Sen. Don Harmon

Filed: 3/4/2005

 

 


 

 


 
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1
AMENDMENT TO SENATE BILL 316

2     AMENDMENT NO. ______. Amend Senate Bill 316 by replacing
3 everything after the enacting clause with the following:
 
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

 

 

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21         withdrawn by the taxpayer in the taxable year from a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

 

 

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1         on the taxpayer's federal income tax return for the
2         taxable year under subsection (k) of Section 168 of the
3         Internal Revenue Code;
4             (D-16) If the taxpayer reports a capital gain or
5         loss on the taxpayer's federal income tax return for
6         the taxable year based on a sale or transfer of
7         property for which the taxpayer was required in any
8         taxable year to make an addition modification under
9         subparagraph (D-15), then an amount equal to the
10         aggregate amount of the deductions taken in all taxable
11         years under subparagraph (Z) with respect to that
12         property.
13             The taxpayer is required to make the addition
14         modification under this subparagraph only once with
15         respect to any one piece of property;
16             (D-17) For taxable years ending on or after
17         December 31, 2004, an amount equal to the amount
18         otherwise allowed as a deduction in computing base
19         income for interest paid, accrued, or incurred,
20         directly or indirectly, to a foreign person who would
21         be a member of the same unitary business group but for
22         the fact that foreign person's business activity
23         outside the United States is 80% or more of the foreign
24         person's total business activity. The addition
25         modification required by this subparagraph shall be
26         reduced to the extent that dividends were included in
27         base income of the unitary group for the same taxable
28         year and received by the taxpayer or by a member of the
29         taxpayer's unitary business group (including amounts
30         included in gross income under Sections 951 through 964
31         of the Internal Revenue Code and amounts included in
32         gross income under Section 78 of the Internal Revenue
33         Code) with respect to the stock of the same person to
34         whom the interest was paid, accrued, or incurred.

 

 

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

 

 

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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             (D-18) 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 under Sections 951 through 964 of the Internal
29         Revenue Code and amounts included in gross income under
30         Section 78 of the Internal Revenue Code) with respect
31         to the stock of the same person to whom the intangible
32         expenses and costs were directly or indirectly paid,
33         incurred, or accrued. The preceding sentence does not
34         apply to the extent that the same dividends caused a

 

 

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

 

 

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1                 intangible expense or cost between the
2                 taxpayer and the foreign person did not have as
3                 a principal purpose the avoidance of Illinois
4                 income tax, and is paid pursuant to a contract
5                 or agreement that reflects arm's-length terms;
6                 or
7                 (iii) any item of intangible expense or cost
8             paid, accrued, or incurred, directly or
9             indirectly, from a transaction with a foreign
10             person if the taxpayer establishes by clear and
11             convincing evidence, that the adjustments are
12             unreasonable; or if the taxpayer and the Director
13             agree in writing to the application or use of an
14             alternative method of apportionment under Section
15             304(f);
16                 Nothing in this subsection shall preclude the
17             Director from making any other adjustment
18             otherwise allowed under Section 404 of this Act for
19             any tax year beginning after the effective date of
20             this amendment provided such adjustment is made
21             pursuant to regulation adopted by the Department
22             and such regulations provide methods and standards
23             by which the Department will utilize its authority
24             under Section 404 of this Act;
25             (D-20) For taxable years beginning on or after
26         January 1, 2002, in the case of a distribution from a
27         qualified tuition program under Section 529 of the
28         Internal Revenue Code, other than (i) a distribution
29         from a College Savings Pool created under Section 16.5
30         of the State Treasurer Act or (ii) a distribution from
31         the Illinois Prepaid Tuition Trust Fund, an amount
32         equal to the amount excluded from gross income under
33         Section 529(c)(3)(B);
34     and by deducting from the total so obtained the sum of the

 

 

