State of Illinois
92nd General Assembly
Legislation

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92_HB4187eng

 
HB4187 Engrossed                               LRB9214971JMmb

 1        AN ACT concerning college savings.

 2        Be it  enacted  by  the  People  of  the  State  of  Illinois,
 3    represented in the General Assembly:

 4        Section  5.   The  State  Treasurer  Act  is  amended  by
 5    changing Section 16.5 as follows:

 6        (15 ILCS 505/16.5)
 7        Sec. 16.5. College Savings Pool.  The State Treasurer may
 8    establish and administer a College Savings Pool to supplement
 9    and enhance the investment opportunities otherwise  available
10    to  persons seeking to finance the costs of higher education.
11    The State Treasurer, in  administering  the  College  Savings
12    Pool,  may receive moneys paid into the pool by a participant
13    and may serve as the fiscal agent of that participant for the
14    purpose of holding  and investing those moneys.
15        "Participant", as used in this Section, means any  person
16    who makes investments in the pool.  "Designated beneficiary",
17    as  used in this Section, means any person on whose behalf an
18    account is established in  the  College  Savings  Pool  by  a
19    participant.   Both  in-state and out-of-state persons may be
20    participants and  designated  beneficiaries  in  the  College
21    Savings Pool.
22        New  accounts  in  the  College  Savings  Pool  shall  be
23    processed   through   participating  financial  institutions.
24    "Participating  financial  institution",  as  used  in   this
25    Section,  means  any  financial  institution  insured  by the
26    Federal Deposit  Insurance  Corporation  and  lawfully  doing
27    business  in  the  State  of  Illinois  and  any credit union
28    approved by the State Treasurer and lawfully  doing  business
29    in  the State of Illinois that agrees to process new accounts
30    in  the  College  Savings  Pool.    Participating   financial
31    institutions  may  charge a processing fee to participants to
 
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 1    open an account in the pool that shall not exceed  $30  until
 2    the  year 2001.  Beginning in 2001 and every year thereafter,
 3    the maximum fee limit shall  be  adjusted  by  the  Treasurer
 4    based  on  the  Consumer  Price  Index  for the North Central
 5    Region as published by the United States Department of Labor,
 6    Bureau of Labor  Statistics  for  the  immediately  preceding
 7    calendar  year.   Every  contribution received by a financial
 8    institution for investment in the College Savings Pool  shall
 9    be  transferred  from the financial institution to a location
10    selected by the  State  Treasurer  within  one  business  day
11    following  the  day  that the funds must be made available in
12    accordance with federal law.   All  communications  from  the
13    State   Treasurer   to   participants   shall  reference  the
14    participating financial institution at which the account  was
15    processed.
16        The  Treasurer  may  invest  the  moneys  in  the College
17    Savings Pool in  the  same  manner,  in  the  same  types  of
18    investments, and subject to the same limitations provided for
19    the  investment  of  moneys  by  the  Illinois State Board of
20    Investment.  To enhance  the  safety  and  liquidity  of  the
21    College  Savings  Pool,  to ensure the diversification of the
22    investment portfolio of the pool, and in an  effort  to  keep
23    investment  dollars  in  the  State  of  Illinois,  the State
24    Treasurer shall make a percentage of each  account  available
25    for  investment in participating financial institutions doing
26    business in the State.  The  State  Treasurer  shall  deposit
27    with  the  participating  financial  institution at which the
28    account  was  processed  the  following  percentage  of  each
29    account at a prevailing  rate  offered  by  the  institution,
30    provided  that  the  deposit  is  federally  insured or fully
31    collateralized and the institution accepts the  deposit:  10%
32    of the total amount of each account for which the current age
33    of  the  beneficiary  is less than 7 years of age, 20% of the
34    total amount of each account for which the beneficiary is  at
 
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 1    least  7  years of age and less than 12 years of age, and 50%
 2    of the total amount of each account for which the current age
 3    of the beneficiary is at least 12 years of  age.   The  State
 4    Treasurer  shall  adjust  each  account  at least annually to
 5    ensure compliance with this Section.    The  Treasurer  shall
 6    develop, publish, and implement an investment policy covering
 7    the  investment  of  the  moneys in the College Savings Pool.
 8    The policy shall be published (i) at least once each year  in
 9    at  least  one  newspaper  of  general  circulation  in  both
10    Springfield  and  Chicago  and  (ii) each year as part of the
11    audit of the College Savings Pool  by  the  Auditor  General,
12    which   shall   be  distributed  to  all  participants.   The
13    Treasurer shall notify all participants in writing,  and  the
14    Treasurer shall publish in a newspaper of general circulation
15    in   both   Chicago  and  Springfield,  any  changes  to  the
16    previously published investment policy at least  30  calendar
17    days  before  implementing  the policy. Any investment policy
18    adopted by the Treasurer shall be  reviewed  and  updated  if
19    necessary  within  90  days following the date that the State
20    Treasurer takes office.
21        Participants shall be required to use moneys  distributed
22    from  the  College  Savings  Pool  for  qualified expenses at
23    eligible educational institutions.  "Qualified expenses",  as
24    used in this Section, means the following: (i) tuition, fees,
25    and  the costs of books, supplies, and equipment required for
26    enrollment  or  attendance   at   an   eligible   educational
27    institution and (ii) certain room and board expenses incurred
28    while  attending an eligible educational institution at least
29    half-time. "Eligible educational institutions",  as  used  in
30    this  Section,  means  public  and  private  colleges, junior
31    colleges,   graduate   schools,   and   certain    vocational
32    institutions  that are described in Section 481 of the Higher
33    Education Act of 1965 (20 U.S.C. 1088) and that are  eligible
34    to   participate  in  Department  of  Education  student  aid
 
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 1    programs. A student shall be considered  to  be  enrolled  at
 2    least  half-time if the student is enrolled for at least half
 3    the full-time academic work load for the course of study  the
 4    student  is pursuing as determined under the standards of the
 5    institution at which the student is enrolled.   Distributions
 6    made  from  the  pool  for  qualified  expenses shall be made
 7    directly to the eligible educational institution, directly to
 8    a vendor, or in the form of  a  check  payable  to  both  the
 9    beneficiary  and  the  institution or vendor. Any moneys that
10    are distributed in any other manner  or  that  are  used  for
11    expenses   other  than  qualified  expenses  at  an  eligible
12    educational institution shall be subject to a penalty of  10%
13    of   the   earnings  unless  the  beneficiary  dies,  becomes
14    disabled, or receives a scholarship that  equals  or  exceeds
15    the  distribution.   Penalties  shall be withheld at the time
16    the distribution is made.
17        The Treasurer shall limit the contributions that  may  be
18    made  on  behalf  of  a  designated  beneficiary  based on an
19    actuarial estimate of what is required to pay tuition,  fees,
20    and  room  and board for 5 undergraduate years at the highest
21    cost eligible educational institution. The contributions made
22    on behalf of a beneficiary who is also  a  beneficiary  under
23    the   Illinois  Prepaid  Tuition  Program  shall  be  further
24    restricted to ensure that the contributions in both  programs
25    combined  do not exceed the limit established for the College
26    Savings Pool.   The  Treasurer  shall  provide  the  Illinois
27    Student  Assistance Commission each year at a time designated
28    by the Commission, an electronic report  of  all  participant
29    accounts  in  the  Treasurer's  College Savings Pool, listing
30    total contributions and disbursements  from  each  individual
31    account   during   the   previous  calendar  year.   As  soon
32    thereafter  as  is  possible   following   receipt   of   the
33    Treasurer's   report,   the   Illinois   Student   Assistance
34    Commission  shall,  in  turn,  provide  the Treasurer with an
 
