96TH GENERAL ASSEMBLY
State of Illinois
2009 and 2010
HB0343

 

Introduced 1/27/2009, by Rep. Rosemary Mulligan - Patricia R. Bellock - Sandra M. Pihos

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 5/203   from Ch. 120, par. 2-203

    Amends the Illinois Income Tax Act. Creates an income tax deduction for individuals and trusts and estates for any amount exceeding $2,000 expended for the purchase of a hearing aid. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB0343 LRB096 03465 HLH 13489 b

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

 

 

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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

 

 

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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

 

 

HB0343 - 25 - LRB096 03465 HLH 13489 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, 2009 and ending on or before December 30, 2014, an
22         amount equal to: (i) the amount expended by the
23         taxpayer during the taxable year for the purchase of a
24         hearing aid for use by the taxpayer or by a dependent
25         of the taxpayer; less (ii) $2,000. For the purpose of
26         this subparagraph (FF), "hearing aid" means an

 

 

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1         ear-level or body-worn electroacoustic instrument that
2         is used for the purpose of amplifying sound and the
3         basic components of which are a microphone, amplifier,
4         and receiver. "Hearing aid" also includes prosthetic
5         devices that produce perception of sound by replacing
6         the function of the middle ear, cochlea, or auditory
7         nerve, such as auditory osseointegrated devices and
8         auditory brainstem devices.
 
9     (b) Corporations.
10         (1) In general. In the case of a corporation, 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. The taxable income referred to in
14     paragraph (1) shall be modified by adding thereto the sum
15     of the following amounts:
16             (A) An amount equal to all amounts paid or accrued
17         to the taxpayer as interest and all distributions
18         received from regulated investment companies during
19         the taxable year to the extent excluded from gross
20         income in the computation of taxable income;
21             (B) An amount equal to the amount of tax imposed by
22         this Act to the extent deducted from gross income in
23         the computation of taxable income for the taxable year;
24             (C) In the case of a regulated investment company,
25         an amount equal to the excess of (i) the net long-term

 

 

HB0343 - 27 - LRB096 03465 HLH 13489 b

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

 

 

HB0343 - 28 - LRB096 03465 HLH 13489 b

1             addition modification under this subparagraph (E)
2             which related to that net operating loss and which
3             was taken into account in calculating the base
4             income of an earlier taxable year, and
5                 (ii) the addition modification relating to the
6             net operating loss carried back or forward to the
7             taxable year from any taxable year ending prior to
8             December 31, 1986 shall not exceed the amount of
9             such carryback or carryforward;
10             For taxable years in which there is a net operating
11         loss carryback or carryforward from more than one other
12         taxable year ending prior to December 31, 1986, the
13         addition modification provided in this subparagraph
14         (E) shall be the sum of the amounts computed
15         independently under the preceding provisions of this
16         subparagraph (E) for each such taxable year;
17             (E-5) For taxable years ending after December 31,
18         1997, an amount equal to any eligible remediation costs
19         that the corporation deducted in computing adjusted
20         gross income and for which the corporation claims a
21         credit under subsection (l) of Section 201;
22             (E-10) For taxable years 2001 and thereafter, an
23         amount equal to the bonus depreciation deduction taken
24         on the taxpayer's federal income tax return for the
25         taxable year under subsection (k) of Section 168 of the
26         Internal Revenue Code;

 

 

HB0343 - 29 - LRB096 03465 HLH 13489 b

1             (E-11) If the taxpayer sells, transfers, abandons,
2         or otherwise disposes of property for which the
3         taxpayer was required in any taxable year to make an
4         addition modification under subparagraph (E-10), then
5         an amount equal to the aggregate amount of the
6         deductions taken in all taxable years under
7         subparagraph (T) with respect to that property.
8             If the taxpayer continues to own property through
9         the last day of the last tax year for which the
10         taxpayer may claim a depreciation deduction for
11         federal income tax purposes and for which the taxpayer
12         was allowed in any taxable year to make a subtraction
13         modification under subparagraph (T), then an amount
14         equal to that subtraction modification.
15             The taxpayer is required to make the addition
16         modification under this subparagraph only once with
17         respect to any one piece of property;
18             (E-12) An amount equal to the amount otherwise
19         allowed as a deduction in computing base income for
20         interest paid, accrued, or incurred, directly or
21         indirectly, (i) for taxable years ending on or after
22         December 31, 2004, to a foreign person who would be a
23         member of the same unitary business group but for the
24         fact the foreign person's business activity outside
25         the United States is 80% or more of the foreign
26         person's total business activity and (ii) for taxable

