Illinois General Assembly - Full Text of HB1143
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Full Text of HB1143  94th General Assembly

HB1143 94TH GENERAL ASSEMBLY


 


 
94TH GENERAL ASSEMBLY
State of Illinois
2005 and 2006
HB1143

 

Introduced 02/08/05, by Rep. Keith P. Sommer

 

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

    Amends the Illinois Income Tax Act. Allows an income tax deduction for individuals in an amount equal to 50% the aggregate cash donations made to a qualified charitable entity during the taxable year, but not to exceed $2,000 per year. Defines "qualified charitable entity". Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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1     AN ACT concerning revenue.
 
2     Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
 
4     Section 5. The Illinois Income Tax Act is amended by
5 changing Section 203 as follows:
 
6     (35 ILCS 5/203)  (from Ch. 120, par. 2-203)
7     Sec. 203. Base income defined.
8     (a) Individuals.
9         (1) In general. In the case of an individual, base
10     income means an amount equal to the taxpayer's adjusted
11     gross income for the taxable year as modified by paragraph
12     (2).
13         (2) Modifications. The adjusted gross income referred
14     to in paragraph (1) shall be modified by adding thereto the
15     sum of the following amounts:
16             (A) An amount equal to all amounts paid or accrued
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
24         this Act to the extent deducted from gross income in
25         the computation of adjusted gross income for the
26         taxable year;
27             (C) An amount equal to the amount received during
28         the taxable year as a recovery or refund of real
29         property taxes paid with respect to the taxpayer's
30         principal residence under the Revenue Act of 1939 and
31         for which a deduction was previously taken under
32         subparagraph (L) of this paragraph (2) prior to July 1,

 

 

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1         1991, the retrospective application date of Article 4
2         of Public Act 87-17. In the case of multi-unit or
3         multi-use structures and farm dwellings, the taxes on
4         the taxpayer's principal residence shall be that
5         portion of the total taxes for the entire property
6         which is attributable to such principal residence;
7             (D) An amount equal to the amount of the capital
8         gain deduction allowable under the Internal Revenue
9         Code, to the extent deducted from gross income in the
10         computation of adjusted gross income;
11             (D-5) An amount, to the extent not included in
12         adjusted gross income, equal to the amount of money
13         withdrawn by the taxpayer in the taxable year from a
14         medical care savings account and the interest earned on
15         the account in the taxable year of a withdrawal
16         pursuant to subsection (b) of Section 20 of the Medical
17         Care Savings Account Act or subsection (b) of Section
18         20 of the Medical Care Savings Account Act of 2000;
19             (D-10) For taxable years ending after December 31,
20         1997, an amount equal to any eligible remediation costs
21         that the individual deducted in computing adjusted
22         gross income and for which the individual claims a
23         credit under subsection (l) of Section 201;
24             (D-15) For taxable years 2001 and thereafter, an
25         amount equal to the bonus depreciation deduction (30%
26         of the adjusted basis of the qualified property) taken
27         on the taxpayer's federal income tax return for the
28         taxable year under subsection (k) of Section 168 of the
29         Internal Revenue Code;
30             (D-16) If the taxpayer reports a capital gain or
31         loss on the taxpayer's federal income tax return for
32         the taxable year based on a sale or transfer of
33         property for which the taxpayer was required in any
34         taxable year to make an addition modification under
35         subparagraph (D-15), then an amount equal to the
36         aggregate amount of the deductions taken in all taxable

 

 

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1         years under subparagraph (Z) with respect to that
2         property.
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             (D-17) For taxable years ending on or after
7         December 31, 2004, an amount equal to the amount
8         otherwise allowed as a deduction in computing base
9         income for interest paid, accrued, or incurred,
10         directly or indirectly, to a foreign person who would
11         be a member of the same unitary business group but for
12         the fact that foreign person's business activity
13         outside the United States is 80% or more of the foreign
14         person's total business activity. The addition
15         modification required by this subparagraph shall be
16         reduced to the extent that dividends were included in
17         base income of the unitary group for the same taxable
18         year and received by the taxpayer or by a member of the
19         taxpayer's unitary business group (including amounts
20         included in gross income under Sections 951 through 964
21         of the Internal Revenue Code and amounts included in
22         gross income under Section 78 of the Internal Revenue
23         Code) with respect to the stock of the same person to
24         whom the interest was paid, accrued, or incurred.
25             This paragraph shall not apply to the following:
26                 (i) an item of interest paid, accrued, or
27             incurred, directly or indirectly, to a foreign
28             person who is subject in a foreign country or
29             state, other than a state which requires mandatory
30             unitary reporting, to a tax on or measured by net
31             income with respect to such interest; or
32                 (ii) an item of interest paid, accrued, or
33             incurred, directly or indirectly, to a foreign
34             person if the taxpayer can establish, based on a
35             preponderance of the evidence, both of the
36             following:

 

 

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1                     (a) the foreign person, during the same
2                 taxable year, paid, accrued, or incurred, the
3                 interest to a person that is not a related
4                 member, and
5                     (b) the transaction giving rise to the
6                 interest expense between the taxpayer and the
7                 foreign person did not have as a principal
8                 purpose the avoidance of Illinois income tax,
9                 and is paid pursuant to a contract or agreement
10                 that reflects an arm's-length interest rate
11                 and terms; or
12                 (iii) the taxpayer can establish, based on
13             clear and convincing evidence, that the interest
14             paid, accrued, or incurred relates to a contract or
15             agreement entered into at arm's-length rates and
16             terms and the principal purpose for the payment is
17             not federal or Illinois tax avoidance; or
18                 (iv) an item of interest paid, accrued, or
19             incurred, directly or indirectly, to a foreign
20             person if the taxpayer establishes by clear and
21             convincing evidence that the adjustments are
22             unreasonable; or if the taxpayer and the Director
23             agree in writing to the application or use of an
24             alternative method of apportionment under Section
25             304(f).
26                 Nothing in this subsection shall preclude the
27             Director from making any other adjustment
28             otherwise allowed under Section 404 of this Act for
29             any tax year beginning after the effective date of
30             this amendment provided such adjustment is made
31             pursuant to regulation adopted by the Department
32             and such regulations provide methods and standards
33             by which the Department will utilize its authority
34             under Section 404 of this Act;
35             (D-18) For taxable years ending on or after
36         December 31, 2004, an amount equal to the amount of

