Sen. Don Harmon

Filed: 5/13/2005

 

 


 

 


 
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1
AMENDMENT TO HOUSE BILL 709

2     AMENDMENT NO. ______. Amend House Bill 709, AS AMENDED, by
3 replacing everything after the enacting clause with the
4 following:
 
5     "Section 5. The Illinois Income Tax Act is amended by
6 changing Section 203 as follows:
 
7     (35 ILCS 5/203)  (from Ch. 120, par. 2-203)
8     Sec. 203. Base income defined.
9     (a) Individuals.
10         (1) In general. In the case of an individual, base
11     income means an amount equal to the taxpayer's adjusted
12     gross income for the taxable year as modified by paragraph
13     (2).
14         (2) Modifications. The adjusted gross income referred
15     to in paragraph (1) shall be modified by adding thereto the
16     sum of the following amounts:
17             (A) An amount equal to all amounts paid or accrued
18         to the taxpayer as interest or dividends during the
19         taxable year to the extent excluded from gross income
20         in the computation of adjusted gross income, except
21         stock dividends of qualified public utilities
22         described in Section 305(e) of the Internal Revenue
23         Code;
24             (B) An amount equal to the amount of tax imposed by

 

 

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1         this Act to the extent deducted from gross income in
2         the computation of adjusted gross income for the
3         taxable year;
4             (C) An amount equal to the amount received during
5         the taxable year as a recovery or refund of real
6         property taxes paid with respect to the taxpayer's
7         principal residence under the Revenue Act of 1939 and
8         for which a deduction was previously taken under
9         subparagraph (L) of this paragraph (2) prior to July 1,
10         1991, the retrospective application date of Article 4
11         of Public Act 87-17. In the case of multi-unit or
12         multi-use structures and farm dwellings, the taxes on
13         the taxpayer's principal residence shall be that
14         portion of the total taxes for the entire property
15         which is attributable to such principal residence;
16             (D) An amount equal to the amount of the capital
17         gain deduction allowable under the Internal Revenue
18         Code, to the extent deducted from gross income in the
19         computation of adjusted gross income;
20             (D-5) An amount, to the extent not included in
21         adjusted gross income, equal to the amount of money
22         withdrawn by the taxpayer in the taxable year from a
23         medical care savings account and the interest earned on
24         the account in the taxable year of a withdrawal
25         pursuant to subsection (b) of Section 20 of the Medical
26         Care Savings Account Act or subsection (b) of Section
27         20 of the Medical Care Savings Account Act of 2000;
28             (D-10) For taxable years ending after December 31,
29         1997, an amount equal to any eligible remediation costs
30         that the individual deducted in computing adjusted
31         gross income and for which the individual claims a
32         credit under subsection (l) of Section 201;
33             (D-15) For taxable years 2001 and thereafter, an
34         amount equal to the bonus depreciation deduction (30%

 

 

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1         of the adjusted basis of the qualified property) taken
2         on the taxpayer's federal income tax return for the
3         taxable year under subsection (k) of Section 168 of the
4         Internal Revenue Code;
5             (D-16) If the taxpayer reports a capital gain or
6         loss on the taxpayer's federal income tax return for
7         the taxable year based on a sale or transfer of
8         property for which the taxpayer was required in any
9         taxable year to make an addition modification under
10         subparagraph (D-15), then an amount equal to the
11         aggregate amount of the deductions taken in all taxable
12         years under subparagraph (Z) with respect to that
13         property.
14             The taxpayer is required to make the addition
15         modification under this subparagraph only once with
16         respect to any one piece of property;
17             (D-17) For taxable years ending on or after
18         December 31, 2004, an amount equal to the amount
19         otherwise allowed as a deduction in computing base
20         income for interest paid, accrued, or incurred,
21         directly or indirectly, to a foreign person who would
22         be a member of the same unitary business group but for
23         the fact that foreign person's business activity
24         outside the United States is 80% or more of the foreign
25         person's total business activity. The addition
26         modification required by this subparagraph shall be
27         reduced to the extent that dividends were included in
28         base income of the unitary group for the same taxable
29         year and received by the taxpayer or by a member of the
30         taxpayer's unitary business group (including amounts
31         included in gross income under Sections 951 through 964
32         of the Internal Revenue Code and amounts included in
33         gross income under Section 78 of the Internal Revenue
34         Code) with respect to the stock of the same person to

 

 

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

 

 

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1             unreasonable; or if the taxpayer and the Director
2             agree in writing to the application or use of an
3             alternative method of apportionment under Section
4             304(f).
5                 Nothing in this subsection shall preclude the
6             Director from making any other adjustment
7             otherwise allowed under Section 404 of this Act for
8             any tax year beginning after the effective date of
9             this amendment provided such adjustment is made
10             pursuant to regulation adopted by the Department
11             and such regulations provide methods and standards
12             by which the Department will utilize its authority
13             under Section 404 of this Act;
14             (D-18) For taxable years ending on or after
15         December 31, 2004, an amount equal to the amount of
16         intangible expenses and costs otherwise allowed as a
17         deduction in computing base income, and that were paid,
18         accrued, or incurred, directly or indirectly, to a
19         foreign person who would be a member of the same
20         unitary business group but for the fact that the
21         foreign person's business activity outside the United
22         States is 80% or more of that person's total business
23         activity. The addition modification required by this
24         subparagraph shall be reduced to the extent that
25         dividends were included in base income of the unitary
26         group for the same taxable year and received by the
27         taxpayer or by a member of the taxpayer's unitary
28         business group (including amounts included in gross
29         income under Sections 951 through 964 of the Internal
30         Revenue Code and amounts included in gross income under
31         Section 78 of the Internal Revenue Code) with respect
32         to the stock of the same person to whom the intangible
33         expenses and costs were directly or indirectly paid,
34         incurred, or accrued. The preceding sentence does not

 

 

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

 

 

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1                     (b) the transaction giving rise to the
2                 intangible expense or cost between the
3                 taxpayer and the foreign person did not have as
4                 a principal purpose the avoidance of Illinois
5                 income tax, and is paid pursuant to a contract
6                 or agreement that reflects arm's-length terms;
7                 or
8                 (iii) any item of intangible expense or cost
9             paid, accrued, or incurred, directly or
10             indirectly, from a transaction with a foreign
11             person if the taxpayer establishes by clear and
12             convincing evidence, that the adjustments are
13             unreasonable; or if the taxpayer and the Director
14             agree in writing to the application or use of an
15             alternative method of apportionment under Section
16             304(f);
17                 Nothing in this subsection shall preclude the
18             Director from making any other adjustment
19             otherwise allowed under Section 404 of this Act for
20             any tax year beginning after the effective date of
21             this amendment provided such adjustment is made
22             pursuant to regulation adopted by the Department
23             and such regulations provide methods and standards
24             by which the Department will utilize its authority
25             under Section 404 of this Act;
26             (D-20) For taxable years beginning on or after
27         January 1, 2002, in the case of a distribution from a
28         qualified tuition program under Section 529 of the
29         Internal Revenue Code, other than (i) a distribution
30         from a College Savings Pool created under Section 16.5
31         of the State Treasurer Act or (ii) a distribution from
32         the Illinois Prepaid Tuition Trust Fund, an amount
33         equal to the amount excluded from gross income under
34         Section 529(c)(3)(B);

