Sen. Don Harmon

Filed: 4/7/2005

 

 


 

 


 
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1
AMENDMENT TO SENATE BILL 1815

2     AMENDMENT NO. ______. Amend Senate Bill 1815 by replacing
3 everything after the enacting clause with the following:
 
4     "Section 1. Short title. This Act may be cited as the
5 Lifelong Learning Act.
 
6     Section 5. Definitions. As used in this Act:
7     "Account owner" means an eligible employee for which a
8 lifelong learning account has been established under this Act.
9     "Accredited lifelong learning plan" means a lifelong
10 learning plan that has been certified by the Department.
11     "Department" means the Department of Commerce and Economic
12 Opportunity.
13     "Eligible education expense" means a payment for
14 education, including tuition and fees and similar payments,
15 books, supplies, equipment, and tools or supplies that may be
16 retained by the employee after completion of a course of
17 instruction. "Eligible education expense" does not include any
18 expense for (i) meals, lodging, or transportation or (ii) any
19 course or other education involving sports, games, or hobbies.
20     "Eligible employee" means the following:
21         (1) a full-time employee of a participating employer;
22     or
23         (2) A part-time employee of a participating employer,
24     if the part-time employee's principal place of employment

 

 

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1     is with a participating employer located in Illinois and if
2     the participating employer elects to include part-time
3     employees in the participating employer's plan.
4     "Full-time employee" means an individual who:
5         (1) is employed for consideration for at least 35 hours
6     each week or who renders any other standard of service
7     generally accepted by custom or specified by contract as
8     full-time employment; and
9         (2) has the individual's principal place of employment
10     in Illinois with a participating employer.
11     "Participating employer" means a person who (i) employs at
12 least one eligible employee and (ii) has established an
13 accredited lifelong learning plan.
 
14     Section 10. Powers of the Department. The Department, in
15 addition to those powers granted under the Civil Administrative
16 Code of Illinois, is granted and has all the powers necessary
17 or convenient to carry out and effectuate the purposes and
18 provisions of this Act, including, but not limited to, the
19 power and authority to:
20         (i) adopt rules that are necessary and appropriate for
21     the administration of the tax credit program established
22     under Section 30; establish forms for applications,
23     notifications, contracts, or any other agreements; and
24     accept applications at any time during the year;
25         (ii) assist applicants under the provisions of this Act
26     to promote, foster, and support lifelong learning within
27     the State;
28         (iii) gather information and conduct inquiries, in the
29     manner and by the methods as it deems desirable, including,
30     without limitation, gathering information with respect to
31     applicants for the purpose of making any necessary or
32     desirable designations or certifications or to gather
33     information to assist the Department with any

 

 

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1     recommendation or guidance in the furtherance of the
2     purposes of this Act;
3         (iv) provide for sufficient personnel to permit
4     administration, staffing, operation, and related support
5     required to adequately discharge its duties and
6     responsibilities described in this Act from funds as may be
7     appropriated by the General Assembly for the
8     administration of this Act;
9         (v) require applicants, upon written request, to issue
10     any necessary authorization to the appropriate federal,
11     state, or local authority for the release of information
12     concerning a project being considered under the provisions
13     of this Act, including, but not limited to, financial
14     reports, returns, or records relating to the applicant; and
15         (vi) require that an applicant must at all times keep
16     proper books of record and account in accordance with
17     generally accepted accounting principles consistently
18     applied, with the books, records, or papers related to the
19     accredited production in the custody or control of the
20     taxpayer open for reasonable Department inspection and
21     audits, and including, without limitation, the making of
22     copies of the books, records, or papers, and the inspection
23     or appraisal of any of the assets of the applicant.
 
24     Section 15. Application for certification of accredited
25 plan. Any employer located in Illinois, proposing to establish
26 a lifelong learning plan under this Act may request an
27 accredited plan certificate by formal application to the
28 Department.
 
29     Section 20. Review of application for accredited plan
30 certificate.
31     (a) In determining whether to issue an accredited plan
32 certificate, the Department must determine that a

 

 

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1 preponderance of the following conditions exist:
2         (1) The plan is in writing.
3         (2) The plan covers at least all full-time employees of
4     the employer and, if the employer elects to cover part-time
5     employees under the plan, all part-time employees. The plan
6     may require that employees have been employed by the
7     employer for a set amount of time, up to 6 months, in order
8     to be eligible for an account.
9         (3) The plan provides for the establishment of a
10     lifelong learning account, as provided under Section 5, for
11     each eligible employee to which:
12             (A) an eligible employee makes contributions for
13         the payment of eligible education expenses; and
14             (B) the employer makes matching contributions on a
15         dollar for dollar basis for the purpose of paying
16         eligible education expenses. However, the plan may
17         limit the maximum amount that the employer must match.
18         The limitation must uniformly apply to all full-time
19         employees of the employer. If the employer elects to
20         have part-time employees participate in the plan, the
21         employer may impose a different uniform limitation for
22         part-time employees.
23         (4) The plan provides, subject to Section 25, that the
24     lifelong learning account may be used only to pay eligible
25     education expenses incurred by or on behalf of an eligible
26     employee for education selected at the sole discretion of
27     the eligible employee.
28         (5) The plan provides that the availability of the plan
29     does not reduce or substitute for any other education
30     program provided by the employer, including the provision,
31     by an employer, of courses of instruction for the
32     employer's eligible employees (including books, supplies,
33     and equipment).
34         (6) The plan sets forth procedures for the

 

 

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1     dissemination of information about the plan, including the
2     federal and State income tax consequences of the plan.
3         (7) The plan sets forth procedures for submitting any
4     required reports or returns to the Department of Revenue.
5         (8) The plan sets forth procedures for the allocation
6     of credits by the Department for the employer's eligible
7     employees among those eligible employees.
8     (b) Upon satisfactory review of the application, the
9 Department shall issue an Accredited Lifelong Learning Plan
10 Certificate.
 
