94TH GENERAL ASSEMBLY
State of Illinois
2005 and 2006
HB4261

 

Introduced 12/16/2005, by Rep. Sidney H. Mathias

 

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

    Amends the Illinois Income Tax Act. Creates a deduction for individual taxpayers who are 62 years of age or older in an amount equal to the amount the individual pays for Medicare Part B benefits during the taxable year. Provides that the deduction is available in taxable years ending on or after December 31, 2006. Exempts the deduction from the sunset provisions. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         conducts business operations in a federally designated
2         Foreign Trade Zone or Sub-Zone and that is designated a
3         High Impact Business located in Illinois; provided
4         that dividends eligible for the deduction provided in
5         subparagraph (J) of paragraph (2) of this subsection
6         shall not be eligible for the deduction provided under
7         this subparagraph (K);
8             (L) For taxable years ending after December 31,
9         1983, an amount equal to all social security benefits
10         and railroad retirement benefits included in such
11         total pursuant to Sections 72(r) and 86 of the Internal
12         Revenue Code;
13             (M) With the exception of any amounts subtracted
14         under subparagraph (N), an amount equal to the sum of
15         all amounts disallowed as deductions by (i) Sections
16         171(a) (2), and 265(2) of the Internal Revenue Code of
17         1954, as now or hereafter amended, and all amounts of
18         expenses allocable to interest and disallowed as
19         deductions by Section 265(1) of the Internal Revenue
20         Code of 1954, as now or hereafter amended; and (ii) for
21         taxable years ending on or after August 13, 1999,
22         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
23         the Internal Revenue Code; the provisions of this
24         subparagraph are exempt from the provisions of Section
25         250;
26             (N) An amount equal to all amounts included in such
27         total which are exempt from taxation by this State
28         either by reason of its statutes or Constitution or by
29         reason of the Constitution, treaties or statutes of the
30         United States; provided that, in the case of any
31         statute of this State that exempts income derived from
32         bonds or other obligations from the tax imposed under
33         this Act, the amount exempted shall be the interest net
34         of bond premium amortization;
35             (O) An amount equal to any contribution made to a
36         job training project established pursuant to the Tax

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         interest paid, accrued, or incurred, directly or
2         indirectly, to the same foreign person; and
3             (EE) An amount equal to the income from intangible
4         property taken into account for the taxable year (net
5         of the deductions allocable thereto) with respect to
6         transactions with a foreign person who would be a
7         member of the taxpayer's unitary business group but for
8         the fact that the foreign person's business activity
9         outside the United States is 80% or more of that
10         person's total business activity, but not to exceed the
11         addition modification required to be made for the same
12         taxable year under Section 203(a)(2)(D-18) for
13         intangible expenses and costs paid, accrued, or
14         incurred, directly or indirectly, to the same foreign
15         person; and
16             (FF) Beginning with taxable years ending on or
17         after December 31, 2006, for taxpayers 62 years of age
18         and older, an amount equal to all amounts the taxpayer
19         pays during the taxable year for Medicare Part B
20         benefits under Title XVIII of the federal Social
21         Security Act for costs of, including but not limited
22         to, physician services, outpatient hospital services,
23         medical equipment and supplies, and other health
24         services and supplies. This subparagraph (FF) is
25         exempt from the provisions of Section 250.
 
26     (b) Corporations.
27         (1) In general. In the case of a corporation, base
28     income means an amount equal to the taxpayer's taxable
29     income for the taxable year as modified by paragraph (2).
30         (2) Modifications. The taxable income referred to in
31     paragraph (1) shall be modified by adding thereto the sum
32     of the following amounts:
33             (A) An amount equal to all amounts paid or accrued
34         to the taxpayer as interest and all distributions
35         received from regulated investment companies during

