Illinois General Assembly - Full Text of HB0569
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Full Text of HB0569  102nd General Assembly




State of Illinois
2021 and 2022


Introduced 2/8/2021, by Rep. Jonathan Carroll


35 ILCS 5/1501  from Ch. 120, par. 15-1501

    Amends the Illinois Income Tax Act. Makes changes to the definition of investment partnership to provide that a dealer in qualifying investment securities may be considered an investment partnership. Allows a partnership interest to be considered a qualified security if the interest qualifies as a security within the meaning of Section 2(a)(1) of the federal Securities Act of 1933. Effective immediately.

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HB0569LRB102 04058 HLH 14074 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 1501 as follows:
6    (35 ILCS 5/1501)  (from Ch. 120, par. 15-1501)
7    Sec. 1501. Definitions.
8    (a) In general. When used in this Act, where not otherwise
9distinctly expressed or manifestly incompatible with the
10intent thereof:
11        (1) Business income. The term "business income" means
12    all income that may be treated as apportionable business
13    income under the Constitution of the United States.
14    Business income is net of the deductions allocable
15    thereto. Such term does not include compensation or the
16    deductions allocable thereto. For each taxable year
17    beginning on or after January 1, 2003, a taxpayer may
18    elect to treat all income other than compensation as
19    business income. This election shall be made in accordance
20    with rules adopted by the Department and, once made, shall
21    be irrevocable.
22        (1.5) Captive real estate investment trust:
23            (A) The term "captive real estate investment



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1        trust" means a corporation, trust, or association:
2                (i) that is considered a real estate
3            investment trust for the taxable year under
4            Section 856 of the Internal Revenue Code;
5                (ii) the certificates of beneficial interest
6            or shares of which are not regularly traded on an
7            established securities market; and
8                (iii) of which more than 50% of the voting
9            power or value of the beneficial interest or
10            shares, at any time during the last half of the
11            taxable year, is owned or controlled, directly,
12            indirectly, or constructively, by a single
13            corporation.
14            (B) The term "captive real estate investment
15        trust" does not include:
16                (i) a real estate investment trust of which
17            more than 50% of the voting power or value of the
18            beneficial interest or shares is owned or
19            controlled, directly, indirectly, or
20            constructively, by:
21                    (a) a real estate investment trust, other
22                than a captive real estate investment trust;
23                    (b) a person who is exempt from taxation
24                under Section 501 of the Internal Revenue
25                Code, and who is not required to treat income
26                received from the real estate investment trust



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1                as unrelated business taxable income under
2                Section 512 of the Internal Revenue Code;
3                    (c) a listed Australian property trust, if
4                no more than 50% of the voting power or value
5                of the beneficial interest or shares of that
6                trust, at any time during the last half of the
7                taxable year, is owned or controlled, directly
8                or indirectly, by a single person;
9                    (d) an entity organized as a trust,
10                provided a listed Australian property trust
11                described in subparagraph (c) owns or
12                controls, directly or indirectly, or
13                constructively, 75% or more of the voting
14                power or value of the beneficial interests or
15                shares of such entity; or
16                    (e) an entity that is organized outside of
17                the laws of the United States and that
18                satisfies all of the following criteria:
19                        (1) at least 75% of the entity's total
20                    asset value at the close of its taxable
21                    year is represented by real estate assets
22                    (as defined in Section 856(c)(5)(B) of the
23                    Internal Revenue Code, thereby including
24                    shares or certificates of beneficial
25                    interest in any real estate investment
26                    trust), cash and cash equivalents, and



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1                    U.S. Government securities;
2                        (2) the entity is not subject to tax
3                    on amounts that are distributed to its
4                    beneficial owners or is exempt from
5                    entity-level taxation;
6                        (3) the entity distributes at least
7                    85% of its taxable income (as computed in
8                    the jurisdiction in which it is organized)
9                    to the holders of its shares or
10                    certificates of beneficial interest on an
11                    annual basis;
12                        (4) either (i) the shares or
13                    beneficial interests of the entity are
14                    regularly traded on an established
15                    securities market or (ii) not more than
16                    10% of the voting power or value in the
17                    entity is held, directly, indirectly, or
18                    constructively, by a single entity or
19                    individual; and
20                        (5) the entity is organized in a
21                    country that has entered into a tax treaty
22                    with the United States; or
23                (ii) during its first taxable year for which
24            it elects to be treated as a real estate
25            investment trust under Section 856(c)(1) of the
26            Internal Revenue Code, a real estate investment



