Public Act 093-0840
 
SB2207 Enrolled LRB093 15831 RCE 41448 b

    AN ACT in relation to budget implementation.
 
    Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
 
ARTICLE 1

 
    Section 1-1. Short title. This Act may be cited as the
FY2005 Budget Implementation (Revenue) Act.
 
    Section 1-5. Purpose. It is the purpose of this Act to
make changes in State programs that are necessary to implement
the Governor's FY2005 budget recommendations concerning
revenue.
 
ARTICLE 5

 
    Section 5-5. The Illinois Insurance Code is amended by
changing Section 416 as follows:
 
    (215 ILCS 5/416)
    Sec. 416. Industrial Commission Operations Fund Surcharge.
    (a) As of the effective date of this amendatory Act of 2004
the 93rd General Assembly, every company licensed or authorized
by the Illinois Department of Insurance and insuring employers'
liabilities arising under the Workers' Compensation Act or the
Workers' Occupational Diseases Act shall remit to the Director
a surcharge based upon the annual direct written premium, as
reported under Section 136 of this Act, of the company in the
manner provided in this Section. Such proceeds shall be
deposited into the Industrial Commission Operations Fund as
established in the Workers' Compensation Act. If a company
survives or was formed by a merger, consolidation,
reorganization, or reincorporation, the direct written
premiums of all companies party to the merger, consolidation,
reorganization, or reincorporation shall, for purposes of
determining the amount of the fee imposed by this Section, be
regarded as those of the surviving or new company.
    (b)(1) Except as provided in subsection (b)(2) of this
Section, beginning on the effective date of this amendatory Act
of 2004 and on July 1 of July 1, 2004 and each year thereafter,
the Director shall charge an annual Industrial Commission
Operations Fund Surcharge from every company subject to
subsection (a) of this Section equal to 1.01% 1.5% of its
direct written premium for insuring employers' liabilities
arising under the Workers' Compensation Act or Workers'
Occupational Diseases Act as reported in each company's annual
statement filed for the previous year as required by Section
136. The Industrial Commission Operations Fund Surcharge shall
be collected by companies subject to subsection (a) of this
Section as a separately stated surcharge on insured employers
at the rate of 1.01% 1.5% of direct written premium. The
Industrial Commission Operations Fund Surcharge shall not be
collected by companies subject to subsection (a) of this
Section from any employer that self-insures its liabilities
arising under the Workers' Compensation Act or Workers'
Occupational Diseases Act, provided that the employer has paid
the Industrial Commission Operations Fund Fee pursuant to
Section 4d of the Workers' Compensation Act. All sums collected
by the Department of Insurance under the provisions of this
Section shall be paid promptly after the receipt of the same,
accompanied by a detailed statement thereof, into the
Industrial Commission Operations Fund in the State treasury.
    (b)(2) The surcharge due pursuant to this amendatory Act of
2004 shall be collected instead of the surcharge due on July 1,
2004 under Public Act 93-32. Payment of the surcharge due under
this amendatory Act of 2004 shall discharge the employer's
obligations due on July 1, 2004. Prior to July 1, 2004, the
Director shall charge and collect the surcharge set forth in
subparagraph (b)(1) of this Section on or before September 1,
2003, December 1, 2003, March 1, 2004 and June 1, 2004. For
purposes of this subsection (b)(2), the company shall remit the
amounts to the Director based on estimated direct premium for
each quarter beginning on July 1, 2003, together with a sworn
statement attesting to the reasonableness of the estimate, and
the estimated amount of direct premium written forming the
bases of the remittance.
    (c) In addition to the authority specifically granted under
Article XXV of this Code, the Director shall have such
authority to adopt rules or establish forms as may be
reasonably necessary for purposes of enforcing this Section.
The Director shall also have authority to defer, waive, or
abate the surcharge or any penalties imposed by this Section if
in the Director's opinion the company's solvency and ability to
meet its insured obligations would be immediately threatened by
payment of the surcharge due.
    (d) When a company fails to pay the full amount of any
annual Industrial Commission Operations Fund Surcharge of $100
or more due under this Section, there shall be added to the
amount due as a penalty the greater of $1,000 or an amount
equal to 5% of the deficiency for each month or part of a month
that the deficiency remains unpaid.
    (e) The Department of Insurance may enforce the collection
of any delinquent payment, penalty, or portion thereof by legal
action or in any other manner by which the collection of debts
due the State of Illinois may be enforced under the laws of
this State.
    (f) Whenever it appears to the satisfaction of the Director
that a company has paid pursuant to this Act an Industrial
Commission Operations Fund Surcharge in an amount in excess of
the amount legally collectable from the company, the Director
shall issue a credit memorandum for an amount equal to the
amount of such overpayment. A credit memorandum may be applied
for the 2-year period from the date of issuance, against the
payment of any amount due during that period under the
surcharge imposed by this Section or, subject to reasonable
rule of the Department of Insurance including requirement of
notification, may be assigned to any other company subject to
regulation under this Act. Any application of credit memoranda
after the period provided for in this Section is void.
    (g) Annually, the Governor may direct a transfer of up to
2% of all moneys collected under this Section to the Insurance
Financial Regulation Fund.
(Source: P.A. 93-32, eff. 6-20-03.)
 
    Section 5-10. The Workers' Compensation Act is amended by
changing Section 4d as follows:
 
    (820 ILCS 305/4d)
    Sec. 4d. Industrial Commission Operations Fund Fee.
    (a) As of the effective date of this amendatory Act of the
93rd General Assembly, each employer that self-insures its
liabilities arising under this Act or Workers' Occupational
Diseases Act shall pay a fee measured by the annual actual
wages paid in this State of such an employer in the manner
provided in this Section. Such proceeds shall be deposited in
the Industrial Commission Operations Fund. If an employer
survives or was formed by a merger, consolidation,
reorganization, or reincorporation, the actual wages paid in
this State of all employers party to the merger, consolidation,
reorganization, or reincorporation shall, for purposes of
determining the amount of the fee imposed by this Section, be
regarded as those of the surviving or new employer.
    (b) Beginning on the effective date of this amendatory Act
of 2004 the 93rd General Assembly and on July 1 of each year
thereafter, the Chairman shall charge and collect an annual
Industrial Commission Operations Fund Fee from every employer
subject to subsection (a) of this Section equal to 0.0075%
0.045% of its annual actual wages paid in this State as
reported in each employer's annual self-insurance renewal
filed for the previous year as required by Section 4 of this
Act and Section 4 of the Workers' Occupational Diseases Act.
All sums collected by the Commission under the provisions of
this Section shall be paid promptly after the receipt of the
same, accompanied by a detailed statement thereof, into the
Industrial Commission Operations Fund. The fee due pursuant to
this amendatory Act of 2004 shall be collected instead of the
fee due on July 1, 2004 under Public Act 93-32. Payment of the
fee due under this amendatory Act of 2004 shall discharge the
employer's obligations due on July 1, 2004.
    (c) In addition to the authority specifically granted under
Section 16, the Chairman shall have such authority to adopt
rules or establish forms as may be reasonably necessary for
purposes of enforcing this Section. The Commission shall have
authority to defer, waive, or abate the fee or any penalties
imposed by this Section if in the Commission's opinion the
employer's solvency and ability to meet its obligations to pay
workers' compensation benefits would be immediately threatened
by payment of the fee due.
    (d) When an employer fails to pay the full amount of any
annual Industrial Commission Operations Fund Fee of $100 or
more due under this Section, there shall be added to the amount
due as a penalty the greater of $1,000 or an amount equal to 5%
of the deficiency for each month or part of a month that the
deficiency remains unpaid.
    (e) The Commission may enforce the collection of any
delinquent payment, penalty or portion thereof by legal action
or in any other manner by which the collection of debts due the
State of Illinois may be enforced under the laws of this State.
    (f) Whenever it appears to the satisfaction of the Chairman
that an employer has paid pursuant to this Act an Industrial
Commission Operations Fund Fee in an amount in excess of the
amount legally collectable from the employer, the Chairman
shall issue a credit memorandum for an amount equal to the
amount of such overpayment. A credit memorandum may be applied
for the 2-year period from the date of issuance against the
payment of any amount due during that period under the fee
imposed by this Section or, subject to reasonable rule of the
Commission including requirement of notification, may be
assigned to any other employer subject to regulation under this
Act. Any application of credit memoranda after the period
provided for in this Section is void.
(Source: P.A. 93-32, eff. 6-20-03.)
 
ARTICLE 10

 
    Section 10-5. The Illinois Identification Card Act is
amended by changing Sections 2 and 12 as follows:
 
    (15 ILCS 335/2)  (from Ch. 124, par. 22)
    Sec. 2. Administration and powers and duties of the
Administrator. (a) The Secretary of State is the Administrator
of this Act, and he is charged with the duty of observing,
administering and enforcing the provisions of this Act.
    (b) The Secretary is vested with the powers and duties for
the proper administration of this Act as follows:
    1. He shall organize the administration of this Act as he
may deem necessary and appoint such subordinate officers,
clerks and other employees as may be necessary.
    2. From time to time, he may make, amend or rescind rules
and regulations as may be in the public interest to implement
the Act.
    3. He may prescribe or provide suitable forms as necessary,
including such forms as are necessary to establish that an
applicant for an Illinois Disabled Person Identification Card
is a "disabled person" as defined in Section 4A of this Act.
    4. He may prepare under the seal of the Secretary of State
certified copies of any records utilized under this Act and any
such certified copy shall be admissible in any proceeding in
any court in like manner as the original thereof.
    5. Records compiled under this Act shall be maintained for
6 years, but the Secretary may destroy such records with the
prior approval of the State Records Commission.
    6. He shall examine and determine the genuineness,
regularity and legality of every application filed with him
under this Act, and he may in all cases investigate the same,
require additional information or proof or documentation from
any applicant.
    7. He shall require the payment of all fees prescribed in
this Act, and all such fees received by him shall be placed in
the Road Fund of the State treasury except as otherwise
provided in Section 12 of this Act.
(Source: P.A. 83-1421.)
 
    (15 ILCS 335/12)  (from Ch. 124, par. 32)
    Sec. 12. Fees concerning Standard Illinois Identification
Cards. The fees required under this Act for standard Illinois
Identification Cards must accompany any application provided
for in this Act, and the Secretary shall collect such fees as
follows:
    a. Original card issued on or before
        December 31, 2004........................ $4
        Original card issued on or after
        January 1, 2005.......................... $20
    b. Renewal card issued on or before
        December 31, 2004.........................4
        Renewal card issued on or after
        January 1, 2005.......................... 20
    c. Corrected card issued on or before
        December 31, 2004.........................2
        Corrected card issued on or after
        January 1, 2005.......................... 10
    d. Duplicate card issued on or before
        December 31, 2004.........................4
        Duplicate card issued on or after
        January 1, 2005...........................20
    e. Certified copy with seal .................5
    f. Search ...................................2
    g. Applicant 65 years of age or over ........No Fee
    h. Disabled applicant .......................No Fee
    i. Individual living in Veterans
        Home or Hospital .........................No Fee
    All fees collected under this Act shall be paid into the
Road Fund of the State treasury, except that the following
amounts shall be paid into the General Revenue Fund: (i) $16 of
the $20 fee for an original, renewal, or duplicate Illinois
Identification Card issued on or after January 1, 2005; and
(ii) $8 of the $10 fee for a corrected Illinois Identification
Card issued on or after January 1, 2005.
    Any disabled person making an application for a standard
Illinois Identification Card for no fee must, along with the
application, submit an affirmation by the applicant on a form
to be provided by the Secretary of State, attesting that such
person is a disabled person as defined in Section 4A of this
Act.
    An individual, who resides in a veterans home or veterans
hospital operated by the state or federal government, who makes
an application for an Illinois Identification Card to be issued
at no fee, must submit, along with the application, an
affirmation by the applicant on a form provided by the
Secretary of State, that such person resides in a veterans home
or veterans hospital operated by the state or federal
government.
(Source: P.A. 83-1528.)
 
    Section 10-10. The Illinois Lottery Law is amended by
changing Section 10.2 as follows:
 
    (20 ILCS 1605/10.2)  (from Ch. 120, par. 1160.2)
    Sec. 10.2. Application and other fees. Each application
for a new lottery license must be accompanied by a one-time
application fee of $50; the Department, however, may waive the
fee for licenses of limited duration as provided by Department
rule. Each application for renewal of a lottery license must be
accompanied by a renewal fee of $25. Each lottery licensee
granted on-line status pursuant to the Department's rules must
pay a fee of $10 per week as partial reimbursement for
telecommunications charges incurred by the Department in
providing access to the lottery's on-line gaming system. The
Department, by rule, may increase or decrease the amount of
these fees. The Department may charge an application fee except
that such fee shall not exceed $10.00 per annum.
(Source: P.A. 81-477.)
 
ARTICLE 15

 
    Section 15-1. Short title. This Article may be cited as the
Watercraft Use Tax Law, and references in this Article to "this
Law" mean this Article.
 
    Section 15-5. Definitions. For the purposes of this Law:
    "Department" means the Department of Revenue.
    "Purchase price" means the reasonable consideration paid
for a watercraft whether received in money or otherwise,
including, but not limited to, cash, credits, property, and
services, and including the value of any motor sold with, or in
conjunction with, the watercraft. Except in the case of
transfers between immediate family members, reasonable
consideration ordinarily means the fair market value on the
date the watercraft or the share of the watercraft was acquired
or the date the watercraft was brought into this State,
whichever is later, unless the taxpayer can demonstrate that a
different value is reasonable. In the case of transfers between
immediate family members, reasonable consideration ordinarily
means the consideration actually paid, unless it appears from
the facts and circumstances that the primary motivation of the
transfer was the avoidance of tax.
    "Watercraft" means:
        (1) Class 2, Class 3, and Class 4 watercraft, as
    defined in Section 3-2 of the Boat Registration and Safety
    Act; or
        (2) personal watercraft, as defined in Section 1-2 of
    the Boat Registration and Safety Act.
 
    Section 15-10. Tax imposed. A tax is hereby imposed on the
privilege of using, in this State, any watercraft acquired by
gift, transfer, or purchase after September 1, 2004. This tax
does not apply if: (i) the use of the watercraft is otherwise
taxed under the Use Tax Act; (ii) the watercraft is bought and
used by a governmental agency or a society, association,
foundation, or institution organized and operated exclusively
for charitable, religious, or educational purposes and that
entity has been issued an exemption identification number under
Section 1g of the Retailers' Occupation Tax Act; (iii) the use
of the watercraft is not subject to the Use Tax Act by reason
of subsection (a), (b), (c), (d), or (e) of Section 3-55 of
that Act dealing with the prevention of actual or likely
multi-state taxation; (iv) the transfer is a gift to a
beneficiary in the administration of an estate and the
beneficiary is a surviving spouse; or (v) the watercraft is
exempted from the numbering provisions of Section 3-12 of the
Boat Registration and Safety Act. However, the exemption from
tax provided by item (v) shall not apply to a watercraft
exempted under paragraphs A, B, C, F, and G of Section 3-12 of
the Boat Registration and Safety Act if such watercraft are
used upon the waters of this State for more than 30 days in any
calendar year.
 
    Section 15-15. Rate of tax.
    The rate of tax is 6.25% of the purchase price for each
purchase of watercraft that is subject to tax under this Law.
When an ownership share of a watercraft is acquired, the tax is
imposed on the purchase price of that share. All owners are
jointly and severally liable for any tax due as a result of the
purchase, gift, or transfer of an ownership share of the
watercraft.
 
    Section 15-20. Returns.
    (a) The purchaser, transferee, or donee shall file with the
Department a return signed by the purchaser, transferee, or
donee on a form prescribed by the Department. The return shall
contain a verification in substantially the following form and
such other information as the Department may reasonably
require:
VERIFICATION
    I declare that I have examined this return and, to the best
    of my knowledge, it is true, correct, and complete. I
    understand that the penalty for willfully filing a false
    return is a fine not to exceed $1,000 or imprisonment in a
    penal institution other than the penitentiary not to exceed
    one year, or both a fine and imprisonment.
    (b) The return and payment from the purchaser, transferee,
or donee shall be submitted to the Department within 30 days
after the date of purchase, donation, or other transfer or the
date the watercraft is brought into this State, whichever is
later. Payment of tax is a condition to securing certificate of
title for the watercraft from the Department of Natural
Resources. When a purchaser, transferee, or donee pays the tax
imposed by Section 5-10 of this Law, the Department (upon
request therefor from the purchaser, transferee, or donee)
shall issue an appropriate receipt to the purchaser,
transferee, or donee showing that he or she has paid the tax to
the Department. The receipt shall be sufficient to relieve the
purchaser, transferee, or donee from further liability for the
tax to which the receipt may refer.
 
    Section 15-25. Filing false or incomplete return. Any
person required to file a return under this Law who willfully
files a false or incomplete return is guilty of a Class A
misdemeanor.
 
    Section 15-30. Determining purchase price. For the purpose
of assisting in determining the validity of the purchase price
reported on returns filed with the Department, the Department
may furnish the following information to persons with whom the
Department has contracted for service related to making that
determination: (i) the purchase price stated on the return;
(ii) the watercraft identification number; (iii) the year, the
make, and the model name or number of the watercraft; (iv) the
purchase date; and (v) the hours of operation.
 
    Section 15-35. Powers of Department. The Department has
full power to: (i) administer and enforce this Law; (ii)
collect all taxes, penalties, and interest due under this Law;
(iii) dispose of taxes, penalties, and interest so collected in
the manner set forth in this Law; and (iv) determine all rights
to credit memoranda or refunds arising on account of the
erroneous payment of tax, penalty, or interest under this Law.
In the administration of, and compliance with, this Law, the
Department and persons who are subject to this Law have the
same rights, remedies, privileges, immunities, powers, and
duties, and are subject to the same conditions, restrictions,
limitations, penalties, and definitions of terms, and employ
the same modes of procedure, as are prescribed in the Use Tax
Act (except for the provisions of Section 3-70), that are not
inconsistent with this Law, as fully as if the provisions of
the Use Tax Act were set forth in this Law. In addition to any
other penalties imposed under law, any person convicted of
violating the provisions of this Law shall be assessed a fine
of $1,000.
 
    Section 15-40. Payments to State and Local Sales Tax Reform
Fund and General Revenue Fund. The Department shall each month,
upon collecting any taxes as provided in this Law, pay 20% of
the money collected into the State and Local Sales Tax Reform
Fund, a special fund in the State treasury, and 80% into the
General Revenue Fund.
 
    Section 15-45. Rules. The Department has the authority to
adopt such rules as are reasonable and necessary to implement
the provisions of this Law.
 
    Section 15-990. The Retailers' Occupation Tax Act is
amended by changing Section 1c as follows:
 
    (35 ILCS 120/1c)  (from Ch. 120, par. 440c)
    Sec. 1c. A person who is engaged in the business of leasing
or renting motor vehicles or, beginning July 1, 2003, aircraft
or, beginning September 1, 2004, watercraft to others and who,
in connection with such business sells any used motor vehicle,
or aircraft, or watercraft to a purchaser for his use and not
for the purpose of resale, is a retailer engaged in the
business of selling tangible personal property at retail under
this Act to the extent of the value of the motor vehicle, or
aircraft, or watercraft sold. For the purpose of this Section
"motor vehicle" has the meaning prescribed in Section 1-157 of
the Illinois Vehicle Code, as now or hereafter amended. For the
purpose of this Section "aircraft" has the meaning prescribed
in Section 3 of the Illinois Aeronautics Act. For the purpose
of this Section, "watercraft" has the meaning prescribed in
Section 5-5 of the Watercraft Use Tax Law. (Nothing provided
herein shall affect liability incurred under this Act because
of the sale at retail of such motor vehicles, or aircraft, or
watercraft to a lessor.)
(Source: P.A. 93-24, eff. 6-20-03.)
 
    Section 15-995. The Boat Registration and Safety Act is
amended by changing Section 3A-5 as follows:
 
    (625 ILCS 45/3A-5)  (from Ch. 95 1/2, par. 313A-5)
    Sec. 3A-5. Certificate of title - Issuance - Records.
    (a) The Department of Natural Resources shall file each
application received and, when satisfied as to its genuineness
and regularity, and that no tax imposed by the "Use Tax Act" or
the Watercraft Use Tax Law is owed as evidenced by the receipt
for payment or determination of exemption from the Department
of Revenue provided for in Section 3A-3 of this Article, and
that the applicant is entitled to the issuance of a certificate
of title, shall issue a certificate of title.
    (b) The Department of Natural Resources shall maintain a
record of all certificates of title issued under a distinctive
title number assigned to the watercraft and, in the discretion
of the Department, in any other method determined.
(Source: P.A. 89-445, eff. 2-7-96.)
 
ARTICLE 20

 
    Section 20-10. The Use Tax Act is amended by changing
Sections 3-5 and 3-85 as follows:
 
    (35 ILCS 105/3-5)  (from Ch. 120, par. 439.3-5)
    Sec. 3-5. Exemptions. Use of the following tangible
personal property is exempt from the tax imposed by this Act:
    (1) Personal property purchased from a corporation,
society, association, foundation, institution, or
organization, other than a limited liability company, that is
organized and operated as a not-for-profit service enterprise
for the benefit of persons 65 years of age or older if the
personal property was not purchased by the enterprise for the
purpose of resale by the enterprise.
    (2) Personal property purchased by a not-for-profit
Illinois county fair association for use in conducting,
operating, or promoting the county fair.
    (3) Personal property purchased by a not-for-profit arts or
cultural organization that establishes, by proof required by
the Department by rule, that it has received an exemption under
Section 501(c)(3) of the Internal Revenue Code and that is
organized and operated primarily for the presentation or
support of arts or cultural programming, activities, or
services. These organizations include, but are not limited to,
music and dramatic arts organizations such as symphony
orchestras and theatrical groups, arts and cultural service
organizations, local arts councils, visual arts organizations,
and media arts organizations. On and after the effective date
of this amendatory Act of the 92nd General Assembly, however,
an entity otherwise eligible for this exemption shall not make
tax-free purchases unless it has an active identification
number issued by the Department.
    (4) Personal property purchased by a governmental body, by
a corporation, society, association, foundation, or
institution organized and operated exclusively for charitable,
religious, or educational purposes, or by a not-for-profit
corporation, society, association, foundation, institution, or
organization that has no compensated officers or employees and
that is organized and operated primarily for the recreation of
persons 55 years of age or older. A limited liability company
may qualify for the exemption under this paragraph only if the
limited liability company is organized and operated
exclusively for educational purposes. On and after July 1,
1987, however, no entity otherwise eligible for this exemption
shall make tax-free purchases unless it has an active exemption
identification number issued by the Department.
    (5) Until July 1, 2003, a passenger car that is a
replacement vehicle to the extent that the purchase price of
the car is subject to the Replacement Vehicle Tax.
    (6) Until July 1, 2003 and beginning again on September 1,
2004, graphic arts machinery and equipment, including repair
and replacement parts, both new and used, and including that
manufactured on special order, certified by the purchaser to be
used primarily for graphic arts production, and including
machinery and equipment purchased for lease. Equipment
includes chemicals or chemicals acting as catalysts but only if
the chemicals or chemicals acting as catalysts effect a direct
and immediate change upon a graphic arts product.
    (7) Farm chemicals.
    (8) Legal tender, currency, medallions, or gold or silver
coinage issued by the State of Illinois, the government of the
United States of America, or the government of any foreign
country, and bullion.
    (9) Personal property purchased from a teacher-sponsored
student organization affiliated with an elementary or
secondary school located in Illinois.
    (10) A motor vehicle of the first division, a motor vehicle
of the second division that is a self-contained motor vehicle
designed or permanently converted to provide living quarters
for recreational, camping, or travel use, with direct walk
through to the living quarters from the driver's seat, or a
motor vehicle of the second division that is of the van
configuration designed for the transportation of not less than
7 nor more than 16 passengers, as defined in Section 1-146 of
the Illinois Vehicle Code, that is used for automobile renting,
as defined in the Automobile Renting Occupation and Use Tax
Act.
    (11) Farm machinery and equipment, both new and used,
including that manufactured on special order, certified by the
purchaser to be used primarily for production agriculture or
State or federal agricultural programs, including individual
replacement parts for the machinery and equipment, including
machinery and equipment purchased for lease, and including
implements of husbandry defined in Section 1-130 of the
Illinois Vehicle Code, farm machinery and agricultural
chemical and fertilizer spreaders, and nurse wagons required to
be registered under Section 3-809 of the Illinois Vehicle Code,
but excluding other motor vehicles required to be registered
under the Illinois Vehicle Code. Horticultural polyhouses or
hoop houses used for propagating, growing, or overwintering
plants shall be considered farm machinery and equipment under
this item (11). Agricultural chemical tender tanks and dry
boxes shall include units sold separately from a motor vehicle
required to be licensed and units sold mounted on a motor
vehicle required to be licensed if the selling price of the
tender is separately stated.
    Farm machinery and equipment shall include precision
farming equipment that is installed or purchased to be
installed on farm machinery and equipment including, but not
limited to, tractors, harvesters, sprayers, planters, seeders,
or spreaders. Precision farming equipment includes, but is not
limited to, soil testing sensors, computers, monitors,
software, global positioning and mapping systems, and other
such equipment.
    Farm machinery and equipment also includes computers,
sensors, software, and related equipment used primarily in the
computer-assisted operation of production agriculture
facilities, equipment, and activities such as, but not limited
to, the collection, monitoring, and correlation of animal and
crop data for the purpose of formulating animal diets and
agricultural chemicals. This item (11) is exempt from the
provisions of Section 3-90.
    (12) Fuel and petroleum products sold to or used by an air
common carrier, certified by the carrier to be used for
consumption, shipment, or storage in the conduct of its
business as an air common carrier, for a flight destined for or
returning from a location or locations outside the United
States without regard to previous or subsequent domestic
stopovers.
    (13) Proceeds of mandatory service charges separately
stated on customers' bills for the purchase and consumption of
food and beverages purchased at retail from a retailer, to the
extent that the proceeds of the service charge are in fact
turned over as tips or as a substitute for tips to the
employees who participate directly in preparing, serving,
hosting or cleaning up the food or beverage function with
respect to which the service charge is imposed.
    (14) Until July 1, 2003, oil field exploration, drilling,
and production equipment, including (i) rigs and parts of rigs,
rotary rigs, cable tool rigs, and workover rigs, (ii) pipe and
tubular goods, including casing and drill strings, (iii) pumps
and pump-jack units, (iv) storage tanks and flow lines, (v) any
individual replacement part for oil field exploration,
drilling, and production equipment, and (vi) machinery and
equipment purchased for lease; but excluding motor vehicles
required to be registered under the Illinois Vehicle Code.
    (15) Photoprocessing machinery and equipment, including
repair and replacement parts, both new and used, including that
manufactured on special order, certified by the purchaser to be
used primarily for photoprocessing, and including
photoprocessing machinery and equipment purchased for lease.
    (16) Until July 1, 2003, coal exploration, mining,
offhighway hauling, processing, maintenance, and reclamation
equipment, including replacement parts and equipment, and
including equipment purchased for lease, but excluding motor
vehicles required to be registered under the Illinois Vehicle
Code.
    (17) Until July 1, 2003, distillation machinery and
equipment, sold as a unit or kit, assembled or installed by the
retailer, certified by the user to be used only for the
production of ethyl alcohol that will be used for consumption
as motor fuel or as a component of motor fuel for the personal
use of the user, and not subject to sale or resale.
    (18) Manufacturing and assembling machinery and equipment
used primarily in the process of manufacturing or assembling
tangible personal property for wholesale or retail sale or
lease, whether that sale or lease is made directly by the
manufacturer or by some other person, whether the materials
used in the process are owned by the manufacturer or some other
person, or whether that sale or lease is made apart from or as
an incident to the seller's engaging in the service occupation
of producing machines, tools, dies, jigs, patterns, gauges, or
other similar items of no commercial value on special order for
a particular purchaser.
    (19) Personal property delivered to a purchaser or
purchaser's donee inside Illinois when the purchase order for
that personal property was received by a florist located
outside Illinois who has a florist located inside Illinois
deliver the personal property.
    (20) Semen used for artificial insemination of livestock
for direct agricultural production.
    (21) Horses, or interests in horses, registered with and
meeting the requirements of any of the Arabian Horse Club
Registry of America, Appaloosa Horse Club, American Quarter
Horse Association, United States Trotting Association, or
Jockey Club, as appropriate, used for purposes of breeding or
racing for prizes.
    (22) Computers and communications equipment utilized for
any hospital purpose and equipment used in the diagnosis,
analysis, or treatment of hospital patients purchased by a
lessor who leases the equipment, under a lease of one year or
longer executed or in effect at the time the lessor would
otherwise be subject to the tax imposed by this Act, to a
hospital that has been issued an active tax exemption
identification number by the Department under Section 1g of the
Retailers' Occupation Tax Act. If the equipment is leased in a
manner that does not qualify for this exemption or is used in
any other non-exempt manner, the lessor shall be liable for the
tax imposed under this Act or the Service Use Tax Act, as the
case may be, based on the fair market value of the property at
the time the non-qualifying use occurs. No lessor shall collect
or attempt to collect an amount (however designated) that
purports to reimburse that lessor for the tax imposed by this
Act or the Service Use Tax Act, as the case may be, if the tax
has not been paid by the lessor. If a lessor improperly
collects any such amount from the lessee, the lessee shall have
a legal right to claim a refund of that amount from the lessor.
If, however, that amount is not refunded to the lessee for any
reason, the lessor is liable to pay that amount to the
Department.
    (23) Personal property purchased by a lessor who leases the
property, under a lease of one year or longer executed or in
effect at the time the lessor would otherwise be subject to the
tax imposed by this Act, to a governmental body that has been
issued an active sales tax exemption identification number by
the Department under Section 1g of the Retailers' Occupation
Tax Act. If the property is leased in a manner that does not
qualify for this exemption or used in any other non-exempt
manner, the lessor shall be liable for the tax imposed under
this Act or the Service Use Tax Act, as the case may be, based
on the fair market value of the property at the time the
non-qualifying use occurs. No lessor shall collect or attempt
to collect an amount (however designated) that purports to
reimburse that lessor for the tax imposed by this Act or the
Service Use Tax Act, as the case may be, if the tax has not been
paid by the lessor. If a lessor improperly collects any such
amount from the lessee, the lessee shall have a legal right to
claim a refund of that amount from the lessor. If, however,
that amount is not refunded to the lessee for any reason, the
lessor is liable to pay that amount to the Department.
    (24) Beginning with taxable years ending on or after
December 31, 1995 and ending with taxable years ending on or
before December 31, 2004, personal property that is donated for
disaster relief to be used in a State or federally declared
disaster area in Illinois or bordering Illinois by a
manufacturer or retailer that is registered in this State to a
corporation, society, association, foundation, or institution
that has been issued a sales tax exemption identification
number by the Department that assists victims of the disaster
who reside within the declared disaster area.
    (25) Beginning with taxable years ending on or after
December 31, 1995 and ending with taxable years ending on or
before December 31, 2004, personal property that is used in the
performance of infrastructure repairs in this State, including
but not limited to municipal roads and streets, access roads,
bridges, sidewalks, waste disposal systems, water and sewer
line extensions, water distribution and purification
facilities, storm water drainage and retention facilities, and
sewage treatment facilities, resulting from a State or
federally declared disaster in Illinois or bordering Illinois
when such repairs are initiated on facilities located in the
declared disaster area within 6 months after the disaster.
    (26) Beginning July 1, 1999, game or game birds purchased
at a "game breeding and hunting preserve area" or an "exotic
game hunting area" as those terms are used in the Wildlife Code
or at a hunting enclosure approved through rules adopted by the
Department of Natural Resources. This paragraph is exempt from
the provisions of Section 3-90.
    (27) A motor vehicle, as that term is defined in Section
1-146 of the Illinois Vehicle Code, that is donated to a
corporation, limited liability company, society, association,
foundation, or institution that is determined by the Department
to be organized and operated exclusively for educational
purposes. For purposes of this exemption, "a corporation,
limited liability company, society, association, foundation,
or institution organized and operated exclusively for
educational purposes" means all tax-supported public schools,
private schools that offer systematic instruction in useful
branches of learning by methods common to public schools and
that compare favorably in their scope and intensity with the
course of study presented in tax-supported schools, and
vocational or technical schools or institutes organized and
operated exclusively to provide a course of study of not less
than 6 weeks duration and designed to prepare individuals to
follow a trade or to pursue a manual, technical, mechanical,
industrial, business, or commercial occupation.
    (28) Beginning January 1, 2000, personal property,
including food, purchased through fundraising events for the
benefit of a public or private elementary or secondary school,
a group of those schools, or one or more school districts if
the events are sponsored by an entity recognized by the school
district that consists primarily of volunteers and includes
parents and teachers of the school children. This paragraph
does not apply to fundraising events (i) for the benefit of
private home instruction or (ii) for which the fundraising
entity purchases the personal property sold at the events from
another individual or entity that sold the property for the
purpose of resale by the fundraising entity and that profits
from the sale to the fundraising entity. This paragraph is
exempt from the provisions of Section 3-90.
    (29) Beginning January 1, 2000 and through December 31,
2001, new or used automatic vending machines that prepare and
serve hot food and beverages, including coffee, soup, and other
items, and replacement parts for these machines. Beginning
January 1, 2002 and through June 30, 2003, machines and parts
for machines used in commercial, coin-operated amusement and
vending business if a use or occupation tax is paid on the
gross receipts derived from the use of the commercial,
coin-operated amusement and vending machines. This paragraph
is exempt from the provisions of Section 3-90.
    (30) Food for human consumption that is to be consumed off
the premises where it is sold (other than alcoholic beverages,
soft drinks, and food that has been prepared for immediate
consumption) and prescription and nonprescription medicines,
drugs, medical appliances, and insulin, urine testing
materials, syringes, and needles used by diabetics, for human
use, when purchased for use by a person receiving medical
assistance under Article 5 of the Illinois Public Aid Code who
resides in a licensed long-term care facility, as defined in
the Nursing Home Care Act.
    (31) Beginning on the effective date of this amendatory Act
of the 92nd General Assembly, computers and communications
equipment utilized for any hospital purpose and equipment used
in the diagnosis, analysis, or treatment of hospital patients
purchased by a lessor who leases the equipment, under a lease
of one year or longer executed or in effect at the time the
lessor would otherwise be subject to the tax imposed by this
Act, to a hospital that has been issued an active tax exemption
identification number by the Department under Section 1g of the
Retailers' Occupation Tax Act. If the equipment is leased in a
manner that does not qualify for this exemption or is used in
any other nonexempt manner, the lessor shall be liable for the
tax imposed under this Act or the Service Use Tax Act, as the
case may be, based on the fair market value of the property at
the time the nonqualifying use occurs. No lessor shall collect
or attempt to collect an amount (however designated) that
purports to reimburse that lessor for the tax imposed by this
Act or the Service Use Tax Act, as the case may be, if the tax
has not been paid by the lessor. If a lessor improperly
collects any such amount from the lessee, the lessee shall have
a legal right to claim a refund of that amount from the lessor.
If, however, that amount is not refunded to the lessee for any
reason, the lessor is liable to pay that amount to the
Department. This paragraph is exempt from the provisions of
Section 3-90.
    (32) Beginning on the effective date of this amendatory Act
of the 92nd General Assembly, personal property purchased by a
lessor who leases the property, under a lease of one year or
longer executed or in effect at the time the lessor would
otherwise be subject to the tax imposed by this Act, to a
governmental body that has been issued an active sales tax
exemption identification number by the Department under
Section 1g of the Retailers' Occupation Tax Act. If the
property is leased in a manner that does not qualify for this
exemption or used in any other nonexempt manner, the lessor
shall be liable for the tax imposed under this Act or the
Service Use Tax Act, as the case may be, based on the fair
market value of the property at the time the nonqualifying use
occurs. No lessor shall collect or attempt to collect an amount
(however designated) that purports to reimburse that lessor for
the tax imposed by this Act or the Service Use Tax Act, as the
case may be, if the tax has not been paid by the lessor. If a
lessor improperly collects any such amount from the lessee, the
lessee shall have a legal right to claim a refund of that
amount from the lessor. If, however, that amount is not
refunded to the lessee for any reason, the lessor is liable to
pay that amount to the Department. This paragraph is exempt
from the provisions of Section 3-90.
    (33) On and after July 1, 2003, the use in this State of
motor vehicles of the second division with a gross vehicle
weight in excess of 8,000 pounds and that are subject to the
commercial distribution fee imposed under Section 3-815.1 of
the Illinois Vehicle Code. This exemption applies to repair and
replacement parts added after the initial purchase of such a
motor vehicle if that motor vehicle is used in a manner that
would qualify for the rolling stock exemption otherwise
provided for in this Act.
(Source: P.A. 92-35, eff. 7-1-01; 92-227, eff. 8-2-01; 92-337,
eff. 8-10-01; 92-484, eff. 8-23-01; 92-651, eff. 7-11-02;
93-23, eff. 6-20-03; 93-24, eff. 6-20-03; revised 9-11-03.)
 