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1             person who is subject in a foreign country or
2             state, other than a state which requires mandatory
3             unitary reporting, to a tax on or measured by net
4             income with respect to such item; or
5                 (ii) any item of intangible expense or cost
6             paid, accrued, or incurred, directly or
7             indirectly, if the taxpayer can establish, based
8             on a preponderance of the evidence, both of the
9             following:
10                     (a) the foreign person during the same
11                 taxable year paid, accrued, or incurred, the
12                 intangible expense or cost to a person that is
13                 not a related member, and
14                     (b) the transaction giving rise to the
15                 intangible expense or cost between the
16                 taxpayer and the foreign person did not have as
17                 a principal purpose the avoidance of Illinois
18                 income tax, and is paid pursuant to a contract
19                 or agreement that reflects arm's-length terms;
20                 or
21                 (iii) any item of intangible expense or cost
22             paid, accrued, or incurred, directly or
23             indirectly, from a transaction with 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     and by deducting from the total so obtained the sum of the
4     following amounts:
5             (F) An amount equal to the amount of any tax
6         imposed by this Act which was refunded to the taxpayer
7         and included in such total for the taxable year;
8             (G) An amount equal to any amount included in such
9         total under Section 78 of the Internal Revenue Code;
10             (H) In the case of a regulated investment company,
11         an amount equal to the amount of exempt interest
12         dividends as defined in subsection (b) (5) of Section
13         852 of the Internal Revenue Code, paid to shareholders
14         for the taxable year;
15             (I) With the exception of any amounts subtracted
16         under subparagraph (J), an amount equal to the sum of
17         all amounts disallowed as deductions by (i) Sections
18         171(a) (2), and 265(a)(2) and amounts disallowed as
19         interest expense by Section 291(a)(3) of the Internal
20         Revenue Code, as now or hereafter amended, and all
21         amounts of expenses allocable to interest and
22         disallowed as deductions by Section 265(a)(1) of the
23         Internal Revenue Code, as now or hereafter amended; and
24         (ii) for taxable years ending on or after August 13,
25         1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and
26         832(b)(5)(B)(i) of the Internal Revenue Code; the
27         provisions of this subparagraph are exempt from the
28         provisions of Section 250;
29             (J) An amount equal to all amounts included in such
30         total which are exempt from taxation by this State
31         either by reason of its statutes or Constitution or by
32         reason of the Constitution, treaties or statutes of the
33         United States; provided that, in the case of any
34         statute of this State that exempts income derived from
35         bonds or other obligations from the tax imposed under
36         this Act, the amount exempted shall be the interest net

 

 

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1         of bond premium amortization;
2             (K) An amount equal to those dividends included in
3         such total which were paid by a corporation which
4         conducts business operations in an Enterprise Zone or
5         zones created under the Illinois Enterprise Zone Act
6         and conducts substantially all of its operations in an
7         Enterprise Zone or zones;
8             (L) An amount equal to those dividends included in
9         such total that were paid by a corporation that
10         conducts business operations in a federally designated
11         Foreign Trade Zone or Sub-Zone and that is designated a
12         High Impact Business located in Illinois; provided
13         that dividends eligible for the deduction provided in
14         subparagraph (K) of paragraph 2 of this subsection
15         shall not be eligible for the deduction provided under
16         this subparagraph (L);
17             (M) For any taxpayer that is a financial
18         organization within the meaning of Section 304(c) of
19         this Act, an amount included in such total as interest
20         income from a loan or loans made by such taxpayer to a
21         borrower, to the extent that such a loan is secured by
22         property which is eligible for the Enterprise Zone
23         Investment Credit. To determine the portion of a loan
24         or loans that is secured by property eligible for a
25         Section 201(f) investment credit to the borrower, the
26         entire principal amount of the loan or loans between
27         the taxpayer and the borrower should be divided into
28         the basis of the Section 201(f) investment credit
29         property which secures the loan or loans, using for
30         this purpose the original basis of such property on the
31         date that it was placed in service in the Enterprise
32         Zone. The subtraction modification available to
33         taxpayer in any year under this subsection shall be
34         that portion of the total interest paid by the borrower
35         with respect to such loan attributable to the eligible
36         property as calculated under the previous sentence;

 

 

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1             (M-1) For any taxpayer that is a financial
2         organization within the meaning of Section 304(c) of
3         this Act, an amount included in such total as interest
4         income from a loan or loans made by such taxpayer to a
5         borrower, to the extent that such a loan is secured by
6         property which is eligible for the High Impact Business
7         Investment Credit. To determine the portion of a loan
8         or loans that is secured by property eligible for a
9         Section 201(h) investment credit to the borrower, the
10         entire principal amount of the loan or loans between
11         the taxpayer and the borrower should be divided into
12         the basis of the Section 201(h) investment credit
13         property which secures the loan or loans, using for
14         this purpose the original basis of such property on the
15         date that it was placed in service in a federally
16         designated Foreign Trade Zone or Sub-Zone located in
17         Illinois. No taxpayer that is eligible for the
18         deduction provided in subparagraph (M) of paragraph
19         (2) of this subsection shall be eligible for the
20         deduction provided under this subparagraph (M-1). The
21         subtraction modification available to taxpayers in any
22         year under this subsection shall be that portion of the
23         total interest paid by the borrower with respect to
24         such loan attributable to the eligible property as
25         calculated under the previous sentence;
26             (N) Two times any contribution made during the
27         taxable year to a designated zone organization to the
28         extent that the contribution (i) qualifies as a
29         charitable contribution under subsection (c) of
30         Section 170 of the Internal Revenue Code and (ii) must,
31         by its terms, be used for a project approved by the
32         Department of Commerce and Economic Opportunity under
33         Section 11 of the Illinois Enterprise Zone Act;
34             (O) An amount equal to: (i) 85% for taxable years
35         ending on or before December 31, 1992, or, a percentage
36         equal to the percentage allowable under Section

