SB2207enr 93RD GENERAL ASSEMBLY

SB2207 Enrolled LRB093 15831 RCE 41448 b

AN ACT in relation to budget implementation.

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

ARTICLE 1

5		Section 1-1. Short title. This Act may be cited as the
6		FY2005 Budget Implementation (Revenue) Act.

7		Section 1-5. Purpose. It is the purpose of this Act to
8		make changes in State programs that are necessary to implement
9		the Governor's FY2005 budget recommendations concerning
10		revenue.

ARTICLE 5

12		Section 5-5. The Illinois Insurance Code is amended by
13		changing Section 416 as follows:
14		(215 ILCS 5/416)
15		Sec. 416. Industrial Commission Operations Fund Surcharge.
16		(a) As of the effective date of this amendatory Act of 2004
17		the 93rd General Assembly, every company licensed or authorized
18		by the Illinois Department of Insurance and insuring employers'
19		liabilities arising under the Workers' Compensation Act or the
20		Workers' Occupational Diseases Act shall remit to the Director
21		a surcharge based upon the annual direct written premium, as
22		reported under Section 136 of this Act, of the company in the
23		manner provided in this Section. Such proceeds shall be
24		deposited into the Industrial Commission Operations Fund as
25		established in the Workers' Compensation Act. If a company
26		survives or was formed by a merger, consolidation,
27		reorganization, or reincorporation, the direct written
28		premiums of all companies party to the merger, consolidation,

1		reorganization, or reincorporation shall, for purposes of
2		determining the amount of the fee imposed by this Section, be
3		regarded as those of the surviving or new company.
4		(b)(1) Except as provided in subsection (b)(2) of this
5		Section, beginning on the effective date of this amendatory Act
6		of 2004 and on July 1 of July 1, 2004 and each year thereafter,
7		the Director shall charge an annual Industrial Commission
8		Operations Fund Surcharge from every company subject to
9		subsection (a) of this Section equal to 1.01% 1.5% of its
10		direct written premium for insuring employers' liabilities
11		arising under the Workers' Compensation Act or Workers'
12		Occupational Diseases Act as reported in each company's annual
13		statement filed for the previous year as required by Section
14		136. The Industrial Commission Operations Fund Surcharge shall
15		be collected by companies subject to subsection (a) of this
16		Section as a separately stated surcharge on insured employers
17		at the rate of 1.01% 1.5% of direct written premium. The
18		Industrial Commission Operations Fund Surcharge shall not be
19		collected by companies subject to subsection (a) of this
20		Section from any employer that self-insures its liabilities
21		arising under the Workers' Compensation Act or Workers'
22		Occupational Diseases Act, provided that the employer has paid
23		the Industrial Commission Operations Fund Fee pursuant to
24		Section 4d of the Workers' Compensation Act. All sums collected
25		by the Department of Insurance under the provisions of this
26		Section shall be paid promptly after the receipt of the same,
27		accompanied by a detailed statement thereof, into the
28		Industrial Commission Operations Fund in the State treasury.
29		(b)(2) The surcharge due pursuant to this amendatory Act of
30		2004 shall be collected instead of the surcharge due on July 1,
31		2004 under Public Act 93-32. Payment of the surcharge due under
32		this amendatory Act of 2004 shall discharge the employer's
33		obligations due on July 1, 2004. Prior to July 1, 2004, the
34		Director shall charge and collect the surcharge set forth in
35		subparagraph (b)(1) of this Section on or before September 1,
36		2003, December 1, 2003, March 1, 2004 and June 1, 2004. For

1		purposes of this subsection (b)(2), the company shall remit the
2		amounts to the Director based on estimated direct premium for
3		each quarter beginning on July 1, 2003, together with a sworn
4		statement attesting to the reasonableness of the estimate, and
5		the estimated amount of direct premium written forming the
6		bases of the remittance.
7		(c) In addition to the authority specifically granted under
8		Article XXV of this Code, the Director shall have such
9		authority to adopt rules or establish forms as may be
10		reasonably necessary for purposes of enforcing this Section.
11		The Director shall also have authority to defer, waive, or
12		abate the surcharge or any penalties imposed by this Section if
13		in the Director's opinion the company's solvency and ability to
14		meet its insured obligations would be immediately threatened by
15		payment of the surcharge due.
16		(d) When a company fails to pay the full amount of any
17		annual Industrial Commission Operations Fund Surcharge of $100
18		or more due under this Section, there shall be added to the
19		amount due as a penalty the greater of $1,000 or an amount
20		equal to 5% of the deficiency for each month or part of a month
21		that the deficiency remains unpaid.
22		(e) The Department of Insurance may enforce the collection
23		of any delinquent payment, penalty, or portion thereof by legal
24		action or in any other manner by which the collection of debts
25		due the State of Illinois may be enforced under the laws of
26		this State.
27		(f) Whenever it appears to the satisfaction of the Director
28		that a company has paid pursuant to this Act an Industrial
29		Commission Operations Fund Surcharge in an amount in excess of
30		the amount legally collectable from the company, the Director
31		shall issue a credit memorandum for an amount equal to the
32		amount of such overpayment. A credit memorandum may be applied
33		for the 2-year period from the date of issuance, against the
34		payment of any amount due during that period under the
35		surcharge imposed by this Section or, subject to reasonable
36		rule of the Department of Insurance including requirement of

1		notification, may be assigned to any other company subject to
2		regulation under this Act. Any application of credit memoranda
3		after the period provided for in this Section is void.
4		(g) Annually, the Governor may direct a transfer of up to
5		2% of all moneys collected under this Section to the Insurance
6		Financial Regulation Fund.
7		(Source: P.A. 93-32, eff. 6-20-03.)

8		Section 5-10. The Workers' Compensation Act is amended by
9		changing Section 4d as follows:
10		(820 ILCS 305/4d)
11		Sec. 4d. Industrial Commission Operations Fund Fee.
12		(a) As of the effective date of this amendatory Act of the
13		93rd General Assembly, each employer that self-insures its
14		liabilities arising under this Act or Workers' Occupational
15		Diseases Act shall pay a fee measured by the annual actual
16		wages paid in this State of such an employer in the manner
17		provided in this Section. Such proceeds shall be deposited in
18		the Industrial Commission Operations Fund. If an employer
19		survives or was formed by a merger, consolidation,
20		reorganization, or reincorporation, the actual wages paid in
21		this State of all employers party to the merger, consolidation,
22		reorganization, or reincorporation shall, for purposes of
23		determining the amount of the fee imposed by this Section, be
24		regarded as those of the surviving or new employer.
25		(b) Beginning on the effective date of this amendatory Act
26		of 2004 the 93rd General Assembly and on July 1 of each year
27		thereafter, the Chairman shall charge and collect an annual
28		Industrial Commission Operations Fund Fee from every employer
29		subject to subsection (a) of this Section equal to 0.0075%
30		0.045% of its annual actual wages paid in this State as
31		reported in each employer's annual self-insurance renewal
32		filed for the previous year as required by Section 4 of this
33		Act and Section 4 of the Workers' Occupational Diseases Act.
34		All sums collected by the Commission under the provisions of

1		this Section shall be paid promptly after the receipt of the
2		same, accompanied by a detailed statement thereof, into the
3		Industrial Commission Operations Fund. The fee due pursuant to
4		this amendatory Act of 2004 shall be collected instead of the
5		fee due on July 1, 2004 under Public Act 93-32. Payment of the
6		fee due under this amendatory Act of 2004 shall discharge the
7		employer's obligations due on July 1, 2004.
8		(c) In addition to the authority specifically granted under
9		Section 16, the Chairman shall have such authority to adopt
10		rules or establish forms as may be reasonably necessary for
11		purposes of enforcing this Section. The Commission shall have
12		authority to defer, waive, or abate the fee or any penalties
13		imposed by this Section if in the Commission's opinion the
14		employer's solvency and ability to meet its obligations to pay
15		workers' compensation benefits would be immediately threatened
16		by payment of the fee due.
17		(d) When an employer fails to pay the full amount of any
18		annual Industrial Commission Operations Fund Fee of $100 or
19		more due under this Section, there shall be added to the amount
20		due as a penalty the greater of $1,000 or an amount equal to 5%
21		of the deficiency for each month or part of a month that the
22		deficiency remains unpaid.
23		(e) The Commission may enforce the collection of any
24		delinquent payment, penalty or portion thereof by legal action
25		or in any other manner by which the collection of debts due the
26		State of Illinois may be enforced under the laws of this State.
27		(f) Whenever it appears to the satisfaction of the Chairman
28		that an employer has paid pursuant to this Act an Industrial
29		Commission Operations Fund Fee in an amount in excess of the
30		amount legally collectable from the employer, the Chairman
31		shall issue a credit memorandum for an amount equal to the
32		amount of such overpayment. A credit memorandum may be applied
33		for the 2-year period from the date of issuance against the
34		payment of any amount due during that period under the fee
35		imposed by this Section or, subject to reasonable rule of the
36		Commission including requirement of notification, may be

1		assigned to any other employer subject to regulation under this
2		Act. Any application of credit memoranda after the period
3		provided for in this Section is void.
4		(Source: P.A. 93-32, eff. 6-20-03.)

ARTICLE 10

6		Section 10-5. The Illinois Identification Card Act is
7		amended by changing Sections 2 and 12 as follows:
8		(15 ILCS 335/2) (from Ch. 124, par. 22)
9		Sec. 2. Administration and powers and duties of the
10		Administrator. (a) The Secretary of State is the Administrator
11		of this Act, and he is charged with the duty of observing,
12		administering and enforcing the provisions of this Act.
13		(b) The Secretary is vested with the powers and duties for
14		the proper administration of this Act as follows:
15		1. He shall organize the administration of this Act as he
16		may deem necessary and appoint such subordinate officers,
17		clerks and other employees as may be necessary.
18		2. From time to time, he may make, amend or rescind rules
19		and regulations as may be in the public interest to implement
20		the Act.
21		3. He may prescribe or provide suitable forms as necessary,
22		including such forms as are necessary to establish that an
23		applicant for an Illinois Disabled Person Identification Card
24		is a "disabled person" as defined in Section 4A of this Act.
25		4. He may prepare under the seal of the Secretary of State
26		certified copies of any records utilized under this Act and any
27		such certified copy shall be admissible in any proceeding in
28		any court in like manner as the original thereof.
29		5. Records compiled under this Act shall be maintained for
30		6 years, but the Secretary may destroy such records with the
31		prior approval of the State Records Commission.
32		6. He shall examine and determine the genuineness,
33		regularity and legality of every application filed with him

1		under this Act, and he may in all cases investigate the same,
2		require additional information or proof or documentation from
3		any applicant.
4		7. He shall require the payment of all fees prescribed in
5		this Act, and all such fees received by him shall be placed in
6		the Road Fund of the State treasury except as otherwise
7		provided in Section 12 of this Act.
8		(Source: P.A. 83-1421.)
9		(15 ILCS 335/12) (from Ch. 124, par. 32)
10		Sec. 12. Fees concerning Standard Illinois Identification
11		Cards. The fees required under this Act for standard Illinois
12		Identification Cards must accompany any application provided
13		for in this Act, and the Secretary shall collect such fees as
14		follows:

2		All fees collected under this Act shall be paid into the
3		Road Fund of the State treasury, except that the following
4		amounts shall be paid into the General Revenue Fund: (i) $16 of
5		the $20 fee for an original, renewal, or duplicate Illinois
6		Identification Card issued on or after January 1, 2005; and
7		(ii) $8 of the $10 fee for a corrected Illinois Identification
8		Card issued on or after January 1, 2005.
9		Any disabled person making an application for a standard
10		Illinois Identification Card for no fee must, along with the
11		application, submit an affirmation by the applicant on a form
12		to be provided by the Secretary of State, attesting that such
13		person is a disabled person as defined in Section 4A of this
14		Act.
15		An individual, who resides in a veterans home or veterans
16		hospital operated by the state or federal government, who makes
17		an application for an Illinois Identification Card to be issued
18		at no fee, must submit, along with the application, an
19		affirmation by the applicant on a form provided by the
20		Secretary of State, that such person resides in a veterans home
21		or veterans hospital operated by the state or federal
22		government.
23		(Source: P.A. 83-1528.)

24		Section 10-10. The Illinois Lottery Law is amended by
25		changing Section 10.2 as follows:
26		(20 ILCS 1605/10.2) (from Ch. 120, par. 1160.2)
27		Sec. 10.2. Application and other fees. Each application
28		for a new lottery license must be accompanied by a one-time
29		application fee of $50; the Department, however, may waive the
30		fee for licenses of limited duration as provided by Department
31		rule. Each application for renewal of a lottery license must be
32		accompanied by a renewal fee of $25. Each lottery licensee
33		granted on-line status pursuant to the Department's rules must
34		pay a fee of $10 per week as partial reimbursement for

1		telecommunications charges incurred by the Department in
2		providing access to the lottery's on-line gaming system. The
3		Department, by rule, may increase or decrease the amount of
4		these fees. The Department may charge an application fee except
5		that such fee shall not exceed $10.00 per annum.
6		(Source: P.A. 81-477.)

ARTICLE 15

8		Section 15-1. Short title. This Article may be cited as the
9		Watercraft Use Tax Law, and references in this Article to "this
10		Law" mean this Article.

11		Section 15-5. Definitions. For the purposes of this Law:
12		"Department" means the Department of Revenue.
13		"Purchase price" means the reasonable consideration paid
14		for a watercraft whether received in money or otherwise,
15		including, but not limited to, cash, credits, property, and
16		services, and including the value of any motor sold with, or in
17		conjunction with, the watercraft. Except in the case of
18		transfers between immediate family members, reasonable
19		consideration ordinarily means the fair market value on the
20		date the watercraft or the share of the watercraft was acquired
21		or the date the watercraft was brought into this State,
22		whichever is later, unless the taxpayer can demonstrate that a
23		different value is reasonable. In the case of transfers between
24		immediate family members, reasonable consideration ordinarily
25		means the consideration actually paid, unless it appears from
26		the facts and circumstances that the primary motivation of the
27		transfer was the avoidance of tax.
28		"Watercraft" means:
29		(1) Class 2, Class 3, and Class 4 watercraft, as
30		defined in Section 3-2 of the Boat Registration and Safety
31		Act; or
32		(2) personal watercraft, as defined in Section 1-2 of
33		the Boat Registration and Safety Act.

1		Section 15-10. Tax imposed. A tax is hereby imposed on the
2		privilege of using, in this State, any watercraft acquired by
3		gift, transfer, or purchase after September 1, 2004. This tax
4		does not apply if: (i) the use of the watercraft is otherwise
5		taxed under the Use Tax Act; (ii) the watercraft is bought and
6		used by a governmental agency or a society, association,
7		foundation, or institution organized and operated exclusively
8		for charitable, religious, or educational purposes and that
9		entity has been issued an exemption identification number under
10		Section 1g of the Retailers' Occupation Tax Act; (iii) the use
11		of the watercraft is not subject to the Use Tax Act by reason
12		of subsection (a), (b), (c), (d), or (e) of Section 3-55 of
13		that Act dealing with the prevention of actual or likely
14		multi-state taxation; (iv) the transfer is a gift to a
15		beneficiary in the administration of an estate and the
16		beneficiary is a surviving spouse; or (v) the watercraft is
17		exempted from the numbering provisions of Section 3-12 of the
18		Boat Registration and Safety Act. However, the exemption from
19		tax provided by item (v) shall not apply to a watercraft
20		exempted under paragraphs A, B, C, F, and G of Section 3-12 of
21		the Boat Registration and Safety Act if such watercraft are
22		used upon the waters of this State for more than 30 days in any
23		calendar year.

24		Section 15-15. Rate of tax.
25		The rate of tax is 6.25% of the purchase price for each
26		purchase of watercraft that is subject to tax under this Law.
27		When an ownership share of a watercraft is acquired, the tax is
28		imposed on the purchase price of that share. All owners are
29		jointly and severally liable for any tax due as a result of the
30		purchase, gift, or transfer of an ownership share of the
31		watercraft.

32		Section 15-20. Returns.
33		(a) The purchaser, transferee, or donee shall file with the

1		Department a return signed by the purchaser, transferee, or
2		donee on a form prescribed by the Department. The return shall
3		contain a verification in substantially the following form and
4		such other information as the Department may reasonably
5		require:
6		VERIFICATION
7		I declare that I have examined this return and, to the best
8		of my knowledge, it is true, correct, and complete. I
9		understand that the penalty for willfully filing a false
10		return is a fine not to exceed $1,000 or imprisonment in a
11		penal institution other than the penitentiary not to exceed
12		one year, or both a fine and imprisonment.
13		(b) The return and payment from the purchaser, transferee,
14		or donee shall be submitted to the Department within 30 days
15		after the date of purchase, donation, or other transfer or the
16		date the watercraft is brought into this State, whichever is
17		later. Payment of tax is a condition to securing certificate of
18		title for the watercraft from the Department of Natural
19		Resources. When a purchaser, transferee, or donee pays the tax
20		imposed by Section 5-10 of this Law, the Department (upon
21		request therefor from the purchaser, transferee, or donee)
22		shall issue an appropriate receipt to the purchaser,
23		transferee, or donee showing that he or she has paid the tax to
24		the Department. The receipt shall be sufficient to relieve the
25		purchaser, transferee, or donee from further liability for the
26		tax to which the receipt may refer.

27		Section 15-25. Filing false or incomplete return. Any
28		person required to file a return under this Law who willfully
29		files a false or incomplete return is guilty of a Class A
30		misdemeanor.

31		Section 15-30. Determining purchase price. For the purpose
32		of assisting in determining the validity of the purchase price
33		reported on returns filed with the Department, the Department
34		may furnish the following information to persons with whom the

1		Department has contracted for service related to making that
2		determination: (i) the purchase price stated on the return;
3		(ii) the watercraft identification number; (iii) the year, the
4		make, and the model name or number of the watercraft; (iv) the
5		purchase date; and (v) the hours of operation.

6		Section 15-35. Powers of Department. The Department has
7		full power to: (i) administer and enforce this Law; (ii)
8		collect all taxes, penalties, and interest due under this Law;
9		(iii) dispose of taxes, penalties, and interest so collected in
10		the manner set forth in this Law; and (iv) determine all rights
11		to credit memoranda or refunds arising on account of the
12		erroneous payment of tax, penalty, or interest under this Law.
13		In the administration of, and compliance with, this Law, the
14		Department and persons who are subject to this Law have the
15		same rights, remedies, privileges, immunities, powers, and
16		duties, and are subject to the same conditions, restrictions,
17		limitations, penalties, and definitions of terms, and employ
18		the same modes of procedure, as are prescribed in the Use Tax
19		Act (except for the provisions of Section 3-70), that are not
20		inconsistent with this Law, as fully as if the provisions of
21		the Use Tax Act were set forth in this Law. In addition to any
22		other penalties imposed under law, any person convicted of
23		violating the provisions of this Law shall be assessed a fine
24		of $1,000.

25		Section 15-40. Payments to State and Local Sales Tax Reform
26		Fund and General Revenue Fund. The Department shall each month,
27		upon collecting any taxes as provided in this Law, pay 20% of
28		the money collected into the State and Local Sales Tax Reform
29		Fund, a special fund in the State treasury, and 80% into the
30		General Revenue Fund.

31		Section 15-45. Rules. The Department has the authority to
32		adopt such rules as are reasonable and necessary to implement
33		the provisions of this Law.

1		Section 15-990. The Retailers' Occupation Tax Act is
2		amended by changing Section 1c as follows:
3		(35 ILCS 120/1c) (from Ch. 120, par. 440c)
4		Sec. 1c. A person who is engaged in the business of leasing
5		or renting motor vehicles or, beginning July 1, 2003, aircraft
6		or, beginning September 1, 2004, watercraft to others and who,
7		in connection with such business sells any used motor vehicle,
8		or aircraft, or watercraft to a purchaser for his use and not
9		for the purpose of resale, is a retailer engaged in the
10		business of selling tangible personal property at retail under
11		this Act to the extent of the value of the motor vehicle, or
12		aircraft, or watercraft sold. For the purpose of this Section
13		"motor vehicle" has the meaning prescribed in Section 1-157 of
14		the Illinois Vehicle Code, as now or hereafter amended. For the
15		purpose of this Section "aircraft" has the meaning prescribed
16		in Section 3 of the Illinois Aeronautics Act. For the purpose
17		of this Section, "watercraft" has the meaning prescribed in
18		Section 5-5 of the Watercraft Use Tax Law. (Nothing provided
19		herein shall affect liability incurred under this Act because
20		of the sale at retail of such motor vehicles, or aircraft, or
21		watercraft to a lessor.)
22		(Source: P.A. 93-24, eff. 6-20-03.)

23		Section 15-995. The Boat Registration and Safety Act is
24		amended by changing Section 3A-5 as follows:
25		(625 ILCS 45/3A-5) (from Ch. 95 1/2, par. 313A-5)
26		Sec. 3A-5. Certificate of title - Issuance - Records.
27		(a) The Department of Natural Resources shall file each
28		application received and, when satisfied as to its genuineness
29		and regularity, and that no tax imposed by the "Use Tax Act" or
30		the Watercraft Use Tax Law is owed as evidenced by the receipt
31		for payment or determination of exemption from the Department
32		of Revenue provided for in Section 3A-3 of this Article, and

1		that the applicant is entitled to the issuance of a certificate
2		of title, shall issue a certificate of title.
3		(b) The Department of Natural Resources shall maintain a
4		record of all certificates of title issued under a distinctive
5		title number assigned to the watercraft and, in the discretion
6		of the Department, in any other method determined.
7		(Source: P.A. 89-445, eff. 2-7-96.)

ARTICLE 20

9		Section 20-10. The Use Tax Act is amended by changing
10		Sections 3-5 and 3-85 as follows:
11		(35 ILCS 105/3-5) (from Ch. 120, par. 439.3-5)
12		Sec. 3-5. Exemptions. Use of the following tangible
13		personal property is exempt from the tax imposed by this Act:
14		(1) Personal property purchased from a corporation,
15		society, association, foundation, institution, or
16		organization, other than a limited liability company, that is
17		organized and operated as a not-for-profit service enterprise
18		for the benefit of persons 65 years of age or older if the
19		personal property was not purchased by the enterprise for the
20		purpose of resale by the enterprise.
21		(2) Personal property purchased by a not-for-profit
22		Illinois county fair association for use in conducting,
23		operating, or promoting the county fair.
24		(3) Personal property purchased by a not-for-profit arts or
25		cultural organization that establishes, by proof required by
26		the Department by rule, that it has received an exemption under
27		Section 501(c)(3) of the Internal Revenue Code and that is
28		organized and operated primarily for the presentation or
29		support of arts or cultural programming, activities, or
30		services. These organizations include, but are not limited to,
31		music and dramatic arts organizations such as symphony
32		orchestras and theatrical groups, arts and cultural service
33		organizations, local arts councils, visual arts organizations,

1		and media arts organizations. On and after the effective date
2		of this amendatory Act of the 92nd General Assembly, however,
3		an entity otherwise eligible for this exemption shall not make
4		tax-free purchases unless it has an active identification
5		number issued by the Department.
6		(4) Personal property purchased by a governmental body, by
7		a corporation, society, association, foundation, or
8		institution organized and operated exclusively for charitable,
9		religious, or educational purposes, or by a not-for-profit
10		corporation, society, association, foundation, institution, or
11		organization that has no compensated officers or employees and
12		that is organized and operated primarily for the recreation of
13		persons 55 years of age or older. A limited liability company
14		may qualify for the exemption under this paragraph only if the
15		limited liability company is organized and operated
16		exclusively for educational purposes. On and after July 1,
17		1987, however, no entity otherwise eligible for this exemption
18		shall make tax-free purchases unless it has an active exemption
19		identification number issued by the Department.
20		(5) Until July 1, 2003, a passenger car that is a
21		replacement vehicle to the extent that the purchase price of
22		the car is subject to the Replacement Vehicle Tax.
23		(6) Until July 1, 2003 and beginning again on September 1,
24		2004, graphic arts machinery and equipment, including repair
25		and replacement parts, both new and used, and including that
26		manufactured on special order, certified by the purchaser to be
27		used primarily for graphic arts production, and including
28		machinery and equipment purchased for lease. Equipment
29		includes chemicals or chemicals acting as catalysts but only if
30		the chemicals or chemicals acting as catalysts effect a direct
31		and immediate change upon a graphic arts product.
32		(7) Farm chemicals.
33		(8) Legal tender, currency, medallions, or gold or silver
34		coinage issued by the State of Illinois, the government of the
35		United States of America, or the government of any foreign
36		country, and bullion.

1		(9) Personal property purchased from a teacher-sponsored
2		student organization affiliated with an elementary or
3		secondary school located in Illinois.
4		(10) A motor vehicle of the first division, a motor vehicle
5		of the second division that is a self-contained motor vehicle
6		designed or permanently converted to provide living quarters
7		for recreational, camping, or travel use, with direct walk
8		through to the living quarters from the driver's seat, or a
9		motor vehicle of the second division that is of the van
10		configuration designed for the transportation of not less than
11		7 nor more than 16 passengers, as defined in Section 1-146 of
12		the Illinois Vehicle Code, that is used for automobile renting,
13		as defined in the Automobile Renting Occupation and Use Tax
14		Act.
15		(11) Farm machinery and equipment, both new and used,
16		including that manufactured on special order, certified by the
17		purchaser to be used primarily for production agriculture or
18		State or federal agricultural programs, including individual
19		replacement parts for the machinery and equipment, including
20		machinery and equipment purchased for lease, and including
21		implements of husbandry defined in Section 1-130 of the
22		Illinois Vehicle Code, farm machinery and agricultural
23		chemical and fertilizer spreaders, and nurse wagons required to
24		be registered under Section 3-809 of the Illinois Vehicle Code,
25		but excluding other motor vehicles required to be registered
26		under the Illinois Vehicle Code. Horticultural polyhouses or
27		hoop houses used for propagating, growing, or overwintering
28		plants shall be considered farm machinery and equipment under
29		this item (11). Agricultural chemical tender tanks and dry
30		boxes shall include units sold separately from a motor vehicle
31		required to be licensed and units sold mounted on a motor
32		vehicle required to be licensed if the selling price of the
33		tender is separately stated.
34		Farm machinery and equipment shall include precision
35		farming equipment that is installed or purchased to be
36		installed on farm machinery and equipment including, but not

1		limited to, tractors, harvesters, sprayers, planters, seeders,
2		or spreaders. Precision farming equipment includes, but is not
3		limited to, soil testing sensors, computers, monitors,
4		software, global positioning and mapping systems, and other
5		such equipment.
6		Farm machinery and equipment also includes computers,
7		sensors, software, and related equipment used primarily in the
8		computer-assisted operation of production agriculture
9		facilities, equipment, and activities such as, but not limited
10		to, the collection, monitoring, and correlation of animal and
11		crop data for the purpose of formulating animal diets and
12		agricultural chemicals. This item (11) is exempt from the
13		provisions of Section 3-90.
14		(12) Fuel and petroleum products sold to or used by an air
15		common carrier, certified by the carrier to be used for
16		consumption, shipment, or storage in the conduct of its
17		business as an air common carrier, for a flight destined for or
18		returning from a location or locations outside the United
19		States without regard to previous or subsequent domestic
20		stopovers.
21		(13) Proceeds of mandatory service charges separately
22		stated on customers' bills for the purchase and consumption of
23		food and beverages purchased at retail from a retailer, to the
24		extent that the proceeds of the service charge are in fact
25		turned over as tips or as a substitute for tips to the
26		employees who participate directly in preparing, serving,
27		hosting or cleaning up the food or beverage function with
28		respect to which the service charge is imposed.
29		(14) Until July 1, 2003, oil field exploration, drilling,
30		and production equipment, including (i) rigs and parts of rigs,
31		rotary rigs, cable tool rigs, and workover rigs, (ii) pipe and
32		tubular goods, including casing and drill strings, (iii) pumps
33		and pump-jack units, (iv) storage tanks and flow lines, (v) any
34		individual replacement part for oil field exploration,
35		drilling, and production equipment, and (vi) machinery and
36		equipment purchased for lease; but excluding motor vehicles

1		required to be registered under the Illinois Vehicle Code.
2		(15) Photoprocessing machinery and equipment, including
3		repair and replacement parts, both new and used, including that
4		manufactured on special order, certified by the purchaser to be
5		used primarily for photoprocessing, and including
6		photoprocessing machinery and equipment purchased for lease.
7		(16) Until July 1, 2003, coal exploration, mining,
8		offhighway hauling, processing, maintenance, and reclamation
9		equipment, including replacement parts and equipment, and
10		including equipment purchased for lease, but excluding motor
11		vehicles required to be registered under the Illinois Vehicle
12		Code.
13		(17) Until July 1, 2003, distillation machinery and
14		equipment, sold as a unit or kit, assembled or installed by the
15		retailer, certified by the user to be used only for the
16		production of ethyl alcohol that will be used for consumption
17		as motor fuel or as a component of motor fuel for the personal
18		use of the user, and not subject to sale or resale.
19		(18) Manufacturing and assembling machinery and equipment
20		used primarily in the process of manufacturing or assembling
21		tangible personal property for wholesale or retail sale or
22		lease, whether that sale or lease is made directly by the
23		manufacturer or by some other person, whether the materials
24		used in the process are owned by the manufacturer or some other
25		person, or whether that sale or lease is made apart from or as
26		an incident to the seller's engaging in the service occupation
27		of producing machines, tools, dies, jigs, patterns, gauges, or
28		other similar items of no commercial value on special order for
29		a particular purchaser.
30		(19) Personal property delivered to a purchaser or
31		purchaser's donee inside Illinois when the purchase order for
32		that personal property was received by a florist located
33		outside Illinois who has a florist located inside Illinois
34		deliver the personal property.
35		(20) Semen used for artificial insemination of livestock
36		for direct agricultural production.

1		(21) Horses, or interests in horses, registered with and
2		meeting the requirements of any of the Arabian Horse Club
3		Registry of America, Appaloosa Horse Club, American Quarter
4		Horse Association, United States Trotting Association, or
5		Jockey Club, as appropriate, used for purposes of breeding or
6		racing for prizes.
7		(22) Computers and communications equipment utilized for
8		any hospital purpose and equipment used in the diagnosis,
9		analysis, or treatment of hospital patients purchased by a
10		lessor who leases the equipment, under a lease of one year or
11		longer executed or in effect at the time the lessor would
12		otherwise be subject to the tax imposed by this Act, to a
13		hospital that has been issued an active tax exemption
14		identification number by the Department under Section 1g of the
15		Retailers' Occupation Tax Act. If the equipment is leased in a
16		manner that does not qualify for this exemption or is used in
17		any other non-exempt manner, the lessor shall be liable for the
18		tax imposed under this Act or the Service Use Tax Act, as the
19		case may be, based on the fair market value of the property at
20		the time the non-qualifying use occurs. No lessor shall collect
21		or attempt to collect an amount (however designated) that
22		purports to reimburse that lessor for the tax imposed by this
23		Act or the Service Use Tax Act, as the case may be, if the tax
24		has not been paid by the lessor. If a lessor improperly
25		collects any such amount from the lessee, the lessee shall have
26		a legal right to claim a refund of that amount from the lessor.
27		If, however, that amount is not refunded to the lessee for any
28		reason, the lessor is liable to pay that amount to the
29		Department.
30		(23) Personal property purchased by a lessor who leases the
31		property, under a lease of one year or longer executed or in
32		effect at the time the lessor would otherwise be subject to the
33		tax imposed by this Act, to a governmental body that has been
34		issued an active sales tax exemption identification number by
35		the Department under Section 1g of the Retailers' Occupation
36		Tax Act. If the property is leased in a manner that does not

1		qualify for this exemption or used in any other non-exempt
2		manner, the lessor shall be liable for the tax imposed under
3		this Act or the Service Use Tax Act, as the case may be, based
4		on the fair market value of the property at the time the
5		non-qualifying use occurs. No lessor shall collect or attempt
6		to collect an amount (however designated) that purports to
7		reimburse that lessor for the tax imposed by this Act or the
8		Service Use Tax Act, as the case may be, if the tax has not been
9		paid by the lessor. If a lessor improperly collects any such
10		amount from the lessee, the lessee shall have a legal right to
11		claim a refund of that amount from the lessor. If, however,
12		that amount is not refunded to the lessee for any reason, the
13		lessor is liable to pay that amount to the Department.
14		(24) Beginning with taxable years ending on or after
15		December 31, 1995 and ending with taxable years ending on or
16		before December 31, 2004, personal property that is donated for
17		disaster relief to be used in a State or federally declared
18		disaster area in Illinois or bordering Illinois by a
19		manufacturer or retailer that is registered in this State to a
20		corporation, society, association, foundation, or institution
21		that has been issued a sales tax exemption identification
22		number by the Department that assists victims of the disaster
23		who reside within the declared disaster area.
24		(25) Beginning with taxable years ending on or after
25		December 31, 1995 and ending with taxable years ending on or
26		before December 31, 2004, personal property that is used in the
27		performance of infrastructure repairs in this State, including
28		but not limited to municipal roads and streets, access roads,
29		bridges, sidewalks, waste disposal systems, water and sewer
30		line extensions, water distribution and purification
31		facilities, storm water drainage and retention facilities, and
32		sewage treatment facilities, resulting from a State or
33		federally declared disaster in Illinois or bordering Illinois
34		when such repairs are initiated on facilities located in the
35		declared disaster area within 6 months after the disaster.
36		(26) Beginning July 1, 1999, game or game birds purchased

1		at a "game breeding and hunting preserve area" or an "exotic
2		game hunting area" as those terms are used in the Wildlife Code
3		or at a hunting enclosure approved through rules adopted by the
4		Department of Natural Resources. This paragraph is exempt from
5		the provisions of Section 3-90.
6		(27) A motor vehicle, as that term is defined in Section
7		1-146 of the Illinois Vehicle Code, that is donated to a
8		corporation, limited liability company, society, association,
9		foundation, or institution that is determined by the Department
10		to be organized and operated exclusively for educational
11		purposes. For purposes of this exemption, "a corporation,
12		limited liability company, society, association, foundation,
13		or institution organized and operated exclusively for
14		educational purposes" means all tax-supported public schools,
15		private schools that offer systematic instruction in useful
16		branches of learning by methods common to public schools and
17		that compare favorably in their scope and intensity with the
18		course of study presented in tax-supported schools, and
19		vocational or technical schools or institutes organized and
20		operated exclusively to provide a course of study of not less
21		than 6 weeks duration and designed to prepare individuals to
22		follow a trade or to pursue a manual, technical, mechanical,
23		industrial, business, or commercial occupation.
24		(28) Beginning January 1, 2000, personal property,
25		including food, purchased through fundraising events for the
26		benefit of a public or private elementary or secondary school,
27		a group of those schools, or one or more school districts if
28		the events are sponsored by an entity recognized by the school
29		district that consists primarily of volunteers and includes
30		parents and teachers of the school children. This paragraph
31		does not apply to fundraising events (i) for the benefit of
32		private home instruction or (ii) for which the fundraising
33		entity purchases the personal property sold at the events from
34		another individual or entity that sold the property for the
35		purpose of resale by the fundraising entity and that profits
36		from the sale to the fundraising entity. This paragraph is

1		exempt from the provisions of Section 3-90.
2		(29) Beginning January 1, 2000 and through December 31,
3		2001, new or used automatic vending machines that prepare and
4		serve hot food and beverages, including coffee, soup, and other
5		items, and replacement parts for these machines. Beginning
6		January 1, 2002 and through June 30, 2003, machines and parts
7		for machines used in commercial, coin-operated amusement and
8		vending business if a use or occupation tax is paid on the
9		gross receipts derived from the use of the commercial,
10		coin-operated amusement and vending machines. This paragraph
11		is exempt from the provisions of Section 3-90.
12		(30) Food for human consumption that is to be consumed off
13		the premises where it is sold (other than alcoholic beverages,
14		soft drinks, and food that has been prepared for immediate
15		consumption) and prescription and nonprescription medicines,
16		drugs, medical appliances, and insulin, urine testing
17		materials, syringes, and needles used by diabetics, for human
18		use, when purchased for use by a person receiving medical
19		assistance under Article 5 of the Illinois Public Aid Code who
20		resides in a licensed long-term care facility, as defined in
21		the Nursing Home Care Act.
22		(31) Beginning on the effective date of this amendatory Act
23		of the 92nd General Assembly, computers and communications
24		equipment utilized for any hospital purpose and equipment used
25		in the diagnosis, analysis, or treatment of hospital patients
26		purchased by a lessor who leases the equipment, under a lease
27		of one year or longer executed or in effect at the time the
28		lessor would otherwise be subject to the tax imposed by this
29		Act, to a hospital that has been issued an active tax exemption
30		identification number by the Department under Section 1g of the
31		Retailers' Occupation Tax Act. If the equipment is leased in a
32		manner that does not qualify for this exemption or is used in
33		any other nonexempt manner, the lessor shall be liable for the
34		tax imposed under this Act or the Service Use Tax Act, as the
35		case may be, based on the fair market value of the property at
36		the time the nonqualifying use occurs. No lessor shall collect

1		or attempt to collect an amount (however designated) that
2		purports to reimburse that lessor for the tax imposed by this
3		Act or the Service Use Tax Act, as the case may be, if the tax
4		has not been paid by the lessor. If a lessor improperly
5		collects any such amount from the lessee, the lessee shall have
6		a legal right to claim a refund of that amount from the lessor.
7		If, however, that amount is not refunded to the lessee for any
8		reason, the lessor is liable to pay that amount to the
9		Department. This paragraph is exempt from the provisions of
10		Section 3-90.
11		(32) Beginning on the effective date of this amendatory Act
12		of the 92nd General Assembly, personal property purchased by a
13		lessor who leases the property, under a lease of one year or
14		longer executed or in effect at the time the lessor would
15		otherwise be subject to the tax imposed by this Act, to a
16		governmental body that has been issued an active sales tax
17		exemption identification number by the Department under
18		Section 1g of the Retailers' Occupation Tax Act. If the
19		property is leased in a manner that does not qualify for this
20		exemption or used in any other nonexempt manner, the lessor
21		shall be liable for the tax imposed under this Act or the
22		Service Use Tax Act, as the case may be, based on the fair
23		market value of the property at the time the nonqualifying use
24		occurs. No lessor shall collect or attempt to collect an amount
25		(however designated) that purports to reimburse that lessor for
26		the tax imposed by this Act or the Service Use Tax Act, as the
27		case may be, if the tax has not been paid by the lessor. If a
28		lessor improperly collects any such amount from the lessee, the
29		lessee shall have a legal right to claim a refund of that
30		amount from the lessor. If, however, that amount is not
31		refunded to the lessee for any reason, the lessor is liable to
32		pay that amount to the Department. This paragraph is exempt
33		from the provisions of Section 3-90.
34		(33) On and after July 1, 2003, the use in this State of
35		motor vehicles of the second division with a gross vehicle
36		weight in excess of 8,000 pounds and that are subject to the

1		commercial distribution fee imposed under Section 3-815.1 of
2		the Illinois Vehicle Code. This exemption applies to repair and
3		replacement parts added after the initial purchase of such a
4		motor vehicle if that motor vehicle is used in a manner that
5		would qualify for the rolling stock exemption otherwise
6		provided for in this Act.
7		(Source: P.A. 92-35, eff. 7-1-01; 92-227, eff. 8-2-01; 92-337,
8		eff. 8-10-01; 92-484, eff. 8-23-01; 92-651, eff. 7-11-02;
9		93-23, eff. 6-20-03; 93-24, eff. 6-20-03; revised 9-11-03.)
10		(35 ILCS 105/3-85)
11		Sec. 3-85. Manufacturer's Purchase Credit. For purchases
12		of machinery and equipment made on and after January 1, 1995
13		and through June 30, 2003, and on and after September 1, 2004,
14		a purchaser of manufacturing machinery and equipment that
15		qualifies for the exemption provided by paragraph (18) of
16		Section 3-5 of this Act earns a credit in an amount equal to a
17		fixed percentage of the tax which would have been incurred
18		under this Act on those purchases. For purchases of graphic
19		arts machinery and equipment made on or after July 1, 1996 and
20		through June 30, 2003, and on and after September 1, 2004, a
21		purchaser of graphic arts machinery and equipment that
22		qualifies for the exemption provided by paragraph (6) of
23		Section 3-5 of this Act earns a credit in an amount equal to a
24		fixed percentage of the tax that would have been incurred under
25		this Act on those purchases. The credit earned for purchases of
26		manufacturing machinery and equipment or graphic arts
27		machinery and equipment shall be referred to as the
28		Manufacturer's Purchase Credit. A graphic arts producer is a
29		person engaged in graphic arts production as defined in Section
30		2-30 of the Retailers' Occupation Tax Act. Beginning July 1,
31		1996, all references in this Section to manufacturers or
32		manufacturing shall also be deemed to refer to graphic arts
33		producers or graphic arts production.
34		The amount of credit shall be a percentage of the tax that
35		would have been incurred on the purchase of manufacturing

1		machinery and equipment or graphic arts machinery and equipment
2		if the exemptions provided by paragraph (6) or paragraph (18)
3		of Section 3-5 of this Act had not been applicable. The
4		percentage shall be as follows:
5		(1) 15% for purchases made on or before June 30, 1995.
6		(2) 25% for purchases made after June 30, 1995, and on
7		or before June 30, 1996.
8		(3) 40% for purchases made after June 30, 1996, and on
9		or before June 30, 1997.
10		(4) 50% for purchases made on or after July 1, 1997.
11		(a) Manufacturer's Purchase Credit earned prior to July 1,
12		2003. This subsection (a) applies to Manufacturer's Purchase
13		Credit earned prior to July 1, 2003. A purchaser of production
14		related tangible personal property desiring to use the
15		Manufacturer's Purchase Credit shall certify to the seller
16		prior to October 1, 2003 that the purchaser is satisfying all
17		or part of the liability under the Use Tax Act or the Service
18		Use Tax Act that is due on the purchase of the production
19		related tangible personal property by use of Manufacturer's
20		Purchase Credit. The Manufacturer's Purchase Credit
21		certification must be dated and shall include the name and
22		address of the purchaser, the purchaser's registration number,
23		if registered, the credit being applied, and a statement that
24		the State Use Tax or Service Use Tax liability is being
25		satisfied with the manufacturer's or graphic arts producer's
26		accumulated purchase credit. Certification may be incorporated
27		into the manufacturer's or graphic arts producer's purchase
28		order. Manufacturer's Purchase Credit certification provided
29		by the manufacturer or graphic arts producer prior to October
30		1, 2003 may be used to satisfy the retailer's or serviceman's
31		liability under the Retailers' Occupation Tax Act or Service
32		Occupation Tax Act for the credit claimed, not to exceed 6.25%
33		of the receipts subject to tax from a qualifying purchase, but
34		only if the retailer or serviceman reports the Manufacturer's
35		Purchase Credit claimed as required by the Department. A
36		Manufacturer's Purchase Credit reported on any original or

1		amended return filed under this Act after October 20, 2003
2		shall be disallowed. The Manufacturer's Purchase Credit earned
3		by purchase of exempt manufacturing machinery and equipment or
4		graphic arts machinery and equipment is a non-transferable
5		credit. A manufacturer or graphic arts producer that enters
6		into a contract involving the installation of tangible personal
7		property into real estate within a manufacturing or graphic
8		arts production facility may, prior to October 1, 2003,
9		authorize a construction contractor to utilize credit
10		accumulated by the manufacturer or graphic arts producer to
11		purchase the tangible personal property. A manufacturer or
12		graphic arts producer intending to use accumulated credit to
13		purchase such tangible personal property shall execute a
14		written contract authorizing the contractor to utilize a
15		specified dollar amount of credit. The contractor shall
16		furnish, prior to October 1, 2003, the supplier with the
17		manufacturer's or graphic arts producer's name, registration
18		or resale number, and a statement that a specific amount of the
19		Use Tax or Service Use Tax liability, not to exceed 6.25% of
20		the selling price, is being satisfied with the credit. The
21		manufacturer or graphic arts producer shall remain liable to
22		timely report all information required by the annual Report of
23		Manufacturer's Purchase Credit Used for all credit utilized by
24		a construction contractor.
25		No Manufacturer's Purchase Credit earned prior to July 1,
26		2003 may be used after October 1, 2003. The Manufacturer's
27		Purchase Credit may be used to satisfy liability under the Use
28		Tax Act or the Service Use Tax Act due on the purchase of
29		production related tangible personal property (including
30		purchases by a manufacturer, by a graphic arts producer, or by
31		a lessor who rents or leases the use of the property to a
32		manufacturer or graphic arts producer) that does not otherwise
33		qualify for the manufacturing machinery and equipment
34		exemption or the graphic arts machinery and equipment
35		exemption. "Production related tangible personal property"
36		means (i) all tangible personal property used or consumed by

1		the purchaser in a manufacturing facility in which a
2		manufacturing process described in Section 2-45 of the
3		Retailers' Occupation Tax Act takes place, including tangible
4		personal property purchased for incorporation into real estate
5		within a manufacturing facility and including, but not limited
6		to, tangible personal property used or consumed in activities
7		such as preproduction material handling, receiving, quality
8		control, inventory control, storage, staging, and packaging
9		for shipping and transportation purposes; (ii) all tangible
10		personal property used or consumed by the purchaser in a
11		graphic arts facility in which graphic arts production as
12		described in Section 2-30 of the Retailers' Occupation Tax Act
13		takes place, including tangible personal property purchased
14		for incorporation into real estate within a graphic arts
15		facility and including, but not limited to, all tangible
16		personal property used or consumed in activities such as
17		graphic arts preliminary or pre-press production,
18		pre-production material handling, receiving, quality control,
19		inventory control, storage, staging, sorting, labeling,
20		mailing, tying, wrapping, and packaging; and (iii) all tangible
21		personal property used or consumed by the purchaser for
22		research and development. "Production related tangible
23		personal property" does not include (i) tangible personal
24		property used, within or without a manufacturing facility, in
25		sales, purchasing, accounting, fiscal management, marketing,
26		personnel recruitment or selection, or landscaping or (ii)
27		tangible personal property required to be titled or registered
28		with a department, agency, or unit of federal, state, or local
29		government. The Manufacturer's Purchase Credit may be used,
30		prior to October 1, 2003, to satisfy the tax arising either
31		from the purchase of machinery and equipment on or after
32		January 1, 1995 for which the exemption provided by paragraph
33		(18) of Section 3-5 of this Act was erroneously claimed, or the
34		purchase of machinery and equipment on or after July 1, 1996
35		for which the exemption provided by paragraph (6) of Section
36		3-5 of this Act was erroneously claimed, but not in

1		satisfaction of penalty, if any, and interest for failure to
2		pay the tax when due. A purchaser of production related
3		tangible personal property who is required to pay Illinois Use
4		Tax or Service Use Tax on the purchase directly to the
5		Department may, prior to October 1, 2003, utilize the
6		Manufacturer's Purchase Credit in satisfaction of the tax
7		arising from that purchase, but not in satisfaction of penalty
8		and interest. A purchaser who uses the Manufacturer's Purchase
9		Credit to purchase property which is later determined not to be
10		production related tangible personal property may be liable for
11		tax, penalty, and interest on the purchase of that property as
12		of the date of purchase but shall be entitled to use the
13		disallowed Manufacturer's Purchase Credit, so long as it has
14		not expired and is used prior to October 1, 2003, on qualifying
15		purchases of production related tangible personal property not
16		previously subject to credit usage. The Manufacturer's
17		Purchase Credit earned by a manufacturer or graphic arts
18		producer expires the last day of the second calendar year
19		following the calendar year in which the credit arose. No
20		Manufacturer's Purchase Credit may be used after September 30,
21		2003 regardless of when that credit was earned.
22		A purchaser earning Manufacturer's Purchase Credit shall
23		sign and file an annual Report of Manufacturer's Purchase
24		Credit Earned for each calendar year no later than the last day
25		of the sixth month following the calendar year in which a
26		Manufacturer's Purchase Credit is earned. A Report of
27		Manufacturer's Purchase Credit Earned shall be filed on forms
28		as prescribed or approved by the Department and shall state,
29		for each month of the calendar year: (i) the total purchase
30		price of all purchases of exempt manufacturing or graphic arts
31		machinery on which the credit was earned; (ii) the total State
32		Use Tax or Service Use Tax which would have been due on those
33		items; (iii) the percentage used to calculate the amount of
34		credit earned; (iv) the amount of credit earned; and (v) such
35		other information as the Department may reasonably require. A
36		purchaser earning Manufacturer's Purchase Credit shall

1		maintain records which identify, as to each purchase of
2		manufacturing or graphic arts machinery and equipment on which
3		the purchaser earned Manufacturer's Purchase Credit, the
4		vendor (including, if applicable, either the vendor's
5		registration number or Federal Employer Identification
6		Number), the purchase price, and the amount of Manufacturer's
7		Purchase Credit earned on each purchase.
8		A purchaser using Manufacturer's Purchase Credit shall
9		sign and file an annual Report of Manufacturer's Purchase
10		Credit Used for each calendar year no later than the last day
11		of the sixth month following the calendar year in which a
12		Manufacturer's Purchase Credit is used. A Report of
13		Manufacturer's Purchase Credit Used shall be filed on forms as
14		prescribed or approved by the Department and shall state, for
15		each month of the calendar year: (i) the total purchase price
16		of production related tangible personal property purchased
17		from Illinois suppliers; (ii) the total purchase price of
18		production related tangible personal property purchased from
19		out-of-state suppliers; (iii) the total amount of credit used
20		during such month; and (iv) such other information as the
21		Department may reasonably require. A purchaser using
22		Manufacturer's Purchase Credit shall maintain records that
23		identify, as to each purchase of production related tangible
24		personal property on which the purchaser used Manufacturer's
25		Purchase Credit, the vendor (including, if applicable, either
26		the vendor's registration number or Federal Employer
27		Identification Number), the purchase price, and the amount of
28		Manufacturer's Purchase Credit used on each purchase.
29		No annual report shall be filed before May 1, 1996 or after
30		June 30, 2004. A purchaser that fails to file an annual Report
31		of Manufacturer's Purchase Credit Earned or an annual Report of
32		Manufacturer's Purchase Credit Used by the last day of the
33		sixth month following the end of the calendar year shall
34		forfeit all Manufacturer's Purchase Credit for that calendar
35		year unless it establishes that its failure to file was due to
36		reasonable cause. Manufacturer's Purchase Credit reports may

