102ND GENERAL ASSEMBLY
State of Illinois
2021 and 2022
HB5228

 

Introduced 1/31/2022, by Rep. Natalie A. Manley

 

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

    Amends the Illinois Income Tax Act. Provides that, when calculating the taxpayer's base income, the taxpayer's federal adjusted gross income shall be modified to exclude the portion of the income or loss received from a trade or business conducted within and without Illinois or from a pass-through entity conducting business within and without Illinois that is not derived from or connected with Illinois sources. Effective immediately.


LRB102 23899 HLH 33097 b

 

 

A BILL FOR

 

HB5228LRB102 23899 HLH 33097 b

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

 

 

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1        this Act to the extent deducted from gross income in
2        the computation of adjusted gross income for the
3        taxable year;
4            (C) An amount equal to the amount received during
5        the taxable year as a recovery or refund of real
6        property taxes paid with respect to the taxpayer's
7        principal residence under the Revenue Act of 1939 and
8        for which a deduction was previously taken under
9        subparagraph (L) of this paragraph (2) prior to July
10        1, 1991, the retrospective application date of Article
11        4 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
24        on the account in the taxable year of a withdrawal
25        pursuant to subsection (b) of Section 20 of the
26        Medical Care Savings Account Act or subsection (b) of

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1        incurred, directly or indirectly, (i) for taxable
2        years ending on or after December 31, 2004, to a
3        foreign person who would be a member of the same
4        unitary business group but for the fact that the
5        foreign person's business activity outside the United
6        States is 80% or more of that person's total business
7        activity and (ii) for taxable years ending on or after
8        December 31, 2008, to a person who would be a member of
9        the same unitary business group but for the fact that
10        the person is prohibited under Section 1501(a)(27)
11        from being included in the unitary business group
12        because he or she is ordinarily required to apportion
13        business income under different subsections of Section
14        304. The addition modification required by this
15        subparagraph shall be reduced to the extent that
16        dividends were included in base income of the unitary
17        group for the same taxable year and received by the
18        taxpayer or by a member of the taxpayer's unitary
19        business group (including amounts included in gross
20        income under Sections 951 through 964 of the Internal
21        Revenue Code and amounts included in gross income
22        under Section 78 of the Internal Revenue Code) with
23        respect to the stock of the same person to whom the
24        intangible expenses and costs were directly or
25        indirectly paid, incurred, or accrued. The preceding
26        sentence does not apply to the extent that the same

 

 

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

 

 

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

 

 

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

 

 

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1        stock of the same person to whom the premiums and costs
2        were directly or indirectly paid, incurred, or
3        accrued. The preceding sentence does not apply to the
4        extent that the same dividends caused a reduction to
5        the addition modification required under Section
6        203(a)(2)(D-17) or Section 203(a)(2)(D-18) of this
7        Act;
8            (D-20) For taxable years beginning on or after
9        January 1, 2002 and ending on or before December 31,
10        2006, in the case of a distribution from a qualified
11        tuition program under Section 529 of the Internal
12        Revenue Code, other than (i) a distribution from a
13        College Savings Pool created under Section 16.5 of the
14        State Treasurer Act or (ii) a distribution from the
15        Illinois Prepaid Tuition Trust Fund, an amount equal
16        to the amount excluded from gross income under Section
17        529(c)(3)(B). For taxable years beginning on or after
18        January 1, 2007, in the case of a distribution from a
19        qualified tuition program under Section 529 of the
20        Internal Revenue Code, other than (i) a distribution
21        from a College Savings Pool created under Section 16.5
22        of the State Treasurer Act, (ii) a distribution from
23        the Illinois Prepaid Tuition Trust Fund, or (iii) a
24        distribution from a qualified tuition program under
25        Section 529 of the Internal Revenue Code that (I)
26        adopts and determines that its offering materials

 

 

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

 

 

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1        a qualified ABLE program created under Section 16.6 of
2        the State Treasurer Act, an amount equal to the amount
3        excluded from gross income under Section 529A(c)(1)(B)
4        of the Internal Revenue Code;
5            (D-21) For taxable years beginning on or after
6        January 1, 2007, in the case of transfer of moneys from
7        a qualified tuition program under Section 529 of the
8        Internal Revenue Code that is administered by the
9        State to an out-of-state program, an amount equal to
10        the amount of moneys previously deducted from base
11        income under subsection (a)(2)(Y) of this Section;
12            (D-21.5) For taxable years beginning on or after
13        January 1, 2018, in the case of the transfer of moneys
14        from a qualified tuition program under Section 529 or
15        a qualified ABLE program under Section 529A of the
16        Internal Revenue Code that is administered by this
17        State to an ABLE account established under an
18        out-of-state ABLE account program, an amount equal to
19        the contribution component of the transferred amount
20        that was previously deducted from base income under
21        subsection (a)(2)(Y) or subsection (a)(2)(HH) of this
22        Section;
23            (D-22) For taxable years beginning on or after
24        January 1, 2009, and prior to January 1, 2018, in the
25        case of a nonqualified withdrawal or refund of moneys
26        from a qualified tuition program under Section 529 of

 

 

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1        the Internal Revenue Code administered by the State
2        that is not used for qualified expenses at an eligible
3        education institution, an amount equal to the
4        contribution component of the nonqualified withdrawal
5        or refund that was previously deducted from base
6        income under subsection (a)(2)(y) of this Section,
7        provided that the withdrawal or refund did not result
8        from the beneficiary's death or disability. For
9        taxable years beginning on or after January 1, 2018:
10        (1) in the case of a nonqualified withdrawal or
11        refund, as defined under Section 16.5 of the State
12        Treasurer Act, of moneys from a qualified tuition
13        program under Section 529 of the Internal Revenue Code
14        administered by the State, an amount equal to the
15        contribution component of the nonqualified withdrawal
16        or refund that was previously deducted from base
17        income under subsection (a)(2)(Y) of this Section, and
18        (2) in the case of a nonqualified withdrawal or refund
19        from a qualified ABLE program under Section 529A of
20        the Internal Revenue Code administered by the State
21        that is not used for qualified disability expenses, an
22        amount equal to the contribution component of the
23        nonqualified withdrawal or refund that was previously
24        deducted from base income under subsection (a)(2)(HH)
25        of this Section;
26            (D-23) An amount equal to the credit allowable to

 

 

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1        the taxpayer under Section 218(a) of this Act,
2        determined without regard to Section 218(c) of this
3        Act;
4            (D-24) For taxable years ending on or after
5        December 31, 2017, an amount equal to the deduction
6        allowed under Section 199 of the Internal Revenue Code
7        for the taxable year;
8            (D-25) In the case of a resident, an amount equal
9        to the amount of tax for which a credit is allowed
10        pursuant to Section 201(p)(7) of this Act;
11    and by deducting from the total so obtained the sum of the
12    following amounts:
13            (E) For taxable years ending before December 31,
14        2001, any amount included in such total in respect of
15        any compensation (including but not limited to any
16        compensation paid or accrued to a serviceman while a
17        prisoner of war or missing in action) paid to a
18        resident by reason of being on active duty in the Armed
19        Forces of the United States and in respect of any
20        compensation paid or accrued to a resident who as a
21        governmental employee was a prisoner of war or missing
22        in action, and in respect of any compensation paid to a
23        resident in 1971 or thereafter for annual training
24        performed pursuant to Sections 502 and 503, Title 32,
25        United States Code as a member of the Illinois
26        National Guard or, beginning with taxable years ending

 

 

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

 

 