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 1    electronic  report  listing  those   College   Savings   Pool
 2    participants  who  also  participate  in  the State's prepaid
 3    tuition  program,  administered  by  the   Commission.    The
 4    Commission  shall  be responsible for filing any combined tax
 5    reports regarding State qualified savings  programs  required
 6    by the United States Internal Revenue Service.  The Treasurer
 7    shall work with the Illinois Student Assistance Commission to
 8    coordinate  the marketing of the College Savings Pool and the
 9    Illinois Prepaid Tuition Program when  considered  beneficial
10    by  the  Treasurer  and  the Director of the Illinois Student
11    Assistance Commission.   The  Treasurer's  office  shall  not
12    publicize  or  otherwise  market  the College Savings Pool or
13    accept any moneys into the  College  Savings  Pool  prior  to
14    March  1,  2000.   The  Treasurer  shall  provide  a separate
15    accounting  for   each   designated   beneficiary   to   each
16    participant,  the Illinois Student Assistance Commission, and
17    the participating financial institution at which the  account
18    was  processed.  No interest in the program may be pledged as
19    security for a loan.
20        The assets of the College Savings Pool and its income and
21    operation shall be exempt from all taxation by the  State  of
22    Illinois  and  any of its subdivisions.  The accrued earnings
23    on investments in the Pool once  disbursed  on  behalf  of  a
24    designated  beneficiary  shall  be  similarly exempt from all
25    taxation by the State of Illinois and  its  subdivisions,  so
26    long  as they are used for qualified expenses.  Contributions
27    to a College Savings Pool account during the taxable year may
28    be deducted from adjusted gross income as provided in Section
29    203 of the Illinois Income Tax Act.  The provisions  of  this
30    paragraph  are exempt from Section 250 of the Illinois Income
31    Tax Act.
32        The Treasurer shall  adopt  rules  he  or  she  considers
33    necessary  for  the  efficient  administration of the College
34    Savings Pool.  The rules shall  provide  whatever  additional
 
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 1    parameters  and restrictions are necessary to ensure that the
 2    College Savings Pool meets all  of  the  requirements  for  a
 3    qualified  state  tuition  program  under  Section 529 of the
 4    Internal Revenue Code (26  U.S.C.  529).    The  rules  shall
 5    provide  for  the  administration  expenses of the pool to be
 6    paid from its earnings and for  the  investment  earnings  in
 7    excess  of the expenses and all moneys collected as penalties
 8    to be credited or paid monthly to the several participants in
 9    the pool in a manner which equitably reflects  the  differing
10    amounts  of  their respective investments in the pool and the
11    differing periods of time for which those amounts were in the
12    custody of the pool.   Also,  the  rules  shall  require  the
13    maintenance  of records that enable the Treasurer's office to
14    produce a report for  each  account  in  the  pool  at  least
15    annually  that  documents  the account balance and investment
16    earnings.  Notice of any proposed amendments to the rules and
17    regulations shall be provided to all  participants  prior  to
18    adoption.   Amendments  to  rules and regulations shall apply
19    only  to  contributions  made  after  the  adoption  of   the
20    amendment.
21        Upon   creating  the  College  Savings  Pool,  the  State
22    Treasurer shall give bond with 2 or more sufficient sureties,
23    payable to and for the benefit of  the  participants  in  the
24    College  Savings  Pool,  in  the  penal  sum  of  $1,000,000,
25    conditioned  upon the faithful discharge of his or her duties
26    in relation to the College Savings Pool.
27        No contributions to the College Savings  Pool  authorized
28    by  this  Section  shall  be  considered  in  evaluating  the
29    financial  situation  of  the  designated  beneficiary  or be
30    deemed a financial resource of or a form of financial aid  or
31    assistance  to  the  designated  beneficiary, for purposes of
32    determining  eligibility  for  any  scholarship,  grant,   or
33    monetary   assistance   awarded   by   the  Illinois  Student
34    Assistance Commission, the State, or any agency thereof;  nor
 
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 1    shall  contributions  to  the College Savings Pool reduce the
 2    amount of any scholarship, grant, or monetary assistance that
 3    the designated beneficiary is eligible to be awarded  by  the
 4    Illinois  Student  Assistance  Commission,  the State, or any
 5    agency thereof in accordance with the provisions of any State
 6    law.
 7    (Source: P.A.  91-607,  eff.  1-1-00;  91-829,  eff.  1-1-01;
 8    92-16, eff. 6-28-01; 92-439, eff. 8-17-01.)

 9        Section  10.  The  Illinois  Income Tax Act is amended by
10    changing Section 203 as follows:

11        (35 ILCS 5/203) (from Ch. 120, par. 2-203)
12        Sec. 203.  Base income defined.
13        (a)  Individuals.
14             (1)  In general.  In the case of an individual, base
15        income means an amount equal to the  taxpayer's  adjusted
16        gross   income  for  the  taxable  year  as  modified  by
17        paragraph (2).
18             (2)  Modifications.   The  adjusted   gross   income
19        referred  to in paragraph (1) shall be modified by adding
20        thereto the sum of the following amounts:
21                  (A)  An amount equal to  all  amounts  paid  or
22             accrued  to  the  taxpayer  as interest or dividends
23             during the taxable year to the extent excluded  from
24             gross  income  in  the computation of adjusted gross
25             income, except stock dividends of  qualified  public
26             utilities   described   in  Section  305(e)  of  the
27             Internal Revenue Code;
28                  (B)  An amount  equal  to  the  amount  of  tax
29             imposed  by  this  Act  to  the extent deducted from
30             gross income in the computation  of  adjusted  gross
31             income for the taxable year;
32                  (C)  An  amount  equal  to  the amount received
 