 

 

HB4261 - 25 - LRB094 15554 BDD 50753 b

1         243(a)(1) of the Internal Revenue Code of 1986 for
2         taxable years ending after December 31, 1992, of the
3         amount by which dividends included in taxable income
4         and received from a corporation that is not created or
5         organized under the laws of the United States or any
6         state or political subdivision thereof, including, for
7         taxable years ending on or after December 31, 1988,
8         dividends received or deemed received or paid or deemed
9         paid under Sections 951 through 964 of the Internal
10         Revenue Code, exceed the amount of the modification
11         provided under subparagraph (G) of paragraph (2) of
12         this subsection (b) which is related to such dividends;
13         plus (ii) 100% of the amount by which dividends,
14         included in taxable income and received, including,
15         for taxable years ending on or after December 31, 1988,
16         dividends received or deemed received or paid or deemed
17         paid under Sections 951 through 964 of the Internal
18         Revenue Code, from any such corporation specified in
19         clause (i) that would but for the provisions of Section
20         1504 (b) (3) of the Internal Revenue Code be treated as
21         a member of the affiliated group which includes the
22         dividend recipient, exceed the amount of the
23         modification provided under subparagraph (G) of
24         paragraph (2) of this subsection (b) which is related
25         to such dividends;
26             (P) An amount equal to any contribution made to a
27         job training project established pursuant to the Tax
28         Increment Allocation Redevelopment Act;
29             (Q) An amount equal to the amount of the deduction
30         used to compute the federal income tax credit for
31         restoration of substantial amounts held under claim of
32         right for the taxable year pursuant to Section 1341 of
33         the Internal Revenue Code of 1986;
34             (R) In the case of an attorney-in-fact with respect
35         to whom an interinsurer or a reciprocal insurer has
36         made the election under Section 835 of the Internal

 

 

HB4261 - 26 - LRB094 15554 BDD 50753 b

1         Revenue Code, 26 U.S.C. 835, an amount equal to the
2         excess, if any, of the amounts paid or incurred by that
3         interinsurer or reciprocal insurer in the taxable year
4         to the attorney-in-fact over the deduction allowed to
5         that interinsurer or reciprocal insurer with respect
6         to the attorney-in-fact under Section 835(b) of the
7         Internal Revenue Code for the taxable year;
8             (S) For taxable years ending on or after December
9         31, 1997, in the case of a Subchapter S corporation, an
10         amount equal to all amounts of income allocable to a
11         shareholder subject to the Personal Property Tax
12         Replacement Income Tax imposed by subsections (c) and
13         (d) of Section 201 of this Act, including amounts
14         allocable to organizations exempt from federal income
15         tax by reason of Section 501(a) of the Internal Revenue
16         Code. This subparagraph (S) is exempt from the
17         provisions of Section 250;
18             (T) For taxable years 2001 and thereafter, for the
19         taxable year in which the bonus depreciation deduction
20         (30% of the adjusted basis of the qualified property)
21         is taken on the taxpayer's federal income tax return
22         under subsection (k) of Section 168 of the Internal
23         Revenue Code and for each applicable taxable year
24         thereafter, an amount equal to "x", where:
25                 (1) "y" equals the amount of the depreciation
26             deduction taken for the taxable year on the
27             taxpayer's federal income tax return on property
28             for which the bonus depreciation deduction (30% of
29             the adjusted basis of the qualified property) was
30             taken in any year under subsection (k) of Section
31             168 of the Internal Revenue Code, but not including
32             the bonus depreciation deduction; and
33                 (2) "x" equals "y" multiplied by 30 and then
34             divided by 70 (or "y" multiplied by 0.429).
35             The aggregate amount deducted under this
36         subparagraph in all taxable years for any one piece of

