of paragraph 2 of this subsection shall  not  be
18             eligible  for  the  deduction  provided  under  this
19             subparagraph (L);
20                  (M)  For  any  taxpayer  that  is  a  financial
21             organization within the meaning of Section 304(c) of
22             this  Act,  an  amount  included  in  such  total as
23             interest income from a loan or loans  made  by  such
24             taxpayer  to  a  borrower, to the extent that such a
25             loan is secured by property which  is  eligible  for
26             the  Enterprise Zone Investment Credit. To determine
27             the portion of a loan or loans that  is  secured  by
28             property  eligible  for  a Section 201(h) investment
29             credit to the borrower, the entire principal  amount
30             of  the  loan  or loans between the taxpayer and the
31             borrower should be divided into  the  basis  of  the
32             Section  201(h)  investment  credit  property  which
33             secures  the  loan  or loans, using for this purpose
34             the original basis of such property on the date that
                            -11-               LRB9007866KDks
 1             it was placed in service  in  the  Enterprise  Zone.
 2             The  subtraction  modification available to taxpayer
 3             in any year under  this  subsection  shall  be  that
 4             portion  of  the total interest paid by the borrower
 5             with  respect  to  such  loan  attributable  to  the
 6             eligible property as calculated under  the  previous
 7             sentence;
 8                  (M-1)  For  any  taxpayer  that  is a financial
 9             organization within the meaning of Section 304(c) of
10             this Act,  an  amount  included  in  such  total  as
11             interest  income  from  a loan or loans made by such
12             taxpayer to a borrower, to the extent  that  such  a
13             loan  is  secured  by property which is eligible for
14             the High  Impact  Business  Investment  Credit.   To
15             determine  the  portion  of  a loan or loans that is
16             secured by property eligible for  a  Section  201(i)
17             investment   credit  to  the  borrower,  the  entire
18             principal amount of the loan or  loans  between  the
19             taxpayer and the borrower should be divided into the
20             basis   of  the  Section  201(i)  investment  credit
21             property which secures the loan or loans, using  for
22             this  purpose the original basis of such property on
23             the  date  that  it  was  placed  in  service  in  a
24             federally designated Foreign Trade Zone or  Sub-Zone
25             located  in  Illinois.  No taxpayer that is eligible
26             for the deduction provided in  subparagraph  (M)  of
27             paragraph  (2)  of this subsection shall be eligible
28             for the deduction provided under  this  subparagraph
29             (M-1).   The  subtraction  modification available to
30             taxpayers in any year under this subsection shall be
31             that portion of  the  total  interest  paid  by  the
32             borrower  with  respect to such loan attributable to
33             the  eligible  property  as  calculated  under   the
34             previous sentence;
                            -12-               LRB9007866KDks
 1                  (N)  Two times any contribution made during the
 2             taxable  year  to  a designated zone organization to
 3             the extent that the contribution (i) qualifies as  a
 4             charitable  contribution  under  subsection  (c)  of
 5             Section  170  of  the Internal Revenue Code and (ii)
 6             must, by its terms, be used for a  project  approved
 7             by  the Department of Commerce and Community Affairs
 8             under Section 11 of  the  Illinois  Enterprise  Zone
 9             Act;
10                  (O)  An  amount  equal  to: (i) 85% for taxable
11             years ending on or before December 31, 1992,  or,  a
12             percentage  equal  to the percentage allowable under
13             Section 243(a)(1) of the Internal  Revenue  Code  of
14             1986  for  taxable  years  ending after December 31,
15             1992, of the amount by which dividends  included  in
16             taxable  income and received from a corporation that
17             is not created or organized under the  laws  of  the
18             United  States or any state or political subdivision
19             thereof, including, for taxable years ending  on  or
20             after  December  31,  1988,  dividends  received  or
21             deemed   received  or  paid  or  deemed  paid  under
22             Sections 951 through 964  of  the  Internal  Revenue
23             Code, exceed the amount of the modification provided
24             under  subparagraph  (G)  of  paragraph  (2) of this
25             subsection (b) which is related to  such  dividends;
26             plus  (ii)  100%  of  the amount by which dividends,
27             included in taxable income and received,  including,
28             for  taxable  years  ending on or after December 31,
29             1988, dividends received or deemed received or  paid
30             or deemed paid under Sections 951 through 964 of the
31             Internal  Revenue  Code,  from  any such corporation
32             specified in clause  (i)  that  would  but  for  the
33             provisions  of  Section 1504 (b) (3) of the Internal
34             Revenue  Code  be  treated  as  a  member   of   the
                            -13-               LRB9007866KDks
 1             affiliated   group   which   includes  the  dividend
 2             recipient, exceed the  amount  of  the  modification
 3             provided  under subparagraph (G) of paragraph (2) of
 4             this  subsection  (b)  which  is  related  to   such
 5             dividends;
 6                  (P)  An  amount  equal to any contribution made
 7             to a job training project  established  pursuant  to
 8             the Tax Increment Allocation Redevelopment Act; and
 9                  (Q)  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; and .