1		be amended to report and claim credit on qualifying purchases
2		not previously reported at any time before the credit would
3		have expired, unless both the Department and the purchaser have
4		agreed to an extension of the statute of limitations for the
5		issuance of a notice of tax liability as provided in Section 4
6		of the Retailers' Occupation Tax Act. If the time for
7		assessment or refund has been extended, then amended reports
8		for a calendar year may be filed at any time prior to the date
9		to which the statute of limitations for the calendar year or
10		portion thereof has been extended. No Manufacturer's Purchase
11		Credit report filed with the Department for periods prior to
12		January 1, 1995 shall be approved. Manufacturer's Purchase
13		Credit claimed on an amended report may be used, until October
14		1, 2003, to satisfy tax liability under the Use Tax Act or the
15		Service Use Tax Act (i) on qualifying purchases of production
16		related tangible personal property made after the date the
17		amended report is filed or (ii) assessed by the Department on
18		qualifying purchases of production related tangible personal
19		property made in the case of manufacturers on or after January
20		1, 1995, or in the case of graphic arts producers on or after
21		July 1, 1996.
22		If the purchaser is not the manufacturer or a graphic arts
23		producer, but rents or leases the use of the property to a
24		manufacturer or graphic arts producer, the purchaser may earn,
25		report, and use Manufacturer's Purchase Credit in the same
26		manner as a manufacturer or graphic arts producer.
27		A purchaser shall not be entitled to any Manufacturer's
28		Purchase Credit for a purchase that is required to be reported
29		and is not timely reported as provided in this Section. A
30		purchaser remains liable for (i) any tax that was satisfied by
31		use of a Manufacturer's Purchase Credit, as of the date of
32		purchase, if that use is not timely reported as required in
33		this Section and (ii) for any applicable penalties and interest
34		for failing to pay the tax when due. No Manufacturer's Purchase
35		Credit may be used after September 30, 2003 to satisfy any tax
36		liability imposed under this Act, including any audit

1		liability.
2		(b) Manufacturer's Purchase Credit earned on and after
3		September 1, 2004. This subsection (b) applies to
4		Manufacturer's Purchase Credit earned on and after September 1,
5		2004. Manufacturer's Purchase Credit earned on or after
6		September 1, 2004 may only be used to satisfy the Use Tax or
7		Service Use Tax liability incurred on production related
8		tangible personal property purchased on or after September 1,
9		2004. A purchaser of production related tangible personal
10		property desiring to use the Manufacturer's Purchase Credit
11		shall certify to the seller that the purchaser is satisfying
12		all or part of the liability under the Use Tax Act or the
13		Service Use Tax Act that is due on the purchase of the
14		production related tangible personal property by use of
15		Manufacturer's Purchase Credit. The Manufacturer's Purchase
16		Credit certification must be dated and shall include the name
17		and address of the purchaser, the purchaser's registration
18		number, if registered, the credit being applied, and a
19		statement that the State Use Tax or Service Use Tax liability
20		is being satisfied with the manufacturer's or graphic arts
21		producer's accumulated purchase credit. Certification may be
22		incorporated into the manufacturer's or graphic arts
23		producer's purchase order. Manufacturer's Purchase Credit
24		certification provided by the manufacturer or graphic arts
25		producer may be used to satisfy the retailer's or serviceman's
26		liability under the Retailers' Occupation Tax Act or Service
27		Occupation Tax Act for the credit claimed, not to exceed 6.25%
28		of the receipts subject to tax from a qualifying purchase, but
29		only if the retailer or serviceman reports the Manufacturer's
30		Purchase Credit claimed as required by the Department. The
31		Manufacturer's Purchase Credit earned by purchase of exempt
32		manufacturing machinery and equipment or graphic arts
33		machinery and equipment is a non-transferable credit. A
34		manufacturer or graphic arts producer that enters into a
35		contract involving the installation of tangible personal
36		property into real estate within a manufacturing or graphic

1		arts production facility may, on or after September 1, 2004,
2		authorize a construction contractor to utilize credit
3		accumulated by the manufacturer or graphic arts producer to
4		purchase the tangible personal property. A manufacturer or
5		graphic arts producer intending to use accumulated credit to
6		purchase such tangible personal property shall execute a
7		written contract authorizing the contractor to utilize a
8		specified dollar amount of credit. The contractor shall furnish
9		the supplier with the manufacturer's or graphic arts producer's
10		name, registration or resale number, and a statement that a
11		specific amount of the Use Tax or Service Use Tax liability,
12		not to exceed 6.25% of the selling price, is being satisfied
13		with the credit. The manufacturer or graphic arts producer
14		shall remain liable to timely report all information required
15		by the annual Report of Manufacturer's Purchase Credit Used for
16		all credit utilized by a construction contractor.
17		The Manufacturer's Purchase Credit may be used to satisfy
18		liability under the Use Tax Act or the Service Use Tax Act due
19		on the purchase, made on or after September 1, 2004, of
20		production related tangible personal property (including
21		purchases by a manufacturer, by a graphic arts producer, or by
22		a lessor who rents or leases the use of the property to a
23		manufacturer or graphic arts producer) that does not otherwise
24		qualify for the manufacturing machinery and equipment
25		exemption or the graphic arts machinery and equipment
26		exemption. "Production related tangible personal property"
27		means (i) all tangible personal property used or consumed by
28		the purchaser in a manufacturing facility in which a
29		manufacturing process described in Section 2-45 of the
30		Retailers' Occupation Tax Act takes place, including tangible
31		personal property purchased for incorporation into real estate
32		within a manufacturing facility and including, but not limited
33		to, tangible personal property used or consumed in activities
34		such as preproduction material handling, receiving, quality
35		control, inventory control, storage, staging, and packaging
36		for shipping and transportation purposes; (ii) all tangible

1		personal property used or consumed by the purchaser in a
2		graphic arts facility in which graphic arts production as
3		described in Section 2-30 of the Retailers' Occupation Tax Act
4		takes place, including tangible personal property purchased
5		for incorporation into real estate within a graphic arts
6		facility and including, but not limited to, all tangible
7		personal property used or consumed in activities such as
8		graphic arts preliminary or pre-press production,
9		pre-production material handling, receiving, quality control,
10		inventory control, storage, staging, sorting, labeling,
11		mailing, tying, wrapping, and packaging; and (iii) all tangible
12		personal property used or consumed by the purchaser for
13		research and development. "Production related tangible
14		personal property" does not include (i) tangible personal
15		property used, within or without a manufacturing facility, in
16		sales, purchasing, accounting, fiscal management, marketing,
17		personnel recruitment or selection, or landscaping or (ii)
18		tangible personal property required to be titled or registered
19		with a department, agency, or unit of federal, state, or local
20		government. The Manufacturer's Purchase Credit may be used to
21		satisfy the tax arising either from the purchase of machinery
22		and equipment on or after September 1, 2004 for which the
23		exemption provided by paragraph (18) of Section 3-5 of this Act
24		was erroneously claimed, or the purchase of machinery and
25		equipment on or after September 1, 2004 for which the exemption
26		provided by paragraph (6) of Section 3-5 of this Act was
27		erroneously claimed, but not in satisfaction of penalty, if
28		any, and interest for failure to pay the tax when due. A
29		purchaser of production related tangible personal property
30		that is purchased on or after September 1, 2004 who is required
31		to pay Illinois Use Tax or Service Use Tax on the purchase
32		directly to the Department may utilize the Manufacturer's
33		Purchase Credit in satisfaction of the tax arising from that
34		purchase, but not in satisfaction of penalty and interest. A
35		purchaser who uses the Manufacturer's Purchase Credit to
36		purchase property on and after September 1, 2004 which is later

1		determined not to be production related tangible personal
2		property may be liable for tax, penalty, and interest on the
3		purchase of that property as of the date of purchase but shall
4		be entitled to use the disallowed Manufacturer's Purchase
5		Credit, so long as it has not expired and is used on qualifying
6		purchases of production related tangible personal property not
7		previously subject to credit usage. The Manufacturer's
8		Purchase Credit earned by a manufacturer or graphic arts
9		producer expires the last day of the second calendar year
10		following the calendar year in which the credit arose. A
11		purchaser earning Manufacturer's Purchase Credit shall sign
12		and file an annual Report of Manufacturer's Purchase Credit
13		Earned for each calendar year no later than the last day of the
14		sixth month following the calendar year in which a
15		Manufacturer's Purchase Credit is earned. A Report of
16		Manufacturer's Purchase Credit Earned shall be filed on forms
17		as prescribed or approved by the Department and shall state,
18		for each month of the calendar year: (i) the total purchase
19		price of all purchases of exempt manufacturing or graphic arts
20		machinery on which the credit was earned; (ii) the total State
21		Use Tax or Service Use Tax which would have been due on those
22		items; (iii) the percentage used to calculate the amount of
23		credit earned; (iv) the amount of credit earned; and (v) such
24		other information as the Department may reasonably require. A
25		purchaser earning Manufacturer's Purchase Credit shall
26		maintain records which identify, as to each purchase of
27		manufacturing or graphic arts machinery and equipment on which
28		the purchaser earned Manufacturer's Purchase Credit, the
29		vendor (including, if applicable, either the vendor's
30		registration number or Federal Employer Identification
31		Number), the purchase price, and the amount of Manufacturer's
32		Purchase Credit earned on each purchase. A purchaser using
33		Manufacturer's Purchase Credit shall sign and file an annual
34		Report of Manufacturer's Purchase Credit Used for each calendar
35		year no later than the last day of the sixth month following
36		the calendar year in which a Manufacturer's Purchase Credit is

1		used. A Report of Manufacturer's Purchase Credit Used shall be
2		filed on forms as prescribed or approved by the Department and
3		shall state, for each month of the calendar year: (i) the total
4		purchase price of production related tangible personal
5		property purchased from Illinois suppliers; (ii) the total
6		purchase price of production related tangible personal
7		property purchased from out-of-state suppliers; (iii) the
8		total amount of credit used during such month; and (iv) such
9		other information as the Department may reasonably require. A
10		purchaser using Manufacturer's Purchase Credit shall maintain
11		records that identify, as to each purchase of production
12		related tangible personal property on which the purchaser used
13		Manufacturer's Purchase Credit, the vendor (including, if
14		applicable, either the vendor's registration number or Federal
15		Employer Identification Number), the purchase price, and the
16		amount of Manufacturer's Purchase Credit used on each purchase.
17		A purchaser that fails to file an annual Report of
18		Manufacturer's Purchase Credit Earned or an annual Report of
19		Manufacturer's Purchase Credit Used by the last day of the
20		sixth month following the end of the calendar year shall
21		forfeit all Manufacturer's Purchase Credit for that calendar
22		year unless it establishes that its failure to file was due to
23		reasonable cause. Manufacturer's Purchase Credit reports may
24		be amended to report and claim credit on qualifying purchases
25		not previously reported at any time before the credit would
26		have expired, unless both the Department and the purchaser have
27		agreed to an extension of the statute of limitations for the
28		issuance of a notice of tax liability as provided in Section 4
29		of the Retailers' Occupation Tax Act. If the time for
30		assessment or refund has been extended, then amended reports
31		for a calendar year may be filed at any time prior to the date
32		to which the statute of limitations for the calendar year or
33		portion thereof has been extended. Manufacturer's Purchase
34		Credit claimed on an amended report may be used to satisfy tax
35		liability under the Use Tax Act or the Service Use Tax Act (i)
36		on qualifying purchases of production related tangible

1		personal property made after the date the amended report is
2		filed or (ii) assessed by the Department on qualifying
3		production related tangible personal property purchased on or
4		after September 1, 2004. If the purchaser is not the
5		manufacturer or a graphic arts producer, but rents or leases
6		the use of the property to a manufacturer or graphic arts
7		producer, the purchaser may earn, report, and use
8		Manufacturer's Purchase Credit in the same manner as a
9		manufacturer or graphic arts producer. A purchaser shall not be
10		entitled to any Manufacturer's Purchase Credit for a purchase
11		that is required to be reported and is not timely reported as
12		provided in this Section. A purchaser remains liable for (i)
13		any tax that was satisfied by use of a Manufacturer's Purchase
14		Credit, as of the date of purchase, if that use is not timely
15		reported as required in this Section and (ii) for any
16		applicable penalties and interest for failing to pay the tax
17		when due.
18		(Source: P.A. 93-24, eff. 6-20-03.)

19		Section 20-15. The Service Use Tax Act is amended by
20		changing Sections 3-5 and 3-70 as follows:
21		(35 ILCS 110/3-5) (from Ch. 120, par. 439.33-5)
22		Sec. 3-5. Exemptions. Use of the following tangible
23		personal property is exempt from the tax imposed by this Act:
24		(1) Personal property purchased from a corporation,
25		society, association, foundation, institution, or
26		organization, other than a limited liability company, that is
27		organized and operated as a not-for-profit service enterprise
28		for the benefit of persons 65 years of age or older if the
29		personal property was not purchased by the enterprise for the
30		purpose of resale by the enterprise.
31		(2) Personal property purchased by a non-profit Illinois
32		county fair association for use in conducting, operating, or
33		promoting the county fair.
34		(3) Personal property purchased by a not-for-profit arts or

1		cultural organization that establishes, by proof required by
2		the Department by rule, that it has received an exemption under
3		Section 501(c)(3) of the Internal Revenue Code and that is
4		organized and operated primarily for the presentation or
5		support of arts or cultural programming, activities, or
6		services. These organizations include, but are not limited to,
7		music and dramatic arts organizations such as symphony
8		orchestras and theatrical groups, arts and cultural service
9		organizations, local arts councils, visual arts organizations,
10		and media arts organizations. On and after the effective date
11		of this amendatory Act of the 92nd General Assembly, however,
12		an entity otherwise eligible for this exemption shall not make
13		tax-free purchases unless it has an active identification
14		number issued by the Department.
15		(4) Legal tender, currency, medallions, or gold or silver
16		coinage issued by the State of Illinois, the government of the
17		United States of America, or the government of any foreign
18		country, and bullion.
19		(5) Until July 1, 2003 and beginning again on September 1,
20		2004, graphic arts machinery and equipment, including repair
21		and replacement parts, both new and used, and including that
22		manufactured on special order or purchased for lease, certified
23		by the purchaser to be used primarily for graphic arts
24		production. Equipment includes chemicals or chemicals acting
25		as catalysts but only if the chemicals or chemicals acting as
26		catalysts effect a direct and immediate change upon a graphic
27		arts product.
28		(6) Personal property purchased from a teacher-sponsored
29		student organization affiliated with an elementary or
30		secondary school located in Illinois.
31		(7) Farm machinery and equipment, both new and used,
32		including that manufactured on special order, certified by the
33		purchaser to be used primarily for production agriculture or
34		State or federal agricultural programs, including individual
35		replacement parts for the machinery and equipment, including
36		machinery and equipment purchased for lease, and including

1		implements of husbandry defined in Section 1-130 of the
2		Illinois Vehicle Code, farm machinery and agricultural
3		chemical and fertilizer spreaders, and nurse wagons required to
4		be registered under Section 3-809 of the Illinois Vehicle Code,
5		but excluding other motor vehicles required to be registered
6		under the Illinois Vehicle Code. Horticultural polyhouses or
7		hoop houses used for propagating, growing, or overwintering
8		plants shall be considered farm machinery and equipment under
9		this item (7). Agricultural chemical tender tanks and dry boxes
10		shall include units sold separately from a motor vehicle
11		required to be licensed and units sold mounted on a motor
12		vehicle required to be licensed if the selling price of the
13		tender is separately stated.
14		Farm machinery and equipment shall include precision
15		farming equipment that is installed or purchased to be
16		installed on farm machinery and equipment including, but not
17		limited to, tractors, harvesters, sprayers, planters, seeders,
18		or spreaders. Precision farming equipment includes, but is not
19		limited to, soil testing sensors, computers, monitors,
20		software, global positioning and mapping systems, and other
21		such equipment.
22		Farm machinery and equipment also includes computers,
23		sensors, software, and related equipment used primarily in the
24		computer-assisted operation of production agriculture
25		facilities, equipment, and activities such as, but not limited
26		to, the collection, monitoring, and correlation of animal and
27		crop data for the purpose of formulating animal diets and
28		agricultural chemicals. This item (7) is exempt from the
29		provisions of Section 3-75.
30		(8) Fuel and petroleum products sold to or used by an air
31		common carrier, certified by the carrier to be used for
32		consumption, shipment, or storage in the conduct of its
33		business as an air common carrier, for a flight destined for or
34		returning from a location or locations outside the United
35		States without regard to previous or subsequent domestic
36		stopovers.

1		(9) Proceeds of mandatory service charges separately
2		stated on customers' bills for the purchase and consumption of
3		food and beverages acquired as an incident to the purchase of a
4		service from a serviceman, to the extent that the proceeds of
5		the service charge are in fact turned over as tips or as a
6		substitute for tips to the employees who participate directly
7		in preparing, serving, hosting or cleaning up the food or
8		beverage function with respect to which the service charge is
9		imposed.
10		(10) Until July 1, 2003, oil field exploration, drilling,
11		and production equipment, including (i) rigs and parts of rigs,
12		rotary rigs, cable tool rigs, and workover rigs, (ii) pipe and
13		tubular goods, including casing and drill strings, (iii) pumps
14		and pump-jack units, (iv) storage tanks and flow lines, (v) any
15		individual replacement part for oil field exploration,
16		drilling, and production equipment, and (vi) machinery and
17		equipment purchased for lease; but excluding motor vehicles
18		required to be registered under the Illinois Vehicle Code.
19		(11) Proceeds from the sale of photoprocessing machinery
20		and equipment, including repair and replacement parts, both new
21		and used, including that manufactured on special order,
22		certified by the purchaser to be used primarily for
23		photoprocessing, and including photoprocessing machinery and
24		equipment purchased for lease.
25		(12) Until July 1, 2003, coal exploration, mining,
26		offhighway hauling, processing, maintenance, and reclamation
27		equipment, including replacement parts and equipment, and
28		including equipment purchased for lease, but excluding motor
29		vehicles required to be registered under the Illinois Vehicle
30		Code.
31		(13) Semen used for artificial insemination of livestock
32		for direct agricultural production.
33		(14) Horses, or interests in horses, registered with and
34		meeting the requirements of any of the Arabian Horse Club
35		Registry of America, Appaloosa Horse Club, American Quarter
36		Horse Association, United States Trotting Association, or

1		Jockey Club, as appropriate, used for purposes of breeding or
2		racing for prizes.
3		(15) Computers and communications equipment utilized for
4		any hospital purpose and equipment used in the diagnosis,
5		analysis, or treatment of hospital patients purchased by a
6		lessor who leases the equipment, under a lease of one year or
7		longer executed or in effect at the time the lessor would
8		otherwise be subject to the tax imposed by this Act, to a
9		hospital that has been issued an active tax exemption
10		identification number by the Department under Section 1g of the
11		Retailers' Occupation Tax Act. If the equipment is leased in a
12		manner that does not qualify for this exemption or is used in
13		any other non-exempt manner, the lessor shall be liable for the
14		tax imposed under this Act or the Use Tax Act, as the case may
15		be, based on the fair market value of the property at the time
16		the non-qualifying use occurs. No lessor shall collect or
17		attempt to collect an amount (however designated) that purports
18		to reimburse that lessor for the tax imposed by this Act or the
19		Use Tax Act, as the case may be, if the tax has not been paid by
20		the lessor. If a lessor improperly collects any such amount
21		from the lessee, the lessee shall have a legal right to claim a
22		refund of that amount from the lessor. If, however, that amount
23		is not refunded to the lessee for any reason, the lessor is
24		liable to pay that amount to the Department.
25		(16) Personal property purchased by a lessor who leases the
26		property, under a lease of one year or longer executed or in
27		effect at the time the lessor would otherwise be subject to the
28		tax imposed by this Act, to a governmental body that has been
29		issued an active tax exemption identification number by the
30		Department under Section 1g of the Retailers' Occupation Tax
31		Act. If the property is leased in a manner that does not
32		qualify for this exemption or is used in any other non-exempt
33		manner, the lessor shall be liable for the tax imposed under
34		this Act or the Use Tax Act, as the case may be, based on the
35		fair market value of the property at the time the
36		non-qualifying use occurs. No lessor shall collect or attempt

1		to collect an amount (however designated) that purports to
2		reimburse that lessor for the tax imposed by this Act or the
3		Use Tax Act, as the case may be, if the tax has not been paid by
4		the lessor. If a lessor improperly collects any such amount
5		from the lessee, the lessee shall have a legal right to claim a
6		refund of that amount from the lessor. If, however, that amount
7		is not refunded to the lessee for any reason, the lessor is
8		liable to pay that amount to the Department.
9		(17) Beginning with taxable years ending on or after
10		December 31, 1995 and ending with taxable years ending on or
11		before December 31, 2004, personal property that is donated for
12		disaster relief to be used in a State or federally declared
13		disaster area in Illinois or bordering Illinois by a
14		manufacturer or retailer that is registered in this State to a
15		corporation, society, association, foundation, or institution
16		that has been issued a sales tax exemption identification
17		number by the Department that assists victims of the disaster
18		who reside within the declared disaster area.
19		(18) Beginning with taxable years ending on or after
20		December 31, 1995 and ending with taxable years ending on or
21		before December 31, 2004, personal property that is used in the
22		performance of infrastructure repairs in this State, including
23		but not limited to municipal roads and streets, access roads,
24		bridges, sidewalks, waste disposal systems, water and sewer
25		line extensions, water distribution and purification
26		facilities, storm water drainage and retention facilities, and
27		sewage treatment facilities, resulting from a State or
28		federally declared disaster in Illinois or bordering Illinois
29		when such repairs are initiated on facilities located in the
30		declared disaster area within 6 months after the disaster.
31		(19) Beginning July 1, 1999, game or game birds purchased
32		at a "game breeding and hunting preserve area" or an "exotic
33		game hunting area" as those terms are used in the Wildlife Code
34		or at a hunting enclosure approved through rules adopted by the
35		Department of Natural Resources. This paragraph is exempt from
36		the provisions of Section 3-75.

1		(20) A motor vehicle, as that term is defined in Section
2		1-146 of the Illinois Vehicle Code, that is donated to a
3		corporation, limited liability company, society, association,
4		foundation, or institution that is determined by the Department
5		to be organized and operated exclusively for educational
6		purposes. For purposes of this exemption, "a corporation,
7		limited liability company, society, association, foundation,
8		or institution organized and operated exclusively for
9		educational purposes" means all tax-supported public schools,
10		private schools that offer systematic instruction in useful
11		branches of learning by methods common to public schools and
12		that compare favorably in their scope and intensity with the
13		course of study presented in tax-supported schools, and
14		vocational or technical schools or institutes organized and
15		operated exclusively to provide a course of study of not less
16		than 6 weeks duration and designed to prepare individuals to
17		follow a trade or to pursue a manual, technical, mechanical,
18		industrial, business, or commercial occupation.
19		(21) Beginning January 1, 2000, personal property,
20		including food, purchased through fundraising events for the
21		benefit of a public or private elementary or secondary school,
22		a group of those schools, or one or more school districts if
23		the events are sponsored by an entity recognized by the school
24		district that consists primarily of volunteers and includes
25		parents and teachers of the school children. This paragraph
26		does not apply to fundraising events (i) for the benefit of
27		private home instruction or (ii) for which the fundraising
28		entity purchases the personal property sold at the events from
29		another individual or entity that sold the property for the
30		purpose of resale by the fundraising entity and that profits
31		from the sale to the fundraising entity. This paragraph is
32		exempt from the provisions of Section 3-75.
33		(22) Beginning January 1, 2000 and through December 31,
34		2001, new or used automatic vending machines that prepare and
35		serve hot food and beverages, including coffee, soup, and other
36		items, and replacement parts for these machines. Beginning

1		January 1, 2002 and through June 30, 2003, machines and parts
2		for machines used in commercial, coin-operated amusement and
3		vending business if a use or occupation tax is paid on the
4		gross receipts derived from the use of the commercial,
5		coin-operated amusement and vending machines. This paragraph
6		is exempt from the provisions of Section 3-75.
7		(23) Food for human consumption that is to be consumed off
8		the premises where it is sold (other than alcoholic beverages,
9		soft drinks, and food that has been prepared for immediate
10		consumption) and prescription and nonprescription medicines,
11		drugs, medical appliances, and insulin, urine testing
12		materials, syringes, and needles used by diabetics, for human
13		use, when purchased for use by a person receiving medical
14		assistance under Article 5 of the Illinois Public Aid Code who
15		resides in a licensed long-term care facility, as defined in
16		the Nursing Home Care Act.
17		(24) Beginning on the effective date of this amendatory Act
18		of the 92nd General Assembly, computers and communications
19		equipment utilized for any hospital purpose and equipment used
20		in the diagnosis, analysis, or treatment of hospital patients
21		purchased by a lessor who leases the equipment, under a lease
22		of one year or longer executed or in effect at the time the
23		lessor would otherwise be subject to the tax imposed by this
24		Act, to a hospital that has been issued an active tax exemption
25		identification number by the Department under Section 1g of the
26		Retailers' Occupation Tax Act. If the equipment is leased in a
27		manner that does not qualify for this exemption or is used in
28		any other nonexempt manner, the lessor shall be liable for the
29		tax imposed under this Act or the Use Tax Act, as the case may
30		be, based on the fair market value of the property at the time
31		the nonqualifying use occurs. No lessor shall collect or
32		attempt to collect an amount (however designated) that purports
33		to reimburse that lessor for the tax imposed by this Act or the
34		Use Tax Act, as the case may be, if the tax has not been paid by
35		the lessor. If a lessor improperly collects any such amount
36		from the lessee, the lessee shall have a legal right to claim a

1		refund of that amount from the lessor. If, however, that amount
2		is not refunded to the lessee for any reason, the lessor is
3		liable to pay that amount to the Department. This paragraph is
4		exempt from the provisions of Section 3-75.
5		(25) Beginning on the effective date of this amendatory Act
6		of the 92nd General Assembly, personal property purchased by a
7		lessor who leases the property, under a lease of one year or
8		longer executed or in effect at the time the lessor would
9		otherwise be subject to the tax imposed by this Act, to a
10		governmental body that has been issued an active tax exemption
11		identification number by the Department under Section 1g of the
12		Retailers' Occupation Tax Act. If the property is leased in a
13		manner that does not qualify for this exemption or is used in
14		any other nonexempt manner, the lessor shall be liable for the
15		tax imposed under this Act or the Use Tax Act, as the case may
16		be, based on the fair market value of the property at the time
17		the nonqualifying use occurs. No lessor shall collect or
18		attempt to collect an amount (however designated) that purports
19		to reimburse that lessor for the tax imposed by this Act or the
20		Use Tax Act, as the case may be, if the tax has not been paid by
21		the lessor. If a lessor improperly collects any such amount
22		from the lessee, the lessee shall have a legal right to claim a
23		refund of that amount from the lessor. If, however, that amount
24		is not refunded to the lessee for any reason, the lessor is
25		liable to pay that amount to the Department. This paragraph is
26		exempt from the provisions of Section 3-75.
27		(Source: P.A. 92-16, eff. 6-28-01; 92-35, eff. 7-1-01; 92-227,
28		eff. 8-2-01; 92-337, eff. 8-10-01; 92-484, eff. 8-23-01;
29		92-651, eff. 7-11-02; 93-24, eff. 6-20-03.)
30		(35 ILCS 110/3-70)
31		Sec. 3-70. Manufacturer's Purchase Credit. For purchases
32		of machinery and equipment made on and after January 1, 1995
33		and through June 30, 2003, and on and after September 1, 2004,
34		a purchaser of manufacturing machinery and equipment that
35		qualifies for the exemption provided by Section 2 of this Act

1		earns a credit in an amount equal to a fixed percentage of the
2		tax which would have been incurred under this Act on those
3		purchases. For purchases of graphic arts machinery and
4		equipment made on or after July 1, 1996 and through June 30,
5		2003, and on and after September 1, 2004, a purchase of graphic
6		arts machinery and equipment that qualifies for the exemption
7		provided by paragraph (5) of Section 3-5 of this Act earns a
8		credit in an amount equal to a fixed percentage of the tax that
9		would have been incurred under this Act on those purchases. The
10		credit earned for the purchase of manufacturing machinery and
11		equipment and graphic arts machinery and equipment shall be
12		referred to as the Manufacturer's Purchase Credit. A graphic
13		arts producer is a person engaged in graphic arts production as
14		defined in Section 3-30 of the Service Occupation Tax Act.
15		Beginning July 1, 1996, all references in this Section to
16		manufacturers or manufacturing shall also refer to graphic arts
17		producers or graphic arts production.
18		The amount of credit shall be a percentage of the tax that
19		would have been incurred on the purchase of the manufacturing
20		machinery and equipment or graphic arts machinery and equipment
21		if the exemptions provided by Section 2 or paragraph (5) of
22		Section 3-5 of this Act had not been applicable.
23		All purchases prior to October 1, 2003 of manufacturing
24		machinery and equipment and graphic arts machinery and
25		equipment that qualify for the exemptions provided by paragraph
26		(5) of Section 2 or paragraph (5) of Section 3-5 of this Act
27		qualify for the credit without regard to whether the serviceman
28		elected, or could have elected, under paragraph (7) of Section
29		2 of this Act to exclude the transaction from this Act. If the
30		serviceman's billing to the service customer separately states
31		a selling price for the exempt manufacturing machinery or
32		equipment or the exempt graphic arts machinery and equipment,
33		the credit shall be calculated, as otherwise provided herein,
34		based on that selling price. If the serviceman's billing does
35		not separately state a selling price for the exempt
36		manufacturing machinery and equipment or the exempt graphic

1		arts machinery and equipment, the credit shall be calculated,
2		as otherwise provided herein, based on 50% of the entire
3		billing. If the serviceman contracts to design, develop, and
4		produce special order manufacturing machinery and equipment or
5		special order graphic arts machinery and equipment, and the
6		billing does not separately state a selling price for such
7		special order machinery and equipment, the credit shall be
8		calculated, as otherwise provided herein, based on 50% of the
9		entire billing. The provisions of this paragraph are effective
10		for purchases made on or after January 1, 1995.
11		The percentage shall be as follows:
12		(1) 15% for purchases made on or before June 30, 1995.
13		(2) 25% for purchases made after June 30, 1995, and on
14		or before June 30, 1996.
15		(3) 40% for purchases made after June 30, 1996, and on
16		or before June 30, 1997.
17		(4) 50% for purchases made on or after July 1, 1997.
18		(a) Manufacturer's Purchase Credit earned prior to July 1,
19		2003. This subsection (a) applies to Manufacturer's Purchase
20		Credit earned prior to July 1, 2003. A purchaser of production
21		related tangible personal property desiring to use the
22		Manufacturer's Purchase Credit shall certify to the seller
23		prior to October 1, 2003 that the purchaser is satisfying all
24		or part of the liability under the Use Tax Act or the Service
25		Use Tax Act that is due on the purchase of the production
26		related tangible personal property by use of a Manufacturer's
27		Purchase Credit. The Manufacturer's Purchase Credit
28		certification must be dated and shall include the name and
29		address of the purchaser, the purchaser's registration number,
30		if registered, the credit being applied, and a statement that
31		the State Use Tax or Service Use Tax liability is being
32		satisfied with the manufacturer's or graphic arts producer's
33		accumulated purchase credit. Certification may be incorporated
34		into the manufacturer's or graphic arts producer's purchase
35		order. Manufacturer's Purchase Credit certification provided
36		by the manufacturer or graphic arts producer prior to October

1		1, 2003 may be used to satisfy the retailer's or serviceman's
2		liability under the Retailers' Occupation Tax Act or Service
3		Occupation Tax Act for the credit claimed, not to exceed 6.25%
4		of the receipts subject to tax from a qualifying purchase, but
5		only if the retailer or serviceman reports the Manufacturer's
6		Purchase Credit claimed as required by the Department. A
7		Manufacturer's Purchase Credit reported on any original or
8		amended return filed under this Act after October 20, 2003
9		shall be disallowed. The Manufacturer's Purchase Credit earned
10		by purchase of exempt manufacturing machinery and equipment or
11		graphic arts machinery and equipment is a non-transferable
12		credit. A manufacturer or graphic arts producer that enters
13		into a contract involving the installation of tangible personal
14		property into real estate within a manufacturing or graphic
15		arts production facility, prior to October 1, 2003, may
16		authorize a construction contractor to utilize credit
17		accumulated by the manufacturer or graphic arts producer to
18		purchase the tangible personal property. A manufacturer or
19		graphic arts producer intending to use accumulated credit to
20		purchase such tangible personal property shall execute a
21		written contract authorizing the contractor to utilize a
22		specified dollar amount of credit. The contractor shall
23		furnish, prior to October 1, 2003, the supplier with the
24		manufacturer's or graphic arts producer's name, registration
25		or resale number, and a statement that a specific amount of the
26		Use Tax or Service Use Tax liability, not to exceed 6.25% of
27		the selling price, is being satisfied with the credit. The
28		manufacturer or graphic arts producer shall remain liable to
29		timely report all information required by the annual Report of
30		Manufacturer's Purchase Credit Used for credit utilized by a
31		construction contractor.
32		No Manufacturer's Purchase Credit earned prior to July 1,
33		2003 may be used after October 1, 2003. The Manufacturer's
34		Purchase Credit may be used to satisfy liability under the Use
35		Tax Act or the Service Use Tax Act due on the purchase of
36		production related tangible personal property (including

1		purchases by a manufacturer, by a graphic arts producer, or a
2		lessor who rents or leases the use of the property to a
3		manufacturer or graphic arts producer) that does not otherwise
4		qualify for the manufacturing machinery and equipment
5		exemption or the graphic arts machinery and equipment
6		exemption. "Production related tangible personal property"
7		means (i) all tangible personal property used or consumed by
8		the purchaser in a manufacturing facility in which a
9		manufacturing process described in Section 2-45 of the
10		Retailers' Occupation Tax Act takes place, including tangible
11		personal property purchased for incorporation into real estate
12		within a manufacturing facility and including, but not limited
13		to, tangible personal property used or consumed in activities
14		such as pre-production material handling, receiving, quality
15		control, inventory control, storage, staging, and packaging
16		for shipping and transportation purposes; (ii) all tangible
17		personal property used or consumed by the purchaser in a
18		graphic arts facility in which graphic arts production as
19		described in Section 2-30 of the Retailers' Occupation Tax Act
20		takes place, including tangible personal property purchased
21		for incorporation into real estate within a graphic arts
22		facility and including, but not limited to, all tangible
23		personal property used or consumed in activities such as
24		graphic arts preliminary or pre-press production,
25		pre-production material handling, receiving, quality control,
26		inventory control, storage, staging, sorting, labeling,
27		mailing, tying, wrapping, and packaging; and (iii) all tangible
28		personal property used or consumed by the purchaser for
29		research and development. "Production related tangible
30		personal property" does not include (i) tangible personal
31		property used, within or without a manufacturing or graphic
32		arts facility, in sales, purchasing, accounting, fiscal
33		management, marketing, personnel recruitment or selection, or
34		landscaping or (ii) tangible personal property required to be
35		titled or registered with a department, agency, or unit of
36		federal, state, or local government. The Manufacturer's

1		Purchase Credit may be used, prior to October 1, 2003, to
2		satisfy the tax arising either from the purchase of machinery
3		and equipment on or after January 1, 1995 for which the
4		manufacturing machinery and equipment exemption provided by
5		Section 2 of this Act was erroneously claimed, or the purchase
6		of machinery and equipment on or after July 1, 1996 for which
7		the exemption provided by paragraph (5) of Section 3-5 of this
8		Act was erroneously claimed, but not in satisfaction of
9		penalty, if any, and interest for failure to pay the tax when
10		due. A purchaser of production related tangible personal
11		property who is required to pay Illinois Use Tax or Service Use
12		Tax on the purchase directly to the Department may, prior to
13		October 1, 2003, utilize the Manufacturer's Purchase Credit in
14		satisfaction of the tax arising from that purchase, but not in
15		satisfaction of penalty and interest. A purchaser who uses the
16		Manufacturer's Purchase Credit to purchase property which is
17		later determined not to be production related tangible personal
18		property may be liable for tax, penalty, and interest on the
19		purchase of that property as of the date of purchase but shall
20		be entitled to use the disallowed Manufacturer's Purchase
21		Credit, so long as it has not expired and is used prior to
22		October 1, 2003, on qualifying purchases of production related
23		tangible personal property not previously subject to credit
24		usage. The Manufacturer's Purchase Credit earned by a
25		manufacturer or graphic arts producer expires the last day of
26		the second calendar year following the calendar year in which
27		the credit arose. No Manufacturer's Purchase Credit may be used
28		after September 30, 2003 regardless of when that credit was
29		earned.
30		A purchaser earning Manufacturer's Purchase Credit shall
31		sign and file an annual Report of Manufacturer's Purchase
32		Credit Earned for each calendar year no later than the last day
33		of the sixth month following the calendar year in which a
34		Manufacturer's Purchase Credit is earned. A Report of
35		Manufacturer's Purchase Credit Earned shall be filed on forms
36		as prescribed or approved by the Department and shall state,

1		for each month of the calendar year: (i) the total purchase
2		price of all purchases of exempt manufacturing or graphic arts
3		machinery on which the credit was earned; (ii) the total State
4		Use Tax or Service Use Tax which would have been due on those
5		items; (iii) the percentage used to calculate the amount of
6		credit earned; (iv) the amount of credit earned; and (v) such
7		other information as the Department may reasonably require. A
8		purchaser earning Manufacturer's Purchase Credit shall
9		maintain records which identify, as to each purchase of
10		manufacturing or graphic arts machinery and equipment on which
11		the purchaser earned Manufacturer's Purchase Credit, the
12		vendor (including, if applicable, either the vendor's
13		registration number or Federal Employer Identification
14		Number), the purchase price, and the amount of Manufacturer's
15		Purchase Credit earned on each purchase.
16		A purchaser using Manufacturer's Purchase Credit shall
17		sign and file an annual Report of Manufacturer's Purchase
18		Credit Used for each calendar year no later than the last day
19		of the sixth month following the calendar year in which a
20		Manufacturer's Purchase Credit is used. A Report of
21		Manufacturer's Purchase Credit Used shall be filed on forms as
22		prescribed or approved by the Department and shall state, for
23		each month of the calendar year: (i) the total purchase price
24		of production related tangible personal property purchased
25		from Illinois suppliers; (ii) the total purchase price of
26		production related tangible personal property purchased from
27		out-of-state suppliers; (iii) the total amount of credit used
28		during such month; and (iv) such other information as the
29		Department may reasonably require. A purchaser using
30		Manufacturer's Purchase Credit shall maintain records that
31		identify, as to each purchase of production related tangible
32		personal property on which the purchaser used Manufacturer's
33		Purchase Credit, the vendor (including, if applicable, either
34		the vendor's registration number or Federal Employer
35		Identification Number), the purchase price, and the amount of
36		Manufacturer's Purchase Credit used on each purchase.

1		No annual report shall be filed before May 1, 1996 or after
2		June 30, 2004. A purchaser that fails to file an annual Report
3		of Manufacturer's Purchase Credit Earned or an annual Report of
4		Manufacturer's Purchase Credit Used by the last day of the
5		sixth month following the end of the calendar year shall
6		forfeit all Manufacturer's Purchase Credit for that calendar
7		year unless it establishes that its failure to file was due to
8		reasonable cause. Manufacturer's Purchase Credit reports may
9		be amended to report and claim credit on qualifying purchases
10		not previously reported at any time before the credit would
11		have expired, unless both the Department and the purchaser have
12		agreed to an extension of the statute of limitations for the
13		issuance of a notice of tax liability as provided in Section 4
14		of the Retailers' Occupation Tax Act. If the time for
15		assessment or refund has been extended, then amended reports
16		for a calendar year may be filed at any time prior to the date
17		to which the statute of limitations for the calendar year or
18		portion thereof has been extended. No Manufacturer's Purchase
19		Credit report filed with the Department for periods prior to
20		January 1, 1995 shall be approved. Manufacturer's Purchase
21		Credit claimed on an amended report may be used, prior to
22		October 1, 2003, to satisfy tax liability under the Use Tax Act
23		or the Service Use Tax Act (i) on qualifying purchases of
24		production related tangible personal property made after the
25		date the amended report is filed or (ii) assessed by the
26		Department on qualifying purchases of production related
27		tangible personal property made in the case of manufacturers on
28		or after January 1, 1995, or in the case of graphic arts
29		producers on or after July 1, 1996.
30		If the purchaser is not the manufacturer or a graphic arts
31		producer, but rents or leases the use of the property to a
32		manufacturer or a graphic arts producer, the purchaser may
33		earn, report, and use Manufacturer's Purchase Credit in the
34		same manner as a manufacturer or graphic arts producer.
35		A purchaser shall not be entitled to any Manufacturer's
36		Purchase Credit for a purchase that is required to be reported

1		and is not timely reported as provided in this Section. A
2		purchaser remains liable for (i) any tax that was satisfied by
3		use of a Manufacturer's Purchase Credit, as of the date of
4		purchase, if that use is not timely reported as required in
5		this Section and (ii) for any applicable penalties and interest
6		for failing to pay the tax when due. No Manufacturer's Purchase
7		Credit may be used after September 30, 2003 to satisfy any tax
8		liability imposed under this Act, including any audit
9		liability.
10		(b) Manufacturer's Purchase Credit earned on and after
11		September 1, 2004. This subsection (b) applies to
12		Manufacturer's Purchase Credit earned on or after September 1,
13		2004. Manufacturer's Purchase Credit earned on or after
14		September 1, 2004 may only be used to satisfy the Use Tax or
15		Service Use Tax liability incurred on production related
16		tangible personal property purchased on or after September 1,
17		2004. A purchaser of production related tangible personal
18		property desiring to use the Manufacturer's Purchase Credit
19		shall certify to the seller that the purchaser is satisfying
20		all or part of the liability under the Use Tax Act or the
21		Service Use Tax Act that is due on the purchase of the
22		production related tangible personal property by use of a
23		Manufacturer's Purchase Credit. The Manufacturer's Purchase
24		Credit certification must be dated and shall include the name
25		and address of the purchaser, the purchaser's registration
26		number, if registered, the credit being applied, and a
27		statement that the State Use Tax or Service Use Tax liability
28		is being satisfied with the manufacturer's or graphic arts
29		producer's accumulated purchase credit. Certification may be
30		incorporated into the manufacturer's or graphic arts
31		producer's purchase order. Manufacturer's Purchase Credit
32		certification provided by the manufacturer or graphic arts
33		producer may be used to satisfy the retailer's or serviceman's
34		liability under the Retailers' Occupation Tax Act or Service
35		Occupation Tax Act for the credit claimed, not to exceed 6.25%
36		of the receipts subject to tax from a qualifying purchase, but

1		only if the retailer or serviceman reports the Manufacturer's
2		Purchase Credit claimed as required by the Department. The
3		Manufacturer's Purchase Credit earned by purchase of exempt
4		manufacturing machinery and equipment or graphic arts
5		machinery and equipment is a non-transferable credit. A
6		manufacturer or graphic arts producer that enters into a
7		contract involving the installation of tangible personal
8		property into real estate within a manufacturing or graphic
9		arts production facility may, on or after September 1, 2004,
10		authorize a construction contractor to utilize credit
11		accumulated by the manufacturer or graphic arts producer to
12		purchase the tangible personal property. A manufacturer or
13		graphic arts producer intending to use accumulated credit to
14		purchase such tangible personal property shall execute a
15		written contract authorizing the contractor to utilize a
16		specified dollar amount of credit. The contractor shall furnish
17		the supplier with the manufacturer's or graphic arts producer's
18		name, registration or resale number, and a statement that a
19		specific amount of the Use Tax or Service Use Tax liability,
20		not to exceed 6.25% of the selling price, is being satisfied
21		with the credit. The manufacturer or graphic arts producer
22		shall remain liable to timely report all information required
23		by the annual Report of Manufacturer's Purchase Credit Used for
24		credit utilized by a construction contractor.
25		The Manufacturer's Purchase Credit may be used to satisfy
26		liability under the Use Tax Act or the Service Use Tax Act due
27		on the purchase, made on or after September 1, 2004, of
28		production related tangible personal property (including
29		purchases by a manufacturer, by a graphic arts producer, or a
30		lessor who rents or leases the use of the property to a
31		manufacturer or graphic arts producer) that does not otherwise
32		qualify for the manufacturing machinery and equipment
33		exemption or the graphic arts machinery and equipment
34		exemption. "Production related tangible personal property"
35		means (i) all tangible personal property used or consumed by
36		the purchaser in a manufacturing facility in which a

1		manufacturing process described in Section 2-45 of the
2		Retailers' Occupation Tax Act takes place, including tangible
3		personal property purchased for incorporation into real estate
4		within a manufacturing facility and including, but not limited
5		to, tangible personal property used or consumed in activities
6		such as pre-production material handling, receiving, quality
7		control, inventory control, storage, staging, and packaging
8		for shipping and transportation purposes; (ii) all tangible
9		personal property used or consumed by the purchaser in a
10		graphic arts facility in which graphic arts production as
11		described in Section 2-30 of the Retailers' Occupation Tax Act
12		takes place, including tangible personal property purchased
13		for incorporation into real estate within a graphic arts
14		facility and including, but not limited to, all tangible
15		personal property used or consumed in activities such as
16		graphic arts preliminary or pre-press production,
17		pre-production material handling, receiving, quality control,
18		inventory control, storage, staging, sorting, labeling,
19		mailing, tying, wrapping, and packaging; and (iii) all tangible
20		personal property used or consumed by the purchaser for
21		research and development. "Production related tangible
22		personal property" does not include (i) tangible personal
23		property used, within or without a manufacturing or graphic
24		arts facility, in sales, purchasing, accounting, fiscal
25		management, marketing, personnel recruitment or selection, or
26		landscaping or (ii) tangible personal property required to be
27		titled or registered with a department, agency, or unit of
28		federal, state, or local government. The Manufacturer's
29		Purchase Credit may be used to satisfy the tax arising either
30		from the purchase of machinery and equipment on or after
31		September 1, 2004 for which the manufacturing machinery and
32		equipment exemption provided by Section 2 of this Act was
33		erroneously claimed, or the purchase of machinery and equipment
34		on or after September 1, 2004 for which the exemption provided
35		by paragraph (5) of Section 3-5 of this Act was erroneously
36		claimed, but not in satisfaction of penalty, if any, and

1		interest for failure to pay the tax when due. A purchaser of
2		production related tangible personal property that is
3		purchased on or after September 1, 2004 who is required to pay
4		Illinois Use Tax or Service Use Tax on the purchase directly to
5		the Department may utilize the Manufacturer's Purchase Credit
6		in satisfaction of the tax arising from that purchase, but not
7		in satisfaction of penalty and interest. A purchaser who uses
8		the Manufacturer's Purchase Credit to purchase property on and
9		after September 1, 2004 which is later determined not to be
10		production related tangible personal property may be liable for
11		tax, penalty, and interest on the purchase of that property as
12		of the date of purchase but shall be entitled to use the
13		disallowed Manufacturer's Purchase Credit, so long as it has
14		not expired, on qualifying purchases of production related
15		tangible personal property not previously subject to credit
16		usage. The Manufacturer's Purchase Credit earned by a
17		manufacturer or graphic arts producer expires the last day of
18		the second calendar year following the calendar year in which
19		the credit arose.
20		A purchaser earning Manufacturer's Purchase Credit shall
21		sign and file an annual Report of Manufacturer's Purchase
22		Credit Earned for each calendar year no later than the last day
23		of the sixth month following the calendar year in which a
24		Manufacturer's Purchase Credit is earned. A Report of
25		Manufacturer's Purchase Credit Earned shall be filed on forms
26		as prescribed or approved by the Department and shall state,
27		for each month of the calendar year: (i) the total purchase
28		price of all purchases of exempt manufacturing or graphic arts
29		machinery on which the credit was earned; (ii) the total State
30		Use Tax or Service Use Tax which would have been due on those
31		items; (iii) the percentage used to calculate the amount of
32		credit earned; (iv) the amount of credit earned; and (v) such
33		other information as the Department may reasonably require. A
34		purchaser earning Manufacturer's Purchase Credit shall
35		maintain records which identify, as to each purchase of
36		manufacturing or graphic arts machinery and equipment on which

1		the purchaser earned Manufacturer's Purchase Credit, the
2		vendor (including, if applicable, either the vendor's
3		registration number or Federal Employer Identification
4		Number), the purchase price, and the amount of Manufacturer's
5		Purchase Credit earned on each purchase.
6		A purchaser using Manufacturer's Purchase Credit shall
7		sign and file an annual Report of Manufacturer's Purchase
8		Credit Used for each calendar year no later than the last day
9		of the sixth month following the calendar year in which a
10		Manufacturer's Purchase Credit is used. A Report of
11		Manufacturer's Purchase Credit Used shall be filed on forms as
12		prescribed or approved by the Department and shall state, for
13		each month of the calendar year: (i) the total purchase price
14		of production related tangible personal property purchased
15		from Illinois suppliers; (ii) the total purchase price of
16		production related tangible personal property purchased from
17		out-of-state suppliers; (iii) the total amount of credit used
18		during such month; and (iv) such other information as the
19		Department may reasonably require. A purchaser using
20		Manufacturer's Purchase Credit shall maintain records that
21		identify, as to each purchase of production related tangible
22		personal property on which the purchaser used Manufacturer's
23		Purchase Credit, the vendor (including, if applicable, either
24		the vendor's registration number or Federal Employer
25		Identification Number), the purchase price, and the amount of
26		Manufacturer's Purchase Credit used on each purchase.
27		A purchaser that fails to file an annual Report of
28		Manufacturer's Purchase Credit Earned or an annual Report of
29		Manufacturer's Purchase Credit Used by the last day of the
30		sixth month following the end of the calendar year shall
31		forfeit all Manufacturer's Purchase Credit for that calendar
32		year unless it establishes that its failure to file was due to
33		reasonable cause. Manufacturer's Purchase Credit reports may
34		be amended to report and claim credit on qualifying purchases
35		not previously reported at any time before the credit would
36		have expired, unless both the Department and the purchaser have

1		agreed to an extension of the statute of limitations for the
2		issuance of a notice of tax liability as provided in Section 4
3		of the Retailers' Occupation Tax Act. If the time for
4		assessment or refund has been extended, then amended reports
5		for a calendar year may be filed at any time prior to the date
6		to which the statute of limitations for the calendar year or
7		portion thereof has been extended. Manufacturer's Purchase
8		Credit claimed on an amended report may be used to satisfy tax
9		liability under the Use Tax Act or the Service Use Tax Act (i)
10		on qualifying purchases of production related tangible
11		personal property made after the date the amended report is
12		filed or (ii) assessed by the Department on qualifying
13		production related tangible personal property purchased on or
14		after September 1, 2004.
15		If the purchaser is not the manufacturer or a graphic arts
16		producer, but rents or leases the use of the property to a
17		manufacturer or a graphic arts producer, the purchaser may
18		earn, report, and use Manufacturer's Purchase Credit in the
19		same manner as a manufacturer or graphic arts producer. A
20		purchaser shall not be entitled to any Manufacturer's Purchase
21		Credit for a purchase that is required to be reported and is
22		not timely reported as provided in this Section. A purchaser
23		remains liable for (i) any tax that was satisfied by use of a
24		Manufacturer's Purchase Credit, as of the date of purchase, if
25		that use is not timely reported as required in this Section and
26		(ii) for any applicable penalties and interest for failing to
27		pay the tax when due.
28		(Source: P.A. 93-24, eff. 6-20-03.)

