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1     AN ACT concerning revenue.
 
2     Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
 
4     Section 5. The Illinois Income Tax Act is amended by
5 changing Section 203 as follows:
 
6     (35 ILCS 5/203)  (from Ch. 120, par. 2-203)
7     Sec. 203. Base income defined.
8     (a) Individuals.
9         (1) In general. In the case of an individual, base
10     income means an amount equal to the taxpayer's adjusted
11     gross income for the taxable year as modified by paragraph
12     (2).
13         (2) Modifications. The adjusted gross income referred
14     to in paragraph (1) shall be modified by adding thereto the
15     sum of the following amounts:
16         (A) An amount equal to all amounts paid or accrued to
17         the taxpayer as interest or dividends during the
18         taxable year to the extent excluded from gross income
19         in the computation of adjusted gross income, except
20         stock dividends of qualified public utilities
21         described in Section 305(e) of the Internal Revenue
22         Code;
23             (B) An amount equal to the amount of tax imposed by

 

 

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

 

 

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1         20 of the Medical Care Savings Account Act of 2000;
2             (D-10) For taxable years ending after December 31,
3         1997, an amount equal to any eligible remediation costs
4         that the individual deducted in computing adjusted
5         gross income and for which the individual claims a
6         credit under subsection (l) of Section 201;
7             (D-15) For taxable years 2001 and thereafter, an
8         amount equal to the bonus depreciation deduction taken
9         on the taxpayer's federal income tax return for the
10         taxable year under subsection (k) of Section 168 of the
11         Internal Revenue Code;
12             (D-16) If the taxpayer sells, transfers, abandons,
13         or otherwise disposes of property for which the
14         taxpayer was required in any taxable year to make an
15         addition modification under subparagraph (D-15), then
16         an amount equal to the aggregate amount of the
17         deductions taken in all taxable years under
18         subparagraph (Z) with respect to that property.
19             If the taxpayer continues to own property through
20         the last day of the last tax year for which the
21         taxpayer may claim a depreciation deduction for
22         federal income tax purposes and for which the taxpayer
23         was allowed in any taxable year to make a subtraction
24         modification under subparagraph (Z), then an amount
25         equal to that subtraction modification.
26             The taxpayer is required to make the addition

 

 

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1         modification under this subparagraph only once with
2         respect to any one piece of property;
3             (D-17) An amount equal to the amount otherwise
4         allowed as a deduction in computing base income for
5         interest paid, accrued, or incurred, directly or
6         indirectly, (i) for taxable years ending on or after
7         December 31, 2004, to a foreign person who would be a
8         member of the same unitary business group but for the
9         fact that foreign person's business activity outside
10         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 under Sections 951 through 964
25         of the Internal Revenue Code and amounts included in
26         gross income under Section 78 of the Internal Revenue

 

 

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

 

 

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

 

 

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1         unitary business group but for the fact that the
2         foreign person's business activity outside the United
3         States is 80% or more of that person's total business
4         activity and (ii) for taxable years ending on or after
5         December 31, 2008, to a person who would be a member of
6         the same unitary business group but for the fact that
7         the person is prohibited under Section 1501(a)(27)
8         from being included in the unitary business group
9         because he or she is ordinarily required to apportion
10         business income under different subsections of Section
11         304. The addition modification required by this
12         subparagraph shall be reduced to the extent that
13         dividends were included in base income of the unitary
14         group for the same taxable year and received by the
15         taxpayer or by a member of the taxpayer's unitary
16         business group (including amounts included in gross
17         income under Sections 951 through 964 of the Internal
18         Revenue Code and amounts included in gross income under
19         Section 78 of the Internal Revenue Code) with respect
20         to the stock of the same person to whom the intangible
21         expenses and costs were directly or indirectly paid,
22         incurred, or accrued. The preceding sentence does not
23         apply to the extent that the same dividends caused a
24         reduction to the addition modification required under
25         Section 203(a)(2)(D-17) of this Act. As used in this
26         subparagraph, the term "intangible expenses and costs"

 

 

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

 

 

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

 

 

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1             by which the Department will utilize its authority
2             under Section 404 of this Act;
3             (D-19) For taxable years ending on or after
4         December 31, 2008, an amount equal to the amount of
5         insurance premium expenses and costs otherwise allowed
6         as a deduction in computing base income, and that were
7         paid, accrued, or incurred, directly or indirectly, to
8         a person who would be a member of the same unitary
9         business group but for the fact that the person is
10         prohibited under Section 1501(a)(27) from being
11         included in the unitary business group because he or
12         she is ordinarily required to apportion business
13         income under different subsections of Section 304. The
14         addition modification required by this subparagraph
15         shall be reduced to the extent that dividends were
16         included in base income of the unitary group for the
17         same taxable year and received by the taxpayer or by a
18         member of the taxpayer's unitary business group
19         (including amounts included in gross income under
20         Sections 951 through 964 of the Internal Revenue Code
21         and amounts included in gross income under Section 78
22         of the Internal Revenue Code) with respect to the stock
23         of the same person to whom the premiums and costs were
24         directly or indirectly paid, incurred, or accrued. The
25         preceding sentence does not apply to the extent that
26         the same dividends caused a reduction to the addition

 

 

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1         modification required under Section 203(a)(2)(D-17) or
2         Section 203(a)(2)(D-18) of this Act.
3             (D-20) For taxable years beginning on or after
4         January 1, 2002 and ending on or before December 31,
5         2006, in the case of a distribution from a qualified
6         tuition program under Section 529 of the Internal
7         Revenue Code, other than (i) a distribution from a
8         College Savings Pool created under Section 16.5 of the
9         State Treasurer Act or (ii) a distribution from the
10         Illinois Prepaid Tuition Trust Fund, an amount equal to
11         the amount excluded from gross income under Section
12         529(c)(3)(B). For taxable years beginning on or after
13         January 1, 2007, in the case of a distribution from a
14         qualified tuition program under Section 529 of the
15         Internal Revenue Code, other than (i) a distribution
16         from a College Savings Pool created under Section 16.5
17         of the State Treasurer Act, (ii) a distribution from
18         the Illinois Prepaid Tuition Trust Fund, or (iii) a
19         distribution from a qualified tuition program under
20         Section 529 of the Internal Revenue Code that (I)
21         adopts and determines that its offering materials
22         comply with the College Savings Plans Network's
23         disclosure principles and (II) has made reasonable
24         efforts to inform in-state residents of the existence
25         of in-state qualified tuition programs by informing
26         Illinois residents directly and, where applicable, to

 

 

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1         inform financial intermediaries distributing the
2         program to inform in-state residents of the existence
3         of in-state qualified tuition programs at least
4         annually, an amount equal to the amount excluded from
5         gross income under Section 529(c)(3)(B).
6             For the purposes of this subparagraph (D-20), a
7         qualified tuition program has made reasonable efforts
8         if it makes disclosures (which may use the term
9         "in-state program" or "in-state plan" and need not
10         specifically refer to Illinois or its qualified
11         programs by name) (i) directly to prospective
12         participants in its offering materials or makes a
13         public disclosure, such as a website posting; and (ii)
14         where applicable, to intermediaries selling the
15         out-of-state program in the same manner that the
16         out-of-state program distributes its offering
17         materials;
18             (D-21) For taxable years beginning on or after
19         January 1, 2007, in the case of transfer of moneys from
20         a qualified tuition program under Section 529 of the
21         Internal Revenue Code that is administered by the State
22         to an out-of-state program, an amount equal to the
23         amount of moneys previously deducted from base income
24         under subsection (a)(2)(Y) of this Section.
25     and by deducting from the total so obtained the sum of the
26     following amounts:

 

 

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1             (E) For taxable years ending before December 31,
2         2001, any amount included in such total in respect of
3         any compensation (including but not limited to any
4         compensation paid or accrued to a serviceman while a
5         prisoner of war or missing in action) paid to a
6         resident by reason of being on active duty in the Armed
7         Forces of the United States and in respect of any
8         compensation paid or accrued to a resident who as a
9         governmental employee was a prisoner of war or missing
10         in action, and in respect of any compensation paid to a
11         resident in 1971 or thereafter for annual training
12         performed pursuant to Sections 502 and 503, Title 32,
13         United States Code as a member of the Illinois National
14         Guard or, beginning with taxable years ending on or
15         after December 31, 2007, the National Guard of any
16         other state. For taxable years ending on or after
17         December 31, 2001, any amount included in such total in
18         respect of any compensation (including but not limited
19         to any compensation paid or accrued to a serviceman
20         while a prisoner of war or missing in action) paid to a
21         resident by reason of being a member of any component
22         of the Armed Forces of the United States and in respect
23         of any compensation paid or accrued to a resident who
24         as a governmental employee was a prisoner of war or
25         missing in action, and in respect of any compensation
26         paid to a resident in 2001 or thereafter by reason of