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1            trust the certificates of beneficial interest or
2            shares of which are not regularly traded on an
3            established securities market, but only if the
4            certificates of beneficial interest or shares of
5            the real estate investment trust are regularly
6            traded on an established securities market prior
7            to the earlier of the due date (including
8            extensions) for filing its return under this Act
9            for that first taxable year or the date it
10            actually files that return.
11            (C) For the purposes of this subsection (1.5), the
12        constructive ownership rules prescribed under Section
13        318(a) of the Internal Revenue Code, as modified by
14        Section 856(d)(5) of the Internal Revenue Code, apply
15        in determining the ownership of stock, assets, or net
16        profits of any person.
17            (D) For the purposes of this item (1.5), for
18        taxable years ending on or after August 16, 2007, the
19        voting power or value of the beneficial interest or
20        shares of a real estate investment trust does not
21        include any voting power or value of beneficial
22        interest or shares in a real estate investment trust
23        held directly or indirectly in a segregated asset
24        account by a life insurance company (as described in
25        Section 817 of the Internal Revenue Code) to the
26        extent such voting power or value is for the benefit of



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1        entities or persons who are either immune from
2        taxation or exempt from taxation under subtitle A of
3        the Internal Revenue Code.
4        (2) Commercial domicile. The term "commercial
5    domicile" means the principal place from which the trade
6    or business of the taxpayer is directed or managed.
7        (3) Compensation. The term "compensation" means wages,
8    salaries, commissions and any other form of remuneration
9    paid to employees for personal services.
10        (4) Corporation. The term "corporation" includes
11    associations, joint-stock companies, insurance companies
12    and cooperatives. Any entity, including a limited
13    liability company formed under the Illinois Limited
14    Liability Company Act, shall be treated as a corporation
15    if it is so classified for federal income tax purposes.
16        (5) Department. The term "Department" means the
17    Department of Revenue of this State.
18        (6) Director. The term "Director" means the Director
19    of Revenue of this State.
20        (7) Fiduciary. The term "fiduciary" means a guardian,
21    trustee, executor, administrator, receiver, or any person
22    acting in any fiduciary capacity for any person.
23        (8) Financial organization.
24            (A) The term "financial organization" means any
25        bank, bank holding company, trust company, savings
26        bank, industrial bank, land bank, safe deposit



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1        company, private banker, savings and loan association,
2        building and loan association, credit union, currency
3        exchange, cooperative bank, small loan company, sales
4        finance company, investment company, or any person
5        which is owned by a bank or bank holding company. For
6        the purpose of this Section a "person" will include
7        only those persons which a bank holding company may
8        acquire and hold an interest in, directly or
9        indirectly, under the provisions of the Bank Holding
10        Company Act of 1956 (12 U.S.C. 1841, et seq.), except
11        where interests in any person must be disposed of
12        within certain required time limits under the Bank
13        Holding Company Act of 1956.
14            (B) For purposes of subparagraph (A) of this
15        paragraph, the term "bank" includes (i) any entity
16        that is regulated by the Comptroller of the Currency
17        under the National Bank Act, or by the Federal Reserve
18        Board, or by the Federal Deposit Insurance Corporation
19        and (ii) any federally or State chartered bank
20        operating as a credit card bank.
21            (C) For purposes of subparagraph (A) of this
22        paragraph, the term "sales finance company" has the
23        meaning provided in the following item (i) or (ii):
24                (i) A person primarily engaged in one or more
25            of the following businesses: the business of
26            purchasing customer receivables, the business of



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1            making loans upon the security of customer
2            receivables, the business of making loans for the
3            express purpose of funding purchases of tangible
4            personal property or services by the borrower, or
5            the business of finance leasing. For purposes of
6            this item (i), "customer receivable" means:
7                    (a) a retail installment contract or
8                retail charge agreement within the meaning of
9                the Sales Finance Agency Act, the Retail
10                Installment Sales Act, or the Motor Vehicle
11                Retail Installment Sales Act;
12                    (b) an installment, charge, credit, or
13                similar contract or agreement arising from the
14                sale of tangible personal property or services
15                in a transaction involving a deferred payment
16                price payable in one or more installments
17                subsequent to the sale; or
18                    (c) the outstanding balance of a contract
19                or agreement described in provisions (a) or
20                (b) of this item (i).
21                A customer receivable need not provide for
22            payment of interest on deferred payments. A sales
23            finance company may purchase a customer receivable
24            from, or make a loan secured by a customer
25            receivable to, the seller in the original
26            transaction or to a person who purchased the