29		Section 20-20. The Service Occupation Tax Act is amended by
30		changing Sections 3-5 and 9 as follows:
31		(35 ILCS 115/3-5) (from Ch. 120, par. 439.103-5)
32		Sec. 3-5. Exemptions. The following tangible personal
33		property is exempt from the tax imposed by this Act:
34		(1) Personal property sold by a corporation, society,

1		association, foundation, institution, or organization, other
2		than a limited liability company, that is organized and
3		operated as a not-for-profit service enterprise for the benefit
4		of persons 65 years of age or older if the personal property
5		was not purchased by the enterprise for the purpose of resale
6		by the enterprise.
7		(2) Personal property purchased by a not-for-profit
8		Illinois county fair association for use in conducting,
9		operating, or promoting the county fair.
10		(3) Personal property purchased by any not-for-profit arts
11		or cultural organization that establishes, by proof required by
12		the Department by rule, that it has received an exemption under
13		Section 501(c)(3) of the Internal Revenue Code and that is
14		organized and operated primarily for the presentation or
15		support of arts or cultural programming, activities, or
16		services. These organizations include, but are not limited to,
17		music and dramatic arts organizations such as symphony
18		orchestras and theatrical groups, arts and cultural service
19		organizations, local arts councils, visual arts organizations,
20		and media arts organizations. On and after the effective date
21		of this amendatory Act of the 92nd General Assembly, however,
22		an entity otherwise eligible for this exemption shall not make
23		tax-free purchases unless it has an active identification
24		number issued by the Department.
25		(4) Legal tender, currency, medallions, or gold or silver
26		coinage issued by the State of Illinois, the government of the
27		United States of America, or the government of any foreign
28		country, and bullion.
29		(5) Until July 1, 2003 and beginning again on September 1,
30		2004, graphic arts machinery and equipment, including repair
31		and replacement parts, both new and used, and including that
32		manufactured on special order or purchased for lease, certified
33		by the purchaser to be used primarily for graphic arts
34		production. Equipment includes chemicals or chemicals acting
35		as catalysts but only if the chemicals or chemicals acting as
36		catalysts effect a direct and immediate change upon a graphic

1		arts product.
2		(6) Personal property sold by a teacher-sponsored student
3		organization affiliated with an elementary or secondary school
4		located in Illinois.
5		(7) Farm machinery and equipment, both new and used,
6		including that manufactured on special order, certified by the
7		purchaser to be used primarily for production agriculture or
8		State or federal agricultural programs, including individual
9		replacement parts for the machinery and equipment, including
10		machinery and equipment purchased for lease, and including
11		implements of husbandry defined in Section 1-130 of the
12		Illinois Vehicle Code, farm machinery and agricultural
13		chemical and fertilizer spreaders, and nurse wagons required to
14		be registered under Section 3-809 of the Illinois Vehicle Code,
15		but excluding other motor vehicles required to be registered
16		under the Illinois Vehicle Code. Horticultural polyhouses or
17		hoop houses used for propagating, growing, or overwintering
18		plants shall be considered farm machinery and equipment under
19		this item (7). Agricultural chemical tender tanks and dry boxes
20		shall include units sold separately from a motor vehicle
21		required to be licensed and units sold mounted on a motor
22		vehicle required to be licensed if the selling price of the
23		tender is separately stated.
24		Farm machinery and equipment shall include precision
25		farming equipment that is installed or purchased to be
26		installed on farm machinery and equipment including, but not
27		limited to, tractors, harvesters, sprayers, planters, seeders,
28		or spreaders. Precision farming equipment includes, but is not
29		limited to, soil testing sensors, computers, monitors,
30		software, global positioning and mapping systems, and other
31		such equipment.
32		Farm machinery and equipment also includes computers,
33		sensors, software, and related equipment used primarily in the
34		computer-assisted operation of production agriculture
35		facilities, equipment, and activities such as, but not limited
36		to, the collection, monitoring, and correlation of animal and

1		crop data for the purpose of formulating animal diets and
2		agricultural chemicals. This item (7) is exempt from the
3		provisions of Section 3-55.
4		(8) Fuel and petroleum products sold to or used by an air
5		common carrier, certified by the carrier to be used for
6		consumption, shipment, or storage in the conduct of its
7		business as an air common carrier, for a flight destined for or
8		returning from a location or locations outside the United
9		States without regard to previous or subsequent domestic
10		stopovers.
11		(9) Proceeds of mandatory service charges separately
12		stated on customers' bills for the purchase and consumption of
13		food and beverages, to the extent that the proceeds of the
14		service charge are in fact turned over as tips or as a
15		substitute for tips to the employees who participate directly
16		in preparing, serving, hosting or cleaning up the food or
17		beverage function with respect to which the service charge is
18		imposed.
19		(10) Until July 1, 2003, oil field exploration, drilling,
20		and production equipment, including (i) rigs and parts of rigs,
21		rotary rigs, cable tool rigs, and workover rigs, (ii) pipe and
22		tubular goods, including casing and drill strings, (iii) pumps
23		and pump-jack units, (iv) storage tanks and flow lines, (v) any
24		individual replacement part for oil field exploration,
25		drilling, and production equipment, and (vi) machinery and
26		equipment purchased for lease; but excluding motor vehicles
27		required to be registered under the Illinois Vehicle Code.
28		(11) Photoprocessing machinery and equipment, including
29		repair and replacement parts, both new and used, including that
30		manufactured on special order, certified by the purchaser to be
31		used primarily for photoprocessing, and including
32		photoprocessing machinery and equipment purchased for lease.
33		(12) Until July 1, 2003, coal exploration, mining,
34		offhighway hauling, processing, maintenance, and reclamation
35		equipment, including replacement parts and equipment, and
36		including equipment purchased for lease, but excluding motor

1		vehicles required to be registered under the Illinois Vehicle
2		Code.
3		(13) Food for human consumption that is to be consumed off
4		the premises where it is sold (other than alcoholic beverages,
5		soft drinks and food that has been prepared for immediate
6		consumption) and prescription and non-prescription medicines,
7		drugs, medical appliances, and insulin, urine testing
8		materials, syringes, and needles used by diabetics, for human
9		use, when purchased for use by a person receiving medical
10		assistance under Article 5 of the Illinois Public Aid Code who
11		resides in a licensed long-term care facility, as defined in
12		the Nursing Home Care Act.
13		(14) Semen used for artificial insemination of livestock
14		for direct agricultural production.
15		(15) Horses, or interests in horses, registered with and
16		meeting the requirements of any of the Arabian Horse Club
17		Registry of America, Appaloosa Horse Club, American Quarter
18		Horse Association, United States Trotting Association, or
19		Jockey Club, as appropriate, used for purposes of breeding or
20		racing for prizes.
21		(16) Computers and communications equipment utilized for
22		any hospital purpose and equipment used in the diagnosis,
23		analysis, or treatment of hospital patients sold to a lessor
24		who leases the equipment, under a lease of one year or longer
25		executed or in effect at the time of the purchase, to a
26		hospital that has been issued an active tax exemption
27		identification number by the Department under Section 1g of the
28		Retailers' Occupation Tax Act.
29		(17) Personal property sold to a lessor who leases the
30		property, under a lease of one year or longer executed or in
31		effect at the time of the purchase, to a governmental body that
32		has been issued an active tax exemption identification number
33		by the Department under Section 1g of the Retailers' Occupation
34		Tax Act.
35		(18) Beginning with taxable years ending on or after
36		December 31, 1995 and ending with taxable years ending on or

1		before December 31, 2004, personal property that is donated for
2		disaster relief to be used in a State or federally declared
3		disaster area in Illinois or bordering Illinois by a
4		manufacturer or retailer that is registered in this State to a
5		corporation, society, association, foundation, or institution
6		that has been issued a sales tax exemption identification
7		number by the Department that assists victims of the disaster
8		who reside within the declared disaster area.
9		(19) Beginning with taxable years ending on or after
10		December 31, 1995 and ending with taxable years ending on or
11		before December 31, 2004, personal property that is used in the
12		performance of infrastructure repairs in this State, including
13		but not limited to municipal roads and streets, access roads,
14		bridges, sidewalks, waste disposal systems, water and sewer
15		line extensions, water distribution and purification
16		facilities, storm water drainage and retention facilities, and
17		sewage treatment facilities, resulting from a State or
18		federally declared disaster in Illinois or bordering Illinois
19		when such repairs are initiated on facilities located in the
20		declared disaster area within 6 months after the disaster.
21		(20) Beginning July 1, 1999, game or game birds sold at a
22		"game breeding and hunting preserve area" or an "exotic game
23		hunting area" as those terms are used in the Wildlife Code or
24		at a hunting enclosure approved through rules adopted by the
25		Department of Natural Resources. This paragraph is exempt from
26		the provisions of Section 3-55.
27		(21) A motor vehicle, as that term is defined in Section
28		1-146 of the Illinois Vehicle Code, that is donated to a
29		corporation, limited liability company, society, association,
30		foundation, or institution that is determined by the Department
31		to be organized and operated exclusively for educational
32		purposes. For purposes of this exemption, "a corporation,
33		limited liability company, society, association, foundation,
34		or institution organized and operated exclusively for
35		educational purposes" means all tax-supported public schools,
36		private schools that offer systematic instruction in useful

1		branches of learning by methods common to public schools and
2		that compare favorably in their scope and intensity with the
3		course of study presented in tax-supported schools, and
4		vocational or technical schools or institutes organized and
5		operated exclusively to provide a course of study of not less
6		than 6 weeks duration and designed to prepare individuals to
7		follow a trade or to pursue a manual, technical, mechanical,
8		industrial, business, or commercial occupation.
9		(22) Beginning January 1, 2000, personal property,
10		including food, purchased through fundraising events for the
11		benefit of a public or private elementary or secondary school,
12		a group of those schools, or one or more school districts if
13		the events are sponsored by an entity recognized by the school
14		district that consists primarily of volunteers and includes
15		parents and teachers of the school children. This paragraph
16		does not apply to fundraising events (i) for the benefit of
17		private home instruction or (ii) for which the fundraising
18		entity purchases the personal property sold at the events from
19		another individual or entity that sold the property for the
20		purpose of resale by the fundraising entity and that profits
21		from the sale to the fundraising entity. This paragraph is
22		exempt from the provisions of Section 3-55.
23		(23) Beginning January 1, 2000 and through December 31,
24		2001, new or used automatic vending machines that prepare and
25		serve hot food and beverages, including coffee, soup, and other
26		items, and replacement parts for these machines. Beginning
27		January 1, 2002 and through June 30, 2003, machines and parts
28		for machines used in commercial, coin-operated amusement and
29		vending business if a use or occupation tax is paid on the
30		gross receipts derived from the use of the commercial,
31		coin-operated amusement and vending machines. This paragraph
32		is exempt from the provisions of Section 3-55.
33		(24) Beginning on the effective date of this amendatory Act
34		of the 92nd General Assembly, computers and communications
35		equipment utilized for any hospital purpose and equipment used
36		in the diagnosis, analysis, or treatment of hospital patients

1		sold to a lessor who leases the equipment, under a lease of one
2		year or longer executed or in effect at the time of the
3		purchase, to a hospital that has been issued an active tax
4		exemption identification number by the Department under
5		Section 1g of the Retailers' Occupation Tax Act. This paragraph
6		is exempt from the provisions of Section 3-55.
7		(25) Beginning on the effective date of this amendatory Act
8		of the 92nd General Assembly, personal property sold to a
9		lessor who leases the property, under a lease of one year or
10		longer executed or in effect at the time of the purchase, to a
11		governmental body that has been issued an active tax exemption
12		identification number by the Department under Section 1g of the
13		Retailers' Occupation Tax Act. This paragraph is exempt from
14		the provisions of Section 3-55.
15		(26) Beginning on January 1, 2002, tangible personal
16		property purchased from an Illinois retailer by a taxpayer
17		engaged in centralized purchasing activities in Illinois who
18		will, upon receipt of the property in Illinois, temporarily
19		store the property in Illinois (i) for the purpose of
20		subsequently transporting it outside this State for use or
21		consumption thereafter solely outside this State or (ii) for
22		the purpose of being processed, fabricated, or manufactured
23		into, attached to, or incorporated into other tangible personal
24		property to be transported outside this State and thereafter
25		used or consumed solely outside this State. The Director of
26		Revenue shall, pursuant to rules adopted in accordance with the
27		Illinois Administrative Procedure Act, issue a permit to any
28		taxpayer in good standing with the Department who is eligible
29		for the exemption under this paragraph (26). The permit issued
30		under this paragraph (26) shall authorize the holder, to the
31		extent and in the manner specified in the rules adopted under
32		this Act, to purchase tangible personal property from a
33		retailer exempt from the taxes imposed by this Act. Taxpayers
34		shall maintain all necessary books and records to substantiate
35		the use and consumption of all such tangible personal property
36		outside of the State of Illinois.

1		(Source: P.A. 92-16, eff. 6-28-01; 92-35, eff. 7-1-01; 92-227,
2		eff. 8-2-01; 92-337, eff. 8-10-01; 92-484, eff. 8-23-01;
3		92-488, eff. 8-23-01; 92-651, eff. 7-11-02; 93-24, eff.
4		6-20-03.)
5		(35 ILCS 115/9) (from Ch. 120, par. 439.109)
6		Sec. 9. Each serviceman required or authorized to collect
7		the tax herein imposed shall pay to the Department the amount
8		of such tax at the time when he is required to file his return
9		for the period during which such tax was collectible, less a
10		discount of 2.1% prior to January 1, 1990, and 1.75% on and
11		after January 1, 1990, or $5 per calendar year, whichever is
12		greater, which is allowed to reimburse the serviceman for
13		expenses incurred in collecting the tax, keeping records,
14		preparing and filing returns, remitting the tax and supplying
15		data to the Department on request.
16		Where such tangible personal property is sold under a
17		conditional sales contract, or under any other form of sale
18		wherein the payment of the principal sum, or a part thereof, is
19		extended beyond the close of the period for which the return is
20		filed, the serviceman, in collecting the tax may collect, for
21		each tax return period, only the tax applicable to the part of
22		the selling price actually received during such tax return
23		period.
24		Except as provided hereinafter in this Section, on or
25		before the twentieth day of each calendar month, such
26		serviceman shall file a return for the preceding calendar month
27		in accordance with reasonable rules and regulations to be
28		promulgated by the Department of Revenue. Such return shall be
29		filed on a form prescribed by the Department and shall contain
30		such information as the Department may reasonably require.
31		The Department may require returns to be filed on a
32		quarterly basis. If so required, a return for each calendar
33		quarter shall be filed on or before the twentieth day of the
34		calendar month following the end of such calendar quarter. The
35		taxpayer shall also file a return with the Department for each

1		of the first two months of each calendar quarter, on or before
2		the twentieth day of the following calendar month, stating:
3		1. The name of the seller;
4		2. The address of the principal place of business from
5		which he engages in business as a serviceman in this State;
6		3. The total amount of taxable receipts received by him
7		during the preceding calendar month, including receipts
8		from charge and time sales, but less all deductions allowed
9		by law;
10		4. The amount of credit provided in Section 2d of this
11		Act;
12		5. The amount of tax due;
13		5-5. The signature of the taxpayer; and
14		6. Such other reasonable information as the Department
15		may require.
16		If a taxpayer fails to sign a return within 30 days after
17		the proper notice and demand for signature by the Department,
18		the return shall be considered valid and any amount shown to be
19		due on the return shall be deemed assessed.
20		Prior to October 1, 2003, and on and after September 1,
21		2004 a serviceman may accept a Manufacturer's Purchase Credit
22		certification from a purchaser in satisfaction of Service Use
23		Tax as provided in Section 3-70 of the Service Use Tax Act if
24		the purchaser provides the appropriate documentation as
25		required by Section 3-70 of the Service Use Tax Act. A
26		Manufacturer's Purchase Credit certification, accepted prior
27		to October 1, 2003 or on or after September 1, 2004 by a
28		serviceman as provided in Section 3-70 of the Service Use Tax
29		Act, may be used by that serviceman to satisfy Service
30		Occupation Tax liability in the amount claimed in the
31		certification, not to exceed 6.25% of the receipts subject to
32		tax from a qualifying purchase. A Manufacturer's Purchase
33		Credit reported on any original or amended return filed under
34		this Act after October 20, 2003 for reporting periods prior to
35		September 1, 2004 shall be disallowed. Manufacturer's Purchase
36		Credit reported on annual returns due on or after January 1,

1		2005 will be disallowed for periods prior to September 1, 2004.
2		No Manufacturer's Purchase Credit may be used after September
3		30, 2003 through August 31, 2004 to satisfy any tax liability
4		imposed under this Act, including any audit liability.
5		If the serviceman's average monthly tax liability to the
6		Department does not exceed $200, the Department may authorize
7		his returns to be filed on a quarter annual basis, with the
8		return for January, February and March of a given year being
9		due by April 20 of such year; with the return for April, May
10		and June of a given year being due by July 20 of such year; with
11		the return for July, August and September of a given year being
12		due by October 20 of such year, and with the return for
13		October, November and December of a given year being due by
14		January 20 of the following year.
15		If the serviceman's average monthly tax liability to the
16		Department does not exceed $50, the Department may authorize
17		his returns to be filed on an annual basis, with the return for
18		a given year being due by January 20 of the following year.
19		Such quarter annual and annual returns, as to form and
20		substance, shall be subject to the same requirements as monthly
21		returns.
22		Notwithstanding any other provision in this Act concerning
23		the time within which a serviceman may file his return, in the
24		case of any serviceman who ceases to engage in a kind of
25		business which makes him responsible for filing returns under
26		this Act, such serviceman shall file a final return under this
27		Act with the Department not more than 1 month after
28		discontinuing such business.
29		Beginning October 1, 1993, a taxpayer who has an average
30		monthly tax liability of $150,000 or more shall make all
31		payments required by rules of the Department by electronic
32		funds transfer. Beginning October 1, 1994, a taxpayer who has
33		an average monthly tax liability of $100,000 or more shall make
34		all payments required by rules of the Department by electronic
35		funds transfer. Beginning October 1, 1995, a taxpayer who has
36		an average monthly tax liability of $50,000 or more shall make

1		all payments required by rules of the Department by electronic
2		funds transfer. Beginning October 1, 2000, a taxpayer who has
3		an annual tax liability of $200,000 or more shall make all
4		payments required by rules of the Department by electronic
5		funds transfer. The term "annual tax liability" shall be the
6		sum of the taxpayer's liabilities under this Act, and under all
7		other State and local occupation and use tax laws administered
8		by the Department, for the immediately preceding calendar year.
9		The term "average monthly tax liability" means the sum of the
10		taxpayer's liabilities under this Act, and under all other
11		State and local occupation and use tax laws administered by the
12		Department, for the immediately preceding calendar year
13		divided by 12. Beginning on October 1, 2002, a taxpayer who has
14		a tax liability in the amount set forth in subsection (b) of
15		Section 2505-210 of the Department of Revenue Law shall make
16		all payments required by rules of the Department by electronic
17		funds transfer.
18		Before August 1 of each year beginning in 1993, the
19		Department shall notify all taxpayers required to make payments
20		by electronic funds transfer. All taxpayers required to make
21		payments by electronic funds transfer shall make those payments
22		for a minimum of one year beginning on October 1.
23		Any taxpayer not required to make payments by electronic
24		funds transfer may make payments by electronic funds transfer
25		with the permission of the Department.
26		All taxpayers required to make payment by electronic funds
27		transfer and any taxpayers authorized to voluntarily make
28		payments by electronic funds transfer shall make those payments
29		in the manner authorized by the Department.
30		The Department shall adopt such rules as are necessary to
31		effectuate a program of electronic funds transfer and the
32		requirements of this Section.
33		Where a serviceman collects the tax with respect to the
34		selling price of tangible personal property which he sells and
35		the purchaser thereafter returns such tangible personal
36		property and the serviceman refunds the selling price thereof

1		to the purchaser, such serviceman shall also refund, to the
2		purchaser, the tax so collected from the purchaser. When filing
3		his return for the period in which he refunds such tax to the
4		purchaser, the serviceman may deduct the amount of the tax so
5		refunded by him to the purchaser from any other Service
6		Occupation Tax, Service Use Tax, Retailers' Occupation Tax or
7		Use Tax which such serviceman may be required to pay or remit
8		to the Department, as shown by such return, provided that the
9		amount of the tax to be deducted shall previously have been
10		remitted to the Department by such serviceman. If the
11		serviceman shall not previously have remitted the amount of
12		such tax to the Department, he shall be entitled to no
13		deduction hereunder upon refunding such tax to the purchaser.
14		If experience indicates such action to be practicable, the
15		Department may prescribe and furnish a combination or joint
16		return which will enable servicemen, who are required to file
17		returns hereunder and also under the Retailers' Occupation Tax
18		Act, the Use Tax Act or the Service Use Tax Act, to furnish all
19		the return information required by all said Acts on the one
20		form.
21		Where the serviceman has more than one business registered
22		with the Department under separate registrations hereunder,
23		such serviceman shall file separate returns for each registered
24		business.
25		Beginning January 1, 1990, each month the Department shall
26		pay into the Local Government Tax Fund the revenue realized for
27		the preceding month from the 1% tax on sales of food for human
28		consumption which is to be consumed off the premises where it
29		is sold (other than alcoholic beverages, soft drinks and food
30		which has been prepared for immediate consumption) and
31		prescription and nonprescription medicines, drugs, medical
32		appliances and insulin, urine testing materials, syringes and
33		needles used by diabetics.
34		Beginning January 1, 1990, each month the Department shall
35		pay into the County and Mass Transit District Fund 4% of the
36		revenue realized for the preceding month from the 6.25% general

1		rate.
2		Beginning August 1, 2000, each month the Department shall
3		pay into the County and Mass Transit District Fund 20% of the
4		net revenue realized for the preceding month from the 1.25%
5		rate on the selling price of motor fuel and gasohol.
6		Beginning January 1, 1990, each month the Department shall
7		pay into the Local Government Tax Fund 16% of the revenue
8		realized for the preceding month from the 6.25% general rate on
9		transfers of tangible personal property.
10		Beginning August 1, 2000, each month the Department shall
11		pay into the Local Government Tax Fund 80% of the net revenue
12		realized for the preceding month from the 1.25% rate on the
13		selling price of motor fuel and gasohol.
14		Of the remainder of the moneys received by the Department
15		pursuant to this Act, (a) 1.75% thereof shall be paid into the
16		Build Illinois Fund and (b) prior to July 1, 1989, 2.2% and on
17		and after July 1, 1989, 3.8% thereof shall be paid into the
18		Build Illinois Fund; provided, however, that if in any fiscal
19		year the sum of (1) the aggregate of 2.2% or 3.8%, as the case
20		may be, of the moneys received by the Department and required
21		to be paid into the Build Illinois Fund pursuant to Section 3
22		of the Retailers' Occupation Tax Act, Section 9 of the Use Tax
23		Act, Section 9 of the Service Use Tax Act, and Section 9 of the
24		Service Occupation Tax Act, such Acts being hereinafter called
25		the "Tax Acts" and such aggregate of 2.2% or 3.8%, as the case
26		may be, of moneys being hereinafter called the "Tax Act
27		Amount", and (2) the amount transferred to the Build Illinois
28		Fund from the State and Local Sales Tax Reform Fund shall be
29		less than the Annual Specified Amount (as defined in Section 3
30		of the Retailers' Occupation Tax Act), an amount equal to the
31		difference shall be immediately paid into the Build Illinois
32		Fund from other moneys received by the Department pursuant to
33		the Tax Acts; and further provided, that if on the last
34		business day of any month the sum of (1) the Tax Act Amount
35		required to be deposited into the Build Illinois Account in the
36		Build Illinois Fund during such month and (2) the amount

1		transferred during such month to the Build Illinois Fund from
2		the State and Local Sales Tax Reform Fund shall have been less
3		than 1/12 of the Annual Specified Amount, an amount equal to
4		the difference shall be immediately paid into the Build
5		Illinois Fund from other moneys received by the Department
6		pursuant to the Tax Acts; and, further provided, that in no
7		event shall the payments required under the preceding proviso
8		result in aggregate payments into the Build Illinois Fund
9		pursuant to this clause (b) for any fiscal year in excess of
10		the greater of (i) the Tax Act Amount or (ii) the Annual
11		Specified Amount for such fiscal year; and, further provided,
12		that the amounts payable into the Build Illinois Fund under
13		this clause (b) shall be payable only until such time as the
14		aggregate amount on deposit under each trust indenture securing
15		Bonds issued and outstanding pursuant to the Build Illinois
16		Bond Act is sufficient, taking into account any future
17		investment income, to fully provide, in accordance with such
18		indenture, for the defeasance of or the payment of the
19		principal of, premium, if any, and interest on the Bonds
20		secured by such indenture and on any Bonds expected to be
21		issued thereafter and all fees and costs payable with respect
22		thereto, all as certified by the Director of the Bureau of the
23		Budget (now Governor's Office of Management and Budget). If on
24		the last business day of any month in which Bonds are
25		outstanding pursuant to the Build Illinois Bond Act, the
26		aggregate of the moneys deposited in the Build Illinois Bond
27		Account in the Build Illinois Fund in such month shall be less
28		than the amount required to be transferred in such month from
29		the Build Illinois Bond Account to the Build Illinois Bond
30		Retirement and Interest Fund pursuant to Section 13 of the
31		Build Illinois Bond Act, an amount equal to such deficiency
32		shall be immediately paid from other moneys received by the
33		Department pursuant to the Tax Acts to the Build Illinois Fund;
34		provided, however, that any amounts paid to the Build Illinois
35		Fund in any fiscal year pursuant to this sentence shall be
36		deemed to constitute payments pursuant to clause (b) of the

1		preceding sentence and shall reduce the amount otherwise
2		payable for such fiscal year pursuant to clause (b) of the
3		preceding sentence. The moneys received by the Department
4		pursuant to this Act and required to be deposited into the
5		Build Illinois Fund are subject to the pledge, claim and charge
6		set forth in Section 12 of the Build Illinois Bond Act.
7		Subject to payment of amounts into the Build Illinois Fund
8		as provided in the preceding paragraph or in any amendment
9		thereto hereafter enacted, the following specified monthly
10		installment of the amount requested in the certificate of the
11		Chairman of the Metropolitan Pier and Exposition Authority
12		provided under Section 8.25f of the State Finance Act, but not
13		in excess of the sums designated as "Total Deposit", shall be
14		deposited in the aggregate from collections under Section 9 of
15		the Use Tax Act, Section 9 of the Service Use Tax Act, Section
16		9 of the Service Occupation Tax Act, and Section 3 of the
17		Retailers' Occupation Tax Act into the McCormick Place
18		Expansion Project Fund in the specified fiscal years.

23		Beginning July 20, 1993 and in each month of each fiscal
24		year thereafter, one-eighth of the amount requested in the
25		certificate of the Chairman of the Metropolitan Pier and
26		Exposition Authority for that fiscal year, less the amount
27		deposited into the McCormick Place Expansion Project Fund by
28		the State Treasurer in the respective month under subsection
29		(g) of Section 13 of the Metropolitan Pier and Exposition
30		Authority Act, plus cumulative deficiencies in the deposits
31		required under this Section for previous months and years,
32		shall be deposited into the McCormick Place Expansion Project
33		Fund, until the full amount requested for the fiscal year, but
34		not in excess of the amount specified above as "Total Deposit",
35		has been deposited.
36		Subject to payment of amounts into the Build Illinois Fund

1		and the McCormick Place Expansion Project Fund pursuant to the
2		preceding paragraphs or in any amendments thereto hereafter
3		enacted, beginning July 1, 1993, the Department shall each
4		month pay into the Illinois Tax Increment Fund 0.27% of 80% of
5		the net revenue realized for the preceding month from the 6.25%
6		general rate on the selling price of tangible personal
7		property.
8		Subject to payment of amounts into the Build Illinois Fund
9		and the McCormick Place Expansion Project Fund pursuant to the
10		preceding paragraphs or in any amendments thereto hereafter
11		enacted, beginning with the receipt of the first report of
12		taxes paid by an eligible business and continuing for a 25-year
13		period, the Department shall each month pay into the Energy
14		Infrastructure Fund 80% of the net revenue realized from the
15		6.25% general rate on the selling price of Illinois-mined coal
16		that was sold to an eligible business. For purposes of this
17		paragraph, the term "eligible business" means a new electric
18		generating facility certified pursuant to Section 605-332 of
19		the Department of Commerce and Economic Opportunity Community
20		Affairs Law of the Civil Administrative Code of Illinois.
21		Remaining moneys received by the Department pursuant to
22		this Act shall be paid into the General Revenue Fund of the
23		State Treasury.
24		The Department may, upon separate written notice to a
25		taxpayer, require the taxpayer to prepare and file with the
26		Department on a form prescribed by the Department within not
27		less than 60 days after receipt of the notice an annual
28		information return for the tax year specified in the notice.
29		Such annual return to the Department shall include a statement
30		of gross receipts as shown by the taxpayer's last Federal
31		income tax return. If the total receipts of the business as
32		reported in the Federal income tax return do not agree with the
33		gross receipts reported to the Department of Revenue for the
34		same period, the taxpayer shall attach to his annual return a
35		schedule showing a reconciliation of the 2 amounts and the
36		reasons for the difference. The taxpayer's annual return to the

1		Department shall also disclose the cost of goods sold by the
2		taxpayer during the year covered by such return, opening and
3		closing inventories of such goods for such year, cost of goods
4		used from stock or taken from stock and given away by the
5		taxpayer during such year, pay roll information of the
6		taxpayer's business during such year and any additional
7		reasonable information which the Department deems would be
8		helpful in determining the accuracy of the monthly, quarterly
9		or annual returns filed by such taxpayer as hereinbefore
10		provided for in this Section.
11		If the annual information return required by this Section
12		is not filed when and as required, the taxpayer shall be liable
13		as follows:
14		(i) Until January 1, 1994, the taxpayer shall be liable
15		for a penalty equal to 1/6 of 1% of the tax due from such
16		taxpayer under this Act during the period to be covered by
17		the annual return for each month or fraction of a month
18		until such return is filed as required, the penalty to be
19		assessed and collected in the same manner as any other
20		penalty provided for in this Act.
21		(ii) On and after January 1, 1994, the taxpayer shall
22		be liable for a penalty as described in Section 3-4 of the
23		Uniform Penalty and Interest Act.
24		The chief executive officer, proprietor, owner or highest
25		ranking manager shall sign the annual return to certify the
26		accuracy of the information contained therein. Any person who
27		willfully signs the annual return containing false or
28		inaccurate information shall be guilty of perjury and punished
29		accordingly. The annual return form prescribed by the
30		Department shall include a warning that the person signing the
31		return may be liable for perjury.
32		The foregoing portion of this Section concerning the filing
33		of an annual information return shall not apply to a serviceman
34		who is not required to file an income tax return with the
35		United States Government.
36		As soon as possible after the first day of each month, upon

1		certification of the Department of Revenue, the Comptroller
2		shall order transferred and the Treasurer shall transfer from
3		the General Revenue Fund to the Motor Fuel Tax Fund an amount
4		equal to 1.7% of 80% of the net revenue realized under this Act
5		for the second preceding month. Beginning April 1, 2000, this
6		transfer is no longer required and shall not be made.
7		Net revenue realized for a month shall be the revenue
8		collected by the State pursuant to this Act, less the amount
9		paid out during that month as refunds to taxpayers for
10		overpayment of liability.
11		For greater simplicity of administration, it shall be
12		permissible for manufacturers, importers and wholesalers whose
13		products are sold by numerous servicemen in Illinois, and who
14		wish to do so, to assume the responsibility for accounting and
15		paying to the Department all tax accruing under this Act with
16		respect to such sales, if the servicemen who are affected do
17		not make written objection to the Department to this
18		arrangement.
19		(Source: P.A. 92-12, eff. 7-1-01; 92-208, eff. 8-2-01; 92-492,
20		eff. 1-1-02; 92-600, eff. 6-28-02; 92-651, eff. 7-11-02; 93-24,
21		eff. 6-20-03; revised 10-15-03.)

22		Section 20-25. The Retailers' Occupation Tax Act is amended
23		by changing Sections 2-5 and 3 as follows:
24		(35 ILCS 120/2-5) (from Ch. 120, par. 441-5)
25		Sec. 2-5. Exemptions. Gross receipts from proceeds from the
26		sale of the following tangible personal property are exempt
27		from the tax imposed by this Act:
28		(1) Farm chemicals.
29		(2) Farm machinery and equipment, both new and used,
30		including that manufactured on special order, certified by the
31		purchaser to be used primarily for production agriculture or
32		State or federal agricultural programs, including individual
33		replacement parts for the machinery and equipment, including
34		machinery and equipment purchased for lease, and including

1		implements of husbandry defined in Section 1-130 of the
2		Illinois Vehicle Code, farm machinery and agricultural
3		chemical and fertilizer spreaders, and nurse wagons required to
4		be registered under Section 3-809 of the Illinois Vehicle Code,
5		but excluding other motor vehicles required to be registered
6		under the Illinois Vehicle Code. Horticultural polyhouses or
7		hoop houses used for propagating, growing, or overwintering
8		plants shall be considered farm machinery and equipment under
9		this item (2). Agricultural chemical tender tanks and dry boxes
10		shall include units sold separately from a motor vehicle
11		required to be licensed and units sold mounted on a motor
12		vehicle required to be licensed, if the selling price of the
13		tender is separately stated.
14		Farm machinery and equipment shall include precision
15		farming equipment that is installed or purchased to be
16		installed on farm machinery and equipment including, but not
17		limited to, tractors, harvesters, sprayers, planters, seeders,
18		or spreaders. Precision farming equipment includes, but is not
19		limited to, soil testing sensors, computers, monitors,
20		software, global positioning and mapping systems, and other
21		such equipment.
22		Farm machinery and equipment also includes computers,
23		sensors, software, and related equipment used primarily in the
24		computer-assisted operation of production agriculture
25		facilities, equipment, and activities such as, but not limited
26		to, the collection, monitoring, and correlation of animal and
27		crop data for the purpose of formulating animal diets and
28		agricultural chemicals. This item (7) is exempt from the
29		provisions of Section 2-70.
30		(3) Until July 1, 2003, distillation machinery and
31		equipment, sold as a unit or kit, assembled or installed by the
32		retailer, certified by the user to be used only for the
33		production of ethyl alcohol that will be used for consumption
34		as motor fuel or as a component of motor fuel for the personal
35		use of the user, and not subject to sale or resale.
36		(4) Until July 1, 2003 and beginning again September 1,

1		2004, graphic arts machinery and equipment, including repair
2		and replacement parts, both new and used, and including that
3		manufactured on special order or purchased for lease, certified
4		by the purchaser to be used primarily for graphic arts
5		production. Equipment includes chemicals or chemicals acting
6		as catalysts but only if the chemicals or chemicals acting as
7		catalysts effect a direct and immediate change upon a graphic
8		arts product.
9		(5) A motor vehicle of the first division, a motor vehicle
10		of the second division that is a self-contained motor vehicle
11		designed or permanently converted to provide living quarters
12		for recreational, camping, or travel use, with direct walk
13		through access to the living quarters from the driver's seat,
14		or a motor vehicle of the second division that is of the van
15		configuration designed for the transportation of not less than
16		7 nor more than 16 passengers, as defined in Section 1-146 of
17		the Illinois Vehicle Code, that is used for automobile renting,
18		as defined in the Automobile Renting Occupation and Use Tax
19		Act.
20		(6) Personal property sold by a teacher-sponsored student
21		organization affiliated with an elementary or secondary school
22		located in Illinois.
23		(7) Until July 1, 2003, proceeds of that portion of the
24		selling price of a passenger car the sale of which is subject
25		to the Replacement Vehicle Tax.
26		(8) Personal property sold to an Illinois county fair
27		association for use in conducting, operating, or promoting the
28		county fair.
29		(9) Personal property sold to a not-for-profit arts or
30		cultural organization that establishes, by proof required by
31		the Department by rule, that it has received an exemption under
32		Section 501(c)(3) of the Internal Revenue Code and that is
33		organized and operated primarily for the presentation or
34		support of arts or cultural programming, activities, or
35		services. These organizations include, but are not limited to,
36		music and dramatic arts organizations such as symphony

1		orchestras and theatrical groups, arts and cultural service
2		organizations, local arts councils, visual arts organizations,
3		and media arts organizations. On and after the effective date
4		of this amendatory Act of the 92nd General Assembly, however,
5		an entity otherwise eligible for this exemption shall not make
6		tax-free purchases unless it has an active identification
7		number issued by the Department.
8		(10) Personal property sold by a corporation, society,
9		association, foundation, institution, or organization, other
10		than a limited liability company, that is organized and
11		operated as a not-for-profit service enterprise for the benefit
12		of persons 65 years of age or older if the personal property
13		was not purchased by the enterprise for the purpose of resale
14		by the enterprise.
15		(11) Personal property sold to a governmental body, to a
16		corporation, society, association, foundation, or institution
17		organized and operated exclusively for charitable, religious,
18		or educational purposes, or to a not-for-profit corporation,
19		society, association, foundation, institution, or organization
20		that has no compensated officers or employees and that is
21		organized and operated primarily for the recreation of persons
22		55 years of age or older. A limited liability company may
23		qualify for the exemption under this paragraph only if the
24		limited liability company is organized and operated
25		exclusively for educational purposes. On and after July 1,
26		1987, however, no entity otherwise eligible for this exemption
27		shall make tax-free purchases unless it has an active
28		identification number issued by the Department.
29		(12) Tangible personal property sold to interstate
30		carriers for hire for use as rolling stock moving in interstate
31		commerce or to lessors under leases of one year or longer
32		executed or in effect at the time of purchase by interstate
33		carriers for hire for use as rolling stock moving in interstate
34		commerce and equipment operated by a telecommunications
35		provider, licensed as a common carrier by the Federal
36		Communications Commission, which is permanently installed in

1		or affixed to aircraft moving in interstate commerce.
2		(12-5) On and after July 1, 2003, motor vehicles of the
3		second division with a gross vehicle weight in excess of 8,000
4		pounds that are subject to the commercial distribution fee
5		imposed under Section 3-815.1 of the Illinois Vehicle Code.
6		This exemption applies to repair and replacement parts added
7		after the initial purchase of such a motor vehicle if that
8		motor vehicle is used in a manner that would qualify for the
9		rolling stock exemption otherwise provided for in this Act.
10		(13) Proceeds from sales to owners, lessors, or shippers of
11		tangible personal property that is utilized by interstate
12		carriers for hire for use as rolling stock moving in interstate
13		commerce and equipment operated by a telecommunications
14		provider, licensed as a common carrier by the Federal
15		Communications Commission, which is permanently installed in
16		or affixed to aircraft moving in interstate commerce.
17		(14) Machinery and equipment that will be used by the
18		purchaser, or a lessee of the purchaser, primarily in the
19		process of manufacturing or assembling tangible personal
20		property for wholesale or retail sale or lease, whether the
21		sale or lease is made directly by the manufacturer or by some
22		other person, whether the materials used in the process are
23		owned by the manufacturer or some other person, or whether the
24		sale or lease is made apart from or as an incident to the
25		seller's engaging in the service occupation of producing
26		machines, tools, dies, jigs, patterns, gauges, or other similar
27		items of no commercial value on special order for a particular
28		purchaser.
29		(15) Proceeds of mandatory service charges separately
30		stated on customers' bills for purchase and consumption of food
31		and beverages, to the extent that the proceeds of the service
32		charge are in fact turned over as tips or as a substitute for
33		tips to the employees who participate directly in preparing,
34		serving, hosting or cleaning up the food or beverage function
35		with respect to which the service charge is imposed.
36		(16) Petroleum products sold to a purchaser if the seller

1		is prohibited by federal law from charging tax to the
2		purchaser.
3		(17) Tangible personal property sold to a common carrier by
4		rail or motor that receives the physical possession of the
5		property in Illinois and that transports the property, or
6		shares with another common carrier in the transportation of the
7		property, out of Illinois on a standard uniform bill of lading
8		showing the seller of the property as the shipper or consignor
9		of the property to a destination outside Illinois, for use
10		outside Illinois.
11		(18) Legal tender, currency, medallions, or gold or silver
12		coinage issued by the State of Illinois, the government of the
13		United States of America, or the government of any foreign
14		country, and bullion.
15		(19) Until July 1 2003, oil field exploration, drilling,
16		and production equipment, including (i) rigs and parts of rigs,
17		rotary rigs, cable tool rigs, and workover rigs, (ii) pipe and
18		tubular goods, including casing and drill strings, (iii) pumps
19		and pump-jack units, (iv) storage tanks and flow lines, (v) any
20		individual replacement part for oil field exploration,
21		drilling, and production equipment, and (vi) machinery and
22		equipment purchased for lease; but excluding motor vehicles
23		required to be registered under the Illinois Vehicle Code.
24		(20) Photoprocessing machinery and equipment, including
25		repair and replacement parts, both new and used, including that
26		manufactured on special order, certified by the purchaser to be
27		used primarily for photoprocessing, and including
28		photoprocessing machinery and equipment purchased for lease.
29		(21) Until July 1, 2003, coal exploration, mining,
30		offhighway hauling, processing, maintenance, and reclamation
31		equipment, including replacement parts and equipment, and
32		including equipment purchased for lease, but excluding motor
33		vehicles required to be registered under the Illinois Vehicle
34		Code.
35		(22) Fuel and petroleum products sold to or used by an air
36		carrier, certified by the carrier to be used for consumption,

1		shipment, or storage in the conduct of its business as an air
2		common carrier, for a flight destined for or returning from a
3		location or locations outside the United States without regard
4		to previous or subsequent domestic stopovers.
5		(23) A transaction in which the purchase order is received
6		by a florist who is located outside Illinois, but who has a
7		florist located in Illinois deliver the property to the
8		purchaser or the purchaser's donee in Illinois.
9		(24) Fuel consumed or used in the operation of ships,
10		barges, or vessels that are used primarily in or for the
11		transportation of property or the conveyance of persons for
12		hire on rivers bordering on this State if the fuel is delivered
13		by the seller to the purchaser's barge, ship, or vessel while
14		it is afloat upon that bordering river.
15		(25) A motor vehicle sold in this State to a nonresident
16		even though the motor vehicle is delivered to the nonresident
17		in this State, if the motor vehicle is not to be titled in this
18		State, and if a drive-away permit is issued to the motor
19		vehicle as provided in Section 3-603 of the Illinois Vehicle
20		Code or if the nonresident purchaser has vehicle registration
21		plates to transfer to the motor vehicle upon returning to his
22		or her home state. The issuance of the drive-away permit or
23		having the out-of-state registration plates to be transferred
24		is prima facie evidence that the motor vehicle will not be
25		titled in this State.
26		(26) Semen used for artificial insemination of livestock
27		for direct agricultural production.
28		(27) Horses, or interests in horses, registered with and
29		meeting the requirements of any of the Arabian Horse Club
30		Registry of America, Appaloosa Horse Club, American Quarter
31		Horse Association, United States Trotting Association, or
32		Jockey Club, as appropriate, used for purposes of breeding or
33		racing for prizes.
34		(28) Computers and communications equipment utilized for
35		any hospital purpose and equipment used in the diagnosis,
36		analysis, or treatment of hospital patients sold to a lessor

1		who leases the equipment, under a lease of one year or longer
2		executed or in effect at the time of the purchase, to a
3		hospital that has been issued an active tax exemption
4		identification number by the Department under Section 1g of
5		this Act.
6		(29) Personal property sold to a lessor who leases the
7		property, under a lease of one year or longer executed or in
8		effect at the time of the purchase, to a governmental body that
9		has been issued an active tax exemption identification number
10		by the Department under Section 1g of this Act.
11		(30) Beginning with taxable years ending on or after
12		December 31, 1995 and ending with taxable years ending on or
13		before December 31, 2004, personal property that is donated for
14		disaster relief to be used in a State or federally declared
15		disaster area in Illinois or bordering Illinois by a
16		manufacturer or retailer that is registered in this State to a
17		corporation, society, association, foundation, or institution
18		that has been issued a sales tax exemption identification
19		number by the Department that assists victims of the disaster
20		who reside within the declared disaster area.
21		(31) Beginning with taxable years ending on or after
22		December 31, 1995 and ending with taxable years ending on or
23		before December 31, 2004, personal property that is used in the
24		performance of infrastructure repairs in this State, including
25		but not limited to municipal roads and streets, access roads,
26		bridges, sidewalks, waste disposal systems, water and sewer
27		line extensions, water distribution and purification
28		facilities, storm water drainage and retention facilities, and
29		sewage treatment facilities, resulting from a State or
30		federally declared disaster in Illinois or bordering Illinois
31		when such repairs are initiated on facilities located in the
32		declared disaster area within 6 months after the disaster.
33		(32) Beginning July 1, 1999, game or game birds sold at a
34		"game breeding and hunting preserve area" or an "exotic game
35		hunting area" as those terms are used in the Wildlife Code or
36		at a hunting enclosure approved through rules adopted by the

1		Department of Natural Resources. This paragraph is exempt from
2		the provisions of Section 2-70.
3		(33) A motor vehicle, as that term is defined in Section
4		1-146 of the Illinois Vehicle Code, that is donated to a
5		corporation, limited liability company, society, association,
6		foundation, or institution that is determined by the Department
7		to be organized and operated exclusively for educational
8		purposes. For purposes of this exemption, "a corporation,
9		limited liability company, society, association, foundation,
10		or institution organized and operated exclusively for
11		educational purposes" means all tax-supported public schools,
12		private schools that offer systematic instruction in useful
13		branches of learning by methods common to public schools and
14		that compare favorably in their scope and intensity with the
15		course of study presented in tax-supported schools, and
16		vocational or technical schools or institutes organized and
17		operated exclusively to provide a course of study of not less
18		than 6 weeks duration and designed to prepare individuals to
19		follow a trade or to pursue a manual, technical, mechanical,
20		industrial, business, or commercial occupation.
21		(34) Beginning January 1, 2000, personal property,
22		including food, purchased through fundraising events for the
23		benefit of a public or private elementary or secondary school,
24		a group of those schools, or one or more school districts if
25		the events are sponsored by an entity recognized by the school
26		district that consists primarily of volunteers and includes
27		parents and teachers of the school children. This paragraph
28		does not apply to fundraising events (i) for the benefit of
29		private home instruction or (ii) for which the fundraising
30		entity purchases the personal property sold at the events from
31		another individual or entity that sold the property for the
32		purpose of resale by the fundraising entity and that profits
33		from the sale to the fundraising entity. This paragraph is
34		exempt from the provisions of Section 2-70.
35		(35) Beginning January 1, 2000 and through December 31,
36		2001, new or used automatic vending machines that prepare and

1		serve hot food and beverages, including coffee, soup, and other
2		items, and replacement parts for these machines. Beginning
3		January 1, 2002 and through June 30, 2003, machines and parts
4		for machines used in commercial, coin-operated amusement and
5		vending business if a use or occupation tax is paid on the
6		gross receipts derived from the use of the commercial,
7		coin-operated amusement and vending machines. This paragraph
8		is exempt from the provisions of Section 2-70.
9		(35-5) Food for human consumption that is to be consumed
10		off the premises where it is sold (other than alcoholic
11		beverages, soft drinks, and food that has been prepared for
12		immediate consumption) and prescription and nonprescription
13		medicines, drugs, medical appliances, and insulin, urine
14		testing materials, syringes, and needles used by diabetics, for
15		human use, when purchased for use by a person receiving medical
16		assistance under Article 5 of the Illinois Public Aid Code who
17		resides in a licensed long-term care facility, as defined in
18		the Nursing Home Care Act.
19		(36) Beginning August 2, 2001, computers and
20		communications equipment utilized for any hospital purpose and
21		equipment used in the diagnosis, analysis, or treatment of
22		hospital patients sold to a lessor who leases the equipment,
23		under a lease of one year or longer executed or in effect at
24		the time of the purchase, to a hospital that has been issued an
25		active tax exemption identification number by the Department
26		under Section 1g of this Act. This paragraph is exempt from the
27		provisions of Section 2-70.
28		(37) Beginning August 2, 2001, personal property sold to a
29		lessor who leases the property, under a lease of one year or
30		longer executed or in effect at the time of the purchase, to a
31		governmental body that has been issued an active tax exemption
32		identification number by the Department under Section 1g of
33		this Act. This paragraph is exempt from the provisions of
34		Section 2-70.
35		(38) Beginning on January 1, 2002, tangible personal
36		property purchased from an Illinois retailer by a taxpayer