    (35 ILCS 105/3-85)
    Sec. 3-85. Manufacturer's Purchase Credit. For purchases
of machinery and equipment made on and after January 1, 1995
and through June 30, 2003, and on and after September 1, 2004,
a purchaser of manufacturing machinery and equipment that
qualifies for the exemption provided by paragraph (18) of
Section 3-5 of this Act earns a credit in an amount equal to a
fixed percentage of the tax which would have been incurred
under this Act on those purchases. For purchases of graphic
arts machinery and equipment made on or after July 1, 1996 and
through June 30, 2003, and on and after September 1, 2004, a
purchaser of graphic arts machinery and equipment that
qualifies for the exemption provided by paragraph (6) of
Section 3-5 of this Act earns a credit in an amount equal to a
fixed percentage of the tax that would have been incurred under
this Act on those purchases. The credit earned for purchases of
manufacturing machinery and equipment or graphic arts
machinery and equipment shall be referred to as the
Manufacturer's Purchase Credit. A graphic arts producer is a
person engaged in graphic arts production as defined in Section
2-30 of the Retailers' Occupation Tax Act. Beginning July 1,
1996, all references in this Section to manufacturers or
manufacturing shall also be deemed to refer to graphic arts
producers or graphic arts production.
    The amount of credit shall be a percentage of the tax that
would have been incurred on the purchase of manufacturing
machinery and equipment or graphic arts machinery and equipment
if the exemptions provided by paragraph (6) or paragraph (18)
of Section 3-5 of this Act had not been applicable. The
percentage shall be as follows:
        (1) 15% for purchases made on or before June 30, 1995.
        (2) 25% for purchases made after June 30, 1995, and on
    or before June 30, 1996.
        (3) 40% for purchases made after June 30, 1996, and on
    or before June 30, 1997.
        (4) 50% for purchases made on or after July 1, 1997.
    (a) Manufacturer's Purchase Credit earned prior to July 1,
2003. This subsection (a) applies to Manufacturer's Purchase
Credit earned prior to July 1, 2003. A purchaser of production
related tangible personal property desiring to use the
Manufacturer's Purchase Credit shall certify to the seller
prior to October 1, 2003 that the purchaser is satisfying all
or part of the liability under the Use Tax Act or the Service
Use Tax Act that is due on the purchase of the production
related tangible personal property by use of Manufacturer's
Purchase Credit. The Manufacturer's Purchase Credit
certification must be dated and shall include the name and
address of the purchaser, the purchaser's registration number,
if registered, the credit being applied, and a statement that
the State Use Tax or Service Use Tax liability is being
satisfied with the manufacturer's or graphic arts producer's
accumulated purchase credit. Certification may be incorporated
into the manufacturer's or graphic arts producer's purchase
order. Manufacturer's Purchase Credit certification provided
by the manufacturer or graphic arts producer prior to October
1, 2003 may be used to satisfy the retailer's or serviceman's
liability under the Retailers' Occupation Tax Act or Service
Occupation Tax Act for the credit claimed, not to exceed 6.25%
of the receipts subject to tax from a qualifying purchase, but
only if the retailer or serviceman reports the Manufacturer's
Purchase Credit claimed as required by the Department. A
Manufacturer's Purchase Credit reported on any original or
amended return filed under this Act after October 20, 2003
shall be disallowed. The Manufacturer's Purchase Credit earned
by purchase of exempt manufacturing machinery and equipment or
graphic arts machinery and equipment is a non-transferable
credit. A manufacturer or graphic arts producer that enters
into a contract involving the installation of tangible personal
property into real estate within a manufacturing or graphic
arts production facility may, prior to October 1, 2003,
authorize a construction contractor to utilize credit
accumulated by the manufacturer or graphic arts producer to
purchase the tangible personal property. A manufacturer or
graphic arts producer intending to use accumulated credit to
purchase such tangible personal property shall execute a
written contract authorizing the contractor to utilize a
specified dollar amount of credit. The contractor shall
furnish, prior to October 1, 2003, the supplier with the
manufacturer's or graphic arts producer's name, registration
or resale number, and a statement that a specific amount of the
Use Tax or Service Use Tax liability, not to exceed 6.25% of
the selling price, is being satisfied with the credit. The
manufacturer or graphic arts producer shall remain liable to
timely report all information required by the annual Report of
Manufacturer's Purchase Credit Used for all credit utilized by
a construction contractor.
    No Manufacturer's Purchase Credit earned prior to July 1,
2003 may be used after October 1, 2003. The Manufacturer's
Purchase Credit may be used to satisfy liability under the Use
Tax Act or the Service Use Tax Act due on the purchase of
production related tangible personal property (including
purchases by a manufacturer, by a graphic arts producer, or by
a lessor who rents or leases the use of the property to a
manufacturer or graphic arts producer) that does not otherwise
qualify for the manufacturing machinery and equipment
exemption or the graphic arts machinery and equipment
exemption. "Production related tangible personal property"
means (i) all tangible personal property used or consumed by
the purchaser in a manufacturing facility in which a
manufacturing process described in Section 2-45 of the
Retailers' Occupation Tax Act takes place, including tangible
personal property purchased for incorporation into real estate
within a manufacturing facility and including, but not limited
to, tangible personal property used or consumed in activities
such as preproduction material handling, receiving, quality
control, inventory control, storage, staging, and packaging
for shipping and transportation purposes; (ii) all tangible
personal property used or consumed by the purchaser in a
graphic arts facility in which graphic arts production as
described in Section 2-30 of the Retailers' Occupation Tax Act
takes place, including tangible personal property purchased
for incorporation into real estate within a graphic arts
facility and including, but not limited to, all tangible
personal property used or consumed in activities such as
graphic arts preliminary or pre-press production,
pre-production material handling, receiving, quality control,
inventory control, storage, staging, sorting, labeling,
mailing, tying, wrapping, and packaging; and (iii) all tangible
personal property used or consumed by the purchaser for
research and development. "Production related tangible
personal property" does not include (i) tangible personal
property used, within or without a manufacturing facility, in
sales, purchasing, accounting, fiscal management, marketing,
personnel recruitment or selection, or landscaping or (ii)
tangible personal property required to be titled or registered
with a department, agency, or unit of federal, state, or local
government. The Manufacturer's Purchase Credit may be used,
prior to October 1, 2003, to satisfy the tax arising either
from the purchase of machinery and equipment on or after
January 1, 1995 for which the exemption provided by paragraph
(18) of Section 3-5 of this Act was erroneously claimed, or the
purchase of machinery and equipment on or after July 1, 1996
for which the exemption provided by paragraph (6) of Section
3-5 of this Act was erroneously claimed, but not in
satisfaction of penalty, if any, and interest for failure to
pay the tax when due. A purchaser of production related
tangible personal property who is required to pay Illinois Use
Tax or Service Use Tax on the purchase directly to the
Department may, prior to October 1, 2003, utilize the
Manufacturer's Purchase Credit in satisfaction of the tax
arising from that purchase, but not in satisfaction of penalty
and interest. A purchaser who uses the Manufacturer's Purchase
Credit to purchase property which is later determined not to be
production related tangible personal property may be liable for
tax, penalty, and interest on the purchase of that property as
of the date of purchase but shall be entitled to use the
disallowed Manufacturer's Purchase Credit, so long as it has
not expired and is used prior to October 1, 2003, on qualifying
purchases of production related tangible personal property not
previously subject to credit usage. The Manufacturer's
Purchase Credit earned by a manufacturer or graphic arts
producer expires the last day of the second calendar year
following the calendar year in which the credit arose. No
Manufacturer's Purchase Credit may be used after September 30,
2003 regardless of when that credit was earned.
    A purchaser earning Manufacturer's Purchase Credit shall
sign and file an annual Report of Manufacturer's Purchase
Credit Earned for each calendar year no later than the last day
of the sixth month following the calendar year in which a
Manufacturer's Purchase Credit is earned. A Report of
Manufacturer's Purchase Credit Earned shall be filed on forms
as prescribed or approved by the Department and shall state,
for each month of the calendar year: (i) the total purchase
price of all purchases of exempt manufacturing or graphic arts
machinery on which the credit was earned; (ii) the total State
Use Tax or Service Use Tax which would have been due on those
items; (iii) the percentage used to calculate the amount of
credit earned; (iv) the amount of credit earned; and (v) such
other information as the Department may reasonably require. A
purchaser earning Manufacturer's Purchase Credit shall
maintain records which identify, as to each purchase of
manufacturing or graphic arts machinery and equipment on which
the purchaser earned Manufacturer's Purchase Credit, the
vendor (including, if applicable, either the vendor's
registration number or Federal Employer Identification
Number), the purchase price, and the amount of Manufacturer's
Purchase Credit earned on each purchase.
    A purchaser using Manufacturer's Purchase Credit shall
sign and file an annual Report of Manufacturer's Purchase
Credit Used for each calendar year no later than the last day
of the sixth month following the calendar year in which a
Manufacturer's Purchase Credit is used. A Report of
Manufacturer's Purchase Credit Used shall be filed on forms as
prescribed or approved by the Department and shall state, for
each month of the calendar year: (i) the total purchase price
of production related tangible personal property purchased
from Illinois suppliers; (ii) the total purchase price of
production related tangible personal property purchased from
out-of-state suppliers; (iii) the total amount of credit used
during such month; and (iv) such other information as the
Department may reasonably require. A purchaser using
Manufacturer's Purchase Credit shall maintain records that
identify, as to each purchase of production related tangible
personal property on which the purchaser used Manufacturer's
Purchase Credit, the vendor (including, if applicable, either
the vendor's registration number or Federal Employer
Identification Number), the purchase price, and the amount of
Manufacturer's Purchase Credit used on each purchase.
    No annual report shall be filed before May 1, 1996 or after
June 30, 2004. A purchaser that fails to file an annual Report
of Manufacturer's Purchase Credit Earned or an annual Report of
Manufacturer's Purchase Credit Used by the last day of the
sixth month following the end of the calendar year shall
forfeit all Manufacturer's Purchase Credit for that calendar
year unless it establishes that its failure to file was due to
reasonable cause. Manufacturer's Purchase Credit reports may
be amended to report and claim credit on qualifying purchases
not previously reported at any time before the credit would
have expired, unless both the Department and the purchaser have
agreed to an extension of the statute of limitations for the
issuance of a notice of tax liability as provided in Section 4
of the Retailers' Occupation Tax Act. If the time for
assessment or refund has been extended, then amended reports
for a calendar year may be filed at any time prior to the date
to which the statute of limitations for the calendar year or
portion thereof has been extended. No Manufacturer's Purchase
Credit report filed with the Department for periods prior to
January 1, 1995 shall be approved. Manufacturer's Purchase
Credit claimed on an amended report may be used, until October
1, 2003, to satisfy tax liability under the Use Tax Act or the
Service Use Tax Act (i) on qualifying purchases of production
related tangible personal property made after the date the
amended report is filed or (ii) assessed by the Department on
qualifying purchases of production related tangible personal
property made in the case of manufacturers on or after January
1, 1995, or in the case of graphic arts producers on or after
July 1, 1996.
    If the purchaser is not the manufacturer or a graphic arts
producer, but rents or leases the use of the property to a
manufacturer or graphic arts producer, the purchaser may earn,
report, and use Manufacturer's Purchase Credit in the same
manner as a manufacturer or graphic arts producer.
    A purchaser shall not be entitled to any Manufacturer's
Purchase Credit for a purchase that is required to be reported
and is not timely reported as provided in this Section. A
purchaser remains liable for (i) any tax that was satisfied by
use of a Manufacturer's Purchase Credit, as of the date of
purchase, if that use is not timely reported as required in
this Section and (ii) for any applicable penalties and interest
for failing to pay the tax when due. No Manufacturer's Purchase
Credit may be used after September 30, 2003 to satisfy any tax
liability imposed under this Act, including any audit
liability.
    (b) Manufacturer's Purchase Credit earned on and after
September 1, 2004. This subsection (b) applies to
Manufacturer's Purchase Credit earned on and after September 1,
2004. Manufacturer's Purchase Credit earned on or after
September 1, 2004 may only be used to satisfy the Use Tax or
Service Use Tax liability incurred on production related
tangible personal property purchased on or after September 1,
2004. A purchaser of production related tangible personal
property desiring to use the Manufacturer's Purchase Credit
shall certify to the seller that the purchaser is satisfying
all or part of the liability under the Use Tax Act or the
Service Use Tax Act that is due on the purchase of the
production related tangible personal property by use of
Manufacturer's Purchase Credit. The Manufacturer's Purchase
Credit certification must be dated and shall include the name
and address of the purchaser, the purchaser's registration
number, if registered, the credit being applied, and a
statement that the State Use Tax or Service Use Tax liability
is being satisfied with the manufacturer's or graphic arts
producer's accumulated purchase credit. Certification may be
incorporated into the manufacturer's or graphic arts
producer's purchase order. Manufacturer's Purchase Credit
certification provided by the manufacturer or graphic arts
producer may be used to satisfy the retailer's or serviceman's
liability under the Retailers' Occupation Tax Act or Service
Occupation Tax Act for the credit claimed, not to exceed 6.25%
of the receipts subject to tax from a qualifying purchase, but
only if the retailer or serviceman reports the Manufacturer's
Purchase Credit claimed as required by the Department. The
Manufacturer's Purchase Credit earned by purchase of exempt
manufacturing machinery and equipment or graphic arts
machinery and equipment is a non-transferable credit. A
manufacturer or graphic arts producer that enters into a
contract involving the installation of tangible personal
property into real estate within a manufacturing or graphic
arts production facility may, on or after September 1, 2004,
authorize a construction contractor to utilize credit
accumulated by the manufacturer or graphic arts producer to
purchase the tangible personal property. A manufacturer or
graphic arts producer intending to use accumulated credit to
purchase such tangible personal property shall execute a
written contract authorizing the contractor to utilize a
specified dollar amount of credit. The contractor shall furnish
the supplier with the manufacturer's or graphic arts producer's
name, registration or resale number, and a statement that a
specific amount of the Use Tax or Service Use Tax liability,
not to exceed 6.25% of the selling price, is being satisfied
with the credit. The manufacturer or graphic arts producer
shall remain liable to timely report all information required
by the annual Report of Manufacturer's Purchase Credit Used for
all credit utilized by a construction contractor.
    The Manufacturer's Purchase Credit may be used to satisfy
liability under the Use Tax Act or the Service Use Tax Act due
on the purchase, made on or after September 1, 2004, of
production related tangible personal property (including
purchases by a manufacturer, by a graphic arts producer, or by
a lessor who rents or leases the use of the property to a
manufacturer or graphic arts producer) that does not otherwise
qualify for the manufacturing machinery and equipment
exemption or the graphic arts machinery and equipment
exemption. "Production related tangible personal property"
means (i) all tangible personal property used or consumed by
the purchaser in a manufacturing facility in which a
manufacturing process described in Section 2-45 of the
Retailers' Occupation Tax Act takes place, including tangible
personal property purchased for incorporation into real estate
within a manufacturing facility and including, but not limited
to, tangible personal property used or consumed in activities
such as preproduction material handling, receiving, quality
control, inventory control, storage, staging, and packaging
for shipping and transportation purposes; (ii) all tangible
personal property used or consumed by the purchaser in a
graphic arts facility in which graphic arts production as
described in Section 2-30 of the Retailers' Occupation Tax Act
takes place, including tangible personal property purchased
for incorporation into real estate within a graphic arts
facility and including, but not limited to, all tangible
personal property used or consumed in activities such as
graphic arts preliminary or pre-press production,
pre-production material handling, receiving, quality control,
inventory control, storage, staging, sorting, labeling,
mailing, tying, wrapping, and packaging; and (iii) all tangible
personal property used or consumed by the purchaser for
research and development. "Production related tangible
personal property" does not include (i) tangible personal
property used, within or without a manufacturing facility, in
sales, purchasing, accounting, fiscal management, marketing,
personnel recruitment or selection, or landscaping or (ii)
tangible personal property required to be titled or registered
with a department, agency, or unit of federal, state, or local
government. The Manufacturer's Purchase Credit may be used to
satisfy the tax arising either from the purchase of machinery
and equipment on or after September 1, 2004 for which the
exemption provided by paragraph (18) of Section 3-5 of this Act
was erroneously claimed, or the purchase of machinery and
equipment on or after September 1, 2004 for which the exemption
provided by paragraph (6) of Section 3-5 of this Act was
erroneously claimed, but not in satisfaction of penalty, if
any, and interest for failure to pay the tax when due. A
purchaser of production related tangible personal property
that is purchased on or after September 1, 2004 who is required
to pay Illinois Use Tax or Service Use Tax on the purchase
directly to the Department may utilize the Manufacturer's
Purchase Credit in satisfaction of the tax arising from that
purchase, but not in satisfaction of penalty and interest. A
purchaser who uses the Manufacturer's Purchase Credit to
purchase property on and after September 1, 2004 which is later
determined not to be production related tangible personal
property may be liable for tax, penalty, and interest on the
purchase of that property as of the date of purchase but shall
be entitled to use the disallowed Manufacturer's Purchase
Credit, so long as it has not expired and is used on qualifying
purchases of production related tangible personal property not
previously subject to credit usage. The Manufacturer's
Purchase Credit earned by a manufacturer or graphic arts
producer expires the last day of the second calendar year
following the calendar year in which the credit arose. A
purchaser earning Manufacturer's Purchase Credit shall sign
and file an annual Report of Manufacturer's Purchase Credit
Earned for each calendar year no later than the last day of the
sixth month following the calendar year in which a
Manufacturer's Purchase Credit is earned. A Report of
Manufacturer's Purchase Credit Earned shall be filed on forms
as prescribed or approved by the Department and shall state,
for each month of the calendar year: (i) the total purchase
price of all purchases of exempt manufacturing or graphic arts
machinery on which the credit was earned; (ii) the total State
Use Tax or Service Use Tax which would have been due on those
items; (iii) the percentage used to calculate the amount of
credit earned; (iv) the amount of credit earned; and (v) such
other information as the Department may reasonably require. A
purchaser earning Manufacturer's Purchase Credit shall
maintain records which identify, as to each purchase of
manufacturing or graphic arts machinery and equipment on which
the purchaser earned Manufacturer's Purchase Credit, the
vendor (including, if applicable, either the vendor's
registration number or Federal Employer Identification
Number), the purchase price, and the amount of Manufacturer's
Purchase Credit earned on each purchase. A purchaser using
Manufacturer's Purchase Credit shall sign and file an annual
Report of Manufacturer's Purchase Credit Used for each calendar
year no later than the last day of the sixth month following
the calendar year in which a Manufacturer's Purchase Credit is
used. A Report of Manufacturer's Purchase Credit Used shall be
filed on forms as prescribed or approved by the Department and
shall state, for each month of the calendar year: (i) the total
purchase price of production related tangible personal
property purchased from Illinois suppliers; (ii) the total
purchase price of production related tangible personal
property purchased from out-of-state suppliers; (iii) the
total amount of credit used during such month; and (iv) such
other information as the Department may reasonably require. A
purchaser using Manufacturer's Purchase Credit shall maintain
records that identify, as to each purchase of production
related tangible personal property on which the purchaser used
Manufacturer's Purchase Credit, the vendor (including, if
applicable, either the vendor's registration number or Federal
Employer Identification Number), the purchase price, and the
amount of Manufacturer's Purchase Credit used on each purchase.
    A purchaser that fails to file an annual Report of
Manufacturer's Purchase Credit Earned or an annual Report of
Manufacturer's Purchase Credit Used by the last day of the
sixth month following the end of the calendar year shall
forfeit all Manufacturer's Purchase Credit for that calendar
year unless it establishes that its failure to file was due to
reasonable cause. Manufacturer's Purchase Credit reports may
be amended to report and claim credit on qualifying purchases
not previously reported at any time before the credit would
have expired, unless both the Department and the purchaser have
agreed to an extension of the statute of limitations for the
issuance of a notice of tax liability as provided in Section 4
of the Retailers' Occupation Tax Act. If the time for
assessment or refund has been extended, then amended reports
for a calendar year may be filed at any time prior to the date
to which the statute of limitations for the calendar year or
portion thereof has been extended. Manufacturer's Purchase
Credit claimed on an amended report may be used to satisfy tax
liability under the Use Tax Act or the Service Use Tax Act (i)
on qualifying purchases of production related tangible
personal property made after the date the amended report is
filed or (ii) assessed by the Department on qualifying
production related tangible personal property purchased on or
after September 1, 2004. If the purchaser is not the
manufacturer or a graphic arts producer, but rents or leases
the use of the property to a manufacturer or graphic arts
producer, the purchaser may earn, report, and use
Manufacturer's Purchase Credit in the same manner as a
manufacturer or graphic arts producer. A purchaser shall not be
entitled to any Manufacturer's Purchase Credit for a purchase
that is required to be reported and is not timely reported as
provided in this Section. A purchaser remains liable for (i)
any tax that was satisfied by use of a Manufacturer's Purchase
Credit, as of the date of purchase, if that use is not timely
reported as required in this Section and (ii) for any
applicable penalties and interest for failing to pay the tax
when due.
(Source: P.A. 93-24, eff. 6-20-03.)
 
    Section 20-15. The Service Use Tax Act is amended by
changing Sections 3-5 and 3-70 as follows:
 
    (35 ILCS 110/3-5)  (from Ch. 120, par. 439.33-5)
    Sec. 3-5. Exemptions. Use of the following tangible
personal property is exempt from the tax imposed by this Act:
    (1) Personal property purchased from a corporation,
society, association, foundation, institution, or
organization, other than a limited liability company, that is
organized and operated as a not-for-profit service enterprise
for the benefit of persons 65 years of age or older if the
personal property was not purchased by the enterprise for the
purpose of resale by the enterprise.
    (2) Personal property purchased by a non-profit Illinois
county fair association for use in conducting, operating, or
promoting the county fair.
    (3) Personal property purchased by a not-for-profit arts or
cultural organization that establishes, by proof required by
the Department by rule, that it has received an exemption under
Section 501(c)(3) of the Internal Revenue Code and that is
organized and operated primarily for the presentation or
support of arts or cultural programming, activities, or
services. These organizations include, but are not limited to,
music and dramatic arts organizations such as symphony
orchestras and theatrical groups, arts and cultural service
organizations, local arts councils, visual arts organizations,
and media arts organizations. On and after the effective date
of this amendatory Act of the 92nd General Assembly, however,
an entity otherwise eligible for this exemption shall not make
tax-free purchases unless it has an active identification
number issued by the Department.
    (4) Legal tender, currency, medallions, or gold or silver
coinage issued by the State of Illinois, the government of the
United States of America, or the government of any foreign
country, and bullion.
    (5) Until July 1, 2003 and beginning again on September 1,
2004, graphic arts machinery and equipment, including repair
and replacement parts, both new and used, and including that
manufactured on special order or purchased for lease, certified
by the purchaser to be used primarily for graphic arts
production. Equipment includes chemicals or chemicals acting
as catalysts but only if the chemicals or chemicals acting as
catalysts effect a direct and immediate change upon a graphic
arts product.
    (6) Personal property purchased from a teacher-sponsored
student organization affiliated with an elementary or
secondary school located in Illinois.
    (7) Farm machinery and equipment, both new and used,
including that manufactured on special order, certified by the
purchaser to be used primarily for production agriculture or
State or federal agricultural programs, including individual
replacement parts for the machinery and equipment, including
machinery and equipment purchased for lease, and including
implements of husbandry defined in Section 1-130 of the
Illinois Vehicle Code, farm machinery and agricultural
chemical and fertilizer spreaders, and nurse wagons required to
be registered under Section 3-809 of the Illinois Vehicle Code,
but excluding other motor vehicles required to be registered
under the Illinois Vehicle Code. Horticultural polyhouses or
hoop houses used for propagating, growing, or overwintering
plants shall be considered farm machinery and equipment under
this item (7). Agricultural chemical tender tanks and dry boxes
shall include units sold separately from a motor vehicle
required to be licensed and units sold mounted on a motor
vehicle required to be licensed if the selling price of the
tender is separately stated.
    Farm machinery and equipment shall include precision
farming equipment that is installed or purchased to be
installed on farm machinery and equipment including, but not
limited to, tractors, harvesters, sprayers, planters, seeders,
or spreaders. Precision farming equipment includes, but is not
limited to, soil testing sensors, computers, monitors,
software, global positioning and mapping systems, and other
such equipment.
    Farm machinery and equipment also includes computers,
sensors, software, and related equipment used primarily in the
computer-assisted operation of production agriculture
facilities, equipment, and activities such as, but not limited
to, the collection, monitoring, and correlation of animal and
crop data for the purpose of formulating animal diets and
agricultural chemicals. This item (7) is exempt from the
provisions of Section 3-75.
    (8) Fuel and petroleum products sold to or used by an air
common carrier, certified by the carrier to be used for
consumption, shipment, or storage in the conduct of its
business as an air common carrier, for a flight destined for or
returning from a location or locations outside the United
States without regard to previous or subsequent domestic
stopovers.
    (9) Proceeds of mandatory service charges separately
stated on customers' bills for the purchase and consumption of
food and beverages acquired as an incident to the purchase of a
service from a serviceman, to the extent that the proceeds of
the service charge are in fact turned over as tips or as a
substitute for tips to the employees who participate directly
in preparing, serving, hosting or cleaning up the food or
beverage function with respect to which the service charge is
imposed.
    (10) Until July 1, 2003, oil field exploration, drilling,
and production equipment, including (i) rigs and parts of rigs,
rotary rigs, cable tool rigs, and workover rigs, (ii) pipe and
tubular goods, including casing and drill strings, (iii) pumps
and pump-jack units, (iv) storage tanks and flow lines, (v) any
individual replacement part for oil field exploration,
drilling, and production equipment, and (vi) machinery and
equipment purchased for lease; but excluding motor vehicles
required to be registered under the Illinois Vehicle Code.
    (11) Proceeds from the sale of photoprocessing machinery
and equipment, including repair and replacement parts, both new
and used, including that manufactured on special order,
certified by the purchaser to be used primarily for
photoprocessing, and including photoprocessing machinery and
equipment purchased for lease.
    (12) Until July 1, 2003, coal exploration, mining,
offhighway hauling, processing, maintenance, and reclamation
equipment, including replacement parts and equipment, and
including equipment purchased for lease, but excluding motor
vehicles required to be registered under the Illinois Vehicle
Code.
    (13) Semen used for artificial insemination of livestock
for direct agricultural production.
    (14) Horses, or interests in horses, registered with and
meeting the requirements of any of the Arabian Horse Club
Registry of America, Appaloosa Horse Club, American Quarter
Horse Association, United States Trotting Association, or
Jockey Club, as appropriate, used for purposes of breeding or
racing for prizes.
    (15) Computers and communications equipment utilized for
any hospital purpose and equipment used in the diagnosis,
analysis, or treatment of hospital patients purchased by a
lessor who leases the equipment, under a lease of one year or
longer executed or in effect at the time the lessor would
otherwise be subject to the tax imposed by this Act, to a
hospital that has been issued an active tax exemption
identification number by the Department under Section 1g of the
Retailers' Occupation Tax Act. If the equipment is leased in a
manner that does not qualify for this exemption or is used in
any other non-exempt manner, the lessor shall be liable for the
tax imposed under this Act or the Use Tax Act, as the case may
be, based on the fair market value of the property at the time
the non-qualifying use occurs. No lessor shall collect or
attempt to collect an amount (however designated) that purports
to reimburse that lessor for the tax imposed by this Act or the
Use Tax Act, as the case may be, if the tax has not been paid by
the lessor. If a lessor improperly collects any such amount
from the lessee, the lessee shall have a legal right to claim a
refund of that amount from the lessor. If, however, that amount
is not refunded to the lessee for any reason, the lessor is
liable to pay that amount to the Department.
    (16) Personal property purchased by a lessor who leases the
property, under a lease of one year or longer executed or in
effect at the time the lessor would otherwise be subject to the
tax imposed by this Act, to a governmental body that has been
issued an active tax exemption identification number by the
Department under Section 1g of the Retailers' Occupation Tax
Act. If the property is leased in a manner that does not
qualify for this exemption or is used in any other non-exempt
manner, the lessor shall be liable for the tax imposed under
this Act or the Use Tax Act, as the case may be, based on the
fair market value of the property at the time the
non-qualifying use occurs. No lessor shall collect or attempt
to collect an amount (however designated) that purports to
reimburse that lessor for the tax imposed by this Act or the
Use Tax Act, as the case may be, if the tax has not been paid by
the lessor. If a lessor improperly collects any such amount
from the lessee, the lessee shall have a legal right to claim a
refund of that amount from the lessor. If, however, that amount
is not refunded to the lessee for any reason, the lessor is
liable to pay that amount to the Department.
    (17) Beginning with taxable years ending on or after
December 31, 1995 and ending with taxable years ending on or
before December 31, 2004, personal property that is donated for
disaster relief to be used in a State or federally declared
disaster area in Illinois or bordering Illinois by a
manufacturer or retailer that is registered in this State to a
corporation, society, association, foundation, or institution
that has been issued a sales tax exemption identification
number by the Department that assists victims of the disaster
who reside within the declared disaster area.
    (18) Beginning with taxable years ending on or after
December 31, 1995 and ending with taxable years ending on or
before December 31, 2004, personal property that is used in the
performance of infrastructure repairs in this State, including
but not limited to municipal roads and streets, access roads,
bridges, sidewalks, waste disposal systems, water and sewer
line extensions, water distribution and purification
facilities, storm water drainage and retention facilities, and
sewage treatment facilities, resulting from a State or
federally declared disaster in Illinois or bordering Illinois
when such repairs are initiated on facilities located in the
declared disaster area within 6 months after the disaster.
    (19) Beginning July 1, 1999, game or game birds purchased
at a "game breeding and hunting preserve area" or an "exotic
game hunting area" as those terms are used in the Wildlife Code
or at a hunting enclosure approved through rules adopted by the
Department of Natural Resources. This paragraph is exempt from
the provisions of Section 3-75.
    (20) A motor vehicle, as that term is defined in Section
1-146 of the Illinois Vehicle Code, that is donated to a
corporation, limited liability company, society, association,
foundation, or institution that is determined by the Department
to be organized and operated exclusively for educational
purposes. For purposes of this exemption, "a corporation,
limited liability company, society, association, foundation,
or institution organized and operated exclusively for
educational purposes" means all tax-supported public schools,
private schools that offer systematic instruction in useful
branches of learning by methods common to public schools and
that compare favorably in their scope and intensity with the
course of study presented in tax-supported schools, and
vocational or technical schools or institutes organized and
operated exclusively to provide a course of study of not less
than 6 weeks duration and designed to prepare individuals to
follow a trade or to pursue a manual, technical, mechanical,
industrial, business, or commercial occupation.
    (21) Beginning January 1, 2000, personal property,
including food, purchased through fundraising events for the
benefit of a public or private elementary or secondary school,
a group of those schools, or one or more school districts if
the events are sponsored by an entity recognized by the school
district that consists primarily of volunteers and includes
parents and teachers of the school children. This paragraph
does not apply to fundraising events (i) for the benefit of
private home instruction or (ii) for which the fundraising
entity purchases the personal property sold at the events from
another individual or entity that sold the property for the
purpose of resale by the fundraising entity and that profits
from the sale to the fundraising entity. This paragraph is
exempt from the provisions of Section 3-75.
    (22) Beginning January 1, 2000 and through December 31,
2001, new or used automatic vending machines that prepare and
serve hot food and beverages, including coffee, soup, and other
items, and replacement parts for these machines. Beginning
January 1, 2002 and through June 30, 2003, machines and parts
for machines used in commercial, coin-operated amusement and
vending business if a use or occupation tax is paid on the
gross receipts derived from the use of the commercial,
coin-operated amusement and vending machines. This paragraph
is exempt from the provisions of Section 3-75.
    (23) Food for human consumption that is to be consumed off
the premises where it is sold (other than alcoholic beverages,
soft drinks, and food that has been prepared for immediate
consumption) and prescription and nonprescription medicines,
drugs, medical appliances, and insulin, urine testing
materials, syringes, and needles used by diabetics, for human
use, when purchased for use by a person receiving medical
assistance under Article 5 of the Illinois Public Aid Code who
resides in a licensed long-term care facility, as defined in
the Nursing Home Care Act.
    (24) Beginning on the effective date of this amendatory Act
of the 92nd General Assembly, computers and communications
equipment utilized for any hospital purpose and equipment used
in the diagnosis, analysis, or treatment of hospital patients
purchased by a lessor who leases the equipment, under a lease
of one year or longer executed or in effect at the time the
lessor would otherwise be subject to the tax imposed by this
Act, to a hospital that has been issued an active tax exemption
identification number by the Department under Section 1g of the
Retailers' Occupation Tax Act. If the equipment is leased in a
manner that does not qualify for this exemption or is used in
any other nonexempt manner, the lessor shall be liable for the
tax imposed under this Act or the Use Tax Act, as the case may
be, based on the fair market value of the property at the time
the nonqualifying use occurs. No lessor shall collect or
attempt to collect an amount (however designated) that purports
to reimburse that lessor for the tax imposed by this Act or the
Use Tax Act, as the case may be, if the tax has not been paid by
the lessor. If a lessor improperly collects any such amount
from the lessee, the lessee shall have a legal right to claim a
refund of that amount from the lessor. If, however, that amount
is not refunded to the lessee for any reason, the lessor is
liable to pay that amount to the Department. This paragraph is
exempt from the provisions of Section 3-75.
    (25) Beginning on the effective date of this amendatory Act
of the 92nd General Assembly, personal property purchased by a
lessor who leases the property, under a lease of one year or
longer executed or in effect at the time the lessor would
otherwise be subject to the tax imposed by this Act, to a
governmental body that has been issued an active tax exemption
identification number by the Department under Section 1g of the
Retailers' Occupation Tax Act. If the property is leased in a
manner that does not qualify for this exemption or is used in
any other nonexempt manner, the lessor shall be liable for the
tax imposed under this Act or the Use Tax Act, as the case may
be, based on the fair market value of the property at the time
the nonqualifying use occurs. No lessor shall collect or
attempt to collect an amount (however designated) that purports
to reimburse that lessor for the tax imposed by this Act or the
Use Tax Act, as the case may be, if the tax has not been paid by
the lessor. If a lessor improperly collects any such amount
from the lessee, the lessee shall have a legal right to claim a
refund of that amount from the lessor. If, however, that amount
is not refunded to the lessee for any reason, the lessor is
liable to pay that amount to the Department. This paragraph is
exempt from the provisions of Section 3-75.
(Source: P.A. 92-16, eff. 6-28-01; 92-35, eff. 7-1-01; 92-227,
eff. 8-2-01; 92-337, eff. 8-10-01; 92-484, eff. 8-23-01;
92-651, eff. 7-11-02; 93-24, eff. 6-20-03.)
 
    (35 ILCS 110/3-70)
    Sec. 3-70. Manufacturer's Purchase Credit. For purchases
of machinery and equipment made on and after January 1, 1995
and through June 30, 2003, and on and after September 1, 2004,
a purchaser of manufacturing machinery and equipment that
qualifies for the exemption provided by Section 2 of this Act
earns a credit in an amount equal to a fixed percentage of the
tax which would have been incurred under this Act on those
purchases. For purchases of graphic arts machinery and
equipment made on or after July 1, 1996 and through June 30,
2003, and on and after September 1, 2004, a purchase of graphic
arts machinery and equipment that qualifies for the exemption
provided by paragraph (5) of Section 3-5 of this Act earns a
credit in an amount equal to a fixed percentage of the tax that
would have been incurred under this Act on those purchases. The
credit earned for the purchase of manufacturing machinery and
equipment and graphic arts machinery and equipment shall be
referred to as the Manufacturer's Purchase Credit. A graphic
arts producer is a person engaged in graphic arts production as
defined in Section 3-30 of the Service Occupation Tax Act.
Beginning July 1, 1996, all references in this Section to
manufacturers or manufacturing shall also refer to graphic arts
producers or graphic arts production.
    The amount of credit shall be a percentage of the tax that
would have been incurred on the purchase of the manufacturing
machinery and equipment or graphic arts machinery and equipment
if the exemptions provided by Section 2 or paragraph (5) of
Section 3-5 of this Act had not been applicable.
    All purchases prior to October 1, 2003 of manufacturing
machinery and equipment and graphic arts machinery and
equipment that qualify for the exemptions provided by paragraph
(5) of Section 2 or paragraph (5) of Section 3-5 of this Act
qualify for the credit without regard to whether the serviceman
elected, or could have elected, under paragraph (7) of Section
2 of this Act to exclude the transaction from this Act. If the
serviceman's billing to the service customer separately states
a selling price for the exempt manufacturing machinery or
equipment or the exempt graphic arts machinery and equipment,
the credit shall be calculated, as otherwise provided herein,
based on that selling price. If the serviceman's billing does
not separately state a selling price for the exempt
manufacturing machinery and equipment or the exempt graphic
arts machinery and equipment, the credit shall be calculated,
as otherwise provided herein, based on 50% of the entire
billing. If the serviceman contracts to design, develop, and
produce special order manufacturing machinery and equipment or
special order graphic arts machinery and equipment, and the
billing does not separately state a selling price for such
special order machinery and equipment, the credit shall be
calculated, as otherwise provided herein, based on 50% of the
entire billing. The provisions of this paragraph are effective
for purchases made on or after January 1, 1995.
    The percentage shall be as follows:
        (1) 15% for purchases made on or before June 30, 1995.
        (2) 25% for purchases made after June 30, 1995, and on
    or before June 30, 1996.
        (3) 40% for purchases made after June 30, 1996, and on
    or before June 30, 1997.
        (4) 50% for purchases made on or after July 1, 1997.
    (a) Manufacturer's Purchase Credit earned prior to July 1,
2003. This subsection (a) applies to Manufacturer's Purchase
Credit earned prior to July 1, 2003. A purchaser of production
related tangible personal property desiring to use the
Manufacturer's Purchase Credit shall certify to the seller
prior to October 1, 2003 that the purchaser is satisfying all
or part of the liability under the Use Tax Act or the Service
Use Tax Act that is due on the purchase of the production
related tangible personal property by use of a Manufacturer's
Purchase Credit. The Manufacturer's Purchase Credit
certification must be dated and shall include the name and
address of the purchaser, the purchaser's registration number,
if registered, the credit being applied, and a statement that
the State Use Tax or Service Use Tax liability is being
satisfied with the manufacturer's or graphic arts producer's
accumulated purchase credit. Certification may be incorporated
into the manufacturer's or graphic arts producer's purchase
order. Manufacturer's Purchase Credit certification provided
by the manufacturer or graphic arts producer prior to October
1, 2003 may be used to satisfy the retailer's or serviceman's
liability under the Retailers' Occupation Tax Act or Service
Occupation Tax Act for the credit claimed, not to exceed 6.25%
of the receipts subject to tax from a qualifying purchase, but
only if the retailer or serviceman reports the Manufacturer's
Purchase Credit claimed as required by the Department. A
Manufacturer's Purchase Credit reported on any original or
amended return filed under this Act after October 20, 2003
shall be disallowed. The Manufacturer's Purchase Credit earned
by purchase of exempt manufacturing machinery and equipment or
graphic arts machinery and equipment is a non-transferable
credit. A manufacturer or graphic arts producer that enters
into a contract involving the installation of tangible personal
property into real estate within a manufacturing or graphic
arts production facility, prior to October 1, 2003, may
authorize a construction contractor to utilize credit
accumulated by the manufacturer or graphic arts producer to
purchase the tangible personal property. A manufacturer or
graphic arts producer intending to use accumulated credit to
purchase such tangible personal property shall execute a
written contract authorizing the contractor to utilize a
specified dollar amount of credit. The contractor shall
furnish, prior to October 1, 2003, the supplier with the
manufacturer's or graphic arts producer's name, registration
or resale number, and a statement that a specific amount of the
Use Tax or Service Use Tax liability, not to exceed 6.25% of
the selling price, is being satisfied with the credit. The
manufacturer or graphic arts producer shall remain liable to
timely report all information required by the annual Report of
Manufacturer's Purchase Credit Used for credit utilized by a
construction contractor.
    No Manufacturer's Purchase Credit earned prior to July 1,
2003 may be used after October 1, 2003. The Manufacturer's
Purchase Credit may be used to satisfy liability under the Use
Tax Act or the Service Use Tax Act due on the purchase of
production related tangible personal property (including
purchases by a manufacturer, by a graphic arts producer, or a
lessor who rents or leases the use of the property to a
manufacturer or graphic arts producer) that does not otherwise
qualify for the manufacturing machinery and equipment
exemption or the graphic arts machinery and equipment
exemption. "Production related tangible personal property"
means (i) all tangible personal property used or consumed by
the purchaser in a manufacturing facility in which a
manufacturing process described in Section 2-45 of the
Retailers' Occupation Tax Act takes place, including tangible
personal property purchased for incorporation into real estate
within a manufacturing facility and including, but not limited
to, tangible personal property used or consumed in activities
such as pre-production material handling, receiving, quality
control, inventory control, storage, staging, and packaging
for shipping and transportation purposes; (ii) all tangible
personal property used or consumed by the purchaser in a
graphic arts facility in which graphic arts production as
described in Section 2-30 of the Retailers' Occupation Tax Act
takes place, including tangible personal property purchased
for incorporation into real estate within a graphic arts
facility and including, but not limited to, all tangible
personal property used or consumed in activities such as
graphic arts preliminary or pre-press production,
pre-production material handling, receiving, quality control,
inventory control, storage, staging, sorting, labeling,
mailing, tying, wrapping, and packaging; and (iii) all tangible
personal property used or consumed by the purchaser for
research and development. "Production related tangible
personal property" does not include (i) tangible personal
property used, within or without a manufacturing or graphic
arts facility, in sales, purchasing, accounting, fiscal
management, marketing, personnel recruitment or selection, or
landscaping or (ii) tangible personal property required to be
titled or registered with a department, agency, or unit of
federal, state, or local government. The Manufacturer's
Purchase Credit may be used, prior to October 1, 2003, to
satisfy the tax arising either from the purchase of machinery
and equipment on or after January 1, 1995 for which the
manufacturing machinery and equipment exemption provided by
Section 2 of this Act was erroneously claimed, or the purchase
of machinery and equipment on or after July 1, 1996 for which
the exemption provided by paragraph (5) of Section 3-5 of this
Act was erroneously claimed, but not in satisfaction of
penalty, if any, and interest for failure to pay the tax when
due. A purchaser of production related tangible personal
property who is required to pay Illinois Use Tax or Service Use
Tax on the purchase directly to the Department may, prior to
October 1, 2003, utilize the Manufacturer's Purchase Credit in
satisfaction of the tax arising from that purchase, but not in
satisfaction of penalty and interest. A purchaser who uses the
Manufacturer's Purchase Credit to purchase property which is
later determined not to be production related tangible personal
property may be liable for tax, penalty, and interest on the
purchase of that property as of the date of purchase but shall
be entitled to use the disallowed Manufacturer's Purchase
Credit, so long as it has not expired and is used prior to
October 1, 2003, on qualifying purchases of production related
tangible personal property not previously subject to credit
usage. The Manufacturer's Purchase Credit earned by a
manufacturer or graphic arts producer expires the last day of
the second calendar year following the calendar year in which
the credit arose. No Manufacturer's Purchase Credit may be used
after September 30, 2003 regardless of when that credit was
earned.
    A purchaser earning Manufacturer's Purchase Credit shall
sign and file an annual Report of Manufacturer's Purchase
Credit Earned for each calendar year no later than the last day
of the sixth month following the calendar year in which a
Manufacturer's Purchase Credit is earned. A Report of
Manufacturer's Purchase Credit Earned shall be filed on forms
as prescribed or approved by the Department and shall state,
for each month of the calendar year: (i) the total purchase
price of all purchases of exempt manufacturing or graphic arts
machinery on which the credit was earned; (ii) the total State
Use Tax or Service Use Tax which would have been due on those
items; (iii) the percentage used to calculate the amount of
credit earned; (iv) the amount of credit earned; and (v) such
other information as the Department may reasonably require. A
purchaser earning Manufacturer's Purchase Credit shall
maintain records which identify, as to each purchase of
manufacturing or graphic arts machinery and equipment on which
the purchaser earned Manufacturer's Purchase Credit, the
vendor (including, if applicable, either the vendor's
registration number or Federal Employer Identification
Number), the purchase price, and the amount of Manufacturer's
Purchase Credit earned on each purchase.
    A purchaser using Manufacturer's Purchase Credit shall
sign and file an annual Report of Manufacturer's Purchase
Credit Used for each calendar year no later than the last day
of the sixth month following the calendar year in which a
Manufacturer's Purchase Credit is used. A Report of
Manufacturer's Purchase Credit Used shall be filed on forms as
prescribed or approved by the Department and shall state, for
each month of the calendar year: (i) the total purchase price
of production related tangible personal property purchased
from Illinois suppliers; (ii) the total purchase price of
production related tangible personal property purchased from
out-of-state suppliers; (iii) the total amount of credit used
during such month; and (iv) such other information as the
Department may reasonably require. A purchaser using
Manufacturer's Purchase Credit shall maintain records that
identify, as to each purchase of production related tangible
personal property on which the purchaser used Manufacturer's
Purchase Credit, the vendor (including, if applicable, either
the vendor's registration number or Federal Employer
Identification Number), the purchase price, and the amount of
Manufacturer's Purchase Credit used on each purchase.
    No annual report shall be filed before May 1, 1996 or after
June 30, 2004. A purchaser that fails to file an annual Report
of Manufacturer's Purchase Credit Earned or an annual Report of
Manufacturer's Purchase Credit Used by the last day of the
sixth month following the end of the calendar year shall
forfeit all Manufacturer's Purchase Credit for that calendar
year unless it establishes that its failure to file was due to
reasonable cause. Manufacturer's Purchase Credit reports may
be amended to report and claim credit on qualifying purchases
not previously reported at any time before the credit would
have expired, unless both the Department and the purchaser have
agreed to an extension of the statute of limitations for the
issuance of a notice of tax liability as provided in Section 4
of the Retailers' Occupation Tax Act. If the time for
assessment or refund has been extended, then amended reports
for a calendar year may be filed at any time prior to the date
to which the statute of limitations for the calendar year or
portion thereof has been extended. No Manufacturer's Purchase
Credit report filed with the Department for periods prior to
January 1, 1995 shall be approved. Manufacturer's Purchase
Credit claimed on an amended report may be used, prior to
October 1, 2003, to satisfy tax liability under the Use Tax Act
or the Service Use Tax Act (i) on qualifying purchases of
production related tangible personal property made after the
date the amended report is filed or (ii) assessed by the
Department on qualifying purchases of production related
tangible personal property made in the case of manufacturers on
or after January 1, 1995, or in the case of graphic arts
producers on or after July 1, 1996.
    If the purchaser is not the manufacturer or a graphic arts
producer, but rents or leases the use of the property to a
manufacturer or a graphic arts producer, the purchaser may
earn, report, and use Manufacturer's Purchase Credit in the
same manner as a manufacturer or graphic arts producer.
    A purchaser shall not be entitled to any Manufacturer's
Purchase Credit for a purchase that is required to be reported
and is not timely reported as provided in this Section. A
purchaser remains liable for (i) any tax that was satisfied by
use of a Manufacturer's Purchase Credit, as of the date of
purchase, if that use is not timely reported as required in
this Section and (ii) for any applicable penalties and interest
for failing to pay the tax when due. No Manufacturer's Purchase
Credit may be used after September 30, 2003 to satisfy any tax
liability imposed under this Act, including any audit
liability.
    (b) Manufacturer's Purchase Credit earned on and after
September 1, 2004. This subsection (b) applies to
Manufacturer's Purchase Credit earned on or after September 1,
2004. Manufacturer's Purchase Credit earned on or after
September 1, 2004 may only be used to satisfy the Use Tax or
Service Use Tax liability incurred on production related
tangible personal property purchased on or after September 1,
2004. A purchaser of production related tangible personal
property desiring to use the Manufacturer's Purchase Credit
shall certify to the seller that the purchaser is satisfying
all or part of the liability under the Use Tax Act or the
Service Use Tax Act that is due on the purchase of the
production related tangible personal property by use of a
Manufacturer's Purchase Credit. The Manufacturer's Purchase
Credit certification must be dated and shall include the name
and address of the purchaser, the purchaser's registration
number, if registered, the credit being applied, and a
statement that the State Use Tax or Service Use Tax liability
is being satisfied with the manufacturer's or graphic arts
producer's accumulated purchase credit. Certification may be
incorporated into the manufacturer's or graphic arts
producer's purchase order. Manufacturer's Purchase Credit
certification provided by the manufacturer or graphic arts
producer may be used to satisfy the retailer's or serviceman's
liability under the Retailers' Occupation Tax Act or Service
Occupation Tax Act for the credit claimed, not to exceed 6.25%
of the receipts subject to tax from a qualifying purchase, but
only if the retailer or serviceman reports the Manufacturer's
Purchase Credit claimed as required by the Department. The
Manufacturer's Purchase Credit earned by purchase of exempt
manufacturing machinery and equipment or graphic arts
machinery and equipment is a non-transferable credit. A
manufacturer or graphic arts producer that enters into a
contract involving the installation of tangible personal
property into real estate within a manufacturing or graphic
arts production facility may, on or after September 1, 2004,
authorize a construction contractor to utilize credit
accumulated by the manufacturer or graphic arts producer to
purchase the tangible personal property. A manufacturer or
graphic arts producer intending to use accumulated credit to
purchase such tangible personal property shall execute a
written contract authorizing the contractor to utilize a
specified dollar amount of credit. The contractor shall furnish
the supplier with the manufacturer's or graphic arts producer's
name, registration or resale number, and a statement that a
specific amount of the Use Tax or Service Use Tax liability,
not to exceed 6.25% of the selling price, is being satisfied
with the credit. The manufacturer or graphic arts producer
shall remain liable to timely report all information required
by the annual Report of Manufacturer's Purchase Credit Used for
credit utilized by a construction contractor.
    The Manufacturer's Purchase Credit may be used to satisfy
liability under the Use Tax Act or the Service Use Tax Act due
on the purchase, made on or after September 1, 2004, of
production related tangible personal property (including
purchases by a manufacturer, by a graphic arts producer, or a
lessor who rents or leases the use of the property to a
manufacturer or graphic arts producer) that does not otherwise
qualify for the manufacturing machinery and equipment
exemption or the graphic arts machinery and equipment
exemption. "Production related tangible personal property"
means (i) all tangible personal property used or consumed by
the purchaser in a manufacturing facility in which a
manufacturing process described in Section 2-45 of the
Retailers' Occupation Tax Act takes place, including tangible
personal property purchased for incorporation into real estate
within a manufacturing facility and including, but not limited
to, tangible personal property used or consumed in activities
such as pre-production material handling, receiving, quality
control, inventory control, storage, staging, and packaging
for shipping and transportation purposes; (ii) all tangible
personal property used or consumed by the purchaser in a
graphic arts facility in which graphic arts production as
described in Section 2-30 of the Retailers' Occupation Tax Act
takes place, including tangible personal property purchased
for incorporation into real estate within a graphic arts
facility and including, but not limited to, all tangible
personal property used or consumed in activities such as
graphic arts preliminary or pre-press production,
pre-production material handling, receiving, quality control,
inventory control, storage, staging, sorting, labeling,
mailing, tying, wrapping, and packaging; and (iii) all tangible
personal property used or consumed by the purchaser for
research and development. "Production related tangible
personal property" does not include (i) tangible personal
property used, within or without a manufacturing or graphic
arts facility, in sales, purchasing, accounting, fiscal
management, marketing, personnel recruitment or selection, or
landscaping or (ii) tangible personal property required to be
titled or registered with a department, agency, or unit of
federal, state, or local government. The Manufacturer's
Purchase Credit may be used to satisfy the tax arising either
from the purchase of machinery and equipment on or after
September 1, 2004 for which the manufacturing machinery and
equipment exemption provided by Section 2 of this Act was
erroneously claimed, or the purchase of machinery and equipment
on or after September 1, 2004 for which the exemption provided
by paragraph (5) of Section 3-5 of this Act was erroneously
claimed, but not in satisfaction of penalty, if any, and
interest for failure to pay the tax when due. A purchaser of
production related tangible personal property that is
purchased on or after September 1, 2004 who is required to pay
Illinois Use Tax or Service Use Tax on the purchase directly to
the Department may utilize the Manufacturer's Purchase Credit
in satisfaction of the tax arising from that purchase, but not
in satisfaction of penalty and interest. A purchaser who uses
the Manufacturer's Purchase Credit to purchase property on and
after September 1, 2004 which is later determined not to be
production related tangible personal property may be liable for
tax, penalty, and interest on the purchase of that property as
of the date of purchase but shall be entitled to use the
disallowed Manufacturer's Purchase Credit, so long as it has
not expired, on qualifying purchases of production related
tangible personal property not previously subject to credit
usage. The Manufacturer's Purchase Credit earned by a
manufacturer or graphic arts producer expires the last day of
the second calendar year following the calendar year in which
the credit arose.
    A purchaser earning Manufacturer's Purchase Credit shall
sign and file an annual Report of Manufacturer's Purchase
Credit Earned for each calendar year no later than the last day
of the sixth month following the calendar year in which a
Manufacturer's Purchase Credit is earned. A Report of
Manufacturer's Purchase Credit Earned shall be filed on forms
as prescribed or approved by the Department and shall state,
for each month of the calendar year: (i) the total purchase
price of all purchases of exempt manufacturing or graphic arts
machinery on which the credit was earned; (ii) the total State
Use Tax or Service Use Tax which would have been due on those
items; (iii) the percentage used to calculate the amount of
credit earned; (iv) the amount of credit earned; and (v) such
other information as the Department may reasonably require. A
purchaser earning Manufacturer's Purchase Credit shall
maintain records which identify, as to each purchase of
manufacturing or graphic arts machinery and equipment on which
the purchaser earned Manufacturer's Purchase Credit, the
vendor (including, if applicable, either the vendor's
registration number or Federal Employer Identification
Number), the purchase price, and the amount of Manufacturer's
Purchase Credit earned on each purchase.
    A purchaser using Manufacturer's Purchase Credit shall
sign and file an annual Report of Manufacturer's Purchase
Credit Used for each calendar year no later than the last day
of the sixth month following the calendar year in which a
Manufacturer's Purchase Credit is used. A Report of
Manufacturer's Purchase Credit Used shall be filed on forms as
prescribed or approved by the Department and shall state, for
each month of the calendar year: (i) the total purchase price
of production related tangible personal property purchased
from Illinois suppliers; (ii) the total purchase price of
production related tangible personal property purchased from
out-of-state suppliers; (iii) the total amount of credit used
during such month; and (iv) such other information as the
Department may reasonably require. A purchaser using
Manufacturer's Purchase Credit shall maintain records that
identify, as to each purchase of production related tangible
personal property on which the purchaser used Manufacturer's
Purchase Credit, the vendor (including, if applicable, either
the vendor's registration number or Federal Employer
Identification Number), the purchase price, and the amount of
Manufacturer's Purchase Credit used on each purchase.
    A purchaser that fails to file an annual Report of
Manufacturer's Purchase Credit Earned or an annual Report of
Manufacturer's Purchase Credit Used by the last day of the
sixth month following the end of the calendar year shall
forfeit all Manufacturer's Purchase Credit for that calendar
year unless it establishes that its failure to file was due to
reasonable cause. Manufacturer's Purchase Credit reports may
be amended to report and claim credit on qualifying purchases
not previously reported at any time before the credit would
have expired, unless both the Department and the purchaser have
agreed to an extension of the statute of limitations for the
issuance of a notice of tax liability as provided in Section 4
of the Retailers' Occupation Tax Act. If the time for
assessment or refund has been extended, then amended reports
for a calendar year may be filed at any time prior to the date
to which the statute of limitations for the calendar year or
portion thereof has been extended. Manufacturer's Purchase
Credit claimed on an amended report may be used to satisfy tax
liability under the Use Tax Act or the Service Use Tax Act (i)
on qualifying purchases of production related tangible
personal property made after the date the amended report is
filed or (ii) assessed by the Department on qualifying
production related tangible personal property purchased on or
after September 1, 2004.
    If the purchaser is not the manufacturer or a graphic arts
producer, but rents or leases the use of the property to a
manufacturer or a graphic arts producer, the purchaser may
earn, report, and use Manufacturer's Purchase Credit in the
same manner as a manufacturer or graphic arts producer. A
purchaser shall not be entitled to any Manufacturer's Purchase
Credit for a purchase that is required to be reported and is
not timely reported as provided in this Section. A purchaser
remains liable for (i) any tax that was satisfied by use of a
Manufacturer's Purchase Credit, as of the date of purchase, if
that use is not timely reported as required in this Section and
(ii) for any applicable penalties and interest for failing to
pay the tax when due.
(Source: P.A. 93-24, eff. 6-20-03.)
 
