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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) For taxable years ending on or after December
17         31, 2005, subject to the conditions in this
18         subparagraph, up to $10,000, if the taxpayer, or a
19         dependent of the taxpayer eligible to be claimed as an
20         additional exemption under Section 204, while living,
21         donates one or more of his or her human organs to
22         another human being for human organ transplantation. A
23         deduction that is claimed under this subparagraph may
24         be claimed only for the taxable year in which the human
25         organ transplantation occurs. An individual may claim
26         the deduction under this subparagraph only once, and
27         the deduction may be claimed only for the following
28         unreimbursed expenses that are incurred by the
29         taxpayer, or eligible dependent, and related to the
30         organ donation:
31                 (I) travel expenses;
32                 (II) lodging expenses; and
33                 (III) lost wages.
34         The deduction under this subparagraph may not be
35         claimed by a part-year resident or a nonresident of
36         this State. As used in this subparagraph, "human organ"

 

 

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

 

 

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

 

 

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1             (E-10) For taxable years 2001 and thereafter, an
2         amount equal to the bonus depreciation deduction (30%
3         of the adjusted basis of the qualified property) taken
4         on the taxpayer's federal income tax return for the
5         taxable year under subsection (k) of Section 168 of the
6         Internal Revenue Code; and
7             (E-11) If the taxpayer reports a capital gain or
8         loss on the taxpayer's federal income tax return for
9         the taxable year based on a sale or transfer of
10         property for which the taxpayer was required in any
11         taxable year to make an addition modification under
12         subparagraph (E-10), then an amount equal to the
13         aggregate amount of the deductions taken in all taxable
14         years under subparagraph (T) with respect to that
15         property.
16             The taxpayer is required to make the addition
17         modification under this subparagraph only once with
18         respect to any one piece of property;
19             (E-12) For taxable years ending on or after
20         December 31, 2004, an amount equal to the amount
21         otherwise allowed as a deduction in computing base
22         income for interest paid, accrued, or incurred,
23         directly or indirectly, to a foreign person who would
24         be a member of the same unitary business group but for
25         the fact the foreign person's business activity
26         outside the United States is 80% or more of the foreign
27         person's total business activity. The addition
28         modification required by this subparagraph shall be
29         reduced to the extent that dividends were included in
30         base income of the unitary group for the same taxable
31         year and received by the taxpayer or by a member of the
32         taxpayer's unitary business group (including amounts
33         included in gross income pursuant to Sections 951
34         through 964 of the Internal Revenue Code and amounts
35         included in gross income under Section 78 of the
36         Internal Revenue Code) with respect to the stock of the

 

 

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1         same person to whom the interest was paid, accrued, or
2         incurred.
3             This paragraph shall not apply to the following:
4                 (i) an item of interest paid, accrued, or
5             incurred, directly or indirectly, to a 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 interest; or
10                 (ii) an item of interest paid, accrued, or
11             incurred, directly or indirectly, to a foreign
12             person if the taxpayer can establish, based on a
13             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                 interest to a person that is not a related
18                 member, and
19                     (b) the transaction giving rise to the
20                 interest expense between the taxpayer and the
21                 foreign person did not have as a principal
22                 purpose the avoidance of Illinois income tax,
23                 and is paid pursuant to a contract or agreement
24                 that reflects an arm's-length interest rate
25                 and terms; or
26                 (iii) the taxpayer can establish, based on
27             clear and convincing evidence, that the interest
28             paid, accrued, or incurred relates to a contract or
29             agreement entered into at arm's-length rates and
30             terms and the principal purpose for the payment is
31             not federal or Illinois tax avoidance; or
32                 (iv) an item of interest paid, accrued, or
33             incurred, directly or indirectly, to a foreign
34             person if the taxpayer establishes by clear and
35             convincing evidence that the adjustments are
36             unreasonable; or if the taxpayer and the Director

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

SB0230 Engrossed - 26 - LRB094 07772 BDD 37950 b

1         clause (i) that would but for the provisions of Section
2         1504 (b) (3) of the Internal Revenue Code be treated as
3         a member of the affiliated group which includes the
4         dividend recipient, exceed the amount of the
5         modification provided under subparagraph (G) of
6         paragraph (2) of this subsection (b) which is related
7         to such dividends;
8             (P) An amount equal to any contribution made to a
9         job training project established pursuant to the Tax
10         Increment Allocation Redevelopment Act;
11             (Q) An amount equal to the amount of the deduction
12         used to compute the federal income tax credit for
13         restoration of substantial amounts held under claim of
14         right for the taxable year pursuant to Section 1341 of
15         the Internal Revenue Code of 1986;
16             (R) In the case of an attorney-in-fact with respect
17         to whom an interinsurer or a reciprocal insurer has
18         made the election under Section 835 of the Internal
19         Revenue Code, 26 U.S.C. 835, an amount equal to the
20         excess, if any, of the amounts paid or incurred by that
21         interinsurer or reciprocal insurer in the taxable year
22         to the attorney-in-fact over the deduction allowed to
23         that interinsurer or reciprocal insurer with respect
24         to the attorney-in-fact under Section 835(b) of the
25         Internal Revenue Code for the taxable year;
26             (S) For taxable years ending on or after December
27         31, 1997, in the case of a Subchapter S corporation, an
28         amount equal to all amounts of income allocable to a
29         shareholder subject to the Personal Property Tax
30         Replacement Income Tax imposed by subsections (c) and
31         (d) of Section 201 of this Act, including amounts
32         allocable to organizations exempt from federal income
33         tax by reason of Section 501(a) of the Internal Revenue
34         Code. This subparagraph (S) is exempt from the
35         provisions of Section 250;
36             (T) For taxable years 2001 and thereafter, for the