11     Section 25. Lifelong learning accounts.
12     (a) To qualify as a lifelong learning account under this
13 Act, an account must meet all the following criteria:
14         (1) The account must be established and administered in
15     accordance with a lifelong learning plan, as set forth
16     under Section 20.
17         (2) Except as otherwise provided in this Section, the
18     account may be used only to pay eligible education expenses
19     incurred by or on behalf of the account owner for education
20     selected at the sole discretion of the account owner.
21         (3) The account must be held by a trustee, custodian,
22     or fiduciary approved by the Department. The trustee,
23     custodian, or fiduciary may be a bank, trust company,
24     national banking association, credit union, savings and
25     loan association, insurance company, or other financial
26     institution as determined by the Department.
27     (b) Moneys in a lifelong learning account that are
28 contributed by an account owner must be held in trust for the
29 account owner. An account owner may withdraw the amount of his
30 or her contribution to the account at any time for any purpose.
31 A withdrawal from a lifelong learning account is a qualified
32 withdrawal and may be made without penalty if the withdrawal is
33 made by the account owner or his or her designee and if the

 

 

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1 withdrawal is made: (i) for the purpose of paying the qualified
2 higher education expenses of the account owner; (ii) as a
3 result of the death or disability of the account owner; or
4 (iii) as a result of a rollover to the account of another
5 participating employer, in accordance with rules adopted by the
6 Department.
7     (c) Withdrawals that do not meet the requirements of
8 subsection (b) are nonqualified withdrawals and are subject to
9 the provisions of this subsection (c). In the case of any
10 nonqualified withdrawal from a lifelong learning account, an
11 amount of not more than 15% of the withdrawal may be withheld
12 as a penalty and paid to the Department for use in operating
13 and marketing the program. The Department may establish the
14 percentage rate of the penalty or change the basis of the
15 penalty if the Department determines that it is necessary to do
16 so in order to discourage nonqualified withdrawals. If an
17 account owner makes a nonqualified withdrawal and no penalty
18 amount is withheld under this Section or, if the amount
19 withheld is less than the amount required to be withheld by the
20 Department, then the account owner shall pay the unpaid portion
21 of the penalty to the Department on or before April 15 of the
22 following tax year.
23     (d) A lifelong learning account may contain gifts to the
24 account in addition to contributions by the account owner or a
25 participating employer. A gift to an account may be used only
26 to pay eligible education expenses.
 
27     Section 30. Tax credit awards. Subject to the provisions
28 of Section 216 of the Illinois Income Tax Act, a participating
29 employer is entitled to an income tax credit of up to $500 per
30 taxable year per participating employee for contributions made
31 to a lifelong learning account established under the employer's
32 accredited lifelong learning plan.
 

 

 

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1     Section 35. Evaluation of the Act. No later than January
2 30, 2007, the Department must evaluate the lifelong learning
3 account program established under this Act. The evaluation must
4 include an assessment of the effectiveness of the program in
5 meeting the educational needs of the citizens of and employers
6 in Illinois and of the revenue impact of the program, and may
7 include a review of the practices and experiences of other
8 states or nations with similar programs. Upon completion of
9 this evaluation, the Department shall determine the overall
10 success of the program and may make a recommendation to extend,
11 modify, or not extend the program based on this evaluation.
 
12     Section 40. The Department may not accredit any lifelong
13 learning plan after December 31, 2008. No participating
14 employer may receive a tax credit for contributions made to a
15 lifelong learning account after December 31, 2008. The
16 Department may not accredit more than 10,000 life long learning
17 plans before December 31, 2008.
 
18     Section 900. The Illinois Income Tax Act is amended by
19 changing Section 203 and by adding Section 216 as follows:
 
20     (35 ILCS 5/203)  (from Ch. 120, par. 2-203)
21     Sec. 203. Base income defined.
22     (a) Individuals.
23         (1) In general. In the case of an individual, base
24     income means an amount equal to the taxpayer's adjusted
25     gross income for the taxable year as modified by paragraph
26     (2).
27         (2) Modifications. The adjusted gross income referred
28     to in paragraph (1) shall be modified by adding thereto the
29     sum of the following amounts:
30             (A) An amount equal to all amounts paid or accrued
31         to the taxpayer as interest or dividends during the

 

 