 

 

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

 

 

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

 

 

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1         in the computation of taxable income;
2             (B) In the case of (i) an estate, $600; (ii) a
3         trust which, under its governing instrument, is
4         required to distribute all of its income currently,
5         $300; and (iii) any other trust, $100, but in each such
6         case, only to the extent such amount was deducted in
7         the computation of taxable income;
8             (C) An amount equal to the amount of tax imposed by
9         this Act to the extent deducted from gross income in
10         the computation of taxable income for the taxable year;
11             (D) The amount of any net operating loss deduction
12         taken in arriving at taxable income, other than a net
13         operating loss carried forward from a taxable year
14         ending prior to December 31, 1986;
15             (E) For taxable years in which a net operating loss
16         carryback or carryforward from a taxable year ending
17         prior to December 31, 1986 is an element of taxable
18         income under paragraph (1) of subsection (e) or
19         subparagraph (E) of paragraph (2) of subsection (e),
20         the amount by which addition modifications other than
21         those provided by this subparagraph (E) exceeded
22         subtraction modifications in such taxable year, with
23         the following limitations applied in the order that
24         they are listed:
25                 (i) the addition modification relating to the
26             net operating loss carried back or forward to the
27             taxable year from any taxable year ending prior to
28             December 31, 1986 shall be reduced by the amount of
29             addition modification under this subparagraph (E)
30             which related to that net operating loss and which
31             was taken into account in calculating the base
32             income of an earlier taxable year, and
33                 (ii) the addition modification relating to the
34             net operating loss carried back or forward to the
35             taxable year from any taxable year ending prior to
36             December 31, 1986 shall not exceed the amount of

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1             otherwise allowed under Section 404 of this Act for
2             any tax year beginning after the effective date of
3             this amendment provided such adjustment is made
4             pursuant to regulation adopted by the Department
5             and such regulations provide methods and standards
6             by which the Department will utilize its authority
7             under Section 404 of this Act;
8     and by deducting from the total so obtained the sum of the
9     following amounts:
10             (H) An amount equal to all amounts included in such
11         total pursuant to the provisions of Sections 402(a),
12         402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
13         Internal Revenue Code or included in such total as
14         distributions under the provisions of any retirement
15         or disability plan for employees of any governmental
16         agency or unit, or retirement payments to retired
17         partners, which payments are excluded in computing net
18         earnings from self employment by Section 1402 of the
19         Internal Revenue Code and regulations adopted pursuant
20         thereto;
21             (I) The valuation limitation amount;
22             (J) An amount equal to the amount of any tax
23         imposed by this Act which was refunded to the taxpayer
24         and included in such total for the taxable year;
25             (K) An amount equal to all amounts included in
26         taxable income as modified by subparagraphs (A), (B),
27         (C), (D), (E), (F) and (G) which are exempt from
28         taxation by this State either by reason of its statutes
29         or Constitution or by reason of the Constitution,
30         treaties or statutes of the United States; provided
31         that, in the case of any statute of this State that
32         exempts income derived from bonds or other obligations
33         from the tax imposed under this Act, the amount
34         exempted shall be the interest net of bond premium
35         amortization;
36             (L) With the exception of any amounts subtracted

 

 

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1         under subparagraph (K), an amount equal to the sum of
2         all amounts disallowed as deductions by (i) Sections
3         171(a) (2) and 265(a)(2) of the Internal Revenue Code,
4         as now or hereafter amended, and all amounts of
5         expenses allocable to interest and disallowed as
6         deductions by Section 265(1) of the Internal Revenue
7         Code of 1954, as now or hereafter amended; and (ii) for
8         taxable years ending on or after August 13, 1999,
9         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
10         the Internal Revenue Code; the provisions of this
11         subparagraph are exempt from the provisions of Section
12         250;
13             (M) An amount equal to those dividends included in
14         such total which were paid by a corporation which
15         conducts business operations in an Enterprise Zone or
16         zones created under the Illinois Enterprise Zone Act
17         and conducts substantially all of its operations in an
18         Enterprise Zone or Zones;
19             (N) An amount equal to any contribution made to a
20         job training project established pursuant to the Tax
21         Increment Allocation Redevelopment Act;
22             (O) An amount equal to those dividends included in
23         such total that were paid by a corporation that
24         conducts business operations in a federally designated
25         Foreign Trade Zone or Sub-Zone and that is designated a
26         High Impact Business located in Illinois; provided
27         that dividends eligible for the deduction provided in
28         subparagraph (M) of paragraph (2) of this subsection
29         shall not be eligible for the deduction provided under
30         this subparagraph (O);
31             (P) An amount equal to the amount of the deduction
32         used to compute the federal income tax credit for
33         restoration of substantial amounts held under claim of
34         right for the taxable year pursuant to Section 1341 of
35         the Internal Revenue Code of 1986;
36             (Q) For taxable year 1999 and thereafter, an amount