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1        computing net earnings from self employment by Section
2        1402 of the Internal Revenue Code and regulations
3        adopted pursuant thereto;
4            (G) The valuation limitation amount;
5            (H) An amount equal to the amount of any tax
6        imposed by this Act which was refunded to the taxpayer
7        and included in such total for the taxable year;
8            (I) An amount equal to all amounts included in
9        such total pursuant to the provisions of Section 111
10        of the Internal Revenue Code as a recovery of items
11        previously deducted from adjusted gross income in the
12        computation of taxable income;
13            (J) An amount equal to those dividends included in
14        such total which were paid by a corporation which
15        conducts business operations in a River Edge
16        Redevelopment Zone or zones created under the River
17        Edge Redevelopment Zone Act, and conducts
18        substantially all of its operations in a River Edge
19        Redevelopment Zone or zones. This subparagraph (J) is
20        exempt from the provisions of Section 250;
21            (K) An amount equal to those dividends included in
22        such total that were paid by a corporation that
23        conducts business operations in a federally designated
24        Foreign Trade Zone or Sub-Zone and that is designated
25        a High Impact Business located in Illinois; provided
26        that dividends eligible for the deduction provided in

 

 

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1        subparagraph (J) of paragraph (2) of this subsection
2        shall not be eligible for the deduction provided under
3        this subparagraph (K);
4            (L) For taxable years ending after December 31,
5        1983, an amount equal to all social security benefits
6        and railroad retirement benefits included in such
7        total pursuant to Sections 72(r) and 86 of the
8        Internal Revenue Code;
9            (M) With the exception of any amounts subtracted
10        under subparagraph (N), 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        and all amounts of expenses allocable to interest and
14        disallowed as deductions by Section 265(a)(1) of the
15        Internal Revenue Code; and (ii) for taxable years
16        ending on or after August 13, 1999, Sections
17        171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
18        Internal Revenue Code, plus, for taxable years ending
19        on or after December 31, 2011, Section 45G(e)(3) of
20        the Internal Revenue Code and, for taxable years
21        ending on or after December 31, 2008, any amount
22        included in gross income under Section 87 of the
23        Internal Revenue Code; the provisions of this
24        subparagraph are exempt from the provisions of Section
25        250;
26            (N) An amount equal to all amounts included in

 

 

HB5228- 19 -LRB102 23899 HLH 33097 b

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

 

 

HB5228- 20 -LRB102 23899 HLH 33097 b

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

 

 

HB5228- 21 -LRB102 23899 HLH 33097 b

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

 

 

HB5228- 22 -LRB102 23899 HLH 33097 b

1        from amounts converted from a regular IRA to a Roth
2        IRA. This paragraph is exempt from the provisions of
3        Section 250;
4            (X) For taxable year 1999 and thereafter, an
5        amount equal to the amount of any (i) distributions,
6        to the extent includible in gross income for federal
7        income tax purposes, made to the taxpayer because of
8        his or her status as a victim of persecution for racial
9        or religious reasons by Nazi Germany or any other Axis
10        regime or as an heir of the victim and (ii) items of
11        income, to the extent includible in gross income for
12        federal income tax purposes, attributable to, derived
13        from or in any way related to assets stolen from,
14        hidden from, or otherwise lost to a victim of
15        persecution for racial or religious reasons by Nazi
16        Germany or any other Axis regime immediately prior to,
17        during, and immediately after World War II, including,
18        but not limited to, interest on the proceeds
19        receivable as insurance under policies issued to a
20        victim of persecution for racial or religious reasons
21        by Nazi Germany or any other Axis regime by European
22        insurance companies immediately prior to and during
23        World War II; provided, however, this subtraction from
24        federal adjusted gross income does not apply to assets
25        acquired with such assets or with the proceeds from
26        the sale of such assets; provided, further, this

 

 

HB5228- 23 -LRB102 23899 HLH 33097 b

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

 

 

HB5228- 24 -LRB102 23899 HLH 33097 b

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

 

 

HB5228- 25 -LRB102 23899 HLH 33097 b

1                basis was taken, "x" equals "y" multiplied by
2                30 and then divided by 70 (or "y" multiplied
3                by 0.429);
4                    (ii) for property on which a bonus
5                depreciation deduction of 50% of the adjusted
6                basis was taken, "x" equals "y" multiplied by
7                1.0;
8                    (iii) for property on which a bonus
9                depreciation deduction of 100% of the adjusted
10                basis was taken in a taxable year ending on or
11                after December 31, 2021, "x" equals the
12                depreciation deduction that would be allowed
13                on that property if the taxpayer had made the
14                election under Section 168(k)(7) of the
15                Internal Revenue Code to not claim bonus
16                depreciation deprecation on that property; and
17                    (iv) for property on which a bonus
18                depreciation deduction of a percentage other
19                than 30%, 50% or 100% of the adjusted basis
20                was taken in a taxable year ending on or after
21                December 31, 2021, "x" equals "y" multiplied
22                by 100 times the percentage bonus depreciation
23                on the property (that is, 100(bonus%)) and
24                then divided by 100 times 1 minus the
25                percentage bonus depreciation on the property
26                (that is, 100(1–bonus%)).

 

 

HB5228- 26 -LRB102 23899 HLH 33097 b

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

 

 

HB5228- 27 -LRB102 23899 HLH 33097 b

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

 

 

HB5228- 28 -LRB102 23899 HLH 33097 b

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

 

 

HB5228- 29 -LRB102 23899 HLH 33097 b

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

 

 

HB5228- 30 -LRB102 23899 HLH 33097 b

1        (GG), the insurer to which the premiums were paid must
2        add back to income the amount subtracted by the
3        taxpayer pursuant to this subparagraph (GG). This
4        subparagraph (GG) is exempt from the provisions of
5        Section 250; and
6            (HH) For taxable years beginning on or after
7        January 1, 2018 and prior to January 1, 2023, a maximum
8        of $10,000 contributed in the taxable year to a
9        qualified ABLE account under Section 16.6 of the State
10        Treasurer Act, except that amounts excluded from gross
11        income under Section 529(c)(3)(C)(i) or Section
12        529A(c)(1)(C) of the Internal Revenue Code shall not
13        be considered moneys contributed under this
14        subparagraph (HH). For purposes of this subparagraph
15        (HH), contributions made by an employer on behalf of
16        an employee, or matching contributions made by an
17        employee, shall be treated as made by the employee.
 
18    (b) Corporations.
19        (1) In general. In the case of a corporation, 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. The taxable income referred to in
23    paragraph (1) shall be modified by adding thereto the sum
24    of the following amounts:
25            (A) An amount equal to all amounts paid or accrued

 

 

HB5228- 31 -LRB102 23899 HLH 33097 b

1        to the taxpayer as interest and all distributions
2        received from regulated investment companies during
3        the taxable year to the extent excluded from gross
4        income in the computation of taxable income;
5            (B) An amount equal to the amount of tax imposed by
6        this Act to the extent deducted from gross income in
7        the computation of taxable income for the taxable
8        year;
9            (C) In the case of a regulated investment company,
10        an amount equal to the excess of (i) the net long-term
11        capital gain for the taxable year, over (ii) the
12        amount of the capital gain dividends designated as
13        such in accordance with Section 852(b)(3)(C) of the
14        Internal Revenue Code and any amount designated under
15        Section 852(b)(3)(D) of the Internal Revenue Code,
16        attributable to the taxable year (this amendatory Act
17        of 1995 (Public Act 89-89) is declarative of existing
18        law and is not a new enactment);
19            (D) The amount of any net operating loss deduction
20        taken in arriving at taxable income, other than a net
21        operating loss carried forward from a taxable year
22        ending prior to December 31, 1986;
23            (E) For taxable years in which a net operating
24        loss carryback or carryforward from a taxable year
25        ending prior to December 31, 1986 is an element of
26        taxable income under paragraph (1) of subsection (e)

 

 