 

 

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1         being a member of the Illinois National Guard or,
2         beginning with taxable years ending on or after
3         December 31, 2007, the National Guard of any other
4         state. The provisions of this amendatory Act of the
5         92nd General Assembly are exempt from the provisions of
6         Section 250;
7             (F) An amount equal to all amounts included in such
8         total pursuant to the provisions of Sections 402(a),
9         402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the
10         Internal Revenue Code, or included in such total as
11         distributions under the provisions of any retirement
12         or disability plan for employees of any governmental
13         agency or unit, or retirement payments to retired
14         partners, which payments are excluded in computing net
15         earnings from self employment by Section 1402 of the
16         Internal Revenue Code and regulations adopted pursuant
17         thereto;
18             (G) The valuation limitation amount;
19             (H) An amount equal to the amount of any tax
20         imposed by this Act which was refunded to the taxpayer
21         and included in such total for the taxable year;
22             (I) An amount equal to all amounts included in such
23         total pursuant to the provisions of Section 111 of the
24         Internal Revenue Code as a recovery of items previously
25         deducted from adjusted gross income in the computation
26         of taxable income;

 

 

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1             (J) An amount equal to those dividends included in
2         such total which were paid by a corporation which
3         conducts business operations in an Enterprise Zone or
4         zones created under the Illinois Enterprise Zone Act or
5         a River Edge Redevelopment Zone or zones created under
6         the River Edge Redevelopment Zone Act, and conducts
7         substantially all of its operations in an Enterprise
8         Zone or zones or a River Edge Redevelopment Zone or
9         zones. This subparagraph (J) is exempt from the
10         provisions of Section 250;
11             (K) An amount equal to those dividends included in
12         such total that were paid by a corporation that
13         conducts business operations in a federally designated
14         Foreign Trade Zone or Sub-Zone and that is designated a
15         High Impact Business located in Illinois; provided
16         that dividends eligible for the deduction provided in
17         subparagraph (J) of paragraph (2) of this subsection
18         shall not be eligible for the deduction provided under
19         this subparagraph (K);
20             (L) For taxable years ending after December 31,
21         1983, an amount equal to all social security benefits
22         and railroad retirement benefits included in such
23         total pursuant to Sections 72(r) and 86 of the Internal
24         Revenue Code;
25             (M) With the exception of any amounts subtracted
26         under subparagraph (N), an amount equal to the sum of

 

 

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

 

 

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

 

 

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1         tax imposed and paid under subsections (a) and (b) of
2         Section 201 of this Act on grant amounts received by
3         the taxpayer under the Nursing Home Grant Assistance
4         Act during the taxpayer's taxable years 1992 and 1993;
5             (V) Beginning with tax years ending on or after
6         December 31, 1995 and ending with tax years ending on
7         or before December 31, 2004, an amount equal to the
8         amount paid by a taxpayer who is a self-employed
9         taxpayer, a partner of a partnership, or a shareholder
10         in a Subchapter S corporation for health insurance or
11         long-term care insurance for that taxpayer or that
12         taxpayer's spouse or dependents, to the extent that the
13         amount paid for that health insurance or long-term care
14         insurance may be deducted under Section 213 of the
15         Internal Revenue Code of 1986, has not been deducted on
16         the federal income tax return of the taxpayer, and does
17         not exceed the taxable income attributable to that
18         taxpayer's income, self-employment income, or
19         Subchapter S corporation income; except that no
20         deduction shall be allowed under this item (V) if the
21         taxpayer is eligible to participate in any health
22         insurance or long-term care insurance plan of an
23         employer of the taxpayer or the taxpayer's spouse. The
24         amount of the health insurance and long-term care
25         insurance subtracted under this item (V) shall be
26         determined by multiplying total health insurance and

 

 

SB2148 Engrossed - 19 - LRB095 17798 BDD 45375 b

1         long-term care insurance premiums paid by the taxpayer
2         times a number that represents the fractional
3         percentage of eligible medical expenses under Section
4         213 of the Internal Revenue Code of 1986 not actually
5         deducted on the taxpayer's federal income tax return;
6             (W) For taxable years beginning on or after January
7         1, 1998, all amounts included in the taxpayer's federal
8         gross income in the taxable year from amounts converted
9         from a regular IRA to a Roth IRA. This paragraph is
10         exempt from the provisions of Section 250;
11             (X) 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             (Y) For taxable years beginning on or after January
19         1, 2002 and ending on or before December 31, 2004,
20         moneys contributed in the taxable year to a College
21         Savings Pool account under Section 16.5 of the State
22         Treasurer Act, except that amounts excluded from gross
23         income under Section 529(c)(3)(C)(i) of the Internal
24         Revenue Code shall not be considered moneys
25         contributed under this subparagraph (Y). For taxable
26         years beginning on or after January 1, 2005, a maximum

 

 

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1         of $10,000 contributed in the taxable year to (i) a
2         College Savings Pool account under Section 16.5 of the
3         State Treasurer Act or (ii) the Illinois Prepaid
4         Tuition Trust Fund, except that amounts excluded from
5         gross income under Section 529(c)(3)(C)(i) of the
6         Internal Revenue Code shall not be considered moneys
7         contributed under this subparagraph (Y). This
8         subparagraph (Y) is exempt from the provisions of
9         Section 250;
10             (Z) For taxable years 2001 and thereafter, for the
11         taxable year in which the bonus depreciation deduction
12         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 (Z) is exempt from the provisions of
19         Section 250;
20             (AA) If the taxpayer sells, transfers, abandons,
21         or otherwise disposes of property for which the
22         taxpayer was required in any taxable year to make an
23         addition modification under subparagraph (D-15), then
24         an amount 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-15), 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 (AA) is exempt from the
10         provisions of Section 250;
11             (BB) Any amount included in adjusted gross income,
12         other than salary, received by a driver in a
13         ridesharing arrangement using a motor vehicle;
14             (CC) The amount of (i) any interest income (net of
15         the deductions allocable thereto) taken into account
16         for the taxable year with respect to a transaction with
17         a taxpayer that is required to make an addition
18         modification with respect to such transaction under
19         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
20         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
21         the amount of that addition modification, and (ii) any
22         income from intangible property (net of the deductions
23         allocable thereto) taken into account for the taxable
24         year with respect to a transaction with a taxpayer that
25         is required to make an addition modification with
26         respect to such transaction under Section

 

 

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1         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
2         203(d)(2)(D-8), but not to exceed the amount of that
3         addition modification. This subparagraph (CC) is
4         exempt from the provisions of Section 250;
5             (DD) An amount equal to the interest income taken
6         into account for the taxable year (net of the
7         deductions allocable thereto) with respect to
8         transactions with (i) a foreign person who would be a
9         member of the taxpayer's unitary business group but for
10         the fact that the foreign person's business activity
11         outside the United States is 80% or more of that
12         person's total business activity and (ii) for taxable
13         years ending on or after December 31, 2008, to a person
14         who would be a member of the same unitary business
15         group but for the fact that the person is prohibited
16         under Section 1501(a)(27) from being included in the
17         unitary business group because he or she is ordinarily
18         required to apportion business income under different
19         subsections of Section 304, but not to exceed the
20         addition modification required to be made for the same
21         taxable year under Section 203(a)(2)(D-17) for
22         interest paid, accrued, or incurred, directly or
23         indirectly, to the same person. This subparagraph (DD)
24         is exempt from the provisions of Section 250; and
25             (EE) An amount equal to the income from intangible
26         property taken into account for the taxable year (net

 

 

SB2148 Engrossed - 25 - LRB095 17798 BDD 45375 b

1         of the deductions allocable thereto) with respect to
2         transactions with (i) a foreign person who would be a
3         member of the taxpayer's unitary business group but for
4         the fact that the foreign person's business activity
5         outside the United States is 80% or more of that
6         person's total business activity and (ii) for taxable
7         years ending on or after December 31, 2008, to a person
8         who would be a member of the same unitary business
9         group but for the fact that the person is prohibited
10         under Section 1501(a)(27) from being included in the
11         unitary business group because he or she is ordinarily
12         required to apportion business income under different
13         subsections of Section 304, but not to exceed the
14         addition modification required to be made for the same
15         taxable year under Section 203(a)(2)(D-18) for
16         intangible expenses and costs paid, accrued, or
17         incurred, directly or indirectly, to the same foreign
18         person. This subparagraph (EE) is exempt from the
19         provisions of Section 250; and .
20             (FF) For taxable years ending on or after December
21         31, 2008, an amount equal to a percentage of the
22         following income:
23                 (1) licensing fees or other income received
24             for the use of a qualified patent;
25                 (2) royalties received for the infringement of
26             a qualified patent;

