94TH GENERAL ASSEMBLY
State of Illinois
2005 and 2006
HB0750

 

Introduced 2/2/2005, by Rep. David E. Miller

 

SYNOPSIS AS INTRODUCED:
 
See Index

    Amends the State Finance Act. Creates the School District Property Tax Relief Fund. Requires the General Assembly, in FY06, to appropriate $2.4 billion from the education appropriation minimum to the School District Property Tax Relief Fund and to appropriate additional amounts each fiscal year thereafter. Requires the Department of Revenue to annually determine and certify the total amount of property tax relief grants that each school district will receive from the Fund. Sets forth procedures for appropriating these grants. Amends the Illinois Income Tax Act. Provides that for taxable years beginning after January 1, 2005, the rate of income tax for individuals, trusts, and estates is increased from 3% to 5% of the taxpayer's net income and the rate of income tax for corporations is increased from 4.8% to 8% of the taxpayer's net income. Includes retirement income within the definition of base income for individuals with an adjusted gross income of $75,000 or more annually. Eliminates certain exemptions for corporations located in Enterprise Zones or federally designated Foreign Trade Zones. Creates the Family Tax Credit, which is a refundable tax credit available to any natural person or married couple filing jointly that reports a total annual income of $47,000 or less. Amends the Use Tax Act, the Service Use Tax Act, the Service Occupation Tax Act, and the Retailers' Occupation Tax Act. Eliminates exemptions concerning newsprint and ink and concerning manufacturing and assembling machinery. Includes certain arts, entertainment, and recreation services within the definition of sale at retail in the Retailers' Occupation Tax Act. Amends the Property Tax Code. Requires the county clerk to abate the extension for educational purposes for each school district in the county by the amount of the property tax relief grants received by each of those school districts. Amends the Motor Fuel Tax Law. Deletes provisions concerning discounts for timely filing and paying the taxes. Amends the School Code. In the State aid formula provisions, increases the foundation level of support and grant amount for supplemental general State aid. Provides for an education appropriation minimum and supplemental State aid for rapidly expanding school districts.


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FISCAL NOTE ACT MAY APPLY
HOUSING AFFORDABILITY IMPACT NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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1     AN ACT concerning education.
 
2     Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
 
4     Section 5. The State Finance Act is amended by adding
5 Sections 5.640 and 6z-68 as follows:
 
6     (30 ILCS 105/5.640 new)
7     Sec. 5.640. The School District Property Tax Relief Fund.
 
8     (30 ILCS 105/6z-68 new)
9     Sec. 6z-68. School District Property Tax Relief Fund.
10     (a) The School District property Tax Relief Fund is created
11 as a special Fund in the State treasury. All interest earned on
12 moneys in the Fund shall be deposited into the Fund.
13     (b) As used in this Section:
14     "Department" means the Department of Revenue.
15     "Minimum property tax relief grant" means the minimum
16 amount of property tax relief that will be distributed to each
17 school district from the School District Property Tax Relief
18 Fund in each fiscal year.
19     "High property tax effort school district" means each
20 school district that has a total tax rate that is in the top
21 25% of all total tax rates of all school districts.
22     "Supplemental percentage" means the average daily head
23 count of a particular high property tax effort school district
24 in a fiscal year, divided by the head count total for that
25 fiscal year.
26     "Head count total" means the aggregate average daily
27 attendance of all high property tax effort school districts in
28 the applicable fiscal year.
29     "Supplemental property tax relief grant" means the amount
30 of property tax relief granted to each high property tax effort
31 school district in each fiscal year that is in addition to the

 

 

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1 minimum property tax relief grant that the district receives.
2     (c) Beginning in fiscal year 2006, the General Assembly
3 shall appropriate $2.4 billion from the education
4 appropriation minimum, as defined in Section 18-25 of the
5 School Code, to the School District Property Tax Relief Fund.
6 In each fiscal year thereafter, the General Assembly shall
7 appropriate an amount from the education appropriation
8 minimum, to the School District Property Tax Relief Fund equal
9 to the amount appropriated to the School District Property Tax
10 Relief Fund in the immediately preceding fiscal year, increased
11 by the Employment Cost Index ("ECI") published by the U.S.
12 Bureau of Labor Statistics for the immediately preceding fiscal
13 year.
14     (d) Between November 15 and 17 beginning in fiscal year
15 2006 and for every year thereafter, the Department must
16 certify, no earlier than November 15 and no later than November
17 17, the total amount of property tax relief each school
18 district will receive from the School District Property Tax
19 Relief Fund. The relief shall be determined as follows:
20         (1) In each fiscal year commencing with fiscal year
21     2006, the General Assembly shall appropriate 80% of the
22     total amount appropriated to the School District Property
23     Tax Relief Fund for that fiscal year to fund the aggregate
24     amount of minimum property tax relief grants that will be
25     distributed to all school districts. The Department then
26     shall calculate the amount of minimum property tax relief
27     grant to be distributed to each school district in each
28     fiscal year as follows:
29             (A) for fiscal year 2006, each school district
30         shall receive a minimum property tax relief grant in an
31         amount equal to 20% of the total property taxes
32         reported as payable for that school district in fiscal
33         year 2002; and
34             (B) for each fiscal year thereafter, the minimum
35         property tax relief grant for each school district must
36         be increased by the percentage increase, if any, in the

 

 

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1         ECI published for the prior fiscal year.
2         (2) In each fiscal year commencing with fiscal year
3     2006, the General Assembly shall appropriate 20% of the
4     total amount appropriated to the School District Property
5     Tax Relief Fund for that fiscal year to fund the aggregate
6     amount of supplemental property tax relief grants that will
7     be distributed to all high property tax effort school
8     districts. The Department shall calculate the amount of
9     supplemental property tax relief grants payable to a
10     particular high property tax effort school district in each
11     fiscal year commencing in fiscal year 2006 and continuing
12     in each fiscal year thereafter by multiplying the
13     Supplemental Percentage of that high property tax effort
14     school district for that fiscal year by the total amount
15     appropriated to fund all the supplemental property tax
16     relief grants in that fiscal year.
 
17     Section 10. The Illinois Income Tax Act is amended by
18 changing Sections 201 and 203 and by adding Section 247 as
19 follows:
 
20     (35 ILCS 5/201)  (from Ch. 120, par. 2-201)
21     Sec. 201. Tax Imposed.
22     (a) In general. A tax measured by net income is hereby
23 imposed on every individual, corporation, trust and estate for
24 each taxable year ending after July 31, 1969 on the privilege
25 of earning or receiving income in or as a resident of this
26 State. Such tax shall be in addition to all other occupation or
27 privilege taxes imposed by this State or by any municipal
28 corporation or political subdivision thereof.
29     (b) Rates. The tax imposed by subsection (a) of this
30 Section shall be determined as follows, except as adjusted by
31 subsection (d-1):
32         (1) In the case of an individual, trust or estate, for
33     taxable years ending prior to July 1, 1989, an amount equal
34     to 2 1/2% of the taxpayer's net income for the taxable

 

 

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1     year.
2         (2) In the case of an individual, trust or estate, for
3     taxable years beginning prior to July 1, 1989 and ending
4     after June 30, 1989, an amount equal to the sum of (i) 2
5     1/2% of the taxpayer's net income for the period prior to
6     July 1, 1989, as calculated under Section 202.3, and (ii)
7     3% of the taxpayer's net income for the period after June
8     30, 1989, as calculated under Section 202.3.
9         (3) In the case of an individual, trust or estate, for
10     taxable years beginning after June 30, 1989 and beginning
11     on or before January 1, 2005, an amount equal to 3% of the
12     taxpayer's net income for the taxable year.
13         (4) In the case of an individual, trust or estate, for
14     taxable years beginning after January 1, 2005, an amount
15     equal to 5% of the taxpayer's net income for the taxable
16     year (Blank).
17         (5) (Blank).
18         (6) In the case of a corporation, for taxable years
19     ending prior to July 1, 1989, an amount equal to 4% of the
20     taxpayer's net income for the taxable year.
21         (7) In the case of a corporation, for taxable years
22     beginning prior to July 1, 1989 and ending after June 30,
23     1989, an amount equal to the sum of (i) 4% of the
24     taxpayer's net income for the period prior to July 1, 1989,
25     as calculated under Section 202.3, and (ii) 4.8% of the
26     taxpayer's net income for the period after June 30, 1989,
27     as calculated under Section 202.3.
28         (8) In the case of a corporation, for taxable years
29     beginning after June 30, 1989 and beginning on or before
30     January 1, 2005, an amount equal to 4.8% of the taxpayer's
31     net income for the taxable year.
32         (9) In the case of a corporation, for taxable years
33 beginning after January 1, 2005, an amount equal to 8% of the
34 taxpayer's net income for the taxable year.
35     (c) Personal Property Tax Replacement Income Tax.
36 Beginning on July 1, 1979 and thereafter, in addition to such

 

 

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1 income tax, there is also hereby imposed the Personal Property
2 Tax Replacement Income Tax measured by net income on every
3 corporation (including Subchapter S corporations), partnership
4 and trust, for each taxable year ending after June 30, 1979.
5 Such taxes are imposed on the privilege of earning or receiving
6 income in or as a resident of this State. The Personal Property
7 Tax Replacement Income Tax shall be in addition to the income
8 tax imposed by subsections (a) and (b) of this Section and in
9 addition to all other occupation or privilege taxes imposed by
10 this State or by any municipal corporation or political
11 subdivision thereof.
12     (d) Additional Personal Property Tax Replacement Income
13 Tax Rates. The personal property tax replacement income tax
14 imposed by this subsection and subsection (c) of this Section
15 in the case of a corporation, other than a Subchapter S
16 corporation and except as adjusted by subsection (d-1), shall
17 be an additional amount equal to 2.85% of such taxpayer's net
18 income for the taxable year, except that beginning on January
19 1, 1981, and thereafter, the rate of 2.85% specified in this
20 subsection shall be reduced to 2.5%, and in the case of a
21 partnership, trust or a Subchapter S corporation shall be an
22 additional amount equal to 1.5% of such taxpayer's net income
23 for the taxable year.
24     (d-1) Rate reduction for certain foreign insurers. In the
25 case of a foreign insurer, as defined by Section 35A-5 of the
26 Illinois Insurance Code, whose state or country of domicile
27 imposes on insurers domiciled in Illinois a retaliatory tax
28 (excluding any insurer whose premiums from reinsurance assumed
29 are 50% or more of its total insurance premiums as determined
30 under paragraph (2) of subsection (b) of Section 304, except
31 that for purposes of this determination premiums from
32 reinsurance do not include premiums from inter-affiliate
33 reinsurance arrangements), beginning with taxable years ending
34 on or after December 31, 1999, the sum of the rates of tax
35 imposed by subsections (b) and (d) shall be reduced (but not
36 increased) to the rate at which the total amount of tax imposed

 

 

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1 under this Act, net of all credits allowed under this Act,
2 shall equal (i) the total amount of tax that would be imposed
3 on the foreign insurer's net income allocable to Illinois for
4 the taxable year by such foreign insurer's state or country of
5 domicile if that net income were subject to all income taxes
6 and taxes measured by net income imposed by such foreign
7 insurer's state or country of domicile, net of all credits
8 allowed or (ii) a rate of zero if no such tax is imposed on such
9 income by the foreign insurer's state of domicile. For the
10 purposes of this subsection (d-1), an inter-affiliate includes
11 a mutual insurer under common management.
12         (1) For the purposes of subsection (d-1), in no event
13     shall the sum of the rates of tax imposed by subsections
14     (b) and (d) be reduced below the rate at which the sum of:
15             (A) the total amount of tax imposed on such foreign
16         insurer under this Act for a taxable year, net of all
17         credits allowed under this Act, plus
18             (B) the privilege tax imposed by Section 409 of the
19         Illinois Insurance Code, the fire insurance company
20         tax imposed by Section 12 of the Fire Investigation
21         Act, and the fire department taxes imposed under
22         Section 11-10-1 of the Illinois Municipal Code,
23     equals 1.25% for taxable years ending prior to December 31,
24     2003, or 1.75% for taxable years ending on or after
25     December 31, 2003, of the net taxable premiums written for
26     the taxable year, as described by subsection (1) of Section
27     409 of the Illinois Insurance Code. This paragraph will in
28     no event increase the rates imposed under subsections (b)
29     and (d).
30         (2) Any reduction in the rates of tax imposed by this
31     subsection shall be applied first against the rates imposed
32     by subsection (b) and only after the tax imposed by
33     subsection (a) net of all credits allowed under this
34     Section other than the credit allowed under subsection (i)
35     has been reduced to zero, against the rates imposed by
36     subsection (d).

 

 

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1     This subsection (d-1) is exempt from the provisions of
2 Section 250.
3     (e) Investment credit. A taxpayer shall be allowed a credit
4 against the Personal Property Tax Replacement Income Tax for
5 investment in qualified property.
6         (1) A taxpayer shall be allowed a credit equal to .5%
7     of the basis of qualified property placed in service during
8     the taxable year, provided such property is placed in
9     service on or after July 1, 1984. There shall be allowed an
10     additional credit equal to .5% of the basis of qualified
11     property placed in service during the taxable year,
12     provided such property is placed in service on or after
13     July 1, 1986, and the taxpayer's base employment within
14     Illinois has increased by 1% or more over the preceding
15     year as determined by the taxpayer's employment records
16     filed with the Illinois Department of Employment Security.
17     Taxpayers who are new to Illinois shall be deemed to have
18     met the 1% growth in base employment for the first year in
19     which they file employment records with the Illinois
20     Department of Employment Security. The provisions added to
21     this Section by Public Act 85-1200 (and restored by Public
22     Act 87-895) shall be construed as declaratory of existing
23     law and not as a new enactment. If, in any year, the
24     increase in base employment within Illinois over the
25     preceding year is less than 1%, the additional credit shall
26     be limited to that percentage times a fraction, the
27     numerator of which is .5% and the denominator of which is
28     1%, but shall not exceed .5%. The investment credit shall
29     not be allowed to the extent that it would reduce a
30     taxpayer's liability in any tax year below zero, nor may
31     any credit for qualified property be allowed for any year
32     other than the year in which the property was placed in
33     service in Illinois. For tax years ending on or after
34     December 31, 1987, and on or before December 31, 1988, the
35     credit shall be allowed for the tax year in which the
36     property is placed in service, or, if the amount of the

 

 

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1     credit exceeds the tax liability for that year, whether it
2     exceeds the original liability or the liability as later
3     amended, such excess may be carried forward and applied to
4     the tax liability of the 5 taxable years following the
5     excess credit years if the taxpayer (i) makes investments
6     which cause the creation of a minimum of 2,000 full-time
7     equivalent jobs in Illinois, (ii) is located in an
8     enterprise zone established pursuant to the Illinois
9     Enterprise Zone Act and (iii) is certified by the
10     Department of Commerce and Community Affairs (now
11     Department of Commerce and Economic Opportunity) as
12     complying with the requirements specified in clause (i) and
13     (ii) by July 1, 1986. The Department of Commerce and
14     Community Affairs (now Department of Commerce and Economic
15     Opportunity) shall notify the Department of Revenue of all
16     such certifications immediately. For tax years ending
17     after December 31, 1988, the credit shall be allowed for
18     the tax year in which the property is placed in service,
19     or, if the amount of the credit exceeds the tax liability
20     for that year, whether it exceeds the original liability or
21     the liability as later amended, such excess may be carried
22     forward and applied to the tax liability of the 5 taxable
23     years following the excess credit years. The credit shall
24     be applied to the earliest year for which there is a
25     liability. If there is credit from more than one tax year
26     that is available to offset a liability, earlier credit
27     shall be applied first.
28         (2) The term "qualified property" means property
29     which:
30             (A) is tangible, whether new or used, including
31         buildings and structural components of buildings and
32         signs that are real property, but not including land or
33         improvements to real property that are not a structural
34         component of a building such as landscaping, sewer
35         lines, local access roads, fencing, parking lots, and
36         other appurtenances;

 

 

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1             (B) is depreciable pursuant to Section 167 of the
2         Internal Revenue Code, except that "3-year property"
3         as defined in Section 168(c)(2)(A) of that Code is not
4         eligible for the credit provided by this subsection
5         (e);
6             (C) is acquired by purchase as defined in Section
7         179(d) of the Internal Revenue Code;
8             (D) is used in Illinois by a taxpayer who is
9         primarily engaged in manufacturing, or in mining coal
10         or fluorite, or in retailing; and
11             (E) has not previously been used in Illinois in
12         such a manner and by such a person as would qualify for
13         the credit provided by this subsection (e) or
14         subsection (f).
15         (3) For purposes of this subsection (e),
16     "manufacturing" means the material staging and production
17     of tangible personal property by procedures commonly
18     regarded as manufacturing, processing, fabrication, or
19     assembling which changes some existing material into new
20     shapes, new qualities, or new combinations. For purposes of
21     this subsection (e) the term "mining" shall have the same
22     meaning as the term "mining" in Section 613(c) of the
23     Internal Revenue Code. For purposes of this subsection (e),
24     the term "retailing" means the sale of tangible personal
25     property or services rendered in conjunction with the sale
26     of tangible consumer goods or commodities.
27         (4) The basis of qualified property shall be the basis
28     used to compute the depreciation deduction for federal
29     income tax purposes.
30         (5) If the basis of the property for federal income tax
31     depreciation purposes is increased after it has been placed
32     in service in Illinois by the taxpayer, the amount of such
33     increase shall be deemed property placed in service on the
34     date of such increase in basis.
35         (6) The term "placed in service" shall have the same
36     meaning as under Section 46 of the Internal Revenue Code.

 

 

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1         (7) If during any taxable year, any property ceases to
2     be qualified property in the hands of the taxpayer within
3     48 months after being placed in service, or the situs of
4     any qualified property is moved outside Illinois within 48
5     months after being placed in service, the Personal Property
6     Tax Replacement Income Tax for such taxable year shall be
7     increased. Such increase shall be determined by (i)
8     recomputing the investment credit which would have been
9     allowed for the year in which credit for such property was
10     originally allowed by eliminating such property from such
11     computation and, (ii) subtracting such recomputed credit
12     from the amount of credit previously allowed. For the
13     purposes of this paragraph (7), a reduction of the basis of
14     qualified property resulting from a redetermination of the
15     purchase price shall be deemed a disposition of qualified
16     property to the extent of such reduction.
17         (8) Unless the investment credit is extended by law,
18     the basis of qualified property shall not include costs
19     incurred after December 31, 2008, except for costs incurred
20     pursuant to a binding contract entered into on or before
21     December 31, 2008.
22         (9) Each taxable year ending before December 31, 2000,
23     a partnership may elect to pass through to its partners the
24     credits to which the partnership is entitled under this
25     subsection (e) for the taxable year. A partner may use the
26     credit allocated to him or her under this paragraph only
27     against the tax imposed in subsections (c) and (d) of this
28     Section. If the partnership makes that election, those
29     credits shall be allocated among the partners in the
30     partnership in accordance with the rules set forth in
31     Section 704(b) of the Internal Revenue Code, and the rules
32     promulgated under that Section, and the allocated amount of
33     the credits shall be allowed to the partners for that
34     taxable year. The partnership shall make this election on
35     its Personal Property Tax Replacement Income Tax return for
36     that taxable year. The election to pass through the credits

 

 

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1     shall be irrevocable.
2         For taxable years ending on or after December 31, 2000,
3     a partner that qualifies its partnership for a subtraction
4     under subparagraph (I) of paragraph (2) of subsection (d)
5     of Section 203 or a shareholder that qualifies a Subchapter
6     S corporation for a subtraction under subparagraph (S) of
7     paragraph (2) of subsection (b) of Section 203 shall be
8     allowed a credit under this subsection (e) equal to its
9     share of the credit earned under this subsection (e) during
10     the taxable year by the partnership or Subchapter S
11     corporation, determined in accordance with the
12     determination of income and distributive share of income
13     under Sections 702 and 704 and Subchapter S of the Internal
14     Revenue Code. This paragraph is exempt from the provisions
15     of Section 250.
16       (f) Investment credit; Enterprise Zone.
17         (1) A taxpayer shall be allowed a credit against the
18     tax imposed by subsections (a) and (b) of this Section for
19     investment in qualified property which is placed in service
20     in an Enterprise Zone created pursuant to the Illinois
21     Enterprise Zone Act. For partners, shareholders of
22     Subchapter S corporations, and owners of limited liability
23     companies, if the liability company is treated as a
24     partnership for purposes of federal and State income
25     taxation, there shall be allowed a credit under this
26     subsection (f) to be determined in accordance with the
27     determination of income and distributive share of income
28     under Sections 702 and 704 and Subchapter S of the Internal
29     Revenue Code. The credit shall be .5% of the basis for such
30     property. The credit shall be available only in the taxable
31     year in which the property is placed in service in the
32     Enterprise Zone and shall not be allowed to the extent that
33     it would reduce a taxpayer's liability for the tax imposed
34     by subsections (a) and (b) of this Section to below zero.
35     For tax years ending on or after December 31, 1985, the
36     credit shall be allowed for the tax year in which the

 

 

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1     property is placed in service, or, if the amount of the
2     credit exceeds the tax liability for that year, whether it
3     exceeds the original liability or the liability as later
4     amended, such excess may be carried forward and applied to
5     the tax liability of the 5 taxable years following the
6     excess credit year. The credit shall be applied to the
7     earliest year for which there is a liability. If there is
8     credit from more than one tax year that is available to
9     offset a liability, the credit accruing first in time shall
10     be applied first.
11         (2) The term qualified property means property which:
12             (A) is tangible, whether new or used, including
13         buildings and structural components of buildings;
14             (B) is depreciable pursuant to Section 167 of the
15         Internal Revenue Code, except that "3-year property"
16         as defined in Section 168(c)(2)(A) of that Code is not
17         eligible for the credit provided by this subsection
18         (f);
19             (C) is acquired by purchase as defined in Section
20         179(d) of the Internal Revenue Code;
21             (D) is used in the Enterprise Zone by the taxpayer;
22         and
23             (E) has not been previously used in Illinois in
24         such a manner and by such a person as would qualify for
25         the credit provided by this subsection (f) or
26         subsection (e).
27         (3) The basis of qualified property shall be the basis
28     used to compute the depreciation deduction for federal
29     income tax purposes.
30         (4) If the basis of the property for federal income tax
31     depreciation purposes is increased after it has been placed
32     in service in the Enterprise Zone by the taxpayer, the
33     amount of such increase shall be deemed property placed in
34     service on the date of such increase in basis.
35         (5) The term "placed in service" shall have the same
36     meaning as under Section 46 of the Internal Revenue Code.

