101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
SB1655

 

Introduced 2/15/2019, by Sen. Chuck Weaver

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 5/203  from Ch. 120, par. 2-203
35 ILCS 735/3-3.5 new

    Amends the Illinois Income Tax Act. Creates an income tax deduction for an amount of up to $50,000 per tax year contributed to a small business asset purchase account and all interest earned on such accounts during the tax year. Provides that a "small business asset purchase account" means an account established by a taxpayer, the proceeds of which are used to purchase property used primarily in Illinois for which a federal income tax deduction is claimed under Section 179 of the Internal Revenue Code. Provides an addition modification for amounts withdrawn from a small business asset purchase account that are not used for qualified purchases. Amends the Uniform Penalty and Interest Act to establish a penalty for improper use of moneys in a small business asset purchase account. Effective immediately.


LRB101 08952 HLH 54042 b

 

 

A BILL FOR

 

SB1655LRB101 08952 HLH 54042 b

1    AN ACT concerning revenue.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Income Tax Act is amended by
5changing Section 203 as follows:
 
6    (35 ILCS 5/203)  (from Ch. 120, par. 2-203)
7    Sec. 203. Base income defined.
8    (a) Individuals.
9        (1) In general. In the case of an individual, base
10    income means an amount equal to the taxpayer's adjusted
11    gross income for the taxable year as modified by paragraph
12    (2).
13        (2) Modifications. The adjusted gross income referred
14    to in paragraph (1) shall be modified by adding thereto the
15    sum of the following amounts:
16            (A) An amount equal to all amounts paid or accrued
17        to the taxpayer as interest or dividends during the
18        taxable year to the extent excluded from gross income
19        in the computation of adjusted gross income, except
20        stock dividends of qualified public utilities
21        described in Section 305(e) of the Internal Revenue
22        Code;
23            (B) An amount equal to the amount of tax imposed by

 

 

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1        this Act to the extent deducted from gross income in
2        the computation of adjusted gross income for the
3        taxable year;
4            (C) An amount equal to the amount received during
5        the taxable year as a recovery or refund of real
6        property taxes paid with respect to the taxpayer's
7        principal residence under the Revenue Act of 1939 and
8        for which a deduction was previously taken under
9        subparagraph (L) of this paragraph (2) prior to July 1,
10        1991, the retrospective application date of Article 4
11        of Public Act 87-17. In the case of multi-unit or
12        multi-use structures and farm dwellings, the taxes on
13        the taxpayer's principal residence shall be that
14        portion of the total taxes for the entire property
15        which is attributable to such principal residence;
16            (D) An amount equal to the amount of the capital
17        gain deduction allowable under the Internal Revenue
18        Code, to the extent deducted from gross income in the
19        computation of adjusted gross income;
20            (D-5) An amount, to the extent not included in
21        adjusted gross income, equal to the amount of money
22        withdrawn by the taxpayer in the taxable year from a
23        medical care savings account and the interest earned on
24        the account in the taxable year of a withdrawal
25        pursuant to subsection (b) of Section 20 of the Medical
26        Care Savings Account Act or subsection (b) of Section

 

 

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1        20 of the Medical Care Savings Account Act of 2000;
2            (D-10) For taxable years ending after December 31,
3        1997, an amount equal to any eligible remediation costs
4        that the individual deducted in computing adjusted
5        gross income and for which the individual claims a
6        credit under subsection (l) of Section 201;
7            (D-15) For taxable years 2001 and thereafter, an
8        amount equal to the bonus depreciation deduction taken
9        on the taxpayer's federal income tax return for the
10        taxable year under subsection (k) of Section 168 of the
11        Internal Revenue Code;
12            (D-16) If the taxpayer sells, transfers, abandons,
13        or otherwise disposes of property for which the
14        taxpayer was required in any taxable year to make an
15        addition modification under subparagraph (D-15), then
16        an amount equal to the aggregate amount of the
17        deductions taken in all taxable years under
18        subparagraph (Z) with respect to that property.
19            If the taxpayer continues to own property through
20        the last day of the last tax year for which the
21        taxpayer may claim a depreciation deduction for
22        federal income tax purposes and for which the taxpayer
23        was allowed in any taxable year to make a subtraction
24        modification under subparagraph (Z), then an amount
25        equal to that subtraction modification.
26            The taxpayer is required to make the addition

 

 

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1        modification under this subparagraph only once with
2        respect to any one piece of property;
3            (D-17) An amount equal to the amount otherwise
4        allowed as a deduction in computing base income for
5        interest paid, accrued, or incurred, directly or
6        indirectly, (i) for taxable years ending on or after
7        December 31, 2004, to a foreign person who would be a
8        member of the same unitary business group but for the
9        fact that foreign person's business activity outside
10        the United States is 80% or more of the foreign
11        person's total business activity and (ii) for taxable
12        years ending on or after December 31, 2008, to a person
13        who would be a member of the same unitary business
14        group but for the fact that the person is prohibited
15        under Section 1501(a)(27) from being included in the
16        unitary business group because he or she is ordinarily
17        required to apportion business income under different
18        subsections of Section 304. The addition modification
19        required by this subparagraph shall be reduced to the
20        extent that dividends were included in base income of
21        the unitary group for the same taxable year and
22        received by the taxpayer or by a member of the
23        taxpayer's unitary business group (including amounts
24        included in gross income under Sections 951 through 964
25        of the Internal Revenue Code and amounts included in
26        gross income under Section 78 of the Internal Revenue

 

 

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1        Code) with respect to the stock of the same person to
2        whom the interest was paid, accrued, or incurred.
3            This paragraph shall not apply to the following:
4                (i) an item of interest paid, accrued, or
5            incurred, directly or indirectly, to a person who
6            is subject in a foreign country or state, other
7            than a state which requires mandatory unitary
8            reporting, to a tax on or measured by net income
9            with respect to such interest; or
10                (ii) an item of interest paid, accrued, or
11            incurred, directly or indirectly, to a person if
12            the taxpayer can establish, based on a
13            preponderance of the evidence, both of the
14            following:
15                    (a) the person, during the same taxable
16                year, paid, accrued, or incurred, the interest
17                to a person that is not a related member, and
18                    (b) the transaction giving rise to the
19                interest expense between the taxpayer and the
20                person did not have as a principal purpose the
21                avoidance of Illinois income tax, and is paid
22                pursuant to a contract or agreement that
23                reflects an arm's-length interest rate and
24                terms; or
25                (iii) the taxpayer can establish, based on
26            clear and convincing evidence, that the interest

 

 

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1            paid, accrued, or incurred relates to a contract or
2            agreement entered into at arm's-length rates and
3            terms and the principal purpose for the payment is
4            not federal or Illinois tax avoidance; or
5                (iv) an item of interest paid, accrued, or
6            incurred, directly or indirectly, to a person if
7            the taxpayer establishes by clear and convincing
8            evidence that the adjustments are unreasonable; or
9            if the taxpayer and the Director agree in writing
10            to the application or use of an alternative method
11            of apportionment under Section 304(f).
12                Nothing in this subsection shall preclude the
13            Director from making any other adjustment
14            otherwise allowed under Section 404 of this Act for
15            any tax year beginning after the effective date of
16            this amendment provided such adjustment is made
17            pursuant to regulation adopted by the Department
18            and such regulations provide methods and standards
19            by which the Department will utilize its authority
20            under Section 404 of this Act;
21            (D-18) An amount equal to the amount of intangible
22        expenses and costs otherwise allowed as a deduction in
23        computing base income, and that were paid, accrued, or
24        incurred, directly or indirectly, (i) for taxable
25        years ending on or after December 31, 2004, to a
26        foreign person who would be a member of the same

 

 

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1        unitary business group but for the fact that the
2        foreign person's business activity outside the United
3        States is 80% or more of that person's total business
4        activity and (ii) for taxable years ending on or after
5        December 31, 2008, to a person who would be a member of
6        the same unitary business group but for the fact that
7        the person is prohibited under Section 1501(a)(27)
8        from being included in the unitary business group
9        because he or she is ordinarily required to apportion
10        business income under different subsections of Section
11        304. The addition modification required by this
12        subparagraph shall be reduced to the extent that
13        dividends were included in base income of the unitary
14        group for the same taxable year and received by the
15        taxpayer or by a member of the taxpayer's unitary
16        business group (including amounts included in gross
17        income under Sections 951 through 964 of the Internal
18        Revenue Code and amounts included in gross income under
19        Section 78 of the Internal Revenue Code) with respect
20        to the stock of the same person to whom the intangible
21        expenses and costs were directly or indirectly paid,
22        incurred, or accrued. The preceding sentence does not
23        apply to the extent that the same dividends caused a
24        reduction to the addition modification required under
25        Section 203(a)(2)(D-17) of this Act. As used in this
26        subparagraph, the term "intangible expenses and costs"

 

 

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1        includes (1) expenses, losses, and costs for, or
2        related to, the direct or indirect acquisition, use,
3        maintenance or management, ownership, sale, exchange,
4        or any other disposition of intangible property; (2)
5        losses incurred, directly or indirectly, from
6        factoring transactions or discounting transactions;
7        (3) royalty, patent, technical, and copyright fees;
8        (4) licensing fees; and (5) other similar expenses and
9        costs. For purposes of this subparagraph, "intangible
10        property" includes patents, patent applications, trade
11        names, trademarks, service marks, copyrights, mask
12        works, trade secrets, and similar types of intangible
13        assets.
14            This paragraph shall not apply to the following:
15                (i) any item of intangible expenses or costs
16            paid, accrued, or incurred, directly or
17            indirectly, from a transaction with a person who is
18            subject in a foreign country or state, other than a
19            state which requires mandatory unitary reporting,
20            to a tax on or measured by net income with respect
21            to such item; or
22                (ii) any item of intangible expense or cost
23            paid, accrued, or incurred, directly or
24            indirectly, if the taxpayer can establish, based
25            on a preponderance of the evidence, both of the
26            following:

 

 

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1                    (a) the person during the same taxable
2                year paid, accrued, or incurred, the
3                intangible expense or cost to a person that is
4                not a related member, and
5                    (b) the transaction giving rise to the
6                intangible expense or cost between the
7                taxpayer and the person did not have as a
8                principal purpose the avoidance of Illinois
9                income tax, and is paid pursuant to a contract
10                or agreement that reflects arm's-length terms;
11                or
12                (iii) any item of intangible expense or cost
13            paid, accrued, or incurred, directly or
14            indirectly, from a transaction with a person if the
15            taxpayer establishes by clear and convincing
16            evidence, that the adjustments are unreasonable;
17            or if the taxpayer and the Director agree in
18            writing to the application or use of an alternative
19            method of apportionment under Section 304(f);
20                Nothing in this subsection shall preclude the
21            Director from making any other adjustment
22            otherwise allowed under Section 404 of this Act for
23            any tax year beginning after the effective date of
24            this amendment provided such adjustment is made
25            pursuant to regulation adopted by the Department
26            and such regulations provide methods and standards

 

 

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1            by which the Department will utilize its authority
2            under Section 404 of this Act;
3            (D-19) For taxable years ending on or after
4        December 31, 2008, an amount equal to the amount of
5        insurance premium expenses and costs otherwise allowed
6        as a deduction in computing base income, and that were
7        paid, accrued, or incurred, directly or indirectly, to
8        a person who would be a member of the same unitary
9        business group but for the fact that the person is
10        prohibited under Section 1501(a)(27) from being
11        included in the unitary business group because he or
12        she is ordinarily required to apportion business
13        income under different subsections of Section 304. The
14        addition modification required by this subparagraph
15        shall be reduced to the extent that dividends were
16        included in base income of the unitary group for the
17        same taxable year and received by the taxpayer or by a
18        member of the taxpayer's unitary business group
19        (including amounts included in gross income under
20        Sections 951 through 964 of the Internal Revenue Code
21        and amounts included in gross income under Section 78
22        of the Internal Revenue Code) with respect to the stock
23        of the same person to whom the premiums and costs were
24        directly or indirectly paid, incurred, or accrued. The
25        preceding sentence does not apply to the extent that
26        the same dividends caused a reduction to the addition

 

 

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1        modification required under Section 203(a)(2)(D-17) or
2        Section 203(a)(2)(D-18) of this Act.
3            (D-20) For taxable years beginning on or after
4        January 1, 2002 and ending on or before December 31,
5        2006, in the case of a distribution from a qualified
6        tuition program under Section 529 of the Internal
7        Revenue Code, other than (i) a distribution from a
8        College Savings Pool created under Section 16.5 of the
9        State Treasurer Act or (ii) a distribution from the
10        Illinois Prepaid Tuition Trust Fund, an amount equal to
11        the amount excluded from gross income under Section
12        529(c)(3)(B). For taxable years beginning on or after
13        January 1, 2007, in the case of a distribution from a
14        qualified tuition program under Section 529 of the
15        Internal Revenue Code, other than (i) a distribution
16        from a College Savings Pool created under Section 16.5
17        of the State Treasurer Act, (ii) a distribution from
18        the Illinois Prepaid Tuition Trust Fund, or (iii) a
19        distribution from a qualified tuition program under
20        Section 529 of the Internal Revenue Code that (I)
21        adopts and determines that its offering materials
22        comply with the College Savings Plans Network's
23        disclosure principles and (II) has made reasonable
24        efforts to inform in-state residents of the existence
25        of in-state qualified tuition programs by informing
26        Illinois residents directly and, where applicable, to

 

 

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1        inform financial intermediaries distributing the
2        program to inform in-state residents of the existence
3        of in-state qualified tuition programs at least
4        annually, an amount equal to the amount excluded from
5        gross income under Section 529(c)(3)(B).
6            For the purposes of this subparagraph (D-20), a
7        qualified tuition program has made reasonable efforts
8        if it makes disclosures (which may use the term
9        "in-state program" or "in-state plan" and need not
10        specifically refer to Illinois or its qualified
11        programs by name) (i) directly to prospective
12        participants in its offering materials or makes a
13        public disclosure, such as a website posting; and (ii)
14        where applicable, to intermediaries selling the
15        out-of-state program in the same manner that the
16        out-of-state program distributes its offering
17        materials;
18            (D-20.5) For taxable years beginning on or after
19        January 1, 2018, in the case of a distribution from a
20        qualified ABLE program under Section 529A of the
21        Internal Revenue Code, other than a distribution from a
22        qualified ABLE program created under Section 16.6 of
23        the State Treasurer Act, an amount equal to the amount
24        excluded from gross income under Section 529A(c)(1)(B)
25        of the Internal Revenue Code;
26            (D-21) For taxable years beginning on or after

 

 

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1        January 1, 2007, in the case of transfer of moneys from
2        a qualified tuition program under Section 529 of the
3        Internal Revenue Code that is administered by the State
4        to an out-of-state program, an amount equal to the
5        amount of moneys previously deducted from base income
6        under subsection (a)(2)(Y) of this Section;
7            (D-21.5) For taxable years beginning on or after
8        January 1, 2018, in the case of the transfer of moneys
9        from a qualified tuition program under Section 529 or a
10        qualified ABLE program under Section 529A of the
11        Internal Revenue Code that is administered by this
12        State to an ABLE account established under an
13        out-of-state ABLE account program, an amount equal to
14        the contribution component of the transferred amount
15        that was previously deducted from base income under
16        subsection (a)(2)(Y) or subsection (a)(2)(HH) of this
17        Section;
18            (D-22) For taxable years beginning on or after
19        January 1, 2009, and prior to January 1, 2018, in the
20        case of a nonqualified withdrawal or refund of moneys
21        from a qualified tuition program under Section 529 of
22        the Internal Revenue Code administered by the State
23        that is not used for qualified expenses at an eligible
24        education institution, an amount equal to the
25        contribution component of the nonqualified withdrawal
26        or refund that was previously deducted from base income