 

 

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1                 (3) receipts from the sale of a qualified
2             patent; and
3                 (4) income from the taxpayer's own use of the
4             taxpayer's qualified patent to produce the claimed
5             invention, but not to exceed the fair market value
6             of the licensing fees or other income that would be
7             received by allowing use of the qualified
8             taxpayer's qualified patent by someone other than
9             the taxpayer; the fair market value must be
10             determined in each taxable year in which the
11             qualified taxpayer claims a deduction under this
12             subparagraph.
13             The total amount of deductions claimed under this
14         subparagraph (FF) by a qualified taxpayer in a taxable
15         year may not exceed $10,000,000. A qualified taxpayer
16         may not claim an exemption under this subparagraph (FF)
17         with respect to a particular qualified patent for more
18         than 10 taxable years.
19             The percentage of the income, royalties, or
20         receipts from a particular qualified patent that may be
21         deducted is as follows:
22                 (1) for each of the first 5 taxable years in
23             which the deduction is claimed, 50% of the income,
24             royalties, or receipts from the qualified patent;
25                 (2) for the 6th taxable year in which the
26             deduction is claimed, 40% of the income,

 

 

SB2148 Engrossed - 27 - LRB095 17798 BDD 45375 b

1             royalties, or receipts from the qualified patent;
2                 (3) for the 7th taxable year in which the
3             deduction is claimed, 30% of the income,
4             royalties, or receipts from the qualified patent;
5                 (4) for the 8th taxable year in which the
6             deduction is claimed, 20% of the income,
7             royalties, or receipts from the qualified patent;
8             and
9                 (5) for each of the 9th and 10th taxable years
10             in which the deduction is claimed, 10% of the
11             income, royalties, or receipts from the qualified
12             patent.
13             As used in this subparagraph (FF):
14             "Qualified patent" means a utility patent (under
15         35 U.S.C. 101) or a plant patent (under 35 U.S.C. 161)
16         that was issued after December 31, 2007 for an
17         invention resulting from a development process
18         conducted in Illinois.
19             "Qualified taxpayer" means a taxpayer who is
20         domiciled in Illinois and who is either: (i) an
21         individual or corporation; or (ii) a nonprofit
22         organization or nonprofit corporation.
23             This subparagraph (FF) is exempt from the
24         provisions of Section 250.
 
25     (b) Corporations.

 

 

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

 

 

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1         operating loss carried forward from a taxable year
2         ending prior to December 31, 1986;
3             (E) For taxable years in which a net operating loss
4         carryback or carryforward from a taxable year ending
5         prior to December 31, 1986 is an element of taxable
6         income under paragraph (1) of subsection (e) or
7         subparagraph (E) of paragraph (2) of subsection (e),
8         the amount by which addition modifications other than
9         those provided by this subparagraph (E) exceeded
10         subtraction modifications in such earlier taxable
11         year, with the following limitations applied in the
12         order that they are listed:
13                 (i) the addition modification relating to the
14             net operating loss carried back or forward to the
15             taxable year from any taxable year ending prior to
16             December 31, 1986 shall be reduced by the amount of
17             addition modification under this subparagraph (E)
18             which related to that net operating loss and which
19             was taken into account in calculating the base
20             income of an earlier taxable year, and
21                 (ii) the addition modification relating to the
22             net operating loss carried back or forward to the
23             taxable year from any taxable year ending prior to
24             December 31, 1986 shall not exceed the amount of
25             such carryback or carryforward;
26             For taxable years in which there is a net operating

 

 

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1         loss carryback or carryforward from more than one other
2         taxable year ending prior to December 31, 1986, the
3         addition modification provided in this subparagraph
4         (E) shall be the sum of the amounts computed
5         independently under the preceding provisions of this
6         subparagraph (E) for each such taxable year;
7             (E-5) For taxable years ending after December 31,
8         1997, an amount equal to any eligible remediation costs
9         that the corporation deducted in computing adjusted
10         gross income and for which the corporation claims a
11         credit under subsection (l) of Section 201;
12             (E-10) For taxable years 2001 and thereafter, an
13         amount equal to the bonus depreciation deduction taken
14         on the taxpayer's federal income tax return for the
15         taxable year under subsection (k) of Section 168 of the
16         Internal Revenue Code;
17             (E-11) If the taxpayer sells, transfers, abandons,
18         or otherwise disposes of property for which the
19         taxpayer was required in any taxable year to make an
20         addition modification under subparagraph (E-10), then
21         an amount equal to the aggregate amount of the
22         deductions taken in all taxable years under
23         subparagraph (T) with respect to that property.
24             If the taxpayer continues to own property through
25         the last day of the last tax year for which the
26         taxpayer may claim a depreciation deduction for

 

 

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1         federal income tax purposes and for which the taxpayer
2         was allowed in any taxable year to make a subtraction
3         modification under subparagraph (T), then an amount
4         equal to that subtraction modification.
5             The taxpayer is required to make the addition
6         modification under this subparagraph only once with
7         respect to any one piece of property;
8             (E-12) An amount equal to the amount otherwise
9         allowed as a deduction in computing base income for
10         interest paid, accrued, or incurred, directly or
11         indirectly, (i) for taxable years ending on or after
12         December 31, 2004, to a foreign person who would be a
13         member of the same unitary business group but for the
14         fact the foreign person's business activity outside
15         the United States is 80% or more of the foreign
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. The addition modification
24         required by this subparagraph shall be reduced to the
25         extent that dividends were included in base income of
26         the unitary group for the same taxable year and

 

 

SB2148 Engrossed - 32 - LRB095 17798 BDD 45375 b

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

 

 

SB2148 Engrossed - 33 - LRB095 17798 BDD 45375 b

1                 avoidance of Illinois income tax, and is paid
2                 pursuant to a contract or agreement that
3                 reflects an arm's-length interest rate and
4                 terms; or
5                 (iii) the taxpayer can establish, based on
6             clear and convincing evidence, that the interest
7             paid, accrued, or incurred relates to a contract or
8             agreement entered into at arm's-length rates and
9             terms and the principal purpose for the payment is
10             not federal or Illinois tax avoidance; or
11                 (iv) an item of interest paid, accrued, or
12             incurred, directly or indirectly, to a person if
13             the taxpayer establishes by clear and convincing
14             evidence that the adjustments are unreasonable; or
15             if the taxpayer and the Director agree in writing
16             to the application or use of an alternative method
17             of apportionment under Section 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;

 

 

SB2148 Engrossed - 34 - LRB095 17798 BDD 45375 b

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

 

 

SB2148 Engrossed - 35 - LRB095 17798 BDD 45375 b

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

 

 

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

 

 

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

 

 

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1         and amounts included in gross income under Section 78
2         of the Internal Revenue Code) with respect to the stock
3         of the same person to whom the premiums and costs were
4         directly or indirectly paid, incurred, or accrued. The
5         preceding sentence does not apply to the extent that
6         the same dividends caused a reduction to the addition
7         modification required under Section 203(b)(2)(E-12) or
8         Section 203(b)(2)(E-13) of this Act;
9             (E-15) For taxable years beginning after December
10         31, 2008, any deduction for dividends paid by a captive
11         real estate investment trust that is allowed to a real
12         estate investment trust under Section 857(b)(2)(B) of
13         the Internal Revenue Code for 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 that exempts income derived from
20         bonds or other obligations from the tax imposed under
21         this Act, the amount exempted shall be the interest net
22         of bond premium amortization;
23             (K) An amount equal to those dividends included in
24         such total which were paid by a corporation which
25         conducts business operations in an Enterprise Zone or
26         zones created under the Illinois Enterprise Zone Act or

 

 