1		engaged in centralized purchasing activities in Illinois who
2		will, upon receipt of the property in Illinois, temporarily
3		store the property in Illinois (i) for the purpose of
4		subsequently transporting it outside this State for use or
5		consumption thereafter solely outside this State or (ii) for
6		the purpose of being processed, fabricated, or manufactured
7		into, attached to, or incorporated into other tangible personal
8		property to be transported outside this State and thereafter
9		used or consumed solely outside this State. The Director of
10		Revenue shall, pursuant to rules adopted in accordance with the
11		Illinois Administrative Procedure Act, issue a permit to any
12		taxpayer in good standing with the Department who is eligible
13		for the exemption under this paragraph (38). The permit issued
14		under this paragraph (38) shall authorize the holder, to the
15		extent and in the manner specified in the rules adopted under
16		this Act, to purchase tangible personal property from a
17		retailer exempt from the taxes imposed by this Act. Taxpayers
18		shall maintain all necessary books and records to substantiate
19		the use and consumption of all such tangible personal property
20		outside of the State of Illinois.
21		(Source: P.A. 92-16, eff. 6-28-01; 92-35, eff. 7-1-01; 92-227,
22		eff. 8-2-01; 92-337, eff. 8-10-01; 92-484, eff. 8-23-01;
23		92-488, eff. 8-23-01; 92-651, eff. 7-11-02; 92-680, eff.
24		7-16-02; 93-23, eff. 6-20-03; 93-24, eff. 6-20-03; revised
25		9-11-03.)
26		(35 ILCS 120/3) (from Ch. 120, par. 442)
27		Sec. 3. Except as provided in this Section, on or before
28		the twentieth day of each calendar month, every person engaged
29		in the business of selling tangible personal property at retail
30		in this State during the preceding calendar month shall file a
31		return with the Department, stating:
32		1. The name of the seller;
33		2. His residence address and the address of his
34		principal place of business and the address of the
35		principal place of business (if that is a different

1		address) from which he engages in the business of selling
2		tangible personal property at retail in this State;
3		3. Total amount of receipts received by him during the
4		preceding calendar month or quarter, as the case may be,
5		from sales of tangible personal property, and from services
6		furnished, by him during such preceding calendar month or
7		quarter;
8		4. Total amount received by him during the preceding
9		calendar month or quarter on charge and time sales of
10		tangible personal property, and from services furnished,
11		by him prior to the month or quarter for which the return
12		is filed;
13		5. Deductions allowed by law;
14		6. Gross receipts which were received by him during the
15		preceding calendar month or quarter and upon the basis of
16		which the tax is imposed;
17		7. The amount of credit provided in Section 2d of this
18		Act;
19		8. The amount of tax due;
20		9. The signature of the taxpayer; and
21		10. Such other reasonable information as the
22		Department may require.
23		If a taxpayer fails to sign a return within 30 days after
24		the proper notice and demand for signature by the Department,
25		the return shall be considered valid and any amount shown to be
26		due on the return shall be deemed assessed.
27		Each return shall be accompanied by the statement of
28		prepaid tax issued pursuant to Section 2e for which credit is
29		claimed.
30		Prior to October 1, 2003, and on and after September 1,
31		2004 a retailer may accept a Manufacturer's Purchase Credit
32		certification from a purchaser in satisfaction of Use Tax as
33		provided in Section 3-85 of the Use Tax Act if the purchaser
34		provides the appropriate documentation as required by Section
35		3-85 of the Use Tax Act. A Manufacturer's Purchase Credit
36		certification, accepted by a retailer prior to October 1, 2003

1		and on and after September 1, 2004 as provided in Section 3-85
2		of the Use Tax Act, may be used by that retailer to satisfy
3		Retailers' Occupation Tax liability in the amount claimed in
4		the certification, not to exceed 6.25% of the receipts subject
5		to tax from a qualifying purchase. A Manufacturer's Purchase
6		Credit reported on any original or amended return filed under
7		this Act after October 20, 2003 for reporting periods prior to
8		September 1, 2004 shall be disallowed. Manufacturer's
9		Purchaser Credit reported on annual returns due on or after
10		January 1, 2005 will be disallowed for periods prior to
11		September 1, 2004. No Manufacturer's Purchase Credit may be
12		used after September 30, 2003 through August 31, 2004 to
13		satisfy any tax liability imposed under this Act, including any
14		audit liability.
15		The Department may require returns to be filed on a
16		quarterly basis. If so required, a return for each calendar
17		quarter shall be filed on or before the twentieth day of the
18		calendar month following the end of such calendar quarter. The
19		taxpayer shall also file a return with the Department for each
20		of the first two months of each calendar quarter, on or before
21		the twentieth day of the following calendar month, stating:
22		1. The name of the seller;
23		2. The address of the principal place of business from
24		which he engages in the business of selling tangible
25		personal property at retail in this State;
26		3. The total amount of taxable receipts received by him
27		during the preceding calendar month from sales of tangible
28		personal property by him during such preceding calendar
29		month, including receipts from charge and time sales, but
30		less all deductions allowed by law;
31		4. The amount of credit provided in Section 2d of this
32		Act;
33		5. The amount of tax due; and
34		6. Such other reasonable information as the Department
35		may require.
36		Beginning on October 1, 2003, any person who is not a

1		licensed distributor, importing distributor, or manufacturer,
2		as defined in the Liquor Control Act of 1934, but is engaged in
3		the business of selling, at retail, alcoholic liquor shall file
4		a statement with the Department of Revenue, in a format and at
5		a time prescribed by the Department, showing the total amount
6		paid for alcoholic liquor purchased during the preceding month
7		and such other information as is reasonably required by the
8		Department. The Department may adopt rules to require that this
9		statement be filed in an electronic or telephonic format. Such
10		rules may provide for exceptions from the filing requirements
11		of this paragraph. For the purposes of this paragraph, the term
12		"alcoholic liquor" shall have the meaning prescribed in the
13		Liquor Control Act of 1934.
14		Beginning on October 1, 2003, every distributor, importing
15		distributor, and manufacturer of alcoholic liquor as defined in
16		the Liquor Control Act of 1934, shall file a statement with the
17		Department of Revenue, no later than the 10th day of the month
18		for the preceding month during which transactions occurred, by
19		electronic means, showing the total amount of gross receipts
20		from the sale of alcoholic liquor sold or distributed during
21		the preceding month to purchasers; identifying the purchaser to
22		whom it was sold or distributed; the purchaser's tax
23		registration number; and such other information reasonably
24		required by the Department. A copy of the monthly statement
25		shall be sent to the retailer no later than the 10th day of the
26		month for the preceding month during which transactions
27		occurred.
28		If a total amount of less than $1 is payable, refundable or
29		creditable, such amount shall be disregarded if it is less than
30		50 cents and shall be increased to $1 if it is 50 cents or more.
31		Beginning October 1, 1993, a taxpayer who has an average
32		monthly tax liability of $150,000 or more shall make all
33		payments required by rules of the Department by electronic
34		funds transfer. Beginning October 1, 1994, a taxpayer who has
35		an average monthly tax liability of $100,000 or more shall make
36		all payments required by rules of the Department by electronic

1		funds transfer. Beginning October 1, 1995, a taxpayer who has
2		an average monthly tax liability of $50,000 or more shall make
3		all payments required by rules of the Department by electronic
4		funds transfer. Beginning October 1, 2000, a taxpayer who has
5		an annual tax liability of $200,000 or more shall make all
6		payments required by rules of the Department by electronic
7		funds transfer. The term "annual tax liability" shall be the
8		sum of the taxpayer's liabilities under this Act, and under all
9		other State and local occupation and use tax laws administered
10		by the Department, for the immediately preceding calendar year.
11		The term "average monthly tax liability" shall be the sum of
12		the taxpayer's liabilities under this Act, and under all other
13		State and local occupation and use tax laws administered by the
14		Department, for the immediately preceding calendar year
15		divided by 12. Beginning on October 1, 2002, a taxpayer who has
16		a tax liability in the amount set forth in subsection (b) of
17		Section 2505-210 of the Department of Revenue Law shall make
18		all payments required by rules of the Department by electronic
19		funds transfer.
20		Before August 1 of each year beginning in 1993, the
21		Department shall notify all taxpayers required to make payments
22		by electronic funds transfer. All taxpayers required to make
23		payments by electronic funds transfer shall make those payments
24		for a minimum of one year beginning on October 1.
25		Any taxpayer not required to make payments by electronic
26		funds transfer may make payments by electronic funds transfer
27		with the permission of the Department.
28		All taxpayers required to make payment by electronic funds
29		transfer and any taxpayers authorized to voluntarily make
30		payments by electronic funds transfer shall make those payments
31		in the manner authorized by the Department.
32		The Department shall adopt such rules as are necessary to
33		effectuate a program of electronic funds transfer and the
34		requirements of this Section.
35		Any amount which is required to be shown or reported on any
36		return or other document under this Act shall, if such amount

1		is not a whole-dollar amount, be increased to the nearest
2		whole-dollar amount in any case where the fractional part of a
3		dollar is 50 cents or more, and decreased to the nearest
4		whole-dollar amount where the fractional part of a dollar is
5		less than 50 cents.
6		If the retailer is otherwise required to file a monthly
7		return and if the retailer's average monthly tax liability to
8		the Department does not exceed $200, the Department may
9		authorize his returns to be filed on a quarter annual basis,
10		with the return for January, February and March of a given year
11		being due by April 20 of such year; with the return for April,
12		May and June of a given year being due by July 20 of such year;
13		with the return for July, August and September of a given year
14		being due by October 20 of such year, and with the return for
15		October, November and December of a given year being due by
16		January 20 of the following year.
17		If the retailer is otherwise required to file a monthly or
18		quarterly return and if the retailer's average monthly tax
19		liability with the Department does not exceed $50, the
20		Department may authorize his returns to be filed on an annual
21		basis, with the return for a given year being due by January 20
22		of the following year.
23		Such quarter annual and annual returns, as to form and
24		substance, shall be subject to the same requirements as monthly
25		returns.
26		Notwithstanding any other provision in this Act concerning
27		the time within which a retailer may file his return, in the
28		case of any retailer who ceases to engage in a kind of business
29		which makes him responsible for filing returns under this Act,
30		such retailer shall file a final return under this Act with the
31		Department not more than one month after discontinuing such
32		business.
33		Where the same person has more than one business registered
34		with the Department under separate registrations under this
35		Act, such person may not file each return that is due as a
36		single return covering all such registered businesses, but

1		shall file separate returns for each such registered business.
2		In addition, with respect to motor vehicles, watercraft,
3		aircraft, and trailers that are required to be registered with
4		an agency of this State, every retailer selling this kind of
5		tangible personal property shall file, with the Department,
6		upon a form to be prescribed and supplied by the Department, a
7		separate return for each such item of tangible personal
8		property which the retailer sells, except that if, in the same
9		transaction, (i) a retailer of aircraft, watercraft, motor
10		vehicles or trailers transfers more than one aircraft,
11		watercraft, motor vehicle or trailer to another aircraft,
12		watercraft, motor vehicle retailer or trailer retailer for the
13		purpose of resale or (ii) a retailer of aircraft, watercraft,
14		motor vehicles, or trailers transfers more than one aircraft,
15		watercraft, motor vehicle, or trailer to a purchaser for use as
16		a qualifying rolling stock as provided in Section 2-5 of this
17		Act, then that seller may report the transfer of all aircraft,
18		watercraft, motor vehicles or trailers involved in that
19		transaction to the Department on the same uniform
20		invoice-transaction reporting return form. For purposes of
21		this Section, "watercraft" means a Class 2, Class 3, or Class 4
22		watercraft as defined in Section 3-2 of the Boat Registration
23		and Safety Act, a personal watercraft, or any boat equipped
24		with an inboard motor.
25		Any retailer who sells only motor vehicles, watercraft,
26		aircraft, or trailers that are required to be registered with
27		an agency of this State, so that all retailers' occupation tax
28		liability is required to be reported, and is reported, on such
29		transaction reporting returns and who is not otherwise required
30		to file monthly or quarterly returns, need not file monthly or
31		quarterly returns. However, those retailers shall be required
32		to file returns on an annual basis.
33		The transaction reporting return, in the case of motor
34		vehicles or trailers that are required to be registered with an
35		agency of this State, shall be the same document as the Uniform
36		Invoice referred to in Section 5-402 of The Illinois Vehicle

1		Code and must show the name and address of the seller; the name
2		and address of the purchaser; the amount of the selling price
3		including the amount allowed by the retailer for traded-in
4		property, if any; the amount allowed by the retailer for the
5		traded-in tangible personal property, if any, to the extent to
6		which Section 1 of this Act allows an exemption for the value
7		of traded-in property; the balance payable after deducting such
8		trade-in allowance from the total selling price; the amount of
9		tax due from the retailer with respect to such transaction; the
10		amount of tax collected from the purchaser by the retailer on
11		such transaction (or satisfactory evidence that such tax is not
12		due in that particular instance, if that is claimed to be the
13		fact); the place and date of the sale; a sufficient
14		identification of the property sold; such other information as
15		is required in Section 5-402 of The Illinois Vehicle Code, and
16		such other information as the Department may reasonably
17		require.
18		The transaction reporting return in the case of watercraft
19		or aircraft must show the name and address of the seller; the
20		name and address of the purchaser; the amount of the selling
21		price including the amount allowed by the retailer for
22		traded-in property, if any; the amount allowed by the retailer
23		for the traded-in tangible personal property, if any, to the
24		extent to which Section 1 of this Act allows an exemption for
25		the value of traded-in property; the balance payable after
26		deducting such trade-in allowance from the total selling price;
27		the amount of tax due from the retailer with respect to such
28		transaction; the amount of tax collected from the purchaser by
29		the retailer on such transaction (or satisfactory evidence that
30		such tax is not due in that particular instance, if that is
31		claimed to be the fact); the place and date of the sale, a
32		sufficient identification of the property sold, and such other
33		information as the Department may reasonably require.
34		Such transaction reporting return shall be filed not later
35		than 20 days after the day of delivery of the item that is
36		being sold, but may be filed by the retailer at any time sooner

1		than that if he chooses to do so. The transaction reporting
2		return and tax remittance or proof of exemption from the
3		Illinois use tax may be transmitted to the Department by way of
4		the State agency with which, or State officer with whom the
5		tangible personal property must be titled or registered (if
6		titling or registration is required) if the Department and such
7		agency or State officer determine that this procedure will
8		expedite the processing of applications for title or
9		registration.
10		With each such transaction reporting return, the retailer
11		shall remit the proper amount of tax due (or shall submit
12		satisfactory evidence that the sale is not taxable if that is
13		the case), to the Department or its agents, whereupon the
14		Department shall issue, in the purchaser's name, a use tax
15		receipt (or a certificate of exemption if the Department is
16		satisfied that the particular sale is tax exempt) which such
17		purchaser may submit to the agency with which, or State officer
18		with whom, he must title or register the tangible personal
19		property that is involved (if titling or registration is
20		required) in support of such purchaser's application for an
21		Illinois certificate or other evidence of title or registration
22		to such tangible personal property.
23		No retailer's failure or refusal to remit tax under this
24		Act precludes a user, who has paid the proper tax to the
25		retailer, from obtaining his certificate of title or other
26		evidence of title or registration (if titling or registration
27		is required) upon satisfying the Department that such user has
28		paid the proper tax (if tax is due) to the retailer. The
29		Department shall adopt appropriate rules to carry out the
30		mandate of this paragraph.
31		If the user who would otherwise pay tax to the retailer
32		wants the transaction reporting return filed and the payment of
33		the tax or proof of exemption made to the Department before the
34		retailer is willing to take these actions and such user has not
35		paid the tax to the retailer, such user may certify to the fact
36		of such delay by the retailer and may (upon the Department

1		being satisfied of the truth of such certification) transmit
2		the information required by the transaction reporting return
3		and the remittance for tax or proof of exemption directly to
4		the Department and obtain his tax receipt or exemption
5		determination, in which event the transaction reporting return
6		and tax remittance (if a tax payment was required) shall be
7		credited by the Department to the proper retailer's account
8		with the Department, but without the 2.1% or 1.75% discount
9		provided for in this Section being allowed. When the user pays
10		the tax directly to the Department, he shall pay the tax in the
11		same amount and in the same form in which it would be remitted
12		if the tax had been remitted to the Department by the retailer.
13		Refunds made by the seller during the preceding return
14		period to purchasers, on account of tangible personal property
15		returned to the seller, shall be allowed as a deduction under
16		subdivision 5 of his monthly or quarterly return, as the case
17		may be, in case the seller had theretofore included the
18		receipts from the sale of such tangible personal property in a
19		return filed by him and had paid the tax imposed by this Act
20		with respect to such receipts.
21		Where the seller is a corporation, the return filed on
22		behalf of such corporation shall be signed by the president,
23		vice-president, secretary or treasurer or by the properly
24		accredited agent of such corporation.
25		Where the seller is a limited liability company, the return
26		filed on behalf of the limited liability company shall be
27		signed by a manager, member, or properly accredited agent of
28		the limited liability company.
29		Except as provided in this Section, the retailer filing the
30		return under this Section shall, at the time of filing such
31		return, pay to the Department the amount of tax imposed by this
32		Act less a discount of 2.1% prior to January 1, 1990 and 1.75%
33		on and after January 1, 1990, or $5 per calendar year,
34		whichever is greater, which is allowed to reimburse the
35		retailer for the expenses incurred in keeping records,
36		preparing and filing returns, remitting the tax and supplying

1		data to the Department on request. Any prepayment made pursuant
2		to Section 2d of this Act shall be included in the amount on
3		which such 2.1% or 1.75% discount is computed. In the case of
4		retailers who report and pay the tax on a transaction by
5		transaction basis, as provided in this Section, such discount
6		shall be taken with each such tax remittance instead of when
7		such retailer files his periodic return.
8		Before October 1, 2000, if the taxpayer's average monthly
9		tax liability to the Department under this Act, the Use Tax
10		Act, the Service Occupation Tax Act, and the Service Use Tax
11		Act, excluding any liability for prepaid sales tax to be
12		remitted in accordance with Section 2d of this Act, was $10,000
13		or more during the preceding 4 complete calendar quarters, he
14		shall file a return with the Department each month by the 20th
15		day of the month next following the month during which such tax
16		liability is incurred and shall make payments to the Department
17		on or before the 7th, 15th, 22nd and last day of the month
18		during which such liability is incurred. On and after October
19		1, 2000, if the taxpayer's average monthly tax liability to the
20		Department under this Act, the Use Tax Act, the Service
21		Occupation Tax Act, and the Service Use Tax Act, excluding any
22		liability for prepaid sales tax to be remitted in accordance
23		with Section 2d of this Act, was $20,000 or more during the
24		preceding 4 complete calendar quarters, he shall file a return
25		with the Department each month by the 20th day of the month
26		next following the month during which such tax liability is
27		incurred and shall make payment to the Department on or before
28		the 7th, 15th, 22nd and last day of the month during which such
29		liability is incurred. If the month during which such tax
30		liability is incurred began prior to January 1, 1985, each
31		payment shall be in an amount equal to 1/4 of the taxpayer's
32		actual liability for the month or an amount set by the
33		Department not to exceed 1/4 of the average monthly liability
34		of the taxpayer to the Department for the preceding 4 complete
35		calendar quarters (excluding the month of highest liability and
36		the month of lowest liability in such 4 quarter period). If the

1		month during which such tax liability is incurred begins on or
2		after January 1, 1985 and prior to January 1, 1987, each
3		payment shall be in an amount equal to 22.5% of the taxpayer's
4		actual liability for the month or 27.5% of the taxpayer's
5		liability for the same calendar month of the preceding year. If
6		the month during which such tax liability is incurred begins on
7		or after January 1, 1987 and prior to January 1, 1988, each
8		payment shall be in an amount equal to 22.5% of the taxpayer's
9		actual liability for the month or 26.25% of the taxpayer's
10		liability for the same calendar month of the preceding year. If
11		the month during which such tax liability is incurred begins on
12		or after January 1, 1988, and prior to January 1, 1989, or
13		begins on or after January 1, 1996, each payment shall be in an
14		amount equal to 22.5% of the taxpayer's actual liability for
15		the month or 25% of the taxpayer's liability for the same
16		calendar month of the preceding year. If the month during which
17		such tax liability is incurred begins on or after January 1,
18		1989, and prior to January 1, 1996, each payment shall be in an
19		amount equal to 22.5% of the taxpayer's actual liability for
20		the month or 25% of the taxpayer's liability for the same
21		calendar month of the preceding year or 100% of the taxpayer's
22		actual liability for the quarter monthly reporting period. The
23		amount of such quarter monthly payments shall be credited
24		against the final tax liability of the taxpayer's return for
25		that month. Before October 1, 2000, once applicable, the
26		requirement of the making of quarter monthly payments to the
27		Department by taxpayers having an average monthly tax liability
28		of $10,000 or more as determined in the manner provided above
29		shall continue until such taxpayer's average monthly liability
30		to the Department during the preceding 4 complete calendar
31		quarters (excluding the month of highest liability and the
32		month of lowest liability) is less than $9,000, or until such
33		taxpayer's average monthly liability to the Department as
34		computed for each calendar quarter of the 4 preceding complete
35		calendar quarter period is less than $10,000. However, if a
36		taxpayer can show the Department that a substantial change in

1		the taxpayer's business has occurred which causes the taxpayer
2		to anticipate that his average monthly tax liability for the
3		reasonably foreseeable future will fall below the $10,000
4		threshold stated above, then such taxpayer may petition the
5		Department for a change in such taxpayer's reporting status. On
6		and after October 1, 2000, once applicable, the requirement of
7		the making of quarter monthly payments to the Department by
8		taxpayers having an average monthly tax liability of $20,000 or
9		more as determined in the manner provided above shall continue
10		until such taxpayer's average monthly liability to the
11		Department during the preceding 4 complete calendar quarters
12		(excluding the month of highest liability and the month of
13		lowest liability) is less than $19,000 or until such taxpayer's
14		average monthly liability to the Department as computed for
15		each calendar quarter of the 4 preceding complete calendar
16		quarter period is less than $20,000. However, if a taxpayer can
17		show the Department that a substantial change in the taxpayer's
18		business has occurred which causes the taxpayer to anticipate
19		that his average monthly tax liability for the reasonably
20		foreseeable future will fall below the $20,000 threshold stated
21		above, then such taxpayer may petition the Department for a
22		change in such taxpayer's reporting status. The Department
23		shall change such taxpayer's reporting status unless it finds
24		that such change is seasonal in nature and not likely to be
25		long term. If any such quarter monthly payment is not paid at
26		the time or in the amount required by this Section, then the
27		taxpayer shall be liable for penalties and interest on the
28		difference between the minimum amount due as a payment and the
29		amount of such quarter monthly payment actually and timely
30		paid, except insofar as the taxpayer has previously made
31		payments for that month to the Department in excess of the
32		minimum payments previously due as provided in this Section.
33		The Department shall make reasonable rules and regulations to
34		govern the quarter monthly payment amount and quarter monthly
35		payment dates for taxpayers who file on other than a calendar
36		monthly basis.

1		The provisions of this paragraph apply before October 1,
2		2001. Without regard to whether a taxpayer is required to make
3		quarter monthly payments as specified above, any taxpayer who
4		is required by Section 2d of this Act to collect and remit
5		prepaid taxes and has collected prepaid taxes which average in
6		excess of $25,000 per month during the preceding 2 complete
7		calendar quarters, shall file a return with the Department as
8		required by Section 2f and shall make payments to the
9		Department on or before the 7th, 15th, 22nd and last day of the
10		month during which such liability is incurred. If the month
11		during which such tax liability is incurred began prior to the
12		effective date of this amendatory Act of 1985, each payment
13		shall be in an amount not less than 22.5% of the taxpayer's
14		actual liability under Section 2d. If the month during which
15		such tax liability is incurred begins on or after January 1,
16		1986, each payment shall be in an amount equal to 22.5% of the
17		taxpayer's actual liability for the month or 27.5% of the
18		taxpayer's liability for the same calendar month of the
19		preceding calendar year. If the month during which such tax
20		liability is incurred begins on or after January 1, 1987, each
21		payment shall be in an amount equal to 22.5% of the taxpayer's
22		actual liability for the month or 26.25% of the taxpayer's
23		liability for the same calendar month of the preceding year.
24		The amount of such quarter monthly payments shall be credited
25		against the final tax liability of the taxpayer's return for
26		that month filed under this Section or Section 2f, as the case
27		may be. Once applicable, the requirement of the making of
28		quarter monthly payments to the Department pursuant to this
29		paragraph shall continue until such taxpayer's average monthly
30		prepaid tax collections during the preceding 2 complete
31		calendar quarters is $25,000 or less. If any such quarter
32		monthly payment is not paid at the time or in the amount
33		required, the taxpayer shall be liable for penalties and
34		interest on such difference, except insofar as the taxpayer has
35		previously made payments for that month in excess of the
36		minimum payments previously due.

1		The provisions of this paragraph apply on and after October
2		1, 2001. Without regard to whether a taxpayer is required to
3		make quarter monthly payments as specified above, any taxpayer
4		who is required by Section 2d of this Act to collect and remit
5		prepaid taxes and has collected prepaid taxes that average in
6		excess of $20,000 per month during the preceding 4 complete
7		calendar quarters shall file a return with the Department as
8		required by Section 2f and shall make payments to the
9		Department on or before the 7th, 15th, 22nd and last day of the
10		month during which the liability is incurred. Each payment
11		shall be in an amount equal to 22.5% of the taxpayer's actual
12		liability for the month or 25% of the taxpayer's liability for
13		the same calendar month of the preceding year. The amount of
14		the quarter monthly payments shall be credited against the
15		final tax liability of the taxpayer's return for that month
16		filed under this Section or Section 2f, as the case may be.
17		Once applicable, the requirement of the making of quarter
18		monthly payments to the Department pursuant to this paragraph
19		shall continue until the taxpayer's average monthly prepaid tax
20		collections during the preceding 4 complete calendar quarters
21		(excluding the month of highest liability and the month of
22		lowest liability) is less than $19,000 or until such taxpayer's
23		average monthly liability to the Department as computed for
24		each calendar quarter of the 4 preceding complete calendar
25		quarters is less than $20,000. If any such quarter monthly
26		payment is not paid at the time or in the amount required, the
27		taxpayer shall be liable for penalties and interest on such
28		difference, except insofar as the taxpayer has previously made
29		payments for that month in excess of the minimum payments
30		previously due.
31		If any payment provided for in this Section exceeds the
32		taxpayer's liabilities under this Act, the Use Tax Act, the
33		Service Occupation Tax Act and the Service Use Tax Act, as
34		shown on an original monthly return, the Department shall, if
35		requested by the taxpayer, issue to the taxpayer a credit
36		memorandum no later than 30 days after the date of payment. The

1		credit evidenced by such credit memorandum may be assigned by
2		the taxpayer to a similar taxpayer under this Act, the Use Tax
3		Act, the Service Occupation Tax Act or the Service Use Tax Act,
4		in accordance with reasonable rules and regulations to be
5		prescribed by the Department. If no such request is made, the
6		taxpayer may credit such excess payment against tax liability
7		subsequently to be remitted to the Department under this Act,
8		the Use Tax Act, the Service Occupation Tax Act or the Service
9		Use Tax Act, in accordance with reasonable rules and
10		regulations prescribed by the Department. If the Department
11		subsequently determined that all or any part of the credit
12		taken was not actually due to the taxpayer, the taxpayer's 2.1%
13		and 1.75% vendor's discount shall be reduced by 2.1% or 1.75%
14		of the difference between the credit taken and that actually
15		due, and that taxpayer shall be liable for penalties and
16		interest on such difference.
17		If a retailer of motor fuel is entitled to a credit under
18		Section 2d of this Act which exceeds the taxpayer's liability
19		to the Department under this Act for the month which the
20		taxpayer is filing a return, the Department shall issue the
21		taxpayer a credit memorandum for the excess.
22		Beginning January 1, 1990, each month the Department shall
23		pay into the Local Government Tax Fund, a special fund in the
24		State treasury which is hereby created, the net revenue
25		realized for the preceding month from the 1% tax on sales of
26		food for human consumption which is to be consumed off the
27		premises where it is sold (other than alcoholic beverages, soft
28		drinks and food which has been prepared for immediate
29		consumption) and prescription and nonprescription medicines,
30		drugs, medical appliances and insulin, urine testing
31		materials, syringes and needles used by diabetics.
32		Beginning January 1, 1990, each month the Department shall
33		pay into the County and Mass Transit District Fund, a special
34		fund in the State treasury which is hereby created, 4% of the
35		net revenue realized for the preceding month from the 6.25%
36		general rate.

1		Beginning August 1, 2000, each month the Department shall
2		pay into the County and Mass Transit District Fund 20% of the
3		net revenue realized for the preceding month from the 1.25%
4		rate on the selling price of motor fuel and gasohol.
5		Beginning January 1, 1990, each month the Department shall
6		pay into the Local Government Tax Fund 16% of the net revenue
7		realized for the preceding month from the 6.25% general rate on
8		the selling price of tangible personal property.
9		Beginning August 1, 2000, each month the Department shall
10		pay into the Local Government Tax Fund 80% of the net revenue
11		realized for the preceding month from the 1.25% rate on the
12		selling price of motor fuel and gasohol.
13		Of the remainder of the moneys received by the Department
14		pursuant to this Act, (a) 1.75% thereof shall be paid into the
15		Build Illinois Fund and (b) prior to July 1, 1989, 2.2% and on
16		and after July 1, 1989, 3.8% thereof shall be paid into the
17		Build Illinois Fund; provided, however, that if in any fiscal
18		year the sum of (1) the aggregate of 2.2% or 3.8%, as the case
19		may be, of the moneys received by the Department and required
20		to be paid into the Build Illinois Fund pursuant to this Act,
21		Section 9 of the Use Tax Act, Section 9 of the Service Use Tax
22		Act, and Section 9 of the Service Occupation Tax Act, such Acts
23		being hereinafter called the "Tax Acts" and such aggregate of
24		2.2% or 3.8%, as the case may be, of moneys being hereinafter
25		called the "Tax Act Amount", and (2) the amount transferred to
26		the Build Illinois Fund from the State and Local Sales Tax
27		Reform Fund shall be less than the Annual Specified Amount (as
28		hereinafter defined), an amount equal to the difference shall
29		be immediately paid into the Build Illinois Fund from other
30		moneys received by the Department pursuant to the Tax Acts; the
31		"Annual Specified Amount" means the amounts specified below for
32		fiscal years 1986 through 1993:

6		and means the Certified Annual Debt Service Requirement (as
7		defined in Section 13 of the Build Illinois Bond Act) or the
8		Tax Act Amount, whichever is greater, for fiscal year 1994 and
9		each fiscal year thereafter; and further provided, that if on
10		the last business day of any month the sum of (1) the Tax Act
11		Amount required to be deposited into the Build Illinois Bond
12		Account in the Build Illinois Fund during such month and (2)
13		the amount transferred to the Build Illinois Fund from the
14		State and Local Sales Tax Reform Fund shall have been less than
15		1/12 of the Annual Specified Amount, an amount equal to the
16		difference shall be immediately paid into the Build Illinois
17		Fund from other moneys received by the Department pursuant to
18		the Tax Acts; and, further provided, that in no event shall the
19		payments required under the preceding proviso result in
20		aggregate payments into the Build Illinois Fund pursuant to
21		this clause (b) for any fiscal year in excess of the greater of
22		(i) the Tax Act Amount or (ii) the Annual Specified Amount for
23		such fiscal year. The amounts payable into the Build Illinois
24		Fund under clause (b) of the first sentence in this paragraph
25		shall be payable only until such time as the aggregate amount
26		on deposit under each trust indenture securing Bonds issued and
27		outstanding pursuant to the Build Illinois Bond Act is
28		sufficient, taking into account any future investment income,
29		to fully provide, in accordance with such indenture, for the
30		defeasance of or the payment of the principal of, premium, if
31		any, and interest on the Bonds secured by such indenture and on
32		any Bonds expected to be issued thereafter and all fees and
33		costs payable with respect thereto, all as certified by the
34		Director of the Bureau of the Budget (now Governor's Office of
35		Management and Budget). If on the last business day of any
36		month in which Bonds are outstanding pursuant to the Build

1		Illinois Bond Act, the aggregate of moneys deposited in the
2		Build Illinois Bond Account in the Build Illinois Fund in such
3		month shall be less than the amount required to be transferred
4		in such month from the Build Illinois Bond Account to the Build
5		Illinois Bond Retirement and Interest Fund pursuant to Section
6		13 of the Build Illinois Bond Act, an amount equal to such
7		deficiency shall be immediately paid from other moneys received
8		by the Department pursuant to the Tax Acts to the Build
9		Illinois Fund; provided, however, that any amounts paid to the
10		Build Illinois Fund in any fiscal year pursuant to this
11		sentence shall be deemed to constitute payments pursuant to
12		clause (b) of the first sentence of this paragraph and shall
13		reduce the amount otherwise payable for such fiscal year
14		pursuant to that clause (b). The moneys received by the
15		Department pursuant to this Act and required to be deposited
16		into the Build Illinois Fund are subject to the pledge, claim
17		and charge set forth in Section 12 of the Build Illinois Bond
18		Act.
19		Subject to payment of amounts into the Build Illinois Fund
20		as provided in the preceding paragraph or in any amendment
21		thereto hereafter enacted, the following specified monthly
22		installment of the amount requested in the certificate of the
23		Chairman of the Metropolitan Pier and Exposition Authority
24		provided under Section 8.25f of the State Finance Act, but not
25		in excess of sums designated as "Total Deposit", shall be
26		deposited in the aggregate from collections under Section 9 of
27		the Use Tax Act, Section 9 of the Service Use Tax Act, Section
28		9 of the Service Occupation Tax Act, and Section 3 of the
29		Retailers' Occupation Tax Act into the McCormick Place
30		Expansion Project Fund in the specified fiscal years.

35		Beginning July 20, 1993 and in each month of each fiscal
36		year thereafter, one-eighth of the amount requested in the

1		certificate of the Chairman of the Metropolitan Pier and
2		Exposition Authority for that fiscal year, less the amount
3		deposited into the McCormick Place Expansion Project Fund by
4		the State Treasurer in the respective month under subsection
5		(g) of Section 13 of the Metropolitan Pier and Exposition
6		Authority Act, plus cumulative deficiencies in the deposits
7		required under this Section for previous months and years,
8		shall be deposited into the McCormick Place Expansion Project
9		Fund, until the full amount requested for the fiscal year, but
10		not in excess of the amount specified above as "Total Deposit",
11		has been deposited.
12		Subject to payment of amounts into the Build Illinois Fund
13		and the McCormick Place Expansion Project Fund pursuant to the
14		preceding paragraphs or in any amendments thereto hereafter
15		enacted, beginning July 1, 1993, the Department shall each
16		month pay into the Illinois Tax Increment Fund 0.27% of 80% of
17		the net revenue realized for the preceding month from the 6.25%
18		general rate on the selling price of tangible personal
19		property.
20		Subject to payment of amounts into the Build Illinois Fund
21		and the McCormick Place Expansion Project Fund pursuant to the
22		preceding paragraphs or in any amendments thereto hereafter
23		enacted, beginning with the receipt of the first report of
24		taxes paid by an eligible business and continuing for a 25-year
25		period, the Department shall each month pay into the Energy
26		Infrastructure Fund 80% of the net revenue realized from the
27		6.25% general rate on the selling price of Illinois-mined coal
28		that was sold to an eligible business. For purposes of this
29		paragraph, the term "eligible business" means a new electric
30		generating facility certified pursuant to Section 605-332 of
31		the Department of Commerce and Economic Opportunity Community
32		Affairs Law of the Civil Administrative Code of Illinois.
33		Of the remainder of the moneys received by the Department
34		pursuant to this Act, 75% thereof shall be paid into the State
35		Treasury and 25% shall be reserved in a special account and
36		used only for the transfer to the Common School Fund as part of

1		the monthly transfer from the General Revenue Fund in
2		accordance with Section 8a of the State Finance Act.
3		The Department may, upon separate written notice to a
4		taxpayer, require the taxpayer to prepare and file with the
5		Department on a form prescribed by the Department within not
6		less than 60 days after receipt of the notice an annual
7		information return for the tax year specified in the notice.
8		Such annual return to the Department shall include a statement
9		of gross receipts as shown by the retailer's last Federal
10		income tax return. If the total receipts of the business as
11		reported in the Federal income tax return do not agree with the
12		gross receipts reported to the Department of Revenue for the
13		same period, the retailer shall attach to his annual return a
14		schedule showing a reconciliation of the 2 amounts and the
15		reasons for the difference. The retailer's annual return to the
16		Department shall also disclose the cost of goods sold by the
17		retailer during the year covered by such return, opening and
18		closing inventories of such goods for such year, costs of goods
19		used from stock or taken from stock and given away by the
20		retailer during such year, payroll information of the
21		retailer's business during such year and any additional
22		reasonable information which the Department deems would be
23		helpful in determining the accuracy of the monthly, quarterly
24		or annual returns filed by such retailer as provided for in
25		this Section.
26		If the annual information return required by this Section
27		is not filed when and as required, the taxpayer shall be liable
28		as follows:
29		(i) Until January 1, 1994, the taxpayer shall be liable
30		for a penalty equal to 1/6 of 1% of the tax due from such
31		taxpayer under this Act during the period to be covered by
32		the annual return for each month or fraction of a month
33		until such return is filed as required, the penalty to be
34		assessed and collected in the same manner as any other
35		penalty provided for in this Act.
36		(ii) On and after January 1, 1994, the taxpayer shall

1		be liable for a penalty as described in Section 3-4 of the
2		Uniform Penalty and Interest Act.
3		The chief executive officer, proprietor, owner or highest
4		ranking manager shall sign the annual return to certify the
5		accuracy of the information contained therein. Any person who
6		willfully signs the annual return containing false or
7		inaccurate information shall be guilty of perjury and punished
8		accordingly. The annual return form prescribed by the
9		Department shall include a warning that the person signing the
10		return may be liable for perjury.
11		The provisions of this Section concerning the filing of an
12		annual information return do not apply to a retailer who is not
13		required to file an income tax return with the United States
14		Government.
15		As soon as possible after the first day of each month, upon
16		certification of the Department of Revenue, the Comptroller
17		shall order transferred and the Treasurer shall transfer from
18		the General Revenue Fund to the Motor Fuel Tax Fund an amount
19		equal to 1.7% of 80% of the net revenue realized under this Act
20		for the second preceding month. Beginning April 1, 2000, this
21		transfer is no longer required and shall not be made.
22		Net revenue realized for a month shall be the revenue
23		collected by the State pursuant to this Act, less the amount
24		paid out during that month as refunds to taxpayers for
25		overpayment of liability.
26		For greater simplicity of administration, manufacturers,
27		importers and wholesalers whose products are sold at retail in
28		Illinois by numerous retailers, and who wish to do so, may
29		assume the responsibility for accounting and paying to the
30		Department all tax accruing under this Act with respect to such
31		sales, if the retailers who are affected do not make written
32		objection to the Department to this arrangement.
33		Any person who promotes, organizes, provides retail
34		selling space for concessionaires or other types of sellers at
35		the Illinois State Fair, DuQuoin State Fair, county fairs,
36		local fairs, art shows, flea markets and similar exhibitions or

1		events, including any transient merchant as defined by Section
2		2 of the Transient Merchant Act of 1987, is required to file a
3		report with the Department providing the name of the merchant's
4		business, the name of the person or persons engaged in
5		merchant's business, the permanent address and Illinois
6		Retailers Occupation Tax Registration Number of the merchant,
7		the dates and location of the event and other reasonable
8		information that the Department may require. The report must be
9		filed not later than the 20th day of the month next following
10		the month during which the event with retail sales was held.
11		Any person who fails to file a report required by this Section
12		commits a business offense and is subject to a fine not to
13		exceed $250.
14		Any person engaged in the business of selling tangible
15		personal property at retail as a concessionaire or other type
16		of seller at the Illinois State Fair, county fairs, art shows,
17		flea markets and similar exhibitions or events, or any
18		transient merchants, as defined by Section 2 of the Transient
19		Merchant Act of 1987, may be required to make a daily report of
20		the amount of such sales to the Department and to make a daily
21		payment of the full amount of tax due. The Department shall
22		impose this requirement when it finds that there is a
23		significant risk of loss of revenue to the State at such an
24		exhibition or event. Such a finding shall be based on evidence
25		that a substantial number of concessionaires or other sellers
26		who are not residents of Illinois will be engaging in the
27		business of selling tangible personal property at retail at the
28		exhibition or event, or other evidence of a significant risk of
29		loss of revenue to the State. The Department shall notify
30		concessionaires and other sellers affected by the imposition of
31		this requirement. In the absence of notification by the
32		Department, the concessionaires and other sellers shall file
33		their returns as otherwise required in this Section.
34		(Source: P.A. 92-12, eff. 7-1-01; 92-16, eff. 6-28-01; 92-208,
35		eff. 8-2-01; 92-484, eff. 8-23-01; 92-492, eff. 1-1-02; 92-600,
36		eff. 6-28-02; 92-651, eff. 7-11-02; 93-22, eff. 6-20-03; 93-24,

1		eff. 6-20-03; revised 10-15-03.)

ARTICLE 25

3		Section 25-5. The Illinois Income Tax Act is amended by
4		changing Sections 203, 205, 305, and 1501 as follows:
5		(35 ILCS 5/203) (from Ch. 120, par. 2-203)
6		Sec. 203. Base income defined.
7		(a) Individuals.
8		(1) In general. In the case of an individual, base
9		income means an amount equal to the taxpayer's adjusted
10		gross income for the taxable year as modified by paragraph
11		(2).
12		(2) Modifications. The adjusted gross income referred
13		to in paragraph (1) shall be modified by adding thereto the
14		sum of the following amounts:
15		(A) An amount equal to all amounts paid or accrued
16		to the taxpayer as interest or dividends during the
17		taxable year to the extent excluded from gross income
18		in the computation of adjusted gross income, except
19		stock dividends of qualified public utilities
20		described in Section 305(e) of the Internal Revenue
21		Code;
22		(B) An amount equal to the amount of tax imposed by
23		this Act to the extent deducted from gross income in
24		the computation of adjusted gross income for the
25		taxable year;
26		(C) An amount equal to the amount received during
27		the taxable year as a recovery or refund of real
28		property taxes paid with respect to the taxpayer's
29		principal residence under the Revenue Act of 1939 and
30		for which a deduction was previously taken under
31		subparagraph (L) of this paragraph (2) prior to July 1,
32		1991, the retrospective application date of Article 4
33		of Public Act 87-17. In the case of multi-unit or

1		multi-use structures and farm dwellings, the taxes on
2		the taxpayer's principal residence shall be that
3		portion of the total taxes for the entire property
4		which is attributable to such principal residence;
5		(D) An amount equal to the amount of the capital
6		gain deduction allowable under the Internal Revenue
7		Code, to the extent deducted from gross income in the
8		computation of adjusted gross income;
9		(D-5) An amount, to the extent not included in
10		adjusted gross income, equal to the amount of money
11		withdrawn by the taxpayer in the taxable year from a
12		medical care savings account and the interest earned on
13		the account in the taxable year of a withdrawal
14		pursuant to subsection (b) of Section 20 of the Medical
15		Care Savings Account Act or subsection (b) of Section
16		20 of the Medical Care Savings Account Act of 2000;
17		(D-10) For taxable years ending after December 31,
18		1997, an amount equal to any eligible remediation costs
19		that the individual deducted in computing adjusted
20		gross income and for which the individual claims a
21		credit under subsection (l) of Section 201;
22		(D-15) For taxable years 2001 and thereafter, an
23		amount equal to the bonus depreciation deduction (30%
24		of the adjusted basis of the qualified property) taken
25		on the taxpayer's federal income tax return for the
26		taxable year under subsection (k) of Section 168 of the
27		Internal Revenue Code; and
28		(D-16) If the taxpayer reports a capital gain or
29		loss on the taxpayer's federal income tax return for
30		the taxable year based on a sale or transfer of
31		property for which the taxpayer was required in any
32		taxable year to make an addition modification under
33		subparagraph (D-15), then an amount equal to the
34		aggregate amount of the deductions taken in all taxable
35		years under subparagraph (Z) with respect to that
36		property. ;

1		The taxpayer is required to make the addition
2		modification under this subparagraph only once with
3		respect to any one piece of property; . and
4		(D-17) For taxable years ending on or after
5		December 31, 2004, an amount equal to the amount
6		otherwise allowed as a deduction in computing base
7		income for interest paid, accrued, or incurred,
8		directly or indirectly, to a foreign person who would
9		be a member of the same unitary business group but for
10		the fact that foreign person's business activity
11		outside the United States is 80% or more of the foreign
12		person's total business activity. The addition
13		modification required by this subparagraph shall be
14		reduced to the extent that dividends were included in
15		base income of the unitary group for the same taxable
16		year and received by the taxpayer or by a member of the
17		taxpayer's unitary business group (including amounts
18		included in gross income under Sections 951 through 964
19		of the Internal Revenue Code and amounts included in
20		gross income under Section 78 of the Internal Revenue
21		Code) with respect to the stock of the same person to
22		whom the interest was paid, accrued, or incurred.
23		This paragraph shall not apply to the following:
24		(i) an item of interest paid, accrued, or
25		incurred, directly or indirectly, to a foreign
26		person who is subject in a foreign country or
27		state, other than a state which requires mandatory
28		unitary reporting, to a tax on or measured by net
29		income with respect to such interest; or
30		(ii) an item of interest paid, accrued, or
31		incurred, directly or indirectly, to a foreign
32		person if the taxpayer can establish, based on a
33		preponderance of the evidence, both of the
34		following:
35		(a) the foreign person, during the same
36		taxable year, paid, accrued, or incurred, the

1		interest to a person that is not a related
2		member, and
3		(b) the transaction giving rise to the
4		interest expense between the taxpayer and the
5		foreign person did not have as a principal
6		purpose the avoidance of Illinois income tax,
7		and is paid pursuant to a contract or agreement
8		that reflects an arm's-length interest rate
9		and 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 foreign
18		person if the taxpayer establishes by clear and
19		convincing evidence that the adjustments are
20		unreasonable; or if the taxpayer and the Director
21		agree in writing to the application or use of an
22		alternative method of apportionment under Section
23		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
27		any tax year beginning after the effective date of
28		this amendment provided such adjustment is made
29		pursuant to regulation adopted by the Department
30		and such regulations provide methods and standards
31		by which the Department will utilize its authority
32		under Section 404 of this Act;
33		(D-18) For taxable years ending on or after
34		December 31, 2004, an amount equal to the amount of
35		intangible expenses and costs otherwise allowed as a
36		deduction in computing base income, and that were paid,

1		accrued, or incurred, directly or indirectly, to a
2		foreign person who would be a member of the same
3		unitary business group but for the fact that the
4		foreign person's business activity outside the United
5		States is 80% or more of that person's total business
6		activity. The addition modification required by this
7		subparagraph shall be reduced to the extent that
8		dividends were included in base income of the unitary
9		group for the same taxable year and received by the
10		taxpayer or by a member of the taxpayer's unitary
11		business group (including amounts included in gross
12		income under Sections 951 through 964 of the Internal
13		Revenue Code and amounts included in gross income under
14		Section 78 of the Internal Revenue Code) with respect
15		to the stock of the same person to whom the intangible
16		expenses and costs were directly or indirectly paid,
17		incurred, or accrued. The preceding sentence does not
18		apply to the extent that the same dividends caused a
19		reduction to the addition modification required under
20		Section 203(a)(2)(D-17) of this Act. As used in this
21		subparagraph, the term "intangible expenses and costs"
22		includes (1) expenses, losses, and costs for, or
23		related to, the direct or indirect acquisition, use,
24		maintenance or management, ownership, sale, exchange,
25		or any other disposition of intangible property; (2)
26		losses incurred, directly or indirectly, from
27		factoring transactions or discounting transactions;
28		(3) royalty, patent, technical, and copyright fees;
29		(4) licensing fees; and (5) other similar expenses and
30		costs. For purposes of this subparagraph, "intangible
31		property" includes patents, patent applications, trade
32		names, trademarks, service marks, copyrights, mask
33		works, trade secrets, and similar types of intangible
34		assets.
35		This paragraph shall not apply to the following:
36		(i) any item of intangible expenses or costs

1		paid, accrued, or incurred, directly or
2		indirectly, from a transaction with a foreign
3		person who is subject in a foreign country or
4		state, other than a state which requires mandatory
5		unitary reporting, to a tax on or measured by net
6		income with respect 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 foreign person during the same
13		taxable 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 foreign person did not have as
19		a 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 foreign
26		person if the taxpayer establishes by clear and
27		convincing evidence, that the adjustments are
28		unreasonable; or if the taxpayer and the Director
29		agree in writing to the application or use of an
30		alternative method of apportionment under Section
31		304(f);
32		Nothing in this subsection shall preclude the
33		Director from making any other adjustment
34		otherwise allowed under Section 404 of this Act for
35		any tax year beginning after the effective date of
36		this amendment provided such adjustment is made

1		pursuant to regulation adopted by the Department
2		and such regulations provide methods and standards
3		by which the Department will utilize its authority
4		under Section 404 of this Act;
5		(D-20) (D-15) For taxable years beginning on or
6		after January 1, 2002, in the case of a distribution
7		from a qualified tuition program under Section 529 of
8		the Internal Revenue Code, other than (i) a
9		distribution from a College Savings Pool created under
10		Section 16.5 of the State Treasurer Act or (ii) a
11		distribution from the Illinois Prepaid Tuition Trust
12		Fund, an amount equal to the amount excluded from gross
13		income under Section 529(c)(3)(B);
14		and by deducting from the total so obtained the sum of the
15		following amounts:
16		(E) For taxable years ending before December 31,
17		2001, any amount included in such total in respect of
18		any compensation (including but not limited to any
19		compensation paid or accrued to a serviceman while a
20		prisoner of war or missing in action) paid to a
21		resident by reason of being on active duty in the Armed
22		Forces of the United States and in respect of any
23		compensation paid or accrued to a resident who as a
24		governmental employee was a prisoner of war or missing
25		in action, and in respect of any compensation paid to a
26		resident in 1971 or thereafter for annual training
27		performed pursuant to Sections 502 and 503, Title 32,
28		United States Code as a member of the Illinois National
29		Guard. For taxable years ending on or after December
30		31, 2001, any amount included in such total in respect
31		of any compensation (including but not limited to any
32		compensation paid or accrued to a serviceman while a
33		prisoner of war or missing in action) paid to a
34		resident by reason of being a member of any component
35		of the Armed Forces of the United States and in respect
36		of any compensation paid or accrued to a resident who