 

 

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

 

 

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1             This paragraph shall not apply to the following:
2                 (i) any item of intangible expenses or costs
3             paid, accrued, or incurred, directly or
4             indirectly, from a transaction with a foreign
5             person who is subject in a foreign country or
6             state, other than a state which requires mandatory
7             unitary reporting, to a tax on or measured by net
8             income with respect to such item; or
9                 (ii) any item of intangible expense or cost
10             paid, accrued, or incurred, directly or
11             indirectly, if the taxpayer can establish, based
12             on a preponderance of the evidence, both of the
13             following:
14                     (a) the foreign person during the same
15                 taxable year paid, accrued, or incurred, the
16                 intangible expense or cost to a person that is
17                 not a related member, and
18                     (b) the transaction giving rise to the
19                 intangible expense or cost between the
20                 taxpayer and the foreign person did not have as
21                 a principal purpose the avoidance of Illinois
22                 income tax, and is paid pursuant to a contract
23                 or agreement that reflects arm's-length terms;
24                 or
25                 (iii) any item of intangible expense or cost
26             paid, accrued, or incurred, directly or
27             indirectly, from a transaction with a foreign
28             person if the taxpayer establishes by clear and
29             convincing evidence, that the adjustments are
30             unreasonable; or if the taxpayer and the Director
31             agree in writing to the application or use of an
32             alternative method of apportionment under Section
33             304(f);
34                 Nothing in this subsection shall preclude the
35             Director from making any other adjustment
36             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             (D-20) For taxable years beginning on or after
8         January 1, 2002, in the case of a distribution from a
9         qualified tuition program under Section 529 of the
10         Internal Revenue Code, other than (i) a distribution
11         from a College Savings Pool created under Section 16.5
12         of the State Treasurer Act or (ii) a distribution from
13         the Illinois Prepaid Tuition Trust Fund, an amount
14         equal to the amount excluded from gross income under
15         Section 529(c)(3)(B);
16     and by deducting from the total so obtained the sum of the
17     following amounts:
18             (E) For taxable years ending before December 31,
19         2001, any amount included in such total in respect of
20         any compensation (including but not limited to any
21         compensation paid or accrued to a serviceman while a
22         prisoner of war or missing in action) paid to a
23         resident by reason of being on active duty in the Armed
24         Forces of the United States and in respect of any
25         compensation paid or accrued to a resident who as a
26         governmental employee was a prisoner of war or missing
27         in action, and in respect of any compensation paid to a
28         resident in 1971 or thereafter for annual training
29         performed pursuant to Sections 502 and 503, Title 32,
30         United States Code as a member of the Illinois National
31         Guard. For taxable years ending on or after December
32         31, 2001, any amount included in such total in respect
33         of any compensation (including but not limited to any
34         compensation paid or accrued to a serviceman while a
35         prisoner of war or missing in action) paid to a
36         resident by reason of being a member of any component

 

 

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1         of the Armed Forces of the United States and in respect
2         of any compensation paid or accrued to a resident who
3         as a governmental employee was a prisoner of war or
4         missing in action, and in respect of any compensation
5         paid to a resident in 2001 or thereafter by reason of
6         being a member of the Illinois National Guard. The
7         provisions of this amendatory Act of the 92nd General
8         Assembly are exempt from the provisions of Section 250;
9             (F) An amount equal to all amounts included in such
10         total pursuant to the provisions of Sections 402(a),
11         402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the
12         Internal Revenue Code, or included in such total as
13         distributions under the provisions of any retirement
14         or disability plan for employees of any governmental
15         agency or unit, or retirement payments to retired
16         partners, which payments are excluded in computing net
17         earnings from self employment by Section 1402 of the
18         Internal Revenue Code and regulations adopted pursuant
19         thereto;
20             (G) The valuation limitation amount;
21             (H) An amount equal to the amount of any tax
22         imposed by this Act which was refunded to the taxpayer
23         and included in such total for the taxable year;
24             (I) An amount equal to all amounts included in such
25         total pursuant to the provisions of Section 111 of the
26         Internal Revenue Code as a recovery of items previously
27         deducted from adjusted gross income in the computation
28         of taxable income;
29             (J) An amount equal to those dividends included in
30         such total which were paid by a corporation which
31         conducts business operations in an Enterprise Zone or
32         zones created under the Illinois Enterprise Zone Act,
33         and conducts substantially all of its operations in an
34         Enterprise Zone or zones;
35             (K) An amount equal to those dividends included in
36         such total that were paid by a corporation that

 

 

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1         conducts business operations in a federally designated
2         Foreign Trade Zone or Sub-Zone and that is designated a
3         High Impact Business located in Illinois; provided
4         that dividends eligible for the deduction provided in
5         subparagraph (J) of paragraph (2) of this subsection
6         shall not be eligible for the deduction provided under
7         this subparagraph (K);
8             (L) For taxable years ending after December 31,
9         1983, an amount equal to all social security benefits
10         and railroad retirement benefits included in such
11         total pursuant to Sections 72(r) and 86 of the Internal
12         Revenue Code;
13             (M) With the exception of any amounts subtracted
14         under subparagraph (N), 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 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             (N) An amount equal to all amounts included in such
27         total which are exempt from taxation by this State
28         either by reason of its statutes or Constitution or by
29         reason of the Constitution, treaties or statutes of the
30         United States; provided that, in the case of any
31         statute of this State that exempts income derived from
32         bonds or other obligations from the tax imposed under
33         this Act, the amount exempted shall be the interest net
34         of bond premium amortization;
35             (O) An amount equal to any contribution made to a
36         job training project established pursuant to the Tax