 

 

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1         equal to the amount of any (i) distributions, to the
2         extent includible in gross income for federal income
3         tax purposes, made to the taxpayer because of his or
4         her status as a victim of persecution for racial or
5         religious reasons by Nazi Germany or any other Axis
6         regime or as an heir of the victim and (ii) items of
7         income, to the extent includible in gross income for
8         federal income tax purposes, attributable to, derived
9         from or in any way related to assets stolen from,
10         hidden from, or otherwise lost to a victim of
11         persecution for racial or religious reasons by Nazi
12         Germany or any other Axis regime immediately prior to,
13         during, and immediately after World War II, including,
14         but not limited to, interest on the proceeds receivable
15         as insurance under policies issued to a victim of
16         persecution for racial or religious reasons by Nazi
17         Germany or any other Axis regime by European insurance
18         companies immediately prior to and during World War II;
19         provided, however, this subtraction from federal
20         adjusted gross income does not apply to assets acquired
21         with such assets or with the proceeds from the sale of
22         such assets; provided, further, this paragraph shall
23         only apply to a taxpayer who was the first recipient of
24         such assets after their recovery and who is a victim of
25         persecution for racial or religious reasons by Nazi
26         Germany or any other Axis regime or as an heir of the
27         victim. The amount of and the eligibility for any
28         public assistance, benefit, or similar entitlement is
29         not affected by the inclusion of items (i) and (ii) of
30         this paragraph in gross income for federal income tax
31         purposes. This paragraph is exempt from the provisions
32         of Section 250;
33             (R) 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             (S) 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         (G-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             (T) 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             (U) 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 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(c)(2)(G-12) for
21         interest paid, accrued, or incurred, directly or
22         indirectly, to the same foreign person; and
23             (V) 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(c)(2)(G-13) for
33         intangible expenses and costs paid, accrued, or
34         incurred, directly or indirectly, to the same foreign
35         person.
36         (3) Limitation. The amount of any modification

 

 

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1     otherwise required under this subsection shall, under
2     regulations prescribed by the Department, be adjusted by
3     any amounts included therein which were properly paid,
4     credited, or required to be distributed, or permanently set
5     aside for charitable purposes pursuant to Internal Revenue
6     Code Section 642(c) during the taxable year.
 
7     (d) Partnerships.
8         (1) In general. In the case of a partnership, base
9     income means an amount equal to the taxpayer's taxable
10     income for the taxable year as modified by paragraph (2).
11         (2) Modifications. The taxable income referred to in
12     paragraph (1) shall be modified by adding thereto the sum
13     of the following amounts:
14             (A) An amount equal to all amounts paid or accrued
15         to the taxpayer as interest or dividends during the
16         taxable year to the extent excluded from gross income
17         in the computation of taxable income;
18             (B) An amount equal to the amount of tax imposed by
19         this Act to the extent deducted from gross income for
20         the taxable year;
21             (C) The amount of deductions allowed to the
22         partnership pursuant to Section 707 (c) of the Internal
23         Revenue Code in calculating its taxable income;
24             (D) An amount equal to the amount of the capital
25         gain deduction allowable under the Internal Revenue
26         Code, to the extent deducted from gross income in the
27         computation of taxable income;
28             (D-5) 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-6) If the taxpayer reports a capital gain or
35         loss on the taxpayer's federal income tax return for