    Section 20-20. The Service Occupation Tax Act is amended by
changing Sections 3-5 and 9 as follows:
 
    (35 ILCS 115/3-5)  (from Ch. 120, par. 439.103-5)
    Sec. 3-5. Exemptions. The following tangible personal
property is exempt from the tax imposed by this Act:
    (1) Personal property sold by a corporation, society,
association, foundation, institution, or organization, other
than a limited liability company, that is organized and
operated as a not-for-profit service enterprise for the benefit
of persons 65 years of age or older if the personal property
was not purchased by the enterprise for the purpose of resale
by the enterprise.
    (2) Personal property purchased by a not-for-profit
Illinois county fair association for use in conducting,
operating, or promoting the county fair.
    (3) Personal property purchased by any not-for-profit arts
or cultural organization that establishes, by proof required by
the Department by rule, that it has received an exemption under
Section 501(c)(3) of the Internal Revenue Code and that is
organized and operated primarily for the presentation or
support of arts or cultural programming, activities, or
services. These organizations include, but are not limited to,
music and dramatic arts organizations such as symphony
orchestras and theatrical groups, arts and cultural service
organizations, local arts councils, visual arts organizations,
and media arts organizations. On and after the effective date
of this amendatory Act of the 92nd General Assembly, however,
an entity otherwise eligible for this exemption shall not make
tax-free purchases unless it has an active identification
number issued by the Department.
    (4) Legal tender, currency, medallions, or gold or silver
coinage issued by the State of Illinois, the government of the
United States of America, or the government of any foreign
country, and bullion.
    (5) Until July 1, 2003 and beginning again on September 1,
2004, graphic arts machinery and equipment, including repair
and replacement parts, both new and used, and including that
manufactured on special order or purchased for lease, certified
by the purchaser to be used primarily for graphic arts
production. Equipment includes chemicals or chemicals acting
as catalysts but only if the chemicals or chemicals acting as
catalysts effect a direct and immediate change upon a graphic
arts product.
    (6) Personal property sold by a teacher-sponsored student
organization affiliated with an elementary or secondary school
located in Illinois.
    (7) Farm machinery and equipment, both new and used,
including that manufactured on special order, certified by the
purchaser to be used primarily for production agriculture or
State or federal agricultural programs, including individual
replacement parts for the machinery and equipment, including
machinery and equipment purchased for lease, and including
implements of husbandry defined in Section 1-130 of the
Illinois Vehicle Code, farm machinery and agricultural
chemical and fertilizer spreaders, and nurse wagons required to
be registered under Section 3-809 of the Illinois Vehicle Code,
but excluding other motor vehicles required to be registered
under the Illinois Vehicle Code. Horticultural polyhouses or
hoop houses used for propagating, growing, or overwintering
plants shall be considered farm machinery and equipment under
this item (7). Agricultural chemical tender tanks and dry boxes
shall include units sold separately from a motor vehicle
required to be licensed and units sold mounted on a motor
vehicle required to be licensed if the selling price of the
tender is separately stated.
    Farm machinery and equipment shall include precision
farming equipment that is installed or purchased to be
installed on farm machinery and equipment including, but not
limited to, tractors, harvesters, sprayers, planters, seeders,
or spreaders. Precision farming equipment includes, but is not
limited to, soil testing sensors, computers, monitors,
software, global positioning and mapping systems, and other
such equipment.
    Farm machinery and equipment also includes computers,
sensors, software, and related equipment used primarily in the
computer-assisted operation of production agriculture
facilities, equipment, and activities such as, but not limited
to, the collection, monitoring, and correlation of animal and
crop data for the purpose of formulating animal diets and
agricultural chemicals. This item (7) is exempt from the
provisions of Section 3-55.
    (8) Fuel and petroleum products sold to or used by an air
common carrier, certified by the carrier to be used for
consumption, shipment, or storage in the conduct of its
business as an air common carrier, for a flight destined for or
returning from a location or locations outside the United
States without regard to previous or subsequent domestic
stopovers.
    (9) Proceeds of mandatory service charges separately
stated on customers' bills for the purchase and consumption of
food and beverages, to the extent that the proceeds of the
service charge are in fact turned over as tips or as a
substitute for tips to the employees who participate directly
in preparing, serving, hosting or cleaning up the food or
beverage function with respect to which the service charge is
imposed.
    (10) Until July 1, 2003, oil field exploration, drilling,
and production equipment, including (i) rigs and parts of rigs,
rotary rigs, cable tool rigs, and workover rigs, (ii) pipe and
tubular goods, including casing and drill strings, (iii) pumps
and pump-jack units, (iv) storage tanks and flow lines, (v) any
individual replacement part for oil field exploration,
drilling, and production equipment, and (vi) machinery and
equipment purchased for lease; but excluding motor vehicles
required to be registered under the Illinois Vehicle Code.
    (11) Photoprocessing machinery and equipment, including
repair and replacement parts, both new and used, including that
manufactured on special order, certified by the purchaser to be
used primarily for photoprocessing, and including
photoprocessing machinery and equipment purchased for lease.
    (12) Until July 1, 2003, coal exploration, mining,
offhighway hauling, processing, maintenance, and reclamation
equipment, including replacement parts and equipment, and
including equipment purchased for lease, but excluding motor
vehicles required to be registered under the Illinois Vehicle
Code.
    (13) Food for human consumption that is to be consumed off
the premises where it is sold (other than alcoholic beverages,
soft drinks and food that has been prepared for immediate
consumption) and prescription and non-prescription medicines,
drugs, medical appliances, and insulin, urine testing
materials, syringes, and needles used by diabetics, for human
use, when purchased for use by a person receiving medical
assistance under Article 5 of the Illinois Public Aid Code who
resides in a licensed long-term care facility, as defined in
the Nursing Home Care Act.
    (14) Semen used for artificial insemination of livestock
for direct agricultural production.
    (15) Horses, or interests in horses, registered with and
meeting the requirements of any of the Arabian Horse Club
Registry of America, Appaloosa Horse Club, American Quarter
Horse Association, United States Trotting Association, or
Jockey Club, as appropriate, used for purposes of breeding or
racing for prizes.
    (16) Computers and communications equipment utilized for
any hospital purpose and equipment used in the diagnosis,
analysis, or treatment of hospital patients sold to a lessor
who leases the equipment, under a lease of one year or longer
executed or in effect at the time of the purchase, to a
hospital that has been issued an active tax exemption
identification number by the Department under Section 1g of the
Retailers' Occupation Tax Act.
    (17) Personal property sold to a lessor who leases the
property, under a lease of one year or longer executed or in
effect at the time of the purchase, to a governmental body that
has been issued an active tax exemption identification number
by the Department under Section 1g of the Retailers' Occupation
Tax Act.
    (18) Beginning with taxable years ending on or after
December 31, 1995 and ending with taxable years ending on or
before December 31, 2004, personal property that is donated for
disaster relief to be used in a State or federally declared
disaster area in Illinois or bordering Illinois by a
manufacturer or retailer that is registered in this State to a
corporation, society, association, foundation, or institution
that has been issued a sales tax exemption identification
number by the Department that assists victims of the disaster
who reside within the declared disaster area.
    (19) Beginning with taxable years ending on or after
December 31, 1995 and ending with taxable years ending on or
before December 31, 2004, personal property that is used in the
performance of infrastructure repairs in this State, including
but not limited to municipal roads and streets, access roads,
bridges, sidewalks, waste disposal systems, water and sewer
line extensions, water distribution and purification
facilities, storm water drainage and retention facilities, and
sewage treatment facilities, resulting from a State or
federally declared disaster in Illinois or bordering Illinois
when such repairs are initiated on facilities located in the
declared disaster area within 6 months after the disaster.
    (20) Beginning July 1, 1999, game or game birds sold at a
"game breeding and hunting preserve area" or an "exotic game
hunting area" as those terms are used in the Wildlife Code or
at a hunting enclosure approved through rules adopted by the
Department of Natural Resources. This paragraph is exempt from
the provisions of Section 3-55.
    (21) A motor vehicle, as that term is defined in Section
1-146 of the Illinois Vehicle Code, that is donated to a
corporation, limited liability company, society, association,
foundation, or institution that is determined by the Department
to be organized and operated exclusively for educational
purposes. For purposes of this exemption, "a corporation,
limited liability company, society, association, foundation,
or institution organized and operated exclusively for
educational purposes" means all tax-supported public schools,
private schools that offer systematic instruction in useful
branches of learning by methods common to public schools and
that compare favorably in their scope and intensity with the
course of study presented in tax-supported schools, and
vocational or technical schools or institutes organized and
operated exclusively to provide a course of study of not less
than 6 weeks duration and designed to prepare individuals to
follow a trade or to pursue a manual, technical, mechanical,
industrial, business, or commercial occupation.
    (22) Beginning January 1, 2000, personal property,
including food, purchased through fundraising events for the
benefit of a public or private elementary or secondary school,
a group of those schools, or one or more school districts if
the events are sponsored by an entity recognized by the school
district that consists primarily of volunteers and includes
parents and teachers of the school children. This paragraph
does not apply to fundraising events (i) for the benefit of
private home instruction or (ii) for which the fundraising
entity purchases the personal property sold at the events from
another individual or entity that sold the property for the
purpose of resale by the fundraising entity and that profits
from the sale to the fundraising entity. This paragraph is
exempt from the provisions of Section 3-55.
    (23) Beginning January 1, 2000 and through December 31,
2001, new or used automatic vending machines that prepare and
serve hot food and beverages, including coffee, soup, and other
items, and replacement parts for these machines. Beginning
January 1, 2002 and through June 30, 2003, machines and parts
for machines used in commercial, coin-operated amusement and
vending business if a use or occupation tax is paid on the
gross receipts derived from the use of the commercial,
coin-operated amusement and vending machines. This paragraph
is exempt from the provisions of Section 3-55.
    (24) Beginning on the effective date of this amendatory Act
of the 92nd General Assembly, computers and communications
equipment utilized for any hospital purpose and equipment used
in the diagnosis, analysis, or treatment of hospital patients
sold to a lessor who leases the equipment, under a lease of one
year or longer executed or in effect at the time of the
purchase, to a hospital that has been issued an active tax
exemption identification number by the Department under
Section 1g of the Retailers' Occupation Tax Act. This paragraph
is exempt from the provisions of Section 3-55.
    (25) Beginning on the effective date of this amendatory Act
of the 92nd General Assembly, personal property sold to a
lessor who leases the property, under a lease of one year or
longer executed or in effect at the time of the purchase, to a
governmental body that has been issued an active tax exemption
identification number by the Department under Section 1g of the
Retailers' Occupation Tax Act. This paragraph is exempt from
the provisions of Section 3-55.
    (26) Beginning on January 1, 2002, tangible personal
property purchased from an Illinois retailer by a taxpayer
engaged in centralized purchasing activities in Illinois who
will, upon receipt of the property in Illinois, temporarily
store the property in Illinois (i) for the purpose of
subsequently transporting it outside this State for use or
consumption thereafter solely outside this State or (ii) for
the purpose of being processed, fabricated, or manufactured
into, attached to, or incorporated into other tangible personal
property to be transported outside this State and thereafter
used or consumed solely outside this State. The Director of
Revenue shall, pursuant to rules adopted in accordance with the
Illinois Administrative Procedure Act, issue a permit to any
taxpayer in good standing with the Department who is eligible
for the exemption under this paragraph (26). The permit issued
under this paragraph (26) shall authorize the holder, to the
extent and in the manner specified in the rules adopted under
this Act, to purchase tangible personal property from a
retailer exempt from the taxes imposed by this Act. Taxpayers
shall maintain all necessary books and records to substantiate
the use and consumption of all such tangible personal property
outside of the State of Illinois.
(Source: P.A. 92-16, eff. 6-28-01; 92-35, eff. 7-1-01; 92-227,
eff. 8-2-01; 92-337, eff. 8-10-01; 92-484, eff. 8-23-01;
92-488, eff. 8-23-01; 92-651, eff. 7-11-02; 93-24, eff.
6-20-03.)
 
    (35 ILCS 115/9)  (from Ch. 120, par. 439.109)
    Sec. 9. Each serviceman required or authorized to collect
the tax herein imposed shall pay to the Department the amount
of such tax at the time when he is required to file his return
for the period during which such tax was collectible, less a
discount of 2.1% prior to January 1, 1990, and 1.75% on and
after January 1, 1990, or $5 per calendar year, whichever is
greater, which is allowed to reimburse the serviceman for
expenses incurred in collecting the tax, keeping records,
preparing and filing returns, remitting the tax and supplying
data to the Department on request.
    Where such tangible personal property is sold under a
conditional sales contract, or under any other form of sale
wherein the payment of the principal sum, or a part thereof, is
extended beyond the close of the period for which the return is
filed, the serviceman, in collecting the tax may collect, for
each tax return period, only the tax applicable to the part of
the selling price actually received during such tax return
period.
    Except as provided hereinafter in this Section, on or
before the twentieth day of each calendar month, such
serviceman shall file a return for the preceding calendar month
in accordance with reasonable rules and regulations to be
promulgated by the Department of Revenue. Such return shall be
filed on a form prescribed by the Department and shall contain
such information as the Department may reasonably require.
    The Department may require returns to be filed on a
quarterly basis. If so required, a return for each calendar
quarter shall be filed on or before the twentieth day of the
calendar month following the end of such calendar quarter. The
taxpayer shall also file a return with the Department for each
of the first two months of each calendar quarter, on or before
the twentieth day of the following calendar month, stating:
        1. The name of the seller;
        2. The address of the principal place of business from
    which he engages in business as a serviceman in this State;
        3. The total amount of taxable receipts received by him
    during the preceding calendar month, including receipts
    from charge and time sales, but less all deductions allowed
    by law;
        4. The amount of credit provided in Section 2d of this
    Act;
        5. The amount of tax due;
        5-5. The signature of the taxpayer; and
        6. Such other reasonable information as the Department
    may require.
    If a taxpayer fails to sign a return within 30 days after
the proper notice and demand for signature by the Department,
the return shall be considered valid and any amount shown to be
due on the return shall be deemed assessed.
    Prior to October 1, 2003, and on and after September 1,
2004 a serviceman may accept a Manufacturer's Purchase Credit
certification from a purchaser in satisfaction of Service Use
Tax as provided in Section 3-70 of the Service Use Tax Act if
the purchaser provides the appropriate documentation as
required by Section 3-70 of the Service Use Tax Act. A
Manufacturer's Purchase Credit certification, accepted prior
to October 1, 2003 or on or after September 1, 2004 by a
serviceman as provided in Section 3-70 of the Service Use Tax
Act, may be used by that serviceman to satisfy Service
Occupation Tax liability in the amount claimed in the
certification, not to exceed 6.25% of the receipts subject to
tax from a qualifying purchase. A Manufacturer's Purchase
Credit reported on any original or amended return filed under
this Act after October 20, 2003 for reporting periods prior to
September 1, 2004 shall be disallowed. Manufacturer's Purchase
Credit reported on annual returns due on or after January 1,
2005 will be disallowed for periods prior to September 1, 2004.
No Manufacturer's Purchase Credit may be used after September
30, 2003 through August 31, 2004 to satisfy any tax liability
imposed under this Act, including any audit liability.
    If the serviceman's average monthly tax liability to the
Department does not exceed $200, the Department may authorize
his returns to be filed on a quarter annual basis, with the
return for January, February and March of a given year being
due by April 20 of such year; with the return for April, May
and June of a given year being due by July 20 of such year; with
the return for July, August and September of a given year being
due by October 20 of such year, and with the return for
October, November and December of a given year being due by
January 20 of the following year.
    If the serviceman's average monthly tax liability to the
Department does not exceed $50, the Department may authorize
his returns to be filed on an annual basis, with the return for
a given year being due by January 20 of the following year.
    Such quarter annual and annual returns, as to form and
substance, shall be subject to the same requirements as monthly
returns.
    Notwithstanding any other provision in this Act concerning
the time within which a serviceman may file his return, in the
case of any serviceman who ceases to engage in a kind of
business which makes him responsible for filing returns under
this Act, such serviceman shall file a final return under this
Act with the Department not more than 1 month after
discontinuing such business.
    Beginning October 1, 1993, a taxpayer who has an average
monthly tax liability of $150,000 or more shall make all
payments required by rules of the Department by electronic
funds transfer. Beginning October 1, 1994, a taxpayer who has
an average monthly tax liability of $100,000 or more shall make
all payments required by rules of the Department by electronic
funds transfer. Beginning October 1, 1995, a taxpayer who has
an average monthly tax liability of $50,000 or more shall make
all payments required by rules of the Department by electronic
funds transfer. Beginning October 1, 2000, a taxpayer who has
an annual tax liability of $200,000 or more shall make all
payments required by rules of the Department by electronic
funds transfer. The term "annual tax liability" shall be the
sum of the taxpayer's liabilities under this Act, and under all
other State and local occupation and use tax laws administered
by the Department, for the immediately preceding calendar year.
The term "average monthly tax liability" means the sum of the
taxpayer's liabilities under this Act, and under all other
State and local occupation and use tax laws administered by the
Department, for the immediately preceding calendar year
divided by 12. Beginning on October 1, 2002, a taxpayer who has
a tax liability in the amount set forth in subsection (b) of
Section 2505-210 of the Department of Revenue Law shall make
all payments required by rules of the Department by electronic
funds transfer.
    Before August 1 of each year beginning in 1993, the
Department shall notify all taxpayers required to make payments
by electronic funds transfer. All taxpayers required to make
payments by electronic funds transfer shall make those payments
for a minimum of one year beginning on October 1.
    Any taxpayer not required to make payments by electronic
funds transfer may make payments by electronic funds transfer
with the permission of the Department.
    All taxpayers required to make payment by electronic funds
transfer and any taxpayers authorized to voluntarily make
payments by electronic funds transfer shall make those payments
in the manner authorized by the Department.
    The Department shall adopt such rules as are necessary to
effectuate a program of electronic funds transfer and the
requirements of this Section.
    Where a serviceman collects the tax with respect to the
selling price of tangible personal property which he sells and
the purchaser thereafter returns such tangible personal
property and the serviceman refunds the selling price thereof
to the purchaser, such serviceman shall also refund, to the
purchaser, the tax so collected from the purchaser. When filing
his return for the period in which he refunds such tax to the
purchaser, the serviceman may deduct the amount of the tax so
refunded by him to the purchaser from any other Service
Occupation Tax, Service Use Tax, Retailers' Occupation Tax or
Use Tax which such serviceman may be required to pay or remit
to the Department, as shown by such return, provided that the
amount of the tax to be deducted shall previously have been
remitted to the Department by such serviceman. If the
serviceman shall not previously have remitted the amount of
such tax to the Department, he shall be entitled to no
deduction hereunder upon refunding such tax to the purchaser.
    If experience indicates such action to be practicable, the
Department may prescribe and furnish a combination or joint
return which will enable servicemen, who are required to file
returns hereunder and also under the Retailers' Occupation Tax
Act, the Use Tax Act or the Service Use Tax Act, to furnish all
the return information required by all said Acts on the one
form.
    Where the serviceman has more than one business registered
with the Department under separate registrations hereunder,
such serviceman shall file separate returns for each registered
business.
    Beginning January 1, 1990, each month the Department shall
pay into the Local Government Tax Fund the revenue realized for
the preceding month from the 1% tax on sales of food for human
consumption which is to be consumed off the premises where it
is sold (other than alcoholic beverages, soft drinks and food
which has been prepared for immediate consumption) and
prescription and nonprescription medicines, drugs, medical
appliances and insulin, urine testing materials, syringes and
needles used by diabetics.
    Beginning January 1, 1990, each month the Department shall
pay into the County and Mass Transit District Fund 4% of the
revenue realized for the preceding month from the 6.25% general
rate.
    Beginning August 1, 2000, each month the Department shall
pay into the County and Mass Transit District Fund 20% of the
net revenue realized for the preceding month from the 1.25%
rate on the selling price of motor fuel and gasohol.
    Beginning January 1, 1990, each month the Department shall
pay into the Local Government Tax Fund 16% of the revenue
realized for the preceding month from the 6.25% general rate on
transfers of tangible personal property.
    Beginning August 1, 2000, each month the Department shall
pay into the Local Government Tax Fund 80% of the net revenue
realized for the preceding month from the 1.25% rate on the
selling price of motor fuel and gasohol.
    Of the remainder of the moneys received by the Department
pursuant to this Act, (a) 1.75% thereof shall be paid into the
Build Illinois Fund and (b) prior to July 1, 1989, 2.2% and on
and after July 1, 1989, 3.8% thereof shall be paid into the
Build Illinois Fund; provided, however, that if in any fiscal
year the sum of (1) the aggregate of 2.2% or 3.8%, as the case
may be, of the moneys received by the Department and required
to be paid into the Build Illinois Fund pursuant to Section 3
of the Retailers' Occupation Tax Act, Section 9 of the Use Tax
Act, Section 9 of the Service Use Tax Act, and Section 9 of the
Service Occupation Tax Act, such Acts being hereinafter called
the "Tax Acts" and such aggregate of 2.2% or 3.8%, as the case
may be, of moneys being hereinafter called the "Tax Act
Amount", and (2) the amount transferred to the Build Illinois
Fund from the State and Local Sales Tax Reform Fund shall be
less than the Annual Specified Amount (as defined in Section 3
of the Retailers' Occupation Tax Act), an amount equal to the
difference shall be immediately paid into the Build Illinois
Fund from other moneys received by the Department pursuant to
the Tax Acts; and further provided, that if on the last
business day of any month the sum of (1) the Tax Act Amount
required to be deposited into the Build Illinois Account in the
Build Illinois Fund during such month and (2) the amount
transferred during such month to the Build Illinois Fund from
the State and Local Sales Tax Reform Fund shall have been less
than 1/12 of the Annual Specified Amount, an amount equal to
the difference shall be immediately paid into the Build
Illinois Fund from other moneys received by the Department
pursuant to the Tax Acts; and, further provided, that in no
event shall the payments required under the preceding proviso
result in aggregate payments into the Build Illinois Fund
pursuant to this clause (b) for any fiscal year in excess of
the greater of (i) the Tax Act Amount or (ii) the Annual
Specified Amount for such fiscal year; and, further provided,
that the amounts payable into the Build Illinois Fund under
this clause (b) shall be payable only until such time as the
aggregate amount on deposit under each trust indenture securing
Bonds issued and outstanding pursuant to the Build Illinois
Bond Act is sufficient, taking into account any future
investment income, to fully provide, in accordance with such
indenture, for the defeasance of or the payment of the
principal of, premium, if any, and interest on the Bonds
secured by such indenture and on any Bonds expected to be
issued thereafter and all fees and costs payable with respect
thereto, all as certified by the Director of the Bureau of the
Budget (now Governor's Office of Management and Budget). If on
the last business day of any month in which Bonds are
outstanding pursuant to the Build Illinois Bond Act, the
aggregate of the moneys deposited in the Build Illinois Bond
Account in the Build Illinois Fund in such month shall be less
than the amount required to be transferred in such month from
the Build Illinois Bond Account to the Build Illinois Bond
Retirement and Interest Fund pursuant to Section 13 of the
Build Illinois Bond Act, an amount equal to such deficiency
shall be immediately paid from other moneys received by the
Department pursuant to the Tax Acts to the Build Illinois Fund;
provided, however, that any amounts paid to the Build Illinois
Fund in any fiscal year pursuant to this sentence shall be
deemed to constitute payments pursuant to clause (b) of the
preceding sentence and shall reduce the amount otherwise
payable for such fiscal year pursuant to clause (b) of the
preceding sentence. The moneys received by the Department
pursuant to this Act and required to be deposited into the
Build Illinois Fund are subject to the pledge, claim and charge
set forth in Section 12 of the Build Illinois Bond Act.
    Subject to payment of amounts into the Build Illinois Fund
as provided in the preceding paragraph or in any amendment
thereto hereafter enacted, the following specified monthly
installment of the amount requested in the certificate of the
Chairman of the Metropolitan Pier and Exposition Authority
provided under Section 8.25f of the State Finance Act, but not
in excess of the sums designated as "Total Deposit", shall be
deposited in the aggregate from collections under Section 9 of
the Use Tax Act, Section 9 of the Service Use Tax Act, Section
9 of the Service Occupation Tax Act, and Section 3 of the
Retailers' Occupation Tax Act into the McCormick Place
Expansion Project Fund in the specified fiscal years.
Fiscal YearTotal Deposit
1993         $0
1994 53,000,000
1995 58,000,000
1996 61,000,000
1997 64,000,000
1998 68,000,000
1999 71,000,000
2000 75,000,000
2001 80,000,000
2002 93,000,000
2003 99,000,000
2004103,000,000
2005108,000,000
2006113,000,000
2007119,000,000
2008126,000,000
2009132,000,000
2010139,000,000
2011146,000,000
2012153,000,000
2013161,000,000
2014170,000,000
2015179,000,000
2016189,000,000
2017199,000,000
2018210,000,000
2019221,000,000
2020233,000,000
2021246,000,000
2022260,000,000
2023 and275,000,000
each fiscal year
thereafter that bonds
are outstanding under
Section 13.2 of the
Metropolitan Pier and
Exposition Authority Act,
but not after fiscal year 2042.
    Beginning July 20, 1993 and in each month of each fiscal
year thereafter, one-eighth of the amount requested in the
certificate of the Chairman of the Metropolitan Pier and
Exposition Authority for that fiscal year, less the amount
deposited into the McCormick Place Expansion Project Fund by
the State Treasurer in the respective month under subsection
(g) of Section 13 of the Metropolitan Pier and Exposition
Authority Act, plus cumulative deficiencies in the deposits
required under this Section for previous months and years,
shall be deposited into the McCormick Place Expansion Project
Fund, until the full amount requested for the fiscal year, but
not in excess of the amount specified above as "Total Deposit",
has been deposited.
    Subject to payment of amounts into the Build Illinois Fund
and the McCormick Place Expansion Project Fund pursuant to the
preceding paragraphs or in any amendments thereto hereafter
enacted, beginning July 1, 1993, the Department shall each
month pay into the Illinois Tax Increment Fund 0.27% of 80% of
the net revenue realized for the preceding month from the 6.25%
general rate on the selling price of tangible personal
property.
    Subject to payment of amounts into the Build Illinois Fund
and the McCormick Place Expansion Project Fund pursuant to the
preceding paragraphs or in any amendments thereto hereafter
enacted, beginning with the receipt of the first report of
taxes paid by an eligible business and continuing for a 25-year
period, the Department shall each month pay into the Energy
Infrastructure Fund 80% of the net revenue realized from the
6.25% general rate on the selling price of Illinois-mined coal
that was sold to an eligible business. For purposes of this
paragraph, the term "eligible business" means a new electric
generating facility certified pursuant to Section 605-332 of
the Department of Commerce and Economic Opportunity Community
Affairs Law of the Civil Administrative Code of Illinois.
    Remaining moneys received by the Department pursuant to
this Act shall be paid into the General Revenue Fund of the
State Treasury.
    The Department may, upon separate written notice to a
taxpayer, require the taxpayer to prepare and file with the
Department on a form prescribed by the Department within not
less than 60 days after receipt of the notice an annual
information return for the tax year specified in the notice.
Such annual return to the Department shall include a statement
of gross receipts as shown by the taxpayer's last Federal
income tax return. If the total receipts of the business as
reported in the Federal income tax return do not agree with the
gross receipts reported to the Department of Revenue for the
same period, the taxpayer shall attach to his annual return a
schedule showing a reconciliation of the 2 amounts and the
reasons for the difference. The taxpayer's annual return to the
Department shall also disclose the cost of goods sold by the
taxpayer during the year covered by such return, opening and
closing inventories of such goods for such year, cost of goods
used from stock or taken from stock and given away by the
taxpayer during such year, pay roll information of the
taxpayer's business during such year and any additional
reasonable information which the Department deems would be
helpful in determining the accuracy of the monthly, quarterly
or annual returns filed by such taxpayer as hereinbefore
provided for in this Section.
    If the annual information return required by this Section
is not filed when and as required, the taxpayer shall be liable
as follows:
        (i) Until January 1, 1994, the taxpayer shall be liable
    for a penalty equal to 1/6 of 1% of the tax due from such
    taxpayer under this Act during the period to be covered by
    the annual return for each month or fraction of a month
    until such return is filed as required, the penalty to be
    assessed and collected in the same manner as any other
    penalty provided for in this Act.
        (ii) On and after January 1, 1994, the taxpayer shall
    be liable for a penalty as described in Section 3-4 of the
    Uniform Penalty and Interest Act.
    The chief executive officer, proprietor, owner or highest
ranking manager shall sign the annual return to certify the
accuracy of the information contained therein. Any person who
willfully signs the annual return containing false or
inaccurate information shall be guilty of perjury and punished
accordingly. The annual return form prescribed by the
Department shall include a warning that the person signing the
return may be liable for perjury.
    The foregoing portion of this Section concerning the filing
of an annual information return shall not apply to a serviceman
who is not required to file an income tax return with the
United States Government.
    As soon as possible after the first day of each month, upon
certification of the Department of Revenue, the Comptroller
shall order transferred and the Treasurer shall transfer from
the General Revenue Fund to the Motor Fuel Tax Fund an amount
equal to 1.7% of 80% of the net revenue realized under this Act
for the second preceding month. Beginning April 1, 2000, this
transfer is no longer required and shall not be made.
    Net revenue realized for a month shall be the revenue
collected by the State pursuant to this Act, less the amount
paid out during that month as refunds to taxpayers for
overpayment of liability.
    For greater simplicity of administration, it shall be
permissible for manufacturers, importers and wholesalers whose
products are sold by numerous servicemen in Illinois, and who
wish to do so, to assume the responsibility for accounting and
paying to the Department all tax accruing under this Act with
respect to such sales, if the servicemen who are affected do
not make written objection to the Department to this
arrangement.
(Source: P.A. 92-12, eff. 7-1-01; 92-208, eff. 8-2-01; 92-492,
eff. 1-1-02; 92-600, eff. 6-28-02; 92-651, eff. 7-11-02; 93-24,
eff. 6-20-03; revised 10-15-03.)
 
    Section 20-25. The Retailers' Occupation Tax Act is amended
by changing Sections 2-5 and 3 as follows:
 
