97TH GENERAL ASSEMBLY
State of Illinois
2011 and 2012
HB1725

 

Introduced , by Rep. Rosemary Mulligan

 

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

 

HB1725LRB097 03033 HLH 43064 b

1    AN ACT concerning revenue.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Income Tax Act is amended by
5changing 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            (D-22) For taxable years beginning on or after
26        January 1, 2009, in the case of a nonqualified

 

 

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1        withdrawal or refund of moneys from a qualified tuition
2        program under Section 529 of the Internal Revenue Code
3        administered by the State that is not used for
4        qualified expenses at an eligible education
5        institution, an amount equal to the contribution
6        component of the nonqualified withdrawal or refund
7        that was previously deducted from base income under
8        subsection (a)(2)(y) of this Section, provided that
9        the withdrawal or refund did not result from the
10        beneficiary's death or disability;
11            (D-23) An amount equal to the credit allowable to
12        the taxpayer under Section 218(a) of this Act,
13        determined without regard to Section 218(c) of this
14        Act;
15    and by deducting from the total so obtained the sum of the
16    following amounts:
17            (E) For taxable years ending before December 31,
18        2001, any amount included in such total in respect of
19        any compensation (including but not limited to any
20        compensation paid or accrued to a serviceman while a
21        prisoner of war or missing in action) paid to a
22        resident by reason of being on active duty in the Armed
23        Forces of the United States and in respect of any
24        compensation paid or accrued to a resident who as a
25        governmental employee was a prisoner of war or missing
26        in action, and in respect of any compensation paid to a

 

 

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1        resident in 1971 or thereafter for annual training
2        performed pursuant to Sections 502 and 503, Title 32,
3        United States Code as a member of the Illinois National
4        Guard or, beginning with taxable years ending on or
5        after December 31, 2007, the National Guard of any
6        other state. For taxable years ending on or after
7        December 31, 2001, any amount included in such total in
8        respect of any compensation (including but not limited
9        to any compensation paid or accrued to a serviceman
10        while a prisoner of war or missing in action) paid to a
11        resident by reason of being a member of any component
12        of the Armed Forces of the United States and in respect
13        of any compensation paid or accrued to a resident who
14        as a governmental employee was a prisoner of war or
15        missing in action, and in respect of any compensation
16        paid to a resident in 2001 or thereafter by reason of
17        being a member of the Illinois National Guard or,
18        beginning with taxable years ending on or after
19        December 31, 2007, the National Guard of any other
20        state. The provisions of this amendatory Act of the
21        92nd General Assembly are exempt from the provisions of
22        Section 250;
23            (F) An amount equal to all amounts included in such
24        total pursuant to the provisions of Sections 402(a),
25        402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the
26        Internal Revenue Code, or included in such total as

 

 

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1        distributions under the provisions of any retirement
2        or disability plan for employees of any governmental
3        agency or unit, or retirement payments to retired
4        partners, which payments are excluded in computing net
5        earnings from self employment by Section 1402 of the
6        Internal Revenue Code and regulations adopted pursuant
7        thereto;
8            (G) The valuation limitation amount;
9            (H) An amount equal to the amount of any tax
10        imposed by this Act which was refunded to the taxpayer
11        and included in such total for the taxable year;
12            (I) An amount equal to all amounts included in such
13        total pursuant to the provisions of Section 111 of the
14        Internal Revenue Code as a recovery of items previously
15        deducted from adjusted gross income in the computation
16        of taxable income;
17            (J) An amount equal to those dividends included in
18        such total which were paid by a corporation which
19        conducts business operations in an Enterprise Zone or
20        zones created under the Illinois Enterprise Zone Act or
21        a River Edge Redevelopment Zone or zones created under
22        the River Edge Redevelopment Zone Act, and conducts
23        substantially all of its operations in an Enterprise
24        Zone or zones or a River Edge Redevelopment Zone or
25        zones. This subparagraph (J) is exempt from the
26        provisions of Section 250;

 

 

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1            (K) An amount equal to those dividends included in
2        such total that were paid by a corporation that
3        conducts business operations in a federally designated
4        Foreign Trade Zone or Sub-Zone and that is designated a
5        High Impact Business located in Illinois; provided
6        that dividends eligible for the deduction provided in
7        subparagraph (J) of paragraph (2) of this subsection
8        shall not be eligible for the deduction provided under
9        this subparagraph (K);
10            (L) For taxable years ending after December 31,
11        1983, an amount equal to all social security benefits
12        and railroad retirement benefits included in such
13        total pursuant to Sections 72(r) and 86 of the Internal
14        Revenue Code;
15            (M) With the exception of any amounts subtracted
16        under subparagraph (N), an amount equal to the sum of
17        all amounts disallowed as deductions by (i) Sections
18        171(a) (2), and 265(2) of the Internal Revenue Code of
19        1954, as now or hereafter amended, and all amounts of
20        expenses allocable to interest and disallowed as
21        deductions by Section 265(1) of the Internal Revenue
22        Code of 1954, as now or hereafter amended; and (ii) for
23        taxable years ending on or after August 13, 1999,
24        Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
25        the Internal Revenue Code; the provisions of this
26        subparagraph are exempt from the provisions of Section