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1         a River Edge Redevelopment Zone or zones created under
2         the River Edge Redevelopment Zone Act and conducts
3         substantially all of its operations in an Enterprise
4         Zone or zones or a River Edge Redevelopment Zone or
5         zones. This subparagraph (K) is exempt from the
6         provisions of Section 250;
7             (L) An amount equal to those dividends included in
8         such total that were paid by a corporation that
9         conducts business operations in a federally designated
10         Foreign Trade Zone or Sub-Zone and that is designated a
11         High Impact Business located in Illinois; provided
12         that dividends eligible for the deduction provided in
13         subparagraph (K) of paragraph 2 of this subsection
14         shall not be eligible for the deduction provided under
15         this subparagraph (L);
16             (M) For any taxpayer that is a financial
17         organization within the meaning of Section 304(c) of
18         this Act, an amount included in such total as interest
19         income from a loan or loans made by such taxpayer to a
20         borrower, to the extent that such a loan is secured by
21         property which is eligible for the Enterprise Zone
22         Investment Credit or the River Edge Redevelopment Zone
23         Investment Credit. To determine the portion of a loan
24         or loans that is secured by property eligible for a
25         Section 201(f) investment credit to the borrower, the
26         entire principal amount of the loan or loans between

 

 

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

 

 

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1         this purpose the original basis of such property on the
2         date that it was placed in service in a federally
3         designated Foreign Trade Zone or Sub-Zone located in
4         Illinois. No taxpayer that is eligible for the
5         deduction provided in subparagraph (M) of paragraph
6         (2) of this subsection shall be eligible for the
7         deduction provided under this subparagraph (M-1). The
8         subtraction modification available to taxpayers in any
9         year under this subsection shall be that portion of the
10         total interest paid by the borrower with respect to
11         such loan attributable to the eligible property as
12         calculated under the previous sentence;
13             (N) Two times any contribution made during the
14         taxable year to a designated zone organization to the
15         extent that the contribution (i) qualifies as a
16         charitable contribution under subsection (c) of
17         Section 170 of the Internal Revenue Code and (ii) must,
18         by its terms, be used for a project approved by the
19         Department of Commerce and Economic Opportunity under
20         Section 11 of the Illinois Enterprise Zone Act or under
21         Section 10-10 of the River Edge Redevelopment Zone Act.
22         This subparagraph (N) is exempt from the provisions of
23         Section 250;
24             (O) An amount equal to: (i) 85% for taxable years
25         ending on or before December 31, 1992, or, a percentage
26         equal to the percentage allowable under Section

 

 

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1         243(a)(1) of the Internal Revenue Code of 1986 for
2         taxable years ending after December 31, 1992, of the
3         amount by which dividends included in taxable income
4         and received from a corporation that is not created or
5         organized under the laws of the United States or any
6         state or political subdivision thereof, including, for
7         taxable years ending on or after December 31, 1988,
8         dividends received or deemed received or paid or deemed
9         paid under Sections 951 through 964 of the Internal
10         Revenue Code, exceed the amount of the modification
11         provided under subparagraph (G) of paragraph (2) of
12         this subsection (b) which is related to such dividends,
13         and including, for taxable years ending on or after
14         December 31, 2008, dividends received from a captive
15         real estate investment trust; plus (ii) 100% of the
16         amount by which dividends, included in taxable income
17         and received, including, for taxable years ending on or
18         after December 31, 1988, dividends received or deemed
19         received or paid or deemed paid under Sections 951
20         through 964 of the Internal Revenue Code and including,
21         for taxable years ending on or after December 31, 2008,
22         dividends received from a captive real estate
23         investment trust, from any such corporation specified
24         in clause (i) that would but for the provisions of
25         Section 1504 (b) (3) of the Internal Revenue Code be
26         treated as a member of the affiliated group which

 

 

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1         includes the dividend recipient, exceed the amount of
2         the modification provided under subparagraph (G) of
3         paragraph (2) of this subsection (b) which is related
4         to such dividends. This subparagraph (O) is exempt from
5         the provisions of Section 250 of this Act;
6             (P) An amount equal to any contribution made to a
7         job training project established pursuant to the Tax
8         Increment Allocation Redevelopment Act;
9             (Q) An amount equal to the amount of the deduction
10         used to compute the federal income tax credit for
11         restoration of substantial amounts held under claim of
12         right for the taxable year pursuant to Section 1341 of
13         the Internal Revenue Code of 1986;
14             (R) On and after July 20, 1999, in the case of an
15         attorney-in-fact with respect to whom an interinsurer
16         or a reciprocal insurer has made the election under
17         Section 835 of the Internal Revenue Code, 26 U.S.C.
18         835, an amount equal to the excess, if any, of the
19         amounts paid or incurred by that interinsurer or
20         reciprocal insurer in the taxable year to the
21         attorney-in-fact over the deduction allowed to that
22         interinsurer or reciprocal insurer with respect to the
23         attorney-in-fact under Section 835(b) of the Internal
24         Revenue Code for the taxable year; the provisions of
25         this subparagraph are exempt from the provisions of
26         Section 250;

 

 

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1             (S) For taxable years ending on or after December
2         31, 1997, in the case of a Subchapter S corporation, an
3         amount equal to all amounts of income allocable to a
4         shareholder subject to the Personal Property Tax
5         Replacement Income Tax imposed by subsections (c) and
6         (d) of Section 201 of this Act, including amounts
7         allocable to organizations exempt from federal income
8         tax by reason of Section 501(a) of the Internal Revenue
9         Code. This subparagraph (S) is exempt from the
10         provisions of Section 250;
11             (T) For taxable years 2001 and thereafter, for the
12         taxable year in which the bonus depreciation deduction
13         is taken on the taxpayer's federal income tax return
14         under subsection (k) of Section 168 of the Internal
15         Revenue Code and for each applicable taxable year
16         thereafter, an amount equal to "x", where:
17                 (1) "y" equals the amount of the depreciation
18             deduction taken for the taxable year on the
19             taxpayer's federal income tax return on property
20             for which the bonus depreciation deduction was
21             taken in any year under subsection (k) of Section
22             168 of the Internal Revenue Code, but not including
23             the bonus depreciation deduction;
24                 (2) for taxable years ending on or before
25             December 31, 2005, "x" equals "y" multiplied by 30
26             and then divided by 70 (or "y" multiplied by

 

 

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

 

 

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

 

 

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1         addition modification, and (iii) any insurance premium
2         income (net of deductions allocable thereto) taken
3         into account for the taxable year with respect to a
4         transaction with a taxpayer that is required to make an
5         addition modification with respect to such transaction
6         under Section 203(a)(2)(D-19), Section
7         203(b)(2)(E-14), Section 203(c)(2)(G-14), or Section
8         203(d)(2)(D-9), but not to exceed the amount of that
9         addition modification. This subparagraph (V) is exempt
10         from the provisions of Section 250;
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 person. This subparagraph (W)
4         is exempt from the provisions of Section 250; and
5             (X) An amount equal to the income from intangible
6         property taken into account for the taxable year (net
7         of the deductions allocable thereto) with respect to
8         transactions with (i) a foreign person who would be a
9         member of the taxpayer's unitary business group but for
10         the fact that the foreign person's business activity
11         outside the United States is 80% or more of that
12         person's total business activity and (ii) for taxable
13         years ending on or after December 31, 2008, to a person
14         who would be a member of the same unitary business
15         group but for the fact that the person is prohibited
16         under Section 1501(a)(27) from being included in the
17         unitary business group because he or she is ordinarily
18         required to apportion business income under different
19         subsections of Section 304, but not to exceed the
20         addition modification required to be made for the same
21         taxable year under Section 203(b)(2)(E-13) for
22         intangible expenses and costs paid, accrued, or
23         incurred, directly or indirectly, to the same foreign
24         person. This subparagraph (X) is exempt from the
25         provisions of Section 250; and .
26             (Y) For taxable years ending on or after December

 

 

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1         31, 2008, an amount equal to a percentage of the
2         following income:
3                 (1) licensing fees or other income received
4             for the use of a qualified patent;
5                 (2) royalties received for the infringement of
6             a qualified patent;
7                 (3) receipts from the sale of a qualified
8             patent; and
9                 (4) income from the taxpayer's own use of the
10             taxpayer's qualified patent to produce the claimed
11             invention, but not to exceed the fair market value
12             of the licensing fees or other income that would be
13             received by allowing use of the qualified
14             taxpayer's qualified patent by someone other than
15             the taxpayer; the fair market value must be
16             determined in each taxable year in which the
17             qualified taxpayer claims a deduction under this
18             subparagraph.
19             The total amount of deductions claimed under this
20         subparagraph (Y) by a qualified taxpayer in a taxable
21         year may not exceed $10,000,000. A qualified taxpayer
22         may not claim an exemption under this subparagraph (Y)
23         with respect to a particular qualified patent for more
24         than 10 taxable years.
25             The percentage of the income, royalties, or
26         receipts from a particular qualified patent that may be

 

 

