95TH GENERAL ASSEMBLY
State of Illinois
2007 and 2008
HB4113

 

Introduced , by Rep. Mark H. Beaubien, Jr. - David R. Leitch - Suzanne Bassi - Dennis M. Reboletti - Jil Tracy

 

SYNOPSIS AS INTRODUCED:
 
New Act
805 ILCS 5/15.90   from Ch. 32, par. 15.90
805 ILCS 5/16.05   from Ch. 32, par. 16.05
35 ILCS 5/203   from Ch. 120, par. 2-203
35 ILCS 5/205   from Ch. 120, par. 2-205
35 ILCS 5/207   from Ch. 120, par. 2-207
35 ILCS 5/304   from Ch. 120, par. 3-304
35 ILCS 5/502   from Ch. 120, par. 5-502
35 ILCS 5/711   from Ch. 120, par. 7-711
35 ILCS 5/712   from Ch. 120, par. 7-712
35 ILCS 5/713   from Ch. 120, par. 7-713
35 ILCS 5/804   from Ch. 120, par. 8-804
35 ILCS 5/911   from Ch. 120, par. 9-911
35 ILCS 5/1501   from Ch. 120, par. 15-1501
35 ILCS 5/709.5 rep.
35 ILCS 120/2-5   from Ch. 120, par. 441-5

    Amends various Acts, if and only if Senate Bill 1544 of the 95th General Assembly becomes law. Reinstates the provisions of those Act as they were prior to that Senate Bill 1544. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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1     AN ACT concerning revenue.
 
2     Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
 
4
ARTICLE 5. REPEAL OF THE FRANCHISE TAX AND LICENSE FEE AMNESTY
5
ACT OF 2007

 
6     Section 5-1. If and only if Senate Bill 1544 of the 95th
7 General Assembly becomes law, then the Franchise Tax and
8 License Fee Amnesty Act of 2007 is repealed.
 
9     Section 5-90. If and only if Senate Bill 1544 of the 95th
10 General Assembly becomes law, then the Business Corporation Act
11 of 1983 is amended by changing Sections 15.90 and 16.05 as
12 follows:
 
13     (805 ILCS 5/15.90)  (from Ch. 32, par. 15.90)
14     Sec. 15.90. Statute of limitations.
15     (a) Except as otherwise provided in this Section and
16 notwithstanding anything to the contrary contained in any other
17 Section of this Act, no domestic corporation or foreign
18 corporation shall be obligated to pay any annual franchise tax,
19 fee, or penalty or interest thereon imposed under this Act, nor
20 shall any administrative or judicial sanction (including
21 dissolution) be imposed or enforced nor access to the courts of

 

 

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1 this State be denied based upon nonpayment thereof more than 7
2 years after the date of filing the annual report with respect
3 to the period during which the obligation for the tax, fee,
4 penalty or interest arose, unless (1) within that 7 year period
5 the Secretary of State sends a written notice to the
6 corporation to the effect that (A) administrative or judicial
7 action to dissolve the corporation or revoke its certificate of
8 authority for nonpayment of a tax, fee, penalty or interest has
9 been commenced; or (B) the corporation has submitted a report
10 but has failed to pay a tax, fee, penalty or interest required
11 to be paid therewith; or (C) a report with respect to an event
12 or action giving rise to an obligation to pay a tax, fee,
13 penalty or interest is required but has not been filed, or has
14 been filed and is in error or incomplete; or (2) the annual
15 report by the corporation was filed with fraudulent intent to
16 evade taxes payable under this Act. A corporation nonetheless
17 shall be required to pay all taxes that would have been payable
18 during the most recent 7 year period due to a previously
19 unreported increase in paid-in capital that occurred prior to
20 that 7 year period and interest and penalties thereon for that
21 period, except that with respect to any corporation that
22 participates in the Franchise Tax and License Fee Amnesty Act
23 of 2007, the corporation shall be only required to pay all
24 taxes that would have been payable during the most recent 4
25 year period due to a previously unreported increase in paid-in
26 capital that occurred prior to that 7 year period.

 

 

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1     (b) If within 2 years following a change in control of a
2 corporation the corporation voluntarily pays in good faith all
3 known obligations of the corporation imposed by this Article 15
4 with respect to reports that were required to have been filed
5 since the beginning of the 7 year period ending on the
6 effective date of the change in control, no action shall be
7 taken to enforce or collect obligations of that corporation
8 imposed by this Article 15 with respect to reports that were
9 required to have been filed prior to that 7 year period
10 regardless of whether the limitation period set forth in
11 subsection (a) is otherwise applicable. For purposes of this
12 subsection (b), a change in control means a transaction, or a
13 series of transactions consummated within a period of 180
14 consecutive days, as a result of which a person which owned
15 less than 10% of the shares having the power to elect directors
16 of the corporation acquires shares such that the person becomes
17 the holder of 80% or more of the shares having such power. For
18 purposes of this subsection (b) a person means any natural
19 person, corporation, partnership, trust or other entity
20 together with all other persons controlled by, controlling or
21 under common control with such person.
22     (c) Except as otherwise provided in this Section and
23 notwithstanding anything to the contrary contained in any other
24 Section of this Act, no foreign corporation that has not
25 previously obtained a certificate of authority under this Act
26 shall, upon voluntary application for a certificate of

 

 

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1 authority filed with the Secretary of State prior to January 1,
2 2001, be obligated to pay any tax, fee, penalty, or interest
3 imposed under this Act, nor shall any administrative or
4 judicial sanction be imposed or enforced based upon nonpayment
5 thereof with respect to a period during which the obligation
6 arose that is prior to January 1, 1993 unless (1) prior to
7 receipt of the application for a certificate of authority the
8 Secretary of State had sent written notice to the corporation
9 regarding its failure to obtain a certificate of authority, (2)
10 the corporation had submitted an application for a certificate
11 of authority previously but had failed to pay any tax, fee,
12 penalty or interest to be paid therewith, or (3) the
13 application for a certificate of authority was submitted by the
14 corporation with fraudulent intent to evade taxes payable under
15 this Act. A corporation nonetheless shall be required to pay
16 all taxes and fees due under this Act that would have been
17 payable since January 1, 1993 as a result of commencing the
18 transaction of its business in this State and interest thereon
19 for that period.
20 (Source: P.A. 90-421, eff. 1-1-98; 09500SB1544enr.)
 
21     (805 ILCS 5/16.05)  (from Ch. 32, par. 16.05)
22     Sec. 16.05. Penalties and interest imposed upon
23 corporations.
24     (a) Each corporation, domestic or foreign, that fails or
25 refuses to file any annual report or report of cumulative

 

 

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1 changes in paid-in capital and pay any franchise tax due
2 pursuant to the report prior to the first day of its
3 anniversary month or, in the case of a corporation which has
4 established an extended filing month, the extended filing month
5 of the corporation shall pay a penalty of 10% of the amount of
6 any delinquent franchise tax due for the report. No penalty
7 shall be imposed with respect to any amount of delinquent
8 franchise tax paid pursuant to the Franchise Tax and License
9 Fee Amnesty Act of 2007.
10     (b) Each corporation, domestic or foreign, that fails or
11 refuses to file a report of issuance of shares or increase in
12 paid-in capital within the time prescribed by this Act is
13 subject to a penalty on any obligation occurring prior to
14 January 1, 1991, and interest on those obligations on or after
15 January 1, 1991, for each calendar month or part of month that
16 it is delinquent in the amount of 1% of the amount of license
17 fees and franchise taxes provided by this Act to be paid on
18 account of the issuance of shares or increase in paid-in
19 capital. No penalty shall be imposed, or interest charged, with
20 respect to any amount of delinquent license fees and franchise
21 taxes paid pursuant to the Franchise Tax and License Fee
22 Amnesty Act of 2007.
23     (c) Each corporation, domestic or foreign, that fails or
24 refuses to file a report of cumulative changes in paid-in
25 capital or report following merger within the time prescribed
26 by this Act is subject to interest on or after January 1, 1992,

 

 

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1 for each calendar month or part of month that it is delinquent,
2 in the amount of 1% of the amount of franchise taxes provided
3 by this Act to be paid on account of the issuance of shares or
4 increase in paid-in capital disclosed on the report of
5 cumulative changes in paid-in capital or report following
6 merger, or $1, whichever is greater. No interest shall be
7 charged with respect to any amount of delinquent franchise tax
8 paid pursuant to the Franchise Tax and License Fee Amnesty Act
9 of 2007.
10     (d) If the annual franchise tax, or the supplemental annual
11 franchise tax for any 12-month period commencing July 1, 1968,
12 or July 1 of any subsequent year through June 30, 1983,
13 assessed in accordance with this Act, is not paid by July 31,
14 it is delinquent, and there is added a penalty prior to January
15 1, 1991, and interest on and after January 1, 1991, of 1% for
16 each month or part of month that it is delinquent commencing
17 with the month of August, or $1, whichever is greater. No
18 penalty shall be imposed, or interest charged, with respect to
19 any amount of delinquent franchise taxes paid pursuant to the
20 Franchise Tax and License Fee Amnesty Act of 2007.
21     (e) If the supplemental annual franchise tax assessed in
22 accordance with the provisions of this Act for the 12-month
23 period commencing July 1, 1967, is not paid by September 30,
24 1967, it is delinquent, and there is added a penalty prior to
25 January 1, 1991, and interest on and after January 1, 1991, of
26 1% for each month or part of month that it is delinquent

 

 

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1 commencing with the month of October, 1967. No penalty shall be
2 imposed, or interest charged, with respect to any amount of
3 delinquent franchise taxes paid pursuant to the Franchise Tax
4 and License Fee Amnesty Act of 2007.
5     (f) If any annual franchise tax for any period beginning on
6 or after July 1, 1983, is not paid by the time period herein
7 prescribed, it is delinquent and there is added a penalty prior
8 to January 1, 1991, and interest on and after January 1, 1991,
9 of 1% for each month or part of a month that it is delinquent
10 commencing with the anniversary month or in the case of a
11 corporation that has established an extended filing month, the
12 extended filing month, or $1, whichever is greater. No penalty
13 shall be imposed, or interest charged, with respect to any
14 amount of delinquent franchise taxes paid pursuant to the
15 Franchise Tax and License Fee Amnesty Act of 2007.
16     (g) Any corporation, domestic or foreign, failing to pay
17 the prescribed fee for assumed corporate name renewal when due
18 and payable shall be given notice of nonpayment by the
19 Secretary of State by regular mail; and if the fee together
20 with a penalty fee of $5 is not paid within 90 days after the
21 notice is mailed, the right to use the assumed name shall
22 cease.
23     (h) Any corporation which (i) puts forth any sign or
24 advertisement, assuming any name other than that by which it is
25 incorporated or otherwise authorized by law to act or (ii)
26 violates Section 3.25, shall be guilty of a Class C misdemeanor

 

 

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1 and shall be deemed guilty of an additional offense for each
2 day it shall continue to so offend.
3     (i) Each corporation, domestic or foreign, that fails or
4 refuses (1) to file in the office of the recorder within the
5 time prescribed by this Act any document required by this Act
6 to be so filed, or (2) to answer truthfully and fully within
7 the time prescribed by this Act interrogatories propounded by
8 the Secretary of State in accordance with this Act, or (3) to
9 perform any other act required by this Act to be performed by
10 the corporation, is guilty of a Class C misdemeanor.
11     (j) Each corporation that fails or refuses to file articles
12 of revocation of dissolution within the time prescribed by this
13 Act is subject to a penalty for each calendar month or part of
14 the month that it is delinquent in the amount of $50.
15 (Source: P.A. 91-464, eff. 1-1-00; 91-906, eff. 1-1-01;
16 09500SB1544enr.)
 
17
ARTICLE 10. AMENDATORY PROVISIONS

 
18     Section 10-5. If and only if Senate Bill 1544 of the 95th
19 General Assembly becomes law, then the Illinois Income Tax Act
20 is amended by changing Sections 203, 205, 207, 304, 502, 711,
21 712, 713, 804, 911, and 1501 as follows:
 
22     (35 ILCS 5/203)  (from Ch. 120, par. 2-203)
23     Sec. 203. Base income defined.

 

 

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1     (a) Individuals.
2         (1) In general. In the case of an individual, base
3     income means an amount equal to the taxpayer's adjusted
4     gross income for the taxable year as modified by paragraph
5     (2).
6         (2) Modifications. The adjusted gross income referred
7     to in paragraph (1) shall be modified by adding thereto the
8     sum of the following amounts:
9             (A) An amount equal to all amounts paid or accrued
10         to the taxpayer as interest or dividends during the
11         taxable year to the extent excluded from gross income
12         in the computation of adjusted gross income, except
13         stock dividends of qualified public utilities
14         described in Section 305(e) of the Internal Revenue
15         Code;
16             (B) An amount equal to the amount of tax imposed by
17         this Act to the extent deducted from gross income in
18         the computation of adjusted gross income for the
19         taxable year;
20             (C) An amount equal to the amount received during
21         the taxable year as a recovery or refund of real
22         property taxes paid with respect to the taxpayer's
23         principal residence under the Revenue Act of 1939 and
24         for which a deduction was previously taken under
25         subparagraph (L) of this paragraph (2) prior to July 1,
26         1991, the retrospective application date of Article 4

 

 

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

 

 

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1         Internal Revenue Code;
2             (D-16) If the taxpayer sells, transfers, abandons,
3         or otherwise disposes of property for which the
4         taxpayer was required in any taxable year to make an
5         addition modification under subparagraph (D-15), then
6         an amount equal to the aggregate amount of the
7         deductions taken in all taxable years under
8         subparagraph (Z) with respect to that property.
9             If the taxpayer continues to own property through
10         the last day of the last tax year for which the
11         taxpayer may claim a depreciation deduction for
12         federal income tax purposes and for which the taxpayer
13         was allowed in any taxable year to make a subtraction
14         modification under subparagraph (Z), then an amount
15         equal to that subtraction modification.
16             The taxpayer is required to make the addition
17         modification under this subparagraph only once with
18         respect to any one piece of property;
19             (D-17) An For taxable years ending on or after
20         December 31, 2004, an amount equal to the amount
21         otherwise allowed as a deduction in computing base
22         income for interest paid, accrued, or incurred,
23         directly or indirectly, (i) for taxable years ending on
24         or after December 31, 2004, to a foreign person who
25         would be a member of the same unitary business group
26         but for the fact that foreign person's business

 

 

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1         activity outside the United States is 80% or more of
2         the foreign person's total business activity and (ii)
3         for taxable years ending on or after December 31, 2008,
4         to a person who would be a member of the same unitary
5         business group but for the fact that the person is
6         prohibited under Section 1501(a)(27) from being
7         included in the unitary business group because he or
8         she is ordinarily required to apportion business
9         income under different subsections of Section 304. 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 under
16         Sections 951 through 964 of the Internal Revenue Code
17         and amounts included in gross income under Section 78
18         of the Internal Revenue Code) with respect to the stock
19         of the same person to whom the interest was paid,
20         accrued, or incurred.
21             This paragraph shall not apply to the following:
22                 (i) an item of interest paid, accrued, or
23             incurred, directly or indirectly, to a foreign
24             person who is subject in a foreign country or
25             state, other than a state which requires mandatory
26             unitary reporting, to a tax on or measured by net

 

 

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1             income with respect to such interest; or
2                 (ii) an item of interest paid, accrued, or
3             incurred, directly or indirectly, to a foreign
4             person if the taxpayer can establish, based on a
5             preponderance of the evidence, both of the
6             following:
7                     (a) the foreign person, during the same
8                 taxable year, paid, accrued, or incurred, the
9                 interest to a person that is not a related
10                 member, and
11                     (b) the transaction giving rise to the
12                 interest expense between the taxpayer and the
13                 foreign person did not have as a principal
14                 purpose the avoidance of Illinois income tax,
15                 and is paid pursuant to a contract or agreement
16                 that reflects an arm's-length interest rate
17                 and terms; or
18                 (iii) the taxpayer can establish, based on
19             clear and convincing evidence, that the interest
20             paid, accrued, or incurred relates to a contract or
21             agreement entered into at arm's-length rates and
22             terms and the principal purpose for the payment is
23             not federal or Illinois tax avoidance; or
24                 (iv) an item of interest paid, accrued, or
25             incurred, directly or indirectly, to a foreign
26             person if the taxpayer establishes by clear and

 

 

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1             convincing evidence that the adjustments are
2             unreasonable; or if the taxpayer and the Director
3             agree in writing to the application or use of an
4             alternative method of apportionment under Section
5             304(f).
6                 Nothing in this subsection shall preclude the
7             Director from making any other adjustment
8             otherwise allowed under Section 404 of this Act for
9             any tax year beginning after the effective date of
10             this amendment provided such adjustment is made
11             pursuant to regulation adopted by the Department
12             and such regulations provide methods and standards
13             by which the Department will utilize its authority
14             under Section 404 of this Act;
15             (D-18) An For taxable years ending on or after
16         December 31, 2004, an amount equal to the amount of
17         intangible expenses and costs otherwise allowed as a
18         deduction in computing base income, and that were paid,
19         accrued, or incurred, directly or indirectly, (i) for
20         taxable years ending on or after December 31, 2004, to
21         a foreign person who would be a member of the same
22         unitary business group but for the fact that the
23         foreign person's business activity outside the United
24         States is 80% or more of that person's total business
25         activity and (ii) for taxable years ending on or after
26         December 31, 2008, to a person who would be a member of

 

 

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1         the same unitary business group but for the fact that
2         the person is prohibited under Section 1501(a)(27)
3         from being included in the unitary business group
4         because he or she is ordinarily required to apportion
5         business income under different subsections of Section
6         304. The addition modification required by this
7         subparagraph shall be reduced to the extent that
8         dividends were included in base income of the unitary
9         group for the same taxable year and received by the
10         taxpayer or by a member of the taxpayer's unitary
11         business group (including amounts included in gross
12         income under Sections 951 through 964 of the Internal
13         Revenue Code and amounts included in gross income under
14         Section 78 of the Internal Revenue Code) with respect
15         to the stock of the same person to whom the intangible
16         expenses and costs were directly or indirectly paid,
17         incurred, or accrued. The preceding sentence does not
18         apply to the extent that the same dividends caused a
19         reduction to the addition modification required under
20         Section 203(a)(2)(D-17) of this Act. As used in this
21         subparagraph, the term "intangible expenses and costs"
22         includes (1) expenses, losses, and costs for, or
23         related to, the direct or indirect acquisition, use,
24         maintenance or management, ownership, sale, exchange,
25         or any other disposition of intangible property; (2)
26         losses incurred, directly or indirectly, from

 

 

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

 

 

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1                 intangible expense or cost between the
2                 taxpayer and the foreign person did not have as
3                 a principal purpose the avoidance of Illinois
4                 income tax, and is paid pursuant to a contract
5                 or agreement that reflects arm's-length terms;
6                 or
7                 (iii) any item of intangible expense or cost
8             paid, accrued, or incurred, directly or
9             indirectly, from a transaction with a foreign
10             person if the taxpayer establishes by clear and
11             convincing evidence, that the adjustments are
12             unreasonable; or if the taxpayer and the Director
13             agree in writing to the application or use of an
14             alternative method of apportionment under Section
15             304(f);
16                 Nothing in this subsection shall preclude the
17             Director from making any other adjustment
18             otherwise allowed under Section 404 of this Act for
19             any tax year beginning after the effective date of
20             this amendment provided such adjustment is made
21             pursuant to regulation adopted by the Department
22             and such regulations provide methods and standards
23             by which the Department will utilize its authority
24             under Section 404 of this Act;
25             (D-19) For taxable years ending on or after
26         December 31, 2008, an amount equal to the amount of

 

 

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1         insurance premium expenses and costs otherwise allowed
2         as a deduction in computing base income, and that were
3         paid, accrued, or incurred, directly or indirectly, to
4         a person who would be a member of the same unitary
5         business group but for the fact that the person is
6         prohibited under Section 1501(a)(27) from being
7         included in the unitary business group because he or
8         she is ordinarily required to apportion business
9         income under different subsections of Section 304. 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 under
16         Sections 951 through 964 of the Internal Revenue Code
17         and amounts included in gross income under Section 78
18         of the Internal Revenue Code) with respect to the stock
19         of the same person to whom the intangible expenses and
20         costs were directly or indirectly paid, incurred, or
21         accrued. The preceding sentence does not apply to the
22         extent that the same dividends caused a reduction to
23         the addition modification required under Section
24         203(a)(2)(D-17) of this Act.
25             (D-20) For taxable years beginning on or after
26         January 1, 2002, in the case of a distribution from a

 

 

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

 

 

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1         prisoner of war or missing in action) paid to a
2         resident by reason of being a member of any component
3         of the Armed Forces of the United States and in respect
4         of any compensation paid or accrued to a resident who
5         as a governmental employee was a prisoner of war or
6         missing in action, and in respect of any compensation
7         paid to a resident in 2001 or thereafter by reason of
8         being a member of the Illinois National Guard. The
9         provisions of this amendatory Act of the 92nd General
10         Assembly are exempt from the provisions of Section 250;
11             (F) An amount equal to all amounts included in such
12         total pursuant to the provisions of Sections 402(a),
13         402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the
14         Internal Revenue Code, or included in such total as
15         distributions under the provisions of any retirement
16         or disability plan for employees of any governmental
17         agency or unit, or retirement payments to retired
18         partners, which payments are excluded in computing net
19         earnings from self employment by Section 1402 of the
20         Internal Revenue Code and regulations adopted pursuant
21         thereto;
22             (G) The valuation limitation amount;
23             (H) An amount equal to the amount of any tax
24         imposed by this Act which was refunded to the taxpayer
25         and included in such total for the taxable year;
26             (I) An amount equal to all amounts included in such

 

 

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1         total pursuant to the provisions of Section 111 of the
2         Internal Revenue Code as a recovery of items previously
3         deducted from adjusted gross income in the computation
4         of taxable income;
5             (J) An amount equal to those dividends included in
6         such total which were paid by a corporation which
7         conducts business operations in an Enterprise Zone or
8         zones created under the Illinois Enterprise Zone Act or
9         a River Edge Redevelopment Zone or zones created under
10         the River Edge Redevelopment Zone Act, and conducts
11         substantially all of its operations in an Enterprise
12         Zone or zones or a River Edge Redevelopment Zone or
13         zones. This subparagraph (J) is exempt from the
14         provisions of Section 250;
15             (K) An amount equal to those dividends included in
16         such total that were paid by a corporation that
17         conducts business operations in a federally designated
18         Foreign Trade Zone or Sub-Zone and that is designated a
19         High Impact Business located in Illinois; provided
20         that dividends eligible for the deduction provided in
21         subparagraph (J) of paragraph (2) of this subsection
22         shall not be eligible for the deduction provided under
23         this subparagraph (K);
24             (L) For taxable years ending after December 31,
25         1983, an amount equal to all social security benefits
26         and railroad retirement benefits included in such