HB5228- 32 -LRB102 23899 HLH 33097 b

1        or subparagraph (E) of paragraph (2) of subsection
2        (e), the amount by which addition modifications other
3        than those provided by this subparagraph (E) exceeded
4        subtraction modifications in such earlier taxable
5        year, with the following limitations applied in the
6        order that they are listed:
7                (i) the addition modification relating to the
8            net operating loss carried back or forward to the
9            taxable year from any taxable year ending prior to
10            December 31, 1986 shall be reduced by the amount
11            of addition modification under this subparagraph
12            (E) which related to that net operating loss and
13            which was taken into account in calculating the
14            base income of an earlier taxable year, and
15                (ii) the addition modification relating to the
16            net operating loss carried back or forward to the
17            taxable year from any taxable year ending prior to
18            December 31, 1986 shall not exceed the amount of
19            such carryback or carryforward;
20            For taxable years in which there is a net
21        operating loss carryback or carryforward from more
22        than one other taxable year ending prior to December
23        31, 1986, the addition modification provided in this
24        subparagraph (E) shall be the sum of the amounts
25        computed independently under the preceding provisions
26        of this subparagraph (E) for each such taxable year;

 

 

HB5228- 33 -LRB102 23899 HLH 33097 b

1            (E-5) For taxable years ending after December 31,
2        1997, an amount equal to any eligible remediation
3        costs that the corporation deducted in computing
4        adjusted gross income and for which the corporation
5        claims a credit under subsection (l) of Section 201;
6            (E-10) For taxable years 2001 and thereafter, an
7        amount equal to the bonus depreciation deduction taken
8        on the taxpayer's federal income tax return for the
9        taxable year under subsection (k) of Section 168 of
10        the Internal Revenue Code;
11            (E-11) If the taxpayer sells, transfers, abandons,
12        or otherwise disposes of property for which the
13        taxpayer was required in any taxable year to make an
14        addition modification under subparagraph (E-10), then
15        an amount equal to the aggregate amount of the
16        deductions taken in all taxable years under
17        subparagraph (T) with respect to that property.
18            If the taxpayer continues to own property through
19        the last day of the last tax year for which a
20        subtraction is allowed with respect to that property
21        under subparagraph (T) and for which the taxpayer was
22        allowed in any taxable year to make a subtraction
23        modification under subparagraph (T), then an amount
24        equal to that subtraction modification.
25            The taxpayer is required to make the addition
26        modification under this subparagraph only once with

 

 

HB5228- 34 -LRB102 23899 HLH 33097 b

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

 

 

HB5228- 35 -LRB102 23899 HLH 33097 b

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

 

 

HB5228- 36 -LRB102 23899 HLH 33097 b

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

 

 

HB5228- 37 -LRB102 23899 HLH 33097 b

1        foreign person who would be a member of the same
2        unitary business group but for the fact that the
3        foreign person's business activity outside the United
4        States is 80% or more of that person's total business
5        activity and (ii) for taxable years ending on or after
6        December 31, 2008, to a person who would be a member of
7        the same unitary business group but for the fact that
8        the person is prohibited under Section 1501(a)(27)
9        from being included in the unitary business group
10        because he or she is ordinarily required to apportion
11        business income under different subsections of Section
12        304. 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(b)(2)(E-12) of

 

 

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

 

 

HB5228- 39 -LRB102 23899 HLH 33097 b

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

 

 

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

 

 

HB5228- 41 -LRB102 23899 HLH 33097 b

1        accrued. The preceding sentence does not apply to the
2        extent that the same dividends caused a reduction to
3        the addition modification required under Section
4        203(b)(2)(E-12) or Section 203(b)(2)(E-13) of this
5        Act;
6            (E-15) For taxable years beginning after December
7        31, 2008, any deduction for dividends paid by a
8        captive real estate investment trust that is allowed
9        to a real estate investment trust under Section
10        857(b)(2)(B) of the Internal Revenue Code for
11        dividends paid;
12            (E-16) An amount equal to the credit allowable to
13        the taxpayer under Section 218(a) of this Act,
14        determined without regard to Section 218(c) of this
15        Act;
16            (E-17) For taxable years ending on or after
17        December 31, 2017, an amount equal to the deduction
18        allowed under Section 199 of the Internal Revenue Code
19        for the taxable year;
20            (E-18) for taxable years beginning after December
21        31, 2018, an amount equal to the deduction allowed
22        under Section 250(a)(1)(A) of the Internal Revenue
23        Code for the taxable year;
24            (E-19) for taxable years ending on or after June
25        30, 2021, an amount equal to the deduction allowed
26        under Section 250(a)(1)(B)(i) of the Internal Revenue

 

 

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1        Code for the taxable year;
2            (E-20) for taxable years ending on or after June
3        30, 2021, an amount equal to the deduction allowed
4        under Sections 243(e) and 245A(a) of the Internal
5        Revenue Code for the taxable year.
6    and by deducting from the total so obtained the sum of the
7    following amounts:
8            (F) An amount equal to the amount of any tax
9        imposed by this Act which was refunded to the taxpayer
10        and included in such total for the taxable year;
11            (G) An amount equal to any amount included in such
12        total under Section 78 of the Internal Revenue Code;
13            (H) In the case of a regulated investment company,
14        an amount equal to the amount of exempt interest
15        dividends as defined in subsection (b)(5) of Section
16        852 of the Internal Revenue Code, paid to shareholders
17        for the taxable year;
18            (I) With the exception of any amounts subtracted
19        under subparagraph (J), an amount equal to the sum of
20        all amounts disallowed as deductions by (i) Sections
21        171(a)(2) and 265(a)(2) and amounts disallowed as
22        interest expense by Section 291(a)(3) of the Internal
23        Revenue Code, and all amounts of expenses allocable to
24        interest and disallowed as deductions by Section
25        265(a)(1) of the Internal Revenue Code; and (ii) for
26        taxable years ending on or after August 13, 1999,

 

 

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

 

 

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1            (K) An amount equal to those dividends included in
2        such total which were paid by a corporation which
3        conducts business operations in a River Edge
4        Redevelopment Zone or zones created under the River
5        Edge Redevelopment Zone Act and conducts substantially
6        all of its operations in a River Edge Redevelopment
7        Zone or zones. This subparagraph (K) is exempt from
8        the provisions of Section 250;
9            (L) An amount equal to those dividends included in
10        such total that were paid by a corporation that
11        conducts business operations in a federally designated
12        Foreign Trade Zone or Sub-Zone and that is designated
13        a High Impact Business located in Illinois; provided
14        that dividends eligible for the deduction provided in
15        subparagraph (K) of paragraph 2 of this subsection
16        shall not be eligible for the deduction provided under
17        this subparagraph (L);
18            (M) For any taxpayer that is a financial
19        organization within the meaning of Section 304(c) of
20        this Act, an amount included in such total as interest
21        income from a loan or loans made by such taxpayer to a
22        borrower, to the extent that such a loan is secured by
23        property which is eligible for the River Edge
24        Redevelopment Zone Investment Credit. To determine the
25        portion of a loan or loans that is secured by property
26        eligible for a Section 201(f) investment credit to the

 

 

HB5228- 45 -LRB102 23899 HLH 33097 b

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

 

 

HB5228- 46 -LRB102 23899 HLH 33097 b

1        investment credit property which secures the loan or
2        loans, using for this purpose the original basis of
3        such property on the date that it was placed in service
4        in a federally designated Foreign Trade Zone or
5        Sub-Zone located in Illinois. No taxpayer that is
6        eligible for the deduction provided in subparagraph
7        (M) of paragraph (2) of this subsection shall be
8        eligible for the deduction provided under this
9        subparagraph (M-1). The subtraction modification
10        available to taxpayers in any year under this
11        subsection shall be that portion of the total interest
12        paid by the borrower with respect to such loan
13        attributable to the eligible property as calculated
14        under the previous sentence;
15            (N) Two times any contribution made during the
16        taxable year to a designated zone organization to the
17        extent that the contribution (i) qualifies as a
18        charitable contribution under subsection (c) of
19        Section 170 of the Internal Revenue Code and (ii)
20        must, by its terms, be used for a project approved by
21        the Department of Commerce and Economic Opportunity
22        under Section 11 of the Illinois Enterprise Zone Act
23        or under Section 10-10 of the River Edge Redevelopment
24        Zone Act. This subparagraph (N) is exempt from the
25        provisions of Section 250;
26            (O) An amount equal to: (i) 85% for taxable years

 

 

HB5228- 47 -LRB102 23899 HLH 33097 b

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

 

