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91_HB3158
LRB9110649SMdv
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
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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 (D-5) An amount, to the extent not included in
15 adjusted gross income, equal to the amount of money
16 withdrawn by the taxpayer in the taxable year from a
17 medical care savings account and the interest earned
18 on the account in the taxable year of a withdrawal
19 pursuant to subsection (b) of Section 20 of the
20 Medical Care Savings Account Act; and
21 (D-10) For taxable years ending after December
22 31, 1997, an amount equal to any eligible
23 remediation costs that the individual deducted in
24 computing adjusted gross income and for which the
25 individual claims a credit under subsection (l) of
26 Section 201;
27 and by deducting from the total so obtained the sum of
28 the following amounts:
29 (E) Any amount included in such total in
30 respect of any compensation (including but not
31 limited to any compensation paid or accrued to a
32 serviceman while a prisoner of war or missing in
33 action) paid to a resident by reason of being on
34 active duty in the Armed Forces of the United States
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1 and in respect of any compensation paid or accrued
2 to a resident who as a governmental employee was a
3 prisoner of war or missing in action, and in respect
4 of any compensation paid to a resident in 1971 or
5 thereafter for annual training performed pursuant to
6 Sections 502 and 503, Title 32, United States Code
7 as a member of the Illinois National Guard;
8 (F) An amount equal to all amounts included in
9 such total pursuant to the provisions of Sections
10 402(a), 402(c), 403(a), 403(b), 406(a), 407(a), and
11 408 of the Internal Revenue Code, or included in
12 such total as distributions under the provisions of
13 any retirement or disability plan for employees of
14 any governmental agency or unit, or retirement
15 payments to retired partners, which payments are
16 excluded in computing net earnings from self
17 employment by Section 1402 of the Internal Revenue
18 Code and regulations adopted pursuant thereto;
19 (G) The valuation limitation amount;
20 (H) An amount equal to the amount of any tax
21 imposed by this Act which was refunded to the
22 taxpayer and included in such total for the taxable
23 year;
24 (I) An amount equal to all amounts included in
25 such total pursuant to the provisions of Section 111
26 of the Internal Revenue Code as a recovery of items
27 previously deducted from adjusted gross income in
28 the computation of taxable income;
29 (J) 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;
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1 (K) An amount equal to those dividends
2 included in such total that were paid by a
3 corporation that conducts business operations in a
4 federally designated Foreign Trade Zone or Sub-Zone
5 and that is designated a High Impact Business
6 located in Illinois; provided that dividends
7 eligible for the deduction provided in subparagraph
8 (J) of paragraph (2) of this subsection shall not be
9 eligible for the deduction provided under this
10 subparagraph (K);
11 (L) For taxable years ending after December
12 31, 1983, an amount equal to all social security
13 benefits and railroad retirement benefits included
14 in such total pursuant to Sections 72(r) and 86 of
15 the Internal Revenue Code;
16 (M) With the exception of any amounts
17 subtracted under subparagraph (N), an amount equal
18 to the sum of all amounts disallowed as deductions
19 by (i) Sections 171(a) (2), and 265(2) of the
20 Internal Revenue Code of 1954, as now or hereafter
21 amended, and all amounts of expenses allocable to
22 interest and disallowed as deductions by Section
23 265(1) of the Internal Revenue Code of 1954, as now
24 or hereafter amended; and (ii) for taxable years
25 ending on or after August 13, 1999 the effective
26 date of this amendatory Act of the 91st General
27 Assembly, Sections 171(a)(2), 265, 280C, and
28 832(b)(5)(B)(i) of the Internal Revenue Code; the
29 provisions of this subparagraph are exempt from the
30 provisions of Section 250;
31 (N) 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,
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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 (O) An amount equal to any contribution made
8 to a job training project established pursuant to
9 the Tax Increment Allocation Redevelopment Act;
10 (P) An amount equal to the amount of the
11 deduction used to compute the federal income tax
12 credit for restoration of substantial amounts held
13 under claim of right for the taxable year pursuant
14 to Section 1341 of the Internal Revenue Code of
15 1986;
16 (Q) An amount equal to any amounts included in
17 such total, received by the taxpayer as an
18 acceleration in the payment of life, endowment or
19 annuity benefits in advance of the time they would
20 otherwise be payable as an indemnity for a terminal