    (35 ILCS 120/2-5)  (from Ch. 120, par. 441-5)
    Sec. 2-5. Exemptions. Gross receipts from proceeds from the
sale of the following tangible personal property are exempt
from the tax imposed by this Act:
    (1) Farm chemicals.
    (2) Farm machinery and equipment, both new and used,
including that manufactured on special order, certified by the
purchaser to be used primarily for production agriculture or
State or federal agricultural programs, including individual
replacement parts for the machinery and equipment, including
machinery and equipment purchased for lease, and including
implements of husbandry defined in Section 1-130 of the
Illinois Vehicle Code, farm machinery and agricultural
chemical and fertilizer spreaders, and nurse wagons required to
be registered under Section 3-809 of the Illinois Vehicle Code,
but excluding other motor vehicles required to be registered
under the Illinois Vehicle Code. Horticultural polyhouses or
hoop houses used for propagating, growing, or overwintering
plants shall be considered farm machinery and equipment under
this item (2). Agricultural chemical tender tanks and dry boxes
shall include units sold separately from a motor vehicle
required to be licensed and units sold mounted on a motor
vehicle required to be licensed, if the selling price of the
tender is separately stated.
    Farm machinery and equipment shall include precision
farming equipment that is installed or purchased to be
installed on farm machinery and equipment including, but not
limited to, tractors, harvesters, sprayers, planters, seeders,
or spreaders. Precision farming equipment includes, but is not
limited to, soil testing sensors, computers, monitors,
software, global positioning and mapping systems, and other
such equipment.
    Farm machinery and equipment also includes computers,
sensors, software, and related equipment used primarily in the
computer-assisted operation of production agriculture
facilities, equipment, and activities such as, but not limited
to, the collection, monitoring, and correlation of animal and
crop data for the purpose of formulating animal diets and
agricultural chemicals. This item (7) is exempt from the
provisions of Section 2-70.
    (3) Until July 1, 2003, distillation machinery and
equipment, sold as a unit or kit, assembled or installed by the
retailer, certified by the user to be used only for the
production of ethyl alcohol that will be used for consumption
as motor fuel or as a component of motor fuel for the personal
use of the user, and not subject to sale or resale.
    (4) Until July 1, 2003 and beginning again September 1,
2004, graphic arts machinery and equipment, including repair
and replacement parts, both new and used, and including that
manufactured on special order or purchased for lease, certified
by the purchaser to be used primarily for graphic arts
production. Equipment includes chemicals or chemicals acting
as catalysts but only if the chemicals or chemicals acting as
catalysts effect a direct and immediate change upon a graphic
arts product.
    (5) A motor vehicle of the first division, a motor vehicle
of the second division that is a self-contained motor vehicle
designed or permanently converted to provide living quarters
for recreational, camping, or travel use, with direct walk
through access to the living quarters from the driver's seat,
or a motor vehicle of the second division that is of the van
configuration designed for the transportation of not less than
7 nor more than 16 passengers, as defined in Section 1-146 of
the Illinois Vehicle Code, that is used for automobile renting,
as defined in the Automobile Renting Occupation and Use Tax
Act.
    (6) Personal property sold by a teacher-sponsored student
organization affiliated with an elementary or secondary school
located in Illinois.
    (7) Until July 1, 2003, proceeds of that portion of the
selling price of a passenger car the sale of which is subject
to the Replacement Vehicle Tax.
    (8) Personal property sold to an Illinois county fair
association for use in conducting, operating, or promoting the
county fair.
    (9) Personal property sold to a not-for-profit arts or
cultural organization that establishes, by proof required by
the Department by rule, that it has received an exemption under
Section 501(c)(3) of the Internal Revenue Code and that is
organized and operated primarily for the presentation or
support of arts or cultural programming, activities, or
services. These organizations include, but are not limited to,
music and dramatic arts organizations such as symphony
orchestras and theatrical groups, arts and cultural service
organizations, local arts councils, visual arts organizations,
and media arts organizations. On and after the effective date
of this amendatory Act of the 92nd General Assembly, however,
an entity otherwise eligible for this exemption shall not make
tax-free purchases unless it has an active identification
number issued by the Department.
    (10) Personal property sold by a corporation, society,
association, foundation, institution, or organization, other
than a limited liability company, that is organized and
operated as a not-for-profit service enterprise for the benefit
of persons 65 years of age or older if the personal property
was not purchased by the enterprise for the purpose of resale
by the enterprise.
    (11) Personal property sold to a governmental body, to a
corporation, society, association, foundation, or institution
organized and operated exclusively for charitable, religious,
or educational purposes, or to a not-for-profit corporation,
society, association, foundation, institution, or organization
that has no compensated officers or employees and that is
organized and operated primarily for the recreation of persons
55 years of age or older. A limited liability company may
qualify for the exemption under this paragraph only if the
limited liability company is organized and operated
exclusively for educational purposes. On and after July 1,
1987, however, no entity otherwise eligible for this exemption
shall make tax-free purchases unless it has an active
identification number issued by the Department.
    (12) Tangible personal property sold to interstate
carriers for hire for use as rolling stock moving in interstate
commerce or to lessors under leases of one year or longer
executed or in effect at the time of purchase by interstate
carriers for hire for use as rolling stock moving in interstate
commerce and equipment operated by a telecommunications
provider, licensed as a common carrier by the Federal
Communications Commission, which is permanently installed in
or affixed to aircraft moving in interstate commerce.
    (12-5) On and after July 1, 2003, motor vehicles of the
second division with a gross vehicle weight in excess of 8,000
pounds that are subject to the commercial distribution fee
imposed under Section 3-815.1 of the Illinois Vehicle Code.
This exemption applies to repair and replacement parts added
after the initial purchase of such a motor vehicle if that
motor vehicle is used in a manner that would qualify for the
rolling stock exemption otherwise provided for in this Act.
    (13) Proceeds from sales to owners, lessors, or shippers of
tangible personal property that is utilized by interstate
carriers for hire for use as rolling stock moving in interstate
commerce and equipment operated by a telecommunications
provider, licensed as a common carrier by the Federal
Communications Commission, which is permanently installed in
or affixed to aircraft moving in interstate commerce.
    (14) Machinery and equipment that will be used by the
purchaser, or a lessee of the purchaser, primarily in the
process of manufacturing or assembling tangible personal
property for wholesale or retail sale or lease, whether the
sale or lease is made directly by the manufacturer or by some
other person, whether the materials used in the process are
owned by the manufacturer or some other person, or whether the
sale or lease is made apart from or as an incident to the
seller's engaging in the service occupation of producing
machines, tools, dies, jigs, patterns, gauges, or other similar
items of no commercial value on special order for a particular
purchaser.
    (15) Proceeds of mandatory service charges separately
stated on customers' bills for purchase and consumption of food
and beverages, to the extent that the proceeds of the service
charge are in fact turned over as tips or as a substitute for
tips to the employees who participate directly in preparing,
serving, hosting or cleaning up the food or beverage function
with respect to which the service charge is imposed.
    (16) Petroleum products sold to a purchaser if the seller
is prohibited by federal law from charging tax to the
purchaser.
    (17) Tangible personal property sold to a common carrier by
rail or motor that receives the physical possession of the
property in Illinois and that transports the property, or
shares with another common carrier in the transportation of the
property, out of Illinois on a standard uniform bill of lading
showing the seller of the property as the shipper or consignor
of the property to a destination outside Illinois, for use
outside Illinois.
    (18) Legal tender, currency, medallions, or gold or silver
coinage issued by the State of Illinois, the government of the
United States of America, or the government of any foreign
country, and bullion.
    (19) Until July 1 2003, oil field exploration, drilling,
and production equipment, including (i) rigs and parts of rigs,
rotary rigs, cable tool rigs, and workover rigs, (ii) pipe and
tubular goods, including casing and drill strings, (iii) pumps
and pump-jack units, (iv) storage tanks and flow lines, (v) any
individual replacement part for oil field exploration,
drilling, and production equipment, and (vi) machinery and
equipment purchased for lease; but excluding motor vehicles
required to be registered under the Illinois Vehicle Code.
    (20) Photoprocessing machinery and equipment, including
repair and replacement parts, both new and used, including that
manufactured on special order, certified by the purchaser to be
used primarily for photoprocessing, and including
photoprocessing machinery and equipment purchased for lease.
    (21) Until July 1, 2003, coal exploration, mining,
offhighway hauling, processing, maintenance, and reclamation
equipment, including replacement parts and equipment, and
including equipment purchased for lease, but excluding motor
vehicles required to be registered under the Illinois Vehicle
Code.
    (22) Fuel and petroleum products sold to or used by an air
carrier, certified by the carrier to be used for consumption,
shipment, or storage in the conduct of its business as an air
common carrier, for a flight destined for or returning from a
location or locations outside the United States without regard
to previous or subsequent domestic stopovers.
    (23) A transaction in which the purchase order is received
by a florist who is located outside Illinois, but who has a
florist located in Illinois deliver the property to the
purchaser or the purchaser's donee in Illinois.
    (24) Fuel consumed or used in the operation of ships,
barges, or vessels that are used primarily in or for the
transportation of property or the conveyance of persons for
hire on rivers bordering on this State if the fuel is delivered
by the seller to the purchaser's barge, ship, or vessel while
it is afloat upon that bordering river.
    (25) A motor vehicle sold in this State to a nonresident
even though the motor vehicle is delivered to the nonresident
in this State, if the motor vehicle is not to be titled in this
State, and if a drive-away permit is issued to the motor
vehicle as provided in Section 3-603 of the Illinois Vehicle
Code or if the nonresident purchaser has vehicle registration
plates to transfer to the motor vehicle upon returning to his
or her home state. The issuance of the drive-away permit or
having the out-of-state registration plates to be transferred
is prima facie evidence that the motor vehicle will not be
titled in this State.
    (26) Semen used for artificial insemination of livestock
for direct agricultural production.
    (27) Horses, or interests in horses, registered with and
meeting the requirements of any of the Arabian Horse Club
Registry of America, Appaloosa Horse Club, American Quarter
Horse Association, United States Trotting Association, or
Jockey Club, as appropriate, used for purposes of breeding or
racing for prizes.
    (28) Computers and communications equipment utilized for
any hospital purpose and equipment used in the diagnosis,
analysis, or treatment of hospital patients sold to a lessor
who leases the equipment, under a lease of one year or longer
executed or in effect at the time of the purchase, to a
hospital that has been issued an active tax exemption
identification number by the Department under Section 1g of
this Act.
    (29) Personal property sold to a lessor who leases the
property, under a lease of one year or longer executed or in
effect at the time of the purchase, to a governmental body that
has been issued an active tax exemption identification number
by the Department under Section 1g of this Act.
    (30) Beginning with taxable years ending on or after
December 31, 1995 and ending with taxable years ending on or
before December 31, 2004, personal property that is donated for
disaster relief to be used in a State or federally declared
disaster area in Illinois or bordering Illinois by a
manufacturer or retailer that is registered in this State to a
corporation, society, association, foundation, or institution
that has been issued a sales tax exemption identification
number by the Department that assists victims of the disaster
who reside within the declared disaster area.
    (31) Beginning with taxable years ending on or after
December 31, 1995 and ending with taxable years ending on or
before December 31, 2004, personal property that is used in the
performance of infrastructure repairs in this State, including
but not limited to municipal roads and streets, access roads,
bridges, sidewalks, waste disposal systems, water and sewer
line extensions, water distribution and purification
facilities, storm water drainage and retention facilities, and
sewage treatment facilities, resulting from a State or
federally declared disaster in Illinois or bordering Illinois
when such repairs are initiated on facilities located in the
declared disaster area within 6 months after the disaster.
    (32) Beginning July 1, 1999, game or game birds sold at a
"game breeding and hunting preserve area" or an "exotic game
hunting area" as those terms are used in the Wildlife Code or
at a hunting enclosure approved through rules adopted by the
Department of Natural Resources. This paragraph is exempt from
the provisions of Section 2-70.
    (33) A motor vehicle, as that term is defined in Section
1-146 of the Illinois Vehicle Code, that is donated to a
corporation, limited liability company, society, association,
foundation, or institution that is determined by the Department
to be organized and operated exclusively for educational
purposes. For purposes of this exemption, "a corporation,
limited liability company, society, association, foundation,
or institution organized and operated exclusively for
educational purposes" means all tax-supported public schools,
private schools that offer systematic instruction in useful
branches of learning by methods common to public schools and
that compare favorably in their scope and intensity with the
course of study presented in tax-supported schools, and
vocational or technical schools or institutes organized and
operated exclusively to provide a course of study of not less
than 6 weeks duration and designed to prepare individuals to
follow a trade or to pursue a manual, technical, mechanical,
industrial, business, or commercial occupation.
    (34) Beginning January 1, 2000, personal property,
including food, purchased through fundraising events for the
benefit of a public or private elementary or secondary school,
a group of those schools, or one or more school districts if
the events are sponsored by an entity recognized by the school
district that consists primarily of volunteers and includes
parents and teachers of the school children. This paragraph
does not apply to fundraising events (i) for the benefit of
private home instruction or (ii) for which the fundraising
entity purchases the personal property sold at the events from
another individual or entity that sold the property for the
purpose of resale by the fundraising entity and that profits
from the sale to the fundraising entity. This paragraph is
exempt from the provisions of Section 2-70.
    (35) Beginning January 1, 2000 and through December 31,
2001, new or used automatic vending machines that prepare and
serve hot food and beverages, including coffee, soup, and other
items, and replacement parts for these machines. Beginning
January 1, 2002 and through June 30, 2003, machines and parts
for machines used in commercial, coin-operated amusement and
vending business if a use or occupation tax is paid on the
gross receipts derived from the use of the commercial,
coin-operated amusement and vending machines. This paragraph
is exempt from the provisions of Section 2-70.
    (35-5) Food for human consumption that is to be consumed
off the premises where it is sold (other than alcoholic
beverages, soft drinks, and food that has been prepared for
immediate consumption) and prescription and nonprescription
medicines, drugs, medical appliances, and insulin, urine
testing materials, syringes, and needles used by diabetics, for
human use, when purchased for use by a person receiving medical
assistance under Article 5 of the Illinois Public Aid Code who
resides in a licensed long-term care facility, as defined in
the Nursing Home Care Act.
    (36) Beginning August 2, 2001, computers and
communications equipment utilized for any hospital purpose and
equipment used in the diagnosis, analysis, or treatment of
hospital patients sold to a lessor who leases the equipment,
under a lease of one year or longer executed or in effect at
the time of the purchase, to a hospital that has been issued an
active tax exemption identification number by the Department
under Section 1g of this Act. This paragraph is exempt from the
provisions of Section 2-70.
    (37) Beginning August 2, 2001, personal property sold to a
lessor who leases the property, under a lease of one year or
longer executed or in effect at the time of the purchase, to a
governmental body that has been issued an active tax exemption
identification number by the Department under Section 1g of
this Act. This paragraph is exempt from the provisions of
Section 2-70.
    (38) Beginning on January 1, 2002, tangible personal
property purchased from an Illinois retailer by a taxpayer
engaged in centralized purchasing activities in Illinois who
will, upon receipt of the property in Illinois, temporarily
store the property in Illinois (i) for the purpose of
subsequently transporting it outside this State for use or
consumption thereafter solely outside this State or (ii) for
the purpose of being processed, fabricated, or manufactured
into, attached to, or incorporated into other tangible personal
property to be transported outside this State and thereafter
used or consumed solely outside this State. The Director of
Revenue shall, pursuant to rules adopted in accordance with the
Illinois Administrative Procedure Act, issue a permit to any
taxpayer in good standing with the Department who is eligible
for the exemption under this paragraph (38). The permit issued
under this paragraph (38) shall authorize the holder, to the
extent and in the manner specified in the rules adopted under
this Act, to purchase tangible personal property from a
retailer exempt from the taxes imposed by this Act. Taxpayers
shall maintain all necessary books and records to substantiate
the use and consumption of all such tangible personal property
outside of the State of Illinois.
(Source: P.A. 92-16, eff. 6-28-01; 92-35, eff. 7-1-01; 92-227,
eff. 8-2-01; 92-337, eff. 8-10-01; 92-484, eff. 8-23-01;
92-488, eff. 8-23-01; 92-651, eff. 7-11-02; 92-680, eff.
7-16-02; 93-23, eff. 6-20-03; 93-24, eff. 6-20-03; revised
9-11-03.)
 
    (35 ILCS 120/3)  (from Ch. 120, par. 442)
    Sec. 3. Except as provided in this Section, on or before
the twentieth day of each calendar month, every person engaged
in the business of selling tangible personal property at retail
in this State during the preceding calendar month shall file a
return with the Department, stating:
        1. The name of the seller;
        2. His residence address and the address of his
    principal place of business and the address of the
    principal place of business (if that is a different
    address) from which he engages in the business of selling
    tangible personal property at retail in this State;
        3. Total amount of receipts received by him during the
    preceding calendar month or quarter, as the case may be,
    from sales of tangible personal property, and from services
    furnished, by him during such preceding calendar month or
    quarter;
        4. Total amount received by him during the preceding
    calendar month or quarter on charge and time sales of
    tangible personal property, and from services furnished,
    by him prior to the month or quarter for which the return
    is filed;
        5. Deductions allowed by law;
        6. Gross receipts which were received by him during the
    preceding calendar month or quarter and upon the basis of
    which the tax is imposed;
        7. The amount of credit provided in Section 2d of this
    Act;
        8. The amount of tax due;
        9. The signature of the taxpayer; and
        10. Such other reasonable information as the
    Department may require.
    If a taxpayer fails to sign a return within 30 days after
the proper notice and demand for signature by the Department,
the return shall be considered valid and any amount shown to be
due on the return shall be deemed assessed.
    Each return shall be accompanied by the statement of
prepaid tax issued pursuant to Section 2e for which credit is
claimed.
    Prior to October 1, 2003, and on and after September 1,
2004 a retailer may accept a Manufacturer's Purchase Credit
certification from a purchaser in satisfaction of Use Tax as
provided in Section 3-85 of the Use Tax Act if the purchaser
provides the appropriate documentation as required by Section
3-85 of the Use Tax Act. A Manufacturer's Purchase Credit
certification, accepted by a retailer prior to October 1, 2003
and on and after September 1, 2004 as provided in Section 3-85
of the Use Tax Act, may be used by that retailer to satisfy
Retailers' Occupation Tax liability in the amount claimed in
the certification, not to exceed 6.25% of the receipts subject
to tax from a qualifying purchase. A Manufacturer's Purchase
Credit reported on any original or amended return filed under
this Act after October 20, 2003 for reporting periods prior to
September 1, 2004 shall be disallowed. Manufacturer's
Purchaser Credit reported on annual returns due on or after
January 1, 2005 will be disallowed for periods prior to
September 1, 2004. No Manufacturer's Purchase Credit may be
used after September 30, 2003 through August 31, 2004 to
satisfy any tax liability imposed under this Act, including any
audit liability.
    The Department may require returns to be filed on a
quarterly basis. If so required, a return for each calendar
quarter shall be filed on or before the twentieth day of the
calendar month following the end of such calendar quarter. The
taxpayer shall also file a return with the Department for each
of the first two months of each calendar quarter, on or before
the twentieth day of the following calendar month, stating:
        1. The name of the seller;
        2. The address of the principal place of business from
    which he engages in the business of selling tangible
    personal property at retail in this State;
        3. The total amount of taxable receipts received by him
    during the preceding calendar month from sales of tangible
    personal property by him during such preceding calendar
    month, including receipts from charge and time sales, but
    less all deductions allowed by law;
        4. The amount of credit provided in Section 2d of this
    Act;
        5. The amount of tax due; and
        6. Such other reasonable information as the Department
    may require.
    Beginning on October 1, 2003, any person who is not a
licensed distributor, importing distributor, or manufacturer,
as defined in the Liquor Control Act of 1934, but is engaged in
the business of selling, at retail, alcoholic liquor shall file
a statement with the Department of Revenue, in a format and at
a time prescribed by the Department, showing the total amount
paid for alcoholic liquor purchased during the preceding month
and such other information as is reasonably required by the
Department. The Department may adopt rules to require that this
statement be filed in an electronic or telephonic format. Such
rules may provide for exceptions from the filing requirements
of this paragraph. For the purposes of this paragraph, the term
"alcoholic liquor" shall have the meaning prescribed in the
Liquor Control Act of 1934.
    Beginning on October 1, 2003, every distributor, importing
distributor, and manufacturer of alcoholic liquor as defined in
the Liquor Control Act of 1934, shall file a statement with the
Department of Revenue, no later than the 10th day of the month
for the preceding month during which transactions occurred, by
electronic means, showing the total amount of gross receipts
from the sale of alcoholic liquor sold or distributed during
the preceding month to purchasers; identifying the purchaser to
whom it was sold or distributed; the purchaser's tax
registration number; and such other information reasonably
required by the Department. A copy of the monthly statement
shall be sent to the retailer no later than the 10th day of the
month for the preceding month during which transactions
occurred.
    If a total amount of less than $1 is payable, refundable or
creditable, such amount shall be disregarded if it is less than
50 cents and shall be increased to $1 if it is 50 cents or more.
    Beginning October 1, 1993, a taxpayer who has an average
monthly tax liability of $150,000 or more shall make all
payments required by rules of the Department by electronic
funds transfer. Beginning October 1, 1994, a taxpayer who has
an average monthly tax liability of $100,000 or more shall make
all payments required by rules of the Department by electronic
funds transfer. Beginning October 1, 1995, a taxpayer who has
an average monthly tax liability of $50,000 or more shall make
all payments required by rules of the Department by electronic
funds transfer. Beginning October 1, 2000, a taxpayer who has
an annual tax liability of $200,000 or more shall make all
payments required by rules of the Department by electronic
funds transfer. The term "annual tax liability" shall be the
sum of the taxpayer's liabilities under this Act, and under all
other State and local occupation and use tax laws administered
by the Department, for the immediately preceding calendar year.
The term "average monthly tax liability" shall be the sum of
the taxpayer's liabilities under this Act, and under all other
State and local occupation and use tax laws administered by the
Department, for the immediately preceding calendar year
divided by 12. Beginning on October 1, 2002, a taxpayer who has
a tax liability in the amount set forth in subsection (b) of
Section 2505-210 of the Department of Revenue Law shall make
all payments required by rules of the Department by electronic
funds transfer.
    Before August 1 of each year beginning in 1993, the
Department shall notify all taxpayers required to make payments
by electronic funds transfer. All taxpayers required to make
payments by electronic funds transfer shall make those payments
for a minimum of one year beginning on October 1.
    Any taxpayer not required to make payments by electronic
funds transfer may make payments by electronic funds transfer
with the permission of the Department.
    All taxpayers required to make payment by electronic funds
transfer and any taxpayers authorized to voluntarily make
payments by electronic funds transfer shall make those payments
in the manner authorized by the Department.
    The Department shall adopt such rules as are necessary to
effectuate a program of electronic funds transfer and the
requirements of this Section.
    Any amount which is required to be shown or reported on any
return or other document under this Act shall, if such amount
is not a whole-dollar amount, be increased to the nearest
whole-dollar amount in any case where the fractional part of a
dollar is 50 cents or more, and decreased to the nearest
whole-dollar amount where the fractional part of a dollar is
less than 50 cents.
    If the retailer is otherwise required to file a monthly
return and if the retailer's average monthly tax liability to
the Department does not exceed $200, the Department may
authorize his returns to be filed on a quarter annual basis,
with the return for January, February and March of a given year
being due by April 20 of such year; with the return for April,
May and June of a given year being due by July 20 of such year;
with the return for July, August and September of a given year
being due by October 20 of such year, and with the return for
October, November and December of a given year being due by
January 20 of the following year.
    If the retailer is otherwise required to file a monthly or
quarterly return and if the retailer's average monthly tax
liability with the Department does not exceed $50, the
Department may authorize his returns to be filed on an annual
basis, with the return for a given year being due by January 20
of the following year.
    Such quarter annual and annual returns, as to form and
substance, shall be subject to the same requirements as monthly
returns.
    Notwithstanding any other provision in this Act concerning
the time within which a retailer may file his return, in the
case of any retailer who ceases to engage in a kind of business
which makes him responsible for filing returns under this Act,
such retailer shall file a final return under this Act with the
Department not more than one month after discontinuing such
business.
    Where the same person has more than one business registered
with the Department under separate registrations under this
Act, such person may not file each return that is due as a
single return covering all such registered businesses, but
shall file separate returns for each such registered business.
    In addition, with respect to motor vehicles, watercraft,
aircraft, and trailers that are required to be registered with
an agency of this State, every retailer selling this kind of
tangible personal property shall file, with the Department,
upon a form to be prescribed and supplied by the Department, a
separate return for each such item of tangible personal
property which the retailer sells, except that if, in the same
transaction, (i) a retailer of aircraft, watercraft, motor
vehicles or trailers transfers more than one aircraft,
watercraft, motor vehicle or trailer to another aircraft,
watercraft, motor vehicle retailer or trailer retailer for the
purpose of resale or (ii) a retailer of aircraft, watercraft,
motor vehicles, or trailers transfers more than one aircraft,
watercraft, motor vehicle, or trailer to a purchaser for use as
a qualifying rolling stock as provided in Section 2-5 of this
Act, then that seller may report the transfer of all aircraft,
watercraft, motor vehicles or trailers involved in that
transaction to the Department on the same uniform
invoice-transaction reporting return form. For purposes of
this Section, "watercraft" means a Class 2, Class 3, or Class 4
watercraft as defined in Section 3-2 of the Boat Registration
and Safety Act, a personal watercraft, or any boat equipped
with an inboard motor.
    Any retailer who sells only motor vehicles, watercraft,
aircraft, or trailers that are required to be registered with
an agency of this State, so that all retailers' occupation tax
liability is required to be reported, and is reported, on such
transaction reporting returns and who is not otherwise required
to file monthly or quarterly returns, need not file monthly or
quarterly returns. However, those retailers shall be required
to file returns on an annual basis.
    The transaction reporting return, in the case of motor
vehicles or trailers that are required to be registered with an
agency of this State, shall be the same document as the Uniform
Invoice referred to in Section 5-402 of The Illinois Vehicle
Code and must show the name and address of the seller; the name
and address of the purchaser; the amount of the selling price
including the amount allowed by the retailer for traded-in
property, if any; the amount allowed by the retailer for the
traded-in tangible personal property, if any, to the extent to
which Section 1 of this Act allows an exemption for the value
of traded-in property; the balance payable after deducting such
trade-in allowance from the total selling price; the amount of
tax due from the retailer with respect to such transaction; the
amount of tax collected from the purchaser by the retailer on
such transaction (or satisfactory evidence that such tax is not
due in that particular instance, if that is claimed to be the
fact); the place and date of the sale; a sufficient
identification of the property sold; such other information as
is required in Section 5-402 of The Illinois Vehicle Code, and
such other information as the Department may reasonably
require.
    The transaction reporting return in the case of watercraft
or aircraft must show the name and address of the seller; the
name and address of the purchaser; the amount of the selling
price including the amount allowed by the retailer for
traded-in property, if any; the amount allowed by the retailer
for the traded-in tangible personal property, if any, to the
extent to which Section 1 of this Act allows an exemption for
the value of traded-in property; the balance payable after
deducting such trade-in allowance from the total selling price;
the amount of tax due from the retailer with respect to such
transaction; the amount of tax collected from the purchaser by
the retailer on such transaction (or satisfactory evidence that
such tax is not due in that particular instance, if that is
claimed to be the fact); the place and date of the sale, a
sufficient identification of the property sold, and such other
information as the Department may reasonably require.
    Such transaction reporting return shall be filed not later
than 20 days after the day of delivery of the item that is
being sold, but may be filed by the retailer at any time sooner
than that if he chooses to do so. The transaction reporting
return and tax remittance or proof of exemption from the
Illinois use tax may be transmitted to the Department by way of
the State agency with which, or State officer with whom the
tangible personal property must be titled or registered (if
titling or registration is required) if the Department and such
agency or State officer determine that this procedure will
expedite the processing of applications for title or
registration.
    With each such transaction reporting return, the retailer
shall remit the proper amount of tax due (or shall submit
satisfactory evidence that the sale is not taxable if that is
the case), to the Department or its agents, whereupon the
Department shall issue, in the purchaser's name, a use tax
receipt (or a certificate of exemption if the Department is
satisfied that the particular sale is tax exempt) which such
purchaser may submit to the agency with which, or State officer
with whom, he must title or register the tangible personal
property that is involved (if titling or registration is
required) in support of such purchaser's application for an
Illinois certificate or other evidence of title or registration
to such tangible personal property.
    No retailer's failure or refusal to remit tax under this
Act precludes a user, who has paid the proper tax to the
retailer, from obtaining his certificate of title or other
evidence of title or registration (if titling or registration
is required) upon satisfying the Department that such user has
paid the proper tax (if tax is due) to the retailer. The
Department shall adopt appropriate rules to carry out the
mandate of this paragraph.
    If the user who would otherwise pay tax to the retailer
wants the transaction reporting return filed and the payment of
the tax or proof of exemption made to the Department before the
retailer is willing to take these actions and such user has not
paid the tax to the retailer, such user may certify to the fact
of such delay by the retailer and may (upon the Department
being satisfied of the truth of such certification) transmit
the information required by the transaction reporting return
and the remittance for tax or proof of exemption directly to
the Department and obtain his tax receipt or exemption
determination, in which event the transaction reporting return
and tax remittance (if a tax payment was required) shall be
credited by the Department to the proper retailer's account
with the Department, but without the 2.1% or 1.75% discount
provided for in this Section being allowed. When the user pays
the tax directly to the Department, he shall pay the tax in the
same amount and in the same form in which it would be remitted
if the tax had been remitted to the Department by the retailer.
    Refunds made by the seller during the preceding return
period to purchasers, on account of tangible personal property
returned to the seller, shall be allowed as a deduction under
subdivision 5 of his monthly or quarterly return, as the case
may be, in case the seller had theretofore included the
receipts from the sale of such tangible personal property in a
return filed by him and had paid the tax imposed by this Act
with respect to such receipts.
    Where the seller is a corporation, the return filed on
behalf of such corporation shall be signed by the president,
vice-president, secretary or treasurer or by the properly
accredited agent of such corporation.
    Where the seller is a limited liability company, the return
filed on behalf of the limited liability company shall be
signed by a manager, member, or properly accredited agent of
the limited liability company.
    Except as provided in this Section, the retailer filing the
return under this Section shall, at the time of filing such
return, pay to the Department the amount of tax imposed by this
Act less a discount of 2.1% prior to January 1, 1990 and 1.75%
on and after January 1, 1990, or $5 per calendar year,
whichever is greater, which is allowed to reimburse the
retailer for the expenses incurred in keeping records,
preparing and filing returns, remitting the tax and supplying
data to the Department on request. Any prepayment made pursuant
to Section 2d of this Act shall be included in the amount on
which such 2.1% or 1.75% discount is computed. In the case of
retailers who report and pay the tax on a transaction by
transaction basis, as provided in this Section, such discount
shall be taken with each such tax remittance instead of when
such retailer files his periodic return.
    Before October 1, 2000, if the taxpayer's average monthly
tax liability to the Department under this Act, the Use Tax
Act, the Service Occupation Tax Act, and the Service Use Tax
Act, excluding any liability for prepaid sales tax to be
remitted in accordance with Section 2d of this Act, was $10,000
or more during the preceding 4 complete calendar quarters, he
shall file a return with the Department each month by the 20th
day of the month next following the month during which such tax
liability is incurred and shall make payments to the Department
on or before the 7th, 15th, 22nd and last day of the month
during which such liability is incurred. On and after October
1, 2000, if the taxpayer's average monthly tax liability to the
Department under this Act, the Use Tax Act, the Service
Occupation Tax Act, and the Service Use Tax Act, excluding any
liability for prepaid sales tax to be remitted in accordance
with Section 2d of this Act, was $20,000 or more during the
preceding 4 complete calendar quarters, he shall file a return
with the Department each month by the 20th day of the month
next following the month during which such tax liability is
incurred and shall make payment to the Department on or before
the 7th, 15th, 22nd and last day of the month during which such
liability is incurred. If the month during which such tax
liability is incurred began prior to January 1, 1985, each
payment shall be in an amount equal to 1/4 of the taxpayer's
actual liability for the month or an amount set by the
Department not to exceed 1/4 of the average monthly liability
of the taxpayer to the Department for the preceding 4 complete
calendar quarters (excluding the month of highest liability and
the month of lowest liability in such 4 quarter period). If the
month during which such tax liability is incurred begins on or
after January 1, 1985 and prior to January 1, 1987, each
payment shall be in an amount equal to 22.5% of the taxpayer's
actual liability for the month or 27.5% of the taxpayer's
liability for the same calendar month of the preceding year. If
the month during which such tax liability is incurred begins on
or after January 1, 1987 and prior to January 1, 1988, each
payment shall be in an amount equal to 22.5% of the taxpayer's
actual liability for the month or 26.25% of the taxpayer's
liability for the same calendar month of the preceding year. If
the month during which such tax liability is incurred begins on
or after January 1, 1988, and prior to January 1, 1989, or
begins on or after January 1, 1996, each payment shall be in an
amount equal to 22.5% of the taxpayer's actual liability for
the month or 25% of the taxpayer's liability for the same
calendar month of the preceding year. If the month during which
such tax liability is incurred begins on or after January 1,
1989, and prior to January 1, 1996, each payment shall be in an
amount equal to 22.5% of the taxpayer's actual liability for
the month or 25% of the taxpayer's liability for the same
calendar month of the preceding year or 100% of the taxpayer's
actual liability for the quarter monthly reporting period. The
amount of such quarter monthly payments shall be credited
against the final tax liability of the taxpayer's return for
that month. Before October 1, 2000, once applicable, the
requirement of the making of quarter monthly payments to the
Department by taxpayers having an average monthly tax liability
of $10,000 or more as determined in the manner provided above
shall continue until such taxpayer's average monthly liability
to the Department during the preceding 4 complete calendar
quarters (excluding the month of highest liability and the
month of lowest liability) is less than $9,000, or until such
taxpayer's average monthly liability to the Department as
computed for each calendar quarter of the 4 preceding complete
calendar quarter period is less than $10,000. However, if a
taxpayer can show the Department that a substantial change in
the taxpayer's business has occurred which causes the taxpayer
to anticipate that his average monthly tax liability for the
reasonably foreseeable future will fall below the $10,000
threshold stated above, then such taxpayer may petition the
Department for a change in such taxpayer's reporting status. On
and after October 1, 2000, once applicable, the requirement of
the making of quarter monthly payments to the Department by
taxpayers having an average monthly tax liability of $20,000 or
more as determined in the manner provided above shall continue
until such taxpayer's average monthly liability to the
Department during the preceding 4 complete calendar quarters
(excluding the month of highest liability and the month of
lowest liability) is less than $19,000 or until such taxpayer's
average monthly liability to the Department as computed for
each calendar quarter of the 4 preceding complete calendar
quarter period is less than $20,000. However, if a taxpayer can
show the Department that a substantial change in the taxpayer's
business has occurred which causes the taxpayer to anticipate
that his average monthly tax liability for the reasonably
foreseeable future will fall below the $20,000 threshold stated
above, then such taxpayer may petition the Department for a
change in such taxpayer's reporting status. The Department
shall change such taxpayer's reporting status unless it finds
that such change is seasonal in nature and not likely to be
long term. If any such quarter monthly payment is not paid at
the time or in the amount required by this Section, then the
taxpayer shall be liable for penalties and interest on the
difference between the minimum amount due as a payment and the
amount of such quarter monthly payment actually and timely
paid, except insofar as the taxpayer has previously made
payments for that month to the Department in excess of the
minimum payments previously due as provided in this Section.
The Department shall make reasonable rules and regulations to
govern the quarter monthly payment amount and quarter monthly
payment dates for taxpayers who file on other than a calendar
monthly basis.
    The provisions of this paragraph apply before October 1,
2001. Without regard to whether a taxpayer is required to make
quarter monthly payments as specified above, any taxpayer who
is required by Section 2d of this Act to collect and remit
prepaid taxes and has collected prepaid taxes which average in
excess of $25,000 per month during the preceding 2 complete
calendar quarters, shall file a return with the Department as
required by Section 2f and shall make payments to the
Department on or before the 7th, 15th, 22nd and last day of the
month during which such liability is incurred. If the month
during which such tax liability is incurred began prior to the
effective date of this amendatory Act of 1985, each payment
shall be in an amount not less than 22.5% of the taxpayer's
actual liability under Section 2d. If the month during which
such tax liability is incurred begins on or after January 1,
1986, each payment shall be in an amount equal to 22.5% of the
taxpayer's actual liability for the month or 27.5% of the
taxpayer's liability for the same calendar month of the
preceding calendar year. If the month during which such tax
liability is incurred begins on or after January 1, 1987, each
payment shall be in an amount equal to 22.5% of the taxpayer's
actual liability for the month or 26.25% of the taxpayer's
liability for the same calendar month of the preceding year.
The amount of such quarter monthly payments shall be credited
against the final tax liability of the taxpayer's return for
that month filed under this Section or Section 2f, as the case
may be. Once applicable, the requirement of the making of
quarter monthly payments to the Department pursuant to this
paragraph shall continue until such taxpayer's average monthly
prepaid tax collections during the preceding 2 complete
calendar quarters is $25,000 or less. If any such quarter
monthly payment is not paid at the time or in the amount
required, the taxpayer shall be liable for penalties and
interest on such difference, except insofar as the taxpayer has
previously made payments for that month in excess of the
minimum payments previously due.
    The provisions of this paragraph apply on and after October
1, 2001. Without regard to whether a taxpayer is required to
make quarter monthly payments as specified above, any taxpayer
who is required by Section 2d of this Act to collect and remit
prepaid taxes and has collected prepaid taxes that average in
excess of $20,000 per month during the preceding 4 complete
calendar quarters shall file a return with the Department as
required by Section 2f and shall make payments to the
Department on or before the 7th, 15th, 22nd and last day of the
month during which the liability is incurred. Each payment
shall be in an amount equal to 22.5% of the taxpayer's actual
liability for the month or 25% of the taxpayer's liability for
the same calendar month of the preceding year. The amount of
the quarter monthly payments shall be credited against the
final tax liability of the taxpayer's return for that month
filed under this Section or Section 2f, as the case may be.
Once applicable, the requirement of the making of quarter
monthly payments to the Department pursuant to this paragraph
shall continue until the taxpayer's average monthly prepaid tax
collections during the preceding 4 complete calendar quarters
(excluding the month of highest liability and the month of
lowest liability) is less than $19,000 or until such taxpayer's
average monthly liability to the Department as computed for
each calendar quarter of the 4 preceding complete calendar
quarters is less than $20,000. If any such quarter monthly
payment is not paid at the time or in the amount required, the
taxpayer shall be liable for penalties and interest on such
difference, except insofar as the taxpayer has previously made
payments for that month in excess of the minimum payments
previously due.
    If any payment provided for in this Section exceeds the
taxpayer's liabilities under this Act, the Use Tax Act, the
Service Occupation Tax Act and the Service Use Tax Act, as
shown on an original monthly return, the Department shall, if
requested by the taxpayer, issue to the taxpayer a credit
memorandum no later than 30 days after the date of payment. The
credit evidenced by such credit memorandum may be assigned by
the taxpayer to a similar taxpayer under this Act, the Use Tax
Act, the Service Occupation Tax Act or the Service Use Tax Act,
in accordance with reasonable rules and regulations to be
prescribed by the Department. If no such request is made, the
taxpayer may credit such excess payment against tax liability
subsequently to be remitted to the Department under this Act,
the Use Tax Act, the Service Occupation Tax Act or the Service
Use Tax Act, in accordance with reasonable rules and
regulations prescribed by the Department. If the Department
subsequently determined that all or any part of the credit
taken was not actually due to the taxpayer, the taxpayer's 2.1%
and 1.75% vendor's discount shall be reduced by 2.1% or 1.75%
of the difference between the credit taken and that actually
due, and that taxpayer shall be liable for penalties and
interest on such difference.
    If a retailer of motor fuel is entitled to a credit under
Section 2d of this Act which exceeds the taxpayer's liability
to the Department under this Act for the month which the
taxpayer is filing a return, the Department shall issue the
taxpayer a credit memorandum for the excess.
    Beginning January 1, 1990, each month the Department shall
pay into the Local Government Tax Fund, a special fund in the
State treasury which is hereby created, the net revenue
realized for the preceding month from the 1% tax on sales of
food for human consumption which is to be consumed off the
premises where it is sold (other than alcoholic beverages, soft
drinks and food which has been prepared for immediate
consumption) and prescription and nonprescription medicines,
drugs, medical appliances and insulin, urine testing
materials, syringes and needles used by diabetics.
    Beginning January 1, 1990, each month the Department shall
pay into the County and Mass Transit District Fund, a special
fund in the State treasury which is hereby created, 4% of the
net revenue realized for the preceding month from the 6.25%
general rate.
    Beginning August 1, 2000, each month the Department shall
pay into the County and Mass Transit District Fund 20% of the
net revenue realized for the preceding month from the 1.25%
rate on the selling price of motor fuel and gasohol.
    Beginning January 1, 1990, each month the Department shall
pay into the Local Government Tax Fund 16% of the net revenue
realized for the preceding month from the 6.25% general rate on
the selling price of tangible personal property.
    Beginning August 1, 2000, each month the Department shall
pay into the Local Government Tax Fund 80% of the net revenue
realized for the preceding month from the 1.25% rate on the
selling price of motor fuel and gasohol.
    Of the remainder of the moneys received by the Department
pursuant to this Act, (a) 1.75% thereof shall be paid into the
Build Illinois Fund and (b) prior to July 1, 1989, 2.2% and on
and after July 1, 1989, 3.8% thereof shall be paid into the
Build Illinois Fund; provided, however, that if in any fiscal
year the sum of (1) the aggregate of 2.2% or 3.8%, as the case
may be, of the moneys received by the Department and required
to be paid into the Build Illinois Fund pursuant to this Act,
Section 9 of the Use Tax Act, Section 9 of the Service Use Tax
Act, and Section 9 of the Service Occupation Tax Act, such Acts
being hereinafter called the "Tax Acts" and such aggregate of
2.2% or 3.8%, as the case may be, of moneys being hereinafter
called the "Tax Act Amount", and (2) the amount transferred to
the Build Illinois Fund from the State and Local Sales Tax
Reform Fund shall be less than the Annual Specified Amount (as
hereinafter defined), an amount equal to the difference shall
be immediately paid into the Build Illinois Fund from other
moneys received by the Department pursuant to the Tax Acts; the
"Annual Specified Amount" means the amounts specified below for
fiscal years 1986 through 1993:
Fiscal YearAnnual Specified Amount
1986$54,800,000
1987$76,650,000
1988$80,480,000
1989$88,510,000
1990$115,330,000
1991$145,470,000
1992$182,730,000
1993$206,520,000;
and means the Certified Annual Debt Service Requirement (as
defined in Section 13 of the Build Illinois Bond Act) or the
Tax Act Amount, whichever is greater, for fiscal year 1994 and
each fiscal year thereafter; and further provided, that if on
the last business day of any month the sum of (1) the Tax Act
Amount required to be deposited into the Build Illinois Bond
Account in the Build Illinois Fund during such month and (2)
the amount transferred to the Build Illinois Fund from the
State and Local Sales Tax Reform Fund shall have been less than
1/12 of the Annual Specified Amount, an amount equal to the
difference shall be immediately paid into the Build Illinois
Fund from other moneys received by the Department pursuant to
the Tax Acts; and, further provided, that in no event shall the
payments required under the preceding proviso result in
aggregate payments into the Build Illinois Fund pursuant to
this clause (b) for any fiscal year in excess of the greater of
(i) the Tax Act Amount or (ii) the Annual Specified Amount for
such fiscal year. The amounts payable into the Build Illinois
Fund under clause (b) of the first sentence in this paragraph
shall be payable only until such time as the aggregate amount
on deposit under each trust indenture securing Bonds issued and
outstanding pursuant to the Build Illinois Bond Act is
sufficient, taking into account any future investment income,
to fully provide, in accordance with such indenture, for the
defeasance of or the payment of the principal of, premium, if
any, and interest on the Bonds secured by such indenture and on
any Bonds expected to be issued thereafter and all fees and
costs payable with respect thereto, all as certified by the
Director of the Bureau of the Budget (now Governor's Office of
Management and Budget). If on the last business day of any
month in which Bonds are outstanding pursuant to the Build
Illinois Bond Act, the aggregate of moneys deposited in the
Build Illinois Bond Account in the Build Illinois Fund in such
month shall be less than the amount required to be transferred
in such month from the Build Illinois Bond Account to the Build
Illinois Bond Retirement and Interest Fund pursuant to Section
13 of the Build Illinois Bond Act, an amount equal to such
deficiency shall be immediately paid from other moneys received
by the Department pursuant to the Tax Acts to the Build
Illinois Fund; provided, however, that any amounts paid to the
Build Illinois Fund in any fiscal year pursuant to this
sentence shall be deemed to constitute payments pursuant to
clause (b) of the first sentence of this paragraph and shall
reduce the amount otherwise payable for such fiscal year
pursuant to that clause (b). The moneys received by the
Department pursuant to this Act and required to be deposited
into the Build Illinois Fund are subject to the pledge, claim
and charge set forth in Section 12 of the Build Illinois Bond
Act.
    Subject to payment of amounts into the Build Illinois Fund
as provided in the preceding paragraph or in any amendment
thereto hereafter enacted, the following specified monthly
installment of the amount requested in the certificate of the
Chairman of the Metropolitan Pier and Exposition Authority
provided under Section 8.25f of the State Finance Act, but not
in excess of sums designated as "Total Deposit", shall be
deposited in the aggregate from collections under Section 9 of
the Use Tax Act, Section 9 of the Service Use Tax Act, Section
9 of the Service Occupation Tax Act, and Section 3 of the
Retailers' Occupation Tax Act into the McCormick Place
Expansion Project Fund in the specified fiscal years.
Fiscal YearTotal Deposit
1993         $0
1994 53,000,000
1995 58,000,000
1996 61,000,000
1997 64,000,000
1998 68,000,000
1999 71,000,000
2000 75,000,000
2001 80,000,000
2002 93,000,000
2003 99,000,000
2004103,000,000
2005108,000,000
2006113,000,000
2007119,000,000
2008126,000,000
2009132,000,000
2010139,000,000
2011146,000,000
2012153,000,000
2013161,000,000
2014170,000,000
2015179,000,000
2016189,000,000
2017199,000,000
2018210,000,000
2019221,000,000
2020233,000,000
2021246,000,000
2022260,000,000
2023 and275,000,000
each fiscal year
thereafter that bonds
are outstanding under
Section 13.2 of the
Metropolitan Pier and
Exposition Authority Act,
but not after fiscal year 2042.
    Beginning July 20, 1993 and in each month of each fiscal
year thereafter, one-eighth of the amount requested in the
certificate of the Chairman of the Metropolitan Pier and
Exposition Authority for that fiscal year, less the amount
deposited into the McCormick Place Expansion Project Fund by
the State Treasurer in the respective month under subsection
(g) of Section 13 of the Metropolitan Pier and Exposition
Authority Act, plus cumulative deficiencies in the deposits
required under this Section for previous months and years,
shall be deposited into the McCormick Place Expansion Project
Fund, until the full amount requested for the fiscal year, but
not in excess of the amount specified above as "Total Deposit",
has been deposited.
    Subject to payment of amounts into the Build Illinois Fund
and the McCormick Place Expansion Project Fund pursuant to the
preceding paragraphs or in any amendments thereto hereafter
enacted, beginning July 1, 1993, the Department shall each
month pay into the Illinois Tax Increment Fund 0.27% of 80% of
the net revenue realized for the preceding month from the 6.25%
general rate on the selling price of tangible personal
property.
    Subject to payment of amounts into the Build Illinois Fund
and the McCormick Place Expansion Project Fund pursuant to the
preceding paragraphs or in any amendments thereto hereafter
enacted, beginning with the receipt of the first report of
taxes paid by an eligible business and continuing for a 25-year
period, the Department shall each month pay into the Energy
Infrastructure Fund 80% of the net revenue realized from the
6.25% general rate on the selling price of Illinois-mined coal
that was sold to an eligible business. For purposes of this
paragraph, the term "eligible business" means a new electric
generating facility certified pursuant to Section 605-332 of
the Department of Commerce and Economic Opportunity Community
Affairs Law of the Civil Administrative Code of Illinois.
    Of the remainder of the moneys received by the Department
pursuant to this Act, 75% thereof shall be paid into the State
Treasury and 25% shall be reserved in a special account and
used only for the transfer to the Common School Fund as part of
the monthly transfer from the General Revenue Fund in
accordance with Section 8a of the State Finance Act.
    The Department may, upon separate written notice to a
taxpayer, require the taxpayer to prepare and file with the
Department on a form prescribed by the Department within not
less than 60 days after receipt of the notice an annual
information return for the tax year specified in the notice.
Such annual return to the Department shall include a statement
of gross receipts as shown by the retailer's last Federal
income tax return. If the total receipts of the business as
reported in the Federal income tax return do not agree with the
gross receipts reported to the Department of Revenue for the
same period, the retailer shall attach to his annual return a
schedule showing a reconciliation of the 2 amounts and the
reasons for the difference. The retailer's annual return to the
Department shall also disclose the cost of goods sold by the
retailer during the year covered by such return, opening and
closing inventories of such goods for such year, costs of goods
used from stock or taken from stock and given away by the
retailer during such year, payroll information of the
retailer's business during such year and any additional
reasonable information which the Department deems would be
helpful in determining the accuracy of the monthly, quarterly
or annual returns filed by such retailer as provided for in
this Section.
    If the annual information return required by this Section
is not filed when and as required, the taxpayer shall be liable
as follows:
        (i) Until January 1, 1994, the taxpayer shall be liable
    for a penalty equal to 1/6 of 1% of the tax due from such
    taxpayer under this Act during the period to be covered by
    the annual return for each month or fraction of a month
    until such return is filed as required, the penalty to be
    assessed and collected in the same manner as any other
    penalty provided for in this Act.
        (ii) On and after January 1, 1994, the taxpayer shall
    be liable for a penalty as described in Section 3-4 of the
    Uniform Penalty and Interest Act.
    The chief executive officer, proprietor, owner or highest
ranking manager shall sign the annual return to certify the
accuracy of the information contained therein. Any person who
willfully signs the annual return containing false or
inaccurate information shall be guilty of perjury and punished
accordingly. The annual return form prescribed by the
Department shall include a warning that the person signing the
return may be liable for perjury.
    The provisions of this Section concerning the filing of an
annual information return do not apply to a retailer who is not
required to file an income tax return with the United States
Government.
    As soon as possible after the first day of each month, upon
certification of the Department of Revenue, the Comptroller
shall order transferred and the Treasurer shall transfer from
the General Revenue Fund to the Motor Fuel Tax Fund an amount
equal to 1.7% of 80% of the net revenue realized under this Act
for the second preceding month. Beginning April 1, 2000, this
transfer is no longer required and shall not be made.
    Net revenue realized for a month shall be the revenue
collected by the State pursuant to this Act, less the amount
paid out during that month as refunds to taxpayers for
overpayment of liability.
    For greater simplicity of administration, manufacturers,
importers and wholesalers whose products are sold at retail in
Illinois by numerous retailers, and who wish to do so, may
assume the responsibility for accounting and paying to the
Department all tax accruing under this Act with respect to such
sales, if the retailers who are affected do not make written
objection to the Department to this arrangement.
    Any person who promotes, organizes, provides retail
selling space for concessionaires or other types of sellers at
the Illinois State Fair, DuQuoin State Fair, county fairs,
local fairs, art shows, flea markets and similar exhibitions or
events, including any transient merchant as defined by Section
2 of the Transient Merchant Act of 1987, is required to file a
report with the Department providing the name of the merchant's
business, the name of the person or persons engaged in
merchant's business, the permanent address and Illinois
Retailers Occupation Tax Registration Number of the merchant,
the dates and location of the event and other reasonable
information that the Department may require. The report must be
filed not later than the 20th day of the month next following
the month during which the event with retail sales was held.
Any person who fails to file a report required by this Section
commits a business offense and is subject to a fine not to
exceed $250.
    Any person engaged in the business of selling tangible
personal property at retail as a concessionaire or other type
of seller at the Illinois State Fair, county fairs, art shows,
flea markets and similar exhibitions or events, or any
transient merchants, as defined by Section 2 of the Transient
Merchant Act of 1987, may be required to make a daily report of
the amount of such sales to the Department and to make a daily
payment of the full amount of tax due. The Department shall
impose this requirement when it finds that there is a
significant risk of loss of revenue to the State at such an
exhibition or event. Such a finding shall be based on evidence
that a substantial number of concessionaires or other sellers
who are not residents of Illinois will be engaging in the
business of selling tangible personal property at retail at the
exhibition or event, or other evidence of a significant risk of
loss of revenue to the State. The Department shall notify
concessionaires and other sellers affected by the imposition of
this requirement. In the absence of notification by the
Department, the concessionaires and other sellers shall file
their returns as otherwise required in this Section.
(Source: P.A. 92-12, eff. 7-1-01; 92-16, eff. 6-28-01; 92-208,
eff. 8-2-01; 92-484, eff. 8-23-01; 92-492, eff. 1-1-02; 92-600,
eff. 6-28-02; 92-651, eff. 7-11-02; 93-22, eff. 6-20-03; 93-24,
eff. 6-20-03; revised 10-15-03.)
 