 

 

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1        250;
2            (N) An amount equal to all amounts included in such
3        total which are exempt from taxation by this State
4        either by reason of its statutes or Constitution or by
5        reason of the Constitution, treaties or statutes of the
6        United States; provided that, in the case of any
7        statute of this State that exempts income derived from
8        bonds or other obligations from the tax imposed under
9        this Act, the amount exempted shall be the interest net
10        of bond premium amortization;
11            (O) An amount equal to any contribution made to a
12        job training project established pursuant to the Tax
13        Increment Allocation Redevelopment Act;
14            (P) An amount equal to the amount of the deduction
15        used to compute the federal income tax credit for
16        restoration of substantial amounts held under claim of
17        right for the taxable year pursuant to Section 1341 of
18        the Internal Revenue Code of 1986;
19            (Q) An amount equal to any amounts included in such
20        total, received by the taxpayer as an acceleration in
21        the payment of life, endowment or annuity benefits in
22        advance of the time they would otherwise be payable as
23        an indemnity for a terminal illness;
24            (R) An amount equal to the amount of any federal or
25        State bonus paid to veterans of the Persian Gulf War;
26            (S) An amount, to the extent included in adjusted

 

 

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

 

 

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

 

 

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

 

 

HB1725- 21 -LRB097 03033 HLH 43064 b

1        Germany or any other Axis regime or as an heir of the
2        victim. The amount of and the eligibility for any
3        public assistance, benefit, or similar entitlement is
4        not affected by the inclusion of items (i) and (ii) of
5        this paragraph in gross income for federal income tax
6        purposes. This paragraph is exempt from the provisions
7        of Section 250;
8            (Y) For taxable years beginning on or after January
9        1, 2002 and ending on or before December 31, 2004,
10        moneys contributed in the taxable year to a College
11        Savings Pool account under Section 16.5 of the State
12        Treasurer Act, except that amounts excluded from gross
13        income under Section 529(c)(3)(C)(i) of the Internal
14        Revenue Code shall not be considered moneys
15        contributed under this subparagraph (Y). For taxable
16        years beginning on or after January 1, 2005, a maximum
17        of $10,000 contributed in the taxable year to (i) a
18        College Savings Pool account under Section 16.5 of the
19        State Treasurer Act or (ii) the Illinois Prepaid
20        Tuition Trust Fund, except that amounts excluded from
21        gross income under Section 529(c)(3)(C)(i) of the
22        Internal Revenue Code shall not be considered moneys
23        contributed under this subparagraph (Y). For purposes
24        of this subparagraph, contributions made by an
25        employer on behalf of an employee, or matching
26        contributions made by an employee, shall be treated as

 

 

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1        made by the employee. This subparagraph (Y) is exempt
2        from the provisions of Section 250;
3            (Z) For taxable years 2001 and thereafter, for the
4        taxable year in which the bonus depreciation deduction
5        is taken on the taxpayer's federal income tax return
6        under subsection (k) of Section 168 of the Internal
7        Revenue Code and for each applicable taxable year
8        thereafter, an amount equal to "x", where:
9                (1) "y" equals the amount of the depreciation
10            deduction taken for the taxable year on the
11            taxpayer's federal income tax return on property
12            for which the bonus depreciation deduction was
13            taken in any year under subsection (k) of Section
14            168 of the Internal Revenue Code, but not including
15            the bonus depreciation deduction;
16                (2) for taxable years ending on or before
17            December 31, 2005, "x" equals "y" multiplied by 30
18            and then divided by 70 (or "y" multiplied by
19            0.429); and
20                (3) for taxable years ending after December
21            31, 2005:
22                    (i) for property on which a bonus
23                depreciation deduction of 30% of the adjusted
24                basis was taken, "x" equals "y" multiplied by
25                30 and then divided by 70 (or "y" multiplied by
26                0.429); and

 

 

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

 

 