 

 

HB0343 - 30 - LRB096 03465 HLH 13489 b

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

 

 

HB0343 - 31 - LRB096 03465 HLH 13489 b

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

 

 

HB0343 - 32 - LRB096 03465 HLH 13489 b

1             of apportionment under Section 304(f).
2                 Nothing in this subsection shall preclude the
3             Director from making any other adjustment
4             otherwise allowed under Section 404 of this Act for
5             any tax year beginning after the effective date of
6             this amendment provided such adjustment is made
7             pursuant to regulation adopted by the Department
8             and such regulations provide methods and standards
9             by which the Department will utilize its authority
10             under Section 404 of this Act;
11             (E-13) An amount equal to the amount of intangible
12         expenses and costs otherwise allowed as a deduction in
13         computing base income, and that were paid, accrued, or
14         incurred, directly or indirectly, (i) for taxable
15         years ending on or after December 31, 2004, to a
16         foreign person who would be a member of the same
17         unitary business group but for the fact that the
18         foreign person's business activity outside the United
19         States is 80% or more of that person's total business
20         activity and (ii) for taxable years ending on or after
21         December 31, 2008, to a person who would be a member of
22         the same unitary business group but for the fact that
23         the person is prohibited under Section 1501(a)(27)
24         from being included in the unitary business group
25         because he or she is ordinarily required to apportion
26         business income under different subsections of Section

 

 

HB0343 - 33 - LRB096 03465 HLH 13489 b

1         304. The addition modification required by this
2         subparagraph shall be reduced to the extent that
3         dividends were included in base income of the unitary
4         group for the same taxable year and received by the
5         taxpayer or by a member of the taxpayer's unitary
6         business group (including amounts included in gross
7         income pursuant to Sections 951 through 964 of the
8         Internal Revenue Code and amounts included in gross
9         income under Section 78 of the Internal Revenue Code)
10         with respect to the stock of the same person to whom
11         the intangible expenses and costs were directly or
12         indirectly paid, incurred, or accrued. The preceding
13         sentence shall not apply to the extent that the same
14         dividends caused a reduction to the addition
15         modification required under Section 203(b)(2)(E-12) of
16         this Act. As used in this subparagraph, the term
17         "intangible expenses and costs" includes (1) expenses,
18         losses, and costs for, or related to, the direct or
19         indirect acquisition, use, maintenance or management,
20         ownership, sale, exchange, or any other disposition of
21         intangible property; (2) losses incurred, directly or
22         indirectly, from factoring transactions or discounting
23         transactions; (3) royalty, patent, technical, and
24         copyright fees; (4) licensing fees; and (5) other
25         similar expenses and costs. For purposes of this
26         subparagraph, "intangible property" includes patents,

 

 

HB0343 - 34 - LRB096 03465 HLH 13489 b

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

 

 

HB0343 - 35 - LRB096 03465 HLH 13489 b

1                 or
2                 (iii) any item of intangible expense or cost
3             paid, accrued, or incurred, directly or
4             indirectly, from a transaction with a person if the
5             taxpayer establishes by clear and convincing
6             evidence, that the adjustments are unreasonable;
7             or if the taxpayer and the Director agree in
8             writing to the application or use of an alternative
9             method of apportionment under Section 304(f);
10                 Nothing in this subsection shall preclude the
11             Director from making any other adjustment
12             otherwise allowed under Section 404 of this Act for
13             any tax year beginning after the effective date of
14             this amendment provided such adjustment is made
15             pursuant to regulation adopted by the Department
16             and such regulations provide methods and standards
17             by which the Department will utilize its authority
18             under Section 404 of this Act;
19             (E-14) For taxable years ending on or after
20         December 31, 2008, an amount equal to the amount of
21         insurance premium expenses and costs otherwise allowed
22         as a deduction in computing base income, and that were
23         paid, accrued, or incurred, directly or indirectly, to
24         a person who would be a member of the same unitary
25         business group but for the fact that the person is
26         prohibited under Section 1501(a)(27) from being

 

 