21 illness;
22 (R) An amount equal to the amount of any
23 federal or State bonus paid to veterans of the
24 Persian Gulf War;
25 (S) An amount, to the extent included in
26 adjusted gross income, equal to the amount of a
27 contribution made in the taxable year on behalf of
28 the taxpayer to a medical care savings account
29 established under the Medical Care Savings Account
30 Act to the extent the contribution is accepted by
31 the account administrator as provided in that Act;
32 (T) An amount, to the extent included in
33 adjusted gross income, equal to the amount of
34 interest earned in the taxable year on a medical
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1 care savings account established under the Medical
2 Care Savings Account Act on behalf of the taxpayer,
3 other than interest added pursuant to item (D-5) of
4 this paragraph (2);
5 (U) For one taxable year beginning on or after
6 January 1, 1994, an amount equal to the total amount
7 of tax imposed and paid under subsections (a) and
8 (b) of Section 201 of this Act on grant amounts
9 received by the taxpayer under the Nursing Home
10 Grant Assistance Act during the taxpayer's taxable
11 years 1992 and 1993;
12 (V) Beginning with tax years ending on or
13 after December 31, 1995 and ending with tax years
14 ending on or before December 31, 2004, an amount
15 equal to the amount paid by a taxpayer who is a
16 self-employed taxpayer, a partner of a partnership,
17 or a shareholder in a Subchapter S corporation for
18 health insurance or long-term care insurance for
19 that taxpayer or that taxpayer's spouse or
20 dependents, to the extent that the amount paid for
21 that health insurance or long-term care insurance
22 may be deducted under Section 213 of the Internal
23 Revenue Code of 1986, has not been deducted on the
24 federal income tax return of the taxpayer, and does
25 not exceed the taxable income attributable to that
26 taxpayer's income, self-employment income, or
27 Subchapter S corporation income; except that no
28 deduction shall be allowed under this item (V) if
29 the taxpayer is eligible to participate in any
30 health insurance or long-term care insurance plan of
31 an employer of the taxpayer or the taxpayer's
32 spouse. The amount of the health insurance and
33 long-term care insurance subtracted under this item
34 (V) shall be determined by multiplying total health
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1 insurance and long-term care insurance premiums paid
2 by the taxpayer times a number that represents the
3 fractional percentage of eligible medical expenses
4 under Section 213 of the Internal Revenue Code of
5 1986 not actually deducted on the taxpayer's federal
6 income tax return;
7 (W) For taxable years beginning on or after
8 January 1, 1998, all amounts included in the
9 taxpayer's federal gross income in the taxable year
10 from amounts converted from a regular IRA to a Roth
11 IRA. This paragraph is exempt from the provisions of
12 Section 250; and
13 (X) For taxable year 1999 and thereafter, an
14 amount equal to the amount of any (i) distributions,
15 to the extent includible in gross income for federal
16 income tax purposes, made to the taxpayer because of
17 his or her status as a victim of persecution for
18 racial or religious reasons by Nazi Germany or any
19 other Axis regime or as an heir of the victim and
20 (ii) items of income, to the extent includible in
21 gross income for federal income tax purposes,
22 attributable to, derived from or in any way related
23 to assets stolen from, hidden from, or otherwise
24 lost to a victim of persecution for racial or
25 religious reasons by Nazi Germany or any other Axis
26 regime immediately prior to, during, and immediately
27 after World War II, including, but not limited to,
28 interest on the proceeds receivable as insurance
29 under policies issued to a victim of persecution for
30 racial or religious reasons by Nazi Germany or any
31 other Axis regime by European insurance companies
32 immediately prior to and during World War II;
33 provided, however, this subtraction from federal
34 adjusted gross income does not apply to assets
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1 acquired with such assets or with the proceeds from
2 the sale of such assets; provided, further, this
3 paragraph shall only apply to a taxpayer who was the
4 first recipient of such assets after their recovery
5 and who is a victim of persecution for racial or
6 religious reasons by Nazi Germany or any other Axis
7 regime or as an heir of the victim. The amount of
8 and the eligibility for any public assistance,
9 benefit, or similar entitlement is not affected by
10 the inclusion of items (i) and (ii) of this
11 paragraph in gross income for federal income tax
12 purposes. This paragraph is exempt from the
13 provisions of Section 250.
14 (b) Corporations.
15 (1) In general. In the case of a corporation, base
16 income means an amount equal to the taxpayer's taxable
17 income for the taxable year as modified by paragraph (2).