 

 

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1        under subsection (a)(2)(y) of this Section, provided
2        that the withdrawal or refund did not result from the
3        beneficiary's death or disability. For taxable years
4        beginning on or after January 1, 2018: (1) in the case
5        of a nonqualified withdrawal or refund, as defined
6        under Section 16.5 of the State Treasurer Act, of
7        moneys from a qualified tuition program under Section
8        529 of the Internal Revenue Code administered by the
9        State, an amount equal to the contribution component of
10        the nonqualified withdrawal or refund that was
11        previously deducted from base income under subsection
12        (a)(2)(Y) of this Section, and (2) in the case of a
13        nonqualified withdrawal or refund from a qualified
14        ABLE program under Section 529A of the Internal Revenue
15        Code administered by the State that is not used for
16        qualified disability expenses, an amount equal to the
17        contribution component of the nonqualified withdrawal
18        or refund that was previously deducted from base income
19        under subsection (a)(2)(HH) of this Section;
20            (D-23) An amount equal to the credit allowable to
21        the taxpayer under Section 218(a) of this Act,
22        determined without regard to Section 218(c) of this
23        Act;
24            (D-24) For taxable years ending on or after
25        December 31, 2017, an amount equal to the deduction
26        allowed under Section 199 of the Internal Revenue Code

 

 

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1        for the taxable year;
2            (D-25) An amount withdrawn from a small business
3        asset purchase account that is not used for purchases
4        of property for which a deduction under Section 179 of
5        the Internal Revenue Code is claimed for the tax year
6        in which the amount is withdrawn and which property is
7        used predominately in Illinois; such amounts are
8        subject to the 10% penalty for ineligible use under
9        Section 3-3.5 of the Uniform Penalty and Interest Act;
10    and by deducting from the total so obtained the sum of the
11    following amounts:
12            (E) For taxable years ending before December 31,
13        2001, any amount included in such total in respect of
14        any compensation (including but not limited to any
15        compensation paid or accrued to a serviceman while a
16        prisoner of war or missing in action) paid to a
17        resident by reason of being on active duty in the Armed
18        Forces of the United States and in respect of any
19        compensation paid or accrued to a resident who as a
20        governmental employee was a prisoner of war or missing
21        in action, and in respect of any compensation paid to a
22        resident in 1971 or thereafter for annual training
23        performed pursuant to Sections 502 and 503, Title 32,
24        United States Code as a member of the Illinois National
25        Guard or, beginning with taxable years ending on or
26        after December 31, 2007, the National Guard of any

 

 

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1        other state. For taxable years ending on or after
2        December 31, 2001, any amount included in such total in
3        respect of any compensation (including but not limited
4        to any compensation paid or accrued to a serviceman
5        while a prisoner of war or missing in action) paid to a
6        resident by reason of being a member of any component
7        of the Armed Forces of the United States and in respect
8        of any compensation paid or accrued to a resident who
9        as a governmental employee was a prisoner of war or
10        missing in action, and in respect of any compensation
11        paid to a resident in 2001 or thereafter by reason of
12        being a member of the Illinois National Guard or,
13        beginning with taxable years ending on or after
14        December 31, 2007, the National Guard of any other
15        state. The provisions of this subparagraph (E) are
16        exempt from the provisions of Section 250;
17            (F) An amount equal to all amounts included in such
18        total pursuant to the provisions of Sections 402(a),
19        402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the
20        Internal Revenue Code, or included in such total as
21        distributions under the provisions of any retirement
22        or disability plan for employees of any governmental
23        agency or unit, or retirement payments to retired
24        partners, which payments are excluded in computing net
25        earnings from self employment by Section 1402 of the
26        Internal Revenue Code and regulations adopted pursuant

 

 

SB1655- 17 -LRB101 08952 HLH 54042 b

1        thereto;
2            (G) The valuation limitation amount;
3            (H) An amount equal to the amount of any tax
4        imposed by this Act which was refunded to the taxpayer
5        and included in such total for the taxable year;
6            (I) An amount equal to all amounts included in such
7        total pursuant to the provisions of Section 111 of the
8        Internal Revenue Code as a recovery of items previously
9        deducted from adjusted gross income in the computation
10        of taxable income;
11            (J) An amount equal to those dividends included in
12        such total which were paid by a corporation which
13        conducts business operations in a River Edge
14        Redevelopment Zone or zones created under the River
15        Edge Redevelopment Zone Act, and conducts
16        substantially all of its operations in a River Edge
17        Redevelopment Zone or zones. This subparagraph (J) is
18        exempt from the provisions of Section 250;
19            (K) An amount equal to those dividends included in
20        such total that were paid by a corporation that
21        conducts business operations in a federally designated
22        Foreign Trade Zone or Sub-Zone and that is designated a
23        High Impact Business located in Illinois; provided
24        that dividends eligible for the deduction provided in
25        subparagraph (J) of paragraph (2) of this subsection
26        shall not be eligible for the deduction provided under

 

 

SB1655- 18 -LRB101 08952 HLH 54042 b

1        this subparagraph (K);
2            (L) For taxable years ending after December 31,
3        1983, an amount equal to all social security benefits
4        and railroad retirement benefits included in such
5        total pursuant to Sections 72(r) and 86 of the Internal
6        Revenue Code;
7            (M) With the exception of any amounts subtracted
8        under subparagraph (N), an amount equal to the sum of
9        all amounts disallowed as deductions by (i) Sections
10        171(a)(2), and 265(a)(2) 265(2) of the Internal
11        Revenue Code, and all amounts of expenses allocable to
12        interest and disallowed as deductions by Section
13        265(a)(1) 265(1) of the Internal Revenue Code; and (ii)
14        for taxable years ending on or after August 13, 1999,
15        Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
16        the Internal Revenue Code, plus, for taxable years
17        ending on or after December 31, 2011, Section 45G(e)(3)
18        of the Internal Revenue Code and, for taxable years
19        ending on or after December 31, 2008, any amount
20        included in gross income under Section 87 of the
21        Internal Revenue Code; the provisions of this
22        subparagraph are exempt from the provisions of Section
23        250;
24            (N) An amount equal to all amounts included in such
25        total which are exempt from taxation by this State
26        either by reason of its statutes or Constitution or by

 

 

SB1655- 19 -LRB101 08952 HLH 54042 b

1        reason of the Constitution, treaties or statutes of the
2        United States; provided that, in the case of any
3        statute of this State that exempts income derived from
4        bonds or other obligations from the tax imposed under
5        this Act, the amount exempted shall be the interest net
6        of bond premium amortization;
7            (O) An amount equal to any contribution made to a
8        job training project established pursuant to the Tax
9        Increment Allocation Redevelopment Act;
10            (P) An amount equal to the amount of the deduction
11        used to compute the federal income tax credit for
12        restoration of substantial amounts held under claim of
13        right for the taxable year pursuant to Section 1341 of
14        the Internal Revenue Code or of any itemized deduction
15        taken from adjusted gross income in the computation of
16        taxable income for restoration of substantial amounts
17        held under claim of right for the taxable year;
18            (Q) An amount equal to any amounts included in such
19        total, received by the taxpayer as an acceleration in
20        the payment of life, endowment or annuity benefits in
21        advance of the time they would otherwise be payable as
22        an indemnity for a terminal illness;
23            (R) An amount equal to the amount of any federal or
24        State bonus paid to veterans of the Persian Gulf War;
25            (S) An amount, to the extent included in adjusted
26        gross income, equal to the amount of a contribution

 

 

SB1655- 20 -LRB101 08952 HLH 54042 b

1        made in the taxable year on behalf of the taxpayer to a
2        medical care savings account established under the
3        Medical Care Savings Account Act or the Medical Care
4        Savings Account Act of 2000 to the extent the
5        contribution is accepted by the account administrator
6        as provided in that Act;
7            (T) An amount, to the extent included in adjusted
8        gross income, equal to the amount of interest earned in
9        the taxable year on a medical care savings account
10        established under the Medical Care Savings Account Act
11        or the Medical Care Savings Account Act of 2000 on
12        behalf of the taxpayer, other than interest added
13        pursuant to item (D-5) of this paragraph (2);
14            (U) For one taxable year beginning on or after
15        January 1, 1994, an amount equal to the total amount of
16        tax imposed and paid under subsections (a) and (b) of
17        Section 201 of this Act on grant amounts received by
18        the taxpayer under the Nursing Home Grant Assistance
19        Act during the taxpayer's taxable years 1992 and 1993;
20            (V) Beginning with tax years ending on or after
21        December 31, 1995 and ending with tax years ending on
22        or before December 31, 2004, an amount equal to the
23        amount paid by a taxpayer who is a self-employed
24        taxpayer, a partner of a partnership, or a shareholder
25        in a Subchapter S corporation for health insurance or
26        long-term care insurance for that taxpayer or that

 

 

SB1655- 21 -LRB101 08952 HLH 54042 b

1        taxpayer's spouse or dependents, to the extent that the
2        amount paid for that health insurance or long-term care
3        insurance may be deducted under Section 213 of the
4        Internal Revenue Code, has not been deducted on the
5        federal income tax return of the taxpayer, and does not
6        exceed the taxable income attributable to that
7        taxpayer's income, self-employment income, or
8        Subchapter S corporation income; except that no
9        deduction shall be allowed under this item (V) if the
10        taxpayer is eligible to participate in any health
11        insurance or long-term care insurance plan of an
12        employer of the taxpayer or the taxpayer's spouse. The
13        amount of the health insurance and long-term care
14        insurance subtracted under this item (V) shall be
15        determined by multiplying total health insurance and
16        long-term care insurance premiums paid by the taxpayer
17        times a number that represents the fractional
18        percentage of eligible medical expenses under Section
19        213 of the Internal Revenue Code of 1986 not actually
20        deducted on the taxpayer's federal income tax return;
21            (W) For taxable years beginning on or after January
22        1, 1998, all amounts included in the taxpayer's federal
23        gross income in the taxable year from amounts converted
24        from a regular IRA to a Roth IRA. This paragraph is
25        exempt from the provisions of Section 250;
26            (X) For taxable year 1999 and thereafter, an amount

 

 

SB1655- 22 -LRB101 08952 HLH 54042 b

1        equal to the amount of any (i) distributions, to the
2        extent includible in gross income for federal income
3        tax purposes, made to the taxpayer because of his or
4        her status as a victim of persecution for racial or
5        religious reasons by Nazi Germany or any other Axis
6        regime or as an heir of the victim and (ii) items of
7        income, to the extent includible in gross income for
8        federal income tax purposes, attributable to, derived
9        from or in any way related to assets stolen from,
10        hidden from, or otherwise lost to a victim of
11        persecution for racial or religious reasons by Nazi
12        Germany or any other Axis regime immediately prior to,
13        during, and immediately after World War II, including,
14        but not limited to, interest on the proceeds receivable
15        as insurance under policies issued to a victim of
16        persecution for racial or religious reasons by Nazi
17        Germany or any other Axis regime by European insurance
18        companies immediately prior to and during World War II;
19        provided, however, this subtraction from federal
20        adjusted gross income does not apply to assets acquired
21        with such assets or with the proceeds from the sale of
22        such assets; provided, further, this paragraph shall
23        only apply to a taxpayer who was the first recipient of
24        such assets after their recovery and who is a victim of
25        persecution for racial or religious reasons by Nazi
26        Germany or any other Axis regime or as an heir of the

 

 

SB1655- 23 -LRB101 08952 HLH 54042 b

1        victim. The amount of and the eligibility for any
2        public assistance, benefit, or similar entitlement is
3        not affected by the inclusion of items (i) and (ii) of
4        this paragraph in gross income for federal income tax
5        purposes. This paragraph is exempt from the provisions
6        of Section 250;
7            (Y) For taxable years beginning on or after January
8        1, 2002 and ending on or before December 31, 2004,
9        moneys contributed in the taxable year to a College
10        Savings Pool account under Section 16.5 of the State
11        Treasurer Act, except that amounts excluded from gross
12        income under Section 529(c)(3)(C)(i) of the Internal
13        Revenue Code shall not be considered moneys
14        contributed under this subparagraph (Y). For taxable
15        years beginning on or after January 1, 2005, a maximum
16        of $10,000 contributed in the taxable year to (i) a
17        College Savings Pool account under Section 16.5 of the
18        State Treasurer Act or (ii) the Illinois Prepaid
19        Tuition Trust Fund, except that amounts excluded from
20        gross income under Section 529(c)(3)(C)(i) of the
21        Internal Revenue Code shall not be considered moneys
22        contributed under this subparagraph (Y). For purposes
23        of this subparagraph, contributions made by an
24        employer on behalf of an employee, or matching
25        contributions made by an employee, shall be treated as
26        made by the employee. This subparagraph (Y) is exempt

 

 

SB1655- 24 -LRB101 08952 HLH 54042 b

1        from the provisions of Section 250;
2            (Z) For taxable years 2001 and thereafter, for the
3        taxable year in which the bonus depreciation deduction
4        is taken on the taxpayer's federal income tax return
5        under subsection (k) of Section 168 of the Internal
6        Revenue Code and for each applicable taxable year
7        thereafter, an amount equal to "x", where:
8                (1) "y" equals the amount of the depreciation
9            deduction taken for the taxable year on the
10            taxpayer's federal income tax return on property
11            for which the bonus depreciation deduction was
12            taken in any year under subsection (k) of Section
13            168 of the Internal Revenue Code, but not including
14            the bonus depreciation deduction;
15                (2) for taxable years ending on or before
16            December 31, 2005, "x" equals "y" multiplied by 30
17            and then divided by 70 (or "y" multiplied by
18            0.429); and
19                (3) for taxable years ending after December
20            31, 2005:
21                    (i) for property on which a bonus
22                depreciation deduction of 30% of the adjusted
23                basis was taken, "x" equals "y" multiplied by
24                30 and then divided by 70 (or "y" multiplied by
25                0.429); and
26                    (ii) for property on which a bonus

 

 

SB1655- 25 -LRB101 08952 HLH 54042 b

1                depreciation deduction of 50% of the adjusted
2                basis was taken, "x" equals "y" multiplied by
3                1.0.
4            The aggregate amount deducted under this
5        subparagraph in all taxable years for any one piece of
6        property may not exceed the amount of the bonus
7        depreciation deduction taken on that property on the
8        taxpayer's federal income tax return under subsection
9        (k) of Section 168 of the Internal Revenue Code. This
10        subparagraph (Z) is exempt from the provisions of
11        Section 250;
12            (AA) If the taxpayer sells, transfers, abandons,
13        or otherwise disposes of property for which the
14        taxpayer was required in any taxable year to make an
15        addition modification under subparagraph (D-15), then
16        an amount equal to that addition modification.
17            If the taxpayer continues to own property through
18        the last day of the last tax year for which the
19        taxpayer may claim a depreciation deduction for
20        federal income tax purposes and for which the taxpayer
21        was required in any taxable year to make an addition
22        modification under subparagraph (D-15), then an amount
23        equal to that addition modification.
24            The taxpayer is allowed to take the deduction under
25        this subparagraph only once with respect to any one
26        piece of property.