 

HB5228- 48 -LRB102 23899 HLH 33097 b

1        would but for the provisions of Section 1504(b)(3) of
2        the Internal Revenue Code be treated as a member of the
3        affiliated group which includes the dividend
4        recipient, exceed the amount of the modification
5        provided under subparagraph (G) of paragraph (2) of
6        this subsection (b) which is related to such
7        dividends. For taxable years ending on or after June
8        30, 2021, (i) for purposes of this subparagraph, the
9        term "dividend" does not include any amount treated as
10        a dividend under Section 1248 of the Internal Revenue
11        Code, and (ii) this subparagraph shall not apply to
12        dividends for which a deduction is allowed under
13        Section 245(a) of the Internal Revenue Code. This
14        subparagraph (O) is exempt from the provisions of
15        Section 250 of this Act;
16            (P) An amount equal to any contribution made to a
17        job training project established pursuant to the Tax
18        Increment Allocation Redevelopment Act;
19            (Q) An amount equal to the amount of the deduction
20        used to compute the federal income tax credit for
21        restoration of substantial amounts held under claim of
22        right for the taxable year pursuant to Section 1341 of
23        the Internal Revenue Code;
24            (R) On and after July 20, 1999, in the case of an
25        attorney-in-fact with respect to whom an interinsurer
26        or a reciprocal insurer has made the election under

 

 

HB5228- 49 -LRB102 23899 HLH 33097 b

1        Section 835 of the Internal Revenue Code, 26 U.S.C.
2        835, an amount equal to the excess, if any, of the
3        amounts paid or incurred by that interinsurer or
4        reciprocal insurer in the taxable year to the
5        attorney-in-fact over the deduction allowed to that
6        interinsurer or reciprocal insurer with respect to the
7        attorney-in-fact under Section 835(b) of the Internal
8        Revenue Code for the taxable year; the provisions of
9        this subparagraph are exempt from the provisions of
10        Section 250;
11            (S) For taxable years ending on or after December
12        31, 1997, in the case of a Subchapter S corporation, an
13        amount equal to all amounts of income allocable to a
14        shareholder subject to the Personal Property Tax
15        Replacement Income Tax imposed by subsections (c) and
16        (d) of Section 201 of this Act, including amounts
17        allocable to organizations exempt from federal income
18        tax by reason of Section 501(a) of the Internal
19        Revenue Code. This subparagraph (S) is exempt from the
20        provisions of Section 250;
21            (T) For taxable years 2001 and thereafter, for the
22        taxable year in which the bonus depreciation deduction
23        is taken on the taxpayer's federal income tax return
24        under subsection (k) of Section 168 of the Internal
25        Revenue Code and for each applicable taxable year
26        thereafter, an amount equal to "x", where:

 

 

HB5228- 50 -LRB102 23899 HLH 33097 b

1                (1) "y" equals the amount of the depreciation
2            deduction taken for the taxable year on the
3            taxpayer's federal income tax return on property
4            for which the bonus depreciation deduction was
5            taken in any year under subsection (k) of Section
6            168 of the Internal Revenue Code, but not
7            including the bonus depreciation deduction;
8                (2) for taxable years ending on or before
9            December 31, 2005, "x" equals "y" multiplied by 30
10            and then divided by 70 (or "y" multiplied by
11            0.429); and
12                (3) for taxable years ending after December
13            31, 2005:
14                    (i) for property on which a bonus
15                depreciation deduction of 30% of the adjusted
16                basis was taken, "x" equals "y" multiplied by
17                30 and then divided by 70 (or "y" multiplied
18                by 0.429);
19                    (ii) for property on which a bonus
20                depreciation deduction of 50% of the adjusted
21                basis was taken, "x" equals "y" multiplied by
22                1.0;
23                    (iii) for property on which a bonus
24                depreciation deduction of 100% of the adjusted
25                basis was taken in a taxable year ending on or
26                after December 31, 2021, "x" equals the

 

 

HB5228- 51 -LRB102 23899 HLH 33097 b

1                depreciation deduction that would be allowed
2                on that property if the taxpayer had made the
3                election under Section 168(k)(7) of the
4                Internal Revenue Code to not claim bonus
5                depreciation deprecation on that property; and
6                    (iv) for property on which a bonus
7                depreciation deduction of a percentage other
8                than 30%, 50% or 100% of the adjusted basis
9                was taken in a taxable year ending on or after
10                December 31, 2021, "x" equals "y" multiplied
11                by 100 times the percentage bonus depreciation
12                on the property (that is, 100(bonus%)) and
13                then divided by 100 times 1 minus the
14                percentage bonus depreciation on the property
15                (that is, 100(1–bonus%)).
16            The aggregate amount deducted under this
17        subparagraph in all taxable years for any one piece of
18        property may not exceed the amount of the bonus
19        depreciation deduction taken on that property on the
20        taxpayer's federal income tax return under subsection
21        (k) of Section 168 of the Internal Revenue Code. This
22        subparagraph (T) is exempt from the provisions of
23        Section 250;
24            (U) If the taxpayer sells, transfers, abandons, or
25        otherwise disposes of property for which the taxpayer
26        was required in any taxable year to make an addition

 

 

HB5228- 52 -LRB102 23899 HLH 33097 b

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

 

 

HB5228- 53 -LRB102 23899 HLH 33097 b

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

 

 

HB5228- 54 -LRB102 23899 HLH 33097 b

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

 

 

HB5228- 55 -LRB102 23899 HLH 33097 b

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

 

 

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1        provisions of Section 250.
2        (3) Special rule. For purposes of paragraph (2)(A),
3    "gross income" in the case of a life insurance company,
4    for tax years ending on and after December 31, 1994, and
5    prior to December 31, 2011, shall mean the gross
6    investment income for the taxable year and, for tax years
7    ending on or after December 31, 2011, shall mean all
8    amounts included in life insurance gross income under
9    Section 803(a)(3) of the Internal Revenue Code.
 
10    (c) Trusts and estates.
11        (1) In general. In the case of a trust or estate, base
12    income means an amount equal to the taxpayer's taxable
13    income for the taxable year as modified by paragraph (2).
14        (2) Modifications. Subject to the provisions of
15    paragraph (3), the taxable income referred to in paragraph
16    (1) shall be modified by adding thereto the sum of the
17    following amounts:
18            (A) An amount equal to all amounts paid or accrued
19        to the taxpayer as interest or dividends during the
20        taxable year to the extent excluded from gross income
21        in the computation of taxable income;
22            (B) In the case of (i) an estate, $600; (ii) a
23        trust which, under its governing instrument, is
24        required to distribute all of its income currently,
25        $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
6        year;
7            (D) The amount of any net operating loss deduction
8        taken in arriving at taxable income, other than a net
9        operating loss carried forward from a taxable year
10        ending prior to December 31, 1986;
11            (E) For taxable years in which a net operating
12        loss carryback or carryforward from a taxable year
13        ending prior to December 31, 1986 is an element of
14        taxable income under paragraph (1) of subsection (e)
15        or subparagraph (E) of paragraph (2) of subsection
16        (e), the amount by which addition modifications other
17        than those provided by this subparagraph (E) exceeded
18        subtraction modifications in such taxable year, with
19        the following limitations applied in the order that
20        they are listed:
21                (i) the addition modification relating to the
22            net operating loss carried back or forward to the
23            taxable year from any taxable year ending prior to
24            December 31, 1986 shall be reduced by the amount
25            of addition modification under this subparagraph
26            (E) which related to that net operating loss and

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

HB5228- 66 -LRB102 23899 HLH 33097 b

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

 

 