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1     following amounts:
2             (E) For taxable years ending before December 31,
3         2001, any amount included in such total in respect of
4         any compensation (including but not limited to any
5         compensation paid or accrued to a serviceman while a
6         prisoner of war or missing in action) paid to a
7         resident by reason of being on active duty in the Armed
8         Forces of the United States and in respect of any
9         compensation paid or accrued to a resident who as a
10         governmental employee was a prisoner of war or missing
11         in action, and in respect of any compensation paid to a
12         resident in 1971 or thereafter for annual training
13         performed pursuant to Sections 502 and 503, Title 32,
14         United States Code as a member of the Illinois National
15         Guard. For taxable years ending on or after December
16         31, 2001, any amount included in such total in respect
17         of any compensation (including but not limited to any
18         compensation paid or accrued to a serviceman while a
19         prisoner of war or missing in action) paid to a
20         resident by reason of being a member of any component
21         of the Armed Forces of the United States and in respect
22         of any compensation paid or accrued to a resident who
23         as a governmental employee was a prisoner of war or
24         missing in action, and in respect of any compensation
25         paid to a resident in 2001 or thereafter by reason of
26         being a member of the Illinois National Guard. The
27         provisions of this amendatory Act of the 92nd General
28         Assembly are exempt from the provisions of Section 250;
29             (F) An amount equal to all amounts included in such
30         total pursuant to the provisions of Sections 402(a),
31         402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the
32         Internal Revenue Code, or included in such total as
33         distributions under the provisions of any retirement
34         or disability plan for employees of any governmental

 

 

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1         agency or unit, or retirement payments to retired
2         partners, which payments are excluded in computing net
3         earnings from self employment by Section 1402 of the
4         Internal Revenue Code and regulations adopted pursuant
5         thereto;
6             (G) The valuation limitation amount;
7             (H) An amount equal to the amount of any tax
8         imposed by this Act which was refunded to the taxpayer
9         and included in such total for the taxable year;
10             (I) An amount equal to all amounts included in such
11         total pursuant to the provisions of Section 111 of the
12         Internal Revenue Code as a recovery of items previously
13         deducted from adjusted gross income in the computation
14         of taxable income;
15             (J) An amount equal to those dividends included in
16         such total which were paid by a corporation which
17         conducts business operations in an Enterprise Zone or
18         zones created under the Illinois Enterprise Zone Act,
19         and conducts substantially all of its operations in an
20         Enterprise Zone or zones;
21             (K) An amount equal to those dividends included in
22         such total that were paid by a corporation that
23         conducts business operations in a federally designated
24         Foreign Trade Zone or Sub-Zone and that is designated a
25         High Impact Business located in Illinois; provided
26         that dividends eligible for the deduction provided in
27         subparagraph (J) of paragraph (2) of this subsection
28         shall not be eligible for the deduction provided under
29         this subparagraph (K);
30             (L) For taxable years ending after December 31,
31         1983, an amount equal to all social security benefits
32         and railroad retirement benefits included in such
33         total pursuant to Sections 72(r) and 86 of the Internal
34         Revenue Code;

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

09400SB0316sam001 - 15 - LRB094 05315 BDD 43117 a

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

 

 

09400SB0316sam001 - 16 - LRB094 05315 BDD 43117 a

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.
 
16     (b) Corporations.
17         (1) In general. In the case of a corporation, base
18     income means an amount equal to the taxpayer's taxable
19     income for the taxable year as modified by paragraph (2).
20         (2) Modifications. The taxable income referred to in
21     paragraph (1) shall be modified by adding thereto the sum
22     of the following amounts:
23             (A) An amount equal to all amounts paid or accrued
24         to the taxpayer as interest and all distributions
25         received from regulated investment companies during
26         the taxable year to the extent excluded from gross
27         income in the computation of taxable income;
28             (B) An amount equal to the amount of tax imposed by
29         this Act to the extent deducted from gross income in
30         the computation of taxable income for the taxable year;
31             (C) In the case of a regulated investment company,
32         an amount equal to the excess of (i) the net long-term
33         capital gain for the taxable year, over (ii) the amount

 

 

09400SB0316sam001 - 17 - LRB094 05315 BDD 43117 a

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

 

 