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1             (G-5) For taxable years ending after December 31,
2         1997, an amount equal to any eligible remediation costs
3         that the trust or estate deducted in computing adjusted
4         gross income and for which the trust or estate claims a
5         credit under subsection (l) of Section 201;
6             (G-10) For taxable years 2001 and thereafter, an
7         amount equal to the bonus depreciation deduction (30%
8         of the adjusted basis of the qualified property) taken
9         on the taxpayer's federal income tax return for the
10         taxable year under subsection (k) of Section 168 of the
11         Internal Revenue Code; and
12             (G-11) If the taxpayer reports a capital gain or
13         loss on the taxpayer's federal income tax return for
14         the taxable year based on a sale or transfer of
15         property for which the taxpayer was required in any
16         taxable year to make an addition modification under
17         subparagraph (G-10), then an amount equal to the
18         aggregate amount of the deductions taken in all taxable
19         years under subparagraph (R) with respect to that
20         property.
21             The taxpayer is required to make the addition
22         modification under this subparagraph only once with
23         respect to any one piece of property;
24             (G-12) For taxable years ending on or after
25         December 31, 2004, an amount equal to the amount
26         otherwise allowed as a deduction in computing base
27         income for interest paid, accrued, or incurred,
28         directly or indirectly, to a foreign person who would
29         be a member of the same unitary business group but for
30         the fact that the foreign person's business activity
31         outside the United States is 80% or more of the foreign
32         person's total business activity. The addition
33         modification required by this subparagraph shall be
34         reduced to the extent that dividends were included in
35         base income of the unitary group for the same taxable
36         year and received by the taxpayer or by a member of the

 

 

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

 

 

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

 

 

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1         the intangible expenses and costs were directly or
2         indirectly paid, incurred, or accrued. The preceding
3         sentence shall not apply to the extent that the same
4         dividends caused a reduction to the addition
5         modification required under Section 203(c)(2)(G-12) of
6         this Act. As used in this subparagraph, the term
7         "intangible expenses and costs" includes: (1)
8         expenses, losses, and costs for or related to the
9         direct or indirect acquisition, use, maintenance or
10         management, ownership, sale, exchange, or any other
11         disposition of intangible property; (2) losses
12         incurred, directly or indirectly, from factoring
13         transactions or discounting transactions; (3) royalty,
14         patent, technical, and copyright fees; (4) licensing
15         fees; and (5) other similar expenses and costs. For
16         purposes of this subparagraph, "intangible property"
17         includes patents, patent applications, trade names,
18         trademarks, service marks, copyrights, mask works,
19         trade secrets, and similar types of intangible assets.
20             This paragraph shall not apply to the following:
21                 (i) any item of intangible expenses or costs
22             paid, accrued, or incurred, directly or
23             indirectly, from a transaction with 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 item; or
28                 (ii) any item of intangible expense or cost
29             paid, accrued, or incurred, directly or
30             indirectly, if the taxpayer can establish, based
31             on a 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                 intangible expense or cost to a person that is
36                 not a related member, and

 

 

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

 

 

SB0230 Engrossed - 36 - LRB094 07772 BDD 37950 b

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

 

 

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

 

 

SB0230 Engrossed - 38 - LRB094 07772 BDD 37950 b

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

 

 

SB0230 Engrossed - 39 - LRB094 07772 BDD 37950 b

1         taxpayer's federal income tax return under subsection
2         (k) of Section 168 of the Internal Revenue Code;
3             (S) If the taxpayer reports a capital gain or loss
4         on the taxpayer's federal income tax return for the
5         taxable year based on a sale or transfer of property
6         for which the taxpayer was required in any taxable year
7         to make an addition modification under subparagraph
8         (G-10), then an amount equal to that addition
9         modification.
10             The taxpayer is allowed to take the deduction under
11         this subparagraph only once with respect to any one
12         piece of property;
13             (T) The amount of (i) any interest income (net of
14         the deductions allocable thereto) taken into account
15         for the taxable year with respect to a transaction with
16         a taxpayer that is required to make an addition
17         modification with respect to such transaction under
18         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
19         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
20         the amount of such addition modification and (ii) any
21         income from intangible property (net of the deductions
22         allocable thereto) taken into account for the taxable
23         year with respect to a transaction with a taxpayer that
24         is required to make an addition modification with
25         respect to such transaction under Section
26         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
27         203(d)(2)(D-8), but not to exceed the amount of such
28         addition modification;
29             (U) An amount equal to the interest income taken
30         into account for the taxable year (net of the
31         deductions allocable thereto) with respect to
32         transactions with a foreign person who would be a
33         member of the taxpayer's unitary business group but for
34         the fact the foreign person's business activity
35         outside the United States is 80% or more of that
36         person's total business activity, but not to exceed the