18 (2) Modifications. The taxable income referred to
19 in paragraph (1) shall be modified by adding thereto the
20 sum of the following amounts:
21 (A) An amount equal to all amounts paid or
22 accrued to the taxpayer as interest and all
23 distributions received from regulated investment
24 companies during the taxable year to the extent
25 excluded from gross income in the computation of
26 taxable income;
27 (B) An amount equal to the amount of tax
28 imposed by this Act to the extent deducted from
29 gross income in the computation of taxable income
30 for the taxable year;
31 (C) In the case of a regulated investment
32 company, an amount equal to the excess of (i) the
33 net long-term capital gain for the taxable year,
34 over (ii) the amount of the capital gain dividends
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1 designated as such in accordance with Section
2 852(b)(3)(C) of the Internal Revenue Code and any
3 amount designated under Section 852(b)(3)(D) of the
4 Internal Revenue Code, attributable to the taxable
5 year (this amendatory Act of 1995 (Public Act 89-89)
6 is declarative of existing law and is not a new
7 enactment);
8 (D) The amount of any net operating loss
9 deduction taken in arriving at taxable income, other
10 than a net operating loss carried forward from a
11 taxable year ending prior to December 31, 1986;
12 (E) For taxable years in which a net operating
13 loss carryback or carryforward from a taxable year
14 ending prior to December 31, 1986 is an element of
15 taxable income under paragraph (1) of subsection (e)
16 or subparagraph (E) of paragraph (2) of subsection
17 (e), the amount by which addition modifications
18 other than those provided by this subparagraph (E)
19 exceeded subtraction modifications in such earlier
20 taxable year, with the following limitations applied
21 in the order that they are listed:
22 (i) the addition modification relating to
23 the net operating loss carried back or forward
24 to the taxable year from any taxable year
25 ending prior to December 31, 1986 shall be
26 reduced by the amount of addition modification
27 under this subparagraph (E) which related to
28 that net operating loss and which was taken
29 into account in calculating the base income of
30 an earlier taxable year, and
31 (ii) the addition modification relating
32 to the net operating loss carried back or
33 forward to the taxable year from any taxable
34 year ending prior to December 31, 1986 shall
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1 not exceed the amount of such carryback or
2 carryforward;
3 For taxable years in which there is a net
4 operating loss carryback or carryforward from more
5 than one other taxable year ending prior to December
6 31, 1986, the addition modification provided in this
7 subparagraph (E) shall be the sum of the amounts
8 computed independently under the preceding
9 provisions of this subparagraph (E) for each such
10 taxable year; and
11 (E-5) For taxable years ending after December
12 31, 1997, an amount equal to any eligible
13 remediation costs that the corporation deducted in
14 computing adjusted gross income and for which the
15 corporation claims a credit under subsection (l) of
16 Section 201;
17 and by deducting from the total so obtained the sum of
18 the following amounts:
19 (F) An amount equal to the amount of any tax
20 imposed by this Act which was refunded to the
21 taxpayer and included in such total for the taxable
22 year;
23 (G) An amount equal to any amount included in
24 such total under Section 78 of the Internal Revenue
25 Code;
26 (H) In the case of a regulated investment
27 company, an amount equal to the amount of exempt
28 interest dividends as defined in subsection (b) (5)
29 of Section 852 of the Internal Revenue Code, paid to
30 shareholders for the taxable year;
31 (I) With the exception of any amounts
32 subtracted under subparagraph (J), an amount equal
33 to the sum of all amounts disallowed as deductions
34 by (i) Sections 171(a) (2), and 265(a)(2) and
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1 amounts disallowed as interest expense by Section
2 291(a)(3) of the Internal Revenue Code, as now or
3 hereafter amended, and all amounts of expenses
4 allocable to interest and disallowed as deductions
5 by Section 265(a)(1) of the Internal Revenue Code,
6 as now or hereafter amended; and (ii) for taxable
7 years ending on or after August 13, 1999 the
8 effective date of this amendatory Act of the 91st
9 General Assembly, Sections 171(a)(2), 265, 280C, and
10 832(b)(5)(B)(i) of the Internal Revenue Code; the
11 provisions of this subparagraph are exempt from the
12 provisions of Section 250;
13 (J) An amount equal to all amounts included in
14 such total which are exempt from taxation by this
15 State either by reason of its statutes or
16 Constitution or by reason of the Constitution,
17 treaties or statutes of the United States; provided
18 that, in the case of any statute of this State that
19 exempts income derived from bonds or other
20 obligations from the tax imposed under this Act, the
21 amount exempted shall be the interest net of bond
22 premium amortization;
23 (K) An amount equal to those dividends
24 included in such total which were paid by a
25 corporation which conducts business operations in an
26 Enterprise Zone or zones created under the Illinois
27 Enterprise Zone Act and conducts substantially all
28 of its operations in an Enterprise Zone or zones;
29 (L) An amount equal to those dividends
30 included in such total that were paid by a
31 corporation that conducts business operations in a
32 federally designated Foreign Trade Zone or Sub-Zone
33 and that is designated a High Impact Business
34 located in Illinois; provided that dividends
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1 eligible for the deduction provided in subparagraph
2 (K) of paragraph 2 of this subsection shall not be
3 eligible for the deduction provided under this
4 subparagraph (L);
5 (M) For any taxpayer that is a financial
6 organization within the meaning of Section 304(c) of
7 this Act, an amount included in such total as
8 interest income from a loan or loans made by such
9 taxpayer to a borrower, to the extent that such a
10 loan is secured by property which is eligible for
11 the Enterprise Zone Investment Credit. To determine
12 the portion of a loan or loans that is secured by
13 property eligible for a Section 201(h) investment
14 credit to the borrower, the entire principal amount
15 of the loan or loans between the taxpayer and the
16 borrower should be divided into the basis of the
17 Section 201(h) investment credit property which
18 secures the loan or loans, using for this purpose
19 the original basis of such property on the date that
20 it was placed in service in the Enterprise Zone.