HB5228- 67 -LRB102 23899 HLH 33097 b

1        extent that the same dividends caused a reduction to
2        the addition modification required under Section
3        203(c)(2)(G-12) or Section 203(c)(2)(G-13) of this
4        Act;
5            (G-15) An amount equal to the credit allowable to
6        the taxpayer under Section 218(a) of this Act,
7        determined without regard to Section 218(c) of this
8        Act;
9            (G-16) For taxable years ending on or after
10        December 31, 2017, an amount equal to the deduction
11        allowed under Section 199 of the Internal Revenue Code
12        for the taxable year;
13    and by deducting from the total so obtained the sum of the
14    following amounts:
15            (H) An amount equal to all amounts included in
16        such total pursuant to the provisions of Sections
17        402(a), 402(c), 403(a), 403(b), 406(a), 407(a) and 408
18        of the Internal Revenue Code or included in such total
19        as distributions under the provisions of any
20        retirement or disability plan for employees of any
21        governmental agency or unit, or retirement payments to
22        retired partners, which payments are excluded in
23        computing net earnings from self employment by Section
24        1402 of the Internal Revenue Code and regulations
25        adopted pursuant thereto;
26            (I) The valuation limitation amount;

 

 

HB5228- 68 -LRB102 23899 HLH 33097 b

1            (J) An amount equal to the amount of any tax
2        imposed by this Act which was refunded to the taxpayer
3        and included in such total for the taxable year;
4            (K) An amount equal to all amounts included in
5        taxable income as modified by subparagraphs (A), (B),
6        (C), (D), (E), (F) and (G) which are exempt from
7        taxation by this State either by reason of its
8        statutes or Constitution or by reason of the
9        Constitution, treaties or statutes of the United
10        States; provided that, in the case of any statute of
11        this State that exempts income derived from bonds or
12        other obligations from the tax imposed under this Act,
13        the amount exempted shall be the interest net of bond
14        premium amortization;
15            (L) With the exception of any amounts subtracted
16        under subparagraph (K), an amount equal to the sum of
17        all amounts disallowed as deductions by (i) Sections
18        171(a)(2) and 265(a)(2) of the Internal Revenue Code,
19        and all amounts of expenses allocable to interest and
20        disallowed as deductions by Section 265(a)(1) of the
21        Internal Revenue Code; and (ii) for taxable years
22        ending on or after August 13, 1999, Sections
23        171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
24        Internal Revenue Code, plus, (iii) for taxable years
25        ending on or after December 31, 2011, Section
26        45G(e)(3) of the Internal Revenue Code and, for

 

 

HB5228- 69 -LRB102 23899 HLH 33097 b

1        taxable years ending on or after December 31, 2008,
2        any amount included in gross income under Section 87
3        of the Internal Revenue Code; the provisions of this
4        subparagraph are exempt from the provisions of Section
5        250;
6            (M) An amount equal to those dividends included in
7        such total which were paid by a corporation which
8        conducts business operations in a River Edge
9        Redevelopment Zone or zones created under the River
10        Edge Redevelopment Zone Act and conducts substantially
11        all of its operations in a River Edge Redevelopment
12        Zone or zones. This subparagraph (M) is exempt from
13        the provisions of Section 250;
14            (N) An amount equal to any contribution made to a
15        job training project established pursuant to the Tax
16        Increment Allocation Redevelopment Act;
17            (O) An amount equal to those dividends included in
18        such total that were paid by a corporation that
19        conducts business operations in a federally designated
20        Foreign Trade Zone or Sub-Zone and that is designated
21        a High Impact Business located in Illinois; provided
22        that dividends eligible for the deduction provided in
23        subparagraph (M) of paragraph (2) of this subsection
24        shall not be eligible for the deduction provided under
25        this subparagraph (O);
26            (P) An amount equal to the amount of the deduction

 

 

HB5228- 70 -LRB102 23899 HLH 33097 b

1        used to compute the federal income tax credit for
2        restoration of substantial amounts held under claim of
3        right for the taxable year pursuant to Section 1341 of
4        the Internal Revenue Code;
5            (Q) For taxable year 1999 and thereafter, an
6        amount equal to the amount of any (i) distributions,
7        to the extent includible in gross income for federal
8        income tax purposes, made to the taxpayer because of
9        his or her status as a victim of persecution for racial
10        or religious reasons by Nazi Germany or any other Axis
11        regime or as an heir of the victim and (ii) items of
12        income, to the extent includible in gross income for
13        federal income tax purposes, attributable to, derived
14        from or in any way related to assets stolen from,
15        hidden from, or otherwise lost to a victim of
16        persecution for racial or religious reasons by Nazi
17        Germany or any other Axis regime immediately prior to,
18        during, and immediately after World War II, including,
19        but not limited to, interest on the proceeds
20        receivable as insurance under policies issued to a
21        victim of persecution for racial or religious reasons
22        by Nazi Germany or any other Axis regime by European
23        insurance companies immediately prior to and during
24        World War II; provided, however, this subtraction from
25        federal adjusted gross income does not apply to assets
26        acquired with such assets or with the proceeds from

 

 

HB5228- 71 -LRB102 23899 HLH 33097 b

1        the sale of such assets; provided, further, this
2        paragraph shall only apply to a taxpayer who was the
3        first recipient of such assets after their recovery
4        and who is a victim of persecution for racial or
5        religious reasons by Nazi Germany or any other Axis
6        regime or as an heir of the victim. The amount of and
7        the eligibility for any public assistance, benefit, or
8        similar entitlement is not affected by the inclusion
9        of items (i) and (ii) of this paragraph in gross income
10        for federal income tax purposes. This paragraph is
11        exempt from the provisions of Section 250;
12            (R) For taxable years 2001 and thereafter, for the
13        taxable year in which the bonus depreciation deduction
14        is taken on the taxpayer's federal income tax return
15        under subsection (k) of Section 168 of the Internal
16        Revenue Code and for each applicable taxable year
17        thereafter, an amount equal to "x", where:
18                (1) "y" equals the amount of the depreciation
19            deduction taken for the taxable year on the
20            taxpayer's federal income tax return on property
21            for which the bonus depreciation deduction was
22            taken in any year under subsection (k) of Section
23            168 of the Internal Revenue Code, but not
24            including the bonus depreciation deduction;
25                (2) for taxable years ending on or before
26            December 31, 2005, "x" equals "y" multiplied by 30

 

 

HB5228- 72 -LRB102 23899 HLH 33097 b

1            and then divided by 70 (or "y" multiplied by
2            0.429); and
3                (3) for taxable years ending after December
4            31, 2005:
5                    (i) for property on which a bonus
6                depreciation deduction of 30% of the adjusted
7                basis was taken, "x" equals "y" multiplied by
8                30 and then divided by 70 (or "y" multiplied
9                by 0.429);
10                    (ii) for property on which a bonus
11                depreciation deduction of 50% of the adjusted
12                basis was taken, "x" equals "y" multiplied by
13                1.0;
14                    (iii) for property on which a bonus
15                depreciation deduction of 100% of the adjusted
16                basis was taken in a taxable year ending on or
17                after December 31, 2021, "x" equals the
18                depreciation deduction that would be allowed
19                on that property if the taxpayer had made the
20                election under Section 168(k)(7) of the
21                Internal Revenue Code to not claim bonus
22                depreciation deprecation on that property; and
23                    (iv) for property on which a bonus
24                depreciation deduction of a percentage other
25                than 30%, 50% or 100% of the adjusted basis
26                was taken in a taxable year ending on or after

 

 

HB5228- 73 -LRB102 23899 HLH 33097 b

1                December 31, 2021, "x" equals "y" multiplied
2                by 100 times the percentage bonus depreciation
3                on the property (that is, 100(bonus%)) and
4                then divided by 100 times 1 minus the
5                percentage bonus depreciation on the property
6                (that is, 100(1–bonus%)).
7            The aggregate amount deducted under this
8        subparagraph in all taxable years for any one piece of
9        property may not exceed the amount of the bonus
10        depreciation deduction taken on that property on the
11        taxpayer's federal income tax return under subsection
12        (k) of Section 168 of the Internal Revenue Code. This
13        subparagraph (R) is exempt from the provisions of
14        Section 250;
15            (S) If the taxpayer sells, transfers, abandons, or
16        otherwise disposes of property for which the taxpayer
17        was required in any taxable year to make an addition
18        modification under subparagraph (G-10), then an amount
19        equal to that addition modification.
20            If the taxpayer continues to own property through
21        the last day of the last tax year for which a
22        subtraction is allowed with respect to that property
23        under subparagraph (R) and for which the taxpayer was
24        required in any taxable year to make an addition
25        modification under subparagraph (G-10), then an amount
26        equal to that addition modification.