ARTICLE 25

 
    Section 25-5. The Illinois Income Tax Act is amended by
changing Sections 203, 205, 305, and 1501 as follows:
 
    (35 ILCS 5/203)  (from Ch. 120, par. 2-203)
    Sec. 203. Base income defined.
    (a) Individuals.
        (1) In general. In the case of an individual, base
    income means an amount equal to the taxpayer's adjusted
    gross income for the taxable year as modified by paragraph
    (2).
        (2) Modifications. The adjusted gross income referred
    to in paragraph (1) shall be modified by adding thereto the
    sum of the following amounts:
            (A) An amount equal to all amounts paid or accrued
        to the taxpayer as interest or dividends during the
        taxable year to the extent excluded from gross income
        in the computation of adjusted gross income, except
        stock dividends of qualified public utilities
        described in Section 305(e) of the Internal Revenue
        Code;
            (B) An amount equal to the amount of tax imposed by
        this Act to the extent deducted from gross income in
        the computation of adjusted gross income for the
        taxable year;
            (C) An amount equal to the amount received during
        the taxable year as a recovery or refund of real
        property taxes paid with respect to the taxpayer's
        principal residence under the Revenue Act of 1939 and
        for which a deduction was previously taken under
        subparagraph (L) of this paragraph (2) prior to July 1,
        1991, the retrospective application date of Article 4
        of Public Act 87-17. In the case of multi-unit or
        multi-use structures and farm dwellings, the taxes on
        the taxpayer's principal residence shall be that
        portion of the total taxes for the entire property
        which is attributable to such principal residence;
            (D) An amount equal to the amount of the capital
        gain deduction allowable under the Internal Revenue
        Code, to the extent deducted from gross income in the
        computation of adjusted gross income;
            (D-5) An amount, to the extent not included in
        adjusted gross income, equal to the amount of money
        withdrawn by the taxpayer in the taxable year from a
        medical care savings account and the interest earned on
        the account in the taxable year of a withdrawal
        pursuant to subsection (b) of Section 20 of the Medical
        Care Savings Account Act or subsection (b) of Section
        20 of the Medical Care Savings Account Act of 2000;
            (D-10) For taxable years ending after December 31,
        1997, an amount equal to any eligible remediation costs
        that the individual deducted in computing adjusted
        gross income and for which the individual claims a
        credit under subsection (l) of Section 201;
            (D-15) For taxable years 2001 and thereafter, an
        amount equal to the bonus depreciation deduction (30%
        of the adjusted basis of the qualified property) taken
        on the taxpayer's federal income tax return for the
        taxable year under subsection (k) of Section 168 of the
        Internal Revenue Code; and
            (D-16) If the taxpayer reports a capital gain or
        loss on the taxpayer's federal income tax return for
        the taxable year based on a sale or transfer of
        property for which the taxpayer was required in any
        taxable year to make an addition modification under
        subparagraph (D-15), then an amount equal to the
        aggregate amount of the deductions taken in all taxable
        years under subparagraph (Z) with respect to that
        property. ;
            The taxpayer is required to make the addition
        modification under this subparagraph only once with
        respect to any one piece of property; . and
            (D-17) For taxable years ending on or after
        December 31, 2004, an amount equal to the amount
        otherwise allowed as a deduction in computing base
        income for interest paid, accrued, or incurred,
        directly or indirectly, to a foreign person who would
        be a member of the same unitary business group but for
        the fact that foreign person's business activity
        outside the United States is 80% or more of the foreign
        person's total business activity. The addition
        modification required by this subparagraph shall be
        reduced to the extent that dividends were included in
        base income of the unitary group for the same taxable
        year and received by the taxpayer or by a member of the
        taxpayer's unitary business group (including amounts
        included in gross income under Sections 951 through 964
        of the Internal Revenue Code and amounts included in
        gross income under Section 78 of the Internal Revenue
        Code) with respect to the stock of the same person to
        whom the interest was paid, accrued, or incurred.
            This paragraph shall not apply to the following:
                (i) an item of interest paid, accrued, or
            incurred, directly or indirectly, to a foreign
            person who is subject in a foreign country or
            state, other than a state which requires mandatory
            unitary reporting, to a tax on or measured by net
            income with respect to such interest; or
                (ii) an item of interest paid, accrued, or
            incurred, directly or indirectly, to a foreign
            person if the taxpayer can establish, based on a
            preponderance of the evidence, both of the
            following:
                    (a) the foreign person, during the same
                taxable year, paid, accrued, or incurred, the
                interest to a person that is not a related
                member, and
                    (b) the transaction giving rise to the
                interest expense between the taxpayer and the
                foreign person did not have as a principal
                purpose the avoidance of Illinois income tax,
                and is paid pursuant to a contract or agreement
                that reflects an arm's-length interest rate
                and terms; or
                (iii) the taxpayer can establish, based on
            clear and convincing evidence, that the interest
            paid, accrued, or incurred relates to a contract or
            agreement entered into at arm's-length rates and
            terms and the principal purpose for the payment is
            not federal or Illinois tax avoidance; or
                (iv) an item of interest paid, accrued, or
            incurred, directly or indirectly, to a foreign
            person if the taxpayer establishes by clear and
            convincing evidence that the adjustments are
            unreasonable; or if the taxpayer and the Director
            agree in writing to the application or use of an
            alternative method of apportionment under Section
            304(f).
                Nothing in this subsection shall preclude the
            Director from making any other adjustment
            otherwise allowed under Section 404 of this Act for
            any tax year beginning after the effective date of
            this amendment provided such adjustment is made
            pursuant to regulation adopted by the Department
            and such regulations provide methods and standards
            by which the Department will utilize its authority
            under Section 404 of this Act;
            (D-18) For taxable years ending on or after
        December 31, 2004, an amount equal to the amount of
        intangible expenses and costs otherwise allowed as a
        deduction in computing base income, and that were paid,
        accrued, or incurred, directly or indirectly, to a
        foreign person who would be a member of the same
        unitary business group but for the fact that the
        foreign person's business activity outside the United
        States is 80% or more of that person's total business
        activity. The addition modification required by this
        subparagraph shall be reduced to the extent that
        dividends were included in base income of the unitary
        group for the same taxable year and received by the
        taxpayer or by a member of the taxpayer's unitary
        business group (including amounts included in gross
        income under Sections 951 through 964 of the Internal
        Revenue Code and amounts included in gross income under
        Section 78 of the Internal Revenue Code) with respect
        to the stock of the same person to whom the intangible
        expenses and costs were directly or indirectly paid,
        incurred, or accrued. The preceding sentence does not
        apply to the extent that the same dividends caused a
        reduction to the addition modification required under
        Section 203(a)(2)(D-17) of this Act. As used in this
        subparagraph, the term "intangible expenses and costs"
        includes (1) expenses, losses, and costs for, or
        related to, the direct or indirect acquisition, use,
        maintenance or management, ownership, sale, exchange,
        or any other disposition of intangible property; (2)
        losses incurred, directly or indirectly, from
        factoring transactions or discounting transactions;
        (3) royalty, patent, technical, and copyright fees;
        (4) licensing fees; and (5) other similar expenses and
        costs. For purposes of this subparagraph, "intangible
        property" includes patents, patent applications, trade
        names, trademarks, service marks, copyrights, mask
        works, trade secrets, and similar types of intangible
        assets.
            This paragraph shall not apply to the following:
                (i) any item of intangible expenses or costs
            paid, accrued, or incurred, directly or
            indirectly, from a transaction with a foreign
            person who is subject in a foreign country or
            state, other than a state which requires mandatory
            unitary reporting, to a tax on or measured by net
            income with respect to such item; or
                (ii) any item of intangible expense or cost
            paid, accrued, or incurred, directly or
            indirectly, if the taxpayer can establish, based
            on a preponderance of the evidence, both of the
            following:
                    (a) the foreign person during the same
                taxable year paid, accrued, or incurred, the
                intangible expense or cost to a person that is
                not a related member, and
                    (b) the transaction giving rise to the
                intangible expense or cost between the
                taxpayer and the foreign person did not have as
                a principal purpose the avoidance of Illinois
                income tax, and is paid pursuant to a contract
                or agreement that reflects arm's-length terms;
                or
                (iii) any item of intangible expense or cost
            paid, accrued, or incurred, directly or
            indirectly, from a transaction with a foreign
            person if the taxpayer establishes by clear and
            convincing evidence, that the adjustments are
            unreasonable; or if the taxpayer and the Director
            agree in writing to the application or use of an
            alternative method of apportionment under Section
            304(f);
                Nothing in this subsection shall preclude the
            Director from making any other adjustment
            otherwise allowed under Section 404 of this Act for
            any tax year beginning after the effective date of
            this amendment provided such adjustment is made
            pursuant to regulation adopted by the Department
            and such regulations provide methods and standards
            by which the Department will utilize its authority
            under Section 404 of this Act;
            (D-20) (D-15) For taxable years beginning on or
        after January 1, 2002, in the case of a distribution
        from a qualified tuition program under Section 529 of
        the Internal Revenue Code, other than (i) a
        distribution from a College Savings Pool created under
        Section 16.5 of the State Treasurer Act or (ii) a
        distribution from the Illinois Prepaid Tuition Trust
        Fund, an amount equal to the amount excluded from gross
        income under Section 529(c)(3)(B);
    and by deducting from the total so obtained the sum of the
    following amounts:
            (E) For taxable years ending before December 31,
        2001, any amount included in such total in respect of
        any compensation (including but not limited to any
        compensation paid or accrued to a serviceman while a
        prisoner of war or missing in action) paid to a
        resident by reason of being on active duty in the Armed
        Forces of the United States and in respect of any
        compensation paid or accrued to a resident who as a
        governmental employee was a prisoner of war or missing
        in action, and in respect of any compensation paid to a
        resident in 1971 or thereafter for annual training
        performed pursuant to Sections 502 and 503, Title 32,
        United States Code as a member of the Illinois National
        Guard. For taxable years ending on or after December
        31, 2001, any amount included in such total in respect
        of any compensation (including but not limited to any
        compensation paid or accrued to a serviceman while a
        prisoner of war or missing in action) paid to a
        resident by reason of being a member of any component
        of the Armed Forces of the United States and in respect
        of any compensation paid or accrued to a resident who
        as a governmental employee was a prisoner of war or
        missing in action, and in respect of any compensation
        paid to a resident in 2001 or thereafter by reason of
        being a member of the Illinois National Guard. The
        provisions of this amendatory Act of the 92nd General
        Assembly are exempt from the provisions of Section 250;
            (F) An amount equal to all amounts included in such
        total pursuant to the provisions of Sections 402(a),
        402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the
        Internal Revenue Code, or included in such total as
        distributions under the provisions of any retirement
        or disability plan for employees of any governmental
        agency or unit, or retirement payments to retired
        partners, which payments are excluded in computing net
        earnings from self employment by Section 1402 of the
        Internal Revenue Code and regulations adopted pursuant
        thereto;
            (G) The valuation limitation amount;
            (H) An amount equal to the amount of any tax
        imposed by this Act which was refunded to the taxpayer
        and included in such total for the taxable year;
            (I) An amount equal to all amounts included in such
        total pursuant to the provisions of Section 111 of the
        Internal Revenue Code as a recovery of items previously
        deducted from adjusted gross income in the computation
        of taxable income;
            (J) An amount equal to those dividends included in
        such total which were paid by a corporation which
        conducts business operations in an Enterprise Zone or
        zones created under the Illinois Enterprise Zone Act,
        and conducts substantially all of its operations in an
        Enterprise Zone or zones;
            (K) An amount equal to those dividends included in
        such total that were paid by a corporation that
        conducts business operations in a federally designated
        Foreign Trade Zone or Sub-Zone and that is designated a
        High Impact Business located in Illinois; provided
        that dividends eligible for the deduction provided in
        subparagraph (J) of paragraph (2) of this subsection
        shall not be eligible for the deduction provided under
        this subparagraph (K);
            (L) For taxable years ending after December 31,
        1983, an amount equal to all social security benefits
        and railroad retirement benefits included in such
        total pursuant to Sections 72(r) and 86 of the Internal
        Revenue Code;
            (M) With the exception of any amounts subtracted
        under subparagraph (N), an amount equal to the sum of
        all amounts disallowed as deductions by (i) Sections
        171(a) (2), and 265(2) of the Internal Revenue Code of
        1954, as now or hereafter amended, and all amounts of
        expenses allocable to interest and disallowed as
        deductions by Section 265(1) of the Internal Revenue
        Code of 1954, as now or hereafter amended; and (ii) for
        taxable years ending on or after August 13, 1999,
        Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
        the Internal Revenue Code; the provisions of this
        subparagraph are exempt from the provisions of Section
        250;
            (N) An amount equal to all amounts included in such
        total which are exempt from taxation by this State
        either by reason of its statutes or Constitution or by
        reason of the Constitution, treaties or statutes of the
        United States; provided that, in the case of any
        statute of this State that exempts income derived from
        bonds or other obligations from the tax imposed under
        this Act, the amount exempted shall be the interest net
        of bond premium amortization;
            (O) An amount equal to any contribution made to a
        job training project established pursuant to the Tax
        Increment Allocation Redevelopment Act;
            (P) An amount equal to the amount of the deduction
        used to compute the federal income tax credit for
        restoration of substantial amounts held under claim of
        right for the taxable year pursuant to Section 1341 of
        the Internal Revenue Code of 1986;
            (Q) An amount equal to any amounts included in such
        total, received by the taxpayer as an acceleration in
        the payment of life, endowment or annuity benefits in
        advance of the time they would otherwise be payable as
        an indemnity for a terminal illness;
            (R) An amount equal to the amount of any federal or
        State bonus paid to veterans of the Persian Gulf War;
            (S) An amount, to the extent included in adjusted
        gross income, equal to the amount of a contribution
        made in the taxable year on behalf of the taxpayer to a
        medical care savings account established under the
        Medical Care Savings Account Act or the Medical Care
        Savings Account Act of 2000 to the extent the
        contribution is accepted by the account administrator
        as provided in that Act;
            (T) An amount, to the extent included in adjusted
        gross income, equal to the amount of interest earned in
        the taxable year on a medical care savings account
        established under the Medical Care Savings Account Act
        or the Medical Care Savings Account Act of 2000 on
        behalf of the taxpayer, other than interest added
        pursuant to item (D-5) of this paragraph (2);
            (U) For one taxable year beginning on or after
        January 1, 1994, an amount equal to the total amount of
        tax imposed and paid under subsections (a) and (b) of
        Section 201 of this Act on grant amounts received by
        the taxpayer under the Nursing Home Grant Assistance
        Act during the taxpayer's taxable years 1992 and 1993;
            (V) Beginning with tax years ending on or after
        December 31, 1995 and ending with tax years ending on
        or before December 31, 2004, an amount equal to the
        amount paid by a taxpayer who is a self-employed
        taxpayer, a partner of a partnership, or a shareholder
        in a Subchapter S corporation for health insurance or
        long-term care insurance for that taxpayer or that
        taxpayer's spouse or dependents, to the extent that the
        amount paid for that health insurance or long-term care
        insurance may be deducted under Section 213 of the
        Internal Revenue Code of 1986, has not been deducted on
        the federal income tax return of the taxpayer, and does
        not exceed the taxable income attributable to that
        taxpayer's income, self-employment income, or
        Subchapter S corporation income; except that no
        deduction shall be allowed under this item (V) if the
        taxpayer is eligible to participate in any health
        insurance or long-term care insurance plan of an
        employer of the taxpayer or the taxpayer's spouse. The
        amount of the health insurance and long-term care
        insurance subtracted under this item (V) shall be
        determined by multiplying total health insurance and
        long-term care insurance premiums paid by the taxpayer
        times a number that represents the fractional
        percentage of eligible medical expenses under Section
        213 of the Internal Revenue Code of 1986 not actually
        deducted on the taxpayer's federal income tax return;
            (W) For taxable years beginning on or after January
        1, 1998, all amounts included in the taxpayer's federal
        gross income in the taxable year from amounts converted
        from a regular IRA to a Roth IRA. This paragraph is
        exempt from the provisions of Section 250;
            (X) For taxable year 1999 and thereafter, an amount
        equal to the amount of any (i) distributions, to the
        extent includible in gross income for federal income
        tax purposes, made to the taxpayer because of his or
        her status as a victim of persecution for racial or
        religious reasons by Nazi Germany or any other Axis
        regime or as an heir of the victim and (ii) items of
        income, to the extent includible in gross income for
        federal income tax purposes, attributable to, derived
        from or in any way related to assets stolen from,
        hidden from, or otherwise lost to a victim of
        persecution for racial or religious reasons by Nazi
        Germany or any other Axis regime immediately prior to,
        during, and immediately after World War II, including,
        but not limited to, interest on the proceeds receivable
        as insurance under policies issued to a victim of
        persecution for racial or religious reasons by Nazi
        Germany or any other Axis regime by European insurance
        companies immediately prior to and during World War II;
        provided, however, this subtraction from federal
        adjusted gross income does not apply to assets acquired
        with such assets or with the proceeds from the sale of
        such assets; provided, further, this paragraph shall
        only apply to a taxpayer who was the first recipient of
        such assets after their recovery and who is a victim of
        persecution for racial or religious reasons by Nazi
        Germany or any other Axis regime or as an heir of the
        victim. The amount of and the eligibility for any
        public assistance, benefit, or similar entitlement is
        not affected by the inclusion of items (i) and (ii) of
        this paragraph in gross income for federal income tax
        purposes. This paragraph is exempt from the provisions
        of Section 250;
            (Y) For taxable years beginning on or after January
        1, 2002, moneys contributed in the taxable year to a
        College Savings Pool account under Section 16.5 of the
        State Treasurer Act, except that amounts excluded from
        gross income under Section 529(c)(3)(C)(i) of the
        Internal Revenue Code shall not be considered moneys
        contributed under this subparagraph (Y). This
        subparagraph (Y) is exempt from the provisions of
        Section 250;
            (Z) For taxable years 2001 and thereafter, for the
        taxable year in which the bonus depreciation deduction
        (30% of the adjusted basis of the qualified property)
        is taken on the taxpayer's federal income tax return
        under subsection (k) of Section 168 of the Internal
        Revenue Code and for each applicable taxable year
        thereafter, an amount equal to "x", where:
                (1) "y" equals the amount of the depreciation
            deduction taken for the taxable year on the
            taxpayer's federal income tax return on property
            for which the bonus depreciation deduction (30% of
            the adjusted basis of the qualified property) was
            taken in any year under subsection (k) of Section
            168 of the Internal Revenue Code, but not including
            the bonus depreciation deduction; and
                (2) "x" equals "y" multiplied by 30 and then
            divided by 70 (or "y" multiplied by 0.429).
            The aggregate amount deducted under this
        subparagraph in all taxable years for any one piece of
        property may not exceed the amount of the bonus
        depreciation deduction (30% of the adjusted basis of
        the qualified property) taken on that property on the
        taxpayer's federal income tax return under subsection
        (k) of Section 168 of the Internal Revenue Code; and
            (AA) If the taxpayer reports a capital gain or loss
        on the taxpayer's federal income tax return for the
        taxable year based on a sale or transfer of property
        for which the taxpayer was required in any taxable year
        to make an addition modification under subparagraph
        (D-15), then an amount equal to that addition
        modification.
            The taxpayer is allowed to take the deduction under
        this subparagraph only once with respect to any one
        piece of property; and
            (BB) (Z) Any amount included in adjusted gross
        income, other than salary, received by a driver in a
        ridesharing arrangement using a motor vehicle; .
            (CC) The amount of (i) any interest income (net of
        the deductions allocable thereto) taken into account
        for the taxable year with respect to a transaction with
        a taxpayer that is required to make an addition
        modification with respect to such transaction under
        Section 203(a)(2)(D-17), 203(b)(2)(E-13),
        203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
        the amount of that addition modification, and (ii) any
        income from intangible property (net of the deductions
        allocable thereto) taken into account for the taxable
        year with respect to a transaction with a taxpayer that
        is required to make an addition modification with
        respect to such transaction under Section
        203(a)(2)(D-18), 203(b)(2)(E-14), 203(c)(2)(G-13), or
        203(d)(2)(D-8), but not to exceed the amount of that
        addition modification;
            (DD) An amount equal to the interest income taken
        into account for the taxable year (net of the
        deductions allocable thereto) with respect to
        transactions with a foreign person who would be a
        member of the taxpayer's unitary business group but for
        the fact that the foreign person's business activity
        outside the United States is 80% or more of that
        person's total business activity, but not to exceed the
        addition modification required to be made for the same
        taxable year under Section 203(a)(2)(D-17) for
        interest paid, accrued, or incurred, directly or
        indirectly, to the same foreign person; and
            (EE) An amount equal to the income from intangible
        property taken into account for the taxable year (net
        of the deductions allocable thereto) with respect to
        transactions with a foreign person who would be a
        member of the taxpayer's unitary business group but for
        the fact that the foreign person's business activity
        outside the United States is 80% or more of that
        person's total business activity, but not to exceed the
        addition modification required to be made for the same
        taxable year under Section 203(a)(2)(D-18) for
        intangible expenses and costs paid, accrued, or
        incurred, directly or indirectly, to the same foreign
        person.
 
    (b) Corporations.
        (1) In general. In the case of a corporation, base
    income means an amount equal to the taxpayer's taxable
    income for the taxable year as modified by paragraph (2).
        (2) Modifications. The taxable income referred to in
    paragraph (1) shall be modified by adding thereto the sum
    of the following amounts:
            (A) An amount equal to all amounts paid or accrued
        to the taxpayer as interest and all distributions
        received from regulated investment companies during
        the taxable year to the extent excluded from gross
        income in the computation of taxable income;
            (B) An amount equal to the amount of tax imposed by
        this Act to the extent deducted from gross income in
        the computation of taxable income for the taxable year;
            (C) In the case of a regulated investment company,
        an amount equal to the excess of (i) the net long-term
        capital gain for the taxable year, over (ii) the amount
        of the capital gain dividends designated as such in
        accordance with Section 852(b)(3)(C) of the Internal
        Revenue Code and any amount designated under Section
        852(b)(3)(D) of the Internal Revenue Code,
        attributable to the taxable year (this amendatory Act
        of 1995 (Public Act 89-89) is declarative of existing
        law and is not a new enactment);
            (D) The amount of any net operating loss deduction
        taken in arriving at taxable income, other than a net
        operating loss carried forward from a taxable year
        ending prior to December 31, 1986;
            (E) For taxable years in which a net operating loss
        carryback or carryforward from a taxable year ending
        prior to December 31, 1986 is an element of taxable
        income under paragraph (1) of subsection (e) or
        subparagraph (E) of paragraph (2) of subsection (e),
        the amount by which addition modifications other than
        those provided by this subparagraph (E) exceeded
        subtraction modifications in such earlier taxable
        year, with the following limitations applied in the
        order that they are listed:
                (i) the addition modification relating to the
            net operating loss carried back or forward to the
            taxable year from any taxable year ending prior to
            December 31, 1986 shall be reduced by the amount of
            addition modification under this subparagraph (E)
            which related to that net operating loss and which
            was taken into account in calculating the base
            income of an earlier taxable year, and
                (ii) the addition modification relating to the
            net operating loss carried back or forward to the
            taxable year from any taxable year ending prior to
            December 31, 1986 shall not exceed the amount of
            such carryback or carryforward;
            For taxable years in which there is a net operating
        loss carryback or carryforward from more than one other
        taxable year ending prior to December 31, 1986, the
        addition modification provided in this subparagraph
        (E) shall be the sum of the amounts computed
        independently under the preceding provisions of this
        subparagraph (E) for each such taxable year;
            (E-5) For taxable years ending after December 31,
        1997, an amount equal to any eligible remediation costs
        that the corporation deducted in computing adjusted
        gross income and for which the corporation claims a
        credit under subsection (l) of Section 201;
            (E-10) For taxable years 2001 and thereafter, an
        amount equal to the bonus depreciation deduction (30%
        of the adjusted basis of the qualified property) taken
        on the taxpayer's federal income tax return for the
        taxable year under subsection (k) of Section 168 of the
        Internal Revenue Code; and
            (E-11) If the taxpayer reports a capital gain or
        loss on the taxpayer's federal income tax return for
        the taxable year based on a sale or transfer of
        property for which the taxpayer was required in any
        taxable year to make an addition modification under
        subparagraph (E-10), then an amount equal to the
        aggregate amount of the deductions taken in all taxable
        years under subparagraph (T) with respect to that
        property;
            The taxpayer is required to make the addition
        modification under this subparagraph only once with
        respect to any one piece of property;
            (E-12) For taxable years ending on or after
        December 31, 2004, an amount equal to the amount
        otherwise allowed as a deduction in computing base
        income for interest paid, accrued, or incurred,
        directly or indirectly, to a foreign person who would
        be a member of the same unitary business group but for
        the fact the foreign person's business activity
        outside the United States is 80% or more of the foreign
        person's total business activity. The addition
        modification required by this subparagraph shall be
        reduced to the extent that dividends were included in
        base income of the unitary group for the same taxable
        year and received by the taxpayer or by a member of the
        taxpayer's unitary business group (including amounts
        included in gross income pursuant to Sections 951
        through 964 of the Internal Revenue Code and amounts
        included in gross income under Section 78 of the
        Internal Revenue Code) with respect to the stock of the
        same person to whom the interest was paid, accrued, or
        incurred.
            This paragraph shall not apply to the following:
                (i) an item of interest paid, accrued, or
            incurred, directly or indirectly, to a foreign
            person who is subject in a foreign country or
            state, other than a state which requires mandatory
            unitary reporting, to a tax on or measured by net
            income with respect to such interest; or
                (ii) an item of interest paid, accrued, or
            incurred, directly or indirectly, to a foreign
            person if the taxpayer can establish, based on a
            preponderance of the evidence, both of the
            following:
                    (a) the foreign person, during the same
                taxable year, paid, accrued, or incurred, the
                interest to a person that is not a related
                member, and
                    (b) the transaction giving rise to the
                interest expense between the taxpayer and the
                foreign person did not have as a principal
                purpose the avoidance of Illinois income tax,
                and is paid pursuant to a contract or agreement
                that reflects an arm's-length interest rate
                and terms; or
                (iii) the taxpayer can establish, based on
            clear and convincing evidence, that the interest
            paid, accrued, or incurred relates to a contract or
            agreement entered into at arm's-length rates and
            terms and the principal purpose for the payment is
            not federal or Illinois tax avoidance; or
                (iv) an item of interest paid, accrued, or
            incurred, directly or indirectly, to a foreign
            person if the taxpayer establishes by clear and
            convincing evidence that the adjustments are
            unreasonable; or if the taxpayer and the Director
            agree in writing to the application or use of an
            alternative method of apportionment under Section
            304(f).
                Nothing in this subsection shall preclude the
            Director from making any other adjustment
            otherwise allowed under Section 404 of this Act for
            any tax year beginning after the effective date of
            this amendment provided such adjustment is made
            pursuant to regulation adopted by the Department
            and such regulations provide methods and standards
            by which the Department will utilize its authority
            under Section 404 of this Act;
            (E-13) For taxable years ending on or after
        December 31, 2004, an amount equal to the amount of
        intangible expenses and costs otherwise allowed as a
        deduction in computing base income, and that were paid,
        accrued, or incurred, directly or indirectly, to a
        foreign person who would be a member of the same
        unitary business group but for the fact that the
        foreign person's business activity outside the United
        States is 80% or more of that person's total business
        activity. The addition modification required by this
        subparagraph shall be reduced to the extent that
        dividends were included in base income of the unitary
        group for the same taxable year and received by the
        taxpayer or by a member of the taxpayer's unitary
        business group (including amounts included in gross
        income pursuant to Sections 951 through 964 of the
        Internal Revenue Code and amounts included in gross
        income under Section 78 of the Internal Revenue Code)
        with respect to the stock of the same person to whom
        the intangible expenses and costs were directly or
        indirectly paid, incurred, or accrued. The preceding
        sentence shall not apply to the extent that the same
        dividends caused a reduction to the addition
        modification required under Section 203(b)(2)(E-12) of
        this Act. As used in this subparagraph, the term
        "intangible expenses and costs" includes (1) expenses,
        losses, and costs for, or related to, the direct or
        indirect acquisition, use, maintenance or management,
        ownership, sale, exchange, or any other disposition of
        intangible property; (2) losses incurred, directly or
        indirectly, from factoring transactions or discounting
        transactions; (3) royalty, patent, technical, and
        copyright fees; (4) licensing fees; and (5) other
        similar expenses and costs. For purposes of this
        subparagraph, "intangible property" includes patents,
        patent applications, trade names, trademarks, service
        marks, copyrights, mask works, trade secrets, and
        similar types of intangible assets.
            This paragraph shall not apply to the following:
            (i) any item of intangible expenses or costs paid,
            accrued, or incurred, directly or indirectly, from
            a transaction with a foreign person who is subject
            in a foreign country or state, other than a state
            which requires mandatory unitary reporting, to a
            tax on or measured by net income with respect to
            such item; or
            (ii) any item of intangible expense or cost paid,
            accrued, or incurred, directly or indirectly, if
            the taxpayer can establish, based on a
            preponderance of the evidence, both of the
            following:
                (a) the foreign person during the same taxable
                year paid, accrued, or incurred, the
                intangible expense or cost to a person that is
                not a related member, and
                (b) the transaction giving rise to the
                intangible expense or cost between the
                taxpayer and the foreign person did not have as
                a principal purpose the avoidance of Illinois
                income tax, and is paid pursuant to a contract
                or agreement that reflects arm's-length terms;
                or
                    (iii) any item of intangible expense or
            cost paid, accrued, or incurred, directly or
            indirectly, from a transaction with a foreign
            person if the taxpayer establishes by clear and
            convincing evidence, that the adjustments are
            unreasonable; or if the taxpayer and the Director
            agree in writing to the application or use of an
            alternative method of apportionment under Section
            304(f);
                Nothing in this subsection shall preclude the
            Director from making any other adjustment
            otherwise allowed under Section 404 of this Act for
            any tax year beginning after the effective date of
            this amendment provided such adjustment is made
            pursuant to regulation adopted by the Department
            and such regulations provide methods and standards
            by which the Department will utilize its authority
            under Section 404 of this Act;
    and by deducting from the total so obtained the sum of the
    following amounts:
            (F) An amount equal to the amount of any tax
        imposed by this Act which was refunded to the taxpayer
        and included in such total for the taxable year;
            (G) An amount equal to any amount included in such
        total under Section 78 of the Internal Revenue Code;
            (H) In the case of a regulated investment company,
        an amount equal to the amount of exempt interest
        dividends as defined in subsection (b) (5) of Section
        852 of the Internal Revenue Code, paid to shareholders
        for the taxable year;
            (I) With the exception of any amounts subtracted
        under subparagraph (J), an amount equal to the sum of
        all amounts disallowed as deductions by (i) Sections
        171(a) (2), and 265(a)(2) and amounts disallowed as
        interest expense by Section 291(a)(3) of the Internal
        Revenue Code, as now or hereafter amended, and all
        amounts of expenses allocable to interest and
        disallowed as deductions by Section 265(a)(1) of the
        Internal Revenue Code, as now or hereafter amended; and
        (ii) for taxable years ending on or after August 13,
        1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and
        832(b)(5)(B)(i) of the Internal Revenue Code; the
        provisions of this subparagraph are exempt from the
        provisions of Section 250;
            (J) An amount equal to all amounts included in such
        total which are exempt from taxation by this State
        either by reason of its statutes or Constitution or by
        reason of the Constitution, treaties or statutes of the
        United States; provided that, in the case of any
        statute of this State that exempts income derived from
        bonds or other obligations from the tax imposed under
        this Act, the amount exempted shall be the interest net
        of bond premium amortization;
            (K) An amount equal to those dividends included in
        such total which were paid by a corporation which
        conducts business operations in an Enterprise Zone or
        zones created under the Illinois Enterprise Zone Act
        and conducts substantially all of its operations in an
        Enterprise Zone or zones;
            (L) An amount equal to those dividends included in
        such total that were paid by a corporation that
        conducts business operations in a federally designated
        Foreign Trade Zone or Sub-Zone and that is designated a
        High Impact Business located in Illinois; provided
        that dividends eligible for the deduction provided in
        subparagraph (K) of paragraph 2 of this subsection
        shall not be eligible for the deduction provided under
        this subparagraph (L);
            (M) For any taxpayer that is a financial
        organization within the meaning of Section 304(c) of
        this Act, an amount included in such total as interest
        income from a loan or loans made by such taxpayer to a
        borrower, to the extent that such a loan is secured by
        property which is eligible for the Enterprise Zone
        Investment Credit. To determine the portion of a loan
        or loans that is secured by property eligible for a
        Section 201(f) investment credit to the borrower, the
        entire principal amount of the loan or loans between
        the taxpayer and the borrower should be divided into
        the basis of the Section 201(f) investment credit
        property which secures the loan or loans, using for
        this purpose the original basis of such property on the
        date that it was placed in service in the Enterprise
        Zone. The subtraction modification available to
        taxpayer in any year under this subsection shall be
        that portion of the total interest paid by the borrower
        with respect to such loan attributable to the eligible
        property as calculated under the previous sentence;
            (M-1) For any taxpayer that is a financial
        organization within the meaning of Section 304(c) of
        this Act, an amount included in such total as interest
        income from a loan or loans made by such taxpayer to a
        borrower, to the extent that such a loan is secured by
        property which is eligible for the High Impact Business
        Investment Credit. To determine the portion of a loan
        or loans that is secured by property eligible for a
        Section 201(h) investment credit to the borrower, the
        entire principal amount of the loan or loans between
        the taxpayer and the borrower should be divided into
        the basis of the Section 201(h) investment credit
        property which secures the loan or loans, using for
        this purpose the original basis of such property on the
        date that it was placed in service in a federally
        designated Foreign Trade Zone or Sub-Zone located in
        Illinois. No taxpayer that is eligible for the
        deduction provided in subparagraph (M) of paragraph
        (2) of this subsection shall be eligible for the
        deduction provided under this subparagraph (M-1). The
        subtraction modification available to taxpayers in any
        year under this subsection shall be that portion of the
        total interest paid by the borrower with respect to
        such loan attributable to the eligible property as
        calculated under the previous sentence;
            (N) Two times any contribution made during the
        taxable year to a designated zone organization to the
        extent that the contribution (i) qualifies as a
        charitable contribution under subsection (c) of
        Section 170 of the Internal Revenue Code and (ii) must,
        by its terms, be used for a project approved by the
        Department of Commerce and Economic Opportunity
        Community Affairs under Section 11 of the Illinois
        Enterprise Zone Act;
            (O) An amount equal to: (i) 85% for taxable years
        ending on or before December 31, 1992, or, a percentage
        equal to the percentage allowable under Section
        243(a)(1) of the Internal Revenue Code of 1986 for
        taxable years ending after December 31, 1992, of the
        amount by which dividends included in taxable income
        and received from a corporation that is not created or
        organized under the laws of the United States or any
        state or political subdivision thereof, including, for
        taxable years ending on or after December 31, 1988,
        dividends received or deemed received or paid or deemed
        paid under Sections 951 through 964 of the Internal
        Revenue Code, exceed the amount of the modification
        provided under subparagraph (G) of paragraph (2) of
        this subsection (b) which is related to such dividends;
        plus (ii) 100% of the amount by which dividends,
        included in taxable income and received, including,
        for taxable years ending on or after December 31, 1988,
        dividends received or deemed received or paid or deemed
        paid under Sections 951 through 964 of the Internal
        Revenue Code, from any such corporation specified in
        clause (i) that would but for the provisions of Section
        1504 (b) (3) of the Internal Revenue Code be treated as
        a member of the affiliated group which includes the
        dividend recipient, exceed the amount of the
        modification provided under subparagraph (G) of
        paragraph (2) of this subsection (b) which is related
        to such dividends;
            (P) An amount equal to any contribution made to a
        job training project established pursuant to the Tax
        Increment Allocation Redevelopment Act;
            (Q) An amount equal to the amount of the deduction
        used to compute the federal income tax credit for
        restoration of substantial amounts held under claim of
        right for the taxable year pursuant to Section 1341 of
        the Internal Revenue Code of 1986;
            (R) In the case of an attorney-in-fact with respect
        to whom an interinsurer or a reciprocal insurer has
        made the election under Section 835 of the Internal
        Revenue Code, 26 U.S.C. 835, an amount equal to the
        excess, if any, of the amounts paid or incurred by that
        interinsurer or reciprocal insurer in the taxable year
        to the attorney-in-fact over the deduction allowed to
        that interinsurer or reciprocal insurer with respect
        to the attorney-in-fact under Section 835(b) of the
        Internal Revenue Code for the taxable year;
            (S) For taxable years ending on or after December
        31, 1997, in the case of a Subchapter S corporation, an
        amount equal to all amounts of income allocable to a
        shareholder subject to the Personal Property Tax
        Replacement Income Tax imposed by subsections (c) and
        (d) of Section 201 of this Act, including amounts
        allocable to organizations exempt from federal income
        tax by reason of Section 501(a) of the Internal Revenue
        Code. This subparagraph (S) is exempt from the
        provisions of Section 250;
            (T) For taxable years 2001 and thereafter, for the
        taxable year in which the bonus depreciation deduction
        (30% of the adjusted basis of the qualified property)
        is taken on the taxpayer's federal income tax return
        under subsection (k) of Section 168 of the Internal
        Revenue Code and for each applicable taxable year
        thereafter, an amount equal to "x", where:
                (1) "y" equals the amount of the depreciation
            deduction taken for the taxable year on the
            taxpayer's federal income tax return on property
            for which the bonus depreciation deduction (30% of
            the adjusted basis of the qualified property) was
            taken in any year under subsection (k) of Section
            168 of the Internal Revenue Code, but not including
            the bonus depreciation deduction; and
                (2) "x" equals "y" multiplied by 30 and then
            divided by 70 (or "y" multiplied by 0.429).
            The aggregate amount deducted under this
        subparagraph in all taxable years for any one piece of
        property may not exceed the amount of the bonus
        depreciation deduction (30% of the adjusted basis of
        the qualified property) taken on that property on the
        taxpayer's federal income tax return under subsection
        (k) of Section 168 of the Internal Revenue Code; and
            (U) If the taxpayer reports a capital gain or loss
        on the taxpayer's federal income tax return for the
        taxable year based on a sale or transfer of property
        for which the taxpayer was required in any taxable year
        to make an addition modification under subparagraph
        (E-10), then an amount equal to that addition
        modification.
            The taxpayer is allowed to take the deduction under
        this subparagraph only once with respect to any one
        piece of property; .
            (V) The amount of: (i) any interest income (net of
        the deductions allocable thereto) taken into account
        for the taxable year with respect to a transaction with
        a taxpayer that is required to make an addition
        modification with respect to such transaction under
        Section 203(a)(2)(D-17), 203(b)(2)(E-12),
        203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
        the amount of such addition modification and (ii) any
        income from intangible property (net of the deductions
        allocable thereto) taken into account for the taxable
        year with respect to a transaction with a taxpayer that
        is required to make an addition modification with
        respect to such transaction under Section
        203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
        203(d)(2)(D-8), but not to exceed the amount of such
        addition modification;
            (W) An amount equal to the interest income taken
        into account for the taxable year (net of the
        deductions allocable thereto) with respect to
        transactions with a foreign person who would be a
        member of the taxpayer's unitary business group but for
        the fact that the foreign person's business activity
        outside the United States is 80% or more of that
        person's total business activity, but not to exceed the
        addition modification required to be made for the same
        taxable year under Section 203(b)(2)(E-12) for
        interest paid, accrued, or incurred, directly or
        indirectly, to the same foreign person; and
            (X) An amount equal to the income from intangible
        property taken into account for the taxable year (net
        of the deductions allocable thereto) with respect to
        transactions with a foreign person who would be a
        member of the taxpayer's unitary business group but for
        the fact that the foreign person's business activity
        outside the United States is 80% or more of that
        person's total business activity, but not to exceed the
        addition modification required to be made for the same
        taxable year under Section 203(b)(2)(E-13) for
        intangible expenses and costs paid, accrued, or
        incurred, directly or indirectly, to the same foreign
        person.
        (3) Special rule. For purposes of paragraph (2) (A),
    "gross income" in the case of a life insurance company, for
    tax years ending on and after December 31, 1994, shall mean
    the gross investment income for the taxable year.
 