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1         taxable year to the extent excluded from gross income
2         in the computation of adjusted gross income, except
3         stock dividends of qualified public utilities
4         described in Section 305(e) of the Internal Revenue
5         Code;
6             (B) An amount equal to the amount of tax imposed by
7         this Act to the extent deducted from gross income in
8         the computation of adjusted gross income for the
9         taxable year;
10             (C) An amount equal to the amount received during
11         the taxable year as a recovery or refund of real
12         property taxes paid with respect to the taxpayer's
13         principal residence under the Revenue Act of 1939 and
14         for which a deduction was previously taken under
15         subparagraph (L) of this paragraph (2) prior to July 1,
16         1991, the retrospective application date of Article 4
17         of Public Act 87-17. In the case of multi-unit or
18         multi-use structures and farm dwellings, the taxes on
19         the taxpayer's principal residence shall be that
20         portion of the total taxes for the entire property
21         which is attributable to such principal residence;
22             (D) An amount equal to the amount of the capital
23         gain deduction allowable under the Internal Revenue
24         Code, to the extent deducted from gross income in the
25         computation of adjusted gross income;
26             (D-5) An amount, to the extent not included in
27         adjusted gross income, equal to the amount of money
28         withdrawn by the taxpayer in the taxable year from a
29         medical care savings account and the interest earned on
30         the account in the taxable year of a withdrawal
31         pursuant to subsection (b) of Section 20 of the Medical
32         Care Savings Account Act or subsection (b) of Section
33         20 of the Medical Care Savings Account Act of 2000;
34             (D-10) For taxable years ending after December 31,

 

 

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

 

 

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

 

 

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

 

 

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1         income under Sections 951 through 964 of the Internal
2         Revenue Code and amounts included in gross income under
3         Section 78 of the Internal Revenue Code) with respect
4         to the stock of the same person to whom the intangible
5         expenses and costs were directly or indirectly paid,
6         incurred, or accrued. The preceding sentence does not
7         apply to the extent that the same dividends caused a
8         reduction to the addition modification required under
9         Section 203(a)(2)(D-17) of this Act. As used in this
10         subparagraph, the term "intangible expenses and costs"
11         includes (1) expenses, losses, and costs for, or
12         related to, the direct or indirect acquisition, use,
13         maintenance or management, ownership, sale, exchange,
14         or any other disposition of intangible property; (2)
15         losses incurred, directly or indirectly, from
16         factoring transactions or discounting transactions;
17         (3) royalty, patent, technical, and copyright fees;
18         (4) licensing fees; and (5) other similar expenses and
19         costs. For purposes of this subparagraph, "intangible
20         property" includes patents, patent applications, trade
21         names, trademarks, service marks, copyrights, mask
22         works, trade secrets, and similar types of intangible
23         assets.
24             This paragraph shall not apply to the following:
25                 (i) any item of intangible expenses or costs
26             paid, accrued, or incurred, directly or
27             indirectly, from a transaction with a foreign
28             person who is subject in a foreign country or
29             state, other than a state which requires mandatory
30             unitary reporting, to a tax on or measured by net
31             income with respect to such item; or
32                 (ii) any item of intangible expense or cost
33             paid, accrued, or incurred, directly or
34             indirectly, if the taxpayer can establish, based

 

 

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1             on a preponderance of the evidence, both of the
2             following:
3                     (a) the foreign person during the same
4                 taxable year paid, accrued, or incurred, the
5                 intangible expense or cost to a person that is
6                 not a related member, and
7                     (b) the transaction giving rise to the
8                 intangible expense or cost between the
9                 taxpayer and the foreign person did not have as
10                 a principal purpose the avoidance of Illinois
11                 income tax, and is paid pursuant to a contract
12                 or agreement that reflects arm's-length terms;
13                 or
14                 (iii) any item of intangible expense or cost
15             paid, accrued, or incurred, directly or
16             indirectly, from a transaction with a foreign
17             person if the taxpayer establishes by clear and
18             convincing evidence, that the adjustments are
19             unreasonable; or if the taxpayer and the Director
20             agree in writing to the application or use of an
21             alternative method of apportionment under Section
22             304(f);
23                 Nothing in this subsection shall preclude the
24             Director from making any other adjustment
25             otherwise allowed under Section 404 of this Act for
26             any tax year beginning after the effective date of
27             this amendment provided such adjustment is made
28             pursuant to regulation adopted by the Department
29             and such regulations provide methods and standards
30             by which the Department will utilize its authority
31             under Section 404 of this Act;
32             (D-20) For taxable years beginning on or after
33         January 1, 2002, in the case of a distribution from a
34         qualified tuition program under Section 529 of the

 

 

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1         Internal Revenue Code, other than (i) a distribution
2         from a College Savings Pool created under Section 16.5
3         of the State Treasurer Act or (ii) a distribution from
4         the Illinois Prepaid Tuition Trust Fund, an amount
5         equal to the amount excluded from gross income under
6         Section 529(c)(3)(B);
7         (D-21) For taxable years beginning on or after January
8         1, 2006, an amount equal to the amount of money
9         withdrawn by the taxpayer in the taxable year from a
10         lifelong learning account established under the
11         Lifelong Learning Act;
12     and by deducting from the total so obtained the sum of the
13     following amounts:
14             (E) For taxable years ending before December 31,
15         2001, any amount included in such total in respect of
16         any compensation (including but not limited to any
17         compensation paid or accrued to a serviceman while a
18         prisoner of war or missing in action) paid to a
19         resident by reason of being on active duty in the Armed
20         Forces of the United States and in respect of any
21         compensation paid or accrued to a resident who as a
22         governmental employee was a prisoner of war or missing
23         in action, and in respect of any compensation paid to a
24         resident in 1971 or thereafter for annual training
25         performed pursuant to Sections 502 and 503, Title 32,
26         United States Code as a member of the Illinois National
27         Guard. For taxable years ending on or after December
28         31, 2001, any amount included in such total in respect
29         of any compensation (including but not limited to any
30         compensation paid or accrued to a serviceman while a
31         prisoner of war or missing in action) paid to a
32         resident by reason of being a member of any component
33         of the Armed Forces of the United States and in respect
34         of any compensation paid or accrued to a resident who