 

 

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1     and by deducting from the total so obtained the sum of the
2     following amounts:
3             (E) For taxable years ending before December 31,
4         2001, any amount included in such total in respect of
5         any compensation (including but not limited to any
6         compensation paid or accrued to a serviceman while a
7         prisoner of war or missing in action) paid to a
8         resident by reason of being on active duty in the Armed
9         Forces of the United States and in respect of any
10         compensation paid or accrued to a resident who as a
11         governmental employee was a prisoner of war or missing
12         in action, and in respect of any compensation paid to a
13         resident in 1971 or thereafter for annual training
14         performed pursuant to Sections 502 and 503, Title 32,
15         United States Code as a member of the Illinois National
16         Guard. For taxable years ending on or after December
17         31, 2001, any amount included in such total in respect
18         of 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 a member of any component
22         of the Armed Forces of the United States and in respect
23         of any compensation paid or accrued to a resident who
24         as a governmental employee was a prisoner of war or
25         missing in action, and in respect of any compensation
26         paid to a resident in 2001 or thereafter by reason of
27         being a member of the Illinois National Guard. The
28         provisions of this amendatory Act of the 92nd General
29         Assembly are exempt from the provisions of Section 250;
30             (F) An amount equal to all amounts included in such
31         total pursuant to the provisions of Sections 402(a),
32         402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the
33         Internal Revenue Code, or included in such total as
34         distributions under the provisions of any retirement

 

 

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1         or disability plan for employees of any governmental
2         agency or unit, or retirement payments to retired
3         partners, which payments are excluded in computing net
4         earnings from self employment by Section 1402 of the
5         Internal Revenue Code and regulations adopted pursuant
6         thereto;
7             (G) The valuation limitation amount;
8             (H) An amount equal to the amount of any tax
9         imposed by this Act which was refunded to the taxpayer
10         and included in such total for the taxable year;
11             (I) An amount equal to all amounts included in such
12         total pursuant to the provisions of Section 111 of the
13         Internal Revenue Code as a recovery of items previously
14         deducted from adjusted gross income in the computation
15         of taxable income;
16             (J) An amount equal to those dividends included in
17         such total which were paid by a corporation which
18         conducts business operations in an Enterprise Zone or
19         zones created under the Illinois Enterprise Zone Act,
20         and conducts substantially all of its operations in an
21         Enterprise Zone or zones;
22             (K) An amount equal to those dividends included in
23         such total that were paid by a corporation that
24         conducts business operations in a federally designated
25         Foreign Trade Zone or Sub-Zone and that is designated a
26         High Impact Business located in Illinois; provided
27         that dividends eligible for the deduction provided in
28         subparagraph (J) of paragraph (2) of this subsection
29         shall not be eligible for the deduction provided under
30         this subparagraph (K);
31             (L) For taxable years ending after December 31,
32         1983, an amount equal to all social security benefits
33         and railroad retirement benefits included in such
34         total pursuant to Sections 72(r) and 86 of the Internal

 

 

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1         Revenue Code;
2             (M) With the exception of any amounts subtracted
3         under subparagraph (N), an amount equal to the sum of
4         all amounts disallowed as deductions by (i) Sections
5         171(a) (2), and 265(2) of the Internal Revenue Code of
6         1954, as now or hereafter amended, and all amounts of
7         expenses allocable to interest and disallowed as
8         deductions by Section 265(1) of the Internal Revenue
9         Code of 1954, as now or hereafter amended; and (ii) for
10         taxable years ending on or after August 13, 1999,
11         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
12         the Internal Revenue Code; the provisions of this
13         subparagraph are exempt from the provisions of Section
14         250;
15             (N) An amount equal to all amounts included in such
16         total which are exempt from taxation by this State
17         either by reason of its statutes or Constitution or by
18         reason of the Constitution, treaties or statutes of the
19         United States; provided that, in the case of any
20         statute of this State that exempts income derived from
21         bonds or other obligations from the tax imposed under
22         this Act, the amount exempted shall be the interest net
23         of bond premium amortization;
24             (O) An amount equal to any contribution made to a
25         job training project established pursuant to the Tax
26         Increment Allocation Redevelopment Act;
27             (P) An amount equal to the amount of the deduction
28         used to compute the federal income tax credit for
29         restoration of substantial amounts held under claim of
30         right for the taxable year pursuant to Section 1341 of
31         the Internal Revenue Code of 1986;
32             (Q) An amount equal to any amounts included in such
33         total, received by the taxpayer as an acceleration in
34         the payment of life, endowment or annuity benefits in

 

 

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

 

 

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

 

 

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1         persecution for racial or religious reasons by Nazi
2         Germany or any other Axis regime immediately prior to,
3         during, and immediately after World War II, including,
4         but not limited to, interest on the proceeds receivable
5         as insurance under policies issued to a victim of
6         persecution for racial or religious reasons by Nazi
7         Germany or any other Axis regime by European insurance
8         companies immediately prior to and during World War II;
9         provided, however, this subtraction from federal
10         adjusted gross income does not apply to assets acquired
11         with such assets or with the proceeds from the sale of
12         such assets; provided, further, this paragraph shall
13         only apply to a taxpayer who was the first recipient of
14         such assets after their recovery and who is a victim of
15         persecution for racial or religious reasons by Nazi
16         Germany or any other Axis regime or as an heir of the
17         victim. The amount of and the eligibility for any
18         public assistance, benefit, or similar entitlement is
19         not affected by the inclusion of items (i) and (ii) of
20         this paragraph in gross income for federal income tax
21         purposes. This paragraph is exempt from the provisions
22         of Section 250;
23             (Y) For taxable years beginning on or after January
24         1, 2002 and ending on or before December 31, 2004,
25         moneys contributed in the taxable year to a College
26         Savings Pool account under Section 16.5 of the State
27         Treasurer Act, except that amounts excluded from gross
28         income under Section 529(c)(3)(C)(i) of the Internal
29         Revenue Code shall not be considered moneys
30         contributed under this subparagraph (Y). For taxable
31         years beginning on or after January 1, 2005, a maximum
32         of $10,000 contributed in the taxable year to (i) a
33         College Savings Pool account under Section 16.5 of the
34         State Treasurer Act or (ii) the Illinois Prepaid

 

 