 

 

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1         total pursuant to Sections 72(r) and 86 of the Internal
2         Revenue Code;
3             (M) With the exception of any amounts subtracted
4         under subparagraph (N), an amount equal to the sum of
5         all amounts disallowed as deductions by (i) Sections
6         171(a) (2), and 265(2) of the Internal Revenue Code of
7         1954, as now or hereafter amended, and all amounts of
8         expenses allocable to interest and disallowed as
9         deductions by Section 265(1) of the Internal Revenue
10         Code of 1954, as now or hereafter amended; and (ii) for
11         taxable years ending on or after August 13, 1999,
12         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
13         the Internal Revenue Code; the provisions of this
14         subparagraph are exempt from the provisions of Section
15         250;
16             (N) An amount equal to all amounts included in such
17         total which are exempt from taxation by this State
18         either by reason of its statutes or Constitution or by
19         reason of the Constitution, treaties or statutes of the
20         United States; provided that, in the case of any
21         statute of this State or, for taxable years ending on
22         or after December 31, 2008, of the United States, any
23         treaty of the United States, the Illinois
24         Constitution, or the United States Constitution that
25         exempts income derived from bonds or other obligations
26         from the tax imposed under this Act, the amount

 

 

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1         exempted shall be the income interest net of bond
2         premium amortization, and, for taxable years ending on
3         or after December 31, 2008, interest expense incurred
4         on indebtedness to carry the bond or other obligation,
5         expenses incurred in producing the income to be
6         deducted, and all other related expenses. The amount of
7         expenses to be taken into account under this provision
8         may not exceed the amount of income that is exempted;
9             (O) An amount equal to any contribution made to a
10         job training project established pursuant to the Tax
11         Increment Allocation Redevelopment Act;
12             (P) An amount equal to the amount of the deduction
13         used to compute the federal income tax credit for
14         restoration of substantial amounts held under claim of
15         right for the taxable year pursuant to Section 1341 of
16         the Internal Revenue Code of 1986;
17             (Q) An amount equal to any amounts included in such
18         total, received by the taxpayer as an acceleration in
19         the payment of life, endowment or annuity benefits in
20         advance of the time they would otherwise be payable as
21         an indemnity for a terminal illness;
22             (R) An amount equal to the amount of any federal or
23         State bonus paid to veterans of the Persian Gulf War;
24             (S) An amount, to the extent included in adjusted
25         gross income, equal to the amount of a contribution
26         made in the taxable year on behalf of the taxpayer to a

 

 

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

 

 

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1         amount paid for that health insurance or long-term care
2         insurance may be deducted under Section 213 of the
3         Internal Revenue Code of 1986, has not been deducted on
4         the federal income tax return of the taxpayer, and does
5         not exceed the taxable income attributable to that
6         taxpayer's income, self-employment income, or
7         Subchapter S corporation income; except that no
8         deduction shall be allowed under this item (V) if the
9         taxpayer is eligible to participate in any health
10         insurance or long-term care insurance plan of an
11         employer of the taxpayer or the taxpayer's spouse. The
12         amount of the health insurance and long-term care
13         insurance subtracted under this item (V) shall be
14         determined by multiplying total health insurance and
15         long-term care insurance premiums paid by the taxpayer
16         times a number that represents the fractional
17         percentage of eligible medical expenses under Section
18         213 of the Internal Revenue Code of 1986 not actually
19         deducted on the taxpayer's federal income tax return;
20             (W) For taxable years beginning on or after January
21         1, 1998, all amounts included in the taxpayer's federal
22         gross income in the taxable year from amounts converted
23         from a regular IRA to a Roth IRA. This paragraph is
24         exempt from the provisions of Section 250;
25             (X) For taxable year 1999 and thereafter, an amount
26         equal to the amount of any (i) distributions, to the

 

 

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1         extent includible in gross income for federal income
2         tax purposes, made to the taxpayer because of his or
3         her status as a victim of persecution for racial or
4         religious reasons by Nazi Germany or any other Axis
5         regime or as an heir of the victim and (ii) items of
6         income, to the extent includible in gross income for
7         federal income tax purposes, attributable to, derived
8         from or in any way related to assets stolen from,
9         hidden from, or otherwise lost to a victim of
10         persecution for racial or religious reasons by Nazi
11         Germany or any other Axis regime immediately prior to,
12         during, and immediately after World War II, including,
13         but not limited to, interest on the proceeds receivable
14         as insurance under policies issued to a victim of
15         persecution for racial or religious reasons by Nazi
16         Germany or any other Axis regime by European insurance
17         companies immediately prior to and during World War II;
18         provided, however, this subtraction from federal
19         adjusted gross income does not apply to assets acquired
20         with such assets or with the proceeds from the sale of
21         such assets; provided, further, this paragraph shall
22         only apply to a taxpayer who was the first recipient of
23         such assets after their recovery and who is a victim of
24         persecution for racial or religious reasons by Nazi
25         Germany or any other Axis regime or as an heir of the
26         victim. The amount of and the eligibility for any

 

 

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1         public assistance, benefit, or similar entitlement is
2         not affected by the inclusion of items (i) and (ii) of
3         this paragraph in gross income for federal income tax
4         purposes. This paragraph is exempt from the provisions
5         of Section 250;
6             (Y) For taxable years beginning on or after January
7         1, 2002 and ending on or before December 31, 2004,
8         moneys contributed in the taxable year to a College
9         Savings Pool account under Section 16.5 of the State
10         Treasurer Act, except that amounts excluded from gross
11         income under Section 529(c)(3)(C)(i) of the Internal
12         Revenue Code shall not be considered moneys
13         contributed under this subparagraph (Y). For taxable
14         years beginning on or after January 1, 2005, a maximum
15         of $10,000 contributed in the taxable year to (i) a
16         College Savings Pool account under Section 16.5 of the
17         State Treasurer Act or (ii) the Illinois Prepaid
18         Tuition Trust Fund, except that amounts excluded from
19         gross income under Section 529(c)(3)(C)(i) of the
20         Internal Revenue Code shall not be considered moneys
21         contributed under this subparagraph (Y). This
22         subparagraph (Y) is exempt from the provisions of
23         Section 250;
24             (Z) For taxable years 2001 and thereafter, for the
25         taxable year in which the bonus depreciation deduction
26         is taken on the taxpayer's federal income tax return

 

 

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1         under subsection (k) of Section 168 of the Internal
2         Revenue Code and for each applicable taxable year
3         thereafter, an amount equal to "x", where:
4                 (1) "y" equals the amount of the depreciation
5             deduction taken for the taxable year on the
6             taxpayer's federal income tax return on property
7             for which the bonus depreciation deduction was
8             taken in any year under subsection (k) of Section
9             168 of the Internal Revenue Code, but not including
10             the bonus depreciation deduction;
11                 (2) for taxable years ending on or before
12             December 31, 2005, "x" equals "y" multiplied by 30
13             and then divided by 70 (or "y" multiplied by
14             0.429); and
15                 (3) for taxable years ending after December
16             31, 2005:
17                     (i) for property on which a bonus
18                 depreciation deduction of 30% of the adjusted
19                 basis was taken, "x" equals "y" multiplied by
20                 30 and then divided by 70 (or "y" multiplied by
21                 0.429); and
22                     (ii) for property on which a bonus
23                 depreciation deduction of 50% of the adjusted
24                 basis was taken, "x" equals "y" multiplied by
25                 1.0.
26             The aggregate amount deducted under this

 

 

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1         subparagraph in all taxable years for any one piece of
2         property may not exceed the amount of the bonus
3         depreciation deduction taken on that property on the
4         taxpayer's federal income tax return under subsection
5         (k) of Section 168 of the Internal Revenue Code. This
6         subparagraph (Z) is exempt from the provisions of
7         Section 250;
8             (AA) If the taxpayer sells, transfers, abandons,
9         or otherwise disposes of property for which the
10         taxpayer was required in any taxable year to make an
11         addition modification under subparagraph (D-15), then
12         an amount equal to that addition modification.
13             If the taxpayer continues to own property through
14         the last day of the last tax year for which the
15         taxpayer may claim a depreciation deduction for
16         federal income tax purposes and for which the taxpayer
17         was required in any taxable year to make an addition
18         modification under subparagraph (D-15), then an amount
19         equal to that addition modification.
20             The taxpayer is allowed to take the deduction under
21         this subparagraph only once with respect to any one
22         piece of property.
23             This subparagraph (AA) is exempt from the
24         provisions of Section 250;
25             (BB) Any amount included in adjusted gross income,
26         other than salary, received by a driver in a

 

 

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1         ridesharing arrangement using a motor vehicle;
2             (CC) The amount of (i) any interest income (net of
3         the deductions allocable thereto) taken into account
4         for the taxable year with respect to a transaction with
5         a taxpayer that is required to make an addition
6         modification with respect to such transaction under
7         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
8         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
9         the amount of that addition modification, and (ii) any
10         income from intangible property (net of the deductions
11         allocable thereto) taken into account for the taxable
12         year with respect to a transaction with a taxpayer that
13         is required to make an addition modification with
14         respect to such transaction under Section
15         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
16         203(d)(2)(D-8), but not to exceed the amount of that
17         addition modification;
18             (DD) An amount equal to the interest income taken
19         into account for the taxable year (net of the
20         deductions allocable thereto) with respect to
21         transactions with (i) a foreign person who would be a
22         member of the taxpayer's unitary business group but for
23         the fact that the foreign person's business activity
24         outside the United States is 80% or more of that
25         person's total business activity and (ii) for taxable
26         years ending on or after December 31, 2008, to a person

 

 

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1         who would be a member of the same unitary business
2         group but for the fact that the person is prohibited
3         under Section 1501(a)(27) from being included in the
4         unitary business group because he or she is ordinarily
5         required to apportion business income under different
6         subsections of Section 304, but not to exceed the
7         addition modification required to be made for the same
8         taxable year under Section 203(a)(2)(D-17) for
9         interest paid, accrued, or incurred, directly or
10         indirectly, to the same foreign person; and
11             (EE) An amount equal to the income from intangible
12         property taken into account for the taxable year (net
13         of the deductions allocable thereto) with respect to
14         transactions with (i) a foreign person who would be a
15         member of the taxpayer's unitary business group but for
16         the fact that the foreign person's business activity
17         outside the United States is 80% or more of that
18         person's total business activity and (ii) for taxable
19         years ending on or after December 31, 2008, to a person
20         who would be a member of the same unitary business
21         group but for the fact that the person is prohibited
22         under Section 1501(a)(27) from being included in the
23         unitary business group because he or she is ordinarily
24         required to apportion business income under different
25         subsections of Section 304, but not to exceed the
26         addition modification required to be made for the same

 

 

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1         taxable year under Section 203(a)(2)(D-18) for
2         intangible expenses and costs paid, accrued, or
3         incurred, directly or indirectly, to the same foreign
4         person; and .
5             (FF) An amount equal to the income from insurance
6         premiums taken into account for the taxable year (net
7         of the deductions allocable thereto) with respect to
8         transactions with a person who would be a member of the
9         same unitary business group but for the fact that the
10         person is prohibited under Section 1501(a)(27) from
11         being included in the unitary business group because he
12         or she is ordinarily required to apportion business
13         income under different subsections of Section 304, but
14         not to exceed the addition modification required to be
15         made for the same taxable year under Section
16         203(a)(2)(D-18) for intangible expenses and costs
17         paid, accrued, or incurred, directly or indirectly, to
18         the same person.
 
19     (b) Corporations.
20         (1) In general. In the case of a corporation, base
21     income means an amount equal to the taxpayer's taxable
22     income for the taxable year as modified by paragraph (2).
23         (2) Modifications. The taxable income referred to in
24     paragraph (1) shall be modified by adding thereto the sum
25     of the following amounts:

 

 

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

 

 

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1         subparagraph (E) of paragraph (2) of subsection (e),
2         the amount by which addition modifications other than
3         those provided by this subparagraph (E) exceeded
4         subtraction modifications in such 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;

 

 

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1             (E-5) For taxable years ending after December 31,
2         1997, an amount equal to any eligible remediation costs
3         that the corporation deducted in computing adjusted
4         gross income and for which the corporation claims a
5         credit under subsection (l) of Section 201;
6             (E-10) For taxable years 2001 and thereafter, an
7         amount equal to the bonus depreciation deduction 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; and
11             (E-11) If the taxpayer sells, transfers, abandons,
12         or otherwise disposes of property for which the
13         taxpayer was required in any taxable year to make an
14         addition modification under subparagraph (E-10), then
15         an amount equal to the aggregate amount of the
16         deductions taken in all taxable years under
17         subparagraph (T) with respect to that property.
18             If the taxpayer continues to own property through
19         the last day of the last tax year for which the
20         taxpayer may claim a depreciation deduction for
21         federal income tax purposes and for which the taxpayer
22         was allowed in any taxable year to make a subtraction
23         modification under subparagraph (T), then an amount
24         equal to that subtraction modification.
25             The taxpayer is required to make the addition
26         modification under this subparagraph only once with

 

 

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1         respect to any one piece of property;
2             (E-12) An For taxable years ending on or after
3         December 31, 2004, an amount equal to the amount
4         otherwise allowed as a deduction in computing base
5         income for interest paid, accrued, or incurred,
6         directly or indirectly, (i) for taxable years ending on
7         or after December 31, 2004, to a foreign person who
8         would be a member of the same unitary business group
9         but for the fact the foreign person's business activity
10         outside the United States is 80% or more of the foreign
11         person's total business activity and (ii) for taxable
12         years ending on or after December 31, 2008, to a person
13         who would be a member of the same unitary business
14         group but for the fact that the person is prohibited
15         under Section 1501(a)(27) from being included in the
16         unitary business group because he or she is ordinarily
17         required to apportion business income under different
18         subsections of Section 304. The addition modification
19         required by this subparagraph shall be reduced to the
20         extent that dividends were included in base income of
21         the unitary group for the same taxable year and
22         received by the taxpayer or by a member of the
23         taxpayer's unitary business group (including amounts
24         included in gross income pursuant to Sections 951
25         through 964 of the Internal Revenue Code and amounts
26         included in gross income under Section 78 of the

 

 

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

 

 

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

 

 

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1         deduction in computing base income, and that were paid,
2         accrued, or incurred, directly or indirectly, (i) for
3         taxable years ending on or after December 31, 2004, to
4         a foreign person who would be a member of the same
5         unitary business group but for the fact that the
6         foreign person's business activity outside the United
7         States is 80% or more of that person's total business
8         activity and (ii) for taxable years ending on or after
9         December 31, 2008, to a person who would be a member of
10         the same unitary business group but for the fact that
11         the person is prohibited under Section 1501(a)(27)
12         from being included in the unitary business group
13         because he or she is ordinarily required to apportion
14         business income under different subsections of Section
15         304. The addition modification required by this
16         subparagraph shall be reduced to the extent that
17         dividends were included in base income of the unitary
18         group for the same taxable year and received by the
19         taxpayer or by a member of the taxpayer's unitary
20         business group (including amounts included in gross
21         income pursuant to Sections 951 through 964 of the
22         Internal Revenue Code and amounts included in gross
23         income under Section 78 of the Internal Revenue Code)
24         with respect to the stock of the same person to whom
25         the intangible expenses and costs were directly or
26         indirectly paid, incurred, or accrued. The preceding

 

 

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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

 

 

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

 

 

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1             otherwise allowed under Section 404 of this Act for
2             any tax year beginning after the effective date of
3             this amendment provided such adjustment is made
4             pursuant to regulation adopted by the Department
5             and such regulations provide methods and standards
6             by which the Department will utilize its authority
7             under Section 404 of this Act;
8             (E-14) For taxable years ending on or after
9         December 31, 2008, an amount equal to the amount of
10         insurance premium expenses and costs otherwise allowed
11         as a deduction in computing base income, and that were
12         paid, accrued, or incurred, directly or indirectly, to
13         a person who would be a member of the same unitary
14         business group but for the fact that the person is
15         prohibited under Section 1501(a)(27) from being
16         included in the unitary business group because he or
17         she is ordinarily required to apportion business
18         income under different subsections of Section 304. The
19         addition modification required by this subparagraph
20         shall be reduced to the extent that dividends were
21         included in base income of the unitary group for the
22         same taxable year and received by the taxpayer or by a
23         member of the taxpayer's unitary business group
24         (including amounts included in gross income under
25         Sections 951 through 964 of the Internal Revenue Code
26         and amounts included in gross income under Section 78

 

 

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1         of the Internal Revenue Code) with respect to the stock
2         of the same person to whom the intangible expenses and
3         costs were directly or indirectly paid, incurred, or
4         accrued. The preceding sentence does not apply to the
5         extent that the same dividends caused a reduction to
6         the addition modification required under Section
7         203(a)(2)(D-17) of this Act;
8             (E-15) For taxable years beginning after December
9         31, 2008, any deduction for dividends paid to a
10         corporation by a captive real estate trust that is
11         allowed to a real estate investment trust under Section
12         857(b)(2)(B) of the Internal Revenue Code for
13         dividends paid;
14     and by deducting from the total so obtained the sum of the
15     following amounts:
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 any amount included in such
20         total under Section 78 of the Internal Revenue Code;
21             (H) In the case of a regulated investment company,
22         an amount equal to the amount of exempt interest
23         dividends as defined in subsection (b) (5) of Section
24         852 of the Internal Revenue Code, paid to shareholders
25         for the taxable year;
26             (I) With the exception of any amounts subtracted

 

 

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1         under subparagraph (J), an amount equal to the sum of
2         all amounts disallowed as deductions by (i) Sections
3         171(a) (2), and 265(a)(2) and amounts disallowed as
4         interest expense by Section 291(a)(3) of the Internal
5         Revenue Code, as now or hereafter amended, and all
6         amounts of expenses allocable to interest and
7         disallowed as deductions by Section 265(a)(1) of the
8         Internal Revenue Code, as now or hereafter amended; and
9         (ii) for taxable years ending on or after August 13,
10         1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and
11         832(b)(5)(B)(i) of the Internal Revenue Code; the
12         provisions of this subparagraph are exempt from the
13         provisions of Section 250;
14             (J) An amount equal to all amounts included in such
15         total which are exempt from taxation by this State
16         either by reason of its statutes or Constitution or by
17         reason of the Constitution, treaties or statutes of the
18         United States; provided that, in the case of any
19         statute of this State or, for taxable years ending on
20         or after December 31, 2008, of the United States, any
21         treaty of the United States, the Illinois
22         Constitution, or the United States Constitution that
23         exempts income derived from bonds or other obligations
24         from the tax imposed under this Act, the amount
25         exempted shall be the income interest net of bond
26         premium amortization, and, for taxable years ending on

 

 

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1         or after December 31, 2008, interest expense incurred
2         on indebtedness to carry the bond or other obligation,
3         expenses incurred in producing the income to be
4         deducted, and all other related expenses. The amount of
5         expenses to be taken into account under this provision
6         may not exceed the amount of income that is exempted;
7             (K) An amount equal to those dividends included in
8         such total which were paid by a corporation which
9         conducts business operations in an Enterprise Zone or
10         zones created under the Illinois Enterprise Zone Act or
11         a River Edge Redevelopment Zone or zones created under
12         the River Edge Redevelopment Zone Act and conducts
13         substantially all of its operations in an Enterprise
14         Zone or zones or a River Edge Redevelopment Zone or
15         zones. This subparagraph (K) is exempt from the
16         provisions of Section 250;
17             (L) An amount equal to those dividends included in
18         such total that were paid by a corporation that
19         conducts business operations in a federally designated
20         Foreign Trade Zone or Sub-Zone and that is designated a
21         High Impact Business located in Illinois; provided
22         that dividends eligible for the deduction provided in
23         subparagraph (K) of paragraph 2 of this subsection
24         shall not be eligible for the deduction provided under
25         this subparagraph (L);
26             (M) For any taxpayer that is a financial

 

 

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1         organization within the meaning of Section 304(c) of
2         this Act, an amount included in such total as interest
3         income from a loan or loans made by such taxpayer to a
4         borrower, to the extent that such a loan is secured by
5         property which is eligible for the Enterprise Zone
6         Investment Credit or the River Edge Redevelopment Zone
7         Investment Credit. To determine the portion of a loan
8         or loans that is secured by property eligible for a
9         Section 201(f) investment credit to the borrower, the
10         entire principal amount of the loan or loans between
11         the taxpayer and the borrower should be divided into
12         the basis of the Section 201(f) investment credit
13         property which secures the loan or loans, using for
14         this purpose the original basis of such property on the
15         date that it was placed in service in the Enterprise
16         Zone or the River Edge Redevelopment Zone. The
17         subtraction modification available to taxpayer in any
18         year under this subsection shall be that portion of the
19         total interest paid by the borrower with respect to
20         such loan attributable to the eligible property as
21         calculated under the previous sentence. This
22         subparagraph (M) is exempt from the provisions of
23         Section 250;
24             (M-1) For any taxpayer that is a financial
25         organization within the meaning of Section 304(c) of
26         this Act, an amount included in such total as interest

 

 

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

 

 

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1         Section 170 of the Internal Revenue Code and (ii) must,
2         by its terms, be used for a project approved by the
3         Department of Commerce and Economic Opportunity under
4         Section 11 of the Illinois Enterprise Zone Act or under
5         Section 10-10 of the Illinois River Edge Redevelopment
6         Zone Act. This subparagraph (N) is exempt from the
7         provisions of Section 250;
8             (O) An amount equal to: (i) 85% for taxable years
9         ending on or before December 31, 1992, or, a percentage
10         equal to the percentage allowable under Section
11         243(a)(1) of the Internal Revenue Code of 1986 for
12         taxable years ending after December 31, 1992, of the
13         amount by which dividends included in taxable income
14         and received from a corporation that is not created or
15         organized under the laws of the United States or any
16         state or political subdivision thereof, including, for
17         taxable years ending on or after December 31, 1988,
18         dividends received or deemed received or paid or deemed
19         paid under Sections 951 through 964 of the Internal
20         Revenue Code, exceed the amount of the modification
21         provided under subparagraph (G) of paragraph (2) of
22         this subsection (b) which is related to such dividends,
23         and including, for taxable years ending on or after
24         December 31, 2008, dividends received from a real
25         estate investment trust; plus (ii) 100% of the amount
26         by which dividends, included in taxable income and

 

 

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1         received, including, for taxable years ending on or
2         after December 31, 1988, dividends received or deemed
3         received or paid or deemed paid under Sections 951
4         through 964 of the Internal Revenue Code and including,
5         for taxable years ending on or after December 31, 2008,
6         dividends received from a real estate investment
7         trust, from any such corporation specified in clause
8         (i) that would but for the provisions of Section 1504
9         (b) (3) of the Internal Revenue Code be treated as a
10         member of the affiliated group which includes the
11         dividend recipient, exceed the amount of the
12         modification provided under subparagraph (G) of
13         paragraph (2) of this subsection (b) which is related
14         to such dividends;
15             (P) An amount equal to any contribution made to a
16         job training project established pursuant to the Tax
17         Increment Allocation Redevelopment Act;
18             (Q) An amount equal to the amount of the deduction
19         used to compute the federal income tax credit for
20         restoration of substantial amounts held under claim of
21         right for the taxable year pursuant to Section 1341 of
22         the Internal Revenue Code of 1986;
23             (R) On and after July 20, 1999, in the case of an
24         attorney-in-fact with respect to whom an interinsurer
25         or a reciprocal insurer has made the election under
26         Section 835 of the Internal Revenue Code, 26 U.S.C.