 

 

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1         Increment Allocation Redevelopment Act;
2             (P) An amount equal to the amount of the deduction
3         used to compute the federal income tax credit for
4         restoration of substantial amounts held under claim of
5         right for the taxable year pursuant to Section 1341 of
6         the Internal Revenue Code of 1986;
7             (Q) An amount equal to any amounts included in such
8         total, received by the taxpayer as an acceleration in
9         the payment of life, endowment or annuity benefits in
10         advance of the time they would otherwise be payable as
11         an indemnity for a terminal illness;
12             (R) An amount equal to the amount of any federal or
13         State bonus paid to veterans of the Persian Gulf War;
14             (S) An amount, to the extent included in adjusted
15         gross income, equal to the amount of a contribution
16         made in the taxable year on behalf of the taxpayer to a
17         medical care savings account established under the
18         Medical Care Savings Account Act or the Medical Care
19         Savings Account Act of 2000 to the extent the
20         contribution is accepted by the account administrator
21         as provided in that Act;
22             (T) An amount, to the extent included in adjusted
23         gross income, equal to the amount of interest earned in
24         the taxable year on a medical care savings account
25         established under the Medical Care Savings Account Act
26         or the Medical Care Savings Account Act of 2000 on
27         behalf of the taxpayer, other than interest added
28         pursuant to item (D-5) of this paragraph (2);
29             (U) For one taxable year beginning on or after
30         January 1, 1994, an amount equal to the total amount of
31         tax imposed and paid under subsections (a) and (b) of
32         Section 201 of this Act on grant amounts received by
33         the taxpayer under the Nursing Home Grant Assistance
34         Act during the taxpayer's taxable years 1992 and 1993;
35             (V) Beginning with tax years ending on or after
36         December 31, 1995 and ending with tax years ending on

 

 

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1         or before December 31, 2004, an amount equal to the
2         amount paid by a taxpayer who is a self-employed
3         taxpayer, a partner of a partnership, or a shareholder
4         in a Subchapter S corporation for health insurance or
5         long-term care insurance for that taxpayer or that
6         taxpayer's spouse or dependents, to the extent that the
7         amount paid for that health insurance or long-term care
8         insurance may be deducted under Section 213 of the
9         Internal Revenue Code of 1986, has not been deducted on
10         the federal income tax return of the taxpayer, and does
11         not exceed the taxable income attributable to that
12         taxpayer's income, self-employment income, or
13         Subchapter S corporation income; except that no
14         deduction shall be allowed under this item (V) if the
15         taxpayer is eligible to participate in any health
16         insurance or long-term care insurance plan of an
17         employer of the taxpayer or the taxpayer's spouse. The
18         amount of the health insurance and long-term care
19         insurance subtracted under this item (V) shall be
20         determined by multiplying total health insurance and
21         long-term care insurance premiums paid by the taxpayer
22         times a number that represents the fractional
23         percentage of eligible medical expenses under Section
24         213 of the Internal Revenue Code of 1986 not actually
25         deducted on the taxpayer's federal income tax return;
26             (W) For taxable years beginning on or after January
27         1, 1998, all amounts included in the taxpayer's federal
28         gross income in the taxable year from amounts converted
29         from a regular IRA to a Roth IRA. This paragraph is
30         exempt from the provisions of Section 250;
31             (X) For taxable year 1999 and thereafter, an amount
32         equal to the amount of any (i) distributions, to the
33         extent includible in gross income for federal income
34         tax purposes, made to the taxpayer because of his or
35         her status as a victim of persecution for racial or
36         religious reasons by Nazi Germany or any other Axis

 

 

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1         regime or as an heir of the victim and (ii) items of
2         income, to the extent includible in gross income for
3         federal income tax purposes, attributable to, derived
4         from or in any way related to assets stolen from,
5         hidden from, or otherwise lost to a victim of
6         persecution for racial or religious reasons by Nazi
7         Germany or any other Axis regime immediately prior to,
8         during, and immediately after World War II, including,
9         but not limited to, interest on the proceeds receivable
10         as insurance under policies issued to a victim of
11         persecution for racial or religious reasons by Nazi
12         Germany or any other Axis regime by European insurance
13         companies immediately prior to and during World War II;
14         provided, however, this subtraction from federal
15         adjusted gross income does not apply to assets acquired
16         with such assets or with the proceeds from the sale of
17         such assets; provided, further, this paragraph shall
18         only apply to a taxpayer who was the first recipient of
19         such assets after their recovery and who is a victim of
20         persecution for racial or religious reasons by Nazi
21         Germany or any other Axis regime or as an heir of the
22         victim. The amount of and the eligibility for any
23         public assistance, benefit, or similar entitlement is
24         not affected by the inclusion of items (i) and (ii) of
25         this paragraph in gross income for federal income tax
26         purposes. This paragraph is exempt from the provisions
27         of Section 250;
28             (Y) For taxable years beginning on or after January
29         1, 2002 and ending on or before December 31, 2004,
30         moneys contributed in the taxable year to a College
31         Savings Pool account under Section 16.5 of the State
32         Treasurer Act, except that amounts excluded from gross
33         income under Section 529(c)(3)(C)(i) of the Internal
34         Revenue Code shall not be considered moneys
35         contributed under this subparagraph (Y). For taxable
36         years beginning on or after January 1, 2005, a maximum

 

 