15                  (R)  Beginning with taxable years beginning  on
16             or  after  January  1,  1998 and ending with taxable
17             years ending on or  before  December  31,  2003,  an
18             amount,  not to exceed $100,000, equal to the amount
19             contributed for educational purposes by the taxpayer
20             to any public or  private  elementary  or  secondary
21             school  in Illinois or to any foundation established
22             under Section 501(c)(3) of the Internal Revenue Code
23             to raise moneys for any public or private elementary
24             or secondary school in  Illinois,  as  certified  by
25             the recipient school.
26             (3)  Special  rule.   For  purposes of paragraph (2)
27        (A), "gross income" in  the  case  of  a  life  insurance
28        company,  for  tax years ending on and after December 31,
29        1994, shall mean the  gross  investment  income  for  the
30        taxable year.
31        (c)  Trusts and estates.
32             (1)  In  general.  In the case of a trust or estate,
33        base income means  an  amount  equal  to  the  taxpayer's
34        taxable  income  for  the  taxable  year  as  modified by
                            -14-               LRB9007866KDks
 1        paragraph (2).
 2             (2)  Modifications.  Subject to  the  provisions  of
 3        paragraph   (3),   the  taxable  income  referred  to  in
 4        paragraph (1) shall be modified by adding thereto the sum
 5        of the following amounts:
 6                  (A)  An amount equal to  all  amounts  paid  or
 7             accrued  to  the  taxpayer  as interest or dividends
 8             during the taxable year to the extent excluded  from
 9             gross income in the computation of taxable income;
10                  (B)  In the case of (i) an estate, $600; (ii) a
11             trust  which,  under  its  governing  instrument, is
12             required to distribute all of its income  currently,
13             $300;  and  (iii) any other trust, $100, but in each
14             such case,  only  to  the  extent  such  amount  was
15             deducted in the computation of taxable income;
16                  (C)  An  amount  equal  to  the  amount  of tax
17             imposed by this Act  to  the  extent  deducted  from
18             gross  income  in  the computation of taxable income
19             for the taxable year;
20                  (D)  The  amount  of  any  net  operating  loss
21             deduction taken in arriving at taxable income, other
22             than a net operating loss  carried  forward  from  a
23             taxable year ending prior to December 31, 1986;
24                  (E)  For taxable years in which a net operating
25             loss  carryback  or carryforward from a taxable year
26             ending prior to December 31, 1986 is an  element  of
27             taxable income under paragraph (1) of subsection (e)
28             or  subparagraph  (E) of paragraph (2) of subsection
29             (e), the  amount  by  which  addition  modifications
30             other  than  those provided by this subparagraph (E)
31             exceeded subtraction modifications in  such  taxable
32             year,  with the following limitations applied in the
33             order that they are listed:
34                       (i)  the addition modification relating to
                            -15-               LRB9007866KDks
 1                  the net operating loss carried back or  forward
 2                  to  the  taxable  year  from  any  taxable year
 3                  ending prior to  December  31,  1986  shall  be
 4                  reduced  by the amount of addition modification
 5                  under this subparagraph (E)  which  related  to
 6                  that  net  operating  loss  and which was taken
 7                  into account in calculating the base income  of
 8                  an earlier taxable year, and
 9                       (ii)  the  addition  modification relating
10                  to the  net  operating  loss  carried  back  or
11                  forward  to  the  taxable year from any taxable
12                  year ending prior to December  31,  1986  shall
13                  not  exceed  the  amount  of  such carryback or
14                  carryforward;
15                  For taxable years  in  which  there  is  a  net
16             operating  loss  carryback or carryforward from more
17             than one other taxable year ending prior to December
18             31, 1986, the addition modification provided in this
19             subparagraph (E) shall be the  sum  of  the  amounts
20             computed    independently    under   the   preceding