 

 

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

 

 

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1             deduction taken for the taxable year on the
2             taxpayer's federal income tax return on property
3             for which the bonus depreciation deduction was
4             taken in any year under subsection (k) of Section
5             168 of the Internal Revenue Code, but not including
6             the bonus depreciation deduction;
7                 (2) for taxable years ending on or before
8             December 31, 2005, "x" equals "y" multiplied by 30
9             and then divided by 70 (or "y" multiplied by
10             0.429); and
11                 (3) for taxable years ending after December
12             31, 2005:
13                     (i) for property on which a bonus
14                 depreciation deduction of 30% of the adjusted
15                 basis was taken, "x" equals "y" multiplied by
16                 30 and then divided by 70 (or "y" multiplied by
17                 0.429); and
18                     (ii) for property on which a bonus
19                 depreciation deduction of 50% of the adjusted
20                 basis was taken, "x" equals "y" multiplied by
21                 1.0.
22             The aggregate amount deducted under this
23         subparagraph in all taxable years for any one piece of
24         property may not exceed the amount of the bonus
25         depreciation deduction taken on that property on the
26         taxpayer's federal income tax return under subsection

 

 

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1         (k) of Section 168 of the Internal Revenue Code. This
2         subparagraph (T) is exempt from the provisions of
3         Section 250;
4             (U) If the taxpayer sells, transfers, abandons, or
5         otherwise disposes of property for which the taxpayer
6         was required in any taxable year to make an addition
7         modification under subparagraph (E-10), then an amount
8         equal to that addition modification.
9             If the taxpayer continues to own property through
10         the last day of the last tax year for which the
11         taxpayer may claim a depreciation deduction for
12         federal income tax purposes and for which the taxpayer
13         was required in any taxable year to make an addition
14         modification under subparagraph (E-10), then an amount
15         equal to that addition modification.
16             The taxpayer is allowed to take the deduction under
17         this subparagraph only once with respect to any one
18         piece of property.
19             This subparagraph (U) is exempt from the
20         provisions of Section 250;
21             (V) 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-12),

 

 

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1         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
2         the amount of such addition modification and (ii) any
3         income from intangible property (net of the deductions
4         allocable thereto) taken into account for the taxable
5         year with respect to a transaction with a taxpayer that
6         is required to make an addition modification with
7         respect to such transaction under Section
8         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
9         203(d)(2)(D-8), but not to exceed the amount of such
10         addition modification;
11             (W) An amount equal to the interest income taken
12         into account for the taxable year (net of the
13         deductions allocable thereto) with respect to
14         transactions with (i) a foreign person who would be a
15         member of the taxpayer's unitary business group but for
16         the fact that the foreign person's business activity
17         outside the United States is 80% or more of that
18         person's total business activity and (ii) for taxable
19         years ending on or after December 31, 2008, to a person
20         who would be a member of the same unitary business
21         group but for the fact that the person is prohibited
22         under Section 1501(a)(27) from being included in the
23         unitary business group because he or she is ordinarily
24         required to apportion business income under different
25         subsections of Section 304, but not to exceed the
26         addition modification required to be made for the same

 

 

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1         taxable year under Section 203(b)(2)(E-12) for
2         interest paid, accrued, or incurred, directly or
3         indirectly, to the same foreign person; and
4             (X) An amount equal to the income from intangible
5         property taken into account for the taxable year (net
6         of the deductions allocable thereto) with respect to
7         transactions with (i) a foreign person who would be a
8         member of the taxpayer's unitary business group but for
9         the fact that the foreign person's business activity
10         outside the United States is 80% or more of that
11         person's total business activity and (ii) for taxable
12         years ending on or after December 31, 2008, to a person
13         who would be a member of the same unitary business
14         group but for the fact that the person is prohibited
15         under Section 1501(a)(27) from being included in the
16         unitary business group because he or she is ordinarily
17         required to apportion business income under different
18         subsections of Section 304, but not to exceed the
19         addition modification required to be made for the same
20         taxable year under Section 203(b)(2)(E-13) for
21         intangible expenses and costs paid, accrued, or
22         incurred, directly or indirectly, to the same foreign
23         person; and .
24             (FF) An amount equal to the income from insurance
25         premiums taken into account for the taxable year (net
26         of the deductions allocable thereto) with respect to

 

 

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1         transactions with a person who would be a member of the
2         same unitary business group but for the fact that the
3         person is prohibited under Section 1501(a)(27) from
4         being included in the unitary business group because he
5         or she is ordinarily required to apportion business
6         income under different subsections of Section 304, but
7         not to exceed the addition modification required to be
8         made for the same taxable year under Section
9         203(a)(2)(D-18) for intangible expenses and costs
10         paid, accrued, or incurred, directly or indirectly, to
11         the same person.
12         (3) Special rule. For purposes of paragraph (2) (A),
13     "gross income" in the case of a life insurance company, for
14     tax years ending on and after December 31, 1994, shall mean
15     the gross investment income for the taxable year.
 
16     (c) Trusts and estates.
17         (1) In general. In the case of a trust or estate, base
18     income means an amount equal to the taxpayer's taxable
19     income for the taxable year as modified by paragraph (2).
20         (2) Modifications. Subject to the provisions of
21     paragraph (3), the taxable income referred to in paragraph
22     (1) shall be modified by adding thereto the sum of the
23     following amounts:
24             (A) An amount equal to all amounts paid or accrued
25         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 taxable income;
3             (B) In the case of (i) an estate, $600; (ii) a
4         trust which, under its governing instrument, is
5         required to distribute all of its income currently,
6         $300; and (iii) any other trust, $100, but in each such
7         case, only to the extent such amount was deducted in
8         the computation of taxable income;
9             (C) An amount equal to the amount of tax imposed by
10         this Act to the extent deducted from gross income in
11         the computation of taxable income for the taxable year;
12             (D) The amount of any net operating loss deduction
13         taken in arriving at taxable income, other than a net
14         operating loss carried forward from a taxable year
15         ending prior to December 31, 1986;
16             (E) For taxable years in which a net operating loss
17         carryback or carryforward from a taxable year ending
18         prior to December 31, 1986 is an element of taxable
19         income under paragraph (1) of subsection (e) or
20         subparagraph (E) of paragraph (2) of subsection (e),
21         the amount by which addition modifications other than
22         those provided by this subparagraph (E) exceeded
23         subtraction modifications in such taxable year, with
24         the following limitations applied in the order that
25         they are listed:
26                 (i) the addition modification relating to the

 

 

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1             net operating loss carried back or forward to the
2             taxable year from any taxable year ending prior to
3             December 31, 1986 shall be reduced by the amount of
4             addition modification under this subparagraph (E)
5             which related to that net operating loss and which
6             was taken into account in calculating the base
7             income of an earlier taxable year, and
8                 (ii) the addition modification relating to the
9             net operating loss carried back or forward to the
10             taxable year from any taxable year ending prior to
11             December 31, 1986 shall not exceed the amount of
12             such carryback or carryforward;
13             For taxable years in which there is a net operating
14         loss carryback or carryforward from more than one other
15         taxable year ending prior to December 31, 1986, the
16         addition modification provided in this subparagraph
17         (E) shall be the sum of the amounts computed
18         independently under the preceding provisions of this
19         subparagraph (E) for each such taxable year;
20             (F) For taxable years ending on or after January 1,
21         1989, an amount equal to the tax deducted pursuant to
22         Section 164 of the Internal Revenue Code if the trust
23         or estate is claiming the same tax for purposes of the
24         Illinois foreign tax credit under Section 601 of this
25         Act;
26             (G) An amount equal to the amount of the capital

 

 

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1         gain deduction allowable under the Internal Revenue
2         Code, to the extent deducted from gross income in the
3         computation of taxable income;
4             (G-5) For taxable years ending after December 31,
5         1997, an amount equal to any eligible remediation costs
6         that the trust or estate deducted in computing adjusted
7         gross income and for which the trust or estate claims a
8         credit under subsection (l) of Section 201;
9             (G-10) For taxable years 2001 and thereafter, an
10         amount equal to the bonus depreciation deduction taken
11         on the taxpayer's federal income tax return for the
12         taxable year under subsection (k) of Section 168 of the
13         Internal Revenue Code; and
14             (G-11) If the taxpayer sells, transfers, abandons,
15         or otherwise disposes of property for which the
16         taxpayer was required in any taxable year to make an
17         addition modification under subparagraph (G-10), then
18         an amount equal to the aggregate amount of the
19         deductions taken in all taxable years under
20         subparagraph (R) with respect to that property.
21             If the taxpayer continues to own property through
22         the last day of the last tax year for which the
23         taxpayer may claim a depreciation deduction for
24         federal income tax purposes and for which the taxpayer
25         was allowed in any taxable year to make a subtraction
26         modification under subparagraph (R), then an amount

 

 

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1         equal to that subtraction modification.
2             The taxpayer is required to make the addition
3         modification under this subparagraph only once with
4         respect to any one piece of property;
5             (G-12) An For taxable years ending on or after
6         December 31, 2004, an amount equal to the amount
7         otherwise allowed as a deduction in computing base
8         income for interest paid, accrued, or incurred,
9         directly or indirectly, (i) for taxable years ending on
10         or after December 31, 2004, to a foreign person who
11         would be a member of the same unitary business group
12         but for the fact that the foreign person's business
13         activity outside the United States is 80% or more of
14         the foreign person's total business activity and (ii)
15         for taxable years ending on or after December 31, 2008,
16         to a person who would be a member of the same unitary
17         business group but for the fact that the person is
18         prohibited under Section 1501(a)(27) from being
19         included in the unitary business group because he or
20         she is ordinarily required to apportion business
21         income under different subsections of Section 304. The
22         addition modification required by this subparagraph
23         shall be reduced to the extent that dividends were
24         included in base income of the unitary group for the
25         same taxable year and received by the taxpayer or by a
26         member of the taxpayer's unitary business group

 

 

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

 

 

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

 

 

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1             (G-13) An For taxable years ending on or after
2         December 31, 2004, an amount equal to the amount of
3         intangible expenses and costs otherwise allowed as a
4         deduction in computing base income, and that were paid,
5         accrued, or incurred, directly or indirectly, (i) for
6         taxable years ending on or after December 31, 2004, to
7         a foreign person who would be a member of the same
8         unitary business group but for the fact that the
9         foreign person's business activity outside the United
10         States is 80% or more of that person's total business
11         activity and (ii) for taxable years ending on or after
12         December 31, 2008, to a person who would be a member of
13         the same unitary business group but for the fact that
14         the person is prohibited under Section 1501(a)(27)
15         from being included in the unitary business group
16         because he or she is ordinarily required to apportion
17         business income under different subsections of Section
18         304. The addition modification required by this
19         subparagraph shall be reduced to the extent that
20         dividends were included in base income of the unitary
21         group for the same taxable year and received by the
22         taxpayer or by a member of the taxpayer's unitary
23         business group (including amounts included in gross
24         income pursuant to Sections 951 through 964 of the
25         Internal Revenue Code and amounts included in gross
26         income under Section 78 of the Internal Revenue Code)

 

 

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

 

 

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1             unitary reporting, to a tax on or measured by net
2             income with respect to such item; or
3                 (ii) any item of intangible expense or cost
4             paid, accrued, or incurred, directly or
5             indirectly, if the taxpayer can establish, based
6             on a preponderance of the evidence, both of the
7             following:
8                     (a) the foreign person during the same
9                 taxable year paid, accrued, or incurred, the
10                 intangible expense or cost to a person that is
11                 not a related member, and
12                     (b) the transaction giving rise to the
13                 intangible expense or cost between the
14                 taxpayer and the foreign person did not have as
15                 a principal purpose the avoidance of Illinois
16                 income tax, and is paid pursuant to a contract
17                 or agreement that reflects arm's-length terms;
18                 or
19                 (iii) any item of intangible expense or cost
20             paid, accrued, or incurred, directly or
21             indirectly, from a transaction with a foreign
22             person if the taxpayer establishes by clear and
23             convincing evidence, that the adjustments are
24             unreasonable; or if the taxpayer and the Director
25             agree in writing to the application or use of an
26             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-14) For taxable years ending on or after
12         December 31, 2008, an amount equal to the amount of
13         insurance premium expenses and costs otherwise allowed
14         as a deduction in computing base income, and that were
15         paid, accrued, or incurred, directly or indirectly, to
16         a person who would be a member of the same unitary
17         business group but for the fact that the person is
18         prohibited under Section 1501(a)(27) from being
19         included in the unitary business group because he or
20         she is ordinarily required to apportion business
21         income under different subsections of Section 304. The
22         addition modification required by this subparagraph
23         shall be reduced to the extent that dividends were
24         included in base income of the unitary group for the
25         same taxable year and received by the taxpayer or by a
26         member of the taxpayer's unitary business group

 

 

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1         (including amounts included in gross income under
2         Sections 951 through 964 of the Internal Revenue Code
3         and amounts included in gross income under Section 78
4         of the Internal Revenue Code) with respect to the stock
5         of the same person to whom the intangible expenses and
6         costs were directly or indirectly paid, incurred, or
7         accrued. The preceding sentence does not apply to the
8         extent that the same dividends caused a reduction to
9         the addition modification required under Section
10         203(a)(2)(D-17) of this Act.
11     and by deducting from the total so obtained the sum of the
12     following amounts:
13             (H) An amount equal to all amounts included in such
14         total pursuant to the provisions of Sections 402(a),
15         402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
16         Internal Revenue Code or included in such total as
17         distributions under the provisions of any retirement
18         or disability plan for employees of any governmental
19         agency or unit, or retirement payments to retired
20         partners, which payments are excluded in computing net
21         earnings from self employment by Section 1402 of the
22         Internal Revenue Code and regulations adopted pursuant
23         thereto;
24             (I) The valuation limitation amount;
25             (J) An amount equal to the amount of any tax
26         imposed by this Act which was refunded to the taxpayer

 

 

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1         and included in such total for the taxable year;
2             (K) An amount equal to all amounts included in
3         taxable income as modified by subparagraphs (A), (B),
4         (C), (D), (E), (F) and (G) which are exempt from
5         taxation by this State either by reason of its statutes
6         or Constitution or by reason of the Constitution,
7         treaties or statutes of the United States; provided
8         that, in the case of any statute of this State or, for
9         taxable years ending on or after December 31, 2008, of
10         the United States, any treaty of the United States, the
11         Illinois Constitution, or the United States
12         Constitution that exempts income derived from bonds or
13         other obligations from the tax imposed under this Act,
14         the amount exempted shall be the income interest net of
15         bond premium amortization, and, for taxable years
16         ending on or after December 31, 2008, interest expense
17         incurred on indebtedness to carry the bond or other
18         obligation, expenses incurred in producing the income
19         to be deducted, and all other related expenses. The
20         amount of expenses to be taken into account under this
21         provision may not exceed the amount of income that is
22         exempted;
23             (L) With the exception of any amounts subtracted
24         under subparagraph (K), an amount equal to the sum of
25         all amounts disallowed as deductions by (i) Sections
26         171(a) (2) and 265(a)(2) of the Internal Revenue Code,

 

 

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1         as now or hereafter amended, and all amounts of
2         expenses allocable to interest and disallowed as
3         deductions by Section 265(1) of the Internal Revenue
4         Code of 1954, as now or hereafter amended; and (ii) for
5         taxable years ending on or after August 13, 1999,
6         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
7         the Internal Revenue Code; the provisions of this
8         subparagraph are exempt from the provisions of Section
9         250;
10             (M) An amount equal to those dividends included in
11         such total which were paid by a corporation which
12         conducts business operations in an Enterprise Zone or
13         zones created under the Illinois Enterprise Zone Act or
14         a River Edge Redevelopment Zone or zones created under
15         the River Edge Redevelopment Zone Act and conducts
16         substantially all of its operations in an Enterprise
17         Zone or Zones or a River Edge Redevelopment Zone or
18         zones. This subparagraph (M) is exempt from the
19         provisions of Section 250;
20             (N) An amount equal to any contribution made to a
21         job training project established pursuant to the Tax
22         Increment Allocation Redevelopment Act;
23             (O) An amount equal to those dividends included in
24         such total that were paid by a corporation that
25         conducts business operations in a federally designated
26         Foreign Trade Zone or Sub-Zone and that is designated a

 

 

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1         High Impact Business located in Illinois; provided
2         that dividends eligible for the deduction provided in
3         subparagraph (M) of paragraph (2) of this subsection
4         shall not be eligible for the deduction provided under
5         this subparagraph (O);
6             (P) 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             (Q) For taxable year 1999 and thereafter, an amount
12         equal to the amount of any (i) distributions, to the
13         extent includible in gross income for federal income
14         tax purposes, made to the taxpayer because of his or
15         her status as a victim of persecution for racial or
16         religious reasons by Nazi Germany or any other Axis
17         regime or as an heir of the victim and (ii) items of
18         income, to the extent includible in gross income for
19         federal income tax purposes, attributable to, derived
20         from or in any way related to assets stolen from,
21         hidden from, or otherwise lost to a victim of
22         persecution for racial or religious reasons by Nazi
23         Germany or any other Axis regime immediately prior to,
24         during, and immediately after World War II, including,
25         but not limited to, interest on the proceeds receivable
26         as insurance under policies issued to a victim of

 

 

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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         is taken on the taxpayer's federal income tax return
21         under subsection (k) of Section 168 of the Internal
22         Revenue Code and for each applicable taxable year
23         thereafter, an amount equal to "x", where:
24                 (1) "y" equals the amount of the depreciation
25             deduction taken for the taxable year on the
26             taxpayer's federal income tax return on property

 

 

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1             for which the bonus depreciation deduction was
2             taken in any year under subsection (k) of Section
3             168 of the Internal Revenue Code, but not including
4             the bonus depreciation deduction;
5                 (2) for taxable years ending on or before
6             December 31, 2005, "x" equals "y" multiplied by 30
7             and then divided by 70 (or "y" multiplied by
8             0.429); and
9                 (3) for taxable years ending after December
10             31, 2005:
11                     (i) for property on which a bonus
12                 depreciation deduction of 30% of the adjusted
13                 basis was taken, "x" equals "y" multiplied by
14                 30 and then divided by 70 (or "y" multiplied by
15                 0.429); and
16                     (ii) for property on which a bonus
17                 depreciation deduction of 50% of the adjusted
18                 basis was taken, "x" equals "y" multiplied by
19                 1.0.
20             The aggregate amount deducted under this
21         subparagraph in all taxable years for any one piece of
22         property may not exceed the amount of the bonus
23         depreciation deduction taken on that property on the
24         taxpayer's federal income tax return under subsection
25         (k) of Section 168 of the Internal Revenue Code. This
26         subparagraph (R) is exempt from the provisions of

 

 

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1         Section 250;
2             (S) If the taxpayer sells, transfers, abandons, or
3         otherwise disposes of property for which the taxpayer
4         was required in any taxable year to make an addition
5         modification under subparagraph (G-10), then an amount
6         equal to that addition modification.
7             If the taxpayer continues to own property through
8         the last day of the last tax year for which the
9         taxpayer may claim a depreciation deduction for
10         federal income tax purposes and for which the taxpayer
11         was required in any taxable year to make an addition
12         modification under subparagraph (G-10), then an amount
13         equal to that addition modification.
14             The taxpayer is allowed to take the deduction under
15         this subparagraph only once with respect to any one
16         piece of property.
17             This subparagraph (S) is exempt from the
18         provisions of Section 250;
19             (T) The amount of (i) any interest income (net of
20         the deductions allocable thereto) taken into account
21         for the taxable year with respect to a transaction with
22         a taxpayer that is required to make an addition
23         modification with respect to such transaction under
24         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
25         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
26         the amount of such addition modification and (ii) any

 

 

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1         income from intangible property (net of the deductions
2         allocable thereto) taken into account for the taxable
3         year with respect to a transaction with a taxpayer that
4         is required to make an addition modification with
5         respect to such transaction under Section
6         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
7         203(d)(2)(D-8), but not to exceed the amount of such
8         addition modification;
9             (U) An amount equal to the interest income taken
10         into account for the taxable year (net of the
11         deductions allocable thereto) with respect to
12         transactions with (i) a foreign person who would be a
13         member of the taxpayer's unitary business group but for
14         the fact the foreign person's business activity
15         outside the United States is 80% or more of that
16         person's total business activity and (ii) for taxable
17         years ending on or after December 31, 2008, to a person
18         who would be a member of the same unitary business
19         group but for the fact that the person is prohibited
20         under Section 1501(a)(27) from being included in the
21         unitary business group because he or she is ordinarily
22         required to apportion business income under different
23         subsections of Section 304, but not to exceed the
24         addition modification required to be made for the same
25         taxable year under Section 203(c)(2)(G-12) for
26         interest paid, accrued, or incurred, directly or

 

 