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1        piece of property.
2            This subparagraph (AA) is exempt from the
3        provisions of Section 250;
4            (BB) Any amount included in adjusted gross income,
5        other than salary, received by a driver in a
6        ridesharing arrangement using a motor vehicle;
7            (CC) The amount of (i) any interest income (net of
8        the deductions allocable thereto) taken into account
9        for the taxable year with respect to a transaction with
10        a taxpayer that is required to make an addition
11        modification with respect to such transaction under
12        Section 203(a)(2)(D-17), 203(b)(2)(E-12),
13        203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
14        the amount of that addition modification, and (ii) any
15        income from intangible property (net of the deductions
16        allocable thereto) taken into account for the taxable
17        year with respect to a transaction with a taxpayer that
18        is required to make an addition modification with
19        respect to such transaction under Section
20        203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
21        203(d)(2)(D-8), but not to exceed the amount of that
22        addition modification. This subparagraph (CC) is
23        exempt from the provisions of Section 250;
24            (DD) An amount equal to the interest income taken
25        into account for the taxable year (net of the
26        deductions allocable thereto) with respect to

 

 

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

 

 

HB1725- 26 -LRB097 03033 HLH 43064 b

1        who would be a member of the same unitary business
2        group but for the fact that the person is prohibited
3        under Section 1501(a)(27) from being included in the
4        unitary business group because he or she is ordinarily
5        required to apportion business income under different
6        subsections of Section 304, but not to exceed the
7        addition modification required to be made for the same
8        taxable year under Section 203(a)(2)(D-18) for
9        intangible expenses and costs paid, accrued, or
10        incurred, directly or indirectly, to the same foreign
11        person. This subparagraph (EE) is exempt from the
12        provisions of Section 250; and
13            (FF) An amount equal to any amount awarded to the
14        taxpayer during the taxable year by the Court of Claims
15        under subsection (c) of Section 8 of the Court of
16        Claims Act for time unjustly served in a State prison.
17        This subparagraph (FF) is exempt from the provisions of
18        Section 250; and .
19            (GG) For taxable years ending on or after December
20        31, 2011 and ending on or before December 31, 2016, an
21        amount equal to: (i) the amount expended by the
22        taxpayer during the taxable year for the purchase of a
23        hearing aid for use by the taxpayer or by a dependent
24        of the taxpayer; less (ii) $2,000. For the purpose of
25        this subparagraph (GG), "hearing aid" means an
26        ear-level or body-worn electroacoustic instrument that

 

 

HB1725- 27 -LRB097 03033 HLH 43064 b

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

 

 

HB1725- 28 -LRB097 03033 HLH 43064 b

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

 

 

HB1725- 29 -LRB097 03033 HLH 43064 b

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

 

 

HB1725- 30 -LRB097 03033 HLH 43064 b

1        or otherwise disposes of property for which the
2        taxpayer was required in any taxable year to make an
3        addition modification under subparagraph (E-10), then
4        an amount equal to the aggregate amount of the
5        deductions taken in all taxable years under
6        subparagraph (T) with respect to that property.
7            If the taxpayer continues to own property through
8        the last day of the last tax year for which the
9        taxpayer may claim a depreciation deduction for
10        federal income tax purposes and for which the taxpayer
11        was allowed in any taxable year to make a subtraction
12        modification under subparagraph (T), then an amount
13        equal to that subtraction modification.
14            The taxpayer is required to make the addition
15        modification under this subparagraph only once with
16        respect to any one piece of property;
17            (E-12) An amount equal to the amount otherwise
18        allowed as a deduction in computing base income for
19        interest paid, accrued, or incurred, directly or
20        indirectly, (i) for taxable years ending on or after
21        December 31, 2004, to a foreign person who would be a
22        member of the same unitary business group but for the
23        fact the foreign person's business activity outside
24        the United States is 80% or more of the foreign
25        person's total business activity and (ii) for taxable
26        years ending on or after December 31, 2008, to a person

 

 

HB1725- 31 -LRB097 03033 HLH 43064 b

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

 

 

HB1725- 32 -LRB097 03033 HLH 43064 b

1            the taxpayer can establish, based on a
2            preponderance of the evidence, both of the
3            following:
4                    (a) the person, during the same taxable
5                year, paid, accrued, or incurred, the interest
6                to a person that is not a related member, and
7                    (b) the transaction giving rise to the
8                interest expense between the taxpayer and the
9                person did not have as a principal purpose the
10                avoidance of Illinois income tax, and is paid
11                pursuant to a contract or agreement that
12                reflects an arm's-length interest rate and
13                terms; or
14                (iii) the taxpayer can establish, based on
15            clear and convincing evidence, that the interest
16            paid, accrued, or incurred relates to a contract or
17            agreement entered into at arm's-length rates and
18            terms and the principal purpose for the payment is
19            not federal or Illinois tax avoidance; or
20                (iv) an item of interest paid, accrued, or
21            incurred, directly or indirectly, to a person if
22            the taxpayer establishes by clear and convincing
23            evidence that the adjustments are unreasonable; or
24            if the taxpayer and the Director agree in writing
25            to the application or use of an alternative method
26            of apportionment under Section 304(f).

