94TH GENERAL ASSEMBLY
State of Illinois
2005 and 2006
HB0262

 

Introduced 1/18/2005, by Rep. Shane Cultra

 

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

    Amends the Illinois Income Tax Act. For taxable years ending on or after December 31, 2005, allows a deduction of up to $10,000 if the taxpayer, while living, donates one or more of his or her human organs to another human being for human organ transplantation. Provides that the deduction may be claimed only once and for only unreimbursed travel and lodging expenses and lost wages incurred by the claimant and related to the claimant's organ donation. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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

 

 

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1         1991, the retrospective application date of Article 4
2         of Public Act 87-17. In the case of multi-unit or
3         multi-use structures and farm dwellings, the taxes on
4         the taxpayer's principal residence shall be that
5         portion of the total taxes for the entire property
6         which is attributable to such principal residence;
7             (D) An amount equal to the amount of the capital
8         gain deduction allowable under the Internal Revenue
9         Code, to the extent deducted from gross income in the
10         computation of adjusted gross income;
11             (D-5) An amount, to the extent not included in
12         adjusted gross income, equal to the amount of money
13         withdrawn by the taxpayer in the taxable year from a
14         medical care savings account and the interest earned on
15         the account in the taxable year of a withdrawal
16         pursuant to subsection (b) of Section 20 of the Medical
17         Care Savings Account Act or subsection (b) of Section
18         20 of the Medical Care Savings Account Act of 2000;
19             (D-10) For taxable years ending after December 31,
20         1997, an amount equal to any eligible remediation costs
21         that the individual deducted in computing adjusted
22         gross income and for which the individual claims a
23         credit under subsection (l) of Section 201;
24             (D-15) For taxable years 2001 and thereafter, an
25         amount equal to the bonus depreciation deduction (30%
26         of the adjusted basis of the qualified property) taken
27         on the taxpayer's federal income tax return for the
28         taxable year under subsection (k) of Section 168 of the
29         Internal Revenue Code;
30             (D-16) If the taxpayer reports a capital gain or
31         loss on the taxpayer's federal income tax return for
32         the taxable year based on a sale or transfer of
33         property for which the taxpayer was required in any
34         taxable year to make an addition modification under
35         subparagraph (D-15), then an amount equal to the
36         aggregate amount of the deductions taken in all taxable

 

 

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

 

 

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

 

 

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

 

 

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1             This paragraph shall not apply to the following:
2                 (i) any item of intangible expenses or costs
3             paid, accrued, or incurred, directly or
4             indirectly, from a transaction with a foreign
5             person who is subject in a foreign country or
6             state, other than a state which requires mandatory
7             unitary reporting, to a tax on or measured by net
8             income with respect to such item; or
9                 (ii) any item of intangible expense or cost
10             paid, accrued, or incurred, directly or
11             indirectly, if the taxpayer can establish, based
12             on a preponderance of the evidence, both of the
13             following:
14                     (a) the foreign person during the same
15                 taxable year paid, accrued, or incurred, the
16                 intangible expense or cost to a person that is
17                 not a related member, and
18                     (b) the transaction giving rise to the
19                 intangible expense or cost between the
20                 taxpayer and the foreign person did not have as
21                 a principal purpose the avoidance of Illinois
22                 income tax, and is paid pursuant to a contract
23                 or agreement that reflects arm's-length terms;
24                 or
25                 (iii) any item of intangible expense or cost
26             paid, accrued, or incurred, directly or
27             indirectly, from a transaction with a foreign
28             person if the taxpayer establishes by clear and
29             convincing evidence, that the adjustments are
30             unreasonable; or if the taxpayer and the Director
31             agree in writing to the application or use of an
32             alternative method of apportionment under Section
33             304(f);
34                 Nothing in this subsection shall preclude the
35             Director from making any other adjustment
36             otherwise allowed under Section 404 of this Act for