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1         Tuition Trust Fund, except that amounts excluded from
2         gross income under Section 529(c)(3)(C)(i) of the
3         Internal Revenue Code shall not be considered moneys
4         contributed under this subparagraph (Y). This
5         subparagraph (Y) is exempt from the provisions of
6         Section 250;
7             (Z) For taxable years 2001 and thereafter, for the
8         taxable year in which the bonus depreciation deduction
9         (30% of the adjusted basis of the qualified property)
10         is taken on the taxpayer's federal income tax return
11         under subsection (k) of Section 168 of the Internal
12         Revenue Code and for each applicable taxable year
13         thereafter, an amount equal to "x", where:
14                 (1) "y" equals the amount of the depreciation
15             deduction taken for the taxable year on the
16             taxpayer's federal income tax return on property
17             for which the bonus depreciation deduction (30% of
18             the adjusted basis of the qualified property) was
19             taken in any year under subsection (k) of Section
20             168 of the Internal Revenue Code, but not including
21             the bonus depreciation deduction; and
22                 (2) for property on which a bonus depreciation
23             deduction of 30% of the adjusted basis was taken,
24             "x" equals "y" multiplied by 30 and then divided by
25             70 (or "y" multiplied by 0.429), and for property
26             on which a bonus depreciation deduction of 50% of
27             the adjusted basis was taken, "x" equals "y"
28             multiplied by 1.0.
29             The aggregate amount deducted under this
30         subparagraph in all taxable years for any one piece of
31         property may not exceed the amount of the bonus
32         depreciation deduction (30% of the adjusted basis of
33         the qualified property) taken on that property on the
34         taxpayer's federal income tax return under subsection

 

 

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1         (k) of Section 168 of the Internal Revenue Code;
2             (AA) If the taxpayer reports a capital gain or loss
3         on the taxpayer's federal income tax return for the
4         taxable year based on a sale or transfer of property
5         for which the taxpayer was required in any taxable year
6         to make an addition modification under subparagraph
7         (D-15), then an amount equal to that addition
8         modification.
9             The taxpayer is allowed to take the deduction under
10         this subparagraph only once with respect to any one
11         piece of property;
12             (BB) Any amount included in adjusted gross income,
13         other than salary, received by a driver in a
14         ridesharing arrangement using a motor vehicle;
15             (CC) The amount of (i) any interest income (net of
16         the deductions allocable thereto) taken into account
17         for the taxable year with respect to a transaction with
18         a taxpayer that is required to make an addition
19         modification with respect to such transaction under
20         Section 203(a)(2)(D-17), 203(b)(2)(E-13),
21         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
22         the amount of that addition modification, and (ii) any
23         income from intangible property (net of the deductions
24         allocable thereto) taken into account for the taxable
25         year with respect to a transaction with a taxpayer that
26         is required to make an addition modification with
27         respect to such transaction under Section
28         203(a)(2)(D-18), 203(b)(2)(E-14), 203(c)(2)(G-13), or
29         203(d)(2)(D-8), but not to exceed the amount of that
30         addition modification;
31             (DD) An amount equal to the interest income taken
32         into account for the taxable year (net of the
33         deductions allocable thereto) with respect to
34         transactions with a foreign person who would be a

 

 

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1         member of the taxpayer's unitary business group but for
2         the fact that the foreign person's business activity
3         outside the United States is 80% or more of that
4         person's total business activity, but not to exceed the
5         addition modification required to be made for the same
6         taxable year under Section 203(a)(2)(D-17) for
7         interest paid, accrued, or incurred, directly or
8         indirectly, to the same foreign person; and
9             (EE) An amount equal to the income from intangible
10         property taken into account for the taxable year (net
11         of the deductions allocable thereto) with respect to
12         transactions with a foreign person who would be a
13         member of the taxpayer's unitary business group but for
14         the fact that the foreign person's business activity
15         outside the United States is 80% or more of that
16         person's total business activity, but not to exceed the
17         addition modification required to be made for the same
18         taxable year under Section 203(a)(2)(D-18) for
19         intangible expenses and costs paid, accrued, or
20         incurred, directly or indirectly, to the same foreign
21         person.
 
22     (b) Corporations.
23         (1) In general. In the case of a corporation, base
24     income means an amount equal to the taxpayer's taxable
25     income for the taxable year as modified by paragraph (2).
26         (2) Modifications. The taxable income referred to in
27     paragraph (1) shall be modified by adding thereto the sum
28     of the following amounts:
29             (A) An amount equal to all amounts paid or accrued
30         to the taxpayer as interest and all distributions
31         received from regulated investment companies during
32         the taxable year to the extent excluded from gross
33         income in the computation of taxable income;

 

 

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1             (B) An amount equal to the amount of tax imposed by
2         this Act to the extent deducted from gross income in
3         the computation of taxable income for the taxable year;
4             (C) In the case of a regulated investment company,
5         an amount equal to the excess of (i) the net long-term
6         capital gain for the taxable year, over (ii) the amount
7         of the capital gain dividends designated as such in
8         accordance with Section 852(b)(3)(C) of the Internal
9         Revenue Code and any amount designated under Section
10         852(b)(3)(D) of the Internal Revenue Code,
11         attributable to the taxable year (this amendatory Act
12         of 1995 (Public Act 89-89) is declarative of existing
13         law and is not a new enactment);
14             (D) The amount of any net operating loss deduction
15         taken in arriving at taxable income, other than a net
16         operating loss carried forward from a taxable year
17         ending prior to December 31, 1986;
18             (E) For taxable years in which a net operating loss
19         carryback or carryforward from a taxable year ending
20         prior to December 31, 1986 is an element of taxable
21         income under paragraph (1) of subsection (e) or
22         subparagraph (E) of paragraph (2) of subsection (e),
23         the amount by which addition modifications other than
24         those provided by this subparagraph (E) exceeded
25         subtraction modifications in such earlier taxable
26         year, with the following limitations applied in the
27         order that they are listed:
28                 (i) the addition modification relating to the
29             net operating loss carried back or forward to the
30             taxable year from any taxable year ending prior to
31             December 31, 1986 shall be reduced by the amount of
32             addition modification under this subparagraph (E)
33             which related to that net operating loss and which
34             was taken into account in calculating the base

 

 

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1             income of an earlier taxable year, and
2                 (ii) the addition modification relating to the
3             net operating loss carried back or forward to the
4             taxable year from any taxable year ending prior to
5             December 31, 1986 shall not exceed the amount of
6             such carryback or carryforward;
7             For taxable years in which there is a net operating
8         loss carryback or carryforward from more than one other
9         taxable year ending prior to December 31, 1986, the
10         addition modification provided in this subparagraph
11         (E) shall be the sum of the amounts computed
12         independently under the preceding provisions of this
13         subparagraph (E) for each such taxable year;
14             (E-5) For taxable years ending after December 31,
15         1997, an amount equal to any eligible remediation costs
16         that the corporation deducted in computing adjusted
17         gross income and for which the corporation claims a
18         credit under subsection (l) of Section 201;
19             (E-10) For taxable years 2001 and thereafter, an
20         amount equal to the bonus depreciation deduction (30%
21         of the adjusted basis of the qualified property) taken
22         on the taxpayer's federal income tax return for the
23         taxable year under subsection (k) of Section 168 of the
24         Internal Revenue Code; and
25             (E-11) If the taxpayer reports a capital gain or
26         loss on the taxpayer's federal income tax return for
27         the taxable year based on a sale or transfer of
28         property for which the taxpayer was required in any
29         taxable year to make an addition modification under
30         subparagraph (E-10), then an amount equal to the
31         aggregate amount of the deductions taken in all taxable
32         years under subparagraph (T) with respect to that
33         property.
34             The taxpayer is required to make the addition

