98TH GENERAL ASSEMBLY
State of Illinois
2013 and 2014
HB4646

 

Introduced , by Rep. Marcus C. Evans, Jr.

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 5/305  from Ch. 120, par. 3-305
35 ILCS 5/307  from Ch. 120, par. 3-307
35 ILCS 5/308  from Ch. 120, par. 3-308

    Amends the Illinois Income Tax Act. Contains provisions concerning the apportionment to nonresidents of gains or losses on partnerships, trusts, or stock in Subchapter S corporations upon the sale, exchange, abandonment, liquidation, or other disposition of the interest in the partnership, trust, or stock.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB4646LRB098 19229 HLH 54381 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 Sections 305, 307, and 308 as follows:
 
6    (35 ILCS 5/305)  (from Ch. 120, par. 3-305)
7    Sec. 305. Allocation of Partnership Income by partnerships
8and partners other than residents.
9    (a) Allocation of partnership business income by partners
10other than residents. The respective shares of partners other
11than residents in so much of the business income of the
12partnership as is allocated or apportioned to this State in the
13possession of the partnership shall be taken into account by
14such partners pro rata in accordance with their respective
15distributive shares of such partnership income for the
16partnership's taxable year and allocated to this State.
17    (b) Allocation of partnership nonbusiness income by
18partners other than residents. The respective shares of
19partners other than residents in the items of partnership
20income and deduction not taken into account in computing the
21business income of a partnership shall be taken into account by
22such partners pro rata in accordance with their respective
23distributive shares of such partnership income for the

 

 

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1partnership's taxable year, and allocated as if such items had
2been paid, incurred or accrued directly to such partners in
3their separate capacities.
4    (c) Allocation or apportionment of base income by
5partnership. Base income of a partnership shall be allocated or
6apportioned to this State pursuant to Article 3, in the same
7manner as it is allocated or apportioned for any other
8nonresident.
9    (c-5) Taxable income of an investment partnership, as
10defined in Section 1501(a)(11.5) of this Act, that is
11distributable to a nonresident partner shall be treated as
12nonbusiness income and shall be allocated to the partner's
13state of residence (in the case of an individual) or commercial
14domicile (in the case of any other person). However, any income
15distributable to a nonresident partner shall be treated as
16business income and apportioned as if such income had been
17received directly by the partner if the partner has made an
18election under Section 1501(a)(1) of this Act to treat all
19income as business income or if such income is from investment
20activity:
21        (1) that is directly or integrally related to any other
22    business activity conducted in this State by the
23    nonresident partner (or any member of that partner's
24    unitary business group);
25        (2) that serves an operational function to any other
26    business activity of the nonresident partner (or any member

 

 

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1    of that partner's unitary business group) in this State; or
2        (3) where assets of the investment partnership were
3    acquired with working capital from a trade or business
4    activity conducted in this State in which the nonresident
5    partner (or any member of that partner's unitary business
6    group) owns an interest.
7    (c-10) Gain or loss on partnership interest. The amount of
8gain or loss realized by a nonresident partner upon the sale,
9exchange, abandonment, liquidation, or other disposition of an
10interest in a partnership (other than an investment
11partnership) included in net income of that partner shall be
12the total gain or loss multiplied by the apportionment factor
13of the partnership determined under Section 304 of this Act for
14the taxable year of the partnership in which the sale,
15exchange, abandonment, liquidation or other disposition
16occurs.
17    (d) Cross reference. For allocation of partnership income
18or deductions by residents, see Section 301(a).
19(Source: P.A. 93-840, eff. 7-30-04.)
 