21             provisions of this subparagraph (E)  for  each  such
22             taxable year;
23                  (F)  For  taxable  years  ending  on  or  after
24             January 1, 1989, an amount equal to the tax deducted
25             pursuant to Section 164 of the Internal Revenue Code
26             if  the trust or estate is claiming the same tax for
27             purposes of the Illinois foreign  tax  credit  under
28             Section 601 of this Act; and
29                  (G)  An  amount  equal  to  the  amount  of the
30             capital gain deduction allowable under the  Internal
31             Revenue  Code,  to  the  extent  deducted from gross
32             income in the computation of taxable income;
33        and by deducting from the total so obtained  the  sum  of
34        the following amounts:
                            -16-               LRB9007866KDks
 1                  (H)  An amount equal to all amounts included in
 2             such  total  pursuant  to the provisions of Sections
 3             402(a), 402(c), 403(a), 403(b), 406(a),  407(a)  and
 4             408 of the Internal Revenue Code or included in such
 5             total  as  distributions under the provisions of any
 6             retirement or disability plan for employees  of  any
 7             governmental  agency or unit, or retirement payments
 8             to retired partners, which payments are excluded  in
 9             computing  net  earnings  from  self  employment  by
10             Section  1402  of  the  Internal  Revenue  Code  and
11             regulations adopted pursuant thereto;
12                  (I)  The valuation limitation amount;
13                  (J)  An  amount  equal to the amount of any tax
14             imposed by  this  Act  which  was  refunded  to  the
15             taxpayer  and included in such total for the taxable
16             year;
17                  (K)  An amount equal to all amounts included in
18             taxable income as  modified  by  subparagraphs  (A),
19             (B),  (C),  (D),  (E),  (F) and (G) which are exempt
20             from taxation by this State either by reason of  its
21             statutes   or  Constitution  or  by  reason  of  the
22             Constitution, treaties or  statutes  of  the  United
23             States; provided that, in the case of any statute of
24             this State that exempts income derived from bonds or
25             other  obligations  from  the tax imposed under this
26             Act, the amount exempted shall be the  interest  net
27             of bond premium amortization;
28                  (L)  With   the   exception   of   any  amounts
29             subtracted under subparagraph (K), an  amount  equal
30             to  the  sum of all amounts disallowed as deductions
31             by Sections 171(a) (2) and 265(a)(2) of the Internal
32             Revenue Code, as now or hereafter amended,  and  all
33             amounts   of  expenses  allocable  to  interest  and
34             disallowed as deductions by Section  265(1)  of  the
                            -17-               LRB9007866KDks
 1             Internal  Revenue  Code of 1954, as now or hereafter
 2             amended;
 3                  (M)  An  amount  equal   to   those   dividends
 4             included   in  such  total  which  were  paid  by  a
 5             corporation which conducts business operations in an
 6             Enterprise Zone or zones created under the  Illinois
 7             Enterprise  Zone  Act and conducts substantially all
 8             of its operations in an Enterprise Zone or Zones;
 9                  (N)  An amount equal to any  contribution  made
10             to  a  job  training project established pursuant to
11             the Tax Increment Allocation Redevelopment Act;
12                  (O)  An  amount  equal   to   those   dividends
13             included   in   such  total  that  were  paid  by  a
14             corporation that conducts business operations  in  a
15             federally  designated Foreign Trade Zone or Sub-Zone
16             and  that  is  designated  a  High  Impact  Business
17             located  in  Illinois;   provided   that   dividends
18             eligible  for the deduction provided in subparagraph
19             (M) of paragraph (2) of this subsection shall not be
20             eligible  for  the  deduction  provided  under  this
21             subparagraph (O); and
22                  (P)  An amount  equal  to  the  amount  of  the
23             deduction  used  to  compute  the federal income tax
24             credit for restoration of substantial  amounts  held
25             under  claim  of right for the taxable year pursuant
26             to Section 1341 of  the  Internal  Revenue  Code  of
27             1986; and .