 

 

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

 

 

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1         end of the previous tax year for which a jobs tax
2         credit under this Section was taken, or beyond the
3         total employed by the taxpayer as of December 31, 1985,
4         whichever is later; and
5             (C) the eligible employees must be employed 180
6         consecutive days in order to be deemed hired for
7         purposes of this subsection.
8         (3) An "eligible employee" means an employee who is:
9             (A) Certified by the Department of Commerce and
10         Economic Opportunity as "eligible for services"
11         pursuant to regulations promulgated in accordance with
12         Title II of the Job Training Partnership Act, Training
13         Services for the Disadvantaged or Title III of the Job
14         Training Partnership Act, Employment and Training
15         Assistance for Dislocated Workers Program.
16             (B) Hired after the enterprise zone or federally
17         designated Foreign Trade Zone or Sub-Zone was
18         designated or the trade or business was located in that
19         zone, whichever is later.
20             (C) Employed in the enterprise zone or Foreign
21         Trade Zone or Sub-Zone. An employee is employed in an
22         enterprise zone or federally designated Foreign Trade
23         Zone or Sub-Zone if his services are rendered there or
24         it is the base of operations for the services
25         performed.
26             (D) A full-time employee working 30 or more hours
27         per week.
28         (4) For tax years ending on or after December 31, 1985
29     and prior to December 31, 1988, the credit shall be allowed
30     for the tax year in which the eligible employees are hired.
31     For tax years ending on or after December 31, 1988, the
32     credit shall be allowed for the tax year immediately
33     following the tax year in which the eligible employees are
34     hired. If the amount of the credit exceeds the tax
35     liability for that year, whether it exceeds the original
36     liability or the liability as later amended, such excess

 

 

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

 

 

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1     year in which the property is placed in service and shall
2     not be allowed to the extent that it would reduce a
3     taxpayer's liability for the tax imposed by subsections (a)
4     and (b) of this Section to below zero. For tax years ending
5     on or after December 31, 1987, the credit shall be allowed
6     for the tax year in which the property is placed in
7     service, or, if the amount of the credit exceeds the tax
8     liability for that year, whether it exceeds the original
9     liability or the liability as later amended, such excess
10     may be carried forward and applied to the tax liability of
11     the 5 taxable years following the excess credit year. The
12     credit shall be applied to the earliest year for which
13     there is a liability. If there is credit from more than one
14     tax year that is available to offset a liability, the
15     credit accruing first in time shall be applied first.
16         Changes made in this subdivision (h)(1) by Public Act
17     88-670 restore changes made by Public Act 85-1182 and
18     reflect existing law.
19         (2) The term qualified property means property which:
20             (A) is tangible, whether new or used, including
21         buildings and structural components of buildings;
22             (B) is depreciable pursuant to Section 167 of the
23         Internal Revenue Code, except that "3-year property"
24         as defined in Section 168(c)(2)(A) of that Code is not
25         eligible for the credit provided by this subsection
26         (h);
27             (C) is acquired by purchase as defined in Section
28         179(d) of the Internal Revenue Code; and
29             (D) is not eligible for the Enterprise Zone
30         Investment Credit provided by subsection (f) of this
31         Section.
32         (3) The basis of qualified property shall be the basis
33     used to compute the depreciation deduction for federal
34     income tax purposes.
35         (4) If the basis of the property for federal income tax
36     depreciation purposes is increased after it has been placed

 

 

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1     in service in a federally designated Foreign Trade Zone or
2     Sub-Zone located in Illinois by the taxpayer, the amount of
3     such increase shall be deemed property placed in service on
4     the date of such increase in basis.
5         (5) The term "placed in service" shall have the same
6     meaning as under Section 46 of the Internal Revenue Code.
7         (6) If during any taxable year ending on or before
8     December 31, 1996, any property ceases to be qualified
9     property in the hands of the taxpayer within 48 months
10     after being placed in service, or the situs of any
11     qualified property is moved outside Illinois within 48
12     months after being placed in service, the tax imposed under
13     subsections (a) and (b) of this Section for such taxable
14     year shall be increased. Such increase shall be determined
15     by (i) recomputing the investment credit which would have
16     been allowed for the year in which credit for such property
17     was originally allowed by eliminating such property from
18     such computation, and (ii) subtracting such recomputed
19     credit from the amount of credit previously allowed. For
20     the purposes of this paragraph (6), a reduction of the
21     basis of qualified property resulting from a
22     redetermination of the purchase price shall be deemed a
23     disposition of qualified property to the extent of such
24     reduction.
25         (7) Beginning with tax years ending after December 31,
26     1996, if a taxpayer qualifies for the credit under this
27     subsection (h) and thereby is granted a tax abatement and
28     the taxpayer relocates its entire facility in violation of
29     the explicit terms and length of the contract under Section
30     18-183 of the Property Tax Code, the tax imposed under
31     subsections (a) and (b) of this Section shall be increased
32     for the taxable year in which the taxpayer relocated its
33     facility by an amount equal to the amount of credit
34     received by the taxpayer under this subsection (h).
35     (i) Credit for Personal Property Tax Replacement Income
36 Tax. For tax years ending prior to December 31, 2003, a credit

 

 

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1 shall be allowed against the tax imposed by subsections (a) and
2 (b) of this Section for the tax imposed by subsections (c) and
3 (d) of this Section. This credit shall be computed by
4 multiplying the tax imposed by subsections (c) and (d) of this
5 Section by a fraction, the numerator of which is base income
6 allocable to Illinois and the denominator of which is Illinois
7 base income, and further multiplying the product by the tax
8 rate imposed by subsections (a) and (b) of this Section.
9     Any credit earned on or after December 31, 1986 under this
10 subsection which is unused in the year the credit is computed
11 because it exceeds the tax liability imposed by subsections (a)
12 and (b) for that year (whether it exceeds the original
13 liability or the liability as later amended) may be carried
14 forward and applied to the tax liability imposed by subsections
15 (a) and (b) of the 5 taxable years following the excess credit
16 year, provided that no credit may be carried forward to any
17 year ending on or after December 31, 2003. This credit shall be
18 applied first to the earliest year for which there is a
19 liability. If there is a credit under this subsection from more
20 than one tax year that is available to offset a liability the
21 earliest credit arising under this subsection shall be applied
22 first.
23     If, during any taxable year ending on or after December 31,
24 1986, the tax imposed by subsections (c) and (d) of this
25 Section for which a taxpayer has claimed a credit under this
26 subsection (i) is reduced, the amount of credit for such tax
27 shall also be reduced. Such reduction shall be determined by
28 recomputing the credit to take into account the reduced tax
29 imposed by subsections (c) and (d). If any portion of the
30 reduced amount of credit has been carried to a different
31 taxable year, an amended return shall be filed for such taxable
32 year to reduce the amount of credit claimed.
33     (j) Training expense credit. Beginning with tax years
34 ending on or after December 31, 1986 and prior to December 31,
35 2003, a taxpayer shall be allowed a credit against the tax
36 imposed by subsections (a) and (b) under this Section for all

 

 

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1 amounts paid or accrued, on behalf of all persons employed by
2 the taxpayer in Illinois or Illinois residents employed outside
3 of Illinois by a taxpayer, for educational or vocational
4 training in semi-technical or technical fields or semi-skilled
5 or skilled fields, which were deducted from gross income in the
6 computation of taxable income. The credit against the tax
7 imposed by subsections (a) and (b) shall be 1.6% of such
8 training expenses. For partners, shareholders of subchapter S
9 corporations, and owners of limited liability companies, if the
10 liability company is treated as a partnership for purposes of
11 federal and State income taxation, there shall be allowed a
12 credit under this subsection (j) to be determined in accordance
13 with the determination of income and distributive share of
14 income under Sections 702 and 704 and subchapter S of the
15 Internal Revenue Code.
16     Any credit allowed under this subsection which is unused in
17 the year the credit is earned may be carried forward to each of
18 the 5 taxable years following the year for which the credit is
19 first computed until it is used. This credit shall be applied
20 first to the earliest year for which there is a liability. If
21 there is a credit under this subsection from more than one tax
22 year that is available to offset a liability the earliest
23 credit arising under this subsection shall be applied first. No
24 carryforward credit may be claimed in any tax year ending on or
25 after December 31, 2003.
26     (k) Research and development credit.
27     For tax years ending after July 1, 1990 and prior to
28 December 31, 2003, and beginning again for tax years ending on
29 or after December 31, 2004, a taxpayer shall be allowed a
30 credit against the tax imposed by subsections (a) and (b) of
31 this Section for increasing research activities in this State.
32 The credit allowed against the tax imposed by subsections (a)
33 and (b) shall be equal to 6 1/2% of the qualifying expenditures
34 for increasing research activities in this State. For partners,
35 shareholders of subchapter S corporations, and owners of
36 limited liability companies, if the liability company is

 

 

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1 treated as a partnership for purposes of federal and State
2 income taxation, there shall be allowed a credit under this
3 subsection to be determined in accordance with the
4 determination of income and distributive share of income under
5 Sections 702 and 704 and subchapter S of the Internal Revenue
6 Code.
7     For purposes of this subsection, "qualifying expenditures"
8 means the qualifying expenditures as defined for the federal
9 credit for increasing research activities which would be
10 allowable under Section 41 of the Internal Revenue Code and
11 which are conducted in this State, "qualifying expenditures for
12 increasing research activities in this State" means the excess
13 of qualifying expenditures for the taxable year in which
14 incurred over qualifying expenditures for the base period,
15 "qualifying expenditures for the base period" means the average
16 of the qualifying expenditures for each year in the base
17 period, and "base period" means the 3 taxable years immediately
18 preceding the taxable year for which the determination is being
19 made.
20     Any credit in excess of the tax liability for the taxable
21 year may be carried forward. A taxpayer may elect to have the
22 unused credit shown on its final completed return carried over
23 as a credit against the tax liability for the following 5
24 taxable years or until it has been fully used, whichever occurs
25 first; provided that no credit earned in a tax year ending
26 prior to December 31, 2003 may be carried forward to any year
27 ending on or after December 31, 2003.
28     If an unused credit is carried forward to a given year from
29 2 or more earlier years, that credit arising in the earliest
30 year will be applied first against the tax liability for the
31 given year. If a tax liability for the given year still
32 remains, the credit from the next earliest year will then be
33 applied, and so on, until all credits have been used or no tax
34 liability for the given year remains. Any remaining unused
35 credit or credits then will be carried forward to the next
36 following year in which a tax liability is incurred, except

 

 

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1 that no credit can be carried forward to a year which is more
2 than 5 years after the year in which the expense for which the
3 credit is given was incurred.
4     No inference shall be drawn from this amendatory Act of the
5 91st General Assembly in construing this Section for taxable
6 years beginning before January 1, 1999.
7     (l) Environmental Remediation Tax Credit.
8         (i) For tax years ending after December 31, 1997 and on
9     or before December 31, 2001, a taxpayer shall be allowed a
10     credit against the tax imposed by subsections (a) and (b)
11     of this Section for certain amounts paid for unreimbursed
12     eligible remediation costs, as specified in this
13     subsection. For purposes of this Section, "unreimbursed
14     eligible remediation costs" means costs approved by the
15     Illinois Environmental Protection Agency ("Agency") under
16     Section 58.14 of the Environmental Protection Act that were
17     paid in performing environmental remediation at a site for
18     which a No Further Remediation Letter was issued by the
19     Agency and recorded under Section 58.10 of the
20     Environmental Protection Act. The credit must be claimed
21     for the taxable year in which Agency approval of the
22     eligible remediation costs is granted. The credit is not
23     available to any taxpayer if the taxpayer or any related
24     party caused or contributed to, in any material respect, a
25     release of regulated substances on, in, or under the site
26     that was identified and addressed by the remedial action
27     pursuant to the Site Remediation Program of the
28     Environmental Protection Act. After the Pollution Control
29     Board rules are adopted pursuant to the Illinois
30     Administrative Procedure Act for the administration and
31     enforcement of Section 58.9 of the Environmental
32     Protection Act, determinations as to credit availability
33     for purposes of this Section shall be made consistent with
34     those rules. For purposes of this Section, "taxpayer"
35     includes a person whose tax attributes the taxpayer has
36     succeeded to under Section 381 of the Internal Revenue Code

 

 

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1     and "related party" includes the persons disallowed a
2     deduction for losses by paragraphs (b), (c), and (f)(1) of
3     Section 267 of the Internal Revenue Code by virtue of being
4     a related taxpayer, as well as any of its partners. The
5     credit allowed against the tax imposed by subsections (a)
6     and (b) shall be equal to 25% of the unreimbursed eligible
7     remediation costs in excess of $100,000 per site, except
8     that the $100,000 threshold shall not apply to any site
9     contained in an enterprise zone as determined by the
10     Department of Commerce and Community Affairs (now
11     Department of Commerce and Economic Opportunity). The
12     total credit allowed shall not exceed $40,000 per year with
13     a maximum total of $150,000 per site. For partners and
14     shareholders of subchapter S corporations, there shall be
15     allowed a credit under this subsection to be determined in
16     accordance with the determination of income and
17     distributive share of income under Sections 702 and 704 and
18     subchapter S of the Internal Revenue Code.
19         (ii) A credit allowed under this subsection that is
20     unused in the year the credit is earned may be carried
21     forward to each of the 5 taxable years following the year
22     for which the credit is first earned until it is used. The
23     term "unused credit" does not include any amounts of
24     unreimbursed eligible remediation costs in excess of the
25     maximum credit per site authorized under paragraph (i).
26     This credit shall be applied first to the earliest year for
27     which there is a liability. If there is a credit under this
28     subsection from more than one tax year that is available to
29     offset a liability, the earliest credit arising under this
30     subsection shall be applied first. A credit allowed under
31     this subsection may be sold to a buyer as part of a sale of
32     all or part of the remediation site for which the credit
33     was granted. The purchaser of a remediation site and the
34     tax credit shall succeed to the unused credit and remaining
35     carry-forward period of the seller. To perfect the
36     transfer, the assignor shall record the transfer in the

 

 

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1     chain of title for the site and provide written notice to
2     the Director of the Illinois Department of Revenue of the
3     assignor's intent to sell the remediation site and the
4     amount of the tax credit to be transferred as a portion of
5     the sale. In no event may a credit be transferred to any
6     taxpayer if the taxpayer or a related party would not be
7     eligible under the provisions of subsection (i).
8         (iii) For purposes of this Section, the term "site"
9     shall have the same meaning as under Section 58.2 of the
10     Environmental Protection Act.
11     (m) Education expense credit. Beginning with tax years
12 ending after December 31, 1999, a taxpayer who is the custodian
13 of one or more qualifying pupils shall be allowed a credit
14 against the tax imposed by subsections (a) and (b) of this
15 Section for qualified education expenses incurred on behalf of
16 the qualifying pupils. The credit shall be equal to 25% of
17 qualified education expenses, but in no event may the total
18 credit under this subsection claimed by a family that is the
19 custodian of qualifying pupils exceed $500. In no event shall a
20 credit under this subsection reduce the taxpayer's liability
21 under this Act to less than zero. This subsection is exempt
22 from the provisions of Section 250 of this Act.
23     For purposes of this subsection:
24     "Qualifying pupils" means individuals who (i) are
25 residents of the State of Illinois, (ii) are under the age of
26 21 at the close of the school year for which a credit is
27 sought, and (iii) during the school year for which a credit is
28 sought were full-time pupils enrolled in a kindergarten through
29 twelfth grade education program at any school, as defined in
30 this subsection.
31     "Qualified education expense" means the amount incurred on
32 behalf of a qualifying pupil in excess of $250 for tuition,
33 book fees, and lab fees at the school in which the pupil is
34 enrolled during the regular school year.
35     "School" means any public or nonpublic elementary or
36 secondary school in Illinois that is in compliance with Title

 

 

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1 VI of the Civil Rights Act of 1964 and attendance at which
2 satisfies the requirements of Section 26-1 of the School Code,
3 except that nothing shall be construed to require a child to
4 attend any particular public or nonpublic school to qualify for
5 the credit under this Section.
6     "Custodian" means, with respect to qualifying pupils, an
7 Illinois resident who is a parent, the parents, a legal
8 guardian, or the legal guardians of the qualifying pupils.
9 (Source: P.A. 92-12, eff. 7-1-01; 92-16, eff. 6-28-01; 92-651,
10 eff. 7-11-02; 93-840, eff. 7-30-04; 92-846, eff. 8-23-02;
11 93-29, eff. 6-20-03; 93-840, eff. 7-30-04; 93-871, eff. 8-6-04;
12 revised 10-25-04.)
 
13     (35 ILCS 5/203)  (from Ch. 120, par. 2-203)
14     Sec. 203. Base income defined.
15     (a) Individuals.
16         (1) In general. In the case of an individual, base
17     income means an amount equal to the taxpayer's adjusted
18     gross income for the taxable year as modified by paragraph
19     (2).
20         (2) Modifications. The adjusted gross income referred
21     to in paragraph (1) shall be modified by adding thereto the
22     sum of the following amounts:
23             (A) An amount equal to all amounts paid or accrued
24         to the taxpayer as interest or dividends during the
25         taxable year to the extent excluded from gross income
26         in the computation of adjusted gross income, except
27         stock dividends of qualified public utilities
28         described in Section 305(e) of the Internal Revenue
29         Code;
30             (B) An amount equal to the amount of tax imposed by
31         this Act to the extent deducted from gross income in
32         the computation of adjusted gross income for the
33         taxable year;
34             (C) An amount equal to the amount received during
35         the taxable year as a recovery or refund of real

 

 

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1         property taxes paid with respect to the taxpayer's
2         principal residence under the Revenue Act of 1939 and
3         for which a deduction was previously taken under
4         subparagraph (L) of this paragraph (2) prior to July 1,
5         1991, the retrospective application date of Article 4
6         of Public Act 87-17. In the case of multi-unit or
7         multi-use structures and farm dwellings, the taxes on
8         the taxpayer's principal residence shall be that
9         portion of the total taxes for the entire property
10         which is attributable to such principal residence;
11             (D) An amount equal to the amount of the capital
12         gain deduction allowable under the Internal Revenue
13         Code, to the extent deducted from gross income in the
14         computation of adjusted gross income;
15             (D-5) An amount, to the extent not included in
16         adjusted gross income, equal to the amount of money
17         withdrawn by the taxpayer in the taxable year from a
18         medical care savings account and the interest earned on
19         the account in the taxable year of a withdrawal
20         pursuant to subsection (b) of Section 20 of the Medical
21         Care Savings Account Act or subsection (b) of Section
22         20 of the Medical Care Savings Account Act of 2000;
23             (D-10) For taxable years ending after December 31,
24         1997, an amount equal to any eligible remediation costs
25         that the individual deducted in computing adjusted
26         gross income and for which the individual claims a
27         credit under subsection (l) of Section 201;
28             (D-15) For taxable years 2001 and thereafter, an
29         amount equal to the bonus depreciation deduction (30%
30         of the adjusted basis of the qualified property) taken
31         on the taxpayer's federal income tax return for the
32         taxable year under subsection (k) of Section 168 of the
33         Internal Revenue Code;
34             (D-16) If the taxpayer reports a capital gain or
35         loss on the taxpayer's federal income tax return for
36         the taxable year based on a sale or transfer of

 

 

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

 

 

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

 

 

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

 

 

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1         property" includes patents, patent applications, trade
2         names, trademarks, service marks, copyrights, mask
3         works, trade secrets, and similar types of intangible
4         assets.
5             This paragraph shall not apply to the following:
6                 (i) any item of intangible expenses or costs
7             paid, accrued, or incurred, directly or
8             indirectly, from a transaction with a foreign
9             person who is subject in a foreign country or
10             state, other than a state which requires mandatory
11             unitary reporting, to a tax on or measured by net
12             income with respect to such item; or
13                 (ii) any item of intangible expense or cost
14             paid, accrued, or incurred, directly or
15             indirectly, if the taxpayer can establish, based
16             on a preponderance of the evidence, both of the
17             following:
18                     (a) the foreign person during the same
19                 taxable year paid, accrued, or incurred, the
20                 intangible expense or cost to a person that is
21                 not a related member, and
22                     (b) the transaction giving rise to the
23                 intangible expense or cost between the
24                 taxpayer and the foreign person did not have as
25                 a principal purpose the avoidance of Illinois
26                 income tax, and is paid pursuant to a contract
27                 or agreement that reflects arm's-length terms;
28                 or
29                 (iii) any item of intangible expense or cost
30             paid, accrued, or incurred, directly or
31             indirectly, from a transaction with a foreign
32             person if the taxpayer establishes by clear and
33             convincing evidence, that the adjustments are
34             unreasonable; or if the taxpayer and the Director
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             (D-20) For taxable years beginning on or after
12         January 1, 2002, in the case of a distribution from a
13         qualified tuition program under Section 529 of the
14         Internal Revenue Code, other than (i) a distribution
15         from a College Savings Pool created under Section 16.5
16         of the State Treasurer Act or (ii) a distribution from
17         the Illinois Prepaid Tuition Trust Fund, an amount
18         equal to the amount excluded from gross income under
19         Section 529(c)(3)(B);
20     and by deducting from the total so obtained the sum of the
21     following amounts:
22             (E) For taxable years ending before December 31,
23         2001, any amount included in such total in respect of
24         any compensation (including but not limited to any
25         compensation paid or accrued to a serviceman while a
26         prisoner of war or missing in action) paid to a
27         resident by reason of being on active duty in the Armed
28         Forces of the United States and in respect of any
29         compensation paid or accrued to a resident who as a
30         governmental employee was a prisoner of war or missing
31         in action, and in respect of any compensation paid to a
32         resident in 1971 or thereafter for annual training
33         performed pursuant to Sections 502 and 503, Title 32,
34         United States Code as a member of the Illinois National
35         Guard. For taxable years ending on or after December
36         31, 2001, any amount included in such total in respect

 

 

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1         of any compensation (including but not limited to any
2         compensation paid or accrued to a serviceman while a
3         prisoner of war or missing in action) paid to a
4         resident by reason of being a member of any component
5         of the Armed Forces of the United States and in respect
6         of any compensation paid or accrued to a resident who
7         as a governmental employee was a prisoner of war or
8         missing in action, and in respect of any compensation
9         paid to a resident in 2001 or thereafter by reason of
10         being a member of the Illinois National Guard. The
11         provisions of this amendatory Act of the 92nd General
12         Assembly are exempt from the provisions of Section 250;
13             (F) For taxable years beginning on or before
14         January 1, 2005, an An amount equal to all amounts
15         included in such total pursuant to the provisions of
16         Sections 402(a), 402(c), 403(a), 403(b), 406(a),
17         407(a), and 408 of the Internal Revenue Code, or
18         included in such total as distributions under the
19         provisions of any retirement or disability plan for
20         employees of any governmental agency or unit, or
21         retirement payments to retired partners, which
22         payments are excluded in computing net earnings from
23         self employment by Section 1402 of the Internal Revenue
24         Code and regulations adopted pursuant thereto;
25             (F-5) For taxable years beginning after January 1,
26         2005, for those taxpayers who report an adjusted gross
27         income of $74,999 ("the retirement threshold amount")
28         or less, an amount equal to all amounts included in
29         such total pursuant to the provisions of Sections
30         402(a), 402(c), 403(a), 403(b), 406(a), 407(a), and
31         408 of the Internal Revenue Code, or included in such
32         total as distributions under the provisions of any
33         retirement or disability plan for employees of any
34         governmental agency or unit, or retirement payments to
35         retired partners, which payments are excluded in
36         computing net earnings from self employment by Section

 

 

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1         1402 of the Internal Revenue Code and regulations
2         adopted pursuant thereto, provided that the retirement
3         threshold amount shall increase annually for each tax
4         year by the percentage increase, if any, in the
5         Consumer Price Index published by the U.S. Bureau of
6         Labor Statistics from July of the immediately
7         preceding tax year to June 30 of the then current tax
8         year;
9             (G) The valuation limitation amount;
10             (H) An amount equal to the amount of any tax
11         imposed by this Act which was refunded to the taxpayer
12         and included in such total for the taxable year;
13             (I) An amount equal to all amounts included in such
14         total pursuant to the provisions of Section 111 of the
15         Internal Revenue Code as a recovery of items previously
16         deducted from adjusted gross income in the computation
17         of taxable income;
18             (J) 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             (K) 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 (J) of paragraph (2) of this subsection
31         shall not be eligible for the deduction provided under
32         this subparagraph (K);
33             (L) For taxable years ending after December 31,
34         1983, an amount equal to all social security benefits
35         and railroad retirement benefits included in such
36         total pursuant to Sections 72(r) and 86 of the Internal

 

 

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

 

 

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1             (R) An amount equal to the amount of any federal or
2         State bonus paid to veterans of the Persian Gulf War;
3             (S) An amount, to the extent included in adjusted
4         gross income, equal to the amount of a contribution
5         made in the taxable year on behalf of the taxpayer to a
6         medical care savings account established under the
7         Medical Care Savings Account Act or the Medical Care
8         Savings Account Act of 2000 to the extent the
9         contribution is accepted by the account administrator
10         as provided in that Act;
11             (T) An amount, to the extent included in adjusted
12         gross income, equal to the amount of interest earned in
13         the taxable year on a medical care savings account
14         established under the Medical Care Savings Account Act
15         or the Medical Care Savings Account Act of 2000 on
16         behalf of the taxpayer, other than interest added
17         pursuant to item (D-5) of this paragraph (2);
18             (U) For one taxable year beginning on or after
19         January 1, 1994, an amount equal to the total amount of
20         tax imposed and paid under subsections (a) and (b) of
21         Section 201 of this Act on grant amounts received by
22         the taxpayer under the Nursing Home Grant Assistance
23         Act during the taxpayer's taxable years 1992 and 1993;
24             (V) Beginning with tax years ending on or after
25         December 31, 1995 and ending with tax years ending on
26         or before December 31, 2004, an amount equal to the
27         amount paid by a taxpayer who is a self-employed
28         taxpayer, a partner of a partnership, or a shareholder
29         in a Subchapter S corporation for health insurance or
30         long-term care insurance for that taxpayer or that
31         taxpayer's spouse or dependents, to the extent that the
32         amount paid for that health insurance or long-term care
33         insurance may be deducted under Section 213 of the
34         Internal Revenue Code of 1986, has not been deducted on
35         the federal income tax return of the taxpayer, and does
36         not exceed the taxable income attributable to that