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         or before December 31, 2004, an amount equal to the
2         amount paid by a taxpayer who is a self-employed
3         taxpayer, a partner of a partnership, or a shareholder
4         in a Subchapter S corporation for health insurance or
5         long-term care insurance for that taxpayer or that
6         taxpayer's spouse or dependents, to the extent that the
7         amount paid for that health insurance or long-term care
8         insurance may be deducted under Section 213 of the
9         Internal Revenue Code of 1986, has not been deducted on
10         the federal income tax return of the taxpayer, and does
11         not exceed the taxable income attributable to that
12         taxpayer's income, self-employment income, or
13         Subchapter S corporation income; except that no
14         deduction shall be allowed under this item (V) if the
15         taxpayer is eligible to participate in any health
16         insurance or long-term care insurance plan of an
17         employer of the taxpayer or the taxpayer's spouse. The
18         amount of the health insurance and long-term care
19         insurance subtracted under this item (V) shall be
20         determined by multiplying total health insurance and
21         long-term care insurance premiums paid by the taxpayer
22         times a number that represents the fractional
23         percentage of eligible medical expenses under Section
24         213 of the Internal Revenue Code of 1986 not actually
25         deducted on the taxpayer's federal income tax return;
26             (W) For taxable years beginning on or after January
27         1, 1998, all amounts included in the taxpayer's federal
28         gross income in the taxable year from amounts converted
29         from a regular IRA to a Roth IRA. This paragraph is
30         exempt from the provisions of Section 250;
31             (X) For taxable year 1999 and thereafter, an amount
32         equal to the amount of any (i) distributions, to the
33         extent includible in gross income for federal income
34         tax purposes, made to the taxpayer because of his or
35         her status as a victim of persecution for racial or
36         religious reasons by Nazi Germany or any other Axis

 

 

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

 

 

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1         of $10,000 contributed in the taxable year to (i) a
2         College Savings Pool account under Section 16.5 of the
3         State Treasurer Act or (ii) the Illinois Prepaid
4         Tuition Trust Fund, except that amounts excluded from
5         gross income under Section 529(c)(3)(C)(i) of the
6         Internal Revenue Code shall not be considered moneys
7         contributed under this subparagraph (Y). This
8         subparagraph (Y) is exempt from the provisions of
9         Section 250;
10             (Z) For taxable years 2001 and thereafter, for the
11         taxable year in which the bonus depreciation deduction
12         (30% of the adjusted basis of the qualified property)
13         is taken on the taxpayer's federal income tax return
14         under subsection (k) of Section 168 of the Internal
15         Revenue Code and for each applicable taxable year
16         thereafter, an amount equal to "x", where:
17                 (1) "y" equals the amount of the depreciation
18             deduction taken for the taxable year on the
19             taxpayer's federal income tax return on property
20             for which the bonus depreciation deduction (30% of
21             the adjusted basis of the qualified property) was
22             taken in any year under subsection (k) of Section
23             168 of the Internal Revenue Code, but not including
24             the bonus depreciation deduction; and
25                 (2) "x" equals "y" multiplied by 30 and then
26             divided by 70 (or "y" multiplied by 0.429).
27             The aggregate amount deducted under this
28         subparagraph in all taxable years for any one piece of
29         property may not exceed the amount of the bonus
30         depreciation deduction (30% of the adjusted basis of
31         the qualified property) taken on that property on the
32         taxpayer's federal income tax return under subsection
33         (k) of Section 168 of the Internal Revenue Code;
34             (AA) If the taxpayer reports a capital gain or loss
35         on the taxpayer's federal income tax return for the
36         taxable year based on a sale or transfer of property

 

 