09400SB0316sam001 - 18 - LRB094 05315 BDD 43117 a

1             For taxable years in which there is a net operating
2         loss carryback or carryforward from more than one other
3         taxable year ending prior to December 31, 1986, the
4         addition modification provided in this subparagraph
5         (E) shall be the sum of the amounts computed
6         independently under the preceding provisions of this
7         subparagraph (E) for each such taxable year;
8             (E-5) For taxable years ending after December 31,
9         1997, an amount equal to any eligible remediation costs
10         that the corporation deducted in computing adjusted
11         gross income and for which the corporation claims a
12         credit under subsection (l) of Section 201;
13             (E-10) For taxable years 2001 and thereafter, an
14         amount equal to the bonus depreciation deduction (30%
15         of the adjusted basis of the qualified property) taken
16         on the taxpayer's federal income tax return for the
17         taxable year under subsection (k) of Section 168 of the
18         Internal Revenue Code; and
19             (E-11) If the taxpayer reports a capital gain or
20         loss on the taxpayer's federal income tax return for
21         the taxable year based on a sale or transfer of
22         property for which the taxpayer was required in any
23         taxable year to make an addition modification under
24         subparagraph (E-10), then an amount equal to the
25         aggregate amount of the deductions taken in all taxable
26         years under subparagraph (T) with respect to that
27         property.
28             The taxpayer is required to make the addition
29         modification under this subparagraph only once with
30         respect to any one piece of property;
31             (E-12) For taxable years ending on or after
32         December 31, 2004, an amount equal to the amount
33         otherwise allowed as a deduction in computing base
34         income for interest paid, accrued, or incurred,

 

 

09400SB0316sam001 - 19 - LRB094 05315 BDD 43117 a

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

 

 

09400SB0316sam001 - 20 - LRB094 05315 BDD 43117 a

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

 

 

09400SB0316sam001 - 21 - LRB094 05315 BDD 43117 a

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

 

 

09400SB0316sam001 - 22 - LRB094 05315 BDD 43117 a

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

 

 

09400SB0316sam001 - 23 - LRB094 05315 BDD 43117 a

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     and by deducting from the total so obtained the sum of the
8     following amounts:
9             (F) An amount equal to the amount of any tax
10         imposed by this Act which was refunded to the taxpayer
11         and included in such total for the taxable year;
12             (G) An amount equal to any amount included in such
13         total under Section 78 of the Internal Revenue Code;
14             (H) In the case of a regulated investment company,
15         an amount equal to the amount of exempt interest
16         dividends as defined in subsection (b) (5) of Section
17         852 of the Internal Revenue Code, paid to shareholders
18         for the taxable year;
19             (I) With the exception of any amounts subtracted
20         under subparagraph (J), an amount equal to the sum of
21         all amounts disallowed as deductions by (i) Sections
22         171(a) (2), and 265(a)(2) and amounts disallowed as
23         interest expense by Section 291(a)(3) of the Internal
24         Revenue Code, as now or hereafter amended, and all
25         amounts of expenses allocable to interest and
26         disallowed as deductions by Section 265(a)(1) of the
27         Internal Revenue Code, as now or hereafter amended; and
28         (ii) for taxable years ending on or after August 13,
29         1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and
30         832(b)(5)(B)(i) of the Internal Revenue Code; the
31         provisions of this subparagraph are exempt from the
32         provisions of Section 250;
33             (J) An amount equal to all amounts included in such
34         total which are exempt from taxation by this State

 

 

09400SB0316sam001 - 24 - LRB094 05315 BDD 43117 a

1         either by reason of its statutes or Constitution or by
2         reason of the Constitution, treaties or statutes of the
3         United States; provided that, in the case of any
4         statute of this State that exempts income derived from
5         bonds or other obligations from the tax imposed under
6         this Act, the amount exempted shall be the interest net
7         of bond premium amortization;
8             (K) An amount equal to those dividends included in
9         such total which were paid by a corporation which
10         conducts business operations in an Enterprise Zone or
11         zones created under the Illinois Enterprise Zone Act
12         and conducts substantially all of its operations in an
13         Enterprise Zone or zones;
14             (L) An amount equal to those dividends included in
15         such total that were paid by a corporation that
16         conducts business operations in a federally designated
17         Foreign Trade Zone or Sub-Zone and that is designated a
18         High Impact Business located in Illinois; provided
19         that dividends eligible for the deduction provided in
20         subparagraph (K) of paragraph 2 of this subsection
21         shall not be eligible for the deduction provided under
22         this subparagraph (L);
23             (M) For any taxpayer that is a financial
24         organization within the meaning of Section 304(c) of
25         this Act, an amount included in such total as interest
26         income from a loan or loans made by such taxpayer to a
27         borrower, to the extent that such a loan is secured by
28         property which is eligible for the Enterprise Zone
29         Investment Credit. To determine the portion of a loan
30         or loans that is secured by property eligible for a
31         Section 201(f) investment credit to the borrower, the
32         entire principal amount of the loan or loans between
33         the taxpayer and the borrower should be divided into
34         the basis of the Section 201(f) investment credit