1		as a governmental employee was a prisoner of war or
2		missing in action, and in respect of any compensation
3		paid to a resident in 2001 or thereafter by reason of
4		being a member of the Illinois National Guard. The
5		provisions of this amendatory Act of the 92nd General
6		Assembly are exempt from the provisions of Section 250;
7		(F) An amount equal to all amounts included in such
8		total pursuant to the provisions of Sections 402(a),
9		402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the
10		Internal Revenue Code, or included in such total as
11		distributions under the provisions of any retirement
12		or disability plan for employees of any governmental
13		agency or unit, or retirement payments to retired
14		partners, which payments are excluded in computing net
15		earnings from self employment by Section 1402 of the
16		Internal Revenue Code and regulations adopted pursuant
17		thereto;
18		(G) The valuation limitation amount;
19		(H) An amount equal to the amount of any tax
20		imposed by this Act which was refunded to the taxpayer
21		and included in such total for the taxable year;
22		(I) An amount equal to all amounts included in such
23		total pursuant to the provisions of Section 111 of the
24		Internal Revenue Code as a recovery of items previously
25		deducted from adjusted gross income in the computation
26		of taxable income;
27		(J) An amount equal to those dividends included in
28		such total which were paid by a corporation which
29		conducts business operations in an Enterprise Zone or
30		zones created under the Illinois Enterprise Zone Act,
31		and conducts substantially all of its operations in an
32		Enterprise Zone or zones;
33		(K) An amount equal to those dividends included in
34		such total that were paid by a corporation that
35		conducts business operations in a federally designated
36		Foreign Trade Zone or Sub-Zone and that is designated a

1		High Impact Business located in Illinois; provided
2		that dividends eligible for the deduction provided in
3		subparagraph (J) of paragraph (2) of this subsection
4		shall not be eligible for the deduction provided under
5		this subparagraph (K);
6		(L) For taxable years ending after December 31,
7		1983, an amount equal to all social security benefits
8		and railroad retirement benefits included in such
9		total pursuant to Sections 72(r) and 86 of the Internal
10		Revenue Code;
11		(M) With the exception of any amounts subtracted
12		under subparagraph (N), an amount equal to the sum of
13		all amounts disallowed as deductions by (i) Sections
14		171(a) (2), and 265(2) of the Internal Revenue Code of
15		1954, as now or hereafter amended, and all amounts of
16		expenses allocable to interest and disallowed as
17		deductions by Section 265(1) of the Internal Revenue
18		Code of 1954, as now or hereafter amended; and (ii) for
19		taxable years ending on or after August 13, 1999,
20		Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
21		the 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
27		reason of the Constitution, treaties or statutes of the
28		United States; provided that, in the case of any
29		statute of this State that exempts income derived from
30		bonds or other obligations from the tax imposed under
31		this Act, the amount exempted shall be the interest net
32		of bond premium amortization;
33		(O) An amount equal to any contribution made to a
34		job training project established pursuant to the Tax
35		Increment Allocation Redevelopment Act;
36		(P) An amount equal to the amount of the deduction

1		used to compute the federal income tax credit for
2		restoration of substantial amounts held under claim of
3		right for the taxable year pursuant to Section 1341 of
4		the Internal Revenue Code of 1986;
5		(Q) An amount equal to any amounts included in such
6		total, received by the taxpayer as an acceleration in
7		the payment of life, endowment or annuity benefits in
8		advance of the time they would otherwise be payable as
9		an indemnity for a terminal illness;
10		(R) An amount equal to the amount of any federal or
11		State bonus paid to veterans of the Persian Gulf War;
12		(S) An amount, to the extent included in adjusted
13		gross income, equal to the amount of a contribution
14		made in the taxable year on behalf of the taxpayer to a
15		medical care savings account established under the
16		Medical Care Savings Account Act or the Medical Care
17		Savings Account Act of 2000 to the extent the
18		contribution is accepted by the account administrator
19		as provided in that Act;
20		(T) An amount, to the extent included in adjusted
21		gross income, equal to the amount of interest earned in
22		the taxable year on a medical care savings account
23		established under the Medical Care Savings Account Act
24		or the Medical Care Savings Account Act of 2000 on
25		behalf of the taxpayer, other than interest added
26		pursuant to item (D-5) of this paragraph (2);
27		(U) For one taxable year beginning on or after
28		January 1, 1994, an amount equal to the total amount of
29		tax imposed and paid under subsections (a) and (b) of
30		Section 201 of this Act on grant amounts received by
31		the taxpayer under the Nursing Home Grant Assistance
32		Act during the taxpayer's taxable years 1992 and 1993;
33		(V) Beginning with tax years ending on or after
34		December 31, 1995 and ending with tax years ending on
35		or before December 31, 2004, an amount equal to the
36		amount paid by a taxpayer who is a self-employed

1		taxpayer, a partner of a partnership, or a shareholder
2		in a Subchapter S corporation for health insurance or
3		long-term care insurance for that taxpayer or that
4		taxpayer's spouse or dependents, to the extent that the
5		amount paid for that health insurance or long-term care
6		insurance may be deducted under Section 213 of the
7		Internal Revenue Code of 1986, has not been deducted on
8		the federal income tax return of the taxpayer, and does
9		not exceed the taxable income attributable to that
10		taxpayer's income, self-employment income, or
11		Subchapter S corporation income; except that no
12		deduction shall be allowed under this item (V) if the
13		taxpayer is eligible to participate in any health
14		insurance or long-term care insurance plan of an
15		employer of the taxpayer or the taxpayer's spouse. The
16		amount of the health insurance and long-term care
17		insurance subtracted under this item (V) shall be
18		determined by multiplying total health insurance and
19		long-term care insurance premiums paid by the taxpayer
20		times a number that represents the fractional
21		percentage of eligible medical expenses under Section
22		213 of the Internal Revenue Code of 1986 not actually
23		deducted on the taxpayer's federal income tax return;
24		(W) For taxable years beginning on or after January
25		1, 1998, all amounts included in the taxpayer's federal
26		gross income in the taxable year from amounts converted
27		from a regular IRA to a Roth IRA. This paragraph is
28		exempt from the provisions of Section 250;
29		(X) For taxable year 1999 and thereafter, an amount
30		equal to the amount of any (i) distributions, to the
31		extent includible in gross income for federal income
32		tax purposes, made to the taxpayer because of his or
33		her status as a victim of persecution for racial or
34		religious reasons by Nazi Germany or any other Axis
35		regime or as an heir of the victim and (ii) items of
36		income, to the extent includible in gross income for

1		federal income tax purposes, attributable to, derived
2		from or in any way related to assets stolen from,
3		hidden from, or otherwise lost to a victim of
4		persecution for racial or religious reasons by Nazi
5		Germany or any other Axis regime immediately prior to,
6		during, and immediately after World War II, including,
7		but not limited to, interest on the proceeds receivable
8		as insurance under policies issued to a victim of
9		persecution for racial or religious reasons by Nazi
10		Germany or any other Axis regime by European insurance
11		companies immediately prior to and during World War II;
12		provided, however, this subtraction from federal
13		adjusted gross income does not apply to assets acquired
14		with such assets or with the proceeds from the sale of
15		such assets; provided, further, this paragraph shall
16		only apply to a taxpayer who was the first recipient of
17		such assets after their recovery and who is a victim of
18		persecution for racial or religious reasons by Nazi
19		Germany or any other Axis regime or as an heir of the
20		victim. The amount of and the eligibility for any
21		public assistance, benefit, or similar entitlement is
22		not affected by the inclusion of items (i) and (ii) of
23		this paragraph in gross income for federal income tax
24		purposes. This paragraph is exempt from the provisions
25		of Section 250;
26		(Y) For taxable years beginning on or after January
27		1, 2002, moneys contributed in the taxable year to a
28		College Savings Pool account under Section 16.5 of the
29		State Treasurer Act, except that amounts excluded from
30		gross income under Section 529(c)(3)(C)(i) of the
31		Internal Revenue Code shall not be considered moneys
32		contributed under this subparagraph (Y). This
33		subparagraph (Y) is exempt from the provisions of
34		Section 250;
35		(Z) For taxable years 2001 and thereafter, for the
36		taxable year in which the bonus depreciation deduction

1		(30% of the adjusted basis of the qualified property)
2		is taken on the taxpayer's federal income tax return
3		under subsection (k) of Section 168 of the Internal
4		Revenue Code and for each applicable taxable year
5		thereafter, an amount equal to "x", where:
6		(1) "y" equals the amount of the depreciation
7		deduction taken for the taxable year on the
8		taxpayer's federal income tax return on property
9		for which the bonus depreciation deduction (30% of
10		the adjusted basis of the qualified property) 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; and
14		(2) "x" equals "y" multiplied by 30 and then
15		divided by 70 (or "y" multiplied by 0.429).
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 (30% of the adjusted basis of
20		the qualified property) taken on that property on the
21		taxpayer's federal income tax return under subsection
22		(k) of Section 168 of the Internal Revenue Code; and
23		(AA) If the taxpayer reports a capital gain or loss
24		on the taxpayer's federal income tax return for the
25		taxable year based on a sale or transfer of property
26		for which the taxpayer was required in any taxable year
27		to make an addition modification under subparagraph
28		(D-15), then an amount equal to that addition
29		modification.
30		The taxpayer is allowed to take the deduction under
31		this subparagraph only once with respect to any one
32		piece of property; and
33		(BB) (Z) Any amount included in adjusted gross
34		income, other than salary, received by a driver in a
35		ridesharing arrangement using a motor vehicle; .
36		(CC) The amount of (i) any interest income (net of

1		the deductions allocable thereto) taken into account
2		for the taxable year with respect to a transaction with
3		a taxpayer that is required to make an addition
4		modification with respect to such transaction under
5		Section 203(a)(2)(D-17), 203(b)(2)(E-13),
6		203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
7		the amount of that addition modification, and (ii) any
8		income from intangible property (net of the deductions
9		allocable thereto) taken into account for the taxable
10		year with respect to a transaction with a taxpayer that
11		is required to make an addition modification with
12		respect to such transaction under Section
13		203(a)(2)(D-18), 203(b)(2)(E-14), 203(c)(2)(G-13), or
14		203(d)(2)(D-8), but not to exceed the amount of that
15		addition modification;
16		(DD) An amount equal to the interest income taken
17		into account for the taxable year (net of the
18		deductions allocable thereto) with respect to
19		transactions with a foreign person who would be a
20		member of the taxpayer's unitary business group but for
21		the fact that the foreign person's business activity
22		outside the United States is 80% or more of that
23		person's total business activity, but not to exceed the
24		addition modification required to be made for the same
25		taxable year under Section 203(a)(2)(D-17) for
26		interest paid, accrued, or incurred, directly or
27		indirectly, to the same foreign person; and
28		(EE) An amount equal to the income from intangible
29		property taken into account for the taxable year (net
30		of the deductions allocable thereto) with respect to
31		transactions with a foreign person who would be a
32		member of the taxpayer's unitary business group but for
33		the fact that the foreign person's business activity
34		outside the United States is 80% or more of that
35		person's total business activity, but not to exceed the
36		addition modification required to be made for the same

1		taxable year under Section 203(a)(2)(D-18) for
2		intangible expenses and costs paid, accrued, or
3		incurred, directly or indirectly, to the same foreign
4		person.
5		(b) Corporations.
6		(1) In general. In the case of a corporation, base
7		income means an amount equal to the taxpayer's taxable
8		income for the taxable year as modified by paragraph (2).
9		(2) Modifications. The taxable income referred to in
10		paragraph (1) shall be modified by adding thereto the sum
11		of the following amounts:
12		(A) An amount equal to all amounts paid or accrued
13		to the taxpayer as interest and all distributions
14		received from regulated investment companies during
15		the taxable year to the extent excluded from gross
16		income in the computation of taxable income;
17		(B) An amount equal to the amount of tax imposed by
18		this Act to the extent deducted from gross income in
19		the computation of taxable income for the taxable year;
20		(C) In the case of a regulated investment company,
21		an amount equal to the excess of (i) the net long-term
22		capital gain for the taxable year, over (ii) the amount
23		of the capital gain dividends designated as such in
24		accordance with Section 852(b)(3)(C) of the Internal
25		Revenue Code and any amount designated under Section
26		852(b)(3)(D) of the Internal Revenue Code,
27		attributable to the taxable year (this amendatory Act
28		of 1995 (Public Act 89-89) is declarative of existing
29		law and is not a new enactment);
30		(D) The amount of any net operating loss deduction
31		taken in arriving at taxable income, other than a net
32		operating loss carried forward from a taxable year
33		ending prior to December 31, 1986;
34		(E) For taxable years in which a net operating loss
35		carryback or carryforward from a taxable year ending

1		prior to December 31, 1986 is an element of taxable
2		income under paragraph (1) of subsection (e) or
3		subparagraph (E) of paragraph (2) of subsection (e),
4		the amount by which addition modifications other than
5		those provided by this subparagraph (E) exceeded
6		subtraction modifications in such earlier taxable
7		year, with the following limitations applied in the
8		order that they are listed:
9		(i) the addition modification relating to the
10		net operating loss carried back or forward to the
11		taxable year from any taxable year ending prior to
12		December 31, 1986 shall be reduced by the amount of
13		addition modification under this subparagraph (E)
14		which related to that net operating loss and which
15		was taken into account in calculating the base
16		income of an earlier taxable year, and
17		(ii) the addition modification relating to the
18		net operating loss carried back or forward to the
19		taxable year from any taxable year ending prior to
20		December 31, 1986 shall not exceed the amount of
21		such carryback or carryforward;
22		For taxable years in which there is a net operating
23		loss carryback or carryforward from more than one other
24		taxable year ending prior to December 31, 1986, the
25		addition modification provided in this subparagraph
26		(E) shall be the sum of the amounts computed
27		independently under the preceding provisions of this
28		subparagraph (E) for each such taxable year;
29		(E-5) For taxable years ending after December 31,
30		1997, an amount equal to any eligible remediation costs
31		that the corporation deducted in computing adjusted
32		gross income and for which the corporation claims a
33		credit under subsection (l) of Section 201;
34		(E-10) For taxable years 2001 and thereafter, an
35		amount equal to the bonus depreciation deduction (30%
36		of the adjusted basis of the qualified property) taken

1		on the taxpayer's federal income tax return for the
2		taxable year under subsection (k) of Section 168 of the
3		Internal Revenue Code; and
4		(E-11) If the taxpayer reports a capital gain or
5		loss on the taxpayer's federal income tax return for
6		the taxable year based on a sale or transfer of
7		property for which the taxpayer was required in any
8		taxable year to make an addition modification under
9		subparagraph (E-10), then an amount equal to the
10		aggregate amount of the deductions taken in all taxable
11		years under subparagraph (T) with respect to that
12		property;
13		The taxpayer is required to make the addition
14		modification under this subparagraph only once with
15		respect to any one piece of property;
16		(E-12) For taxable years ending on or after
17		December 31, 2004, an amount equal to the amount
18		otherwise allowed as a deduction in computing base
19		income for interest paid, accrued, or incurred,
20		directly or indirectly, to a foreign person who would
21		be a member of the same unitary business group but for
22		the fact the foreign person's business activity
23		outside the United States is 80% or more of the foreign
24		person's total business activity. The addition
25		modification required by this subparagraph shall be
26		reduced to the extent that dividends were included in
27		base income of the unitary group for the same taxable
28		year and received by the taxpayer or by a member of the
29		taxpayer's unitary business group (including amounts
30		included in gross income pursuant to Sections 951
31		through 964 of the Internal Revenue Code and amounts
32		included in gross income under Section 78 of the
33		Internal Revenue Code) with respect to the stock of the
34		same person to whom the interest was paid, accrued, or
35		incurred.
36		This paragraph shall not apply to the following:

1		(i) an item of interest paid, accrued, or
2		incurred, directly or indirectly, to a foreign
3		person who is subject in a foreign country or
4		state, other than a state which requires mandatory
5		unitary reporting, to a tax on or measured by net
6		income with respect to such interest; or
7		(ii) an item of interest paid, accrued, or
8		incurred, directly or indirectly, to a foreign
9		person if the taxpayer can establish, based on a
10		preponderance of the evidence, both of the
11		following:
12		(a) the foreign person, during the same
13		taxable year, paid, accrued, or incurred, the
14		interest to a person that is not a related
15		member, and
16		(b) the transaction giving rise to the
17		interest expense between the taxpayer and the
18		foreign person did not have as a principal
19		purpose the avoidance of Illinois income tax,
20		and is paid pursuant to a contract or agreement
21		that reflects an arm's-length interest rate
22		and terms; or
23		(iii) the taxpayer can establish, based on
24		clear and convincing evidence, that the interest
25		paid, accrued, or incurred relates to a contract or
26		agreement entered into at arm's-length rates and
27		terms and the principal purpose for the payment is
28		not federal or Illinois tax avoidance; or
29		(iv) an item of interest paid, accrued, or
30		incurred, directly or indirectly, to a foreign
31		person if the taxpayer establishes by clear and
32		convincing evidence that the adjustments are
33		unreasonable; or if the taxpayer and the Director
34		agree in writing to the application or use of an
35		alternative method of apportionment under Section
36		304(f).

1		Nothing in this subsection shall preclude the
2		Director from making any other adjustment
3		otherwise allowed under Section 404 of this Act for
4		any tax year beginning after the effective date of
5		this amendment provided such adjustment is made
6		pursuant to regulation adopted by the Department
7		and such regulations provide methods and standards
8		by which the Department will utilize its authority
9		under Section 404 of this Act;
10		(E-13) For taxable years ending on or after
11		December 31, 2004, an amount equal to the amount of
12		intangible expenses and costs otherwise allowed as a
13		deduction in computing base income, and that were paid,
14		accrued, or incurred, directly or indirectly, to a
15		foreign person who would be a member of the same
16		unitary business group but for the fact that the
17		foreign person's business activity outside the United
18		States is 80% or more of that person's total business
19		activity. The addition modification required by this
20		subparagraph shall be reduced to the extent that
21		dividends were included in base income of the unitary
22		group for the same taxable year and received by the
23		taxpayer or by a member of the taxpayer's unitary
24		business group (including amounts included in gross
25		income pursuant to Sections 951 through 964 of the
26		Internal Revenue Code and amounts included in gross
27		income under Section 78 of the Internal Revenue Code)
28		with respect to the stock of the same person to whom
29		the intangible expenses and costs were directly or
30		indirectly paid, incurred, or accrued. The preceding
31		sentence shall not apply to the extent that the same
32		dividends caused a reduction to the addition
33		modification required under Section 203(b)(2)(E-12) of
34		this Act. As used in this subparagraph, the term
35		"intangible expenses and costs" includes (1) expenses,
36		losses, and costs for, or related to, the direct or

1		indirect acquisition, use, maintenance or management,
2		ownership, sale, exchange, or any other disposition of
3		intangible property; (2) losses incurred, directly or
4		indirectly, from factoring transactions or discounting
5		transactions; (3) royalty, patent, technical, and
6		copyright fees; (4) licensing fees; and (5) other
7		similar expenses and costs. For purposes of this
8		subparagraph, "intangible property" includes patents,
9		patent applications, trade names, trademarks, service
10		marks, copyrights, mask works, trade secrets, and
11		similar types of intangible assets.
12		This paragraph shall not apply to the following:
13		(i) any item of intangible expenses or costs paid,
14		accrued, or incurred, directly or indirectly, from
15		a transaction with a foreign person who is subject
16		in a foreign country or state, other than a state
17		which requires mandatory unitary reporting, to a
18		tax on or measured by net income with respect to
19		such item; or
20		(ii) any item of intangible expense or cost paid,
21		accrued, or incurred, directly or indirectly, if
22		the taxpayer can establish, based on a
23		preponderance of the evidence, both of the
24		following:
25		(a) the foreign person during the same taxable
26		year paid, accrued, or incurred, the
27		intangible expense or cost to a person that is
28		not a related member, and
29		(b) the transaction giving rise to the
30		intangible expense or cost between the
31		taxpayer and the foreign person did not have as
32		a principal purpose the avoidance of Illinois
33		income tax, and is paid pursuant to a contract
34		or agreement that reflects arm's-length terms;
35		or
36		(iii) any item of intangible expense or

1		cost paid, accrued, or incurred, directly or
2		indirectly, from a transaction with a foreign
3		person if the taxpayer establishes by clear and
4		convincing evidence, that the adjustments are
5		unreasonable; or if the taxpayer and the Director
6		agree in writing to the application or use of an
7		alternative method of apportionment under Section
8		304(f);
9		Nothing in this subsection shall preclude the
10		Director from making any other adjustment
11		otherwise allowed under Section 404 of this Act for
12		any tax year beginning after the effective date of
13		this amendment provided such adjustment is made
14		pursuant to regulation adopted by the Department
15		and such regulations provide methods and standards
16		by which the Department will utilize its authority
17		under Section 404 of this Act;
18		and by deducting from the total so obtained the sum of the
19		following amounts:
20		(F) An amount equal to the amount of any tax
21		imposed by this Act which was refunded to the taxpayer
22		and included in such total for the taxable year;
23		(G) An amount equal to any amount included in such
24		total under Section 78 of the Internal Revenue Code;
25		(H) In the case of a regulated investment company,
26		an amount equal to the amount of exempt interest
27		dividends as defined in subsection (b) (5) of Section
28		852 of the Internal Revenue Code, paid to shareholders
29		for the taxable year;
30		(I) With the exception of any amounts subtracted
31		under subparagraph (J), an amount equal to the sum of
32		all amounts disallowed as deductions by (i) Sections
33		171(a) (2), and 265(a)(2) and amounts disallowed as
34		interest expense by Section 291(a)(3) of the Internal
35		Revenue Code, as now or hereafter amended, and all
36		amounts of expenses allocable to interest and

1		disallowed as deductions by Section 265(a)(1) of the
2		Internal Revenue Code, as now or hereafter amended; and
3		(ii) for taxable years ending on or after August 13,
4		1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and
5		832(b)(5)(B)(i) of the Internal Revenue Code; the
6		provisions of this subparagraph are exempt from the
7		provisions of Section 250;
8		(J) An amount equal to all amounts included in such
9		total which are exempt from taxation by this State
10		either by reason of its statutes or Constitution or by
11		reason of the Constitution, treaties or statutes of the
12		United States; provided that, in the case of any
13		statute of this State that exempts income derived from
14		bonds or other obligations from the tax imposed under
15		this Act, the amount exempted shall be the interest net
16		of bond premium amortization;
17		(K) An amount equal to those dividends included in
18		such total which were paid by a corporation which
19		conducts business operations in an Enterprise Zone or
20		zones created under the Illinois Enterprise Zone Act
21		and conducts substantially all of its operations in an
22		Enterprise Zone or zones;
23		(L) An amount equal to those dividends included in
24		such total that were paid by a corporation that
25		conducts business operations in a federally designated
26		Foreign Trade Zone or Sub-Zone and that is designated a
27		High Impact Business located in Illinois; provided
28		that dividends eligible for the deduction provided in
29		subparagraph (K) of paragraph 2 of this subsection
30		shall not be eligible for the deduction provided under
31		this subparagraph (L);
32		(M) For any taxpayer that is a financial
33		organization within the meaning of Section 304(c) of
34		this Act, an amount included in such total as interest
35		income from a loan or loans made by such taxpayer to a
36		borrower, to the extent that such a loan is secured by

1		property which is eligible for the Enterprise Zone
2		Investment Credit. To determine the portion of a loan
3		or loans that is secured by property eligible for a
4		Section 201(f) investment credit to the borrower, the
5		entire principal amount of the loan or loans between
6		the taxpayer and the borrower should be divided into
7		the basis of the Section 201(f) investment credit
8		property which secures the loan or loans, using for
9		this purpose the original basis of such property on the
10		date that it was placed in service in the Enterprise
11		Zone. The subtraction modification available to
12		taxpayer in any year under this subsection shall be
13		that portion of the total interest paid by the borrower
14		with respect to such loan attributable to the eligible
15		property as calculated under the previous sentence;
16		(M-1) For any taxpayer that is a financial
17		organization within the meaning of Section 304(c) of
18		this Act, an amount included in such total as interest
19		income from a loan or loans made by such taxpayer to a
20		borrower, to the extent that such a loan is secured by
21		property which is eligible for the High Impact Business
22		Investment Credit. To determine the portion of a loan
23		or loans that is secured by property eligible for a
24		Section 201(h) investment credit to the borrower, the
25		entire principal amount of the loan or loans between
26		the taxpayer and the borrower should be divided into
27		the basis of the Section 201(h) investment credit
28		property which secures the loan or loans, using for
29		this purpose the original basis of such property on the
30		date that it was placed in service in a federally
31		designated Foreign Trade Zone or Sub-Zone located in
32		Illinois. No taxpayer that is eligible for the
33		deduction provided in subparagraph (M) of paragraph
34		(2) of this subsection shall be eligible for the
35		deduction provided under this subparagraph (M-1). The
36		subtraction modification available to taxpayers in any

1		year under this subsection shall be that portion of the
2		total interest paid by the borrower with respect to
3		such loan attributable to the eligible property as
4		calculated under the previous sentence;
5		(N) Two times any contribution made during the
6		taxable year to a designated zone organization to the
7		extent that the contribution (i) qualifies as a
8		charitable contribution under subsection (c) of
9		Section 170 of the Internal Revenue Code and (ii) must,
10		by its terms, be used for a project approved by the
11		Department of Commerce and Economic Opportunity
12		Community Affairs under Section 11 of the Illinois
13		Enterprise Zone Act;
14		(O) An amount equal to: (i) 85% for taxable years
15		ending on or before December 31, 1992, or, a percentage
16		equal to the percentage allowable under Section
17		243(a)(1) of the Internal Revenue Code of 1986 for
18		taxable years ending after December 31, 1992, of the
19		amount by which dividends included in taxable income
20		and received from a corporation that is not created or
21		organized under the laws of the United States or any
22		state or political subdivision thereof, including, for
23		taxable years ending on or after December 31, 1988,
24		dividends received or deemed received or paid or deemed
25		paid under Sections 951 through 964 of the Internal
26		Revenue Code, exceed the amount of the modification
27		provided under subparagraph (G) of paragraph (2) of
28		this subsection (b) which is related to such dividends;
29		plus (ii) 100% of the amount by which dividends,
30		included in taxable income and received, including,
31		for taxable years ending on or after December 31, 1988,
32		dividends received or deemed received or paid or deemed
33		paid under Sections 951 through 964 of the Internal
34		Revenue Code, from any such corporation specified in
35		clause (i) that would but for the provisions of Section
36		1504 (b) (3) of the Internal Revenue Code be treated as

1		a member of the affiliated group which includes the
2		dividend recipient, exceed the amount of the
3		modification provided under subparagraph (G) of
4		paragraph (2) of this subsection (b) which is related
5		to such dividends;
6		(P) An amount equal to any contribution made to a
7		job training project established pursuant to the Tax
8		Increment Allocation Redevelopment Act;
9		(Q) An amount equal to the amount of the deduction
10		used to compute the federal income tax credit for
11		restoration of substantial amounts held under claim of
12		right for the taxable year pursuant to Section 1341 of
13		the Internal Revenue Code of 1986;
14		(R) In the case of an attorney-in-fact with respect
15		to whom an interinsurer or a reciprocal insurer has
16		made the election under Section 835 of the Internal
17		Revenue Code, 26 U.S.C. 835, an amount equal to the
18		excess, if any, of the amounts paid or incurred by that
19		interinsurer or reciprocal insurer in the taxable year
20		to the attorney-in-fact over the deduction allowed to
21		that interinsurer or reciprocal insurer with respect
22		to the attorney-in-fact under Section 835(b) of the
23		Internal Revenue Code for the taxable year;
24		(S) For taxable years ending on or after December
25		31, 1997, in the case of a Subchapter S corporation, an
26		amount equal to all amounts of income allocable to a
27		shareholder subject to the Personal Property Tax
28		Replacement Income Tax imposed by subsections (c) and
29		(d) of Section 201 of this Act, including amounts
30		allocable to organizations exempt from federal income
31		tax by reason of Section 501(a) of the Internal Revenue
32		Code. This subparagraph (S) is exempt from the
33		provisions of Section 250;
34		(T) For taxable years 2001 and thereafter, for the
35		taxable year in which the bonus depreciation deduction
36		(30% of the adjusted basis of the qualified property)

1		is taken on the taxpayer's federal income tax return
2		under subsection (k) of Section 168 of the Internal
3		Revenue Code and for each applicable taxable year
4		thereafter, an amount equal to "x", where:
5		(1) "y" equals the amount of the depreciation
6		deduction taken for the taxable year on the
7		taxpayer's federal income tax return on property
8		for which the bonus depreciation deduction (30% of
9		the adjusted basis of the qualified property) was
10		taken in any year under subsection (k) of Section
11		168 of the Internal Revenue Code, but not including
12		the bonus depreciation deduction; and
13		(2) "x" equals "y" multiplied by 30 and then
14		divided by 70 (or "y" multiplied by 0.429).
15		The aggregate amount deducted under this
16		subparagraph in all taxable years for any one piece of
17		property may not exceed the amount of the bonus
18		depreciation deduction (30% of the adjusted basis of
19		the qualified property) 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; and
22		(U) If the taxpayer reports a capital gain or loss
23		on the taxpayer's federal income tax return for the
24		taxable year based on a sale or transfer of property
25		for which the taxpayer was required in any taxable year
26		to make an addition modification under subparagraph
27		(E-10), then an amount equal to that addition
28		modification.
29		The taxpayer is allowed to take the deduction under
30		this subparagraph only once with respect to any one
31		piece of property; .
32		(V) The amount of: (i) any interest income (net of
33		the deductions allocable thereto) taken into account
34		for the taxable year with respect to a transaction with
35		a taxpayer that is required to make an addition
36		modification with respect to such transaction under

1		Section 203(a)(2)(D-17), 203(b)(2)(E-12),
2		203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
3		the amount of such addition modification and (ii) any
4		income from intangible property (net of the deductions
5		allocable thereto) taken into account for the taxable
6		year with respect to a transaction with a taxpayer that
7		is required to make an addition modification with
8		respect to such transaction under Section
9		203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
10		203(d)(2)(D-8), but not to exceed the amount of such
11		addition modification;
12		(W) An amount equal to the interest income taken
13		into account for the taxable year (net of the
14		deductions allocable thereto) with respect to
15		transactions with a foreign person who would be a
16		member of the taxpayer's unitary business group but for
17		the fact that the foreign person's business activity
18		outside the United States is 80% or more of that
19		person's total business activity, but not to exceed the
20		addition modification required to be made for the same
21		taxable year under Section 203(b)(2)(E-12) for
22		interest paid, accrued, or incurred, directly or
23		indirectly, to the same foreign person; and
24		(X) An amount equal to the income from intangible
25		property taken into account for the taxable year (net
26		of the deductions allocable thereto) with respect to
27		transactions with a foreign person who would be a
28		member of the taxpayer's unitary business group but for
29		the fact that the foreign person's business activity
30		outside the United States is 80% or more of that
31		person's total business activity, but not to exceed the
32		addition modification required to be made for the same
33		taxable year under Section 203(b)(2)(E-13) for
34		intangible expenses and costs paid, accrued, or
35		incurred, directly or indirectly, to the same foreign
36		person.

1		(3) Special rule. For purposes of paragraph (2) (A),
2		"gross income" in the case of a life insurance company, for
3		tax years ending on and after December 31, 1994, shall mean
4		the gross investment income for the taxable year.
5		(c) Trusts and estates.
6		(1) In general. In the case of a trust or estate, base
7		income means an amount equal to the taxpayer's taxable
8		income for the taxable year as modified by paragraph (2).
9		(2) Modifications. Subject to the provisions of
10		paragraph (3), the taxable income referred to in paragraph
11		(1) shall be modified by adding thereto the sum of the
12		following amounts:
13		(A) An amount equal to all amounts paid or accrued
14		to the taxpayer as interest or dividends during the
15		taxable year to the extent excluded from gross income
16		in the computation of taxable income;
17		(B) In the case of (i) an estate, $600; (ii) a
18		trust which, under its governing instrument, is
19		required to distribute all of its income currently,
20		$300; and (iii) any other trust, $100, but in each such
21		case, only to the extent such amount was deducted in
22		the computation of taxable income;
23		(C) An amount equal to the amount of tax imposed by
24		this Act to the extent deducted from gross income in
25		the computation of taxable income for the taxable year;
26		(D) The amount of any net operating loss deduction
27		taken in arriving at taxable income, other than a net
28		operating loss carried forward from a taxable year
29		ending prior to December 31, 1986;
30		(E) For taxable years in which a net operating loss
31		carryback or carryforward from a taxable year ending
32		prior to December 31, 1986 is an element of taxable
33		income under paragraph (1) of subsection (e) or
34		subparagraph (E) of paragraph (2) of subsection (e),
35		the amount by which addition modifications other than

1		those provided by this subparagraph (E) exceeded
2		subtraction modifications in such taxable year, with
3		the following limitations applied in the order that
4		they are listed:
5		(i) the addition modification relating to the
6		net operating loss carried back or forward to the
7		taxable year from any taxable year ending prior to
8		December 31, 1986 shall be reduced by the amount of
9		addition modification under this subparagraph (E)
10		which related to that net operating loss and which
11		was taken into account in calculating the base
12		income of an earlier taxable year, and
13		(ii) the addition modification relating to the
14		net operating loss carried back or forward to the
15		taxable year from any taxable year ending prior to
16		December 31, 1986 shall not exceed the amount of
17		such carryback or carryforward;
18		For taxable years in which there is a net operating
19		loss carryback or carryforward from more than one other
20		taxable year ending prior to December 31, 1986, the
21		addition modification provided in this subparagraph
22		(E) shall be the sum of the amounts computed
23		independently under the preceding provisions of this
24		subparagraph (E) for each such taxable year;
25		(F) For taxable years ending on or after January 1,
26		1989, an amount equal to the tax deducted pursuant to
27		Section 164 of the Internal Revenue Code if the trust
28		or estate is claiming the same tax for purposes of the
29		Illinois foreign tax credit under Section 601 of this
30		Act;
31		(G) An amount equal to the amount of the capital
32		gain deduction allowable under the Internal Revenue
33		Code, to the extent deducted from gross income in the
34		computation of taxable income;
35		(G-5) For taxable years ending after December 31,
36		1997, an amount equal to any eligible remediation costs

1		that the trust or estate deducted in computing adjusted
2		gross income and for which the trust or estate claims a
3		credit under subsection (l) of Section 201;
4		(G-10) For taxable years 2001 and thereafter, an
5		amount equal to the bonus depreciation deduction (30%
6		of the adjusted basis of the qualified property) taken
7		on the taxpayer's federal income tax return for the
8		taxable year under subsection (k) of Section 168 of the
9		Internal Revenue Code; and
10		(G-11) If the taxpayer reports a capital gain or
11		loss on the taxpayer's federal income tax return for
12		the taxable year based on a sale or transfer of
13		property for which the taxpayer was required in any
14		taxable year to make an addition modification under
15		subparagraph (G-10), then an amount equal to the
16		aggregate amount of the deductions taken in all taxable
17		years under subparagraph (R) with respect to that
18		property;
19		The taxpayer is required to make the addition
20		modification under this subparagraph only once with
21		respect to any one piece of property;
22		(G-12) For taxable years ending on or after
23		December 31, 2004, an amount equal to the amount
24		otherwise allowed as a deduction in computing base
25		income for interest paid, accrued, or incurred,
26		directly or indirectly, to a foreign person who would
27		be a member of the same unitary business group but for
28		the fact that the foreign person's business activity
29		outside the United States is 80% or more of the foreign
30		person's total business activity. The addition
31		modification required by this subparagraph shall be
32		reduced to the extent that dividends were included in
33		base income of the unitary group for the same taxable
34		year and received by the taxpayer or by a member of the
35		taxpayer's unitary business group (including amounts
36		included in gross income pursuant to Sections 951

1		through 964 of the Internal Revenue Code and amounts
2		included in gross income under Section 78 of the
3		Internal Revenue Code) with respect to the stock of the
4		same person to whom the interest was paid, accrued, or
5		incurred.
6		This paragraph shall not apply to the following:
7		(i) an item of interest paid, accrued, or
8		incurred, directly or indirectly, to a foreign
9		person who is subject in a foreign country or
10		state, other than a state which requires mandatory
11		unitary reporting, to a tax on or measured by net
12		income with respect to such interest; or
13		(ii) an item of interest paid, accrued, or
14		incurred, directly or indirectly, to a foreign
15		person if the taxpayer can establish, based on a
16		preponderance of the evidence, both of the
17		following:
18		(a) the foreign person, during the same
19		taxable year, paid, accrued, or incurred, the
20		interest to a person that is not a related
21		member, and
22		(b) the transaction giving rise to the
23		interest expense between the taxpayer and the
24		foreign person did not have as a principal
25		purpose the avoidance of Illinois income tax,
26		and is paid pursuant to a contract or agreement
27		that reflects an arm's-length interest rate
28		and terms; or
29		(iii) the taxpayer can establish, based on
30		clear and convincing evidence, that the interest
31		paid, accrued, or incurred relates to a contract or
32		agreement entered into at arm's-length rates and
33		terms and the principal purpose for the payment is
34		not federal or Illinois tax avoidance; or
35		(iv) an item of interest paid, accrued, or
36		incurred, directly or indirectly, to a foreign

1		person if the taxpayer establishes by clear and
2		convincing evidence that the adjustments are
3		unreasonable; or if the taxpayer and the Director
4		agree in writing to the application or use of an
5		alternative method of apportionment under Section
6		304(f).
7		Nothing in this subsection shall preclude the
8		Director from making any other adjustment
9		otherwise allowed under Section 404 of this Act for
10		any tax year beginning after the effective date of
11		this amendment provided such adjustment is made
12		pursuant to regulation adopted by the Department
13		and such regulations provide methods and standards
14		by which the Department will utilize its authority
15		under Section 404 of this Act;
16		(G-13) For taxable years ending on or after
17		December 31, 2004, an amount equal to the amount of
18		intangible expenses and costs otherwise allowed as a
19		deduction in computing base income, and that were paid,
20		accrued, or incurred, directly or indirectly, to a
21		foreign person who would be a member of the same
22		unitary business group but for the fact that the
23		foreign person's business activity outside the United
24		States is 80% or more of that person's total business
25		activity. The addition modification required by this
26		subparagraph shall be reduced to the extent that
27		dividends were included in base income of the unitary
28		group for the same taxable year and received by the
29		taxpayer or by a member of the taxpayer's unitary
30		business group (including amounts included in gross
31		income pursuant to Sections 951 through 964 of the
32		Internal Revenue Code and amounts included in gross
33		income under Section 78 of the Internal Revenue Code)
34		with respect to the stock of the same person to whom
35		the intangible expenses and costs were directly or
36		indirectly paid, incurred, or accrued. The preceding

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

1		taxpayer and the foreign person did not have as
2		a principal purpose the avoidance of Illinois
3		income tax, and is paid pursuant to a contract
4		or agreement that reflects arm's-length terms;
5		or
6		(iii) any item of intangible expense or
7		cost paid, accrued, or incurred, directly or
8		indirectly, from a transaction with a foreign
9		person if the taxpayer establishes by clear and
10		convincing evidence, that the adjustments are
11		unreasonable; or if the taxpayer and the Director
12		agree in writing to the application or use of an
13		alternative method of apportionment under Section
14		304(f);
15		Nothing in this subsection shall preclude the
16		Director from making any other adjustment
17		otherwise allowed under Section 404 of this Act for
18		any tax year beginning after the effective date of
19		this amendment provided such adjustment is made
20		pursuant to regulation adopted by the Department
21		and such regulations provide methods and standards
22		by which the Department will utilize its authority
23		under Section 404 of this 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
27		total pursuant to the provisions of Sections 402(a),
28		402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
29		Internal Revenue Code or included in such total as
30		distributions under the provisions of any retirement
31		or disability plan for employees of any governmental
32		agency or unit, or retirement payments to retired
33		partners, which payments are excluded in computing net
34		earnings from self employment by Section 1402 of the
35		Internal Revenue Code and regulations adopted pursuant
36		thereto;

1		(I) The valuation limitation amount;
2		(J) An amount equal to the amount of any tax
3		imposed by this Act which was refunded to the taxpayer
4		and included in such total for the taxable year;
5		(K) An amount equal to all amounts included in
6		taxable income as modified by subparagraphs (A), (B),
7		(C), (D), (E), (F) and (G) which are exempt from
8		taxation by this State either by reason of its statutes
9		or Constitution or by reason of the Constitution,
10		treaties or statutes of the United States; provided
11		that, in the case of any statute of this State that
12		exempts income derived from bonds or other obligations
13		from the tax imposed under this Act, the amount
14		exempted shall be the interest net of bond premium
15		amortization;
16		(L) With the exception of any amounts subtracted
17		under subparagraph (K), an amount equal to the sum of
18		all amounts disallowed as deductions by (i) Sections
19		171(a) (2) and 265(a)(2) of the Internal Revenue Code,
20		as now or hereafter amended, and all amounts of
21		expenses allocable to interest and disallowed as
22		deductions by Section 265(1) of the Internal Revenue
23		Code of 1954, as now or hereafter amended; and (ii) for
24		taxable years ending on or after August 13, 1999,
25		Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
26		the Internal Revenue Code; the provisions of this
27		subparagraph are exempt from the provisions of Section
28		250;
29		(M) An amount equal to those dividends included in
30		such total which were paid by a corporation which
31		conducts business operations in an Enterprise Zone or
32		zones created under the Illinois Enterprise Zone Act
33		and conducts substantially all of its operations in an
34		Enterprise Zone or Zones;
35		(N) An amount equal to any contribution made to a
36		job training project established pursuant to the Tax

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 of 1986;
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
27		persecution for racial or religious reasons by Nazi
28		Germany or any other Axis regime immediately prior to,
29		during, and immediately after World War II, including,
30		but not limited to, interest on the proceeds receivable
31		as insurance under policies issued to a victim of
32		persecution for racial or religious reasons by Nazi
33		Germany or any other Axis regime by European insurance
34		companies immediately prior to and during World War II;
35		provided, however, this subtraction from federal
36		adjusted gross income does not apply to assets acquired

1		with such assets or with the proceeds from the sale of
2		such assets; provided, further, this paragraph shall
3		only apply to a taxpayer who was the first recipient of
4		such assets after their recovery and who is a victim of
5		persecution for racial or religious reasons by Nazi
6		Germany or any other Axis regime or as an heir of the
7		victim. The amount of and the eligibility for any
8		public assistance, benefit, or similar entitlement is
9		not affected by the inclusion of items (i) and (ii) of
10		this paragraph in gross income for federal income tax
11		purposes. This paragraph is exempt from the provisions
12		of Section 250;
13		(R) For taxable years 2001 and thereafter, for the
14		taxable year in which the bonus depreciation deduction
15		(30% of the adjusted basis of the qualified property)
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 (30% of
24		the adjusted basis of the qualified property) was
25		taken in any year under subsection (k) of Section
26		168 of the Internal Revenue Code, but not including
27		the bonus depreciation deduction; and
28		(2) "x" equals "y" multiplied by 30 and then
29		divided by 70 (or "y" multiplied by 0.429).
30		The aggregate amount deducted under this
31		subparagraph in all taxable years for any one piece of
32		property may not exceed the amount of the bonus
33		depreciation deduction (30% of the adjusted basis of
34		the qualified property) taken on that property on the
35		taxpayer's federal income tax return under subsection
36		(k) of Section 168 of the Internal Revenue Code; and

1		(S) If the taxpayer reports a capital gain or loss
2		on the taxpayer's federal income tax return for the
3		taxable year based on a sale or transfer of property
4		for which the taxpayer was required in any taxable year
5		to make an addition modification under subparagraph
6		(G-10), then an amount equal to that addition
7		modification.
8		The taxpayer is allowed to take the deduction under
9		this subparagraph only once with respect to any one
10		piece of property; .
11		(T) The amount of (i) any interest income (net of
12		the deductions allocable thereto) taken into account
13		for the taxable year with respect to a transaction with
14		a taxpayer that is required to make an addition
15		modification with respect to such transaction under
16		Section 203(a)(2)(D-17), 203(b)(2)(E-12),
17		203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
18		the amount of such addition modification and (ii) any
19		income from intangible property (net of the deductions
20		allocable thereto) taken into account for the taxable
21		year with respect to a transaction with a taxpayer that
22		is required to make an addition modification with
23		respect to such transaction under Section
24		203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
25		203(d)(2)(D-8), but not to exceed the amount of such
26		addition modification;
27		(U) An amount equal to the interest income taken
28		into account for the taxable year (net of the
29		deductions allocable thereto) with respect to
30		transactions with a foreign person who would be a
31		member of the taxpayer's unitary business group but for
32		the fact the foreign person's business activity
33		outside the United States is 80% or more of that
34		person's total business activity, but not to exceed the
35		addition modification required to be made for the same
36		taxable year under Section 203(c)(2)(G-12) for

1		interest paid, accrued, or incurred, directly or
2		indirectly, to the same foreign person; and
3		(V) An amount equal to the income from intangible
4		property taken into account for the taxable year (net
5		of the deductions allocable thereto) with respect to
6		transactions with a foreign person who would be a
7		member of the taxpayer's unitary business group but for
8		the fact that the foreign person's business activity
9		outside the United States is 80% or more of that
10		person's total business activity, but not to exceed the
11		addition modification required to be made for the same
12		taxable year under Section 203(c)(2)(G-13) for
13		intangible expenses and costs paid, accrued, or
14		incurred, directly or indirectly, to the same foreign
15		person.
16		(3) Limitation. The amount of any modification
17		otherwise required under this subsection shall, under
18		regulations prescribed by the Department, be adjusted by
19		any amounts included therein which were properly paid,
20		credited, or required to be distributed, or permanently set
21		aside for charitable purposes pursuant to Internal Revenue
22		Code Section 642(c) during the taxable year.
23		(d) Partnerships.
24		(1) In general. In the case of a partnership, base
25		income means an amount equal to the taxpayer's taxable
26		income for the taxable year as modified by paragraph (2).
27		(2) Modifications. The taxable income referred to in
28		paragraph (1) shall be modified by adding thereto the sum
29		of the following amounts:
30		(A) An amount equal to all amounts paid or accrued
31		to the taxpayer as interest or dividends during the
32		taxable year to the extent excluded from gross income
33		in the computation of taxable income;
34		(B) An amount equal to the amount of tax imposed by
35		this Act to the extent deducted from gross income for

1		the taxable year;
2		(C) The amount of deductions allowed to the
3		partnership pursuant to Section 707 (c) of the Internal
4		Revenue Code in calculating its taxable income;
5		(D) An amount equal to the amount of the capital
6		gain deduction allowable under the Internal Revenue
7		Code, to the extent deducted from gross income in the
8		computation of taxable income;
9		(D-5) For taxable years 2001 and thereafter, an
10		amount equal to the bonus depreciation deduction (30%
11		of the adjusted basis of the qualified property) taken
12		on the taxpayer's federal income tax return for the
13		taxable year under subsection (k) of Section 168 of the
14		Internal Revenue Code; and
15		(D-6) If the taxpayer reports a capital gain or
16		loss on the taxpayer's federal income tax return for
17		the taxable year based on a sale or transfer of
18		property for which the taxpayer was required in any
19		taxable year to make an addition modification under
20		subparagraph (D-5), then an amount equal to the
21		aggregate amount of the deductions taken in all taxable
22		years under subparagraph (O) with respect to that
23		property;
24		The taxpayer is required to make the addition
25		modification under this subparagraph only once with
26		respect to any one piece of property;
27		(D-7) For taxable years ending on or after December
28		31, 2004, an amount equal to the amount otherwise
29		allowed as a deduction in computing base income for
30		interest paid, accrued, or incurred, directly or
31		indirectly, to a foreign person who would be a member
32		of the same unitary business group but for the fact the
33		foreign person's business activity outside the United
34		States is 80% or more of the foreign person's total
35		business activity. The addition modification required
36		by this subparagraph shall be reduced to the extent

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

1		terms and the principal purpose for the payment is
2		not federal or Illinois tax avoidance; or
3		(iv) an item of interest paid, accrued, or
4		incurred, directly or indirectly, to a foreign
5		person if the taxpayer establishes by clear and
6		convincing evidence that the adjustments are
7		unreasonable; or if the taxpayer and the Director
8		agree in writing to the application or use of an
9		alternative method of apportionment under Section
10		304(f).
11		Nothing in this subsection shall preclude the
12		Director from making any other adjustment
13		otherwise allowed under Section 404 of this Act for
14		any tax year beginning after the effective date of
15		this amendment provided such adjustment is made
16		pursuant to regulation adopted by the Department
17		and such regulations provide methods and standards
18		by which the Department will utilize its authority
19		under Section 404 of this Act; and
20		(D-8) For taxable years ending on or after December
21		31, 2004, 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, to a foreign person
25		who would be a member of the same unitary business
26		group but for the fact that the foreign person's
27		business activity outside the United States is 80% or
28		more of that person's total business activity. The
29		addition modification required by this subparagraph
30		shall be reduced to the extent that dividends were
31		included in base income of the unitary group for the
32		same taxable year and received by the taxpayer or by a
33		member of the taxpayer's unitary business group
34		(including amounts included in gross income pursuant
35		to Sections 951 through 964 of the Internal Revenue
36		Code and amounts included in gross income under Section