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1         indirectly, to the same foreign person; and
2             (V) An amount equal to the income from intangible
3         property taken into account for the taxable year (net
4         of the deductions allocable thereto) with respect to
5         transactions with a foreign person who would be a
6         member of the taxpayer's unitary business group but for
7         the fact that the foreign person's business activity
8         outside the United States is 80% or more of that
9         person's total business activity, but not to exceed the
10         addition modification required to be made for the same
11         taxable year under Section 203(c)(2)(G-13) for
12         intangible expenses and costs paid, accrued, or
13         incurred, directly or indirectly, to the same foreign
14         person; and .
15             (FF) An amount equal to the income from insurance
16         premiums taken into account for the taxable year (net
17         of the deductions allocable thereto) with respect to
18         transactions with a person who would be a member of the
19         same unitary business group but for the fact that the
20         person is prohibited under Section 1501(a)(27) from
21         being included in the unitary business group because he
22         or she is ordinarily required to apportion business
23         income under different subsections of Section 304, but
24         not to exceed the addition modification required to be
25         made for the same taxable year under Section
26         203(a)(2)(D-18) for intangible expenses and costs

 

 

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

 

 

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1         Revenue Code in calculating its taxable income;
2             (D) An amount equal to the amount of the capital
3         gain deduction allowable under the Internal Revenue
4         Code, to the extent deducted from gross income in the
5         computation of taxable income;
6             (D-5) For taxable years 2001 and thereafter, an
7         amount equal to the bonus depreciation deduction 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-6) If the taxpayer sells, transfers, abandons,
12         or otherwise disposes of property for which the
13         taxpayer was required in any taxable year to make an
14         addition modification under subparagraph (D-5), then
15         an amount equal to the aggregate amount of the
16         deductions taken in all taxable years under
17         subparagraph (O) with respect to that property.
18             If the taxpayer continues to own property through
19         the last day of the last tax year for which the
20         taxpayer may claim a depreciation deduction for
21         federal income tax purposes and for which the taxpayer
22         was allowed in any taxable year to make a subtraction
23         modification under subparagraph (O), then an amount
24         equal to that subtraction modification.
25             The taxpayer is required to make the addition
26         modification under this subparagraph only once with

 

 

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1         respect to any one piece of property;
2             (D-7) An For taxable years ending on or after
3         December 31, 2004, an amount equal to the amount
4         otherwise allowed as a deduction in computing base
5         income for interest paid, accrued, or incurred,
6         directly or indirectly, (i) for taxable years ending on
7         or after December 31, 2004, to a foreign person who
8         would be a member of the same unitary business group
9         but for the fact the foreign person's business activity
10         outside the United States is 80% or more of the foreign
11         person's total business activity and (ii) for taxable
12         years ending on or after December 31, 2008, to a person
13         who would be a member of the same unitary business
14         group but for the fact that the person is prohibited
15         under Section 1501(a)(27) from being included in the
16         unitary business group because he or she is ordinarily
17         required to apportion business income under different
18         subsections of Section 304. The addition modification
19         required by this subparagraph shall be reduced to the
20         extent that dividends were included in base income of
21         the unitary group for the same taxable year and
22         received by the taxpayer or by a member of the
23         taxpayer's unitary business group (including amounts
24         included in gross income pursuant to Sections 951
25         through 964 of the Internal Revenue Code and amounts
26         included in gross income under Section 78 of the

 

 

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

 

 

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

 

 

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1         deduction in computing base income, and that were paid,
2         accrued, or incurred, directly or indirectly, (i) for
3         taxable years ending on or after December 31, 2004, to
4         a foreign person who would be a member of the same
5         unitary business group but for the fact that the
6         foreign person's business activity outside the United
7         States is 80% or more of that person's total business
8         activity and (ii) for taxable years ending on or after
9         December 31, 2008, to a person who would be a member of
10         the same unitary business group but for the fact that
11         the person is prohibited under Section 1501(a)(27)
12         from being included in the unitary business group
13         because he or she is ordinarily required to apportion
14         business income under different subsections of Section
15         304. The addition modification required by this
16         subparagraph shall be reduced to the extent that
17         dividends were included in base income of the unitary
18         group for the same taxable year and received by the
19         taxpayer or by a member of the taxpayer's unitary
20         business group (including amounts included in gross
21         income pursuant to Sections 951 through 964 of the
22         Internal Revenue Code and amounts included in gross
23         income under Section 78 of the Internal Revenue Code)
24         with respect to the stock of the same person to whom
25         the intangible expenses and costs were directly or
26         indirectly paid, incurred or accrued. The preceding

 

 

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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(d)(2)(D-7) 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

 

 

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

 

 

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1             otherwise allowed under Section 404 of this Act for
2             any tax year beginning after the effective date of
3             this amendment provided such adjustment is made
4             pursuant to regulation adopted by the Department
5             and such regulations provide methods and standards
6             by which the Department will utilize its authority
7             under Section 404 of this Act;
8             (D-9) For taxable years ending on or after December
9         31, 2008, an amount equal to the amount of insurance
10         premium expenses and costs otherwise allowed as a
11         deduction in computing base income, and that were paid,
12         accrued, or incurred, directly or indirectly, to a
13         person who would be a member of the same unitary
14         business group but for the fact that the person is
15         prohibited under Section 1501(a)(27) from being
16         included in the unitary business group because he or
17         she is ordinarily required to apportion business
18         income under different subsections of Section 304. The
19         addition modification required by this subparagraph
20         shall be reduced to the extent that dividends were
21         included in base income of the unitary group for the
22         same taxable year and received by the taxpayer or by a
23         member of the taxpayer's unitary business group
24         (including amounts included in gross income under
25         Sections 951 through 964 of the Internal Revenue Code
26         and amounts included in gross income under Section 78

 

 

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1         of the Internal Revenue Code) with respect to the stock
2         of the same person to whom the intangible expenses and
3         costs were directly or indirectly paid, incurred, or
4         accrued. The preceding sentence does not apply to the
5         extent that the same dividends caused a reduction to
6         the addition modification required under Section
7         203(a)(2)(D-17) of this Act.
8     and by deducting from the total so obtained the following
9     amounts:
10             (E) The valuation limitation amount;
11             (F) An amount equal to the amount of any tax
12         imposed by this Act which was refunded to the taxpayer
13         and included in such total for the taxable year;
14             (G) An amount equal to all amounts included in
15         taxable income as modified by subparagraphs (A), (B),
16         (C) and (D) which are exempt from taxation by this
17         State either by reason of its statutes or Constitution
18         or by reason of the Constitution, treaties or statutes
19         of the United States; provided that, in the case of any
20         statute of this State or, for taxable years ending on
21         or after December 31, 2008, of the United States, any
22         treaty of the United States, the Illinois
23         Constitution, or the United States Constitution that
24         exempts income derived from bonds or other obligations
25         from the tax imposed under this Act, the amount
26         exempted shall be the income interest net of bond

 

 

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1         premium amortization, and, for taxable years ending on
2         or after December 31, 2008, interest expense incurred
3         on indebtedness to carry the bond or other obligation,
4         expenses incurred in producing the income to be
5         deducted, and all other related expenses. The amount of
6         expenses to be taken into account under this provision
7         may not exceed the amount of income that is exempted;
8             (H) Any income of the partnership which
9         constitutes personal service income as defined in
10         Section 1348 (b) (1) of the Internal Revenue Code (as
11         in effect December 31, 1981) or a reasonable allowance
12         for compensation paid or accrued for services rendered
13         by partners to the partnership, whichever is greater;
14             (I) An amount equal to all amounts of income
15         distributable to an entity subject to the Personal
16         Property Tax Replacement Income Tax imposed by
17         subsections (c) and (d) of Section 201 of this Act
18         including amounts distributable to organizations
19         exempt from federal income tax by reason of Section
20         501(a) of the Internal Revenue Code;
21             (J) With the exception of any amounts subtracted
22         under subparagraph (G), an amount equal to the sum of
23         all amounts disallowed as deductions by (i) Sections
24         171(a) (2), and 265(2) of the Internal Revenue Code of
25         1954, as now or hereafter amended, and all amounts of
26         expenses allocable to interest and disallowed as

 

 

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1         deductions by Section 265(1) of the Internal Revenue
2         Code, as now or hereafter amended; and (ii) for taxable
3         years ending on or after August 13, 1999, Sections
4         171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
5         Internal Revenue Code; the provisions of this
6         subparagraph are exempt from the provisions of Section
7         250;
8             (K) An amount equal to those dividends included in
9         such total which were paid by a corporation which
10         conducts business operations in an Enterprise Zone or
11         zones created under the Illinois Enterprise Zone Act,
12         enacted by the 82nd General Assembly, or a River Edge
13         Redevelopment Zone or zones created under the River
14         Edge Redevelopment Zone Act and conducts substantially
15         all of its operations in an Enterprise Zone or Zones or
16         from a River Edge Redevelopment Zone or zones. This
17         subparagraph (K) is exempt from the provisions of
18         Section 250;
19             (L) An amount equal to any contribution made to a
20         job training project established pursuant to the Real
21         Property Tax Increment Allocation Redevelopment Act;
22             (M) An amount equal to those dividends included in
23         such total that were paid by a corporation that
24         conducts business operations in a federally designated
25         Foreign Trade Zone or Sub-Zone and that is designated a
26         High Impact Business located in Illinois; provided

 

 

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1         that dividends eligible for the deduction provided in
2         subparagraph (K) of paragraph (2) of this subsection
3         shall not be eligible for the deduction provided under
4         this subparagraph (M);
5             (N) An amount equal to the amount of the deduction
6         used to compute the federal income tax credit for
7         restoration of substantial amounts held under claim of
8         right for the taxable year pursuant to Section 1341 of
9         the Internal Revenue Code of 1986;
10             (O) For taxable years 2001 and thereafter, for the
11         taxable year in which the bonus depreciation deduction
12         is taken on the taxpayer's federal income tax return
13         under subsection (k) of Section 168 of the Internal
14         Revenue Code and for each applicable taxable year
15         thereafter, an amount equal to "x", where:
16                 (1) "y" equals the amount of the depreciation
17             deduction taken for the taxable year on the
18             taxpayer's federal income tax return on property
19             for which the bonus depreciation deduction was
20             taken in any year under subsection (k) of Section
21             168 of the Internal Revenue Code, but not including
22             the bonus depreciation deduction;
23                 (2) for taxable years ending on or before
24             December 31, 2005, "x" equals "y" multiplied by 30
25             and then divided by 70 (or "y" multiplied by
26             0.429); and

 

 

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1                 (3) for taxable years ending after December
2             31, 2005:
3                     (i) for property on which a bonus
4                 depreciation deduction of 30% of the adjusted
5                 basis was taken, "x" equals "y" multiplied by
6                 30 and then divided by 70 (or "y" multiplied by
7                 0.429); and
8                     (ii) for property on which a bonus
9                 depreciation deduction of 50% of the adjusted
10                 basis was taken, "x" equals "y" multiplied by
11                 1.0.
12             The aggregate amount deducted under this
13         subparagraph in all taxable years for any one piece of
14         property may not exceed the amount of the bonus
15         depreciation deduction taken on that property on the
16         taxpayer's federal income tax return under subsection
17         (k) of Section 168 of the Internal Revenue Code. This
18         subparagraph (O) is exempt from the provisions of
19         Section 250;
20             (P) If the taxpayer sells, transfers, abandons, or
21         otherwise disposes of property for which the taxpayer
22         was required in any taxable year to make an addition
23         modification under subparagraph (D-5), then an amount
24         equal to that addition modification.
25             If the taxpayer continues to own property through
26         the last day of the last tax year for which the

 

 

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1         taxpayer may claim a depreciation deduction for
2         federal income tax purposes and for which the taxpayer
3         was required in any taxable year to make an addition
4         modification under subparagraph (D-5), then an amount
5         equal to that addition modification.
6             The taxpayer is allowed to take the deduction under
7         this subparagraph only once with respect to any one
8         piece of property.
9             This subparagraph (P) is exempt from the
10         provisions of Section 250;
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;

 

 

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1             (R) An amount equal to the interest income taken
2         into account for the taxable year (net of the
3         deductions allocable thereto) with respect to
4         transactions with (i) a foreign person who would be a
5         member of the taxpayer's unitary business group but for
6         the fact that the foreign person's business activity
7         outside the United States is 80% or more of that
8         person's total business activity and (ii) for taxable
9         years ending on or after December 31, 2008, to a person
10         who would be a member of the same unitary business
11         group but for the fact that the person is prohibited
12         under Section 1501(a)(27) from being included in the
13         unitary business group because he or she is ordinarily
14         required to apportion business income under different
15         subsections of Section 304, but not to exceed the
16         addition modification required to be made for the same
17         taxable year under Section 203(d)(2)(D-7) for interest
18         paid, accrued, or incurred, directly or indirectly, to
19         the same foreign person; and
20             (S) An amount equal to the income from intangible
21         property taken into account for the taxable year (net
22         of the deductions allocable thereto) with respect to
23         transactions with (i) a foreign person who would be a
24         member of the taxpayer's unitary business group but for
25         the fact that the foreign person's business activity
26         outside the United States is 80% or more of that

 

 

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1         person's total business activity and (ii) for taxable
2         years ending on or after December 31, 2008, to a person
3         who would be a member of the same unitary business
4         group but for the fact that the person is prohibited
5         under Section 1501(a)(27) from being included in the
6         unitary business group because he or she is ordinarily
7         required to apportion business income under different
8         subsections of Section 304, but not to exceed the
9         addition modification required to be made for the same
10         taxable year under Section 203(d)(2)(D-8) for
11         intangible expenses and costs paid, accrued, or
12         incurred, directly or indirectly, to the same foreign
13         person; and .
14             (FF) An amount equal to the income from insurance
15         premiums taken into account for the taxable year (net
16         of the deductions allocable thereto) with respect to
17         transactions with a person who would be a member of the
18         same unitary business group but for the fact that the
19         person is prohibited under Section 1501(a)(27) from
20         being included in the unitary business group because he
21         or she is ordinarily required to apportion business
22         income under different subsections of Section 304, but
23         not to exceed the addition modification required to be
24         made for the same taxable year under Section
25         203(a)(2)(D-18) for intangible expenses and costs
26         paid, accrued, or incurred, directly or indirectly, to

 

 

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

 

 

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1     subparagraph (E) of paragraph (2) of subsection (c) for
2     trusts and estates, exceed subtraction modifications, an
3     addition modification must be made under those
4     subparagraphs for any other taxable year to which the
5     taxable income less than zero (net operating loss) is
6     applied under Section 172 of the Internal Revenue Code or
7     under subparagraph (E) of paragraph (2) of this subsection
8     (e) applied in conjunction with Section 172 of the Internal
9     Revenue Code.
10         (2) Special rule. For purposes of paragraph (1) of this
11     subsection, the taxable income properly reportable for
12     federal income tax purposes shall mean:
13             (A) Certain life insurance companies. In the case
14         of a life insurance company subject to the tax imposed
15         by Section 801 of the Internal Revenue Code, life
16         insurance company taxable income, plus the amount of
17         distribution from pre-1984 policyholder surplus
18         accounts as calculated under Section 815a of the
19         Internal Revenue Code;
20             (B) Certain other insurance companies. In the case
21         of mutual insurance companies subject to the tax
22         imposed by Section 831 of the Internal Revenue Code,
23         insurance company taxable income;
24             (C) Regulated investment companies. In the case of
25         a regulated investment company subject to the tax
26         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

 

 

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1         corporation determined in accordance with Section
2         1363(b) of the Internal Revenue Code, except that
3         taxable income shall take into account those items
4         which are required by Section 1363(b)(1) of the
5         Internal Revenue Code to be separately stated; and (ii)
6         a Subchapter S corporation for which there is in effect
7         a federal election to opt out of the provisions of the
8         Subchapter S Revision Act of 1982 and have applied
9         instead the prior federal Subchapter S rules as in
10         effect on July 1, 1982, the taxable income of such
11         corporation determined in accordance with the federal
12         Subchapter S rules as in effect on July 1, 1982; and
13             (H) Partnerships. In the case of a partnership,
14         taxable income determined in accordance with Section
15         703 of the Internal Revenue Code, except that taxable
16         income shall take into account those items which are
17         required by Section 703(a)(1) to be separately stated
18         but which would be taken into account by an individual
19         in calculating his taxable income.
20         (3) Recapture of business expenses on disposition of
21     asset or business. Notwithstanding any other law to the
22     contrary, if in prior years income from an asset or
23     business has been classified as business income and in a
24     later year is demonstrated to be non-business income, then
25     all expenses, without limitation, deducted in such later
26     year and in the 2 immediately preceding taxable years

 

 

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1     related to that asset or business that generated the
2     non-business income shall be added back and recaptured as
3     business income in the year of the disposition of the asset
4     or business. Such amount shall be apportioned to Illinois
5     using the greater of the apportionment fraction computed
6     for the business under Section 304 of this Act for the
7     taxable year or the average of the apportionment fractions
8     computed for the business under Section 304 of this Act for
9     the taxable year and for the 2 immediately preceding
10     taxable years.
11     (f) Valuation limitation amount.
12         (1) In general. The valuation limitation amount
13     referred to in subsections (a) (2) (G), (c) (2) (I) and
14     (d)(2) (E) is an amount equal to:
15             (A) The sum of the pre-August 1, 1969 appreciation
16         amounts (to the extent consisting of gain reportable
17         under the provisions of Section 1245 or 1250 of the
18         Internal Revenue Code) for all property in respect of
19         which such gain was reported for the taxable year; plus
20             (B) The lesser of (i) the sum of the pre-August 1,
21         1969 appreciation amounts (to the extent consisting of
22         capital gain) for all property in respect of which such
23         gain was reported for federal income tax purposes for
24         the taxable year, or (ii) the net capital gain for the
25         taxable year, reduced in either case by any amount of
26         such gain included in the amount determined under

 

 

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1         subsection (a) (2) (F) or (c) (2) (H).
2         (2) Pre-August 1, 1969 appreciation amount.
3             (A) If the fair market value of property referred
4         to in paragraph (1) was readily ascertainable on August
5         1, 1969, the pre-August 1, 1969 appreciation amount for
6         such property is the lesser of (i) the excess of such
7         fair market value over the taxpayer's basis (for
8         determining gain) for such property on that date
9         (determined under the Internal Revenue Code as in
10         effect on that date), or (ii) the total gain realized
11         and reportable for federal income tax purposes in
12         respect of the sale, exchange or other disposition of
13         such property.
14             (B) If the fair market value of property referred
15         to in paragraph (1) was not readily ascertainable on
16         August 1, 1969, the pre-August 1, 1969 appreciation
17         amount for such property is that amount which bears the
18         same ratio to the total gain reported in respect of the
19         property for federal income tax purposes for the
20         taxable year, as the number of full calendar months in
21         that part of the taxpayer's holding period for the
22         property ending July 31, 1969 bears to the number of
23         full calendar months in the taxpayer's entire holding
24         period for the property.
25             (C) The Department shall prescribe such
26         regulations as may be necessary to carry out the

 

 

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1         purposes of this paragraph.
 
2     (g) Double deductions. Unless specifically provided
3 otherwise, nothing in this Section shall permit the same item
4 to be deducted more than once.
 
5     (h) Legislative intention. Except as expressly provided by
6 this Section there shall be no modifications or limitations on
7 the amounts of income, gain, loss or deduction taken into
8 account in determining gross income, adjusted gross income or
9 taxable income for federal income tax purposes for the taxable
10 year, or in the amount of such items entering into the
11 computation of base income and net income under this Act for
12 such taxable year, whether in respect of property values as of
13 August 1, 1969 or otherwise.
14 (Source: P.A. 93-812, eff. 7-26-04; 93-840, eff. 7-30-04;
15 94-776, eff. 5-19-06; 94-789, eff. 5-19-06; 94-1021, eff.
16 7-12-06; 94-1074, eff. 12-26-06; revised 1-2-07;
17 09500SB1544enr.)
 
18     (35 ILCS 5/205)  (from Ch. 120, par. 2-205)
19     Sec. 205. Exempt organizations.
20     (a) Charitable, etc. organizations. The base income of an
21 organization which is exempt from the federal income tax by
22 reason of Section 501(a) of the Internal Revenue Code shall not
23 be determined under section 203 of this Act, but shall be its

 

 

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1 unrelated business taxable income as determined under section
2 512 of the Internal Revenue Code, without any deduction for the
3 tax imposed by this Act. The standard exemption provided by
4 section 204 of this Act shall not be allowed in determining the
5 net income of an organization to which this subsection applies.
6     (b) Partnerships. A partnership as such shall not be
7 subject to the tax imposed by subsection 201 (a) and (b) of
8 this Act, but shall be subject to the replacement tax imposed
9 by subsection 201 (c) and (d) of this Act and shall compute its
10 base income as described in subsection (d) of Section 203 of
11 this Act. For taxable years ending on or after December 31,
12 2004, an investment partnership, as defined in Section
13 1501(a)(11.5) of this Act, shall not be subject to the tax
14 imposed by subsections (c) and (d) of Section 201 of this Act.
15 A partnership shall file such returns and other information at
16 such time and in such manner as may be required under Article 5
17 of this Act. The partners in a partnership shall be liable for
18 the replacement tax imposed by subsection 201 (c) and (d) of
19 this Act on such partnership, to the extent such tax is not
20 paid by the partnership, as provided under the laws of Illinois
21 governing the liability of partners for the obligations of a
22 partnership. Persons carrying on business as partners shall be
23 liable for the tax imposed by subsection 201 (a) and (b) of
24 this Act only in their separate or individual capacities.
25     (c) Subchapter S corporations. A Subchapter S corporation
26 shall not be subject to the tax imposed by subsection 201 (a)

 

 

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1 and (b) of this Act but shall be subject to the replacement tax
2 imposed by subsection 201 (c) and (d) of this Act and shall
3 file such returns and other information at such time and in
4 such manner as may be required under Article 5 of this Act.
5     (d) Combat zone death. An individual relieved from the
6 federal income tax for any taxable year by reason of section
7 692 of the Internal Revenue Code shall not be subject to the
8 tax imposed by this Act for such taxable year.
9     (e) Certain trusts. A common trust fund described in
10 Section 584 of the Internal Revenue Code, and any other trust
11 to the extent that the grantor is treated as the owner thereof
12 under sections 671 through 678 of the Internal Revenue Code
13 shall not be subject to the tax imposed by this Act.
14     (f) Certain business activities. A person not otherwise
15 subject to the tax imposed by this Act shall not become subject
16 to the tax imposed by this Act by reason of:
17         (1) that person's ownership of tangible personal
18     property located at the premises of a printer in this State
19     with which the person has contracted for printing, or
20         (2) activities of the person's employees or agents
21     located solely at the premises of a printer and related to
22     quality control, distribution, or printing services
23     performed by a printer in the State with which the person
24     has contracted for printing.
25     (g) A nonprofit risk organization that holds a certificate
26 of authority under Article VIID of the Illinois Insurance Code

 

 

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1 is exempt from the tax imposed under this Act with respect to
2 its activities or operations in furtherance of the powers
3 conferred upon it under that Article VIID of the Illinois
4 Insurance Code.
5 (Source: P.A. 93-840, eff. 7-30-04; 93-918, eff. 1-1-05;
6 revised 10-25-04; 09500SB1544enr.)
 