 

 

09400SB0316sam001 - 25 - LRB094 05315 BDD 43117 a

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

 

 

09400SB0316sam001 - 26 - LRB094 05315 BDD 43117 a

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

 

 

09400SB0316sam001 - 27 - LRB094 05315 BDD 43117 a

1         to such dividends;
2             (P) An amount equal to any contribution made to a
3         job training project established pursuant to the Tax
4         Increment Allocation Redevelopment Act;
5             (Q) An amount equal to the amount of the deduction
6         used to compute the federal income tax credit for
7         restoration of substantial amounts held under claim of
8         right for the taxable year pursuant to Section 1341 of
9         the Internal Revenue Code of 1986;
10             (R) On and after July 20, 1999, in In the case of
11         an attorney-in-fact with respect to whom an
12         interinsurer or a reciprocal insurer has made the
13         election under Section 835 of the Internal Revenue
14         Code, 26 U.S.C. 835, an amount equal to the excess, if
15         any, of the amounts paid or incurred by that
16         interinsurer or reciprocal insurer in the taxable year
17         to the attorney-in-fact over the deduction allowed to
18         that interinsurer or reciprocal insurer with respect
19         to the attorney-in-fact under Section 835(b) of the
20         Internal Revenue Code for the taxable year; the
21         provisions of this subparagraph are exempt from the
22         provisions of Section 250;
23             (S) For taxable years ending on or after December
24         31, 1997, in the case of a Subchapter S corporation, an
25         amount equal to all amounts of income allocable to a
26         shareholder subject to the Personal Property Tax
27         Replacement Income Tax imposed by subsections (c) and
28         (d) of Section 201 of this Act, including amounts
29         allocable to organizations exempt from federal income
30         tax by reason of Section 501(a) of the Internal Revenue
31         Code. This subparagraph (S) is exempt from the
32         provisions of Section 250;
33             (T) For taxable years 2001 and thereafter, for the
34         taxable year in which the bonus depreciation deduction

 

 

09400SB0316sam001 - 28 - LRB094 05315 BDD 43117 a

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

 

 

09400SB0316sam001 - 29 - LRB094 05315 BDD 43117 a

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

 

 

09400SB0316sam001 - 30 - LRB094 05315 BDD 43117 a

1         addition modification required to be made for the same
2         taxable year under Section 203(b)(2)(E-13) for
3         intangible expenses and costs paid, accrued, or
4         incurred, directly or indirectly, to the same foreign
5         person.
6         (3) Special rule. For purposes of paragraph (2) (A),
7     "gross income" in the case of a life insurance company, for
8     tax years ending on and after December 31, 1994, shall mean
9     the gross investment income for the taxable year.
 
10     (c) Trusts and estates.
11         (1) In general. In the case of a trust or estate, base
12     income means an amount equal to the taxpayer's taxable
13     income for the taxable year as modified by paragraph (2).
14         (2) Modifications. Subject to the provisions of
15     paragraph (3), the taxable income referred to in paragraph
16     (1) shall be modified by adding thereto the sum of the
17     following amounts:
18             (A) An amount equal to all amounts paid or accrued
19         to the taxpayer as interest or dividends during the
20         taxable year to the extent excluded from gross income
21         in the computation of taxable income;
22             (B) In the case of (i) an estate, $600; (ii) a
23         trust which, under its governing instrument, is
24         required to distribute all of its income currently,
25         $300; and (iii) any other trust, $100, but in each such
26         case, only to the extent such amount was deducted in
27         the computation of taxable income;
28             (C) An amount equal to the amount of tax imposed by
29         this Act to the extent deducted from gross income in
30         the computation of taxable income for the taxable year;
31             (D) The amount of any net operating loss deduction
32         taken in arriving at taxable income, other than a net
33         operating loss carried forward from a taxable year

 

 

09400SB0316sam001 - 31 - LRB094 05315 BDD 43117 a

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 taxable year, with
10         the following limitations applied in the order that
11         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             (F) For taxable years ending on or after January 1,
33         1989, an amount equal to the tax deducted pursuant to
34         Section 164 of the Internal Revenue Code if the trust