1		78 of the Internal Revenue Code) with respect to the
2		stock of the same person to whom the intangible
3		expenses and costs were directly or indirectly paid,
4		incurred or accrued. The preceding sentence shall not
5		apply to the extent that the same dividends caused a
6		reduction to the addition modification required under
7		Section 203(d)(2)(D-7) of this Act. As used in this
8		subparagraph, the term "intangible expenses and costs"
9		includes (1) expenses, losses, and costs for, or
10		related to, the direct or indirect acquisition, use,
11		maintenance or management, ownership, sale, exchange,
12		or any other disposition of intangible property; (2)
13		losses incurred, directly or indirectly, from
14		factoring transactions or discounting transactions;
15		(3) royalty, patent, technical, and copyright fees;
16		(4) licensing fees; and (5) other similar expenses and
17		costs. For purposes of this subparagraph, "intangible
18		property" includes patents, patent applications, trade
19		names, trademarks, service marks, copyrights, mask
20		works, trade secrets, and similar types of intangible
21		assets;
22		This paragraph shall not apply to the following:
23		(i) any item of intangible expenses or costs paid,
24		accrued, or incurred, directly or indirectly, from
25		a transaction with a foreign person who is subject
26		in a foreign country or state, other than a state
27		which requires mandatory unitary reporting, to a
28		tax on or measured by net income with respect to
29		such item; or
30		(ii) any item of intangible expense or cost paid,
31		accrued, or incurred, directly or indirectly, if
32		the taxpayer can establish, based on a
33		preponderance of the evidence, both of the
34		following:
35		(a) the foreign person during the same taxable
36		year paid, accrued, or incurred, the

1		intangible expense or cost to a person that is
2		not a related member, and
3		(b) the transaction giving rise to the
4		intangible expense or cost between the
5		taxpayer and the foreign person did not have as
6		a principal purpose the avoidance of Illinois
7		income tax, and is paid pursuant to a contract
8		or agreement that reflects arm's-length terms;
9		or
10		(iii) any item of intangible expense or
11		cost paid, accrued, or incurred, directly or
12		indirectly, from a transaction with a foreign
13		person if the taxpayer establishes by clear and
14		convincing evidence, that the adjustments are
15		unreasonable; or if the taxpayer and the Director
16		agree in writing to the application or use of an
17		alternative method of apportionment under Section
18		304(f);
19		Nothing in this subsection shall preclude the
20		Director from making any other adjustment
21		otherwise allowed under Section 404 of this Act for
22		any tax year beginning after the effective date of
23		this amendment provided such adjustment is made
24		pursuant to regulation adopted by the Department
25		and such regulations provide methods and standards
26		by which the Department will utilize its authority
27		under Section 404 of this Act;
28		and by deducting from the total so obtained the following
29		amounts:
30		(E) The valuation limitation amount;
31		(F) An amount equal to the amount of any tax
32		imposed by this Act which was refunded to the taxpayer
33		and included in such total for the taxable year;
34		(G) An amount equal to all amounts included in
35		taxable income as modified by subparagraphs (A), (B),
36		(C) and (D) which are exempt from taxation by this

1		State either by reason of its statutes or Constitution
2		or by reason of the Constitution, treaties or statutes
3		of the United States; provided that, in the case of any
4		statute of this State that exempts income derived from
5		bonds or other obligations from the tax imposed under
6		this Act, the amount exempted shall be the interest net
7		of bond premium amortization;
8		(H) Any income of the partnership which
9		constitutes personal service income as defined in
10		Section 1348 (b) (1) of the Internal Revenue Code (as
11		in effect December 31, 1981) or a reasonable allowance
12		for compensation paid or accrued for services rendered
13		by partners to the partnership, whichever is greater;
14		(I) An amount equal to all amounts of income
15		distributable to an entity subject to the Personal
16		Property Tax Replacement Income Tax imposed by
17		subsections (c) and (d) of Section 201 of this Act
18		including amounts distributable to organizations
19		exempt from federal income tax by reason of Section
20		501(a) of the Internal Revenue Code;
21		(J) With the exception of any amounts subtracted
22		under subparagraph (G), an amount equal to the sum of
23		all amounts disallowed as deductions by (i) Sections
24		171(a) (2), and 265(2) of the Internal Revenue Code of
25		1954, as now or hereafter amended, and all amounts of
26		expenses allocable to interest and disallowed as
27		deductions by Section 265(1) of the Internal Revenue
28		Code, as now or hereafter amended; and (ii) for taxable
29		years ending on or after August 13, 1999, Sections
30		171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
31		Internal Revenue Code; the provisions of this
32		subparagraph are exempt from the provisions of Section
33		250;
34		(K) An amount equal to those dividends included in
35		such total which were paid by a corporation which
36		conducts business operations in an Enterprise Zone or

1		zones created under the Illinois Enterprise Zone Act,
2		enacted by the 82nd General Assembly, and conducts
3		substantially all of its operations in an Enterprise
4		Zone or Zones;
5		(L) An amount equal to any contribution made to a
6		job training project established pursuant to the Real
7		Property Tax Increment Allocation Redevelopment Act;
8		(M) An amount equal to those dividends included in
9		such total that were paid by a corporation that
10		conducts business operations in a federally designated
11		Foreign Trade Zone or Sub-Zone and that is designated a
12		High Impact Business located in Illinois; provided
13		that dividends eligible for the deduction provided in
14		subparagraph (K) of paragraph (2) of this subsection
15		shall not be eligible for the deduction provided under
16		this subparagraph (M);
17		(N) An amount equal to the amount of the deduction
18		used to compute the federal income tax credit for
19		restoration of substantial amounts held under claim of
20		right for the taxable year pursuant to Section 1341 of
21		the Internal Revenue Code of 1986;
22		(O) For taxable years 2001 and thereafter, for the
23		taxable year in which the bonus depreciation deduction
24		(30% of the adjusted basis of the qualified property)
25		is taken on the taxpayer's federal income tax return
26		under subsection (k) of Section 168 of the Internal
27		Revenue Code and for each applicable taxable year
28		thereafter, an amount equal to "x", where:
29		(1) "y" equals the amount of the depreciation
30		deduction taken for the taxable year on the
31		taxpayer's federal income tax return on property
32		for which the bonus depreciation deduction (30% of
33		the adjusted basis of the qualified property) was
34		taken in any year under subsection (k) of Section
35		168 of the Internal Revenue Code, but not including
36		the bonus depreciation deduction; and

1		(2) "x" equals "y" multiplied by 30 and then
2		divided by 70 (or "y" multiplied by 0.429).
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 (30% of the adjusted basis of
7		the qualified property) 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; and
10		(P) If the taxpayer reports a capital gain or loss
11		on the taxpayer's federal income tax return for the
12		taxable year based on a sale or transfer of property
13		for which the taxpayer was required in any taxable year
14		to make an addition modification under subparagraph
15		(D-5), then an amount equal to that addition
16		modification.
17		The taxpayer is allowed to take the deduction under
18		this subparagraph only once with respect to any one
19		piece of property; .
20		(Q) The amount of (i) any interest income (net of
21		the deductions allocable thereto) taken into account
22		for the taxable year with respect to a transaction with
23		a taxpayer that is required to make an addition
24		modification with respect to such transaction under
25		Section 203(a)(2)(D-17), 203(b)(2)(E-12),
26		203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
27		the amount of such addition modification and (ii) any
28		income from intangible property (net of the deductions
29		allocable thereto) taken into account for the taxable
30		year with respect to a transaction with a taxpayer that
31		is required to make an addition modification with
32		respect to such transaction under Section
33		203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
34		203(d)(2)(D-8), but not to exceed the amount of such
35		addition modification;
36		(R) An amount equal to the interest income taken

1		into account for the taxable year (net of the
2		deductions allocable thereto) with respect to
3		transactions with a foreign person who would be a
4		member of the taxpayer's unitary business group but for
5		the fact that the foreign person's business activity
6		outside the United States is 80% or more of that
7		person's total business activity, 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 foreign person; and
12		(S) An amount equal to the income from intangible
13		property taken into account for the taxable year (net
14		of the deductions allocable thereto) with respect to
15		transactions with a foreign person who would be a
16		member of the taxpayer's unitary business group but for
17		the fact that the foreign person's business activity
18		outside the United States is 80% or more of that
19		person's total business activity, but not to exceed the
20		addition modification required to be made for the same
21		taxable year under Section 203(d)(2)(D-8) for
22		intangible expenses and costs paid, accrued, or
23		incurred, directly or indirectly, to the same foreign
24		person.
25		(e) Gross income; adjusted gross income; taxable income.
26		(1) In general. Subject to the provisions of paragraph
27		(2) and subsection (b) (3), for purposes of this Section
28		and Section 803(e), a taxpayer's gross income, adjusted
29		gross income, or taxable income for the taxable year shall
30		mean the amount of gross income, adjusted gross income or
31		taxable income properly reportable for federal income tax
32		purposes for the taxable year under the provisions of the
33		Internal Revenue Code. Taxable income may be less than
34		zero. However, for taxable years ending on or after
35		December 31, 1986, net operating loss carryforwards from

1		taxable years ending prior to December 31, 1986, may not
2		exceed the sum of federal taxable income for the taxable
3		year before net operating loss deduction, plus the excess
4		of addition modifications over subtraction modifications
5		for the taxable year. For taxable years ending prior to
6		December 31, 1986, taxable income may never be an amount in
7		excess of the net operating loss for the taxable year as
8		defined in subsections (c) and (d) of Section 172 of the
9		Internal Revenue Code, provided that when taxable income of
10		a corporation (other than a Subchapter S corporation),
11		trust, or estate is less than zero and addition
12		modifications, other than those provided by subparagraph
13		(E) of paragraph (2) of subsection (b) for corporations or
14		subparagraph (E) of paragraph (2) of subsection (c) for
15		trusts and estates, exceed subtraction modifications, an
16		addition modification must be made under those
17		subparagraphs for any other taxable year to which the
18		taxable income less than zero (net operating loss) is
19		applied under Section 172 of the Internal Revenue Code or
20		under subparagraph (E) of paragraph (2) of this subsection
21		(e) applied in conjunction with Section 172 of the Internal
22		Revenue Code.
23		(2) Special rule. For purposes of paragraph (1) of this
24		subsection, the taxable income properly reportable for
25		federal income tax purposes shall mean:
26		(A) Certain life insurance companies. In the case
27		of a life insurance company subject to the tax imposed
28		by Section 801 of the Internal Revenue Code, life
29		insurance company taxable income, plus the amount of
30		distribution from pre-1984 policyholder surplus
31		accounts as calculated under Section 815a of the
32		Internal Revenue Code;
33		(B) Certain other insurance companies. In the case
34		of mutual insurance companies subject to the tax
35		imposed by Section 831 of the Internal Revenue Code,
36		insurance company taxable income;

1		(C) Regulated investment companies. In the case of
2		a regulated investment company subject to the tax
3		imposed by Section 852 of the Internal Revenue Code,
4		investment company taxable income;
5		(D) Real estate investment trusts. In the case of a
6		real estate investment trust subject to the tax imposed
7		by Section 857 of the Internal Revenue Code, real
8		estate investment trust taxable income;
9		(E) Consolidated corporations. In the case of a
10		corporation which is a member of an affiliated group of
11		corporations filing a consolidated income tax return
12		for the taxable year for federal income tax purposes,
13		taxable income determined as if such corporation had
14		filed a separate return for federal income tax purposes
15		for the taxable year and each preceding taxable year
16		for which it was a member of an affiliated group. For
17		purposes of this subparagraph, the taxpayer's separate
18		taxable income shall be determined as if the election
19		provided by Section 243(b) (2) of the Internal Revenue
20		Code had been in effect for all such years;
21		(F) Cooperatives. In the case of a cooperative
22		corporation or association, the taxable income of such
23		organization determined in accordance with the
24		provisions of Section 1381 through 1388 of the Internal
25		Revenue Code;
26		(G) Subchapter S corporations. In the case of: (i)
27		a Subchapter S corporation for which there is in effect
28		an election for the taxable year under Section 1362 of
29		the Internal Revenue Code, the taxable income of such
30		corporation determined in accordance with Section
31		1363(b) of the Internal Revenue Code, except that
32		taxable income shall take into account those items
33		which are required by Section 1363(b)(1) of the
34		Internal Revenue Code to be separately stated; and (ii)
35		a Subchapter S corporation for which there is in effect
36		a federal election to opt out of the provisions of the

1		Subchapter S Revision Act of 1982 and have applied
2		instead the prior federal Subchapter S rules as in
3		effect on July 1, 1982, the taxable income of such
4		corporation determined in accordance with the federal
5		Subchapter S rules as in effect on July 1, 1982; and
6		(H) Partnerships. In the case of a partnership,
7		taxable income determined in accordance with Section
8		703 of the Internal Revenue Code, except that taxable
9		income shall take into account those items which are
10		required by Section 703(a)(1) to be separately stated
11		but which would be taken into account by an individual
12		in calculating his taxable income.
13		(3) Recapture of business expenses on disposition of
14		asset or business. Notwithstanding any other law to the
15		contrary, if in prior years income from an asset or
16		business has been classified as business income and in a
17		later year is demonstrated to be non-business income, then
18		all expenses, without limitation, deducted in such later
19		year and in the 2 immediately preceding taxable years
20		related to that asset or business that generated the
21		non-business income shall be added back and recaptured as
22		business income in the year of the disposition of the asset
23		or business. Such amount shall be apportioned to Illinois
24		using the greater of the apportionment fraction computed
25		for the business under Section 304 of this Act for the
26		taxable year or the average of the apportionment fractions
27		computed for the business under Section 304 of this Act for
28		the taxable year and for the 2 immediately preceding
29		taxable years.
30		(f) Valuation limitation amount.
31		(1) In general. The valuation limitation amount
32		referred to in subsections (a) (2) (G), (c) (2) (I) and
33		(d)(2) (E) is an amount equal to:
34		(A) The sum of the pre-August 1, 1969 appreciation
35		amounts (to the extent consisting of gain reportable
36		under the provisions of Section 1245 or 1250 of the

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

1		(g) Double deductions. Unless specifically provided
2		otherwise, nothing in this Section shall permit the same item
3		to be deducted more than once.
4		(h) Legislative intention. Except as expressly provided by
5		this Section there shall be no modifications or limitations on
6		the amounts of income, gain, loss or deduction taken into
7		account in determining gross income, adjusted gross income or
8		taxable income for federal income tax purposes for the taxable
9		year, or in the amount of such items entering into the
10		computation of base income and net income under this Act for
11		such taxable year, whether in respect of property values as of
12		August 1, 1969 or otherwise.
13		(Source: P.A. 91-192, eff. 7-20-99; 91-205, eff. 7-20-99;
14		91-357, eff. 7-29-99; 91-541, eff. 8-13-99; 91-676, eff.
15		12-23-99; 91-845, eff. 6-22-00; 91-913, eff. 1-1-01; 92-16,
16		eff. 6-28-01; 92-244, eff. 8-3-01; 92-439, eff. 8-17-01;
17		92-603, eff. 6-28-02; 92-626, eff. 7-11-02; 92-651, eff.
18		7-11-02; 92-846, eff. 8-23-02; revised 10-15-03.)
19		(35 ILCS 5/205) (from Ch. 120, par. 2-205)
20		Sec. 205. Exempt organizations.
21		(a) Charitable, etc. organizations. The base income of an
22		organization which is exempt from the federal income tax by
23		reason of Section 501(a) of the Internal Revenue Code shall not
24		be determined under section 203 of this Act, but shall be its
25		unrelated business taxable income as determined under section
26		512 of the Internal Revenue Code, without any deduction for the
27		tax imposed by this Act. The standard exemption provided by
28		section 204 of this Act shall not be allowed in determining the
29		net income of an organization to which this subsection applies.
30		(b) Partnerships. A partnership as such shall not be
31		subject to the tax imposed by subsection 201 (a) and (b) of
32		this Act, but shall be subject to the replacement tax imposed
33		by subsection 201 (c) and (d) of this Act and shall compute its

1		base income as described in subsection (d) of Section 203 of
2		this Act. For taxable years ending on or after December 31,
3		2004, an investment partnership, as defined in Section
4		1501(a)(11.5) of this Act, shall not be subject to the tax
5		imposed by subsections (c) and (d) of Section 201 of this Act.
6		A partnership shall file such returns and other information at
7		such time and in such manner as may be required under Article 5
8		of this Act. The partners in a partnership shall be liable for
9		the replacement tax imposed by subsection 201 (c) and (d) of
10		this Act on such partnership, to the extent such tax is not
11		paid by the partnership, as provided under the laws of Illinois
12		governing the liability of partners for the obligations of a
13		partnership. Persons carrying on business as partners shall be
14		liable for the tax imposed by subsection 201 (a) and (b) of
15		this Act only in their separate or individual capacities.
16		(c) Subchapter S corporations. A Subchapter S corporation
17		shall not be subject to the tax imposed by subsection 201 (a)
18		and (b) of this Act but shall be subject to the replacement tax
19		imposed by subsection 201 (c) and (d) of this Act and shall
20		file such returns and other information at such time and in
21		such manner as may be required under Article 5 of this Act.
22		(d) Combat zone death. An individual relieved from the
23		federal income tax for any taxable year by reason of section
24		692 of the Internal Revenue Code shall not be subject to the
25		tax imposed by this Act for such taxable year.
26		(e) Certain trusts. A common trust fund described in
27		Section 584 of the Internal Revenue Code, and any other trust
28		to the extent that the grantor is treated as the owner thereof
29		under sections 671 through 678 of the Internal Revenue Code
30		shall not be subject to the tax imposed by this Act.
31		(f) Certain business activities. A person not otherwise
32		subject to the tax imposed by this Act shall not become subject
33		to the tax imposed by this Act by reason of:
34		(1) that person's ownership of tangible personal
35		property located at the premises of a printer in this State
36		with which the person has contracted for printing, or

1		(2) activities of the person's employees or agents
2		located solely at the premises of a printer and related to
3		quality control, distribution, or printing services
4		performed by a printer in the State with which the person
5		has contracted for printing.
6		(Source: P.A. 88-361.)
7		(35 ILCS 5/305) (from Ch. 120, par. 3-305)
8		Sec. 305. Allocation of Partnership Income by partnerships
9		and partners other than residents. (a) Allocation of
10		partnership business income by partners other than residents.
11		The respective shares of partners other than residents in so
12		much of the business income of the partnership as is allocated
13		or apportioned to this State in the possession of the
14		partnership shall be taken into account by such partners pro
15		rata in accordance with their respective distributive shares of
16		such partnership income for the partnership's taxable year and
17		allocated to this State.
18		(b) Allocation of partnership nonbusiness income by
19		partners other than residents. The respective shares of
20		partners other than residents in the items of partnership
21		income and deduction not taken into account in computing the
22		business income of a partnership shall be taken into account by
23		such partners pro rata in accordance with their respective
24		distributive shares of such partnership income for the
25		partnership's taxable year, and allocated as if such items had
26		been paid, incurred or accrued directly to such partners in
27		their separate capacities.
28		(c) Allocation or apportionment of base income by
29		partnership. Base income of a partnership shall be allocated or
30		apportioned to this State pursuant to Article 3, in the same
31		manner as it is allocated or apportioned for any other
32		nonresident.
33		(c-5) Taxable income of an investment partnership, as
34		defined in Section 1501(a)(11.5) of this Act, that is
35		distributable to a nonresident partner shall be treated as

1		nonbusiness income and shall be allocated to the partner's
2		state of residence (in the case of an individual) or commercial
3		domicile (in the case of any other person). However, any income
4		distributable to a nonresident partner shall be treated as
5		business income and apportioned as if such income had been
6		received directly by the partner if the partner has made an
7		election under Section 1501(a)(1) of this Act to treat all
8		income as business income or if such income is from investment
9		activity:
10		(1) that is directly or integrally related to any other
11		business activity conducted in this State by the
12		nonresident partner (or any member of that partner's
13		unitary business group);
14		(2) that serves an operational function to any other
15		business activity of the nonresident partner (or any member
16		of that partner's unitary business group) in this State; or
17		(3) where assets of the investment partnership were
18		acquired with working capital from a trade or business
19		activity conducted in this State in which the nonresident
20		partner (or any member of that partner's unitary business
21		group) owns an interest.
22		(d) Cross reference. For allocation of partnership income
23		or deductions by residents, see Section 301(a).
24		(Source: P.A. 84-550.)
25		(35 ILCS 5/1501) (from Ch. 120, par. 15-1501)
26		Sec. 1501. Definitions.
27		(a) In general. When used in this Act, where not otherwise
28		distinctly expressed or manifestly incompatible with the
29		intent thereof:
30		(1) Business income. The term "business income" means
31		all income that may be treated as apportionable business
32		income under the Constitution of the United States.
33		Business income is net of the deductions allocable thereto
34		income arising from transactions and activity in the
35		regular course of the taxpayer's trade or business, net of

1		the deductions allocable thereto, and includes income from
2		tangible and intangible property if the acquisition,
3		management, and disposition of the property constitute
4		integral parts of the taxpayer's regular trade or business
5		operations. Such term does not include compensation or the
6		deductions allocable thereto. For each taxable year
7		beginning on or after January 1, 2003, a taxpayer may elect
8		to treat all income other than compensation as business
9		income. This election shall be made in accordance with
10		rules adopted by the Department and, once made, shall be
11		irrevocable.
12		(2) Commercial domicile. The term "commercial
13		domicile" means the principal place from which the trade or
14		business of the taxpayer is directed or managed.
15		(3) Compensation. The term "compensation" means wages,
16		salaries, commissions and any other form of remuneration
17		paid to employees for personal services.
18		(4) Corporation. The term "corporation" includes
19		associations, joint-stock companies, insurance companies
20		and cooperatives. Any entity, including a limited
21		liability company formed under the Illinois Limited
22		Liability Company Act, shall be treated as a corporation if
23		it is so classified for federal income tax purposes.
24		(5) Department. The term "Department" means the
25		Department of Revenue of this State.
26		(6) Director. The term "Director" means the Director of
27		Revenue of this State.
28		(7) Fiduciary. The term "fiduciary" means a guardian,
29		trustee, executor, administrator, receiver, or any person
30		acting in any fiduciary capacity for any person.
31		(8) Financial organization.
32		(A) The term "financial organization" means any
33		bank, bank holding company, trust company, savings
34		bank, industrial bank, land bank, safe deposit
35		company, private banker, savings and loan association,
36		building and loan association, credit union, currency

1		exchange, cooperative bank, small loan company, sales
2		finance company, investment company, or any person
3		which is owned by a bank or bank holding company. For
4		the purpose of this Section a "person" will include
5		only those persons which a bank holding company may
6		acquire and hold an interest in, directly or
7		indirectly, under the provisions of the Bank Holding
8		Company Act of 1956 (12 U.S.C. 1841, et seq.), except
9		where interests in any person must be disposed of
10		within certain required time limits under the Bank
11		Holding Company Act of 1956.
12		(B) For purposes of subparagraph (A) of this
13		paragraph, the term "bank" includes (i) any entity that
14		is regulated by the Comptroller of the Currency under
15		the National Bank Act, or by the Federal Reserve Board,
16		or by the Federal Deposit Insurance Corporation and
17		(ii) any federally or State chartered bank operating as
18		a credit card bank.
19		(C) For purposes of subparagraph (A) of this
20		paragraph, the term "sales finance company" has the
21		meaning provided in the following item (i) or (ii):
22		(i) A person primarily engaged in one or more
23		of the following businesses: the business of
24		purchasing customer receivables, the business of
25		making loans upon the security of customer
26		receivables, the business of making loans for the
27		express purpose of funding purchases of tangible
28		personal property or services by the borrower, or
29		the business of finance leasing. For purposes of
30		this item (i), "customer receivable" means:
31		(a) a retail installment contract or
32		retail charge agreement within the meaning of
33		the Sales Finance Agency Act, the Retail
34		Installment Sales Act, or the Motor Vehicle
35		Retail Installment Sales Act;
36		(b) an installment, charge, credit, or

1		similar contract or agreement arising from the
2		sale of tangible personal property or services
3		in a transaction involving a deferred payment
4		price payable in one or more installments
5		subsequent to the sale; or
6		(c) the outstanding balance of a contract
7		or agreement described in provisions (a) or (b)
8		of this item (i).
9		A customer receivable need not provide for
10		payment of interest on deferred payments. A sales
11		finance company may purchase a customer receivable
12		from, or make a loan secured by a customer
13		receivable to, the seller in the original
14		transaction or to a person who purchased the
15		customer receivable directly or indirectly from
16		that seller.
17		(ii) A corporation meeting each of the
18		following criteria:
19		(a) the corporation must be a member of an
20		"affiliated group" within the meaning of
21		Section 1504(a) of the Internal Revenue Code,
22		determined without regard to Section 1504(b)
23		of the Internal Revenue Code;
24		(b) more than 50% of the gross income of
25		the corporation for the taxable year must be
26		interest income derived from qualifying loans.
27		A "qualifying loan" is a loan made to a member
28		of the corporation's affiliated group that
29		originates customer receivables (within the
30		meaning of item (i)) or to whom customer
31		receivables originated by a member of the
32		affiliated group have been transferred, to the
33		extent the average outstanding balance of
34		loans from that corporation to members of its
35		affiliated group during the taxable year do not
36		exceed the limitation amount for that

1		corporation. The "limitation amount" for a
2		corporation is the average outstanding
3		balances during the taxable year of customer
4		receivables (within the meaning of item (i))
5		originated by all members of the affiliated
6		group. If the average outstanding balances of
7		the loans made by a corporation to members of
8		its affiliated group exceed the limitation
9		amount, the interest income of that
10		corporation from qualifying loans shall be
11		equal to its interest income from loans to
12		members of its affiliated groups times a
13		fraction equal to the limitation amount
14		divided by the average outstanding balances of
15		the loans made by that corporation to members
16		of its affiliated group;
17		(c) the total of all shareholder's equity
18		(including, without limitation, paid-in
19		capital on common and preferred stock and
20		retained earnings) of the corporation plus the
21		total of all of its loans, advances, and other
22		obligations payable or owed to members of its
23		affiliated group may not exceed 20% of the
24		total assets of the corporation at any time
25		during the tax year; and
26		(d) more than 50% of all interest-bearing
27		obligations of the affiliated group payable to
28		persons outside the group determined in
29		accordance with generally accepted accounting
30		principles must be obligations of the
31		corporation.
32		This amendatory Act of the 91st General Assembly is
33		declaratory of existing law.
34		(D) Subparagraphs (B) and (C) of this paragraph are
35		declaratory of existing law and apply retroactively,
36		for all tax years beginning on or before December 31,

1		1996, to all original returns, to all amended returns
2		filed no later than 30 days after the effective date of
3		this amendatory Act of 1996, and to all notices issued
4		on or before the effective date of this amendatory Act
5		of 1996 under subsection (a) of Section 903, subsection
6		(a) of Section 904, subsection (e) of Section 909, or
7		Section 912. A taxpayer that is a "financial
8		organization" that engages in any transaction with an
9		affiliate shall be a "financial organization" for all
10		purposes of this Act.
11		(E) For all tax years beginning on or before
12		December 31, 1996, a taxpayer that falls within the
13		definition of a "financial organization" under
14		subparagraphs (B) or (C) of this paragraph, but who
15		does not fall within the definition of a "financial
16		organization" under the Proposed Regulations issued by
17		the Department of Revenue on July 19, 1996, may
18		irrevocably elect to apply the Proposed Regulations
19		for all of those years as though the Proposed
20		Regulations had been lawfully promulgated, adopted,
21		and in effect for all of those years. For purposes of
22		applying subparagraphs (B) or (C) of this paragraph to
23		all of those years, the election allowed by this
24		subparagraph applies only to the taxpayer making the
25		election and to those members of the taxpayer's unitary
26		business group who are ordinarily required to
27		apportion business income under the same subsection of
28		Section 304 of this Act as the taxpayer making the
29		election. No election allowed by this subparagraph
30		shall be made under a claim filed under subsection (d)
31		of Section 909 more than 30 days after the effective
32		date of this amendatory Act of 1996.
33		(F) Finance Leases. For purposes of this
34		subsection, a finance lease shall be treated as a loan
35		or other extension of credit, rather than as a lease,
36		regardless of how the transaction is characterized for

1		any other purpose, including the purposes of any
2		regulatory agency to which the lessor is subject. A
3		finance lease is any transaction in the form of a lease
4		in which the lessee is treated as the owner of the
5		leased asset entitled to any deduction for
6		depreciation allowed under Section 167 of the Internal
7		Revenue Code.
8		(9) Fiscal year. The term "fiscal year" means an
9		accounting period of 12 months ending on the last day of
10		any month other than December.
11		(10) Includes and including. The terms "includes" and
12		"including" when used in a definition contained in this Act
13		shall not be deemed to exclude other things otherwise
14		within the meaning of the term defined.
15		(11) Internal Revenue Code. The term "Internal Revenue
16		Code" means the United States Internal Revenue Code of 1954
17		or any successor law or laws relating to federal income
18		taxes in effect for the taxable year.
19		(11.5) Investment partnership.
20		(A) The term "investment partnership" means any
21		entity that is treated as a partnership for federal
22		income tax purposes that meets the following
23		requirements:
24		(i) no less than 90% of the partnership's cost
25		of its total assets consists of qualifying
26		investment securities, deposits at banks or other
27		financial institutions, and office space and
28		equipment reasonably necessary to carry on its
29		activities as an investment partnership;
30		(ii) no less than 90% of its gross income
31		consists of interest, dividends, and gains from
32		the sale or exchange of qualifying investment
33		securities; and
34		(iii) the partnership is not a dealer in
35		qualifying investment securities.
36		(B) For purposes of this paragraph (11.5), the term

1		"qualifying investment securities" includes all of the
2		following:
3		(i) common stock, including preferred or debt
4		securities convertible into common stock, and
5		preferred stock;
6		(ii) bonds, debentures, and other debt
7		securities;
8		(iii) foreign and domestic currency deposits
9		secured by federal, state, or local governmental
10		agencies;
11		(iv) mortgage or asset-backed securities
12		secured by federal, state, or local governmental
13		agencies;
14		(v) repurchase agreements and loan
15		participations;
16		(vi) foreign currency exchange contracts and
17		forward and futures contracts on foreign
18		currencies;
19		(vii) stock and bond index securities and
20		futures contracts and other similar financial
21		securities and futures contracts on those
22		securities;
23		(viii) options for the purchase or sale of any
24		of the securities, currencies, contracts, or
25		financial instruments described in items (i) to
26		(vii), inclusive;
27		(ix) regulated futures contracts;
28		(x) commodities (not described in Section
29		1221(a)(1) of the Internal Revenue Code) or
30		futures, forwards, and options with respect to
31		such commodities, provided, however, that any item
32		of a physical commodity to which title is actually
33		acquired in the partnership's capacity as a dealer
34		in such commodity shall not be a qualifying
35		investment security;
36		(xi) derivatives; and

1		(xii) a partnership interest in another
2		partnership that is an investment partnership.
3		(12) Mathematical error. The term "mathematical error"
4		includes the following types of errors, omissions, or
5		defects in a return filed by a taxpayer which prevents
6		acceptance of the return as filed for processing:
7		(A) arithmetic errors or incorrect computations on
8		the return or supporting schedules;
9		(B) entries on the wrong lines;
10		(C) omission of required supporting forms or
11		schedules or the omission of the information in whole
12		or in part called for thereon; and
13		(D) an attempt to claim, exclude, deduct, or
14		improperly report, in a manner directly contrary to the
15		provisions of the Act and regulations thereunder any
16		item of income, exemption, deduction, or credit.
17		(13) Nonbusiness income. The term "nonbusiness income"
18		means all income other than business income or
19		compensation.
20		(14) Nonresident. The term "nonresident" means a
21		person who is not a resident.
22		(15) Paid, incurred and accrued. The terms "paid",
23		"incurred" and "accrued" shall be construed according to
24		the method of accounting upon the basis of which the
25		person's base income is computed under this Act.
26		(16) Partnership and partner. The term "partnership"
27		includes a syndicate, group, pool, joint venture or other
28		unincorporated organization, through or by means of which
29		any business, financial operation, or venture is carried
30		on, and which is not, within the meaning of this Act, a
31		trust or estate or a corporation; and the term "partner"
32		includes a member in such syndicate, group, pool, joint
33		venture or organization.
34		The term "partnership" includes any entity, including
35		a limited liability company formed under the Illinois
36		Limited Liability Company Act, classified as a partnership

1		for federal income tax purposes.
2		The term "partnership" does not include a syndicate,
3		group, pool, joint venture, or other unincorporated
4		organization established for the sole purpose of playing
5		the Illinois State Lottery.
6		(17) Part-year resident. The term "part-year resident"
7		means an individual who became a resident during the
8		taxable year or ceased to be a resident during the taxable
9		year. Under Section 1501(a)(20)(A)(i) residence commences
10		with presence in this State for other than a temporary or
11		transitory purpose and ceases with absence from this State
12		for other than a temporary or transitory purpose. Under
13		Section 1501(a)(20)(A)(ii) residence commences with the
14		establishment of domicile in this State and ceases with the
15		establishment of domicile in another State.
16		(18) Person. The term "person" shall be construed to
17		mean and include an individual, a trust, estate,
18		partnership, association, firm, company, corporation,
19		limited liability company, or fiduciary. For purposes of
20		Section 1301 and 1302 of this Act, a "person" means (i) an
21		individual, (ii) a corporation, (iii) an officer, agent, or
22		employee of a corporation, (iv) a member, agent or employee
23		of a partnership, or (v) a member, manager, employee,
24		officer, director, or agent of a limited liability company
25		who in such capacity commits an offense specified in
26		Section 1301 and 1302.
27		(18A) Records. The term "records" includes all data
28		maintained by the taxpayer, whether on paper, microfilm,
29		microfiche, or any type of machine-sensible data
30		compilation.
31		(19) Regulations. The term "regulations" includes
32		rules promulgated and forms prescribed by the Department.
33		(20) Resident. The term "resident" means:
34		(A) an individual (i) who is in this State for
35		other than a temporary or transitory purpose during the
36		taxable year; or (ii) who is domiciled in this State

1		but is absent from the State for a temporary or
2		transitory purpose during the taxable year;
3		(B) The estate of a decedent who at his or her
4		death was domiciled in this State;
5		(C) A trust created by a will of a decedent who at
6		his death was domiciled in this State; and
7		(D) An irrevocable trust, the grantor of which was
8		domiciled in this State at the time such trust became
9		irrevocable. For purpose of this subparagraph, a trust
10		shall be considered irrevocable to the extent that the
11		grantor is not treated as the owner thereof under
12		Sections 671 through 678 of the Internal Revenue Code.
13		(21) Sales. The term "sales" means all gross receipts
14		of the taxpayer not allocated under Sections 301, 302 and
15		303.
16		(22) State. The term "state" when applied to a
17		jurisdiction other than this State means any state of the
18		United States, the District of Columbia, the Commonwealth
19		of Puerto Rico, any Territory or Possession of the United
20		States, and any foreign country, or any political
21		subdivision of any of the foregoing. For purposes of the
22		foreign tax credit under Section 601, the term "state"
23		means any state of the United States, the District of
24		Columbia, the Commonwealth of Puerto Rico, and any
25		territory or possession of the United States, or any
26		political subdivision of any of the foregoing, effective
27		for tax years ending on or after December 31, 1989.
28		(23) Taxable year. The term "taxable year" means the
29		calendar year, or the fiscal year ending during such
30		calendar year, upon the basis of which the base income is
31		computed under this Act. "Taxable year" means, in the case
32		of a return made for a fractional part of a year under the
33		provisions of this Act, the period for which such return is
34		made.
35		(24) Taxpayer. The term "taxpayer" means any person
36		subject to the tax imposed by this Act.

1		(25) International banking facility. The term
2		international banking facility shall have the same meaning
3		as is set forth in the Illinois Banking Act or as is set
4		forth in the laws of the United States or regulations of
5		the Board of Governors of the Federal Reserve System.
6		(26) Income Tax Return Preparer.
7		(A) The term "income tax return preparer" means any
8		person who prepares for compensation, or who employs
9		one or more persons to prepare for compensation, any
10		return of tax imposed by this Act or any claim for
11		refund of tax imposed by this Act. The preparation of a
12		substantial portion of a return or claim for refund
13		shall be treated as the preparation of that return or
14		claim for refund.
15		(B) A person is not an income tax return preparer
16		if all he or she does is
17		(i) furnish typing, reproducing, or other
18		mechanical assistance;
19		(ii) prepare returns or claims for refunds for
20		the employer by whom he or she is regularly and
21		continuously employed;
22		(iii) prepare as a fiduciary returns or claims
23		for refunds for any person; or
24		(iv) prepare claims for refunds for a taxpayer
25		in response to any notice of deficiency issued to
26		that taxpayer or in response to any waiver of
27		restriction after the commencement of an audit of
28		that taxpayer or of another taxpayer if a
29		determination in the audit of the other taxpayer
30		directly or indirectly affects the tax liability
31		of the taxpayer whose claims he or she is
32		preparing.
33		(27) Unitary business group. The term "unitary
34		business group" means a group of persons related through
35		common ownership whose business activities are integrated
36		with, dependent upon and contribute to each other. The

1		group will not include those members whose business
2		activity outside the United States is 80% or more of any
3		such member's total business activity; for purposes of this
4		paragraph and clause (a)(3)(B)(ii) of Section 304,
5		business activity within the United States shall be
6		measured by means of the factors ordinarily applicable
7		under subsections (a), (b), (c), (d), or (h) of Section 304
8		except that, in the case of members ordinarily required to
9		apportion business income by means of the 3 factor formula
10		of property, payroll and sales specified in subsection (a)
11		of Section 304, including the formula as weighted in
12		subsection (h) of Section 304, such members shall not use
13		the sales factor in the computation and the results of the
14		property and payroll factor computations of subsection (a)
15		of Section 304 shall be divided by 2 (by one if either the
16		property or payroll factor has a denominator of zero). The
17		computation required by the preceding sentence shall, in
18		each case, involve the division of the member's property,
19		payroll, or revenue miles in the United States, insurance
20		premiums on property or risk in the United States, or
21		financial organization business income from sources within
22		the United States, as the case may be, by the respective
23		worldwide figures for such items. Common ownership in the
24		case of corporations is the direct or indirect control or
25		ownership of more than 50% of the outstanding voting stock
26		of the persons carrying on unitary business activity.
27		Unitary business activity can ordinarily be illustrated
28		where the activities of the members are: (1) in the same
29		general line (such as manufacturing, wholesaling,
30		retailing of tangible personal property, insurance,
31		transportation or finance); or (2) are steps in a
32		vertically structured enterprise or process (such as the
33		steps involved in the production of natural resources,
34		which might include exploration, mining, refining, and
35		marketing); and, in either instance, the members are
36		functionally integrated through the exercise of strong

1		centralized management (where, for example, authority over
2		such matters as purchasing, financing, tax compliance,
3		product line, personnel, marketing and capital investment
4		is not left to each member). In no event, however, will any
5		unitary business group include members which are
6		ordinarily required to apportion business income under
7		different subsections of Section 304 except that for tax
8		years ending on or after December 31, 1987 this prohibition
9		shall not apply to a unitary business group composed of one
10		or more taxpayers all of which apportion business income
11		pursuant to subsection (b) of Section 304, or all of which
12		apportion business income pursuant to subsection (d) of
13		Section 304, and a holding company of such single-factor
14		taxpayers (see definition of "financial organization" for
15		rule regarding holding companies of financial
16		organizations). If a unitary business group would, but for
17		the preceding sentence, include members that are
18		ordinarily required to apportion business income under
19		different subsections of Section 304, then for each
20		subsection of Section 304 for which there are two or more
21		members, there shall be a separate unitary business group
22		composed of such members. For purposes of the preceding two
23		sentences, a member is "ordinarily required to apportion
24		business income" under a particular subsection of Section
25		304 if it would be required to use the apportionment method
26		prescribed by such subsection except for the fact that it
27		derives business income solely from Illinois. As used in
28		this paragraph, the phrase "United States" means only the
29		50 states and the District of Columbia, but does not
30		include any territory or possession of the United States or
31		any area over which the United States has asserted
32		jurisdiction or claimed exclusive rights with respect to
33		the exploration for or exploitation of natural resources.
34		If the unitary business group members' accounting
35		periods differ, the common parent's accounting period or,
36		if there is no common parent, the accounting period of the

1		member that is expected to have, on a recurring basis, the
2		greatest Illinois income tax liability must be used to
3		determine whether to use the apportionment method provided
4		in subsection (a) or subsection (h) of Section 304. The
5		prohibition against membership in a unitary business group
6		for taxpayers ordinarily required to apportion income
7		under different subsections of Section 304 does not apply
8		to taxpayers required to apportion income under subsection
9		(a) and subsection (h) of Section 304. The provisions of
10		this amendatory Act of 1998 apply to tax years ending on or
11		after December 31, 1998.
12		(28) Subchapter S corporation. The term "Subchapter S
13		corporation" means a corporation for which there is in
14		effect an election under Section 1362 of the Internal
15		Revenue Code, or for which there is a federal election to
16		opt out of the provisions of the Subchapter S Revision Act
17		of 1982 and have applied instead the prior federal
18		Subchapter S rules as in effect on July 1, 1982.
19		(30) Foreign person. The term "foreign person" means
20		any person who is a nonresident alien individual and any
21		nonindividual entity, regardless of where created or
22		organized, whose business activity outside the United
23		States is 80% or more of the entity's total business
24		activity.
25		(b) Other definitions.
26		(1) Words denoting number, gender, and so forth, when
27		used in this Act, where not otherwise distinctly expressed
28		or manifestly incompatible with the intent thereof:
29		(A) Words importing the singular include and apply
30		to several persons, parties or things;
31		(B) Words importing the plural include the
32		singular; and
33		(C) Words importing the masculine gender include
34		the feminine as well.
35		(2) "Company" or "association" as including successors

1		and assigns. The word "company" or "association", when used
2		in reference to a corporation, shall be deemed to embrace
3		the words "successors and assigns of such company or
4		association", and in like manner as if these last-named
5		words, or words of similar import, were expressed.
6		(3) Other terms. Any term used in any Section of this
7		Act with respect to the application of, or in connection
8		with, the provisions of any other Section of this Act shall
9		have the same meaning as in such other Section.
10		(Source: P.A. 91-535, eff. 1-1-00; 91-913, eff. 1-1-01; 92-846,
11		eff. 8-23-02.)

ARTICLE 30

13		Section 30-5. The Illinois Vehicle Code is amended by
14		changing Sections 2-119, 3-820, 3-821, and 11-501 and by adding
15		Section 3-821.2 as follows:
16		(625 ILCS 5/2-119) (from Ch. 95 1/2, par. 2-119)
17		Sec. 2-119. Disposition of fees and taxes.
18		(a) All moneys received from Salvage Certificates shall be
19		deposited in the Common School Fund in the State Treasury.
20		(b) Beginning January 1, 1990 and concluding December 31,
21		1994, of the money collected for each certificate of title,
22		duplicate certificate of title and corrected certificate of
23		title, $0.50 shall be deposited into the Used Tire Management
24		Fund. Beginning January 1, 1990 and concluding December 31,
25		1994, of the money collected for each certificate of title,
26		duplicate certificate of title and corrected certificate of
27		title, $1.50 shall be deposited in the Park and Conservation
28		Fund.
29		Beginning January 1, 1995, of the money collected for each
30		certificate of title, duplicate certificate of title and
31		corrected certificate of title, $2 shall be deposited in the
32		Park and Conservation Fund. The moneys deposited in the Park
33		and Conservation Fund pursuant to this Section shall be used

1		for the acquisition and development of bike paths as provided
2		for in Section 805-420 of the Department of Natural Resources
3		(Conservation) Law (20 ILCS 805/805-420).
4		Beginning January 1, 2000, of the moneys collected for each
5		certificate of title, duplicate certificate of title, and
6		corrected certificate of title, $48 shall be deposited into the
7		Road Fund and $4 shall be deposited into the Motor Vehicle
8		License Plate Fund, except that if the balance in the Motor
9		Vehicle License Plate Fund exceeds $40,000,000 on the last day
10		of a calendar month, then during the next calendar month the $4
11		shall instead be deposited into the Road Fund.
12		Beginning January 1, 2005, of the moneys collected for each
13		delinquent vehicle registration renewal fee, $20 shall be
14		deposited into the General Revenue Fund.
15		Except as otherwise provided in this Code, all remaining
16		moneys collected for certificates of title, and all moneys
17		collected for filing of security interests, shall be placed in
18		the General Revenue Fund in the State Treasury.
19		(c) All moneys collected for that portion of a driver's
20		license fee designated for driver education under Section 6-118
21		shall be placed in the Driver Education Fund in the State
22		Treasury.
23		(d) Beginning January 1, 1999, of the monies collected as a
24		registration fee for each motorcycle, motor driven cycle and
25		motorized pedalcycle, 27% of each annual registration fee for
26		such vehicle and 27% of each semiannual registration fee for
27		such vehicle is deposited in the Cycle Rider Safety Training
28		Fund.
29		(e) Of the monies received by the Secretary of State as
30		registration fees or taxes or as payment of any other fee, as
31		provided in this Act, except fees received by the Secretary
32		under paragraph (7) of subsection (b) of Section 5-101 and
33		Section 5-109 of this Code, 37% shall be deposited into the
34		State Construction Fund.
35		(f) Of the total money collected for a CDL instruction
36		permit or original or renewal issuance of a commercial driver's

1		license (CDL) pursuant to the Uniform Commercial Driver's
2		License Act (UCDLA): (i) $6 of the total fee for an original or
3		renewal CDL, and $6 of the total CDL instruction permit fee
4		when such permit is issued to any person holding a valid
5		Illinois driver's license, shall be paid into the
6		CDLIS/AAMVAnet Trust Fund (Commercial Driver's License
7		Information System/American Association of Motor Vehicle
8		Administrators network Trust Fund) and shall be used for the
9		purposes provided in Section 6z-23 of the State Finance Act and
10		(ii) $20 of the total fee for an original or renewal CDL or
11		commercial driver instruction permit shall be paid into the
12		Motor Carrier Safety Inspection Fund, which is hereby created
13		as a special fund in the State Treasury, to be used by the
14		Department of State Police, subject to appropriation, to hire
15		additional officers to conduct motor carrier safety
16		inspections pursuant to Chapter 18b of this Code.
17		(g) All remaining moneys received by the Secretary of State
18		as registration fees or taxes or as payment of any other fee,
19		as provided in this Act, except fees received by the Secretary
20		under paragraph (7)(A) of subsection (b) of Section 5-101 and
21		Section 5-109 of this Code, shall be deposited in the Road Fund
22		in the State Treasury. Moneys in the Road Fund shall be used
23		for the purposes provided in Section 8.3 of the State Finance
24		Act.
25		(h) (Blank).
26		(i) (Blank).
27		(j) (Blank).
28		(k) There is created in the State Treasury a special fund
29		to be known as the Secretary of State Special License Plate
30		Fund. Money deposited into the Fund shall, subject to
31		appropriation, be used by the Office of the Secretary of State
32		(i) to help defray plate manufacturing and plate processing
33		costs for the issuance and, when applicable, renewal of any new
34		or existing registration plates authorized under this Code and
35		(ii) for grants made by the Secretary of State to benefit
36		Illinois Veterans Home libraries.

1		On or before October 1, 1995, the Secretary of State shall
2		direct the State Comptroller and State Treasurer to transfer
3		any unexpended balance in the Special Environmental License
4		Plate Fund, the Special Korean War Veteran License Plate Fund,
5		and the Retired Congressional License Plate Fund to the
6		Secretary of State Special License Plate Fund.
7		(l) The Motor Vehicle Review Board Fund is created as a
8		special fund in the State Treasury. Moneys deposited into the
9		Fund under paragraph (7) of subsection (b) of Section 5-101 and
10		Section 5-109 shall, subject to appropriation, be used by the
11		Office of the Secretary of State to administer the Motor
12		Vehicle Review Board, including without limitation payment of
13		compensation and all necessary expenses incurred in
14		administering the Motor Vehicle Review Board under the Motor
15		Vehicle Franchise Act.
16		(m) Effective July 1, 1996, there is created in the State
17		Treasury a special fund to be known as the Family
18		Responsibility Fund. Moneys deposited into the Fund shall,
19		subject to appropriation, be used by the Office of the
20		Secretary of State for the purpose of enforcing the Family
21		Financial Responsibility Law.
22		(n) The Illinois Fire Fighters' Memorial Fund is created as
23		a special fund in the State Treasury. Moneys deposited into the
24		Fund shall, subject to appropriation, be used by the Office of
25		the State Fire Marshal for construction of the Illinois Fire
26		Fighters' Memorial to be located at the State Capitol grounds
27		in Springfield, Illinois. Upon the completion of the Memorial,
28		moneys in the Fund shall be used in accordance with Section
29		3-634.
30		(o) Of the money collected for each certificate of title
31		for all-terrain vehicles and off-highway motorcycles, $17
32		shall be deposited into the Off-Highway Vehicle Trails Fund.
33		(p) For audits conducted on or after July 1, 2003 pursuant
34		to Section 2-124(d) of this Code, 50% of the money collected as
35		audit fees shall be deposited into the General Revenue Fund.
36		(Source: P.A. 92-16, eff. 6-28-01; 93-32, eff. 7-1-03.)

1		(625 ILCS 5/3-820) (from Ch. 95 1/2, par. 3-820)
2		Sec. 3-820. Duplicate Number Plates. Upon filing in the
3		Office of the Secretary of State an affidavit to the effect
4		that an original number plate for a vehicle is lost, stolen or
5		destroyed, a duplicate number plate shall be furnished upon
6		payment of a fee of $6 for each duplicate plate and a fee of $9
7		for a pair of duplicate plates.
8		Upon filing in the Office of the Secretary of State an
9		affidavit to the effect that an original registration sticker
10		for a vehicle is lost, stolen or destroyed, a new registration
11		sticker shall be furnished upon payment of a fee of $5.
12		The Secretary of State may, in his discretion, assign a new
13		number plate or plates in lieu of a duplicate of the plate or
14		plates so lost, stolen or destroyed, but such assignment of a
15		new plate or plates shall not affect the right of the owner to
16		secure a reassignment of his original registration number in
17		the manner provided in this Act. The fee for one new number
18		plate shall be $6, and for a pair of new number plates, $9.
19		For the administration of this Section, the Secretary shall
20		consider the loss of a registration plate or plates with
21		properly affixed registration stickers as requiring the
22		payment of: either
23		(i) $11 for each duplicate; or
24		(ii) $14 for a pair of duplicate plates; or
25		(iii) $39 for a pair of duplicate plates on or after
26		January 1, 2005, which includes a fee of $20 for the
27		replacement sticker or $19 for a pair of duplicate plates
28		if stickers are required on both front and rear
29		registration plates.
30		(Source: P.A. 91-37, eff. 7-1-99.)
31		(625 ILCS 5/3-821) (from Ch. 95 1/2, par. 3-821)
32		Sec. 3-821. Miscellaneous Registration and Title Fees.
33		(a) The fee to be paid to the Secretary of State for the
34		following certificates, registrations or evidences of proper

1		registration, or for corrected or duplicate documents shall be
2		in accordance with the following schedule:
23		There shall be no fee paid for a Junking Certificate.
24		(b) The Secretary may prescribe the maximum service charge
25		to be imposed upon an applicant for renewal of a registration
26		by any person authorized by law to receive and remit or
27		transmit to the Secretary such renewal application and fees
28		therewith.
29		(c) If a check is delivered to the Office of the Secretary
30		of State as payment of any fee or tax under this Code, and such
31		check is not honored by the bank on which it is drawn for any
32		reason, the registrant or other person tendering the check
33		remains liable for the payment of such fee or tax. The
34		Secretary of State may assess a service charge of $19 in
35		addition to the fee or tax due and owing for all dishonored
36		checks.