 

 

HB5228- 74 -LRB102 23899 HLH 33097 b

1            The taxpayer is allowed to take the deduction
2        under this subparagraph only once with respect to any
3        one piece of property.
4            This subparagraph (S) is exempt from the
5        provisions of Section 250;
6            (T) The amount of (i) any interest income (net of
7        the deductions allocable thereto) taken into account
8        for the taxable year with respect to a transaction
9        with a taxpayer that is required to make an addition
10        modification with respect to such transaction under
11        Section 203(a)(2)(D-17), 203(b)(2)(E-12),
12        203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
13        the amount of such addition modification and (ii) any
14        income from intangible property (net of the deductions
15        allocable thereto) taken into account for the taxable
16        year with respect to a transaction with a taxpayer
17        that is required to make an addition modification with
18        respect to such transaction under Section
19        203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
20        203(d)(2)(D-8), but not to exceed the amount of such
21        addition modification. This subparagraph (T) is exempt
22        from the provisions of Section 250;
23            (U) An amount equal to the interest income taken
24        into account for the taxable year (net of the
25        deductions allocable thereto) with respect to
26        transactions with (i) a foreign person who would be a

 

 

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

 

 

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1        business group but for the fact that the person is
2        prohibited under Section 1501(a)(27) from being
3        included in the unitary business group because he or
4        she is ordinarily required to apportion business
5        income under different subsections of Section 304, but
6        not to exceed the addition modification required to be
7        made for the same taxable year under Section
8        203(c)(2)(G-13) for intangible expenses and costs
9        paid, accrued, or incurred, directly or indirectly, to
10        the same foreign person. This subparagraph (V) is
11        exempt from the provisions of Section 250;
12            (W) in the case of an estate, an amount equal to
13        all amounts included in such total pursuant to the
14        provisions of Section 111 of the Internal Revenue Code
15        as a recovery of items previously deducted by the
16        decedent from adjusted gross income in the computation
17        of taxable income. This subparagraph (W) is exempt
18        from Section 250;
19            (X) an amount equal to the refund included in such
20        total of any tax deducted for federal income tax
21        purposes, to the extent that deduction was added back
22        under subparagraph (F). This subparagraph (X) is
23        exempt from the provisions of Section 250;
24            (Y) For taxable years ending on or after December
25        31, 2011, in the case of a taxpayer who was required to
26        add back any insurance premiums under Section

 

 

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1        203(c)(2)(G-14), such taxpayer may elect to subtract
2        that part of a reimbursement received from the
3        insurance company equal to the amount of the expense
4        or loss (including expenses incurred by the insurance
5        company) that would have been taken into account as a
6        deduction for federal income tax purposes if the
7        expense or loss had been uninsured. If a taxpayer
8        makes the election provided for by this subparagraph
9        (Y), the insurer to which the premiums were paid must
10        add back to income the amount subtracted by the
11        taxpayer pursuant to this subparagraph (Y). This
12        subparagraph (Y) is exempt from the provisions of
13        Section 250; and
14            (Z) For taxable years beginning after December 31,
15        2018 and before January 1, 2026, the amount of excess
16        business loss of the taxpayer disallowed as a
17        deduction by Section 461(l)(1)(B) of the Internal
18        Revenue Code.
19        (3) Limitation. The amount of any modification
20    otherwise required under this subsection shall, under
21    regulations prescribed by the Department, be adjusted by
22    any amounts included therein which were properly paid,
23    credited, or required to be distributed, or permanently
24    set aside for charitable purposes pursuant to Internal
25    Revenue Code Section 642(c) during the taxable year.
 

 

 

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

 

 

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

 

 

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1        person's total business activity and (ii) for taxable
2        years ending on or after December 31, 2008, to a person
3        who would be a member of the same unitary business
4        group but for the fact that the person is prohibited
5        under Section 1501(a)(27) from being included in the
6        unitary business group because he or she is ordinarily
7        required to apportion business income under different
8        subsections of Section 304. The addition modification
9        required by this subparagraph shall be reduced to the
10        extent that dividends were included in base income of
11        the unitary group for the same taxable year and
12        received by the taxpayer or by a member of the
13        taxpayer's unitary business group (including amounts
14        included in gross income pursuant to Sections 951
15        through 964 of the Internal Revenue Code and amounts
16        included in gross income under Section 78 of the
17        Internal Revenue Code) with respect to the stock of
18        the same person to whom the interest was paid,
19        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 person who
23            is subject in a foreign country or state, other
24            than a state which requires mandatory unitary
25            reporting, to a tax on or measured by net income
26            with respect to such interest; or

 

 

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1                (ii) an item of interest paid, accrued, or
2            incurred, directly or indirectly, to a person if
3            the taxpayer can establish, based on a
4            preponderance of the evidence, both of the
5            following:
6                    (a) the person, during the same taxable
7                year, paid, accrued, or incurred, the interest
8                to a person that is not a related member, and
9                    (b) the transaction giving rise to the
10                interest expense between the taxpayer and the
11                person did not have as a principal purpose the
12                avoidance of Illinois income tax, and is paid
13                pursuant to a contract or agreement that
14                reflects an arm's-length interest rate and
15                terms; or
16                (iii) the taxpayer can establish, based on
17            clear and convincing evidence, that the interest
18            paid, accrued, or incurred relates to a contract
19            or agreement entered into at arm's-length rates
20            and terms and the principal purpose for the
21            payment is not federal or Illinois tax avoidance;
22            or
23                (iv) an item of interest paid, accrued, or
24            incurred, directly or indirectly, to a person if
25            the taxpayer establishes by clear and convincing
26            evidence that the adjustments are unreasonable; or

 

 

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1            if the taxpayer and the Director agree in writing
2            to the application or use of an alternative method
3            of apportionment under Section 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
7            for any tax year beginning after the effective
8            date of this amendment provided such adjustment is
9            made pursuant to regulation adopted by the
10            Department and such regulations provide methods
11            and standards by which the Department will utilize
12            its authority under Section 404 of this Act; and
13            (D-8) An amount equal to the amount of intangible
14        expenses and costs otherwise allowed as a deduction in
15        computing base income, and that were paid, accrued, or
16        incurred, directly or indirectly, (i) for taxable
17        years ending on or after December 31, 2004, to a
18        foreign person who would be a member of the same
19        unitary business group but for the fact that the
20        foreign person's business activity outside the United
21        States is 80% or more of that person's total business
22        activity and (ii) for taxable years ending on or after
23        December 31, 2008, to a person who would be a member of
24        the same unitary business group but for the fact that
25        the person is prohibited under Section 1501(a)(27)
26        from being included in the unitary business group

 

 

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1        because he or she is ordinarily required to apportion
2        business income under different subsections of Section
3        304. The addition modification required by this
4        subparagraph shall be reduced to the extent that
5        dividends were included in base income of the unitary
6        group for the same taxable year and received by the
7        taxpayer or by a member of the taxpayer's unitary
8        business group (including amounts included in gross
9        income pursuant to Sections 951 through 964 of the
10        Internal Revenue Code and amounts included in gross
11        income under Section 78 of the Internal Revenue Code)
12        with respect to the stock of the same person to whom
13        the intangible expenses and costs were directly or
14        indirectly paid, incurred or accrued. The preceding
15        sentence shall not apply to the extent that the same
16        dividends caused a reduction to the addition
17        modification required under Section 203(d)(2)(D-7) of
18        this Act. As used in this subparagraph, the term
19        "intangible expenses and costs" includes (1) expenses,
20        losses, and costs for, or related to, the direct or
21        indirect acquisition, use, maintenance or management,
22        ownership, sale, exchange, or any other disposition of
23        intangible property; (2) losses incurred, directly or
24        indirectly, from factoring transactions or discounting
25        transactions; (3) royalty, patent, technical, and
26        copyright fees; (4) licensing fees; and (5) other