 

 

09400SB0316sam001 - 32 - LRB094 05315 BDD 43117 a

1         or estate is claiming the same tax for purposes of the
2         Illinois foreign tax credit under Section 601 of this
3         Act;
4             (G) An amount equal to the amount of the capital
5         gain deduction allowable under the Internal Revenue
6         Code, to the extent deducted from gross income in the
7         computation of taxable income;
8             (G-5) For taxable years ending after December 31,
9         1997, an amount equal to any eligible remediation costs
10         that the trust or estate deducted in computing adjusted
11         gross income and for which the trust or estate claims a
12         credit under subsection (l) of Section 201;
13             (G-10) For taxable years 2001 and thereafter, an
14         amount equal to the bonus depreciation deduction (30%
15         of the adjusted basis of the qualified property) taken
16         on the taxpayer's federal income tax return for the
17         taxable year under subsection (k) of Section 168 of the
18         Internal Revenue Code; and
19             (G-11) If the taxpayer reports a capital gain or
20         loss on the taxpayer's federal income tax return for
21         the taxable year based on a sale or transfer of
22         property for which the taxpayer was required in any
23         taxable year to make an addition modification under
24         subparagraph (G-10), then an amount equal to the
25         aggregate amount of the deductions taken in all taxable
26         years under subparagraph (R) with respect to that
27         property.
28             The taxpayer is required to make the addition
29         modification under this subparagraph only once with
30         respect to any one piece of property;
31             (G-12) For taxable years ending on or after
32         December 31, 2004, an amount equal to the amount
33         otherwise allowed as a deduction in computing base
34         income for interest paid, accrued, or incurred,

 

 

09400SB0316sam001 - 33 - LRB094 05315 BDD 43117 a

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

 

 

09400SB0316sam001 - 34 - LRB094 05315 BDD 43117 a

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

 

 

09400SB0316sam001 - 35 - LRB094 05315 BDD 43117 a

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

 

 

09400SB0316sam001 - 36 - LRB094 05315 BDD 43117 a

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

 

 

09400SB0316sam001 - 37 - LRB094 05315 BDD 43117 a

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     and by deducting from the total so obtained the sum of the
8     following amounts:
9             (H) 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             (I) The valuation limitation amount;
21             (J) 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             (K) An amount equal to all amounts included in
25         taxable income as modified by subparagraphs (A), (B),
26         (C), (D), (E), (F) and (G) which are exempt from
27         taxation by this State either by reason of its statutes
28         or Constitution or by reason of the Constitution,
29         treaties or statutes of the United States; provided
30         that, in the case of any statute of this State that
31         exempts income derived from bonds or other obligations
32         from the tax imposed under this Act, the amount
33         exempted shall be the interest net of bond premium
34         amortization;

 

 

09400SB0316sam001 - 38 - LRB094 05315 BDD 43117 a

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

 

 

09400SB0316sam001 - 39 - LRB094 05315 BDD 43117 a

1         right for the taxable year pursuant to Section 1341 of
2         the Internal Revenue Code of 1986;
3             (Q) For taxable year 1999 and thereafter, an amount
4         equal to the amount of any (i) distributions, to the
5         extent includible in gross income for federal income
6         tax purposes, made to the taxpayer because of his or
7         her status as a victim of persecution for racial or
8         religious reasons by Nazi Germany or any other Axis
9         regime or as an heir of the victim and (ii) items of
10         income, to the extent includible in gross income for
11         federal income tax purposes, attributable to, derived
12         from or in any way related to assets stolen from,
13         hidden from, or otherwise lost to a victim of
14         persecution for racial or religious reasons by Nazi
15         Germany or any other Axis regime immediately prior to,
16         during, and immediately after World War II, including,
17         but not limited to, interest on the proceeds receivable
18         as insurance under policies issued to a victim of
19         persecution for racial or religious reasons by Nazi
20         Germany or any other Axis regime by European insurance
21         companies immediately prior to and during World War II;
22         provided, however, this subtraction from federal
23         adjusted gross income does not apply to assets acquired
24         with such assets or with the proceeds from the sale of
25         such assets; provided, further, this paragraph shall
26         only apply to a taxpayer who was the first recipient of
27         such assets after their recovery and who is a victim of
28         persecution for racial or religious reasons by Nazi
29         Germany or any other Axis regime or as an heir of the
30         victim. The amount of and the eligibility for any
31         public assistance, benefit, or similar entitlement is
32         not affected by the inclusion of items (i) and (ii) of
33         this paragraph in gross income for federal income tax
34         purposes. This paragraph is exempt from the provisions