 

 

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

 

 

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

 

 

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1             (O) An amount equal to any contribution made to a
2         job training project established pursuant to the Tax
3         Increment Allocation Redevelopment Act;
4             (P) An amount equal to the amount of the deduction
5         used to compute the federal income tax credit for
6         restoration of substantial amounts held under claim of
7         right for the taxable year pursuant to Section 1341 of
8         the Internal Revenue Code of 1986;
9             (Q) An amount equal to any amounts included in such
10         total, received by the taxpayer as an acceleration in
11         the payment of life, endowment or annuity benefits in
12         advance of the time they would otherwise be payable as
13         an indemnity for a terminal illness;
14             (R) An amount equal to the amount of any federal or
15         State bonus paid to veterans of the Persian Gulf War;
16             (S) An amount, to the extent included in adjusted
17         gross income, equal to the amount of a contribution
18         made in the taxable year on behalf of the taxpayer to a
19         medical care savings account established under the
20         Medical Care Savings Account Act or the Medical Care
21         Savings Account Act of 2000 to the extent the
22         contribution is accepted by the account administrator
23         as provided in that Act;
24             (T) An amount, to the extent included in adjusted
25         gross income, equal to the amount of interest earned in
26         the taxable year on a medical care savings account
27         established under the Medical Care Savings Account Act
28         or the Medical Care Savings Account Act of 2000 on
29         behalf of the taxpayer, other than interest added
30         pursuant to item (D-5) of this paragraph (2);
31             (U) For one taxable year beginning on or after
32         January 1, 1994, an amount equal to the total amount of
33         tax imposed and paid under subsections (a) and (b) of
34         Section 201 of this Act on grant amounts received by

 

 

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1         the taxpayer under the Nursing Home Grant Assistance
2         Act during the taxpayer's taxable years 1992 and 1993;
3             (V) Beginning with tax years ending on or after
4         December 31, 1995 and ending with tax years ending on
5         or before December 31, 2004, an amount equal to the
6         amount paid by a taxpayer who is a self-employed
7         taxpayer, a partner of a partnership, or a shareholder
8         in a Subchapter S corporation for health insurance or
9         long-term care insurance for that taxpayer or that
10         taxpayer's spouse or dependents, to the extent that the
11         amount paid for that health insurance or long-term care
12         insurance may be deducted under Section 213 of the
13         Internal Revenue Code of 1986, has not been deducted on
14         the federal income tax return of the taxpayer, and does
15         not exceed the taxable income attributable to that
16         taxpayer's income, self-employment income, or
17         Subchapter S corporation income; except that no
18         deduction shall be allowed under this item (V) if the
19         taxpayer is eligible to participate in any health
20         insurance or long-term care insurance plan of an
21         employer of the taxpayer or the taxpayer's spouse. The
22         amount of the health insurance and long-term care
23         insurance subtracted under this item (V) shall be
24         determined by multiplying total health insurance and
25         long-term care insurance premiums paid by the taxpayer
26         times a number that represents the fractional
27         percentage of eligible medical expenses under Section
28         213 of the Internal Revenue Code of 1986 not actually
29         deducted on the taxpayer's federal income tax return;
30             (W) For taxable years beginning on or after January
31         1, 1998, all amounts included in the taxpayer's federal
32         gross income in the taxable year from amounts converted
33         from a regular IRA to a Roth IRA. This paragraph is
34         exempt from the provisions of Section 250;

 

 

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1             (X) For taxable year 1999 and thereafter, an amount
2         equal to the amount of any (i) distributions, to the
3         extent includible in gross income for federal income
4         tax purposes, made to the taxpayer because of his or
5         her status as a victim of persecution for racial or
6         religious reasons by Nazi Germany or any other Axis
7         regime or as an heir of the victim and (ii) items of
8         income, to the extent includible in gross income for
9         federal income tax purposes, attributable to, derived
10         from or in any way related to assets stolen from,
11         hidden from, or otherwise lost to a victim of
12         persecution for racial or religious reasons by Nazi
13         Germany or any other Axis regime immediately prior to,
14         during, and immediately after World War II, including,
15         but not limited to, interest on the proceeds receivable
16         as insurance under policies issued to a victim of
17         persecution for racial or religious reasons by Nazi
18         Germany or any other Axis regime by European insurance
19         companies immediately prior to and during World War II;
20         provided, however, this subtraction from federal
21         adjusted gross income does not apply to assets acquired
22         with such assets or with the proceeds from the sale of
23         such assets; provided, further, this paragraph shall
24         only apply to a taxpayer who was the first recipient of
25         such assets after their recovery and who is a victim of
26         persecution for racial or religious reasons by Nazi
27         Germany or any other Axis regime or as an heir of the
28         victim. The amount of and the eligibility for any
29         public assistance, benefit, or similar entitlement is
30         not affected by the inclusion of items (i) and (ii) of
31         this paragraph in gross income for federal income tax
32         purposes. This paragraph is exempt from the provisions
33         of Section 250;
34             (Y) For taxable years beginning on or after January

 

 