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1         included in the unitary business group because he or
2         she is ordinarily required to apportion business
3         income under different subsections of Section 304. The
4         addition modification required by this subparagraph
5         shall be reduced to the extent that dividends were
6         included in base income of the unitary group for the
7         same taxable year and received by the taxpayer or by a
8         member of the taxpayer's unitary business group
9         (including amounts included in gross income under
10         Sections 951 through 964 of the Internal Revenue Code
11         and amounts included in gross income under Section 78
12         of the Internal Revenue Code) with respect to the stock
13         of the same person to whom the premiums and costs were
14         directly or indirectly paid, incurred, or accrued. The
15         preceding sentence does not apply to the extent that
16         the same dividends caused a reduction to the addition
17         modification required under Section 203(b)(2)(E-12) or
18         Section 203(b)(2)(E-13) of this Act;
19             (E-15) For taxable years beginning after December
20         31, 2008, any deduction for dividends paid by a captive
21         real estate investment trust that is allowed to a real
22         estate investment trust under Section 857(b)(2)(B) of
23         the Internal Revenue Code for dividends paid;
24     and by deducting from the total so obtained the sum of the
25     following amounts:
26             (F) An amount equal to the amount of any tax

 

 

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

 

 

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1         reason of the Constitution, treaties or statutes of the
2         United States; provided that, in the case of any
3         statute of this State that exempts income derived from
4         bonds or other obligations from the tax imposed under
5         this Act, the amount exempted shall be the interest net
6         of bond premium amortization;
7             (K) An amount equal to those dividends included in
8         such total which were paid by a corporation which
9         conducts business operations in an Enterprise Zone or
10         zones created under the Illinois Enterprise Zone Act or
11         a River Edge Redevelopment Zone or zones created under
12         the River Edge Redevelopment Zone Act and conducts
13         substantially all of its operations in an Enterprise
14         Zone or zones or a River Edge Redevelopment Zone or
15         zones. This subparagraph (K) is exempt from the
16         provisions of Section 250;
17             (L) An amount equal to those dividends included in
18         such total that were paid by a corporation that
19         conducts business operations in a federally designated
20         Foreign Trade Zone or Sub-Zone and that is designated a
21         High Impact Business located in Illinois; provided
22         that dividends eligible for the deduction provided in
23         subparagraph (K) of paragraph 2 of this subsection
24         shall not be eligible for the deduction provided under
25         this subparagraph (L);
26             (M) For any taxpayer that is a financial

 

 

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

 

 

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

 

 

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

 

 

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1         and received, including, for taxable years ending on or
2         after December 31, 1988, dividends received or deemed
3         received or paid or deemed paid under Sections 951
4         through 964 of the Internal Revenue Code and including,
5         for taxable years ending on or after December 31, 2008,
6         dividends received from a captive real estate
7         investment trust, from any such corporation specified
8         in clause (i) that would but for the provisions of
9         Section 1504 (b) (3) of the Internal Revenue Code be
10         treated as a member of the affiliated group which
11         includes the dividend recipient, exceed the amount of
12         the modification provided under subparagraph (G) of
13         paragraph (2) of this subsection (b) which is related
14         to such dividends. This subparagraph (O) is exempt from
15         the provisions of Section 250 of this Act;
16             (P) An amount equal to any contribution made to a
17         job training project established pursuant to the Tax
18         Increment Allocation Redevelopment Act;
19             (Q) An amount equal to the amount of the deduction
20         used to compute the federal income tax credit for
21         restoration of substantial amounts held under claim of
22         right for the taxable year pursuant to Section 1341 of
23         the Internal Revenue Code of 1986;
24             (R) On and after July 20, 1999, in the case of an
25         attorney-in-fact with respect to whom an interinsurer
26         or a reciprocal insurer has made the election under

 

 

HB0343 - 43 - LRB096 03465 HLH 13489 b

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

 

 

HB0343 - 44 - LRB096 03465 HLH 13489 b

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

 

 

HB0343 - 45 - LRB096 03465 HLH 13489 b

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

 

 

HB0343 - 46 - LRB096 03465 HLH 13489 b

1         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
2         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
3         the amount of such addition modification, (ii) any
4         income from intangible property (net of the deductions
5         allocable thereto) taken into account for the taxable
6         year with respect to a transaction with a taxpayer that
7         is required to make an addition modification with
8         respect to such transaction under Section
9         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
10         203(d)(2)(D-8), but not to exceed the amount of such
11         addition modification, and (iii) any insurance premium
12         income (net of deductions allocable thereto) taken
13         into account for the taxable year with respect to a
14         transaction with a taxpayer that is required to make an
15         addition modification with respect to such transaction
16         under Section 203(a)(2)(D-19), Section
17         203(b)(2)(E-14), Section 203(c)(2)(G-14), or Section
18         203(d)(2)(D-9), but not to exceed the amount of that
19         addition modification. This subparagraph (V) is exempt
20         from the provisions of Section 250;
21             (W) An amount equal to the interest income taken
22         into account for the taxable year (net of the
23         deductions allocable thereto) with respect to
24         transactions with (i) a foreign person who would be a
25         member of the taxpayer's unitary business group but for
26         the fact that the foreign person's business activity