 

 

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

 

 

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1         Germany or any other Axis regime by European insurance
2         companies immediately prior to and during World War II;
3         provided, however, this subtraction from federal
4         adjusted gross income does not apply to assets acquired
5         with such assets or with the proceeds from the sale of
6         such assets; provided, further, this paragraph shall
7         only apply to a taxpayer who was the first recipient of
8         such assets after their recovery and who is a victim of
9         persecution for racial or religious reasons by Nazi
10         Germany or any other Axis regime or as an heir of the
11         victim. The amount of and the eligibility for any
12         public assistance, benefit, or similar entitlement is
13         not affected by the inclusion of items (i) and (ii) of
14         this paragraph in gross income for federal income tax
15         purposes. This paragraph is exempt from the provisions
16         of Section 250;
17             (Y) For taxable years beginning on or after January
18         1, 2002 and ending on or before December 31, 2004,
19         moneys contributed in the taxable year to a College
20         Savings Pool account under Section 16.5 of the State
21         Treasurer Act, except that amounts excluded from gross
22         income under Section 529(c)(3)(C)(i) of the Internal
23         Revenue Code shall not be considered moneys
24         contributed under this subparagraph (Y). For taxable
25         years beginning on or after January 1, 2005, a maximum
26         of $10,000 contributed in the taxable year to (i) a
27         College Savings Pool account under Section 16.5 of the
28         State Treasurer Act or (ii) the Illinois Prepaid
29         Tuition Trust Fund, except that amounts excluded from
30         gross income under Section 529(c)(3)(C)(i) of the
31         Internal Revenue Code shall not be considered moneys
32         contributed under this subparagraph (Y). This
33         subparagraph (Y) is exempt from the provisions of
34         Section 250;
35             (Z) For taxable years 2001 and thereafter, for the
36         taxable year in which the bonus depreciation deduction

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         dividend recipient, exceed the amount of the
2         modification provided under subparagraph (G) of
3         paragraph (2) of this subsection (b) which is related
4         to such dividends;
5             (P) An amount equal to any contribution made to a
6         job training project established pursuant to the Tax
7         Increment Allocation Redevelopment Act;
8             (Q) An amount equal to the amount of the deduction
9         used to compute the federal income tax credit for
10         restoration of substantial amounts held under claim of
11         right for the taxable year pursuant to Section 1341 of
12         the Internal Revenue Code of 1986;
13             (R) In the case of an attorney-in-fact with respect
14         to whom an interinsurer or a reciprocal insurer has
15         made the election under Section 835 of the Internal
16         Revenue Code, 26 U.S.C. 835, an amount equal to the
17         excess, if any, of the amounts paid or incurred by that
18         interinsurer or reciprocal insurer in the taxable year
19         to the attorney-in-fact over the deduction allowed to
20         that interinsurer or reciprocal insurer with respect
21         to the attorney-in-fact under Section 835(b) of the
22         Internal Revenue Code for the taxable year;
23             (S) For taxable years ending on or after December
24         31, 1997, in the case of a Subchapter S corporation, an
25         amount equal to all amounts of income allocable to a
26         shareholder subject to the Personal Property Tax
27         Replacement Income Tax imposed by subsections (c) and
28         (d) of Section 201 of this Act, including amounts
29         allocable to organizations exempt from federal income
30         tax by reason of Section 501(a) of the Internal Revenue
31         Code. This subparagraph (S) is exempt from the
32         provisions of Section 250;
33             (T) For taxable years 2001 and thereafter, for the
34         taxable year in which the bonus depreciation deduction
35         (30% of the adjusted basis of the qualified property)
36         is taken on the taxpayer's federal income tax return

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         gross income and for which the trust or estate claims a
2         credit under subsection (l) of Section 201;
3             (G-10) For taxable years 2001 and thereafter, an
4         amount equal to the bonus depreciation deduction (30%
5         of the adjusted basis of the qualified property) taken
6         on the taxpayer's federal income tax return for the
7         taxable year under subsection (k) of Section 168 of the
8         Internal Revenue Code; and
9             (G-11) If the taxpayer reports a capital gain or
10         loss on the taxpayer's federal income tax return for
11         the taxable year based on a sale or transfer of
12         property for which the taxpayer was required in any
13         taxable year to make an addition modification under
14         subparagraph (G-10), then an amount equal to the
15         aggregate amount of the deductions taken in all taxable
16         years under subparagraph (R) with respect to that
17         property.
18             The taxpayer is required to make the addition
19         modification under this subparagraph only once with
20         respect to any one piece of property;
21             (G-12) For taxable years ending on or after
22         December 31, 2004, an amount equal to the amount
23         otherwise allowed as a deduction in computing base
24         income for interest paid, accrued, or incurred,
25         directly or indirectly, to a foreign person who would
26         be a member of the same unitary business group but for
27         the fact that the foreign person's business activity
28         outside the United States is 80% or more of the foreign
29         person's total business activity. The addition
30         modification required by this subparagraph shall be
31         reduced to the extent that dividends were included in
32         base income of the unitary group for the same taxable
33         year and received by the taxpayer or by a member of the
34         taxpayer's unitary business group (including amounts
35         included in gross income pursuant to Sections 951
36         through 964 of the Internal Revenue Code and amounts

 

 

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

 

 

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

 

 

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

 

 

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1                 a principal purpose the avoidance of Illinois
2                 income tax, and is paid pursuant to a contract
3                 or agreement that reflects arm's-length terms;
4                 or
5                 (iii) any item of intangible expense or cost
6             paid, accrued, or incurred, directly or
7             indirectly, from a transaction with a foreign
8             person if the taxpayer establishes by clear and
9             convincing evidence, that the adjustments are
10             unreasonable; or if the taxpayer and the Director
11             agree in writing to the application or use of an
12             alternative method of apportionment under Section
13             304(f);
14                 Nothing in this subsection shall preclude the
15             Director from making any other adjustment
16             otherwise allowed under Section 404 of this Act for
17             any tax year beginning after the effective date of
18             this amendment provided such adjustment is made
19             pursuant to regulation adopted by the Department
20             and such regulations provide methods and standards
21             by which the Department will utilize its authority
22             under Section 404 of this Act;
23     and by deducting from the total so obtained the sum of the
24     following amounts:
25             (H) An amount equal to all amounts included in such
26         total pursuant to the provisions of Sections 402(a),
27         402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
28         Internal Revenue Code or included in such total as
29         distributions under the provisions of any retirement
30         or disability plan for employees of any governmental
31         agency or unit, or retirement payments to retired
32         partners, which payments are excluded in computing net
33         earnings from self employment by Section 1402 of the
34         Internal Revenue Code and regulations adopted pursuant
35         thereto;
36             (I) The valuation limitation amount;

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1             not federal or Illinois tax avoidance; or
2                 (iv) an item of interest paid, accrued, or
3             incurred, directly or indirectly, to 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; and
19             (D-8) For taxable years ending on or after December
20         31, 2004, an amount equal to the amount of intangible
21         expenses and costs otherwise allowed as a deduction in
22         computing base income, and that were paid, accrued, or
23         incurred, directly or indirectly, to a foreign person
24         who would be a member of the same unitary business
25         group but for the fact that the foreign person's
26         business activity outside the United States is 80% or
27         more of that person's total business activity. The
28         addition modification required by this subparagraph
29         shall be reduced to the extent that dividends were
30         included in base income of the unitary group for the
31         same taxable year and received by the taxpayer or by a
32         member of the taxpayer's unitary business group
33         (including amounts included in gross income pursuant
34         to Sections 951 through 964 of the Internal Revenue
35         Code and amounts included in gross income under Section
36         78 of the Internal Revenue Code) with respect to the

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         a regulated investment company subject to the tax
2         imposed by Section 852 of the Internal Revenue Code,
3         investment company taxable income;
4             (D) Real estate investment trusts. In the case of a
5         real estate investment trust subject to the tax imposed
6         by Section 857 of the Internal Revenue Code, real
7         estate investment trust taxable income;
8             (E) Consolidated corporations. In the case of a
9         corporation which is a member of an affiliated group of
10         corporations filing a consolidated income tax return
11         for the taxable year for federal income tax purposes,
12         taxable income determined as if such corporation had
13         filed a separate return for federal income tax purposes
14         for the taxable year and each preceding taxable year
15         for which it was a member of an affiliated group. For
16         purposes of this subparagraph, the taxpayer's separate
17         taxable income shall be determined as if the election
18         provided by Section 243(b) (2) of the Internal Revenue
19         Code had been in effect for all such years;
20             (F) Cooperatives. In the case of a cooperative
21         corporation or association, the taxable income of such
22         organization determined in accordance with the
23         provisions of Section 1381 through 1388 of the Internal
24         Revenue Code;
25             (G) Subchapter S corporations. In the case of: (i)
26         a Subchapter S corporation for which there is in effect
27         an election for the taxable year under Section 1362 of
28         the Internal Revenue Code, the taxable income of such
29         corporation determined in accordance with Section
30         1363(b) of the Internal Revenue Code, except that
31         taxable income shall take into account those items
32         which are required by Section 1363(b)(1) of the
33         Internal Revenue Code to be separately stated; and (ii)
34         a Subchapter S corporation for which there is in effect
35         a federal election to opt out of the provisions of the
36         Subchapter S Revision Act of 1982 and have applied

 

 

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

 

 

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1         which such gain was reported for the taxable year; plus
2             (B) The lesser of (i) the sum of the pre-August 1,
3         1969 appreciation amounts (to the extent consisting of
4         capital gain) for all property in respect of which such
5         gain was reported for federal income tax purposes for
6         the taxable year, or (ii) the net capital gain for the
7         taxable year, reduced in either case by any amount of
8         such gain included in the amount determined under
9         subsection (a) (2) (F) or (c) (2) (H).
10         (2) Pre-August 1, 1969 appreciation amount.
11             (A) If the fair market value of property referred
12         to in paragraph (1) was readily ascertainable on August
13         1, 1969, the pre-August 1, 1969 appreciation amount for
14         such property is the lesser of (i) the excess of such
15         fair market value over the taxpayer's basis (for
16         determining gain) for such property on that date
17         (determined under the Internal Revenue Code as in
18         effect on that date), or (ii) the total gain realized
19         and reportable for federal income tax purposes in
20         respect of the sale, exchange or other disposition of
21         such property.
22             (B) If the fair market value of property referred
23         to in paragraph (1) was not readily ascertainable on
24         August 1, 1969, the pre-August 1, 1969 appreciation
25         amount for such property is that amount which bears the
26         same ratio to the total gain reported in respect of the
27         property for federal income tax purposes for the
28         taxable year, as the number of full calendar months in
29         that part of the taxpayer's holding period for the
30         property ending July 31, 1969 bears to the number of
31         full calendar months in the taxpayer's entire holding
32         period for the property.
33             (C) The Department shall prescribe such
34         regulations as may be necessary to carry out the
35         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     (35 ILCS 5/247 new)
18     Sec. 247. Family Tax Credit.
19     (a) For taxable years beginning after January 1, 2005, each
20 taxpayer who is a natural person or is a married couple filing
21 jointly that reports total annual income of $47,000 or less
22 (the "eligibility cap"), is entitled to a refundable tax credit
23 known as the Family Tax Credit in those amounts identified in
24 subsection (b) of this Section. The Family Tax Credit may be
25 claimed only upon proper filing of an Illinois State income tax
26 return by an eligible taxpayer. The eligibility cap shall
27 increase for each tax year beginning after December 31, 2005,
28 by an amount equal to the percentage increase, if any, in the
29 Consumer Price Index ("CPI") published by the U.S. Bureau of
30 Labor Statistics for the immediately preceding tax year,
31 multiplied by the eligibility cap for that immediately
32 preceding tax year.
33     (b) The amount of Family Tax Credit an eligible taxpayer
34 may claim will vary in amount, based on the following table:
 

 

 

 

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1
2Total Annual Income Credit
3Less than $16,000 $200
4$16,000 or more but less than $29,000 $350
5$29,000 or more but less than $47,001 $230
6 The dollar ranges of Total Annual Income identified in each
7 category, as well as the value of the credit for that category,
8 shall increase in each tax year beginning after December 31,
9 2005 by an amount equal to the applicable Total Annual Income
10 category or credit amount, as the case may be, increased by the
11 percentage increase, if any, in the CPI for the immediately
12 preceding tax year. The Department of Revenue shall update the
13 Total Annual Income category and credit amounts for the Family
14 Tax Credit annually and distribute the updated table with the
15 Illinois personal income tax returns.
16     (c) If the amount of the Family Tax Credit exceeds the
17 income tax liability of an eligible taxpayer, the State shall
18 refund to the taxpayer the difference between the Family Tax
19 Credit and the taxpayer's income tax liability.
20     (d) This Section is exempt from the provisions of Section
21 250 of this Act.
 
22     Section 15. The Use Tax Act is amended by changing Section
23 2 as follows:
 
24     (35 ILCS 105/2)  (from Ch. 120, par. 439.2)
25     Sec. 2. "Use" means the exercise by any person of any right
26 or power over tangible personal property incident to the
27 ownership of that property, except that it does not include the
28 sale of such property in any form as tangible personal property
29 in the regular course of business to the extent that such
30 property is not first subjected to a use for which it was
31 purchased, and does not include the use of such property by its
32 owner for demonstration purposes: Provided that the property

 

 

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1 purchased is deemed to be purchased for the purpose of resale,
2 despite first being used, to the extent to which it is resold
3 as an ingredient of an intentionally produced product or
4 by-product of manufacturing. "Use" does not mean the
5 demonstration use or interim use of tangible personal property
6 by a retailer before he sells that tangible personal property.
7 For watercraft or aircraft, if the period of demonstration use
8 or interim use by the retailer exceeds 18 months, the retailer
9 shall pay on the retailers' original cost price the tax imposed
10 by this Act, and no credit for that tax is permitted if the
11 watercraft or aircraft is subsequently sold by the retailer.
12 "Use" does not mean the physical incorporation of tangible
13 personal property, to the extent not first subjected to a use
14 for which it was purchased, as an ingredient or constituent,
15 into other tangible personal property (a) which is sold in the
16 regular course of business or (b) which the person
17 incorporating such ingredient or constituent therein has
18 undertaken at the time of such purchase to cause to be
19 transported in interstate commerce to destinations outside the
20 State of Illinois: Provided that the property purchased is
21 deemed to be purchased for the purpose of resale, despite first
22 being used, to the extent to which it is resold as an
23 ingredient of an intentionally produced product or by-product
24 of manufacturing.
25     "Watercraft" means a Class 2, Class 3, or Class 4
26 watercraft as defined in Section 3-2 of the Boat Registration
27 and Safety Act, a personal watercraft, or any boat equipped
28 with an inboard motor.
29     "Purchase at retail" means the acquisition of the ownership
30 of or title to tangible personal property through a sale at
31 retail.
32     "Purchaser" means anyone who, through a sale at retail,
33 acquires the ownership of tangible personal property for a
34 valuable consideration.
35     "Sale at retail" means any transfer of the ownership of or
36 title to tangible personal property to a purchaser, for the

 

 

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1 purpose of use, and not for the purpose of resale in any form
2 as tangible personal property to the extent not first subjected
3 to a use for which it was purchased, for a valuable
4 consideration: Provided that the property purchased is deemed
5 to be purchased for the purpose of resale, despite first being
6 used, to the extent to which it is resold as an ingredient of
7 an intentionally produced product or by-product of
8 manufacturing. For this purpose, slag produced as an incident
9 to manufacturing pig iron or steel and sold is considered to be
10 an intentionally produced by-product of manufacturing. "Sale
11 at retail" includes any such transfer made for resale unless
12 made in compliance with Section 2c of the Retailers' Occupation
13 Tax Act, as incorporated by reference into Section 12 of this
14 Act. Transactions whereby the possession of the property is
15 transferred but the seller retains the title as security for
16 payment of the selling price are sales.
17     "Sale at retail" shall also be construed to include any
18 Illinois florist's sales transaction in which the purchase
19 order is received in Illinois by a florist and the sale is for
20 use or consumption, but the Illinois florist has a florist in
21 another state deliver the property to the purchaser or the
22 purchaser's donee in such other state.
23     Nonreusable tangible personal property that is used by
24 persons engaged in the business of operating a restaurant,
25 cafeteria, or drive-in is a sale for resale when it is
26 transferred to customers in the ordinary course of business as
27 part of the sale of food or beverages and is used to deliver,
28 package, or consume food or beverages, regardless of where
29 consumption of the food or beverages occurs. Examples of those
30 items include, but are not limited to nonreusable, paper and
31 plastic cups, plates, baskets, boxes, sleeves, buckets or other
32 containers, utensils, straws, placemats, napkins, doggie bags,
33 and wrapping or packaging materials that are transferred to
34 customers as part of the sale of food or beverages in the
35 ordinary course of business.
36     The purchase, employment and transfer of such tangible

 

 

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1 personal property as newsprint and ink for the primary purpose
2 of conveying news (with or without other information) is not a
3 purchase, use or sale of tangible personal property.
4     "Selling price" means the consideration for a sale valued
5 in money whether received in money or otherwise, including
6 cash, credits, property other than as hereinafter provided, and
7 services, but not including the value of or credit given for
8 traded-in tangible personal property where the item that is
9 traded-in is of like kind and character as that which is being
10 sold, and shall be determined without any deduction on account
11 of the cost of the property sold, the cost of materials used,
12 labor or service cost or any other expense whatsoever, but does
13 not include interest or finance charges which appear as
14 separate items on the bill of sale or sales contract nor
15 charges that are added to prices by sellers on account of the
16 seller's tax liability under the "Retailers' Occupation Tax
17 Act", or on account of the seller's duty to collect, from the
18 purchaser, the tax that is imposed by this Act, or on account
19 of the seller's tax liability under Section 8-11-1 of the
20 Illinois Municipal Code, as heretofore and hereafter amended,
21 or on account of the seller's tax liability under the "County
22 Retailers' Occupation Tax Act". Effective December 1, 1985,
23 "selling price" shall include charges that are added to prices
24 by sellers on account of the seller's tax liability under the
25 Cigarette Tax Act, on account of the seller's duty to collect,
26 from the purchaser, the tax imposed under the Cigarette Use Tax
27 Act, and on account of the seller's duty to collect, from the
28 purchaser, any cigarette tax imposed by a home rule unit.
29     The phrase "like kind and character" shall be liberally
30 construed (including but not limited to any form of motor
31 vehicle for any form of motor vehicle, or any kind of farm or
32 agricultural implement for any other kind of farm or
33 agricultural implement), while not including a kind of item
34 which, if sold at retail by that retailer, would be exempt from
35 retailers' occupation tax and use tax as an isolated or
36 occasional sale.

 

 

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1     "Department" means the Department of Revenue.
2     "Person" means any natural individual, firm, partnership,
3 association, joint stock company, joint adventure, public or
4 private corporation, limited liability company, or a receiver,
5 executor, trustee, guardian or other representative appointed
6 by order of any court.
7     "Retailer" means and includes every person engaged in the
8 business of making sales at retail as defined in this Section.
9     A person who holds himself or herself out as being engaged
10 (or who habitually engages) in selling tangible personal
11 property at retail is a retailer hereunder with respect to such
12 sales (and not primarily in a service occupation)
13 notwithstanding the fact that such person designs and produces
14 such tangible personal property on special order for the
15 purchaser and in such a way as to render the property of value
16 only to such purchaser, if such tangible personal property so
17 produced on special order serves substantially the same
18 function as stock or standard items of tangible personal
19 property that are sold at retail.
20     A person whose activities are organized and conducted
21 primarily as a not-for-profit service enterprise, and who
22 engages in selling tangible personal property at retail
23 (whether to the public or merely to members and their guests)
24 is a retailer with respect to such transactions, excepting only
25 a person organized and operated exclusively for charitable,
26 religious or educational purposes either (1), to the extent of
27 sales by such person to its members, students, patients or
28 inmates of tangible personal property to be used primarily for
29 the purposes of such person, or (2), to the extent of sales by
30 such person of tangible personal property which is not sold or
31 offered for sale by persons organized for profit. The selling
32 of school books and school supplies by schools at retail to
33 students is not "primarily for the purposes of" the school
34 which does such selling. This paragraph does not apply to nor
35 subject to taxation occasional dinners, social or similar
36 activities of a person organized and operated exclusively for

 

 

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1 charitable, religious or educational purposes, whether or not
2 such activities are open to the public.
3     A person who is the recipient of a grant or contract under
4 Title VII of the Older Americans Act of 1965 (P.L. 92-258) and
5 serves meals to participants in the federal Nutrition Program
6 for the Elderly in return for contributions established in
7 amount by the individual participant pursuant to a schedule of
8 suggested fees as provided for in the federal Act is not a
9 retailer under this Act with respect to such transactions.
10     Persons who engage in the business of transferring tangible
11 personal property upon the redemption of trading stamps are
12 retailers hereunder when engaged in such business.
13     The isolated or occasional sale of tangible personal
14 property at retail by a person who does not hold himself out as
15 being engaged (or who does not habitually engage) in selling
16 such tangible personal property at retail or a sale through a
17 bulk vending machine does not make such person a retailer
18 hereunder. However, any person who is engaged in a business
19 which is not subject to the tax imposed by the "Retailers'
20 Occupation Tax Act" because of involving the sale of or a
21 contract to sell real estate or a construction contract to
22 improve real estate, but who, in the course of conducting such
23 business, transfers tangible personal property to users or
24 consumers in the finished form in which it was purchased, and
25 which does not become real estate, under any provision of a
26 construction contract or real estate sale or real estate sales
27 agreement entered into with some other person arising out of or
28 because of such nontaxable business, is a retailer to the
29 extent of the value of the tangible personal property so
30 transferred. If, in such transaction, a separate charge is made
31 for the tangible personal property so transferred, the value of
32 such property, for the purposes of this Act, is the amount so
33 separately charged, but not less than the cost of such property
34 to the transferor; if no separate charge is made, the value of
35 such property, for the purposes of this Act, is the cost to the
36 transferor of such tangible personal property.

 

 

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1     "Retailer maintaining a place of business in this State",
2 or any like term, means and includes any of the following
3 retailers:
4         1. A retailer having or maintaining within this State,
5     directly or by a subsidiary, an office, distribution house,
6     sales house, warehouse or other place of business, or any
7     agent or other representative operating within this State
8     under the authority of the retailer or its subsidiary,
9     irrespective of whether such place of business or agent or
10     other representative is located here permanently or
11     temporarily, or whether such retailer or subsidiary is
12     licensed to do business in this State. However, the
13     ownership of property that is located at the premises of a
14     printer with which the retailer has contracted for printing
15     and that consists of the final printed product, property
16     that becomes a part of the final printed product, or copy
17     from which the printed product is produced shall not result
18     in the retailer being deemed to have or maintain an office,
19     distribution house, sales house, warehouse, or other place
20     of business within this State.
21         2. A retailer soliciting orders for tangible personal
22     property by means of a telecommunication or television
23     shopping system (which utilizes toll free numbers) which is
24     intended by the retailer to be broadcast by cable
25     television or other means of broadcasting, to consumers
26     located in this State.
27         3. A retailer, pursuant to a contract with a
28     broadcaster or publisher located in this State, soliciting
29     orders for tangible personal property by means of
30     advertising which is disseminated primarily to consumers
31     located in this State and only secondarily to bordering
32     jurisdictions.
33         4. A retailer soliciting orders for tangible personal
34     property by mail if the solicitations are substantial and
35     recurring and if the retailer benefits from any banking,
36     financing, debt collection, telecommunication, or

 

 

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1     marketing activities occurring in this State or benefits
2     from the location in this State of authorized installation,
3     servicing, or repair facilities.
4         5. A retailer that is owned or controlled by the same
5     interests that own or control any retailer engaging in
6     business in the same or similar line of business in this
7     State.
8         6. A retailer having a franchisee or licensee operating
9     under its trade name if the franchisee or licensee is
10     required to collect the tax under this Section.
11         7. A retailer, pursuant to a contract with a cable
12     television operator located in this State, soliciting
13     orders for tangible personal property by means of
14     advertising which is transmitted or distributed over a
15     cable television system in this State.
16         8. A retailer engaging in activities in Illinois, which
17     activities in the state in which the retail business
18     engaging in such activities is located would constitute
19     maintaining a place of business in that state.
20     "Bulk vending machine" means a vending machine, containing
21 unsorted confections, nuts, toys, or other items designed
22 primarily to be used or played with by children which, when a
23 coin or coins of a denomination not larger than $0.50 are
24 inserted, are dispensed in equal portions, at random and
25 without selection by the customer.
26 (Source: P.A. 92-213, eff. 1-1-02.)
 