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1            customer receivable directly or indirectly from
2            that seller.
3                (ii) A corporation meeting each of the
4            following criteria:
5                    (a) the corporation must be a member of an
6                "affiliated group" within the meaning of
7                Section 1504(a) of the Internal Revenue Code,
8                determined without regard to Section 1504(b)
9                of the Internal Revenue Code;
10                    (b) more than 50% of the gross income of
11                the corporation for the taxable year must be
12                interest income derived from qualifying loans.
13                A "qualifying loan" is a loan made to a member
14                of the corporation's affiliated group that
15                originates customer receivables (within the
16                meaning of item (i)) or to whom customer
17                receivables originated by a member of the
18                affiliated group have been transferred, to the
19                extent the average outstanding balance of
20                loans from that corporation to members of its
21                affiliated group during the taxable year do
22                not exceed the limitation amount for that
23                corporation. The "limitation amount" for a
24                corporation is the average outstanding
25                balances during the taxable year of customer
26                receivables (within the meaning of item (i))



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1                originated by all members of the affiliated
2                group. If the average outstanding balances of
3                the loans made by a corporation to members of
4                its affiliated group exceed the limitation
5                amount, the interest income of that
6                corporation from qualifying loans shall be
7                equal to its interest income from loans to
8                members of its affiliated groups times a
9                fraction equal to the limitation amount
10                divided by the average outstanding balances of
11                the loans made by that corporation to members
12                of its affiliated group;
13                    (c) the total of all shareholder's equity
14                (including, without limitation, paid-in
15                capital on common and preferred stock and
16                retained earnings) of the corporation plus the
17                total of all of its loans, advances, and other
18                obligations payable or owed to members of its
19                affiliated group may not exceed 20% of the
20                total assets of the corporation at any time
21                during the tax year; and
22                    (d) more than 50% of all interest-bearing
23                obligations of the affiliated group payable to
24                persons outside the group determined in
25                accordance with generally accepted accounting
26                principles must be obligations of the



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1                corporation.
2            This amendatory Act of the 91st General Assembly
3        is declaratory of existing law.
4            (D) Subparagraphs (B) and (C) of this paragraph
5        are declaratory of existing law and apply
6        retroactively, for all tax years beginning on or
7        before December 31, 1996, to all original returns, to
8        all amended returns filed no later than 30 days after
9        the effective date of this amendatory Act of 1996, and
10        to all notices issued on or before the effective date
11        of this amendatory Act of 1996 under subsection (a) of
12        Section 903, subsection (a) of Section 904, subsection
13        (e) of Section 909, or Section 912. A taxpayer that is
14        a "financial organization" that engages in any
15        transaction with an affiliate shall be a "financial
16        organization" for all purposes of this Act.
17            (E) For all tax years beginning on or before
18        December 31, 1996, a taxpayer that falls within the
19        definition of a "financial organization" under
20        subparagraphs (B) or (C) of this paragraph, but who
21        does not fall within the definition of a "financial
22        organization" under the Proposed Regulations issued by
23        the Department of Revenue on July 19, 1996, may
24        irrevocably elect to apply the Proposed Regulations
25        for all of those years as though the Proposed
26        Regulations had been lawfully promulgated, adopted,



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1        and in effect for all of those years. For purposes of
2        applying subparagraphs (B) or (C) of this paragraph to
3        all of those years, the election allowed by this
4        subparagraph applies only to the taxpayer making the
5        election and to those members of the taxpayer's
6        unitary business group who are ordinarily required to
7        apportion business income under the same subsection of
8        Section 304 of this Act as the taxpayer making the
9        election. No election allowed by this subparagraph
10        shall be made under a claim filed under subsection (d)
11        of Section 909 more than 30 days after the effective
12        date of this amendatory Act of 1996.
13            (F) Finance Leases. For purposes of this
14        subsection, a finance lease shall be treated as a loan
15        or other extension of credit, rather than as a lease,
16        regardless of how the transaction is characterized for
17        any other purpose, including the purposes of any
18        regulatory agency to which the lessor is subject. A
19        finance lease is any transaction in the form of a lease
20        in which the lessee is treated as the owner of the
21        leased asset entitled to any deduction for
22        depreciation allowed under Section 167 of the Internal
23        Revenue Code.
24        (9) Fiscal year. The term "fiscal year" means an
25    accounting period of 12 months ending on the last day of
26    any month other than December.