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 1             during the taxable year as a recovery or  refund  of
 2             real   property  taxes  paid  with  respect  to  the
 3             taxpayer's principal residence under the Revenue Act
 4             of 1939 and for which  a  deduction  was  previously
 5             taken  under  subparagraph (L) of this paragraph (2)
 6             prior to July 1, 1991, the retrospective application
 7             date of Article 4 of Public Act 87-17.  In the  case
 8             of  multi-unit  or  multi-use  structures  and  farm
 9             dwellings,  the  taxes  on  the taxpayer's principal
10             residence shall be that portion of the  total  taxes
11             for  the  entire  property  which is attributable to
12             such principal residence;
13                  (D)  An amount  equal  to  the  amount  of  the
14             capital  gain deduction allowable under the Internal
15             Revenue Code, to  the  extent  deducted  from  gross
16             income in the computation of adjusted gross income;
17                  (D-5)  An amount, to the extent not included in
18             adjusted  gross income, equal to the amount of money
19             withdrawn by the taxpayer in the taxable year from a
20             medical care savings account and the interest earned
21             on the account in the taxable year of  a  withdrawal
22             pursuant  to  subsection  (b)  of  Section 20 of the
23             Medical Care Savings Account Act or  subsection  (b)
24             of  Section  20  of the Medical Care Savings Account
25             Act of 2000; and
26                  (D-10)  For taxable years ending after December
27             31,  1997,  an  amount   equal   to   any   eligible
28             remediation  costs  that  the individual deducted in
29             computing adjusted gross income and  for  which  the
30             individual  claims  a credit under subsection (l) of
31             Section 201; and
32                  (D-15)  For taxable years beginning on or after
33             January 1, 2002, in the case of a distribution  from
34             a qualified tuition program under Section 529 of the
 
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 1             Internal Revenue Code, other than (i) a distribution
 2             from  a  College  Savings Pool created under Section
 3             16.5  of  the  State  Treasurer  Act   or   (ii)   a
 4             distribution from the Illinois Prepaid Tuition Trust
 5             Fund,  an  amount  equal to the amount excluded from
 6             gross income under Section 529(c)(3)(B);
 7        and by deducting from the total so obtained  the  sum  of
 8        the following amounts:
 9                  (E)  For  taxable  years ending before December
10             31, 2001, any  amount  included  in  such  total  in
11             respect  of  any  compensation  (including  but  not
12             limited  to  any  compensation  paid or accrued to a
13             serviceman while a prisoner of  war  or  missing  in
14             action)  paid  to  a  resident by reason of being on
15             active duty in the Armed Forces of the United States
16             and in respect of any compensation paid  or  accrued
17             to  a  resident who as a governmental employee was a
18             prisoner of war or missing in action, and in respect
19             of any compensation paid to a resident  in  1971  or
20             thereafter for annual training performed pursuant to
21             Sections  502  and 503, Title 32, United States Code
22             as a member of  the  Illinois  National  Guard.  For
23             taxable  years ending on or after December 31, 2001,
24             any amount included in such total in respect of  any
25             compensation  (including  but  not  limited  to  any
26             compensation paid or accrued to a serviceman while a
27             prisoner  of  war  or  missing  in action) paid to a
28             resident  by  reason  of  being  a  member  of   any
29             component  of  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  2001  or
34             thereafter  by  reason  of  being  a  member  of the
 
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 1             Illinois National  Guard.  The  provisions  of  this
 2             amendatory  Act  of  the  92nd  General Assembly are
 3             exempt from the provisions of Section 250;
 4                  (F)  An amount equal to all amounts included in
 5             such total pursuant to the  provisions  of  Sections
 6             402(a),  402(c), 403(a), 403(b), 406(a), 407(a), and
 7             408 of the Internal Revenue  Code,  or  included  in
 8             such  total as distributions under the provisions of
 9             any retirement or disability plan for  employees  of
10             any  governmental  agency  or  unit,  or  retirement
11             payments  to  retired  partners,  which payments are
12             excluded  in  computing  net  earnings   from   self
13             employment  by  Section 1402 of the Internal Revenue
14             Code and regulations adopted pursuant thereto;
15                  (G)  The valuation limitation amount;
16                  (H)  An amount equal to the amount of  any  tax
17             imposed  by  this  Act  which  was  refunded  to the
18             taxpayer and included in such total for the  taxable
19             year;
20                  (I)  An amount equal to all amounts included in
21             such total pursuant to the provisions of Section 111
22             of  the Internal Revenue Code as a recovery of items
23             previously deducted from adjusted  gross  income  in
24             the computation of taxable income;
25                  (J)  An   amount   equal   to  those  dividends
26             included  in  such  total  which  were  paid  by   a
27             corporation which conducts business operations in an
28             Enterprise  Zone or zones created under the Illinois
29             Enterprise Zone Act, and conducts substantially  all
30             of its operations in an Enterprise Zone or zones;
31                  (K)  An   amount   equal   to  those  dividends
32             included  in  such  total  that  were  paid   by   a
33             corporation  that  conducts business operations in a
34             federally designated Foreign Trade Zone or  Sub-Zone
 
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 1             and  that  is  designated  a  High  Impact  Business
 2             located   in   Illinois;   provided  that  dividends
 3             eligible for the deduction provided in  subparagraph
 4             (J) of paragraph (2) of this subsection shall not be
 5             eligible  for  the  deduction  provided  under  this
 6             subparagraph (K);
 7                  (L)  For  taxable  years  ending after December
 8             31, 1983, an amount equal  to  all  social  security
 9             benefits  and  railroad retirement benefits included
10             in such total pursuant to Sections 72(r) and  86  of
11             the Internal Revenue Code;
12                  (M)  With   the   exception   of   any  amounts
13             subtracted under subparagraph (N), an  amount  equal
14             to  the  sum of all amounts disallowed as deductions
15             by (i)  Sections  171(a)  (2),  and  265(2)  of  the
16             Internal  Revenue  Code of 1954, as now or hereafter
17             amended, and all amounts of  expenses  allocable  to
18             interest  and   disallowed  as deductions by Section
19             265(1) of the Internal Revenue Code of 1954, as  now
20             or  hereafter  amended;  and  (ii) for taxable years
21             ending  on  or  after  August  13,  1999,   Sections
22             171(a)(2),  265,  280C,  and  832(b)(5)(B)(i) of the
23             Internal  Revenue  Code;  the  provisions  of   this
24             subparagraph  are  exempt  from  the  provisions  of
25             Section 250;
26                  (N)  An amount equal to all amounts included in
27             such  total  which  are exempt from taxation by this
28             State  either  by  reason   of   its   statutes   or
29             Constitution  or  by  reason  of  the  Constitution,
30             treaties  or statutes of the United States; provided
31             that, in the case of any statute of this State  that
32             exempts   income   derived   from   bonds  or  other
33             obligations from the tax imposed under this Act, the
34             amount exempted shall be the interest  net  of  bond
 