 

 

SB1655- 26 -LRB101 08952 HLH 54042 b

1            This subparagraph (AA) is exempt from the
2        provisions of Section 250;
3            (BB) Any amount included in adjusted gross income,
4        other than salary, received by a driver in a
5        ridesharing arrangement using a motor vehicle;
6            (CC) The amount of (i) any interest income (net of
7        the deductions allocable thereto) taken into account
8        for the taxable year with respect to a transaction with
9        a taxpayer that is required to make an addition
10        modification with respect to such transaction under
11        Section 203(a)(2)(D-17), 203(b)(2)(E-12),
12        203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
13        the amount of that addition modification, and (ii) any
14        income from intangible property (net of the deductions
15        allocable thereto) taken into account for the taxable
16        year with respect to a transaction with a taxpayer that
17        is required to make an addition modification with
18        respect to such transaction under Section
19        203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
20        203(d)(2)(D-8), but not to exceed the amount of that
21        addition modification. This subparagraph (CC) is
22        exempt from the provisions of Section 250;
23            (DD) An amount equal to the interest income taken
24        into account for the taxable year (net of the
25        deductions allocable thereto) with respect to
26        transactions with (i) a foreign person who would be a

 

 

SB1655- 27 -LRB101 08952 HLH 54042 b

1        member of the taxpayer's unitary business group but for
2        the fact that the foreign person's business activity
3        outside the United States is 80% or more of that
4        person's total business activity and (ii) for taxable
5        years ending on or after December 31, 2008, to a person
6        who would be a member of the same unitary business
7        group but for the fact that the person is prohibited
8        under Section 1501(a)(27) from being included in the
9        unitary business group because he or she is ordinarily
10        required to apportion business income under different
11        subsections of Section 304, but not to exceed the
12        addition modification required to be made for the same
13        taxable year under Section 203(a)(2)(D-17) for
14        interest paid, accrued, or incurred, directly or
15        indirectly, to the same person. This subparagraph (DD)
16        is exempt from the provisions of Section 250;
17            (EE) An amount equal to the income from intangible
18        property taken into account for the taxable year (net
19        of the deductions allocable thereto) with respect to
20        transactions with (i) a foreign person who would be a
21        member of the taxpayer's unitary business group but for
22        the fact that the foreign person's business activity
23        outside the United States is 80% or more of that
24        person's total business activity and (ii) for taxable
25        years ending on or after December 31, 2008, to a person
26        who would be a member of the same unitary business

 

 

SB1655- 28 -LRB101 08952 HLH 54042 b

1        group but for the fact that the person is prohibited
2        under Section 1501(a)(27) from being included in the
3        unitary business group because he or she is ordinarily
4        required to apportion business income under different
5        subsections of Section 304, but not to exceed the
6        addition modification required to be made for the same
7        taxable year under Section 203(a)(2)(D-18) for
8        intangible expenses and costs paid, accrued, or
9        incurred, directly or indirectly, to the same foreign
10        person. This subparagraph (EE) is exempt from the
11        provisions of Section 250;
12            (FF) An amount equal to any amount awarded to the
13        taxpayer during the taxable year by the Court of Claims
14        under subsection (c) of Section 8 of the Court of
15        Claims Act for time unjustly served in a State prison.
16        This subparagraph (FF) is exempt from the provisions of
17        Section 250;
18            (GG) For taxable years ending on or after December
19        31, 2011, in the case of a taxpayer who was required to
20        add back any insurance premiums under Section
21        203(a)(2)(D-19), such taxpayer may elect to subtract
22        that part of a reimbursement received from the
23        insurance company equal to the amount of the expense or
24        loss (including expenses incurred by the insurance
25        company) that would have been taken into account as a
26        deduction for federal income tax purposes if the

 

 

SB1655- 29 -LRB101 08952 HLH 54042 b

1        expense or loss had been uninsured. If a taxpayer makes
2        the election provided for by this subparagraph (GG),
3        the insurer to which the premiums were paid must add
4        back to income the amount subtracted by the taxpayer
5        pursuant to this subparagraph (GG). This subparagraph
6        (GG) is exempt from the provisions of Section 250; and
7            (HH) For taxable years beginning on or after
8        January 1, 2018 and prior to January 1, 2023, a maximum
9        of $10,000 contributed in the taxable year to a
10        qualified ABLE account under Section 16.6 of the State
11        Treasurer Act, except that amounts excluded from gross
12        income under Section 529(c)(3)(C)(i) or Section
13        529A(c)(1)(C) of the Internal Revenue Code shall not be
14        considered moneys contributed under this subparagraph
15        (HH). For purposes of this subparagraph (HH),
16        contributions made by an employer on behalf of an
17        employee, or matching contributions made by an
18        employee, shall be treated as made by the employee; and
19        .
20            (II) For taxable years beginning on or after
21        January 1, 2020, an amount of up to $50,000 per tax
22        year contributed to a small business asset purchase
23        account during the tax year, plus all interest earned
24        on such accounts during the tax year; a "small business
25        asset purchase account" means an account established
26        by a taxpayer, the proceeds of which are used to

 

 

SB1655- 30 -LRB101 08952 HLH 54042 b

1        purchase property used primarily in Illinois for which
2        a federal income tax deduction is claimed under Section
3        179 of the Internal Revenue Code.
 
4    (b) Corporations.
5        (1) In general. In the case of a corporation, base
6    income means an amount equal to the taxpayer's taxable
7    income for the taxable year as modified by paragraph (2).
8        (2) Modifications. The taxable income referred to in
9    paragraph (1) shall be modified by adding thereto the sum
10    of the following amounts:
11            (A) An amount equal to all amounts paid or accrued
12        to the taxpayer as interest and all distributions
13        received from regulated investment companies during
14        the taxable year to the extent excluded from gross
15        income in the computation of taxable income;
16            (B) An amount equal to the amount of tax imposed by
17        this Act to the extent deducted from gross income in
18        the computation of taxable income for the taxable year;
19            (C) In the case of a regulated investment company,
20        an amount equal to the excess of (i) the net long-term
21        capital gain for the taxable year, over (ii) the amount
22        of the capital gain dividends designated as such in
23        accordance with Section 852(b)(3)(C) of the Internal
24        Revenue Code and any amount designated under Section
25        852(b)(3)(D) of the Internal Revenue Code,

 

 

SB1655- 31 -LRB101 08952 HLH 54042 b

1        attributable to the taxable year (this amendatory Act
2        of 1995 (Public Act 89-89) is declarative of existing
3        law and is not a new enactment);
4            (D) The amount of any net operating loss deduction
5        taken in arriving at taxable income, other than a net
6        operating loss carried forward from a taxable year
7        ending prior to December 31, 1986;
8            (E) For taxable years in which a net operating loss
9        carryback or carryforward from a taxable year ending
10        prior to December 31, 1986 is an element of taxable
11        income under paragraph (1) of subsection (e) or
12        subparagraph (E) of paragraph (2) of subsection (e),
13        the amount by which addition modifications other than
14        those provided by this subparagraph (E) exceeded
15        subtraction modifications in such earlier taxable
16        year, with the following limitations applied in the
17        order that they are listed:
18                (i) the addition modification relating to the
19            net operating loss carried back or forward to the
20            taxable year from any taxable year ending prior to
21            December 31, 1986 shall be reduced by the amount of
22            addition modification under this subparagraph (E)
23            which related to that net operating loss and which
24            was taken into account in calculating the base
25            income of an earlier taxable year, and
26                (ii) the addition modification relating to the

 

 

SB1655- 32 -LRB101 08952 HLH 54042 b

1            net operating loss carried back or forward to the
2            taxable year from any taxable year ending prior to
3            December 31, 1986 shall not exceed the amount of
4            such carryback or carryforward;
5            For taxable years in which there is a net operating
6        loss carryback or carryforward from more than one other
7        taxable year ending prior to December 31, 1986, the
8        addition modification provided in this subparagraph
9        (E) shall be the sum of the amounts computed
10        independently under the preceding provisions of this
11        subparagraph (E) for each such taxable year;
12            (E-5) For taxable years ending after December 31,
13        1997, an amount equal to any eligible remediation costs
14        that the corporation deducted in computing adjusted
15        gross income and for which the corporation claims a
16        credit under subsection (l) of Section 201;
17            (E-10) For taxable years 2001 and thereafter, an
18        amount equal to the bonus depreciation deduction taken
19        on the taxpayer's federal income tax return for the
20        taxable year under subsection (k) of Section 168 of the
21        Internal Revenue Code;
22            (E-11) If the taxpayer sells, transfers, abandons,
23        or otherwise disposes of property for which the
24        taxpayer was required in any taxable year to make an
25        addition modification under subparagraph (E-10), then
26        an amount equal to the aggregate amount of the

 

 

SB1655- 33 -LRB101 08952 HLH 54042 b

1        deductions taken in all taxable years under
2        subparagraph (T) with respect to that property.
3            If the taxpayer continues to own property through
4        the last day of the last tax year for which the
5        taxpayer may claim a depreciation deduction for
6        federal income tax purposes and for which the taxpayer
7        was allowed in any taxable year to make a subtraction
8        modification under subparagraph (T), then an amount
9        equal to that subtraction modification.
10            The taxpayer is required to make the addition
11        modification under this subparagraph only once with
12        respect to any one piece of property;
13            (E-12) An amount equal to the amount otherwise
14        allowed as a deduction in computing base income for
15        interest paid, accrued, or incurred, directly or
16        indirectly, (i) for taxable years ending on or after
17        December 31, 2004, to a foreign person who would be a
18        member of the same unitary business group but for the
19        fact the foreign person's business activity outside
20        the United States is 80% or more of the foreign
21        person's total business activity and (ii) for taxable
22        years ending on or after December 31, 2008, to a person
23        who would be a member of the same unitary business
24        group but for the fact that the person is prohibited
25        under Section 1501(a)(27) from being included in the
26        unitary business group because he or she is ordinarily

 

 

SB1655- 34 -LRB101 08952 HLH 54042 b

1        required to apportion business income under different
2        subsections of Section 304. The addition modification
3        required by this subparagraph shall be reduced to the
4        extent that dividends were included in base income of
5        the unitary group for the same taxable year and
6        received by the taxpayer or by a member of the
7        taxpayer's unitary business group (including amounts
8        included in gross income pursuant to Sections 951
9        through 964 of the Internal Revenue Code and amounts
10        included in gross income under Section 78 of the
11        Internal Revenue Code) with respect to the stock of the
12        same person to whom the interest was paid, accrued, or
13        incurred.
14            This paragraph shall not apply to the following:
15                (i) an item of interest paid, accrued, or
16            incurred, directly or indirectly, to a person who
17            is subject in a foreign country or state, other
18            than a state which requires mandatory unitary
19            reporting, to a tax on or measured by net income
20            with respect to such interest; or
21                (ii) an item of interest paid, accrued, or
22            incurred, directly or indirectly, to a person if
23            the taxpayer can establish, based on a
24            preponderance of the evidence, both of the
25            following:
26                    (a) the person, during the same taxable

 

 

SB1655- 35 -LRB101 08952 HLH 54042 b

1                year, paid, accrued, or incurred, the interest
2                to a person that is not a related member, and
3                    (b) the transaction giving rise to the
4                interest expense between the taxpayer and the
5                person did not have as a principal purpose the
6                avoidance of Illinois income tax, and is paid
7                pursuant to a contract or agreement that
8                reflects an arm's-length interest rate and
9                terms; or
10                (iii) the taxpayer can establish, based on
11            clear and convincing evidence, that the interest
12            paid, accrued, or incurred relates to a contract or
13            agreement entered into at arm's-length rates and
14            terms and the principal purpose for the payment is
15            not federal or Illinois tax avoidance; or
16                (iv) an item of interest paid, accrued, or
17            incurred, directly or indirectly, to a person if
18            the taxpayer establishes by clear and convincing
19            evidence that the adjustments are unreasonable; or
20            if the taxpayer and the Director agree in writing
21            to the application or use of an alternative method
22            of apportionment under Section 304(f).
23                Nothing in this subsection shall preclude the
24            Director from making any other adjustment
25            otherwise allowed under Section 404 of this Act for
26            any tax year beginning after the effective date of

 

 

SB1655- 36 -LRB101 08952 HLH 54042 b

1            this amendment provided such adjustment is made
2            pursuant to regulation adopted by the Department
3            and such regulations provide methods and standards
4            by which the Department will utilize its authority
5            under Section 404 of this Act;
6            (E-13) An amount equal to the amount of intangible
7        expenses and costs otherwise allowed as a deduction in
8        computing base income, and that were paid, accrued, or
9        incurred, directly or indirectly, (i) for taxable
10        years ending on or after December 31, 2004, to a
11        foreign person who would be a member of the same
12        unitary business group but for the fact that the
13        foreign person's business activity outside the United
14        States is 80% or more of that person's total business
15        activity and (ii) for taxable years ending on or after
16        December 31, 2008, to a person who would be a member of
17        the same unitary business group but for the fact that
18        the person is prohibited under Section 1501(a)(27)
19        from being included in the unitary business group
20        because he or she is ordinarily required to apportion
21        business income under different subsections of Section
22        304. The addition modification required by this
23        subparagraph shall be reduced to the extent that
24        dividends were included in base income of the unitary
25        group for the same taxable year and received by the
26        taxpayer or by a member of the taxpayer's unitary

 

 

SB1655- 37 -LRB101 08952 HLH 54042 b

1        business group (including amounts included in gross
2        income pursuant to Sections 951 through 964 of the
3        Internal Revenue Code and amounts included in gross
4        income under Section 78 of the Internal Revenue Code)
5        with respect to the stock of the same person to whom
6        the intangible expenses and costs were directly or
7        indirectly paid, incurred, or accrued. The preceding
8        sentence shall not apply to the extent that the same
9        dividends caused a reduction to the addition
10        modification required under Section 203(b)(2)(E-12) of
11        this Act. As used in this subparagraph, the term
12        "intangible expenses and costs" includes (1) expenses,
13        losses, and costs for, or related to, the direct or
14        indirect acquisition, use, maintenance or management,
15        ownership, sale, exchange, or any other disposition of
16        intangible property; (2) losses incurred, directly or
17        indirectly, from factoring transactions or discounting
18        transactions; (3) royalty, patent, technical, and
19        copyright fees; (4) licensing fees; and (5) other
20        similar expenses and costs. For purposes of this
21        subparagraph, "intangible property" includes patents,
22        patent applications, trade names, trademarks, service
23        marks, copyrights, mask works, trade secrets, and
24        similar types of intangible assets.
25            This paragraph shall not apply to the following:
26                (i) any item of intangible expenses or costs

 

 