 

 

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

 

 

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

 

 

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1             (E-13) For taxable years ending on or after
2         December 31, 2004, an amount equal to the amount of
3         intangible expenses and costs otherwise allowed as a
4         deduction in computing base income, and that were paid,
5         accrued, or incurred, directly or indirectly, to a
6         foreign person who would be a member of the same
7         unitary business group but for the fact that the
8         foreign person's business activity outside the United
9         States is 80% or more of that person's total business
10         activity. The addition modification required by this
11         subparagraph shall be reduced to the extent that
12         dividends were included in base income of the unitary
13         group for the same taxable year and received by the
14         taxpayer or by a member of the taxpayer's unitary
15         business group (including amounts included in gross
16         income pursuant to Sections 951 through 964 of the
17         Internal Revenue Code and amounts included in gross
18         income under Section 78 of the Internal Revenue Code)
19         with respect to the stock of the same person to whom
20         the intangible expenses and costs were directly or
21         indirectly paid, incurred, or accrued. The preceding
22         sentence shall not apply to the extent that the same
23         dividends caused a reduction to the addition
24         modification required under Section 203(b)(2)(E-12) of
25         this Act. As used in this subparagraph, the term
26         "intangible expenses and costs" includes (1) expenses,
27         losses, and costs for, or related to, the direct or
28         indirect acquisition, use, maintenance or management,
29         ownership, sale, exchange, or any other disposition of
30         intangible property; (2) losses incurred, directly or
31         indirectly, from factoring transactions or discounting
32         transactions; (3) royalty, patent, technical, and
33         copyright fees; (4) licensing fees; and (5) other
34         similar expenses and costs. For purposes of this

 

 

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1         subparagraph, "intangible property" includes patents,
2         patent applications, trade names, trademarks, service
3         marks, copyrights, mask works, trade secrets, and
4         similar types of intangible assets.
5             This paragraph shall not apply to the following:
6                 (i) any item of intangible expenses or costs
7             paid, accrued, or incurred, directly or
8             indirectly, from a transaction with 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 item; or
13                 (ii) any item of intangible expense or cost
14             paid, accrued, or incurred, directly or
15             indirectly, if the taxpayer can establish, based
16             on a 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                 intangible expense or cost to a person that is
21                 not a related member, and
22                     (b) the transaction giving rise to the
23                 intangible expense or cost between the
24                 taxpayer and the foreign person did not have as
25                 a principal purpose the avoidance of Illinois
26                 income tax, and is paid pursuant to a contract
27                 or agreement that reflects arm's-length terms;
28                 or
29                 (iii) any item of intangible expense or cost
30             paid, accrued, or incurred, directly or
31             indirectly, from a transaction with a foreign
32             person if the taxpayer establishes by clear and
33             convincing evidence, that the adjustments are
34             unreasonable; or if the taxpayer and the Director

 

 

09400HB0709sam003 - 23 - LRB094 08094 BDD 46541 a

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

 

 

09400HB0709sam003 - 24 - LRB094 08094 BDD 46541 a

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

 

 

09400HB0709sam003 - 25 - LRB094 08094 BDD 46541 a

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

 

 

09400HB0709sam003 - 26 - LRB094 08094 BDD 46541 a

1         subtraction modification available to taxpayers in any
2         year under this subsection shall be that portion of the
3         total interest paid by the borrower with respect to
4         such loan attributable to the eligible property as
5         calculated under the previous sentence;
6             (N) Two times any contribution made during the
7         taxable year to a designated zone organization to the
8         extent that the contribution (i) qualifies as a
9         charitable contribution under subsection (c) of
10         Section 170 of the Internal Revenue Code and (ii) must,
11         by its terms, be used for a project approved by the
12         Department of Commerce and Economic Opportunity under
13         Section 11 of the Illinois 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

 

 

09400HB0709sam003 - 27 - LRB094 08094 BDD 46541 a

1         clause (i) that would but for the provisions of Section
2         1504 (b) (3) of the Internal Revenue Code be treated as
3         a member of the affiliated group which includes the
4         dividend recipient, exceed the amount of the
5         modification provided under subparagraph (G) of
6         paragraph (2) of this subsection (b) which is related
7         to such dividends;
8             (P) An amount equal to any contribution made to a
9         job training project established pursuant to the Tax
10         Increment Allocation Redevelopment Act;
11             (Q) 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             (R) In the case of an attorney-in-fact with respect
17         to whom an interinsurer or a reciprocal insurer has
18         made the election under Section 835 of the Internal
19         Revenue Code, 26 U.S.C. 835, an amount equal to the
20         excess, if any, of the amounts paid or incurred by that
21         interinsurer or reciprocal insurer in the taxable year
22         to the attorney-in-fact over the deduction allowed to
23         that interinsurer or reciprocal insurer with respect
24         to the attorney-in-fact under Section 835(b) of the
25         Internal Revenue Code for the taxable year;
26             (S) For taxable years ending on or after December
27         31, 1997, in the case of a Subchapter S corporation, an
28         amount equal to all amounts of income allocable to a
29         shareholder subject to the Personal Property Tax
30         Replacement Income Tax imposed by subsections (c) and
31         (d) of Section 201 of this Act, including amounts
32         allocable to organizations exempt from federal income
33         tax by reason of Section 501(a) of the Internal Revenue
34         Code. This subparagraph (S) is exempt from the

 

 

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1         provisions of Section 250;
2             (T) For taxable years 2001 and thereafter, for the
3         taxable year in which the bonus depreciation deduction
4         (30% of the adjusted basis of the qualified property)
5         is taken on the taxpayer's federal income tax return
6         under subsection (k) of Section 168 of the Internal
7         Revenue Code and for each applicable taxable year
8         thereafter, an amount equal to "x", where:
9                 (1) "y" equals the amount of the depreciation
10             deduction taken for the taxable year on the
11             taxpayer's federal income tax return on property
12             for which the bonus depreciation deduction (30% of
13             the adjusted basis of the qualified property) was
14             taken in any year under subsection (k) of Section
15             168 of the Internal Revenue Code, but not including
16             the bonus depreciation deduction; and
17                 (2) for property on which a bonus depreciation
18             deduction of 30% of the adjusted basis was taken,
19             "x" equals "y" multiplied by 30 and then divided by
20             70 (or "y" multiplied by 0.429), and for property
21             on which a bonus depreciation deduction of 50% of
22             the adjusted basis was taken, "x" equals "y"
23             multiplied by 1.0.
24             The aggregate amount deducted under this
25         subparagraph in all taxable years for any one piece of
26         property may not exceed the amount of the bonus
27         depreciation deduction (30% of the adjusted basis of
28         the qualified property) taken on that property on the
29         taxpayer's federal income tax return under subsection
30         (k) of Section 168 of the Internal Revenue Code;
31             (U) If the taxpayer reports a capital gain or loss
32         on the taxpayer's federal income tax return for the
33         taxable year based on a sale or transfer of property
34         for which the taxpayer was required in any taxable year