 

 

HB1725- 33 -LRB097 03033 HLH 43064 b

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

 

 

HB1725- 34 -LRB097 03033 HLH 43064 b

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

 

 

HB1725- 35 -LRB097 03033 HLH 43064 b

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

 

 

HB1725- 36 -LRB097 03033 HLH 43064 b

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

 

 

HB1725- 37 -LRB097 03033 HLH 43064 b

1        she is ordinarily required to apportion business
2        income under different subsections of Section 304. The
3        addition modification required by this subparagraph
4        shall be reduced to the extent that dividends were
5        included in base income of the unitary group for the
6        same taxable year and received by the taxpayer or by a
7        member of the taxpayer's unitary business group
8        (including amounts included in gross income under
9        Sections 951 through 964 of the Internal Revenue Code
10        and amounts included in gross income under Section 78
11        of the Internal Revenue Code) with respect to the stock
12        of the same person to whom the premiums and costs were
13        directly or indirectly paid, incurred, or accrued. The
14        preceding sentence does not apply to the extent that
15        the same dividends caused a reduction to the addition
16        modification required under Section 203(b)(2)(E-12) or
17        Section 203(b)(2)(E-13) of this Act;
18            (E-15) For taxable years beginning after December
19        31, 2008, any deduction for dividends paid by a captive
20        real estate investment trust that is allowed to a real
21        estate investment trust under Section 857(b)(2)(B) of
22        the Internal Revenue Code for dividends paid;
23            (E-16) An amount equal to the credit allowable to
24        the taxpayer under Section 218(a) of this Act,
25        determined without regard to Section 218(c) of this
26        Act;

 

 

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

 

 

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1            (J) An amount equal to all amounts included in such
2        total which are exempt from taxation by this State
3        either by reason of its statutes or Constitution or by
4        reason of the Constitution, treaties or statutes of the
5        United States; provided that, in the case of any
6        statute of this State that exempts income derived from
7        bonds or other obligations from the tax imposed under
8        this Act, the amount exempted shall be the interest net
9        of bond premium amortization;
10            (K) An amount equal to those dividends included in
11        such total which were paid by a corporation which
12        conducts business operations in an Enterprise Zone or
13        zones created under the Illinois Enterprise Zone Act or
14        a River Edge Redevelopment Zone or zones created under
15        the River Edge Redevelopment Zone Act and conducts
16        substantially all of its operations in an Enterprise
17        Zone or zones or a River Edge Redevelopment Zone or
18        zones. This subparagraph (K) is exempt from the
19        provisions of Section 250;
20            (L) An amount equal to those dividends included in
21        such total that were paid by a corporation that
22        conducts business operations in a federally designated
23        Foreign Trade Zone or Sub-Zone and that is designated a
24        High Impact Business located in Illinois; provided
25        that dividends eligible for the deduction provided in
26        subparagraph (K) of paragraph 2 of this subsection

 

 

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1        shall not be eligible for the deduction provided under
2        this subparagraph (L);
3            (M) For any taxpayer that is a financial
4        organization within the meaning of Section 304(c) of
5        this Act, an amount included in such total as interest
6        income from a loan or loans made by such taxpayer to a
7        borrower, to the extent that such a loan is secured by
8        property which is eligible for the Enterprise Zone
9        Investment Credit or the River Edge Redevelopment Zone
10        Investment Credit. To determine the portion of a loan
11        or loans that is secured by property eligible for a
12        Section 201(f) investment credit to the borrower, the
13        entire principal amount of the loan or loans between
14        the taxpayer and the borrower should be divided into
15        the basis of the Section 201(f) investment credit
16        property which secures the loan or loans, using for
17        this purpose the original basis of such property on the
18        date that it was placed in service in the Enterprise
19        Zone or the River Edge Redevelopment Zone. The
20        subtraction modification available to taxpayer in any
21        year under this subsection shall be that portion of the
22        total interest paid by the borrower with respect to
23        such loan attributable to the eligible property as
24        calculated under the previous sentence. This
25        subparagraph (M) is exempt from the provisions of
26        Section 250;

 

 