21 The subtraction modification available to taxpayer
22 in any year under this subsection shall be that
23 portion of the total interest paid by the borrower
24 with respect to such loan attributable to the
25 eligible property as calculated under the previous
26 sentence;
27 (M-1) For any taxpayer that is a financial
28 organization within the meaning of Section 304(c) of
29 this Act, an amount included in such total as
30 interest income from a loan or loans made by such
31 taxpayer to a borrower, to the extent that such a
32 loan is secured by property which is eligible for
33 the High Impact Business Investment Credit. To
34 determine the portion of a loan or loans that is
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1 secured by property eligible for a Section 201(i)
2 investment credit to the borrower, the entire
3 principal amount of the loan or loans between the
4 taxpayer and the borrower should be divided into the
5 basis of the Section 201(i) investment credit
6 property which secures the loan or loans, using for
7 this purpose the original basis of such property on
8 the date that it was placed in service in a
9 federally designated Foreign Trade Zone or Sub-Zone
10 located in Illinois. No taxpayer that is eligible
11 for the deduction provided in subparagraph (M) of
12 paragraph (2) of this subsection shall be eligible
13 for the deduction provided under this subparagraph
14 (M-1). The subtraction modification available to
15 taxpayers in any year under this subsection shall be
16 that portion of the total interest paid by the
17 borrower with respect to such loan attributable to
18 the eligible property as calculated under the
19 previous sentence;
20 (N) Two times any contribution made during the
21 taxable year to a designated zone organization to
22 the extent that the contribution (i) qualifies as a
23 charitable contribution under subsection (c) of
24 Section 170 of the Internal Revenue Code and (ii)
25 must, by its terms, be used for a project approved
26 by the Department of Commerce and Community Affairs
27 under Section 11 of the Illinois Enterprise Zone
28 Act;
29 (O) An amount equal to: (i) 85% for taxable
30 years ending on or before December 31, 1992, or, a
31 percentage equal to the percentage allowable under
32 Section 243(a)(1) of the Internal Revenue Code of
33 1986 for taxable years ending after December 31,
34 1992, of the amount by which dividends included in
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1 taxable income and received from a corporation that
2 is not created or organized under the laws of the
3 United States or any state or political subdivision
4 thereof, including, for taxable years ending on or
5 after December 31, 1988, dividends received or
6 deemed received or paid or deemed paid under
7 Sections 951 through 964 of the Internal Revenue
8 Code, exceed the amount of the modification provided
9 under subparagraph (G) of paragraph (2) of this
10 subsection (b) which is related to such dividends;
11 plus (ii) 100% of the amount by which dividends,
12 included in taxable income and received, including,
13 for taxable years ending on or after December 31,
14 1988, dividends received or deemed received or paid
15 or deemed paid under Sections 951 through 964 of the
16 Internal Revenue Code, from any such corporation
17 specified in clause (i) that would but for the
18 provisions of Section 1504 (b) (3) of the Internal
19 Revenue Code be treated as a member of the
20 affiliated group which includes the dividend
21 recipient, exceed the amount of the modification
22 provided under subparagraph (G) of paragraph (2) of
23 this subsection (b) which is related to such
24 dividends;
25 (P) An amount equal to any contribution made
26 to a job training project established pursuant to
27 the Tax Increment Allocation Redevelopment Act;
28 (Q) 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; and
34 (R) In the case of an attorney-in-fact with
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1 respect to whom an interinsurer or a reciprocal
2 insurer has made the election under Section 835 of
3 the Internal Revenue Code, 26 U.S.C. 835, an amount
4 equal to the excess, if any, of the amounts paid or
5 incurred by that interinsurer or reciprocal insurer
6 in the taxable year to the attorney-in-fact over the
7 deduction allowed to that interinsurer or reciprocal
8 insurer with respect to the attorney-in-fact under
9 Section 835(b) of the Internal Revenue Code for the
10 taxable year; and
11 (S) For taxable years 1997 and thereafter, an
12 amount equal to all amounts of income distributable
13 to an entity subject to the Personal Property Tax
14 Replacement Income Tax imposed by subsections (c)
15 and (d) of Section 201 of this Act including amounts
16 distributable to organizations exempt from federal
17 income tax by reason of Section 501(a) of the
18 Internal Revenue Code; a corporation that would have
19 been eligible for a deduction from base income under
20 this subparagraph (S) for taxable years 1997, 1998,
21 or 1999 may file a claim for a refund under Article
22 9 for those taxable years; the provisions of this
23 subparagraph (S) are exempt from the provisions of
24 Section 250.
25 (3) Special rule. For purposes of paragraph (2)
26 (A), "gross income" in the case of a life insurance
27 company, for tax years ending on and after December 31,
28 1994, shall mean the gross investment income for the
29 taxable year.
30 (c) Trusts and estates.
31 (1) In general. In the case of a trust or estate,
32 base income means an amount equal to the taxpayer's
33 taxable income for the taxable year as modified by
34 paragraph (2).