27     (35 ILCS 105/3-50 rep.)  (from Ch. 120, par. 439.3-50)
28     Section 17. The Use Tax Act is amended by repealing Section
29 3-50.
 
30     Section 20. The Service Use Tax Act is amended by changing
31 Section 2 as follows:
 
32     (35 ILCS 110/2)  (from Ch. 120, par. 439.32)
33     Sec. 2. "Use" means the exercise by any person of any right

 

 

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1 or power over tangible personal property incident to the
2 ownership of that property, but does not include the sale or
3 use for demonstration by him of that property in any form as
4 tangible personal property in the regular course of business.
5 "Use" does not mean the interim use of tangible personal
6 property nor the physical incorporation of tangible personal
7 property, as an ingredient or constituent, into other tangible
8 personal property, (a) which is sold in the regular course of
9 business or (b) which the person incorporating such ingredient
10 or constituent therein has undertaken at the time of such
11 purchase to cause to be transported in interstate commerce to
12 destinations outside the State of Illinois.
13     "Purchased from a serviceman" means the acquisition of the
14 ownership of, or title to, tangible personal property through a
15 sale of service.
16     "Purchaser" means any person who, through a sale of
17 service, acquires the ownership of, or title to, any tangible
18 personal property.
19     "Cost price" means the consideration paid by the serviceman
20 for a purchase valued in money, whether paid in money or
21 otherwise, including cash, credits and services, and shall be
22 determined without any deduction on account of the supplier's
23 cost of the property sold or on account of any other expense
24 incurred by the supplier. When a serviceman contracts out part
25 or all of the services required in his sale of service, it
26 shall be presumed that the cost price to the serviceman of the
27 property transferred to him or her by his or her subcontractor
28 is equal to 50% of the subcontractor's charges to the
29 serviceman in the absence of proof of the consideration paid by
30 the subcontractor for the purchase of such property.
31     "Selling price" means the consideration for a sale valued
32 in money whether received in money or otherwise, including
33 cash, credits and service, and shall be determined without any
34 deduction on account of the serviceman's cost of the property
35 sold, the cost of materials used, labor or service cost or any
36 other expense whatsoever, but does not include interest or

 

 

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1 finance charges which appear as separate items on the bill of
2 sale or sales contract nor charges that are added to prices by
3 sellers on account of the seller's duty to collect, from the
4 purchaser, the tax that is imposed by this Act.
5     "Department" means the Department of Revenue.
6     "Person" means any natural individual, firm, partnership,
7 association, joint stock company, joint venture, public or
8 private corporation, limited liability company, and any
9 receiver, executor, trustee, guardian or other representative
10 appointed by order of any court.
11     "Sale of service" means any transaction except:
12         (1) a retail sale of tangible personal property taxable
13     under the Retailers' Occupation Tax Act or under the Use
14     Tax Act.
15         (2) a sale of tangible personal property for the
16     purpose of resale made in compliance with Section 2c of the
17     Retailers' Occupation Tax Act.
18         (3) except as hereinafter provided, a sale or transfer
19     of tangible personal property as an incident to the
20     rendering of service for or by any governmental body, or
21     for or by any corporation, society, association,
22     foundation or institution organized and operated
23     exclusively for charitable, religious or educational
24     purposes or any not-for-profit corporation, society,
25     association, foundation, institution or organization which
26     has no compensated officers or employees and which is
27     organized and operated primarily for the recreation of
28     persons 55 years of age or older. A limited liability
29     company may qualify for the exemption under this paragraph
30     only if the limited liability company is organized and
31     operated exclusively for educational purposes.
32         (4) a sale or transfer of tangible personal property as
33     an incident to the rendering of service for interstate
34     carriers for hire for use as rolling stock moving in
35     interstate commerce or by lessors under a lease of one year
36     or longer, executed or in effect at the time of purchase of

 

 

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1     personal property, to interstate carriers for hire for use
2     as rolling stock moving in interstate commerce so long as
3     so used by such interstate carriers for hire, and equipment
4     operated by a telecommunications provider, licensed as a
5     common carrier by the Federal Communications Commission,
6     which is permanently installed in or affixed to aircraft
7     moving in interstate commerce.
8         (4a) a sale or transfer of tangible personal property
9     as an incident to the rendering of service for owners,
10     lessors, or shippers of tangible personal property which is
11     utilized by interstate carriers for hire for use as rolling
12     stock moving in interstate commerce so long as so used by
13     interstate carriers for hire, and equipment operated by a
14     telecommunications provider, licensed as a common carrier
15     by the Federal Communications Commission, which is
16     permanently installed in or affixed to aircraft moving in
17     interstate commerce.
18         (4a-5) on and after July 1, 2003 and through June 30,
19     2004, a sale or transfer of a motor vehicle of the second
20     division with a gross vehicle weight in excess of 8,000
21     pounds as an incident to the rendering of service if that
22     motor vehicle is subject to the commercial distribution fee
23     imposed under Section 3-815.1 of the Illinois Vehicle Code.
24     Beginning on July 1, 2004 and through June 30, 2005, the
25     use in this State of motor vehicles of the second division:
26     (i) with a gross vehicle weight rating in excess of 8,000
27     pounds; (ii) that are subject to the commercial
28     distribution fee imposed under Section 3-815.1 of the
29     Illinois Vehicle Code; and (iii) that are primarily used
30     for commercial purposes. Through June 30, 2005, this
31     exemption applies to repair and replacement parts added
32     after the initial purchase of such a motor vehicle if that
33     motor vehicle is used in a manner that would qualify for
34     the rolling stock exemption otherwise provided for in this
35     Act. For purposes of this paragraph, "used for commercial
36     purposes" means the transportation of persons or property

 

 

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1     in furtherance of any commercial or industrial enterprise
2     whether for-hire or not.
3         (5) a sale or transfer of machinery and equipment used
4     primarily in the process of the manufacturing or
5     assembling, either in an existing, an expanded or a new
6     manufacturing facility, of tangible personal property for
7     wholesale or retail sale or lease, whether such sale or
8     lease is made directly by the manufacturer or by some other
9     person, whether the materials used in the process are owned
10     by the manufacturer or some other person, or whether such
11     sale or lease is made apart from or as an incident to the
12     seller's engaging in a service occupation and the
13     applicable tax is a Service Use Tax or Service Occupation
14     Tax, rather than Use Tax or Retailers' Occupation Tax.
15         (5a) the repairing, reconditioning or remodeling, for
16     a common carrier by rail, of tangible personal property
17     which belongs to such carrier for hire, and as to which
18     such carrier receives the physical possession of the
19     repaired, reconditioned or remodeled item of tangible
20     personal property in Illinois, and which such carrier
21     transports, or shares with another common carrier in the
22     transportation of such property, out of Illinois on a
23     standard uniform bill of lading showing the person who
24     repaired, reconditioned or remodeled the property to a
25     destination outside Illinois, for use outside Illinois.
26         (5b) a sale or transfer of tangible personal property
27     which is produced by the seller thereof on special order in
28     such a way as to have made the applicable tax the Service
29     Occupation Tax or the Service Use Tax, rather than the
30     Retailers' Occupation Tax or the Use Tax, for an interstate
31     carrier by rail which receives the physical possession of
32     such property in Illinois, and which transports such
33     property, or shares with another common carrier in the
34     transportation of such property, out of Illinois on a
35     standard uniform bill of lading showing the seller of the
36     property as the shipper or consignor of such property to a

 

 

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1     destination outside Illinois, for use outside Illinois.
2         (6) until July 1, 2003, a sale or transfer of
3     distillation machinery and equipment, sold as a unit or kit
4     and assembled or installed by the retailer, which machinery
5     and equipment is certified by the user to be used only for
6     the production of ethyl alcohol that will be used for
7     consumption as motor fuel or as a component of motor fuel
8     for the personal use of such user and not subject to sale
9     or resale.
10         (7) at the election of any serviceman not required to
11     be otherwise registered as a retailer under Section 2a of
12     the Retailers' Occupation Tax Act, made for each fiscal
13     year sales of service in which the aggregate annual cost
14     price of tangible personal property transferred as an
15     incident to the sales of service is less than 35%, or 75%
16     in the case of servicemen transferring prescription drugs
17     or servicemen engaged in graphic arts production, of the
18     aggregate annual total gross receipts from all sales of
19     service. The purchase of such tangible personal property by
20     the serviceman shall be subject to tax under the Retailers'
21     Occupation Tax Act and the Use Tax Act. However, if a
22     primary serviceman who has made the election described in
23     this paragraph subcontracts service work to a secondary
24     serviceman who has also made the election described in this
25     paragraph, the primary serviceman does not incur a Use Tax
26     liability if the secondary serviceman (i) has paid or will
27     pay Use Tax on his or her cost price of any tangible
28     personal property transferred to the primary serviceman
29     and (ii) certifies that fact in writing to the primary
30     serviceman.
31     Tangible personal property transferred incident to the
32 completion of a maintenance agreement is exempt from the tax
33 imposed pursuant to this Act.
34     Exemption (5) also includes machinery and equipment used in
35 the general maintenance or repair of such exempt machinery and
36 equipment or for in-house manufacture of exempt machinery and

 

 

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1 equipment. For the purposes of exemption (5), each of these
2 terms shall have the following meanings: (1) "manufacturing
3 process" shall mean the production of any article of tangible
4 personal property, whether such article is a finished product
5 or an article for use in the process of manufacturing or
6 assembling a different article of tangible personal property,
7 by procedures commonly regarded as manufacturing, processing,
8 fabricating, or refining which changes some existing material
9 or materials into a material with a different form, use or
10 name. In relation to a recognized integrated business composed
11 of a series of operations which collectively constitute
12 manufacturing, or individually constitute manufacturing
13 operations, the manufacturing process shall be deemed to
14 commence with the first operation or stage of production in the
15 series, and shall not be deemed to end until the completion of
16 the final product in the last operation or stage of production
17 in the series; and further, for purposes of exemption (5),
18 photoprocessing is deemed to be a manufacturing process of
19 tangible personal property for wholesale or retail sale; (2)
20 "assembling process" shall mean the production of any article
21 of tangible personal property, whether such article is a
22 finished product or an article for use in the process of
23 manufacturing or assembling a different article of tangible
24 personal property, by the combination of existing materials in
25 a manner commonly regarded as assembling which results in a
26 material of a different form, use or name; (3) "machinery"
27 shall mean major mechanical machines or major components of
28 such machines contributing to a manufacturing or assembling
29 process; and (4) "equipment" shall include any independent
30 device or tool separate from any machinery but essential to an
31 integrated manufacturing or assembly process; including
32 computers used primarily in a manufacturer's computer assisted
33 design, computer assisted manufacturing (CAD/CAM) system; or
34 any subunit or assembly comprising a component of any machinery
35 or auxiliary, adjunct or attachment parts of machinery, such as
36 tools, dies, jigs, fixtures, patterns and molds; or any parts

 

 

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1 which require periodic replacement in the course of normal
2 operation; but shall not include hand tools. Equipment includes
3 chemicals or chemicals acting as catalysts but only if the
4 chemicals or chemicals acting as catalysts effect a direct and
5 immediate change upon a product being manufactured or assembled
6 for wholesale or retail sale or lease. The purchaser of such
7 machinery and equipment who has an active resale registration
8 number shall furnish such number to the seller at the time of
9 purchase. The user of such machinery and equipment and tools
10 without an active resale registration number shall prepare a
11 certificate of exemption for each transaction stating facts
12 establishing the exemption for that transaction, which
13 certificate shall be available to the Department for inspection
14 or audit. The Department shall prescribe the form of the
15 certificate.
16     Any informal rulings, opinions or letters issued by the
17 Department in response to an inquiry or request for any opinion
18 from any person regarding the coverage and applicability of
19 exemption (5) to specific devices shall be published,
20 maintained as a public record, and made available for public
21 inspection and copying. If the informal ruling, opinion or
22 letter contains trade secrets or other confidential
23 information, where possible the Department shall delete such
24 information prior to publication. Whenever such informal
25 rulings, opinions, or letters contain any policy of general
26 applicability, the Department shall formulate and adopt such
27 policy as a rule in accordance with the provisions of the
28 Illinois Administrative Procedure Act.
29     On and after July 1, 1987, no entity otherwise eligible
30 under exemption (3) of this Section shall make tax free
31 purchases unless it has an active exemption identification
32 number issued by the Department.
33     The purchase, employment and transfer of such tangible
34 personal property as newsprint and ink for the primary purpose
35 of conveying news (with or without other information) is not a
36 purchase, use or sale of service or of tangible personal

 

 

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1 property within the meaning of this Act.
2     "Serviceman" means any person who is engaged in the
3 occupation of making sales of service.
4     "Sale at retail" means "sale at retail" as defined in the
5 Retailers' Occupation Tax Act.
6     "Supplier" means any person who makes sales of tangible
7 personal property to servicemen for the purpose of resale as an
8 incident to a sale of service.
9     "Serviceman maintaining a place of business in this State",
10 or any like term, means and includes any serviceman:
11         1. having or maintaining within this State, directly or
12     by a subsidiary, an office, distribution house, sales
13     house, warehouse or other place of business, or any agent
14     or other representative operating within this State under
15     the authority of the serviceman or its subsidiary,
16     irrespective of whether such place of business or agent or
17     other representative is located here permanently or
18     temporarily, or whether such serviceman or subsidiary is
19     licensed to do business in this State;
20         2. soliciting orders for tangible personal property by
21     means of a telecommunication or television shopping system
22     (which utilizes toll free numbers) which is intended by the
23     retailer to be broadcast by cable television or other means
24     of broadcasting, to consumers located in this State;
25         3. pursuant to a contract with a broadcaster or
26     publisher located in this State, soliciting orders for
27     tangible personal property by means of advertising which is
28     disseminated primarily to consumers located in this State
29     and only secondarily to bordering jurisdictions;
30         4. soliciting orders for tangible personal property by
31     mail if the solicitations are substantial and recurring and
32     if the retailer benefits from any banking, financing, debt
33     collection, telecommunication, or marketing activities
34     occurring in this State or benefits from the location in
35     this State of authorized installation, servicing, or
36     repair facilities;

 

 

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1         5. being owned or controlled by the same interests
2     which own or control any retailer engaging in business in
3     the same or similar line of business in this State;
4         6. having a franchisee or licensee operating under its
5     trade name if the franchisee or licensee is required to
6     collect the tax under this Section;
7         7. pursuant to a contract with a cable television
8     operator located in this State, soliciting orders for
9     tangible personal property by means of advertising which is
10     transmitted or distributed over a cable television system
11     in this State; or
12         8. engaging in activities in Illinois, which
13     activities in the state in which the supply business
14     engaging in such activities is located would constitute
15     maintaining a place of business in that state.
16 (Source: P.A. 92-484, eff. 8-23-01; 93-23, eff. 6-20-03; 93-24,
17 eff. 6-20-03; 93-1033, eff. 9-3-04.)
 
18     Section 25. The Service Occupation Tax Act is amended by
19 changing Section 2 as follows:
 
20     (35 ILCS 115/2)  (from Ch. 120, par. 439.102)
21     Sec. 2. "Transfer" means any transfer of the title to
22 property or of the ownership of property whether or not the
23 transferor retains title as security for the payment of amounts
24 due him from the transferee.
25     "Cost Price" means the consideration paid by the serviceman
26 for a purchase valued in money, whether paid in money or
27 otherwise, including cash, credits and services, and shall be
28 determined without any deduction on account of the supplier's
29 cost of the property sold or on account of any other expense
30 incurred by the supplier. When a serviceman contracts out part
31 or all of the services required in his sale of service, it
32 shall be presumed that the cost price to the serviceman of the
33 property transferred to him by his or her subcontractor is
34 equal to 50% of the subcontractor's charges to the serviceman

 

 

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1 in the absence of proof of the consideration paid by the
2 subcontractor for the purchase of such property.
3     "Department" means the Department of Revenue.
4     "Person" means any natural individual, firm, partnership,
5 association, joint stock company, joint venture, public or
6 private corporation, limited liability company, and any
7 receiver, executor, trustee, guardian or other representative
8 appointed by order of any court.
9     "Sale of Service" means any transaction except:
10     (a) A retail sale of tangible personal property taxable
11 under the Retailers' Occupation Tax Act or under the Use Tax
12 Act.
13     (b) A sale of tangible personal property for the purpose of
14 resale made in compliance with Section 2c of the Retailers'
15 Occupation Tax Act.
16     (c) Except as hereinafter provided, a sale or transfer of
17 tangible personal property as an incident to the rendering of
18 service for or by any governmental body or for or by any
19 corporation, society, association, foundation or institution
20 organized and operated exclusively for charitable, religious
21 or educational purposes or any not-for-profit corporation,
22 society, association, foundation, institution or organization
23 which has no compensated officers or employees and which is
24 organized and operated primarily for the recreation of persons
25 55 years of age or older. A limited liability company may
26 qualify for the exemption under this paragraph only if the
27 limited liability company is organized and operated
28 exclusively for educational purposes.
29     (d) A sale or transfer of tangible personal property as an
30 incident to the rendering of service for interstate carriers
31 for hire for use as rolling stock moving in interstate commerce
32 or lessors under leases of one year or longer, executed or in
33 effect at the time of purchase, to interstate carriers for hire
34 for use as rolling stock moving in interstate commerce, and
35 equipment operated by a telecommunications provider, licensed
36 as a common carrier by the Federal Communications Commission,

 

 

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1 which is permanently installed in or affixed to aircraft moving
2 in interstate commerce.
3     (d-1) A sale or transfer of tangible personal property as
4 an incident to the rendering of service for owners, lessors or
5 shippers of tangible personal property which is utilized by
6 interstate carriers for hire for use as rolling stock moving in
7 interstate commerce, and equipment operated by a
8 telecommunications provider, licensed as a common carrier by
9 the Federal Communications Commission, which is permanently
10 installed in or affixed to aircraft moving in interstate
11 commerce.
12     (d-1.1) On and after July 1, 2003 and through June 30,
13 2004, a sale or transfer of a motor vehicle of the second
14 division with a gross vehicle weight in excess of 8,000 pounds
15 as an incident to the rendering of service if that motor
16 vehicle is subject to the commercial distribution fee imposed
17 under Section 3-815.1 of the Illinois Vehicle Code. Beginning
18 on July 1, 2004 and through June 30, 2005, the use in this
19 State of motor vehicles of the second division: (i) with a
20 gross vehicle weight rating in excess of 8,000 pounds; (ii)
21 that are subject to the commercial distribution fee imposed
22 under Section 3-815.1 of the Illinois Vehicle Code; and (iii)
23 that are primarily used for commercial purposes. Through June
24 30, 2005, this exemption applies to repair and replacement
25 parts added after the initial purchase of such a motor vehicle
26 if that motor vehicle is used in a manner that would qualify
27 for the rolling stock exemption otherwise provided for in this
28 Act. For purposes of this paragraph, "used for commercial
29 purposes" means the transportation of persons or property in
30 furtherance of any commercial or industrial enterprise whether
31 for-hire or not.
32     (d-2) The repairing, reconditioning or remodeling, for a
33 common carrier by rail, of tangible personal property which
34 belongs to such carrier for hire, and as to which such carrier
35 receives the physical possession of the repaired,
36 reconditioned or remodeled item of tangible personal property

 

 

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1 in Illinois, and which such carrier transports, or shares with
2 another common carrier in the transportation of such property,
3 out of Illinois on a standard uniform bill of lading showing
4 the person who repaired, reconditioned or remodeled the
5 property as the shipper or consignor of such property to a
6 destination outside Illinois, for use outside Illinois.
7     (d-3) A sale or transfer of tangible personal property
8 which is produced by the seller thereof on special order in
9 such a way as to have made the applicable tax the Service
10 Occupation Tax or the Service Use Tax, rather than the
11 Retailers' Occupation Tax or the Use Tax, for an interstate
12 carrier by rail which receives the physical possession of such
13 property in Illinois, and which transports such property, or
14 shares with another common carrier in the transportation of
15 such property, out of Illinois on a standard uniform bill of
16 lading showing the seller of the property as the shipper or
17 consignor of such property to a destination outside Illinois,
18 for use outside Illinois.
19     (d-4) Until January 1, 1997, a sale, by a registered
20 serviceman paying tax under this Act to the Department, of
21 special order printed materials delivered outside Illinois and
22 which are not returned to this State, if delivery is made by
23 the seller or agent of the seller, including an agent who
24 causes the product to be delivered outside Illinois by a common
25 carrier or the U.S. postal service.
26     (e) A sale or transfer of machinery and equipment used
27 primarily in the process of the manufacturing or assembling,
28 either in an existing, an expanded or a new manufacturing
29 facility, of tangible personal property for wholesale or retail
30 sale or lease, whether such sale or lease is made directly by
31 the manufacturer or by some other person, whether the materials
32 used in the process are owned by the manufacturer or some other
33 person, or whether such sale or lease is made apart from or as
34 an incident to the seller's engaging in a service occupation
35 and the applicable tax is a Service Occupation Tax or Service
36 Use Tax, rather than Retailers' Occupation Tax or Use Tax.