28                  (Q)  Beginning  with taxable years beginning on
29             or after January 1, 1998  and  ending  with  taxable
30             years  ending  on  or  before  December 31, 2003, an
31             amount, not to exceed $100,000, equal to the  amount
32             contributed for educational purposes by the taxpayer
33             to  any  public  or  private elementary or secondary
34             school in Illinois or to any foundation  established
                            -18-               LRB9007866KDks
 1             under Section 501(c)(3) of the Internal Revenue Code
 2             to raise moneys for any public or private elementary
 3             or secondary school in Illinois, as certified by the
 4             recipient school.
 5             (3)  Limitation.   The  amount  of  any modification
 6        otherwise required under  this  subsection  shall,  under
 7        regulations  prescribed by the Department, be adjusted by
 8        any amounts included therein which  were  properly  paid,
 9        credited,  or  required to be distributed, or permanently
10        set aside for charitable purposes pursuant   to  Internal
11        Revenue Code Section 642(c) during the taxable year.
12        (d)  Partnerships.
13             (1)  In  general. In the case of a partnership, base
14        income means an amount equal to  the  taxpayer's  taxable
15        income for the taxable year as modified by paragraph (2).
16             (2)  Modifications.  The  taxable income referred to
17        in paragraph (1) shall be modified by adding thereto  the
18        sum of the following amounts:
19                  (A)  An  amount  equal  to  all amounts paid or
20             accrued to the taxpayer  as  interest  or  dividends
21             during  the taxable year to the extent excluded from
22             gross income in the computation of taxable income;
23                  (B)  An amount  equal  to  the  amount  of  tax
24             imposed  by  this  Act  to  the extent deducted from
25             gross income for the taxable year; and
26                  (C)  The amount of deductions  allowed  to  the
27             partnership  pursuant  to  Section  707  (c)  of the
28             Internal Revenue Code  in  calculating  its  taxable
29             income;
30                  (D)  An  amount  equal  to  the  amount  of the
31             capital gain deduction allowable under the  Internal
32             Revenue  Code,  to  the  extent  deducted from gross
33             income in the computation of taxable income;
34        and by deducting from the total so obtained the following
                            -19-               LRB9007866KDks
 1        amounts:
 2                  (E)  The valuation limitation amount;
 3                  (F)  An amount equal to the amount of  any  tax
 4             imposed  by  this  Act  which  was  refunded  to the
 5             taxpayer and included in such total for the  taxable
 6             year;
 7                  (G)  An amount equal to all amounts included in
 8             taxable  income  as  modified  by subparagraphs (A),
 9             (B), (C) and (D) which are exempt from  taxation  by
10             this  State  either  by  reason  of  its statutes or
11             Constitution  or  by  reason  of  the  Constitution,
12             treaties or statutes of the United States;  provided
13             that,  in the case of any statute of this State that
14             exempts  income  derived   from   bonds   or   other
15             obligations from the tax imposed under this Act, the
16             amount  exempted  shall  be the interest net of bond
17             premium amortization;
18                  (H)  Any  income  of  the   partnership   which
19             constitutes  personal  service  income as defined in
20             Section 1348 (b) (1) of the  Internal  Revenue  Code
21             (as  in  effect  December  31, 1981) or a reasonable
22             allowance  for  compensation  paid  or  accrued  for
23             services rendered by partners  to  the  partnership,
24             whichever is greater;
25                  (I)  An  amount  equal to all amounts of income
26             distributable to an entity subject to  the  Personal
27             Property  Tax  Replacement  Income  Tax  imposed  by
28             subsections  (c)  and (d) of Section 201 of this Act
29             including  amounts  distributable  to  organizations