7     (35 ILCS 5/207)  (from Ch. 120, par. 2-207)
8     Sec. 207. Net Losses.
9     (a) If after applying all of the (i) modifications provided
10 for in paragraph (2) of Section 203(b), paragraph (2) of
11 Section 203(c) and paragraph (2) of Section 203(d) and (ii) the
12 allocation and apportionment provisions of Article 3 of this
13 Act and subsection (c) of this Section, the taxpayer's net
14 income results in a loss;
15         (1) for any taxable year ending prior to December 31,
16     1999, such loss shall be allowed as a carryover or
17     carryback deduction in the manner allowed under Section 172
18     of the Internal Revenue Code;
19         (2) for any taxable year ending on or after December
20     31, 1999 and prior to December 31, 2003, such loss shall be
21     allowed as a carryback to each of the 2 taxable years
22     preceding the taxable year of such loss and shall be a net
23     operating loss carryover to each of the 20 taxable years
24     following the taxable year of such loss; and
25         (3) for any taxable year ending on or after December

 

 

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1     31, 2003, such loss shall be allowed as a net operating
2     loss carryover to each of the 12 taxable years following
3     the taxable year of such loss.
4     (a-5) Election to relinquish carryback and order of
5 application of losses.
6             (A) For losses incurred in tax years ending prior
7         to December 31, 2003, the taxpayer may elect to
8         relinquish the entire carryback period with respect to
9         such loss. Such election shall be made in the form and
10         manner prescribed by the Department and shall be made
11         by the due date (including extensions of time) for
12         filing the taxpayer's return for the taxable year in
13         which such loss is incurred, and such election, once
14         made, shall be irrevocable.
15             (B) The entire amount of such loss shall be carried
16         to the earliest taxable year to which such loss may be
17         carried. The amount of such loss which shall be carried
18         to each of the other taxable years shall be the excess,
19         if any, of the amount of such loss over the sum of the
20         deductions for carryback or carryover of such loss
21         allowable for each of the prior taxable years to which
22         such loss may be carried.
23     (b) Any loss determined under subsection (a) of this
24 Section must be carried back or carried forward in the same
25 manner for purposes of subsections (a) and (b) of Section 201
26 of this Act as for purposes of subsections (c) and (d) of

 

 

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1 Section 201 of this Act.
2     (c) Notwithstanding any other provision of this Act, for
3 each taxable year ending on or after December 31, 2008, for
4 purposes of computing the loss for the taxable year under
5 subsection (a) of this Section and the deduction taken into
6 account for the taxable year for a net operating loss carryover
7 under paragraphs (1), (2), and (3) of subsection (a) of this
8 Section, the loss and net operating loss carryover shall be
9 reduced in an amount equal to the reduction to the net
10 operating loss and net operating loss carryover to the taxable
11 year, respectively, required under Section 108(b)(2)(A) of the
12 Internal Revenue Code, multiplied by a fraction, the numerator
13 of which is the amount of discharge of indebtedness income that
14 is excluded from gross income for the taxable year (but only if
15 the taxable year ends on or after December 31, 2008) under
16 Section 108(a) of the Internal Revenue Code and that would have
17 been allocated and apportioned to this State under Article 3 of
18 this Act but for that exclusion, and the denominator of which
19 is the total amount of discharge of indebtedness income
20 excluded from gross income under Section 108(a) of the Internal
21 Revenue Code for the taxable year. The reduction required under
22 this subsection (c) shall be made after the determination of
23 Illinois net income for the taxable year in which the
24 indebtedness is discharged.
25 (Source: P.A. 93-29, eff. 6-20-03; 09500SB1544enr.)
 

 

 

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1     (35 ILCS 5/304)  (from Ch. 120, par. 3-304)
2     Sec. 304. Business income of persons other than residents.
3     (a) In general. The business income of a person other than
4 a resident shall be allocated to this State if such person's
5 business income is derived solely from this State. If a person
6 other than a resident derives business income from this State
7 and one or more other states, then, for tax years ending on or
8 before December 30, 1998, and except as otherwise provided by
9 this Section, such person's business income shall be
10 apportioned to this State by multiplying the income by a
11 fraction, the numerator of which is the sum of the property
12 factor (if any), the payroll factor (if any) and 200% of the
13 sales factor (if any), and the denominator of which is 4
14 reduced by the number of factors other than the sales factor
15 which have a denominator of zero and by an additional 2 if the
16 sales factor has a denominator of zero. For tax years ending on
17 or after December 31, 1998, and except as otherwise provided by
18 this Section, persons other than residents who derive business
19 income from this State and one or more other states shall
20 compute their apportionment factor by weighting their
21 property, payroll, and sales factors as provided in subsection
22 (h) of this Section.
23     (1) Property factor.
24         (A) The property factor is a fraction, the numerator of
25     which is the average value of the person's real and
26     tangible personal property owned or rented and used in the

 

 

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1     trade or business in this State during the taxable year and
2     the denominator of which is the average value of all the
3     person's real and tangible personal property owned or
4     rented and used in the trade or business during the taxable
5     year.
6         (B) Property owned by the person is valued at its
7     original cost. Property rented by the person is valued at 8
8     times the net annual rental rate. Net annual rental rate is
9     the annual rental rate paid by the person less any annual
10     rental rate received by the person from sub-rentals.
11         (C) The average value of property shall be determined
12     by averaging the values at the beginning and ending of the
13     taxable year but the Director may require the averaging of
14     monthly values during the taxable year if reasonably
15     required to reflect properly the average value of the
16     person's property.
17     (2) Payroll factor.
18         (A) The payroll factor is a fraction, the numerator of
19     which is the total amount paid in this State during the
20     taxable year by the person for compensation, and the
21     denominator of which is the total compensation paid
22     everywhere during the taxable year.
23         (B) Compensation is paid in this State if:
24             (i) The individual's service is performed entirely
25         within this State;
26             (ii) The individual's service is performed both

 

 

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1         within and without this State, but the service
2         performed without this State is incidental to the
3         individual's service performed within this State; or
4             (iii) Some of the service is performed within this
5         State and either the base of operations, or if there is
6         no base of operations, the place from which the service
7         is directed or controlled is within this State, or the
8         base of operations or the place from which the service
9         is directed or controlled is not in any state in which
10         some part of the service is performed, but the
11         individual's residence is in this State.
12             (iv) Compensation paid to nonresident professional
13         athletes.
14             (a) General. The Illinois source income of a
15         nonresident individual who is a member of a
16         professional athletic team includes the portion of the
17         individual's total compensation for services performed
18         as a member of a professional athletic team during the
19         taxable year which the number of duty days spent within
20         this State performing services for the team in any
21         manner during the taxable year bears to the total
22         number of duty days spent both within and without this
23         State during the taxable year.
24             (b) Travel days. Travel days that do not involve
25         either a game, practice, team meeting, or other similar
26         team event are not considered duty days spent in this

 

 

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1         State. However, such travel days are considered in the
2         total duty days spent both within and without this
3         State.
4             (c) Definitions. For purposes of this subpart
5         (iv):
6                 (1) The term "professional athletic team"
7             includes, but is not limited to, any professional
8             baseball, basketball, football, soccer, or hockey
9             team.
10                 (2) The term "member of a professional
11             athletic team" includes those employees who are
12             active players, players on the disabled list, and
13             any other persons required to travel and who travel
14             with and perform services on behalf of a
15             professional athletic team on a regular basis.
16             This includes, but is not limited to, coaches,
17             managers, and trainers.
18                 (3) Except as provided in items (C) and (D) of
19             this subpart (3), the term "duty days" means all
20             days during the taxable year from the beginning of
21             the professional athletic team's official
22             pre-season training period through the last game
23             in which the team competes or is scheduled to
24             compete. Duty days shall be counted for the year in
25             which they occur, including where a team's
26             official pre-season training period through the

 

 

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1             last game in which the team competes or is
2             scheduled to compete, occurs during more than one
3             tax year.
4                     (A) Duty days shall also include days on
5                 which a member of a professional athletic team
6                 performs service for a team on a date that does
7                 not fall within the foregoing period (e.g.,
8                 participation in instructional leagues, the
9                 "All Star Game", or promotional "caravans").
10                 Performing a service for a professional
11                 athletic team includes conducting training and
12                 rehabilitation activities, when such
13                 activities are conducted at team facilities.
14                     (B) Also included in duty days are game
15                 days, practice days, days spent at team
16                 meetings, promotional caravans, preseason
17                 training camps, and days served with the team
18                 through all post-season games in which the team
19                 competes or is scheduled to compete.
20                     (C) Duty days for any person who joins a
21                 team during the period from the beginning of
22                 the professional athletic team's official
23                 pre-season training period through the last
24                 game in which the team competes, or is
25                 scheduled to compete, shall begin on the day
26                 that person joins the team. Conversely, duty

 

 

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1                 days for any person who leaves a team during
2                 this period shall end on the day that person
3                 leaves the team. Where a person switches teams
4                 during a taxable year, a separate duty-day
5                 calculation shall be made for the period the
6                 person was with each team.
7                     (D) Days for which a member of a
8                 professional athletic team is not compensated
9                 and is not performing services for the team in
10                 any manner, including days when such member of
11                 a professional athletic team has been
12                 suspended without pay and prohibited from
13                 performing any services for the team, shall not
14                 be treated as duty days.
15                     (E) Days for which a member of a
16                 professional athletic team is on the disabled
17                 list and does not conduct rehabilitation
18                 activities at facilities of the team, and is
19                 not otherwise performing services for the team
20                 in Illinois, shall not be considered duty days
21                 spent in this State. All days on the disabled
22                 list, however, are considered to be included in
23                 total duty days spent both within and without
24                 this State.
25                 (4) The term "total compensation for services
26             performed as a member of a professional athletic

 

 

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1             team" means the total compensation received during
2             the taxable year for services performed:
3                     (A) from the beginning of the official
4                 pre-season training period through the last
5                 game in which the team competes or is scheduled
6                 to compete during that taxable year; and
7                     (B) during the taxable year on a date which
8                 does not fall within the foregoing period
9                 (e.g., participation in instructional leagues,
10                 the "All Star Game", or promotional caravans).
11                 This compensation shall include, but is not
12             limited to, salaries, wages, bonuses as described
13             in this subpart, and any other type of compensation
14             paid during the taxable year to a member of a
15             professional athletic team for services performed
16             in that year. This compensation does not include
17             strike benefits, severance pay, termination pay,
18             contract or option year buy-out payments,
19             expansion or relocation payments, or any other
20             payments not related to services performed for the
21             team.
22                 For purposes of this subparagraph, "bonuses"
23             included in "total compensation for services
24             performed as a member of a professional athletic
25             team" subject to the allocation described in
26             Section 302(c)(1) are: bonuses earned as a result

 

 

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1             of play (i.e., performance bonuses) during the
2             season, including bonuses paid for championship,
3             playoff or "bowl" games played by a team, or for
4             selection to all-star league or other honorary
5             positions; and bonuses paid for signing a
6             contract, unless the payment of the signing bonus
7             is not conditional upon the signee playing any
8             games for the team or performing any subsequent
9             services for the team or even making the team, the
10             signing bonus is payable separately from the
11             salary and any other compensation, and the signing
12             bonus is nonrefundable.
13     (3) Sales factor.
14         (A) The sales factor is a fraction, the numerator of
15     which is the total sales of the person in this State during
16     the taxable year, and the denominator of which is the total
17     sales of the person everywhere during the taxable year.
18         (B) Sales of tangible personal property are in this
19     State if:
20             (i) The property is delivered or shipped to a
21         purchaser, other than the United States government,
22         within this State regardless of the f. o. b. point or
23         other conditions of the sale; or
24             (ii) The property is shipped from an office, store,
25         warehouse, factory or other place of storage in this
26         State and either the purchaser is the United States

 

 

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1         government or the person is not taxable in the state of
2         the purchaser; provided, however, that premises owned
3         or leased by a person who has independently contracted
4         with the seller for the printing of newspapers,
5         periodicals or books shall not be deemed to be an
6         office, store, warehouse, factory or other place of
7         storage for purposes of this Section. Sales of tangible
8         personal property are not in this State if the seller
9         and purchaser would be members of the same unitary
10         business group but for the fact that either the seller
11         or purchaser is a person with 80% or more of total
12         business activity outside of the United States and the
13         property is purchased for resale.
14         (B-1) Patents, copyrights, trademarks, and similar
15     items of intangible personal property.
16             (i) Gross receipts from the licensing, sale, or
17         other disposition of a patent, copyright, trademark,
18         or similar item of intangible personal property are in
19         this State to the extent the item is utilized in this
20         State during the year the gross receipts are included
21         in gross income.
22             (ii) Place of utilization.
23                 (I) A patent is utilized in a state to the
24             extent that it is employed in production,
25             fabrication, manufacturing, or other processing in
26             the state or to the extent that a patented product

 

 

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1             is produced in the state. If a patent is utilized
2             in more than one state, the extent to which it is
3             utilized in any one state shall be a fraction equal
4             to the gross receipts of the licensee or purchaser
5             from sales or leases of items produced,
6             fabricated, manufactured, or processed within that
7             state using the patent and of patented items
8             produced within that state, divided by the total of
9             such gross receipts for all states in which the
10             patent is utilized.
11                 (II) A copyright is utilized in a state to the
12             extent that printing or other publication
13             originates in the state. If a copyright is utilized
14             in more than one state, the extent to which it is
15             utilized in any one state shall be a fraction equal
16             to the gross receipts from sales or licenses of
17             materials printed or published in that state
18             divided by the total of such gross receipts for all
19             states in which the copyright is utilized.
20                 (III) Trademarks and other items of intangible
21             personal property governed by this paragraph (B-1)
22             are utilized in the state in which the commercial
23             domicile of the licensee or purchaser is located.
24             (iii) If the state of utilization of an item of
25         property governed by this paragraph (B-1) cannot be
26         determined from the taxpayer's books and records or

 

 

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1         from the books and records of any person related to the
2         taxpayer within the meaning of Section 267(b) of the
3         Internal Revenue Code, 26 U.S.C. 267, the gross
4         receipts attributable to that item shall be excluded
5         from both the numerator and the denominator of the
6         sales factor.
7         (B-2) Gross receipts from the license, sale, or other
8     disposition of patents, copyrights, trademarks, and
9     similar items of intangible personal property may be
10     included in the numerator or denominator of the sales
11     factor only if gross receipts from licenses, sales, or
12     other disposition of such items comprise more than 50% of
13     the taxpayer's total gross receipts included in gross
14     income during the tax year and during each of the 2
15     immediately preceding tax years; provided that, when a
16     taxpayer is a member of a unitary business group, such
17     determination shall be made on the basis of the gross
18     receipts of the entire unitary business group.
19         (C) For taxable years ending before December 31, 2008,
20     sales Sales, other than sales governed by paragraphs (B),
21     and (B-1), and (B-2), are in this State if:
22             (i) The income-producing activity is performed in
23         this State; or
24             (ii) The income-producing activity is performed
25         both within and without this State and a greater
26         proportion of the income-producing activity is

 

 

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1         performed within this State than without this State,
2         based on performance costs.
3         (C-5) For taxable years ending on or after December 31,
4     2008, sales, other than sales governed by paragraphs (B),
5     (B-1), and (B-2), are in this State if the purchaser is in
6     this State or the sale is otherwise attributable to this
7     State's marketplace. The following examples are
8     illustrative:
9             (i) Sales from the sale or lease of real property
10         are in this State if the property is located in this
11         State.
12             (ii) Sales from the lease or rental of tangible
13         personal property are in this State if the property is
14         located in this State during the rental period. Sales
15         from the lease or rental of tangible personal property
16         that is characteristically moving property, including,
17         but not limited to, motor vehicles, rolling stock,
18         aircraft, vessels, or mobile equipment are in this
19         State to the extent that the property is used in this
20         State.
21             (iii) Sales of intangible personal property are in
22         this State if the purchaser realizes benefit from the
23         property in this State. If the purchaser realizes
24         benefit from the property both within and without this
25         State, the gross receipts from the sale shall be
26         divided among those states in which the taxpayer is

 

 

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1         taxable in proportion to the benefit in each state. If
2         the proportionate benefit in this State cannot be
3         determined, the sale shall be excluded from both the
4         numerator and the denominator of the sales factor.
5             (iv) Sales of services are in this State if the
6         benefit of the service is realized in this State. If
7         the benefit of the service is realized both within and
8         without this State, the gross receipts from the sale
9         shall be divided among those states in which the
10         taxpayer is taxable in proportion to the benefit of
11         service realized in each state. If the proportionate
12         benefit in this State cannot be determined, the sale
13         shall be excluded from both the numerator and the
14         denominator of the sales factor. The Department may
15         adopt rules prescribing where the benefit of specific
16         types of service, including, but not limited to,
17         telecommunications, broadcast, cable, advertising,
18         publishing, and utility service, is realized.
19         (D) For taxable years ending on or after December 31,
20     1995, the following items of income shall not be included
21     in the numerator or denominator of the sales factor:
22     dividends; amounts included under Section 78 of the
23     Internal Revenue Code; and Subpart F income as defined in
24     Section 952 of the Internal Revenue Code. No inference
25     shall be drawn from the enactment of this paragraph (D) in
26     construing this Section for taxable years ending before

 

 

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1     December 31, 1995.
2         (E) Paragraphs (B-1) and (B-2) shall apply to tax years
3     ending on or after December 31, 1999, provided that a
4     taxpayer may elect to apply the provisions of these
5     paragraphs to prior tax years. Such election shall be made
6     in the form and manner prescribed by the Department, shall
7     be irrevocable, and shall apply to all tax years; provided
8     that, if a taxpayer's Illinois income tax liability for any
9     tax year, as assessed under Section 903 prior to January 1,
10     1999, was computed in a manner contrary to the provisions
11     of paragraphs (B-1) or (B-2), no refund shall be payable to
12     the taxpayer for that tax year to the extent such refund is
13     the result of applying the provisions of paragraph (B-1) or
14     (B-2) retroactively. In the case of a unitary business
15     group, such election shall apply to all members of such
16     group for every tax year such group is in existence, but
17     shall not apply to any taxpayer for any period during which
18     that taxpayer is not a member of such group.
19     (b) Insurance companies.
20         (1) In general. Except as otherwise provided by
21     paragraph (2), business income of an insurance company for
22     a taxable year shall be apportioned to this State by
23     multiplying such income by a fraction, the numerator of
24     which is the direct premiums written for insurance upon
25     property or risk in this State, and the denominator of
26     which is the direct premiums written for insurance upon

 

 

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1     property or risk everywhere. For purposes of this
2     subsection, the term "direct premiums written" means the
3     total amount of direct premiums written, assessments and
4     annuity considerations as reported for the taxable year on
5     the annual statement filed by the company with the Illinois
6     Director of Insurance in the form approved by the National
7     Convention of Insurance Commissioners or such other form as
8     may be prescribed in lieu thereof.
9         (2) Reinsurance. If the principal source of premiums
10     written by an insurance company consists of premiums for
11     reinsurance accepted by it, the business income of such
12     company shall be apportioned to this State by multiplying
13     such income by a fraction, the numerator of which is the
14     sum of (i) direct premiums written for insurance upon
15     property or risk in this State, plus (ii) premiums written
16     for reinsurance accepted in respect of property or risk in
17     this State, and the denominator of which is the sum of
18     (iii) direct premiums written for insurance upon property
19     or risk everywhere, plus (iv) premiums written for
20     reinsurance accepted in respect of property or risk
21     everywhere. For taxable years ending before December 31,
22     2008, for purposes of this paragraph, premiums written for
23     reinsurance accepted in respect of property or risk in this
24     State, whether or not otherwise determinable, may, at the
25     election of the company, be determined on the basis of the
26     proportion which premiums written for reinsurance accepted

 

 

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1     from companies commercially domiciled in Illinois bears to
2     premiums written for reinsurance accepted from all
3     sources, or, alternatively, in the proportion which the sum
4     of the direct premiums written for insurance upon property
5     or risk in this State by each ceding company from which
6     reinsurance is accepted bears to the sum of the total
7     direct premiums written by each such ceding company for the
8     taxable year.
9     (c) Financial organizations.
10         (1) In general. For taxable years ending before
11     December 31, 2008, business Business income of a financial
12     organization shall be apportioned to this State by
13     multiplying such income by a fraction, the numerator of
14     which is its business income from sources within this
15     State, and the denominator of which is its business income
16     from all sources. For the purposes of this subsection, the
17     business income of a financial organization from sources
18     within this State is the sum of the amounts referred to in
19     subparagraphs (A) through (E) following, but excluding the
20     adjusted income of an international banking facility as
21     determined in paragraph (2):
22             (A) Fees, commissions or other compensation for
23         financial services rendered within this State;
24             (B) Gross profits from trading in stocks, bonds or
25         other securities managed within this State;
26             (C) Dividends, and interest from Illinois

 

 

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1         customers, which are received within this State;
2             (D) Interest charged to customers at places of
3         business maintained within this State for carrying
4         debit balances of margin accounts, without deduction
5         of any costs incurred in carrying such accounts; and
6             (E) Any other gross income resulting from the
7         operation as a financial organization within this
8         State. In computing the amounts referred to in
9         paragraphs (A) through (E) of this subsection, any
10         amount received by a member of an affiliated group
11         (determined under Section 1504(a) of the Internal
12         Revenue Code but without reference to whether any such
13         corporation is an "includible corporation" under
14         Section 1504(b) of the Internal Revenue Code) from
15         another member of such group shall be included only to
16         the extent such amount exceeds expenses of the
17         recipient directly related thereto.
18         (2) International Banking Facility. For taxable years
19     ending before December 31, 2008:
20             (A) Adjusted Income. The adjusted income of an
21         international banking facility is its income reduced
22         by the amount of the floor amount.
23             (B) Floor Amount. The floor amount shall be the
24         amount, if any, determined by multiplying the income of
25         the international banking facility by a fraction, not
26         greater than one, which is determined as follows:

 

 

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1                 (i) The numerator shall be:
2                 The average aggregate, determined on a
3             quarterly basis, of the financial organization's
4             loans to banks in foreign countries, to foreign
5             domiciled borrowers (except where secured
6             primarily by real estate) and to foreign
7             governments and other foreign official
8             institutions, as reported for its branches,
9             agencies and offices within the state on its
10             "Consolidated Report of Condition", Schedule A,
11             Lines 2.c., 5.b., and 7.a., which was filed with
12             the Federal Deposit Insurance Corporation and
13             other regulatory authorities, for the year 1980,
14             minus
15                 The average aggregate, determined on a
16             quarterly basis, of such loans (other than loans of
17             an international banking facility), as reported by
18             the financial institution for its branches,
19             agencies and offices within the state, on the
20             corresponding Schedule and lines of the
21             Consolidated Report of Condition for the current
22             taxable year, provided, however, that in no case
23             shall the amount determined in this clause (the
24             subtrahend) exceed the amount determined in the
25             preceding clause (the minuend); and
26                 (ii) the denominator shall be the average

 

 

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1             aggregate, determined on a quarterly basis, of the
2             international banking facility's loans to banks in
3             foreign countries, to foreign domiciled borrowers
4             (except where secured primarily by real estate)
5             and to foreign governments and other foreign
6             official institutions, which were recorded in its
7             financial accounts for the current taxable year.
8             (C) Change to Consolidated Report of Condition and
9         in Qualification. In the event the Consolidated Report
10         of Condition which is filed with the Federal Deposit
11         Insurance Corporation and other regulatory authorities
12         is altered so that the information required for
13         determining the floor amount is not found on Schedule
14         A, lines 2.c., 5.b. and 7.a., the financial institution
15         shall notify the Department and the Department may, by
16         regulations or otherwise, prescribe or authorize the
17         use of an alternative source for such information. The
18         financial institution shall also notify the Department
19         should its international banking facility fail to
20         qualify as such, in whole or in part, or should there
21         be any amendment or change to the Consolidated Report
22         of Condition, as originally filed, to the extent such
23         amendment or change alters the information used in
24         determining the floor amount.
25         (3) For taxable years ending on or after December 31,
26     2008, the business income of a financial organization shall

 

 

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1     be apportioned to this State by multiplying such income by
2     a fraction, the numerator of which is its gross receipts
3     from sources in this State or otherwise attributable to
4     this State's marketplace and the denominator of which is
5     its gross receipts everywhere during the taxable year.
6     "Gross receipts" for purposes of this subparagraph (3)
7     means gross income, including net taxable gain on
8     disposition of assets, including securities and money
9     market instruments, when derived from transactions and
10     activities in the regular course of the financial
11     organization's trade or business. If a person derives
12     business income from activities in addition to the
13     provision of financial services, this subparagraph (3)
14     shall apply only to its business income from financial
15     services, and its other business income shall be
16     apportioned to this State under the applicable provisions
17     of this Section. The following examples are illustrative:
18             (i) Receipts from the lease or rental of real or
19         tangible personal property are in this State if the
20         property is located in this State during the rental
21         period. Receipts from the lease or rental of tangible
22         personal property that is characteristically moving
23         property, including, but not limited to, motor
24         vehicles, rolling stock, aircraft, vessels, or mobile
25         equipment are from sources in this State to the extent
26         that the property is used in this State.