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1            (M-1) For any taxpayer that is a financial
2        organization within the meaning of Section 304(c) of
3        this Act, an amount included in such total as interest
4        income from a loan or loans made by such taxpayer to a
5        borrower, to the extent that such a loan is secured by
6        property which is eligible for the High Impact Business
7        Investment Credit. To determine the portion of a loan
8        or loans that is secured by property eligible for a
9        Section 201(h) 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(h) 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 a federally
16        designated Foreign Trade Zone or Sub-Zone located in
17        Illinois. No taxpayer that is eligible for the
18        deduction provided in subparagraph (M) of paragraph
19        (2) of this subsection shall be eligible for the
20        deduction provided under this subparagraph (M-1). The
21        subtraction modification available to taxpayers in any
22        year under this subsection shall be that portion of the
23        total interest paid by the borrower with respect to
24        such loan attributable to the eligible property as
25        calculated under the previous sentence;
26            (N) Two times any contribution made during the

 

 

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

 

 

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1        December 31, 2008, dividends received from a captive
2        real estate investment trust; plus (ii) 100% of the
3        amount by which dividends, included in taxable income
4        and received, including, for taxable years ending on or
5        after December 31, 1988, dividends received or deemed
6        received or paid or deemed paid under Sections 951
7        through 964 of the Internal Revenue Code and including,
8        for taxable years ending on or after December 31, 2008,
9        dividends received from a captive real estate
10        investment trust, from any such corporation specified
11        in clause (i) that would but for the provisions of
12        Section 1504 (b) (3) of the Internal Revenue Code be
13        treated as a member of the affiliated group which
14        includes the dividend recipient, exceed the amount of
15        the modification provided under subparagraph (G) of
16        paragraph (2) of this subsection (b) which is related
17        to such dividends. This subparagraph (O) is exempt from
18        the provisions of Section 250 of this Act;
19            (P) An amount equal to any contribution made to a
20        job training project established pursuant to the Tax
21        Increment Allocation Redevelopment Act;
22            (Q) An amount equal to the amount of the deduction
23        used to compute the federal income tax credit for
24        restoration of substantial amounts held under claim of
25        right for the taxable year pursuant to Section 1341 of
26        the Internal Revenue Code of 1986;

 

 

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1            (R) On and after July 20, 1999, in the case of an
2        attorney-in-fact with respect to whom an interinsurer
3        or a reciprocal insurer has made the election under
4        Section 835 of the Internal Revenue Code, 26 U.S.C.
5        835, an amount equal to the excess, if any, of the
6        amounts paid or incurred by that interinsurer or
7        reciprocal insurer in the taxable year to the
8        attorney-in-fact over the deduction allowed to that
9        interinsurer or reciprocal insurer with respect to the
10        attorney-in-fact under Section 835(b) of the Internal
11        Revenue Code for the taxable year; the provisions of
12        this subparagraph are exempt from the provisions of
13        Section 250;
14            (S) For taxable years ending on or after December
15        31, 1997, in the case of a Subchapter S corporation, an
16        amount equal to all amounts of income allocable to a
17        shareholder subject to the Personal Property Tax
18        Replacement Income Tax imposed by subsections (c) and
19        (d) of Section 201 of this Act, including amounts
20        allocable to organizations exempt from federal income
21        tax by reason of Section 501(a) of the Internal Revenue
22        Code. This subparagraph (S) is exempt from the
23        provisions of Section 250;
24            (T) For taxable years 2001 and thereafter, for the
25        taxable year in which the bonus depreciation deduction
26        is taken on the taxpayer's federal income tax return

 

 

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

 

 

HB1725- 46 -LRB097 03033 HLH 43064 b

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

 

 

HB1725- 47 -LRB097 03033 HLH 43064 b

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

 

 

HB1725- 48 -LRB097 03033 HLH 43064 b

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

 

 

HB1725- 49 -LRB097 03033 HLH 43064 b

1        who would be a member of the same unitary business
2        group but for the fact that the person is prohibited
3        under Section 1501(a)(27) from being included in the
4        unitary business group because he or she is ordinarily
5        required to apportion business income under different
6        subsections of Section 304, but not to exceed the
7        addition modification required to be made for the same
8        taxable year under Section 203(b)(2)(E-13) for
9        intangible expenses and costs paid, accrued, or
10        incurred, directly or indirectly, to the same foreign
11        person. This subparagraph (X) is exempt from the
12        provisions of Section 250.
13        (3) Special rule. For purposes of paragraph (2) (A),
14    "gross income" in the case of a life insurance company, for
15    tax years ending on and after December 31, 1994, shall mean
16    the gross investment income for the taxable year.
 