 

 

09400HB0709sam003 - 29 - LRB094 08094 BDD 46541 a

1         to make an addition modification under subparagraph
2         (E-10), then an amount equal to that addition
3         modification.
4             The taxpayer is allowed to take the deduction under
5         this subparagraph only once with respect to any one
6         piece of property;
7             (V) The amount of: (i) any interest income (net of
8         the deductions allocable thereto) taken into account
9         for the taxable year with respect to a transaction with
10         a taxpayer that is required to make an addition
11         modification with respect to such transaction under
12         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
13         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
14         the amount of such addition modification and (ii) any
15         income from intangible property (net of the deductions
16         allocable thereto) taken into account for the taxable
17         year with respect to a transaction with a taxpayer that
18         is required to make an addition modification with
19         respect to such transaction under Section
20         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
21         203(d)(2)(D-8), but not to exceed the amount of such
22         addition modification;
23             (W) An amount equal to the interest income taken
24         into account for the taxable year (net of the
25         deductions allocable thereto) with respect to
26         transactions with a foreign person who would be a
27         member of the taxpayer's 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 that
30         person's total business activity, but not to exceed the
31         addition modification required to be made for the same
32         taxable year under Section 203(b)(2)(E-12) for
33         interest paid, accrued, or incurred, directly or
34         indirectly, to the same foreign person; and

 

 

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1             (X) An amount equal to the income from intangible
2         property taken into account for the taxable year (net
3         of the deductions allocable thereto) with respect to
4         transactions with a foreign person who would be a
5         member of the taxpayer's unitary business group but for
6         the fact that the foreign person's business activity
7         outside the United States is 80% or more of that
8         person's total business activity, but not to exceed the
9         addition modification required to be made for the same
10         taxable year under Section 203(b)(2)(E-13) for
11         intangible expenses and costs paid, accrued, or
12         incurred, directly or indirectly, to the same foreign
13         person.
14         (3) Special rule. For purposes of paragraph (2) (A),
15     "gross income" in the case of a life insurance company, for
16     tax years ending on and after December 31, 1994, shall mean
17     the gross investment income for the taxable year.
 
18     (c) Trusts and estates.
19         (1) In general. In the case of a trust or estate, base
20     income means an amount equal to the taxpayer's taxable
21     income for the taxable year as modified by paragraph (2).
22         (2) Modifications. Subject to the provisions of
23     paragraph (3), the taxable income referred to in paragraph
24     (1) shall be modified by adding thereto the sum of the
25     following amounts:
26             (A) An amount equal to all amounts paid or accrued
27         to the taxpayer as interest or dividends during the
28         taxable year to the extent excluded from gross income
29         in the computation of taxable income;
30             (B) In the case of (i) an estate, $600; (ii) a
31         trust which, under its governing instrument, is
32         required to distribute all of its income currently,
33         $300; and (iii) any other trust, $100, but in each such

 

 

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1         case, only to the extent such amount was deducted in
2         the computation of taxable income;
3             (C) An amount equal to the amount of tax imposed by
4         this Act to the extent deducted from gross income in
5         the computation of taxable income for the taxable year;
6             (D) The amount of any net operating loss deduction
7         taken in arriving at taxable income, other than a net
8         operating loss carried forward from a taxable year
9         ending prior to December 31, 1986;
10             (E) For taxable years in which a net operating loss
11         carryback or carryforward from a taxable year ending
12         prior to December 31, 1986 is an element of taxable
13         income under paragraph (1) of subsection (e) or
14         subparagraph (E) of paragraph (2) of subsection (e),
15         the amount by which addition modifications other than
16         those provided by this subparagraph (E) exceeded
17         subtraction modifications in such taxable year, with
18         the following limitations applied in the order that
19         they are listed:
20                 (i) the addition modification relating to the
21             net operating loss carried back or forward to the
22             taxable year from any taxable year ending prior to
23             December 31, 1986 shall be reduced by the amount of
24             addition modification under this subparagraph (E)
25             which related to that net operating loss and which
26             was taken into account in calculating the base
27             income of an earlier taxable year, and
28                 (ii) the addition modification relating to the
29             net operating loss carried back or forward to the
30             taxable year from any taxable year ending prior to
31             December 31, 1986 shall not exceed the amount of
32             such carryback or carryforward;
33             For taxable years in which there is a net operating
34         loss carryback or carryforward from more than one other

 

 

09400HB0709sam003 - 32 - LRB094 08094 BDD 46541 a

1         taxable year ending prior to December 31, 1986, the
2         addition modification provided in this subparagraph
3         (E) shall be the sum of the amounts computed
4         independently under the preceding provisions of this
5         subparagraph (E) for each such taxable year;
6             (F) For taxable years ending on or after January 1,
7         1989, an amount equal to the tax deducted pursuant to
8         Section 164 of the Internal Revenue Code if the trust
9         or estate is claiming the same tax for purposes of the
10         Illinois foreign tax credit under Section 601 of this
11         Act;
12             (G) An amount equal to the amount of the capital
13         gain deduction allowable under the Internal Revenue
14         Code, to the extent deducted from gross income in the
15         computation of taxable income;
16             (G-5) For taxable years ending after December 31,
17         1997, an amount equal to any eligible remediation costs
18         that the trust or estate deducted in computing adjusted
19         gross income and for which the trust or estate claims a
20         credit under subsection (l) of Section 201;
21             (G-10) For taxable years 2001 and thereafter, an
22         amount equal to the bonus depreciation deduction (30%
23         of the adjusted basis of the qualified property) taken
24         on the taxpayer's federal income tax return for the
25         taxable year under subsection (k) of Section 168 of the
26         Internal Revenue Code; and
27             (G-11) If the taxpayer reports a capital gain or
28         loss on the taxpayer's federal income tax return for
29         the taxable year based on a sale or transfer of
30         property for which the taxpayer was required in any
31         taxable year to make an addition modification under
32         subparagraph (G-10), then an amount equal to the
33         aggregate amount of the deductions taken in all taxable
34         years under subparagraph (R) with respect to that

 

 

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

 

 

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1             preponderance of the evidence, both of the
2             following:
3                     (a) the foreign person, during the same
4                 taxable year, paid, accrued, or incurred, the
5                 interest to a person that is not a related
6                 member, and
7                     (b) the transaction giving rise to the
8                 interest expense between the taxpayer and the
9                 foreign person did not have as a principal
10                 purpose the avoidance of Illinois income tax,
11                 and is paid pursuant to a contract or agreement
12                 that reflects an arm's-length interest rate
13                 and terms; or
14                 (iii) the taxpayer can establish, based on
15             clear and convincing evidence, that the interest
16             paid, accrued, or incurred relates to a contract or
17             agreement entered into at arm's-length rates and
18             terms and the principal purpose for the payment is
19             not federal or Illinois tax avoidance; or
20                 (iv) an item of interest paid, accrued, or
21             incurred, directly or indirectly, to a foreign
22             person if the taxpayer establishes by clear and
23             convincing evidence that the adjustments are
24             unreasonable; or if the taxpayer and the Director
25             agree in writing to the application or use of an
26             alternative method of apportionment under Section
27             304(f).
28                 Nothing in this subsection shall preclude the
29             Director from making any other adjustment
30             otherwise allowed under Section 404 of this Act for
31             any tax year beginning after the effective date of
32             this amendment provided such adjustment is made
33             pursuant to regulation adopted by the Department
34             and such regulations provide methods and standards