 

 

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1             (ii) Interest income, commissions, fees, gains on
2         disposition, and other receipts from assets in the
3         nature of loans that are secured primarily by real
4         estate or tangible personal property are from sources
5         in this State if the security is located in this State.
6             (iii) Interest income, commissions, fees, gains on
7         disposition, and other receipts from consumer loans
8         that are not secured by real or tangible personal
9         property are from sources in this State if the debtor
10         is a resident of this State.
11             (iv) Interest income, commissions, fees, gains on
12         disposition, and other receipts from commercial loans
13         and installment obligations that are not secured by
14         real or tangible personal property are from sources in
15         this State if the proceeds of the loan are to be
16         applied in this State. If it cannot be determined where
17         the funds are to be applied, the income and receipts
18         are from sources in this State if the office of the
19         borrower from which the loan was negotiated in the
20         regular course of business is located in this State. If
21         the location of this office cannot be determined, the
22         income and receipts shall be excluded from the
23         numerator and denominator of the sales factor.
24             (v) Interest income, fees, gains on disposition,
25         service charges, merchant discount income, and other
26         receipts from credit card receivables are from sources

 

 

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1         in this State if the card charges are regularly billed
2         to a customer in this State.
3             (vi) Receipts from the performance of services,
4         including, but not limited to, fiduciary, advisory,
5         and brokerage services, are in this State if the
6         benefit of the service is realized in this State. If
7         the benefit of the service is realized both within and
8         without this State, the gross receipts from the sale
9         shall be divided among those states in which the
10         taxpayer is taxable in proportion to the benefit of
11         service realized in each state. If the proportionate
12         benefit in this State cannot be determined, the sale
13         shall be excluded from both the numerator and the
14         denominator of the gross receipts factor.
15             (vii) Receipts from the issuance of travelers
16         checks and money orders are from sources in this State
17         if the checks and money orders are issued from a
18         location within this State.
19             (viii) In the case of a financial organization that
20         accepts deposits, receipts from investments and from
21         money market instruments are apportioned to this State
22         based on the ratio that the total deposits of the
23         financial organization (including all members of the
24         financial organization's unitary group) from this
25         State, its residents, (including businesses with an
26         office or other place of business in this State), and

 

 

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1         its political subdivisions, agencies, and
2         instrumentalities bear to total deposits everywhere.
3         For purposes of this subdivision, deposits must be
4         attributed to this State under the preceding sentence,
5         whether or not the deposits are accepted or maintained
6         by the financial organization at locations within this
7         State. In the case of a financial organization that
8         does not accept deposits, receipts from investments in
9         securities and from money market instruments shall be
10         excluded from the numerator and the denominator of the
11         gross receipts factor.
12         (4) As used in subparagraph (3), "deposit" includes but
13     is not limited to:
14             (i) the unpaid balance of money or its equivalent
15         received or held by a financial institution in the
16         usual course of business and for which it has given or
17         is obligated to give credit, either conditionally or
18         unconditionally, to a commercial, checking, savings,
19         time, or thrift account whether or not advance notice
20         is required to withdraw the credited funds, or which is
21         evidenced by its certificate of deposit, thrift
22         certificate, investment certificate, or certificate of
23         indebtedness, or other similar name, or a check or
24         draft drawn against a deposit account and certified by
25         the financial organization, or a letter of credit or a
26         traveler's check on which the financial organization

 

 

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1         is primarily liable. However, without limiting the
2         generality of the term "money or its equivalent", any
3         such account or instrument must be regarded as
4         evidencing the receipt of the equivalent of money when
5         credited or issued in exchange for checks or drafts or
6         for a promissory note upon which the person obtaining
7         the credit or instrument is primarily or secondarily
8         liable, or for a charge against a deposit account, or
9         in settlement of checks, drafts, or other instruments
10         forwarded to the bank for collection;
11             (ii) trust funds received or held by the financial
12         organization, whether held in the trust department or
13         held or deposited in any other department of the
14         financial organization;
15             (iii) money received or held by a financial
16         organization, or the credit given for money or its
17         equivalent received or held by a financial
18         organization, in the usual course of business for a
19         special or specific purpose, regardless of the legal
20         relationship so established. Under this paragraph,
21         "deposit" includes, but is not limited to, escrow
22         funds, funds held as security for an obligation due to
23         the financial organization or others, including funds
24         held as dealers reserves, or for securities loaned by
25         the financial organization, funds deposited by a
26         debtor to meet maturing obligations, funds deposited

 

 

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1         as advance payment on subscriptions to United States
2         government securities, funds held for distribution or
3         purchase of securities, funds held to meet its
4         acceptances or letters of credit, and withheld taxes.
5         It does not include funds received by the financial
6         organization for immediate application to the
7         reduction of an indebtedness to the receiving
8         financial organization, or under condition that the
9         receipt of the funds immediately reduces or
10         extinguishes the indebtedness;
11             (iv) outstanding drafts, including advice of
12         another financial organization, cashier's checks,
13         money orders, or other officer's checks issued in the
14         usual course of business for any purpose, but not
15         including those issued in payment for services,
16         dividends, or purchases or other costs or expenses of
17         the financial organization itself; and
18             (v) money or its equivalent held as a credit
19         balance by a financial organization on behalf of its
20         customer if the entity is engaged in soliciting and
21         holding such balances in the regular course of its
22         business.
23         (5) As used in subparagraph (3), "money market
24     instruments" includes but is not limited to:
25             (i) Interest-bearing deposits, federal funds sold
26         and securities purchased under agreements to resell,

 

 

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1         commercial paper, banker's acceptances, and purchased
2         certificates of deposit and similar instruments to the
3         extent that the instruments are reflected as assets
4         under generally accepted accounting principles.
5             "Securities" means corporate stock, bonds, and
6         other securities (including, for purposes of taxation
7         of gains on securities and for purchases under
8         agreements to resell, United States Treasury
9         securities, obligations of United States government
10         agencies and corporations, obligations of state and
11         political subdivisions, the interest on which is
12         exempt from Illinois income tax), participations in
13         securities backed by mortgages held by United States or
14         state government agencies, loan-backed securities, and
15         similar investments to the extent the investments are
16         reflected as assets under generally accepted
17         accounting principles.
18             (ii) For purposes of subparagraph (3), "money
19         market instruments" shall include investments in
20         investment partnerships, trusts, pools, funds,
21         investment companies, or any similar entity in
22         proportion to the investment of the entity in money
23         market instruments, and "securities" shall include
24         investments in investment partnerships, trusts, pools,
25         funds, investment companies, or any similar entity in
26         proportion to the investment of the entity in

 

 

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1         securities.
2     (d) Transportation services. For taxable years ending
3 before December 31, 2008, business Business income derived from
4 furnishing transportation services shall be apportioned to
5 this State in accordance with paragraphs (1) and (2):
6         (1) Such business income (other than that derived from
7     transportation by pipeline) shall be apportioned to this
8     State by multiplying such income by a fraction, the
9     numerator of which is the revenue miles of the person in
10     this State, and the denominator of which is the revenue
11     miles of the person everywhere. For purposes of this
12     paragraph, a revenue mile is the transportation of 1
13     passenger or 1 net ton of freight the distance of 1 mile
14     for a consideration. Where a person is engaged in the
15     transportation of both passengers and freight, the
16     fraction above referred to shall be determined by means of
17     an average of the passenger revenue mile fraction and the
18     freight revenue mile fraction, weighted to reflect the
19     person's
20             (A) relative railway operating income from total
21         passenger and total freight service, as reported to the
22         Interstate Commerce Commission, in the case of
23         transportation by railroad, and
24             (B) relative gross receipts from passenger and
25         freight transportation, in case of transportation
26         other than by railroad.

 

 

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1         (2) Such business income derived from transportation
2     by pipeline shall be apportioned to this State by
3     multiplying such income by a fraction, the numerator of
4     which is the revenue miles of the person in this State, and
5     the denominator of which is the revenue miles of the person
6     everywhere. For the purposes of this paragraph, a revenue
7     mile is the transportation by pipeline of 1 barrel of oil,
8     1,000 cubic feet of gas, or of any specified quantity of
9     any other substance, the distance of 1 mile for a
10     consideration.
11         (3) For taxable years ending on or after December 31,
12     2008, business income derived from providing
13     transportation services other than airline services shall
14     be apportioned to this State by using a fraction, (a) the
15     numerator of which shall be (i) all receipts from any
16     movement or shipment of people, goods, mail, oil, gas, or
17     any other substance (other than by airline) that both
18     originates and terminates in this State, plus (ii) that
19     portion of the person's gross receipts from movements or
20     shipments of people, goods, mail, oil, gas, or any other
21     substance (other than by airline) passing through, into, or
22     out of this State, that is determined by the ratio that the
23     miles traveled in this State bears to total miles from
24     point of origin to point of destination and (b) the
25     denominator of which shall be all revenue derived from the
26     movement or shipment of people, goods, mail, oil, gas, or

 

 

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1     any other substance (other than by airline). If a person
2     derives business income from activities in addition to the
3     provision of transportation services (other than by
4     airline), this subsection shall apply only to its business
5     income from transportation services and its other business
6     income shall be apportioned to this State according to the
7     applicable provisions of this Section.
8         (4) For taxable years ending on or after December 31,
9     2008, business income derived from providing airline
10     services shall be apportioned to this State by using a
11     fraction, (a) the numerator of which shall be arrivals of
12     aircraft to and departures from this State weighted as to
13     cost of aircraft by type and (b) the denominator of which
14     shall be total arrivals and departures of aircraft weighted
15     as to cost of aircraft by type. If a person derives
16     business income from activities in addition to the
17     provision of airline services, this subsection shall apply
18     only to its business income from airline services and its
19     other business income shall be apportioned to this State
20     under the applicable provisions of this Section.
21     (e) Combined apportionment. Where 2 or more persons are
22 engaged in a unitary business as described in subsection
23 (a)(27) of Section 1501, a part of which is conducted in this
24 State by one or more members of the group, the business income
25 attributable to this State by any such member or members shall
26 be apportioned by means of the combined apportionment method.

 

 

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1     (f) Alternative allocation. If the allocation and
2 apportionment provisions of subsections (a) through (e) and of
3 subsection (h) do not fairly represent the extent of a person's
4 business activity in this State, the person may petition for,
5 or the Director may, without a petition, permit or require, in
6 respect of all or any part of the person's business activity,
7 if reasonable:
8         (1) Separate accounting;
9         (2) The exclusion of any one or more factors;
10         (3) The inclusion of one or more additional factors
11     which will fairly represent the person's business
12     activities in this State; or
13         (4) The employment of any other method to effectuate an
14     equitable allocation and apportionment of the person's
15     business income.
16     (g) Cross reference. For allocation of business income by
17 residents, see Section 301(a).
18     (h) For tax years ending on or after December 31, 1998, the
19 apportionment factor of persons who apportion their business
20 income to this State under subsection (a) shall be equal to:
21         (1) for tax years ending on or after December 31, 1998
22     and before December 31, 1999, 16 2/3% of the property
23     factor plus 16 2/3% of the payroll factor plus 66 2/3% of
24     the sales factor;
25         (2) for tax years ending on or after December 31, 1999
26     and before December 31, 2000, 8 1/3% of the property factor

 

 

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1     plus 8 1/3% of the payroll factor plus 83 1/3% of the sales
2     factor;
3         (3) for tax years ending on or after December 31, 2000,
4     the sales factor.
5 If, in any tax year ending on or after December 31, 1998 and
6 before December 31, 2000, the denominator of the payroll,
7 property, or sales factor is zero, the apportionment factor
8 computed in paragraph (1) or (2) of this subsection for that
9 year shall be divided by an amount equal to 100% minus the
10 percentage weight given to each factor whose denominator is
11 equal to zero.
12 (Source: P.A. 94-247, eff. 1-1-06; 09500SB1544enr.)
 
13     (35 ILCS 5/502)  (from Ch. 120, par. 5-502)
14     Sec. 502. Returns and notices.
15     (a) In general. A return with respect to the taxes imposed
16 by this Act shall be made by every person for any taxable year:
17         (1) for which such person is liable for a tax imposed
18     by this Act, or
19         (2) in the case of a resident or in the case of a
20     corporation which is qualified to do business in this
21     State, for which such person is required to make a federal
22     income tax return, regardless of whether such person is
23     liable for a tax imposed by this Act. However, this
24     paragraph shall not require a resident to make a return if
25     such person has an Illinois base income of the basic amount

 

 

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1     in Section 204(b) or less and is either claimed as a
2     dependent on another person's tax return under the Internal
3     Revenue Code of 1986, or is claimed as a dependent on
4     another person's tax return under this Act.
5     Notwithstanding the provisions of paragraph (1), a
6 nonresident whose Illinois income tax liability under
7 subsections (a), (b), (c), and (d) of Section 201 of this Act
8 is paid in full after taking into account the credits allowed
9 under subsection (f) of this Section or allowed under Section
10 709.5 of this Act shall not be required to file a return under
11 this subsection (a).
12     (b) Fiduciaries and receivers.
13         (1) Decedents. If an individual is deceased, any return
14     or notice required of such individual under this Act shall
15     be made by his executor, administrator, or other person
16     charged with the property of such decedent.
17         (2) Individuals under a disability. If an individual is
18     unable to make a return or notice required under this Act,
19     the return or notice required of such individual shall be
20     made by his duly authorized agent, guardian, fiduciary or
21     other person charged with the care of the person or
22     property of such individual.
23         (3) Estates and trusts. Returns or notices required of
24     an estate or a trust shall be made by the fiduciary
25     thereof.
26         (4) Receivers, trustees and assignees for

 

 

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1     corporations. In a case where a receiver, trustee in
2     bankruptcy, or assignee, by order of a court of competent
3     jurisdiction, by operation of law, or otherwise, has
4     possession of or holds title to all or substantially all
5     the property or business of a corporation, whether or not
6     such property or business is being operated, such receiver,
7     trustee, or assignee shall make the returns and notices
8     required of such corporation in the same manner and form as
9     corporations are required to make such returns and notices.
10     (c) Joint returns by husband and wife.
11         (1) Except as provided in paragraph (3), if a husband
12     and wife file a joint federal income tax return for a
13     taxable year they shall file a joint return under this Act
14     for such taxable year and their liabilities shall be joint
15     and several, but if the federal income tax liability of
16     either spouse is determined on a separate federal income
17     tax return, they shall file separate returns under this
18     Act.
19         (2) If neither spouse is required to file a federal
20     income tax return and either or both are required to file a
21     return under this Act, they may elect to file separate or
22     joint returns and pursuant to such election their
23     liabilities shall be separate or joint and several.
24         (3) If either husband or wife is a resident and the
25     other is a nonresident, they shall file separate returns in
26     this State on such forms as may be required by the

 

 

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1     Department in which event their tax liabilities shall be
2     separate; but they may elect to determine their joint net
3     income and file a joint return as if both were residents
4     and in such case, their liabilities shall be joint and
5     several.
6         (4) Innocent spouses.
7             (A) However, for tax liabilities arising and paid
8         prior to August 13, 1999, an innocent spouse shall be
9         relieved of liability for tax (including interest and
10         penalties) for any taxable year for which a joint
11         return has been made, upon submission of proof that the
12         Internal Revenue Service has made a determination
13         under Section 6013(e) of the Internal Revenue Code, for
14         the same taxable year, which determination relieved
15         the spouse from liability for federal income taxes. If
16         there is no federal income tax liability at issue for
17         the same taxable year, the Department shall rely on the
18         provisions of Section 6013(e) to determine whether the
19         person requesting innocent spouse abatement of tax,
20         penalty, and interest is entitled to that relief.
21             (B) For tax liabilities arising on and after August
22         13, 1999 or which arose prior to that date, but remain
23         unpaid as of that date, if an individual who filed a
24         joint return for any taxable year has made an election
25         under this paragraph, the individual's liability for
26         any tax shown on the joint return shall not exceed the

 

 

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1         individual's separate return amount and the
2         individual's liability for any deficiency assessed for
3         that taxable year shall not exceed the portion of the
4         deficiency properly allocable to the individual. For
5         purposes of this paragraph:
6                 (i) An election properly made pursuant to
7             Section 6015 of the Internal Revenue Code shall
8             constitute an election under this paragraph,
9             provided that the election shall not be effective
10             until the individual has notified the Department
11             of the election in the form and manner prescribed
12             by the Department.
13                 (ii) If no election has been made under Section
14             6015, the individual may make an election under
15             this paragraph in the form and manner prescribed by
16             the Department, provided that no election may be
17             made if the Department finds that assets were
18             transferred between individuals filing a joint
19             return as part of a scheme by such individuals to
20             avoid payment of Illinois income tax and the
21             election shall not eliminate the individual's
22             liability for any portion of a deficiency
23             attributable to an error on the return of which the
24             individual had actual knowledge as of the date of
25             filing.
26                 (iii) In determining the separate return

 

 

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1             amount or portion of any deficiency attributable
2             to an individual, the Department shall follow the
3             provisions in subsections (c) and (d) of Section
4             6015 of the Internal Revenue Code.
5                 (iv) In determining the validity of an
6             individual's election under subparagraph (ii) and
7             in determining an electing individual's separate
8             return amount or portion of any deficiency under
9             subparagraph (iii), any determination made by the
10             Secretary of the Treasury, by the United States Tax
11             Court on petition for review of a determination by
12             the Secretary of the Treasury, or on appeal from
13             the United States Tax Court under Section 6015 of
14             the Internal Revenue Code regarding criteria for
15             eligibility or under subsection (d) of Section
16             6015 of the Internal Revenue Code regarding the
17             allocation of any item of income, deduction,
18             payment, or credit between an individual making
19             the federal election and that individual's spouse
20             shall be conclusively presumed to be correct. With
21             respect to any item that is not the subject of a
22             determination by the Secretary of the Treasury or
23             the federal courts, in any proceeding involving
24             this subsection, the individual making the
25             election shall have the burden of proof with
26             respect to any item except that the Department

 

 

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1             shall have the burden of proof with respect to
2             items in subdivision (ii).
3                 (v) Any election made by an individual under
4             this subsection shall apply to all years for which
5             that individual and the spouse named in the
6             election have filed a joint return.
7                 (vi) After receiving a notice that the federal
8             election has been made or after receiving an
9             election under subdivision (ii), the Department
10             shall take no collection action against the
11             electing individual for any liability arising from
12             a joint return covered by the election until the
13             Department has notified the electing individual in
14             writing that the election is invalid or of the
15             portion of the liability the Department has
16             allocated to the electing individual. Within 60
17             days (150 days if the individual is outside the
18             United States) after the issuance of such
19             notification, the individual may file a written
20             protest of the denial of the election or of the
21             Department's determination of the liability
22             allocated to him or her and shall be granted a
23             hearing within the Department under the provisions
24             of Section 908. If a protest is filed, the
25             Department shall take no collection action against
26             the electing individual until the decision

 

 

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1             regarding the protest has become final under
2             subsection (d) of Section 908 or, if
3             administrative review of the Department's decision
4             is requested under Section 1201, until the
5             decision of the court becomes final.
6     (d) Partnerships. Every partnership having any base income
7 allocable to this State in accordance with section 305(c) shall
8 retain information concerning all items of income, gain, loss
9 and deduction; the names and addresses of all of the partners,
10 or names and addresses of members of a limited liability
11 company, or other persons who would be entitled to share in the
12 base income of the partnership if distributed; the amount of
13 the distributive share of each; and such other pertinent
14 information as the Department may by forms or regulations
15 prescribe. The partnership shall make that information
16 available to the Department when requested by the Department.
17     (e) For taxable years ending on or after December 31, 1985,
18 and before December 31, 1993, taxpayers that are corporations
19 (other than Subchapter S corporations) having the same taxable
20 year and that are members of the same unitary business group
21 may elect to be treated as one taxpayer for purposes of any
22 original return, amended return which includes the same
23 taxpayers of the unitary group which joined in the election to
24 file the original return, extension, claim for refund,
25 assessment, collection and payment and determination of the
26 group's tax liability under this Act. This subsection (e) does

 

 

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1 not permit the election to be made for some, but not all, of
2 the purposes enumerated above. For taxable years ending on or
3 after December 31, 1987, corporate members (other than
4 Subchapter S corporations) of the same unitary business group
5 making this subsection (e) election are not required to have
6 the same taxable year.
7     For taxable years ending on or after December 31, 1993,
8 taxpayers that are corporations (other than Subchapter S
9 corporations) and that are members of the same unitary business
10 group shall be treated as one taxpayer for purposes of any
11 original return, amended return which includes the same
12 taxpayers of the unitary group which joined in filing the
13 original return, extension, claim for refund, assessment,
14 collection and payment and determination of the group's tax
15 liability under this Act.
16     (f) The Department may promulgate regulations to permit
17 nonresident individual partners of the same partnership,
18 nonresident Subchapter S corporation shareholders of the same
19 Subchapter S corporation, and nonresident individuals
20 transacting an insurance business in Illinois under a Lloyds
21 plan of operation, and nonresident individual members of the
22 same limited liability company that is treated as a partnership
23 under Section 1501 (a)(16) of this Act, to file composite
24 individual income tax returns reflecting the composite income
25 of such individuals allocable to Illinois and to make composite
26 individual income tax payments. The Department may by

 

 

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1 regulation also permit such composite returns to include the
2 income tax owed by Illinois residents attributable to their
3 income from partnerships, Subchapter S corporations, insurance
4 businesses organized under a Lloyds plan of operation, or
5 limited liability companies that are treated as partnership
6 under Section 1501(a)(16) of this Act, in which case such
7 Illinois residents will be permitted to claim credits on their
8 individual returns for their shares of the composite tax
9 payments. This paragraph of subsection (f) applies to taxable
10 years ending on or after December 31, 1987.
11     For taxable years ending on or after December 31, 1999, the
12 Department may, by regulation, also permit any persons
13 transacting an insurance business organized under a Lloyds plan
14 of operation to file composite returns reflecting the income of
15 such persons allocable to Illinois and the tax rates applicable
16 to such persons under Section 201 and to make composite tax
17 payments and shall, by regulation, also provide that the income
18 and apportionment factors attributable to the transaction of an
19 insurance business organized under a Lloyds plan of operation
20 by any person joining in the filing of a composite return
21 shall, for purposes of allocating and apportioning income under
22 Article 3 of this Act and computing net income under Section
23 202 of this Act, be excluded from any other income and
24 apportionment factors of that person or of any unitary business
25 group, as defined in subdivision (a)(27) of Section 1501, to
26 which that person may belong.