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1             alternative method of apportionment under Section
2             304(f);
3                 Nothing in this subsection shall preclude the
4             Director from making any other adjustment
5             otherwise allowed under Section 404 of this Act for
6             any tax year beginning after the effective date of
7             this amendment provided such adjustment is made
8             pursuant to regulation adopted by the Department
9             and such regulations provide methods and standards
10             by which the Department will utilize its authority
11             under Section 404 of this Act;
12     and by deducting from the total so obtained the following
13     amounts:
14             (E) The valuation limitation amount;
15             (F) An amount equal to the amount of any tax
16         imposed by this Act which was refunded to the taxpayer
17         and included in such total for the taxable year;
18             (G) An amount equal to all amounts included in
19         taxable income as modified by subparagraphs (A), (B),
20         (C) and (D) which are exempt from taxation by this
21         State either by reason of its statutes or Constitution
22         or by reason of the Constitution, treaties or statutes
23         of the United States; provided that, in the case of any
24         statute of this State that exempts income derived from
25         bonds or other obligations from the tax imposed under
26         this Act, the amount exempted shall be the interest net
27         of bond premium amortization;
28             (H) Any income of the partnership which
29         constitutes personal service income as defined in
30         Section 1348 (b) (1) of the Internal Revenue Code (as
31         in effect December 31, 1981) or a reasonable allowance
32         for compensation paid or accrued for services rendered
33         by partners to the partnership, whichever is greater;
34             (I) An amount equal to all amounts of income
35         distributable to an entity subject to the Personal
36         Property Tax Replacement Income Tax imposed by

 

 

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1         subsections (c) and (d) of Section 201 of this Act
2         including amounts distributable to organizations
3         exempt from federal income tax by reason of Section
4         501(a) of the Internal Revenue Code;
5             (J) With the exception of any amounts subtracted
6         under subparagraph (G), an amount equal to the sum of
7         all amounts disallowed as deductions by (i) Sections
8         171(a) (2), and 265(2) of the Internal Revenue Code of
9         1954, as now or hereafter amended, and all amounts of
10         expenses allocable to interest and disallowed as
11         deductions by Section 265(1) of the Internal Revenue
12         Code, as now or hereafter amended; and (ii) for taxable
13         years ending on or after August 13, 1999, Sections
14         171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
15         Internal Revenue Code; the provisions of this
16         subparagraph are exempt from the provisions of Section
17         250;
18             (K) An amount equal to those dividends included in
19         such total which were paid by a corporation which
20         conducts business operations in an Enterprise Zone or
21         zones created under the Illinois Enterprise Zone Act,
22         enacted by the 82nd General Assembly, and conducts
23         substantially all of its operations in an Enterprise
24         Zone or Zones;
25             (L) An amount equal to any contribution made to a
26         job training project established pursuant to the Real
27         Property Tax Increment Allocation Redevelopment Act;
28             (M) An amount equal to those dividends included in
29         such total that were paid by a corporation that
30         conducts business operations in a federally designated
31         Foreign Trade Zone or Sub-Zone and that is designated a
32         High Impact Business located in Illinois; provided
33         that dividends eligible for the deduction provided in
34         subparagraph (K) of paragraph (2) of this subsection
35         shall not be eligible for the deduction provided under
36         this subparagraph (M);

 

 

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1             (N) An amount equal to the amount of the deduction
2         used to compute the federal income tax credit for
3         restoration of substantial amounts held under claim of
4         right for the taxable year pursuant to Section 1341 of
5         the Internal Revenue Code of 1986;
6             (O) For taxable years 2001 and thereafter, for the
7         taxable year in which the bonus depreciation deduction
8         (30% of the adjusted basis of the qualified property)
9         is taken on the taxpayer's federal income tax return
10         under subsection (k) of Section 168 of the Internal
11         Revenue Code and for each applicable taxable year
12         thereafter, an amount equal to "x", where:
13                 (1) "y" equals the amount of the depreciation
14             deduction taken for the taxable year on the
15             taxpayer's federal income tax return on property
16             for which the bonus depreciation deduction (30% of
17             the adjusted basis of the qualified property) was
18             taken in any year under subsection (k) of Section
19             168 of the Internal Revenue Code, but not including
20             the bonus depreciation deduction; and
21                 (2) "x" equals "y" multiplied by 30 and then
22             divided by 70 (or "y" multiplied by 0.429).
23             The aggregate amount deducted under this
24         subparagraph in all taxable years for any one piece of
25         property may not exceed the amount of the bonus
26         depreciation deduction (30% of the adjusted basis of
27         the qualified property) taken on that property on the
28         taxpayer's federal income tax return under subsection
29         (k) of Section 168 of the Internal Revenue Code;
30             (P) If the taxpayer reports a capital gain or loss
31         on the taxpayer's federal income tax return for the
32         taxable year based on a sale or transfer of property
33         for which the taxpayer was required in any taxable year
34         to make an addition modification under subparagraph
35         (D-5), then an amount equal to that addition
36         modification.