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1 (2) Modifications. Subject to the provisions of
2 paragraph (3), the taxable income referred to in
3 paragraph (1) shall be modified by adding thereto the sum
4 of the following amounts:
5 (A) An amount equal to all amounts paid or
6 accrued to the taxpayer as interest or dividends
7 during the taxable year to the extent excluded from
8 gross income in the computation of taxable income;
9 (B) In the case of (i) an estate, $600; (ii) a
10 trust which, under its governing instrument, is
11 required to distribute all of its income currently,
12 $300; and (iii) any other trust, $100, but in each
13 such case, only to the extent such amount was
14 deducted in the computation of taxable income;
15 (C) An amount equal to the amount of tax
16 imposed by this Act to the extent deducted from
17 gross income in the computation of taxable income
18 for the taxable year;
19 (D) The amount of any net operating loss
20 deduction taken in arriving at taxable income, other
21 than a net operating loss carried forward from a
22 taxable year ending prior to December 31, 1986;
23 (E) For taxable years in which a net operating
24 loss carryback or carryforward from a taxable year
25 ending prior to December 31, 1986 is an element of
26 taxable income under paragraph (1) of subsection (e)
27 or subparagraph (E) of paragraph (2) of subsection
28 (e), the amount by which addition modifications
29 other than those provided by this subparagraph (E)
30 exceeded subtraction modifications in such taxable
31 year, with the following limitations applied in the
32 order that they are listed:
33 (i) the addition modification relating to
34 the net operating loss carried back or forward
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1 to the taxable year from any taxable year
2 ending prior to December 31, 1986 shall be
3 reduced by the amount of addition modification
4 under this subparagraph (E) which related to
5 that net operating loss and which was taken
6 into account in calculating the base income of
7 an earlier taxable year, and
8 (ii) the addition modification relating
9 to the net operating loss carried back or
10 forward to the taxable year from any taxable
11 year ending prior to December 31, 1986 shall
12 not exceed the amount of such carryback or
13 carryforward;
14 For taxable years in which there is a net
15 operating loss carryback or carryforward from more
16 than one other taxable year ending prior to December
17 31, 1986, the addition modification provided in this
18 subparagraph (E) shall be the sum of the amounts
19 computed independently under the preceding
20 provisions of this subparagraph (E) for each such
21 taxable year;
22 (F) For taxable years ending on or after
23 January 1, 1989, an amount equal to the tax deducted
24 pursuant to Section 164 of the Internal Revenue Code
25 if the trust or estate is claiming the same tax for
26 purposes of the Illinois foreign tax credit under
27 Section 601 of this Act;
28 (G) An amount equal to the amount of the
29 capital gain deduction allowable under the Internal
30 Revenue Code, to the extent deducted from gross
31 income in the computation of taxable income; and
32 (G-5) For taxable years ending after December
33 31, 1997, an amount equal to any eligible
34 remediation costs that the trust or estate deducted
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1 in computing adjusted gross income and for which the
2 trust or estate claims a credit under subsection (l)
3 of Section 201;
4 and by deducting from the total so obtained the sum of
5 the following amounts:
6 (H) An amount equal to all amounts included in
7 such total pursuant to the provisions of Sections
8 402(a), 402(c), 403(a), 403(b), 406(a), 407(a) and
9 408 of the Internal Revenue Code or included in such
10 total as distributions under the provisions of any
11 retirement or disability plan for employees of any
12 governmental agency or unit, or retirement payments
13 to retired partners, which payments are excluded in
14 computing net earnings from self employment by
15 Section 1402 of the Internal Revenue Code and
16 regulations adopted pursuant thereto;
17 (I) The valuation limitation amount;
18 (J) 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 (K) An amount equal to all amounts included in
23 taxable income as modified by subparagraphs (A),
24 (B), (C), (D), (E), (F) and (G) which are exempt
25 from taxation by this State either by reason of its
26 statutes or Constitution or by reason of the
27 Constitution, treaties or statutes of the United
28 States; provided that, in the case of any statute of
29 this State that exempts income derived from bonds or
30 other obligations from the tax imposed under this
31 Act, the amount exempted shall be the interest net
32 of bond premium amortization;
33 (L) With the exception of any amounts
34 subtracted under subparagraph (K), an amount equal
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1 to the sum of all amounts disallowed as deductions
2 by (i) Sections 171(a) (2) and 265(a)(2) of the
3 Internal Revenue Code, as now or hereafter amended,
4 and all amounts of expenses allocable to interest