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1         for which the taxpayer was required in any taxable year
2         to make an addition modification under subparagraph
3         (D-15), then an amount equal to that addition
4         modification.
5             The taxpayer is allowed to take the deduction under
6         this subparagraph only once with respect to any one
7         piece of property;
8             (BB) Any amount included in adjusted gross income,
9         other than salary, received by a driver in a
10         ridesharing arrangement using a motor vehicle;
11             (CC) The amount of (i) any interest income (net of
12         the deductions allocable thereto) taken into account
13         for the taxable year with respect to a transaction with
14         a taxpayer that is required to make an addition
15         modification with respect to such transaction under
16         Section 203(a)(2)(D-17), 203(b)(2)(E-13),
17         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
18         the amount of that addition modification, and (ii) any
19         income from intangible property (net of the deductions
20         allocable thereto) taken into account for the taxable
21         year with respect to a transaction with a taxpayer that
22         is required to make an addition modification with
23         respect to such transaction under Section
24         203(a)(2)(D-18), 203(b)(2)(E-14), 203(c)(2)(G-13), or
25         203(d)(2)(D-8), but not to exceed the amount of that
26         addition modification;
27             (DD) An amount equal to the interest income taken
28         into account for the taxable year (net of the
29         deductions allocable thereto) with respect to
30         transactions with a foreign person who would be a
31         member of the taxpayer's unitary business group but for
32         the fact that the foreign person's business activity
33         outside the United States is 80% or more of that
34         person's total business activity, but not to exceed the
35         addition modification required to be made for the same
36         taxable year under Section 203(a)(2)(D-17) for

 

 

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1         interest paid, accrued, or incurred, directly or
2         indirectly, to the same foreign person; and
3             (EE) An amount equal to the income from intangible
4         property taken into account for the taxable year (net
5         of the deductions allocable thereto) with respect to
6         transactions with a foreign person who would be a
7         member of the taxpayer's unitary business group but for
8         the fact that the foreign person's business activity
9         outside the United States is 80% or more of that
10         person's total business activity, but not to exceed the
11         addition modification required to be made for the same
12         taxable year under Section 203(a)(2)(D-18) for
13         intangible expenses and costs paid, accrued, or
14         incurred, directly or indirectly, to the same foreign
15         person; and .
16             (FF) For taxable years ending on or after December
17         31, 2005, subject to the conditions in this
18         subparagraph, up to $10,000, if the taxpayer, while
19         living, donates one or more of his or her human organs
20         to another human being for human organ
21         transplantation. A deduction that is claimed under
22         this subparagraph may be claimed for the taxable year
23         in which the human organ transplantation occurs. An
24         individual may claim the deduction under this
25         subparagraph only once, and the deduction may be
26         claimed for only the following unreimbursed expenses
27         that are incurred by the claimant and related to the
28         claimant's organ donation:
29                 (I) travel expenses;
30                 (II) lodging expenses; and
31                 (III) lost wages.
32         The deduction under this subparagraph may not be
33         claimed by a part-year resident or a nonresident of
34         this State. As used in this subparagraph, "human organ"
35         means all or part of a liver, pancreas, kidney,
36         intestine, lung, or bone marrow, and "human organ

 

 

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1         transplantation" means the medical procedure by which
2         transfer of a human organ is made from the body of a
3         person to the body of another person. This subparagraph
4         is exempt from the provisions of Section 250 of the
5         Act.
 
6     (b) Corporations.
7         (1) In general. In the case of a corporation, base
8     income means an amount equal to the taxpayer's taxable
9     income for the taxable year as modified by paragraph (2).
10         (2) Modifications. The taxable income referred to in
11     paragraph (1) shall be modified by adding thereto the sum
12     of the following amounts:
13             (A) An amount equal to all amounts paid or accrued
14         to the taxpayer as interest and all distributions
15         received from regulated investment companies during
16         the taxable year to the extent excluded from gross
17         income in the computation of taxable income;
18             (B) An amount equal to the amount of tax imposed by
19         this Act to the extent deducted from gross income in
20         the computation of taxable income for the taxable year;
21             (C) In the case of a regulated investment company,
22         an amount equal to the excess of (i) the net long-term
23         capital gain for the taxable year, over (ii) the amount
24         of the capital gain dividends designated as such in
25         accordance with Section 852(b)(3)(C) of the Internal
26         Revenue Code and any amount designated under Section
27         852(b)(3)(D) of the Internal Revenue Code,
28         attributable to the taxable year (this amendatory Act
29         of 1995 (Public Act 89-89) is declarative of existing
30         law and is not a new enactment);
31             (D) The amount of any net operating loss deduction
32         taken in arriving at taxable income, other than a net
33         operating loss carried forward from a taxable year
34         ending prior to December 31, 1986;
35             (E) For taxable years in which a net operating loss