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1        (9.5) Fixed place of business. The term "fixed place
2    of business" has the same meaning as that term is given in
3    Section 864 of the Internal Revenue Code and the related
4    Treasury regulations.
5        (10) Includes and including. The terms "includes" and
6    "including" when used in a definition contained in this
7    Act shall not be deemed to exclude other things otherwise
8    within the meaning of the term defined.
9        (11) Internal Revenue Code. The term "Internal Revenue
10    Code" means the United States Internal Revenue Code of
11    1954 or any successor law or laws relating to federal
12    income taxes in effect for the taxable year.
13        (11.5) Investment partnership.
14            (A) The term "investment partnership" means any
15        entity that is treated as a partnership for federal
16        income tax purposes that meets the following
17        requirements:
18                (i) no less than 90% of the partnership's cost
19            of its total assets consists of qualifying
20            investment securities, deposits at banks or other
21            financial institutions, and office space and
22            equipment reasonably necessary to carry on its
23            activities as an investment partnership;
24                (ii) no less than 90% of its gross income
25            consists of interest, dividends, and gains from
26            the sale or exchange of qualifying investment



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1            securities; and
2                (iii) (blank). the partnership is not a dealer
3            in qualifying investment securities.
4            (B) For purposes of this paragraph (11.5), the
5        term "qualifying investment securities" (other than
6        securities with respect to which the taxpayer is
7        required to apply the rules of Internal Revenue Code
8        Section 475(a)) includes all of the following:
9                (i) common stock, including preferred or debt
10            securities convertible into common stock, and
11            preferred stock;
12                (ii) bonds, debentures, and other debt
13            securities;
14                (iii) foreign and domestic currency deposits
15            secured by federal, state, or local governmental
16            agencies;
17                (iv) mortgage or asset-backed securities
18            secured by federal, state, or local governmental
19            agencies;
20                (v) repurchase agreements and loan
21            participations;
22                (vi) foreign currency exchange contracts and
23            forward and futures contracts on foreign
24            currencies;
25                (vii) stock and bond index securities and
26            futures contracts and other similar financial



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1            securities and futures contracts on those
2            securities;
3                (viii) options for the purchase or sale of any
4            of the securities, currencies, contracts, or
5            financial instruments described in items (i) to
6            (vii), inclusive;
7                (ix) regulated futures contracts;
8                (x) commodities (not described in Section
9            1221(a)(1) of the Internal Revenue Code) or
10            futures, forwards, and options with respect to
11            such commodities, provided, however, that any item
12            of a physical commodity to which title is actually
13            acquired in the partnership's capacity as a dealer
14            in such commodity shall not be a qualifying
15            investment security;
16                (xi) derivatives; and
17                (xii) a partnership interest in another
18            partnership that is an investment partnership; and
19            .
20                (xiii) a partnership interest which, in the
21            hands of the partnership, qualifies as a security
22            within the meaning of Section 2(a)(1) of the
23            federal Securities Act of 1933.
24        (12) Mathematical error. The term "mathematical error"
25    includes the following types of errors, omissions, or
26    defects in a return filed by a taxpayer which prevents



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



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



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



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1        Sections 671 through 678 of the Internal Revenue Code.
2        (21) Sales. The term "sales" means all gross receipts
3    of the taxpayer not allocated under Sections 301, 302 and
4    303.
5        (22) State. The term "state" when applied to a
6    jurisdiction other than this State means any state of the
7    United States, the District of Columbia, the Commonwealth
8    of Puerto Rico, any Territory or Possession of the United
9    States, and any foreign country, or any political
10    subdivision of any of the foregoing. For purposes of the
11    foreign tax credit under Section 601, the term "state"
12    means any state of the United States, the District of
13    Columbia, the Commonwealth of Puerto Rico, and any
14    territory or possession of the United States, or any
15    political subdivision of any of the foregoing, effective
16    for tax years ending on or after December 31, 1989.
17        (23) Taxable year. The term "taxable year" means the
18    calendar year, or the fiscal year ending during such
19    calendar year, upon the basis of which the base income is
20    computed under this Act. "Taxable year" means, in the case
21    of a return made for a fractional part of a year under the
22    provisions of this Act, the period for which such return
23    is made.
24        (24) Taxpayer. The term "taxpayer" means any person
25    subject to the tax imposed by this Act.
26        (25) International banking facility. The term