    (c) Trusts and estates.
        (1) In general. In the case of a trust or estate, base
    income means an amount equal to the taxpayer's taxable
    income for the taxable year as modified by paragraph (2).
        (2) Modifications. Subject to the provisions of
    paragraph (3), the taxable income referred to in paragraph
    (1) shall be modified by adding thereto the sum of the
    following amounts:
            (A) An amount equal to all amounts paid or accrued
        to the taxpayer as interest or dividends during the
        taxable year to the extent excluded from gross income
        in the computation of taxable income;
            (B) In the case of (i) an estate, $600; (ii) a
        trust which, under its governing instrument, is
        required to distribute all of its income currently,
        $300; and (iii) any other trust, $100, but in each such
        case, only to the extent such amount was deducted in
        the computation of taxable income;
            (C) An amount equal to the amount of tax imposed by
        this Act to the extent deducted from gross income in
        the computation of taxable income for the taxable year;
            (D) The amount of any net operating loss deduction
        taken in arriving at taxable income, other than a net
        operating loss carried forward from a taxable year
        ending prior to December 31, 1986;
            (E) For taxable years in which a net operating loss
        carryback or carryforward from a taxable year ending
        prior to December 31, 1986 is an element of taxable
        income under paragraph (1) of subsection (e) or
        subparagraph (E) of paragraph (2) of subsection (e),
        the amount by which addition modifications other than
        those provided by this subparagraph (E) exceeded
        subtraction modifications in such taxable year, with
        the following limitations applied in the order that
        they are listed:
                (i) the addition modification relating to the
            net operating loss carried back or forward to the
            taxable year from any taxable year ending prior to
            December 31, 1986 shall be reduced by the amount of
            addition modification under this subparagraph (E)
            which related to that net operating loss and which
            was taken into account in calculating the base
            income of an earlier taxable year, and
                (ii) the addition modification relating to the
            net operating loss carried back or forward to the
            taxable year from any taxable year ending prior to
            December 31, 1986 shall not exceed the amount of
            such carryback or carryforward;
            For taxable years in which there is a net operating
        loss carryback or carryforward from more than one other
        taxable year ending prior to December 31, 1986, the
        addition modification provided in this subparagraph
        (E) shall be the sum of the amounts computed
        independently under the preceding provisions of this
        subparagraph (E) for each such taxable year;
            (F) For taxable years ending on or after January 1,
        1989, an amount equal to the tax deducted pursuant to
        Section 164 of the Internal Revenue Code if the trust
        or estate is claiming the same tax for purposes of the
        Illinois foreign tax credit under Section 601 of this
        Act;
            (G) An amount equal to the amount of the capital
        gain deduction allowable under the Internal Revenue
        Code, to the extent deducted from gross income in the
        computation of taxable income;
            (G-5) For taxable years ending after December 31,
        1997, an amount equal to any eligible remediation costs
        that the trust or estate deducted in computing adjusted
        gross income and for which the trust or estate claims a
        credit under subsection (l) of Section 201;
            (G-10) For taxable years 2001 and thereafter, an
        amount equal to the bonus depreciation deduction (30%
        of the adjusted basis of the qualified property) taken
        on the taxpayer's federal income tax return for the
        taxable year under subsection (k) of Section 168 of the
        Internal Revenue Code; and
            (G-11) If the taxpayer reports a capital gain or
        loss on the taxpayer's federal income tax return for
        the taxable year based on a sale or transfer of
        property for which the taxpayer was required in any
        taxable year to make an addition modification under
        subparagraph (G-10), then an amount equal to the
        aggregate amount of the deductions taken in all taxable
        years under subparagraph (R) with respect to that
        property;
            The taxpayer is required to make the addition
        modification under this subparagraph only once with
        respect to any one piece of property;
            (G-12) For taxable years ending on or after
        December 31, 2004, an amount equal to the amount
        otherwise allowed as a deduction in computing base
        income for interest paid, accrued, or incurred,
        directly or indirectly, to a foreign person who would
        be a member of the same unitary business group but for
        the fact that the foreign person's business activity
        outside the United States is 80% or more of the foreign
        person's total business activity. The addition
        modification required by this subparagraph shall be
        reduced to the extent that dividends were included in
        base income of the unitary group for the same taxable
        year and received by the taxpayer or by a member of the
        taxpayer's unitary business group (including amounts
        included in gross income pursuant to Sections 951
        through 964 of the Internal Revenue Code and amounts
        included in gross income under Section 78 of the
        Internal Revenue Code) with respect to the stock of the
        same person to whom the interest was paid, accrued, or
        incurred.
            This paragraph shall not apply to the following:
                (i) an item of interest paid, accrued, or
            incurred, directly or indirectly, to a foreign
            person who is subject in a foreign country or
            state, other than a state which requires mandatory
            unitary reporting, to a tax on or measured by net
            income with respect to such interest; or
                (ii) an item of interest paid, accrued, or
            incurred, directly or indirectly, to a foreign
            person if the taxpayer can establish, based on a
            preponderance of the evidence, both of the
            following:
                    (a) the foreign person, during the same
                taxable year, paid, accrued, or incurred, the
                interest to a person that is not a related
                member, and
                    (b) the transaction giving rise to the
                interest expense between the taxpayer and the
                foreign person did not have as a principal
                purpose the avoidance of Illinois income tax,
                and is paid pursuant to a contract or agreement
                that reflects an arm's-length interest rate
                and terms; or
                (iii) the taxpayer can establish, based on
            clear and convincing evidence, that the interest
            paid, accrued, or incurred relates to a contract or
            agreement entered into at arm's-length rates and
            terms and the principal purpose for the payment is
            not federal or Illinois tax avoidance; or
                (iv) an item of interest paid, accrued, or
            incurred, directly or indirectly, to a foreign
            person if the taxpayer establishes by clear and
            convincing evidence that the adjustments are
            unreasonable; or if the taxpayer and the Director
            agree in writing to the application or use of an
            alternative method of apportionment under Section
            304(f).
                Nothing in this subsection shall preclude the
            Director from making any other adjustment
            otherwise allowed under Section 404 of this Act for
            any tax year beginning after the effective date of
            this amendment provided such adjustment is made
            pursuant to regulation adopted by the Department
            and such regulations provide methods and standards
            by which the Department will utilize its authority
            under Section 404 of this Act;
            (G-13) For taxable years ending on or after
        December 31, 2004, an amount equal to the amount of
        intangible expenses and costs otherwise allowed as a
        deduction in computing base income, and that were paid,
        accrued, or incurred, directly or indirectly, to a
        foreign person who would be a member of the same
        unitary business group but for the fact that the
        foreign person's business activity outside the United
        States is 80% or more of that person's total business
        activity. The addition modification required by this
        subparagraph shall be reduced to the extent that
        dividends were included in base income of the unitary
        group for the same taxable year and received by the
        taxpayer or by a member of the taxpayer's unitary
        business group (including amounts included in gross
        income pursuant to Sections 951 through 964 of the
        Internal Revenue Code and amounts included in gross
        income under Section 78 of the Internal Revenue Code)
        with respect to the stock of the same person to whom
        the intangible expenses and costs were directly or
        indirectly paid, incurred, or accrued. The preceding
        sentence shall not apply to the extent that the same
        dividends caused a reduction to the addition
        modification required under Section 203(c)(2)(G-12) of
        this Act. As used in this subparagraph, the term
        "intangible expenses and costs" includes: (1)
        expenses, losses, and costs for or related to the
        direct or indirect acquisition, use, maintenance or
        management, ownership, sale, exchange, or any other
        disposition of intangible property; (2) losses
        incurred, directly or indirectly, from factoring
        transactions or discounting transactions; (3) royalty,
        patent, technical, and copyright fees; (4) licensing
        fees; and (5) other similar expenses and costs. For
        purposes of this subparagraph, "intangible property"
        includes patents, patent applications, trade names,
        trademarks, service marks, copyrights, mask works,
        trade secrets, and similar types of intangible assets.
            This paragraph shall not apply to the following:
            (i) any item of intangible expenses or costs paid,
            accrued, or incurred, directly or indirectly, from
            a transaction with a foreign person who is subject
            in a foreign country or state, other than a state
            which requires mandatory unitary reporting, to a
            tax on or measured by net income with respect to
            such item; or
            (ii) any item of intangible expense or cost paid,
            accrued, or incurred, directly or indirectly, if
            the taxpayer can establish, based on a
            preponderance of the evidence, both of the
            following:
                (a) the foreign person during the same taxable
                year paid, accrued, or incurred, the
                intangible expense or cost to a person that is
                not a related member, and
                (b) the transaction giving rise to the
                intangible expense or cost between the
                taxpayer and the foreign person did not have as
                a principal purpose the avoidance of Illinois
                income tax, and is paid pursuant to a contract
                or agreement that reflects arm's-length terms;
                or
                    (iii) any item of intangible expense or
            cost paid, accrued, or incurred, directly or
            indirectly, from a transaction with a foreign
            person if the taxpayer establishes by clear and
            convincing evidence, that the adjustments are
            unreasonable; or if the taxpayer and the Director
            agree in writing to the application or use of an
            alternative method of apportionment under Section
            304(f);
                Nothing in this subsection shall preclude the
            Director from making any other adjustment
            otherwise allowed under Section 404 of this Act for
            any tax year beginning after the effective date of
            this amendment provided such adjustment is made
            pursuant to regulation adopted by the Department
            and such regulations provide methods and standards
            by which the Department will utilize its authority
            under Section 404 of this Act;
    and by deducting from the total so obtained the sum of the
    following amounts:
            (H) An amount equal to all amounts included in such
        total pursuant to the provisions of Sections 402(a),
        402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
        Internal Revenue Code or included in such total as
        distributions under the provisions of any retirement
        or disability plan for employees of any governmental
        agency or unit, or retirement payments to retired
        partners, which payments are excluded in computing net
        earnings from self employment by Section 1402 of the
        Internal Revenue Code and regulations adopted pursuant
        thereto;
            (I) The valuation limitation amount;
            (J) An amount equal to the amount of any tax
        imposed by this Act which was refunded to the taxpayer
        and included in such total for the taxable year;
            (K) An amount equal to all amounts included in
        taxable income as modified by subparagraphs (A), (B),
        (C), (D), (E), (F) and (G) which are exempt from
        taxation by this State either by reason of its statutes
        or Constitution or by reason of the Constitution,
        treaties or statutes of the United States; provided
        that, in the case of any statute of this State that
        exempts income derived from bonds or other obligations
        from the tax imposed under this Act, the amount
        exempted shall be the interest net of bond premium
        amortization;
            (L) With the exception of any amounts subtracted
        under subparagraph (K), an amount equal to the sum of
        all amounts disallowed as deductions by (i) Sections
        171(a) (2) and 265(a)(2) of the Internal Revenue Code,
        as now or hereafter amended, and all amounts of
        expenses allocable to interest and disallowed as
        deductions by Section 265(1) of the Internal Revenue
        Code of 1954, as now or hereafter amended; and (ii) for
        taxable years ending on or after August 13, 1999,
        Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
        the Internal Revenue Code; the provisions of this
        subparagraph are exempt from the provisions of Section
        250;
            (M) An amount equal to those dividends included in
        such total which were paid by a corporation which
        conducts business operations in an Enterprise Zone or
        zones created under the Illinois Enterprise Zone Act
        and conducts substantially all of its operations in an
        Enterprise Zone or Zones;
            (N) An amount equal to any contribution made to a
        job training project established pursuant to the Tax
        Increment Allocation Redevelopment Act;
            (O) An amount equal to those dividends included in
        such total that were paid by a corporation that
        conducts business operations in a federally designated
        Foreign Trade Zone or Sub-Zone and that is designated a
        High Impact Business located in Illinois; provided
        that dividends eligible for the deduction provided in
        subparagraph (M) of paragraph (2) of this subsection
        shall not be eligible for the deduction provided under
        this subparagraph (O);
            (P) An amount equal to the amount of the deduction
        used to compute the federal income tax credit for
        restoration of substantial amounts held under claim of
        right for the taxable year pursuant to Section 1341 of
        the Internal Revenue Code of 1986;
            (Q) For taxable year 1999 and thereafter, an amount
        equal to the amount of any (i) distributions, to the
        extent includible in gross income for federal income
        tax purposes, made to the taxpayer because of his or
        her status as a victim of persecution for racial or
        religious reasons by Nazi Germany or any other Axis
        regime or as an heir of the victim and (ii) items of
        income, to the extent includible in gross income for
        federal income tax purposes, attributable to, derived
        from or in any way related to assets stolen from,
        hidden from, or otherwise lost to a victim of
        persecution for racial or religious reasons by Nazi
        Germany or any other Axis regime immediately prior to,
        during, and immediately after World War II, including,
        but not limited to, interest on the proceeds receivable
        as insurance under policies issued to a victim of
        persecution for racial or religious reasons by Nazi
        Germany or any other Axis regime by European insurance
        companies immediately prior to and during World War II;
        provided, however, this subtraction from federal
        adjusted gross income does not apply to assets acquired
        with such assets or with the proceeds from the sale of
        such assets; provided, further, this paragraph shall
        only apply to a taxpayer who was the first recipient of
        such assets after their recovery and who is a victim of
        persecution for racial or religious reasons by Nazi
        Germany or any other Axis regime or as an heir of the
        victim. The amount of and the eligibility for any
        public assistance, benefit, or similar entitlement is
        not affected by the inclusion of items (i) and (ii) of
        this paragraph in gross income for federal income tax
        purposes. This paragraph is exempt from the provisions
        of Section 250;
            (R) For taxable years 2001 and thereafter, for the
        taxable year in which the bonus depreciation deduction
        (30% of the adjusted basis of the qualified property)
        is taken on the taxpayer's federal income tax return
        under subsection (k) of Section 168 of the Internal
        Revenue Code and for each applicable taxable year
        thereafter, an amount equal to "x", where:
                (1) "y" equals the amount of the depreciation
            deduction taken for the taxable year on the
            taxpayer's federal income tax return on property
            for which the bonus depreciation deduction (30% of
            the adjusted basis of the qualified property) was
            taken in any year under subsection (k) of Section
            168 of the Internal Revenue Code, but not including
            the bonus depreciation deduction; and
                (2) "x" equals "y" multiplied by 30 and then
            divided by 70 (or "y" multiplied by 0.429).
            The aggregate amount deducted under this
        subparagraph in all taxable years for any one piece of
        property may not exceed the amount of the bonus
        depreciation deduction (30% of the adjusted basis of
        the qualified property) taken on that property on the
        taxpayer's federal income tax return under subsection
        (k) of Section 168 of the Internal Revenue Code; and
            (S) If the taxpayer reports a capital gain or loss
        on the taxpayer's federal income tax return for the
        taxable year based on a sale or transfer of property
        for which the taxpayer was required in any taxable year
        to make an addition modification under subparagraph
        (G-10), then an amount equal to that addition
        modification.
            The taxpayer is allowed to take the deduction under
        this subparagraph only once with respect to any one
        piece of property; .
            (T) The amount of (i) any interest income (net of
        the deductions allocable thereto) taken into account
        for the taxable year with respect to a transaction with
        a taxpayer that is required to make an addition
        modification with respect to such transaction under
        Section 203(a)(2)(D-17), 203(b)(2)(E-12),
        203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
        the amount of such addition modification and (ii) any
        income from intangible property (net of the deductions
        allocable thereto) taken into account for the taxable
        year with respect to a transaction with a taxpayer that
        is required to make an addition modification with
        respect to such transaction under Section
        203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
        203(d)(2)(D-8), but not to exceed the amount of such
        addition modification;
            (U) An amount equal to the interest income taken
        into account for the taxable year (net of the
        deductions allocable thereto) with respect to
        transactions with a foreign person who would be a
        member of the taxpayer's unitary business group but for
        the fact the foreign person's business activity
        outside the United States is 80% or more of that
        person's total business activity, but not to exceed the
        addition modification required to be made for the same
        taxable year under Section 203(c)(2)(G-12) for
        interest paid, accrued, or incurred, directly or
        indirectly, to the same foreign person; and
            (V) An amount equal to the income from intangible
        property taken into account for the taxable year (net
        of the deductions allocable thereto) with respect to
        transactions with a foreign person who would be a
        member of the taxpayer's unitary business group but for
        the fact that the foreign person's business activity
        outside the United States is 80% or more of that
        person's total business activity, but not to exceed the
        addition modification required to be made for the same
        taxable year under Section 203(c)(2)(G-13) for
        intangible expenses and costs paid, accrued, or
        incurred, directly or indirectly, to the same foreign
        person.
        (3) Limitation. The amount of any modification
    otherwise required under this subsection shall, under
    regulations prescribed by the Department, be adjusted by
    any amounts included therein which were properly paid,
    credited, or required to be distributed, or permanently set
    aside for charitable purposes pursuant to Internal Revenue
    Code Section 642(c) during the taxable year.
 
    (d) Partnerships.
        (1) In general. In the case of a partnership, base
    income means an amount equal to the taxpayer's taxable
    income for the taxable year as modified by paragraph (2).
        (2) Modifications. The taxable income referred to in
    paragraph (1) shall be modified by adding thereto the sum
    of the following amounts:
            (A) An amount equal to all amounts paid or accrued
        to the taxpayer as interest or dividends during the
        taxable year to the extent excluded from gross income
        in the computation of taxable income;
            (B) An amount equal to the amount of tax imposed by
        this Act to the extent deducted from gross income for
        the taxable year;
            (C) The amount of deductions allowed to the
        partnership pursuant to Section 707 (c) of the Internal
        Revenue Code in calculating its taxable income;
            (D) An amount equal to the amount of the capital
        gain deduction allowable under the Internal Revenue
        Code, to the extent deducted from gross income in the
        computation of taxable income;
            (D-5) For taxable years 2001 and thereafter, an
        amount equal to the bonus depreciation deduction (30%
        of the adjusted basis of the qualified property) taken
        on the taxpayer's federal income tax return for the
        taxable year under subsection (k) of Section 168 of the
        Internal Revenue Code; and
            (D-6) If the taxpayer reports a capital gain or
        loss on the taxpayer's federal income tax return for
        the taxable year based on a sale or transfer of
        property for which the taxpayer was required in any
        taxable year to make an addition modification under
        subparagraph (D-5), then an amount equal to the
        aggregate amount of the deductions taken in all taxable
        years under subparagraph (O) with respect to that
        property;
            The taxpayer is required to make the addition
        modification under this subparagraph only once with
        respect to any one piece of property;
            (D-7) For taxable years ending on or after December
        31, 2004, an amount equal to the amount otherwise
        allowed as a deduction in computing base income for
        interest paid, accrued, or incurred, directly or
        indirectly, to a foreign person who would be a member
        of the same unitary business group but for the fact the
        foreign person's business activity outside the United
        States is 80% or more of the foreign person's total
        business activity. The addition modification required
        by this subparagraph shall be reduced to the extent
        that dividends were included in base income of the
        unitary group for the same taxable year and received by
        the taxpayer or by a member of the taxpayer's unitary
        business group (including amounts included in gross
        income pursuant to Sections 951 through 964 of the
        Internal Revenue Code and amounts included in gross
        income under Section 78 of the Internal Revenue Code)
        with respect to the stock of the same person to whom
        the interest was paid, accrued, or incurred.
            This paragraph shall not apply to the following:
                (i) an item of interest paid, accrued, or
            incurred, directly or indirectly, to a foreign
            person who is subject in a foreign country or
            state, other than a state which requires mandatory
            unitary reporting, to a tax on or measured by net
            income with respect to such interest; or
                (ii) an item of interest paid, accrued, or
            incurred, directly or indirectly, to a foreign
            person if the taxpayer can establish, based on a
            preponderance of the evidence, both of the
            following:
                    (a) the foreign person, during the same
                taxable year, paid, accrued, or incurred, the
                interest to a person that is not a related
                member, and
                    (b) the transaction giving rise to the
                interest expense between the taxpayer and the
                foreign person did not have as a principal
                purpose the avoidance of Illinois income tax,
                and is paid pursuant to a contract or agreement
                that reflects an arm's-length interest rate
                and terms; or
                (iii) the taxpayer can establish, based on
            clear and convincing evidence, that the interest
            paid, accrued, or incurred relates to a contract or
            agreement entered into at arm's-length rates and
            terms and the principal purpose for the payment is
            not federal or Illinois tax avoidance; or
                (iv) an item of interest paid, accrued, or
            incurred, directly or indirectly, to a foreign
            person if the taxpayer establishes by clear and
            convincing evidence that the adjustments are
            unreasonable; or if the taxpayer and the Director
            agree in writing to the application or use of an
            alternative method of apportionment under Section
            304(f).
                Nothing in this subsection shall preclude the
            Director from making any other adjustment
            otherwise allowed under Section 404 of this Act for
            any tax year beginning after the effective date of
            this amendment provided such adjustment is made
            pursuant to regulation adopted by the Department
            and such regulations provide methods and standards
            by which the Department will utilize its authority
            under Section 404 of this Act; and
            (D-8) For taxable years ending on or after December
        31, 2004, an amount equal to the amount of intangible
        expenses and costs otherwise allowed as a deduction in
        computing base income, and that were paid, accrued, or
        incurred, directly or indirectly, to a foreign person
        who would be a member of the same unitary business
        group but for the fact that the foreign person's
        business activity outside the United States is 80% or
        more of that person's total business activity. The
        addition modification required by this subparagraph
        shall be reduced to the extent that dividends were
        included in base income of the unitary group for the
        same taxable year and received by the taxpayer or by a
        member of the taxpayer's unitary business group
        (including amounts included in gross income pursuant
        to Sections 951 through 964 of the Internal Revenue
        Code and amounts included in gross income under Section
        78 of the Internal Revenue Code) with respect to the
        stock of the same person to whom the intangible
        expenses and costs were directly or indirectly paid,
        incurred or accrued. The preceding sentence shall not
        apply to the extent that the same dividends caused a
        reduction to the addition modification required under
        Section 203(d)(2)(D-7) of this Act. As used in this
        subparagraph, the term "intangible expenses and costs"
        includes (1) expenses, losses, and costs for, or
        related to, the direct or indirect acquisition, use,
        maintenance or management, ownership, sale, exchange,
        or any other disposition of intangible property; (2)
        losses incurred, directly or indirectly, from
        factoring transactions or discounting transactions;
        (3) royalty, patent, technical, and copyright fees;
        (4) licensing fees; and (5) other similar expenses and
        costs. For purposes of this subparagraph, "intangible
        property" includes patents, patent applications, trade
        names, trademarks, service marks, copyrights, mask
        works, trade secrets, and similar types of intangible
        assets;
            This paragraph shall not apply to the following:
            (i) any item of intangible expenses or costs paid,
            accrued, or incurred, directly or indirectly, from
            a transaction with a foreign person who is subject
            in a foreign country or state, other than a state
            which requires mandatory unitary reporting, to a
            tax on or measured by net income with respect to
            such item; or
            (ii) any item of intangible expense or cost paid,
            accrued, or incurred, directly or indirectly, if
            the taxpayer can establish, based on a
            preponderance of the evidence, both of the
            following:
                (a) the foreign person during the same taxable
                year paid, accrued, or incurred, the
                intangible expense or cost to a person that is
                not a related member, and
                (b) the transaction giving rise to the
                intangible expense or cost between the
                taxpayer and the foreign person did not have as
                a principal purpose the avoidance of Illinois
                income tax, and is paid pursuant to a contract
                or agreement that reflects arm's-length terms;
                or
                    (iii) any item of intangible expense or
            cost paid, accrued, or incurred, directly or
            indirectly, from a transaction with a foreign
            person if the taxpayer establishes by clear and
            convincing evidence, that the adjustments are
            unreasonable; or if the taxpayer and the Director
            agree in writing to the application or use of an
            alternative method of apportionment under Section
            304(f);
                Nothing in this subsection shall preclude the
            Director from making any other adjustment
            otherwise allowed under Section 404 of this Act for
            any tax year beginning after the effective date of
            this amendment provided such adjustment is made
            pursuant to regulation adopted by the Department
            and such regulations provide methods and standards
            by which the Department will utilize its authority
            under Section 404 of this Act;
    and by deducting from the total so obtained the following
    amounts:
            (E) The valuation limitation amount;
            (F) An amount equal to the amount of any tax
        imposed by this Act which was refunded to the taxpayer
        and included in such total for the taxable year;
            (G) An amount equal to all amounts included in
        taxable income as modified by subparagraphs (A), (B),
        (C) and (D) which are exempt from taxation by this
        State either by reason of its statutes or Constitution
        or by reason of the Constitution, treaties or statutes
        of the United States; provided that, in the case of any
        statute of this State that exempts income derived from
        bonds or other obligations from the tax imposed under
        this Act, the amount exempted shall be the interest net
        of bond premium amortization;
            (H) Any income of the partnership which
        constitutes personal service income as defined in
        Section 1348 (b) (1) of the Internal Revenue Code (as
        in effect December 31, 1981) or a reasonable allowance
        for compensation paid or accrued for services rendered
        by partners to the partnership, whichever is greater;
            (I) An amount equal to all amounts of income
        distributable to an entity subject to the Personal
        Property Tax Replacement Income Tax imposed by
        subsections (c) and (d) of Section 201 of this Act
        including amounts distributable to organizations
        exempt from federal income tax by reason of Section
        501(a) of the Internal Revenue Code;
            (J) With the exception of any amounts subtracted
        under subparagraph (G), an amount equal to the sum of
        all amounts disallowed as deductions by (i) Sections
        171(a) (2), and 265(2) of the Internal Revenue Code of
        1954, as now or hereafter amended, and all amounts of
        expenses allocable to interest and disallowed as
        deductions by Section 265(1) of the Internal Revenue
        Code, as now or hereafter amended; and (ii) for taxable
        years ending on or after August 13, 1999, Sections
        171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
        Internal Revenue Code; the provisions of this
        subparagraph are exempt from the provisions of Section
        250;
            (K) An amount equal to those dividends included in
        such total which were paid by a corporation which
        conducts business operations in an Enterprise Zone or
        zones created under the Illinois Enterprise Zone Act,
        enacted by the 82nd General Assembly, and conducts
        substantially all of its operations in an Enterprise
        Zone or Zones;
            (L) An amount equal to any contribution made to a
        job training project established pursuant to the Real
        Property Tax Increment Allocation Redevelopment Act;
            (M) An amount equal to those dividends included in
        such total that were paid by a corporation that
        conducts business operations in a federally designated
        Foreign Trade Zone or Sub-Zone and that is designated a
        High Impact Business located in Illinois; provided
        that dividends eligible for the deduction provided in
        subparagraph (K) of paragraph (2) of this subsection
        shall not be eligible for the deduction provided under
        this subparagraph (M);
            (N) An amount equal to the amount of the deduction
        used to compute the federal income tax credit for
        restoration of substantial amounts held under claim of
        right for the taxable year pursuant to Section 1341 of
        the Internal Revenue Code of 1986;
            (O) For taxable years 2001 and thereafter, for the
        taxable year in which the bonus depreciation deduction
        (30% of the adjusted basis of the qualified property)
        is taken on the taxpayer's federal income tax return
        under subsection (k) of Section 168 of the Internal
        Revenue Code and for each applicable taxable year
        thereafter, an amount equal to "x", where:
                (1) "y" equals the amount of the depreciation
            deduction taken for the taxable year on the
            taxpayer's federal income tax return on property
            for which the bonus depreciation deduction (30% of
            the adjusted basis of the qualified property) was
            taken in any year under subsection (k) of Section
            168 of the Internal Revenue Code, but not including
            the bonus depreciation deduction; and
                (2) "x" equals "y" multiplied by 30 and then
            divided by 70 (or "y" multiplied by 0.429).
            The aggregate amount deducted under this
        subparagraph in all taxable years for any one piece of
        property may not exceed the amount of the bonus
        depreciation deduction (30% of the adjusted basis of
        the qualified property) taken on that property on the
        taxpayer's federal income tax return under subsection
        (k) of Section 168 of the Internal Revenue Code; and
            (P) If the taxpayer reports a capital gain or loss
        on the taxpayer's federal income tax return for the
        taxable year based on a sale or transfer of property
        for which the taxpayer was required in any taxable year
        to make an addition modification under subparagraph
        (D-5), then an amount equal to that addition
        modification.
            The taxpayer is allowed to take the deduction under
        this subparagraph only once with respect to any one
        piece of property; .
            (Q) The amount of (i) any interest income (net of
        the deductions allocable thereto) taken into account
        for the taxable year with respect to a transaction with
        a taxpayer that is required to make an addition
        modification with respect to such transaction under
        Section 203(a)(2)(D-17), 203(b)(2)(E-12),
        203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
        the amount of such addition modification and (ii) any
        income from intangible property (net of the deductions
        allocable thereto) taken into account for the taxable
        year with respect to a transaction with a taxpayer that
        is required to make an addition modification with
        respect to such transaction under Section
        203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
        203(d)(2)(D-8), but not to exceed the amount of such
        addition modification;
            (R) An amount equal to the interest income taken
        into account for the taxable year (net of the
        deductions allocable thereto) with respect to
        transactions with a foreign person who would be a
        member of the taxpayer's unitary business group but for
        the fact that the foreign person's business activity
        outside the United States is 80% or more of that
        person's total business activity, but not to exceed the
        addition modification required to be made for the same
        taxable year under Section 203(d)(2)(D-7) for interest
        paid, accrued, or incurred, directly or indirectly, to
        the same foreign person; and
            (S) An amount equal to the income from intangible
        property taken into account for the taxable year (net
        of the deductions allocable thereto) with respect to
        transactions with a foreign person who would be a
        member of the taxpayer's unitary business group but for
        the fact that the foreign person's business activity
        outside the United States is 80% or more of that
        person's total business activity, but not to exceed the
        addition modification required to be made for the same
        taxable year under Section 203(d)(2)(D-8) for
        intangible expenses and costs paid, accrued, or
        incurred, directly or indirectly, to the same foreign
        person.
 
    (e) Gross income; adjusted gross income; taxable income.
        (1) In general. Subject to the provisions of paragraph
    (2) and subsection (b) (3), for purposes of this Section
    and Section 803(e), a taxpayer's gross income, adjusted
    gross income, or taxable income for the taxable year shall
    mean the amount of gross income, adjusted gross income or
    taxable income properly reportable for federal income tax
    purposes for the taxable year under the provisions of the
    Internal Revenue Code. Taxable income may be less than
    zero. However, for taxable years ending on or after
    December 31, 1986, net operating loss carryforwards from
    taxable years ending prior to December 31, 1986, may not
    exceed the sum of federal taxable income for the taxable
    year before net operating loss deduction, plus the excess
    of addition modifications over subtraction modifications
    for the taxable year. For taxable years ending prior to
    December 31, 1986, taxable income may never be an amount in
    excess of the net operating loss for the taxable year as
    defined in subsections (c) and (d) of Section 172 of the
    Internal Revenue Code, provided that when taxable income of
    a corporation (other than a Subchapter S corporation),
    trust, or estate is less than zero and addition
    modifications, other than those provided by subparagraph
    (E) of paragraph (2) of subsection (b) for corporations or
    subparagraph (E) of paragraph (2) of subsection (c) for
    trusts and estates, exceed subtraction modifications, an
    addition modification must be made under those
    subparagraphs for any other taxable year to which the
    taxable income less than zero (net operating loss) is
    applied under Section 172 of the Internal Revenue Code or
    under subparagraph (E) of paragraph (2) of this subsection
    (e) applied in conjunction with Section 172 of the Internal
    Revenue Code.
        (2) Special rule. For purposes of paragraph (1) of this
    subsection, the taxable income properly reportable for
    federal income tax purposes shall mean:
            (A) Certain life insurance companies. In the case
        of a life insurance company subject to the tax imposed
        by Section 801 of the Internal Revenue Code, life
        insurance company taxable income, plus the amount of
        distribution from pre-1984 policyholder surplus
        accounts as calculated under Section 815a of the
        Internal Revenue Code;
            (B) Certain other insurance companies. In the case
        of mutual insurance companies subject to the tax
        imposed by Section 831 of the Internal Revenue Code,
        insurance company taxable income;
            (C) Regulated investment companies. In the case of
        a regulated investment company subject to the tax
        imposed by Section 852 of the Internal Revenue Code,
        investment company taxable income;
            (D) Real estate investment trusts. In the case of a
        real estate investment trust subject to the tax imposed
        by Section 857 of the Internal Revenue Code, real
        estate investment trust taxable income;
            (E) Consolidated corporations. In the case of a
        corporation which is a member of an affiliated group of
        corporations filing a consolidated income tax return
        for the taxable year for federal income tax purposes,
        taxable income determined as if such corporation had
        filed a separate return for federal income tax purposes
        for the taxable year and each preceding taxable year
        for which it was a member of an affiliated group. For
        purposes of this subparagraph, the taxpayer's separate
        taxable income shall be determined as if the election
        provided by Section 243(b) (2) of the Internal Revenue
        Code had been in effect for all such years;
            (F) Cooperatives. In the case of a cooperative
        corporation or association, the taxable income of such
        organization determined in accordance with the
        provisions of Section 1381 through 1388 of the Internal
        Revenue Code;
            (G) Subchapter S corporations. In the case of: (i)
        a Subchapter S corporation for which there is in effect
        an election for the taxable year under Section 1362 of
        the Internal Revenue Code, the taxable income of such
        corporation determined in accordance with Section
        1363(b) of the Internal Revenue Code, except that
        taxable income shall take into account those items
        which are required by Section 1363(b)(1) of the
        Internal Revenue Code to be separately stated; and (ii)
        a Subchapter S corporation for which there is in effect
        a federal election to opt out of the provisions of the
        Subchapter S Revision Act of 1982 and have applied
        instead the prior federal Subchapter S rules as in
        effect on July 1, 1982, the taxable income of such
        corporation determined in accordance with the federal
        Subchapter S rules as in effect on July 1, 1982; and
            (H) Partnerships. In the case of a partnership,
        taxable income determined in accordance with Section
        703 of the Internal Revenue Code, except that taxable
        income shall take into account those items which are
        required by Section 703(a)(1) to be separately stated
        but which would be taken into account by an individual
        in calculating his taxable income.
        (3) Recapture of business expenses on disposition of
    asset or business. Notwithstanding any other law to the
    contrary, if in prior years income from an asset or
    business has been classified as business income and in a
    later year is demonstrated to be non-business income, then
    all expenses, without limitation, deducted in such later
    year and in the 2 immediately preceding taxable years
    related to that asset or business that generated the
    non-business income shall be added back and recaptured as
    business income in the year of the disposition of the asset
    or business. Such amount shall be apportioned to Illinois
    using the greater of the apportionment fraction computed
    for the business under Section 304 of this Act for the
    taxable year or the average of the apportionment fractions
    computed for the business under Section 304 of this Act for
    the taxable year and for the 2 immediately preceding
    taxable years.
    (f) Valuation limitation amount.
        (1) In general. The valuation limitation amount
    referred to in subsections (a) (2) (G), (c) (2) (I) and
    (d)(2) (E) is an amount equal to:
            (A) The sum of the pre-August 1, 1969 appreciation
        amounts (to the extent consisting of gain reportable
        under the provisions of Section 1245 or 1250 of the
        Internal Revenue Code) for all property in respect of
        which such gain was reported for the taxable year; plus
            (B) The lesser of (i) the sum of the pre-August 1,
        1969 appreciation amounts (to the extent consisting of
        capital gain) for all property in respect of which such
        gain was reported for federal income tax purposes for
        the taxable year, or (ii) the net capital gain for the
        taxable year, reduced in either case by any amount of
        such gain included in the amount determined under
        subsection (a) (2) (F) or (c) (2) (H).
        (2) Pre-August 1, 1969 appreciation amount.
            (A) If the fair market value of property referred
        to in paragraph (1) was readily ascertainable on August
        1, 1969, the pre-August 1, 1969 appreciation amount for
        such property is the lesser of (i) the excess of such
        fair market value over the taxpayer's basis (for
        determining gain) for such property on that date
        (determined under the Internal Revenue Code as in
        effect on that date), or (ii) the total gain realized
        and reportable for federal income tax purposes in
        respect of the sale, exchange or other disposition of
        such property.
            (B) If the fair market value of property referred
        to in paragraph (1) was not readily ascertainable on
        August 1, 1969, the pre-August 1, 1969 appreciation
        amount for such property is that amount which bears the
        same ratio to the total gain reported in respect of the
        property for federal income tax purposes for the
        taxable year, as the number of full calendar months in
        that part of the taxpayer's holding period for the
        property ending July 31, 1969 bears to the number of
        full calendar months in the taxpayer's entire holding
        period for the property.
            (C) The Department shall prescribe such
        regulations as may be necessary to carry out the
        purposes of this paragraph.
 
    (g) Double deductions. Unless specifically provided
otherwise, nothing in this Section shall permit the same item
to be deducted more than once.
 
    (h) Legislative intention. Except as expressly provided by
this Section there shall be no modifications or limitations on
the amounts of income, gain, loss or deduction taken into
account in determining gross income, adjusted gross income or
taxable income for federal income tax purposes for the taxable
year, or in the amount of such items entering into the
computation of base income and net income under this Act for
such taxable year, whether in respect of property values as of
August 1, 1969 or otherwise.
(Source: P.A. 91-192, eff. 7-20-99; 91-205, eff. 7-20-99;
91-357, eff. 7-29-99; 91-541, eff. 8-13-99; 91-676, eff.
12-23-99; 91-845, eff. 6-22-00; 91-913, eff. 1-1-01; 92-16,
eff. 6-28-01; 92-244, eff. 8-3-01; 92-439, eff. 8-17-01;
92-603, eff. 6-28-02; 92-626, eff. 7-11-02; 92-651, eff.
7-11-02; 92-846, eff. 8-23-02; revised 10-15-03.)
 
    (35 ILCS 5/205)  (from Ch. 120, par. 2-205)
    Sec. 205. Exempt organizations.
    (a) Charitable, etc. organizations. The base income of an
organization which is exempt from the federal income tax by
reason of Section 501(a) of the Internal Revenue Code shall not
be determined under section 203 of this Act, but shall be its
unrelated business taxable income as determined under section
512 of the Internal Revenue Code, without any deduction for the
tax imposed by this Act. The standard exemption provided by
section 204 of this Act shall not be allowed in determining the
net income of an organization to which this subsection applies.
    (b) Partnerships. A partnership as such shall not be
subject to the tax imposed by subsection 201 (a) and (b) of
this Act, but shall be subject to the replacement tax imposed
by subsection 201 (c) and (d) of this Act and shall compute its
base income as described in subsection (d) of Section 203 of
this Act. For taxable years ending on or after December 31,
2004, an investment partnership, as defined in Section
1501(a)(11.5) of this Act, shall not be subject to the tax
imposed by subsections (c) and (d) of Section 201 of this Act.
A partnership shall file such returns and other information at
such time and in such manner as may be required under Article 5
of this Act. The partners in a partnership shall be liable for
the replacement tax imposed by subsection 201 (c) and (d) of
this Act on such partnership, to the extent such tax is not
paid by the partnership, as provided under the laws of Illinois
governing the liability of partners for the obligations of a
partnership. Persons carrying on business as partners shall be
liable for the tax imposed by subsection 201 (a) and (b) of
this Act only in their separate or individual capacities.
    (c) Subchapter S corporations. A Subchapter S corporation
shall not be subject to the tax imposed by subsection 201 (a)
and (b) of this Act but shall be subject to the replacement tax
imposed by subsection 201 (c) and (d) of this Act and shall
file such returns and other information at such time and in
such manner as may be required under Article 5 of this Act.
    (d) Combat zone death. An individual relieved from the
federal income tax for any taxable year by reason of section
692 of the Internal Revenue Code shall not be subject to the
tax imposed by this Act for such taxable year.
    (e) Certain trusts. A common trust fund described in
Section 584 of the Internal Revenue Code, and any other trust
to the extent that the grantor is treated as the owner thereof
under sections 671 through 678 of the Internal Revenue Code
shall not be subject to the tax imposed by this Act.
    (f) Certain business activities. A person not otherwise
subject to the tax imposed by this Act shall not become subject
to the tax imposed by this Act by reason of:
        (1) that person's ownership of tangible personal
    property located at the premises of a printer in this State
    with which the person has contracted for printing, or
        (2) activities of the person's employees or agents
    located solely at the premises of a printer and related to
    quality control, distribution, or printing services
    performed by a printer in the State with which the person
    has contracted for printing.
(Source: P.A. 88-361.)
 
    (35 ILCS 5/305)  (from Ch. 120, par. 3-305)
    Sec. 305. Allocation of Partnership Income by partnerships
and partners other than residents. (a) Allocation of
partnership business income by partners other than residents.
The respective shares of partners other than residents in so
much of the business income of the partnership as is allocated
or apportioned to this State in the possession of the
partnership shall be taken into account by such partners pro
rata in accordance with their respective distributive shares of
such partnership income for the partnership's taxable year and
allocated to this State.
    (b) Allocation of partnership nonbusiness income by
partners other than residents. The respective shares of
partners other than residents in the items of partnership
income and deduction not taken into account in computing the
business income of a partnership shall be taken into account by
such partners pro rata in accordance with their respective
distributive shares of such partnership income for the
partnership's taxable year, and allocated as if such items had
been paid, incurred or accrued directly to such partners in
their separate capacities.
    (c) Allocation or apportionment of base income by
partnership. Base income of a partnership shall be allocated or
apportioned to this State pursuant to Article 3, in the same
manner as it is allocated or apportioned for any other
nonresident.
    (c-5) Taxable income of an investment partnership, as
defined in Section 1501(a)(11.5) of this Act, that is
distributable to a nonresident partner shall be treated as
nonbusiness income and shall be allocated to the partner's
state of residence (in the case of an individual) or commercial
domicile (in the case of any other person). However, any income
distributable to a nonresident partner shall be treated as
business income and apportioned as if such income had been
received directly by the partner if the partner has made an
election under Section 1501(a)(1) of this Act to treat all
income as business income or if such income is from investment
activity:
        (1) that is directly or integrally related to any other
    business activity conducted in this State by the
    nonresident partner (or any member of that partner's
    unitary business group);
        (2) that serves an operational function to any other
    business activity of the nonresident partner (or any member
    of that partner's unitary business group) in this State; or
        (3) where assets of the investment partnership were
    acquired with working capital from a trade or business
    activity conducted in this State in which the nonresident
    partner (or any member of that partner's unitary business
    group) owns an interest.
    (d) Cross reference. For allocation of partnership income
or deductions by residents, see Section 301(a).
(Source: P.A. 84-550.)
 