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1         deducted is as follows:
2                 (1) for each of the first 5 taxable years in
3             which the deduction is claimed, 50% of the income,
4             royalties, or receipts from the qualified patent;
5                 (2) for the 6th taxable year in which the
6             deduction is claimed, 40% of the income,
7             royalties, or receipts from the qualified patent;
8                 (3) for the 7th taxable year in which the
9             deduction is claimed, 30% of the income,
10             royalties, or receipts from the qualified patent;
11                 (4) for the 8th taxable year in which the
12             deduction is claimed, 20% of the income,
13             royalties, or receipts from the qualified patent;
14             and
15                 (5) for each of the 9th and 10th taxable years
16             in which the deduction is claimed, 10% of the
17             income, royalties, or receipts from the qualified
18             patent.
19             As used in this subparagraph (Y):
20             "Qualified patent" means a utility patent (under
21         35 U.S.C. 101) or a plant patent (under 35 U.S.C. 161)
22         that was issued after December 31, 2007 for an
23         invention resulting from a development process
24         conducted in Illinois.
25             "Qualified taxpayer" means a taxpayer who is
26         domiciled in Illinois and who is either: (i) an

 

 

SB2148 Engrossed - 52 - LRB095 17798 BDD 45375 b

1         individual or corporation; or (ii) a nonprofit
2         organization or nonprofit corporation.
3             This subparagraph (Y) is exempt from the
4         provisions of Section 250.
5         (3) Special rule. For purposes of paragraph (2) (A),
6     "gross income" in the case of a life insurance company, for
7     tax years ending on and after December 31, 1994, shall mean
8     the gross investment income for the taxable year.
 
9     (c) Trusts and estates.
10         (1) In general. In the case of a trust or estate, base
11     income means an amount equal to the taxpayer's taxable
12     income for the taxable year as modified by paragraph (2).
13         (2) Modifications. Subject to the provisions of
14     paragraph (3), the taxable income referred to in paragraph
15     (1) shall be modified by adding thereto the sum of the
16     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) In the case of (i) an estate, $600; (ii) a
22         trust which, under its governing instrument, is
23         required to distribute all of its income currently,
24         $300; and (iii) any other trust, $100, but in each such
25         case, only to the extent such amount was deducted in

 

 

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1         the computation of taxable income;
2             (C) An amount equal to the amount of tax imposed by
3         this Act to the extent deducted from gross income in
4         the computation of taxable income for the taxable year;
5             (D) The amount of any net operating loss deduction
6         taken in arriving at taxable income, other than a net
7         operating loss carried forward from a taxable year
8         ending prior to December 31, 1986;
9             (E) For taxable years in which a net operating loss
10         carryback or carryforward from a taxable year ending
11         prior to December 31, 1986 is an element of taxable
12         income under paragraph (1) of subsection (e) or
13         subparagraph (E) of paragraph (2) of subsection (e),
14         the amount by which addition modifications other than
15         those provided by this subparagraph (E) exceeded
16         subtraction modifications in such taxable year, with
17         the following limitations applied in the order that
18         they are listed:
19                 (i) the addition modification relating to the
20             net operating loss carried back or forward to the
21             taxable year from any taxable year ending prior to
22             December 31, 1986 shall be reduced by the amount of
23             addition modification under this subparagraph (E)
24             which related to that net operating loss and which
25             was taken into account in calculating the base
26             income of an earlier taxable year, and

 

 

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

 

 

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1         credit under subsection (l) of Section 201;
2             (G-10) For taxable years 2001 and thereafter, an
3         amount equal to the bonus depreciation deduction taken
4         on the taxpayer's federal income tax return for the
5         taxable year under subsection (k) of Section 168 of the
6         Internal Revenue Code; and
7             (G-11) If the taxpayer sells, transfers, abandons,
8         or otherwise disposes of property for which the
9         taxpayer was required in any taxable year to make an
10         addition modification under subparagraph (G-10), then
11         an amount equal to the aggregate amount of the
12         deductions taken in all taxable years under
13         subparagraph (R) with respect to that property.
14             If the taxpayer continues to own property through
15         the last day of the last tax year for which the
16         taxpayer may claim a depreciation deduction for
17         federal income tax purposes and for which the taxpayer
18         was allowed in any taxable year to make a subtraction
19         modification under subparagraph (R), then an amount
20         equal to that subtraction modification.
21             The taxpayer is required to make the addition
22         modification under this subparagraph only once with
23         respect to any one piece of property;
24             (G-12) An amount equal to the amount otherwise
25         allowed as a deduction in computing base income for
26         interest paid, accrued, or incurred, directly or

 

 

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1         indirectly, (i) for taxable years ending on or after
2         December 31, 2004, to a foreign person who would be a
3         member of the same unitary business group but for the
4         fact that the foreign person's business activity
5         outside the United States is 80% or more of the foreign
6         person's total business activity and (ii) for taxable
7         years ending on or after December 31, 2008, to a person
8         who would be a member of the same unitary business
9         group but for the fact that the person is prohibited
10         under Section 1501(a)(27) from being included in the
11         unitary business group because he or she is ordinarily
12         required to apportion business income under different
13         subsections of Section 304. The addition modification
14         required by this subparagraph shall be reduced to the
15         extent that dividends were included in base income of
16         the unitary group for the same taxable year and
17         received by the taxpayer or by a member of the
18         taxpayer's unitary business group (including amounts
19         included in gross income pursuant to Sections 951
20         through 964 of the Internal Revenue Code and amounts
21         included in gross income under Section 78 of the
22         Internal Revenue Code) with respect to the stock of the
23         same person to whom the interest was paid, accrued, or
24         incurred.
25             This paragraph shall not apply to the following:
26                 (i) an item of interest paid, accrued, or

 

 

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

 

 

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

 

 

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1         December 31, 2008, to a person who would be a member of
2         the same unitary business group but for the fact that
3         the person is prohibited under Section 1501(a)(27)
4         from being included in the unitary business group
5         because he or she is ordinarily required to apportion
6         business income under different subsections of Section
7         304. The addition modification required by this
8         subparagraph shall be reduced to the extent that
9         dividends were included in base income of the unitary
10         group for the same taxable year and received by the
11         taxpayer or by a member of the taxpayer's unitary
12         business group (including amounts included in gross
13         income pursuant to Sections 951 through 964 of the
14         Internal Revenue Code and amounts included in gross
15         income under Section 78 of the Internal Revenue Code)
16         with respect to the stock of the same person to whom
17         the intangible expenses and costs were directly or
18         indirectly paid, incurred, or accrued. The preceding
19         sentence shall not apply to the extent that the same
20         dividends caused a reduction to the addition
21         modification required under Section 203(c)(2)(G-12) of
22         this Act. As used in this subparagraph, the term
23         "intangible expenses and costs" includes: (1)
24         expenses, losses, and costs for or related to the
25         direct or indirect acquisition, use, maintenance or
26         management, ownership, sale, exchange, or any other

 

 

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

 

 

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1                     (b) the transaction giving rise to the
2                 intangible expense or cost between the
3                 taxpayer and the person did not have as a
4                 principal purpose the avoidance of Illinois
5                 income tax, and is paid pursuant to a contract
6                 or agreement that reflects arm's-length terms;
7                 or
8                 (iii) any item of intangible expense or cost
9             paid, accrued, or incurred, directly or
10             indirectly, from a transaction with a person if the
11             taxpayer establishes by clear and convincing
12             evidence, that the adjustments are unreasonable;
13             or if the taxpayer and the Director agree in
14             writing to the application or use of an alternative
15             method of apportionment under Section 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             (G-14) 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 premiums and costs were
20         directly or indirectly paid, incurred, or accrued. The
21         preceding sentence does not apply to the extent that
22         the same dividends caused a reduction to the addition
23         modification required under Section 203(c)(2)(G-12) or
24         Section 203(c)(2)(G-13) of this Act.
25     and by deducting from the total so obtained the sum of the
26     following amounts:

 

 

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1             (H) An amount equal to all amounts included in such
2         total pursuant to the provisions of Sections 402(a),
3         402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
4         Internal Revenue Code or included in such total as
5         distributions under the provisions of any retirement
6         or disability plan for employees of any governmental
7         agency or unit, or retirement payments to retired
8         partners, which payments are excluded in computing net
9         earnings from self employment by Section 1402 of the
10         Internal Revenue Code and regulations adopted pursuant
11         thereto;
12             (I) The valuation limitation amount;
13             (J) An amount equal to the amount of any tax
14         imposed by this Act which was refunded to the taxpayer
15         and included in such total for the taxable year;
16             (K) An amount equal to all amounts included in
17         taxable income as modified by subparagraphs (A), (B),
18         (C), (D), (E), (F) and (G) which are exempt from
19         taxation by this State either by reason of its statutes
20         or Constitution or by reason of the Constitution,
21         treaties or statutes of the United States; provided
22         that, in the case of any statute of this State 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 interest net of bond premium
26         amortization;