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



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



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1        either the property or payroll factor has a
2        denominator of zero). The computation required by the
3        preceding sentence shall, in each case, involve the
4        division of the member's property, payroll, or revenue
5        miles in the United States, insurance premiums on
6        property or risk in the United States, or financial
7        organization business income from sources within the
8        United States, as the case may be, by the respective
9        worldwide figures for such items. Common ownership in
10        the case of corporations is the direct or indirect
11        control or ownership of more than 50% of the
12        outstanding voting stock of the persons carrying on
13        unitary business activity. Unitary business activity
14        can ordinarily be illustrated where the activities of
15        the members are: (1) in the same general line (such as
16        manufacturing, wholesaling, retailing of tangible
17        personal property, insurance, transportation or
18        finance); or (2) are steps in a vertically structured
19        enterprise or process (such as the steps involved in
20        the production of natural resources, which might
21        include exploration, mining, refining, and marketing);
22        and, in either instance, the members are functionally
23        integrated through the exercise of strong centralized
24        management (where, for example, authority over such
25        matters as purchasing, financing, tax compliance,
26        product line, personnel, marketing and capital



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1        investment is not left to each member).
2            (B) In no event, for taxable years ending prior to
3        December 31, 2017, shall any unitary business group
4        include members which are ordinarily required to
5        apportion business income under different subsections
6        of Section 304 except that for tax years ending on or
7        after December 31, 1987 this prohibition shall not
8        apply to a holding company that would otherwise be a
9        member of a unitary business group with taxpayers that
10        apportion business income under any of subsections
11        (b), (c), (c-1), or (d) of Section 304. If a unitary
12        business group would, but for the preceding sentence,
13        include members that are ordinarily required to
14        apportion business income under different subsections
15        of Section 304, then for each subsection of Section
16        304 for which there are two or more members, there
17        shall be a separate unitary business group composed of
18        such members. For purposes of the preceding two
19        sentences, a member is "ordinarily required to
20        apportion business income" under a particular
21        subsection of Section 304 if it would be required to
22        use the apportionment method prescribed by such
23        subsection except for the fact that it derives
24        business income solely from Illinois. As used in this
25        paragraph, for taxable years ending before December
26        31, 2017, the phrase "United States" means only the 50



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1        states and the District of Columbia, but does not
2        include any territory or possession of the United
3        States or any area over which the United States has
4        asserted jurisdiction or claimed exclusive rights with
5        respect to the exploration for or exploitation of
6        natural resources. For taxable years ending on or
7        after December 31, 2017, the phrase "United States",
8        as used in this paragraph, means only the 50 states,
9        the District of Columbia, and any area over which the
10        United States has asserted jurisdiction or claimed
11        exclusive rights with respect to the exploration for
12        or exploitation of natural resources, but does not
13        include any territory or possession of the United
14        States.
15            (C) Holding companies.
16                (i) For purposes of this subparagraph, a
17            "holding company" is a corporation (other than a
18            corporation that is a financial organization under
19            paragraph (8) of this subsection (a) of Section
20            1501 because it is a bank holding company under
21            the provisions of the Bank Holding Company Act of
22            1956 (12 U.S.C. 1841, et seq.) or because it is
23            owned by a bank or a bank holding company) that
24            owns a controlling interest in one or more other
25            taxpayers ("controlled taxpayers"); that, during
26            the period that includes the taxable year and the



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1            2 immediately preceding taxable years or, if the
2            corporation was formed during the current or
3            immediately preceding taxable year, the taxable
4            years in which the corporation has been in
5            existence, derived substantially all its gross
6            income from dividends, interest, rents, royalties,
7            fees or other charges received from controlled
8            taxpayers for the provision of services, and gains
9            on the sale or other disposition of interests in
10            controlled taxpayers or in property leased or
11            licensed to controlled taxpayers or used by the
12            taxpayer in providing services to controlled
13            taxpayers; and that incurs no substantial expenses
14            other than expenses (including interest and other
15            costs of borrowing) incurred in connection with
16            the acquisition and holding of interests in
17            controlled taxpayers and in the provision of
18            services to controlled taxpayers or in the leasing
19            or licensing of property to controlled taxpayers.
20                (ii) The income of a holding company which is
21            a member of more than one unitary business group
22            shall be included in each unitary business group
23            of which it is a member on a pro rata basis, by
24            including in each unitary business group that
25            portion of the base income of the holding company
26            that bears the same proportion to the total base