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1         of $10,000 contributed in the taxable year to (i) a
2         College Savings Pool account under Section 16.5 of the
3         State Treasurer Act or (ii) the Illinois Prepaid
4         Tuition Trust Fund, except that amounts excluded from
5         gross income under Section 529(c)(3)(C)(i) of the
6         Internal Revenue Code shall not be considered moneys
7         contributed under this subparagraph (Y). This
8         subparagraph (Y) is exempt from the provisions of
9         Section 250;
10             (Z) For taxable years 2001 and thereafter, for the
11         taxable year in which the bonus depreciation deduction
12         (30% of the adjusted basis of the qualified property)
13         is taken on the taxpayer's federal income tax return
14         under subsection (k) of Section 168 of the Internal
15         Revenue Code and for each applicable taxable year
16         thereafter, an amount equal to "x", where:
17                 (1) "y" equals the amount of the depreciation
18             deduction taken for the taxable year on the
19             taxpayer's federal income tax return on property
20             for which the bonus depreciation deduction (30% of
21             the adjusted basis of the qualified property) was
22             taken in any year under subsection (k) of Section
23             168 of the Internal Revenue Code, but not including
24             the bonus depreciation deduction; and
25                 (2) "x" equals "y" multiplied by 30 and then
26             divided by 70 (or "y" multiplied by 0.429).
27             The aggregate amount deducted under this
28         subparagraph in all taxable years for any one piece of
29         property may not exceed the amount of the bonus
30         depreciation deduction (30% of the adjusted basis of
31         the qualified property) taken on that property on the
32         taxpayer's federal income tax return under subsection
33         (k) of Section 168 of the Internal Revenue Code;
34             (AA) If the taxpayer reports a capital gain or loss
35         on the taxpayer's federal income tax return for the
36         taxable year based on a sale or transfer of property

 

 

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1         for which the taxpayer was required in any taxable year
2         to make an addition modification under subparagraph
3         (D-15), then an amount equal to that addition
4         modification.
5             The taxpayer is allowed to take the deduction under
6         this subparagraph only once with respect to any one
7         piece of property;
8             (BB) Any amount included in adjusted gross income,
9         other than salary, received by a driver in a
10         ridesharing arrangement using a motor vehicle;
11             (CC) The amount of (i) any interest income (net of
12         the deductions allocable thereto) taken into account
13         for the taxable year with respect to a transaction with
14         a taxpayer that is required to make an addition
15         modification with respect to such transaction under
16         Section 203(a)(2)(D-17), 203(b)(2)(E-13),
17         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
18         the amount of that addition modification, and (ii) any
19         income from intangible property (net of the deductions
20         allocable thereto) taken into account for the taxable
21         year with respect to a transaction with a taxpayer that
22         is required to make an addition modification with
23         respect to such transaction under Section
24         203(a)(2)(D-18), 203(b)(2)(E-14), 203(c)(2)(G-13), or
25         203(d)(2)(D-8), but not to exceed the amount of that
26         addition modification;
27             (DD) An amount equal to the interest income taken
28         into account for the taxable year (net of the
29         deductions allocable thereto) with respect to
30         transactions with a foreign person who would be a
31         member of the taxpayer's unitary business group but for
32         the fact that the foreign person's business activity
33         outside the United States is 80% or more of that
34         person's total business activity, but not to exceed the
35         addition modification required to be made for the same
36         taxable year under Section 203(a)(2)(D-17) for

 

 

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1         interest paid, accrued, or incurred, directly or
2         indirectly, to the same foreign person; and
3             (EE) An amount equal to the income from intangible
4         property taken into account for the taxable year (net
5         of the deductions allocable thereto) with respect to
6         transactions with a foreign person who would be a
7         member of the taxpayer's unitary business group but for
8         the fact that the foreign person's business activity
9         outside the United States is 80% or more of that
10         person's total business activity, but not to exceed the
11         addition modification required to be made for the same
12         taxable year under Section 203(a)(2)(D-18) for
13         intangible expenses and costs paid, accrued, or
14         incurred, directly or indirectly, to the same foreign
15         person; and .
16             (FF) An amount, to the extent included in adjusted
17         gross income, equal to 50% the aggregate cash donations
18         made to a qualified charitable entity during the
19         taxable year, but not to exceed $2,000 per year. For
20         purposes of this subparagraph, a "qualified charitable
21         entity" is a charitable entity that is (i) located in
22         the State of Illinois and (ii) qualifies for exemption
23         from federal income taxation under Section 501(c)(3)
24         of the Internal Revenue Code.
 
25     (b) Corporations.
26         (1) In general. In the case of a corporation, base
27     income means an amount equal to the taxpayer's taxable
28     income for the taxable year as modified by paragraph (2).
29         (2) Modifications. The taxable income referred to in
30     paragraph (1) shall be modified by adding thereto the sum
31     of the following amounts:
32             (A) An amount equal to all amounts paid or accrued
33         to the taxpayer as interest and all distributions
34         received from regulated investment companies during
35         the taxable year to the extent excluded from gross

 

 

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

 

 