5 and disallowed as deductions by Section 265(1) of
6 the Internal Revenue Code of 1954, as now or
7 hereafter amended; and (ii) for taxable years ending
8 on or after August 13, 1999 the effective date of
9 this amendatory Act of the 91st General Assembly,
10 Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i)
11 of the Internal Revenue Code; the provisions of this
12 subparagraph are exempt from the provisions of
13 Section 250;
14 (M) An amount equal to those dividends
15 included in such total which were paid by a
16 corporation which conducts business operations in an
17 Enterprise Zone or zones created under the Illinois
18 Enterprise Zone Act and conducts substantially all
19 of its operations in an Enterprise Zone or Zones;
20 (N) An amount equal to any contribution made
21 to a job training project established pursuant to
22 the Tax Increment Allocation Redevelopment Act;
23 (O) An amount equal to those dividends
24 included in such total that were paid by a
25 corporation that conducts business operations in a
26 federally designated Foreign Trade Zone or Sub-Zone
27 and that is designated a High Impact Business
28 located in Illinois; provided that dividends
29 eligible for the deduction provided in subparagraph
30 (M) of paragraph (2) of this subsection shall not be
31 eligible for the deduction provided under this
32 subparagraph (O);
33 (P) An amount equal to the amount of the
34 deduction used to compute the federal income tax
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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; and
5 (Q) For taxable year 1999 and thereafter, an
6 amount equal to the amount of any (i) distributions,
7 to the extent includible in gross income for federal
8 income tax purposes, made to the taxpayer because of
9 his or her status as a victim of persecution for
10 racial or religious reasons by Nazi Germany or any
11 other Axis regime or as an heir of the victim and
12 (ii) items of income, to the extent includible in
13 gross income for federal income tax purposes,
14 attributable to, derived from or in any way related
15 to assets stolen from, hidden from, or otherwise
16 lost to a victim of persecution for racial or
17 religious reasons by Nazi Germany or any other Axis
18 regime immediately prior to, during, and immediately
19 after World War II, including, but not limited to,
20 interest on the proceeds receivable as insurance
21 under policies issued to a victim of persecution for
22 racial or religious reasons by Nazi Germany or any
23 other Axis regime by European insurance companies
24 immediately prior to and during World War II;
25 provided, however, this subtraction from federal
26 adjusted gross income does not apply to assets
27 acquired with such assets or with the proceeds from
28 the sale of such assets; provided, further, this
29 paragraph shall only apply to a taxpayer who was the
30 first recipient of such assets after their recovery
31 and who is a victim of persecution for racial or
32 religious reasons by Nazi Germany or any other Axis
33 regime or as an heir of the victim. The amount of
34 and the eligibility for any public assistance,
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1 benefit, or similar entitlement is not affected by
2 the inclusion of items (i) and (ii) of this
3 paragraph in gross income for federal income tax
4 purposes. This paragraph is exempt from the
5 provisions of Section 250.
6 (3) Limitation. The amount of any modification
7 otherwise required under this subsection shall, under
8 regulations prescribed by the Department, be adjusted by
9 any amounts included therein which were properly paid,
10 credited, or required to be distributed, or permanently
11 set aside for charitable purposes pursuant to Internal
12 Revenue Code Section 642(c) during the taxable year.
13 (d) Partnerships.
14 (1) In general. In the case of a partnership, base
15 income means an amount equal to the taxpayer's taxable
16 income for the taxable year as modified by paragraph (2).
17 (2) Modifications. The taxable income referred to
18 in paragraph (1) shall be modified by adding thereto the
19 sum of the following amounts:
20 (A) An amount equal to all amounts paid or
21 accrued to the taxpayer as interest or dividends
22 during the taxable year to the extent excluded from
23 gross income in the computation of taxable income;
24 (B) An amount equal to the amount of tax
25 imposed by this Act to the extent deducted from
26 gross income for the taxable year;
27 (C) The amount of deductions allowed to the
28 partnership pursuant to Section 707 (c) of the
29 Internal Revenue Code in calculating its taxable
30 income; and
31 (D) An amount equal to the amount of the
32 capital gain deduction allowable under the Internal
33 Revenue Code, to the extent deducted from gross
34 income in the computation of taxable income;
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1 and by deducting from the total so obtained the following
2 amounts:
3 (E) The valuation limitation amount;
4 (F) An amount equal to the amount of any tax
5 imposed by this Act which was refunded to the
6 taxpayer and included in such total for the taxable
7 year;
8 (G) An amount equal to all amounts included in