1		If the total amount then due and owing exceeds the sum of
2		$50 and has not been paid in full within 60 days from the date
3		such fee or tax became due to the Secretary of State, the
4		Secretary of State shall assess a penalty of 25% of such amount
5		remaining unpaid.
6		All amounts payable under this Section shall be computed to
7		the nearest dollar.
8		(d) The minimum fee and tax to be paid by any applicant for
9		apportionment of a fleet of vehicles under this Code shall be
10		$15 if the application was filed on or before the date
11		specified by the Secretary together with fees and taxes due. If
12		an application and the fees or taxes due are filed after the
13		date specified by the Secretary, the Secretary may prescribe
14		the payment of interest at the rate of 1/2 of 1% per month or
15		fraction thereof after such due date and a minimum of $8.
16		(e) Trucks, truck tractors, truck tractors with loads, and
17		motor buses, any one of which having a combined total weight in
18		excess of 12,000 lbs. shall file an application for a Fleet
19		Reciprocity Permit issued by the Secretary of State. This
20		permit shall be in the possession of any driver operating a
21		vehicle on Illinois highways. Any foreign licensed vehicle of
22		the second division operating at any time in Illinois without a
23		Fleet Reciprocity Permit or other proper Illinois
24		registration, shall subject the operator to the penalties
25		provided in Section 3-834 of this Code. For the purposes of
26		this Code, "Fleet Reciprocity Permit" means any second division
27		motor vehicle with a foreign license and used only in
28		interstate transportation of goods. The fee for such permit
29		shall be $15 per fleet which shall include all vehicles of the
30		fleet being registered.
31		(f) For purposes of this Section, "all-terrain vehicle or
32		off-highway motorcycle used for production agriculture" means
33		any all-terrain vehicle or off-highway motorcycle used in the
34		raising of or the propagation of livestock, crops for sale for
35		human consumption, crops for livestock consumption, and
36		production seed stock grown for the propagation of feed grains

1		and the husbandry of animals or for the purpose of providing a
2		food product, including the husbandry of blood stock as a main
3		source of providing a food product. "All-terrain vehicle or
4		off-highway motorcycle used in production agriculture" also
5		means any all-terrain vehicle or off-highway motorcycle used in
6		animal husbandry, floriculture, aquaculture, horticulture, and
7		viticulture.
8		(Source: P.A. 91-37, eff. 7-1-99; 91-441, eff. 1-1-00; 92-16,
9		eff. 6-28-01.)
10		(625 ILCS 5/3-821.2 new)
11		Sec. 3-821.2. Delinquent Registration Renewal Fee. For
12		registration renewal periods beginning on or after January 1,
13		2005, the Secretary of State may impose a delinquent
14		registration renewal fee of $20 for the registration renewal of
15		all passenger vehicles of the first division and motor vehicles
16		of the second division weighing not more than 8,000 pounds if
17		the application for registration renewal is received by the
18		Secretary more than one month after the expiration of the most
19		recent period during which the vehicle was registered. If a
20		delinquent registration renewal fee is imposed, the Secretary
21		shall not renew the registration of such a vehicle until the
22		delinquent registration renewal fee has been paid, in addition
23		to any other registration fees owed for the vehicle. Active
24		duty military personnel stationed outside of Illinois shall not
25		be required to pay the delinquent registration renewal fee. If
26		a delinquent registration renewal fee is imposed, the Secretary
27		shall adopt rules for the implementation of this Section.
28		(625 ILCS 5/11-501) (from Ch. 95 1/2, par. 11-501)
29		Sec. 11-501. Driving while under the influence of alcohol,
30		other drug or drugs, intoxicating compound or compounds or any
31		combination thereof.
32		(a) A person shall not drive or be in actual physical
33		control of any vehicle within this State while:
34		(1) the alcohol concentration in the person's blood or

1		breath is 0.08 or more based on the definition of blood and
2		breath units in Section 11-501.2;
3		(2) under the influence of alcohol;
4		(3) under the influence of any intoxicating compound or
5		combination of intoxicating compounds to a degree that
6		renders the person incapable of driving safely;
7		(4) under the influence of any other drug or
8		combination of drugs to a degree that renders the person
9		incapable of safely driving;
10		(5) under the combined influence of alcohol, other drug
11		or drugs, or intoxicating compound or compounds to a degree
12		that renders the person incapable of safely driving; or
13		(6) there is any amount of a drug, substance, or
14		compound in the person's breath, blood, or urine resulting
15		from the unlawful use or consumption of cannabis listed in
16		the Cannabis Control Act, a controlled substance listed in
17		the Illinois Controlled Substances Act, or an intoxicating
18		compound listed in the Use of Intoxicating Compounds Act.
19		(b) The fact that any person charged with violating this
20		Section is or has been legally entitled to use alcohol, other
21		drug or drugs, or intoxicating compound or compounds, or any
22		combination thereof, shall not constitute a defense against any
23		charge of violating this Section.
24		(c) Except as provided under paragraphs (c-3), (c-4), and
25		(d) of this Section, every person convicted of violating this
26		Section or a similar provision of a local ordinance, shall be
27		guilty of a Class A misdemeanor and, in addition to any other
28		criminal or administrative action, for any second conviction of
29		violating this Section or a similar provision of a law of
30		another state or local ordinance committed within 5 years of a
31		previous violation of this Section or a similar provision of a
32		local ordinance shall be mandatorily sentenced to a minimum of
33		5 days of imprisonment or assigned to a minimum of 30 days of
34		community service as may be determined by the court. Every
35		person convicted of violating this Section or a similar
36		provision of a local ordinance shall be subject to an

1		additional mandatory minimum fine of $500 and an additional
2		mandatory 5 days of community service in a program benefiting
3		children if the person committed a violation of paragraph (a)
4		or a similar provision of a local ordinance while transporting
5		a person under age 16. Every person convicted a second time for
6		violating this Section or a similar provision of a local
7		ordinance within 5 years of a previous violation of this
8		Section or a similar provision of a law of another state or
9		local ordinance shall be subject to an additional mandatory
10		minimum fine of $500 and an additional 10 days of mandatory
11		community service in a program benefiting children if the
12		current offense was committed while transporting a person under
13		age 16. The imprisonment or assignment under this subsection
14		shall not be subject to suspension nor shall the person be
15		eligible for probation in order to reduce the sentence or
16		assignment.
17		(c-1) (1) A person who violates this Section during a
18		period in which his or her driving privileges are revoked
19		or suspended, where the revocation or suspension was for a
20		violation of this Section, Section 11-501.1, paragraph (b)
21		of Section 11-401, or Section 9-3 of the Criminal Code of
22		1961 is guilty of a Class 4 felony.
23		(2) A person who violates this Section a third time
24		during a period in which his or her driving privileges are
25		revoked or suspended where the revocation or suspension was
26		for a violation of this Section, Section 11-501.1,
27		paragraph (b) of Section 11-401, or Section 9-3 of the
28		Criminal Code of 1961 is guilty of a Class 3 felony.
29		(3) A person who violates this Section a fourth or
30		subsequent time during a period in which his or her driving
31		privileges are revoked or suspended where the revocation or
32		suspension was for a violation of this Section, Section
33		11-501.1, paragraph (b) of Section 11-401, or Section 9-3
34		of the Criminal Code of 1961 is guilty of a Class 2 felony.
35		(c-2) (Blank).
36		(c-3) Every person convicted of violating this Section or a

1		similar provision of a local ordinance who had a child under
2		age 16 in the vehicle at the time of the offense shall have his
3		or her punishment under this Act enhanced by 2 days of
4		imprisonment for a first offense, 10 days of imprisonment for a
5		second offense, 30 days of imprisonment for a third offense,
6		and 90 days of imprisonment for a fourth or subsequent offense,
7		in addition to the fine and community service required under
8		subsection (c) and the possible imprisonment required under
9		subsection (d). The imprisonment or assignment under this
10		subsection shall not be subject to suspension nor shall the
11		person be eligible for probation in order to reduce the
12		sentence or assignment.
13		(c-4) When a person is convicted of violating Section
14		11-501 of this Code or a similar provision of a local
15		ordinance, the following penalties apply when his or her blood,
16		breath, or urine was .16 or more based on the definition of
17		blood, breath, or urine units in Section 11-501.2 or when that
18		person is convicted of violating this Section while
19		transporting a child under the age of 16:
20		(1) A person who is convicted of violating subsection
21		(a) of Section 11-501 of this Code a first time, in
22		addition to any other penalty that may be imposed under
23		subsection (c), is subject to a mandatory minimum of 100
24		hours of community service and a minimum fine of $500.
25		(2) A person who is convicted of violating subsection
26		(a) of Section 11-501 of this Code a second time within 10
27		years, in addition to any other penalty that may be imposed
28		under subsection (c), is subject to a mandatory minimum of
29		2 days of imprisonment and a minimum fine of $1,250.
30		(3) A person who is convicted of violating subsection
31		(a) of Section 11-501 of this Code a third time within 20
32		years is guilty of a Class 4 felony and, in addition to any
33		other penalty that may be imposed under subsection (c), is
34		subject to a mandatory minimum of 90 days of imprisonment
35		and a minimum fine of $2,500.
36		(4) A person who is convicted of violating this

1		subsection (c-4) a fourth or subsequent time is guilty of a
2		Class 2 felony and, in addition to any other penalty that
3		may be imposed under subsection (c), is not eligible for a
4		sentence of probation or conditional discharge and is
5		subject to a minimum fine of $2,500.
6		(d) (1) Every person convicted of committing a violation of
7		this Section shall be guilty of aggravated driving under
8		the influence of alcohol, other drug or drugs, or
9		intoxicating compound or compounds, or any combination
10		thereof if:
11		(A) the person committed a violation of this
12		Section, or a similar provision of a law of another
13		state or a local ordinance when the cause of action is
14		the same as or substantially similar to this Section,
15		for the third or subsequent time;
16		(B) the person committed a violation of paragraph
17		(a) while driving a school bus with children on board;
18		(C) the person in committing a violation of
19		paragraph (a) was involved in a motor vehicle accident
20		that resulted in great bodily harm or permanent
21		disability or disfigurement to another, when the
22		violation was a proximate cause of the injuries;
23		(D) the person committed a violation of paragraph
24		(a) for a second time and has been previously convicted
25		of violating Section 9-3 of the Criminal Code of 1961
26		relating to reckless homicide in which the person was
27		determined to have been under the influence of alcohol,
28		other drug or drugs, or intoxicating compound or
29		compounds as an element of the offense or the person
30		has previously been convicted under subparagraph (C)
31		or subparagraph (F) of this paragraph (1);
32		(E) the person, in committing a violation of
33		paragraph (a) while driving at any speed in a school
34		speed zone at a time when a speed limit of 20 miles per
35		hour was in effect under subsection (a) of Section
36		11-605 of this Code, was involved in a motor vehicle

1		accident that resulted in bodily harm, other than great
2		bodily harm or permanent disability or disfigurement,
3		to another person, when the violation of paragraph (a)
4		was a proximate cause of the bodily harm; or
5		(F) the person, in committing a violation of
6		paragraph (a), was involved in a motor vehicle,
7		snowmobile, all-terrain vehicle, or watercraft
8		accident that resulted in the death of another person,
9		when the violation of paragraph (a) was a proximate
10		cause of the death.
11		(2) Except as provided in this paragraph (2),
12		aggravated driving under the influence of alcohol, other
13		drug or drugs, or intoxicating compound or compounds, or
14		any combination thereof is a Class 4 felony. For a
15		violation of subparagraph (C) of paragraph (1) of this
16		subsection (d), the defendant, if sentenced to a term of
17		imprisonment, shall be sentenced to not less than one year
18		nor more than 12 years. Aggravated driving under the
19		influence of alcohol, other drug or drugs, or intoxicating
20		compound or compounds, or any combination thereof as
21		defined in subparagraph (F) of paragraph (1) of this
22		subsection (d) is a Class 2 felony, for which the
23		defendant, if sentenced to a term of imprisonment, shall be
24		sentenced to: (A) a term of imprisonment of not less than 3
25		years and not more than 14 years if the violation resulted
26		in the death of one person; or (B) a term of imprisonment
27		of not less than 6 years and not more than 28 years if the
28		violation resulted in the deaths of 2 or more persons. For
29		any prosecution under this subsection (d), a certified copy
30		of the driving abstract of the defendant shall be admitted
31		as proof of any prior conviction.
32		(e) After a finding of guilt and prior to any final
33		sentencing, or an order for supervision, for an offense based
34		upon an arrest for a violation of this Section or a similar
35		provision of a local ordinance, individuals shall be required
36		to undergo a professional evaluation to determine if an

1		alcohol, drug, or intoxicating compound abuse problem exists
2		and the extent of the problem, and undergo the imposition of
3		treatment as appropriate. Programs conducting these
4		evaluations shall be licensed by the Department of Human
5		Services. The cost of any professional evaluation shall be paid
6		for by the individual required to undergo the professional
7		evaluation.
8		(e-1) Any person who is found guilty of or pleads guilty to
9		violating this Section, including any person receiving a
10		disposition of court supervision for violating this Section,
11		may be required by the Court to attend a victim impact panel
12		offered by, or under contract with, a County State's Attorney's
13		office, a probation and court services department, Mothers
14		Against Drunk Driving, or the Alliance Against Intoxicated
15		Motorists. All costs generated by the victim impact panel shall
16		be paid from fees collected from the offender or as may be
17		determined by the court.
18		(f) Every person found guilty of violating this Section,
19		whose operation of a motor vehicle while in violation of this
20		Section proximately caused any incident resulting in an
21		appropriate emergency response, shall be liable for the expense
22		of an emergency response as provided under Section 5-5-3 of the
23		Unified Code of Corrections.
24		(g) The Secretary of State shall revoke the driving
25		privileges of any person convicted under this Section or a
26		similar provision of a local ordinance.
27		(h) Every person sentenced under paragraph (2) or (3) of
28		subsection (c-1) of this Section or subsection (d) of this
29		Section and who receives a term of probation or conditional
30		discharge shall be required to serve a minimum term of either
31		60 days community service or 10 days of imprisonment as a
32		condition of the probation or conditional discharge. This
33		mandatory minimum term of imprisonment or assignment of
34		community service shall not be suspended and shall not be
35		subject to reduction by the court.
36		(i) The Secretary of State shall require the use of

1		ignition interlock devices on all vehicles owned by an
2		individual who has been convicted of a second or subsequent
3		offense of this Section or a similar provision of a local
4		ordinance. The Secretary shall establish by rule and regulation
5		the procedures for certification and use of the interlock
6		system.
7		(j) In addition to any other penalties and liabilities, a
8		person who is found guilty of or pleads guilty to violating
9		this Section, including any person placed on court supervision
10		for violating this Section, shall be fined $500 $100, payable
11		to the circuit clerk, who shall distribute the money as
12		follows: 20% to the law enforcement agency that made the arrest
13		and 80% shall be forwarded to the State Treasurer for deposit
14		into the General Revenue Fund. If the person has been
15		previously convicted of violating this Section or a similar
16		provision of a local ordinance, the fine shall be $1,000 $200.
17		In the event that more than one agency is responsible for the
18		arrest, the amount payable to law enforcement agencies $100 or
19		$200 shall be shared equally. Any moneys received by a law
20		enforcement agency under this subsection (j) shall be used to
21		purchase law enforcement equipment that will assist in the
22		prevention of alcohol related criminal violence throughout the
23		State. This shall include, but is not limited to, in-car video
24		cameras, radar and laser speed detection devices, and alcohol
25		breath testers. Any moneys received by the Department of State
26		Police under this subsection (j) shall be deposited into the
27		State Police DUI Fund and shall be used to purchase law
28		enforcement equipment that will assist in the prevention of
29		alcohol related criminal violence throughout the State.
30		(k) The Secretary of State Police DUI Fund is created as a
31		special fund in the State treasury. All moneys received by the
32		Secretary of State Police under subsection (j) of this Section
33		shall be deposited into the Secretary of State Police DUI Fund
34		and, subject to appropriation, shall be used to purchase law
35		enforcement equipment to assist in the prevention of alcohol
36		related criminal violence throughout the State.

1		(Source: P.A. 92-248, eff. 8-3-01; 92-418, eff. 8-17-01;
2		92-420, eff. 8-17-01; 92-429, eff. 1-1-02; 92-431, eff. 1-1-02;
3		92-651, eff. 7-11-02; 93-156, eff. 1-1-04; 93-213, eff.
4		7-18-03; 93-584, eff. 8-22-03; revised 8-27-03.)

ARTICLE 35

6		Section 35-1. Short title. This Article may be cited as the
7		Tax Shelter Voluntary Compliance Law, and references in this
8		Article to "this Law" mean this Article.

9		Section 35-5. Tax Shelter Voluntary Compliance Program.
10		(a) In general. The Department of Revenue shall establish
11		and administer a tax shelter voluntary compliance program as
12		provided in this Section for eligible taxpayers subject to tax
13		under the Illinois Income Tax Act. The tax shelter voluntary
14		compliance program shall be conducted from October 15, 2004 to
15		January 31, 2005 and shall apply to tax liabilities under
16		Section 201 of the Illinois Income Tax Act attributable to the
17		use of tax avoidance transactions for taxable years beginning
18		before January 1, 2004. The Department shall adopt rules, issue
19		forms and instructions, and take such other actions as it deems
20		necessary to implement the provisions of this Law. Any
21		correspondence mailed by the Department to a taxpayer at the
22		taxpayer's last known address outlining the tax shelter
23		voluntary compliance program constitutes a "contact" within
24		the meaning of Sections 1005(b)(6) and 1005(c) of the Illinois
25		Income Tax Act.
26		(b) Election. An eligible taxpayer that meets the
27		requirements of subsection (c) of this Section with respect to
28		any taxable year to which this Law applies may elect to
29		participate in the tax shelter voluntary compliance program
30		under either method for any particular tax avoidance
31		transaction period. Such election shall be made separately for
32		each taxable year and in the form and manner prescribed by the
33		Department, and once made shall be irrevocable.

1		(1) Voluntary compliance without appeal. If an
2		eligible taxpayer elects to participate under this
3		paragraph, then: (i) the Department shall abate and not
4		seek to collect any penalty that may be applicable to the
5		underreporting or underpayment of Illinois income tax
6		attributable to the use of tax avoidance transactions for
7		such taxable year, (ii) except as otherwise provided in
8		this Law, the Department shall not seek civil or criminal
9		prosecution against the taxpayer for such taxable year with
10		respect to tax avoidance transactions, and (iii) the
11		taxpayer may not file a claim for credit or refund with
12		respect to the tax avoidance transaction for such taxable
13		year. Nothing in this subsection shall preclude a taxpayer
14		from filing a claim for credit or refund for the same
15		taxable year in which a tax avoidance transaction was
16		reported if such credit or refund is not attributable to
17		the tax avoidance transaction. No penalty may be waived or
18		abated under this Law if the penalty imposed related to an
19		amount of Illinois income tax assessed prior to October 15,
20		2004.
21		(2) Voluntary compliance with appeal. If an eligible
22		taxpayer elects to participate under this paragraph, then:
23		(i) the Department shall abate and not seek to collect the
24		penalties imposed under Sections 1005(b) and 1005(c) of the
25		Illinois Income Tax Act with respect to such taxable year,
26		(ii) except as otherwise provided in this Act, the
27		Department shall not seek civil or criminal prosecution
28		against the taxpayer for such taxable year with respect to
29		tax avoidance transactions, and (iii) the taxpayer may file
30		a claim for credit or refund as provided in the Illinois
31		Income Tax Act with respect to such taxable year.
32		Notwithstanding Section 909(e) of the Illinois Income Tax
33		Act, the taxpayer may not file a written protest until
34		after either of the following: (i) the Department issues a
35		notice of denial, or (ii) the earlier of (1) the date which
36		is 180 days after the date of a final determination by the

1		Internal Revenue Service with respect to the transactions
2		at issue, or (2) the date that is 3 years after the date
3		the claim for refund was filed or one year after full
4		payment of all tax, including penalty and interest. No
5		penalty may be waived or abated under this Act if the
6		penalty imposed relates to an amount of Illinois income tax
7		assessed prior to October 15, 2004.
8		(c) Eligible taxpayer. The tax shelter voluntary
9		compliance program applies to any taxpayer who, during the
10		period from October 15, 2004 to January 31, 2005, does both of
11		the following:
12		(1) Files an amended return for the taxable year for
13		which the taxpayer used a tax avoidance transaction to
14		under report the taxpayer's Illinois income tax liability,
15		reporting the total Illinois net income and tax for such
16		taxable year computed without regard to any tax avoidance
17		transactions;
18		(2) Makes full payment of the additional Illinois
19		income tax and interest due for such taxable year that is
20		attributable to the use of the tax avoidance transaction
21		(not including a payment made under protest as provided in
22		Section 2a.1 of the State Officers and Employees Money
23		Disposition Act (30 ILCS 230/2a.1));
24		For purposes of this subsection (c), if the Department
25		subsequently determines that the correct amount of Illinois
26		income tax was not paid for the taxable year, then the penalty
27		relief under this Section shall not apply to any portion of the
28		underpayment attributable to a tax avoidance transaction not
29		paid to the State.

30		Section 35-10. "Tax avoidance transaction" defined. For
31		purposes of this Law, the term "tax avoidance transaction"
32		means a plan or arrangement devised for the principal purpose
33		of avoiding federal income tax. Tax avoidance transactions
34		include, but are not limited to, "listed transactions" as
35		defined in Treasury Regulations Section 1.6011-4(b)(2).

1		Section 35-15. Use of evidence of participation in the
2		program. The fact of a taxpayer's participation in the tax
3		shelter voluntary compliance program shall not be considered
4		evidence that the taxpayer in fact engaged in a tax avoidance
5		transaction.

6		Section 35-90. The Illinois Income Tax Act is amended by
7		changing Sections 501, 905, 1001, 1002, and 1005 and by adding
8		Sections 1007, 1008, 1405.5, and 1405.6 as follows:
9		(35 ILCS 5/501) (from Ch. 120, par. 5-501)
10		Sec. 501. Notice or Regulations Requiring Records,
11		Statements and Special Returns.
12		(a) In general. Every person liable for any tax imposed by
13		this Act shall keep such records, render such statements, make
14		such returns and notices, and comply with such rules and
15		regulations as the Department may from time to time prescribe.
16		Whenever in the judgment of the Director it is necessary, he
17		may require any person, by notice served upon such person or by
18		regulations, to make such returns and notices, render such
19		statements, or keep such records, as the Director deems
20		sufficient to show whether or not such person is liable for tax
21		under this Act.
22		(b) Reportable transactions. For each taxable year in which
23		a taxpayer is required to make a disclosure statement under
24		Treasury Regulations Section 1.6011-4 (26 CFR 1.6011-4)
25		(including any taxpayer that is a member of a consolidated
26		group required to make such disclosure) with respect to a
27		reportable transaction (including a listed transaction) in
28		which the taxpayer participated in a taxable year for which a
29		return is required under Section 502 of this Act, such taxpayer
30		shall file a copy of such disclosure with the Department.
31		Disclosure under this subsection is required to be made by any
32		taxpayer that is a member of a unitary business group that
33		includes any person required to make a disclosure statement

1		under Treasury Regulations Section 1.6011-4. Disclosure under
2		this subsection is required with respect to any transaction
3		entered into after February 28, 2000 that becomes a listed
4		transaction at any time, and shall be made in the manner
5		prescribed by the Department. With respect to transactions in
6		which the taxpayer participated for taxable years ending before
7		December 31, 2004, disclosure shall be made by the due date
8		(including extensions) of the first return required under
9		Section 502 of this Act due after the effective date of this
10		amendatory Act of the 93rd General Assembly. With respect to
11		transactions in which the taxpayer participated for taxable
12		years ending on and after December 31, 2004, disclosure shall
13		be made in the time and manner prescribed in Treasury
14		Regulations Section 1.6011-4(e). Notwithstanding the above, no
15		disclosure is required for transactions entered into after
16		February 28, 2000 and before January 1, 2005 (i) if the
17		taxpayer has filed an amended Illinois income tax return which
18		reverses the tax benefits of the potential tax avoidance
19		transaction, or (ii) as a result of a federal audit the
20		Internal Revenue Service has determined the tax treatment of
21		the transaction and an Illinois amended return has been filed
22		to reflect the federal treatment.
23		(Source: P.A. 76-261.)
24		(35 ILCS 5/905) (from Ch. 120, par. 9-905)
25		Sec. 905. Limitations on Notices of Deficiency.
26		(a) In general. Except as otherwise provided in this Act:
27		(1) A notice of deficiency shall be issued not later
28		than 3 years after the date the return was filed, and
29		(2) No deficiency shall be assessed or collected with
30		respect to the year for which the return was filed unless
31		such notice is issued within such period.
32		(b) Substantial omission of items.
33		(1) Omission of more than 25% of income. If the
34		taxpayer omits from base income an amount properly
35		includible therein which is in excess of 25% of the amount

1		of base income stated in the return, a notice of deficiency
2		may be issued not later than 6 years after the return was
3		filed. For purposes of this paragraph, there shall not be
4		taken into account any amount which is omitted in the
5		return if such amount is disclosed in the return, or in a
6		statement attached to the return, in a manner adequate to
7		apprise the Department of the nature and the amount of such
8		item.
9		(2) Reportable transactions. If a taxpayer fails to
10		include on any return or statement for any taxable year any
11		information with respect to a reportable transaction, as
12		required under Section 501(b) of this Act, a notice of
13		deficiency may be issued not later than 6 years after the
14		return is filed with respect to the taxable year in which
15		the taxpayer participated in the reportable transaction
16		and said deficiency is limited to the non-disclosed item.
17		(c) No return or fraudulent return. If no return is filed
18		or a false and fraudulent return is filed with intent to evade
19		the tax imposed by this Act, a notice of deficiency may be
20		issued at any time.
21		(d) Failure to report federal change. If a taxpayer fails
22		to notify the Department in any case where notification is
23		required by Section 304(c) or 506(b), or fails to report a
24		change or correction which is treated in the same manner as if
25		it were a deficiency for federal income tax purposes, a notice
26		of deficiency may be issued (i) at any time or (ii) on or after
27		August 13, 1999, at any time for the taxable year for which the
28		notification is required or for any taxable year to which the
29		taxpayer may carry an Article 2 credit, or a Section 207 loss,
30		earned, incurred, or used in the year for which the
31		notification is required; provided, however, that the amount of
32		any proposed assessment set forth in the notice shall be
33		limited to the amount of any deficiency resulting under this
34		Act from the recomputation of the taxpayer's net income,
35		Article 2 credits, or Section 207 loss earned, incurred, or
36		used in the taxable year for which the notification is required

1		after giving effect to the item or items required to be
2		reported.
3		(e) Report of federal change.
4		(1) Before August 13, 1999, in any case where
5		notification of an alteration is given as required by
6		Section 506(b), a notice of deficiency may be issued at any
7		time within 2 years after the date such notification is
8		given, provided, however, that the amount of any proposed
9		assessment set forth in such notice shall be limited to the
10		amount of any deficiency resulting under this Act from
11		recomputation of the taxpayer's net income, net loss, or
12		Article 2 credits for the taxable year after giving effect
13		to the item or items reflected in the reported alteration.
14		(2) On and after August 13, 1999, in any case where
15		notification of an alteration is given as required by
16		Section 506(b), a notice of deficiency may be issued at any
17		time within 2 years after the date such notification is
18		given for the taxable year for which the notification is
19		given or for any taxable year to which the taxpayer may
20		carry an Article 2 credit, or a Section 207 loss, earned,
21		incurred, or used in the year for which the notification is
22		given, provided, however, that the amount of any proposed
23		assessment set forth in such notice shall be limited to the
24		amount of any deficiency resulting under this Act from
25		recomputation of the taxpayer's net income, Article 2
26		credits, or Section 207 loss earned, incurred, or used in
27		the taxable year for which the notification is given after
28		giving effect to the item or items reflected in the
29		reported alteration.
30		(f) Extension by agreement. Where, before the expiration of
31		the time prescribed in this Section for the issuance of a
32		notice of deficiency, both the Department and the taxpayer
33		shall have consented in writing to its issuance after such
34		time, such notice may be issued at any time prior to the
35		expiration of the period agreed upon. In the case of a taxpayer
36		who is a partnership, Subchapter S corporation, or trust and

1		who enters into an agreement with the Department pursuant to
2		this subsection on or after January 1, 2003, a notice of
3		deficiency may be issued to the partners, shareholders, or
4		beneficiaries of the taxpayer at any time prior to the
5		expiration of the period agreed upon. Any proposed assessment
6		set forth in the notice, however, shall be limited to the
7		amount of any deficiency resulting under this Act from
8		recomputation of items of income, deduction, credits, or other
9		amounts of the taxpayer that are taken into account by the
10		partner, shareholder, or beneficiary in computing its
11		liability under this Act. The period so agreed upon may be
12		extended by subsequent agreements in writing made before the
13		expiration of the period previously agreed upon.
14		(g) Erroneous refunds. In any case in which there has been
15		an erroneous refund of tax payable under this Act, a notice of
16		deficiency may be issued at any time within 2 years from the
17		making of such refund, or within 5 years from the making of
18		such refund if it appears that any part of the refund was
19		induced by fraud or the misrepresentation of a material fact,
20		provided, however, that the amount of any proposed assessment
21		set forth in such notice shall be limited to the amount of such
22		erroneous refund.
23		Beginning July 1, 1993, in any case in which there has been
24		a refund of tax payable under this Act attributable to a net
25		loss carryback as provided for in Section 207, and that refund
26		is subsequently determined to be an erroneous refund due to a
27		reduction in the amount of the net loss which was originally
28		carried back, a notice of deficiency for the erroneous refund
29		amount may be issued at any time during the same time period in
30		which a notice of deficiency can be issued on the loss year
31		creating the carryback amount and subsequent erroneous refund.
32		The amount of any proposed assessment set forth in the notice
33		shall be limited to the amount of such erroneous refund.
34		(h) Time return deemed filed. For purposes of this Section
35		a tax return filed before the last day prescribed by law
36		(including any extension thereof) shall be deemed to have been

1		filed on such last day.
2		(i) Request for prompt determination of liability. For
3		purposes of subsection (a)(1), in the case of a tax return
4		required under this Act in respect of a decedent, or by his
5		estate during the period of administration, or by a
6		corporation, the period referred to in such Subsection shall be
7		18 months after a written request for prompt determination of
8		liability is filed with the Department (at such time and in
9		such form and manner as the Department shall by regulations
10		prescribe) by the executor, administrator, or other fiduciary
11		representing the estate of such decedent, or by such
12		corporation, but not more than 3 years after the date the
13		return was filed. This subsection shall not apply in the case
14		of a corporation unless:
15		(1) (A) such written request notifies the Department
16		that the corporation contemplates dissolution at or before
17		the expiration of such 18-month period, (B) the dissolution
18		is begun in good faith before the expiration of such
19		18-month period, and (C) the dissolution is completed;
20		(2) (A) such written request notifies the Department
21		that a dissolution has in good faith been begun, and (B)
22		the dissolution is completed; or
23		(3) a dissolution has been completed at the time such
24		written request is made.
25		(j) Withholding tax. In the case of returns required under
26		Article 7 of this Act (with respect to any amounts withheld as
27		tax or any amounts required to have been withheld as tax) a
28		notice of deficiency shall be issued not later than 3 years
29		after the 15th day of the 4th month following the close of the
30		calendar year in which such withholding was required.
31		(k) Penalties for failure to make information reports. A
32		notice of deficiency for the penalties provided by Subsection
33		1405.1(c) of this Act may not be issued more than 3 years after
34		the due date of the reports with respect to which the penalties
35		are asserted.
36		(l) Penalty for failure to file withholding returns. A

1		notice of deficiency for penalties provided by Section 1004 of
2		this Act for taxpayer's failure to file withholding returns may
3		not be issued more than three years after the 15th day of the
4		4th month following the close of the calendar year in which the
5		withholding giving rise to taxpayer's obligation to file those
6		returns occurred.
7		(m) Transferee liability. A notice of deficiency may be
8		issued to a transferee relative to a liability asserted under
9		Section 1405 during time periods defined as follows:
10		1) Initial Transferee. In the case of the liability of
11		an initial transferee, up to 2 years after the expiration
12		of the period of limitation for assessment against the
13		transferor, except that if a court proceeding for review of
14		the assessment against the transferor has begun, then up to
15		2 years after the return of the certified copy of the
16		judgment in the court proceeding.
17		2) Transferee of Transferee. In the case of the
18		liability of a transferee, up to 2 years after the
19		expiration of the period of limitation for assessment
20		against the preceding transferee, but not more than 3 years
21		after the expiration of the period of limitation for
22		assessment against the initial transferor; except that if,
23		before the expiration of the period of limitation for the
24		assessment of the liability of the transferee, a court
25		proceeding for the collection of the tax or liability in
26		respect thereof has been begun against the initial
27		transferor or the last preceding transferee, as the case
28		may be, then the period of limitation for assessment of the
29		liability of the transferee shall expire 2 years after the
30		return of the certified copy of the judgment in the court
31		proceeding.
32		(n) Notice of decrease in net loss. On and after the
33		effective date of this amendatory Act of the 92nd General
34		Assembly, no notice of deficiency shall be issued as the result
35		of a decrease determined by the Department in the net loss
36		incurred by a taxpayer under Section 207 of this Act unless the

1		Department has notified the taxpayer of the proposed decrease
2		within 3 years after the return reporting the loss was filed or
3		within one year after an amended return reporting an increase
4		in the loss was filed, provided that in the case of an amended
5		return, a decrease proposed by the Department more than 3 years
6		after the original return was filed may not exceed the increase
7		claimed by the taxpayer on the original return.
8		(Source: P.A. 91-541, eff. 8-13-99; 92-846, eff. 8-23-02.)
9		(35 ILCS 5/1001) (from Ch. 120, par. 10-1001)
10		Sec. 1001. Failure to File Tax Returns.
11		(a) Failure to file tax return. In case of failure to file
12		any tax return required under this Act on the date prescribed
13		therefor, (determined with regard to any extensions of time for
14		filing) there shall be added as a penalty the amount prescribed
15		by Section 3-3 of the Uniform Penalty and Interest Act.
16		(b) Failure to disclose reportable transaction. Any
17		taxpayer who fails to comply with the requirements of Section
18		501(b) of this Act shall pay a penalty in the amount determined
19		under this subsection. Such penalty shall be deemed assessed
20		upon the date of filing of the return for the taxable year in
21		which the taxpayer participates in the reportable transaction.
22		A taxpayer shall not be considered to have complied with the
23		requirements of Section 501(b) of this Act unless the
24		disclosure statement filed with the Department includes all of
25		the information required to be disclosed with respect to a
26		reportable transaction pursuant to Treasury Regulations
27		Section 1.6011-4 (26 CFR 1.6011-4) and regulations promulgated
28		by the Department under Section 501(b) of this Act.
29		(1) Amount of penalty. Except as provided in paragraph (2),
30		the amount of the penalty under this subsection shall be
31		$15,000 for each failure to comply with the requirements of
32		Section 501(b).
33		(2) Increase in penalty for listed transactions. In the
34		case of a failure to comply with the requirements of Section
35		501(b) with respect to a "listed transaction", the penalty

1		under this subsection shall be $30,000 for each failure.
2		(3) Authority to rescind penalty. The Department may
3		rescind all or any portion of any penalty imposed by this
4		subsection with respect to any violation, if any of the
5		following apply:
6		(A) It is determined that failure to comply did not
7		jeopardize the best interests of the State and is not due
8		to any willful neglect or any intent not to comply;
9		(B) The person on whom the penalty is imposed has a
10		history of complying with the requirements of this Act;
11		(C) It is shown that the violation is due to an
12		unintentional mistake of fact;
13		(D) Imposing the penalty would be against equity and
14		good conscience;
15		(E) Rescinding the penalty would promote compliance
16		with the requirements of this Act and effective tax
17		administration; or
18		(F) The taxpayer can show that there was a reasonable
19		cause for the failure to disclose and that the taxpayer
20		acted in good faith.
21		A determination made under this subparagraph (3) may be
22		reviewed in any administrative or judicial proceeding.
23		(4) Coordination with other penalties. The penalty imposed
24		by this subsection is in addition to any penalty imposed by
25		this Act or the Uniform Penalty and Interest Act. The doubling
26		of penalties and interest authorized by the Illinois Tax
27		Delinquency Amnesty Act (P.A. 93-26) are not applicable to the
28		reportable penalties under subsection (b).
29		(c) The total penalty imposed under subsection (b) of this
30		Section with respect to any taxable year shall not exceed 10%
31		of the increase in net income (or reduction in Illinois net
32		loss under Section 207 of this Act) that would result had the
33		taxpayer not participated in any reportable transaction
34		affecting its net income for such taxable year.
35		(Source: P.A. 87-205.)

1		(35 ILCS 5/1002) (from Ch. 120, par. 10-1002)
2		Sec. 1002. Failure to Pay Tax.
3		(a) Negligence. If any part of a deficiency is due to
4		negligence or intentional disregard of rules and regulations
5		(but without intent to defraud) there shall be added to the tax
6		as a penalty the amount prescribed by Section 3-5 of the
7		Uniform Penalty and Interest Act.
8		(b) Fraud. If any part of a deficiency is due to fraud,
9		there shall be added to the tax as a penalty the amount
10		prescribed by Section 3-6 of the Uniform Penalty and Interest
11		Act.
12		(c) Nonwillful failure to pay withholding tax. If any
13		employer, without intent to evade or defeat any tax imposed by
14		this Act or the payment thereof, shall fail to make a return
15		and pay a tax withheld by him at the time required by or under
16		the provisions of this Act, such employer shall be liable for
17		such taxes and shall pay the same together with the interest
18		and the penalty provided by Sections 3-2 and 3-3, respectively,
19		of the Uniform Penalty and Interest Act and such interest and
20		penalty shall not be charged to or collected from the employee
21		by the employer.
22		(d) Willful failure to collect and pay over tax. Any person
23		required to collect, truthfully account for, and pay over the
24		tax imposed by this Act who willfully fails to collect such tax
25		or truthfully account for and pay over such tax or willfully
26		attempts in any manner to evade or defeat the tax or the
27		payment thereof, shall, in addition to other penalties provided
28		by law, be liable for the penalty imposed by Section 3-7 of the
29		Uniform Penalty and Interest Act.
30		(e) Penalties assessable.
31		(1) In general. Except as otherwise provided in this
32		Act provided in paragraphs (2), (3) and (4), the penalties
33		provided by this Act shall be paid upon notice and demand
34		and shall be assessed, collected, and paid in the same
35		manner as taxes and any reference in this Act to the tax
36		imposed by this Act shall be deemed also to refer to

1		penalties provided by this Act.
2		(2) Procedure for assessing certain penalties. For the
3		purposes of Article 9 any penalty under Section 804(a) or
4		Section 1001 shall be deemed assessed upon the filing of
5		the return for the taxable year.
6		(3) Procedure for assessing the penalty for failure to
7		file withholding returns or annual transmittal forms for
8		wage and tax statements. The penalty imposed by Section
9		1004 will be asserted by the Department's issuance of a
10		notice of deficiency. If taxpayer files a timely protest,
11		the procedures of Section 908 will be followed. If taxpayer
12		does not file a timely protest, the notice of deficiency
13		will constitute an assessment pursuant to subsection (c) of
14		Section 904.
15		(4) Assessment of penalty under Section 1005(b). The
16		penalty imposed under Section 1005(b) shall be deemed
17		assessed upon the assessment of the tax to which such
18		penalty relates and shall be collected and paid on notice
19		and demand in the same manner as the tax.
20		(f) Determination of deficiency. For purposes of
21		subsections (a) and (b), the amount shown as the tax by the
22		taxpayer upon his return shall be taken into account in
23		determining the amount of the deficiency only if such return
24		was filed on or before the last day prescribed by law for the
25		filing of such return, including any extensions of the time for
26		such filing.
27		(Source: P.A. 89-379, eff. 1-1-96.)
28		(35 ILCS 5/1005) (from Ch. 120, par. 10-1005)
29		Sec. 1005. Penalty for Underpayment of Tax.
30		(a) In general. If any amount of tax required to be shown
31		on a return prescribed by this Act is not paid on or before the
32		date required for filing such return (determined without regard
33		to any extension of time to file), a penalty shall be imposed
34		in the manner and at the rate prescribed by the Uniform Penalty
35		and Interest Act.

1		(b) Reportable transaction penalty. If a taxpayer has a
2		reportable transaction understatement for any taxable year,
3		there shall be added to the tax an amount equal to 20% of the
4		amount of that understatement. This penalty shall be deemed
5		assessed upon the assessment of the tax to which such penalty
6		relates and shall be collected and paid on notice and demand in
7		the same manner as the tax.
8		(1) Reportable transaction understatement. For
9		purposes of this Section, the term "reportable transaction
10		understatement" means the sum of subparagraphs (A) and (B):
11		(A) The product of (i) the amount of the increase
12		(if any) in Illinois net income, as determined by
13		reference to the amount of post-apportioned income
14		that results from a difference between the proper tax
15		treatment of an item to which this subsection applies
16		and the taxpayer's treatment of that item (as shown on
17		the taxpayer's return of tax), including an amended
18		return filed prior to the date the taxpayer is first
19		contacted by the Department regarding the examination
20		of the return, and (ii) the applicable tax rates under
21		Section 201 of this Act.
22		(B) Special rules in the case of carrybacks and
23		carryovers. The penalty for an understatement of
24		income attributable to a reportable transaction
25		applies to any portion of an understatement for a year
26		to which a loss, deduction, or credit is carried that
27		is attributable to a reportable transaction for that
28		year in which the carryback or carryover of the loss,
29		deduction, or credit arises (the "loss or credit
30		year").
31		(2) Items to which subsection applies. This subsection
32		shall apply to any item which is attributable to either of
33		the following: (i) any listed transaction as defined in
34		Treasury Regulations Section 1.6011-4, and (ii) any
35		reportable transaction as defined in Treasury Regulations
36		Section 1.6011-4 (other than a listed transaction) if a

1		significant purpose of the transaction is the avoidance or
2		evasion of federal income tax.
3		(3) Subsection (b) shall be applied by substituting
4		"30%" for "20%" with respect to the portion of any
5		reportable transaction understatement with respect to
6		which the requirements of (4)(B)(i) of this subsection are
7		not met.
8		(4) Reasonable cause exception.
9		(A) In general. No penalty shall be imposed under
10		this subsection with respect to any portion of a
11		reportable transaction understatement if it is shown
12		that there was a reasonable cause for such portion and
13		that the taxpayer acted in good faith with respect to
14		such portion.
15		(B) Special rules. Subparagraph (A) does not apply
16		to any reportable transaction (including listed
17		transaction) unless all of the following requirements
18		are met:
19		(i) The relevant facts affecting the tax
20		treatment of the item are adequately disclosed in
21		accordance with Section 501(b) of this Act. A
22		taxpayer failing to adequately disclose in
23		accordance with Section 501(b) shall be treated as
24		meeting the requirements of this subparagraph (i)
25		if the penalty for that failure was rescinded under
26		Section 1001(b)(3) of this Act;
27		(ii) There is or was substantial authority for
28		such treatment; and
29		(iii) The taxpayer reasonably believed that
30		such treatment was more likely than not the proper
31		treatment.
32		(C) Rules relating to reasonable belief. For
33		purposes of subparagraph (B), a taxpayer shall be
34		treated as having a reasonable belief with respect to
35		the tax treatment of an item only if such belief meets
36		the requirements of this subparagraph (C):

1		(i) Such belief must be based on the facts and
2		law that exist at the time the return of tax that
3		includes that tax treatment is filed;
4		(ii) Such belief must relate solely to the
5		taxpayer's chances of success on the merits of that
6		treatment and does not take into account the
7		possibility that the return will not be audited,
8		that the treatment will not be raised on audit, or
9		that the treatment will be resolved through
10		settlement if it is raised; and
11		(iii) Such belief is not solely based on the
12		opinion of a disqualified tax advisor or on a
13		disqualified opinion.
14		(5) Definitions.
15		(A) Disqualified tax advisor. The term
16		"disqualified tax advisor" is a tax advisor that meets
17		any of the following conditions:
18		(I) Is a material advisor who participates in
19		the organization, management, promotion, or sale
20		of the transaction or who is related (within the
21		meaning of Sections 267(b) or 707(b)(1) of the
22		Internal Revenue Code) to any person who so
23		participates;
24		(II) Is compensated directly or indirectly by
25		a material advisor with respect to the
26		transaction;
27		(III) Has a fee arrangement with respect to the
28		transaction that is contingent on all or part of
29		the intended tax benefits from the transaction
30		being sustained; or
31		(IV) As determined under regulations
32		prescribed by either the Secretary of the Treasury
33		for federal income tax purposes or the Department,
34		has a continuing financial interest with respect
35		to the transaction.
36		(B) Disqualified opinion. The term "disqualified

1		opinion" means an opinion that meets any of the
2		following conditions:
3		(I) Is based on unreasonable factual or legal
4		assumptions (including assumptions as to future
5		events);
6		(II) Unreasonably relies on representations,
7		statements, findings, or agreements of the
8		taxpayer or any other person;
9		(III) Does not identify and consider all
10		relevant facts; or
11		(IV) Fails to meet any other requirement as
12		either the Secretary of the Treasury for federal
13		income tax purposes or the Department may
14		prescribe.
15		(C) Material Advisor. The term "material advisor"
16		shall have substantially the same meaning as the same
17		term is defined under Treasury Regulations Section
18		301.6112-1, (26 CFR 301.6112-1) and shall include any
19		person that is a material advisor for federal income
20		tax purposes under such regulation.
21		(6) Effective date. This subsection shall apply to
22		taxable years ending on and after December 31, 2004, except
23		that a reportable transaction understatement shall include
24		an understatement (as determined under paragraph (1)) with
25		respect to any taxable year for which the limitations
26		period on assessment has not expired as of January 1, 2005
27		that is attributable to a transaction which the taxpayer
28		has entered into after February 28, 2000 and before
29		December 31, 2004 that becomes a listed transaction (as
30		defined in Treasury Regulations Section 1.6011-4(b)(2) at
31		any time.
32		(c) 100% interest penalty. If a taxpayer has been contacted
33		by the Internal Revenue Service or the Department regarding the
34		use of a potential tax avoidance transaction with respect to a
35		taxable year and has a deficiency with respect to such taxable
36		year or years, there shall be added to the tax attributable to

1		the potential tax avoidance transaction (determined as
2		described in subsection (b)(1) of Section 1005) an amount equal
3		to 100% of the interest assessed under the Uniform Penalty and
4		Interest Act (determined without regard to subsection (f) of
5		Section 3-2 of such Act) for the period beginning on the last
6		date prescribed by law for the payment of such tax and ending
7		on the date of the notice of deficiency. Such penalty shall be
8		deemed assessed upon the assessment of the interest to which
9		such penalty relates and shall be collected and paid in the
10		same manner as such interest. The penalty imposed by this
11		subsection is in addition to any penalty imposed by this Act or
12		the Uniform Penalty and Interest Act. For purposes of this
13		subsection and subsection (d) of this Section, the term
14		"potential tax avoidance transaction" means any tax shelter as
15		defined in Section 6111 of the Internal Revenue Code. This
16		subsection shall apply to taxable years ending on and after
17		December 31, 2004, except that the penalty may also be imposed
18		with respect to any taxable year for which the limitations
19		period on assessment has not expired as of January 1, 2005 that
20		is attributable to a transaction in which the taxpayer has
21		entered into after February 28, 2000 and before December 31,
22		2004, which transaction becomes a listed transaction (as
23		defined in Treasury Regulations Section 1.6011-4(b)(2)) at any
24		time.
25		(d) 150% interest rate. For taxable years ending on and
26		after July 1, 2002, for any notice of deficiency issued before
27		the taxpayer is contacted by the Internal Revenue Service or
28		the Department regarding a potential tax avoidance
29		transaction, the taxpayer is subject to interest as provided
30		under Section 3-2 of the Uniform Penalty and Interest Act, but
31		with respect to any deficiency attributable to a potential tax
32		avoidance transaction, the taxpayer is subject to interest at a
33		rate of 150% of the otherwise applicable rate.
34		(e) Coordination with other penalties. Except as provided
35		in regulations, the penalties imposed by this Section are in
36		addition to any other penalty imposed by this Act or the

1		Uniform Penalty and Interest Act. The doubling of penalties and
2		interest authorized by the Illinois Tax Delinquency Amnesty Act
3		(P.A. 93-26), are not applicable to the reportable transaction
4		penalties and interest under subsections (b), (c), and (d).
5		The provisions of this Section shall apply to all taxable
6		years ending on or after January 1, 1986.
7		(Source: P.A. 87-205.)
8		(35 ILCS 5/1007 new)
9		Sec. 1007. Failure to register tax shelter or maintain
10		list.
11		(a) Penalty Imposed. Any person that fails to comply with
12		the requirements of Section 1405.5 or Section 1405.6 shall
13		incur a penalty as provided in this Section. A person shall not
14		be in compliance with the requirements of Section 1405.5 unless
15		and until the required registration has been filed and contains
16		all of the information required to be included with such
17		registration under Section 6111 of the Internal Revenue Code or
18		such Section 1405.5. A person shall not be in compliance with
19		the requirements of Section 1405.6 unless, at the time the
20		required list is made available to the Department, such list
21		contains all of the information required to be maintained under
22		Section 6112 of the Internal Revenue Code or such Section
23		1405.6.
24		(b) Amount of Penalty. The following penalties apply:
25		(1) In the case of each failure to comply with the
26		requirements of subsection (a), subsection (b), or
27		subsection (e) of Section 1405.5, the penalty shall be
28		$15,000.
29		(2) If the failure is with respect to a listed
30		transaction under subsection (c) of Section 1405.5, the
31		penalty shall be $100,000.
32		(3) In the case of each failure to comply with the
33		requirements of subsection (a) or subsection (b) of Section
34		1405.6, the penalty shall be $15,000.
35		(4) If the failure is with respect to a listed

1		transaction under subsection (c) of Section 1405.6, the
2		penalty shall be $100,000.
3		(c) Authority to rescind penalty. The Director of the Board
4		of Appeals may rescind all or any portion of any penalty
5		imposed by this Section with respect to any violation, if any
6		of the following apply:
7		(1) It is determined that failure to comply did not
8		jeopardize the best interests of the State and is not due
9		to any willful neglect or any intent not to comply;
10		(2) The person on whom the penalty is imposed has a
11		history of complying with the requirements of this Act;
12		(3) It is shown that the violation is due to an
13		unintentional mistake of fact;
14		(4) Imposing the penalty would be against equity and
15		good conscience;
16		(5) Rescinding the penalty would promote compliance
17		with the requirements of this Act and effective tax
18		administration; or
19		(6) The taxpayer can show that there was reasonable
20		cause for the failure to disclose and that the taxpayer
21		acted in good faith.
22		(d) Coordination with other penalties. The penalty imposed
23		by this Section is in addition to any penalty imposed by this
24		Act or the Uniform Penalty and Interest Act.
25		(35 ILCS 5/1008 new)
26		Sec. 1008. Promoting tax shelters. Except as herein
27		provided, the provisions of Section 6700 of the Internal
28		Revenue Code shall apply for purposes of this Act as if such
29		Section applied to an Illinois deduction, credit, exclusion
30		from income, allocation or apportionment rule, or other
31		Illinois tax benefit. Notwithstanding Section 6700(a) of the
32		Internal Revenue Code, if an activity with respect to which a
33		penalty imposed under Section 6700(a) of the Internal Revenue
34		Code, as applied for purposes of this Act, involves a statement
35		described in Section 6700(a)(2)(A) of the Internal Revenue

1		Code, as applied for purposes of this Act, the amount of the
2		penalty imposed under this Section shall be the greater of
3		$10,000 or 50% of the gross income received (or to be received)
4		from any person to whom such statement is furnished that is
5		required to file a return under Section 502 of this Act.
6		(35 ILCS 5/1405.5 new)
7		Sec. 1405.5. Registration of tax shelters.
8		(a) Federal tax shelter. Any tax shelter organizer required
9		to register a tax shelter under Section 6111 of the Internal
10		Revenue Code shall send a duplicate of the federal registration
11		information to the Department not later than the day on which
12		registration is required under federal law. Any person required
13		to register under Section 6111 of the Internal Revenue Code who
14		receives a tax registration number from the Secretary of the
15		Treasury shall, within 30 days after request by the Department,
16		file a statement of that registration number.
17		(b) Additional requirements for listed transactions. In
18		addition to the requirements of subsection (a), for any
19		transactions entered into on or after February 28, 2000 that
20		become listed transactions (as defined under Treasury
21		Regulations Section 1.6011-4) at any time, those transactions
22		shall be registered with the Department (in the form and manner
23		prescribed by the Department) by the later of (i) 60 days after
24		entering into the transaction, (ii) 60 days after the
25		transaction becomes a listed transaction, or (iii) December 31,
26		2004.
27		(c) Tax shelters subject to this Section. The provisions of
28		this Section apply to any tax shelter herein described that
29		additionally satisfies any of the following conditions: (1) is
30		organized in this State; (2) is doing business in this State;
31		or (3) is deriving income from sources in this State.
32		(d) Tax shelter identification number. Any person required
33		to file a return under this Act and required to include on the
34		person's federal tax return a tax shelter identification number
35		pursuant to Section 6111 of the Internal Revenue Code shall

1		furnish such number upon filing of the person's Illinois
2		return.
3		(35 ILCS 5/1405.6 new)
4		Sec. 1405.6. Investor lists.
5		(a) Federal abusive tax shelter. Any person required to
6		maintain a list under Section 6112 of the Internal Revenue Code
7		and Treasury Regulations Section 301.6112-1 with respect to a
8		potentially abusive tax shelter shall furnish such list to the
9		Department not later than the time such list is required to be
10		furnished to the Internal Revenue Service under federal income
11		tax law.
12		The list required under this Section shall include the same
13		information required with respect to a potentially abusive tax
14		shelter under Treasury Regulations Section 301.6112-1 and any
15		other information as the Department may require.
16		(b) Additional requirements for listed transactions. For
17		transactions entered into on or after February 28, 2000 that
18		become listed transactions (as defined under Treasury
19		Regulations Section 1.6011-4) at any time, the list shall be
20		furnished to the Department by the later of (i) 60 days after
21		entering into the transaction, (ii) 60 days after the
22		transaction becomes a listed transaction, or (iii) December 31,
23		2004.
24		(d) Tax Shelters subject to this Section. The provisions of
25		this Section apply to any tax shelter herein described that
26		additionally satisfies any of the following conditions:
27		(1) Organized in this State;
28		(2) Doing Business in this State; or
29		(3) Deriving income from sources in this State.