 

 

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1     (f) Until July 1, 2003, the sale or transfer of
2 distillation machinery and equipment, sold as a unit or kit and
3 assembled or installed by the retailer, which machinery and
4 equipment is certified by the user to be used only for the
5 production of ethyl alcohol that will be used for consumption
6 as motor fuel or as a component of motor fuel for the personal
7 use of such user and not subject to sale or resale.
8     (g) At the election of any serviceman not required to be
9 otherwise registered as a retailer under Section 2a of the
10 Retailers' Occupation Tax Act, made for each fiscal year sales
11 of service in which the aggregate annual cost price of tangible
12 personal property transferred as an incident to the sales of
13 service is less than 35% (75% in the case of servicemen
14 transferring prescription drugs or servicemen engaged in
15 graphic arts production) of the aggregate annual total gross
16 receipts from all sales of service. The purchase of such
17 tangible personal property by the serviceman shall be subject
18 to tax under the Retailers' Occupation Tax Act and the Use Tax
19 Act. However, if a primary serviceman who has made the election
20 described in this paragraph subcontracts service work to a
21 secondary serviceman who has also made the election described
22 in this paragraph, the primary serviceman does not incur a Use
23 Tax liability if the secondary serviceman (i) has paid or will
24 pay Use Tax on his or her cost price of any tangible personal
25 property transferred to the primary serviceman and (ii)
26 certifies that fact in writing to the primary serviceman.
27     Tangible personal property transferred incident to the
28 completion of a maintenance agreement is exempt from the tax
29 imposed pursuant to this Act.
30     Exemption (e) also includes machinery and equipment used in
31 the general maintenance or repair of such exempt machinery and
32 equipment or for in-house manufacture of exempt machinery and
33 equipment. For the purposes of exemption (e), each of these
34 terms shall have the following meanings: (1) "manufacturing
35 process" shall mean the production of any article of tangible
36 personal property, whether such article is a finished product

 

 

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1 or an article for use in the process of manufacturing or
2 assembling a different article of tangible personal property,
3 by procedures commonly regarded as manufacturing, processing,
4 fabricating, or refining which changes some existing material
5 or materials into a material with a different form, use or
6 name. In relation to a recognized integrated business composed
7 of a series of operations which collectively constitute
8 manufacturing, or individually constitute manufacturing
9 operations, the manufacturing process shall be deemed to
10 commence with the first operation or stage of production in the
11 series, and shall not be deemed to end until the completion of
12 the final product in the last operation or stage of production
13 in the series; and further for purposes of exemption (e),
14 photoprocessing is deemed to be a manufacturing process of
15 tangible personal property for wholesale or retail sale; (2)
16 "assembling process" shall mean the production of any article
17 of tangible personal property, whether such article is a
18 finished product or an article for use in the process of
19 manufacturing or assembling a different article of tangible
20 personal property, by the combination of existing materials in
21 a manner commonly regarded as assembling which results in a
22 material of a different form, use or name; (3) "machinery"
23 shall mean major mechanical machines or major components of
24 such machines contributing to a manufacturing or assembling
25 process; and (4) "equipment" shall include any independent
26 device or tool separate from any machinery but essential to an
27 integrated manufacturing or assembly process; including
28 computers used primarily in a manufacturer's computer assisted
29 design, computer assisted manufacturing (CAD/CAM) system; or
30 any subunit or assembly comprising a component of any machinery
31 or auxiliary, adjunct or attachment parts of machinery, such as
32 tools, dies, jigs, fixtures, patterns and molds; or any parts
33 which require periodic replacement in the course of normal
34 operation; but shall not include hand tools. Equipment includes
35 chemicals or chemicals acting as catalysts but only if the
36 chemicals or chemicals acting as catalysts effect a direct and

 

 

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1 immediate change upon a product being manufactured or assembled
2 for wholesale or retail sale or lease. The purchaser of such
3 machinery and equipment who has an active resale registration
4 number shall furnish such number to the seller at the time of
5 purchase. The purchaser of such machinery and equipment and
6 tools without an active resale registration number shall
7 furnish to the seller a certificate of exemption for each
8 transaction stating facts establishing the exemption for that
9 transaction, which certificate shall be available to the
10 Department for inspection or audit.
11     Except as provided in Section 2d of this Act, the rolling
12 stock exemption applies to rolling stock used by an interstate
13 carrier for hire, even just between points in Illinois, if such
14 rolling stock transports, for hire, persons whose journeys or
15 property whose shipments originate or terminate outside
16 Illinois.
17     Any informal rulings, opinions or letters issued by the
18 Department in response to an inquiry or request for any opinion
19 from any person regarding the coverage and applicability of
20 exemption (e) to specific devices shall be published,
21 maintained as a public record, and made available for public
22 inspection and copying. If the informal ruling, opinion or
23 letter contains trade secrets or other confidential
24 information, where possible the Department shall delete such
25 information prior to publication. Whenever such informal
26 rulings, opinions, or letters contain any policy of general
27 applicability, the Department shall formulate and adopt such
28 policy as a rule in accordance with the provisions of the
29 Illinois Administrative Procedure Act.
30     On and after July 1, 1987, no entity otherwise eligible
31 under exemption (c) of this Section shall make tax free
32 purchases unless it has an active exemption identification
33 number issued by the Department.
34     "Serviceman" means any person who is engaged in the
35 occupation of making sales of service.
36     "Sale at Retail" means "sale at retail" as defined in the

 

 

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1 Retailers' Occupation Tax Act.
2     "Supplier" means any person who makes sales of tangible
3 personal property to servicemen for the purpose of resale as an
4 incident to a sale of service.
5 (Source: P.A. 92-484, eff. 8-23-01; 93-23, eff. 6-20-03; 93-24,
6 eff. 6-20-03; 93-1033, eff. 9-3-04.)
 
7     Section 30. The Retailers' Occupation Tax Act is amended by
8 changing Sections 1 and 2-5 as follows:
 
9     (35 ILCS 120/1)  (from Ch. 120, par. 440)
10     Sec. 1. Definitions. "Sale at retail" means any transfer of
11 the ownership of or title to tangible personal property to a
12 purchaser, for the purpose of use or consumption, and not for
13 the purpose of resale in any form as tangible personal property
14 to the extent not first subjected to a use for which it was
15 purchased, for a valuable consideration: Provided that the
16 property purchased is deemed to be purchased for the purpose of
17 resale, despite first being used, to the extent to which it is
18 resold as an ingredient of an intentionally produced product or
19 byproduct of manufacturing. For this purpose, slag produced as
20 an incident to manufacturing pig iron or steel and sold is
21 considered to be an intentionally produced byproduct of
22 manufacturing. Transactions whereby the possession of the
23 property is transferred but the seller retains the title as
24 security for payment of the selling price shall be deemed to be
25 sales.
26     "Sale at retail" shall be construed to include any transfer
27 of the ownership of or title to tangible personal property to a
28 purchaser, for use or consumption by any other person to whom
29 such purchaser may transfer the tangible personal property
30 without a valuable consideration, and to include any transfer,
31 whether made for or without a valuable consideration, for
32 resale in any form as tangible personal property unless made in
33 compliance with Section 2c of this Act.
34     Sales of tangible personal property, which property, to the

 

 

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1 extent not first subjected to a use for which it was purchased,
2 as an ingredient or constituent, goes into and forms a part of
3 tangible personal property subsequently the subject of a "Sale
4 at retail", are not sales at retail as defined in this Act:
5 Provided that the property purchased is deemed to be purchased
6 for the purpose of resale, despite first being used, to the
7 extent to which it is resold as an ingredient of an
8 intentionally produced product or byproduct of manufacturing.
9     "Sale at retail" shall be construed to include all of the
10 following services, as enumerated in the North American
11 Industry Classification System Manual (NAICS), 1997, prepared
12 by the United States Office of Management and Budget:
13         (1) Specialized good warehousing and storage
14     (4931902).
15         (2) Household goods warehousing and storage (4931901).
16         (3) Marinas (7131901).
17         (4) Travel arrangement reservation services (5615).
18         (5) Consumer electronics repair and maintenance
19     (811211).
20         (6) Personal and household goods.
21         (7) Carpet and upholstery cleaning services (56174).
22         (8) Dating services (8129902).
23         (9) Hair, nail, and skin care (81211).
24         (10) Other personal services other than hair, nail,
25     facial, or nonpermanent makeup services (81219).
26         (11) Dry cleaning and laundry, except coin-operated
27     (81232).
28         (12) Consumer goods rental (5322).
29         (13) General goods rental (5323).
30         (14) Diet and weight reducing services (812191).
31         (15) Investigation services (561611).
32         (16) Bail bonding (8129901).
33         (17) Telephone answering services (561421).
34         (18) Photographic studios, portrait (541921).
35         (19) Linen supply (812331).
36         (20) Industrial launderers (812332).

 

 

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1         (21) Interior design services (54141).
2         (22) Computer systems design and related services
3     (5415).
4         (23) Credit bureaus (56145).
5         (24) Collection agencies (56144).
6         (25) Other business services, including copy shops
7     (561439).
8         (26) Automotive repair and maintenance (8111).
9         (27) Parking lots and garages (81293).
10         (28) Motor vehicle towing (48841).
11         (29) Racetracks (711212).
12         (30) Amusement parks and arcades (7131).
13         (31) Bowling Centers (71395).
14         (32) Cable and other program distribution (51322).
15         (33) Circuses (7111901).
16         (34) Coin operated amusement devices, except slots
17     (7139905).
18         (35) Golf courses and country clubs (71391).
19         (36) Fitness and recreational sports centers (711211).
20         (37) Sports teams and clubs (711211).
21         (38) Performing arts companies (7111).
22         (39) Miniature golf courses (7139904).
23         (40) Scenic and sightseeing transportation (487).
24         (41) Limousine services (48532).
25         (42) Unscheduled chartered passenger air
26     transportation (481211).
27         (43) Motion picture theaters, except drive-in theaters
28     (512131).
29         (44) Drive-in motion picture theaters (512132).
30     "Sale at retail" shall be construed to include any Illinois
31 florist's sales transaction in which the purchase order is
32 received in Illinois by a florist and the sale is for use or
33 consumption, but the Illinois florist has a florist in another
34 state deliver the property to the purchaser or the purchaser's
35 donee in such other state.
36     Nonreusable tangible personal property that is used by

 

 

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1 persons engaged in the business of operating a restaurant,
2 cafeteria, or drive-in is a sale for resale when it is
3 transferred to customers in the ordinary course of business as
4 part of the sale of food or beverages and is used to deliver,
5 package, or consume food or beverages, regardless of where
6 consumption of the food or beverages occurs. Examples of those
7 items include, but are not limited to nonreusable, paper and
8 plastic cups, plates, baskets, boxes, sleeves, buckets or other
9 containers, utensils, straws, placemats, napkins, doggie bags,
10 and wrapping or packaging materials that are transferred to
11 customers as part of the sale of food or beverages in the
12 ordinary course of business.
13     The purchase, employment and transfer of such tangible
14 personal property as newsprint and ink for the primary purpose
15 of conveying news (with or without other information) is not a
16 purchase, use or sale of tangible personal property.
17     A person whose activities are organized and conducted
18 primarily as a not-for-profit service enterprise, and who
19 engages in selling tangible personal property at retail
20 (whether to the public or merely to members and their guests)
21 is engaged in the business of selling tangible personal
22 property at retail with respect to such transactions, excepting
23 only a person organized and operated exclusively for
24 charitable, religious or educational purposes either (1), to
25 the extent of sales by such person to its members, students,
26 patients or inmates of tangible personal property to be used
27 primarily for the purposes of such person, or (2), to the
28 extent of sales by such person of tangible personal property
29 which is not sold or offered for sale by persons organized for
30 profit. The selling of school books and school supplies by
31 schools at retail to students is not "primarily for the
32 purposes of" the school which does such selling. The provisions
33 of this paragraph shall not apply to nor subject to taxation
34 occasional dinners, socials or similar activities of a person
35 organized and operated exclusively for charitable, religious
36 or educational purposes, whether or not such activities are

 

 

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1 open to the public.
2     A person who is the recipient of a grant or contract under
3 Title VII of the Older Americans Act of 1965 (P.L. 92-258) and
4 serves meals to participants in the federal Nutrition Program
5 for the Elderly in return for contributions established in
6 amount by the individual participant pursuant to a schedule of
7 suggested fees as provided for in the federal Act is not
8 engaged in the business of selling tangible personal property
9 at retail with respect to such transactions.
10     "Purchaser" means anyone who, through a sale at retail,
11 acquires the ownership of or title to tangible personal
12 property for a valuable consideration.
13     "Reseller of motor fuel" means any person engaged in the
14 business of selling or delivering or transferring title of
15 motor fuel to another person other than for use or consumption.
16 No person shall act as a reseller of motor fuel within this
17 State without first being registered as a reseller pursuant to
18 Section 2c or a retailer pursuant to Section 2a.
19     "Selling price" or the "amount of sale" means the
20 consideration for a sale valued in money whether received in
21 money or otherwise, including cash, credits, property, other
22 than as hereinafter provided, and services, but not including
23 the value of or credit given for traded-in tangible personal
24 property where the item that is traded-in is of like kind and
25 character as that which is being sold, and shall be determined
26 without any deduction on account of the cost of the property
27 sold, the cost of materials used, labor or service cost or any
28 other expense whatsoever, but does not include charges that are
29 added to prices by sellers on account of the seller's tax
30 liability under this Act, or on account of the seller's duty to
31 collect, from the purchaser, the tax that is imposed by the Use
32 Tax Act, or on account of the seller's tax liability under
33 Section 8-11-1 of the Illinois Municipal Code, as heretofore
34 and hereafter amended, or on account of the seller's tax
35 liability under the County Retailers' Occupation Tax Act, or on
36 account of the seller's tax liability under the Home Rule

 

 

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1 Municipal Soft Drink Retailers' Occupation Tax, or on account
2 of the seller's tax liability under any tax imposed under the
3 "Regional Transportation Authority Act", approved December 12,
4 1973. Effective December 1, 1985, "selling price" shall include
5 charges that are added to prices by sellers on account of the
6 seller's tax liability under the Cigarette Tax Act, on account
7 of the sellers' duty to collect, from the purchaser, the tax
8 imposed under the Cigarette Use Tax Act, and on account of the
9 seller's duty to collect, from the purchaser, any cigarette tax
10 imposed by a home rule unit.
11     The phrase "like kind and character" shall be liberally
12 construed (including but not limited to any form of motor
13 vehicle for any form of motor vehicle, or any kind of farm or
14 agricultural implement for any other kind of farm or
15 agricultural implement), while not including a kind of item
16 which, if sold at retail by that retailer, would be exempt from
17 retailers' occupation tax and use tax as an isolated or
18 occasional sale.
19     "Gross receipts" from the sales of tangible personal
20 property at retail means the total selling price or the amount
21 of such sales, as hereinbefore defined. In the case of charge
22 and time sales, the amount thereof shall be included only as
23 and when payments are received by the seller. Receipts or other
24 consideration derived by a seller from the sale, transfer or
25 assignment of accounts receivable to a wholly owned subsidiary
26 will not be deemed payments prior to the time the purchaser
27 makes payment on such accounts.
28     "Department" means the Department of Revenue.
29     "Person" means any natural individual, firm, partnership,
30 association, joint stock company, joint adventure, public or
31 private corporation, limited liability company, or a receiver,
32 executor, trustee, guardian or other representative appointed
33 by order of any court.
34     The isolated or occasional sale of tangible personal
35 property at retail by a person who does not hold himself out as
36 being engaged (or who does not habitually engage) in selling

 

 

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1 such tangible personal property at retail, or a sale through a
2 bulk vending machine, does not constitute engaging in a
3 business of selling such tangible personal property at retail
4 within the meaning of this Act; provided that any person who is
5 engaged in a business which is not subject to the tax imposed
6 by this Act because of involving the sale of or a contract to
7 sell real estate or a construction contract to improve real
8 estate or a construction contract to engineer, install, and
9 maintain an integrated system of products, but who, in the
10 course of conducting such business, transfers tangible
11 personal property to users or consumers in the finished form in
12 which it was purchased, and which does not become real estate
13 or was not engineered and installed, under any provision of a
14 construction contract or real estate sale or real estate sales
15 agreement entered into with some other person arising out of or
16 because of such nontaxable business, is engaged in the business
17 of selling tangible personal property at retail to the extent
18 of the value of the tangible personal property so transferred.
19 If, in such a transaction, a separate charge is made for the
20 tangible personal property so transferred, the value of such
21 property, for the purpose of this Act, shall be the amount so
22 separately charged, but not less than the cost of such property
23 to the transferor; if no separate charge is made, the value of
24 such property, for the purposes of this Act, is the cost to the
25 transferor of such tangible personal property. Construction
26 contracts for the improvement of real estate consisting of
27 engineering, installation, and maintenance of voice, data,
28 video, security, and all telecommunication systems do not
29 constitute engaging in a business of selling tangible personal
30 property at retail within the meaning of this Act if they are
31 sold at one specified contract price.
32     A person who holds himself or herself out as being engaged
33 (or who habitually engages) in selling tangible personal
34 property at retail is a person engaged in the business of
35 selling tangible personal property at retail hereunder with
36 respect to such sales (and not primarily in a service

 

 

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1 occupation) notwithstanding the fact that such person designs
2 and produces such tangible personal property on special order
3 for the purchaser and in such a way as to render the property
4 of value only to such purchaser, if such tangible personal
5 property so produced on special order serves substantially the
6 same function as stock or standard items of tangible personal
7 property that are sold at retail.
8     Persons who engage in the business of transferring tangible
9 personal property upon the redemption of trading stamps are
10 engaged in the business of selling such property at retail and
11 shall be liable for and shall pay the tax imposed by this Act
12 on the basis of the retail value of the property transferred
13 upon redemption of such stamps.
14     "Bulk vending machine" means a vending machine, containing
15 unsorted confections, nuts, toys, or other items designed
16 primarily to be used or played with by children which, when a
17 coin or coins of a denomination not larger than $0.50 are
18 inserted, are dispensed in equal portions, at random and
19 without selection by the customer.
20 (Source: P.A. 92-213, eff. 1-1-02.)
 
21     (35 ILCS 120/2-5)  (from Ch. 120, par. 441-5)
22     Sec. 2-5. Exemptions. Gross receipts from proceeds from the
23 sale of the following tangible personal property are exempt
24 from the tax imposed by this Act:
25     (1) Farm chemicals.
26     (2) Farm machinery and equipment, both new and used,
27 including that manufactured on special order, certified by the
28 purchaser to be used primarily for production agriculture or
29 State or federal agricultural programs, including individual
30 replacement parts for the machinery and equipment, including
31 machinery and equipment purchased for lease, and including
32 implements of husbandry defined in Section 1-130 of the
33 Illinois Vehicle Code, farm machinery and agricultural
34 chemical and fertilizer spreaders, and nurse wagons required to
35 be registered under Section 3-809 of the Illinois Vehicle Code,

 

 

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1 but excluding other motor vehicles required to be registered
2 under the Illinois Vehicle Code. Horticultural polyhouses or
3 hoop houses used for propagating, growing, or overwintering
4 plants shall be considered farm machinery and equipment under
5 this item (2). Agricultural chemical tender tanks and dry boxes
6 shall include units sold separately from a motor vehicle
7 required to be licensed and units sold mounted on a motor
8 vehicle required to be licensed, if the selling price of the
9 tender is separately stated.
10     Farm machinery and equipment shall include precision
11 farming equipment that is installed or purchased to be
12 installed on farm machinery and equipment including, but not
13 limited to, tractors, harvesters, sprayers, planters, seeders,
14 or spreaders. Precision farming equipment includes, but is not
15 limited to, soil testing sensors, computers, monitors,
16 software, global positioning and mapping systems, and other
17 such equipment.
18     Farm machinery and equipment also includes computers,
19 sensors, software, and related equipment used primarily in the
20 computer-assisted operation of production agriculture
21 facilities, equipment, and activities such as, but not limited
22 to, the collection, monitoring, and correlation of animal and
23 crop data for the purpose of formulating animal diets and
24 agricultural chemicals. This item (7) is exempt from the
25 provisions of Section 2-70.
26     (3) Until July 1, 2003, distillation machinery and
27 equipment, sold as a unit or kit, assembled or installed by the
28 retailer, certified by the user to be used only for the
29 production of ethyl alcohol that will be used for consumption
30 as motor fuel or as a component of motor fuel for the personal
31 use of the user, and not subject to sale or resale.
32     (4) Until July 1, 2003 and beginning again September 1,
33 2004, graphic arts machinery and equipment, including repair
34 and replacement parts, both new and used, and including that
35 manufactured on special order or purchased for lease, certified
36 by the purchaser to be used primarily for graphic arts

 

 

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1 production. Equipment includes chemicals or chemicals acting
2 as catalysts but only if the chemicals or chemicals acting as
3 catalysts effect a direct and immediate change upon a graphic
4 arts product.
5     (5) (Blank). A motor vehicle of the first division, a motor
6 vehicle of the second division that is a self-contained motor
7 vehicle designed or permanently converted to provide living
8 quarters for recreational, camping, or travel use, with direct
9 walk through access to the living quarters from the driver's
10 seat, or a motor vehicle of the second division that is of the
11 van configuration designed for the transportation of not less
12 than 7 nor more than 16 passengers, as defined in Section 1-146
13 of the Illinois Vehicle Code, that is used for automobile
14 renting, as defined in the Automobile Renting Occupation and
15 Use Tax Act.
16     (6) Personal property sold by a teacher-sponsored student
17 organization affiliated with an elementary or secondary school
18 located in Illinois.
19     (7) Until July 1, 2003, proceeds of that portion of the
20 selling price of a passenger car the sale of which is subject
21 to the Replacement Vehicle Tax.
22     (8) Personal property sold to an Illinois county fair
23 association for use in conducting, operating, or promoting the
24 county fair.
25     (9) Personal property sold to a not-for-profit arts or
26 cultural organization that establishes, by proof required by
27 the Department by rule, that it has received an exemption under
28 Section 501(c)(3) of the Internal Revenue Code and that is
29 organized and operated primarily for the presentation or
30 support of arts or cultural programming, activities, or
31 services. These organizations include, but are not limited to,
32 music and dramatic arts organizations such as symphony
33 orchestras and theatrical groups, arts and cultural service
34 organizations, local arts councils, visual arts organizations,
35 and media arts organizations. On and after the effective date
36 of this amendatory Act of the 92nd General Assembly, however,

 

 

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1 an entity otherwise eligible for this exemption shall not make
2 tax-free purchases unless it has an active identification
3 number issued by the Department.
4     (10) Personal property sold by a corporation, society,
5 association, foundation, institution, or organization, other
6 than a limited liability company, that is organized and
7 operated as a not-for-profit service enterprise for the benefit
8 of persons 65 years of age or older if the personal property
9 was not purchased by the enterprise for the purpose of resale
10 by the enterprise.
11     (11) Personal property sold to a governmental body, to a
12 corporation, society, association, foundation, or institution
13 organized and operated exclusively for charitable, religious,
14 or educational purposes, or to a not-for-profit corporation,
15 society, association, foundation, institution, or organization
16 that has no compensated officers or employees and that is
17 organized and operated primarily for the recreation of persons
18 55 years of age or older. A limited liability company may
19 qualify for the exemption under this paragraph only if the
20 limited liability company is organized and operated
21 exclusively for educational purposes. On and after July 1,
22 1987, however, no entity otherwise eligible for this exemption
23 shall make tax-free purchases unless it has an active
24 identification number issued by the Department.
25     (12) Tangible personal property sold to interstate
26 carriers for hire for use as rolling stock moving in interstate
27 commerce or to lessors under leases of one year or longer
28 executed or in effect at the time of purchase by interstate
29 carriers for hire for use as rolling stock moving in interstate
30 commerce and equipment operated by a telecommunications
31 provider, licensed as a common carrier by the Federal
32 Communications Commission, which is permanently installed in
33 or affixed to aircraft moving in interstate commerce.
34     (12-5) On and after July 1, 2003 and through June 30, 2004,
35 motor vehicles of the second division with a gross vehicle
36 weight in excess of 8,000 pounds that are subject to the

 

 

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1 commercial distribution fee imposed under Section 3-815.1 of
2 the Illinois Vehicle Code. Beginning on July 1, 2004 and
3 through June 30, 2005, the use in this State of motor vehicles
4 of the second division: (i) with a gross vehicle weight rating
5 in excess of 8,000 pounds; (ii) that are subject to the
6 commercial distribution fee imposed under Section 3-815.1 of
7 the Illinois Vehicle Code; and (iii) that are primarily used
8 for commercial purposes. Through June 30, 2005, this exemption
9 applies to repair and replacement parts added after the initial
10 purchase of such a motor vehicle if that motor vehicle is used
11 in a manner that would qualify for the rolling stock exemption
12 otherwise provided for in this Act. For purposes of this
13 paragraph, "used for commercial purposes" means the
14 transportation of persons or property in furtherance of any
15 commercial or industrial enterprise whether for-hire or not.
16     (13) Proceeds from sales to owners, lessors, or shippers of
17 tangible personal property that is utilized by interstate
18 carriers for hire for use as rolling stock moving in interstate
19 commerce and equipment operated by a telecommunications
20 provider, licensed as a common carrier by the Federal
21 Communications Commission, which is permanently installed in
22 or affixed to aircraft moving in interstate commerce.
23     (14) (Blank). Machinery and equipment that will be used by
24 the purchaser, or a lessee of the purchaser, primarily in the
25 process of manufacturing or assembling tangible personal
26 property for wholesale or retail sale or lease, whether the
27 sale or lease is made directly by the manufacturer or by some
28 other person, whether the materials used in the process are
29 owned by the manufacturer or some other person, or whether the
30 sale or lease is made apart from or as an incident to the
31 seller's engaging in the service occupation of producing
32 machines, tools, dies, jigs, patterns, gauges, or other similar
33 items of no commercial value on special order for a particular
34 purchaser.
35     (15) Proceeds of mandatory service charges separately
36 stated on customers' bills for purchase and consumption of food

 

 

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

 

 

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1 equipment, including replacement parts and equipment, and
2 including equipment purchased for lease, but excluding motor
3 vehicles required to be registered under the Illinois Vehicle
4 Code.
5     (22) Fuel and petroleum products sold to or used by an air
6 carrier, certified by the carrier to be used for consumption,
7 shipment, or storage in the conduct of its business as an air
8 common carrier, for a flight destined for or returning from a
9 location or locations outside the United States without regard
10 to previous or subsequent domestic stopovers.
11     (23) A transaction in which the purchase order is received
12 by a florist who is located outside Illinois, but who has a
13 florist located in Illinois deliver the property to the
14 purchaser or the purchaser's donee in Illinois.
15     (24) Fuel consumed or used in the operation of ships,
16 barges, or vessels that are used primarily in or for the
17 transportation of property or the conveyance of persons for
18 hire on rivers bordering on this State if the fuel is delivered
19 by the seller to the purchaser's barge, ship, or vessel while
20 it is afloat upon that bordering river.
21     (25) Except as provided in item (25-5) of this Section, a
22 motor vehicle sold in this State to a nonresident even though
23 the motor vehicle is delivered to the nonresident in this
24 State, if the motor vehicle is not to be titled in this State,
25 and if a drive-away permit is issued to the motor vehicle as
26 provided in Section 3-603 of the Illinois Vehicle Code or if
27 the nonresident purchaser has vehicle registration plates to
28 transfer to the motor vehicle upon returning to his or her home
29 state. The issuance of the drive-away permit or having the
30 out-of-state registration plates to be transferred is prima
31 facie evidence that the motor vehicle will not be titled in
32 this State.
33     (25-5) The exemption under item (25) does not apply if the
34 state in which the motor vehicle will be titled does not allow
35 a reciprocal exemption for a motor vehicle sold and delivered
36 in that state to an Illinois resident but titled in Illinois.