 

 

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

 

 

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1                income tax, and is paid pursuant to a contract
2                or agreement that reflects arm's-length terms;
3                or
4                (iii) any item of intangible expense or cost
5            paid, accrued, or incurred, directly or
6            indirectly, from a transaction with a person if
7            the taxpayer establishes by clear and convincing
8            evidence, that the adjustments are unreasonable;
9            or if the taxpayer and the Director agree in
10            writing to the application or use of an
11            alternative method of apportionment under Section
12            304(f);
13                Nothing in this subsection shall preclude the
14            Director from making any other adjustment
15            otherwise allowed under Section 404 of this Act
16            for any tax year beginning after the effective
17            date of this amendment provided such adjustment is
18            made pursuant to regulation adopted by the
19            Department and such regulations provide methods
20            and standards by which the Department will utilize
21            its authority under Section 404 of this Act;
22            (D-9) For taxable years ending on or after
23        December 31, 2008, an amount equal to the amount of
24        insurance premium expenses and costs otherwise allowed
25        as a deduction in computing base income, and that were
26        paid, accrued, or incurred, directly or indirectly, to

 

 

HB5228- 86 -LRB102 23899 HLH 33097 b

1        a person who would be a member of the same unitary
2        business group but for the fact that the person is
3        prohibited under Section 1501(a)(27) from being
4        included in the unitary business group because he or
5        she is ordinarily required to apportion business
6        income under different subsections of Section 304. 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 under
13        Sections 951 through 964 of the Internal Revenue Code
14        and amounts included in gross income under Section 78
15        of the Internal Revenue Code) with respect to the
16        stock of the same person to whom the premiums and costs
17        were directly or indirectly paid, incurred, or
18        accrued. The preceding sentence does not apply to the
19        extent that the same dividends caused a reduction to
20        the addition modification required under Section
21        203(d)(2)(D-7) or Section 203(d)(2)(D-8) of this Act;
22            (D-10) An amount equal to the credit allowable to
23        the taxpayer under Section 218(a) of this Act,
24        determined without regard to Section 218(c) of this
25        Act;
26            (D-11) For taxable years ending on or after

 

 

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1        December 31, 2017, an amount equal to the deduction
2        allowed under Section 199 of the Internal Revenue Code
3        for the taxable year;
4    and by deducting from the total so obtained the following
5    amounts:
6            (E) The valuation limitation amount;
7            (F) An amount equal to the amount of any tax
8        imposed by this Act which was refunded to the taxpayer
9        and included in such total for the taxable year;
10            (G) An amount equal to all amounts included in
11        taxable income as modified by subparagraphs (A), (B),
12        (C) and (D) which are exempt from taxation by this
13        State either by reason of its statutes or Constitution
14        or by reason of the Constitution, treaties or statutes
15        of the United States; provided that, in the case of any
16        statute of this State that exempts income derived from
17        bonds or other obligations from the tax imposed under
18        this Act, the amount exempted shall be the interest
19        net of bond premium amortization;
20            (H) Any income of the partnership which
21        constitutes personal service income as defined in
22        Section 1348(b)(1) of the Internal Revenue Code (as in
23        effect December 31, 1981) or a reasonable allowance
24        for compensation paid or accrued for services rendered
25        by partners to the partnership, whichever is greater;
26        this subparagraph (H) is exempt from the provisions of

 

 

HB5228- 88 -LRB102 23899 HLH 33097 b

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

 

 

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1            (K) An amount equal to those dividends included in
2        such total which were paid by a corporation which
3        conducts business operations in a River Edge
4        Redevelopment Zone or zones created under the River
5        Edge Redevelopment Zone Act and conducts substantially
6        all of its operations from a River Edge Redevelopment
7        Zone or zones. This subparagraph (K) is exempt from
8        the provisions of Section 250;
9            (L) An amount equal to any contribution made to a
10        job training project established pursuant to the Real
11        Property Tax Increment Allocation Redevelopment Act;
12            (M) An amount equal to those dividends included in
13        such total that were paid by a corporation that
14        conducts business operations in a federally designated
15        Foreign Trade Zone or Sub-Zone and that is designated
16        a High Impact Business located in Illinois; provided
17        that dividends eligible for the deduction provided in
18        subparagraph (K) of paragraph (2) of this subsection
19        shall not be eligible for the deduction provided under
20        this subparagraph (M);
21            (N) An amount equal to the amount of the deduction
22        used to compute the federal income tax credit for
23        restoration of substantial amounts held under claim of
24        right for the taxable year pursuant to Section 1341 of
25        the Internal Revenue Code;
26            (O) For taxable years 2001 and thereafter, for the

 

 

HB5228- 90 -LRB102 23899 HLH 33097 b

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

 

 

HB5228- 91 -LRB102 23899 HLH 33097 b

1                1.0;
2                    (iii) for property on which a bonus
3                depreciation deduction of 100% of the adjusted
4                basis was taken in a taxable year ending on or
5                after December 31, 2021, "x" equals the
6                depreciation deduction that would be allowed
7                on that property if the taxpayer had made the
8                election under Section 168(k)(7) of the
9                Internal Revenue Code to not claim bonus
10                depreciation deprecation on that property; and
11                    (iv) for property on which a bonus
12                depreciation deduction of a percentage other
13                than 30%, 50% or 100% of the adjusted basis
14                was taken in a taxable year ending on or after
15                December 31, 2021, "x" equals "y" multiplied
16                by 100 times the percentage bonus depreciation
17                on the property (that is, 100(bonus%)) and
18                then divided by 100 times 1 minus the
19                percentage bonus depreciation on the property
20                (that is, 100(1–bonus%)).
21            The aggregate amount deducted under this
22        subparagraph in all taxable years for any one piece of
23        property may not exceed the amount of the bonus
24        depreciation deduction taken on that property on the
25        taxpayer's federal income tax return under subsection
26        (k) of Section 168 of the Internal Revenue Code. This

 

 

HB5228- 92 -LRB102 23899 HLH 33097 b

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

 

 

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

 

 

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

 

 

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1        31, 2011, in the case of a taxpayer who was required to
2        add back any insurance premiums under Section
3        203(d)(2)(D-9), such taxpayer may elect to subtract
4        that part of a reimbursement received from the
5        insurance company equal to the amount of the expense
6        or loss (including expenses incurred by the insurance
7        company) that would have been taken into account as a
8        deduction for federal income tax purposes if the
9        expense or loss had been uninsured. If a taxpayer
10        makes the election provided for by this subparagraph
11        (T), the insurer to which the premiums were paid must
12        add back to income the amount subtracted by the
13        taxpayer pursuant to this subparagraph (T). This
14        subparagraph (T) is exempt from the provisions of
15        Section 250.
 