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1         1, 2002 and ending on or before December 31, 2004,
2         moneys contributed in the taxable year to a College
3         Savings Pool account under Section 16.5 of the State
4         Treasurer Act, except that amounts excluded from gross
5         income under Section 529(c)(3)(C)(i) of the Internal
6         Revenue Code shall not be considered moneys
7         contributed under this subparagraph (Y). For taxable
8         years beginning on or after January 1, 2005, a maximum
9         of $10,000 contributed in the taxable year to (i) a
10         College Savings Pool account under Section 16.5 of the
11         State Treasurer Act or (ii) the Illinois Prepaid
12         Tuition Trust Fund, except that amounts excluded from
13         gross income under Section 529(c)(3)(C)(i) of the
14         Internal Revenue Code shall not be considered moneys
15         contributed under this subparagraph (Y). This
16         subparagraph (Y) is exempt from the provisions of
17         Section 250;
18             (Z) For taxable years 2001 and thereafter, for the
19         taxable year in which the bonus depreciation deduction
20         (30% of the adjusted basis of the qualified property)
21         is taken on the taxpayer's federal income tax return
22         under subsection (k) of Section 168 of the Internal
23         Revenue Code and for each applicable taxable year
24         thereafter, an amount equal to "x", where:
25                 (1) "y" equals the amount of the depreciation
26             deduction taken for the taxable year on the
27             taxpayer's federal income tax return on property
28             for which the bonus depreciation deduction (30% of
29             the adjusted basis of the qualified property) was
30             taken in any year under subsection (k) of Section
31             168 of the Internal Revenue Code, but not including
32             the bonus depreciation deduction; and
33                 (2) "x" equals "y" multiplied by 30 and then
34             divided by 70 (or "y" multiplied by 0.429).

 

 

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

 

 

09400SB1815sam001 - 22 - LRB094 11152 BDD 44382 a

1         203(d)(2)(D-8), but not to exceed the amount of that
2         addition modification;
3             (DD) An amount equal to the interest income taken
4         into account for the taxable year (net of the
5         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-17) for
13         interest paid, accrued, or incurred, directly or
14         indirectly, to the same foreign person; and
15             (EE) An amount equal to the income from intangible
16         property taken into account for the taxable year (net
17         of the 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(a)(2)(D-18) for
25         intangible expenses and costs paid, accrued, or
26         incurred, directly or indirectly, to the same foreign
27         person; and .
28             (FF) For taxable years beginning on or after
29         January 1, 2006, an amount equal to the amount of money
30         deposited by the taxpayer in the taxable year into a
31         lifelong learning account established under the
32         Lifelong Learning Act of which the taxpayer is a
33         beneficiary. This paragraph is exempt from the
34         provisions of Section 250.
 

 

 

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

 

 

09400SB1815sam001 - 24 - LRB094 11152 BDD 44382 a

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

 

 

09400SB1815sam001 - 25 - LRB094 11152 BDD 44382 a

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

 

 

09400SB1815sam001 - 26 - LRB094 11152 BDD 44382 a

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

 

 

09400SB1815sam001 - 27 - LRB094 11152 BDD 44382 a

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

 

 

09400SB1815sam001 - 28 - LRB094 11152 BDD 44382 a

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

 

 

09400SB1815sam001 - 29 - LRB094 11152 BDD 44382 a

1                     (b) the transaction giving rise to the
2                 intangible expense or cost between the
3                 taxpayer and the foreign person did not have as
4                 a principal purpose the avoidance of Illinois
5                 income tax, and is paid pursuant to a contract
6                 or agreement that reflects arm's-length terms;
7                 or
8                 (iii) any item of intangible expense or cost
9             paid, accrued, or incurred, directly or
10             indirectly, from a transaction with a foreign
11             person if the taxpayer establishes by clear and
12             convincing evidence, that the adjustments are
13             unreasonable; or if the taxpayer and the Director
14             agree in writing to the application or use of an
15             alternative method of apportionment under Section
16             304(f);
17                 Nothing in this subsection shall preclude the
18             Director from making any other adjustment
19             otherwise allowed under Section 404 of this Act for
20             any tax year beginning after the effective date of
21             this amendment provided such adjustment is made
22             pursuant to regulation adopted by the Department
23             and such regulations provide methods and standards
24             by which the Department will utilize its authority
25             under Section 404 of this Act;
26     and by deducting from the total so obtained the sum of the
27     following amounts:
28             (F) An amount equal to the amount of any tax
29         imposed by this Act which was refunded to the taxpayer
30         and included in such total for the taxable year;
31             (G) An amount equal to any amount included in such
32         total under Section 78 of the Internal Revenue Code;
33             (H) In the case of a regulated investment company,
34         an amount equal to the amount of exempt interest

 

 

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1         dividends as defined in subsection (b) (5) of Section
2         852 of the Internal Revenue Code, paid to shareholders
3         for the taxable year;
4             (I) With the exception of any amounts subtracted
5         under subparagraph (J), an amount equal to the sum of
6         all amounts disallowed as deductions by (i) Sections
7         171(a) (2), and 265(a)(2) and amounts disallowed as
8         interest expense by Section 291(a)(3) of the Internal
9         Revenue Code, as now or hereafter amended, and all
10         amounts of expenses allocable to interest and
11         disallowed as deductions by Section 265(a)(1) of the
12         Internal Revenue Code, as now or hereafter amended; and
13         (ii) for taxable years ending on or after August 13,
14         1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and
15         832(b)(5)(B)(i) of the Internal Revenue Code; the
16         provisions of this subparagraph are exempt from the
17         provisions of Section 250;
18             (J) An amount equal to all amounts included in such
19         total which are exempt from taxation by this State
20         either by reason of its statutes or Constitution or by
21         reason of the Constitution, treaties or statutes of the
22         United States; provided that, in the case of any
23         statute of this State that exempts income derived from
24         bonds or other obligations from the tax imposed under
25         this Act, the amount exempted shall be the interest net
26         of bond premium amortization;
27             (K) An amount equal to those dividends included in
28         such total which were paid by a corporation which
29         conducts business operations in an Enterprise Zone or
30         zones created under the Illinois Enterprise Zone Act
31         and conducts substantially all of its operations in an
32         Enterprise Zone or zones;
33             (L) An amount equal to those dividends included in
34         such total that were paid by a corporation that