17    (c) Trusts and estates.
18        (1) In general. In the case of a trust or estate, base
19    income means an amount equal to the taxpayer's taxable
20    income for the taxable year as modified by paragraph (2).
21        (2) Modifications. Subject to the provisions of
22    paragraph (3), the taxable income referred to in paragraph
23    (1) shall be modified by adding thereto the sum of the
24    following amounts:
25            (A) An amount equal to all amounts paid or accrued

 

 

HB1725- 50 -LRB097 03033 HLH 43064 b

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

 

 

HB1725- 51 -LRB097 03033 HLH 43064 b

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

 

 

HB1725- 52 -LRB097 03033 HLH 43064 b

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

 

 

HB1725- 53 -LRB097 03033 HLH 43064 b

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

 

 

HB1725- 54 -LRB097 03033 HLH 43064 b

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

 

 

HB1725- 55 -LRB097 03033 HLH 43064 b

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1        of the same person to whom the premiums and costs were
2        directly or indirectly paid, incurred, or accrued. The
3        preceding sentence does not apply to the extent that
4        the same dividends caused a reduction to the addition
5        modification required under Section 203(c)(2)(G-12) or
6        Section 203(c)(2)(G-13) of this Act;
7            (G-15) An amount equal to the credit allowable to
8        the taxpayer under Section 218(a) of this Act,
9        determined without regard to Section 218(c) of this
10        Act;
11    and by deducting from the total so obtained the sum of the
12    following amounts:
13            (H) An amount equal to all amounts included in such
14        total pursuant to the provisions of Sections 402(a),
15        402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
16        Internal Revenue Code or included in such total as
17        distributions under the provisions of any retirement
18        or disability plan for employees of any governmental
19        agency or unit, or retirement payments to retired
20        partners, which payments are excluded in computing net
21        earnings from self employment by Section 1402 of the
22        Internal Revenue Code and regulations adopted pursuant
23        thereto;
24            (I) The valuation limitation amount;
25            (J) An amount equal to the amount of any tax
26        imposed by this Act which was refunded to the taxpayer

 

 

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

 

 

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

 

 

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

 

 

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1        Germany or any other Axis regime or as an heir of the
2        victim. The amount of and the eligibility for any
3        public assistance, benefit, or similar entitlement is
4        not affected by the inclusion of items (i) and (ii) of
5        this paragraph in gross income for federal income tax
6        purposes. This paragraph is exempt from the provisions
7        of Section 250;
8            (R) For taxable years 2001 and thereafter, for the
9        taxable year in which the bonus depreciation deduction
10        is taken on the taxpayer's federal income tax return
11        under subsection (k) of Section 168 of the Internal
12        Revenue Code and for each applicable taxable year
13        thereafter, an amount equal to "x", where:
14                (1) "y" equals the amount of the depreciation
15            deduction taken for the taxable year on the
16            taxpayer's federal income tax return on property
17            for which the bonus depreciation deduction was
18            taken in any year under subsection (k) of Section
19            168 of the Internal Revenue Code, but not including
20            the bonus depreciation deduction;
21                (2) for taxable years ending on or before
22            December 31, 2005, "x" equals "y" multiplied by 30
23            and then divided by 70 (or "y" multiplied by
24            0.429); and
25                (3) for taxable years ending after December
26            31, 2005:

 

 

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

 

 

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

 

 

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

 

 

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1        person's total business activity and (ii) for taxable
2        years ending on or after December 31, 2008, to a person
3        who would be a member of the same unitary business
4        group but for the fact that the person is prohibited
5        under Section 1501(a)(27) from being included in the
6        unitary business group because he or she is ordinarily
7        required to apportion business income under different
8        subsections of Section 304, but not to exceed the
9        addition modification required to be made for the same
10        taxable year under Section 203(c)(2)(G-13) for
11        intangible expenses and costs paid, accrued, or
12        incurred, directly or indirectly, to the same foreign
13        person. This subparagraph (V) is exempt from the
14        provisions of Section 250; and .
15            (W) For taxable years ending on or after December
16        31, 2011 and ending on or before December 31, 2016, an
17        amount equal to: (i) the amount expended by the
18        taxpayer during the taxable year for the purchase of a
19        hearing aid for use by a beneficiary or by a dependent
20        of beneficiary; less (ii) $2,000. For the purpose of
21        this subparagraph (W), "hearing aid" means an
22        ear-level or body-worn electroacoustic instrument that
23        is used for the purpose of amplifying sound and the
24        basic components of which are a microphone, amplifier,
25        and receiver. "Hearing aid" also includes prosthetic
26        devices that produce perception of sound by replacing