 

 

09400SB0316sam001 - 40 - LRB094 05315 BDD 43117 a

1         of Section 250;
2             (R) For taxable years 2001 and thereafter, for the
3         taxable year in which the bonus depreciation deduction
4         (30% of the adjusted basis of the qualified property)
5         is taken on the taxpayer's federal income tax return
6         under subsection (k) of Section 168 of the Internal
7         Revenue Code and for each applicable taxable year
8         thereafter, an amount equal to "x", where:
9                 (1) "y" equals the amount of the depreciation
10             deduction taken for the taxable year on the
11             taxpayer's federal income tax return on property
12             for which the bonus depreciation deduction (30% of
13             the adjusted basis of the qualified property) was
14             taken in any year under subsection (k) of Section
15             168 of the Internal Revenue Code, but not including
16             the bonus depreciation deduction; and
17                 (2) "x" equals "y" multiplied by 30 and then
18             divided by 70 (or "y" multiplied by 0.429).
19             The aggregate amount deducted under this
20         subparagraph in all taxable years for any one piece of
21         property may not exceed the amount of the bonus
22         depreciation deduction (30% of the adjusted basis of
23         the qualified property) taken on that property on the
24         taxpayer's federal income tax return under subsection
25         (k) of Section 168 of the Internal Revenue Code;
26             (S) If the taxpayer reports a capital gain or loss
27         on the taxpayer's federal income tax return for the
28         taxable year based on a sale or transfer of property
29         for which the taxpayer was required in any taxable year
30         to make an addition modification under subparagraph
31         (G-10), then an amount equal to that addition
32         modification.
33             The taxpayer is allowed to take the deduction under
34         this subparagraph only once with respect to any one

 

 

09400SB0316sam001 - 41 - LRB094 05315 BDD 43117 a

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

 

 

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1         the fact that the foreign person's business activity
2         outside the United States is 80% or more of that
3         person's total business activity, but not to exceed the
4         addition modification required to be made for the same
5         taxable year under Section 203(c)(2)(G-13) for
6         intangible expenses and costs paid, accrued, or
7         incurred, directly or indirectly, to the same foreign
8         person.
9         (3) Limitation. The amount of any modification
10     otherwise required under this subsection shall, under
11     regulations prescribed by the Department, be adjusted by
12     any amounts included therein which were properly paid,
13     credited, or required to be distributed, or permanently set
14     aside for charitable purposes pursuant to Internal Revenue
15     Code Section 642(c) during the taxable year.
 
16     (d) Partnerships.
17         (1) In general. In the case of a partnership, base
18     income means an amount equal to the taxpayer's taxable
19     income for the taxable year as modified by paragraph (2).
20         (2) Modifications. The taxable income referred to in
21     paragraph (1) shall be modified by adding thereto the sum
22     of the following amounts:
23             (A) An amount equal to all amounts paid or accrued
24         to the taxpayer as interest or dividends during the
25         taxable year to the extent excluded from gross income
26         in the computation of taxable income;
27             (B) An amount equal to the amount of tax imposed by
28         this Act to the extent deducted from gross income for
29         the taxable year;
30             (C) The amount of deductions allowed to the
31         partnership pursuant to Section 707 (c) of the Internal
32         Revenue Code in calculating its taxable income;
33             (D) An amount equal to the amount of the capital

 

 

09400SB0316sam001 - 43 - LRB094 05315 BDD 43117 a

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

 

 

09400SB0316sam001 - 44 - LRB094 05315 BDD 43117 a

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

 

 

09400SB0316sam001 - 45 - LRB094 05315 BDD 43117 a

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

 

 

09400SB0316sam001 - 46 - LRB094 05315 BDD 43117 a

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

 

 

09400SB0316sam001 - 47 - LRB094 05315 BDD 43117 a

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

 

 

09400SB0316sam001 - 48 - LRB094 05315 BDD 43117 a

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

 