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1            paid, accrued, or incurred, directly or
2            indirectly, from a transaction with a person who is
3            subject in a foreign country or state, other than a
4            state which requires mandatory unitary reporting,
5            to a tax on or measured by net income with respect
6            to such item; or
7                (ii) any item of intangible expense or cost
8            paid, accrued, or incurred, directly or
9            indirectly, if the taxpayer can establish, based
10            on a preponderance of the evidence, both of the
11            following:
12                    (a) the person during the same taxable
13                year paid, accrued, or incurred, the
14                intangible expense or cost to a person that is
15                not a related member, and
16                    (b) the transaction giving rise to the
17                intangible expense or cost between the
18                taxpayer and the person did not have as a
19                principal purpose the avoidance of Illinois
20                income tax, and is paid pursuant to a contract
21                or agreement that reflects arm's-length terms;
22                or
23                (iii) any item of intangible expense or cost
24            paid, accrued, or incurred, directly or
25            indirectly, from a transaction with a person if the
26            taxpayer establishes by clear and convincing

 

 

SB1655- 39 -LRB101 08952 HLH 54042 b

1            evidence, that the adjustments are unreasonable;
2            or if the taxpayer and the Director agree in
3            writing to the application or use of an alternative
4            method of apportionment under Section 304(f);
5                Nothing in this subsection shall preclude the
6            Director from making any other adjustment
7            otherwise allowed under Section 404 of this Act for
8            any tax year beginning after the effective date of
9            this amendment provided such adjustment is made
10            pursuant to regulation adopted by the Department
11            and such regulations provide methods and standards
12            by which the Department will utilize its authority
13            under Section 404 of this Act;
14            (E-14) For taxable years ending on or after
15        December 31, 2008, an amount equal to the amount of
16        insurance premium expenses and costs otherwise allowed
17        as a deduction in computing base income, and that were
18        paid, accrued, or incurred, directly or indirectly, to
19        a person who would be a member of the same unitary
20        business group but for the fact that the person is
21        prohibited under Section 1501(a)(27) from being
22        included in the unitary business group because he or
23        she is ordinarily required to apportion business
24        income under different subsections of Section 304. The
25        addition modification required by this subparagraph
26        shall be reduced to the extent that dividends were

 

 

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1        included in base income of the unitary group for the
2        same taxable year and received by the taxpayer or by a
3        member of the taxpayer's unitary business group
4        (including amounts included in gross income under
5        Sections 951 through 964 of the Internal Revenue Code
6        and amounts included in gross income under Section 78
7        of the Internal Revenue Code) with respect to the stock
8        of the same person to whom the premiums and costs were
9        directly or indirectly paid, incurred, or accrued. The
10        preceding sentence does not apply to the extent that
11        the same dividends caused a reduction to the addition
12        modification required under Section 203(b)(2)(E-12) or
13        Section 203(b)(2)(E-13) of this Act;
14            (E-15) For taxable years beginning after December
15        31, 2008, any deduction for dividends paid by a captive
16        real estate investment trust that is allowed to a real
17        estate investment trust under Section 857(b)(2)(B) of
18        the Internal Revenue Code for dividends paid;
19            (E-16) An amount equal to the credit allowable to
20        the taxpayer under Section 218(a) of this Act,
21        determined without regard to Section 218(c) of this
22        Act;
23            (E-17) For taxable years ending on or after
24        December 31, 2017, an amount equal to the deduction
25        allowed under Section 199 of the Internal Revenue Code
26        for the taxable year;

 

 

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1            (E-18) An amount withdrawn from a small business
2        asset purchase account that is not used for purchases
3        of property for which a deduction under Section 179 of
4        the Internal Revenue Code is claimed for the tax year
5        in which the amount is withdrawn and which property is
6        used predominately in Illinois; such amounts are
7        subject to the 10% penalty for ineligible use under
8        Section 3-3.5 of the Uniform Penalty and Interest Act;
9    and by deducting from the total so obtained the sum of the
10    following amounts:
11            (F) An amount equal to the amount of any tax
12        imposed by this Act which was refunded to the taxpayer
13        and included in such total for the taxable year;
14            (G) An amount equal to any amount included in such
15        total under Section 78 of the Internal Revenue Code;
16            (H) In the case of a regulated investment company,
17        an amount equal to the amount of exempt interest
18        dividends as defined in subsection (b)(5) of Section
19        852 of the Internal Revenue Code, paid to shareholders
20        for the taxable year;
21            (I) With the exception of any amounts subtracted
22        under subparagraph (J), an amount equal to the sum of
23        all amounts disallowed as deductions by (i) Sections
24        171(a)(2), and 265(a)(2) and amounts disallowed as
25        interest expense by Section 291(a)(3) of the Internal
26        Revenue Code, and all amounts of expenses allocable to

 

 

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1        interest and disallowed as deductions by Section
2        265(a)(1) of the Internal Revenue Code; and (ii) for
3        taxable years ending on or after August 13, 1999,
4        Sections 171(a)(2), 265, 280C, 291(a)(3), and
5        832(b)(5)(B)(i) of the Internal Revenue Code, plus,
6        for tax years ending on or after December 31, 2011,
7        amounts disallowed as deductions by Section 45G(e)(3)
8        of the Internal Revenue Code and, for taxable years
9        ending on or after December 31, 2008, any amount
10        included in gross income under Section 87 of the
11        Internal Revenue Code and the policyholders' share of
12        tax-exempt interest of a life insurance company under
13        Section 807(a)(2)(B) of the Internal Revenue Code (in
14        the case of a life insurance company with gross income
15        from a decrease in reserves for the tax year) or
16        Section 807(b)(1)(B) of the Internal Revenue Code (in
17        the case of a life insurance company allowed a
18        deduction for an increase in reserves for the tax
19        year); the provisions of this subparagraph are exempt
20        from the provisions of Section 250;
21            (J) An amount equal to all amounts included in such
22        total which are exempt from taxation by this State
23        either by reason of its statutes or Constitution or by
24        reason of the Constitution, treaties or statutes of the
25        United States; provided that, in the case of any
26        statute of this State that exempts income derived from

 

 

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1        bonds or other obligations from the tax imposed under
2        this Act, the amount exempted shall be the interest net
3        of bond premium amortization;
4            (K) An amount equal to those dividends included in
5        such total which were paid by a corporation which
6        conducts business operations in a River Edge
7        Redevelopment Zone or zones created under the River
8        Edge Redevelopment Zone Act and conducts substantially
9        all of its operations in a River Edge Redevelopment
10        Zone or zones. This subparagraph (K) is exempt from the
11        provisions of Section 250;
12            (L) An amount equal to those dividends included in
13        such total that were paid by a corporation that
14        conducts business operations in a federally designated
15        Foreign Trade Zone or Sub-Zone and that is designated a
16        High Impact Business located in Illinois; provided
17        that dividends eligible for the deduction provided in
18        subparagraph (K) of paragraph 2 of this subsection
19        shall not be eligible for the deduction provided under
20        this subparagraph (L);
21            (M) For any taxpayer that is a financial
22        organization within the meaning of Section 304(c) of
23        this Act, an amount included in such total as interest
24        income from a loan or loans made by such taxpayer to a
25        borrower, to the extent that such a loan is secured by
26        property which is eligible for the River Edge

 

 

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1        Redevelopment Zone Investment Credit. To determine the
2        portion of a loan or loans that is secured by property
3        eligible for a Section 201(f) investment credit to the
4        borrower, the entire principal amount of the loan or
5        loans between the taxpayer and the borrower should be
6        divided into the basis of the Section 201(f) investment
7        credit property which secures the loan or loans, using
8        for this purpose the original basis of such property on
9        the date that it was placed in service in the River
10        Edge Redevelopment Zone. The subtraction modification
11        available to the taxpayer in any year under this
12        subsection shall be that portion of the total interest
13        paid by the borrower with respect to such loan
14        attributable to the eligible property as calculated
15        under the previous sentence. This subparagraph (M) is
16        exempt from the provisions of Section 250;
17            (M-1) For any taxpayer that is a financial
18        organization within the meaning of Section 304(c) of
19        this Act, an amount included in such total as interest
20        income from a loan or loans made by such taxpayer to a
21        borrower, to the extent that such a loan is secured by
22        property which is eligible for the High Impact Business
23        Investment Credit. To determine the portion of a loan
24        or loans that is secured by property eligible for a
25        Section 201(h) investment credit to the borrower, the
26        entire principal amount of the loan or loans between

 

 

SB1655- 45 -LRB101 08952 HLH 54042 b

1        the taxpayer and the borrower should be divided into
2        the basis of the Section 201(h) investment credit
3        property which secures the loan or loans, using for
4        this purpose the original basis of such property on the
5        date that it was placed in service in a federally
6        designated Foreign Trade Zone or Sub-Zone located in
7        Illinois. No taxpayer that is eligible for the
8        deduction provided in subparagraph (M) of paragraph
9        (2) of this subsection shall be eligible for the
10        deduction provided under this subparagraph (M-1). The
11        subtraction modification available to taxpayers in any
12        year under this subsection shall be that portion of the
13        total interest paid by the borrower with respect to
14        such loan attributable to the eligible property as
15        calculated under the previous sentence;
16            (N) Two times any contribution made during the
17        taxable year to a designated zone organization to the
18        extent that the contribution (i) qualifies as a
19        charitable contribution under subsection (c) of
20        Section 170 of the Internal Revenue Code and (ii) must,
21        by its terms, be used for a project approved by the
22        Department of Commerce and Economic Opportunity under
23        Section 11 of the Illinois Enterprise Zone Act or under
24        Section 10-10 of the River Edge Redevelopment Zone Act.
25        This subparagraph (N) is exempt from the provisions of
26        Section 250;

 

 

SB1655- 46 -LRB101 08952 HLH 54042 b

1            (O) An amount equal to: (i) 85% for taxable years
2        ending on or before December 31, 1992, or, a percentage
3        equal to the percentage allowable under Section
4        243(a)(1) of the Internal Revenue Code of 1986 for
5        taxable years ending after December 31, 1992, of the
6        amount by which dividends included in taxable income
7        and received from a corporation that is not created or
8        organized under the laws of the United States or any
9        state or political subdivision thereof, including, for
10        taxable years ending on or after December 31, 1988,
11        dividends received or deemed received or paid or deemed
12        paid under Sections 951 through 965 of the Internal
13        Revenue Code, exceed the amount of the modification
14        provided under subparagraph (G) of paragraph (2) of
15        this subsection (b) which is related to such dividends,
16        and including, for taxable years ending on or after
17        December 31, 2008, dividends received from a captive
18        real estate investment trust; plus (ii) 100% of the
19        amount by which dividends, included in taxable income
20        and received, including, for taxable years ending on or
21        after December 31, 1988, dividends received or deemed
22        received or paid or deemed paid under Sections 951
23        through 964 of the Internal Revenue Code and including,
24        for taxable years ending on or after December 31, 2008,
25        dividends received from a captive real estate
26        investment trust, from any such corporation specified

 

 

SB1655- 47 -LRB101 08952 HLH 54042 b

1        in clause (i) that would but for the provisions of
2        Section 1504(b)(3) of the Internal Revenue Code be
3        treated as a member of the affiliated group which
4        includes the dividend recipient, exceed the amount of
5        the modification provided under subparagraph (G) of
6        paragraph (2) of this subsection (b) which is related
7        to such dividends. This subparagraph (O) is exempt from
8        the provisions of Section 250 of this Act;
9            (P) An amount equal to any contribution made to a
10        job training project established pursuant to the Tax
11        Increment Allocation Redevelopment Act;
12            (Q) An amount equal to the amount of the deduction
13        used to compute the federal income tax credit for
14        restoration of substantial amounts held under claim of
15        right for the taxable year pursuant to Section 1341 of
16        the Internal Revenue Code;
17            (R) On and after July 20, 1999, in the case of an
18        attorney-in-fact with respect to whom an interinsurer
19        or a reciprocal insurer has made the election under
20        Section 835 of the Internal Revenue Code, 26 U.S.C.
21        835, an amount equal to the excess, if any, of the
22        amounts paid or incurred by that interinsurer or
23        reciprocal insurer in the taxable year to the
24        attorney-in-fact over the deduction allowed to that
25        interinsurer or reciprocal insurer with respect to the
26        attorney-in-fact under Section 835(b) of the Internal

 

 

SB1655- 48 -LRB101 08952 HLH 54042 b

1        Revenue Code for the taxable year; the provisions of
2        this subparagraph are exempt from the provisions of
3        Section 250;
4            (S) For taxable years ending on or after December
5        31, 1997, in the case of a Subchapter S corporation, an
6        amount equal to all amounts of income allocable to a
7        shareholder subject to the Personal Property Tax
8        Replacement Income Tax imposed by subsections (c) and
9        (d) of Section 201 of this Act, including amounts
10        allocable to organizations exempt from federal income
11        tax by reason of Section 501(a) of the Internal Revenue
12        Code. This subparagraph (S) is exempt from the
13        provisions of Section 250;
14            (T) For taxable years 2001 and thereafter, for the
15        taxable year in which the bonus depreciation deduction
16        is taken on the taxpayer's federal income tax return
17        under subsection (k) of Section 168 of the Internal
18        Revenue Code and for each applicable taxable year
19        thereafter, an amount equal to "x", where:
20                (1) "y" equals the amount of the depreciation
21            deduction taken for the taxable year on the
22            taxpayer's federal income tax return on property
23            for which the bonus depreciation deduction was
24            taken in any year under subsection (k) of Section
25            168 of the Internal Revenue Code, but not including
26            the bonus depreciation deduction;

 

 

SB1655- 49 -LRB101 08952 HLH 54042 b

1                (2) for taxable years ending on or before
2            December 31, 2005, "x" equals "y" multiplied by 30
3            and then divided by 70 (or "y" multiplied by
4            0.429); and
5                (3) for taxable years ending after December
6            31, 2005:
7                    (i) for property on which a bonus
8                depreciation deduction of 30% of the adjusted
9                basis was taken, "x" equals "y" multiplied by
10                30 and then divided by 70 (or "y" multiplied by
11                0.429); and
12                    (ii) for property on which a bonus
13                depreciation deduction of 50% of the adjusted
14                basis was taken, "x" equals "y" multiplied by
15                1.0.
16            The aggregate amount deducted under this
17        subparagraph in all taxable years for any one piece of
18        property may not exceed the amount of the bonus
19        depreciation deduction taken on that property on the
20        taxpayer's federal income tax return under subsection
21        (k) of Section 168 of the Internal Revenue Code. This
22        subparagraph (T) is exempt from the provisions of
23        Section 250;
24            (U) If the taxpayer sells, transfers, abandons, or
25        otherwise disposes of property for which the taxpayer
26        was required in any taxable year to make an addition

 

 

SB1655- 50 -LRB101 08952 HLH 54042 b

1        modification under subparagraph (E-10), then an amount
2        equal to that addition modification.
3            If the taxpayer continues to own property through
4        the last day of the last tax year for which the
5        taxpayer may claim a depreciation deduction for
6        federal income tax purposes and for which the taxpayer
7        was required in any taxable year to make an addition
8        modification under subparagraph (E-10), then an amount
9        equal to that addition modification.
10            The taxpayer is allowed to take the deduction under
11        this subparagraph only once with respect to any one
12        piece of property.
13            This subparagraph (U) is exempt from the
14        provisions of Section 250;
15            (V) The amount of: (i) any interest income (net of
16        the deductions allocable thereto) taken into account
17        for the taxable year with respect to a transaction with
18        a taxpayer that is required to make an addition
19        modification with respect to such transaction under
20        Section 203(a)(2)(D-17), 203(b)(2)(E-12),
21        203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
22        the amount of such addition modification, (ii) any
23        income from intangible property (net of the deductions
24        allocable thereto) taken into account for the taxable
25        year with respect to a transaction with a taxpayer that
26        is required to make an addition modification with