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1            income of the holding company as the gross
2            receipts of the unitary business group bears to
3            the combined gross receipts of all unitary
4            business groups (in both cases without regard to
5            the holding company) or on any other reasonable
6            basis, consistently applied.
7                (iii) A holding company shall apportion its
8            business income under the subsection of Section
9            304 used by the other members of its unitary
10            business group. The apportionment factors of a
11            holding company which would be a member of more
12            than one unitary business group shall be included
13            with the apportionment factors of each unitary
14            business group of which it is a member on a pro
15            rata basis using the same method used in clause
16            (ii).
17                (iv) The provisions of this subparagraph (C)
18            are intended to clarify existing law.
19            (D) If including the base income and factors of a
20        holding company in more than one unitary business
21        group under subparagraph (C) does not fairly reflect
22        the degree of integration between the holding company
23        and one or more of the unitary business groups, the
24        dependence of the holding company and one or more of
25        the unitary business groups upon each other, or the
26        contributions between the holding company and one or



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1        more of the unitary business groups, the holding
2        company may petition the Director, under the
3        procedures provided under Section 304(f), for
4        permission to include all base income and factors of
5        the holding company only with members of a unitary
6        business group apportioning their business income
7        under one subsection of subsections (a), (b), (c), or
8        (d) of Section 304. If the petition is granted, the
9        holding company shall be included in a unitary
10        business group only with persons apportioning their
11        business income under the selected subsection of
12        Section 304 until the Director grants a petition of
13        the holding company either to be included in more than
14        one unitary business group under subparagraph (C) or
15        to include its base income and factors only with
16        members of a unitary business group apportioning their
17        business income under a different subsection of
18        Section 304.
19            (E) If the unitary business group members'
20        accounting periods differ, the common parent's
21        accounting period or, if there is no common parent,
22        the accounting period of the member that is expected
23        to have, on a recurring basis, the greatest Illinois
24        income tax liability must be used to determine whether
25        to use the apportionment method provided in subsection
26        (a) or subsection (h) of Section 304. The prohibition



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1        against membership in a unitary business group for
2        taxpayers ordinarily required to apportion income
3        under different subsections of Section 304 does not
4        apply to taxpayers required to apportion income under
5        subsection (a) and subsection (h) of Section 304. The
6        provisions of this amendatory Act of 1998 apply to tax
7        years ending on or after December 31, 1998.
8        (28) Subchapter S corporation. The term "Subchapter S
9    corporation" means a corporation for which there is in
10    effect an election under Section 1362 of the Internal
11    Revenue Code, or for which there is a federal election to
12    opt out of the provisions of the Subchapter S Revision Act
13    of 1982 and have applied instead the prior federal
14    Subchapter S rules as in effect on July 1, 1982.
15        (30) Foreign person. The term "foreign person" means
16    any person who is a nonresident alien individual and any
17    nonindividual entity, regardless of where created or
18    organized, whose business activity outside the United
19    States is 80% or more of the entity's total business
20    activity.
21    (b) Other definitions.
22        (1) Words denoting number, gender, and so forth, when
23    used in this Act, where not otherwise distinctly expressed
24    or manifestly incompatible with the intent thereof:
25            (A) Words importing the singular include and apply



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1        to several persons, parties or things;
2            (B) Words importing the plural include the
3        singular; and
4            (C) Words importing the masculine gender include
5        the feminine as well.
6        (2) "Company" or "association" as including successors
7    and assigns. The word "company" or "association", when
8    used in reference to a corporation, shall be deemed to
9    embrace the words "successors and assigns of such company
10    or association", and in like manner as if these last-named
11    words, or words of similar import, were expressed.
12        (3) Other terms. Any term used in any Section of this
13    Act with respect to the application of, or in connection
14    with, the provisions of any other Section of this Act
15    shall have the same meaning as in such other Section.
16(Source: P.A. 99-213, eff. 7-31-15; 100-22, eff. 7-6-17.)
17    Section 99. Effective date. This Act takes effect upon
18becoming law.