 

 

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

 

 

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1         the fact that the foreign person's business activity
2         outside the United States is 80% or more of that
3         person's total business activity, but not to exceed the
4         addition modification required to be made for the same
5         taxable year under Section 203(d)(2)(D-8) for
6         intangible expenses and costs paid, accrued, or
7         incurred, directly or indirectly, to the same foreign
8         person.
 
9     (e) Gross income; adjusted gross income; taxable income.
10         (1) In general. Subject to the provisions of paragraph
11     (2) and subsection (b) (3), for purposes of this Section
12     and Section 803(e), a taxpayer's gross income, adjusted
13     gross income, or taxable income for the taxable year shall
14     mean the amount of gross income, adjusted gross income or
15     taxable income properly reportable for federal income tax
16     purposes for the taxable year under the provisions of the
17     Internal Revenue Code. Taxable income may be less than
18     zero. However, for taxable years ending on or after
19     December 31, 1986, net operating loss carryforwards from
20     taxable years ending prior to December 31, 1986, may not
21     exceed the sum of federal taxable income for the taxable
22     year before net operating loss deduction, plus the excess
23     of addition modifications over subtraction modifications
24     for the taxable year. For taxable years ending prior to
25     December 31, 1986, taxable income may never be an amount in
26     excess of the net operating loss for the taxable year as
27     defined in subsections (c) and (d) of Section 172 of the
28     Internal Revenue Code, provided that when taxable income of
29     a corporation (other than a Subchapter S corporation),
30     trust, or estate is less than zero and addition
31     modifications, other than those provided by subparagraph
32     (E) of paragraph (2) of subsection (b) for corporations or
33     subparagraph (E) of paragraph (2) of subsection (c) for
34     trusts and estates, exceed subtraction modifications, an
35     addition modification must be made under those

 

 

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1     subparagraphs for any other taxable year to which the
2     taxable income less than zero (net operating loss) is
3     applied under Section 172 of the Internal Revenue Code or
4     under subparagraph (E) of paragraph (2) of this subsection
5     (e) applied in conjunction with Section 172 of the Internal
6     Revenue Code.
7         (2) Special rule. For purposes of paragraph (1) of this
8     subsection, the taxable income properly reportable for
9     federal income tax purposes shall mean:
10             (A) Certain life insurance companies. In the case
11         of a life insurance company subject to the tax imposed
12         by Section 801 of the Internal Revenue Code, life
13         insurance company taxable income, plus the amount of
14         distribution from pre-1984 policyholder surplus
15         accounts as calculated under Section 815a of the
16         Internal Revenue Code;
17             (B) Certain other insurance companies. In the case
18         of mutual insurance companies subject to the tax
19         imposed by Section 831 of the Internal Revenue Code,
20         insurance company taxable income;
21             (C) Regulated investment companies. In the case of
22         a regulated investment company subject to the tax
23         imposed by Section 852 of the Internal Revenue Code,
24         investment company taxable income;
25             (D) Real estate investment trusts. In the case of a
26         real estate investment trust subject to the tax imposed
27         by Section 857 of the Internal Revenue Code, real
28         estate investment trust taxable income;
29             (E) Consolidated corporations. In the case of a
30         corporation which is a member of an affiliated group of
31         corporations filing a consolidated income tax return
32         for the taxable year for federal income tax purposes,
33         taxable income determined as if such corporation had
34         filed a separate return for federal income tax purposes
35         for the taxable year and each preceding taxable year
36         for which it was a member of an affiliated group. For

 

 

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1         purposes of this subparagraph, the taxpayer's separate
2         taxable income shall be determined as if the election
3         provided by Section 243(b) (2) of the Internal Revenue
4         Code had been in effect for all such years;
5             (F) Cooperatives. In the case of a cooperative
6         corporation or association, the taxable income of such
7         organization determined in accordance with the
8         provisions of Section 1381 through 1388 of the Internal
9         Revenue Code;
10             (G) Subchapter S corporations. In the case of: (i)
11         a Subchapter S corporation for which there is in effect
12         an election for the taxable year under Section 1362 of
13         the Internal Revenue Code, the taxable income of such
14         corporation determined in accordance with Section
15         1363(b) of the Internal Revenue Code, except that
16         taxable income shall take into account those items
17         which are required by Section 1363(b)(1) of the
18         Internal Revenue Code to be separately stated; and (ii)
19         a Subchapter S corporation for which there is in effect
20         a federal election to opt out of the provisions of the
21         Subchapter S Revision Act of 1982 and have applied
22         instead the prior federal Subchapter S rules as in
23         effect on July 1, 1982, the taxable income of such
24         corporation determined in accordance with the federal
25         Subchapter S rules as in effect on July 1, 1982; and
26             (H) Partnerships. In the case of a partnership,
27         taxable income determined in accordance with Section
28         703 of the Internal Revenue Code, except that taxable
29         income shall take into account those items which are
30         required by Section 703(a)(1) to be separately stated
31         but which would be taken into account by an individual
32         in calculating his taxable income.
33         (3) Recapture of business expenses on disposition of
34     asset or business. Notwithstanding any other law to the
35     contrary, if in prior years income from an asset or
36     business has been classified as business income and in a