 

 

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

 

 

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1             (O) An amount equal to those dividends included in
2         such total that were paid by a corporation that
3         conducts business operations in a federally designated
4         Foreign Trade Zone or Sub-Zone and that is designated a
5         High Impact Business located in Illinois; provided
6         that dividends eligible for the deduction provided in
7         subparagraph (M) of paragraph (2) of this subsection
8         shall not be eligible for the deduction provided under
9         this subparagraph (O);
10             (P) An amount equal to the amount of the deduction
11         used to compute the federal income tax credit for
12         restoration of substantial amounts held under claim of
13         right for the taxable year pursuant to Section 1341 of
14         the Internal Revenue Code of 1986;
15             (Q) For taxable year 1999 and thereafter, an amount
16         equal to the amount of any (i) distributions, to the
17         extent includible in gross income for federal income
18         tax purposes, made to the taxpayer because of his or
19         her status as a victim of persecution for racial or
20         religious reasons by Nazi Germany or any other Axis
21         regime or as an heir of the victim and (ii) items of
22         income, to the extent includible in gross income for
23         federal income tax purposes, attributable to, derived
24         from or in any way related to assets stolen from,
25         hidden from, or otherwise lost to a victim of
26         persecution for racial or religious reasons by Nazi

 

 

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

 

 

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

 

 

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1         depreciation deduction taken on that property on the
2         taxpayer's federal income tax return under subsection
3         (k) of Section 168 of the Internal Revenue Code. This
4         subparagraph (R) is exempt from the provisions of
5         Section 250;
6             (S) If the taxpayer sells, transfers, abandons, or
7         otherwise disposes of property for which the taxpayer
8         was required in any taxable year to make an addition
9         modification under subparagraph (G-10), then an amount
10         equal to that addition modification.
11             If the taxpayer continues to own property through
12         the last day of the last tax year for which the
13         taxpayer may claim a depreciation deduction for
14         federal income tax purposes and for which the taxpayer
15         was required in any taxable year to make an addition
16         modification under subparagraph (G-10), then an amount
17         equal to that addition modification.
18             The taxpayer is allowed to take the deduction under
19         this subparagraph only once with respect to any one
20         piece of property.
21             This subparagraph (S) is exempt from the
22         provisions of Section 250;
23             (T) The amount of (i) any interest income (net of
24         the deductions allocable thereto) taken into account
25         for the taxable year with respect to a transaction with
26         a taxpayer that is required to make an addition

 

 

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1         modification with respect to such transaction under
2         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
3         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
4         the amount of such addition modification and (ii) any
5         income from intangible property (net of the deductions
6         allocable thereto) taken into account for the taxable
7         year with respect to a transaction with a taxpayer that
8         is required to make an addition modification with
9         respect to such transaction under Section
10         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
11         203(d)(2)(D-8), but not to exceed the amount of such
12         addition modification. This subparagraph (T) is exempt
13         from the provisions of Section 250;
14             (U) An amount equal to the interest income taken
15         into account for the taxable year (net of the
16         deductions allocable thereto) with respect to
17         transactions with (i) a foreign person who would be a
18         member of the taxpayer's unitary business group but for
19         the fact the foreign person's business activity
20         outside the United States is 80% or more of that
21         person's total business activity and (ii) for taxable
22         years ending on or after December 31, 2008, to a person
23         who would be a member of the same unitary business
24         group but for the fact that the person is prohibited
25         under Section 1501(a)(27) from being included in the
26         unitary business group because he or she is ordinarily

 

 

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1         required to apportion business income under different
2         subsections of Section 304, but not to exceed the
3         addition modification required to be made for the same
4         taxable year under Section 203(c)(2)(G-12) for
5         interest paid, accrued, or incurred, directly or
6         indirectly, to the same person. This subparagraph (U)
7         is exempt from the provisions of Section 250; and
8             (V) An amount equal to the income from intangible
9         property taken into account for the taxable year (net
10         of the deductions allocable thereto) with respect to
11         transactions with (i) a foreign person who would be a
12         member of the taxpayer's unitary business group but for
13         the fact that the foreign person's business activity
14         outside the United States is 80% or more of that
15         person's total business activity and (ii) for taxable
16         years ending on or after December 31, 2008, to a person
17         who would be a member of the same unitary business
18         group but for the fact that the person is prohibited
19         under Section 1501(a)(27) from being included in the
20         unitary business group because he or she is ordinarily
21         required to apportion business income under different
22         subsections of Section 304, but not to exceed the
23         addition modification required to be made for the same
24         taxable year under Section 203(c)(2)(G-13) for
25         intangible expenses and costs paid, accrued, or
26         incurred, directly or indirectly, to the same foreign

 

 

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1         person. This subparagraph (V) is exempt from the
2         provisions of Section 250; and .
3             (W) For taxable years ending on or after December
4         31, 2008, an amount equal to a percentage of the
5         following income:
6                 (1) licensing fees or other income received
7             for the use of a qualified patent;
8                 (2) royalties received for the infringement of
9             a qualified patent;
10                 (3) receipts from the sale of a qualified
11             patent; and
12                 (4) income from the taxpayer's own use of the
13             taxpayer's qualified patent to produce the claimed
14             invention, but not to exceed the fair market value
15             of the licensing fees or other income that would be
16             received by allowing use of the qualified
17             taxpayer's qualified patent by someone other than
18             the taxpayer; the fair market value must be
19             determined in each taxable year in which the
20             qualified taxpayer claims a deduction under this
21             subparagraph.
22             The total amount of deductions claimed under this
23         subparagraph (W) by a qualified taxpayer in a taxable
24         year may not exceed $10,000,000. A qualified taxpayer
25         may not claim an exemption under this subparagraph (W)
26         with respect to a particular qualified patent for more

 

 

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1         than 10 taxable years.
2             The percentage of the income, royalties, or
3         receipts from a particular qualified patent that may be
4         deducted is as follows:
5                 (1) for each of the first 5 taxable years in
6             which the deduction is claimed, 50% of the income,
7             royalties, or receipts from the qualified patent;
8                 (2) for the 6th taxable year in which the
9             deduction is claimed, 40% of the income,
10             royalties, or receipts from the qualified patent;
11                 (3) for the 7th taxable year in which the
12             deduction is claimed, 30% of the income,
13             royalties, or receipts from the qualified patent;
14                 (4) for the 8th taxable year in which the
15             deduction is claimed, 20% of the income,
16             royalties, or receipts from the qualified patent;
17             and
18                 (5) for each of the 9th and 10th taxable years
19             in which the deduction is claimed, 10% of the
20             income, royalties, or receipts from the qualified
21             patent.
22             As used in this subparagraph (W):
23             "Qualified patent" means a utility patent (under
24         35 U.S.C. 101) or a plant patent (under 35 U.S.C. 161)
25         that was issued after December 31, 2007 for an
26         invention resulting from a development process

 

 

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1         conducted in Illinois.
2             "Qualified taxpayer" means a taxpayer who is
3         domiciled in Illinois and who is either: (i) an
4         individual or corporation; or (ii) a nonprofit
5         organization or nonprofit corporation.
6             This subparagraph (W) is exempt from the
7         provisions of Section 250.
8         (3) Limitation. The amount of any modification
9     otherwise required under this subsection shall, under
10     regulations prescribed by the Department, be adjusted by
11     any amounts included therein which were properly paid,
12     credited, or required to be distributed, or permanently set
13     aside for charitable purposes pursuant to Internal Revenue
14     Code Section 642(c) during the taxable year.
 