30             exempt from federal income tax by reason of  Section
31             501(a) of the Internal Revenue Code;
32                  (J)  With   the   exception   of   any  amounts
33             subtracted under subparagraph (G), an  amount  equal
34             to  the  sum of all amounts disallowed as deductions
                            -20-               LRB9007866KDks
 1             by Sections 171(a) (2), and 265(2) of  the  Internal
 2             Revenue  Code  of 1954, as now or hereafter amended,
 3             and all amounts of expenses  allocable  to  interest
 4             and  disallowed  as  deductions by Section 265(1) of
 5             the Internal  Revenue  Code,  as  now  or  hereafter
 6             amended;
 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, enacted  by  the  82nd  General
12             Assembly, and which does not conduct such operations
13             other than in an Enterprise Zone or Zones;
14                  (L)  An  amount  equal to any contribution made
15             to a job training project  established  pursuant  to
16             the   Real   Property   Tax   Increment   Allocation
17             Redevelopment Act;
18                  (M)  An   amount   equal   to  those  dividends
19             included  in  such  total  that  were  paid   by   a
20             corporation  that  conducts business operations in a
21             federally designated Foreign Trade Zone or  Sub-Zone
22             and  that  is  designated  a  High  Impact  Business
23             located   in   Illinois;   provided  that  dividends
24             eligible for the deduction provided in  subparagraph
25             (K) of paragraph (2) of this subsection shall not be
26             eligible  for  the  deduction  provided  under  this
27             subparagraph (M); and
28                  (N)  An  amount  equal  to  the  amount  of the
29             deduction used to compute  the  federal  income  tax
30             credit  for  restoration of substantial amounts held
31             under claim of right for the taxable  year  pursuant
32             to  Section  1341  of  the  Internal Revenue Code of
33             1986.
34        (e)  Gross income; adjusted gross income; taxable income.
                            -21-               LRB9007866KDks
 1             (1)  In  general.   Subject  to  the  provisions  of
 2        paragraph (2) and subsection (b)  (3),  for  purposes  of
 3        this  Section  and  Section  803(e),  a  taxpayer's gross
 4        income, adjusted gross income, or taxable income for  the
 5        taxable  year  shall  mean  the  amount  of gross income,
 6        adjusted  gross  income  or   taxable   income   properly
 7        reportable  for  federal  income  tax  purposes  for  the
 8        taxable year under the provisions of the Internal Revenue
 9        Code.  Taxable income may be less than zero. However, for
10        taxable years ending on or after December 31,  1986,  net
11        operating  loss  carryforwards  from taxable years ending
12        prior to December 31, 1986, may not  exceed  the  sum  of
13        federal  taxable  income  for the taxable year before net
14        operating loss deduction, plus  the  excess  of  addition
15        modifications  over  subtraction  modifications  for  the
16        taxable year.  For taxable years ending prior to December
17        31, 1986, taxable income may never be an amount in excess
18        of the net operating loss for the taxable year as defined
19        in subsections (c) and (d) of Section 172 of the Internal
20        Revenue  Code,  provided  that  when  taxable income of a
21        corporation (other  than  a  Subchapter  S  corporation),
22        trust,   or   estate  is  less  than  zero  and  addition
23        modifications, other than those provided by  subparagraph
24        (E)  of  paragraph (2) of subsection (b) for corporations
25        or subparagraph (E) of paragraph (2)  of  subsection  (c)
26        for trusts and estates, exceed subtraction modifications,
27        an   addition  modification  must  be  made  under  those
28        subparagraphs for any other taxable  year  to  which  the
29        taxable  income  less  than  zero (net operating loss) is
30        applied under Section 172 of the Internal Revenue Code or
31        under  subparagraph  (E)  of  paragraph   (2)   of   this
32        subsection (e) applied in conjunction with Section 172 of
33        the Internal Revenue Code.