20    (35 ILCS 5/307)  (from Ch. 120, par. 3-307)
21    Sec. 307. Allocation of income by estate or trust
22beneficiaries other than residents. (a) Allocation of business
23income by beneficiaries other than residents. To the extent the
24business income of an estate or trust allocated or apportioned
25to this State in the possession of the estate or trust is

 

 

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1deemed to have been paid, credited or distributed by the estate
2or trust under Section 306, the respective shares of
3beneficiaries of the estate or trust, other than residents, in
4such business income shall be taken into account by such
5beneficiaries in proportion to their respective shares of the
6distributable net income of the estate or trust for its taxable
7year and allocated to this State.
8    (b) Allocation of nonbusiness income by beneficiaries
9other than residents. To the extent items of estate or trust
10income and deduction not taken into account in computing the
11business income of an estate or trust are deemed to have been
12paid, credited or distributed by the estate or trust under
13Section 306, the respective shares of beneficiaries of the
14estate or trust, other than residents, in such items shall be
15taken into account by such beneficiaries in proportion to their
16respective shares of the distributable net income of the estate
17or trust for its taxable year, and allocated as if such items
18had been paid, incurred or accrued directly to such
19beneficiaries in their separate capacities.
20    (c) Accumulation and capital gain distributions. In the
21event that, in any taxable year of a trust, the trust makes an
22accumulation distribution or a capital gain distribution (both
23as defined in Section 665 of the Internal Revenue Code), the
24total of the amounts which are included in the income of each
25beneficiary of such trust, other than a resident, under
26Sections 668 and 669 of the Internal Revenue Code shall be

 

 

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1allocated to this State to the extent that the items of income
2included in such distribution were allocated or apportioned to
3this State in the hands of the trust.
4    (c-5) Gain or loss on interest in trust. The amount of gain
5or loss realized by a nonresident beneficiary upon the sale,
6exchange, abandonment, liquidation or other disposition of an
7interest in a trust included in net income of that beneficiary
8shall be the total gain or loss multiplied by the apportionment
9factor of the trust determined under Section 304 of this Act
10for the taxable year of the trust in which the sale, exchange,
11abandonment, liquidation or other disposition occurs.
12    (d) Cross references. (1) For allocation of amounts
13received by nonresidents from certain employee trusts, see
14Section 301 (b) (2).
15    (2) For allocation of estate or trust income or deductions
16by residents, see Section 301 (a).
17(Source: P.A. 84-550.)
 
18    (35 ILCS 5/308)  (from Ch. 120, par. 3-308)
19    Sec. 308. Allocation of Subchapter S Corporation Income by
20Subchapter S Corporations and Shareholders Other Than
21Residents. (a) Allocation of Subchapter S corporation business
22income by shareholders other than residents. The respective
23shares of shareholders other than residents in so much of the
24business income of the Subchapter S corporation as is allocated
25or apportioned to this State in the hands of the Subchapter S

 

 

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1corporation shall be taken into account by such shareholder pro
2rata in accordance with the requirements of Section 1366 of the
3Internal Revenue Code for the Subchapter S corporation's
4taxable year and allocated to this State.
5    (b) Allocation of Subchapter S corporation nonbusiness
6income by shareholders other than residents. The respective
7share of shareholders other than residents in the items of
8Subchapter S corporation income and deduction not taken into
9account in computing the business income of the Subchapter S
10corporation shall be taken into account by such shareholders
11pro rata in accordance with the requirements of Section 1366 of
12the Internal Revenue Code for the corporation's taxable year,
13and allocated as if such items had been paid, incurred or
14accrued directly to such shareholders in their separate
15capacities.
16    (c) Allocation or apportionment of base income by the
17Subchapter S corporation. Base income of a Subchapter S
18corporation shall be allocated or apportioned to this State
19pursuant to this Article 3 in the same manner as it is
20allocated or apportioned for any other nonresident.
21    (c-5) Gain or loss on stock in a Subchapter S corporation.
22The amount of gain or loss realized by a nonresident
23shareholder upon the sale, exchange, abandonment, liquidation
24or other disposition of stock in a Subchapter S corporation
25included in net income of that shareholder shall be the total
26gain or loss multiplied by the apportionment factor of the

 

 

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1Subchapter S corporation determined under Section 304 of this
2Act for the taxable year of the Subchapter S corporation in
3which the sale, exchange, abandonment, liquidation or other
4disposition occurs.
5    (d) This Section shall not apply to any corporation for
6which there is in effect a federal election to opt out of the
7provisions of the Subchapter S Revision Act of 1982 and have
8applied instead the prior federal Subchapter S rules as in
9effect on July 1, 1982.
10(Source: P.A. 83-1352.)