9 taxable income as modified by subparagraphs (A),
10 (B), (C) and (D) which are exempt from taxation by
11 this State either by reason of its statutes or
12 Constitution or by reason of the Constitution,
13 treaties or statutes of the United States; provided
14 that, in the case of any statute of this State that
15 exempts income derived from bonds or other
16 obligations from the tax imposed under this Act, the
17 amount exempted shall be the interest net of bond
18 premium amortization;
19 (H) Any income of the partnership which
20 constitutes personal service income as defined in
21 Section 1348 (b) (1) of the Internal Revenue Code
22 (as in effect December 31, 1981) or a reasonable
23 allowance for compensation paid or accrued for
24 services rendered by partners to the partnership,
25 whichever is greater;
26 (I) An amount equal to all amounts of income
27 distributable to an entity subject to the Personal
28 Property Tax Replacement Income Tax imposed by
29 subsections (c) and (d) of Section 201 of this Act
30 including amounts distributable to organizations
31 exempt from federal income tax by reason of Section
32 501(a) of the Internal Revenue Code;
33 (J) With the exception of any amounts
34 subtracted under subparagraph (G), an amount equal
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1 to the sum of all amounts disallowed as deductions
2 by (i) Sections 171(a) (2), and 265(2) of the
3 Internal Revenue Code of 1954, as now or hereafter
4 amended, and all amounts of expenses allocable to
5 interest and disallowed as deductions by Section
6 265(1) of the Internal Revenue Code, as now or
7 hereafter amended; and (ii) for taxable years ending
8 on or after August 13, 1999 the effective date of
9 this amendatory Act of the 91st General Assembly,
10 Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i)
11 of the Internal Revenue Code; the provisions of this
12 subparagraph are exempt from the provisions of
13 Section 250;
14 (K) An amount equal to those dividends
15 included in such total which were paid by a
16 corporation which conducts business operations in an
17 Enterprise Zone or zones created under the Illinois
18 Enterprise Zone Act, enacted by the 82nd General
19 Assembly, and which does not conduct such operations
20 other than in an Enterprise Zone or Zones;
21 (L) An amount equal to any contribution made
22 to a job training project established pursuant to
23 the Real Property Tax Increment Allocation
24 Redevelopment Act;
25 (M) An amount equal to those dividends
26 included in such total that were paid by a
27 corporation that conducts business operations in a
28 federally designated Foreign Trade Zone or Sub-Zone
29 and that is designated a High Impact Business
30 located in Illinois; provided that dividends
31 eligible for the deduction provided in subparagraph
32 (K) of paragraph (2) of this subsection shall not be
33 eligible for the deduction provided under this
34 subparagraph (M); and
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1 (N) An amount equal to the amount of the
2 deduction used to compute the federal income tax
3 credit for restoration of substantial amounts held
4 under claim of right for the taxable year pursuant
5 to Section 1341 of the Internal Revenue Code of
6 1986.
7 (e) Gross income; adjusted gross income; taxable income.
8 (1) In general. Subject to the provisions of
9 paragraph (2) and subsection (b) (3), for purposes of
10 this Section and Section 803(e), a taxpayer's gross
11 income, adjusted gross income, or taxable income for the
12 taxable year shall mean the amount of gross income,
13 adjusted gross income or taxable income properly
14 reportable for federal income tax purposes for the
15 taxable year under the provisions of the Internal Revenue
16 Code. Taxable income may be less than zero. However, for
17 taxable years ending on or after December 31, 1986, net
18 operating loss carryforwards from taxable years ending
19 prior to December 31, 1986, may not exceed the sum of
20 federal taxable income for the taxable year before net
21 operating loss deduction, plus the excess of addition
22 modifications over subtraction modifications for the
23 taxable year. For taxable years ending prior to December
24 31, 1986, taxable income may never be an amount in excess
25 of the net operating loss for the taxable year as defined
26 in subsections (c) and (d) of Section 172 of the Internal
27 Revenue Code, provided that when taxable income of a
28 corporation (other than a Subchapter S corporation),
29 trust, or estate is less than zero and addition
30 modifications, other than those provided by subparagraph
31 (E) of paragraph (2) of subsection (b) for corporations
32 or subparagraph (E) of paragraph (2) of subsection (c)
33 for trusts and estates, exceed subtraction modifications,
34 an addition modification must be made under those
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1 subparagraphs for any other taxable year to which the
2 taxable income less than zero (net operating loss) is
3 applied under Section 172 of the Internal Revenue Code or
4 under subparagraph (E) of paragraph (2) of this
5 subsection (e) applied in conjunction with Section 172 of
6 the Internal Revenue Code.