    (35 ILCS 5/1501)  (from Ch. 120, par. 15-1501)
    Sec. 1501. Definitions.
    (a) In general. When used in this Act, where not otherwise
distinctly expressed or manifestly incompatible with the
intent thereof:
        (1) Business income. The term "business income" means
    all income that may be treated as apportionable business
    income under the Constitution of the United States.
    Business income is net of the deductions allocable thereto
    income arising from transactions and activity in the
    regular course of the taxpayer's trade or business, net of
    the deductions allocable thereto, and includes income from
    tangible and intangible property if the acquisition,
    management, and disposition of the property constitute
    integral parts of the taxpayer's regular trade or business
    operations. Such term does not include compensation or the
    deductions allocable thereto. For each taxable year
    beginning on or after January 1, 2003, a taxpayer may elect
    to treat all income other than compensation as business
    income. This election shall be made in accordance with
    rules adopted by the Department and, once made, shall be
    irrevocable.
        (2) Commercial domicile. The term "commercial
    domicile" means the principal place from which the trade or
    business of the taxpayer is directed or managed.
        (3) Compensation. The term "compensation" means wages,
    salaries, commissions and any other form of remuneration
    paid to employees for personal services.
        (4) Corporation. The term "corporation" includes
    associations, joint-stock companies, insurance companies
    and cooperatives. Any entity, including a limited
    liability company formed under the Illinois Limited
    Liability Company Act, shall be treated as a corporation if
    it is so classified for federal income tax purposes.
        (5) Department. The term "Department" means the
    Department of Revenue of this State.
        (6) Director. The term "Director" means the Director of
    Revenue of this State.
        (7) Fiduciary. The term "fiduciary" means a guardian,
    trustee, executor, administrator, receiver, or any person
    acting in any fiduciary capacity for any person.
        (8) Financial organization.
            (A) The term "financial organization" means any
        bank, bank holding company, trust company, savings
        bank, industrial bank, land bank, safe deposit
        company, private banker, savings and loan association,
        building and loan association, credit union, currency
        exchange, cooperative bank, small loan company, sales
        finance company, investment company, or any person
        which is owned by a bank or bank holding company. For
        the purpose of this Section a "person" will include
        only those persons which a bank holding company may
        acquire and hold an interest in, directly or
        indirectly, under the provisions of the Bank Holding
        Company Act of 1956 (12 U.S.C. 1841, et seq.), except
        where interests in any person must be disposed of
        within certain required time limits under the Bank
        Holding Company Act of 1956.
            (B) For purposes of subparagraph (A) of this
        paragraph, the term "bank" includes (i) any entity that
        is regulated by the Comptroller of the Currency under
        the National Bank Act, or by the Federal Reserve Board,
        or by the Federal Deposit Insurance Corporation and
        (ii) any federally or State chartered bank operating as
        a credit card bank.
            (C) For purposes of subparagraph (A) of this
        paragraph, the term "sales finance company" has the
        meaning provided in the following item (i) or (ii):
                (i) A person primarily engaged in one or more
            of the following businesses: the business of
            purchasing customer receivables, the business of
            making loans upon the security of customer
            receivables, the business of making loans for the
            express purpose of funding purchases of tangible
            personal property or services by the borrower, or
            the business of finance leasing. For purposes of
            this item (i), "customer receivable" means:
                    (a) a retail installment contract or
                retail charge agreement within the meaning of
                the Sales Finance Agency Act, the Retail
                Installment Sales Act, or the Motor Vehicle
                Retail Installment Sales Act;
                    (b) an installment, charge, credit, or
                similar contract or agreement arising from the
                sale of tangible personal property or services
                in a transaction involving a deferred payment
                price payable in one or more installments
                subsequent to the sale; or
                    (c) the outstanding balance of a contract
                or agreement described in provisions (a) or (b)
                of this item (i).
                A customer receivable need not provide for
            payment of interest on deferred payments. A sales
            finance company may purchase a customer receivable
            from, or make a loan secured by a customer
            receivable to, the seller in the original
            transaction or to a person who purchased the
            customer receivable directly or indirectly from
            that seller.
                (ii) A corporation meeting each of the
            following criteria:
                    (a) the corporation must be a member of an
                "affiliated group" within the meaning of
                Section 1504(a) of the Internal Revenue Code,
                determined without regard to Section 1504(b)
                of the Internal Revenue Code;
                    (b) more than 50% of the gross income of
                the corporation for the taxable year must be
                interest income derived from qualifying loans.
                A "qualifying loan" is a loan made to a member
                of the corporation's affiliated group that
                originates customer receivables (within the
                meaning of item (i)) or to whom customer
                receivables originated by a member of the
                affiliated group have been transferred, to the
                extent the average outstanding balance of
                loans from that corporation to members of its
                affiliated group during the taxable year do not
                exceed the limitation amount for that
                corporation. The "limitation amount" for a
                corporation is the average outstanding
                balances during the taxable year of customer
                receivables (within the meaning of item (i))
                originated by all members of the affiliated
                group. If the average outstanding balances of
                the loans made by a corporation to members of
                its affiliated group exceed the limitation
                amount, the interest income of that
                corporation from qualifying loans shall be
                equal to its interest income from loans to
                members of its affiliated groups times a
                fraction equal to the limitation amount
                divided by the average outstanding balances of
                the loans made by that corporation to members
                of its affiliated group;
                    (c) the total of all shareholder's equity
                (including, without limitation, paid-in
                capital on common and preferred stock and
                retained earnings) of the corporation plus the
                total of all of its loans, advances, and other
                obligations payable or owed to members of its
                affiliated group may not exceed 20% of the
                total assets of the corporation at any time
                during the tax year; and
                    (d) more than 50% of all interest-bearing
                obligations of the affiliated group payable to
                persons outside the group determined in
                accordance with generally accepted accounting
                principles must be obligations of the
                corporation.
            This amendatory Act of the 91st General Assembly is
        declaratory of existing law.
            (D) Subparagraphs (B) and (C) of this paragraph are
        declaratory of existing law and apply retroactively,
        for all tax years beginning on or before December 31,
        1996, to all original returns, to all amended returns
        filed no later than 30 days after the effective date of
        this amendatory Act of 1996, and to all notices issued
        on or before the effective date of this amendatory Act
        of 1996 under subsection (a) of Section 903, subsection
        (a) of Section 904, subsection (e) of Section 909, or
        Section 912. A taxpayer that is a "financial
        organization" that engages in any transaction with an
        affiliate shall be a "financial organization" for all
        purposes of this Act.
            (E) For all tax years beginning on or before
        December 31, 1996, a taxpayer that falls within the
        definition of a "financial organization" under
        subparagraphs (B) or (C) of this paragraph, but who
        does not fall within the definition of a "financial
        organization" under the Proposed Regulations issued by
        the Department of Revenue on July 19, 1996, may
        irrevocably elect to apply the Proposed Regulations
        for all of those years as though the Proposed
        Regulations had been lawfully promulgated, adopted,
        and in effect for all of those years. For purposes of
        applying subparagraphs (B) or (C) of this paragraph to
        all of those years, the election allowed by this
        subparagraph applies only to the taxpayer making the
        election and to those members of the taxpayer's unitary
        business group who are ordinarily required to
        apportion business income under the same subsection of
        Section 304 of this Act as the taxpayer making the
        election. No election allowed by this subparagraph
        shall be made under a claim filed under subsection (d)
        of Section 909 more than 30 days after the effective
        date of this amendatory Act of 1996.
            (F) Finance Leases. For purposes of this
        subsection, a finance lease shall be treated as a loan
        or other extension of credit, rather than as a lease,
        regardless of how the transaction is characterized for
        any other purpose, including the purposes of any
        regulatory agency to which the lessor is subject. A
        finance lease is any transaction in the form of a lease
        in which the lessee is treated as the owner of the
        leased asset entitled to any deduction for
        depreciation allowed under Section 167 of the Internal
        Revenue Code.
        (9) Fiscal year. The term "fiscal year" means an
    accounting period of 12 months ending on the last day of
    any month other than December.
        (10) Includes and including. The terms "includes" and
    "including" when used in a definition contained in this Act
    shall not be deemed to exclude other things otherwise
    within the meaning of the term defined.
        (11) Internal Revenue Code. The term "Internal Revenue
    Code" means the United States Internal Revenue Code of 1954
    or any successor law or laws relating to federal income
    taxes in effect for the taxable year.
        (11.5) Investment partnership.
            (A) The term "investment partnership" means any
        entity that is treated as a partnership for federal
        income tax purposes that meets the following
        requirements:
                (i) no less than 90% of the partnership's cost
            of its total assets consists of qualifying
            investment securities, deposits at banks or other
            financial institutions, and office space and
            equipment reasonably necessary to carry on its
            activities as an investment partnership;
                (ii) no less than 90% of its gross income
            consists of interest, dividends, and gains from
            the sale or exchange of qualifying investment
            securities; and
                (iii) the partnership is not a dealer in
            qualifying investment securities.
            (B) For purposes of this paragraph (11.5), the term
        "qualifying investment securities" includes all of the
        following:
                (i) common stock, including preferred or debt
            securities convertible into common stock, and
            preferred stock;
                (ii) bonds, debentures, and other debt
            securities;
                (iii) foreign and domestic currency deposits
            secured by federal, state, or local governmental
            agencies;
                (iv) mortgage or asset-backed securities
            secured by federal, state, or local governmental
            agencies;
                (v) repurchase agreements and loan
            participations;
                (vi) foreign currency exchange contracts and
            forward and futures contracts on foreign
            currencies;
                (vii) stock and bond index securities and
            futures contracts and other similar financial
            securities and futures contracts on those
            securities;
                (viii) options for the purchase or sale of any
            of the securities, currencies, contracts, or
            financial instruments described in items (i) to
            (vii), inclusive;
                (ix) regulated futures contracts;
                (x) commodities (not described in Section
            1221(a)(1) of the Internal Revenue Code) or
            futures, forwards, and options with respect to
            such commodities, provided, however, that any item
            of a physical commodity to which title is actually
            acquired in the partnership's capacity as a dealer
            in such commodity shall not be a qualifying
            investment security;
                (xi) derivatives; and
                (xii) a partnership interest in another
            partnership that is an investment partnership.
        (12) Mathematical error. The term "mathematical error"
    includes the following types of errors, omissions, or
    defects in a return filed by a taxpayer which prevents
    acceptance of the return as filed for processing:
            (A) arithmetic errors or incorrect computations on
        the return or supporting schedules;
            (B) entries on the wrong lines;
            (C) omission of required supporting forms or
        schedules or the omission of the information in whole
        or in part called for thereon; and
            (D) an attempt to claim, exclude, deduct, or
        improperly report, in a manner directly contrary to the
        provisions of the Act and regulations thereunder any
        item of income, exemption, deduction, or credit.
        (13) Nonbusiness income. The term "nonbusiness income"
    means all income other than business income or
    compensation.
        (14) Nonresident. The term "nonresident" means a
    person who is not a resident.
        (15) Paid, incurred and accrued. The terms "paid",
    "incurred" and "accrued" shall be construed according to
    the method of accounting upon the basis of which the
    person's base income is computed under this Act.
        (16) Partnership and partner. The term "partnership"
    includes a syndicate, group, pool, joint venture or other
    unincorporated organization, through or by means of which
    any business, financial operation, or venture is carried
    on, and which is not, within the meaning of this Act, a
    trust or estate or a corporation; and the term "partner"
    includes a member in such syndicate, group, pool, joint
    venture or organization.
        The term "partnership" includes any entity, including
    a limited liability company formed under the Illinois
    Limited Liability Company Act, classified as a partnership
    for federal income tax purposes.
        The term "partnership" does not include a syndicate,
    group, pool, joint venture, or other unincorporated
    organization established for the sole purpose of playing
    the Illinois State Lottery.
        (17) Part-year resident. The term "part-year resident"
    means an individual who became a resident during the
    taxable year or ceased to be a resident during the taxable
    year. Under Section 1501(a)(20)(A)(i) residence commences
    with presence in this State for other than a temporary or
    transitory purpose and ceases with absence from this State
    for other than a temporary or transitory purpose. Under
    Section 1501(a)(20)(A)(ii) residence commences with the
    establishment of domicile in this State and ceases with the
    establishment of domicile in another State.
        (18) Person. The term "person" shall be construed to
    mean and include an individual, a trust, estate,
    partnership, association, firm, company, corporation,
    limited liability company, or fiduciary. For purposes of
    Section 1301 and 1302 of this Act, a "person" means (i) an
    individual, (ii) a corporation, (iii) an officer, agent, or
    employee of a corporation, (iv) a member, agent or employee
    of a partnership, or (v) a member, manager, employee,
    officer, director, or agent of a limited liability company
    who in such capacity commits an offense specified in
    Section 1301 and 1302.
        (18A) Records. The term "records" includes all data
    maintained by the taxpayer, whether on paper, microfilm,
    microfiche, or any type of machine-sensible data
    compilation.
        (19) Regulations. The term "regulations" includes
    rules promulgated and forms prescribed by the Department.
        (20) Resident. The term "resident" means:
            (A) an individual (i) who is in this State for
        other than a temporary or transitory purpose during the
        taxable year; or (ii) who is domiciled in this State
        but is absent from the State for a temporary or
        transitory purpose during the taxable year;
            (B) The estate of a decedent who at his or her
        death was domiciled in this State;
            (C) A trust created by a will of a decedent who at
        his death was domiciled in this State; and
            (D) An irrevocable trust, the grantor of which was
        domiciled in this State at the time such trust became
        irrevocable. For purpose of this subparagraph, a trust
        shall be considered irrevocable to the extent that the
        grantor is not treated as the owner thereof under
        Sections 671 through 678 of the Internal Revenue Code.
        (21) Sales. The term "sales" means all gross receipts
    of the taxpayer not allocated under Sections 301, 302 and
    303.
        (22) State. The term "state" when applied to a
    jurisdiction other than this State means any state of the
    United States, the District of Columbia, the Commonwealth
    of Puerto Rico, any Territory or Possession of the United
    States, and any foreign country, or any political
    subdivision of any of the foregoing. For purposes of the
    foreign tax credit under Section 601, the term "state"
    means any state of the United States, the District of
    Columbia, the Commonwealth of Puerto Rico, and any
    territory or possession of the United States, or any
    political subdivision of any of the foregoing, effective
    for tax years ending on or after December 31, 1989.
        (23) Taxable year. The term "taxable year" means the
    calendar year, or the fiscal year ending during such
    calendar year, upon the basis of which the base income is
    computed under this Act. "Taxable year" means, in the case
    of a return made for a fractional part of a year under the
    provisions of this Act, the period for which such return is
    made.
        (24) Taxpayer. The term "taxpayer" means any person
    subject to the tax imposed by this Act.
        (25) International banking facility. The term
    international banking facility shall have the same meaning
    as is set forth in the Illinois Banking Act or as is set
    forth in the laws of the United States or regulations of
    the Board of Governors of the Federal Reserve System.
        (26) Income Tax Return Preparer.
            (A) The term "income tax return preparer" means any
        person who prepares for compensation, or who employs
        one or more persons to prepare for compensation, any
        return of tax imposed by this Act or any claim for
        refund of tax imposed by this Act. The preparation of a
        substantial portion of a return or claim for refund
        shall be treated as the preparation of that return or
        claim for refund.
            (B) A person is not an income tax return preparer
        if all he or she does is
                (i) furnish typing, reproducing, or other
            mechanical assistance;
                (ii) prepare returns or claims for refunds for
            the employer by whom he or she is regularly and
            continuously employed;
                (iii) prepare as a fiduciary returns or claims
            for refunds for any person; or
                (iv) prepare claims for refunds for a taxpayer
            in response to any notice of deficiency issued to
            that taxpayer or in response to any waiver of
            restriction after the commencement of an audit of
            that taxpayer or of another taxpayer if a
            determination in the audit of the other taxpayer
            directly or indirectly affects the tax liability
            of the taxpayer whose claims he or she is
            preparing.
        (27) Unitary business group. The term "unitary
    business group" means a group of persons related through
    common ownership whose business activities are integrated
    with, dependent upon and contribute to each other. The
    group will not include those members whose business
    activity outside the United States is 80% or more of any
    such member's total business activity; for purposes of this
    paragraph and clause (a)(3)(B)(ii) of Section 304,
    business activity within the United States shall be
    measured by means of the factors ordinarily applicable
    under subsections (a), (b), (c), (d), or (h) of Section 304
    except that, in the case of members ordinarily required to
    apportion business income by means of the 3 factor formula
    of property, payroll and sales specified in subsection (a)
    of Section 304, including the formula as weighted in
    subsection (h) of Section 304, such members shall not use
    the sales factor in the computation and the results of the
    property and payroll factor computations of subsection (a)
    of Section 304 shall be divided by 2 (by one if either the
    property or payroll factor has a denominator of zero). The
    computation required by the preceding sentence shall, in
    each case, involve the division of the member's property,
    payroll, or revenue miles in the United States, insurance
    premiums on property or risk in the United States, or
    financial organization business income from sources within
    the United States, as the case may be, by the respective
    worldwide figures for such items. Common ownership in the
    case of corporations is the direct or indirect control or
    ownership of more than 50% of the outstanding voting stock
    of the persons carrying on unitary business activity.
    Unitary business activity can ordinarily be illustrated
    where the activities of the members are: (1) in the same
    general line (such as manufacturing, wholesaling,
    retailing of tangible personal property, insurance,
    transportation or finance); or (2) are steps in a
    vertically structured enterprise or process (such as the
    steps involved in the production of natural resources,
    which might include exploration, mining, refining, and
    marketing); and, in either instance, the members are
    functionally integrated through the exercise of strong
    centralized management (where, for example, authority over
    such matters as purchasing, financing, tax compliance,
    product line, personnel, marketing and capital investment
    is not left to each member). In no event, however, will any
    unitary business group include members which are
    ordinarily required to apportion business income under
    different subsections of Section 304 except that for tax
    years ending on or after December 31, 1987 this prohibition
    shall not apply to a unitary business group composed of one
    or more taxpayers all of which apportion business income
    pursuant to subsection (b) of Section 304, or all of which
    apportion business income pursuant to subsection (d) of
    Section 304, and a holding company of such single-factor
    taxpayers (see definition of "financial organization" for
    rule regarding holding companies of financial
    organizations). If a unitary business group would, but for
    the preceding sentence, include members that are
    ordinarily required to apportion business income under
    different subsections of Section 304, then for each
    subsection of Section 304 for which there are two or more
    members, there shall be a separate unitary business group
    composed of such members. For purposes of the preceding two
    sentences, a member is "ordinarily required to apportion
    business income" under a particular subsection of Section
    304 if it would be required to use the apportionment method
    prescribed by such subsection except for the fact that it
    derives business income solely from Illinois. As used in
    this paragraph, the phrase "United States" means only the
    50 states and the District of Columbia, but does not
    include any territory or possession of the United States or
    any area over which the United States has asserted
    jurisdiction or claimed exclusive rights with respect to
    the exploration for or exploitation of natural resources.
        If the unitary business group members' accounting
    periods differ, the common parent's accounting period or,
    if there is no common parent, the accounting period of the
    member that is expected to have, on a recurring basis, the
    greatest Illinois income tax liability must be used to
    determine whether to use the apportionment method provided
    in subsection (a) or subsection (h) of Section 304. The
    prohibition against membership in a unitary business group
    for taxpayers ordinarily required to apportion income
    under different subsections of Section 304 does not apply
    to taxpayers required to apportion income under subsection
    (a) and subsection (h) of Section 304. The provisions of
    this amendatory Act of 1998 apply to tax years ending on or
    after December 31, 1998.
        (28) Subchapter S corporation. The term "Subchapter S
    corporation" means a corporation for which there is in
    effect an election under Section 1362 of the Internal
    Revenue Code, or for which there is a federal election to
    opt out of the provisions of the Subchapter S Revision Act
    of 1982 and have applied instead the prior federal
    Subchapter S rules as in effect on July 1, 1982.
        (30) Foreign person. The term "foreign person" means
    any person who is a nonresident alien individual and any
    nonindividual entity, regardless of where created or
    organized, whose business activity outside the United
    States is 80% or more of the entity's total business
    activity.
 
    (b) Other definitions.
        (1) Words denoting number, gender, and so forth, when
    used in this Act, where not otherwise distinctly expressed
    or manifestly incompatible with the intent thereof:
            (A) Words importing the singular include and apply
        to several persons, parties or things;
            (B) Words importing the plural include the
        singular; and
            (C) Words importing the masculine gender include
        the feminine as well.
        (2) "Company" or "association" as including successors
    and assigns. The word "company" or "association", when used
    in reference to a corporation, shall be deemed to embrace
    the words "successors and assigns of such company or
    association", and in like manner as if these last-named
    words, or words of similar import, were expressed.
        (3) Other terms. Any term used in any Section of this
    Act with respect to the application of, or in connection
    with, the provisions of any other Section of this Act shall
    have the same meaning as in such other Section.
(Source: P.A. 91-535, eff. 1-1-00; 91-913, eff. 1-1-01; 92-846,
eff. 8-23-02.)
 
ARTICLE 30

 
    Section 30-5. The Illinois Vehicle Code is amended by
changing Sections 2-119, 3-820, 3-821, and 11-501 and by adding
Section 3-821.2 as follows:
 
    (625 ILCS 5/2-119)  (from Ch. 95 1/2, par. 2-119)
    Sec. 2-119. Disposition of fees and taxes.
    (a) All moneys received from Salvage Certificates shall be
deposited in the Common School Fund in the State Treasury.
    (b) Beginning January 1, 1990 and concluding December 31,
1994, of the money collected for each certificate of title,
duplicate certificate of title and corrected certificate of
title, $0.50 shall be deposited into the Used Tire Management
Fund. Beginning January 1, 1990 and concluding December 31,
1994, of the money collected for each certificate of title,
duplicate certificate of title and corrected certificate of
title, $1.50 shall be deposited in the Park and Conservation
Fund.
    Beginning January 1, 1995, of the money collected for each
certificate of title, duplicate certificate of title and
corrected certificate of title, $2 shall be deposited in the
Park and Conservation Fund. The moneys deposited in the Park
and Conservation Fund pursuant to this Section shall be used
for the acquisition and development of bike paths as provided
for in Section 805-420 of the Department of Natural Resources
(Conservation) Law (20 ILCS 805/805-420).
    Beginning January 1, 2000, of the moneys collected for each
certificate of title, duplicate certificate of title, and
corrected certificate of title, $48 shall be deposited into the
Road Fund and $4 shall be deposited into the Motor Vehicle
License Plate Fund, except that if the balance in the Motor
Vehicle License Plate Fund exceeds $40,000,000 on the last day
of a calendar month, then during the next calendar month the $4
shall instead be deposited into the Road Fund.
    Beginning January 1, 2005, of the moneys collected for each
delinquent vehicle registration renewal fee, $20 shall be
deposited into the General Revenue Fund.
    Except as otherwise provided in this Code, all remaining
moneys collected for certificates of title, and all moneys
collected for filing of security interests, shall be placed in
the General Revenue Fund in the State Treasury.
    (c) All moneys collected for that portion of a driver's
license fee designated for driver education under Section 6-118
shall be placed in the Driver Education Fund in the State
Treasury.
    (d) Beginning January 1, 1999, of the monies collected as a
registration fee for each motorcycle, motor driven cycle and
motorized pedalcycle, 27% of each annual registration fee for
such vehicle and 27% of each semiannual registration fee for
such vehicle is deposited in the Cycle Rider Safety Training
Fund.
    (e) Of the monies received by the Secretary of State as
registration fees or taxes or as payment of any other fee, as
provided in this Act, except fees received by the Secretary
under paragraph (7) of subsection (b) of Section 5-101 and
Section 5-109 of this Code, 37% shall be deposited into the
State Construction Fund.
    (f) Of the total money collected for a CDL instruction
permit or original or renewal issuance of a commercial driver's
license (CDL) pursuant to the Uniform Commercial Driver's
License Act (UCDLA): (i) $6 of the total fee for an original or
renewal CDL, and $6 of the total CDL instruction permit fee
when such permit is issued to any person holding a valid
Illinois driver's license, shall be paid into the
CDLIS/AAMVAnet Trust Fund (Commercial Driver's License
Information System/American Association of Motor Vehicle
Administrators network Trust Fund) and shall be used for the
purposes provided in Section 6z-23 of the State Finance Act and
(ii) $20 of the total fee for an original or renewal CDL or
commercial driver instruction permit shall be paid into the
Motor Carrier Safety Inspection Fund, which is hereby created
as a special fund in the State Treasury, to be used by the
Department of State Police, subject to appropriation, to hire
additional officers to conduct motor carrier safety
inspections pursuant to Chapter 18b of this Code.
    (g) All remaining moneys received by the Secretary of State
as registration fees or taxes or as payment of any other fee,
as provided in this Act, except fees received by the Secretary
under paragraph (7)(A) of subsection (b) of Section 5-101 and
Section 5-109 of this Code, shall be deposited in the Road Fund
in the State Treasury. Moneys in the Road Fund shall be used
for the purposes provided in Section 8.3 of the State Finance
Act.
    (h) (Blank).
    (i) (Blank).
    (j) (Blank).
    (k) There is created in the State Treasury a special fund
to be known as the Secretary of State Special License Plate
Fund. Money deposited into the Fund shall, subject to
appropriation, be used by the Office of the Secretary of State
(i) to help defray plate manufacturing and plate processing
costs for the issuance and, when applicable, renewal of any new
or existing registration plates authorized under this Code and
(ii) for grants made by the Secretary of State to benefit
Illinois Veterans Home libraries.
    On or before October 1, 1995, the Secretary of State shall
direct the State Comptroller and State Treasurer to transfer
any unexpended balance in the Special Environmental License
Plate Fund, the Special Korean War Veteran License Plate Fund,
and the Retired Congressional License Plate Fund to the
Secretary of State Special License Plate Fund.
    (l) The Motor Vehicle Review Board Fund is created as a
special fund in the State Treasury. Moneys deposited into the
Fund under paragraph (7) of subsection (b) of Section 5-101 and
Section 5-109 shall, subject to appropriation, be used by the
Office of the Secretary of State to administer the Motor
Vehicle Review Board, including without limitation payment of
compensation and all necessary expenses incurred in
administering the Motor Vehicle Review Board under the Motor
Vehicle Franchise Act.
    (m)  Effective July 1, 1996, there is created in the State
Treasury a special fund to be known as the Family
Responsibility Fund. Moneys deposited into the Fund shall,
subject to appropriation, be used by the Office of the
Secretary of State for the purpose of enforcing the Family
Financial Responsibility Law.
    (n) The Illinois Fire Fighters' Memorial Fund is created as
a special fund in the State Treasury. Moneys deposited into the
Fund shall, subject to appropriation, be used by the Office of
the State Fire Marshal for construction of the Illinois Fire
Fighters' Memorial to be located at the State Capitol grounds
in Springfield, Illinois. Upon the completion of the Memorial,
moneys in the Fund shall be used in accordance with Section
3-634.
    (o) Of the money collected for each certificate of title
for all-terrain vehicles and off-highway motorcycles, $17
shall be deposited into the Off-Highway Vehicle Trails Fund.
    (p) For audits conducted on or after July 1, 2003 pursuant
to Section 2-124(d) of this Code, 50% of the money collected as
audit fees shall be deposited into the General Revenue Fund.
(Source: P.A. 92-16, eff. 6-28-01; 93-32, eff. 7-1-03.)
 
    (625 ILCS 5/3-820)  (from Ch. 95 1/2, par. 3-820)
    Sec. 3-820. Duplicate Number Plates. Upon filing in the
Office of the Secretary of State an affidavit to the effect
that an original number plate for a vehicle is lost, stolen or
destroyed, a duplicate number plate shall be furnished upon
payment of a fee of $6 for each duplicate plate and a fee of $9
for a pair of duplicate plates.
    Upon filing in the Office of the Secretary of State an
affidavit to the effect that an original registration sticker
for a vehicle is lost, stolen or destroyed, a new registration
sticker shall be furnished upon payment of a fee of $5.
    The Secretary of State may, in his discretion, assign a new
number plate or plates in lieu of a duplicate of the plate or
plates so lost, stolen or destroyed, but such assignment of a
new plate or plates shall not affect the right of the owner to
secure a reassignment of his original registration number in
the manner provided in this Act. The fee for one new number
plate shall be $6, and for a pair of new number plates, $9.
    For the administration of this Section, the Secretary shall
consider the loss of a registration plate or plates with
properly affixed registration stickers as requiring the
payment of: either
        (i) $11 for each duplicate; or
        (ii) $14 for a pair of duplicate plates; or
        (iii) $39 for a pair of duplicate plates on or after
    January 1, 2005, which includes a fee of $20 for the
    replacement sticker or $19 for a pair of duplicate plates
    if stickers are required on both front and rear
    registration plates.
(Source: P.A. 91-37, eff. 7-1-99.)
 
    (625 ILCS 5/3-821)  (from Ch. 95 1/2, par. 3-821)
    Sec. 3-821. Miscellaneous Registration and Title Fees.
    (a) The fee to be paid to the Secretary of State for the
following certificates, registrations or evidences of proper
registration, or for corrected or duplicate documents shall be
in accordance with the following schedule:
    Certificate of Title, except for an all-terrain
vehicle or off-highway motorcycle$65
    Certificate of Title for an all-terrain vehicle
or off-highway motorcycle$30
    Certificate of Title for an all-terrain vehicle
or off-highway motorcycle used for production
agriculture, or accepted by a dealer in trade13
    Transfer of Registration or any evidence of
proper registration 15
    Duplicate Registration Card for plates or other
evidence of proper registration3
    Duplicate Registration Sticker or Stickers, each
    Duplicate Certificate of Title65
    Corrected Registration Card or Card for other
evidence of proper registration3
    Corrected Certificate of Title65
    Salvage Certificate4
    Fleet Reciprocity Permit15
    Prorate Decal1
    Prorate Backing Plate3
    There shall be no fee paid for a Junking Certificate.
    (b) The Secretary may prescribe the maximum service charge
to be imposed upon an applicant for renewal of a registration
by any person authorized by law to receive and remit or
transmit to the Secretary such renewal application and fees
therewith.
    (c) If a check is delivered to the Office of the Secretary
of State as payment of any fee or tax under this Code, and such
check is not honored by the bank on which it is drawn for any
reason, the registrant or other person tendering the check
remains liable for the payment of such fee or tax. The
Secretary of State may assess a service charge of $19 in
addition to the fee or tax due and owing for all dishonored
checks.
    If the total amount then due and owing exceeds the sum of
$50 and has not been paid in full within 60 days from the date
such fee or tax became due to the Secretary of State, the
Secretary of State shall assess a penalty of 25% of such amount
remaining unpaid.
    All amounts payable under this Section shall be computed to
the nearest dollar.
    (d) The minimum fee and tax to be paid by any applicant for
apportionment of a fleet of vehicles under this Code shall be
$15 if the application was filed on or before the date
specified by the Secretary together with fees and taxes due. If
an application and the fees or taxes due are filed after the
date specified by the Secretary, the Secretary may prescribe
the payment of interest at the rate of 1/2 of 1% per month or
fraction thereof after such due date and a minimum of $8.
    (e) Trucks, truck tractors, truck tractors with loads, and
motor buses, any one of which having a combined total weight in
excess of 12,000 lbs. shall file an application for a Fleet
Reciprocity Permit issued by the Secretary of State. This
permit shall be in the possession of any driver operating a
vehicle on Illinois highways. Any foreign licensed vehicle of
the second division operating at any time in Illinois without a
Fleet Reciprocity Permit or other proper Illinois
registration, shall subject the operator to the penalties
provided in Section 3-834 of this Code. For the purposes of
this Code, "Fleet Reciprocity Permit" means any second division
motor vehicle with a foreign license and used only in
interstate transportation of goods. The fee for such permit
shall be $15 per fleet which shall include all vehicles of the
fleet being registered.
    (f) For purposes of this Section, "all-terrain vehicle or
off-highway motorcycle used for production agriculture" means
any all-terrain vehicle or off-highway motorcycle used in the
raising of or the propagation of livestock, crops for sale for
human consumption, crops for livestock consumption, and
production seed stock grown for the propagation of feed grains
and the husbandry of animals or for the purpose of providing a
food product, including the husbandry of blood stock as a main
source of providing a food product. "All-terrain vehicle or
off-highway motorcycle used in production agriculture" also
means any all-terrain vehicle or off-highway motorcycle used in
animal husbandry, floriculture, aquaculture, horticulture, and
viticulture.
(Source: P.A. 91-37, eff. 7-1-99; 91-441, eff. 1-1-00; 92-16,
eff. 6-28-01.)
 
    (625 ILCS 5/3-821.2 new)
    Sec. 3-821.2. Delinquent Registration Renewal Fee. For
registration renewal periods beginning on or after January 1,
2005, the Secretary of State may impose a delinquent
registration renewal fee of $20 for the registration renewal of
all passenger vehicles of the first division and motor vehicles
of the second division weighing not more than 8,000 pounds if
the application for registration renewal is received by the
Secretary more than one month after the expiration of the most
recent period during which the vehicle was registered. If a
delinquent registration renewal fee is imposed, the Secretary
shall not renew the registration of such a vehicle until the
delinquent registration renewal fee has been paid, in addition
to any other registration fees owed for the vehicle. Active
duty military personnel stationed outside of Illinois shall not
be required to pay the delinquent registration renewal fee. If
a delinquent registration renewal fee is imposed, the Secretary
shall adopt rules for the implementation of this Section.
 
    (625 ILCS 5/11-501)  (from Ch. 95 1/2, par. 11-501)
    Sec. 11-501. Driving while under the influence of alcohol,
other drug or drugs, intoxicating compound or compounds or any
combination thereof.
    (a) A person shall not drive or be in actual physical
control of any vehicle within this State while:
        (1) the alcohol concentration in the person's blood or
    breath is 0.08 or more based on the definition of blood and
    breath units in Section 11-501.2;
        (2) under the influence of alcohol;
        (3) under the influence of any intoxicating compound or
    combination of intoxicating compounds to a degree that
    renders the person incapable of driving safely;
        (4) under the influence of any other drug or
    combination of drugs to a degree that renders the person
    incapable of safely driving;
        (5) under the combined influence of alcohol, other drug
    or drugs, or intoxicating compound or compounds to a degree
    that renders the person incapable of safely driving; or
        (6) there is any amount of a drug, substance, or
    compound in the person's breath, blood, or urine resulting
    from the unlawful use or consumption of cannabis listed in
    the Cannabis Control Act, a controlled substance listed in
    the Illinois Controlled Substances Act, or an intoxicating
    compound listed in the Use of Intoxicating Compounds Act.
    (b) The fact that any person charged with violating this
Section is or has been legally entitled to use alcohol, other
drug or drugs, or intoxicating compound or compounds, or any
combination thereof, shall not constitute a defense against any
charge of violating this Section.
    (c) Except as provided under paragraphs (c-3), (c-4), and
(d) of this Section, every person convicted of violating this
Section or a similar provision of a local ordinance, shall be
guilty of a Class A misdemeanor and, in addition to any other
criminal or administrative action, for any second conviction of
violating this Section or a similar provision of a law of
another state or local ordinance committed within 5 years of a
previous violation of this Section or a similar provision of a
local ordinance shall be mandatorily sentenced to a minimum of
5 days of imprisonment or assigned to a minimum of 30 days of
community service as may be determined by the court. Every
person convicted of violating this Section or a similar
provision of a local ordinance shall be subject to an
additional mandatory minimum fine of $500 and an additional
mandatory 5 days of community service in a program benefiting
children if the person committed a violation of paragraph (a)
or a similar provision of a local ordinance while transporting
a person under age 16. Every person convicted a second time for
violating this Section or a similar provision of a local
ordinance within 5 years of a previous violation of this
Section or a similar provision of a law of another state or
local ordinance shall be subject to an additional mandatory
minimum fine of $500 and an additional 10 days of mandatory
community service in a program benefiting children if the
current offense was committed while transporting a person under
age 16. The imprisonment or assignment under this subsection
shall not be subject to suspension nor shall the person be
eligible for probation in order to reduce the sentence or
assignment.
    (c-1) (1) A person who violates this Section during a
    period in which his or her driving privileges are revoked
    or suspended, where the revocation or suspension was for a
    violation of this Section, Section 11-501.1, paragraph (b)
    of Section 11-401, or Section 9-3 of the Criminal Code of
    1961 is guilty of a Class 4 felony.
        (2) A person who violates this Section a third time
    during a period in which his or her driving privileges are
    revoked or suspended where the revocation or suspension was
    for a violation of this Section, Section 11-501.1,
    paragraph (b) of Section 11-401, or Section 9-3 of the
    Criminal Code of 1961 is guilty of a Class 3 felony.
        (3) A person who violates this Section a fourth or
    subsequent time during a period in which his or her driving
    privileges are revoked or suspended where the revocation or
    suspension was for a violation of this Section, Section
    11-501.1, paragraph (b) of Section 11-401, or Section 9-3
    of the Criminal Code of 1961 is guilty of a Class 2 felony.
    (c-2) (Blank).
    (c-3) Every person convicted of violating this Section or a
similar provision of a local ordinance who had a child under
age 16 in the vehicle at the time of the offense shall have his
or her punishment under this Act enhanced by 2 days of
imprisonment for a first offense, 10 days of imprisonment for a
second offense, 30 days of imprisonment for a third offense,
and 90 days of imprisonment for a fourth or subsequent offense,
in addition to the fine and community service required under
subsection (c) and the possible imprisonment required under
subsection (d). The imprisonment or assignment under this
subsection shall not be subject to suspension nor shall the
person be eligible for probation in order to reduce the
sentence or assignment.
    (c-4) When a person is convicted of violating Section
11-501 of this Code or a similar provision of a local
ordinance, the following penalties apply when his or her blood,
breath, or urine was .16 or more based on the definition of
blood, breath, or urine units in Section 11-501.2 or when that
person is convicted of violating this Section while
transporting a child under the age of 16:
        (1) A person who is convicted of violating subsection
    (a) of Section 11-501 of this Code a first time, in
    addition to any other penalty that may be imposed under
    subsection (c), is subject to a mandatory minimum of 100
    hours of community service and a minimum fine of $500.
        (2) A person who is convicted of violating subsection
    (a) of Section 11-501 of this Code a second time within 10
    years, in addition to any other penalty that may be imposed
    under subsection (c), is subject to a mandatory minimum of
    2 days of imprisonment and a minimum fine of $1,250.
        (3) A person who is convicted of violating subsection
    (a) of Section 11-501 of this Code a third time within 20
    years is guilty of a Class 4 felony and, in addition to any
    other penalty that may be imposed under subsection (c), is
    subject to a mandatory minimum of 90 days of imprisonment
    and a minimum fine of $2,500.
        (4) A person who is convicted of violating this
    subsection (c-4) a fourth or subsequent time is guilty of a
    Class 2 felony and, in addition to any other penalty that
    may be imposed under subsection (c), is not eligible for a
    sentence of probation or conditional discharge and is
    subject to a minimum fine of $2,500.
    (d) (1) Every person convicted of committing a violation of
    this Section shall be guilty of aggravated driving under
    the influence of alcohol, other drug or drugs, or
    intoxicating compound or compounds, or any combination
    thereof if:
            (A) the person committed a violation of this
        Section, or a similar provision of a law of another
        state or a local ordinance when the cause of action is
        the same as or substantially similar to this Section,
        for the third or subsequent time;
            (B) the person committed a violation of paragraph
        (a) while driving a school bus with children on board;
            (C) the person in committing a violation of
        paragraph (a) was involved in a motor vehicle accident
        that resulted in great bodily harm or permanent
        disability or disfigurement to another, when the
        violation was a proximate cause of the injuries;
            (D) the person committed a violation of paragraph
        (a) for a second time and has been previously convicted
        of violating Section 9-3 of the Criminal Code of 1961
        relating to reckless homicide in which the person was
        determined to have been under the influence of alcohol,
        other drug or drugs, or intoxicating compound or
        compounds as an element of the offense or the person
        has previously been convicted under subparagraph (C)
        or subparagraph (F) of this paragraph (1);
            (E) the person, in committing a violation of
        paragraph (a) while driving at any speed in a school
        speed zone at a time when a speed limit of 20 miles per
        hour was in effect under subsection (a) of Section
        11-605 of this Code, was involved in a motor vehicle
        accident that resulted in bodily harm, other than great
        bodily harm or permanent disability or disfigurement,
        to another person, when the violation of paragraph (a)
        was a proximate cause of the bodily harm; or
            (F) the person, in committing a violation of
        paragraph (a), was involved in a motor vehicle,
        snowmobile, all-terrain vehicle, or watercraft
        accident that resulted in the death of another person,
        when the violation of paragraph (a) was a proximate
        cause of the death.
        (2) Except as provided in this paragraph (2),
    aggravated driving under the influence of alcohol, other
    drug or drugs, or intoxicating compound or compounds, or
    any combination thereof is a Class 4 felony. For a
    violation of subparagraph (C) of paragraph (1) of this
    subsection (d), the defendant, if sentenced to a term of
    imprisonment, shall be sentenced to not less than one year
    nor more than 12 years. Aggravated driving under the
    influence of alcohol, other drug or drugs, or intoxicating
    compound or compounds, or any combination thereof as
    defined in subparagraph (F) of paragraph (1) of this
    subsection (d) is a Class 2 felony, for which the
    defendant, if sentenced to a term of imprisonment, shall be
    sentenced to: (A) a term of imprisonment of not less than 3
    years and not more than 14 years if the violation resulted
    in the death of one person; or (B) a term of imprisonment
    of not less than 6 years and not more than 28 years if the
    violation resulted in the deaths of 2 or more persons. For
    any prosecution under this subsection (d), a certified copy
    of the driving abstract of the defendant shall be admitted
    as proof of any prior conviction.
    (e) After a finding of guilt and prior to any final
sentencing, or an order for supervision, for an offense based
upon an arrest for a violation of this Section or a similar
provision of a local ordinance, individuals shall be required
to undergo a professional evaluation to determine if an
alcohol, drug, or intoxicating compound abuse problem exists
and the extent of the problem, and undergo the imposition of
treatment as appropriate. Programs conducting these
evaluations shall be licensed by the Department of Human
Services. The cost of any professional evaluation shall be paid
for by the individual required to undergo the professional
evaluation.
    (e-1) Any person who is found guilty of or pleads guilty to
violating this Section, including any person receiving a
disposition of court supervision for violating this Section,
may be required by the Court to attend a victim impact panel
offered by, or under contract with, a County State's Attorney's
office, a probation and court services department, Mothers
Against Drunk Driving, or the Alliance Against Intoxicated
Motorists. All costs generated by the victim impact panel shall
be paid from fees collected from the offender or as may be
determined by the court.
    (f) Every person found guilty of violating this Section,
whose operation of a motor vehicle while in violation of this
Section proximately caused any incident resulting in an
appropriate emergency response, shall be liable for the expense
of an emergency response as provided under Section 5-5-3 of the
Unified Code of Corrections.
    (g) The Secretary of State shall revoke the driving
privileges of any person convicted under this Section or a
similar provision of a local ordinance.
    (h) Every person sentenced under paragraph (2) or (3) of
subsection (c-1) of this Section or subsection (d) of this
Section and who receives a term of probation or conditional
discharge shall be required to serve a minimum term of either
60 days community service or 10 days of imprisonment as a
condition of the probation or conditional discharge. This
mandatory minimum term of imprisonment or assignment of
community service shall not be suspended and shall not be
subject to reduction by the court.
    (i) The Secretary of State shall require the use of
ignition interlock devices on all vehicles owned by an
individual who has been convicted of a second or subsequent
offense of this Section or a similar provision of a local
ordinance. The Secretary shall establish by rule and regulation
the procedures for certification and use of the interlock
system.
    (j) In addition to any other penalties and liabilities, a
person who is found guilty of or pleads guilty to violating
this Section, including any person placed on court supervision
for violating this Section, shall be fined $500 $100, payable
to the circuit clerk, who shall distribute the money as
follows: 20% to the law enforcement agency that made the arrest
and 80% shall be forwarded to the State Treasurer for deposit
into the General Revenue Fund. If the person has been
previously convicted of violating this Section or a similar
provision of a local ordinance, the fine shall be $1,000 $200.
In the event that more than one agency is responsible for the
arrest, the amount payable to law enforcement agencies $100 or
$200 shall be shared equally. Any moneys received by a law
enforcement agency under this subsection (j) shall be used to
purchase law enforcement equipment that will assist in the
prevention of alcohol related criminal violence throughout the
State. This shall include, but is not limited to, in-car video
cameras, radar and laser speed detection devices, and alcohol
breath testers. Any moneys received by the Department of State
Police under this subsection (j) shall be deposited into the
State Police DUI Fund and shall be used to purchase law
enforcement equipment that will assist in the prevention of
alcohol related criminal violence throughout the State.
    (k) The Secretary of State Police DUI Fund is created as a
special fund in the State treasury. All moneys received by the
Secretary of State Police under subsection (j) of this Section
shall be deposited into the Secretary of State Police DUI Fund
and, subject to appropriation, shall be used to purchase law
enforcement equipment to assist in the prevention of alcohol
related criminal violence throughout the State.
(Source: P.A. 92-248, eff. 8-3-01; 92-418, eff. 8-17-01;
92-420, eff. 8-17-01; 92-429, eff. 1-1-02; 92-431, eff. 1-1-02;
92-651, eff. 7-11-02; 93-156, eff. 1-1-04; 93-213, eff.
7-18-03; 93-584, eff. 8-22-03; revised 8-27-03.)
 