 

 

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1 The tax collected under this Act on the sale of a motor vehicle
2 in this State to a resident of another state that does not
3 allow a reciprocal exemption shall be imposed at a rate equal
4 to the state's rate of tax on taxable property in the state in
5 which the purchaser is a resident, except that the tax shall
6 not exceed the tax that would otherwise be imposed under this
7 Act. At the time of the sale, the purchaser shall execute a
8 statement, signed under penalty of perjury, of his or her
9 intent to title the vehicle in the state in which the purchaser
10 is a resident within 30 days after the sale and of the fact of
11 the payment to the State of Illinois of tax in an amount
12 equivalent to the state's rate of tax on taxable property in
13 his or her state of residence and shall submit the statement to
14 the appropriate tax collection agency in his or her state of
15 residence. In addition, the retailer must retain a signed copy
16 of the statement in his or her records. Nothing in this item
17 shall be construed to require the removal of the vehicle from
18 this state following the filing of an intent to title the
19 vehicle in the purchaser's state of residence if the purchaser
20 titles the vehicle in his or her state of residence within 30
21 days after the date of sale. The tax collected under this Act
22 in accordance with this item (25-5) shall be proportionately
23 distributed as if the tax were collected at the 6.25% general
24 rate imposed under this Act.
25     (26) Semen used for artificial insemination of livestock
26 for direct agricultural production.
27     (27) Horses, or interests in horses, registered with and
28 meeting the requirements of any of the Arabian Horse Club
29 Registry of America, Appaloosa Horse Club, American Quarter
30 Horse Association, United States Trotting Association, or
31 Jockey Club, as appropriate, used for purposes of breeding or
32 racing for prizes.
33     (28) Computers and communications equipment utilized for
34 any hospital purpose and equipment used in the diagnosis,
35 analysis, or treatment of hospital patients sold to a lessor
36 who leases the equipment, under a lease of one year or longer

 

 

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

 

 

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

 

 

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

 

 

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1 will, upon receipt of the property in Illinois, temporarily
2 store the property in Illinois (i) for the purpose of
3 subsequently transporting it outside this State for use or
4 consumption thereafter solely outside this State or (ii) for
5 the purpose of being processed, fabricated, or manufactured
6 into, attached to, or incorporated into other tangible personal
7 property to be transported outside this State and thereafter
8 used or consumed solely outside this State. The Director of
9 Revenue shall, pursuant to rules adopted in accordance with the
10 Illinois Administrative Procedure Act, issue a permit to any
11 taxpayer in good standing with the Department who is eligible
12 for the exemption under this paragraph (38). The permit issued
13 under this paragraph (38) shall authorize the holder, to the
14 extent and in the manner specified in the rules adopted under
15 this Act, to purchase tangible personal property from a
16 retailer exempt from the taxes imposed by this Act. Taxpayers
17 shall maintain all necessary books and records to substantiate
18 the use and consumption of all such tangible personal property
19 outside of the State of Illinois.
20 (Source: P.A. 92-16, eff. 6-28-01; 92-35, eff. 7-1-01; 92-227,
21 eff. 8-2-01; 92-337, eff. 8-10-01; 92-484, eff. 8-23-01;
22 92-488, eff. 8-23-01; 92-651, eff. 7-11-02; 92-680, eff.
23 7-16-02; 93-23, eff. 6-20-03; 93-24, eff. 6-20-03; 93-840, eff.
24 7-30-04; 93-1033, eff. 9-3-04; 93-1068, eff. 1-15-05.)
 
25     (35 ILCS 120/1d rep.)  (from Ch. 120, par. 440d)
26     (35 ILCS 120/1f rep.)  (from Ch. 120, par. 440f)
27     Section 33. The Retailers' Occupation Tax Act is amended by
28 repealing Sections 1d and 1f.
 
29     Section 35. The Property Tax Code is amended by changing
30 Sections 18-255, 20-15, and 21-30 and by adding Section 18-178
31 as follows:
 
32     (35 ILCS 200/18-178 new)
33     Sec. 18-178. Education tax abatement. Beginning with taxes

 

 

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1 levied for 2003 (payable in 2004), the county clerk must
2 determine the final extension for educational purposes for all
3 taxable property in a school district located in the county or
4 for the taxable property of that part of a school district
5 located in the county, taking into account the maximum rate,
6 levy, and extension authorized under the Property Tax Extension
7 Limitation Law, the Truth in Taxation Law, and any other
8 statute. The county clerk must then abate the extension for
9 educational purposes for each school district or part of a
10 school district in the county by the amount of the minimum
11 property tax relief grant and, if applicable, the supplemental
12 property tax relief grant, certified to the county clerk for
13 that school district or part of a school district by the
14 Department of Revenue under Section 6z-65 of the State Finance
15 Act. When the final extension for educational purposes has been
16 determined and abated, the county clerk must notify the
17 Department of Revenue. The county clerk must determine the
18 prorated portion of the certified minimum and, if applicable,
19 supplemental property tax relief grants allocable to each
20 taxpayer in a given school district based on the tax rate for
21 educational purposes for that school district and the aggregate
22 relief granted to that school district. The extension amount
23 for educational purposes, as originally calculated before
24 abatement, is the official, final extension for educational
25 purposes and must be used for all other purposes, including
26 determining the maximum rate, levy, and extension authorized
27 under the Property Tax Extension Limitation Law, the Truth in
28 Taxation Law, and any other statute and the maximum amount of
29 tax anticipation warrants under Sections 17-16 and 34-23 of the
30 School Code.
 
31     (35 ILCS 200/18-255)
32     Sec. 18-255. Abstract of assessments and extensions. When
33 the collector's books are completed, the county clerk shall
34 make a complete statement of the assessment and extensions, in
35 conformity to the instructions of the Department. The clerk

 

 

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1 shall certify the statement to the Department. Beginning with
2 the 2003 levy year, the Department shall require the statement
3 to include a separate listing of the amount of any extension
4 that is abated under Section 18-178 of this Act.
5 (Source: Laws 1943, vol. 1, p. 1136; P.A. 88-455.)
 
6     (35 ILCS 200/20-15)
7     Sec. 20-15. Information on bill or separate statement. The
8 amount of tax due and rates shown on the tax bill pursuant to
9 this Section shall be net of any abatement under Section
10 18-178. There shall be printed on each bill, or on a separate
11 slip which shall be mailed with the bill:
12         (a) a statement itemizing the rate at which taxes have
13     been extended for each of the taxing districts in the
14     county in whose district the property is located, and in
15     those counties utilizing electronic data processing
16     equipment the dollar amount of tax due from the person
17     assessed allocable to each of those taxing districts,
18     including a separate statement of the dollar amount of tax
19     due which is allocable to a tax levied under the Illinois
20     Local Library Act or to any other tax levied by a
21     municipality or township for public library purposes,
22         (b) a separate statement for each of the taxing
23     districts of the dollar amount of tax due which is
24     allocable to a tax levied under the Illinois Pension Code
25     or to any other tax levied by a municipality or township
26     for public pension or retirement purposes,
27         (c) the total tax rate,
28         (d) the total amount of tax due, and
29         (e) the amount by which the total tax and the tax
30     allocable to each taxing district differs from the
31     taxpayer's last prior tax bill, and
32         (f) the amount of tax abated under Section 18-178
33     labeled "Portion of your Education Related Property Taxes
34     paid by the State of Illinois".
35     The county treasurer shall ensure that only those taxing

 

 

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1 districts in which a parcel of property is located shall be
2 listed on the bill for that property.
3     In all counties the statement shall also provide:
4         (1) the property index number or other suitable
5     description,
6         (2) the assessment of the property,
7         (3) the equalization factors imposed by the county and
8     by the Department, and
9         (4) the equalized assessment resulting from the
10     application of the equalization factors to the basic
11     assessment.
12     In all counties which do not classify property for purposes
13 of taxation, for property on which a single family residence is
14 situated the statement shall also include a statement to
15 reflect the fair cash value determined for the property. In all
16 counties which classify property for purposes of taxation in
17 accordance with Section 4 of Article IX of the Illinois
18 Constitution, for parcels of residential property in the lowest
19 assessment classification the statement shall also include a
20 statement to reflect the fair cash value determined for the
21 property.
22     In all counties, the statement shall include information
23 that certain taxpayers may be eligible for the Senior Citizens
24 and Disabled Persons Property Tax Relief and Pharmaceutical
25 Assistance Act and that applications are available from the
26 Illinois Department of Revenue.
27     In counties which use the estimated or accelerated billing
28 methods, these statements shall only be provided with the final
29 installment of taxes due, except that the statement under item
30 (f) shall be included with both installments in those counties
31 under estimated or accelerated billing methods, the first
32 billing showing the amount deducted from the first installment,
33 and the final billing showing the total tax abated for the levy
34 year under Section 18-178. The provisions of this Section
35 create a mandatory statutory duty. They are not merely
36 directory or discretionary. The failure or neglect of the

 

 

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1 collector to mail the bill, or the failure of the taxpayer to
2 receive the bill, shall not affect the validity of any tax, or
3 the liability for the payment of any tax.
4 (Source: P.A. 91-699, eff. 1-1-01.)
 
5     (35 ILCS 200/21-30)
6     Sec. 21-30. Accelerated billing. Except as provided in this
7 Section, Section 9-260, and Section 21-40, in counties with
8 3,000,000 or more inhabitants, by January 31 annually,
9 estimated tax bills setting out the first installment of
10 property taxes for the preceding year, payable in that year,
11 shall be prepared and mailed. The first installment of taxes on
12 the estimated tax bills shall be computed at 50% of the total
13 of each tax bill before the abatement of taxes under Section
14 18-178 for the preceding year, less an estimate of one-half of
15 the minimum school district property tax relief grant for the
16 current year determined based on information available. If,
17 prior to the preparation of the estimated tax bills, a
18 certificate of error has been either approved by a court on or
19 before November 30 of the preceding year or certified pursuant
20 to Section 14-15 on or before November 30 of the preceding
21 year, then the first installment of taxes on the estimated tax
22 bills shall be computed at 50% of the total taxes before the
23 abatement of taxes under Section 18-178 for the preceding year
24 as corrected by the certificate of error, less an estimate of
25 one-half of the minimum school district property tax relief
26 grant for the current year determined based on information
27 available. By June 30 annually, actual tax bills shall be
28 prepared and mailed. These bills shall set out total taxes due
29 and the amount of estimated taxes billed in the first
30 installment, and shall state the balance of taxes due for that
31 year as represented by the sum derived from subtracting the
32 amount of the first installment from the total taxes due for
33 that year.
34     The county board may provide by ordinance, in counties with
35 3,000,000 or more inhabitants, for taxes to be paid in 4

 

 

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1 installments. For the levy year for which the ordinance is
2 first effective and each subsequent year, estimated tax bills
3 setting out the first, second, and third installment of taxes
4 for the preceding year, payable in that year, shall be prepared
5 and mailed not later than the date specified by ordinance. Each
6 installment on estimated tax bills shall be computed at 25% of
7 the total of each tax bill for the preceding year. By the date
8 specified in the ordinance, actual tax bills shall be prepared
9 and mailed. These bills shall set out total taxes due and the
10 amount of estimated taxes billed in the first, second, and
11 third installments and shall state the balance of taxes due for
12 that year as represented by the sum derived from subtracting
13 the amount of the estimated installments from the total taxes
14 due for that year.
15     The county board of any county with less than 3,000,000
16 inhabitants may, by ordinance or resolution, adopt an
17 accelerated method of tax billing. The county board may
18 subsequently rescind the ordinance or resolution and revert to
19 the method otherwise provided for in this Code.
20     Taxes levied on homestead property in which a member of the
21 National Guard or reserves of the armed forces of the United
22 States who was called to active duty on or after August 1,
23 1990, and who has an ownership interest shall not be deemed
24 delinquent and no interest shall accrue or be charged as a
25 penalty on such taxes due and payable in 1991 or 1992 until one
26 year after that member returns to civilian status.
27 (Source: P.A. 92-475, eff. 8-23-01; 93-560, eff. 8-20-03.)
 
28     Section 40. The Motor Fuel Tax Law is amended by changing
29 Section 2b as follows:
 
30     (35 ILCS 505/2b)  (from Ch. 120, par. 418b)
31     Sec. 2b. In addition to the tax collection and reporting
32 responsibilities imposed elsewhere in this Act, a person who is
33 required to pay the tax imposed by Section 2a of this Act shall
34 pay the tax to the Department by return showing all fuel

 

 

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1 purchased, acquired or received and sold, distributed or used
2 during the preceding calendar month including losses of fuel as
3 the result of evaporation or shrinkage due to temperature
4 variations, and such other reasonable information as the
5 Department may require. Losses of fuel as the result of
6 evaporation or shrinkage due to temperature variations may not
7 exceed 1% of the total gallons in storage at the beginning of
8 the month, plus the receipts of gallonage during the month,
9 minus the gallonage remaining in storage at the end of the
10 month. Any loss reported that is in excess of this amount shall
11 be subject to the tax imposed by Section 2a of this Law. On and
12 after July 1, 2001, for each 6-month period January through
13 June, net losses of fuel (for each category of fuel that is
14 required to be reported on a return) as the result of
15 evaporation or shrinkage due to temperature variations may not
16 exceed 1% of the total gallons in storage at the beginning of
17 each January, plus the receipts of gallonage each January
18 through June, minus the gallonage remaining in storage at the
19 end of each June. On and after July 1, 2001, for each 6-month
20 period July through December, net losses of fuel (for each
21 category of fuel that is required to be reported on a return)
22 as the result of evaporation or shrinkage due to temperature
23 variations may not exceed 1% of the total gallons in storage at
24 the beginning of each July, plus the receipts of gallonage each
25 July through December, minus the gallonage remaining in storage
26 at the end of each December. Any net loss reported that is in
27 excess of this amount shall be subject to the tax imposed by
28 Section 2a of this Law. For purposes of this Section, "net
29 loss" means the number of gallons gained through temperature
30 variations minus the number of gallons lost through temperature
31 variations or evaporation for each of the respective 6-month
32 periods.
33     The return shall be prescribed by the Department and shall
34 be filed between the 1st and 20th days of each calendar month.
35 The Department may, in its discretion, combine the returns
36 filed under this Section, Section 5, and Section 5a of this

 

 

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1 Act. The return must be accompanied by appropriate
2 computer-generated magnetic media supporting schedule data in
3 the format required by the Department, unless, as provided by
4 rule, the Department grants an exception upon petition of a
5 taxpayer. If the return is filed timely, the seller shall take
6 a discount of 2% through June 30, 2003 and 1.75% thereafter
7 which is allowed to reimburse the seller for the expenses
8 incurred in keeping records, preparing and filing returns,
9 collecting and remitting the tax and supplying data to the
10 Department on request. The discount, however, shall be
11 applicable only to the amount of payment which accompanies a
12 return that is filed timely in accordance with this Section.
13 (Source: P.A. 92-30, eff. 7-1-01; 93-32, eff. 6-20-03.)
 
14     Section 45. The School Code is amended by changing Section
15 18-8.05 and by adding Sections 18-8.15 and 18-25 as follows:
 
16     (105 ILCS 5/18-8.05)
17     Sec. 18-8.05. Basis for apportionment of general State
18 financial aid and supplemental general State aid to the common
19 schools for the 1998-1999 and subsequent school years.
 
20 (A) General Provisions.
21     (1) The provisions of this Section apply to the 1998-1999
22 and subsequent school years. The system of general State
23 financial aid provided for in this Section is designed to
24 assure that, through a combination of State financial aid and
25 required local resources, the financial support provided each
26 pupil in Average Daily Attendance equals or exceeds a
27 prescribed per pupil Foundation Level. This formula approach
28 imputes a level of per pupil Available Local Resources and
29 provides for the basis to calculate a per pupil level of
30 general State financial aid that, when added to Available Local
31 Resources, equals or exceeds the Foundation Level. The amount
32 of per pupil general State financial aid for school districts,
33 in general, varies in inverse relation to Available Local

 

 

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1 Resources. Per pupil amounts are based upon each school
2 district's Average Daily Attendance as that term is defined in
3 this Section.
4     (2) In addition to general State financial aid, school
5 districts with specified levels or concentrations of pupils
6 from low income households are eligible to receive supplemental
7 general State financial aid grants as provided pursuant to
8 subsection (H). The supplemental State aid grants provided for
9 school districts under subsection (H) shall be appropriated for
10 distribution to school districts as part of the same line item
11 in which the general State financial aid of school districts is
12 appropriated under this Section.
13     (3) To receive financial assistance under this Section,
14 school districts are required to file claims with the State
15 Board of Education, subject to the following requirements:
16         (a) Any school district which fails for any given
17     school year to maintain school as required by law, or to
18     maintain a recognized school is not eligible to file for
19     such school year any claim upon the Common School Fund. In
20     case of nonrecognition of one or more attendance centers in
21     a school district otherwise operating recognized schools,
22     the claim of the district shall be reduced in the
23     proportion which the Average Daily Attendance in the
24     attendance center or centers bear to the Average Daily
25     Attendance in the school district. A "recognized school"
26     means any public school which meets the standards as
27     established for recognition by the State Board of
28     Education. A school district or attendance center not
29     having recognition status at the end of a school term is
30     entitled to receive State aid payments due upon a legal
31     claim which was filed while it was recognized.
32         (b) School district claims filed under this Section are
33     subject to Sections 18-9, 18-10, and 18-12, except as
34     otherwise provided in this Section.
35         (c) If a school district operates a full year school
36     under Section 10-19.1, the general State aid to the school

 

 

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1     district shall be determined by the State Board of
2     Education in accordance with this Section as near as may be
3     applicable.
4         (c-5) "ECI" means the Employment Cost Index as
5     published by the U.S. Bureau of Labor Statistics.
6         (d) (Blank).
7     (4) Except as provided in subsections (H) and (L), the
8 board of any district receiving any of the grants provided for
9 in this Section may apply those funds to any fund so received
10 for which that board is authorized to make expenditures by law.
11     School districts are not required to exert a minimum
12 Operating Tax Rate in order to qualify for assistance under
13 this Section.
14     (5) As used in this Section the following terms, when
15 capitalized, shall have the meaning ascribed herein:
16         (a) "Average Daily Attendance": A count of pupil
17     attendance in school, averaged as provided for in
18     subsection (C) and utilized in deriving per pupil financial
19     support levels.
20         (b) "Available Local Resources": A computation of
21     local financial support, calculated on the basis of Average
22     Daily Attendance and derived as provided pursuant to
23     subsection (D).
24         (c) "Corporate Personal Property Replacement Taxes":
25     Funds paid to local school districts pursuant to "An Act in
26     relation to the abolition of ad valorem personal property
27     tax and the replacement of revenues lost thereby, and
28     amending and repealing certain Acts and parts of Acts in
29     connection therewith", certified August 14, 1979, as
30     amended (Public Act 81-1st S.S.-1).
31         (d) "Foundation Level": A prescribed level of per pupil
32     financial support as provided for in subsection (B).
33         (e) "Operating Tax Rate": All school district property
34     taxes extended for all purposes, except Bond and Interest,
35     Summer School, Rent, Capital Improvement, and Vocational
36     Education Building purposes.
 

 

 

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1 (B) Foundation Level.
2     (1) The Foundation Level is a figure established by the
3 State representing the minimum level of per pupil financial
4 support that should be available to provide for the basic
5 education of each pupil in Average Daily Attendance. As set
6 forth in this Section, each school district is assumed to exert
7 a sufficient local taxing effort such that, in combination with
8 the aggregate of general State financial aid provided the
9 district, an aggregate of State and local resources are
10 available to meet the basic education needs of pupils in the
11 district.
12     (2) For the 1998-1999 school year, the Foundation Level of
13 support is $4,225. For the 1999-2000 school year, the
14 Foundation Level of support is $4,325. For the 2000-2001 school
15 year, the Foundation Level of support is $4,425. For the
16 2001-2002 school year and 2002-2003 school year, the Foundation
17 Level of support is $4,560. For the 2003-2004 school year, the
18 Foundation Level of support is $4,810.
19     (3) For the 2004-2005 school year and each school year
20 thereafter, the Foundation Level of support is $4,964 $5,060 or
21 such greater amount as may be established by law by the General
22 Assembly.
23     (4) For the 2005-2006 school year, the Foundation Level of
24 support is $5,952. For each school year thereafter, the
25 Foundation Level of support shall be equal to the Foundation
26 Level of support for the immediately preceding school year,
27 increased by the percentage increase, if any, in the ECI
28 published for the immediately preceding school year, or such
29 greater amount as may be established by law by the General
30 Assembly.
 
31 (C) Average Daily Attendance.
32     (1) For purposes of calculating general State aid pursuant
33 to subsection (E), an Average Daily Attendance figure shall be
34 utilized. The Average Daily Attendance figure for formula

 

 

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1 calculation purposes shall be the monthly average of the actual
2 number of pupils in attendance of each school district, as
3 further averaged for the best 3 months of pupil attendance for
4 each school district. In compiling the figures for the number
5 of pupils in attendance, school districts and the State Board
6 of Education shall, for purposes of general State aid funding,
7 conform attendance figures to the requirements of subsection
8 (F).
9     (2) The Average Daily Attendance figures utilized in
10 subsection (E) shall be the requisite attendance data for the
11 school year immediately preceding the school year for which
12 general State aid is being calculated or the average of the
13 attendance data for the 3 preceding school years, whichever is
14 greater. The Average Daily Attendance figures utilized in
15 subsection (H) shall be the requisite attendance data for the
16 school year immediately preceding the school year for which
17 general State aid is being calculated.
 