34             (2)  Special rule.  For purposes of paragraph (1) of
                            -22-               LRB9007866KDks
 1        this  subsection,  the taxable income properly reportable
 2        for federal income tax purposes shall mean:
 3                  (A)  Certain life insurance companies.  In  the
 4             case  of a life insurance company subject to the tax
 5             imposed by Section 801 of the Internal Revenue Code,
 6             life insurance  company  taxable  income,  plus  the
 7             amount  of  distribution  from pre-1984 policyholder
 8             surplus accounts as calculated under Section 815a of
 9             the Internal Revenue Code;
10                  (B)  Certain other insurance companies.  In the
11             case of mutual insurance companies  subject  to  the
12             tax  imposed  by Section 831 of the Internal Revenue
13             Code, insurance company taxable income;
14                  (C)  Regulated investment  companies.   In  the
15             case  of  a  regulated investment company subject to
16             the tax imposed  by  Section  852  of  the  Internal
17             Revenue Code, investment company taxable income;
18                  (D)  Real  estate  investment  trusts.   In the
19             case of a real estate investment  trust  subject  to
20             the  tax  imposed  by  Section  857  of the Internal
21             Revenue Code, real estate investment  trust  taxable
22             income;
23                  (E)  Consolidated corporations.  In the case of
24             a  corporation  which  is  a member of an affiliated
25             group of corporations filing a  consolidated  income
26             tax  return  for the taxable year for federal income
27             tax purposes, taxable income determined as  if  such
28             corporation  had filed a separate return for federal
29             income tax purposes for the taxable  year  and  each
30             preceding  taxable year for which it was a member of
31             an  affiliated   group.   For   purposes   of   this
32             subparagraph, the taxpayer's separate taxable income
33             shall  be  determined as if the election provided by
34             Section 243(b) (2) of the Internal Revenue Code  had
                            -23-               LRB9007866KDks
 1             been in effect for all such years;
 2                  (F)  Cooperatives.     In   the   case   of   a
 3             cooperative corporation or association, the  taxable
 4             income of such organization determined in accordance
 5             with  the provisions of Section 1381 through 1388 of
 6             the Internal Revenue Code;
 7                  (G)  Subchapter S corporations.   In  the  case
 8             of:  (i)  a Subchapter S corporation for which there
 9             is in effect an election for the taxable year  under
10             Section  1362  of  the  Internal  Revenue  Code, the
11             taxable income of  such  corporation  determined  in
12             accordance  with  Section  1363(b)  of  the Internal
13             Revenue Code, except that taxable income shall  take
14             into  account  those  items  which  are  required by
15             Section 1363(b)(1) of the Internal Revenue  Code  to
16             be  separately  stated;  and  (ii)  a  Subchapter  S
17             corporation  for  which there is in effect a federal
18             election  to  opt  out  of  the  provisions  of  the
19             Subchapter S Revision Act of 1982 and  have  applied
20             instead  the  prior federal Subchapter S rules as in
21             effect on July 1, 1982, the taxable income  of  such
22             corporation   determined   in  accordance  with  the
23             federal Subchapter S rules as in effect on  July  1,
24             1982; and
25                  (H)  Partnerships.     In   the   case   of   a
26             partnership, taxable income determined in accordance
27             with Section  703  of  the  Internal  Revenue  Code,
28             except  that  taxable income shall take into account
29             those items which are required by Section  703(a)(1)
30             to  be  separately  stated  but which would be taken
31             into account by an  individual  in  calculating  his
32             taxable income.