15     (d) Partnerships.
16         (1) In general. In the case of a partnership, base
17     income means an amount equal to the taxpayer's taxable
18     income for the taxable year as modified by paragraph (2).
19         (2) Modifications. The taxable income referred to in
20     paragraph (1) shall be modified by adding thereto the sum
21     of the following amounts:
22             (A) An amount equal to all amounts paid or accrued
23         to the taxpayer as interest or dividends during the
24         taxable year to the extent excluded from gross income
25         in the computation of taxable income;

 

 

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1             (B) An amount equal to the amount of tax imposed by
2         this Act to the extent deducted from gross income for
3         the taxable year;
4             (C) The amount of deductions allowed to the
5         partnership pursuant to Section 707 (c) of the Internal
6         Revenue Code in calculating its taxable income;
7             (D) An amount equal to the amount of the capital
8         gain deduction allowable under the Internal Revenue
9         Code, to the extent deducted from gross income in the
10         computation of taxable income;
11             (D-5) For taxable years 2001 and thereafter, an
12         amount equal to the bonus depreciation deduction taken
13         on the taxpayer's federal income tax return for the
14         taxable year under subsection (k) of Section 168 of the
15         Internal Revenue Code;
16             (D-6) If the taxpayer sells, transfers, abandons,
17         or otherwise disposes of property for which the
18         taxpayer was required in any taxable year to make an
19         addition modification under subparagraph (D-5), then
20         an amount equal to the aggregate amount of the
21         deductions taken in all taxable years under
22         subparagraph (O) with respect to that property.
23             If the taxpayer continues to own property through
24         the last day of the last tax year for which the
25         taxpayer may claim a depreciation deduction for
26         federal income tax purposes and for which the taxpayer

 

 

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

 

 

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

 

 

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1                 pursuant to a contract or agreement that
2                 reflects an arm's-length interest rate and
3                 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 person if
12             the taxpayer establishes by clear and convincing
13             evidence that the adjustments are unreasonable; or
14             if the taxpayer and the Director agree in writing
15             to the application or use of an alternative method
16             of apportionment under Section 304(f).
17                 Nothing in this subsection shall preclude the
18             Director from making any other adjustment
19             otherwise allowed under Section 404 of this Act for
20             any tax year beginning after the effective date of
21             this amendment provided such adjustment is made
22             pursuant to regulation adopted by the Department
23             and such regulations provide methods and standards
24             by which the Department will utilize its authority
25             under Section 404 of this Act; and
26             (D-8) An amount equal to the amount of intangible

 

 

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

 

 

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

 

 

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1                 (ii) any item of intangible expense or cost
2             paid, accrued, or incurred, directly or
3             indirectly, if the taxpayer can establish, based
4             on a preponderance of the evidence, both of the
5             following:
6                     (a) the person during the same taxable
7                 year paid, accrued, or incurred, the
8                 intangible expense or cost to a person that is
9                 not a related member, and
10                     (b) the transaction giving rise to the
11                 intangible expense or cost between the
12                 taxpayer and the person did not have as a
13                 principal purpose the avoidance of Illinois
14                 income tax, and is paid pursuant to a contract
15                 or agreement that reflects arm's-length terms;
16                 or
17                 (iii) any item of intangible expense or cost
18             paid, accrued, or incurred, directly or
19             indirectly, from a transaction with a person if the
20             taxpayer establishes by clear and convincing
21             evidence, that the adjustments are unreasonable;
22             or if the taxpayer and the Director agree in
23             writing to the application or use of an alternative
24             method of apportionment under Section 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 premiums and costs were
3         directly or indirectly paid, incurred, or accrued. The
4         preceding sentence does not apply to the extent that
5         the same dividends caused a reduction to the addition
6         modification required under Section 203(d)(2)(D-7) or
7         Section 203(d)(2)(D-8) 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 that exempts income derived from
21         bonds or other obligations from the tax imposed under
22         this Act, the amount exempted shall be the interest net
23         of bond premium amortization;
24             (H) Any income of the partnership which
25         constitutes personal service income as defined in
26         Section 1348 (b) (1) of the Internal Revenue Code (as

 

 

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1         in effect December 31, 1981) or a reasonable allowance
2         for compensation paid or accrued for services rendered
3         by partners to the partnership, whichever is greater;
4             (I) An amount equal to all amounts of income
5         distributable to an entity subject to the Personal
6         Property Tax Replacement Income Tax imposed by
7         subsections (c) and (d) of Section 201 of this Act
8         including amounts distributable to organizations
9         exempt from federal income tax by reason of Section
10         501(a) of the Internal Revenue Code;
11             (J) With the exception of any amounts subtracted
12         under subparagraph (G), an amount equal to the sum of
13         all amounts disallowed as deductions by (i) Sections
14         171(a) (2), and 265(2) of the Internal Revenue Code of
15         1954, as now or hereafter amended, and all amounts of
16         expenses allocable to interest and disallowed as
17         deductions by Section 265(1) of the Internal Revenue
18         Code, as now or hereafter amended; and (ii) for taxable
19         years ending on or after August 13, 1999, Sections
20         171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
21         Internal Revenue Code; the provisions of this
22         subparagraph are exempt from the provisions of Section
23         250;
24             (K) An amount equal to those dividends included in
25         such total which were paid by a corporation which
26         conducts business operations in an Enterprise Zone or

 

 

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1         zones created under the Illinois Enterprise Zone Act,
2         enacted by the 82nd General Assembly, or a River Edge
3         Redevelopment Zone or zones created under the River
4         Edge Redevelopment Zone Act and conducts substantially
5         all of its operations in an Enterprise Zone or Zones or
6         from a River Edge Redevelopment Zone or zones. This
7         subparagraph (K) is exempt from the provisions of
8         Section 250;
9             (L) An amount equal to any contribution made to a
10         job training project established pursuant to the Real
11         Property Tax Increment Allocation Redevelopment Act;
12             (M) An amount equal to those dividends included in
13         such total that were paid by a corporation that
14         conducts business operations in a federally designated
15         Foreign Trade Zone or Sub-Zone and that is designated a
16         High Impact Business located in Illinois; provided
17         that dividends eligible for the deduction provided in
18         subparagraph (K) of paragraph (2) of this subsection
19         shall not be eligible for the deduction provided under
20         this subparagraph (M);
21             (N) An amount equal to the amount of the deduction
22         used to compute the federal income tax credit for
23         restoration of substantial amounts held under claim of
24         right for the taxable year pursuant to Section 1341 of
25         the Internal Revenue Code of 1986;
26             (O) For taxable years 2001 and thereafter, for the

 

 

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

 

 

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1                 1.0.
2             The aggregate amount deducted under this
3         subparagraph in all taxable years for any one piece of
4         property may not exceed the amount of the bonus
5         depreciation deduction taken on that property on the
6         taxpayer's federal income tax return under subsection
7         (k) of Section 168 of the Internal Revenue Code. This
8         subparagraph (O) is exempt from the provisions of
9         Section 250;
10             (P) If the taxpayer sells, transfers, abandons, or
11         otherwise disposes of property for which the taxpayer
12         was required in any taxable year to make an addition
13         modification under subparagraph (D-5), then an amount
14         equal to that addition modification.
15             If the taxpayer continues to own property through
16         the last day of the last tax year for which the
17         taxpayer may claim a depreciation deduction for
18         federal income tax purposes and for which the taxpayer
19         was required in any taxable year to make an addition
20         modification under subparagraph (D-5), then an amount
21         equal to that addition modification.
22             The taxpayer is allowed to take the deduction under
23         this subparagraph only once with respect to any one
24         piece of property.
25             This subparagraph (P) is exempt from the
26         provisions of Section 250;

 

 

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1             (Q) The amount of (i) any interest income (net of
2         the deductions allocable thereto) taken into account
3         for the taxable year with respect to a transaction with
4         a taxpayer that is required to make an addition
5         modification with respect to such transaction under
6         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
7         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
8         the amount of such addition modification and (ii) any
9         income from intangible property (net of the deductions
10         allocable thereto) taken into account for the taxable
11         year with respect to a transaction with a taxpayer that
12         is required to make an addition modification with
13         respect to such transaction under Section
14         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
15         203(d)(2)(D-8), but not to exceed the amount of such
16         addition modification. This subparagraph (Q) is exempt
17         from Section 250;
18             (R) 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(d)(2)(D-7) for interest
9         paid, accrued, or incurred, directly or indirectly, to
10         the same person. This subparagraph (R) is exempt from
11         Section 250; and
12             (S) An amount equal to the income from intangible
13         property taken into account for the taxable year (net
14         of the deductions allocable thereto) with respect to
15         transactions with (i) a foreign person who would be a
16         member of the taxpayer's unitary business group but for
17         the fact that the foreign person's business activity
18         outside the United States is 80% or more of that
19         person's total business activity and (ii) for taxable
20         years ending on or after December 31, 2008, to a person
21         who would be a member of the same unitary business
22         group but for the fact that the person is prohibited
23         under Section 1501(a)(27) from being included in the
24         unitary business group because he or she is ordinarily
25         required to apportion business income under different
26         subsections of Section 304, but not to exceed the

 

 