18 (D) Available Local Resources.
19     (1) For purposes of calculating general State aid pursuant
20 to subsection (E), a representation of Available Local
21 Resources per pupil, as that term is defined and determined in
22 this subsection, shall be utilized. Available Local Resources
23 per pupil shall include a calculated dollar amount representing
24 local school district revenues from local property taxes and
25 from Corporate Personal Property Replacement Taxes, expressed
26 on the basis of pupils in Average Daily Attendance. Calculation
27 of Available Local Resources shall exclude any tax amnesty
28 funds received as a result of Public Act 93-26.
29     (2) In determining a school district's revenue from local
30 property taxes, the State Board of Education shall utilize the
31 equalized assessed valuation of all taxable property of each
32 school district as of September 30 of the previous year. The
33 equalized assessed valuation utilized shall be obtained and
34 determined as provided in subsection (G).
35     (3) For school districts maintaining grades kindergarten

 

 

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1 through 12, local property tax revenues per pupil shall be
2 calculated as the product of the applicable equalized assessed
3 valuation for the district multiplied by 3.00%, and divided by
4 the district's Average Daily Attendance figure. For school
5 districts maintaining grades kindergarten through 8, local
6 property tax revenues per pupil shall be calculated as the
7 product of the applicable equalized assessed valuation for the
8 district multiplied by 2.30%, and divided by the district's
9 Average Daily Attendance figure. For school districts
10 maintaining grades 9 through 12, local property tax revenues
11 per pupil shall be the applicable equalized assessed valuation
12 of the district multiplied by 1.05%, and divided by the
13 district's Average Daily Attendance figure.
14     (4) The Corporate Personal Property Replacement Taxes paid
15 to each school district during the calendar year 2 years before
16 the calendar year in which a school year begins, divided by the
17 Average Daily Attendance figure for that district, shall be
18 added to the local property tax revenues per pupil as derived
19 by the application of the immediately preceding paragraph (3).
20 The sum of these per pupil figures for each school district
21 shall constitute Available Local Resources as that term is
22 utilized in subsection (E) in the calculation of general State
23 aid.
 
24 (E) Computation of General State Aid.
25     (1) For each school year, the amount of general State aid
26 allotted to a school district shall be computed by the State
27 Board of Education as provided in this subsection.
28     (2) For any school district for which Available Local
29 Resources per pupil is less than the product of 0.93 times the
30 Foundation Level, general State aid for that district shall be
31 calculated as an amount equal to the Foundation Level minus
32 Available Local Resources, multiplied by the Average Daily
33 Attendance of the school district.
34     (3) For any school district for which Available Local
35 Resources per pupil is equal to or greater than the product of

 

 

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1 0.93 times the Foundation Level and less than the product of
2 1.75 times the Foundation Level, the general State aid per
3 pupil shall be a decimal proportion of the Foundation Level
4 derived using a linear algorithm. Under this linear algorithm,
5 the calculated general State aid per pupil shall decline in
6 direct linear fashion from 0.07 times the Foundation Level for
7 a school district with Available Local Resources equal to the
8 product of 0.93 times the Foundation Level, to 0.05 times the
9 Foundation Level for a school district with Available Local
10 Resources equal to the product of 1.75 times the Foundation
11 Level. The allocation of general State aid for school districts
12 subject to this paragraph 3 shall be the calculated general
13 State aid per pupil figure multiplied by the Average Daily
14 Attendance of the school district.
15     (4) For any school district for which Available Local
16 Resources per pupil equals or exceeds the product of 1.75 times
17 the Foundation Level, the general State aid for the school
18 district shall be calculated as the product of $218 multiplied
19 by the Average Daily Attendance of the school district.
20     (5) The amount of general State aid allocated to a school
21 district for the 1999-2000 school year meeting the requirements
22 set forth in paragraph (4) of subsection (G) shall be increased
23 by an amount equal to the general State aid that would have
24 been received by the district for the 1998-1999 school year by
25 utilizing the Extension Limitation Equalized Assessed
26 Valuation as calculated in paragraph (4) of subsection (G) less
27 the general State aid allotted for the 1998-1999 school year.
28 This amount shall be deemed a one time increase, and shall not
29 affect any future general State aid allocations.
 
30 (F) Compilation of Average Daily Attendance.
31     (1) Each school district shall, by July 1 of each year,
32 submit to the State Board of Education, on forms prescribed by
33 the State Board of Education, attendance figures for the school
34 year that began in the preceding calendar year. The attendance
35 information so transmitted shall identify the average daily

 

 

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1 attendance figures for each month of the school year. Beginning
2 with the general State aid claim form for the 2002-2003 school
3 year, districts shall calculate Average Daily Attendance as
4 provided in subdivisions (a), (b), and (c) of this paragraph
5 (1).
6         (a) In districts that do not hold year-round classes,
7     days of attendance in August shall be added to the month of
8     September and any days of attendance in June shall be added
9     to the month of May.
10         (b) In districts in which all buildings hold year-round
11     classes, days of attendance in July and August shall be
12     added to the month of September and any days of attendance
13     in June shall be added to the month of May.
14         (c) In districts in which some buildings, but not all,
15     hold year-round classes, for the non-year-round buildings,
16     days of attendance in August shall be added to the month of
17     September and any days of attendance in June shall be added
18     to the month of May. The average daily attendance for the
19     year-round buildings shall be computed as provided in
20     subdivision (b) of this paragraph (1). To calculate the
21     Average Daily Attendance for the district, the average
22     daily attendance for the year-round buildings shall be
23     multiplied by the days in session for the non-year-round
24     buildings for each month and added to the monthly
25     attendance of the non-year-round buildings.
26     Except as otherwise provided in this Section, days of
27 attendance by pupils shall be counted only for sessions of not
28 less than 5 clock hours of school work per day under direct
29 supervision of: (i) teachers, or (ii) non-teaching personnel or
30 volunteer personnel when engaging in non-teaching duties and
31 supervising in those instances specified in subsection (a) of
32 Section 10-22.34 and paragraph 10 of Section 34-18, with pupils
33 of legal school age and in kindergarten and grades 1 through
34 12.
35     Days of attendance by tuition pupils shall be accredited
36 only to the districts that pay the tuition to a recognized

 

 

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1 school.
2     (2) Days of attendance by pupils of less than 5 clock hours
3 of school shall be subject to the following provisions in the
4 compilation of Average Daily Attendance.
5         (a) Pupils regularly enrolled in a public school for
6     only a part of the school day may be counted on the basis
7     of 1/6 day for every class hour of instruction of 40
8     minutes or more attended pursuant to such enrollment,
9     unless a pupil is enrolled in a block-schedule format of 80
10     minutes or more of instruction, in which case the pupil may
11     be counted on the basis of the proportion of minutes of
12     school work completed each day to the minimum number of
13     minutes that school work is required to be held that day.
14         (b) Days of attendance may be less than 5 clock hours
15     on the opening and closing of the school term, and upon the
16     first day of pupil attendance, if preceded by a day or days
17     utilized as an institute or teachers' workshop.
18         (c) A session of 4 or more clock hours may be counted
19     as a day of attendance upon certification by the regional
20     superintendent, and approved by the State Superintendent
21     of Education to the extent that the district has been
22     forced to use daily multiple sessions.
23         (d) A session of 3 or more clock hours may be counted
24     as a day of attendance (1) when the remainder of the school
25     day or at least 2 hours in the evening of that day is
26     utilized for an in-service training program for teachers,
27     up to a maximum of 5 days per school year of which a
28     maximum of 4 days of such 5 days may be used for
29     parent-teacher conferences, provided a district conducts
30     an in-service training program for teachers which has been
31     approved by the State Superintendent of Education; or, in
32     lieu of 4 such days, 2 full days may be used, in which
33     event each such day may be counted as a day of attendance;
34     and (2) when days in addition to those provided in item (1)
35     are scheduled by a school pursuant to its school
36     improvement plan adopted under Article 34 or its revised or

 

 

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1     amended school improvement plan adopted under Article 2,
2     provided that (i) such sessions of 3 or more clock hours
3     are scheduled to occur at regular intervals, (ii) the
4     remainder of the school days in which such sessions occur
5     are utilized for in-service training programs or other
6     staff development activities for teachers, and (iii) a
7     sufficient number of minutes of school work under the
8     direct supervision of teachers are added to the school days
9     between such regularly scheduled sessions to accumulate
10     not less than the number of minutes by which such sessions
11     of 3 or more clock hours fall short of 5 clock hours. Any
12     full days used for the purposes of this paragraph shall not
13     be considered for computing average daily attendance. Days
14     scheduled for in-service training programs, staff
15     development activities, or parent-teacher conferences may
16     be scheduled separately for different grade levels and
17     different attendance centers of the district.
18         (e) A session of not less than one clock hour of
19     teaching hospitalized or homebound pupils on-site or by
20     telephone to the classroom may be counted as 1/2 day of
21     attendance, however these pupils must receive 4 or more
22     clock hours of instruction to be counted for a full day of
23     attendance.
24         (f) A session of at least 4 clock hours may be counted
25     as a day of attendance for first grade pupils, and pupils
26     in full day kindergartens, and a session of 2 or more hours
27     may be counted as 1/2 day of attendance by pupils in
28     kindergartens which provide only 1/2 day of attendance.
29         (g) For children with disabilities who are below the
30     age of 6 years and who cannot attend 2 or more clock hours
31     because of their disability or immaturity, a session of not
32     less than one clock hour may be counted as 1/2 day of
33     attendance; however for such children whose educational
34     needs so require a session of 4 or more clock hours may be
35     counted as a full day of attendance.
36         (h) A recognized kindergarten which provides for only

 

 

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1     1/2 day of attendance by each pupil shall not have more
2     than 1/2 day of attendance counted in any one day. However,
3     kindergartens may count 2 1/2 days of attendance in any 5
4     consecutive school days. When a pupil attends such a
5     kindergarten for 2 half days on any one school day, the
6     pupil shall have the following day as a day absent from
7     school, unless the school district obtains permission in
8     writing from the State Superintendent of Education.
9     Attendance at kindergartens which provide for a full day of
10     attendance by each pupil shall be counted the same as
11     attendance by first grade pupils. Only the first year of
12     attendance in one kindergarten shall be counted, except in
13     case of children who entered the kindergarten in their
14     fifth year whose educational development requires a second
15     year of kindergarten as determined under the rules and
16     regulations of the State Board of Education.
 
17 (G) Equalized Assessed Valuation Data.
18     (1) For purposes of the calculation of Available Local
19 Resources required pursuant to subsection (D), the State Board
20 of Education shall secure from the Department of Revenue the
21 value as equalized or assessed by the Department of Revenue of
22 all taxable property of every school district, together with
23 (i) the applicable tax rate used in extending taxes for the
24 funds of the district as of September 30 of the previous year
25 and (ii) the limiting rate for all school districts subject to
26 property tax extension limitations as imposed under the
27 Property Tax Extension Limitation Law.
28     The Department of Revenue shall add to the equalized
29 assessed value of all taxable property of each school district
30 situated entirely or partially within a county that is or was
31 subject to the alternative general homestead exemption
32 provisions of Section 15-176 of the Property Tax Code (a) (i)
33 an amount equal to the total amount by which the homestead
34 exemption allowed under Section 15-176 of the Property Tax Code
35 for real property situated in that school district exceeds the

 

 

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1 total amount that would have been allowed in that school
2 district if the maximum reduction under Section 15-176 was (i)
3 $4,500 in Cook County or $3,500 in all other counties in tax
4 year 2003 or (ii) $5,000 in all counties in tax year 2004 and
5 thereafter and (b) (ii) an amount equal to the aggregate amount
6 for the taxable year of all additional exemptions under Section
7 15-175 of the Property Tax Code for owners with a household
8 income of $30,000 or less. The county clerk of any county that
9 is or was subject to the alternative general homestead
10 exemption provisions of Section 15-176 of the Property Tax Code
11 shall annually calculate and certify to the Department of
12 Revenue for each school district all homestead exemption
13 amounts under Section 15-176 of the Property Tax Code and all
14 amounts of additional exemptions under Section 15-175 of the
15 Property Tax Code for owners with a household income of $30,000
16 or less. It is the intent of this paragraph that if the general
17 homestead exemption for a parcel of property is determined
18 under Section 15-176 of the Property Tax Code rather than
19 Section 15-175, then the calculation of Available Local
20 Resources shall not be affected by the difference, if any,
21 between the amount of the general homestead exemption allowed
22 for that parcel of property under Section 15-176 of the
23 Property Tax Code and the amount that would have been allowed
24 had the general homestead exemption for that parcel of property
25 been determined under Section 15-175 of the Property Tax Code.
26 It is further the intent of this paragraph that if additional
27 exemptions are allowed under Section 15-175 of the Property Tax
28 Code for owners with a household income of less than $30,000,
29 then the calculation of Available Local Resources shall not be
30 affected by the difference, if any, because of those additional
31 exemptions.
32     This equalized assessed valuation, as adjusted further by
33 the requirements of this subsection, shall be utilized in the
34 calculation of Available Local Resources.
35     (2) The equalized assessed valuation in paragraph (1) shall
36 be adjusted, as applicable, in the following manner:

 

 

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1         (a) For the purposes of calculating State aid under
2     this Section, with respect to any part of a school district
3     within a redevelopment project area in respect to which a
4     municipality has adopted tax increment allocation
5     financing pursuant to the Tax Increment Allocation
6     Redevelopment Act, Sections 11-74.4-1 through 11-74.4-11
7     of the Illinois Municipal Code or the Industrial Jobs
8     Recovery Law, Sections 11-74.6-1 through 11-74.6-50 of the
9     Illinois Municipal Code, no part of the current equalized
10     assessed valuation of real property located in any such
11     project area which is attributable to an increase above the
12     total initial equalized assessed valuation of such
13     property shall be used as part of the equalized assessed
14     valuation of the district, until such time as all
15     redevelopment project costs have been paid, as provided in
16     Section 11-74.4-8 of the Tax Increment Allocation
17     Redevelopment Act or in Section 11-74.6-35 of the
18     Industrial Jobs Recovery Law. For the purpose of the
19     equalized assessed valuation of the district, the total
20     initial equalized assessed valuation or the current
21     equalized assessed valuation, whichever is lower, shall be
22     used until such time as all redevelopment project costs
23     have been paid.
24         (b) The real property equalized assessed valuation for
25     a school district shall be adjusted by subtracting from the
26     real property value as equalized or assessed by the
27     Department of Revenue for the district an amount computed
28     by dividing the amount of any abatement of taxes under
29     Section 18-170 of the Property Tax Code by 3.00% for a
30     district maintaining grades kindergarten through 12, by
31     2.30% for a district maintaining grades kindergarten
32     through 8, or by 1.05% for a district maintaining grades 9
33     through 12 and adjusted by an amount computed by dividing
34     the amount of any abatement of taxes under subsection (a)
35     of Section 18-165 of the Property Tax Code by the same
36     percentage rates for district type as specified in this

 

 

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1     subparagraph (b).
2     (3) For the 1999-2000 school year and each school year
3 thereafter, if a school district meets all of the criteria of
4 this subsection (G)(3), the school district's Available Local
5 Resources shall be calculated under subsection (D) using the
6 district's Extension Limitation Equalized Assessed Valuation
7 as calculated under this subsection (G)(3).
8     For purposes of this subsection (G)(3) the following terms
9 shall have the following meanings:
10         "Budget Year": The school year for which general State
11     aid is calculated and awarded under subsection (E).
12         "Base Tax Year": The property tax levy year used to
13     calculate the Budget Year allocation of general State aid.
14         "Preceding Tax Year": The property tax levy year
15     immediately preceding the Base Tax Year.
16         "Base Tax Year's Tax Extension": The product of the
17     equalized assessed valuation utilized by the County Clerk
18     in the Base Tax Year multiplied by the limiting rate as
19     calculated by the County Clerk and defined in the Property
20     Tax Extension Limitation Law.
21         "Preceding Tax Year's Tax Extension": The product of
22     the equalized assessed valuation utilized by the County
23     Clerk in the Preceding Tax Year multiplied by the Operating
24     Tax Rate as defined in subsection (A).
25         "Extension Limitation Ratio": A numerical ratio,
26     certified by the County Clerk, in which the numerator is
27     the Base Tax Year's Tax Extension and the denominator is
28     the Preceding Tax Year's Tax Extension.
29         "Operating Tax Rate": The operating tax rate as defined
30     in subsection (A).
31     If a school district is subject to property tax extension
32 limitations as imposed under the Property Tax Extension
33 Limitation Law, the State Board of Education shall calculate
34 the Extension Limitation Equalized Assessed Valuation of that
35 district. For the 1999-2000 school year, the Extension
36 Limitation Equalized Assessed Valuation of a school district as

 

 

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1 calculated by the State Board of Education shall be equal to
2 the product of the district's 1996 Equalized Assessed Valuation
3 and the district's Extension Limitation Ratio. For the
4 2000-2001 school year and each school year thereafter, the
5 Extension Limitation Equalized Assessed Valuation of a school
6 district as calculated by the State Board of Education shall be
7 equal to the product of the Equalized Assessed Valuation last
8 used in the calculation of general State aid and the district's
9 Extension Limitation Ratio. If the Extension Limitation
10 Equalized Assessed Valuation of a school district as calculated
11 under this subsection (G)(3) is less than the district's
12 equalized assessed valuation as calculated pursuant to
13 subsections (G)(1) and (G)(2), then for purposes of calculating
14 the district's general State aid for the Budget Year pursuant
15 to subsection (E), that Extension Limitation Equalized
16 Assessed Valuation shall be utilized to calculate the
17 district's Available Local Resources under subsection (D).
18     (4) For the purposes of calculating general State aid for
19 the 1999-2000 school year only, if a school district
20 experienced a triennial reassessment on the equalized assessed
21 valuation used in calculating its general State financial aid
22 apportionment for the 1998-1999 school year, the State Board of
23 Education shall calculate the Extension Limitation Equalized
24 Assessed Valuation that would have been used to calculate the
25 district's 1998-1999 general State aid. This amount shall equal
26 the product of the equalized assessed valuation used to
27 calculate general State aid for the 1997-1998 school year and
28 the district's Extension Limitation Ratio. If the Extension
29 Limitation Equalized Assessed Valuation of the school district
30 as calculated under this paragraph (4) is less than the
31 district's equalized assessed valuation utilized in
32 calculating the district's 1998-1999 general State aid
33 allocation, then for purposes of calculating the district's
34 general State aid pursuant to paragraph (5) of subsection (E),
35 that Extension Limitation Equalized Assessed Valuation shall
36 be utilized to calculate the district's Available Local

 

 

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1 Resources.
2     (5) For school districts having a majority of their
3 equalized assessed valuation in any county except Cook, DuPage,
4 Kane, Lake, McHenry, or Will, if the amount of general State
5 aid allocated to the school district for the 1999-2000 school
6 year under the provisions of subsection (E), (H), and (J) of
7 this Section is less than the amount of general State aid
8 allocated to the district for the 1998-1999 school year under
9 these subsections, then the general State aid of the district
10 for the 1999-2000 school year only shall be increased by the
11 difference between these amounts. The total payments made under
12 this paragraph (5) shall not exceed $14,000,000. Claims shall
13 be prorated if they exceed $14,000,000.
 
14 (H) Supplemental General State Aid.
15     (1) In addition to the general State aid a school district
16 is allotted pursuant to subsection (E), qualifying school
17 districts shall receive a grant, paid in conjunction with a
18 district's payments of general State aid, for supplemental
19 general State aid based upon the concentration level of
20 children from low-income households within the school
21 district. Supplemental State aid grants provided for school
22 districts under this subsection shall be appropriated for
23 distribution to school districts as part of the same line item
24 in which the general State financial aid of school districts is
25 appropriated under this Section. If the appropriation in any
26 fiscal year for general State aid and supplemental general
27 State aid is insufficient to pay the amounts required under the
28 general State aid and supplemental general State aid
29 calculations, then the State Board of Education shall ensure
30 that each school district receives the full amount due for
31 general State aid and the remainder of the appropriation shall
32 be used for supplemental general State aid, which the State
33 Board of Education shall calculate and pay to eligible
34 districts on a prorated basis.
35     (1.5) This paragraph (1.5) applies only to those school

 

 

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1 years preceding the 2003-2004 school year. For purposes of this
2 subsection (H), the term "Low-Income Concentration Level"
3 shall be the low-income eligible pupil count from the most
4 recently available federal census divided by the Average Daily
5 Attendance of the school district. If, however, (i) the
6 percentage decrease from the 2 most recent federal censuses in
7 the low-income eligible pupil count of a high school district
8 with fewer than 400 students exceeds by 75% or more the
9 percentage change in the total low-income eligible pupil count
10 of contiguous elementary school districts, whose boundaries
11 are coterminous with the high school district, or (ii) a high
12 school district within 2 counties and serving 5 elementary
13 school districts, whose boundaries are coterminous with the
14 high school district, has a percentage decrease from the 2 most
15 recent federal censuses in the low-income eligible pupil count
16 and there is a percentage increase in the total low-income
17 eligible pupil count of a majority of the elementary school
18 districts in excess of 50% from the 2 most recent federal
19 censuses, then the high school district's low-income eligible
20 pupil count from the earlier federal census shall be the number
21 used as the low-income eligible pupil count for the high school
22 district, for purposes of this subsection (H). The changes made
23 to this paragraph (1) by Public Act 92-28 shall apply to
24 supplemental general State aid grants for school years
25 preceding the 2003-2004 school year that are paid in fiscal
26 year 1999 or thereafter and to any State aid payments made in
27 fiscal year 1994 through fiscal year 1998 pursuant to
28 subsection 1(n) of Section 18-8 of this Code (which was
29 repealed on July 1, 1998), and any high school district that is
30 affected by Public Act 92-28 is entitled to a recomputation of
31 its supplemental general State aid grant or State aid paid in
32 any of those fiscal years. This recomputation shall not be
33 affected by any other funding.
34     (1.10) This paragraph (1.10) applies to the 2003-2004
35 school year and each school year thereafter. For purposes of
36 this subsection (H), the term "Low-Income Concentration Level"

 

 

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1 shall, for each fiscal year, be the low-income eligible pupil
2 count as of July 1 of the immediately preceding fiscal year (as
3 determined by the Department of Human Services based on the
4 number of pupils who are eligible for at least one of the
5 following low income programs: Medicaid, KidCare, TANF, or Food
6 Stamps, excluding pupils who are eligible for services provided
7 by the Department of Children and Family Services, averaged
8 over the 2 immediately preceding fiscal years for fiscal year
9 2004 and over the 3 immediately preceding fiscal years for each
10 fiscal year thereafter) divided by the Average Daily Attendance
11 of the school district.
12     (2) Supplemental general State aid pursuant to this
13 subsection (H) shall be provided as follows for the 1998-1999,
14 1999-2000, and 2000-2001 school years only:
15         (a) For any school district with a Low Income
16     Concentration Level of at least 20% and less than 35%, the
17     grant for any school year shall be $800 multiplied by the
18     low income eligible pupil count.
19         (b) For any school district with a Low Income
20     Concentration Level of at least 35% and less than 50%, the
21     grant for the 1998-1999 school year shall be $1,100
22     multiplied by the low income eligible pupil count.
23         (c) For any school district with a Low Income
24     Concentration Level of at least 50% and less than 60%, the
25     grant for the 1998-99 school year shall be $1,500
26     multiplied by the low income eligible pupil count.
27         (d) For any school district with a Low Income
28     Concentration Level of 60% or more, the grant for the
29     1998-99 school year shall be $1,900 multiplied by the low
30     income eligible pupil count.
31         (e) For the 1999-2000 school year, the per pupil amount
32     specified in subparagraphs (b), (c), and (d) immediately
33     above shall be increased to $1,243, $1,600, and $2,000,
34     respectively.
35         (f) For the 2000-2001 school year, the per pupil
36     amounts specified in subparagraphs (b), (c), and (d)

 

 

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1     immediately above shall be $1,273, $1,640, and $2,050,
2     respectively.
3     (2.5) Supplemental general State aid pursuant to this
4 subsection (H) shall be provided as follows for the 2002-2003
5 school year:
6         (a) For any school district with a Low Income
7     Concentration Level of less than 10%, the grant for each
8     school year shall be $355 multiplied by the low income
9     eligible pupil count.
10         (b) For any school district with a Low Income
11     Concentration Level of at least 10% and less than 20%, the
12     grant for each school year shall be $675 multiplied by the
13     low income eligible pupil count.
14         (c) For any school district with a Low Income
15     Concentration Level of at least 20% and less than 35%, the
16     grant for each school year shall be $1,330 multiplied by
17     the low income eligible pupil count.
18         (d) For any school district with a Low Income
19     Concentration Level of at least 35% and less than 50%, the
20     grant for each school year shall be $1,362 multiplied by
21     the low income eligible pupil count.
22         (e) For any school district with a Low Income
23     Concentration Level of at least 50% and less than 60%, the
24     grant for each school year shall be $1,680 multiplied by
25     the low income eligible pupil count.
26         (f) For any school district with a Low Income
27     Concentration Level of 60% or more, the grant for each
28     school year shall be $2,080 multiplied by the low income
29     eligible pupil count.
30     (2.10) Except as otherwise provided, supplemental general
31 State aid pursuant to this subsection (H) shall be provided as
32 follows for the 2003-2004 school year and each school year
33 thereafter:
34         (a) For any school district with a Low Income
35     Concentration Level of 15% or less, the grant for the
36     2003-2004 school year and 2004-2005 each school year shall