 

 

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

 

 

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

 

 

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

 

 

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1             304(f).
2                 Nothing in this subsection shall preclude the
3             Director from making any other adjustment
4             otherwise allowed under Section 404 of this Act for
5             any tax year beginning after the effective date of
6             this amendment provided such adjustment is made
7             pursuant to regulation adopted by the Department
8             and such regulations provide methods and standards
9             by which the Department will utilize its authority
10             under Section 404 of this Act;
11             (E-13) For taxable years ending on or after
12         December 31, 2004, an amount equal to the amount of
13         intangible expenses and costs otherwise allowed as a
14         deduction in computing base income, and that were paid,
15         accrued, or incurred, directly or indirectly, to a
16         foreign person who would be a member of the same
17         unitary business group but for the fact that the
18         foreign person's business activity outside the United
19         States is 80% or more of that person's total business
20         activity. The addition modification required by this
21         subparagraph shall be reduced to the extent that
22         dividends were included in base income of the unitary
23         group for the same taxable year and received by the
24         taxpayer or by a member of the taxpayer's unitary
25         business group (including amounts included in gross
26         income pursuant to Sections 951 through 964 of the
27         Internal Revenue Code and amounts included in gross
28         income under Section 78 of the Internal Revenue Code)
29         with respect to the stock of the same person to whom
30         the intangible expenses and costs were directly or
31         indirectly paid, incurred, or accrued. The preceding
32         sentence shall not apply to the extent that the same
33         dividends caused a reduction to the addition
34         modification required under Section 203(b)(2)(E-12) of
35         this Act. As used in this subparagraph, the term
36         "intangible expenses and costs" includes (1) expenses,

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

HB0262 - 26 - LRB094 03722 BDD 33727 b

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

HB0262 - 32 - LRB094 03722 BDD 33727 b

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

 

 

HB0262 - 33 - LRB094 03722 BDD 33727 b

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

 

 

HB0262 - 34 - LRB094 03722 BDD 33727 b

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

 

 

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

 

 

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

 

 

HB0262 - 37 - LRB094 03722 BDD 33727 b

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

 

 

HB0262 - 38 - LRB094 03722 BDD 33727 b

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1                 (2) "x" equals "y" multiplied by 30 and then
2             divided by 70 (or "y" multiplied by 0.429).
3             The aggregate amount deducted under this
4         subparagraph in all taxable years for any one piece of
5         property may not exceed the amount of the bonus
6         depreciation deduction (30% of the adjusted basis of
7         the qualified property) taken on that property on the
8         taxpayer's federal income tax return under subsection
9         (k) of Section 168 of the Internal Revenue Code;
10             (P) If the taxpayer reports a capital gain or loss
11         on the taxpayer's federal income tax return for the
12         taxable year based on a sale or transfer of property
13         for which the taxpayer was required in any taxable year
14         to make an addition modification under subparagraph
15         (D-5), then an amount equal to that addition
16         modification.
17             The taxpayer is allowed to take the deduction under
18         this subparagraph only once with respect to any one
19         piece of property;
20             (Q) The amount of (i) any interest income (net of
21         the deductions allocable thereto) taken into account
22         for the taxable year with respect to a transaction with
23         a taxpayer that is required to make an addition
24         modification with respect to such transaction under
25         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
26         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
27         the amount of such addition modification and (ii) any
28         income from intangible property (net of the deductions
29         allocable thereto) taken into account for the taxable
30         year with respect to a transaction with a taxpayer that
31         is required to make an addition modification with
32         respect to such transaction under Section
33         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
34         203(d)(2)(D-8), but not to exceed the amount of such
35         addition modification;
36             (R) An amount equal to the interest income taken

 

 

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

 

 

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

 

 

HB0262 - 51 - LRB094 03722 BDD 33727 b

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

 

 

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

 

 

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

 

 

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