 

 

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

 

 

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1         or loans that is secured by property eligible for a
2         Section 201(h) investment credit to the borrower, the
3         entire principal amount of the loan or loans between
4         the taxpayer and the borrower should be divided into
5         the basis of the Section 201(h) investment credit
6         property which secures the loan or loans, using for
7         this purpose the original basis of such property on the
8         date that it was placed in service in a federally
9         designated Foreign Trade Zone or Sub-Zone located in
10         Illinois. No taxpayer that is eligible for the
11         deduction provided in subparagraph (M) of paragraph
12         (2) of this subsection shall be eligible for the
13         deduction provided under this subparagraph (M-1). The
14         subtraction modification available to taxpayers in any
15         year under this subsection shall be that portion of the
16         total interest paid by the borrower with respect to
17         such loan attributable to the eligible property as
18         calculated under the previous sentence;
19             (N) Two times any contribution made during the
20         taxable year to a designated zone organization to the
21         extent that the contribution (i) qualifies as a
22         charitable contribution under subsection (c) of
23         Section 170 of the Internal Revenue Code and (ii) must,
24         by its terms, be used for a project approved by the
25         Department of Commerce and Economic Opportunity under
26         Section 11 of the Illinois Enterprise Zone Act;
27             (O) An amount equal to: (i) 85% for taxable years
28         ending on or before December 31, 1992, or, a percentage
29         equal to the percentage allowable under Section
30         243(a)(1) of the Internal Revenue Code of 1986 for
31         taxable years ending after December 31, 1992, of the
32         amount by which dividends included in taxable income
33         and received from a corporation that is not created or
34         organized under the laws of the United States or any

 

 

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1         state or political subdivision thereof, including, for
2         taxable years ending on or after December 31, 1988,
3         dividends received or deemed received or paid or deemed
4         paid under Sections 951 through 964 of the Internal
5         Revenue Code, exceed the amount of the modification
6         provided under subparagraph (G) of paragraph (2) of
7         this subsection (b) which is related to such dividends;
8         plus (ii) 100% of the amount by which dividends,
9         included in taxable income and received, including,
10         for taxable years ending on or after December 31, 1988,
11         dividends received or deemed received or paid or deemed
12         paid under Sections 951 through 964 of the Internal
13         Revenue Code, from any such corporation specified in
14         clause (i) that would but for the provisions of Section
15         1504 (b) (3) of the Internal Revenue Code be treated as
16         a member of the affiliated group which includes the
17         dividend recipient, exceed the amount of the
18         modification provided under subparagraph (G) of
19         paragraph (2) of this subsection (b) which is related
20         to such dividends;
21             (P) An amount equal to any contribution made to a
22         job training project established pursuant to the Tax
23         Increment Allocation Redevelopment Act;
24             (Q) 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             (R) In the case of an attorney-in-fact with respect
30         to whom an interinsurer or a reciprocal insurer has
31         made the election under Section 835 of the Internal
32         Revenue Code, 26 U.S.C. 835, an amount equal to the
33         excess, if any, of the amounts paid or incurred by that
34         interinsurer or reciprocal insurer in the taxable year

 

 

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

 

 

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

 

 

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

 

 

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1             (A) An amount equal to all amounts paid or accrued
2         to the taxpayer as interest or dividends during the
3         taxable year to the extent excluded from gross income
4         in the computation of taxable income;
5             (B) In the case of (i) an estate, $600; (ii) a
6         trust which, under its governing instrument, is
7         required to distribute all of its income currently,
8         $300; and (iii) any other trust, $100, but in each such
9         case, only to the extent such amount was deducted in
10         the computation of taxable income;
11             (C) An amount equal to the amount of tax imposed by
12         this Act to the extent deducted from gross income in
13         the computation of taxable income for the taxable year;
14             (D) The amount of any net operating loss deduction
15         taken in arriving at taxable income, other than a net
16         operating loss carried forward from a taxable year
17         ending prior to December 31, 1986;
18             (E) For taxable years in which a net operating loss
19         carryback or carryforward from a taxable year ending
20         prior to December 31, 1986 is an element of taxable
21         income under paragraph (1) of subsection (e) or
22         subparagraph (E) of paragraph (2) of subsection (e),
23         the amount by which addition modifications other than
24         those provided by this subparagraph (E) exceeded
25         subtraction modifications in such taxable year, with
26         the following limitations applied in the order that
27         they are listed:
28                 (i) the addition modification relating to the
29             net operating loss carried back or forward to the
30             taxable year from any taxable year ending prior to
31             December 31, 1986 shall be reduced by the amount of
32             addition modification under this subparagraph (E)
33             which related to that net operating loss and which
34             was taken into account in calculating the base

 

 