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1                 (ii) the addition modification relating to the
2             net operating loss carried back or forward to the
3             taxable year from any taxable year ending prior to
4             December 31, 1986 shall not exceed the amount of
5             such carryback or carryforward;
6             For taxable years in which there is a net operating
7         loss carryback or carryforward from more than one other
8         taxable year ending prior to December 31, 1986, the
9         addition modification provided in this subparagraph
10         (E) shall be the sum of the amounts computed
11         independently under the preceding provisions of this
12         subparagraph (E) for each such taxable year;
13             (E-5) For taxable years ending after December 31,
14         1997, an amount equal to any eligible remediation costs
15         that the corporation deducted in computing adjusted
16         gross income and for which the corporation claims a
17         credit under subsection (l) of Section 201;
18             (E-10) For taxable years 2001 and thereafter, an
19         amount equal to the bonus depreciation deduction (30%
20         of the adjusted basis of the qualified property) taken
21         on the taxpayer's federal income tax return for the
22         taxable year under subsection (k) of Section 168 of the
23         Internal Revenue Code; and
24             (E-11) If the taxpayer reports a capital gain or
25         loss on the taxpayer's federal income tax return for
26         the taxable year based on a sale or transfer of
27         property for which the taxpayer was required in any
28         taxable year to make an addition modification under
29         subparagraph (E-10), then an amount equal to the
30         aggregate amount of the deductions taken in all taxable
31         years under subparagraph (T) with respect to that
32         property.
33             The taxpayer is required to make the addition
34         modification under this subparagraph only once with
35         respect to any one piece of property;
36             (E-12) For taxable years ending on or after

 

 

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1         December 31, 2004, an amount equal to the amount
2         otherwise allowed as a deduction in computing base
3         income for interest paid, accrued, or incurred,
4         directly or indirectly, to a foreign person who would
5         be a member of the same unitary business group but for
6         the fact the foreign person's business activity
7         outside the United States is 80% or more of the foreign
8         person's total business activity. The addition
9         modification required by this subparagraph shall be
10         reduced to the extent that dividends were included in
11         base income of the unitary group for the same taxable
12         year and received by the taxpayer or by a member of the
13         taxpayer's unitary business group (including amounts
14         included in gross income pursuant to Sections 951
15         through 964 of the Internal Revenue Code and amounts
16         included in gross income under Section 78 of the
17         Internal Revenue Code) with respect to the stock of the
18         same person to whom the interest was paid, accrued, or
19         incurred.
20             This paragraph shall not apply to the following:
21                 (i) an item of interest paid, accrued, or
22             incurred, directly or indirectly, to a foreign
23             person who is subject in a foreign country or
24             state, other than a state which requires mandatory
25             unitary reporting, to a tax on or measured by net
26             income with respect to such interest; or
27                 (ii) an item of interest paid, accrued, or
28             incurred, directly or indirectly, to a foreign
29             person if the taxpayer can establish, based on a
30             preponderance of the evidence, both of the
31             following:
32                     (a) the foreign person, during the same
33                 taxable year, paid, accrued, or incurred, the
34                 interest to a person that is not a related
35                 member, and
36                     (b) the transaction giving rise to the

 

 

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

 

 

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1         foreign person's business activity outside the United
2         States is 80% or more of that person's total business
3         activity. The addition modification required by this
4         subparagraph shall be reduced to the extent that
5         dividends were included in base income of the unitary
6         group for the same taxable year and received by the
7         taxpayer or by a member of the taxpayer's unitary
8         business group (including amounts included in gross
9         income pursuant to Sections 951 through 964 of the
10         Internal Revenue Code and amounts included in gross
11         income under Section 78 of the Internal Revenue Code)
12         with respect to the stock of the same person to whom
13         the intangible expenses and costs were directly or
14         indirectly paid, incurred, or accrued. The preceding
15         sentence shall not apply to the extent that the same
16         dividends caused a reduction to the addition
17         modification required under Section 203(b)(2)(E-12) of
18         this Act. As used in this subparagraph, the term
19         "intangible expenses and costs" includes (1) expenses,
20         losses, and costs for, or related to, the direct or
21         indirect acquisition, use, maintenance or management,
22         ownership, sale, exchange, or any other disposition of
23         intangible property; (2) losses incurred, directly or
24         indirectly, from factoring transactions or discounting
25         transactions; (3) royalty, patent, technical, and
26         copyright fees; (4) licensing fees; and (5) other
27         similar expenses and costs. For purposes of this
28         subparagraph, "intangible property" includes patents,
29         patent applications, trade names, trademarks, service
30         marks, copyrights, mask works, trade secrets, and
31         similar types of intangible assets.
32             This paragraph shall not apply to the following:
33                 (i) any item of intangible expenses or costs
34             paid, accrued, or incurred, directly or
35             indirectly, from a transaction with a foreign
36             person who is subject in a foreign country or

 

 

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1             state, other than a state which requires mandatory
2             unitary reporting, to a tax on or measured by net
3             income with respect to such item; or
4                 (ii) any item of intangible expense or cost
5             paid, accrued, or incurred, directly or
6             indirectly, if the taxpayer can establish, based
7             on a preponderance of the evidence, both of the
8             following:
9                     (a) the foreign person during the same
10                 taxable year paid, accrued, or incurred, the
11                 intangible expense or cost to a person that is
12                 not a related member, and
13                     (b) the transaction giving rise to the
14                 intangible expense or cost between the
15                 taxpayer and the foreign person did not have as
16                 a principal purpose the avoidance of Illinois
17                 income tax, and is paid pursuant to a contract
18                 or agreement that reflects arm's-length terms;
19                 or
20                 (iii) any item of intangible expense or cost
21             paid, accrued, or incurred, directly or
22             indirectly, from a transaction with a foreign
23             person if the taxpayer establishes by clear and
24             convincing evidence, that the adjustments are
25             unreasonable; or if the taxpayer and the Director
26             agree in writing to the application or use of an
27             alternative method of apportionment under Section
28             304(f);
29                 Nothing in this subsection shall preclude the
30             Director from making any other adjustment
31             otherwise allowed under Section 404 of this Act for
32             any tax year beginning after the effective date of
33             this amendment provided such adjustment is made
34             pursuant to regulation adopted by the Department
35             and such regulations provide methods and standards
36             by which the Department will utilize its authority

 

 