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 1             premium amortization;
 2                  (O)  An  amount  equal to any contribution made
 3             to a job training project  established  pursuant  to
 4             the Tax Increment Allocation Redevelopment Act;
 5                  (P)  An  amount  equal  to  the  amount  of the
 6             deduction used to compute  the  federal  income  tax
 7             credit  for  restoration of substantial amounts held
 8             under claim of right for the taxable  year  pursuant
 9             to  Section  1341  of  the  Internal Revenue Code of
10             1986;
11                  (Q)  An amount equal to any amounts included in
12             such  total,  received  by  the   taxpayer   as   an
13             acceleration  in  the  payment of life, endowment or
14             annuity benefits in advance of the time  they  would
15             otherwise  be payable as an indemnity for a terminal
16             illness;
17                  (R)  An amount  equal  to  the  amount  of  any
18             federal  or  State  bonus  paid  to  veterans of the
19             Persian Gulf War;
20                  (S)  An  amount,  to  the  extent  included  in
21             adjusted gross income, equal  to  the  amount  of  a
22             contribution  made  in the taxable year on behalf of
23             the taxpayer  to  a  medical  care  savings  account
24             established  under  the Medical Care Savings Account
25             Act or the Medical Care Savings Account Act of  2000
26             to  the  extent  the contribution is accepted by the
27             account administrator as provided in that Act;
28                  (T)  An  amount,  to  the  extent  included  in
29             adjusted  gross  income,  equal  to  the  amount  of
30             interest earned in the taxable  year  on  a  medical
31             care  savings  account established under the Medical
32             Care Savings Account Act or the Medical Care Savings
33             Account Act of 2000 on behalf of the taxpayer, other
34             than interest added pursuant to item (D-5)  of  this
 
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 1             paragraph (2);
 2                  (U)  For one taxable year beginning on or after
 3             January 1, 1994, an amount equal to the total amount
 4             of  tax  imposed  and paid under subsections (a) and
 5             (b) of Section 201 of  this  Act  on  grant  amounts
 6             received  by  the  taxpayer  under  the Nursing Home
 7             Grant Assistance Act during the  taxpayer's  taxable
 8             years 1992 and 1993;
 9                  (V)  Beginning  with  tax  years  ending  on or
10             after December 31, 1995 and ending  with  tax  years
11             ending  on  or  before  December 31, 2004, an amount
12             equal to the amount paid by  a  taxpayer  who  is  a
13             self-employed  taxpayer, a partner of a partnership,
14             or a shareholder in a Subchapter S  corporation  for
15             health  insurance  or  long-term  care insurance for
16             that  taxpayer  or   that   taxpayer's   spouse   or
17             dependents,  to  the extent that the amount paid for
18             that health insurance or  long-term  care  insurance
19             may  be  deducted  under Section 213 of the Internal
20             Revenue Code of 1986, has not been deducted  on  the
21             federal  income tax return of the taxpayer, and does
22             not exceed the taxable income attributable  to  that
23             taxpayer's   income,   self-employment   income,  or
24             Subchapter S  corporation  income;  except  that  no
25             deduction  shall  be  allowed under this item (V) if
26             the taxpayer  is  eligible  to  participate  in  any
27             health insurance or long-term care insurance plan of
28             an  employer  of  the  taxpayer  or  the  taxpayer's
29             spouse.   The  amount  of  the  health insurance and
30             long-term care insurance subtracted under this  item
31             (V)  shall be determined by multiplying total health
32             insurance and long-term care insurance premiums paid
33             by the taxpayer times a number that  represents  the
34             fractional  percentage  of eligible medical expenses
 
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 1             under Section 213 of the Internal  Revenue  Code  of
 2             1986 not actually deducted on the taxpayer's federal
 3             income tax return;
 4                  (W)  For  taxable  years  beginning on or after
 5             January  1,  1998,  all  amounts  included  in   the
 6             taxpayer's  federal gross income in the taxable year
 7             from amounts converted from a regular IRA to a  Roth
 8             IRA. This paragraph is exempt from the provisions of
 9             Section 250;
10                  (X)  For  taxable  year 1999 and thereafter, an
11             amount equal to the amount of any (i) distributions,
12             to the extent includible in gross income for federal
13             income tax purposes, made to the taxpayer because of
14             his or her status as a  victim  of  persecution  for
15             racial  or  religious reasons by Nazi Germany or any
16             other Axis regime or as an heir of  the  victim  and
17             (ii)  items  of  income, to the extent includible in
18             gross  income  for  federal  income  tax   purposes,
19             attributable  to, derived from or in any way related
20             to assets stolen from,  hidden  from,  or  otherwise
21             lost  to  a  victim  of  persecution  for  racial or
22             religious reasons by Nazi Germany or any other  Axis
23             regime immediately prior to, during, and immediately
24             after  World  War II, including, but not limited to,
25             interest on the  proceeds  receivable  as  insurance
26             under policies issued to a victim of persecution for
27             racial  or  religious reasons by Nazi Germany or any
28             other Axis regime by  European  insurance  companies
29             immediately  prior  to  and  during  World  War  II;
30             provided,  however,  this  subtraction  from federal
31             adjusted gross  income  does  not  apply  to  assets
32             acquired  with such assets or with the proceeds from
33             the sale of such  assets;  provided,  further,  this
34             paragraph shall only apply to a taxpayer who was the
 
HB4187 Engrossed            -15-               LRB9214971JMmb
 1             first  recipient of such assets after their recovery
 2             and who is a victim of  persecution  for  racial  or
 3             religious  reasons by Nazi Germany or any other Axis
 4             regime or as an heir of the victim.  The  amount  of
 5             and  the  eligibility  for  any  public  assistance,
 6             benefit,  or  similar entitlement is not affected by
 7             the  inclusion  of  items  (i)  and  (ii)  of   this
 8             paragraph  in  gross  income  for federal income tax
 9             purposes.  This  paragraph  is   exempt   from   the
10             provisions of Section 250; and
11                  (Y)  For  taxable  years  beginning on or after
12             January 1, 2002, moneys contributed in  the  taxable
13             year to a College Savings Pool account under Section
14             16.5 of the State Treasurer Act, except that amounts
15             excluded    from    gross   income   under   Section
16             529(c)(3)(i) of the Internal Revenue Code shall  not
17             be   considered   moneys   contributed   under  this
18             subparagraph (Y).  This subparagraph (Y)  is  exempt
19             from the provisions of Section 250.

20        (b)  Corporations.
21             (1)  In general.  In the case of a corporation, base
22        income  means  an  amount equal to the taxpayer's taxable
23        income for the taxable year as modified by paragraph (2).
24             (2)  Modifications.  The taxable income referred  to
25        in  paragraph (1) shall be modified by adding thereto the
26        sum of the following amounts:
27                  (A)  An amount equal to  all  amounts  paid  or
28             accrued   to   the  taxpayer  as  interest  and  all
29             distributions  received  from  regulated  investment
30             companies during the  taxable  year  to  the  extent
31             excluded  from  gross  income  in the computation of
32             taxable income;
33                  (B)  An amount  equal  to  the  amount  of  tax
34             imposed  by  this  Act  to  the extent deducted from
 