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1        directly or indirectly paid, incurred, or accrued. The
2        preceding sentence does not apply to the extent that
3        the same dividends caused a reduction to the addition
4        modification required under Section 203(d)(2)(D-7) or
5        Section 203(d)(2)(D-8) of this Act;
6            (D-10) An amount equal to the credit allowable to
7        the taxpayer under Section 218(a) of this Act,
8        determined without regard to Section 218(c) of this
9        Act;
10    and by deducting from the total so obtained the following
11    amounts:
12            (E) The valuation limitation amount;
13            (F) An amount equal to the amount of any tax
14        imposed by this Act which was refunded to the taxpayer
15        and included in such total for the taxable year;
16            (G) An amount equal to all amounts included in
17        taxable income as modified by subparagraphs (A), (B),
18        (C) and (D) which are exempt from taxation by this
19        State either by reason of its statutes or Constitution
20        or by reason of the Constitution, treaties or statutes
21        of the United States; provided that, in the case of any
22        statute of this State that exempts income derived from
23        bonds or other obligations from the tax imposed under
24        this Act, the amount exempted shall be the interest net
25        of bond premium amortization;
26            (H) Any income of the partnership which

 

 

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1        constitutes personal service income as defined in
2        Section 1348 (b) (1) of the Internal Revenue Code (as
3        in effect December 31, 1981) or a reasonable allowance
4        for compensation paid or accrued for services rendered
5        by partners to the partnership, whichever is greater;
6            (I) An amount equal to all amounts of income
7        distributable to an entity subject to the Personal
8        Property Tax Replacement Income Tax imposed by
9        subsections (c) and (d) of Section 201 of this Act
10        including amounts distributable to organizations
11        exempt from federal income tax by reason of Section
12        501(a) of the Internal Revenue Code;
13            (J) With the exception of any amounts subtracted
14        under subparagraph (G), an amount equal to the sum of
15        all amounts disallowed as deductions by (i) Sections
16        171(a) (2), and 265(2) of the Internal Revenue Code of
17        1954, as now or hereafter amended, and all amounts of
18        expenses allocable to interest and disallowed as
19        deductions by Section 265(1) of the Internal Revenue
20        Code, as now or hereafter amended; and (ii) for taxable
21        years ending on or after August 13, 1999, Sections
22        171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
23        Internal Revenue Code; the provisions of this
24        subparagraph are exempt from the provisions of Section
25        250;
26            (K) An amount equal to those dividends included in

 

 

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

 

 

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1        the Internal Revenue Code of 1986;
2            (O) For taxable years 2001 and thereafter, for the
3        taxable year in which the bonus depreciation deduction
4        is taken on the taxpayer's federal income tax return
5        under subsection (k) of Section 168 of the Internal
6        Revenue Code and for each applicable taxable year
7        thereafter, an amount equal to "x", where:
8                (1) "y" equals the amount of the depreciation
9            deduction taken for the taxable year on the
10            taxpayer's federal income tax return on property
11            for which the bonus depreciation deduction was
12            taken in any year under subsection (k) of Section
13            168 of the Internal Revenue Code, but not including
14            the bonus depreciation deduction;
15                (2) for taxable years ending on or before
16            December 31, 2005, "x" equals "y" multiplied by 30
17            and then divided by 70 (or "y" multiplied by
18            0.429); and
19                (3) for taxable years ending after December
20            31, 2005:
21                    (i) for property on which a bonus
22                depreciation deduction of 30% of the adjusted
23                basis was taken, "x" equals "y" multiplied by
24                30 and then divided by 70 (or "y" multiplied by
25                0.429); and
26                    (ii) for property on which a bonus

 

 

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

 

 

HB1725- 83 -LRB097 03033 HLH 43064 b

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

 

 

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

 

 

HB1725- 85 -LRB097 03033 HLH 43064 b

1        required to apportion business income under different
2        subsections of Section 304, but not to exceed the
3        addition modification required to be made for the same
4        taxable year under Section 203(d)(2)(D-8) for
5        intangible expenses and costs paid, accrued, or
6        incurred, directly or indirectly, to the same person.
7        This subparagraph (S) is exempt from Section 250.
 
8    (e) Gross income; adjusted gross income; taxable income.
9        (1) In general. Subject to the provisions of paragraph
10    (2) and subsection (b) (3), for purposes of this Section
11    and Section 803(e), a taxpayer's gross income, adjusted
12    gross income, or taxable income for the taxable year shall
13    mean the amount of gross income, adjusted gross income or
14    taxable income properly reportable for federal income tax
15    purposes for the taxable year under the provisions of the
16    Internal Revenue Code. Taxable income may be less than
17    zero. However, for taxable years ending on or after
18    December 31, 1986, net operating loss carryforwards from
19    taxable years ending prior to December 31, 1986, may not
20    exceed the sum of federal taxable income for the taxable
21    year before net operating loss deduction, plus the excess
22    of addition modifications over subtraction modifications
23    for the taxable year. For taxable years ending prior to
24    December 31, 1986, taxable income may never be an amount in
25    excess of the net operating loss for the taxable year as