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1             under Section 404 of this Act;
2     and by deducting from the total so obtained the sum of the
3     following amounts:
4             (F) An amount equal to the amount of any tax
5         imposed by this Act which was refunded to the taxpayer
6         and included in such total for the taxable year;
7             (G) An amount equal to any amount included in such
8         total under Section 78 of the Internal Revenue Code;
9             (H) In the case of a regulated investment company,
10         an amount equal to the amount of exempt interest
11         dividends as defined in subsection (b) (5) of Section
12         852 of the Internal Revenue Code, paid to shareholders
13         for the taxable year;
14             (I) With the exception of any amounts subtracted
15         under subparagraph (J), an amount equal to the sum of
16         all amounts disallowed as deductions by (i) Sections
17         171(a) (2), and 265(a)(2) and amounts disallowed as
18         interest expense by Section 291(a)(3) of the Internal
19         Revenue Code, as now or hereafter amended, and all
20         amounts of expenses allocable to interest and
21         disallowed as deductions by Section 265(a)(1) of the
22         Internal Revenue Code, as now or hereafter amended; and
23         (ii) for taxable years ending on or after August 13,
24         1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and
25         832(b)(5)(B)(i) of the Internal Revenue Code; the
26         provisions of this subparagraph are exempt from the
27         provisions of Section 250;
28             (J) An amount equal to all amounts included in such
29         total which are exempt from taxation by this State
30         either by reason of its statutes or Constitution or by
31         reason of the Constitution, treaties or statutes of the
32         United States; provided that, in the case of any
33         statute of this State that exempts income derived from
34         bonds or other obligations from the tax imposed under
35         this Act, the amount exempted shall be the interest net
36         of bond premium amortization;

 

 

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1             (K) An amount equal to those dividends included in
2         such total which were paid by a corporation which
3         conducts business operations in an Enterprise Zone or
4         zones created under the Illinois Enterprise Zone Act
5         and conducts substantially all of its operations in an
6         Enterprise Zone or zones;
7             (L) An amount equal to those dividends included in
8         such total that were paid by a corporation that
9         conducts business operations in a federally designated
10         Foreign Trade Zone or Sub-Zone and that is designated a
11         High Impact Business located in Illinois; provided
12         that dividends eligible for the deduction provided in
13         subparagraph (K) of paragraph 2 of this subsection
14         shall not be eligible for the deduction provided under
15         this subparagraph (L);
16             (M) For any taxpayer that is a financial
17         organization within the meaning of Section 304(c) of
18         this Act, an amount included in such total as interest
19         income from a loan or loans made by such taxpayer to a
20         borrower, to the extent that such a loan is secured by
21         property which is eligible for the Enterprise Zone
22         Investment Credit. To determine the portion of a loan
23         or loans that is secured by property eligible for a
24         Section 201(f) investment credit to the borrower, the
25         entire principal amount of the loan or loans between
26         the taxpayer and the borrower should be divided into
27         the basis of the Section 201(f) investment credit
28         property which secures the loan or loans, using for
29         this purpose the original basis of such property on the
30         date that it was placed in service in the Enterprise
31         Zone. The subtraction modification available to
32         taxpayer in any year under this subsection shall be
33         that portion of the total interest paid by the borrower
34         with respect to such loan attributable to the eligible
35         property as calculated under the previous sentence;
36             (M-1) For any taxpayer that is a financial

 

 

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1         organization within the meaning of Section 304(c) of
2         this Act, an amount included in such total as interest
3         income from a loan or loans made by such taxpayer to a
4         borrower, to the extent that such a loan is secured by
5         property which is eligible for the High Impact Business
6         Investment Credit. To determine the portion of a loan
7         or loans that is secured by property eligible for a
8         Section 201(h) investment credit to the borrower, the
9         entire principal amount of the loan or loans between
10         the taxpayer and the borrower should be divided into
11         the basis of the Section 201(h) investment credit
12         property which secures the loan or loans, using for
13         this purpose the original basis of such property on the
14         date that it was placed in service in a federally
15         designated Foreign Trade Zone or Sub-Zone located in
16         Illinois. No taxpayer that is eligible for the
17         deduction provided in subparagraph (M) of paragraph
18         (2) of this subsection shall be eligible for the
19         deduction provided under this subparagraph (M-1). The
20         subtraction modification available to taxpayers 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;
25             (N) Two times any contribution made during the
26         taxable year to a designated zone organization to the
27         extent that the contribution (i) qualifies as a
28         charitable contribution under subsection (c) of
29         Section 170 of the Internal Revenue Code and (ii) must,
30         by its terms, be used for a project approved by the
31         Department of Commerce and Economic Opportunity under
32         Section 11 of the Illinois Enterprise Zone Act;
33             (O) An amount equal to: (i) 85% for taxable years
34         ending on or before December 31, 1992, or, a percentage
35         equal to the percentage allowable under Section
36         243(a)(1) of the Internal Revenue Code of 1986 for

 

 

HB1143 - 25 - LRB094 08793 BDD 39009 b

1         taxable years ending after December 31, 1992, of the
2         amount by which dividends included in taxable income
3         and received from a corporation that is not created or
4         organized under the laws of the United States or any
5         state or political subdivision thereof, including, for
6         taxable years ending on or after December 31, 1988,
7         dividends received or deemed received or paid or deemed
8         paid under Sections 951 through 964 of the Internal
9         Revenue Code, exceed the amount of the modification
10         provided under subparagraph (G) of paragraph (2) of
11         this subsection (b) which is related to such dividends;
12         plus (ii) 100% of the amount by which dividends,
13         included in taxable income and received, including,
14         for taxable years ending on or after December 31, 1988,
15         dividends received or deemed received or paid or deemed
16         paid under Sections 951 through 964 of the Internal
17         Revenue Code, from any such corporation specified in
18         clause (i) that would but for the provisions of Section
19         1504 (b) (3) of the Internal Revenue Code be treated as
20         a member of the affiliated group which includes the
21         dividend recipient, exceed the amount of the
22         modification provided under subparagraph (G) of
23         paragraph (2) of this subsection (b) which is related
24         to such dividends;
25             (P) An amount equal to any contribution made to a
26         job training project established pursuant to the Tax
27         Increment Allocation Redevelopment Act;
28             (Q) An amount equal to the amount of the deduction
29         used to compute the federal income tax credit for
30         restoration of substantial amounts held under claim of
31         right for the taxable year pursuant to Section 1341 of
32         the Internal Revenue Code of 1986;
33             (R) In the case of an attorney-in-fact with respect
34         to whom an interinsurer or a reciprocal insurer has
35         made the election under Section 835 of the Internal
36         Revenue Code, 26 U.S.C. 835, an amount equal to the