 

 

HB0343 - 47 - LRB096 03465 HLH 13489 b

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

 

 

HB0343 - 48 - LRB096 03465 HLH 13489 b

1         unitary business group because he or she is ordinarily
2         required to apportion business income under different
3         subsections of Section 304, but not to exceed the
4         addition modification required to be made for the same
5         taxable year under Section 203(b)(2)(E-13) for
6         intangible expenses and costs paid, accrued, or
7         incurred, directly or indirectly, to the same foreign
8         person. This subparagraph (X) is exempt from the
9         provisions of Section 250. (Y)
10         (3) Special rule. For purposes of paragraph (2) (A),
11     "gross income" in the case of a life insurance company, for
12     tax years ending on and after December 31, 1994, shall mean
13     the gross investment income for the taxable year.
 
14     (c) Trusts and estates.
15         (1) In general. In the case of a trust or estate, base
16     income means an amount equal to the taxpayer's taxable
17     income for the taxable year as modified by paragraph (2).
18         (2) Modifications. Subject to the provisions of
19     paragraph (3), the taxable income referred to in paragraph
20     (1) shall be modified by adding thereto the sum of the
21     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;

 

 

HB0343 - 49 - LRB096 03465 HLH 13489 b

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

 

 

HB0343 - 50 - LRB096 03465 HLH 13489 b

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

 

 

HB0343 - 51 - LRB096 03465 HLH 13489 b

1         computation of taxable income;
2             (G-5) For taxable years ending after December 31,
3         1997, an amount equal to any eligible remediation costs
4         that the trust or estate deducted in computing adjusted
5         gross income and for which the trust or estate claims a
6         credit under subsection (l) of Section 201;
7             (G-10) 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; and
12             (G-11) 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 (G-10), then
16         an amount equal to the aggregate amount of the
17         deductions taken in all taxable years under
18         subparagraph (R) 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 (R), then an amount
25         equal to that subtraction modification.
26             The taxpayer is required to make the addition

 

 

HB0343 - 52 - LRB096 03465 HLH 13489 b

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1         the same dividends caused a reduction to the addition
2         modification required under Section 203(c)(2)(G-12) or
3         Section 203(c)(2)(G-13) of this Act.
4     and by deducting from the total so obtained the sum of the
5     following amounts:
6             (H) An amount equal to all amounts included in such
7         total pursuant to the provisions of Sections 402(a),
8         402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
9         Internal Revenue Code or included in such total as
10         distributions under the provisions of any retirement
11         or disability plan for employees of any governmental
12         agency or unit, or retirement payments to retired
13         partners, which payments are excluded in computing net
14         earnings from self employment by Section 1402 of the
15         Internal Revenue Code and regulations adopted pursuant
16         thereto;
17             (I) The valuation limitation amount;
18             (J) An amount equal to the amount of any tax
19         imposed by this Act which was refunded to the taxpayer
20         and included in such total for the taxable year;
21             (K) An amount equal to all amounts included in
22         taxable income as modified by subparagraphs (A), (B),
23         (C), (D), (E), (F) and (G) which are exempt from
24         taxation by this State either by reason of its statutes
25         or Constitution or by reason of the Constitution,
26         treaties or statutes of the United States; provided

 

 

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1         that, in the case of any statute of this State that
2         exempts income derived from bonds or other obligations
3         from the tax imposed under this Act, the amount
4         exempted shall be the interest net of bond premium
5         amortization;
6             (L) With the exception of any amounts subtracted
7         under subparagraph (K), an amount equal to the sum of
8         all amounts disallowed as deductions by (i) Sections
9         171(a) (2) and 265(a)(2) of the Internal Revenue Code,
10         as now or hereafter amended, and all amounts of
11         expenses allocable to interest and disallowed as
12         deductions by Section 265(1) of the Internal Revenue
13         Code of 1954, as now or hereafter amended; and (ii) for
14         taxable years ending on or after August 13, 1999,
15         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
16         the Internal Revenue Code; the provisions of this
17         subparagraph are exempt from the provisions of Section
18         250;
19             (M) An amount equal to those dividends included in
20         such total which were paid by a corporation which
21         conducts business operations in an Enterprise Zone or
22         zones created under the Illinois Enterprise Zone Act or
23         a River Edge Redevelopment Zone or zones created under
24         the River Edge Redevelopment Zone Act and conducts
25         substantially all of its operations in an Enterprise
26         Zone or Zones or a River Edge Redevelopment Zone or