16    (e) Gross income; adjusted gross income; taxable income.
17        (1) In general. Subject to the provisions of paragraph
18    (2) and subsection (b)(3), for purposes of this Section
19    and Section 803(e), a taxpayer's gross income, adjusted
20    gross income, or taxable income for the taxable year shall
21    mean the amount of gross income, adjusted gross income or
22    taxable income properly reportable for federal income tax
23    purposes for the taxable year under the provisions of the
24    Internal Revenue Code. Taxable income may be less than
25    zero. However, for taxable years ending on or after

 

 

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1    December 31, 1986, net operating loss carryforwards from
2    taxable years ending prior to December 31, 1986, may not
3    exceed the sum of federal taxable income for the taxable
4    year before net operating loss deduction, plus the excess
5    of addition modifications over subtraction modifications
6    for the taxable year. For taxable years ending prior to
7    December 31, 1986, taxable income may never be an amount
8    in excess of the net operating loss for the taxable year as
9    defined in subsections (c) and (d) of Section 172 of the
10    Internal Revenue Code, provided that when taxable income
11    of a corporation (other than a Subchapter S corporation),
12    trust, or estate is less than zero and addition
13    modifications, other than those provided by subparagraph
14    (E) of paragraph (2) of subsection (b) for corporations or
15    subparagraph (E) of paragraph (2) of subsection (c) for
16    trusts and estates, exceed subtraction modifications, an
17    addition modification must be made under those
18    subparagraphs for any other taxable year to which the
19    taxable income less than zero (net operating loss) is
20    applied under Section 172 of the Internal Revenue Code or
21    under subparagraph (E) of paragraph (2) of this subsection
22    (e) applied in conjunction with Section 172 of the
23    Internal Revenue Code.
24        (2) Special rule. For purposes of paragraph (1) of
25    this subsection, the taxable income properly reportable
26    for federal income tax purposes shall mean:

 

 

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1            (A) Certain life insurance companies. In the case
2        of a life insurance company subject to the tax imposed
3        by Section 801 of the Internal Revenue Code, life
4        insurance company taxable income, plus the amount of
5        distribution from pre-1984 policyholder surplus
6        accounts as calculated under Section 815a of the
7        Internal Revenue Code;
8            (B) Certain other insurance companies. In the case
9        of mutual insurance companies subject to the tax
10        imposed by Section 831 of the Internal Revenue Code,
11        insurance company taxable income;
12            (C) Regulated investment companies. In the case of
13        a regulated investment company subject to the tax
14        imposed by Section 852 of the Internal Revenue Code,
15        investment company taxable income;
16            (D) Real estate investment trusts. In the case of
17        a real estate investment trust subject to the tax
18        imposed by Section 857 of the Internal Revenue Code,
19        real estate investment trust taxable income;
20            (E) Consolidated corporations. In the case of a
21        corporation which is a member of an affiliated group
22        of corporations filing a consolidated income tax
23        return for the taxable year for federal income tax
24        purposes, taxable income determined as if such
25        corporation had filed a separate return for federal
26        income tax purposes for the taxable year and each

 

 

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1        preceding taxable year for which it was a member of an
2        affiliated group. For purposes of this subparagraph,
3        the taxpayer's separate taxable income shall be
4        determined as if the election provided by Section
5        243(b)(2) of the Internal Revenue Code had been in
6        effect for all such years;
7            (F) Cooperatives. In the case of a cooperative
8        corporation or association, the taxable income of such
9        organization determined in accordance with the
10        provisions of Section 1381 through 1388 of the
11        Internal Revenue Code, but without regard to the
12        prohibition against offsetting losses from patronage
13        activities against income from nonpatronage
14        activities; except that a cooperative corporation or
15        association may make an election to follow its federal
16        income tax treatment of patronage losses and
17        nonpatronage losses. In the event such election is
18        made, such losses shall be computed and carried over
19        in a manner consistent with subsection (a) of Section
20        207 of this Act and apportioned by the apportionment
21        factor reported by the cooperative on its Illinois
22        income tax return filed for the taxable year in which
23        the losses are incurred. The election shall be
24        effective for all taxable years with original returns
25        due on or after the date of the election. In addition,
26        the cooperative may file an amended return or returns,

 

 

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1        as allowed under this Act, to provide that the
2        election shall be effective for losses incurred or
3        carried forward for taxable years occurring prior to
4        the date of the election. Once made, the election may
5        only be revoked upon approval of the Director. The
6        Department shall adopt rules setting forth
7        requirements for documenting the elections and any
8        resulting Illinois net loss and the standards to be
9        used by the Director in evaluating requests to revoke
10        elections. Public Act 96-932 is declaratory of
11        existing law;
12            (G) Subchapter S corporations. In the case of: (i)
13        a Subchapter S corporation for which there is in
14        effect an election for the taxable year under Section
15        1362 of the Internal Revenue Code, the taxable income
16        of such corporation determined in accordance with
17        Section 1363(b) of the Internal Revenue Code, except
18        that taxable income shall take into account those
19        items which are required by Section 1363(b)(1) of the
20        Internal Revenue Code to be separately stated; and
21        (ii) a Subchapter S corporation for which there is in
22        effect a federal election to opt out of the provisions
23        of the Subchapter S Revision Act of 1982 and have
24        applied instead the prior federal Subchapter S rules
25        as in effect on July 1, 1982, the taxable income of
26        such corporation determined in accordance with the

 

 

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

 

 

HB5228- 101 -LRB102 23899 HLH 33097 b

1    (f) Valuation limitation amount.
2        (1) In general. The valuation limitation amount
3    referred to in subsections (a)(2)(G), (c)(2)(I) and
4    (d)(2)(E) is an amount equal to:
5            (A) The sum of the pre-August 1, 1969 appreciation
6        amounts (to the extent consisting of gain reportable
7        under the provisions of Section 1245 or 1250 of the
8        Internal Revenue Code) for all property in respect of
9        which such gain was reported for the taxable year;
10        plus
11            (B) The lesser of (i) the sum of the pre-August 1,
12        1969 appreciation amounts (to the extent consisting of
13        capital gain) for all property in respect of which
14        such gain was reported for federal income tax purposes
15        for the taxable year, or (ii) the net capital gain for
16        the taxable year, reduced in either case by any amount
17        of such gain included in the amount determined under
18        subsection (a)(2)(F) or (c)(2)(H).
19        (2) Pre-August 1, 1969 appreciation amount.
20            (A) If the fair market value of property referred
21        to in paragraph (1) was readily ascertainable on
22        August 1, 1969, the pre-August 1, 1969 appreciation
23        amount for such property is the lesser of (i) the
24        excess of such fair market value over the taxpayer's
25        basis (for determining gain) for such property on that

 

 

HB5228- 102 -LRB102 23899 HLH 33097 b

1        date (determined under the Internal Revenue Code as in
2        effect on that date), or (ii) the total gain realized
3        and reportable for federal income tax purposes in
4        respect of the sale, exchange or other disposition of
5        such property.
6            (B) If the fair market value of property referred
7        to in paragraph (1) was not readily ascertainable on
8        August 1, 1969, the pre-August 1, 1969 appreciation
9        amount for such property is that amount which bears
10        the same ratio to the total gain reported in respect of
11        the property for federal income tax purposes for the
12        taxable year, as the number of full calendar months in
13        that part of the taxpayer's holding period for the
14        property ending July 31, 1969 bears to the number of
15        full calendar months in the taxpayer's entire holding
16        period for the property.
17            (C) The Department shall prescribe such
18        regulations as may be necessary to carry out the
19        purposes of this paragraph.
 
20    (g) Double deductions. Unless specifically provided
21otherwise, nothing in this Section shall permit the same item
22to be deducted more than once.
 
23    (g-5) For taxable years beginning on or after January 1,
242023, in calculating the taxpayer's base income, the

 

 

HB5228- 103 -LRB102 23899 HLH 33097 b

1taxpayer's federal adjusted gross income shall also be
2modified to exclude the portion of the income or loss received
3from a trade or business conducted within and without Illinois
4or from a pass-through entity conducting business within and
5without Illinois that is not derived from or connected with
6Illinois sources as determined in the provisions in Article 3
7of this Act. This subsection (g-5) is exempt from the
8provisions of Section 250.
 
9    (h) Legislative intention. Except as expressly provided by
10this Section there shall be no modifications or limitations on
11the amounts of income, gain, loss or deduction taken into
12account in determining gross income, adjusted gross income or
13taxable income for federal income tax purposes for the taxable
14year, or in the amount of such items entering into the
15computation of base income and net income under this Act for
16such taxable year, whether in respect of property values as of
17August 1, 1969 or otherwise.
18(Source: P.A. 101-9, eff. 6-5-19; 101-81, eff. 7-12-19;
19102-16, eff. 6-17-21; 102-558, eff. 8-20-21; 102-658, eff.
208-27-21; revised 10-14-21.)
 
21    Section 99. Effective date. This Act takes effect upon
22becoming law.