 

 

09400HB0709sam003 - 35 - LRB094 08094 BDD 46541 a

1             by which the Department will utilize its authority
2             under Section 404 of this Act;
3             (G-13) For taxable years ending on or after
4         December 31, 2004, an amount equal to the amount of
5         intangible expenses and costs otherwise allowed as a
6         deduction in computing base income, and that were paid,
7         accrued, or incurred, directly or indirectly, to a
8         foreign person who would be a member of the same
9         unitary business group but for the fact that the
10         foreign person's business activity outside the United
11         States is 80% or more of that person's total business
12         activity. The addition modification required by this
13         subparagraph shall be reduced to the extent that
14         dividends were included in base income of the unitary
15         group for the same taxable year and received by the
16         taxpayer or by a member of the taxpayer's unitary
17         business group (including amounts included in gross
18         income pursuant to Sections 951 through 964 of the
19         Internal Revenue Code and amounts included in gross
20         income under Section 78 of the Internal Revenue Code)
21         with respect to the stock of the same person to whom
22         the intangible expenses and costs were directly or
23         indirectly paid, incurred, or accrued. The preceding
24         sentence shall not apply to the extent that the same
25         dividends caused a reduction to the addition
26         modification required under Section 203(c)(2)(G-12) of
27         this Act. As used in this subparagraph, the term
28         "intangible expenses and costs" includes: (1)
29         expenses, losses, and costs for or related to the
30         direct or indirect acquisition, use, maintenance or
31         management, ownership, sale, exchange, or any other
32         disposition of intangible property; (2) losses
33         incurred, directly or indirectly, from factoring
34         transactions or discounting transactions; (3) royalty,

 

 

09400HB0709sam003 - 36 - LRB094 08094 BDD 46541 a

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

 

 

09400HB0709sam003 - 37 - LRB094 08094 BDD 46541 a

1             convincing evidence, that the adjustments are
2             unreasonable; or if the taxpayer and the Director
3             agree in writing to the application or use of an
4             alternative method of apportionment under Section
5             304(f);
6                 Nothing in this subsection shall preclude the
7             Director from making any other adjustment
8             otherwise allowed under Section 404 of this Act for
9             any tax year beginning after the effective date of
10             this amendment provided such adjustment is made
11             pursuant to regulation adopted by the Department
12             and such regulations provide methods and standards
13             by which the Department will utilize its authority
14             under Section 404 of this Act;
15     and by deducting from the total so obtained the sum of the
16     following amounts:
17             (H) An amount equal to all amounts included in such
18         total pursuant to the provisions of Sections 402(a),
19         402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
20         Internal Revenue Code or included in such total as
21         distributions under the provisions of any retirement
22         or disability plan for employees of any governmental
23         agency or unit, or retirement payments to retired
24         partners, which payments are excluded in computing net
25         earnings from self employment by Section 1402 of the
26         Internal Revenue Code and regulations adopted pursuant
27         thereto;
28             (I) The valuation limitation amount;
29             (J) An amount equal to the amount of any tax
30         imposed by this Act which was refunded to the taxpayer
31         and included in such total for the taxable year;
32             (K) An amount equal to all amounts included in
33         taxable income as modified by subparagraphs (A), (B),
34         (C), (D), (E), (F) and (G) which are exempt from

 

 

09400HB0709sam003 - 38 - LRB094 08094 BDD 46541 a

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

 

 

09400HB0709sam003 - 39 - LRB094 08094 BDD 46541 a

1         High Impact Business located in Illinois; provided
2         that dividends eligible for the deduction provided in
3         subparagraph (M) of paragraph (2) of this subsection
4         shall not be eligible for the deduction provided under
5         this subparagraph (O);
6             (P) An amount equal to the amount of the deduction
7         used to compute the federal income tax credit for
8         restoration of substantial amounts held under claim of
9         right for the taxable year pursuant to Section 1341 of
10         the Internal Revenue Code of 1986;
11             (Q) For taxable year 1999 and thereafter, an amount
12         equal to the amount of any (i) distributions, to the
13         extent includible in gross income for federal income
14         tax purposes, made to the taxpayer because of his or
15         her status as a victim of persecution for racial or
16         religious reasons by Nazi Germany or any other Axis
17         regime or as an heir of the victim and (ii) items of
18         income, to the extent includible in gross income for
19         federal income tax purposes, attributable to, derived
20         from or in any way related to assets stolen from,
21         hidden from, or otherwise lost to a victim of
22         persecution for racial or religious reasons by Nazi
23         Germany or any other Axis regime immediately prior to,
24         during, and immediately after World War II, including,
25         but not limited to, interest on the proceeds receivable
26         as insurance under policies issued to a victim of
27         persecution for racial or religious reasons by Nazi
28         Germany or any other Axis regime by European insurance
29         companies immediately prior to and during World War II;
30         provided, however, this subtraction from federal
31         adjusted gross income does not apply to assets acquired
32         with such assets or with the proceeds from the sale of
33         such assets; provided, further, this paragraph shall
34         only apply to a taxpayer who was the first recipient of

 

 

09400HB0709sam003 - 40 - LRB094 08094 BDD 46541 a

1         such assets after their recovery and who is a victim of
2         persecution for racial or religious reasons by Nazi
3         Germany or any other Axis regime or as an heir of the
4         victim. The amount of and the eligibility for any
5         public assistance, benefit, or similar entitlement is
6         not affected by the inclusion of items (i) and (ii) of
7         this paragraph in gross income for federal income tax
8         purposes. This paragraph is exempt from the provisions
9         of Section 250;
10             (R) For taxable years 2001 and thereafter, for the
11         taxable year in which the bonus depreciation deduction
12         (30% of the adjusted basis of the qualified property)
13         is taken on the taxpayer's federal income tax return
14         under subsection (k) of Section 168 of the Internal
15         Revenue Code and for each applicable taxable year
16         thereafter, an amount equal to "x", where:
17                 (1) "y" equals the amount of the depreciation
18             deduction taken for the taxable year on the
19             taxpayer's federal income tax return on property
20             for which the bonus depreciation deduction (30% of
21             the adjusted basis of the qualified property) was
22             taken in any year under subsection (k) of Section
23             168 of the Internal Revenue Code, but not including
24             the bonus depreciation deduction; and
25                 (2) for property on which a bonus depreciation
26             deduction of 30% of the adjusted basis was taken,
27             "x" equals "y" multiplied by 30 and then divided by
28             70 (or "y" multiplied by 0.429), and for property
29             on which a bonus depreciation deduction of 50% of
30             the adjusted basis was taken, "x" equals "y"
31             multiplied by 1.0.
32             The aggregate amount deducted under this
33         subparagraph in all taxable years for any one piece of
34         property may not exceed the amount of the bonus