 

 

SB1655- 51 -LRB101 08952 HLH 54042 b

1        respect to such transaction under Section
2        203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
3        203(d)(2)(D-8), but not to exceed the amount of such
4        addition modification, and (iii) any insurance premium
5        income (net of deductions allocable thereto) taken
6        into account for the taxable year with respect to a
7        transaction with a taxpayer that is required to make an
8        addition modification with respect to such transaction
9        under Section 203(a)(2)(D-19), Section
10        203(b)(2)(E-14), Section 203(c)(2)(G-14), or Section
11        203(d)(2)(D-9), but not to exceed the amount of that
12        addition modification. This subparagraph (V) is exempt
13        from the provisions of Section 250;
14            (W) An amount equal to the interest income taken
15        into account for the taxable year (net of the
16        deductions allocable thereto) with respect to
17        transactions with (i) a foreign person who would be a
18        member of the taxpayer's unitary business group but for
19        the fact that the foreign person's business activity
20        outside the United States is 80% or more of that
21        person's total business activity and (ii) for taxable
22        years ending on or after December 31, 2008, to a person
23        who would be a member of the same unitary business
24        group but for the fact that the person is prohibited
25        under Section 1501(a)(27) from being included in the
26        unitary business group because he or she is ordinarily

 

 

SB1655- 52 -LRB101 08952 HLH 54042 b

1        required to apportion business income under different
2        subsections of Section 304, but not to exceed the
3        addition modification required to be made for the same
4        taxable year under Section 203(b)(2)(E-12) for
5        interest paid, accrued, or incurred, directly or
6        indirectly, to the same person. This subparagraph (W)
7        is exempt from the provisions of Section 250;
8            (X) An amount equal to the income from intangible
9        property taken into account for the taxable year (net
10        of the deductions allocable thereto) with respect to
11        transactions with (i) a foreign person who would be a
12        member of the taxpayer's unitary business group but for
13        the fact that the foreign person's business activity
14        outside the United States is 80% or more of that
15        person's total business activity and (ii) for taxable
16        years ending on or after December 31, 2008, to a person
17        who would be a member of the same unitary business
18        group but for the fact that the person is prohibited
19        under Section 1501(a)(27) from being included in the
20        unitary business group because he or she is ordinarily
21        required to apportion business income under different
22        subsections of Section 304, but not to exceed the
23        addition modification required to be made for the same
24        taxable year under Section 203(b)(2)(E-13) for
25        intangible expenses and costs paid, accrued, or
26        incurred, directly or indirectly, to the same foreign

 

 

SB1655- 53 -LRB101 08952 HLH 54042 b

1        person. This subparagraph (X) is exempt from the
2        provisions of Section 250;
3            (Y) For taxable years ending on or after December
4        31, 2011, in the case of a taxpayer who was required to
5        add back any insurance premiums under Section
6        203(b)(2)(E-14), such taxpayer may elect to subtract
7        that part of a reimbursement received from the
8        insurance company equal to the amount of the expense or
9        loss (including expenses incurred by the insurance
10        company) that would have been taken into account as a
11        deduction for federal income tax purposes if the
12        expense or loss had been uninsured. If a taxpayer makes
13        the election provided for by this subparagraph (Y), the
14        insurer to which the premiums were paid must add back
15        to income the amount subtracted by the taxpayer
16        pursuant to this subparagraph (Y). This subparagraph
17        (Y) is exempt from the provisions of Section 250; and
18            (Z) The difference between the nondeductible
19        controlled foreign corporation dividends under Section
20        965(e)(3) of the Internal Revenue Code over the taxable
21        income of the taxpayer, computed without regard to
22        Section 965(e)(2)(A) of the Internal Revenue Code, and
23        without regard to any net operating loss deduction.
24        This subparagraph (Z) is exempt from the provisions of
25        Section 250.
26            (AA) For taxable years beginning on or after

 

 

SB1655- 54 -LRB101 08952 HLH 54042 b

1        January 1, 2020, an amount of up to $50,000 per tax
2        year contributed to a small business asset purchase
3        account during the tax year, plus all interest earned
4        on such accounts during the tax year; a "small business
5        asset purchase account" means an account established
6        by a taxpayer, the proceeds of which are used to
7        purchase property used primarily in Illinois for which
8        a federal income tax deduction is claimed under Section
9        179 of the Internal Revenue Code.
10        (3) Special rule. For purposes of paragraph (2)(A),
11    "gross income" in the case of a life insurance company, for
12    tax years ending on and after December 31, 1994, and prior
13    to December 31, 2011, shall mean the gross investment
14    income for the taxable year and, for tax years ending on or
15    after December 31, 2011, shall mean all amounts included in
16    life insurance gross income under Section 803(a)(3) of the
17    Internal Revenue Code.
 
18    (c) Trusts and estates.
19        (1) In general. In the case of a trust or estate, base
20    income means an amount equal to the taxpayer's taxable
21    income for the taxable year as modified by paragraph (2).
22        (2) Modifications. Subject to the provisions of
23    paragraph (3), the taxable income referred to in paragraph
24    (1) shall be modified by adding thereto the sum of the
25    following amounts:

 

 

SB1655- 55 -LRB101 08952 HLH 54042 b

1            (A) An amount equal to all amounts paid or accrued
2        to the taxpayer as interest or dividends during the
3        taxable year to the extent excluded from gross income
4        in the computation of taxable income;
5            (B) In the case of (i) an estate, $600; (ii) a
6        trust which, under its governing instrument, is
7        required to distribute all of its income currently,
8        $300; and (iii) any other trust, $100, but in each such
9        case, only to the extent such amount was deducted in
10        the computation of taxable income;
11            (C) An amount equal to the amount of tax imposed by
12        this Act to the extent deducted from gross income in
13        the computation of taxable income for the taxable year;
14            (D) The amount of any net operating loss deduction
15        taken in arriving at taxable income, other than a net
16        operating loss carried forward from a taxable year
17        ending prior to December 31, 1986;
18            (E) For taxable years in which a net operating loss
19        carryback or carryforward from a taxable year ending
20        prior to December 31, 1986 is an element of taxable
21        income under paragraph (1) of subsection (e) or
22        subparagraph (E) of paragraph (2) of subsection (e),
23        the amount by which addition modifications other than
24        those provided by this subparagraph (E) exceeded
25        subtraction modifications in such taxable year, with
26        the following limitations applied in the order that

 

 

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1        they are listed:
2                (i) the addition modification relating to the
3            net operating loss carried back or forward to the
4            taxable year from any taxable year ending prior to
5            December 31, 1986 shall be reduced by the amount of
6            addition modification under this subparagraph (E)
7            which related to that net operating loss and which
8            was taken into account in calculating the base
9            income of an earlier taxable year, and
10                (ii) the addition modification relating to the
11            net operating loss carried back or forward to the
12            taxable year from any taxable year ending prior to
13            December 31, 1986 shall not exceed the amount of
14            such carryback or carryforward;
15            For taxable years in which there is a net operating
16        loss carryback or carryforward from more than one other
17        taxable year ending prior to December 31, 1986, the
18        addition modification provided in this subparagraph
19        (E) shall be the sum of the amounts computed
20        independently under the preceding provisions of this
21        subparagraph (E) for each such taxable year;
22            (F) For taxable years ending on or after January 1,
23        1989, an amount equal to the tax deducted pursuant to
24        Section 164 of the Internal Revenue Code if the trust
25        or estate is claiming the same tax for purposes of the
26        Illinois foreign tax credit under Section 601 of this

 

 

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1        Act;
2            (G) An amount equal to the amount of the capital
3        gain deduction allowable under the Internal Revenue
4        Code, to the extent deducted from gross income in the
5        computation of taxable income;
6            (G-5) For taxable years ending after December 31,
7        1997, an amount equal to any eligible remediation costs
8        that the trust or estate deducted in computing adjusted
9        gross income and for which the trust or estate claims a
10        credit under subsection (l) of Section 201;
11            (G-10) For taxable years 2001 and thereafter, an
12        amount equal to the bonus depreciation deduction taken
13        on the taxpayer's federal income tax return for the
14        taxable year under subsection (k) of Section 168 of the
15        Internal Revenue Code; and
16            (G-11) If the taxpayer sells, transfers, abandons,
17        or otherwise disposes of property for which the
18        taxpayer was required in any taxable year to make an
19        addition modification under subparagraph (G-10), then
20        an amount equal to the aggregate amount of the
21        deductions taken in all taxable years under
22        subparagraph (R) with respect to that property.
23            If the taxpayer continues to own property through
24        the last day of the last tax year for which the
25        taxpayer may claim a depreciation deduction for
26        federal income tax purposes and for which the taxpayer

 

 

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1        was allowed in any taxable year to make a subtraction
2        modification under subparagraph (R), then an amount
3        equal to that subtraction modification.
4            The taxpayer is required to make the addition
5        modification under this subparagraph only once with
6        respect to any one piece of property;
7            (G-12) An amount equal to the amount otherwise
8        allowed as a deduction in computing base income for
9        interest paid, accrued, or incurred, directly or
10        indirectly, (i) for taxable years ending on or after
11        December 31, 2004, to a foreign person who would be a
12        member of the same unitary business group but for the
13        fact that the foreign person's business activity
14        outside the United States is 80% or more of the foreign
15        person's total business activity and (ii) for taxable
16        years ending on or after December 31, 2008, to a person
17        who would be a member of the same unitary business
18        group but for the fact that the person is prohibited
19        under Section 1501(a)(27) from being included in the
20        unitary business group because he or she is ordinarily
21        required to apportion business income under different
22        subsections of Section 304. The addition modification
23        required by this subparagraph shall be reduced to the
24        extent that dividends were included in base income of
25        the unitary group for the same taxable year and
26        received by the taxpayer or by a member of the

 

 

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1        taxpayer's unitary business group (including amounts
2        included in gross income pursuant to Sections 951
3        through 964 of the Internal Revenue Code and amounts
4        included in gross income under Section 78 of the
5        Internal Revenue Code) with respect to the stock of the
6        same person to whom the interest was paid, accrued, or
7        incurred.
8            This paragraph shall not apply to the following:
9                (i) an item of interest paid, accrued, or
10            incurred, directly or indirectly, to a person who
11            is subject in a foreign country or state, other
12            than a state which requires mandatory unitary
13            reporting, to a tax on or measured by net income
14            with respect to such interest; or
15                (ii) an item of interest paid, accrued, or
16            incurred, directly or indirectly, to a person if
17            the taxpayer can establish, based on a
18            preponderance of the evidence, both of the
19            following:
20                    (a) the person, during the same taxable
21                year, paid, accrued, or incurred, the interest
22                to a person that is not a related member, and
23                    (b) the transaction giving rise to the
24                interest expense between the taxpayer and the
25                person did not have as a principal purpose the
26                avoidance of Illinois income tax, and is paid

 

 

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1                pursuant to a contract or agreement that
2                reflects an arm's-length interest rate and
3                terms; or
4                (iii) the taxpayer can establish, based on
5            clear and convincing evidence, that the interest
6            paid, accrued, or incurred relates to a contract or
7            agreement entered into at arm's-length rates and
8            terms and the principal purpose for the payment is
9            not federal or Illinois tax avoidance; or
10                (iv) an item of interest paid, accrued, or
11            incurred, directly or indirectly, to a person if
12            the taxpayer establishes by clear and convincing
13            evidence that the adjustments are unreasonable; or
14            if the taxpayer and the Director agree in writing
15            to the application or use of an alternative method
16            of apportionment under Section 304(f).
17                Nothing in this subsection shall preclude the
18            Director from making any other adjustment
19            otherwise allowed under Section 404 of this Act for
20            any tax year beginning after the effective date of
21            this amendment provided such adjustment is made
22            pursuant to regulation adopted by the Department
23            and such regulations provide methods and standards
24            by which the Department will utilize its authority
25            under Section 404 of this Act;
26            (G-13) An amount equal to the amount of intangible

 

 

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1        expenses and costs otherwise allowed as a deduction in
2        computing base income, and that were paid, accrued, or
3        incurred, directly or indirectly, (i) for taxable
4        years ending on or after December 31, 2004, to a
5        foreign person who would be a member of the same
6        unitary business group but for the fact that the
7        foreign person's business activity outside the United
8        States is 80% or more of that person's total business
9        activity and (ii) for taxable years ending on or after
10        December 31, 2008, to a person who would be a member of
11        the same unitary business group but for the fact that
12        the person is prohibited under Section 1501(a)(27)
13        from being included in the unitary business group
14        because he or she is ordinarily required to apportion
15        business income under different subsections of Section
16        304. The addition modification required by this
17        subparagraph shall be reduced to the extent that
18        dividends were included in base income of the unitary
19        group for the same taxable year and received by the
20        taxpayer or by a member of the taxpayer's unitary
21        business group (including amounts included in gross
22        income pursuant to Sections 951 through 964 of the
23        Internal Revenue Code and amounts included in gross
24        income under Section 78 of the Internal Revenue Code)
25        with respect to the stock of the same person to whom
26        the intangible expenses and costs were directly or

 

 

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1        indirectly paid, incurred, or accrued. The preceding
2        sentence shall not apply to the extent that the same
3        dividends caused a reduction to the addition
4        modification required under Section 203(c)(2)(G-12) of
5        this Act. As used in this subparagraph, the term
6        "intangible expenses and costs" includes: (1)
7        expenses, losses, and costs for or related to the
8        direct or indirect acquisition, use, maintenance or
9        management, ownership, sale, exchange, or any other
10        disposition of intangible property; (2) losses
11        incurred, directly or indirectly, from factoring
12        transactions or discounting transactions; (3) royalty,
13        patent, technical, and copyright fees; (4) licensing
14        fees; and (5) other similar expenses and costs. For
15        purposes of this subparagraph, "intangible property"
16        includes patents, patent applications, trade names,
17        trademarks, service marks, copyrights, mask works,
18        trade secrets, and similar types of intangible assets.
19            This paragraph shall not apply to the following:
20                (i) any item of intangible expenses or costs
21            paid, accrued, or incurred, directly or
22            indirectly, from a transaction with a person who is
23            subject in a foreign country or state, other than a
24            state which requires mandatory unitary reporting,
25            to a tax on or measured by net income with respect
26            to such item; or

 

 