 

 

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1         zones. This subparagraph (M) is exempt from the
2         provisions of Section 250;
3             (N) An amount equal to any contribution made to a
4         job training project established pursuant to the Tax
5         Increment Allocation Redevelopment Act;
6             (O) An amount equal to those dividends included in
7         such total that were paid by a corporation that
8         conducts business operations in a federally designated
9         Foreign Trade Zone or Sub-Zone and that is designated a
10         High Impact Business located in Illinois; provided
11         that dividends eligible for the deduction provided in
12         subparagraph (M) of paragraph (2) of this subsection
13         shall not be eligible for the deduction provided under
14         this subparagraph (O);
15             (P) An amount equal to the amount of the deduction
16         used to compute the federal income tax credit for
17         restoration of substantial amounts held under claim of
18         right for the taxable year pursuant to Section 1341 of
19         the Internal Revenue Code of 1986;
20             (Q) For taxable year 1999 and thereafter, an amount
21         equal to the amount of any (i) distributions, to the
22         extent includible in gross income for federal income
23         tax purposes, made to the taxpayer because of his or
24         her status as a victim of persecution for racial or
25         religious reasons by Nazi Germany or any other Axis
26         regime or as an heir of the victim and (ii) items of

 

 

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

 

 

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1             (R) For taxable years 2001 and thereafter, for the
2         taxable year in which the bonus depreciation deduction
3         is taken on the taxpayer's federal income tax return
4         under subsection (k) of Section 168 of the Internal
5         Revenue Code and for each applicable taxable year
6         thereafter, an amount equal to "x", where:
7                 (1) "y" equals the amount of the depreciation
8             deduction taken for the taxable year on the
9             taxpayer's federal income tax return on property
10             for which the bonus depreciation deduction was
11             taken in any year under subsection (k) of Section
12             168 of the Internal Revenue Code, but not including
13             the bonus depreciation deduction;
14                 (2) for taxable years ending on or before
15             December 31, 2005, "x" equals "y" multiplied by 30
16             and then divided by 70 (or "y" multiplied by
17             0.429); and
18                 (3) for taxable years ending after December
19             31, 2005:
20                     (i) for property on which a bonus
21                 depreciation deduction of 30% of the adjusted
22                 basis was taken, "x" equals "y" multiplied by
23                 30 and then divided by 70 (or "y" multiplied by
24                 0.429); and
25                     (ii) for property on which a bonus
26                 depreciation deduction of 50% of the adjusted

 

 

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

 

 

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

 

 

HB0343 - 66 - LRB096 03465 HLH 13489 b

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

 

 

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1         subsections of Section 304, but not to exceed the
2         addition modification required to be made for the same
3         taxable year under Section 203(c)(2)(G-13) for
4         intangible expenses and costs paid, accrued, or
5         incurred, directly or indirectly, to the same foreign
6         person. This subparagraph (V) is exempt from the
7         provisions of Section 250; and . (W)
8             (W) For taxable years ending on or after December
9         31, 2009 and ending on or before December 30, 2014, an
10         amount equal to: (i) the amount expended by the
11         taxpayer during the taxable year for the purchase of a
12         hearing aid for use by a beneficiary or by a dependent
13         of beneficiary; less (ii) $2,000. For the purpose of
14         this subparagraph (W), "hearing aid" means an
15         ear-level or body-worn electroacoustic instrument that
16         is used for the purpose of amplifying sound and the
17         basic components of which are a microphone, amplifier,
18         and receiver. "Hearing aid" also includes prosthetic
19         devices that produce perception of sound by replacing
20         the function of the middle ear, cochlea, or auditory
21         nerve, such as auditory osseointegrated devices and
22         auditory brainstem devices. "Beneficiary" means any
23         person for whose benefit the trust or estate is created
24         or maintained.
25         (3) Limitation. The amount of any modification
26     otherwise required under this subsection shall, under