33        (f)  Valuation limitation amount.
34             (1)  In  general.   The  valuation limitation amount
                            -24-               LRB9007866KDks
 1        referred to in subsections (a) (2) (G), (c) (2)  (I)  and
 2        (d)(2) (E) is an amount equal to:
 3                  (A)  The   sum   of   the  pre-August  1,  1969
 4             appreciation amounts (to the  extent  consisting  of
 5             gain reportable under the provisions of Section 1245
 6             or  1250  of  the  Internal  Revenue  Code)  for all
 7             property in respect of which such gain was  reported
 8             for the taxable year; plus
 9                  (B)  The   lesser   of   (i)  the  sum  of  the
10             pre-August 1,  1969  appreciation  amounts  (to  the
11             extent  consisting of capital gain) for all property
12             in respect of  which  such  gain  was  reported  for
13             federal income tax purposes for the taxable year, or
14             (ii)  the  net  capital  gain  for the taxable year,
15             reduced in either case by any amount  of  such  gain
16             included  in  the amount determined under subsection
17             (a) (2) (F) or (c) (2) (H).
18        (2)  Pre-August 1, 1969 appreciation amount.
19                  (A)  If  the  fair  market  value  of  property
20             referred   to   in   paragraph   (1)   was   readily
21             ascertainable on August 1, 1969, the  pre-August  1,
22             1969  appreciation  amount  for such property is the
23             lesser of (i) the excess of such fair  market  value
24             over the taxpayer's basis (for determining gain) for
25             such  property  on  that  date (determined under the
26             Internal Revenue Code as in effect on that date), or
27             (ii) the total  gain  realized  and  reportable  for
28             federal  income tax purposes in respect of the sale,
29             exchange or other disposition of such property.
30                  (B)  If  the  fair  market  value  of  property
31             referred  to  in  paragraph  (1)  was  not   readily
32             ascertainable  on  August 1, 1969, the pre-August 1,
33             1969 appreciation amount for such property  is  that
34             amount  which bears the same ratio to the total gain
                            -25-               LRB9007866KDks
 1             reported in respect  of  the  property  for  federal
 2             income  tax  purposes  for  the taxable year, as the
 3             number of full calendar months in that part  of  the
 4             taxpayer's  holding  period  for the property ending
 5             July 31, 1969 bears to the number of  full  calendar
 6             months  in  the taxpayer's entire holding period for
 7             the property.
 8                  (C)  The  Department   shall   prescribe   such
 9             regulations  as  may  be  necessary to carry out the
10             purposes of this paragraph.
11        (g)  Double  deductions.   Unless  specifically  provided
12    otherwise, nothing in this Section shall permit the same item
13    to be deducted more than once.
14        (h)  Legislative intention.  Except as expressly provided
15    by  this  Section  there  shall  be   no   modifications   or
16    limitations on the amounts of income, gain, loss or deduction
17    taken  into  account  in  determining  gross income, adjusted
18    gross  income  or  taxable  income  for  federal  income  tax
19    purposes for the taxable year, or in the amount of such items
20    entering into the computation of base income and  net  income
21    under  this  Act for such taxable year, whether in respect of
22    property values as of August 1, 1969 or otherwise.
23    (Source: P.A.  89-89,  eff.  6-30-95;  89-235,  eff.  8-4-95;
24    89-418,  eff.  11-15-95;  89-460,  eff. 5-24-96; 89-626, eff.
25    8-9-96; 90-491, eff. 1-1-98.)

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