 

 

09400HB0709sam003 - 41 - LRB094 08094 BDD 46541 a

1         depreciation deduction (30% of the adjusted basis of
2         the qualified property) taken on that property on the
3         taxpayer's federal income tax return under subsection
4         (k) of Section 168 of the Internal Revenue Code;
5             (S) If the taxpayer reports a capital gain or loss
6         on the taxpayer's federal income tax return for the
7         taxable year based on a sale or transfer of property
8         for which the taxpayer was required in any taxable year
9         to make an addition modification under subparagraph
10         (G-10), then an amount equal to that addition
11         modification.
12             The taxpayer is allowed to take the deduction under
13         this subparagraph only once with respect to any one
14         piece of property;
15             (T) The amount of (i) any interest income (net of
16         the deductions allocable thereto) taken into account
17         for the taxable year with respect to a transaction with
18         a taxpayer that is required to make an addition
19         modification with respect to such transaction under
20         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
21         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
22         the amount of such addition modification and (ii) any
23         income from intangible property (net of the deductions
24         allocable thereto) taken into account for the taxable
25         year with respect to a transaction with a taxpayer that
26         is required to make an addition modification with
27         respect to such transaction under Section
28         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
29         203(d)(2)(D-8), but not to exceed the amount of such
30         addition modification;
31             (U) An amount equal to the interest income taken
32         into account for the taxable year (net of the
33         deductions allocable thereto) with respect to
34         transactions with a foreign person who would be a

 

 

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

 

 

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1     paragraph (1) shall be modified by adding thereto the sum
2     of the following amounts:
3             (A) An amount equal to all amounts paid or accrued
4         to the taxpayer as interest or dividends during the
5         taxable year to the extent excluded from gross income
6         in the computation of taxable income;
7             (B) An amount equal to the amount of tax imposed by
8         this Act to the extent deducted from gross income for
9         the taxable year;
10             (C) The amount of deductions allowed to the
11         partnership pursuant to Section 707 (c) of the Internal
12         Revenue Code in calculating its taxable income;
13             (D) An amount equal to the amount of the capital
14         gain deduction allowable under the Internal Revenue
15         Code, to the extent deducted from gross income in the
16         computation of taxable income;
17             (D-5) For taxable years 2001 and thereafter, an
18         amount equal to the bonus depreciation deduction (30%
19         of the adjusted basis of the qualified property) taken
20         on the taxpayer's federal income tax return for the
21         taxable year under subsection (k) of Section 168 of the
22         Internal Revenue Code;
23             (D-6) If the taxpayer reports a capital gain or
24         loss on the taxpayer's federal income tax return for
25         the taxable year based on a sale or transfer of
26         property for which the taxpayer was required in any
27         taxable year to make an addition modification under
28         subparagraph (D-5), then an amount equal to the
29         aggregate amount of the deductions taken in all taxable
30         years under subparagraph (O) with respect to that
31         property.
32             The taxpayer is required to make the addition
33         modification under this subparagraph only once with
34         respect to any one piece of property;

 

 

09400HB0709sam003 - 44 - LRB094 08094 BDD 46541 a

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

 

 

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1                 member, and
2                     (b) the transaction giving rise to the
3                 interest expense between the taxpayer and the
4                 foreign person did not have as a principal
5                 purpose the avoidance of Illinois income tax,
6                 and is paid pursuant to a contract or agreement
7                 that reflects an arm's-length interest rate
8                 and terms; or
9                 (iii) the taxpayer can establish, based on
10             clear and convincing evidence, that the interest
11             paid, accrued, or incurred relates to a contract or
12             agreement entered into at arm's-length rates and
13             terms and the principal purpose for the payment is
14             not federal or Illinois tax avoidance; or
15                 (iv) an item of interest paid, accrued, or
16             incurred, directly or indirectly, to a foreign
17             person if the taxpayer establishes by clear and
18             convincing evidence that the adjustments are
19             unreasonable; or if the taxpayer and the Director
20             agree in writing to the application or use of an
21             alternative method of apportionment under Section
22             304(f).
23                 Nothing in this subsection shall preclude the
24             Director from making any other adjustment
25             otherwise allowed under Section 404 of this Act for
26             any tax year beginning after the effective date of
27             this amendment provided such adjustment is made
28             pursuant to regulation adopted by the Department
29             and such regulations provide methods and standards
30             by which the Department will utilize its authority
31             under Section 404 of this Act; and
32             (D-8) For taxable years ending on or after December
33         31, 2004, an amount equal to the amount of intangible
34         expenses and costs otherwise allowed as a deduction in

 

 

09400HB0709sam003 - 46 - LRB094 08094 BDD 46541 a

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

 

 

09400HB0709sam003 - 47 - LRB094 08094 BDD 46541 a

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

 

 

09400HB0709sam003 - 48 - LRB094 08094 BDD 46541 a

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     and by deducting from the total so obtained the following
11     amounts:
12             (E) The valuation limitation amount;
13             (F) An amount equal to the amount of any tax
14         imposed by this Act which was refunded to the taxpayer
15         and included in such total for the taxable year;
16             (G) An amount equal to all amounts included in
17         taxable income as modified by subparagraphs (A), (B),
18         (C) and (D) which are exempt from taxation by this
19         State either by reason of its statutes or Constitution
20         or by reason of the Constitution, treaties or statutes
21         of the United States; provided that, in the case of any
22         statute of this State that exempts income derived from
23         bonds or other obligations from the tax imposed under
24         this Act, the amount exempted shall be the interest net
25         of bond premium amortization;
26             (H) Any income of the partnership which
27         constitutes personal service income as defined in
28         Section 1348 (b) (1) of the Internal Revenue Code (as
29         in effect December 31, 1981) or a reasonable allowance
30         for compensation paid or accrued for services rendered
31         by partners to the partnership, whichever is greater;
32             (I) An amount equal to all amounts of income
33         distributable to an entity subject to the Personal
34         Property Tax Replacement Income Tax imposed by

 

 