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         to Sections 951 through 964 of the Internal Revenue
2         Code and amounts included in gross income under Section
3         78 of the Internal Revenue Code) with respect to the
4         stock of the same person to whom the intangible
5         expenses and costs were directly or indirectly paid,
6         incurred or accrued. The preceding sentence shall not
7         apply to the extent that the same dividends caused a
8         reduction to the addition modification required under
9         Section 203(d)(2)(D-7) of this Act. As used in this
10         subparagraph, the term "intangible expenses and costs"
11         includes (1) expenses, losses, and costs for, or
12         related to, the direct or indirect acquisition, use,
13         maintenance or management, ownership, sale, exchange,
14         or any other disposition of intangible property; (2)
15         losses incurred, directly or indirectly, from
16         factoring transactions or discounting transactions;
17         (3) royalty, patent, technical, and copyright fees;
18         (4) licensing fees; and (5) other similar expenses and
19         costs. For purposes of this subparagraph, "intangible
20         property" includes patents, patent applications, trade
21         names, trademarks, service marks, copyrights, mask
22         works, trade secrets, and similar types of intangible
23         assets;
24             This paragraph shall not apply to the following:
25                 (i) any item of intangible expenses or costs
26             paid, accrued, or incurred, directly or
27             indirectly, from a transaction with 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 item; or
32                 (ii) any item of intangible expense or cost
33             paid, accrued, or incurred, directly or
34             indirectly, if the taxpayer can establish, based
35             on a 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                 intangible expense or cost to a person that is
4                 not a related member, and
5                     (b) the transaction giving rise to the
6                 intangible expense or cost between the
7                 taxpayer and the foreign person did not have as
8                 a principal purpose the avoidance of Illinois
9                 income tax, and is paid pursuant to a contract
10                 or agreement that reflects arm's-length terms;
11                 or
12                 (iii) any item of intangible expense or cost
13             paid, accrued, or incurred, directly or
14             indirectly, from a transaction with a foreign
15             person if the taxpayer establishes by clear and
16             convincing evidence, that the adjustments are
17             unreasonable; or if the taxpayer and the Director
18             agree in writing to the application or use of an
19             alternative method of apportionment under Section
20             304(f);
21                 Nothing in this subsection shall preclude the
22             Director from making any other adjustment
23             otherwise allowed under Section 404 of this Act for
24             any tax year beginning after the effective date of
25             this amendment provided such adjustment is made
26             pursuant to regulation adopted by the Department
27             and such regulations provide methods and standards
28             by which the Department will utilize its authority
29             under Section 404 of this Act;
30     and by deducting from the total so obtained the following
31     amounts:
32             (E) The valuation limitation amount;
33             (F) An amount equal to the amount of any tax
34         imposed by this Act which was refunded to the taxpayer
35         and included in such total for the taxable year;
36             (G) An amount equal to all amounts included in

 

 

SB0230 Engrossed - 46 - LRB094 07772 BDD 37950 b

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

 

 

SB0230 Engrossed - 47 - LRB094 07772 BDD 37950 b

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

 

 

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

 

 

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

 

 

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

 

 

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1         imposed by Section 831 of the Internal Revenue Code,
2         insurance company taxable income;
3             (C) Regulated investment companies. In the case of
4         a regulated investment company subject to the tax
5         imposed by Section 852 of the Internal Revenue Code,
6         investment company taxable income;
7             (D) Real estate investment trusts. In the case of a
8         real estate investment trust subject to the tax imposed
9         by Section 857 of the Internal Revenue Code, real
10         estate investment trust taxable income;
11             (E) Consolidated corporations. In the case of a
12         corporation which is a member of an affiliated group of
13         corporations filing a consolidated income tax return
14         for the taxable year for federal income tax purposes,
15         taxable income determined as if such corporation had
16         filed a separate return for federal income tax purposes
17         for the taxable year and each preceding taxable year
18         for which it was a member of an affiliated group. For
19         purposes of this subparagraph, the taxpayer's separate
20         taxable income shall be determined as if the election
21         provided by Section 243(b) (2) of the Internal Revenue
22         Code had been in effect for all such years;
23             (F) Cooperatives. In the case of a cooperative
24         corporation or association, the taxable income of such
25         organization determined in accordance with the
26         provisions of Section 1381 through 1388 of the Internal
27         Revenue Code;
28             (G) Subchapter S corporations. In the case of: (i)
29         a Subchapter S corporation for which there is in effect
30         an election for the taxable year under Section 1362 of
31         the Internal Revenue Code, the taxable income of such
32         corporation determined in accordance with Section
33         1363(b) of the Internal Revenue Code, except that
34         taxable income shall take into account those items
35         which are required by Section 1363(b)(1) of the
36         Internal Revenue Code to be separately stated; and (ii)

 

 

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

 

 

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

 

 

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