SB1655- 63 -LRB101 08952 HLH 54042 b

1                (ii) any item of intangible expense or cost
2            paid, accrued, or incurred, directly or
3            indirectly, if the taxpayer can establish, based
4            on a preponderance of the evidence, both of the
5            following:
6                    (a) the person during the same taxable
7                year paid, accrued, or incurred, the
8                intangible expense or cost to a person that is
9                not a related member, and
10                    (b) the transaction giving rise to the
11                intangible expense or cost between the
12                taxpayer and the person did not have as a
13                principal purpose the avoidance of Illinois
14                income tax, and is paid pursuant to a contract
15                or agreement that reflects arm's-length terms;
16                or
17                (iii) any item of intangible expense or cost
18            paid, accrued, or incurred, directly or
19            indirectly, from a transaction with a person if the
20            taxpayer establishes by clear and convincing
21            evidence, that the adjustments are unreasonable;
22            or if the taxpayer and the Director agree in
23            writing to the application or use of an alternative
24            method of apportionment under Section 304(f);
25                Nothing in this subsection shall preclude the
26            Director from making any other adjustment

 

 

SB1655- 64 -LRB101 08952 HLH 54042 b

1            otherwise allowed under Section 404 of this Act for
2            any tax year beginning after the effective date of
3            this amendment provided such adjustment is made
4            pursuant to regulation adopted by the Department
5            and such regulations provide methods and standards
6            by which the Department will utilize its authority
7            under Section 404 of this Act;
8            (G-14) For taxable years ending on or after
9        December 31, 2008, an amount equal to the amount of
10        insurance premium expenses and costs otherwise allowed
11        as a deduction in computing base income, and that were
12        paid, accrued, or incurred, directly or indirectly, to
13        a person who would be a member of the same unitary
14        business group but for the fact that the person is
15        prohibited under Section 1501(a)(27) from being
16        included in the unitary business group because he or
17        she is ordinarily required to apportion business
18        income under different subsections of Section 304. The
19        addition modification required by this subparagraph
20        shall be reduced to the extent that dividends were
21        included in base income of the unitary group for the
22        same taxable year and received by the taxpayer or by a
23        member of the taxpayer's unitary business group
24        (including amounts included in gross income under
25        Sections 951 through 964 of the Internal Revenue Code
26        and amounts included in gross income under Section 78

 

 

SB1655- 65 -LRB101 08952 HLH 54042 b

1        of the Internal Revenue Code) with respect to the stock
2        of the same person to whom the premiums and costs were
3        directly or indirectly paid, incurred, or accrued. The
4        preceding sentence does not apply to the extent that
5        the same dividends caused a reduction to the addition
6        modification required under Section 203(c)(2)(G-12) or
7        Section 203(c)(2)(G-13) of this Act;
8            (G-15) An amount equal to the credit allowable to
9        the taxpayer under Section 218(a) of this Act,
10        determined without regard to Section 218(c) of this
11        Act;
12            (G-16) For taxable years ending on or after
13        December 31, 2017, an amount equal to the deduction
14        allowed under Section 199 of the Internal Revenue Code
15        for the taxable year;
16            (G-17) An amount withdrawn from a small business
17        asset purchase account that is not used for purchases
18        of property for which a deduction under Section 179 of
19        the Internal Revenue Code is claimed for the tax year
20        in which the amount is withdrawn and which property is
21        used predominately in Illinois; such amounts are
22        subject to the 10% penalty for ineligible use under
23        Section 3-3.5 of the Uniform Penalty and Interest Act;
24    and by deducting from the total so obtained the sum of the
25    following amounts:
26            (H) An amount equal to all amounts included in such

 

 

SB1655- 66 -LRB101 08952 HLH 54042 b

1        total pursuant to the provisions of Sections 402(a),
2        402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
3        Internal Revenue Code or included in such total as
4        distributions under the provisions of any retirement
5        or disability plan for employees of any governmental
6        agency or unit, or retirement payments to retired
7        partners, which payments are excluded in computing net
8        earnings from self employment by Section 1402 of the
9        Internal Revenue Code and regulations adopted pursuant
10        thereto;
11            (I) The valuation limitation amount;
12            (J) An amount equal to the amount of any tax
13        imposed by this Act which was refunded to the taxpayer
14        and included in such total for the taxable year;
15            (K) An amount equal to all amounts included in
16        taxable income as modified by subparagraphs (A), (B),
17        (C), (D), (E), (F) and (G) which are exempt from
18        taxation by this State either by reason of its statutes
19        or Constitution or by reason of the Constitution,
20        treaties or statutes of the United States; provided
21        that, in the case of any statute of this State that
22        exempts income derived from bonds or other obligations
23        from the tax imposed under this Act, the amount
24        exempted shall be the interest net of bond premium
25        amortization;
26            (L) With the exception of any amounts subtracted

 

 

SB1655- 67 -LRB101 08952 HLH 54042 b

1        under subparagraph (K), an amount equal to the sum of
2        all amounts disallowed as deductions by (i) Sections
3        171(a)(2) and 265(a)(2) of the Internal Revenue Code,
4        and all amounts of expenses allocable to interest and
5        disallowed as deductions by Section 265(a)(1) 265(1)
6        of the Internal Revenue Code; and (ii) for taxable
7        years ending on or after August 13, 1999, Sections
8        171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
9        Internal Revenue Code, plus, (iii) for taxable years
10        ending on or after December 31, 2011, Section 45G(e)(3)
11        of the Internal Revenue Code and, for taxable years
12        ending on or after December 31, 2008, any amount
13        included in gross income under Section 87 of the
14        Internal Revenue Code; the provisions of this
15        subparagraph are exempt from the provisions of Section
16        250;
17            (M) An amount equal to those dividends included in
18        such total which were paid by a corporation which
19        conducts business operations in a River Edge
20        Redevelopment Zone or zones created under the River
21        Edge Redevelopment Zone Act and conducts substantially
22        all of its operations in a River Edge Redevelopment
23        Zone or zones. This subparagraph (M) is exempt from the
24        provisions of Section 250;
25            (N) An amount equal to any contribution made to a
26        job training project established pursuant to the Tax

 

 

SB1655- 68 -LRB101 08952 HLH 54042 b

1        Increment Allocation Redevelopment Act;
2            (O) An amount equal to those dividends included in
3        such total that were paid by a corporation that
4        conducts business operations in a federally designated
5        Foreign Trade Zone or Sub-Zone and that is designated a
6        High Impact Business located in Illinois; provided
7        that dividends eligible for the deduction provided in
8        subparagraph (M) of paragraph (2) of this subsection
9        shall not be eligible for the deduction provided under
10        this subparagraph (O);
11            (P) An amount equal to the amount of the deduction
12        used to compute the federal income tax credit for
13        restoration of substantial amounts held under claim of
14        right for the taxable year pursuant to Section 1341 of
15        the Internal Revenue Code;
16            (Q) For taxable year 1999 and thereafter, an amount
17        equal to the amount of any (i) distributions, to the
18        extent includible in gross income for federal income
19        tax purposes, made to the taxpayer because of his or
20        her status as a victim of persecution for racial or
21        religious reasons by Nazi Germany or any other Axis
22        regime or as an heir of the victim and (ii) items of
23        income, to the extent includible in gross income for
24        federal income tax purposes, attributable to, derived
25        from or in any way related to assets stolen from,
26        hidden from, or otherwise lost to a victim of

 

 

SB1655- 69 -LRB101 08952 HLH 54042 b

1        persecution for racial or religious reasons by Nazi
2        Germany or any other Axis regime immediately prior to,
3        during, and immediately after World War II, including,
4        but not limited to, interest on the proceeds receivable
5        as insurance under policies issued to a victim of
6        persecution for racial or religious reasons by Nazi
7        Germany or any other Axis regime by European insurance
8        companies immediately prior to and during World War II;
9        provided, however, this subtraction from federal
10        adjusted gross income does not apply to assets acquired
11        with such assets or with the proceeds from the sale of
12        such assets; provided, further, this paragraph shall
13        only apply to a taxpayer who was the first recipient of
14        such assets after their recovery and who is a victim of
15        persecution for racial or religious reasons by Nazi
16        Germany or any other Axis regime or as an heir of the
17        victim. The amount of and the eligibility for any
18        public assistance, benefit, or similar entitlement is
19        not affected by the inclusion of items (i) and (ii) of
20        this paragraph in gross income for federal income tax
21        purposes. This paragraph is exempt from the provisions
22        of Section 250;
23            (R) For taxable years 2001 and thereafter, for the
24        taxable year in which the bonus depreciation deduction
25        is taken on the taxpayer's federal income tax return
26        under subsection (k) of Section 168 of the Internal

 

 

SB1655- 70 -LRB101 08952 HLH 54042 b

1        Revenue Code and for each applicable taxable year
2        thereafter, an amount equal to "x", where:
3                (1) "y" equals the amount of the depreciation
4            deduction taken for the taxable year on the
5            taxpayer's federal income tax return on property
6            for which the bonus depreciation deduction was
7            taken in any year under subsection (k) of Section
8            168 of the Internal Revenue Code, but not including
9            the bonus depreciation deduction;
10                (2) for taxable years ending on or before
11            December 31, 2005, "x" equals "y" multiplied by 30
12            and then divided by 70 (or "y" multiplied by
13            0.429); and
14                (3) for taxable years ending after December
15            31, 2005:
16                    (i) for property on which a bonus
17                depreciation deduction of 30% of the adjusted
18                basis was taken, "x" equals "y" multiplied by
19                30 and then divided by 70 (or "y" multiplied by
20                0.429); and
21                    (ii) for property on which a bonus
22                depreciation deduction of 50% of the adjusted
23                basis was taken, "x" equals "y" multiplied by
24                1.0.
25            The aggregate amount deducted under this
26        subparagraph in all taxable years for any one piece of

 

 

SB1655- 71 -LRB101 08952 HLH 54042 b

1        property may not exceed the amount of the bonus
2        depreciation deduction taken on that property on the
3        taxpayer's federal income tax return under subsection
4        (k) of Section 168 of the Internal Revenue Code. This
5        subparagraph (R) is exempt from the provisions of
6        Section 250;
7            (S) If the taxpayer sells, transfers, abandons, or
8        otherwise disposes of property for which the taxpayer
9        was required in any taxable year to make an addition
10        modification under subparagraph (G-10), then an amount
11        equal to that addition modification.
12            If the taxpayer continues to own property through
13        the last day of the last tax year for which the
14        taxpayer may claim a depreciation deduction for
15        federal income tax purposes and for which the taxpayer
16        was required in any taxable year to make an addition
17        modification under subparagraph (G-10), then an amount
18        equal to that addition modification.
19            The taxpayer is allowed to take the deduction under
20        this subparagraph only once with respect to any one
21        piece of property.
22            This subparagraph (S) is exempt from the
23        provisions of Section 250;
24            (T) The amount of (i) any interest income (net of
25        the deductions allocable thereto) taken into account
26        for the taxable year with respect to a transaction with

 

 

SB1655- 72 -LRB101 08952 HLH 54042 b

1        a taxpayer that is required to make an addition
2        modification with respect to such transaction under
3        Section 203(a)(2)(D-17), 203(b)(2)(E-12),
4        203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
5        the amount of such addition modification and (ii) any
6        income from intangible property (net of the deductions
7        allocable thereto) taken into account for the taxable
8        year with respect to a transaction with a taxpayer that
9        is required to make an addition modification with
10        respect to such transaction under Section
11        203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
12        203(d)(2)(D-8), but not to exceed the amount of such
13        addition modification. This subparagraph (T) is exempt
14        from the provisions of Section 250;
15            (U) An amount equal to the interest income taken
16        into account for the taxable year (net of the
17        deductions allocable thereto) with respect to
18        transactions with (i) a foreign person who would be a
19        member of the taxpayer's unitary business group but for
20        the fact the foreign person's business activity
21        outside the United States is 80% or more of that
22        person's total business activity and (ii) for taxable
23        years ending on or after December 31, 2008, to a person
24        who would be a member of the same unitary business
25        group but for the fact that the person is prohibited
26        under Section 1501(a)(27) from being included in the

 

 

SB1655- 73 -LRB101 08952 HLH 54042 b

1        unitary business group because he or she is ordinarily
2        required to apportion business income under different
3        subsections of Section 304, but not to exceed the
4        addition modification required to be made for the same
5        taxable year under Section 203(c)(2)(G-12) for
6        interest paid, accrued, or incurred, directly or
7        indirectly, to the same person. This subparagraph (U)
8        is exempt from the provisions of Section 250;
9            (V) An amount equal to the income from intangible
10        property taken into account for the taxable year (net
11        of the deductions allocable thereto) with respect to
12        transactions with (i) a foreign person who would be a
13        member of the taxpayer's unitary business group but for
14        the fact that the foreign person's business activity
15        outside the United States is 80% or more of that
16        person's total business activity and (ii) for taxable
17        years ending on or after December 31, 2008, to a person
18        who would be a member of the same unitary business
19        group but for the fact that the person is prohibited
20        under Section 1501(a)(27) from being included in the
21        unitary business group because he or she is ordinarily
22        required to apportion business income under different
23        subsections of Section 304, but not to exceed the
24        addition modification required to be made for the same
25        taxable year under Section 203(c)(2)(G-13) for
26        intangible expenses and costs paid, accrued, or

 

 

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1        incurred, directly or indirectly, to the same foreign
2        person. This subparagraph (V) is exempt from the
3        provisions of Section 250;
4            (W) in the case of an estate, an amount equal to
5        all amounts included in such total pursuant to the
6        provisions of Section 111 of the Internal Revenue Code
7        as a recovery of items previously deducted by the
8        decedent from adjusted gross income in the computation
9        of taxable income. This subparagraph (W) is exempt from
10        Section 250;
11            (X) an amount equal to the refund included in such
12        total of any tax deducted for federal income tax
13        purposes, to the extent that deduction was added back
14        under subparagraph (F). This subparagraph (X) is
15        exempt from the provisions of Section 250; and
16            (Y) For taxable years ending on or after December
17        31, 2011, in the case of a taxpayer who was required to
18        add back any insurance premiums under Section
19        203(c)(2)(G-14), such taxpayer may elect to subtract
20        that part of a reimbursement received from the
21        insurance company equal to the amount of the expense or
22        loss (including expenses incurred by the insurance
23        company) that would have been taken into account as a
24        deduction for federal income tax purposes if the
25        expense or loss had been uninsured. If a taxpayer makes
26        the election provided for by this subparagraph (Y), the

 

 

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1        insurer to which the premiums were paid must add back
2        to income the amount subtracted by the taxpayer
3        pursuant to this subparagraph (Y). This subparagraph
4        (Y) is exempt from the provisions of Section 250.
5            (Z) For taxable years beginning on or after January
6        1, 2020, an amount of up to $50,000 per tax year
7        contributed to a small business asset purchase account
8        during the tax year, plus all interest earned on such
9        accounts during the tax year; a "small business asset
10        purchase account" means an account established by a
11        taxpayer, the proceeds of which are used to purchase
12        property used primarily in Illinois for which a federal
13        income tax deduction is claimed under Section 179 of
14        the Internal Revenue Code.
15        (3) Limitation. The amount of any modification
16    otherwise required under this subsection shall, under
17    regulations prescribed by the Department, be adjusted by
18    any amounts included therein which were properly paid,
19    credited, or required to be distributed, or permanently set
20    aside for charitable purposes pursuant to Internal Revenue
21    Code Section 642(c) during the taxable year.
 
22    (d) Partnerships.
23        (1) In general. In the case of a partnership, base
24    income means an amount equal to the taxpayer's taxable
25    income for the taxable year as modified by paragraph (2).