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1         addition modification required to be made for the same
2         taxable year under Section 203(d)(2)(D-8) for
3         intangible expenses and costs paid, accrued, or
4         incurred, directly or indirectly, to the same person.
5         This subparagraph (S) is exempt from Section 250; and .
6             (T) For taxable years ending on or after December
7         31, 2008, an amount equal to a percentage of the
8         following income:
9                 (1) licensing fees or other income received
10             for the use of a qualified patent;
11                 (2) royalties received for the infringement of
12             a qualified patent;
13                 (3) receipts from the sale of a qualified
14             patent; and
15                 (4) income from the taxpayer's own use of the
16             taxpayer's qualified patent to produce the claimed
17             invention, but not to exceed the fair market value
18             of the licensing fees or other income that would be
19             received by allowing use of the qualified
20             taxpayer's qualified patent by someone other than
21             the taxpayer; the fair market value must be
22             determined in each taxable year in which the
23             qualified taxpayer claims a deduction under this
24             subparagraph.
25             The total amount of deductions claimed under this
26         subparagraph (T) by a qualified taxpayer in a taxable

 

 

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1         year may not exceed $10,000,000. A qualified taxpayer
2         may not claim an exemption under this subparagraph (T)
3         with respect to a particular qualified patent for more
4         than 10 taxable years.
5             The percentage of the income, royalties, or
6         receipts from a particular qualified patent that may be
7         deducted is as follows:
8                 (1) for each of the first 5 taxable years in
9             which the deduction is claimed, 50% of the income,
10             royalties, or receipts from the qualified patent;
11                 (2) for the 6th taxable year in which the
12             deduction is claimed, 40% of the income,
13             royalties, or receipts from the qualified patent;
14                 (3) for the 7th taxable year in which the
15             deduction is claimed, 30% of the income,
16             royalties, or receipts from the qualified patent;
17                 (4) for the 8th taxable year in which the
18             deduction is claimed, 20% of the income,
19             royalties, or receipts from the qualified patent;
20             and
21                 (5) for each of the 9th and 10th taxable years
22             in which the deduction is claimed, 10% of the
23             income, royalties, or receipts from the qualified
24             patent.
25             As used in this subparagraph (T):
26             "Qualified patent" means a utility patent (under

 

 

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1         35 U.S.C. 101) or a plant patent (under 35 U.S.C. 161)
2         that was issued after December 31, 2007 for an
3         invention resulting from a development process
4         conducted in Illinois.
5             "Qualified taxpayer" means a taxpayer who is
6         domiciled in Illinois and who is either: (i) an
7         individual or corporation; or (ii) a nonprofit
8         organization or nonprofit corporation.
9             This subparagraph (T) is exempt from the
10         provisions of Section 250.
 
11     (e) Gross income; adjusted gross income; taxable income.
12         (1) In general. Subject to the provisions of paragraph
13     (2) and subsection (b) (3), for purposes of this Section
14     and Section 803(e), a taxpayer's gross income, adjusted
15     gross income, or taxable income for the taxable year shall
16     mean the amount of gross income, adjusted gross income or
17     taxable income properly reportable for federal income tax
18     purposes for the taxable year under the provisions of the
19     Internal Revenue Code. Taxable income may be less than
20     zero. However, for taxable years ending on or after
21     December 31, 1986, net operating loss carryforwards from
22     taxable years ending prior to December 31, 1986, may not
23     exceed the sum of federal taxable income for the taxable
24     year before net operating loss deduction, plus the excess
25     of addition modifications over subtraction modifications

 

 

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

 

 

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1         accounts as calculated under Section 815a of the
2         Internal Revenue Code;
3             (B) Certain other insurance companies. In the case
4         of mutual insurance companies subject to the tax
5         imposed by Section 831 of the Internal Revenue Code,
6         insurance company taxable income;
7             (C) Regulated investment companies. In the case of
8         a regulated investment company subject to the tax
9         imposed by Section 852 of the Internal Revenue Code,
10         investment company taxable income;
11             (D) Real estate investment trusts. In the case of a
12         real estate investment trust subject to the tax imposed
13         by Section 857 of the Internal Revenue Code, real
14         estate investment trust taxable income;
15             (E) Consolidated corporations. In the case of a
16         corporation which is a member of an affiliated group of
17         corporations filing a consolidated income tax return
18         for the taxable year for federal income tax purposes,
19         taxable income determined as if such corporation had
20         filed a separate return for federal income tax purposes
21         for the taxable year and each preceding taxable year
22         for which it was a member of an affiliated group. For
23         purposes of this subparagraph, the taxpayer's separate
24         taxable income shall be determined as if the election
25         provided by Section 243(b) (2) of the Internal Revenue
26         Code had been in effect for all such years;

 

 

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1             (F) Cooperatives. In the case of a cooperative
2         corporation or association, the taxable income of such
3         organization determined in accordance with the
4         provisions of Section 1381 through 1388 of the Internal
5         Revenue Code;
6             (G) Subchapter S corporations. In the case of: (i)
7         a Subchapter S corporation for which there is in effect
8         an election for the taxable year under Section 1362 of
9         the Internal Revenue Code, the taxable income of such
10         corporation determined in accordance with Section
11         1363(b) of the Internal Revenue Code, except that
12         taxable income shall take into account those items
13         which are required by Section 1363(b)(1) of the
14         Internal Revenue Code to be separately stated; and (ii)
15         a Subchapter S corporation for which there is in effect
16         a federal election to opt out of the provisions of the
17         Subchapter S Revision Act of 1982 and have applied
18         instead the prior federal Subchapter S rules as in
19         effect on July 1, 1982, the taxable income of such
20         corporation determined in accordance with the federal
21         Subchapter S rules as in effect on July 1, 1982; and
22             (H) Partnerships. In the case of a partnership,
23         taxable income determined in accordance with Section
24         703 of the Internal Revenue Code, except that taxable
25         income shall take into account those items which are
26         required by Section 703(a)(1) to be separately stated

 

 

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1         but which would be taken into account by an individual
2         in calculating his taxable income.
3         (3) Recapture of business expenses on disposition of
4     asset or business. Notwithstanding any other law to the
5     contrary, if in prior years income from an asset or
6     business has been classified as business income and in a
7     later year is demonstrated to be non-business income, then
8     all expenses, without limitation, deducted in such later
9     year and in the 2 immediately preceding taxable years
10     related to that asset or business that generated the
11     non-business income shall be added back and recaptured as
12     business income in the year of the disposition of the asset
13     or business. Such amount shall be apportioned to Illinois
14     using the greater of the apportionment fraction computed
15     for the business under Section 304 of this Act for the
16     taxable year or the average of the apportionment fractions
17     computed for the business under Section 304 of this Act for
18     the taxable year and for the 2 immediately preceding
19     taxable years.
20     (f) Valuation limitation amount.
21         (1) In general. The valuation limitation amount
22     referred to in subsections (a) (2) (G), (c) (2) (I) and
23     (d)(2) (E) is an amount equal to:
24             (A) The sum of the pre-August 1, 1969 appreciation
25         amounts (to the extent consisting of gain reportable
26         under the provisions of Section 1245 or 1250 of the

 

 

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

 

 

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1         same ratio to the total gain reported in respect of the
2         property for federal income tax purposes for the
3         taxable year, as the number of full calendar months in
4         that part of the taxpayer's holding period for the
5         property ending July 31, 1969 bears to the number of
6         full calendar months in the taxpayer's entire holding
7         period for the property.
8             (C) The Department shall prescribe such
9         regulations as may be necessary to carry out the
10         purposes of this paragraph.
 
11     (g) Double deductions. Unless specifically provided
12 otherwise, nothing in this Section shall permit the same item
13 to be deducted more than once.
 
14     (h) Legislative intention. Except as expressly provided by
15 this Section there shall be no modifications or limitations on
16 the amounts of income, gain, loss or deduction taken into
17 account in determining gross income, adjusted gross income or
18 taxable income for federal income tax purposes for the taxable
19 year, or in the amount of such items entering into the
20 computation of base income and net income under this Act for
21 such taxable year, whether in respect of property values as of
22 August 1, 1969 or otherwise.
23 (Source: P.A. 94-776, eff. 5-19-06; 94-789, eff. 5-19-06;
24 94-1021, eff. 7-12-06; 94-1074, eff. 12-26-06; 95-23, eff.

 

 

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1 8-3-07; 95-233, eff. 8-16-07; 95-286, eff. 8-20-07; 95-331,
2 eff. 8-21-07; 95-707, eff. 1-11-08.)
 
3     Section 99. Effective date. This Act takes effect upon
4 becoming law.