7 (2) Special rule. For purposes of paragraph (1) of
8 this subsection, the taxable income properly reportable
9 for federal income tax purposes shall mean:
10 (A) Certain life insurance companies. In the
11 case of a life insurance company subject to the tax
12 imposed by Section 801 of the Internal Revenue Code,
13 life insurance company taxable income, plus the
14 amount of distribution from pre-1984 policyholder
15 surplus accounts as calculated under Section 815a of
16 the Internal Revenue Code;
17 (B) Certain other insurance companies. In the
18 case of mutual insurance companies subject to the
19 tax imposed by Section 831 of the Internal Revenue
20 Code, insurance company taxable income;
21 (C) Regulated investment companies. In the
22 case of a regulated investment company subject to
23 the tax imposed by Section 852 of the Internal
24 Revenue Code, investment company taxable income;
25 (D) Real estate investment trusts. In the
26 case of a real estate investment trust subject to
27 the tax imposed by Section 857 of the Internal
28 Revenue Code, real estate investment trust taxable
29 income;
30 (E) Consolidated corporations. In the case of
31 a corporation which is a member of an affiliated
32 group of corporations filing a consolidated income
33 tax return for the taxable year for federal income
34 tax purposes, taxable income determined as if such
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1 corporation had filed a separate return for federal
2 income tax purposes for the taxable year and each
3 preceding taxable year for which it was a member of
4 an affiliated group. For purposes of this
5 subparagraph, the taxpayer's separate taxable income
6 shall be determined as if the election provided by
7 Section 243(b) (2) of the Internal Revenue Code had
8 been in effect for all such years;
9 (F) Cooperatives. In the case of a
10 cooperative corporation or association, the taxable
11 income of such organization determined in accordance
12 with the provisions of Section 1381 through 1388 of
13 the Internal Revenue Code;
14 (G) Subchapter S corporations. In the case
15 of: (i) a Subchapter S corporation for which there
16 is in effect an election for the taxable year under
17 Section 1362 of the Internal Revenue Code, the
18 taxable income of such corporation determined in
19 accordance with Section 1363(b) of the Internal
20 Revenue Code, except that taxable income shall take
21 into account those items which are required by
22 Section 1363(b)(1) of the Internal Revenue Code to
23 be separately stated; and (ii) a Subchapter S
24 corporation for which there is in effect a federal
25 election to opt out of the provisions of the
26 Subchapter S Revision Act of 1982 and have applied
27 instead the prior federal Subchapter S rules as in
28 effect on July 1, 1982, the taxable income of such
29 corporation determined in accordance with the
30 federal Subchapter S rules as in effect on July 1,
31 1982; and
32 (H) Partnerships. In the case of a
33 partnership, taxable income determined in accordance
34 with Section 703 of the Internal Revenue Code,
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1 except that taxable income shall take into account
2 those items which are required by Section 703(a)(1)
3 to be separately stated but which would be taken
4 into account by an individual in calculating his
5 taxable income.
6 (f) Valuation limitation amount.
7 (1) In general. The valuation limitation amount
8 referred to in subsections (a) (2) (G), (c) (2) (I) and
9 (d)(2) (E) is an amount equal to:
10 (A) The sum of the pre-August 1, 1969
11 appreciation amounts (to the extent consisting of
12 gain reportable under the provisions of Section 1245
13 or 1250 of the Internal Revenue Code) for all
14 property in respect of which such gain was reported
15 for the taxable year; plus
16 (B) The lesser of (i) the sum of the
17 pre-August 1, 1969 appreciation amounts (to the
18 extent consisting of capital gain) for all property
19 in respect of which such gain was reported for
20 federal income tax purposes for the taxable year, or
21 (ii) the net capital gain for the taxable year,
22 reduced in either case by any amount of such gain
23 included in the amount determined under subsection
24 (a) (2) (F) or (c) (2) (H).
25 (2) Pre-August 1, 1969 appreciation amount.
26 (A) If the fair market value of property
27 referred to in paragraph (1) was readily
28 ascertainable on August 1, 1969, the pre-August 1,
29 1969 appreciation amount for such property is the
30 lesser of (i) the excess of such fair market value
31 over the taxpayer's basis (for determining gain) for
32 such property on that date (determined under the
33 Internal Revenue Code as in effect on that date), or
34 (ii) the total gain realized and reportable for
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1 federal income tax purposes in respect of the sale,
2 exchange or other disposition of such property.
3 (B) If the fair market value of property
4 referred to in paragraph (1) was not readily
5 ascertainable on August 1, 1969, the pre-August 1,
6 1969 appreciation amount for such property is that
7 amount which bears the same ratio to the total gain
8 reported in respect of the property for federal
9 income tax purposes for the taxable year, as the
10 number of full calendar months in that part of the
11 taxpayer's holding period for the property ending
12 July 31, 1969 bears to the number of full calendar
13 months in the taxpayer's entire holding period for
14 the property.
15 (C) The Department shall prescribe such
16 regulations as may be necessary to carry out the
17 purposes of this paragraph.
18 (g) Double deductions. Unless specifically provided
19 otherwise, nothing in this Section shall permit the same item
20 to be deducted more than once.
21 (h) Legislative intention. Except as expressly provided
22 by this Section there shall be no modifications or
23 limitations on the amounts of income, gain, loss or deduction
24 taken into account in determining gross income, adjusted
25 gross income or taxable income for federal income tax
26 purposes for the taxable year, or in the amount of such items
27 entering into the computation of base income and net income
28 under this Act for such taxable year, whether in respect of
29 property values as of August 1, 1969 or otherwise.
30 (Source: P.A. 90-491, eff. 1-1-98; 90-717, eff. 8-7-98;
31 90-770, eff. 8-14-98; 91-192, eff. 7-20-99; 91-205, eff.
32 7-20-99; 91-357, eff. 7-29-99; 91-541, eff. 8-13-99; 91-676,
33 eff. 12-23-99; revised 1-5-00.)
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1 Section 99. Effective date. This Act takes effect upon
2 becoming law.