 

 

HB0343 - 68 - LRB096 03465 HLH 13489 b

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

 

 

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1         computation of taxable income;
2             (D-5) 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;
7             (D-6) 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 (D-5), then
11         an amount equal to the aggregate amount of the
12         deductions taken in all taxable years under
13         subparagraph (O) 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 (O), 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             (D-7) 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 the foreign person's business activity outside
5         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; and
17             (D-8) 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(d)(2)(D-7) of
22         this Act. As used in this subparagraph, the term
23         "intangible expenses and costs" includes (1) expenses,
24         losses, and costs for, or related to, the direct or
25         indirect acquisition, use, maintenance or management,
26         ownership, sale, exchange, or any other disposition of

 

 

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1         intangible property; (2) losses incurred, directly or
2         indirectly, from factoring transactions or discounting
3         transactions; (3) royalty, patent, technical, and
4         copyright fees; (4) licensing fees; and (5) other
5         similar expenses and costs. For purposes of this
6         subparagraph, "intangible property" includes patents,
7         patent applications, trade names, trademarks, service
8         marks, copyrights, mask works, trade secrets, and
9         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             (D-9) For taxable years ending on or after December
26         31, 2008, an amount equal to the amount of insurance

 

 

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1         premium expenses and costs otherwise allowed as a
2         deduction in computing base income, and that were paid,
3         accrued, or incurred, directly or indirectly, to a
4         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(d)(2)(D-7) or
24         Section 203(d)(2)(D-8) of this Act.
25     and by deducting from the total so obtained the following
26     amounts:

 

 

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1             (E) The valuation limitation amount;
2             (F) An amount equal to the amount of any tax
3         imposed by this Act which was refunded to the taxpayer
4         and included in such total for the taxable year;
5             (G) An amount equal to all amounts included in
6         taxable income as modified by subparagraphs (A), (B),
7         (C) and (D) which are exempt from taxation by this
8         State either by reason of its statutes or Constitution
9         or by reason of the Constitution, treaties or statutes
10         of the United States; provided that, in the case of any
11         statute of this State that exempts income derived from
12         bonds or other obligations from the tax imposed under
13         this Act, the amount exempted shall be the interest net
14         of bond premium amortization;
15             (H) Any income of the partnership which
16         constitutes personal service income as defined in
17         Section 1348 (b) (1) of the Internal Revenue Code (as
18         in effect December 31, 1981) or a reasonable allowance
19         for compensation paid or accrued for services rendered
20         by partners to the partnership, whichever is greater;
21             (I) An amount equal to all amounts of income
22         distributable to an entity subject to the Personal
23         Property Tax Replacement Income Tax imposed by
24         subsections (c) and (d) of Section 201 of this Act
25         including amounts distributable to organizations
26         exempt from federal income tax by reason of Section

 

 

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1         501(a) of the Internal Revenue Code;
2             (J) With the exception of any amounts subtracted
3         under subparagraph (G), an amount equal to the sum of
4         all amounts disallowed as deductions by (i) Sections
5         171(a) (2), and 265(2) of the Internal Revenue Code of
6         1954, as now or hereafter amended, and all amounts of
7         expenses allocable to interest and disallowed as
8         deductions by Section 265(1) of the Internal Revenue
9         Code, as now or hereafter amended; and (ii) for taxable
10         years ending on or after August 13, 1999, Sections
11         171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
12         Internal Revenue Code; the provisions of this
13         subparagraph are exempt from the provisions of Section
14         250;
15             (K) An amount equal to those dividends included in
16         such total which were paid by a corporation which
17         conducts business operations in an Enterprise Zone or
18         zones created under the Illinois Enterprise Zone Act,
19         enacted by the 82nd General Assembly, or a River Edge
20         Redevelopment Zone or zones created under the River
21         Edge Redevelopment Zone Act and conducts substantially
22         all of its operations in an Enterprise Zone or Zones or
23         from a River Edge Redevelopment Zone or zones. This
24         subparagraph (K) is exempt from the provisions of
25         Section 250;
26             (L) An amount equal to any contribution made to a