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1             income of an earlier taxable year, and
2                 (ii) the addition modification relating to the
3             net operating loss carried back or forward to the
4             taxable year from any taxable year ending prior to
5             December 31, 1986 shall not exceed the amount of
6             such carryback or carryforward;
7             For taxable years in which there is a net operating
8         loss carryback or carryforward from more than one other
9         taxable year ending prior to December 31, 1986, the
10         addition modification provided in this subparagraph
11         (E) shall be the sum of the amounts computed
12         independently under the preceding provisions of this
13         subparagraph (E) for each such taxable year;
14             (F) For taxable years ending on or after January 1,
15         1989, an amount equal to the tax deducted pursuant to
16         Section 164 of the Internal Revenue Code if the trust
17         or estate is claiming the same tax for purposes of the
18         Illinois foreign tax credit under Section 601 of this
19         Act;
20             (G) An amount equal to the amount of the capital
21         gain deduction allowable under the Internal Revenue
22         Code, to the extent deducted from gross income in the
23         computation of taxable income;
24             (G-5) For taxable years ending after December 31,
25         1997, an amount equal to any eligible remediation costs
26         that the trust or estate deducted in computing adjusted
27         gross income and for which the trust or estate claims a
28         credit under subsection (l) of Section 201;
29             (G-10) For taxable years 2001 and thereafter, an
30         amount equal to the bonus depreciation deduction (30%
31         of the adjusted basis of the qualified property) taken
32         on the taxpayer's federal income tax return for the
33         taxable year under subsection (k) of Section 168 of the
34         Internal Revenue Code; and

 

 

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

 

 

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

 

 

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

 

 

09400SB1815sam001 - 42 - LRB094 11152 BDD 44382 a

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

 

 

09400SB1815sam001 - 43 - LRB094 11152 BDD 44382 a

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

 

 

09400SB1815sam001 - 44 - LRB094 11152 BDD 44382 a

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

 

 

09400SB1815sam001 - 45 - LRB094 11152 BDD 44382 a

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

 

 

09400SB1815sam001 - 46 - LRB094 11152 BDD 44382 a

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

 

 

09400SB1815sam001 - 47 - LRB094 11152 BDD 44382 a

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

 

 

09400SB1815sam001 - 48 - LRB094 11152 BDD 44382 a

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

 

 

09400SB1815sam001 - 49 - LRB094 11152 BDD 44382 a

1     income means an amount equal to the taxpayer's taxable
2     income for the taxable year as modified by paragraph (2).
3         (2) Modifications. The taxable income referred to in
4     paragraph (1) shall be modified by adding thereto the sum
5     of the following amounts:
6             (A) An amount equal to all amounts paid or accrued
7         to the taxpayer as interest or dividends during the
8         taxable year to the extent excluded from gross income
9         in the computation of taxable income;
10             (B) An amount equal to the amount of tax imposed by
11         this Act to the extent deducted from gross income for
12         the taxable year;
13             (C) The amount of deductions allowed to the
14         partnership pursuant to Section 707 (c) of the Internal
15         Revenue Code in calculating its taxable income;
16             (D) An amount equal to the amount of the capital
17         gain deduction allowable under the Internal Revenue
18         Code, to the extent deducted from gross income in the
19         computation of taxable income;
20             (D-5) For taxable years 2001 and thereafter, an
21         amount equal to the bonus depreciation deduction (30%
22         of the adjusted basis of the qualified property) taken
23         on the taxpayer's federal income tax return for the
24         taxable year under subsection (k) of Section 168 of the
25         Internal Revenue Code;
26             (D-6) If the taxpayer reports a capital gain or
27         loss on the taxpayer's federal income tax return for
28         the taxable year based on a sale or transfer of
29         property for which the taxpayer was required in any
30         taxable year to make an addition modification under
31         subparagraph (D-5), then an amount equal to the
32         aggregate amount of the deductions taken in all taxable
33         years under subparagraph (O) with respect to that
34         property.

 

 

09400SB1815sam001 - 50 - LRB094 11152 BDD 44382 a

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

 

 

09400SB1815sam001 - 51 - LRB094 11152 BDD 44382 a

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

 

 

09400SB1815sam001 - 52 - LRB094 11152 BDD 44382 a

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

 

 

09400SB1815sam001 - 53 - LRB094 11152 BDD 44382 a

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

 

 

09400SB1815sam001 - 54 - LRB094 11152 BDD 44382 a

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     and by deducting from the total so obtained the following
14     amounts:
15             (E) The valuation limitation amount;
16             (F) An amount equal to the amount of any tax
17         imposed by this Act which was refunded to the taxpayer
18         and included in such total for the taxable year;
19             (G) An amount equal to all amounts included in
20         taxable income as modified by subparagraphs (A), (B),
21         (C) and (D) which are exempt from taxation by this
22         State either by reason of its statutes or Constitution
23         or by reason of the Constitution, treaties or statutes
24         of the United States; provided that, in the case of any
25         statute of this State that exempts income derived from
26         bonds or other obligations from the tax imposed under
27         this Act, the amount exempted shall be the interest net
28         of bond premium amortization;
29             (H) Any income of the partnership which
30         constitutes personal service income as defined in
31         Section 1348 (b) (1) of the Internal Revenue Code (as
32         in effect December 31, 1981) or a reasonable allowance
33         for compensation paid or accrued for services rendered
34         by partners to the partnership, whichever is greater;

 

 