 

 

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1         excess, if any, of the amounts paid or incurred by that
2         interinsurer or reciprocal insurer in the taxable year
3         to the attorney-in-fact over the deduction allowed to
4         that interinsurer or reciprocal insurer with respect
5         to the attorney-in-fact under Section 835(b) of the
6         Internal Revenue Code for the taxable year;
7             (S) For taxable years ending on or after December
8         31, 1997, in the case of a Subchapter S corporation, an
9         amount equal to all amounts of income allocable to a
10         shareholder subject to the Personal Property Tax
11         Replacement Income Tax imposed by subsections (c) and
12         (d) of Section 201 of this Act, including amounts
13         allocable to organizations exempt from federal income
14         tax by reason of Section 501(a) of the Internal Revenue
15         Code. This subparagraph (S) is exempt from the
16         provisions of Section 250;
17             (T) For taxable years 2001 and thereafter, for the
18         taxable year in which the bonus depreciation deduction
19         (30% of the adjusted basis of the qualified property)
20         is taken on the taxpayer's federal income tax return
21         under subsection (k) of Section 168 of the Internal
22         Revenue Code and for each applicable taxable year
23         thereafter, an amount equal to "x", where:
24                 (1) "y" equals the amount of the depreciation
25             deduction taken for the taxable year on the
26             taxpayer's federal income tax return on property
27             for which the bonus depreciation deduction (30% of
28             the adjusted basis of the qualified property) was
29             taken in any year under subsection (k) of Section
30             168 of the Internal Revenue Code, but not including
31             the bonus depreciation deduction; and
32                 (2) "x" equals "y" multiplied by 30 and then
33             divided by 70 (or "y" multiplied by 0.429).
34             The aggregate amount deducted under this
35         subparagraph in all taxable years for any one piece of
36         property may not exceed the amount of the bonus

 

 

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1         depreciation deduction (30% of the adjusted basis of
2         the qualified property) taken on that property on the
3         taxpayer's federal income tax return under subsection
4         (k) of Section 168 of the Internal Revenue Code;
5             (U) If the taxpayer reports a capital gain or loss
6         on the taxpayer's federal income tax return for the
7         taxable year based on a sale or transfer of property
8         for which the taxpayer was required in any taxable year
9         to make an addition modification under subparagraph
10         (E-10), then an amount equal to that addition
11         modification.
12             The taxpayer is allowed to take the deduction under
13         this subparagraph only once with respect to any one
14         piece of property;
15             (V) The amount of: (i) any interest income (net of
16         the deductions allocable thereto) taken into account
17         for the taxable year with respect to a transaction with
18         a taxpayer that is required to make an addition
19         modification with respect to such transaction under
20         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
21         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed
22         the amount of such addition modification and (ii) any
23         income from intangible property (net of the deductions
24         allocable thereto) taken into account for the taxable
25         year with respect to a transaction with a taxpayer that
26         is required to make an addition modification with
27         respect to such transaction under Section
28         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
29         203(d)(2)(D-8), but not to exceed the amount of such
30         addition modification;
31             (W) An amount equal to the interest income taken
32         into account for the taxable year (net of the
33         deductions allocable thereto) with respect to
34         transactions with a foreign person who would be a
35         member of the taxpayer's unitary business group but for
36         the fact that the foreign person's business activity

 

 

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1         outside the United States is 80% or more of that
2         person's total business activity, but not to exceed the
3         addition modification required to be made for the same
4         taxable year under Section 203(b)(2)(E-12) for
5         interest paid, accrued, or incurred, directly or
6         indirectly, to the same foreign person; and
7             (X) An amount equal to the income from intangible
8         property taken into account for the taxable year (net
9         of the deductions allocable thereto) with respect to
10         transactions with a foreign person who would be a
11         member of the taxpayer's unitary business group but for
12         the fact that the foreign person's business activity
13         outside the United States is 80% or more of that
14         person's total business activity, but not to exceed the
15         addition modification required to be made for the same
16         taxable year under Section 203(b)(2)(E-13) for
17         intangible expenses and costs paid, accrued, or
18         incurred, directly or indirectly, to the same foreign
19         person.
20         (3) Special rule. For purposes of paragraph (2) (A),
21     "gross income" in the case of a life insurance company, for
22     tax years ending on and after December 31, 1994, shall mean
23     the gross investment income for the taxable year.
 