 

 

HB1725- 86 -LRB097 03033 HLH 43064 b

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

 

 

HB1725- 87 -LRB097 03033 HLH 43064 b

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

 

 

HB1725- 88 -LRB097 03033 HLH 43064 b

1        provisions of Section 1381 through 1388 of the Internal
2        Revenue Code, but without regard to the prohibition
3        against offsetting losses from patronage activities
4        against income from nonpatronage activities; except
5        that a cooperative corporation or association may make
6        an election to follow its federal income tax treatment
7        of patronage losses and nonpatronage losses. In the
8        event such election is made, such losses shall be
9        computed and carried over in a manner consistent with
10        subsection (a) of Section 207 of this Act and
11        apportioned by the apportionment factor reported by
12        the cooperative on its Illinois income tax return filed
13        for the taxable year in which the losses are incurred.
14        The election shall be effective for all taxable years
15        with original returns due on or after the date of the
16        election. In addition, the cooperative may file an
17        amended return or returns, as allowed under this Act,
18        to provide that the election shall be effective for
19        losses incurred or carried forward for taxable years
20        occurring prior to the date of the election. Once made,
21        the election may only be revoked upon approval of the
22        Director. The Department shall adopt rules setting
23        forth requirements for documenting the elections and
24        any resulting Illinois net loss and the standards to be
25        used by the Director in evaluating requests to revoke
26        elections. Public Act 96-932 This amendatory Act of the

 

 

HB1725- 89 -LRB097 03033 HLH 43064 b

1        96th General Assembly is declaratory of existing law;
2            (G) Subchapter S corporations. In the case of: (i)
3        a Subchapter S corporation for which there is in effect
4        an election for the taxable year under Section 1362 of
5        the Internal Revenue Code, the taxable income of such
6        corporation determined in accordance with Section
7        1363(b) of the Internal Revenue Code, except that
8        taxable income shall take into account those items
9        which are required by Section 1363(b)(1) of the
10        Internal Revenue Code to be separately stated; and (ii)
11        a Subchapter S corporation for which there is in effect
12        a federal election to opt out of the provisions of the
13        Subchapter S Revision Act of 1982 and have applied
14        instead the prior federal Subchapter S rules as in
15        effect on July 1, 1982, the taxable income of such
16        corporation determined in accordance with the federal
17        Subchapter S rules as in effect on July 1, 1982; and
18            (H) Partnerships. In the case of a partnership,
19        taxable income determined in accordance with Section
20        703 of the Internal Revenue Code, except that taxable
21        income shall take into account those items which are
22        required by Section 703(a)(1) to be separately stated
23        but which would be taken into account by an individual
24        in calculating his taxable income.
25        (3) Recapture of business expenses on disposition of
26    asset or business. Notwithstanding any other law to the

 

 

HB1725- 90 -LRB097 03033 HLH 43064 b

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

 

 

HB1725- 91 -LRB097 03033 HLH 43064 b

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

 

 

HB1725- 92 -LRB097 03033 HLH 43064 b

1        that part of the taxpayer's holding period for the
2        property ending July 31, 1969 bears to the number of
3        full calendar months in the taxpayer's entire holding
4        period for the property.
5            (C) The Department shall prescribe such
6        regulations as may be necessary to carry out the
7        purposes of this paragraph.
 
8    (g) Double deductions. Unless specifically provided
9otherwise, nothing in this Section shall permit the same item
10to be deducted more than once.
 
11    (h) Legislative intention. Except as expressly provided by
12this Section there shall be no modifications or limitations on
13the amounts of income, gain, loss or deduction taken into
14account in determining gross income, adjusted gross income or
15taxable income for federal income tax purposes for the taxable
16year, or in the amount of such items entering into the
17computation of base income and net income under this Act for
18such taxable year, whether in respect of property values as of
19August 1, 1969 or otherwise.
20(Source: P.A. 95-23, eff. 8-3-07; 95-233, eff. 8-16-07; 95-286,
21eff. 8-20-07; 95-331, eff. 8-21-07; 95-707, eff. 1-11-08;
2295-876, eff. 8-21-08; 96-45, eff. 7-15-09; 96-120, eff. 8-4-09;
2396-198, eff. 8-10-09; 96-328, eff. 8-11-09; 96-520, eff.
248-14-09; 96-835, eff. 12-16-09; 96-932, eff. 1-1-11; 96-935,

 

 

HB1725- 93 -LRB097 03033 HLH 43064 b

1eff. 6-21-10; 96-1214, eff. 7-22-10; revised 9-16-10.)
 
2    Section 99. Effective date. This Act takes effect upon
3becoming law.