 

 

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1     For taxable years ending on or after December 31, 2008,
2 every nonresident shall be allowed a credit against his or her
3 liability under subsections (a) and (b) of Section 201 for any
4 amount of tax reported on a composite return and paid on his or
5 her behalf under this subsection (f). Residents (other than
6 persons transacting an insurance business organized under a
7 Lloyds plan of operation) may claim a credit for taxes reported
8 on a composite return and paid on their behalf under this
9 subsection (f) only as permitted by the Department by rule.
10     (f-5) For taxable years ending on or after December 31,
11 2008, the Department may adopt rules to provide that, when a
12 partnership or Subchapter S corporation has made an error in
13 determining the amount of any item of income, deduction,
14 addition, subtraction, or credit required to be reported on its
15 return that affects the liability imposed under this Act on a
16 partner or shareholder, the partnership or Subchapter S
17 corporation may report the changes in liabilities of its
18 partners or shareholders and claim a refund of the resulting
19 overpayments, or pay the resulting underpayments, on behalf of
20 its partners and shareholders.
21     (g) The Department may adopt rules to authorize the
22 electronic filing of any return required to be filed under this
23 Section.
24 (Source: P.A. 94-1074, eff. 12-26-06; 09500SB1544enr.)
 
25     (35 ILCS 5/711)  (from Ch. 120, par. 7-711)

 

 

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1     Sec. 711. Payor's Return and Payment of Tax Withheld. (a)
2 In general. Every payor required to deduct and withhold tax
3 under Section 710 (and until January 1, 1989, Sections 708 and
4 709) shall be subject to the same reporting requirements
5 regarding taxes withheld and the same monthly and quarter
6 monthly (weekly) payment requirements as an employer subject to
7 the provisions of Section 701. For purposes of monthly and
8 quarter monthly (weekly) payments, the total tax withheld under
9 Sections 701, 708, 709 and 710 shall be considered in the
10 aggregate.
11     (a-5) Every partnership, Subchapter S corporation, or
12 trust required to withhold tax under Section 709.5 shall report
13 the amounts withheld and the partners, shareholders, or
14 beneficiaries from whom the amounts were withheld, and pay over
15 the amount withheld, no later than the due date (without regard
16 to extensions) of the tax return of the partnership, Subchapter
17 S corporation, or trust for the taxable year.
18     (b) Information statement. Every payor required to deduct
19 and withhold tax under Section 710 (and until January 1, 1989,
20 Sections 708 and 709) shall furnish in duplicate to each party
21 entitled to the credit for such withholding under subsection
22 (b) of Section 709.5 (c) of Section 708, subsection (c) of
23 Section 709, and subsection (b) of Section 710, respectively,
24 on or before January 31 of the succeeding calendar year for
25 amounts withheld under Section 710 or the due date (without
26 regard to extensions) of the return of the partnership,

 

 

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1 Subchapter S corporation, or trust for the taxable year for
2 amounts withheld under Section 709.5 for the taxable year, a
3 written statement in such form as the Department may by
4 regulation prescribe showing the amount of the payments, the
5 amount deducted and withheld as tax, and such other information
6 as the Department may prescribe. A copy of such statement shall
7 be filed by the party entitled to the credit for the
8 withholding under subsection (b) of Section 709.5 (c) of
9 Section 708, subsection (c) of Section 709, or subsection (b)
10 of Section 710 with his return for the taxable year to which it
11 relates.
12 (Source: P.A. 85-299; 85-982; 09500SB1544enr.)
 
13     (35 ILCS 5/712)  (from Ch. 120, par. 7-712)
14     Sec. 712. Payor's Liability For Withheld Taxes. Every payor
15 who deducts and withholds or is required to deduct and withhold
16 tax under Sections 709.5 or Section 710 (and until January 1,
17 1989, Sections 708 and 709) is liable for such tax. For
18 purposes of assessment and collection, any amount withheld or
19 required to be withheld and paid over to the Department, and
20 any penalties and interest with respect thereto, shall be
21 considered the tax of the payor. Any amount of tax actually
22 deducted and withheld under Sections 709.5 or Section 710 (and
23 until January 1, 1989, Sections 708 and 709) shall be held to
24 be a special fund in trust for the Department. No payee shall
25 have any right of action against his payor in respect of any

 

 

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1 money deducted and withheld and paid over to the Department in
2 compliance or in intended compliance with Sections 709.5 or
3 Section 710 (and until January 1, 1989, Sections 708 and 709).
4 (Source: P.A. 85-299; 85-982; 09500SB1544enr.)
 
5     (35 ILCS 5/713)  (from Ch. 120, par. 7-713)
6     Sec. 713. Payor's Failure To Withhold. If a payor fails to
7 deduct and withhold any amount of tax as required under
8 Sections 709.5 or Section 710 (and until January 1, 1989,
9 Sections 708 and 709) and thereafter the tax on account of
10 which such amount was required to be deducted and withheld is
11 paid, such amount of tax shall not be collected from the payor,
12 but the payor shall not be relieved from liability for
13 penalties or interest otherwise applicable in respect of such
14 failure to deduct and withhold. For purposes of this Section,
15 the tax on account of which an amount is required to be
16 deducted and withheld is the tax of the individual or
17 individuals who are entitled to a credit under subsection (b)
18 of Section 709.5 (c) of Section 708, subsection (c) of Section
19 709, or subsection (b) of Section 710 for the withheld tax.
20 (Source: P.A. 85-299; 85-982; 09500SB1544enr.)
 
21     (35 ILCS 5/804)  (from Ch. 120, par. 8-804)
22     Sec. 804. Failure to Pay Estimated Tax.
23     (a) In general. In case of any underpayment of estimated
24 tax by a taxpayer, except as provided in subsection (d) or (e),

 

 

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1 the taxpayer shall be liable to a penalty in an amount
2 determined at the rate prescribed by Section 3-3 of the Uniform
3 Penalty and Interest Act upon the amount of the underpayment
4 (determined under subsection (b)) for each required
5 installment.
6     (b) Amount of underpayment. For purposes of subsection (a),
7 the amount of the underpayment shall be the excess of:
8         (1) the amount of the installment which would be
9     required to be paid under subsection (c), over
10         (2) the amount, if any, of the installment paid on or
11     before the last date prescribed for payment.
12     (c) Amount of Required Installments.
13         (1) Amount.
14             (A) In General. Except as provided in paragraph
15         (2), the amount of any required installment shall be
16         25% of the required annual payment.
17             (B) Required Annual Payment. For purposes of
18         subparagraph (A), the term "required annual payment"
19         means the lesser of
20                 (i) 90% of the tax shown on the return for the
21             taxable year, or if no return is filed, 90% of the
22             tax for such year, or
23                 (ii) 100% of the tax shown on the return of the
24             taxpayer for the preceding taxable year if a return
25             showing a liability for tax was filed by the
26             taxpayer for the preceding taxable year and such

 

 

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1             preceding year was a taxable year of 12 months.
2         (2) Lower Required Installment where Annualized Income
3     Installment is Less Than Amount Determined Under Paragraph
4     (1).
5             (A) In General. In the case of any required
6         installment if a taxpayer establishes that the
7         annualized income installment is less than the amount
8         determined under paragraph (1),
9                 (i) the amount of such required installment
10             shall be the annualized income installment, and
11                 (ii) any reduction in a required installment
12             resulting from the application of this
13             subparagraph shall be recaptured by increasing the
14             amount of the next required installment determined
15             under paragraph (1) by the amount of such
16             reduction, and by increasing subsequent required
17             installments to the extent that the reduction has
18             not previously been recaptured under this clause.
19             (B) Determination of Annualized Income
20         Installment. In the case of any required installment,
21         the annualized income installment is the excess, if
22         any, of
23                 (i) an amount equal to the applicable
24             percentage of the tax for the taxable year computed
25             by placing on an annualized basis the net income
26             for months in the taxable year ending before the

 

 

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1             due date for the installment, over
2                 (ii) the aggregate amount of any prior
3             required installments for the taxable year.
4             (C) Applicable Percentage.
5        In the case of the followingThe applicable
6        required installments:percentage is:
7        1st ..............................22.5%
8        2nd ...............................45%
9        3rd ...............................67.5%
10        4th ...............................90%
11             (D) Annualized Net Income; Individuals. For
12         individuals, net income shall be placed on an
13         annualized basis by:
14                 (i) multiplying by 12, or in the case of a
15             taxable year of less than 12 months, by the number
16             of months in the taxable year, the net income
17             computed without regard to the standard exemption
18             for the months in the taxable year ending before
19             the month in which the installment is required to
20             be paid;
21                 (ii) dividing the resulting amount by the
22             number of months in the taxable year ending before
23             the month in which such installment date falls; and
24                 (iii) deducting from such amount the standard
25             exemption allowable for the taxable year, such
26             standard exemption being determined as of the last

 

 

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1             date prescribed for payment of the installment.
2             (E) Annualized Net Income; Corporations. For
3         corporations, net income shall be placed on an
4         annualized basis by multiplying by 12 the taxable
5         income
6                 (i) for the first 3 months of the taxable year,
7             in the case of the installment required to be paid
8             in the 4th month,
9                 (ii) for the first 3 months or for the first 5
10             months of the taxable year, in the case of the
11             installment required to be paid in the 6th month,
12                 (iii) for the first 6 months or for the first 8
13             months of the taxable year, in the case of the
14             installment required to be paid in the 9th month,
15             and
16                 (iv) for the first 9 months or for the first 11
17             months of the taxable year, in the case of the
18             installment required to be paid in the 12th month
19             of the taxable year,
20         then dividing the resulting amount by the number of
21         months in the taxable year (3, 5, 6, 8, 9, or 11 as the
22         case may be).
23     (d) Exceptions. Notwithstanding the provisions of the
24 preceding subsections, the penalty imposed by subsection (a)
25 shall not be imposed if the taxpayer was not required to file
26 an Illinois income tax return for the preceding taxable year,

 

 

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1 or, for individuals, if the taxpayer had no tax liability for
2 the preceding taxable year and such year was a taxable year of
3 12 months. The penalty imposed by subsection (a) shall also not
4 be imposed on any underpayments of estimated tax due before the
5 effective date of this amendatory Act of 1998 which
6 underpayments are solely attributable to the change in
7 apportionment from subsection (a) to subsection (h) of Section
8 304. The provisions of this amendatory Act of 1998 apply to tax
9 years ending on or after December 31, 1998.
10     (e) The penalty imposed for underpayment of estimated tax
11 by subsection (a) of this Section shall not be imposed to the
12 extent that the Director Department or his or her designate
13 determines, pursuant to Section 3-8 of the Uniform Penalty and
14 Interest Act that the penalty should not be imposed.
15     (f) Definition of tax. For purposes of subsections (b) and
16 (c), the term "tax" means the excess of the tax imposed under
17 Article 2 of this Act, over the amounts credited against such
18 tax under Sections 601(b) (3) and (4).
19     (g) Application of Section in case of tax withheld under
20 Article 7 on compensation. For purposes of applying this
21 Section:
22         (1) in the case of an individual, tax withheld from
23     compensation under Article 7 for the taxable year shall be
24     deemed a payment of estimated tax, and an equal part of
25     such amount shall be deemed paid on each installment date
26     for such taxable year, unless the taxpayer establishes the

 

 

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1     dates on which all amounts were actually withheld, in which
2     case the amounts so withheld shall be deemed payments of
3     estimated tax on the dates on which such amounts were
4     actually withheld; .
5         (2) amounts timely paid by a partnership, Subchapter S
6     corporation, or trust on behalf of a partner, shareholder,
7     or beneficiary pursuant to subsection (f) of Section 502 or
8     Section 709.5 and claimed as a payment of estimated tax
9     shall be deemed a payment of estimated tax made on the last
10     day of the taxable year of the partnership, Subchapter S
11     corporation, or trust for which the income from the
12     withholding is made was computed; and
13         (3) all other amounts pursuant to Article 7 shall be
14     deemed a payment of estimated tax on the date the payment
15     is made to the taxpayer of the amount from which the tax is
16     withheld.
17     (g-5) Amounts withheld under the State Salary and Annuity
18 Withholding Act. An individual who has amounts withheld under
19 paragraph (10) of Section 4 of the State Salary and Annuity
20 Withholding Act may elect to have those amounts treated as
21 payments of estimated tax made on the dates on which those
22 amounts are actually withheld.
23     (i) Short taxable year. The application of this Section to
24 taxable years of less than 12 months shall be in accordance
25 with regulations prescribed by the Department.
26     The changes in this Section made by Public Act 84-127 shall

 

 

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1 apply to taxable years ending on or after January 1, 1986.
2 (Source: P.A. 90-448, eff. 8-16-97; 90-613, eff. 7-9-98;
3 09500SB1544enr.)
 
4     (35 ILCS 5/911)  (from Ch. 120, par. 9-911)
5     Sec. 911. Limitations on Claims for Refund.
6     (a) In general. Except as otherwise provided in this Act:
7         (1) A claim for refund shall be filed not later than 3
8     years after the date the return was filed (in the case of
9     returns required under Article 7 of this Act respecting any
10     amounts withheld as tax, not later than 3 years after the
11     15th day of the 4th month following the close of the
12     calendar year in which such withholding was made), or one
13     year after the date the tax was paid, whichever is the
14     later; and
15         (2) No credit or refund shall be allowed or made with
16     respect to the year for which the claim was filed unless
17     such claim is filed within such period.
18     (b) Federal changes.
19         (1) In general. In any case where notification of an
20     alteration is required by Section 506(b), a claim for
21     refund may be filed within 2 years after the date on which
22     such notification was due (regardless of whether such
23     notice was given), but the amount recoverable pursuant to a
24     claim filed under this Section shall be limited to the
25     amount of any overpayment resulting under this Act from

 

 

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1     recomputation of the taxpayer's net income, net loss, or
2     Article 2 credits for the taxable year after giving effect
3     to the item or items reflected in the alteration required
4     to be reported.
5         (2) Tentative carryback adjustments paid before
6     January 1, 1974. If, as the result of the payment before
7     January 1, 1974 of a federal tentative carryback
8     adjustment, a notification of an alteration is required
9     under Section 506(b), a claim for refund may be filed at
10     any time before January 1, 1976, but the amount recoverable
11     pursuant to a claim filed under this Section shall be
12     limited to the amount of any overpayment resulting under
13     this Act from recomputation of the taxpayer's base income
14     for the taxable year after giving effect to the federal
15     alteration resulting from the tentative carryback
16     adjustment irrespective of any limitation imposed in
17     paragraph (l) of this subsection.
18     (c) Extension by agreement. Where, before the expiration of
19 the time prescribed in this section for the filing of a claim
20 for refund, both the Department and the claimant shall have
21 consented in writing to its filing after such time, such claim
22 may be filed at any time prior to the expiration of the period
23 agreed upon. The period so agreed upon may be extended by
24 subsequent agreements in writing made before the expiration of
25 the period previously agreed upon. In the case of a taxpayer
26 who is a partnership, Subchapter S corporation, or trust and

 

 

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1 who enters into an agreement with the Department pursuant to
2 this subsection on or after January 1, 2003, a claim for refund
3 may be issued to the partners, shareholders, or beneficiaries
4 of the taxpayer at any time prior to the expiration of the
5 period agreed upon. Any refund allowed pursuant to the claim,
6 however, shall be limited to the amount of any overpayment of
7 tax due under this Act that results from recomputation of items
8 of income, deduction, credits, or other amounts of the taxpayer
9 that are taken into account by the partner, shareholder, or
10 beneficiary in computing its liability under this Act.
11     (d) Limit on amount of credit or refund.
12         (1) Limit where claim filed within 3-year period. If
13     the claim was filed by the claimant during the 3-year
14     period prescribed in subsection (a), the amount of the
15     credit or refund shall not exceed the portion of the tax
16     paid within the period, immediately preceding the filing of
17     the claim, equal to 3 years plus the period of any
18     extension of time for filing the return.
19         (2) Limit where claim not filed within 3-year period.
20     If the claim was not filed within such 3-year period, the
21     amount of the credit or refund shall not exceed the portion
22     of the tax paid during the one year immediately preceding
23     the filing of the claim.
24     (e) Time return deemed filed. For purposes of this section
25 a tax return filed before the last day prescribed by law for
26 the filing of such return (including any extensions thereof)

 

 

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1 shall be deemed to have been filed on such last day.
2     (f) No claim for refund based on the taxpayer's taking a
3 credit for estimated tax payments as provided by Section
4 601(b)(2) or for any amount paid by a taxpayer pursuant to
5 Section 602(a) or for any amount of credit for tax withheld
6 pursuant to Article 7 Section 701 may be filed more than 3
7 years after the due date, as provided by Section 505, of the
8 return which was required to be filed relative to the taxable
9 year for which the payments were made or for which the tax was
10 withheld. The changes in this subsection (f) made by this
11 amendatory Act of 1987 shall apply to all taxable years ending
12 on or after December 31, 1969.
13     (g) Special Period of Limitation with Respect to Net Loss
14 Carrybacks. If the claim for refund relates to an overpayment
15 attributable to a net loss carryback as provided by Section
16 207, in lieu of the 3 year period of limitation prescribed in
17 subsection (a), the period shall be that period which ends 3
18 years after the time prescribed by law for filing the return
19 (including extensions thereof) for the taxable year of the net
20 loss which results in such carryback (or, on and after August
21 13, 1999, with respect to a change in the carryover of an
22 Article 2 credit to a taxable year resulting from the carryback
23 of a Section 207 loss incurred in a taxable year beginning on
24 or after January 1, 2000, the period shall be that period that
25 ends 3 years after the time prescribed by law for filing the
26 return (including extensions of that time) for that subsequent

 

 

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1 taxable year), or the period prescribed in subsection (c) in
2 respect of such taxable year, whichever expires later. In the
3 case of such a claim, the amount of the refund may exceed the
4 portion of the tax paid within the period provided in
5 subsection (d) to the extent of the amount of the overpayment
6 attributable to such carryback. On and after August 13, 1999,
7 if the claim for refund relates to an overpayment attributable
8 to the carryover of an Article 2 credit, or of a Section 207
9 loss, earned, incurred (in a taxable year beginning on or after
10 January 1, 2000), or used in a year for which a notification of
11 a change affecting federal taxable income must be filed under
12 subsection (b) of Section 506, the claim may be filed within
13 the period prescribed in paragraph (1) of subsection (b) in
14 respect of the year for which the notification is required. In
15 the case of such a claim, the amount of the refund may exceed
16 the portion of the tax paid within the period provided in
17 subsection (d) to the extent of the amount of the overpayment
18 attributable to the recomputation of the taxpayer's Article 2
19 credits, or Section 207 loss, earned, incurred, or used in the
20 taxable year for which the notification is given.
21     (h) Claim for refund based on net loss. On and after August
22 23, 2002, no claim for refund shall be allowed to the extent
23 the refund is the result of an amount of net loss incurred in
24 any taxable year ending prior to December 31, 2002 under
25 Section 207 of this Act that was not reported to the Department
26 within 3 years of the due date (including extensions) of the

 

 

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1 return for the loss year on either the original return filed by
2 the taxpayer or on amended return or to the extent that the
3 refund is the result of an amount of net loss incurred in any
4 taxable year under Section 207 for which no return was filed
5 within 3 years of the due date (including extensions) of the
6 return for the loss year.
7 (Source: P.A. 94-836, eff. 6-6-06; 09500SB1544enr.)
 