 

 

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1        (2) Modifications. The taxable income referred to in
2    paragraph (1) shall be modified by adding thereto the sum
3    of the following amounts:
4            (A) An amount equal to all amounts paid or accrued
5        to the taxpayer as interest or dividends during the
6        taxable year to the extent excluded from gross income
7        in the computation of taxable income;
8            (B) An amount equal to the amount of tax imposed by
9        this Act to the extent deducted from gross income for
10        the taxable year;
11            (C) The amount of deductions allowed to the
12        partnership pursuant to Section 707 (c) of the Internal
13        Revenue Code in calculating its taxable income;
14            (D) An amount equal to the amount of the capital
15        gain deduction allowable under the Internal Revenue
16        Code, to the extent deducted from gross income in the
17        computation of taxable income;
18            (D-5) For taxable years 2001 and thereafter, an
19        amount equal to the bonus depreciation deduction taken
20        on the taxpayer's federal income tax return for the
21        taxable year under subsection (k) of Section 168 of the
22        Internal Revenue Code;
23            (D-6) If the taxpayer sells, transfers, abandons,
24        or otherwise disposes of property for which the
25        taxpayer was required in any taxable year to make an
26        addition modification under subparagraph (D-5), then

 

 

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1        an amount equal to the aggregate amount of the
2        deductions taken in all taxable years under
3        subparagraph (O) with respect to that property.
4            If the taxpayer continues to own property through
5        the last day of the last tax year for which the
6        taxpayer may claim a depreciation deduction for
7        federal income tax purposes and for which the taxpayer
8        was allowed in any taxable year to make a subtraction
9        modification under subparagraph (O), then an amount
10        equal to that subtraction modification.
11            The taxpayer is required to make the addition
12        modification under this subparagraph only once with
13        respect to any one piece of property;
14            (D-7) An amount equal to the amount otherwise
15        allowed as a deduction in computing base income for
16        interest paid, accrued, or incurred, directly or
17        indirectly, (i) for taxable years ending on or after
18        December 31, 2004, to a foreign person who would be a
19        member of the same unitary business group but for the
20        fact the foreign person's business activity outside
21        the United States is 80% or more of the foreign
22        person's total business activity and (ii) for taxable
23        years ending on or after December 31, 2008, to a person
24        who would be a member of the same unitary business
25        group but for the fact that the person is prohibited
26        under Section 1501(a)(27) from being included in the

 

 

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1        unitary business group because he or she is ordinarily
2        required to apportion business income under different
3        subsections of Section 304. The addition modification
4        required by this subparagraph shall be reduced to the
5        extent that dividends were included in base income of
6        the unitary group for the same taxable year and
7        received by the taxpayer or by a member of the
8        taxpayer's unitary business group (including amounts
9        included in gross income pursuant to Sections 951
10        through 964 of the Internal Revenue Code and amounts
11        included in gross income under Section 78 of the
12        Internal Revenue Code) with respect to the stock of the
13        same person to whom the interest was paid, accrued, or
14        incurred.
15            This paragraph shall not apply to the following:
16                (i) an item of interest paid, accrued, or
17            incurred, directly or indirectly, to a person who
18            is subject in a foreign country or state, other
19            than a state which requires mandatory unitary
20            reporting, to a tax on or measured by net income
21            with respect to such interest; or
22                (ii) an item of interest paid, accrued, or
23            incurred, directly or indirectly, to a person if
24            the taxpayer can establish, based on a
25            preponderance of the evidence, both of the
26            following:

 

 

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1                    (a) the person, during the same taxable
2                year, paid, accrued, or incurred, the interest
3                to a person that is not a related member, and
4                    (b) the transaction giving rise to the
5                interest expense between the taxpayer and the
6                person did not have as a principal purpose the
7                avoidance of Illinois income tax, and is paid
8                pursuant to a contract or agreement that
9                reflects an arm's-length interest rate and
10                terms; or
11                (iii) the taxpayer can establish, based on
12            clear and convincing evidence, that the interest
13            paid, accrued, or incurred relates to a contract or
14            agreement entered into at arm's-length rates and
15            terms and the principal purpose for the payment is
16            not federal or Illinois tax avoidance; or
17                (iv) an item of interest paid, accrued, or
18            incurred, directly or indirectly, to a person if
19            the taxpayer establishes by clear and convincing
20            evidence that the adjustments are unreasonable; or
21            if the taxpayer and the Director agree in writing
22            to the application or use of an alternative method
23            of apportionment under Section 304(f).
24                Nothing in this subsection shall preclude the
25            Director from making any other adjustment
26            otherwise allowed under Section 404 of this Act for

 

 

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1            any tax year beginning after the effective date of
2            this amendment provided such adjustment is made
3            pursuant to regulation adopted by the Department
4            and such regulations provide methods and standards
5            by which the Department will utilize its authority
6            under Section 404 of this Act; and
7            (D-8) An amount equal to the amount of intangible
8        expenses and costs otherwise allowed as a deduction in
9        computing base income, and that were paid, accrued, or
10        incurred, directly or indirectly, (i) for taxable
11        years ending on or after December 31, 2004, to a
12        foreign person who would be a member of the same
13        unitary business group but for the fact that the
14        foreign person's business activity outside the United
15        States is 80% or more of that person's total business
16        activity and (ii) for taxable years ending on or after
17        December 31, 2008, to a person who would be a member of
18        the same unitary business group but for the fact that
19        the person is prohibited under Section 1501(a)(27)
20        from being included in the unitary business group
21        because he or she is ordinarily required to apportion
22        business income under different subsections of Section
23        304. The addition modification required by this
24        subparagraph shall be reduced to the extent that
25        dividends were included in base income of the unitary
26        group for the same taxable year and received by the

 

 

SB1655- 81 -LRB101 08952 HLH 54042 b

1        taxpayer or by a member of the taxpayer's unitary
2        business group (including amounts included in gross
3        income pursuant to Sections 951 through 964 of the
4        Internal Revenue Code and amounts included in gross
5        income under Section 78 of the Internal Revenue Code)
6        with respect to the stock of the same person to whom
7        the intangible expenses and costs were directly or
8        indirectly paid, incurred or accrued. The preceding
9        sentence shall not apply to the extent that the same
10        dividends caused a reduction to the addition
11        modification required under Section 203(d)(2)(D-7) of
12        this Act. As used in this subparagraph, the term
13        "intangible expenses and costs" includes (1) expenses,
14        losses, and costs for, or related to, the direct or
15        indirect acquisition, use, maintenance or management,
16        ownership, sale, exchange, or any other disposition of
17        intangible property; (2) losses incurred, directly or
18        indirectly, from factoring transactions or discounting
19        transactions; (3) royalty, patent, technical, and
20        copyright fees; (4) licensing fees; and (5) other
21        similar expenses and costs. For purposes of this
22        subparagraph, "intangible property" includes patents,
23        patent applications, trade names, trademarks, service
24        marks, copyrights, mask works, trade secrets, and
25        similar types of intangible assets;
26            This paragraph shall not apply to the following:

 

 

SB1655- 82 -LRB101 08952 HLH 54042 b

1                (i) any item of intangible expenses or costs
2            paid, accrued, or incurred, directly or
3            indirectly, from a transaction with a person who is
4            subject in a foreign country or state, other than a
5            state which requires mandatory unitary reporting,
6            to a tax on or measured by net income with respect
7            to such item; or
8                (ii) any item of intangible expense or cost
9            paid, accrued, or incurred, directly or
10            indirectly, if the taxpayer can establish, based
11            on a preponderance of the evidence, both of the
12            following:
13                    (a) the person during the same taxable
14                year paid, accrued, or incurred, the
15                intangible expense or cost to a person that is
16                not a related member, and
17                    (b) the transaction giving rise to the
18                intangible expense or cost between the
19                taxpayer and the person did not have as a
20                principal purpose the avoidance of Illinois
21                income tax, and is paid pursuant to a contract
22                or agreement that reflects arm's-length terms;
23                or
24                (iii) any item of intangible expense or cost
25            paid, accrued, or incurred, directly or
26            indirectly, from a transaction with a person if the

 

 

SB1655- 83 -LRB101 08952 HLH 54042 b

1            taxpayer establishes by clear and convincing
2            evidence, that the adjustments are unreasonable;
3            or if the taxpayer and the Director agree in
4            writing to the application or use of an alternative
5            method of apportionment under Section 304(f);
6                Nothing in this subsection shall preclude the
7            Director from making any other adjustment
8            otherwise allowed under Section 404 of this Act for
9            any tax year beginning after the effective date of
10            this amendment provided such adjustment is made
11            pursuant to regulation adopted by the Department
12            and such regulations provide methods and standards
13            by which the Department will utilize its authority
14            under Section 404 of this Act;
15            (D-9) For taxable years ending on or after December
16        31, 2008, an amount equal to the amount of insurance
17        premium expenses and costs otherwise allowed as a
18        deduction in computing base income, and that were paid,
19        accrued, or incurred, directly or indirectly, to a
20        person who would be a member of the same unitary
21        business group but for the fact that the person is
22        prohibited under Section 1501(a)(27) from being
23        included in the unitary business group because he or
24        she is ordinarily required to apportion business
25        income under different subsections of Section 304. The
26        addition modification required by this subparagraph

 

 

SB1655- 84 -LRB101 08952 HLH 54042 b

1        shall be reduced to the extent that dividends were
2        included in base income of the unitary group for the
3        same taxable year and received by the taxpayer or by a
4        member of the taxpayer's unitary business group
5        (including amounts included in gross income under
6        Sections 951 through 964 of the Internal Revenue Code
7        and amounts included in gross income under Section 78
8        of the Internal Revenue Code) with respect to the stock
9        of the same person to whom the premiums and costs were
10        directly or indirectly paid, incurred, or accrued. The
11        preceding sentence does not apply to the extent that
12        the same dividends caused a reduction to the addition
13        modification required under Section 203(d)(2)(D-7) or
14        Section 203(d)(2)(D-8) of this Act;
15            (D-10) An amount equal to the credit allowable to
16        the taxpayer under Section 218(a) of this Act,
17        determined without regard to Section 218(c) of this
18        Act;
19            (D-11) For taxable years ending on or after
20        December 31, 2017, an amount equal to the deduction
21        allowed under Section 199 of the Internal Revenue Code
22        for the taxable year;
23            (D-12) An amount withdrawn from a small business
24        asset purchase account that is not used for purchases
25        of property for which a deduction under Section 179 of
26        the Internal Revenue Code is claimed for the tax year

 

 

SB1655- 85 -LRB101 08952 HLH 54042 b

1        in which the amount is withdrawn and which property is
2        used predominately in Illinois; such amounts are
3        subject to the 10% penalty for ineligible use under
4        Section 3-3.5 of the Uniform Penalty and Interest Act;
5    and by deducting from the total so obtained the following
6    amounts:
7            (E) The valuation limitation amount;
8            (F) An amount equal to the amount of any tax
9        imposed by this Act which was refunded to the taxpayer
10        and included in such total for the taxable year;
11            (G) An amount equal to all amounts included in
12        taxable income as modified by subparagraphs (A), (B),
13        (C) and (D) which are exempt from taxation by this
14        State either by reason of its statutes or Constitution
15        or by reason of the Constitution, treaties or statutes
16        of the United States; provided that, in the case of any
17        statute of this State that exempts income derived from
18        bonds or other obligations from the tax imposed under
19        this Act, the amount exempted shall be the interest net
20        of bond premium amortization;
21            (H) Any income of the partnership which
22        constitutes personal service income as defined in
23        Section 1348(b)(1) of the Internal Revenue Code (as in
24        effect December 31, 1981) or a reasonable allowance for
25        compensation paid or accrued for services rendered by
26        partners to the partnership, whichever is greater;

 

 

SB1655- 86 -LRB101 08952 HLH 54042 b

1        this subparagraph (H) is exempt from the provisions of
2        Section 250;
3            (I) An amount equal to all amounts of income
4        distributable to an entity subject to the Personal
5        Property Tax Replacement Income Tax imposed by
6        subsections (c) and (d) of Section 201 of this Act
7        including amounts distributable to organizations
8        exempt from federal income tax by reason of Section
9        501(a) of the Internal Revenue Code; this subparagraph
10        (I) is exempt from the provisions of Section 250;
11            (J) With the exception of any amounts subtracted
12        under subparagraph (G), an amount equal to the sum of
13        all amounts disallowed as deductions by (i) Sections
14        171(a)(2), and 265(a)(2) 265(2) of the Internal
15        Revenue Code, and all amounts of expenses allocable to
16        interest and disallowed as deductions by Section
17        265(a)(1) 265(1) of the Internal Revenue Code; and (ii)
18        for taxable years ending on or after August 13, 1999,
19        Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
20        the Internal Revenue Code, plus, (iii) for taxable
21        years ending on or after December 31, 2011, Section
22        45G(e)(3) of the Internal Revenue Code and, for taxable
23        years ending on or after December 31, 2008, any amount
24        included in gross income under Section 87 of the
25        Internal Revenue Code; the provisions of this
26        subparagraph are exempt from the provisions of Section

 

 

SB1655- 87 -LRB101 08952 HLH 54042 b

1        250;
2            (K) An amount equal to those dividends included in
3        such total which were paid by a corporation which
4        conducts business operations in a River Edge
5        Redevelopment Zone or zones created under the River
6        Edge Redevelopment Zone Act and conducts substantially
7        all of its operations from a River Edge Redevelopment
8        Zone or zones. This subparagraph (K) is exempt from the
9        provisions of Section 250;
10            (L) An amount equal to any contribution made to a
11        job training project established pursuant to the Real
12        Property Tax Increment Allocation Redevelopment Act;
13            (M) An amount equal to those dividends included in
14        such total that were paid by a corporation that
15        conducts business operations in a federally designated
16        Foreign Trade Zone or Sub-Zone and that is designated a
17        High Impact Business located in Illinois; provided
18        that dividends eligible for the deduction provided in
19        subparagraph (K) of paragraph (2) of this subsection
20        shall not be eligible for the deduction provided under
21        this subparagraph (M);
22            (N) An amount equal to the amount of the deduction
23        used to compute the federal income tax credit for
24        restoration of substantial amounts held under claim of
25        right for the taxable year pursuant to Section 1341 of
26        the Internal Revenue Code;

 

 

SB1655- 88 -LRB101 08952 HLH 54042 b

1            (O) For taxable years 2001 and thereafter, for the
2        taxable year in which the bonus depreciation deduction
3        is taken on the taxpayer's federal income tax return
4        under subsection (k) of Section 168 of the Internal
5        Revenue Code and for each applicable taxable year
6        thereafter, an amount equal to "x", where:
7                (1) "y" equals the amount of the depreciation
8            deduction taken for the taxable year on the
9            taxpayer's federal income tax return on property
10            for which the bonus depreciation deduction was
11            taken in any year under subsection (k) of Section
12            168 of the Internal Revenue Code, but not including
13            the bonus depreciation deduction;
14                (2) for taxable years ending on or before
15            December 31, 2005, "x" equals "y" multiplied by 30
16            and then divided by 70 (or "y" multiplied by
17            0.429); and
18                (3) for taxable years ending after December
19            31, 2005:
20                    (i) for property on which a bonus
21                depreciation deduction of 30% of the adjusted
22                basis was taken, "x" equals "y" multiplied by
23                30 and then divided by 70 (or "y" multiplied by
24                0.429); and
25                    (ii) for property on which a bonus
26                depreciation deduction of 50% of the adjusted