ARTICLE 40

31		Section 40-5. The Illinois Income Tax Act is amended by
32		changing Section 201 as follows:

1		(35 ILCS 5/201) (from Ch. 120, par. 2-201)
2		Sec. 201. Tax Imposed.
3		(a) In general. A tax measured by net income is hereby
4		imposed on every individual, corporation, trust and estate for
5		each taxable year ending after July 31, 1969 on the privilege
6		of earning or receiving income in or as a resident of this
7		State. Such tax shall be in addition to all other occupation or
8		privilege taxes imposed by this State or by any municipal
9		corporation or political subdivision thereof.
10		(b) Rates. The tax imposed by subsection (a) of this
11		Section shall be determined as follows, except as adjusted by
12		subsection (d-1):
13		(1) In the case of an individual, trust or estate, for
14		taxable years ending prior to July 1, 1989, an amount equal
15		to 2 1/2% of the taxpayer's net income for the taxable
16		year.
17		(2) In the case of an individual, trust or estate, for
18		taxable years beginning prior to July 1, 1989 and ending
19		after June 30, 1989, an amount equal to the sum of (i) 2
20		1/2% of the taxpayer's net income for the period prior to
21		July 1, 1989, as calculated under Section 202.3, and (ii)
22		3% of the taxpayer's net income for the period after June
23		30, 1989, as calculated under Section 202.3.
24		(3) In the case of an individual, trust or estate, for
25		taxable years beginning after June 30, 1989, an amount
26		equal to 3% of the taxpayer's net income for the taxable
27		year.
28		(4) (Blank).
29		(5) (Blank).
30		(6) In the case of a corporation, for taxable years
31		ending prior to July 1, 1989, an amount equal to 4% of the
32		taxpayer's net income for the taxable year.
33		(7) In the case of a corporation, for taxable years
34		beginning prior to July 1, 1989 and ending after June 30,
35		1989, an amount equal to the sum of (i) 4% of the
36		taxpayer's net income for the period prior to July 1, 1989,

1		as calculated under Section 202.3, and (ii) 4.8% of the
2		taxpayer's net income for the period after June 30, 1989,
3		as calculated under Section 202.3.
4		(8) In the case of a corporation, for taxable years
5		beginning after June 30, 1989, an amount equal to 4.8% of
6		the taxpayer's net income for the taxable year.
7		(c) Personal Property Tax Replacement Income Tax.
8		Beginning on July 1, 1979 and thereafter, in addition to such
9		income tax, there is also hereby imposed the Personal Property
10		Tax Replacement Income Tax measured by net income on every
11		corporation (including Subchapter S corporations), partnership
12		and trust, for each taxable year ending after June 30, 1979.
13		Such taxes are imposed on the privilege of earning or receiving
14		income in or as a resident of this State. The Personal Property
15		Tax Replacement Income Tax shall be in addition to the income
16		tax imposed by subsections (a) and (b) of this Section and in
17		addition to all other occupation or privilege taxes imposed by
18		this State or by any municipal corporation or political
19		subdivision thereof.
20		(d) Additional Personal Property Tax Replacement Income
21		Tax Rates. The personal property tax replacement income tax
22		imposed by this subsection and subsection (c) of this Section
23		in the case of a corporation, other than a Subchapter S
24		corporation and except as adjusted by subsection (d-1), shall
25		be an additional amount equal to 2.85% of such taxpayer's net
26		income for the taxable year, except that beginning on January
27		1, 1981, and thereafter, the rate of 2.85% specified in this
28		subsection shall be reduced to 2.5%, and in the case of a
29		partnership, trust or a Subchapter S corporation shall be an
30		additional amount equal to 1.5% of such taxpayer's net income
31		for the taxable year.
32		(d-1) Rate reduction for certain foreign insurers. In the
33		case of a foreign insurer, as defined by Section 35A-5 of the
34		Illinois Insurance Code, whose state or country of domicile
35		imposes on insurers domiciled in Illinois a retaliatory tax
36		(excluding any insurer whose premiums from reinsurance assumed

1		are 50% or more of its total insurance premiums as determined
2		under paragraph (2) of subsection (b) of Section 304, except
3		that for purposes of this determination premiums from
4		reinsurance do not include premiums from inter-affiliate
5		reinsurance arrangements), beginning with taxable years ending
6		on or after December 31, 1999, the sum of the rates of tax
7		imposed by subsections (b) and (d) shall be reduced (but not
8		increased) to the rate at which the total amount of tax imposed
9		under this Act, net of all credits allowed under this Act,
10		shall equal (i) the total amount of tax that would be imposed
11		on the foreign insurer's net income allocable to Illinois for
12		the taxable year by such foreign insurer's state or country of
13		domicile if that net income were subject to all income taxes
14		and taxes measured by net income imposed by such foreign
15		insurer's state or country of domicile, net of all credits
16		allowed or (ii) a rate of zero if no such tax is imposed on such
17		income by the foreign insurer's state of domicile. For the
18		purposes of this subsection (d-1), an inter-affiliate includes
19		a mutual insurer under common management.
20		(1) For the purposes of subsection (d-1), in no event
21		shall the sum of the rates of tax imposed by subsections
22		(b) and (d) be reduced below the rate at which the sum of:
23		(A) the total amount of tax imposed on such foreign
24		insurer under this Act for a taxable year, net of all
25		credits allowed under this Act, plus
26		(B) the privilege tax imposed by Section 409 of the
27		Illinois Insurance Code, the fire insurance company
28		tax imposed by Section 12 of the Fire Investigation
29		Act, and the fire department taxes imposed under
30		Section 11-10-1 of the Illinois Municipal Code,
31		equals 1.25% for taxable years ending prior to December 31,
32		2003, or 1.75% for taxable years ending on or after
33		December 31, 2003, of the net taxable premiums written for
34		the taxable year, as described by subsection (1) of Section
35		409 of the Illinois Insurance Code. This paragraph will in
36		no event increase the rates imposed under subsections (b)

1		and (d).
2		(2) Any reduction in the rates of tax imposed by this
3		subsection shall be applied first against the rates imposed
4		by subsection (b) and only after the tax imposed by
5		subsection (a) net of all credits allowed under this
6		Section other than the credit allowed under subsection (i)
7		has been reduced to zero, against the rates imposed by
8		subsection (d).
9		This subsection (d-1) is exempt from the provisions of
10		Section 250.
11		(e) Investment credit. A taxpayer shall be allowed a credit
12		against the Personal Property Tax Replacement Income Tax for
13		investment in qualified property.
14		(1) A taxpayer shall be allowed a credit equal to .5%
15		of the basis of qualified property placed in service during
16		the taxable year, provided such property is placed in
17		service on or after July 1, 1984. There shall be allowed an
18		additional credit equal to .5% of the basis of qualified
19		property placed in service during the taxable year,
20		provided such property is placed in service on or after
21		July 1, 1986, and the taxpayer's base employment within
22		Illinois has increased by 1% or more over the preceding
23		year as determined by the taxpayer's employment records
24		filed with the Illinois Department of Employment Security.
25		Taxpayers who are new to Illinois shall be deemed to have
26		met the 1% growth in base employment for the first year in
27		which they file employment records with the Illinois
28		Department of Employment Security. The provisions added to
29		this Section by Public Act 85-1200 (and restored by Public
30		Act 87-895) shall be construed as declaratory of existing
31		law and not as a new enactment. If, in any year, the
32		increase in base employment within Illinois over the
33		preceding year is less than 1%, the additional credit shall
34		be limited to that percentage times a fraction, the
35		numerator of which is .5% and the denominator of which is
36		1%, but shall not exceed .5%. The investment credit shall

1		not be allowed to the extent that it would reduce a
2		taxpayer's liability in any tax year below zero, nor may
3		any credit for qualified property be allowed for any year
4		other than the year in which the property was placed in
5		service in Illinois. For tax years ending on or after
6		December 31, 1987, and on or before December 31, 1988, the
7		credit shall be allowed for the tax year in which the
8		property is placed in service, or, if the amount of the
9		credit exceeds the tax liability for that year, whether it
10		exceeds the original liability or the liability as later
11		amended, such excess may be carried forward and applied to
12		the tax liability of the 5 taxable years following the
13		excess credit years if the taxpayer (i) makes investments
14		which cause the creation of a minimum of 2,000 full-time
15		equivalent jobs in Illinois, (ii) is located in an
16		enterprise zone established pursuant to the Illinois
17		Enterprise Zone Act and (iii) is certified by the
18		Department of Commerce and Community Affairs (now
19		Department of Commerce and Economic Opportunity) as
20		complying with the requirements specified in clause (i) and
21		(ii) by July 1, 1986. The Department of Commerce and
22		Community Affairs (now Department of Commerce and Economic
23		Opportunity) shall notify the Department of Revenue of all
24		such certifications immediately. For tax years ending
25		after December 31, 1988, the credit shall be allowed for
26		the tax year in which the property is placed in service,
27		or, if the amount of the credit exceeds the tax liability
28		for that year, whether it exceeds the original liability or
29		the liability as later amended, such excess may be carried
30		forward and applied to the tax liability of the 5 taxable
31		years following the excess credit years. The credit shall
32		be applied to the earliest year for which there is a
33		liability. If there is credit from more than one tax year
34		that is available to offset a liability, earlier credit
35		shall be applied first.
36		(2) The term "qualified property" means property

1		which:
2		(A) is tangible, whether new or used, including
3		buildings and structural components of buildings and
4		signs that are real property, but not including land or
5		improvements to real property that are not a structural
6		component of a building such as landscaping, sewer
7		lines, local access roads, fencing, parking lots, and
8		other appurtenances;
9		(B) is depreciable pursuant to Section 167 of the
10		Internal Revenue Code, except that "3-year property"
11		as defined in Section 168(c)(2)(A) of that Code is not
12		eligible for the credit provided by this subsection
13		(e);
14		(C) is acquired by purchase as defined in Section
15		179(d) of the Internal Revenue Code;
16		(D) is used in Illinois by a taxpayer who is
17		primarily engaged in manufacturing, or in mining coal
18		or fluorite, or in retailing; and
19		(E) has not previously been used in Illinois in
20		such a manner and by such a person as would qualify for
21		the credit provided by this subsection (e) or
22		subsection (f).
23		(3) For purposes of this subsection (e),
24		"manufacturing" means the material staging and production
25		of tangible personal property by procedures commonly
26		regarded as manufacturing, processing, fabrication, or
27		assembling which changes some existing material into new
28		shapes, new qualities, or new combinations. For purposes of
29		this subsection (e) the term "mining" shall have the same
30		meaning as the term "mining" in Section 613(c) of the
31		Internal Revenue Code. For purposes of this subsection (e),
32		the term "retailing" means the sale of tangible personal
33		property or services rendered in conjunction with the sale
34		of tangible consumer goods or commodities.
35		(4) The basis of qualified property shall be the basis
36		used to compute the depreciation deduction for federal

1		income tax purposes.
2		(5) If the basis of the property for federal income tax
3		depreciation purposes is increased after it has been placed
4		in service in Illinois by the taxpayer, the amount of such
5		increase shall be deemed property placed in service on the
6		date of such increase in basis.
7		(6) The term "placed in service" shall have the same
8		meaning as under Section 46 of the Internal Revenue Code.
9		(7) If during any taxable year, any property ceases to
10		be qualified property in the hands of the taxpayer within
11		48 months after being placed in service, or the situs of
12		any qualified property is moved outside Illinois within 48
13		months after being placed in service, the Personal Property
14		Tax Replacement Income Tax for such taxable year shall be
15		increased. Such increase shall be determined by (i)
16		recomputing the investment credit which would have been
17		allowed for the year in which credit for such property was
18		originally allowed by eliminating such property from such
19		computation and, (ii) subtracting such recomputed credit
20		from the amount of credit previously allowed. For the
21		purposes of this paragraph (7), a reduction of the basis of
22		qualified property resulting from a redetermination of the
23		purchase price shall be deemed a disposition of qualified
24		property to the extent of such reduction.
25		(8) Unless the investment credit is extended by law,
26		the basis of qualified property shall not include costs
27		incurred after December 31, 2003, except for costs incurred
28		pursuant to a binding contract entered into on or before
29		December 31, 2003.
30		(9) Each taxable year ending before December 31, 2000,
31		a partnership may elect to pass through to its partners the
32		credits to which the partnership is entitled under this
33		subsection (e) for the taxable year. A partner may use the
34		credit allocated to him or her under this paragraph only
35		against the tax imposed in subsections (c) and (d) of this
36		Section. If the partnership makes that election, those

1		credits shall be allocated among the partners in the
2		partnership in accordance with the rules set forth in
3		Section 704(b) of the Internal Revenue Code, and the rules
4		promulgated under that Section, and the allocated amount of
5		the credits shall be allowed to the partners for that
6		taxable year. The partnership shall make this election on
7		its Personal Property Tax Replacement Income Tax return for
8		that taxable year. The election to pass through the credits
9		shall be irrevocable.
10		For taxable years ending on or after December 31, 2000,
11		a partner that qualifies its partnership for a subtraction
12		under subparagraph (I) of paragraph (2) of subsection (d)
13		of Section 203 or a shareholder that qualifies a Subchapter
14		S corporation for a subtraction under subparagraph (S) of
15		paragraph (2) of subsection (b) of Section 203 shall be
16		allowed a credit under this subsection (e) equal to its
17		share of the credit earned under this subsection (e) during
18		the taxable year by the partnership or Subchapter S
19		corporation, determined in accordance with the
20		determination of income and distributive share of income
21		under Sections 702 and 704 and Subchapter S of the Internal
22		Revenue Code. This paragraph is exempt from the provisions
23		of Section 250.
24		(f) Investment credit; Enterprise Zone.
25		(1) A taxpayer shall be allowed a credit against the
26		tax imposed by subsections (a) and (b) of this Section for
27		investment in qualified property which is placed in service
28		in an Enterprise Zone created pursuant to the Illinois
29		Enterprise Zone Act. For partners, shareholders of
30		Subchapter S corporations, and owners of limited liability
31		companies, if the liability company is treated as a
32		partnership for purposes of federal and State income
33		taxation, there shall be allowed a credit under this
34		subsection (f) to be determined in accordance with the
35		determination of income and distributive share of income
36		under Sections 702 and 704 and Subchapter S of the Internal

1		Revenue Code. The credit shall be .5% of the basis for such
2		property. The credit shall be available only in the taxable
3		year in which the property is placed in service in the
4		Enterprise Zone and shall not be allowed to the extent that
5		it would reduce a taxpayer's liability for the tax imposed
6		by subsections (a) and (b) of this Section to below zero.
7		For tax years ending on or after December 31, 1985, the
8		credit shall be allowed for the tax year in which the
9		property is placed in service, or, if the amount of the
10		credit exceeds the tax liability for that year, whether it
11		exceeds the original liability or the liability as later
12		amended, such excess may be carried forward and applied to
13		the tax liability of the 5 taxable years following the
14		excess credit year. The credit shall be applied to the
15		earliest year for which there is a liability. If there is
16		credit from more than one tax year that is available to
17		offset a liability, the credit accruing first in time shall
18		be applied first.
19		(2) The term qualified property means property which:
20		(A) is tangible, whether new or used, including
21		buildings and structural components of buildings;
22		(B) is depreciable pursuant to Section 167 of the
23		Internal Revenue Code, except that "3-year property"
24		as defined in Section 168(c)(2)(A) of that Code is not
25		eligible for the credit provided by this subsection
26		(f);
27		(C) is acquired by purchase as defined in Section
28		179(d) of the Internal Revenue Code;
29		(D) is used in the Enterprise Zone by the taxpayer;
30		and
31		(E) has not been previously used in Illinois in
32		such a manner and by such a person as would qualify for
33		the credit provided by this subsection (f) or
34		subsection (e).
35		(3) The basis of qualified property shall be the basis
36		used to compute the depreciation deduction for federal

1		income tax purposes.
2		(4) If the basis of the property for federal income tax
3		depreciation purposes is increased after it has been placed
4		in service in the Enterprise Zone by the taxpayer, the
5		amount of such increase shall be deemed property placed in
6		service on the date of such increase in basis.
7		(5) The term "placed in service" shall have the same
8		meaning as under Section 46 of the Internal Revenue Code.
9		(6) If during any taxable year, any property ceases to
10		be qualified property in the hands of the taxpayer within
11		48 months after being placed in service, or the situs of
12		any qualified property is moved outside the Enterprise Zone
13		within 48 months after being placed in service, the tax
14		imposed under subsections (a) and (b) of this Section for
15		such taxable year shall be increased. Such increase shall
16		be determined by (i) recomputing the investment credit
17		which would have been allowed for the year in which credit
18		for such property was originally allowed by eliminating
19		such property from such computation, and (ii) subtracting
20		such recomputed credit from the amount of credit previously
21		allowed. For the purposes of this paragraph (6), a
22		reduction of the basis of qualified property resulting from
23		a redetermination of the purchase price shall be deemed a
24		disposition of qualified property to the extent of such
25		reduction.
26		(g) Jobs Tax Credit; Enterprise Zone and Foreign Trade
27		Zone or Sub-Zone.
28		(1) A taxpayer conducting a trade or business in an
29		enterprise zone or a High Impact Business designated by the
30		Department of Commerce and Economic Opportunity Community
31		Affairs conducting a trade or business in a federally
32		designated Foreign Trade Zone or Sub-Zone shall be allowed
33		a credit against the tax imposed by subsections (a) and (b)
34		of this Section in the amount of $500 per eligible employee
35		hired to work in the zone during the taxable year.
36		(2) To qualify for the credit:

1		(A) the taxpayer must hire 5 or more eligible
2		employees to work in an enterprise zone or federally
3		designated Foreign Trade Zone or Sub-Zone during the
4		taxable year;
5		(B) the taxpayer's total employment within the
6		enterprise zone or federally designated Foreign Trade
7		Zone or Sub-Zone must increase by 5 or more full-time
8		employees beyond the total employed in that zone at the
9		end of the previous tax year for which a jobs tax
10		credit under this Section was taken, or beyond the
11		total employed by the taxpayer as of December 31, 1985,
12		whichever is later; and
13		(C) the eligible employees must be employed 180
14		consecutive days in order to be deemed hired for
15		purposes of this subsection.
16		(3) An "eligible employee" means an employee who is:
17		(A) Certified by the Department of Commerce and
18		Economic Opportunity Community Affairs as "eligible
19		for services" pursuant to regulations promulgated in
20		accordance with Title II of the Job Training
21		Partnership Act, Training Services for the
22		Disadvantaged or Title III of the Job Training
23		Partnership Act, Employment and Training Assistance
24		for Dislocated Workers Program.
25		(B) Hired after the enterprise zone or federally
26		designated Foreign Trade Zone or Sub-Zone was
27		designated or the trade or business was located in that
28		zone, whichever is later.
29		(C) Employed in the enterprise zone or Foreign
30		Trade Zone or Sub-Zone. An employee is employed in an
31		enterprise zone or federally designated Foreign Trade
32		Zone or Sub-Zone if his services are rendered there or
33		it is the base of operations for the services
34		performed.
35		(D) A full-time employee working 30 or more hours
36		per week.

1		(4) For tax years ending on or after December 31, 1985
2		and prior to December 31, 1988, the credit shall be allowed
3		for the tax year in which the eligible employees are hired.
4		For tax years ending on or after December 31, 1988, the
5		credit shall be allowed for the tax year immediately
6		following the tax year in which the eligible employees are
7		hired. If the amount of the credit exceeds the tax
8		liability for that year, whether it exceeds the original
9		liability or the liability as later amended, such excess
10		may be carried forward and applied to the tax liability of
11		the 5 taxable years following the excess credit year. The
12		credit shall be applied to the earliest year for which
13		there is a liability. If there is credit from more than one
14		tax year that is available to offset a liability, earlier
15		credit shall be applied first.
16		(5) The Department of Revenue shall promulgate such
17		rules and regulations as may be deemed necessary to carry
18		out the purposes of this subsection (g).
19		(6) The credit shall be available for eligible
20		employees hired on or after January 1, 1986.
21		(h) Investment credit; High Impact Business.
22		(1) Subject to subsections (b) and (b-5) of Section 5.5
23		of the Illinois Enterprise Zone Act, a taxpayer shall be
24		allowed a credit against the tax imposed by subsections (a)
25		and (b) of this Section for investment in qualified
26		property which is placed in service by a Department of
27		Commerce and Economic Opportunity Community Affairs
28		designated High Impact Business. The credit shall be .5% of
29		the basis for such property. The credit shall not be
30		available (i) until the minimum investments in qualified
31		property set forth in subdivision (a)(3)(A) of Section 5.5
32		of the Illinois Enterprise Zone Act have been satisfied or
33		(ii) until the time authorized in subsection (b-5) of the
34		Illinois Enterprise Zone Act for entities designated as
35		High Impact Businesses under subdivisions (a)(3)(B),
36		(a)(3)(C), and (a)(3)(D) of Section 5.5 of the Illinois

1		Enterprise Zone Act, and shall not be allowed to the extent
2		that it would reduce a taxpayer's liability for the tax
3		imposed by subsections (a) and (b) of this Section to below
4		zero. The credit applicable to such investments shall be
5		taken in the taxable year in which such investments have
6		been completed. The credit for additional investments
7		beyond the minimum investment by a designated high impact
8		business authorized under subdivision (a)(3)(A) of Section
9		5.5 of the Illinois Enterprise Zone Act shall be available
10		only in the taxable year in which the property is placed in
11		service and shall not be allowed to the extent that it
12		would reduce a taxpayer's liability for the tax imposed by
13		subsections (a) and (b) of this Section to below zero. For
14		tax years ending on or after December 31, 1987, the credit
15		shall be allowed for the tax year in which the property is
16		placed in service, or, if the amount of the credit exceeds
17		the tax liability for that year, whether it exceeds the
18		original liability or the liability as later amended, such
19		excess may be carried forward and applied to the tax
20		liability of the 5 taxable years following the excess
21		credit year. The credit shall be applied to the earliest
22		year for which there is a liability. If there is credit
23		from more than one tax year that is available to offset a
24		liability, the credit accruing first in time shall be
25		applied first.
26		Changes made in this subdivision (h)(1) by Public Act
27		88-670 restore changes made by Public Act 85-1182 and
28		reflect existing law.
29		(2) The term qualified property means property which:
30		(A) is tangible, whether new or used, including
31		buildings and structural components of buildings;
32		(B) is depreciable pursuant to Section 167 of the
33		Internal Revenue Code, except that "3-year property"
34		as defined in Section 168(c)(2)(A) of that Code is not
35		eligible for the credit provided by this subsection
36		(h);

1		(C) is acquired by purchase as defined in Section
2		179(d) of the Internal Revenue Code; and
3		(D) is not eligible for the Enterprise Zone
4		Investment Credit provided by subsection (f) of this
5		Section.
6		(3) The basis of qualified property shall be the basis
7		used to compute the depreciation deduction for federal
8		income tax purposes.
9		(4) If the basis of the property for federal income tax
10		depreciation purposes is increased after it has been placed
11		in service in a federally designated Foreign Trade Zone or
12		Sub-Zone located in Illinois by the taxpayer, the amount of
13		such increase shall be deemed property placed in service on
14		the date of such increase in basis.
15		(5) The term "placed in service" shall have the same
16		meaning as under Section 46 of the Internal Revenue Code.
17		(6) If during any taxable year ending on or before
18		December 31, 1996, any property ceases to be qualified
19		property in the hands of the taxpayer within 48 months
20		after being placed in service, or the situs of any
21		qualified property is moved outside Illinois within 48
22		months after being placed in service, the tax imposed under
23		subsections (a) and (b) of this Section for such taxable
24		year shall be increased. Such increase shall be determined
25		by (i) recomputing the investment credit which would have
26		been allowed for the year in which credit for such property
27		was originally allowed by eliminating such property from
28		such computation, and (ii) subtracting such recomputed
29		credit from the amount of credit previously allowed. For
30		the purposes of this paragraph (6), a reduction of the
31		basis of qualified property resulting from a
32		redetermination of the purchase price shall be deemed a
33		disposition of qualified property to the extent of such
34		reduction.
35		(7) Beginning with tax years ending after December 31,
36		1996, if a taxpayer qualifies for the credit under this

1		subsection (h) and thereby is granted a tax abatement and
2		the taxpayer relocates its entire facility in violation of
3		the explicit terms and length of the contract under Section
4		18-183 of the Property Tax Code, the tax imposed under
5		subsections (a) and (b) of this Section shall be increased
6		for the taxable year in which the taxpayer relocated its
7		facility by an amount equal to the amount of credit
8		received by the taxpayer under this subsection (h).
9		(i) Credit for Personal Property Tax Replacement Income
10		Tax. For tax years ending prior to December 31, 2003, a credit
11		shall be allowed against the tax imposed by subsections (a) and
12		(b) of this Section for the tax imposed by subsections (c) and
13		(d) of this Section. This credit shall be computed by
14		multiplying the tax imposed by subsections (c) and (d) of this
15		Section by a fraction, the numerator of which is base income
16		allocable to Illinois and the denominator of which is Illinois
17		base income, and further multiplying the product by the tax
18		rate imposed by subsections (a) and (b) of this Section.
19		Any credit earned on or after December 31, 1986 under this
20		subsection which is unused in the year the credit is computed
21		because it exceeds the tax liability imposed by subsections (a)
22		and (b) for that year (whether it exceeds the original
23		liability or the liability as later amended) may be carried
24		forward and applied to the tax liability imposed by subsections
25		(a) and (b) of the 5 taxable years following the excess credit
26		year, provided that no credit may be carried forward to any
27		year ending on or after December 31, 2003. This credit shall be
28		applied first to the earliest year for which there is a
29		liability. If there is a credit under this subsection from more
30		than one tax year that is available to offset a liability the
31		earliest credit arising under this subsection shall be applied
32		first.
33		If, during any taxable year ending on or after December 31,
34		1986, the tax imposed by subsections (c) and (d) of this
35		Section for which a taxpayer has claimed a credit under this
36		subsection (i) is reduced, the amount of credit for such tax

1		shall also be reduced. Such reduction shall be determined by
2		recomputing the credit to take into account the reduced tax
3		imposed by subsections (c) and (d). If any portion of the
4		reduced amount of credit has been carried to a different
5		taxable year, an amended return shall be filed for such taxable
6		year to reduce the amount of credit claimed.
7		(j) Training expense credit. Beginning with tax years
8		ending on or after December 31, 1986 and prior to December 31,
9		2003, a taxpayer shall be allowed a credit against the tax
10		imposed by subsections (a) and (b) under this Section for all
11		amounts paid or accrued, on behalf of all persons employed by
12		the taxpayer in Illinois or Illinois residents employed outside
13		of Illinois by a taxpayer, for educational or vocational
14		training in semi-technical or technical fields or semi-skilled
15		or skilled fields, which were deducted from gross income in the
16		computation of taxable income. The credit against the tax
17		imposed by subsections (a) and (b) shall be 1.6% of such
18		training expenses. For partners, shareholders of subchapter S
19		corporations, and owners of limited liability companies, if the
20		liability company is treated as a partnership for purposes of
21		federal and State income taxation, there shall be allowed a
22		credit under this subsection (j) to be determined in accordance
23		with the determination of income and distributive share of
24		income under Sections 702 and 704 and subchapter S of the
25		Internal Revenue Code.
26		Any credit allowed under this subsection which is unused in
27		the year the credit is earned may be carried forward to each of
28		the 5 taxable years following the year for which the credit is
29		first computed until it is used. This credit shall be applied
30		first to the earliest year for which there is a liability. If
31		there is a credit under this subsection from more than one tax
32		year that is available to offset a liability the earliest
33		credit arising under this subsection shall be applied first. No
34		carryforward credit may be claimed in any tax year ending on or
35		after December 31, 2003.
36		(k) Research and development credit.

1		For tax years ending after July 1, 1990 and prior to
2		December 31, 2003, and beginning again for tax years ending on
3		or after December 31, 2004, a taxpayer shall be allowed a
4		credit against the tax imposed by subsections (a) and (b) of
5		this Section for increasing research activities in this State.
6		The credit allowed against the tax imposed by subsections (a)
7		and (b) shall be equal to 6 1/2% of the qualifying expenditures
8		for increasing research activities in this State. For partners,
9		shareholders of subchapter S corporations, and owners of
10		limited liability companies, if the liability company is
11		treated as a partnership for purposes of federal and State
12		income taxation, there shall be allowed a credit under this
13		subsection to be determined in accordance with the
14		determination of income and distributive share of income under
15		Sections 702 and 704 and subchapter S of the Internal Revenue
16		Code.
17		For purposes of this subsection, "qualifying expenditures"
18		means the qualifying expenditures as defined for the federal
19		credit for increasing research activities which would be
20		allowable under Section 41 of the Internal Revenue Code and
21		which are conducted in this State, "qualifying expenditures for
22		increasing research activities in this State" means the excess
23		of qualifying expenditures for the taxable year in which
24		incurred over qualifying expenditures for the base period,
25		"qualifying expenditures for the base period" means the average
26		of the qualifying expenditures for each year in the base
27		period, and "base period" means the 3 taxable years immediately
28		preceding the taxable year for which the determination is being
29		made.
30		Any credit in excess of the tax liability for the taxable
31		year may be carried forward. A taxpayer may elect to have the
32		unused credit shown on its final completed return carried over
33		as a credit against the tax liability for the following 5
34		taxable years or until it has been fully used, whichever occurs
35		first; provided that no credit earned in a tax year ending
36		prior to December 31, 2003 may be carried forward to any year

1		ending on or after December 31, 2003. ; provided that no credit
2		may be carried forward to any year ending on or after December
3		31, 2003.
4		If an unused credit is carried forward to a given year from
5		2 or more earlier years, that credit arising in the earliest
6		year will be applied first against the tax liability for the
7		given year. If a tax liability for the given year still
8		remains, the credit from the next earliest year will then be
9		applied, and so on, until all credits have been used or no tax
10		liability for the given year remains. Any remaining unused
11		credit or credits then will be carried forward to the next
12		following year in which a tax liability is incurred, except
13		that no credit can be carried forward to a year which is more
14		than 5 years after the year in which the expense for which the
15		credit is given was incurred.
16		No inference shall be drawn from this amendatory Act of the
17		91st General Assembly in construing this Section for taxable
18		years beginning before January 1, 1999.
19		(l) Environmental Remediation Tax Credit.
20		(i) For tax years ending after December 31, 1997 and on
21		or before December 31, 2001, a taxpayer shall be allowed a
22		credit against the tax imposed by subsections (a) and (b)
23		of this Section for certain amounts paid for unreimbursed
24		eligible remediation costs, as specified in this
25		subsection. For purposes of this Section, "unreimbursed
26		eligible remediation costs" means costs approved by the
27		Illinois Environmental Protection Agency ("Agency") under
28		Section 58.14 of the Environmental Protection Act that were
29		paid in performing environmental remediation at a site for
30		which a No Further Remediation Letter was issued by the
31		Agency and recorded under Section 58.10 of the
32		Environmental Protection Act. The credit must be claimed
33		for the taxable year in which Agency approval of the
34		eligible remediation costs is granted. The credit is not
35		available to any taxpayer if the taxpayer or any related
36		party caused or contributed to, in any material respect, a

1		release of regulated substances on, in, or under the site
2		that was identified and addressed by the remedial action
3		pursuant to the Site Remediation Program of the
4		Environmental Protection Act. After the Pollution Control
5		Board rules are adopted pursuant to the Illinois
6		Administrative Procedure Act for the administration and
7		enforcement of Section 58.9 of the Environmental
8		Protection Act, determinations as to credit availability
9		for purposes of this Section shall be made consistent with
10		those rules. For purposes of this Section, "taxpayer"
11		includes a person whose tax attributes the taxpayer has
12		succeeded to under Section 381 of the Internal Revenue Code
13		and "related party" includes the persons disallowed a
14		deduction for losses by paragraphs (b), (c), and (f)(1) of
15		Section 267 of the Internal Revenue Code by virtue of being
16		a related taxpayer, as well as any of its partners. The
17		credit allowed against the tax imposed by subsections (a)
18		and (b) shall be equal to 25% of the unreimbursed eligible
19		remediation costs in excess of $100,000 per site, except
20		that the $100,000 threshold shall not apply to any site
21		contained in an enterprise zone as determined by the
22		Department of Commerce and Community Affairs (now
23		Department of Commerce and Economic Opportunity). The
24		total credit allowed shall not exceed $40,000 per year with
25		a maximum total of $150,000 per site. For partners and
26		shareholders of subchapter S corporations, there shall be
27		allowed a credit under this subsection to be determined in
28		accordance with the determination of income and
29		distributive share of income under Sections 702 and 704 and
30		subchapter S of the Internal Revenue Code.
31		(ii) A credit allowed under this subsection that is
32		unused in the year the credit is earned may be carried
33		forward to each of the 5 taxable years following the year
34		for which the credit is first earned until it is used. The
35		term "unused credit" does not include any amounts of
36		unreimbursed eligible remediation costs in excess of the

1		maximum credit per site authorized under paragraph (i).
2		This credit shall be applied first to the earliest year for
3		which there is a liability. If there is a credit under this
4		subsection from more than one tax year that is available to
5		offset a liability, the earliest credit arising under this
6		subsection shall be applied first. A credit allowed under
7		this subsection may be sold to a buyer as part of a sale of
8		all or part of the remediation site for which the credit
9		was granted. The purchaser of a remediation site and the
10		tax credit shall succeed to the unused credit and remaining
11		carry-forward period of the seller. To perfect the
12		transfer, the assignor shall record the transfer in the
13		chain of title for the site and provide written notice to
14		the Director of the Illinois Department of Revenue of the
15		assignor's intent to sell the remediation site and the
16		amount of the tax credit to be transferred as a portion of
17		the sale. In no event may a credit be transferred to any
18		taxpayer if the taxpayer or a related party would not be
19		eligible under the provisions of subsection (i).
20		(iii) For purposes of this Section, the term "site"
21		shall have the same meaning as under Section 58.2 of the
22		Environmental Protection Act.
23		(m) Education expense credit. Beginning with tax years
24		ending after December 31, 1999, a taxpayer who is the custodian
25		of one or more qualifying pupils shall be allowed a credit
26		against the tax imposed by subsections (a) and (b) of this
27		Section for qualified education expenses incurred on behalf of
28		the qualifying pupils. The credit shall be equal to 25% of
29		qualified education expenses, but in no event may the total
30		credit under this subsection claimed by a family that is the
31		custodian of qualifying pupils exceed $500. In no event shall a
32		credit under this subsection reduce the taxpayer's liability
33		under this Act to less than zero. This subsection is exempt
34		from the provisions of Section 250 of this Act.
35		For purposes of this subsection:
36		"Qualifying pupils" means individuals who (i) are

1		residents of the State of Illinois, (ii) are under the age of
2		21 at the close of the school year for which a credit is
3		sought, and (iii) during the school year for which a credit is
4		sought were full-time pupils enrolled in a kindergarten through
5		twelfth grade education program at any school, as defined in
6		this subsection.
7		"Qualified education expense" means the amount incurred on
8		behalf of a qualifying pupil in excess of $250 for tuition,
9		book fees, and lab fees at the school in which the pupil is
10		enrolled during the regular school year.
11		"School" means any public or nonpublic elementary or
12		secondary school in Illinois that is in compliance with Title
13		VI of the Civil Rights Act of 1964 and attendance at which
14		satisfies the requirements of Section 26-1 of the School Code,
15		except that nothing shall be construed to require a child to
16		attend any particular public or nonpublic school to qualify for
17		the credit under this Section.
18		"Custodian" means, with respect to qualifying pupils, an
19		Illinois resident who is a parent, the parents, a legal
20		guardian, or the legal guardians of the qualifying pupils.
21		(Source: P.A. 92-12, eff. 7-1-01; 92-16, eff. 6-28-01; 92-651,
22		eff. 7-11-02; 92-846, eff. 8-23-02; 93-29, eff. 6-20-03;
23		revised 12-6-03.)

ARTICLE 45

25		Section 45-5. The Environmental Protection Act is amended
26		by changing Sections 12.5 as follows:
27		(415 ILCS 5/12.5)
28		Sec. 12.5. NPDES discharge fees; sludge permit fees.
29		(a) Beginning July 1, 2003, the Agency shall assess and
30		collect annual fees (i) in the amounts set forth in subsection
31		(e) for all discharges that require an NPDES permit under
32		subsection (f) of Section 12, from each person holding an NPDES
33		permit authorizing those discharges (including a person who

1		continues to discharge under an expired permit pending
2		renewal), and (ii) in the amounts set forth in subsection (f)
3		of this Section for all activities that require a permit under
4		subsection (b) of Section 12, from each person holding a
5		domestic sewage sludge generator or user permit.
6		Each person subject to this Section must remit the
7		applicable annual fee to the Agency in accordance with the
8		requirements set forth in this Section and any rules adopted
9		pursuant to this Section.
10		(b) Within 30 days after the effective date of this
11		Section, and by May 31 of each year thereafter, the Agency
12		shall send a fee notice by mail to each existing permittee
13		subject to a fee under this Section at his or her address of
14		record. The notice shall state the amount of the applicable
15		annual fee and the date by which payment is required.
16		Except as provided in subsection (c) with respect to
17		initial fees under new permits and certain modifications of
18		existing permits, fees payable under this Section for the 12
19		months beginning July 1, 2003 are due by the date specified in
20		the fee notice, which shall be no less than 30 days after the
21		date the fee notice is mailed by the Agency, and fees payable
22		under this Section for subsequent years shall be due on July 1
23		or as otherwise required in any rules that may be adopted
24		pursuant to this Section.
25		(c) The initial annual fee for discharges under a new
26		individual NPDES permit or for activity under a new individual
27		sludge generator or sludge user permit must be remitted to the
28		Agency prior to the issuance of the permit. The Agency shall
29		provide notice of the amount of the fee to the applicant during
30		its review of the application. In the case of a new individual
31		NPDES or sludge permit issued during the months of January
32		through June, the Agency may prorate the initial annual fee
33		payable under this Section.
34		The initial annual fee for discharges or other activity
35		under a general NPDES permit must be remitted to the Agency as
36		part of the application for coverage under that general permit.

1		If a requested modification to an existing NPDES permit
2		causes a change in the applicable fee categories under
3		subsection (e) that results in an increase in the required fee,
4		the permittee must pay to the Agency the amount of the
5		increase, prorated for the number of months remaining before
6		the next July 1, before the modification is granted.
7		(d) Failure to submit the fee required under this Section
8		by the due date constitutes a violation of this Section. Late
9		payments shall incur an interest penalty, calculated at the
10		rate in effect from time to time for tax delinquencies under
11		subsection (a) of Section 1003 of the Illinois Income Tax Act,
12		from the date the fee is due until the date the fee payment is
13		received by the Agency.
14		(e) The annual fees applicable to discharges under NPDES
15		permits are as follows:
16		(1) For NPDES permits for publicly owned treatment
17		works, other facilities for which the wastewater being
18		treated and discharged is primarily domestic sewage, and
19		wastewater discharges from the operation of public water
20		supply treatment facilities, the fee is:
21		(i) $1,500 for the 12 months beginning July 1, 2003
22		and $500 for each subsequent year, for facilities with
23		a Design Average Flow rate of less than 100,000 gallons
24		per day;
25		(ii) $5,000 for the 12 months beginning July 1,
26		2003 and $2,500 for each subsequent year, for
27		facilities with a Design Average Flow rate of at least
28		100,000 gallons per day but less than 500,000 gallons
29		per day;
30		(iii) $7,500 for facilities with a Design Average
31		Flow rate of at least 500,000 gallons per day but less
32		than 1,000,000 gallons per day;
33		(iv) $15,000 for facilities with a Design Average
34		Flow rate of at least 1,000,000 gallons per day but
35		less than 5,000,000 gallons per day;
36		(v) $30,000 for facilities with a Design Average

1		Flow rate of at least 5,000,000 gallons per day but
2		less than 10,000,000 gallons per day; and
3		(vi) $50,000 for facilities with a Design Average
4		Flow rate of 10,000,000 gallons per day or more.
5		(2) For NPDES permits for treatment works or sewer
6		collection systems that include combined sewer overflow
7		outfalls, the fee is:
8		(i) $1,000 for systems serving a tributary
9		population of 10,000 or less;
10		(ii) $5,000 for systems serving a tributary
11		population that is greater than 10,000 but not more
12		than 25,000; and
13		(iii) $20,000 for systems serving a tributary
14		population that is greater than 25,000.
15		The fee amounts in this subdivision (e)(2) are in
16		addition to the fees stated in subdivision (e)(1) when the
17		combined sewer overflow outfall is contained within a
18		permit subject to subsection (e)(1) fees.
19		(3) For NPDES permits for mines producing coal, the fee
20		is $5,000.
21		(4) For NPDES permits for mines other than mines
22		producing coal, the fee is $5,000.
23		(5) For NPDES permits for industrial activity where
24		toxic substances are not regulated, other than permits
25		covered under subdivision (e)(3) or (e)(4), the fee is:
26		(i) $1,000 for a facility with a Design Average
27		Flow rate that is not more than 10,000 gallons per day;
28		(ii) $2,500 for a facility with a Design Average
29		Flow rate that is more than 10,000 gallons per day but
30		not more than 100,000 gallons per day; and
31		(iii) $10,000 for a facility with a Design Average
32		Flow rate that is more than 100,000 gallons per day.
33		(6) For NPDES permits for industrial activity where
34		toxic substances are regulated, other than permits covered
35		under subdivision (e)(3) or (e)(4), the fee is:
36		(i) $15,000 for a facility with a Design Average

1		Flow rate that is not more than 250,000 gallons per
2		day; and
3		(ii) $20,000 for a facility with a Design Average
4		Flow rate that is more than 250,000 gallons per day.
5		(7) For NPDES permits for industrial activity
6		classified by USEPA as a major discharge, other than
7		permits covered under subdivision (e)(3) or (e)(4), the fee
8		is:
9		(i) $30,000 for a facility where toxic substances
10		are not regulated; and
11		(ii) $50,000 for a facility where toxic substances
12		are regulated.
13		(8) For NPDES permits for municipal separate storm
14		sewer systems, the fee is $1,000.
15		(9) For NPDES permits for construction site or
16		industrial storm water, the fee is $500.
17		(f) The annual fee for activities under a permit that
18		authorizes applying sludge on land is $2,500 for a sludge
19		generator permit and $5,000 for a sludge user permit.
20		(g) More than one of the annual fees specified in
21		subsections (e) and (f) may be applicable to a permit holder.
22		These fees are in addition to any other fees required under
23		this Act.
24		(h) The fees imposed under this Section do not apply to the
25		State or any department or agency of the State, nor to any
26		school district, or to any private sewage disposal system as
27		defined in the Private Sewage Disposal Licensing Act (225 ILCS
28		225/).
29		(i) The Agency may adopt rules to administer the fee
30		program established in this Section. The Agency may include
31		provisions pertaining to invoices, notice of late payment, and
32		disputes concerning the amount or timeliness of payment. The
33		Agency may set forth procedures and criteria for the acceptance
34		of payments. The absence of such rules does not affect the duty
35		of the Agency to immediately begin the assessment and
36		collection of fees under this Section.

1		(j) All fees and interest penalties collected by the Agency
2		under this Section shall be deposited into the Illinois Clean
3		Water Fund, which is hereby created as a special fund in the
4		State treasury. Gifts, supplemental environmental project
5		funds, and grants may be deposited into the Fund. Investment
6		earnings on moneys held in the Fund shall be credited to the
7		Fund.
8		Subject to appropriation, the moneys in the Fund shall be
9		used by the Agency to carry out the Agency's clean water
10		activities.
11		(k) Except as provided in subsection (l), fees Fees paid to
12		the Agency under this Section are not refundable.
13		(l) The Agency may refund the difference between (a) the
14		amount paid by any person under subsection (e)(1)(i) or
15		(e)(1)(ii) of this Section for the 12 months beginning July 1,
16		2004 and (b) the amount due under subsection (e)(1)(i) or
17		(e)(1)(ii) as established by this amendatory Act of the 93rd
18		General Assembly.
19		(Source: P.A. 93-32, eff. 7-1-03.)

ARTICLE 50

21		Section 50-5. The Film Production Services Tax Credit Act
22		is amended by changing Section 90 as follows:
23		(35 ILCS 15/90)
24		(Section scheduled to be repealed on January 1, 2005)
25		Sec. 90. Repeal. This Act is repealed 2 years 1 year after
26		its effective date.
27		(Source: P.A. 93-543, eff. 1-1-04.)

ARTICLE 99

Section 99-99. Effective date. This Act takes effect upon becoming law.