 

 

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1     be $355 multiplied by the low income eligible pupil count .
2     For the 2005-2006 school year and each school year
3     thereafter, the grant shall be $355, increased by the
4     percentage increase, if any, in the ECI published for the
5     immediately preceding school year, and then multiplied by
6     the low income eligible pupil count.
7         (b) For any school district with a Low Income
8     Concentration Level greater than 15%, the grant for the
9     2003-2004 school year and 2004-2005 each school year shall
10     be $294.25 added to the product of $2,700 and the square of
11     the Low Income Concentration Level, all multiplied by the
12     low income eligible pupil count. For the 2005-2006 school
13     year and each school year thereafter, the grant shall be
14     $294.25, increased by the percentage increase, if any, in
15     the ECI published for the immediately preceding school
16     year, then added to the product of (i) $2,700, which amount
17     shall be increased by the percentage increase, if any, in
18     the ECI published for the immediately preceding school
19     year, and (ii) the square of the Low Income Concentration
20     Level, and then all multiplied by the low income eligible
21     pupil count.
22     For the 2003-2004 and 2004-2005 school year only, the grant
23 shall be no less than the grant for the 2002-2003 school year.
24 For the 2005-2006 school year only, the grant shall be no less
25 than the grant for the 2002-2003 school year multiplied by
26 0.66. For the 2006-2007 school year only, the grant shall be no
27 less than the grant for the 2002-2003 school year multiplied by
28 0.33.
29     For the 2003-2004 school year only, the grant shall be no
30 greater than the grant received during the 2002-2003 school
31 year added to the product of 0.25 multiplied by the difference
32 between the grant amount calculated under subsection (a) or (b)
33 of this paragraph (2.10), whichever is applicable, and the
34 grant received during the 2002-2003 school year. For the
35 2004-2005 school year only, the grant shall be no greater than
36 the grant received during the 2002-2003 school year added to

 

 

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1 the product of 0.50 multiplied by the difference between the
2 grant amount calculated under subsection (a) or (b) of this
3 paragraph (2.10), whichever is applicable, and the grant
4 received during the 2002-2003 school year. For the 2005-2006
5 school year only, the grant shall be no greater than the grant
6 received during the 2002-2003 school year added to the product
7 of 0.75 multiplied by the difference between the grant amount
8 calculated under subsection (a) or (b) of this paragraph
9 (2.10), whichever is applicable, and the grant received during
10 the 2002-2003 school year.
11     (3) School districts with an Average Daily Attendance of
12 more than 1,000 and less than 50,000 that qualify for
13 supplemental general State aid pursuant to this subsection
14 shall submit a plan to the State Board of Education prior to
15 October 30 of each year for the use of the funds resulting from
16 this grant of supplemental general State aid for the
17 improvement of instruction in which priority is given to
18 meeting the education needs of disadvantaged children. Such
19 plan shall be submitted in accordance with rules and
20 regulations promulgated by the State Board of Education.
21     (4) School districts with an Average Daily Attendance of
22 50,000 or more that qualify for supplemental general State aid
23 pursuant to this subsection shall be required to distribute
24 from funds available pursuant to this Section, no less than
25 $261,000,000 in accordance with the following requirements:
26         (a) The required amounts shall be distributed to the
27     attendance centers within the district in proportion to the
28     number of pupils enrolled at each attendance center who are
29     eligible to receive free or reduced-price lunches or
30     breakfasts under the federal Child Nutrition Act of 1966
31     and under the National School Lunch Act during the
32     immediately preceding school year.
33         (b) The distribution of these portions of supplemental
34     and general State aid among attendance centers according to
35     these requirements shall not be compensated for or
36     contravened by adjustments of the total of other funds

 

 

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1     appropriated to any attendance centers, and the Board of
2     Education shall utilize funding from one or several sources
3     in order to fully implement this provision annually prior
4     to the opening of school.
5         (c) Each attendance center shall be provided by the
6     school district a distribution of noncategorical funds and
7     other categorical funds to which an attendance center is
8     entitled under law in order that the general State aid and
9     supplemental general State aid provided by application of
10     this subsection supplements rather than supplants the
11     noncategorical funds and other categorical funds provided
12     by the school district to the attendance centers.
13         (d) Any funds made available under this subsection that
14     by reason of the provisions of this subsection are not
15     required to be allocated and provided to attendance centers
16     may be used and appropriated by the board of the district
17     for any lawful school purpose.
18         (e) Funds received by an attendance center pursuant to
19     this subsection shall be used by the attendance center at
20     the discretion of the principal and local school council
21     for programs to improve educational opportunities at
22     qualifying schools through the following programs and
23     services: early childhood education, reduced class size or
24     improved adult to student classroom ratio, enrichment
25     programs, remedial assistance, attendance improvement, and
26     other educationally beneficial expenditures which
27     supplement the regular and basic programs as determined by
28     the State Board of Education. Funds provided shall not be
29     expended for any political or lobbying purposes as defined
30     by board rule.
31         (f) Each district subject to the provisions of this
32     subdivision (H)(4) shall submit an acceptable plan to meet
33     the educational needs of disadvantaged children, in
34     compliance with the requirements of this paragraph, to the
35     State Board of Education prior to July 15 of each year.
36     This plan shall be consistent with the decisions of local

 

 

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1     school councils concerning the school expenditure plans
2     developed in accordance with part 4 of Section 34-2.3. The
3     State Board shall approve or reject the plan within 60 days
4     after its submission. If the plan is rejected, the district
5     shall give written notice of intent to modify the plan
6     within 15 days of the notification of rejection and then
7     submit a modified plan within 30 days after the date of the
8     written notice of intent to modify. Districts may amend
9     approved plans pursuant to rules promulgated by the State
10     Board of Education.
11         Upon notification by the State Board of Education that
12     the district has not submitted a plan prior to July 15 or a
13     modified plan within the time period specified herein, the
14     State aid funds affected by that plan or modified plan
15     shall be withheld by the State Board of Education until a
16     plan or modified plan is submitted.
17         If the district fails to distribute State aid to
18     attendance centers in accordance with an approved plan, the
19     plan for the following year shall allocate funds, in
20     addition to the funds otherwise required by this
21     subsection, to those attendance centers which were
22     underfunded during the previous year in amounts equal to
23     such underfunding.
24         For purposes of determining compliance with this
25     subsection in relation to the requirements of attendance
26     center funding, each district subject to the provisions of
27     this subsection shall submit as a separate document by
28     December 1 of each year a report of expenditure data for
29     the prior year in addition to any modification of its
30     current plan. If it is determined that there has been a
31     failure to comply with the expenditure provisions of this
32     subsection regarding contravention or supplanting, the
33     State Superintendent of Education shall, within 60 days of
34     receipt of the report, notify the district and any affected
35     local school council. The district shall within 45 days of
36     receipt of that notification inform the State

 

 

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1     Superintendent of Education of the remedial or corrective
2     action to be taken, whether by amendment of the current
3     plan, if feasible, or by adjustment in the plan for the
4     following year. Failure to provide the expenditure report
5     or the notification of remedial or corrective action in a
6     timely manner shall result in a withholding of the affected
7     funds.
8         The State Board of Education shall promulgate rules and
9     regulations to implement the provisions of this
10     subsection. No funds shall be released under this
11     subdivision (H)(4) to any district that has not submitted a
12     plan that has been approved by the State Board of
13     Education.
 
14 (I) General State Aid for Newly Configured School Districts.
15     (1) For a new school district formed by combining property
16 included totally within 2 or more previously existing school
17 districts, for its first year of existence the general State
18 aid and supplemental general State aid calculated under this
19 Section shall be computed for the new district and for the
20 previously existing districts for which property is totally
21 included within the new district. If the computation on the
22 basis of the previously existing districts is greater, a
23 supplementary payment equal to the difference shall be made for
24 the first 4 years of existence of the new district.
25     (2) For a school district which annexes all of the
26 territory of one or more entire other school districts, for the
27 first year during which the change of boundaries attributable
28 to such annexation becomes effective for all purposes as
29 determined under Section 7-9 or 7A-8, the general State aid and
30 supplemental general State aid calculated under this Section
31 shall be computed for the annexing district as constituted
32 after the annexation and for the annexing and each annexed
33 district as constituted prior to the annexation; and if the
34 computation on the basis of the annexing and annexed districts
35 as constituted prior to the annexation is greater, a

 

 

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1 supplementary payment equal to the difference shall be made for
2 the first 4 years of existence of the annexing school district
3 as constituted upon such annexation.
4     (3) For 2 or more school districts which annex all of the
5 territory of one or more entire other school districts, and for
6 2 or more community unit districts which result upon the
7 division (pursuant to petition under Section 11A-2) of one or
8 more other unit school districts into 2 or more parts and which
9 together include all of the parts into which such other unit
10 school district or districts are so divided, for the first year
11 during which the change of boundaries attributable to such
12 annexation or division becomes effective for all purposes as
13 determined under Section 7-9 or 11A-10, as the case may be, the
14 general State aid and supplemental general State aid calculated
15 under this Section shall be computed for each annexing or
16 resulting district as constituted after the annexation or
17 division and for each annexing and annexed district, or for
18 each resulting and divided district, as constituted prior to
19 the annexation or division; and if the aggregate of the general
20 State aid and supplemental general State aid as so computed for
21 the annexing or resulting districts as constituted after the
22 annexation or division is less than the aggregate of the
23 general State aid and supplemental general State aid as so
24 computed for the annexing and annexed districts, or for the
25 resulting and divided districts, as constituted prior to the
26 annexation or division, then a supplementary payment equal to
27 the difference shall be made and allocated between or among the
28 annexing or resulting districts, as constituted upon such
29 annexation or division, for the first 4 years of their
30 existence. The total difference payment shall be allocated
31 between or among the annexing or resulting districts in the
32 same ratio as the pupil enrollment from that portion of the
33 annexed or divided district or districts which is annexed to or
34 included in each such annexing or resulting district bears to
35 the total pupil enrollment from the entire annexed or divided
36 district or districts, as such pupil enrollment is determined

 

 

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1 for the school year last ending prior to the date when the
2 change of boundaries attributable to the annexation or division
3 becomes effective for all purposes. The amount of the total
4 difference payment and the amount thereof to be allocated to
5 the annexing or resulting districts shall be computed by the
6 State Board of Education on the basis of pupil enrollment and
7 other data which shall be certified to the State Board of
8 Education, on forms which it shall provide for that purpose, by
9 the regional superintendent of schools for each educational
10 service region in which the annexing and annexed districts, or
11 resulting and divided districts are located.
12     (3.5) Claims for financial assistance under this
13 subsection (I) shall not be recomputed except as expressly
14 provided under this Section.
15     (4) Any supplementary payment made under this subsection
16 (I) shall be treated as separate from all other payments made
17 pursuant to this Section.
 
18 (J) Supplementary Grants in Aid.
19     (1) Notwithstanding any other provisions of this Section,
20 the amount of the aggregate general State aid in combination
21 with supplemental general State aid under this Section for
22 which each school district is eligible shall be no less than
23 the amount of the aggregate general State aid entitlement that
24 was received by the district under Section 18-8 (exclusive of
25 amounts received under subsections 5(p) and 5(p-5) of that
26 Section) for the 1997-98 school year, pursuant to the
27 provisions of that Section as it was then in effect. If a
28 school district qualifies to receive a supplementary payment
29 made under this subsection (J), the amount of the aggregate
30 general State aid in combination with supplemental general
31 State aid under this Section which that district is eligible to
32 receive for each school year shall be no less than the amount
33 of the aggregate general State aid entitlement that was
34 received by the district under Section 18-8 (exclusive of
35 amounts received under subsections 5(p) and 5(p-5) of that

 

 

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1 Section) for the 1997-1998 school year, pursuant to the
2 provisions of that Section as it was then in effect.
3     (2) If, as provided in paragraph (1) of this subsection
4 (J), a school district is to receive aggregate general State
5 aid in combination with supplemental general State aid under
6 this Section for the 1998-99 school year and any subsequent
7 school year that in any such school year is less than the
8 amount of the aggregate general State aid entitlement that the
9 district received for the 1997-98 school year, the school
10 district shall also receive, from a separate appropriation made
11 for purposes of this subsection (J), a supplementary payment
12 that is equal to the amount of the difference in the aggregate
13 State aid figures as described in paragraph (1).
14     (3) (Blank).
 
15 (K) Grants to Laboratory and Alternative Schools.
16     In calculating the amount to be paid to the governing board
17 of a public university that operates a laboratory school under
18 this Section or to any alternative school that is operated by a
19 regional superintendent of schools, the State Board of
20 Education shall require by rule such reporting requirements as
21 it deems necessary.
22     As used in this Section, "laboratory school" means a public
23 school which is created and operated by a public university and
24 approved by the State Board of Education. The governing board
25 of a public university which receives funds from the State
26 Board under this subsection (K) may not increase the number of
27 students enrolled in its laboratory school from a single
28 district, if that district is already sending 50 or more
29 students, except under a mutual agreement between the school
30 board of a student's district of residence and the university
31 which operates the laboratory school. A laboratory school may
32 not have more than 1,000 students, excluding students with
33 disabilities in a special education program.
34     As used in this Section, "alternative school" means a
35 public school which is created and operated by a Regional

 

 

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1 Superintendent of Schools and approved by the State Board of
2 Education. Such alternative schools may offer courses of
3 instruction for which credit is given in regular school
4 programs, courses to prepare students for the high school
5 equivalency testing program or vocational and occupational
6 training. A regional superintendent of schools may contract
7 with a school district or a public community college district
8 to operate an alternative school. An alternative school serving
9 more than one educational service region may be established by
10 the regional superintendents of schools of the affected
11 educational service regions. An alternative school serving
12 more than one educational service region may be operated under
13 such terms as the regional superintendents of schools of those
14 educational service regions may agree.
15     Each laboratory and alternative school shall file, on forms
16 provided by the State Superintendent of Education, an annual
17 State aid claim which states the Average Daily Attendance of
18 the school's students by month. The best 3 months' Average
19 Daily Attendance shall be computed for each school. The general
20 State aid entitlement shall be computed by multiplying the
21 applicable Average Daily Attendance by the Foundation Level as
22 determined under this Section.
 
23 (L) Payments, Additional Grants in Aid and Other Requirements.
24     (1) For a school district operating under the financial
25 supervision of an Authority created under Article 34A, the
26 general State aid otherwise payable to that district under this
27 Section, but not the supplemental general State aid, shall be
28 reduced by an amount equal to the budget for the operations of
29 the Authority as certified by the Authority to the State Board
30 of Education, and an amount equal to such reduction shall be
31 paid to the Authority created for such district for its
32 operating expenses in the manner provided in Section 18-11. The
33 remainder of general State school aid for any such district
34 shall be paid in accordance with Article 34A when that Article
35 provides for a disposition other than that provided by this

 

 

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1 Article.
2     (2) (Blank).
3     (3) Summer school. Summer school payments shall be made as
4 provided in Section 18-4.3.
 
5 (M) Education Funding Advisory Board.
6     The Education Funding Advisory Board, hereinafter in this
7 subsection (M) referred to as the "Board", is hereby created.
8 The Board shall consist of 5 members who are appointed by the
9 Governor, by and with the advice and consent of the Senate. The
10 members appointed shall include representatives of education,
11 business, and the general public. One of the members so
12 appointed shall be designated by the Governor at the time the
13 appointment is made as the chairperson of the Board. The
14 initial members of the Board may be appointed any time after
15 the effective date of this amendatory Act of 1997. The regular
16 term of each member of the Board shall be for 4 years from the
17 third Monday of January of the year in which the term of the
18 member's appointment is to commence, except that of the 5
19 initial members appointed to serve on the Board, the member who
20 is appointed as the chairperson shall serve for a term that
21 commences on the date of his or her appointment and expires on
22 the third Monday of January, 2002, and the remaining 4 members,
23 by lots drawn at the first meeting of the Board that is held
24 after all 5 members are appointed, shall determine 2 of their
25 number to serve for terms that commence on the date of their
26 respective appointments and expire on the third Monday of
27 January, 2001, and 2 of their number to serve for terms that
28 commence on the date of their respective appointments and
29 expire on the third Monday of January, 2000. All members
30 appointed to serve on the Board shall serve until their
31 respective successors are appointed and confirmed. Vacancies
32 shall be filled in the same manner as original appointments. If
33 a vacancy in membership occurs at a time when the Senate is not
34 in session, the Governor shall make a temporary appointment
35 until the next meeting of the Senate, when he or she shall

 

 

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1 appoint, by and with the advice and consent of the Senate, a
2 person to fill that membership for the unexpired term. If the
3 Senate is not in session when the initial appointments are
4 made, those appointments shall be made as in the case of
5 vacancies.
6     The Education Funding Advisory Board shall be deemed
7 established, and the initial members appointed by the Governor
8 to serve as members of the Board shall take office, on the date
9 that the Governor makes his or her appointment of the fifth
10 initial member of the Board, whether those initial members are
11 then serving pursuant to appointment and confirmation or
12 pursuant to temporary appointments that are made by the
13 Governor as in the case of vacancies.
14     The State Board of Education shall provide such staff
15 assistance to the Education Funding Advisory Board as is
16 reasonably required for the proper performance by the Board of
17 its responsibilities.
18     For school years after the 2000-2001 school year, the
19 Education Funding Advisory Board, in consultation with the
20 State Board of Education, shall make recommendations as
21 provided in this subsection (M) to the General Assembly for the
22 foundation level under subsection(B) subdivision (B)(3) of
23 this Section and for the supplemental general State aid grant
24 level under subsection (H) of this Section for districts with
25 high concentrations of children from poverty. The recommended
26 foundation level shall be determined based on a methodology
27 which incorporates the basic education expenditures of
28 low-spending schools exhibiting high academic performance. The
29 Education Funding Advisory Board shall make such
30 recommendations to the General Assembly on January 1 of odd
31 numbered years, beginning January 1, 2001.
 
32 (N) (Blank).
 
33 (O) References.
34     (1) References in other laws to the various subdivisions of

 

 

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1 Section 18-8 as that Section existed before its repeal and
2 replacement by this Section 18-8.05 shall be deemed to refer to
3 the corresponding provisions of this Section 18-8.05, to the
4 extent that those references remain applicable.
5     (2) References in other laws to State Chapter 1 funds shall
6 be deemed to refer to the supplemental general State aid
7 provided under subsection (H) of this Section.
 
8 (P) Public Act 93-838 This amendatory Act of the 93rd General
9 Assembly and Public Act 93-808 House Bill 4266 of the 93rd
10 General Assembly make inconsistent changes to this Section. If
11 House Bill 4266 becomes law, then Under Section 6 of the
12 Statute on Statutes there is an irreconcilable conflict between
13 Public Act 93-808 and Public Act 93-838 House Bill 4266 and
14 this amendatory Act. Public Act 93-838 This amendatory Act,
15 being the last acted upon, is controlling. The text of Public
16 Act 93-838 this amendatory Act is the law regardless of the
17 text of Public Act 93-808 House Bill 4266.
18 (Source: P.A. 92-16, eff. 6-28-01; 92-28, eff. 7-1-01; 92-29,
19 eff. 7-1-01; 92-269, eff. 8-7-01; 92-604, eff. 7-1-02; 92-636,
20 eff. 7-11-02; 92-651, eff. 7-11-02; 93-21, eff. 7-1-03; 93-715,
21 eff. 7-12-04; 93-808, eff. 7-26-04; 93-838, eff. 7-30-04;
22 93-875, eff. 8-6-04; revised 10-21-04.)
 
23     (105 ILCS 5/18-8.15 new)
24     Sec. 18-8.15. Supplemental State aid for rapidly expanding
25 school districts.
26     (a) If there has been an increase in a school district's
27 student population over any 2 consecutive school years of (i)
28 over 1.5% in a district with 10,000 or more pupils in average
29 daily attendance, as defined in Section 18-8.05 of this Code,
30 or (ii) over 10% in any other district, then, subject to
31 appropriation, the district is eligible for a grant under this
32 Section.
33     (b) The State Board of Education shall determine a per
34 pupil grant amount for each school district based on the needs

 

 

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1 of each district. The total grant amount for a district for any
2 given school year shall equal the per pupil grant amount
3 multiplied by the difference between the number of pupils in
4 average daily attendance for the first 3 months of the school
5 year and the number of pupils in average daily attendance for
6 the immediately preceding school year.
7     (c) Each fiscal year, the General Assembly shall
8 appropriate at least $40 million of the aggregate Common School
9 Fund appropriation to funding supplemental grants under this
10 Section. Funds for grants under this Section must be
11 appropriated to the State Board of Education in a separate line
12 item for this purpose. As soon as possible after funds have
13 been appropriated to the State Board of Education, the State
14 Board of Education shall distribute the grants to eligible
15 districts.
16     (d) If a school district intentionally reports incorrect
17 average daily attendance numbers to receive a grant under this
18 Section, then the district shall be denied State aid for
19 intentional incorrect reporting of average daily attendance
20 numbers under Section 18-8.05 of this Code.
21     (e) The State Board of Education may adopt any rules
22 necessary to implement this Section.
 
23     (105 ILCS 5/18-25 new)
24     Sec. 18-25. Education appropriation minimum. At a minimum,
25 the General Assembly shall appropriate to the Common School
26 Fund for fiscal year 2006 and each fiscal year thereafter, an
27 amount equal to the following (the "Education Appropriation
28 Minimum"):
29         (1) For fiscal year 2006, a total appropriation equal
30     to the sum of (A) all amounts appropriated to the Common
31     School Fund for fiscal year 2005, plus (B) the amount
32     necessary to increase the Foundation Level of support per
33     student to $5,952 under Section 18-8.05 of this Code, plus
34     (C) $2.4 billion to fund the School District Property Tax
35     Relief Fund described in Section 6z-65 of the State Finance

 

 

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1     Act.
2         (2) For each fiscal year thereafter, a total
3     appropriation equal to (A) the Education Appropriation
4     Minimum for the immediately preceding fiscal year,
5     increased by the percentage increase, if any, in the
6     Employment Cost Index published by the U.S. Bureau of Labor
7     Statistics for the immediately preceding fiscal year, or
8     (B) such greater amount as the General Assembly may
9     appropriate.

 

 

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1 INDEX
2 Statutes amended in order of appearance
3     30 ILCS 105/5.640 new
4     30 ILCS 105/6z-68 new
5     35 ILCS 5/201 from Ch. 120, par. 2-201
6     35 ILCS 5/203 from Ch. 120, par. 2-203
7     35 ILCS 5/247 new
8     35 ILCS 105/2 from Ch. 120, par. 439.2
9     35 ILCS 105/3-50 rep. from Ch. 120, par. 439.3-50
10     35 ILCS 110/2 from Ch. 120, par. 439.32
11     35 ILCS 115/2 from Ch. 120, par. 439.102
12     35 ILCS 120/1 from Ch. 120, par. 440
13     35 ILCS 120/2-5 from Ch. 120, par. 441-5
14     35 ILCS 120/1d rep. from Ch. 120, par. 440d
15     35 ILCS 120/1f rep. from Ch. 120, par. 440f
16     35 ILCS 200/18-178 new
17     35 ILCS 200/18-255
18     35 ILCS 200/20-15
19     35 ILCS 200/21-30
20     35 ILCS 505/2b from Ch. 120, par. 418b
21     105 ILCS 5/18-8.05
22     105 ILCS 5/18-8.15 new
23     105 ILCS 5/18-25 new