 

 

SB1655- 89 -LRB101 08952 HLH 54042 b

1                basis was taken, "x" equals "y" multiplied by
2                1.0.
3            The aggregate amount deducted under this
4        subparagraph in all taxable years for any one piece of
5        property may not exceed the amount of the bonus
6        depreciation deduction taken on that property on the
7        taxpayer's federal income tax return under subsection
8        (k) of Section 168 of the Internal Revenue Code. This
9        subparagraph (O) is exempt from the provisions of
10        Section 250;
11            (P) If the taxpayer sells, transfers, abandons, or
12        otherwise disposes of property for which the taxpayer
13        was required in any taxable year to make an addition
14        modification under subparagraph (D-5), then an amount
15        equal to that addition modification.
16            If the taxpayer continues to own property through
17        the last day of the last tax year for which the
18        taxpayer may claim a depreciation deduction for
19        federal income tax purposes and for which the taxpayer
20        was required in any taxable year to make an addition
21        modification under subparagraph (D-5), then an amount
22        equal to that addition modification.
23            The taxpayer is allowed to take the deduction under
24        this subparagraph only once with respect to any one
25        piece of property.
26            This subparagraph (P) is exempt from the

 

 

SB1655- 90 -LRB101 08952 HLH 54042 b

1        provisions of Section 250;
2            (Q) The amount of (i) any interest income (net of
3        the deductions allocable thereto) taken into account
4        for the taxable year with respect to a transaction with
5        a taxpayer that is required to make an addition
6        modification with respect to such transaction under
7        Section 203(a)(2)(D-17), 203(b)(2)(E-12),
8        203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
9        the amount of such addition modification and (ii) any
10        income from intangible property (net of the deductions
11        allocable thereto) taken into account for the taxable
12        year with respect to a transaction with a taxpayer that
13        is required to make an addition modification with
14        respect to such transaction under Section
15        203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
16        203(d)(2)(D-8), but not to exceed the amount of such
17        addition modification. This subparagraph (Q) is exempt
18        from Section 250;
19            (R) An amount equal to the interest income taken
20        into account for the taxable year (net of the
21        deductions allocable thereto) with respect to
22        transactions with (i) a foreign person who would be a
23        member of the taxpayer's unitary business group but for
24        the fact that the foreign person's business activity
25        outside the United States is 80% or more of that
26        person's total business activity and (ii) for taxable

 

 

SB1655- 91 -LRB101 08952 HLH 54042 b

1        years ending on or after December 31, 2008, to a person
2        who would be a member of the same unitary business
3        group but for the fact that the person is prohibited
4        under Section 1501(a)(27) from being included in the
5        unitary business group because he or she is ordinarily
6        required to apportion business income under different
7        subsections of Section 304, but not to exceed the
8        addition modification required to be made for the same
9        taxable year under Section 203(d)(2)(D-7) for interest
10        paid, accrued, or incurred, directly or indirectly, to
11        the same person. This subparagraph (R) is exempt from
12        Section 250;
13            (S) An amount equal to the income from intangible
14        property taken into account for the taxable year (net
15        of the deductions allocable thereto) with respect to
16        transactions with (i) a foreign person who would be a
17        member of the taxpayer's unitary business group but for
18        the fact that the foreign person's business activity
19        outside the United States is 80% or more of that
20        person's total business activity and (ii) for taxable
21        years ending on or after December 31, 2008, to a person
22        who would be a member of the same unitary business
23        group but for the fact that the person is prohibited
24        under Section 1501(a)(27) from being included in the
25        unitary business group because he or she is ordinarily
26        required to apportion business income under different

 

 

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1        subsections of Section 304, but not to exceed the
2        addition modification required to be made for the same
3        taxable year under Section 203(d)(2)(D-8) for
4        intangible expenses and costs paid, accrued, or
5        incurred, directly or indirectly, to the same person.
6        This subparagraph (S) is exempt from Section 250; and
7            (T) For taxable years ending on or after December
8        31, 2011, in the case of a taxpayer who was required to
9        add back any insurance premiums under Section
10        203(d)(2)(D-9), such taxpayer may elect to subtract
11        that part of a reimbursement received from the
12        insurance company equal to the amount of the expense or
13        loss (including expenses incurred by the insurance
14        company) that would have been taken into account as a
15        deduction for federal income tax purposes if the
16        expense or loss had been uninsured. If a taxpayer makes
17        the election provided for by this subparagraph (T), the
18        insurer to which the premiums were paid must add back
19        to income the amount subtracted by the taxpayer
20        pursuant to this subparagraph (T). This subparagraph
21        (T) is exempt from the provisions of Section 250.
22            (U) For taxable years beginning on or after January
23        1, 2020, an amount of up to $50,000 per tax year
24        contributed to a small business asset purchase account
25        during the tax year, plus all interest earned on such
26        accounts during the tax year; a "small business asset

 

 

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1        purchase account" means an account established by a
2        taxpayer, the proceeds of which are used to purchase
3        property used primarily in Illinois for which a federal
4        income tax deduction is claimed under Section 179 of
5        the Internal Revenue Code.
 
6    (e) Gross income; adjusted gross income; taxable income.
7        (1) In general. Subject to the provisions of paragraph
8    (2) and subsection (b)(3), for purposes of this Section and
9    Section 803(e), a taxpayer's gross income, adjusted gross
10    income, or taxable income for the taxable year shall mean
11    the amount of gross income, adjusted gross income or
12    taxable income properly reportable for federal income tax
13    purposes for the taxable year under the provisions of the
14    Internal Revenue Code. Taxable income may be less than
15    zero. However, for taxable years ending on or after
16    December 31, 1986, net operating loss carryforwards from
17    taxable years ending prior to December 31, 1986, may not
18    exceed the sum of federal taxable income for the taxable
19    year before net operating loss deduction, plus the excess
20    of addition modifications over subtraction modifications
21    for the taxable year. For taxable years ending prior to
22    December 31, 1986, taxable income may never be an amount in
23    excess of the net operating loss for the taxable year as
24    defined in subsections (c) and (d) of Section 172 of the
25    Internal Revenue Code, provided that when taxable income of

 

 

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1    a corporation (other than a Subchapter S corporation),
2    trust, or estate is less than zero and addition
3    modifications, other than those provided by subparagraph
4    (E) of paragraph (2) of subsection (b) for corporations or
5    subparagraph (E) of paragraph (2) of subsection (c) for
6    trusts and estates, exceed subtraction modifications, an
7    addition modification must be made under those
8    subparagraphs for any other taxable year to which the
9    taxable income less than zero (net operating loss) is
10    applied under Section 172 of the Internal Revenue Code or
11    under subparagraph (E) of paragraph (2) of this subsection
12    (e) applied in conjunction with Section 172 of the Internal
13    Revenue Code.
14        (2) Special rule. For purposes of paragraph (1) of this
15    subsection, the taxable income properly reportable for
16    federal income tax purposes shall mean:
17            (A) Certain life insurance companies. In the case
18        of a life insurance company subject to the tax imposed
19        by Section 801 of the Internal Revenue Code, life
20        insurance company taxable income, plus the amount of
21        distribution from pre-1984 policyholder surplus
22        accounts as calculated under Section 815a of the
23        Internal Revenue Code;
24            (B) Certain other insurance companies. In the case
25        of mutual insurance companies subject to the tax
26        imposed by Section 831 of the Internal Revenue Code,

 

 

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1        insurance company taxable income;
2            (C) Regulated investment companies. In the case of
3        a regulated investment company subject to the tax
4        imposed by Section 852 of the Internal Revenue Code,
5        investment company taxable income;
6            (D) Real estate investment trusts. In the case of a
7        real estate investment trust subject to the tax imposed
8        by Section 857 of the Internal Revenue Code, real
9        estate investment trust taxable income;
10            (E) Consolidated corporations. In the case of a
11        corporation which is a member of an affiliated group of
12        corporations filing a consolidated income tax return
13        for the taxable year for federal income tax purposes,
14        taxable income determined as if such corporation had
15        filed a separate return for federal income tax purposes
16        for the taxable year and each preceding taxable year
17        for which it was a member of an affiliated group. For
18        purposes of this subparagraph, the taxpayer's separate
19        taxable income shall be determined as if the election
20        provided by Section 243(b)(2) of the Internal Revenue
21        Code had been in effect for all such years;
22            (F) Cooperatives. In the case of a cooperative
23        corporation or association, the taxable income of such
24        organization determined in accordance with the
25        provisions of Section 1381 through 1388 of the Internal
26        Revenue Code, but without regard to the prohibition

 

 

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1        against offsetting losses from patronage activities
2        against income from nonpatronage activities; except
3        that a cooperative corporation or association may make
4        an election to follow its federal income tax treatment
5        of patronage losses and nonpatronage losses. In the
6        event such election is made, such losses shall be
7        computed and carried over in a manner consistent with
8        subsection (a) of Section 207 of this Act and
9        apportioned by the apportionment factor reported by
10        the cooperative on its Illinois income tax return filed
11        for the taxable year in which the losses are incurred.
12        The election shall be effective for all taxable years
13        with original returns due on or after the date of the
14        election. In addition, the cooperative may file an
15        amended return or returns, as allowed under this Act,
16        to provide that the election shall be effective for
17        losses incurred or carried forward for taxable years
18        occurring prior to the date of the election. Once made,
19        the election may only be revoked upon approval of the
20        Director. The Department shall adopt rules setting
21        forth requirements for documenting the elections and
22        any resulting Illinois net loss and the standards to be
23        used by the Director in evaluating requests to revoke
24        elections. Public Act 96-932 is declaratory of
25        existing law;
26            (G) Subchapter S corporations. In the case of: (i)

 

 

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1        a Subchapter S corporation for which there is in effect
2        an election for the taxable year under Section 1362 of
3        the Internal Revenue Code, the taxable income of such
4        corporation determined in accordance with Section
5        1363(b) of the Internal Revenue Code, except that
6        taxable income shall take into account those items
7        which are required by Section 1363(b)(1) of the
8        Internal Revenue Code to be separately stated; and (ii)
9        a Subchapter S corporation for which there is in effect
10        a federal election to opt out of the provisions of the
11        Subchapter S Revision Act of 1982 and have applied
12        instead the prior federal Subchapter S rules as in
13        effect on July 1, 1982, the taxable income of such
14        corporation determined in accordance with the federal
15        Subchapter S rules as in effect on July 1, 1982; and
16            (H) Partnerships. In the case of a partnership,
17        taxable income determined in accordance with Section
18        703 of the Internal Revenue Code, except that taxable
19        income shall take into account those items which are
20        required by Section 703(a)(1) to be separately stated
21        but which would be taken into account by an individual
22        in calculating his taxable income.
23        (3) Recapture of business expenses on disposition of
24    asset or business. Notwithstanding any other law to the
25    contrary, if in prior years income from an asset or
26    business has been classified as business income and in a

 

 

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1    later year is demonstrated to be non-business income, then
2    all expenses, without limitation, deducted in such later
3    year and in the 2 immediately preceding taxable years
4    related to that asset or business that generated the
5    non-business income shall be added back and recaptured as
6    business income in the year of the disposition of the asset
7    or business. Such amount shall be apportioned to Illinois
8    using the greater of the apportionment fraction computed
9    for the business under Section 304 of this Act for the
10    taxable year or the average of the apportionment fractions
11    computed for the business under Section 304 of this Act for
12    the taxable year and for the 2 immediately preceding
13    taxable years.
 
14    (f) Valuation limitation amount.
15        (1) In general. The valuation limitation amount
16    referred to in subsections (a)(2)(G), (c)(2)(I) and
17    (d)(2)(E) is an amount equal to:
18            (A) The sum of the pre-August 1, 1969 appreciation
19        amounts (to the extent consisting of gain reportable
20        under the provisions of Section 1245 or 1250 of the
21        Internal Revenue Code) for all property in respect of
22        which such gain was reported for the taxable year; plus
23            (B) The lesser of (i) the sum of the pre-August 1,
24        1969 appreciation amounts (to the extent consisting of
25        capital gain) for all property in respect of which such

 

 

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1        gain was reported for federal income tax purposes for
2        the taxable year, or (ii) the net capital gain for the
3        taxable year, reduced in either case by any amount of
4        such gain included in the amount determined under
5        subsection (a)(2)(F) or (c)(2)(H).
6        (2) Pre-August 1, 1969 appreciation amount.
7            (A) If the fair market value of property referred
8        to in paragraph (1) was readily ascertainable on August
9        1, 1969, the pre-August 1, 1969 appreciation amount for
10        such property is the lesser of (i) the excess of such
11        fair market value over the taxpayer's basis (for
12        determining gain) for such property on that date
13        (determined under the Internal Revenue Code as in
14        effect on that date), or (ii) the total gain realized
15        and reportable for federal income tax purposes in
16        respect of the sale, exchange or other disposition of
17        such property.
18            (B) If the fair market value of property referred
19        to in paragraph (1) was not readily ascertainable on
20        August 1, 1969, the pre-August 1, 1969 appreciation
21        amount for such property is that amount which bears the
22        same ratio to the total gain reported in respect of the
23        property for federal income tax purposes for the
24        taxable year, as the number of full calendar months in
25        that part of the taxpayer's holding period for the
26        property ending July 31, 1969 bears to the number of

 

 

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1        full calendar months in the taxpayer's entire holding
2        period for the property.
3            (C) The Department shall prescribe such
4        regulations as may be necessary to carry out the
5        purposes of this paragraph.
 
6    (g) Double deductions. Unless specifically provided
7otherwise, nothing in this Section shall permit the same item
8to be deducted more than once.
 
9    (h) Legislative intention. Except as expressly provided by
10this Section there shall be no modifications or limitations on
11the amounts of income, gain, loss or deduction taken into
12account in determining gross income, adjusted gross income or
13taxable income for federal income tax purposes for the taxable
14year, or in the amount of such items entering into the
15computation of base income and net income under this Act for
16such taxable year, whether in respect of property values as of
17August 1, 1969 or otherwise.
18(Source: P.A. 100-22, eff. 7-6-17; 100-905, eff. 8-17-18;
19revised 10-29-18.)
 
20    Section 10. The Uniform Penalty and Interest Act is amended
21by adding Section 3-3.5 as follows:
 
22    (35 ILCS 735/3-3.5 new)

 

 

SB1655- 101 -LRB101 08952 HLH 54042 b

1    Sec. 3-3.5. Penalty for improper use of proceeds of Small
2Business Asset Purchase Account. A penalty of 10% of the amount
3withdrawn from a small business asset purchase account, as
4defined in Section 203 of the Illinois Income Tax Act, during a
5tax year that is used for purchases of property for which a
6deduction under Section 179 of the Internal Revenue Code is not
7claimed for the tax year in which the amount is withdrawn, or
8purchases of property for which the deduction under Section 179
9of the Internal Revenue Code is claimed that is not used
10predominately in Illinois.
 
11    Section 99. Effective date. This Act takes effect upon
12becoming law.