HB4187 Engrossed            -16-               LRB9214971JMmb
 1             gross income in the computation  of  taxable  income
 2             for the taxable year;
 3                  (C)  In  the  case  of  a  regulated investment
 4             company, an amount equal to the excess  of  (i)  the
 5             net  long-term  capital  gain  for the taxable year,
 6             over (ii) the amount of the capital  gain  dividends
 7             designated   as  such  in  accordance  with  Section
 8             852(b)(3)(C) of the Internal Revenue  Code  and  any
 9             amount  designated under Section 852(b)(3)(D) of the
10             Internal Revenue Code, attributable to  the  taxable
11             year (this amendatory Act of 1995 (Public Act 89-89)
12             is  declarative  of  existing  law  and is not a new
13             enactment);
14                  (D)  The  amount  of  any  net  operating  loss
15             deduction taken in arriving at taxable income, other
16             than a net operating loss  carried  forward  from  a
17             taxable year ending prior to December 31, 1986;
18                  (E)  For taxable years in which a net operating
19             loss  carryback  or carryforward from a taxable year
20             ending prior to December 31, 1986 is an  element  of
21             taxable income under paragraph (1) of subsection (e)
22             or  subparagraph  (E) of paragraph (2) of subsection
23             (e), the  amount  by  which  addition  modifications
24             other  than  those provided by this subparagraph (E)
25             exceeded subtraction modifications in  such  earlier
26             taxable year, with the following limitations applied
27             in the order that they are listed:
28                       (i)  the addition modification relating to
29                  the  net operating loss carried back or forward
30                  to the  taxable  year  from  any  taxable  year
31                  ending  prior  to  December  31,  1986 shall be
32                  reduced by the amount of addition  modification
33                  under  this  subparagraph  (E) which related to
34                  that net operating loss  and  which  was  taken
 
HB4187 Engrossed            -17-               LRB9214971JMmb
 1                  into  account in calculating the base income of
 2                  an earlier taxable year, and
 3                       (ii)  the addition  modification  relating
 4                  to  the  net  operating  loss  carried  back or
 5                  forward to the taxable year  from  any  taxable
 6                  year  ending  prior  to December 31, 1986 shall
 7                  not exceed the  amount  of  such  carryback  or
 8                  carryforward;
 9                  For  taxable  years  in  which  there  is a net
10             operating loss carryback or carryforward  from  more
11             than one other taxable year ending prior to December
12             31, 1986, the addition modification provided in this
13             subparagraph  (E)  shall  be  the sum of the amounts
14             computed   independently   under    the    preceding
15             provisions  of  this  subparagraph (E) for each such
16             taxable year; and
17                  (E-5)  For taxable years ending after  December
18             31,   1997,   an   amount   equal  to  any  eligible
19             remediation costs that the corporation  deducted  in
20             computing  adjusted  gross  income and for which the
21             corporation claims a credit under subsection (l)  of
22             Section 201;
23        and  by  deducting  from the total so obtained the sum of
24        the following amounts:
25                  (F)  An amount equal to the amount of  any  tax
26             imposed  by  this  Act  which  was  refunded  to the
27             taxpayer and included in such total for the  taxable
28             year;
29                  (G)  An  amount equal to any amount included in
30             such total under Section 78 of the Internal  Revenue
31             Code;
32                  (H)  In  the  case  of  a  regulated investment
33             company, an amount equal to  the  amount  of  exempt
34             interest  dividends as defined in subsection (b) (5)
 
HB4187 Engrossed            -18-               LRB9214971JMmb
 1             of Section 852 of the Internal Revenue Code, paid to
 2             shareholders for the taxable year;
 3                  (I)  With  the   exception   of   any   amounts
 4             subtracted  under  subparagraph (J), an amount equal
 5             to the sum of all amounts disallowed  as  deductions
 6             by  (i)  Sections  171(a)  (2),  and  265(a)(2)  and
 7             amounts  disallowed  as  interest expense by Section
 8             291(a)(3) of the Internal Revenue Code,  as  now  or
 9             hereafter  amended,  and  all  amounts  of  expenses
10             allocable  to  interest and disallowed as deductions
11             by Section 265(a)(1) of the Internal  Revenue  Code,
12             as  now  or  hereafter amended; and (ii) for taxable
13             years ending on or after August 13,  1999,  Sections
14             171(a)(2), 265, 280C, 291(a)(3), and 832(b)(5)(B)(i)
15             of the Internal Revenue Code; the provisions of this
16             subparagraph  are  exempt  from  the  provisions  of
17             Section 250;
18                  (J)  An amount equal to all amounts included in
19             such  total  which  are exempt from taxation by this
20             State  either  by  reason   of   its   statutes   or
21             Constitution  or  by  reason  of  the  Constitution,
22             treaties  or statutes of the United States; provided
23             that, in the case of any statute of this State  that
24             exempts   income   derived   from   bonds  or  other
25             obligations from the tax imposed under this Act, the
26             amount exempted shall be the interest  net  of  bond
27             premium amortization;
28                  (K)  An   amount   equal   to  those  dividends
29             included  in  such  total  which  were  paid  by   a
30             corporation which conducts business operations in an
31             Enterprise  Zone or zones created under the Illinois
32             Enterprise Zone Act and conducts  substantially  all
33             of its operations in an Enterprise Zone or zones;
34                  (L)  An   amount   equal   to  those  dividends
 
HB4187 Engrossed            -19-               LRB9214971JMmb
 1             included  in  such  total  that  were  paid   by   a
 2             corporation  that  conducts business operations in a
 3             federally designated Foreign Trade Zone or  Sub-Zone
 4             and  that  is  designated  a  High  Impact  Business
 5             located   in   Illinois;   provided  that  dividends
 6             eligible for the deduction provided in  subparagraph
 7             (K)  of  paragraph 2 of this subsection shall not be
 8             eligible  for  the  deduction  provided  under  this
 9             subparagraph (L);
10                  (M)  For  any  taxpayer  that  is  a  financial
11             organization within the meaning of Section 304(c) of
12             this Act,  an  amount  included  in  such  total  as
13             interest  income  from  a loan or loans made by such
14             taxpayer to a borrower, to the extent  that  such  a
15             loan  is  secured  by property which is eligible for
16             the Enterprise Zone Investment Credit.  To determine
17             the portion of a loan or loans that  is  secured  by
18             property  eligible  for  a Section 201(f) investment
19             credit to the borrower, the entire principal  amount
20             of  the  loan  or loans between the taxpayer and the
21             borrower should be divided into  the  basis  of  the
22             Section  201(f)  investment  credit  property  which
23             secures  the  loan  or loans, using for this purpose
24             the original basis of such property on the date that
25             it was placed in service  in  the  Enterprise  Zone.
26             The  subtraction  modification available to taxpayer
27             in any year under  this  subsection  shall  be  that
28             portion  of  the total interest paid by the borrower
29             with  respect  to  such  loan  attributable  to  the
30             eligible property as calculated under  the  previous
31             sentence;
32                  (M-1)  For  any  taxpayer  that  is a financial
33             organization within the meaning of Section 304(c) of
34             this Act,  an  amount  included  in  such  total  as
 