ARTICLE 35

 
    Section 35-1. Short title. This Article may be cited as the
Tax Shelter Voluntary Compliance Law, and references in this
Article to "this Law" mean this Article.
 
    Section 35-5. Tax Shelter Voluntary Compliance Program.
    (a) In general. The Department of Revenue shall establish
and administer a tax shelter voluntary compliance program as
provided in this Section for eligible taxpayers subject to tax
under the Illinois Income Tax Act. The tax shelter voluntary
compliance program shall be conducted from October 15, 2004 to
January 31, 2005 and shall apply to tax liabilities under
Section 201 of the Illinois Income Tax Act attributable to the
use of tax avoidance transactions for taxable years beginning
before January 1, 2004. The Department shall adopt rules, issue
forms and instructions, and take such other actions as it deems
necessary to implement the provisions of this Law. Any
correspondence mailed by the Department to a taxpayer at the
taxpayer's last known address outlining the tax shelter
voluntary compliance program constitutes a "contact" within
the meaning of Sections 1005(b)(6) and 1005(c) of the Illinois
Income Tax Act.
    (b) Election. An eligible taxpayer that meets the
requirements of subsection (c) of this Section with respect to
any taxable year to which this Law applies may elect to
participate in the tax shelter voluntary compliance program
under either method for any particular tax avoidance
transaction period. Such election shall be made separately for
each taxable year and in the form and manner prescribed by the
Department, and once made shall be irrevocable.
        (1) Voluntary compliance without appeal. If an
    eligible taxpayer elects to participate under this
    paragraph, then: (i) the Department shall abate and not
    seek to collect any penalty that may be applicable to the
    underreporting or underpayment of Illinois income tax
    attributable to the use of tax avoidance transactions for
    such taxable year, (ii) except as otherwise provided in
    this Law, the Department shall not seek civil or criminal
    prosecution against the taxpayer for such taxable year with
    respect to tax avoidance transactions, and (iii) the
    taxpayer may not file a claim for credit or refund with
    respect to the tax avoidance transaction for such taxable
    year. Nothing in this subsection shall preclude a taxpayer
    from filing a claim for credit or refund for the same
    taxable year in which a tax avoidance transaction was
    reported if such credit or refund is not attributable to
    the tax avoidance transaction. No penalty may be waived or
    abated under this Law if the penalty imposed related to an
    amount of Illinois income tax assessed prior to October 15,
    2004.
        (2) Voluntary compliance with appeal. If an eligible
    taxpayer elects to participate under this paragraph, then:
    (i) the Department shall abate and not seek to collect the
    penalties imposed under Sections 1005(b) and 1005(c) of the
    Illinois Income Tax Act with respect to such taxable year,
    (ii) except as otherwise provided in this Act, the
    Department shall not seek civil or criminal prosecution
    against the taxpayer for such taxable year with respect to
    tax avoidance transactions, and (iii) the taxpayer may file
    a claim for credit or refund as provided in the Illinois
    Income Tax Act with respect to such taxable year.
    Notwithstanding Section 909(e) of the Illinois Income Tax
    Act, the taxpayer may not file a written protest until
    after either of the following: (i) the Department issues a
    notice of denial, or (ii) the earlier of (1) the date which
    is 180 days after the date of a final determination by the
    Internal Revenue Service with respect to the transactions
    at issue, or (2) the date that is 3 years after the date
    the claim for refund was filed or one year after full
    payment of all tax, including penalty and interest. No
    penalty may be waived or abated under this Act if the
    penalty imposed relates to an amount of Illinois income tax
    assessed prior to October 15, 2004.
    (c) Eligible taxpayer. The tax shelter voluntary
compliance program applies to any taxpayer who, during the
period from October 15, 2004 to January 31, 2005, does both of
the following:
        (1) Files an amended return for the taxable year for
    which the taxpayer used a tax avoidance transaction to
    under report the taxpayer's Illinois income tax liability,
    reporting the total Illinois net income and tax for such
    taxable year computed without regard to any tax avoidance
    transactions;
        (2) Makes full payment of the additional Illinois
    income tax and interest due for such taxable year that is
    attributable to the use of the tax avoidance transaction
    (not including a payment made under protest as provided in
    Section 2a.1 of the State Officers and Employees Money
    Disposition Act (30 ILCS 230/2a.1));
    For purposes of this subsection (c), if the Department
subsequently determines that the correct amount of Illinois
income tax was not paid for the taxable year, then the penalty
relief under this Section shall not apply to any portion of the
underpayment attributable to a tax avoidance transaction not
paid to the State.
 
    Section 35-10. "Tax avoidance transaction" defined. For
purposes of this Law, the term "tax avoidance transaction"
means a plan or arrangement devised for the principal purpose
of avoiding federal income tax. Tax avoidance transactions
include, but are not limited to, "listed transactions" as
defined in Treasury Regulations Section 1.6011-4(b)(2).
 
    Section 35-15. Use of evidence of participation in the
program. The fact of a taxpayer's participation in the tax
shelter voluntary compliance program shall not be considered
evidence that the taxpayer in fact engaged in a tax avoidance
transaction.
 
    Section 35-90. The Illinois Income Tax Act is amended by
changing Sections 501, 905, 1001, 1002, and 1005 and by adding
Sections 1007, 1008, 1405.5, and 1405.6 as follows:
 
    (35 ILCS 5/501)  (from Ch. 120, par. 5-501)
    Sec. 501. Notice or Regulations Requiring Records,
Statements and Special Returns.
    (a) In general. Every person liable for any tax imposed by
this Act shall keep such records, render such statements, make
such returns and notices, and comply with such rules and
regulations as the Department may from time to time prescribe.
Whenever in the judgment of the Director it is necessary, he
may require any person, by notice served upon such person or by
regulations, to make such returns and notices, render such
statements, or keep such records, as the Director deems
sufficient to show whether or not such person is liable for tax
under this Act.
    (b) Reportable transactions. For each taxable year in which
a taxpayer is required to make a disclosure statement under
Treasury Regulations Section 1.6011-4 (26 CFR 1.6011-4)
(including any taxpayer that is a member of a consolidated
group required to make such disclosure) with respect to a
reportable transaction (including a listed transaction) in
which the taxpayer participated in a taxable year for which a
return is required under Section 502 of this Act, such taxpayer
shall file a copy of such disclosure with the Department.
Disclosure under this subsection is required to be made by any
taxpayer that is a member of a unitary business group that
includes any person required to make a disclosure statement
under Treasury Regulations Section 1.6011-4. Disclosure under
this subsection is required with respect to any transaction
entered into after February 28, 2000 that becomes a listed
transaction at any time, and shall be made in the manner
prescribed by the Department. With respect to transactions in
which the taxpayer participated for taxable years ending before
December 31, 2004, disclosure shall be made by the due date
(including extensions) of the first return required under
Section 502 of this Act due after the effective date of this
amendatory Act of the 93rd General Assembly. With respect to
transactions in which the taxpayer participated for taxable
years ending on and after December 31, 2004, disclosure shall
be made in the time and manner prescribed in Treasury
Regulations Section 1.6011-4(e). Notwithstanding the above, no
disclosure is required for transactions entered into after
February 28, 2000 and before January 1, 2005 (i) if the
taxpayer has filed an amended Illinois income tax return which
reverses the tax benefits of the potential tax avoidance
transaction, or (ii) as a result of a federal audit the
Internal Revenue Service has determined the tax treatment of
the transaction and an Illinois amended return has been filed
to reflect the federal treatment.
(Source: P.A. 76-261.)
 
    (35 ILCS 5/905)  (from Ch. 120, par. 9-905)
    Sec. 905. Limitations on Notices of Deficiency.
    (a) In general. Except as otherwise provided in this Act:
        (1) A notice of deficiency shall be issued not later
    than 3 years after the date the return was filed, and
        (2) No deficiency shall be assessed or collected with
    respect to the year for which the return was filed unless
    such notice is issued within such period.
    (b) Substantial omission of items.
        (1) Omission of more than 25% of income. If the
    taxpayer omits from base income an amount properly
    includible therein which is in excess of 25% of the amount
    of base income stated in the return, a notice of deficiency
    may be issued not later than 6 years after the return was
    filed. For purposes of this paragraph, there shall not be
    taken into account any amount which is omitted in the
    return if such amount is disclosed in the return, or in a
    statement attached to the return, in a manner adequate to
    apprise the Department of the nature and the amount of such
    item.
        (2) Reportable transactions. If a taxpayer fails to
    include on any return or statement for any taxable year any
    information with respect to a reportable transaction, as
    required under Section 501(b) of this Act, a notice of
    deficiency may be issued not later than 6 years after the
    return is filed with respect to the taxable year in which
    the taxpayer participated in the reportable transaction
    and said deficiency is limited to the non-disclosed item.
    (c) No return or fraudulent return. If no return is filed
or a false and fraudulent return is filed with intent to evade
the tax imposed by this Act, a notice of deficiency may be
issued at any time.
    (d) Failure to report federal change. If a taxpayer fails
to notify the Department in any case where notification is
required by Section 304(c) or 506(b), or fails to report a
change or correction which is treated in the same manner as if
it were a deficiency for federal income tax purposes, a notice
of deficiency may be issued (i) at any time or (ii) on or after
August 13, 1999, at any time for the taxable year for which the
notification is required or for any taxable year to which the
taxpayer may carry an Article 2 credit, or a Section 207 loss,
earned, incurred, or used in the year for which the
notification is required; provided, however, that the amount of
any proposed assessment set forth in the notice shall be
limited to the amount of any deficiency resulting under this
Act from the recomputation of the taxpayer's net income,
Article 2 credits, or Section 207 loss earned, incurred, or
used in the taxable year for which the notification is required
after giving effect to the item or items required to be
reported.
    (e) Report of federal change.
        (1) Before August 13, 1999, in any case where
    notification of an alteration is given as required by
    Section 506(b), a notice of deficiency may be issued at any
    time within 2 years after the date such notification is
    given, provided, however, that the amount of any proposed
    assessment set forth in such notice shall be limited to the
    amount of any deficiency resulting under this Act from
    recomputation of the taxpayer's net income, net loss, or
    Article 2 credits for the taxable year after giving effect
    to the item or items reflected in the reported alteration.
        (2) On and after August 13, 1999, in any case where
    notification of an alteration is given as required by
    Section 506(b), a notice of deficiency may be issued at any
    time within 2 years after the date such notification is
    given for the taxable year for which the notification is
    given or for any taxable year to which the taxpayer may
    carry an Article 2 credit, or a Section 207 loss, earned,
    incurred, or used in the year for which the notification is
    given, provided, however, that the amount of any proposed
    assessment set forth in such notice shall be limited to the
    amount of any deficiency resulting under this Act from
    recomputation of the taxpayer's net income, Article 2
    credits, or Section 207 loss earned, incurred, or used in
    the taxable year for which the notification is given after
    giving effect to the item or items reflected in the
    reported alteration.
    (f) Extension by agreement. Where, before the expiration of
the time prescribed in this Section for the issuance of a
notice of deficiency, both the Department and the taxpayer
shall have consented in writing to its issuance after such
time, such notice may be issued at any time prior to the
expiration of the period agreed upon. In the case of a taxpayer
who is a partnership, Subchapter S corporation, or trust and
who enters into an agreement with the Department pursuant to
this subsection on or after January 1, 2003, a notice of
deficiency may be issued to the partners, shareholders, or
beneficiaries of the taxpayer at any time prior to the
expiration of the period agreed upon. Any proposed assessment
set forth in the notice, however, shall be limited to the
amount of any deficiency resulting under this Act from
recomputation of items of income, deduction, credits, or other
amounts of the taxpayer that are taken into account by the
partner, shareholder, or beneficiary in computing its
liability under this Act. The period so agreed upon may be
extended by subsequent agreements in writing made before the
expiration of the period previously agreed upon.
    (g) Erroneous refunds. In any case in which there has been
an erroneous refund of tax payable under this Act, a notice of
deficiency may be issued at any time within 2 years from the
making of such refund, or within 5 years from the making of
such refund if it appears that any part of the refund was
induced by fraud or the misrepresentation of a material fact,
provided, however, that the amount of any proposed assessment
set forth in such notice shall be limited to the amount of such
erroneous refund.
    Beginning July 1, 1993, in any case in which there has been
a refund of tax payable under this Act attributable to a net
loss carryback as provided for in Section 207, and that refund
is subsequently determined to be an erroneous refund due to a
reduction in the amount of the net loss which was originally
carried back, a notice of deficiency for the erroneous refund
amount may be issued at any time during the same time period in
which a notice of deficiency can be issued on the loss year
creating the carryback amount and subsequent erroneous refund.
The amount of any proposed assessment set forth in the notice
shall be limited to the amount of such erroneous refund.
    (h) Time return deemed filed. For purposes of this Section
a tax return filed before the last day prescribed by law
(including any extension thereof) shall be deemed to have been
filed on such last day.
    (i) Request for prompt determination of liability. For
purposes of subsection (a)(1), in the case of a tax return
required under this Act in respect of a decedent, or by his
estate during the period of administration, or by a
corporation, the period referred to in such Subsection shall be
18 months after a written request for prompt determination of
liability is filed with the Department (at such time and in
such form and manner as the Department shall by regulations
prescribe) by the executor, administrator, or other fiduciary
representing the estate of such decedent, or by such
corporation, but not more than 3 years after the date the
return was filed. This subsection shall not apply in the case
of a corporation unless:
        (1) (A) such written request notifies the Department
    that the corporation contemplates dissolution at or before
    the expiration of such 18-month period, (B) the dissolution
    is begun in good faith before the expiration of such
    18-month period, and (C) the dissolution is completed;
        (2) (A) such written request notifies the Department
    that a dissolution has in good faith been begun, and (B)
    the dissolution is completed; or
        (3) a dissolution has been completed at the time such
    written request is made.
    (j) Withholding tax. In the case of returns required under
Article 7 of this Act (with respect to any amounts withheld as
tax or any amounts required to have been withheld as tax) a
notice of deficiency shall be issued not later than 3 years
after the 15th day of the 4th month following the close of the
calendar year in which such withholding was required.
    (k) Penalties for failure to make information reports. A
notice of deficiency for the penalties provided by Subsection
1405.1(c) of this Act may not be issued more than 3 years after
the due date of the reports with respect to which the penalties
are asserted.
    (l) Penalty for failure to file withholding returns. A
notice of deficiency for penalties provided by Section 1004 of
this Act for taxpayer's failure to file withholding returns may
not be issued more than three years after the 15th day of the
4th month following the close of the calendar year in which the
withholding giving rise to taxpayer's obligation to file those
returns occurred.
    (m) Transferee liability. A notice of deficiency may be
issued to a transferee relative to a liability asserted under
Section 1405 during time periods defined as follows:
        1) Initial Transferee. In the case of the liability of
    an initial transferee, up to 2 years after the expiration
    of the period of limitation for assessment against the
    transferor, except that if a court proceeding for review of
    the assessment against the transferor has begun, then up to
    2 years after the return of the certified copy of the
    judgment in the court proceeding.
        2) Transferee of Transferee. In the case of the
    liability of a transferee, up to 2 years after the
    expiration of the period of limitation for assessment
    against the preceding transferee, but not more than 3 years
    after the expiration of the period of limitation for
    assessment against the initial transferor; except that if,
    before the expiration of the period of limitation for the
    assessment of the liability of the transferee, a court
    proceeding for the collection of the tax or liability in
    respect thereof has been begun against the initial
    transferor or the last preceding transferee, as the case
    may be, then the period of limitation for assessment of the
    liability of the transferee shall expire 2 years after the
    return of the certified copy of the judgment in the court
    proceeding.
    (n) Notice of decrease in net loss. On and after the
effective date of this amendatory Act of the 92nd General
Assembly, no notice of deficiency shall be issued as the result
of a decrease determined by the Department in the net loss
incurred by a taxpayer under Section 207 of this Act unless the
Department has notified the taxpayer of the proposed decrease
within 3 years after the return reporting the loss was filed or
within one year after an amended return reporting an increase
in the loss was filed, provided that in the case of an amended
return, a decrease proposed by the Department more than 3 years
after the original return was filed may not exceed the increase
claimed by the taxpayer on the original return.
(Source: P.A. 91-541, eff. 8-13-99; 92-846, eff. 8-23-02.)
 
    (35 ILCS 5/1001)  (from Ch. 120, par. 10-1001)
    Sec. 1001. Failure to File Tax Returns.
    (a) Failure to file tax return. In case of failure to file
any tax return required under this Act on the date prescribed
therefor, (determined with regard to any extensions of time for
filing) there shall be added as a penalty the amount prescribed
by Section 3-3 of the Uniform Penalty and Interest Act.
    (b) Failure to disclose reportable transaction. Any
taxpayer who fails to comply with the requirements of Section
501(b) of this Act shall pay a penalty in the amount determined
under this subsection. Such penalty shall be deemed assessed
upon the date of filing of the return for the taxable year in
which the taxpayer participates in the reportable transaction.
A taxpayer shall not be considered to have complied with the
requirements of Section 501(b) of this Act unless the
disclosure statement filed with the Department includes all of
the information required to be disclosed with respect to a
reportable transaction pursuant to Treasury Regulations
Section 1.6011-4 (26 CFR 1.6011-4) and regulations promulgated
by the Department under Section 501(b) of this Act.
    (1) Amount of penalty. Except as provided in paragraph (2),
the amount of the penalty under this subsection shall be
$15,000 for each failure to comply with the requirements of
Section 501(b).
    (2) Increase in penalty for listed transactions. In the
case of a failure to comply with the requirements of Section
501(b) with respect to a "listed transaction", the penalty
under this subsection shall be $30,000 for each failure.
    (3) Authority to rescind penalty. The Department may
rescind all or any portion of any penalty imposed by this
subsection with respect to any violation, if any of the
following apply:
        (A) It is determined that failure to comply did not
    jeopardize the best interests of the State and is not due
    to any willful neglect or any intent not to comply;
        (B) The person on whom the penalty is imposed has a
    history of complying with the requirements of this Act;
        (C) It is shown that the violation is due to an
    unintentional mistake of fact;
        (D) Imposing the penalty would be against equity and
    good conscience;
        (E) Rescinding the penalty would promote compliance
    with the requirements of this Act and effective tax
    administration; or
        (F) The taxpayer can show that there was a reasonable
    cause for the failure to disclose and that the taxpayer
    acted in good faith.
    A determination made under this subparagraph (3) may be
reviewed in any administrative or judicial proceeding.
    (4) Coordination with other penalties. The penalty imposed
by this subsection is in addition to any penalty imposed by
this Act or the Uniform Penalty and Interest Act. The doubling
of penalties and interest authorized by the Illinois Tax
Delinquency Amnesty Act (P.A. 93-26) are not applicable to the
reportable penalties under subsection (b).
    (c) The total penalty imposed under subsection (b) of this
Section with respect to any taxable year shall not exceed 10%
of the increase in net income (or reduction in Illinois net
loss under Section 207 of this Act) that would result had the
taxpayer not participated in any reportable transaction
affecting its net income for such taxable year.
(Source: P.A. 87-205.)
 
    (35 ILCS 5/1002)  (from Ch. 120, par. 10-1002)
    Sec. 1002. Failure to Pay Tax.
    (a) Negligence. If any part of a deficiency is due to
negligence or intentional disregard of rules and regulations
(but without intent to defraud) there shall be added to the tax
as a penalty the amount prescribed by Section 3-5 of the
Uniform Penalty and Interest Act.
    (b) Fraud. If any part of a deficiency is due to fraud,
there shall be added to the tax as a penalty the amount
prescribed by Section 3-6 of the Uniform Penalty and Interest
Act.
    (c) Nonwillful failure to pay withholding tax. If any
employer, without intent to evade or defeat any tax imposed by
this Act or the payment thereof, shall fail to make a return
and pay a tax withheld by him at the time required by or under
the provisions of this Act, such employer shall be liable for
such taxes and shall pay the same together with the interest
and the penalty provided by Sections 3-2 and 3-3, respectively,
of the Uniform Penalty and Interest Act and such interest and
penalty shall not be charged to or collected from the employee
by the employer.
    (d) Willful failure to collect and pay over tax. Any person
required to collect, truthfully account for, and pay over the
tax imposed by this Act who willfully fails to collect such tax
or truthfully account for and pay over such tax or willfully
attempts in any manner to evade or defeat the tax or the
payment thereof, shall, in addition to other penalties provided
by law, be liable for the penalty imposed by Section 3-7 of the
Uniform Penalty and Interest Act.
    (e) Penalties assessable.
        (1) In general. Except as otherwise provided in this
    Act provided in paragraphs (2), (3) and (4), the penalties
    provided by this Act shall be paid upon notice and demand
    and shall be assessed, collected, and paid in the same
    manner as taxes and any reference in this Act to the tax
    imposed by this Act shall be deemed also to refer to
    penalties provided by this Act.
        (2) Procedure for assessing certain penalties. For the
    purposes of Article 9 any penalty under Section 804(a) or
    Section 1001 shall be deemed assessed upon the filing of
    the return for the taxable year.
        (3) Procedure for assessing the penalty for failure to
    file withholding returns or annual transmittal forms for
    wage and tax statements. The penalty imposed by Section
    1004 will be asserted by the Department's issuance of a
    notice of deficiency. If taxpayer files a timely protest,
    the procedures of Section 908 will be followed. If taxpayer
    does not file a timely protest, the notice of deficiency
    will constitute an assessment pursuant to subsection (c) of
    Section 904.
        (4) Assessment of penalty under Section 1005(b). The
    penalty imposed under Section 1005(b) shall be deemed
    assessed upon the assessment of the tax to which such
    penalty relates and shall be collected and paid on notice
    and demand in the same manner as the tax.
    (f) Determination of deficiency. For purposes of
subsections (a) and (b), the amount shown as the tax by the
taxpayer upon his return shall be taken into account in
determining the amount of the deficiency only if such return
was filed on or before the last day prescribed by law for the
filing of such return, including any extensions of the time for
such filing.
(Source: P.A. 89-379, eff. 1-1-96.)
 
    (35 ILCS 5/1005)  (from Ch. 120, par. 10-1005)
    Sec. 1005. Penalty for Underpayment of Tax.
    (a) In general. If any amount of tax required to be shown
on a return prescribed by this Act is not paid on or before the
date required for filing such return (determined without regard
to any extension of time to file), a penalty shall be imposed
in the manner and at the rate prescribed by the Uniform Penalty
and Interest Act.
    (b) Reportable transaction penalty. If a taxpayer has a
reportable transaction understatement for any taxable year,
there shall be added to the tax an amount equal to 20% of the
amount of that understatement. This penalty shall be deemed
assessed upon the assessment of the tax to which such penalty
relates and shall be collected and paid on notice and demand in
the same manner as the tax.
        (1) Reportable transaction understatement. For
    purposes of this Section, the term "reportable transaction
    understatement" means the sum of subparagraphs (A) and (B):
            (A) The product of (i) the amount of the increase
        (if any) in Illinois net income, as determined by
        reference to the amount of post-apportioned income
        that results from a difference between the proper tax
        treatment of an item to which this subsection applies
        and the taxpayer's treatment of that item (as shown on
        the taxpayer's return of tax), including an amended
        return filed prior to the date the taxpayer is first
        contacted by the Department regarding the examination
        of the return, and (ii) the applicable tax rates under
        Section 201 of this Act.
            (B) Special rules in the case of carrybacks and
        carryovers. The penalty for an understatement of
        income attributable to a reportable transaction
        applies to any portion of an understatement for a year
        to which a loss, deduction, or credit is carried that
        is attributable to a reportable transaction for that
        year in which the carryback or carryover of the loss,
        deduction, or credit arises (the "loss or credit
        year").
        (2) Items to which subsection applies. This subsection
    shall apply to any item which is attributable to either of
    the following: (i) any listed transaction as defined in
    Treasury Regulations Section 1.6011-4, and (ii) any
    reportable transaction as defined in Treasury Regulations
    Section 1.6011-4 (other than a listed transaction) if a
    significant purpose of the transaction is the avoidance or
    evasion of federal income tax.
        (3) Subsection (b) shall be applied by substituting
    "30%" for "20%" with respect to the portion of any
    reportable transaction understatement with respect to
    which the requirements of (4)(B)(i) of this subsection are
    not met.
        (4) Reasonable cause exception.
            (A) In general. No penalty shall be imposed under
        this subsection with respect to any portion of a
        reportable transaction understatement if it is shown
        that there was a reasonable cause for such portion and
        that the taxpayer acted in good faith with respect to
        such portion.
            (B) Special rules. Subparagraph (A) does not apply
        to any reportable transaction (including listed
        transaction) unless all of the following requirements
        are met:
                (i) The relevant facts affecting the tax
            treatment of the item are adequately disclosed in
            accordance with Section 501(b) of this Act. A
            taxpayer failing to adequately disclose in
            accordance with Section 501(b) shall be treated as
            meeting the requirements of this subparagraph (i)
            if the penalty for that failure was rescinded under
            Section 1001(b)(3) of this Act;
                (ii) There is or was substantial authority for
            such treatment; and
                (iii) The taxpayer reasonably believed that
            such treatment was more likely than not the proper
            treatment.
            (C) Rules relating to reasonable belief. For
        purposes of subparagraph (B), a taxpayer shall be
        treated as having a reasonable belief with respect to
        the tax treatment of an item only if such belief meets
        the requirements of this subparagraph (C):
                (i) Such belief must be based on the facts and
            law that exist at the time the return of tax that
            includes that tax treatment is filed;
                (ii) Such belief must relate solely to the
            taxpayer's chances of success on the merits of that
            treatment and does not take into account the
            possibility that the return will not be audited,
            that the treatment will not be raised on audit, or
            that the treatment will be resolved through
            settlement if it is raised; and
                (iii) Such belief is not solely based on the
            opinion of a disqualified tax advisor or on a
            disqualified opinion.
        (5) Definitions.
            (A) Disqualified tax advisor. The term
        "disqualified tax advisor" is a tax advisor that meets
        any of the following conditions:
                (I) Is a material advisor who participates in
            the organization, management, promotion, or sale
            of the transaction or who is related (within the
            meaning of Sections 267(b) or 707(b)(1) of the
            Internal Revenue Code) to any person who so
            participates;
                (II) Is compensated directly or indirectly by
            a material advisor with respect to the
            transaction;
                (III) Has a fee arrangement with respect to the
            transaction that is contingent on all or part of
            the intended tax benefits from the transaction
            being sustained; or
                (IV) As determined under regulations
            prescribed by either the Secretary of the Treasury
            for federal income tax purposes or the Department,
            has a continuing financial interest with respect
            to the transaction.
            (B) Disqualified opinion. The term "disqualified
        opinion" means an opinion that meets any of the
        following conditions:
                (I) Is based on unreasonable factual or legal
            assumptions (including assumptions as to future
            events);
                (II) Unreasonably relies on representations,
            statements, findings, or agreements of the
            taxpayer or any other person;
                (III) Does not identify and consider all
            relevant facts; or
                (IV) Fails to meet any other requirement as
            either the Secretary of the Treasury for federal
            income tax purposes or the Department may
            prescribe.
            (C) Material Advisor. The term "material advisor"
        shall have substantially the same meaning as the same
        term is defined under Treasury Regulations Section
        301.6112-1, (26 CFR 301.6112-1) and shall include any
        person that is a material advisor for federal income
        tax purposes under such regulation.
        (6) Effective date. This subsection shall apply to
    taxable years ending on and after December 31, 2004, except
    that a reportable transaction understatement shall include
    an understatement (as determined under paragraph (1)) with
    respect to any taxable year for which the limitations
    period on assessment has not expired as of January 1, 2005
    that is attributable to a transaction which the taxpayer
    has entered into after February 28, 2000 and before
    December 31, 2004 that becomes a listed transaction (as
    defined in Treasury Regulations Section 1.6011-4(b)(2) at
    any time.
    (c) 100% interest penalty. If a taxpayer has been contacted
by the Internal Revenue Service or the Department regarding the
use of a potential tax avoidance transaction with respect to a
taxable year and has a deficiency with respect to such taxable
year or years, there shall be added to the tax attributable to
the potential tax avoidance transaction (determined as
described in subsection (b)(1) of Section 1005) an amount equal
to 100% of the interest assessed under the Uniform Penalty and
Interest Act (determined without regard to subsection (f) of
Section 3-2 of such Act) for the period beginning on the last
date prescribed by law for the payment of such tax and ending
on the date of the notice of deficiency. Such penalty shall be
deemed assessed upon the assessment of the interest to which
such penalty relates and shall be collected and paid in the
same manner as such interest. The penalty imposed by this
subsection is in addition to any penalty imposed by this Act or
the Uniform Penalty and Interest Act. For purposes of this
subsection and subsection (d) of this Section, the term
"potential tax avoidance transaction" means any tax shelter as
defined in Section 6111 of the Internal Revenue Code. This
subsection shall apply to taxable years ending on and after
December 31, 2004, except that the penalty may also be imposed
with respect to any taxable year for which the limitations
period on assessment has not expired as of January 1, 2005 that
is attributable to a transaction in which the taxpayer has
entered into after February 28, 2000 and before December 31,
2004, which transaction becomes a listed transaction (as
defined in Treasury Regulations Section 1.6011-4(b)(2)) at any
time.
    (d) 150% interest rate. For taxable years ending on and
after July 1, 2002, for any notice of deficiency issued before
the taxpayer is contacted by the Internal Revenue Service or
the Department regarding a potential tax avoidance
transaction, the taxpayer is subject to interest as provided
under Section 3-2 of the Uniform Penalty and Interest Act, but
with respect to any deficiency attributable to a potential tax
avoidance transaction, the taxpayer is subject to interest at a
rate of 150% of the otherwise applicable rate.
    (e) Coordination with other penalties. Except as provided
in regulations, the penalties imposed by this Section are in
addition to any other penalty imposed by this Act or the
Uniform Penalty and Interest Act. The doubling of penalties and
interest authorized by the Illinois Tax Delinquency Amnesty Act
(P.A. 93-26), are not applicable to the reportable transaction
penalties and interest under subsections (b), (c), and (d).
     The provisions of this Section shall apply to all taxable
years ending on or after January 1, 1986.
(Source: P.A. 87-205.)
 
    (35 ILCS 5/1007 new)
    Sec. 1007. Failure to register tax shelter or maintain
list.
    (a) Penalty Imposed. Any person that fails to comply with
the requirements of Section 1405.5 or Section 1405.6 shall
incur a penalty as provided in this Section. A person shall not
be in compliance with the requirements of Section 1405.5 unless
and until the required registration has been filed and contains
all of the information required to be included with such
registration under Section 6111 of the Internal Revenue Code or
such Section 1405.5. A person shall not be in compliance with
the requirements of Section 1405.6 unless, at the time the
required list is made available to the Department, such list
contains all of the information required to be maintained under
Section 6112 of the Internal Revenue Code or such Section
1405.6.
    (b) Amount of Penalty. The following penalties apply:
        (1) In the case of each failure to comply with the
    requirements of subsection (a), subsection (b), or
    subsection (e) of Section 1405.5, the penalty shall be
    $15,000.
        (2) If the failure is with respect to a listed
    transaction under subsection (c) of Section 1405.5, the
    penalty shall be $100,000.
        (3) In the case of each failure to comply with the
    requirements of subsection (a) or subsection (b) of Section
    1405.6, the penalty shall be $15,000.
        (4) If the failure is with respect to a listed
    transaction under subsection (c) of Section 1405.6, the
    penalty shall be $100,000.
    (c) Authority to rescind penalty. The Director of the Board
of Appeals may rescind all or any portion of any penalty
imposed by this Section with respect to any violation, if any
of the following apply:
        (1) It is determined that failure to comply did not
    jeopardize the best interests of the State and is not due
    to any willful neglect or any intent not to comply;
        (2) The person on whom the penalty is imposed has a
    history of complying with the requirements of this Act;
        (3) It is shown that the violation is due to an
    unintentional mistake of fact;
        (4) Imposing the penalty would be against equity and
    good conscience;
        (5) Rescinding the penalty would promote compliance
    with the requirements of this Act and effective tax
    administration; or
        (6) The taxpayer can show that there was reasonable
    cause for the failure to disclose and that the taxpayer
    acted in good faith.
    (d) Coordination with other penalties. The penalty imposed
by this Section is in addition to any penalty imposed by this
Act or the Uniform Penalty and Interest Act.
 
    (35 ILCS 5/1008 new)
    Sec. 1008. Promoting tax shelters. Except as herein
provided, the provisions of Section 6700 of the Internal
Revenue Code shall apply for purposes of this Act as if such
Section applied to an Illinois deduction, credit, exclusion
from income, allocation or apportionment rule, or other
Illinois tax benefit. Notwithstanding Section 6700(a) of the
Internal Revenue Code, if an activity with respect to which a
penalty imposed under Section 6700(a) of the Internal Revenue
Code, as applied for purposes of this Act, involves a statement
described in Section 6700(a)(2)(A) of the Internal Revenue
Code, as applied for purposes of this Act, the amount of the
penalty imposed under this Section shall be the greater of
$10,000 or 50% of the gross income received (or to be received)
from any person to whom such statement is furnished that is
required to file a return under Section 502 of this Act.
 
    (35 ILCS 5/1405.5 new)
    Sec. 1405.5. Registration of tax shelters.
    (a) Federal tax shelter. Any tax shelter organizer required
to register a tax shelter under Section 6111 of the Internal
Revenue Code shall send a duplicate of the federal registration
information to the Department not later than the day on which
registration is required under federal law. Any person required
to register under Section 6111 of the Internal Revenue Code who
receives a tax registration number from the Secretary of the
Treasury shall, within 30 days after request by the Department,
file a statement of that registration number.
    (b) Additional requirements for listed transactions. In
addition to the requirements of subsection (a), for any
transactions entered into on or after February 28, 2000 that
become listed transactions (as defined under Treasury
Regulations Section 1.6011-4) at any time, those transactions
shall be registered with the Department (in the form and manner
prescribed by the Department) by the later of (i) 60 days after
entering into the transaction, (ii) 60 days after the
transaction becomes a listed transaction, or (iii) December 31,
2004.
    (c) Tax shelters subject to this Section. The provisions of
this Section apply to any tax shelter herein described that
additionally satisfies any of the following conditions: (1) is
organized in this State; (2) is doing business in this State;
or (3) is deriving income from sources in this State.
    (d) Tax shelter identification number. Any person required
to file a return under this Act and required to include on the
person's federal tax return a tax shelter identification number
pursuant to Section 6111 of the Internal Revenue Code shall
furnish such number upon filing of the person's Illinois
return.
 
    (35 ILCS 5/1405.6 new)
    Sec. 1405.6. Investor lists.
    (a) Federal abusive tax shelter. Any person required to
maintain a list under Section 6112 of the Internal Revenue Code
and Treasury Regulations Section 301.6112-1 with respect to a
potentially abusive tax shelter shall furnish such list to the
Department not later than the time such list is required to be
furnished to the Internal Revenue Service under federal income
tax law.
    The list required under this Section shall include the same
information required with respect to a potentially abusive tax
shelter under Treasury Regulations Section 301.6112-1 and any
other information as the Department may require.
    (b) Additional requirements for listed transactions. For
transactions entered into on or after February 28, 2000 that
become listed transactions (as defined under Treasury
Regulations Section 1.6011-4) at any time, the list shall be
furnished to the Department by the later of (i) 60 days after
entering into the transaction, (ii) 60 days after the
transaction becomes a listed transaction, or (iii) December 31,
2004.
    (d) Tax Shelters subject to this Section. The provisions of
this Section apply to any tax shelter herein described that
additionally satisfies any of the following conditions:
        (1) Organized in this State;
        (2) Doing Business in this State; or
        (3) Deriving income from sources in this State.
 
ARTICLE 40

 
    Section 40-5. The Illinois Income Tax Act is amended by
changing Section 201 as follows:
 
    (35 ILCS 5/201)  (from Ch. 120, par. 2-201)
    Sec. 201. Tax Imposed.
    (a) In general. A tax measured by net income is hereby
imposed on every individual, corporation, trust and estate for
each taxable year ending after July 31, 1969 on the privilege
of earning or receiving income in or as a resident of this
State. Such tax shall be in addition to all other occupation or
privilege taxes imposed by this State or by any municipal
corporation or political subdivision thereof.
    (b) Rates. The tax imposed by subsection (a) of this
Section shall be determined as follows, except as adjusted by
subsection (d-1):
        (1) In the case of an individual, trust or estate, for
    taxable years ending prior to July 1, 1989, an amount equal
    to 2 1/2% of the taxpayer's net income for the taxable
    year.
        (2) In the case of an individual, trust or estate, for
    taxable years beginning prior to July 1, 1989 and ending
    after June 30, 1989, an amount equal to the sum of (i) 2
    1/2% of the taxpayer's net income for the period prior to
    July 1, 1989, as calculated under Section 202.3, and (ii)
    3% of the taxpayer's net income for the period after June
    30, 1989, as calculated under Section 202.3.
        (3) In the case of an individual, trust or estate, for
    taxable years beginning after June 30, 1989, an amount
    equal to 3% of the taxpayer's net income for the taxable
    year.
        (4) (Blank).
        (5) (Blank).
        (6) In the case of a corporation, for taxable years
    ending prior to July 1, 1989, an amount equal to 4% of the
    taxpayer's net income for the taxable year.
        (7) In the case of a corporation, for taxable years
    beginning prior to July 1, 1989 and ending after June 30,
    1989, an amount equal to the sum of (i) 4% of the
    taxpayer's net income for the period prior to July 1, 1989,
    as calculated under Section 202.3, and (ii) 4.8% of the
    taxpayer's net income for the period after June 30, 1989,
    as calculated under Section 202.3.
        (8) In the case of a corporation, for taxable years
    beginning after June 30, 1989, an amount equal to 4.8% of
    the taxpayer's net income for the taxable year.
    (c) Personal Property Tax Replacement Income Tax.
Beginning on July 1, 1979 and thereafter, in addition to such
income tax, there is also hereby imposed the Personal Property
Tax Replacement Income Tax measured by net income on every
corporation (including Subchapter S corporations), partnership
and trust, for each taxable year ending after June 30, 1979.
Such taxes are imposed on the privilege of earning or receiving
income in or as a resident of this State. The Personal Property
Tax Replacement Income Tax shall be in addition to the income
tax imposed by subsections (a) and (b) of this Section and in
addition to all other occupation or privilege taxes imposed by
this State or by any municipal corporation or political
subdivision thereof.
    (d) Additional Personal Property Tax Replacement Income
Tax Rates. The personal property tax replacement income tax
imposed by this subsection and subsection (c) of this Section
in the case of a corporation, other than a Subchapter S
corporation and except as adjusted by subsection (d-1), shall
be an additional amount equal to 2.85% of such taxpayer's net
income for the taxable year, except that beginning on January
1, 1981, and thereafter, the rate of 2.85% specified in this
subsection shall be reduced to 2.5%, and in the case of a
partnership, trust or a Subchapter S corporation shall be an
additional amount equal to 1.5% of such taxpayer's net income
for the taxable year.
    (d-1) Rate reduction for certain foreign insurers. In the
case of a foreign insurer, as defined by Section 35A-5 of the
Illinois Insurance Code, whose state or country of domicile
imposes on insurers domiciled in Illinois a retaliatory tax
(excluding any insurer whose premiums from reinsurance assumed
are 50% or more of its total insurance premiums as determined
under paragraph (2) of subsection (b) of Section 304, except
that for purposes of this determination premiums from
reinsurance do not include premiums from inter-affiliate
reinsurance arrangements), beginning with taxable years ending
on or after December 31, 1999, the sum of the rates of tax
imposed by subsections (b) and (d) shall be reduced (but not
increased) to the rate at which the total amount of tax imposed
under this Act, net of all credits allowed under this Act,
shall equal (i) the total amount of tax that would be imposed
on the foreign insurer's net income allocable to Illinois for
the taxable year by such foreign insurer's state or country of
domicile if that net income were subject to all income taxes
and taxes measured by net income imposed by such foreign
insurer's state or country of domicile, net of all credits
allowed or (ii) a rate of zero if no such tax is imposed on such
income by the foreign insurer's state of domicile. For the
purposes of this subsection (d-1), an inter-affiliate includes
a mutual insurer under common management.
        (1) For the purposes of subsection (d-1), in no event
    shall the sum of the rates of tax imposed by subsections
    (b) and (d) be reduced below the rate at which the sum of:
            (A) the total amount of tax imposed on such foreign
        insurer under this Act for a taxable year, net of all
        credits allowed under this Act, plus
            (B) the privilege tax imposed by Section 409 of the
        Illinois Insurance Code, the fire insurance company
        tax imposed by Section 12 of the Fire Investigation
        Act, and the fire department taxes imposed under
        Section 11-10-1 of the Illinois Municipal Code,
    equals 1.25% for taxable years ending prior to December 31,
    2003, or 1.75% for taxable years ending on or after
    December 31, 2003, of the net taxable premiums written for
    the taxable year, as described by subsection (1) of Section
    409 of the Illinois Insurance Code. This paragraph will in
    no event increase the rates imposed under subsections (b)
    and (d).
        (2) Any reduction in the rates of tax imposed by this
    subsection shall be applied first against the rates imposed
    by subsection (b) and only after the tax imposed by
    subsection (a) net of all credits allowed under this
    Section other than the credit allowed under subsection (i)
    has been reduced to zero, against the rates imposed by
    subsection (d).
    This subsection (d-1) is exempt from the provisions of
Section 250.
    (e) Investment credit. A taxpayer shall be allowed a credit
against the Personal Property Tax Replacement Income Tax for
investment in qualified property.
        (1) A taxpayer shall be allowed a credit equal to .5%
    of the basis of qualified property placed in service during
    the taxable year, provided such property is placed in
    service on or after July 1, 1984. There shall be allowed an
    additional credit equal to .5% of the basis of qualified
    property placed in service during the taxable year,
    provided such property is placed in service on or after
    July 1, 1986, and the taxpayer's base employment within
    Illinois has increased by 1% or more over the preceding
    year as determined by the taxpayer's employment records
    filed with the Illinois Department of Employment Security.
    Taxpayers who