 

 

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1     later year is demonstrated to be non-business income, then
2     all expenses, without limitation, deducted in such later
3     year and in the 2 immediately preceding taxable years
4     related to that asset or business that generated the
5     non-business income shall be added back and recaptured as
6     business income in the year of the disposition of the asset
7     or business. Such amount shall be apportioned to Illinois
8     using the greater of the apportionment fraction computed
9     for the business under Section 304 of this Act for the
10     taxable year or the average of the apportionment fractions
11     computed for the business under Section 304 of this Act for
12     the taxable year and for the 2 immediately preceding
13     taxable years.
14     (f) Valuation limitation amount.
15         (1) In general. The valuation limitation amount
16     referred to in subsections (a) (2) (G), (c) (2) (I) and
17     (d)(2) (E) is an amount equal to:
18             (A) The sum of the pre-August 1, 1969 appreciation
19         amounts (to the extent consisting of gain reportable
20         under the provisions of Section 1245 or 1250 of the
21         Internal Revenue Code) for all property in respect of
22         which such gain was reported for the taxable year; plus
23             (B) The lesser of (i) the sum of the pre-August 1,
24         1969 appreciation amounts (to the extent consisting of
25         capital gain) for all property in respect of which such
26         gain was reported for federal income tax purposes for
27         the taxable year, or (ii) the net capital gain for the
28         taxable year, reduced in either case by any amount of
29         such gain included in the amount determined under
30         subsection (a) (2) (F) or (c) (2) (H).
31         (2) Pre-August 1, 1969 appreciation amount.
32             (A) If the fair market value of property referred
33         to in paragraph (1) was readily ascertainable on August
34         1, 1969, the pre-August 1, 1969 appreciation amount for
35         such property is the lesser of (i) the excess of such
36         fair market value over the taxpayer's basis (for

 

 

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1         determining gain) for such property on that date
2         (determined under the Internal Revenue Code as in
3         effect on that date), or (ii) the total gain realized
4         and reportable for federal income tax purposes in
5         respect of the sale, exchange or other disposition of
6         such property.
7             (B) If the fair market value of property referred
8         to in paragraph (1) was not readily ascertainable on
9         August 1, 1969, the pre-August 1, 1969 appreciation
10         amount for such property is that amount which bears the
11         same ratio to the total gain reported in respect of the
12         property for federal income tax purposes for the
13         taxable year, as the number of full calendar months in
14         that part of the taxpayer's holding period for the
15         property ending July 31, 1969 bears to the number of
16         full calendar months in the taxpayer's entire holding
17         period for the property.
18             (C) The Department shall prescribe such
19         regulations as may be necessary to carry out the
20         purposes of this paragraph.
 
21     (g) Double deductions. Unless specifically provided
22 otherwise, nothing in this Section shall permit the same item
23 to be deducted more than once.
 
24     (h) Legislative intention. Except as expressly provided by
25 this Section there shall be no modifications or limitations on
26 the amounts of income, gain, loss or deduction taken into
27 account in determining gross income, adjusted gross income or
28 taxable income for federal income tax purposes for the taxable
29 year, or in the amount of such items entering into the
30 computation of base income and net income under this Act for
31 such taxable year, whether in respect of property values as of
32 August 1, 1969 or otherwise.
33 (Source: P.A. 92-16, eff. 6-28-01; 92-244, eff. 8-3-01; 92-439,
34 eff. 8-17-01; 92-603, eff. 6-28-02; 92-626, eff. 7-11-02;

 

 

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1 92-651, eff. 7-11-02; 92-846, eff. 8-23-02; 93-812, eff.
2 7-26-04; 93-840, eff. 7-30-04; revised 10-12-04.)
 
3     Section 99. Effective date. This Act takes effect upon
4 becoming law.