HB4187 Engrossed            -20-               LRB9214971JMmb
 1             interest  income  from  a loan or loans made by such
 2             taxpayer to a borrower, to the extent  that  such  a
 3             loan  is  secured  by property which is eligible for
 4             the High  Impact  Business  Investment  Credit.   To
 5             determine  the  portion  of  a loan or loans that is
 6             secured by property eligible for  a  Section  201(h)
 7             investment   credit  to  the  borrower,  the  entire
 8             principal amount of the loan or  loans  between  the
 9             taxpayer and the borrower should be divided into the
10             basis   of  the  Section  201(h)  investment  credit
11             property which secures the loan or loans, using  for
12             this  purpose the original basis of such property on
13             the  date  that  it  was  placed  in  service  in  a
14             federally designated Foreign Trade Zone or  Sub-Zone
15             located  in  Illinois.  No taxpayer that is eligible
16             for the deduction provided in  subparagraph  (M)  of
17             paragraph  (2)  of this subsection shall be eligible
18             for the deduction provided under  this  subparagraph
19             (M-1).   The  subtraction  modification available to
20             taxpayers in any year under this subsection shall be
21             that portion of  the  total  interest  paid  by  the
22             borrower  with  respect to such loan attributable to
23             the  eligible  property  as  calculated  under   the
24             previous sentence;
25                  (N)  Two times any contribution made during the
26             taxable  year  to  a designated zone organization to
27             the extent that the contribution (i) qualifies as  a
28             charitable  contribution  under  subsection  (c)  of
29             Section  170  of  the Internal Revenue Code and (ii)
30             must, by its terms, be used for a  project  approved
31             by  the Department of Commerce and Community Affairs
32             under Section 11 of  the  Illinois  Enterprise  Zone
33             Act;
34                  (O)  An  amount  equal  to: (i) 85% for taxable
 
HB4187 Engrossed            -21-               LRB9214971JMmb
 1             years ending on or before December 31, 1992,  or,  a
 2             percentage  equal  to the percentage allowable under
 3             Section 243(a)(1) of the Internal  Revenue  Code  of
 4             1986  for  taxable  years  ending after December 31,
 5             1992, of the amount by which dividends  included  in
 6             taxable  income and received from a corporation that
 7             is not created or organized under the  laws  of  the
 8             United  States or any state or political subdivision
 9             thereof, including, for taxable years ending  on  or
10             after  December  31,  1988,  dividends  received  or
11             deemed   received  or  paid  or  deemed  paid  under
12             Sections 951 through 964  of  the  Internal  Revenue
13             Code, exceed the amount of the modification provided
14             under  subparagraph  (G)  of  paragraph  (2) of this
15             subsection (b) which is related to  such  dividends;
16             plus  (ii)  100%  of  the amount by which dividends,
17             included in taxable income and received,  including,
18             for  taxable  years  ending on or after December 31,
19             1988, dividends received or deemed received or  paid
20             or deemed paid under Sections 951 through 964 of the
21             Internal  Revenue  Code,  from  any such corporation
22             specified in clause  (i)  that  would  but  for  the
23             provisions  of  Section 1504 (b) (3) of the Internal
24             Revenue  Code  be  treated  as  a  member   of   the
25             affiliated   group   which   includes  the  dividend
26             recipient, exceed the  amount  of  the  modification
27             provided  under subparagraph (G) of paragraph (2) of
28             this  subsection  (b)  which  is  related  to   such
29             dividends;
30                  (P)  An  amount  equal to any contribution made
31             to a job training project  established  pursuant  to
32             the Tax Increment Allocation Redevelopment Act;
33                  (Q)  An  amount  equal  to  the  amount  of the
34             deduction used to compute  the  federal  income  tax
 
HB4187 Engrossed            -22-               LRB9214971JMmb
 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                  (R)  In the case of  an  attorney-in-fact  with
 6             respect  to  whom  an  interinsurer  or a reciprocal
 7             insurer has made the election under Section  835  of
 8             the  Internal Revenue Code, 26 U.S.C. 835, an amount
 9             equal to the excess, if any, of the amounts paid  or
10             incurred  by that interinsurer or reciprocal insurer
11             in the taxable year to the attorney-in-fact over the
12             deduction allowed to that interinsurer or reciprocal
13             insurer with respect to the  attorney-in-fact  under
14             Section  835(b) of the Internal Revenue Code for the
15             taxable year; and
16                  (S)  For  taxable  years  ending  on  or  after
17             December 31, 1997, in the case  of  a  Subchapter  S
18             corporation,  an  amount  equal  to  all  amounts of
19             income allocable to a  shareholder  subject  to  the
20             Personal Property Tax Replacement Income Tax imposed
21             by  subsections  (c)  and (d) of Section 201 of this
22             Act, including amounts  allocable  to  organizations
23             exempt  from federal income tax by reason of Section
24             501(a)  of  the   Internal   Revenue   Code.    This
25             subparagraph  (S)  is  exempt from the provisions of
26             Section 250.
27             (3)  Special rule.  For purposes  of  paragraph  (2)
28        (A),  "gross  income"  in  the  case  of a life insurance
29        company, for tax years ending on and after  December  31,
30        1994,  shall  mean  the  gross  investment income for the
31        taxable year.

32        (c)  Trusts and estates.
33             (1)  In general.  In the case of a trust or  estate,
34        base  income  means  an  amount  equal  to the taxpayer's
 
HB4187 Engrossed            -23-               LRB9214971JMmb
 1        taxable income  for  the  taxable  year  as  modified  by
 2        paragraph (2).
 3             (2)  Modifications.   Subject  to  the provisions of
 4        paragraph  (3),  the  taxable  income  referred   to   in
 5        paragraph (1) shall be modified by adding thereto the sum
 6        of the following amounts:
 7                  (A)  An  amount  equal  to  all amounts paid or
 8             accrued to the taxpayer  as  interest  or  dividends
 9             during  the taxable year to the extent excluded from
10             gross income in the computation of taxable income;
11                  (B)  In the case of (i) an estate, $600; (ii) a
12             trust which,  under  its  governing  instrument,  is
13             required  to distribute all of its income currently,
14             $300; and (iii) any other trust, $100, but  in  each
15             such  case,  only  to  the  extent  such  amount was
16             deducted in the computation of taxable income;
17                  (C)  An amount  equal  to  the  amount  of  tax
18             imposed  by  this  Act  to  the extent deducted from
19             gross income in the computation  of  taxable  income
20             for the taxable year;
21                  (D)  The  amount  of  any  net  operating  loss
22             deduction taken in arriving at taxable income, other
23             than  a  net  operating  loss carried forward from a
24             taxable year ending prior to December 31, 1986;
25                  (E)  For taxable years in which a net operating
26             loss carryback or carryforward from a  taxable  year
27             ending  prior  to December 31, 1986 is an element of
28             taxable income under paragraph (1) of subsection (e)
29             or subparagraph (E) of paragraph (2)  of  subsection
30             (e),  the  amount  by  which  addition modifications
31             other than those provided by this  subparagraph  (E)
32             exceeded  subtraction  modifications in such taxable
33             year, with the following limitations applied in  the
34             order that they are listed:
 