09400HB0709sam003 - 49 - LRB094 08094 BDD 46541 a

1         subsections (c) and (d) of Section 201 of this Act
2         including amounts distributable to organizations
3         exempt from federal income tax by reason of Section
4         501(a) of the Internal Revenue Code;
5             (J) With the exception of any amounts subtracted
6         under subparagraph (G), an amount equal to the sum of
7         all amounts disallowed as deductions by (i) Sections
8         171(a) (2), and 265(2) of the Internal Revenue Code of
9         1954, as now or hereafter amended, and all amounts of
10         expenses allocable to interest and disallowed as
11         deductions by Section 265(1) of the Internal Revenue
12         Code, as now or hereafter amended; and (ii) for taxable
13         years ending on or after August 13, 1999, Sections
14         171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
15         Internal Revenue Code; the provisions of this
16         subparagraph are exempt from the provisions of Section
17         250;
18             (K) An amount equal to those dividends included in
19         such total which were paid by a corporation which
20         conducts business operations in an Enterprise Zone or
21         zones created under the Illinois Enterprise Zone Act,
22         enacted by the 82nd General Assembly, and conducts
23         substantially all of its operations in an Enterprise
24         Zone or Zones;
25             (L) An amount equal to any contribution made to a
26         job training project established pursuant to the Real
27         Property Tax Increment Allocation Redevelopment Act;
28             (M) An amount equal to those dividends included in
29         such total that were paid by a corporation that
30         conducts business operations in a federally designated
31         Foreign Trade Zone or Sub-Zone and that is designated a
32         High Impact Business located in Illinois; provided
33         that dividends eligible for the deduction provided in
34         subparagraph (K) of paragraph (2) of this subsection

 

 

09400HB0709sam003 - 50 - LRB094 08094 BDD 46541 a

1         shall not be eligible for the deduction provided under
2         this subparagraph (M);
3             (N) An amount equal to the amount of the deduction
4         used to compute the federal income tax credit for
5         restoration of substantial amounts held under claim of
6         right for the taxable year pursuant to Section 1341 of
7         the Internal Revenue Code of 1986;
8             (O) For taxable years 2001 and thereafter, for the
9         taxable year in which the bonus depreciation deduction
10         (30% of the adjusted basis of the qualified property)
11         is taken on the taxpayer's federal income tax return
12         under subsection (k) of Section 168 of the Internal
13         Revenue Code and for each applicable taxable year
14         thereafter, an amount equal to "x", where:
15                 (1) "y" equals the amount of the depreciation
16             deduction taken for the taxable year on the
17             taxpayer's federal income tax return on property
18             for which the bonus depreciation deduction (30% of
19             the adjusted basis of the qualified property) was
20             taken in any year under subsection (k) of Section
21             168 of the Internal Revenue Code, but not including
22             the bonus depreciation deduction; and
23                 (2) for property on which a bonus depreciation
24             deduction of 30% of the adjusted basis was taken,
25             "x" equals "y" multiplied by 30 and then divided by
26             70 (or "y" multiplied by 0.429), and for property
27             on which a bonus depreciation deduction of 50% of
28             the adjusted basis was taken, "x" equals "y"
29             multiplied by 1.0.
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

 

 

09400HB0709sam003 - 51 - LRB094 08094 BDD 46541 a

1         taxpayer's federal income tax return under subsection
2         (k) of Section 168 of the Internal Revenue Code;
3             (P) If the taxpayer reports a capital gain or loss
4         on the taxpayer's federal income tax return for the
5         taxable year based on a sale or transfer of property
6         for which the taxpayer was required in any taxable year
7         to make an addition modification under subparagraph
8         (D-5), then an amount equal to that addition
9         modification.
10             The taxpayer is allowed to take the deduction under
11         this subparagraph only once with respect to any one
12         piece of property;
13             (Q) The amount of (i) any interest income (net of
14         the deductions allocable thereto) taken into account
15         for the taxable year with respect to a transaction with
16         a taxpayer that is required to make an addition
17         modification with respect to such transaction under
18         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
19         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
20         the amount of such addition modification and (ii) any
21         income from intangible property (net of the deductions
22         allocable thereto) taken into account for the taxable
23         year with respect to a transaction with a taxpayer that
24         is required to make an addition modification with
25         respect to such transaction under Section
26         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
27         203(d)(2)(D-8), but not to exceed the amount of such
28         addition modification;
29             (R) An amount equal to the interest income taken
30         into account for the taxable year (net of the
31         deductions allocable thereto) with respect to
32         transactions with a foreign person who would be a
33         member of the taxpayer's unitary business group but for
34         the fact that the foreign person's business activity

 

 

09400HB0709sam003 - 52 - LRB094 08094 BDD 46541 a

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

 

 

09400HB0709sam003 - 53 - LRB094 08094 BDD 46541 a

1     of addition modifications over subtraction modifications
2     for the taxable year. For taxable years ending prior to
3     December 31, 1986, taxable income may never be an amount in
4     excess of the net operating loss for the taxable year as
5     defined in subsections (c) and (d) of Section 172 of the
6     Internal Revenue Code, provided that when taxable income of
7     a corporation (other than a Subchapter S corporation),
8     trust, or estate is less than zero and addition
9     modifications, other than those provided by subparagraph
10     (E) of paragraph (2) of subsection (b) for corporations or
11     subparagraph (E) of paragraph (2) of subsection (c) for
12     trusts and estates, exceed subtraction modifications, an
13     addition modification must be made under those
14     subparagraphs for any other taxable year to which the
15     taxable income less than zero (net operating loss) is
16     applied under Section 172 of the Internal Revenue Code or
17     under subparagraph (E) of paragraph (2) of this subsection
18     (e) applied in conjunction with Section 172 of the Internal
19     Revenue Code.
20         (2) Special rule. For purposes of paragraph (1) of this
21     subsection, the taxable income properly reportable for
22     federal income tax purposes shall mean:
23             (A) Certain life insurance companies. In the case
24         of a life insurance company subject to the tax imposed
25         by Section 801 of the Internal Revenue Code, life
26         insurance company taxable income, plus the amount of
27         distribution from pre-1984 policyholder surplus
28         accounts as calculated under Section 815a of the
29         Internal Revenue Code;
30             (B) Certain other insurance companies. In the case
31         of mutual insurance companies subject to the tax
32         imposed by Section 831 of the Internal Revenue Code,
33         insurance company taxable income;
34             (C) Regulated investment companies. In the case of

 

 

09400HB0709sam003 - 54 - LRB094 08094 BDD 46541 a

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

 

 

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

 

 

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

 

 

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1         full calendar months in the taxpayer's entire holding
2         period for the property.
3             (C) The Department shall prescribe such
4         regulations as may be necessary to carry out the
5         purposes of this paragraph.
 
6     (g) Double deductions. Unless specifically provided
7 otherwise, nothing in this Section shall permit the same item
8 to be deducted more than once.
 
9     (h) Legislative intention. Except as expressly provided by
10 this Section there shall be no modifications or limitations on
11 the amounts of income, gain, loss or deduction taken into
12 account in determining gross income, adjusted gross income or
13 taxable income for federal income tax purposes for the taxable
14 year, or in the amount of such items entering into the
15 computation of base income and net income under this Act for
16 such taxable year, whether in respect of property values as of
17 August 1, 1969 or otherwise.
18 (Source: P.A. 92-16, eff. 6-28-01; 92-244, eff. 8-3-01; 92-439,
19 eff. 8-17-01; 92-603, eff. 6-28-02; 92-626, eff. 7-11-02;
20 92-651, eff. 7-11-02; 92-846, eff. 8-23-02; 93-812, eff.
21 7-26-04; 93-840, eff. 7-30-04; revised 10-12-04.)
 
22     Section 99. Effective date. This Act takes effect upon
23 becoming law.".