09400SB1815sam001 - 55 - LRB094 11152 BDD 44382 a

1             (I) An amount equal to all amounts of income
2         distributable to an entity subject to the Personal
3         Property Tax Replacement Income Tax imposed by
4         subsections (c) and (d) of Section 201 of this Act
5         including amounts distributable to organizations
6         exempt from federal income tax by reason of Section
7         501(a) of the Internal Revenue Code;
8             (J) With the exception of any amounts subtracted
9         under subparagraph (G), an amount equal to the sum of
10         all amounts disallowed as deductions by (i) Sections
11         171(a) (2), and 265(2) of the Internal Revenue Code of
12         1954, as now or hereafter amended, and all amounts of
13         expenses allocable to interest and disallowed as
14         deductions by Section 265(1) of the Internal Revenue
15         Code, as now or hereafter amended; and (ii) for taxable
16         years ending on or after August 13, 1999, Sections
17         171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
18         Internal Revenue Code; the provisions of this
19         subparagraph are exempt from the provisions of Section
20         250;
21             (K) An amount equal to those dividends included in
22         such total which were paid by a corporation which
23         conducts business operations in an Enterprise Zone or
24         zones created under the Illinois Enterprise Zone Act,
25         enacted by the 82nd General Assembly, and conducts
26         substantially all of its operations in an Enterprise
27         Zone or Zones;
28             (L) An amount equal to any contribution made to a
29         job training project established pursuant to the Real
30         Property Tax Increment Allocation Redevelopment Act;
31             (M) An amount equal to those dividends included in
32         such total that were paid by a corporation that
33         conducts business operations in a federally designated
34         Foreign Trade Zone or Sub-Zone and that is designated a

 

 

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

 

 

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

 

 

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

 

 

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1     December 31, 1986, taxable income may never be an amount in
2     excess of the net operating loss for the taxable year as
3     defined in subsections (c) and (d) of Section 172 of the
4     Internal Revenue Code, provided that when taxable income of
5     a corporation (other than a Subchapter S corporation),
6     trust, or estate is less than zero and addition
7     modifications, other than those provided by subparagraph
8     (E) of paragraph (2) of subsection (b) for corporations or
9     subparagraph (E) of paragraph (2) of subsection (c) for
10     trusts and estates, exceed subtraction modifications, an
11     addition modification must be made under those
12     subparagraphs for any other taxable year to which the
13     taxable income less than zero (net operating loss) is
14     applied under Section 172 of the Internal Revenue Code or
15     under subparagraph (E) of paragraph (2) of this subsection
16     (e) applied in conjunction with Section 172 of the Internal
17     Revenue Code.
18         (2) Special rule. For purposes of paragraph (1) of this
19     subsection, the taxable income properly reportable for
20     federal income tax purposes shall mean:
21             (A) Certain life insurance companies. In the case
22         of a life insurance company subject to the tax imposed
23         by Section 801 of the Internal Revenue Code, life
24         insurance company taxable income, plus the amount of
25         distribution from pre-1984 policyholder surplus
26         accounts as calculated under Section 815a of the
27         Internal Revenue Code;
28             (B) Certain other insurance companies. In the case
29         of mutual insurance companies subject to the tax
30         imposed by Section 831 of the Internal Revenue Code,
31         insurance company taxable income;
32             (C) Regulated investment companies. In the case of
33         a regulated investment company subject to the tax
34         imposed by Section 852 of the Internal Revenue Code,

 

 

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

 

 

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

 

 

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

 

 

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1             (C) The Department shall prescribe such
2         regulations as may be necessary to carry out the
3         purposes of this paragraph.
 
4     (g) Double deductions. Unless specifically provided
5 otherwise, nothing in this Section shall permit the same item
6 to be deducted more than once.
 
7     (h) Legislative intention. Except as expressly provided by
8 this Section there shall be no modifications or limitations on
9 the amounts of income, gain, loss or deduction taken into
10 account in determining gross income, adjusted gross income or
11 taxable income for federal income tax purposes for the taxable
12 year, or in the amount of such items entering into the
13 computation of base income and net income under this Act for
14 such taxable year, whether in respect of property values as of
15 August 1, 1969 or otherwise.
16 (Source: P.A. 92-16, eff. 6-28-01; 92-244, eff. 8-3-01; 92-439,
17 eff. 8-17-01; 92-603, eff. 6-28-02; 92-626, eff. 7-11-02;
18 92-651, eff. 7-11-02; 92-846, eff. 8-23-02; 93-812, eff.
19 7-26-04; 93-840, eff. 7-30-04; revised 10-12-04.)
 
20     (35 ILCS 5/216 new)
21     Sec. 216. Lifelong learning account contributions credit.
22     (a) For taxable years beginning on or after January 1,
23 2006, a taxpayer who is a participating employer under the
24 Lifelong Learning Act is entitled to a credit against the taxes
25 imposed under subsections (a) and (b) of Section 201 of this
26 Act in an amount equal to the amount that the taxpayer
27 contributed to each lifelong learning account established
28 under the taxpayer's accredited lifelong learning plan, but not
29 to exceed $500 per taxable year for any one account.
30     (b) If the taxpayer is a partnership or Subchapter S
31 corporation, the credit is allowed to the partners or

 

 

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1 shareholders in accordance with the determination of income and
2 distributive share of income under Sections 702 and 704 and
3 Subchapter S of the Internal Revenue Code.
4     (c) The Department, in cooperation with the Department of
5 Commerce and Economic Opportunity, must adopt rules to enforce
6 and administer the provisions of this Section.
7     (d) The credit may not be carried forward or back. In no
8 event shall a credit under this Section reduce the taxpayer's
9 liability to less than zero.
10     (e) This Section is exempt from the provisions of Section
11 250 of this Act.
 
12     Section 999. Effective date. This Act takes effect upon
13 becoming law.".