8     (35 ILCS 5/1501)  (from Ch. 120, par. 15-1501)
9     Sec. 1501. Definitions.
10     (a) In general. When used in this Act, where not otherwise
11 distinctly expressed or manifestly incompatible with the
12 intent thereof:
13         (1) Business income. The term "business income" means
14     all income that may be treated as apportionable business
15     income under the Constitution of the United States.
16     Business income is net of the deductions allocable thereto.
17     Such term does not include compensation or the deductions
18     allocable thereto. For each taxable year beginning on or
19     after January 1, 2003, a taxpayer may elect to treat all
20     income other than compensation as business income. This
21     election shall be made in accordance with rules adopted by
22     the Department and, once made, shall be irrevocable.
23         (1.5) Captive real estate investment trust:
24         (A) The term "captive real estate investment trust"
25     means a corporation, trust, or association:

 

 

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1             (i) that is considered a real estate investment
2         trust for the taxable year under Section 856 of the
3         Internal Revenue Code;
4             (ii) that is not regularly traded on an established
5         securities market; and
6             (iii) of which more than 50% of the voting power or
7         value of the beneficial interest or shares, at any time
8         during the last half of the taxable year, is owned or
9         controlled, directly or indirectly, by a single entity
10         that is subject to the provisions of Subchapter C of
11         Chapter 1 of the Internal Revenue Code.
12         (B) The term "captive real estate investment trust"
13     does not include:
14             (i) a corporation, trust, or association of which
15         more than 50% of the voting power or value of the
16         beneficial interest or shares is owned or controlled,
17         at any time during which the corporation, trust, or
18         association satisfies item (A)(iii) of this subsection
19         (1.5), by:
20                 (a) a real estate investment trust, other than
21             a real estate investment trust described in item
22             (A) of this subsection;
23                 (b) a person who is exempt from taxation under
24             Section 501 of the Internal Revenue Code;
25                 (c) a listed Australian property trust; or
26                 (d) a real estate investment trust that,

 

 

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1             subject to rules of the Secretary of State, is
2             intended to become regularly traded on an
3             established securities market and that satisfies
4             the requirements of Sections 856(A)(5) and
5             856(A)(6) of the Internal Revenue Code by reason of
6             Section 856(H)(2) of the Internal Revenue Code.
7         (C) For the purposes of this subsection (1.5), the
8     constructive ownership rules prescribed under Section
9     318(A) of the Internal Revenue Code, as modified by Section
10     856(D)(5) of the Internal Revenue Code, apply in
11     determining the ownership of stock, assets, or net profits
12     of any person.
13         (2) Commercial domicile. The term "commercial
14     domicile" means the principal place from which the trade or
15     business of the taxpayer is directed or managed.
16         (3) Compensation. The term "compensation" means wages,
17     salaries, commissions and any other form of remuneration
18     paid to employees for personal services.
19         (4) Corporation. The term "corporation" includes
20     associations, joint-stock companies, insurance companies
21     and cooperatives. Any entity, including a limited
22     liability company formed under the Illinois Limited
23     Liability Company Act, shall be treated as a corporation if
24     it is so classified for federal income tax purposes.
25         (5) Department. The term "Department" means the
26     Department of Revenue of this State.

 

 

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1         (6) Director. The term "Director" means the Director of
2     Revenue of this State.
3         (7) Fiduciary. The term "fiduciary" means a guardian,
4     trustee, executor, administrator, receiver, or any person
5     acting in any fiduciary capacity for any person.
6         (8) Financial organization.
7             (A) The term "financial organization" means any
8         bank, bank holding company, trust company, savings
9         bank, industrial bank, land bank, safe deposit
10         company, private banker, savings and loan association,
11         building and loan association, credit union, currency
12         exchange, cooperative bank, small loan company, sales
13         finance company, investment company, or any person
14         which is owned by a bank or bank holding company. For
15         the purpose of this Section a "person" will include
16         only those persons which a bank holding company may
17         acquire and hold an interest in, directly or
18         indirectly, under the provisions of the Bank Holding
19         Company Act of 1956 (12 U.S.C. 1841, et seq.), except
20         where interests in any person must be disposed of
21         within certain required time limits under the Bank
22         Holding Company Act of 1956.
23             (B) For purposes of subparagraph (A) of this
24         paragraph, the term "bank" includes (i) any entity that
25         is regulated by the Comptroller of the Currency under
26         the National Bank Act, or by the Federal Reserve Board,

 

 

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1         or by the Federal Deposit Insurance Corporation and
2         (ii) any federally or State chartered bank operating as
3         a credit card bank.
4             (C) For purposes of subparagraph (A) of this
5         paragraph, the term "sales finance company" has the
6         meaning provided in the following item (i) or (ii):
7                 (i) A person primarily engaged in one or more
8             of the following businesses: the business of
9             purchasing customer receivables, the business of
10             making loans upon the security of customer
11             receivables, the business of making loans for the
12             express purpose of funding purchases of tangible
13             personal property or services by the borrower, or
14             the business of finance leasing. For purposes of
15             this item (i), "customer receivable" means:
16                     (a) a retail installment contract or
17                 retail charge agreement within the meaning of
18                 the Sales Finance Agency Act, the Retail
19                 Installment Sales Act, or the Motor Vehicle
20                 Retail Installment Sales Act;
21                     (b) an installment, charge, credit, or
22                 similar contract or agreement arising from the
23                 sale of tangible personal property or services
24                 in a transaction involving a deferred payment
25                 price payable in one or more installments
26                 subsequent to the sale; or

 

 

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1                     (c) the outstanding balance of a contract
2                 or agreement described in provisions (a) or (b)
3                 of this item (i).
4                 A customer receivable need not provide for
5             payment of interest on deferred payments. A sales
6             finance company may purchase a customer receivable
7             from, or make a loan secured by a customer
8             receivable to, the seller in the original
9             transaction or to a person who purchased the
10             customer receivable directly or indirectly from
11             that seller.
12                 (ii) A corporation meeting each of the
13             following criteria:
14                     (a) the corporation must be a member of an
15                 "affiliated group" within the meaning of
16                 Section 1504(a) of the Internal Revenue Code,
17                 determined without regard to Section 1504(b)
18                 of the Internal Revenue Code;
19                     (b) more than 50% of the gross income of
20                 the corporation for the taxable year must be
21                 interest income derived from qualifying loans.
22                 A "qualifying loan" is a loan made to a member
23                 of the corporation's affiliated group that
24                 originates customer receivables (within the
25                 meaning of item (i)) or to whom customer
26                 receivables originated by a member of the

 

 

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1                 affiliated group have been transferred, to the
2                 extent the average outstanding balance of
3                 loans from that corporation to members of its
4                 affiliated group during the taxable year do not
5                 exceed the limitation amount for that
6                 corporation. The "limitation amount" for a
7                 corporation is the average outstanding
8                 balances during the taxable year of customer
9                 receivables (within the meaning of item (i))
10                 originated by all members of the affiliated
11                 group. If the average outstanding balances of
12                 the loans made by a corporation to members of
13                 its affiliated group exceed the limitation
14                 amount, the interest income of that
15                 corporation from qualifying loans shall be
16                 equal to its interest income from loans to
17                 members of its affiliated groups times a
18                 fraction equal to the limitation amount
19                 divided by the average outstanding balances of
20                 the loans made by that corporation to members
21                 of its affiliated group;
22                     (c) the total of all shareholder's equity
23                 (including, without limitation, paid-in
24                 capital on common and preferred stock and
25                 retained earnings) of the corporation plus the
26                 total of all of its loans, advances, and other

 

 

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1                 obligations payable or owed to members of its
2                 affiliated group may not exceed 20% of the
3                 total assets of the corporation at any time
4                 during the tax year; and
5                     (d) more than 50% of all interest-bearing
6                 obligations of the affiliated group payable to
7                 persons outside the group determined in
8                 accordance with generally accepted accounting
9                 principles must be obligations of the
10                 corporation.
11             This amendatory Act of the 91st General Assembly is
12         declaratory of existing law.
13             (D) Subparagraphs (B) and (C) of this paragraph are
14         declaratory of existing law and apply retroactively,
15         for all tax years beginning on or before December 31,
16         1996, to all original returns, to all amended returns
17         filed no later than 30 days after the effective date of
18         this amendatory Act of 1996, and to all notices issued
19         on or before the effective date of this amendatory Act
20         of 1996 under subsection (a) of Section 903, subsection
21         (a) of Section 904, subsection (e) of Section 909, or
22         Section 912. A taxpayer that is a "financial
23         organization" that engages in any transaction with an
24         affiliate shall be a "financial organization" for all
25         purposes of this Act.
26             (E) For all tax years beginning on or before

 

 

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1         December 31, 1996, a taxpayer that falls within the
2         definition of a "financial organization" under
3         subparagraphs (B) or (C) of this paragraph, but who
4         does not fall within the definition of a "financial
5         organization" under the Proposed Regulations issued by
6         the Department of Revenue on July 19, 1996, may
7         irrevocably elect to apply the Proposed Regulations
8         for all of those years as though the Proposed
9         Regulations had been lawfully promulgated, adopted,
10         and in effect for all of those years. For purposes of
11         applying subparagraphs (B) or (C) of this paragraph to
12         all of those years, the election allowed by this
13         subparagraph applies only to the taxpayer making the
14         election and to those members of the taxpayer's unitary
15         business group who are ordinarily required to
16         apportion business income under the same subsection of
17         Section 304 of this Act as the taxpayer making the
18         election. No election allowed by this subparagraph
19         shall be made under a claim filed under subsection (d)
20         of Section 909 more than 30 days after the effective
21         date of this amendatory Act of 1996.
22             (F) Finance Leases. For purposes of this
23         subsection, a finance lease shall be treated as a loan
24         or other extension of credit, rather than as a lease,
25         regardless of how the transaction is characterized for
26         any other purpose, including the purposes of any

 

 

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1         regulatory agency to which the lessor is subject. A
2         finance lease is any transaction in the form of a lease
3         in which the lessee is treated as the owner of the
4         leased asset entitled to any deduction for
5         depreciation allowed under Section 167 of the Internal
6         Revenue Code.
7         (9) Fiscal year. The term "fiscal year" means an
8     accounting period of 12 months ending on the last day of
9     any month other than December.
10         (10) Includes and including. The terms "includes" and
11     "including" when used in a definition contained in this Act
12     shall not be deemed to exclude other things otherwise
13     within the meaning of the term defined.
14         (11) Internal Revenue Code. The term "Internal Revenue
15     Code" means the United States Internal Revenue Code of 1954
16     or any successor law or laws relating to federal income
17     taxes in effect for the taxable year.
18         (11.5) Investment partnership.
19             (A) The term "investment partnership" means any
20         entity that is treated as a partnership for federal
21         income tax purposes that meets the following
22         requirements:
23                 (i) no less than 90% of the partnership's cost
24             of its total assets consists of qualifying
25             investment securities, deposits at banks or other
26             financial institutions, and office space and

 

 

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1             equipment reasonably necessary to carry on its
2             activities as an investment partnership;
3                 (ii) no less than 90% of its gross income
4             consists of interest, dividends, and gains from
5             the sale or exchange of qualifying investment
6             securities; and
7                 (iii) the partnership is not a dealer in
8             qualifying investment securities.
9             (B) For purposes of this paragraph (11.5), the term
10         "qualifying investment securities" includes all of the
11         following:
12                 (i) common stock, including preferred or debt
13             securities convertible into common stock, and
14             preferred stock;
15                 (ii) bonds, debentures, and other debt
16             securities;
17                 (iii) foreign and domestic currency deposits
18             secured by federal, state, or local governmental
19             agencies;
20                 (iv) mortgage or asset-backed securities
21             secured by federal, state, or local governmental
22             agencies;
23                 (v) repurchase agreements and loan
24             participations;
25                 (vi) foreign currency exchange contracts and
26             forward and futures contracts on foreign

 

 

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1             currencies;
2                 (vii) stock and bond index securities and
3             futures contracts and other similar financial
4             securities and futures contracts on those
5             securities;
6                 (viii) options for the purchase or sale of any
7             of the securities, currencies, contracts, or
8             financial instruments described in items (i) to
9             (vii), inclusive;
10                 (ix) regulated futures contracts;
11                 (x) commodities (not described in Section
12             1221(a)(1) of the Internal Revenue Code) or
13             futures, forwards, and options with respect to
14             such commodities, provided, however, that any item
15             of a physical commodity to which title is actually
16             acquired in the partnership's capacity as a dealer
17             in such commodity shall not be a qualifying
18             investment security;
19                 (xi) derivatives; and
20                 (xii) a partnership interest in another
21             partnership that is an investment partnership.
22         (12) Mathematical error. The term "mathematical error"
23     includes the following types of errors, omissions, or
24     defects in a return filed by a taxpayer which prevents
25     acceptance of the return as filed for processing:
26             (A) arithmetic errors or incorrect computations on

 

 

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1         the return or supporting schedules;
2             (B) entries on the wrong lines;
3             (C) omission of required supporting forms or
4         schedules or the omission of the information in whole
5         or in part called for thereon; and
6             (D) an attempt to claim, exclude, deduct, or
7         improperly report, in a manner directly contrary to the
8         provisions of the Act and regulations thereunder any
9         item of income, exemption, deduction, or credit.
10         (13) Nonbusiness income. The term "nonbusiness income"
11     means all income other than business income or
12     compensation.
13         (14) Nonresident. The term "nonresident" means a
14     person who is not a resident.
15         (15) Paid, incurred and accrued. The terms "paid",
16     "incurred" and "accrued" shall be construed according to
17     the method of accounting upon the basis of which the
18     person's base income is computed under this Act.
19         (16) Partnership and partner. The term "partnership"
20     includes a syndicate, group, pool, joint venture or other
21     unincorporated organization, through or by means of which
22     any business, financial operation, or venture is carried
23     on, and which is not, within the meaning of this Act, a
24     trust or estate or a corporation; and the term "partner"
25     includes a member in such syndicate, group, pool, joint
26     venture or organization.

 

 

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1         The term "partnership" includes any entity, including
2     a limited liability company formed under the Illinois
3     Limited Liability Company Act, classified as a partnership
4     for federal income tax purposes.
5         The term "partnership" does not include a syndicate,
6     group, pool, joint venture, or other unincorporated
7     organization established for the sole purpose of playing
8     the Illinois State Lottery.
9         (17) Part-year resident. The term "part-year resident"
10     means an individual who became a resident during the
11     taxable year or ceased to be a resident during the taxable
12     year. Under Section 1501(a)(20)(A)(i) residence commences
13     with presence in this State for other than a temporary or
14     transitory purpose and ceases with absence from this State
15     for other than a temporary or transitory purpose. Under
16     Section 1501(a)(20)(A)(ii) residence commences with the
17     establishment of domicile in this State and ceases with the
18     establishment of domicile in another State.
19         (18) Person. The term "person" shall be construed to
20     mean and include an individual, a trust, estate,
21     partnership, association, firm, company, corporation,
22     limited liability company, or fiduciary. For purposes of
23     Section 1301 and 1302 of this Act, a "person" means (i) an
24     individual, (ii) a corporation, (iii) an officer, agent, or
25     employee of a corporation, (iv) a member, agent or employee
26     of a partnership, or (v) a member, manager, employee,

 

 

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1     officer, director, or agent of a limited liability company
2     who in such capacity commits an offense specified in
3     Section 1301 and 1302.
4         (18A) Records. The term "records" includes all data
5     maintained by the taxpayer, whether on paper, microfilm,
6     microfiche, or any type of machine-sensible data
7     compilation.
8         (19) Regulations. The term "regulations" includes
9     rules promulgated and forms prescribed by the Department.
10         (20) Resident. The term "resident" means:
11             (A) an individual (i) who is in this State for
12         other than a temporary or transitory purpose during the
13         taxable year; or (ii) who is domiciled in this State
14         but is absent from the State for a temporary or
15         transitory purpose during the taxable year;
16             (B) The estate of a decedent who at his or her
17         death was domiciled in this State;
18             (C) A trust created by a will of a decedent who at
19         his death was domiciled in this State; and
20             (D) An irrevocable trust, the grantor of which was
21         domiciled in this State at the time such trust became
22         irrevocable. For purpose of this subparagraph, a trust
23         shall be considered irrevocable to the extent that the
24         grantor is not treated as the owner thereof under
25         Sections 671 through 678 of the Internal Revenue Code.
26         (21) Sales. The term "sales" means all gross receipts

 

 

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1     of the taxpayer not allocated under Sections 301, 302 and
2     303.
3         (22) State. The term "state" when applied to a
4     jurisdiction other than this State means any state of the
5     United States, the District of Columbia, the Commonwealth
6     of Puerto Rico, any Territory or Possession of the United
7     States, and any foreign country, or any political
8     subdivision of any of the foregoing. For purposes of the
9     foreign tax credit under Section 601, the term "state"
10     means any state of the United States, the District of
11     Columbia, the Commonwealth of Puerto Rico, and any
12     territory or possession of the United States, or any
13     political subdivision of any of the foregoing, effective
14     for tax years ending on or after December 31, 1989.
15         (23) Taxable year. The term "taxable year" means the
16     calendar year, or the fiscal year ending during such
17     calendar year, upon the basis of which the base income is
18     computed under this Act. "Taxable year" means, in the case
19     of a return made for a fractional part of a year under the
20     provisions of this Act, the period for which such return is
21     made.
22         (24) Taxpayer. The term "taxpayer" means any person
23     subject to the tax imposed by this Act.
24         (25) International banking facility. The term
25     international banking facility shall have the same meaning
26     as is set forth in the Illinois Banking Act or as is set

 

 

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1     forth in the laws of the United States or regulations of
2     the Board of Governors of the Federal Reserve System.
3         (26) Income Tax Return Preparer.
4             (A) The term "income tax return preparer" means any
5         person who prepares for compensation, or who employs
6         one or more persons to prepare for compensation, any
7         return of tax imposed by this Act or any claim for
8         refund of tax imposed by this Act. The preparation of a
9         substantial portion of a return or claim for refund
10         shall be treated as the preparation of that return or
11         claim for refund.
12             (B) A person is not an income tax return preparer
13         if all he or she does is
14                 (i) furnish typing, reproducing, or other
15             mechanical assistance;
16                 (ii) prepare returns or claims for refunds for
17             the employer by whom he or she is regularly and
18             continuously employed;
19                 (iii) prepare as a fiduciary returns or claims
20             for refunds for any person; or
21                 (iv) prepare claims for refunds for a taxpayer
22             in response to any notice of deficiency issued to
23             that taxpayer or in response to any waiver of
24             restriction after the commencement of an audit of
25             that taxpayer or of another taxpayer if a
26             determination in the audit of the other taxpayer

 

 

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1             directly or indirectly affects the tax liability
2             of the taxpayer whose claims he or she is
3             preparing.
4         (27) Unitary business group. The term "unitary
5     business group" means a group of persons related through
6     common ownership whose business activities are integrated
7     with, dependent upon and contribute to each other. The
8     group will not include those members whose business
9     activity outside the United States is 80% or more of any
10     such member's total business activity; for purposes of this
11     paragraph and clause (a)(3)(B)(ii) of Section 304,
12     business activity within the United States shall be
13     measured by means of the factors ordinarily applicable
14     under subsections (a), (b), (c), (d), or (h) of Section 304
15     except that, in the case of members ordinarily required to
16     apportion business income by means of the 3 factor formula
17     of property, payroll and sales specified in subsection (a)
18     of Section 304, including the formula as weighted in
19     subsection (h) of Section 304, such members shall not use
20     the sales factor in the computation and the results of the
21     property and payroll factor computations of subsection (a)
22     of Section 304 shall be divided by 2 (by one if either the
23     property or payroll factor has a denominator of zero). The
24     computation required by the preceding sentence shall, in
25     each case, involve the division of the member's property,
26     payroll, or revenue miles in the United States, insurance

 

 

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1     premiums on property or risk in the United States, or
2     financial organization business income from sources within
3     the United States, as the case may be, by the respective
4     worldwide figures for such items. Common ownership in the
5     case of corporations is the direct or indirect control or
6     ownership of more than 50% of the outstanding voting stock
7     of the persons carrying on unitary business activity.
8     Unitary business activity can ordinarily be illustrated
9     where the activities of the members are: (1) in the same
10     general line (such as manufacturing, wholesaling,
11     retailing of tangible personal property, insurance,
12     transportation or finance); or (2) are steps in a
13     vertically structured enterprise or process (such as the
14     steps involved in the production of natural resources,
15     which might include exploration, mining, refining, and
16     marketing); and, in either instance, the members are
17     functionally integrated through the exercise of strong
18     centralized management (where, for example, authority over
19     such matters as purchasing, financing, tax compliance,
20     product line, personnel, marketing and capital investment
21     is not left to each member). In no event, however, will any
22     unitary business group include members which are
23     ordinarily required to apportion business income under
24     different subsections of Section 304 except that for tax
25     years ending on or after December 31, 1987 this prohibition
26     shall not apply to a unitary business group composed of one

 

 

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1     or more taxpayers all of which apportion business income
2     pursuant to subsection (b) of Section 304, or all of which
3     apportion business income pursuant to subsection (d) of
4     Section 304, and a holding company of such single-factor
5     taxpayers (see definition of "financial organization" for
6     rule regarding holding companies of financial
7     organizations). If a unitary business group would, but for
8     the preceding sentence, include members that are
9     ordinarily required to apportion business income under
10     different subsections of Section 304, then for each
11     subsection of Section 304 for which there are two or more
12     members, there shall be a separate unitary business group
13     composed of such members. For purposes of the preceding two
14     sentences, a member is "ordinarily required to apportion
15     business income" under a particular subsection of Section
16     304 if it would be required to use the apportionment method
17     prescribed by such subsection except for the fact that it
18     derives business income solely from Illinois. As used in
19     this paragraph, the phrase "United States" means only the
20     50 states and the District of Columbia, but does not
21     include any territory or possession of the United States or
22     any area over which the United States has asserted
23     jurisdiction or claimed exclusive rights with respect to
24     the exploration for or exploitation of natural resources.
25         If the unitary business group members' accounting
26     periods differ, the common parent's accounting period or,

 

 

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1     if there is no common parent, the accounting period of the
2     member that is expected to have, on a recurring basis, the
3     greatest Illinois income tax liability must be used to
4     determine whether to use the apportionment method provided
5     in subsection (a) or subsection (h) of Section 304. The
6     prohibition against membership in a unitary business group
7     for taxpayers ordinarily required to apportion income
8     under different subsections of Section 304 does not apply
9     to taxpayers required to apportion income under su