HB4187 Engrossed            -24-               LRB9214971JMmb
 1                       (i)  the addition modification relating to
 2                  the  net operating loss carried back or forward
 3                  to the  taxable  year  from  any  taxable  year
 4                  ending  prior  to  December  31,  1986 shall be
 5                  reduced by the amount of addition  modification
 6                  under  this  subparagraph  (E) which related to
 7                  that net operating loss  and  which  was  taken
 8                  into  account in calculating the base income of
 9                  an earlier taxable year, and
10                       (ii)  the addition  modification  relating
11                  to  the  net  operating  loss  carried  back or
12                  forward to the taxable year  from  any  taxable
13                  year  ending  prior  to December 31, 1986 shall
14                  not exceed the  amount  of  such  carryback  or
15                  carryforward;
16                  For  taxable  years  in  which  there  is a net
17             operating loss carryback or carryforward  from  more
18             than one other taxable year ending prior to December
19             31, 1986, the addition modification provided in this
20             subparagraph  (E)  shall  be  the sum of the amounts
21             computed   independently   under    the    preceding
22             provisions  of  this  subparagraph (E) for each such
23             taxable year;
24                  (F)  For  taxable  years  ending  on  or  after
25             January 1, 1989, an amount equal to the tax deducted
26             pursuant to Section 164 of the Internal Revenue Code
27             if the trust or estate is claiming the same tax  for
28             purposes  of  the  Illinois foreign tax credit under
29             Section 601 of this Act;
30                  (G)  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; and
34                  (G-5)  For  taxable years ending after December
 
HB4187 Engrossed            -25-               LRB9214971JMmb
 1             31,  1997,  an  amount   equal   to   any   eligible
 2             remediation  costs that the trust or estate deducted
 3             in computing adjusted gross income and for which the
 4             trust or estate claims a credit under subsection (l)
 5             of Section 201;
 6        and by deducting from the total so obtained  the  sum  of
 7        the following amounts:
 8                  (H)  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 such
12             total  as  distributions under the provisions of any
13             retirement or disability plan for employees  of  any
14             governmental  agency or unit, or retirement payments
15             to retired partners, which payments are excluded  in
16             computing  net  earnings  from  self  employment  by
17             Section  1402  of  the  Internal  Revenue  Code  and
18             regulations adopted pursuant thereto;
19                  (I)  The valuation limitation amount;
20                  (J)  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                  (K)  An amount equal to all amounts included in
25             taxable income as  modified  by  subparagraphs  (A),
26             (B),  (C),  (D),  (E),  (F) and (G) which are exempt
27             from taxation by this State either by reason of  its
28             statutes   or  Constitution  or  by  reason  of  the
29             Constitution, treaties or  statutes  of  the  United
30             States; provided that, in the case of any statute of
31             this State that exempts income derived from bonds or
32             other  obligations  from  the tax imposed under this
33             Act, the amount exempted shall be the  interest  net
34             of bond premium amortization;
 
HB4187 Engrossed            -26-               LRB9214971JMmb
 1                  (L)  With   the   exception   of   any  amounts
 2             subtracted under subparagraph (K), an  amount  equal
 3             to  the  sum of all amounts disallowed as deductions
 4             by (i) Sections 171(a)  (2)  and  265(a)(2)  of  the
 5             Internal  Revenue Code, as now or hereafter amended,
 6             and all amounts of expenses  allocable  to  interest
 7             and  disallowed  as  deductions by Section 265(1) of
 8             the  Internal  Revenue  Code  of  1954,  as  now  or
 9             hereafter amended; and (ii) for taxable years ending
10             on or after August  13,  1999,  Sections  171(a)(2),
11             265,  280C,  and  832(b)(5)(B)(i)  of  the  Internal
12             Revenue  Code;  the  provisions of this subparagraph
13             are exempt from the provisions of 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
 
HB4187 Engrossed            -27-               LRB9214971JMmb
 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, Sections 171(a)(2),
 9             265,  280C,  and  832(b)(5)(B)(i)  of  the  Internal
10             Revenue Code; the provisions  of  this  subparagraph
11             are exempt from the provisions of Section 250;
12                  (K)  An   amount   equal   to  those  dividends
13             included  in  such  total  which  were  paid  by   a
14             corporation which conducts business operations in an
15             Enterprise  Zone or zones created under the Illinois
16             Enterprise Zone Act, enacted  by  the  82nd  General
17             Assembly, and which does not conduct such operations
18             other than in an Enterprise Zone or Zones;
19                  (L)  An  amount  equal to any contribution made
20             to a job training project  established  pursuant  to
21             the   Real   Property   Tax   Increment   Allocation
22             Redevelopment Act;
23                  (M)  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             (K) of paragraph (2) of this subsection shall not be
31             eligible  for  the  deduction  provided  under  this
32             subparagraph (M); and
33                  (N)  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.

 5        (e)  Gross income; adjusted gross income; taxable income.
 6             (1)  In  general.   Subject  to  the  provisions  of
 7        paragraph (2) and subsection (b)  (3),  for  purposes  of
 8        this  Section  and  Section  803(e),  a  taxpayer's gross
 9        income, adjusted gross income, or taxable income for  the
10        taxable  year  shall  mean  the  amount  of gross income,
11        adjusted  gross  income  or   taxable   income   properly
12        reportable  for  federal  income  tax  purposes  for  the
13        taxable year under the provisions of the Internal Revenue
14        Code.  Taxable income may be less than zero. However, for
15        taxable years ending on or after December 31,  1986,  net
16        operating  loss  carryforwards  from taxable years ending
17        prior to December 31, 1986, may not  exceed  the  sum  of
18        federal  taxable  income  for the taxable year before net
19        operating loss deduction, plus  the  excess  of  addition
20        modifications  over  subtraction  modifications  for  the
21        taxable year.  For taxable years ending prior to December
22        31, 1986, taxable income may never be an amount in excess
23        of the net operating loss for the taxable year as defined
24        in subsections (c) and (d) of Section 172 of the Internal
25        Revenue  Code,  provided  that  when  taxable income of a
26        corporation (other  than  a  Subchapter  S  corporation),
27        trust,   or   estate  is  less  than  zero  and  addition
28        modifications, other than those provided by  subparagraph
29        (E)  of  paragraph (2) of subsection (b) for corporations
30        or subparagraph (E) of paragraph (2)  of  subsection  (c)
31        for trusts and estates, exceed subtraction modifications,
32        an   addition  modification  must  be  made  under  those
33        subparagraphs for any other taxable  year  to  which  the
34        taxable  income  less  than  zero (net operating loss) is
 