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1     applied under Section 172 of the Internal Revenue Code or
2     under subparagraph (E) of paragraph (2) of this subsection
3     (e) applied in conjunction with Section 172 of the Internal
4     Revenue Code.
5         (2) Special rule. For purposes of paragraph (1) of this
6     subsection, the taxable income properly reportable for
7     federal income tax purposes shall mean:
8             (A) Certain life insurance companies. In the case
9         of a life insurance company subject to the tax imposed
10         by Section 801 of the Internal Revenue Code, life
11         insurance company taxable income, plus the amount of
12         distribution from pre-1984 policyholder surplus
13         accounts as calculated under Section 815a of the
14         Internal Revenue Code;
15             (B) Certain other insurance companies. In the case
16         of mutual insurance companies subject to the tax
17         imposed by Section 831 of the Internal Revenue Code,
18         insurance company taxable income;
19             (C) Regulated investment companies. In the case of
20         a regulated investment company subject to the tax
21         imposed by Section 852 of the Internal Revenue Code,
22         investment company taxable income;
23             (D) Real estate investment trusts. In the case of a
24         real estate investment trust subject to the tax imposed
25         by Section 857 of the Internal Revenue Code, real
26         estate investment trust taxable income;

 

 

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

 

 

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

 

 

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1     for the business under Section 304 of this Act for the
2     taxable year or the average of the apportionment fractions
3     computed for the business under Section 304 of this Act for
4     the taxable year and for the 2 immediately preceding
5     taxable years.
 
6     (f) Valuation limitation amount.
7         (1) In general. The valuation limitation amount
8     referred to in subsections (a) (2) (G), (c) (2) (I) and
9     (d)(2) (E) is an amount equal to:
10             (A) The sum of the pre-August 1, 1969 appreciation
11         amounts (to the extent consisting of gain reportable
12         under the provisions of Section 1245 or 1250 of the
13         Internal Revenue Code) for all property in respect of
14         which such gain was reported for the taxable year; plus
15             (B) The lesser of (i) the sum of the pre-August 1,
16         1969 appreciation amounts (to the extent consisting of
17         capital gain) for all property in respect of which such
18         gain was reported for federal income tax purposes for
19         the taxable year, or (ii) the net capital gain for the
20         taxable year, reduced in either case by any amount of
21         such gain included in the amount determined under
22         subsection (a) (2) (F) or (c) (2) (H).
23         (2) Pre-August 1, 1969 appreciation amount.
24             (A) If the fair market value of property referred
25         to in paragraph (1) was readily ascertainable on August

 

 

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1         1, 1969, the pre-August 1, 1969 appreciation amount for
2         such property is the lesser of (i) the excess of such
3         fair market value over the taxpayer's basis (for
4         determining gain) for such property on that date
5         (determined under the Internal Revenue Code as in
6         effect on that date), or (ii) the total gain realized
7         and reportable for federal income tax purposes in
8         respect of the sale, exchange or other disposition of
9         such property.
10             (B) If the fair market value of property referred
11         to in paragraph (1) was not readily ascertainable on
12         August 1, 1969, the pre-August 1, 1969 appreciation
13         amount for such property is that amount which bears the
14         same ratio to the total gain reported in respect of the
15         property for federal income tax purposes for the
16         taxable year, as the number of full calendar months in
17         that part of the taxpayer's holding period for the
18         property ending July 31, 1969 bears to the number of
19         full calendar months in the taxpayer's entire holding
20         period for the property.
21             (C) The Department shall prescribe such
22         regulations as may be necessary to carry out the
23         purposes of this paragraph.
 
24     (g) Double deductions. Unless specifically provided
25 otherwise, nothing in this Section shall permit the same item

 

 

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1 to be deducted more than once.
 
2     (h) Legislative intention. Except as expressly provided by
3 this Section there shall be no modifications or limitations on
4 the amounts of income, gain, loss or deduction taken into
5 account in determining gross income, adjusted gross income or
6 taxable income for federal income tax purposes for the taxable
7 year, or in the amount of such items entering into the
8 computation of base income and net income under this Act for
9 such taxable year, whether in respect of property values as of
10 August 1, 1969 or otherwise.
11 (Source: P.A. 94-776, eff. 5-19-06; 94-789, eff. 5-19-06;
12 94-1021, eff. 7-12-06; 94-1074, eff. 12-26-06; 95-23, eff.
13 8-3-07; 95-233, eff. 8-16-07; 95-286, eff. 8-20-07; 95-331,
14 eff. 8-21-07; 95-707, eff. 1-11-08; 95-876, eff. 8-21-08;
15 revised 10-15-08.)
 
16     Section 99. Effective date. This Act takes effect upon
17 becoming law.