 

09400SB0316sam001 - 49 - LRB094 05315 BDD 43117 a

1         171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
2         Internal Revenue Code; the provisions of this
3         subparagraph are exempt from the provisions of Section
4         250;
5             (K) An amount equal to those dividends included in
6         such total which were paid by a corporation which
7         conducts business operations in an Enterprise Zone or
8         zones created under the Illinois Enterprise Zone Act,
9         enacted by the 82nd General Assembly, and conducts
10         substantially all of its operations in an Enterprise
11         Zone or Zones;
12             (L) An amount equal to any contribution made to a
13         job training project established pursuant to the Real
14         Property Tax Increment Allocation Redevelopment Act;
15             (M) An amount equal to those dividends included in
16         such total that were paid by a corporation that
17         conducts business operations in a federally designated
18         Foreign Trade Zone or Sub-Zone and that is designated a
19         High Impact Business located in Illinois; provided
20         that dividends eligible for the deduction provided in
21         subparagraph (K) of paragraph (2) of this subsection
22         shall not be eligible for the deduction provided under
23         this subparagraph (M);
24             (N) An amount equal to the amount of the deduction
25         used to compute the federal income tax credit for
26         restoration of substantial amounts held under claim of
27         right for the taxable year pursuant to Section 1341 of
28         the Internal Revenue Code of 1986;
29             (O) For taxable years 2001 and thereafter, for the
30         taxable year in which the bonus depreciation deduction
31         (30% of the adjusted basis of the qualified property)
32         is taken on the taxpayer's federal income tax return
33         under subsection (k) of Section 168 of the Internal
34         Revenue Code and for each applicable taxable year

 

 

09400SB0316sam001 - 50 - LRB094 05315 BDD 43117 a

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

 

 

09400SB0316sam001 - 51 - LRB094 05315 BDD 43117 a

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

 

 

09400SB0316sam001 - 52 - LRB094 05315 BDD 43117 a

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

 

 

09400SB0316sam001 - 53 - LRB094 05315 BDD 43117 a

1     Revenue Code.
2         (2) Special rule. For purposes of paragraph (1) of this
3     subsection, the taxable income properly reportable for
4     federal income tax purposes shall mean:
5             (A) Certain life insurance companies. In the case
6         of a life insurance company subject to the tax imposed
7         by Section 801 of the Internal Revenue Code, life
8         insurance company taxable income, plus the amount of
9         distribution from pre-1984 policyholder surplus
10         accounts as calculated under Section 815a of the
11         Internal Revenue Code;
12             (B) Certain other insurance companies. In the case
13         of mutual insurance companies subject to the tax
14         imposed by Section 831 of the Internal Revenue Code,
15         insurance company taxable income;
16             (C) Regulated investment companies. In the case of
17         a regulated investment company subject to the tax
18         imposed by Section 852 of the Internal Revenue Code,
19         investment company taxable income;
20             (D) Real estate investment trusts. In the case of a
21         real estate investment trust subject to the tax imposed
22         by Section 857 of the Internal Revenue Code, real
23         estate investment trust taxable income;
24             (E) Consolidated corporations. In the case of a
25         corporation which is a member of an affiliated group of
26         corporations filing a consolidated income tax return
27         for the taxable year for federal income tax purposes,
28         taxable income determined as if such corporation had
29         filed a separate return for federal income tax purposes
30         for the taxable year and each preceding taxable year
31         for which it was a member of an affiliated group. For
32         purposes of this subparagraph, the taxpayer's separate
33         taxable income shall be determined as if the election
34         provided by Section 243(b) (2) of the Internal Revenue

 

 

09400SB0316sam001 - 54 - LRB094 05315 BDD 43117 a

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

 

 

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

 

 

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

 

 

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1 August 1, 1969 or otherwise.
2 (Source: P.A. 92-16, eff. 6-28-01; 92-244, eff. 8-3-01; 92-439,
3 eff. 8-17-01; 92-603, eff. 6-28-02; 92-626, eff. 7-11-02;
4 92-651, eff. 7-11-02; 92-846, eff. 8-23-02; 93-812, eff.
5 7-26-04; 93-840, eff. 7-30-04; revised 10-12-04.)
 
6     Section 99. Effective date. This Act takes effect upon
7 becoming law.".