HB4187 Engrossed            -32-               LRB9214971JMmb
 1        applied under Section 172 of the Internal Revenue Code or
 2        under  subparagraph  (E)  of  paragraph   (2)   of   this
 3        subsection (e) applied in conjunction with Section 172 of
 4        the Internal Revenue Code.
 5             (2)  Special rule.  For purposes of paragraph (1) of
 6        this  subsection,  the taxable income properly reportable
 7        for federal income tax purposes shall mean:
 8                  (A)  Certain life insurance companies.  In  the
 9             case  of a life insurance company subject to the tax
10             imposed by Section 801 of the Internal Revenue Code,
11             life insurance  company  taxable  income,  plus  the
12             amount  of  distribution  from pre-1984 policyholder
13             surplus accounts as calculated under Section 815a of
14             the Internal Revenue Code;
15                  (B)  Certain other insurance companies.  In the
16             case of mutual insurance companies  subject  to  the
17             tax  imposed  by Section 831 of the Internal Revenue
18             Code, insurance company taxable income;
19                  (C)  Regulated investment  companies.   In  the
20             case  of  a  regulated investment company subject to
21             the tax imposed  by  Section  852  of  the  Internal
22             Revenue Code, investment company taxable income;
23                  (D)  Real  estate  investment  trusts.   In the
24             case of a real estate investment  trust  subject  to
25             the  tax  imposed  by  Section  857  of the Internal
26             Revenue Code, real estate investment  trust  taxable
27             income;
28                  (E)  Consolidated corporations.  In the case of
29             a  corporation  which  is  a member of an affiliated
30             group of corporations filing a  consolidated  income
31             tax  return  for the taxable year for federal income
32             tax purposes, taxable income determined as  if  such
33             corporation  had filed a separate return for federal
34             income tax purposes for the taxable  year  and  each
 
HB4187 Engrossed            -33-               LRB9214971JMmb
 1             preceding  taxable year for which it was a member of
 2             an  affiliated   group.   For   purposes   of   this
 3             subparagraph, the taxpayer's separate taxable income
 4             shall  be  determined as if the election provided by
 5             Section 243(b) (2) of the Internal Revenue Code  had
 6             been in effect for all such years;
 7                  (F)  Cooperatives.     In   the   case   of   a
 8             cooperative corporation or association, the  taxable
 9             income of such organization determined in accordance
10             with  the provisions of Section 1381 through 1388 of
11             the Internal Revenue Code;
12                  (G)  Subchapter S corporations.   In  the  case
13             of:  (i)  a Subchapter S corporation for which there
14             is in effect an election for the taxable year  under
15             Section  1362  of  the  Internal  Revenue  Code, the
16             taxable income of  such  corporation  determined  in
17             accordance  with  Section  1363(b)  of  the Internal
18             Revenue Code, except that taxable income shall  take
19             into  account  those  items  which  are  required by
20             Section 1363(b)(1) of the Internal Revenue  Code  to
21             be  separately  stated;  and  (ii)  a  Subchapter  S
22             corporation  for  which there is in effect a federal
23             election  to  opt  out  of  the  provisions  of  the
24             Subchapter S Revision Act of 1982 and  have  applied
25             instead  the  prior federal Subchapter S rules as in
26             effect on July 1, 1982, the taxable income  of  such
27             corporation   determined   in  accordance  with  the
28             federal Subchapter S rules as in effect on  July  1,
29             1982; and
30                  (H)  Partnerships.     In   the   case   of   a
31             partnership, taxable income determined in accordance
32             with Section  703  of  the  Internal  Revenue  Code,
33             except  that  taxable income shall take into account
34             those items which are required by Section  703(a)(1)
 
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 1             to  be  separately  stated  but which would be taken
 2             into account by an  individual  in  calculating  his
 3             taxable income.

 4        (f)  Valuation limitation amount.
 5             (1)  In  general.   The  valuation limitation amount
 6        referred to in subsections (a) (2) (G), (c) (2)  (I)  and
 7        (d)(2) (E) is an amount equal to:
 8                  (A)  The   sum   of   the  pre-August  1,  1969
 9             appreciation amounts (to the  extent  consisting  of
10             gain reportable under the provisions of Section 1245
11             or  1250  of  the  Internal  Revenue  Code)  for all
12             property in respect of which such gain was  reported
13             for the taxable year; plus
14                  (B)  The   lesser   of   (i)  the  sum  of  the
15             pre-August 1,  1969  appreciation  amounts  (to  the
16             extent  consisting of capital gain) for all property
17             in respect of  which  such  gain  was  reported  for
18             federal income tax purposes for the taxable year, or
19             (ii)  the  net  capital  gain  for the taxable year,
20             reduced in either case by any amount  of  such  gain
21             included  in  the amount determined under subsection
22             (a) (2) (F) or (c) (2) (H).
23             (2)  Pre-August 1, 1969 appreciation amount.
24                  (A)  If  the  fair  market  value  of  property
25             referred   to   in   paragraph   (1)   was   readily
26             ascertainable on August 1, 1969, the  pre-August  1,
27             1969  appreciation  amount  for such property is the
28             lesser of (i) the excess of such fair  market  value
29             over the taxpayer's basis (for determining gain) for
30             such  property  on  that  date (determined under the
31             Internal Revenue Code as in effect on that date), or
32             (ii) the total  gain  realized  and  reportable  for
33             federal  income tax purposes in respect of the sale,
34             exchange or other disposition of such property.
 
HB4187 Engrossed            -35-               LRB9214971JMmb
 1                  (B)  If  the  fair  market  value  of  property
 2             referred  to  in  paragraph  (1)  was  not   readily
 3             ascertainable  on  August 1, 1969, the pre-August 1,
 4             1969 appreciation amount for such property  is  that
 5             amount  which bears the same ratio to the total gain
 6             reported in respect  of  the  property  for  federal
 7             income  tax  purposes  for  the taxable year, as the
 8             number of full calendar months in that part  of  the
 9             taxpayer's  holding  period  for the property ending
10             July 31, 1969 bears to the number of  full  calendar
11             months  in  the taxpayer's entire holding period for
12             the property.
13                  (C)  The  Department   shall   prescribe   such
14             regulations  as  may  be  necessary to carry out the
15             purposes of this paragraph.

16        (g)  Double  deductions.   Unless  specifically  provided
17    otherwise, nothing in this Section shall permit the same item
18    to be deducted more than once.

19        (h)  Legislative intention.  Except as expressly provided
20    by  this  Section  there  shall  be   no   modifications   or
21    limitations on the amounts of income, gain, loss or deduction
22    taken  into  account  in  determining  gross income, adjusted
23    gross  income  or  taxable  income  for  federal  income  tax
24    purposes for the taxable year, or in the amount of such items
25    entering into the computation of base income and  net  income
26    under  this  Act for such taxable year, whether in respect of
27    property values as of August 1, 1969 or otherwise.
28    (Source: P.A. 91-192, eff.  7-20-99;  91-205,  eff.  7-20-99;
29    91-357,  eff.  7-29-99;  91-541,  eff.  8-13-99; 91-676, eff.
30    12-23-99; 91-845, eff. 6-22-00; 91-913, eff.  1-1-01;  92-16,
31    eff.  6-28-01;  92-244,  eff.  8-3-01;  92-439, eff. 8-17-01;
32    revised 9-21-01.)
 
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 1        Section 99.  Effective date.  This Act takes effect  upon
 2    becoming law.

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