24     (c) Trusts and estates.
25         (1) In general. In the case of a trust or estate, base
26     income means an amount equal to the taxpayer's taxable
27     income for the taxable year as modified by paragraph (2).
28         (2) Modifications. Subject to the provisions of
29     paragraph (3), the taxable income referred to in paragraph
30     (1) shall be modified by adding thereto the sum of the
31     following amounts:
32             (A) An amount equal to all amounts paid or accrued
33         to the taxpayer as interest or dividends during the
34         taxable year to the extent excluded from gross income
35         in the computation of taxable income;

 

 

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1             (B) In the case of (i) an estate, $600; (ii) a
2         trust which, under its governing instrument, is
3         required to distribute all of its income currently,
4         $300; and (iii) any other trust, $100, but in each such
5         case, only to the extent such amount was deducted in
6         the computation of taxable income;
7             (C) An amount equal to the amount of tax imposed by
8         this Act to the extent deducted from gross income in
9         the computation of taxable income for the taxable year;
10             (D) The amount of any net operating loss deduction
11         taken in arriving at taxable income, other than a net
12         operating loss carried forward from a taxable year
13         ending prior to December 31, 1986;
14             (E) For taxable years in which a net operating loss
15         carryback or carryforward from a taxable year ending
16         prior to December 31, 1986 is an element of taxable
17         income under paragraph (1) of subsection (e) or
18         subparagraph (E) of paragraph (2) of subsection (e),
19         the amount by which addition modifications other than
20         those provided by this subparagraph (E) exceeded
21         subtraction modifications in such taxable year, with
22         the following limitations applied in the order that
23         they are listed:
24                 (i) the addition modification relating to the
25             net operating loss carried back or forward to the
26             taxable year from any taxable year ending prior to
27             December 31, 1986 shall be reduced by the amount of
28             addition modification under this subparagraph (E)
29             which related to that net operating loss and which
30             was taken into account in calculating the base
31             income of an earlier taxable year, and
32                 (ii) the addition modification relating to the
33             net operating loss carried back or forward to the
34             taxable year from any taxable year ending prior to
35             December 31, 1986 shall not exceed the amount of
36             such carryback or carryforward;

 

 

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1             For taxable years in which there is a net operating
2         loss carryback or carryforward from more than one other
3         taxable year ending prior to December 31, 1986, the
4         addition modification provided in this subparagraph
5         (E) shall be the sum of the amounts computed
6         independently under the preceding provisions of this
7         subparagraph (E) for each such taxable year;
8             (F) For taxable years ending on or after January 1,
9         1989, an amount equal to the tax deducted pursuant to
10         Section 164 of the Internal Revenue Code if the trust
11         or estate is claiming the same tax for purposes of the
12         Illinois foreign tax credit under Section 601 of this
13         Act;
14             (G) An amount equal to the amount of the capital
15         gain deduction allowable under the Internal Revenue
16         Code, to the extent deducted from gross income in the
17         computation of taxable income;
18             (G-5) For taxable years ending after December 31,
19         1997, an amount equal to any eligible remediation costs
20         that the trust or estate deducted in computing adjusted
21         gross income and for which the trust or estate claims a
22         credit under subsection (l) of Section 201;
23             (G-10) For taxable years 2001 and thereafter, an
24         amount equal to the bonus depreciation deduction (30%
25         of the adjusted basis of the qualified property) taken
26         on the taxpayer's federal income tax return for the
27         taxable year under subsection (k) of Section 168 of the
28         Internal Revenue Code; and
29             (G-11) If the taxpayer reports a capital gain or
30         loss on the taxpayer's federal income tax return for
31         the taxable year based on a sale or transfer of
32         property for which the taxpayer was required in any
33         taxable year to make an addition modification under
34         subparagraph (G-10), then an amount equal to the
35         aggregate amount of the deductions taken in all taxable
36         years under subparagraph (R) with respect to that

 

 

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1         property.
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             (G-12) For taxable years ending on or after
6         December 31, 2004, an amount equal to the amount
7         otherwise allowed as a deduction in computing base
8         income for interest paid, accrued, or incurred,
9         directly or indirectly, to a foreign person who would
10         be a member of the same unitary business group but for
11         the fact that the foreign person's business activity
12         outside the United States is 80% or more of the foreign
13         person's total business activity. The addition
14         modification required by this subparagraph shall be
15         reduced to the extent that dividends were included in
16         base income of the unitary group for the same taxable
17         year and received by the taxpayer or by a member of the
18         taxpayer's unitary business group (including amounts
19         included in gross income pursuant to Sections 951
20         through 964 of the Internal Revenue Code and amounts
21         included in gross income under Section 78 of the
22         Internal Revenue Code) with respect to the stock of the
23         same person to whom the interest was paid, accrued, or
24         incurred.
25             This paragraph shall not apply to the following:
26                 (i) an item of interest paid, accrued, or
27             incurred, directly or indirectly, to a foreign
28             person who is subject in a foreign country or
29             state, other than a state which requires mandatory
30             unitary reporting, to a tax on or measured by net
31             income with respect to such interest; or
32                 (ii) an item of interest paid, accrued, or
33             incurred, directly or indirectly, to a foreign
34             person if the taxpayer can establish, based on a
35             preponderance of the evidence, both of the
36             following:

 

 

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1                     (a) the foreign person, during the same
2                 taxable year, paid, accrued, or incurred, the
3                 interest to a person that is not a related
4                 member, and
5                     (b) the transaction giving rise to the
6                 interest expense between the taxpayer and the
7                 foreign person did not have as a principal
8                 purpose the avoidance of Illinois income tax,
9                 and is paid pursuant to a contract or agreement
10                 that reflects an arm's-length interest rate
11                 and terms; or
12                 (iii) the taxpayer can establish, based on
13             clear and convincing evidence, that the interest
14             paid, accrued, or incurred relates to a contract or
15             agreement entered into at arm's-length rates and
16             terms and the principal purpose for the payment is
17             not federal or Illinois tax avoidance; or
18                 (iv) an item of interest paid, accrued, or
19             incurred, directly or indirectly, to a foreign
20             person if the taxpayer establishes by clear and
21             convincing evidence that the adjustments are
22             unreasonable; or if the taxpayer and the Director
23             agree in writing to the application or use of an
24             alternative method of apportionment under Section
25             304(f).
26                 Nothing in this subsection shall preclude the
27             Director from making any other adjustment
28             otherwise allowed under Section 404 of this Act for
29             any tax year beginning after the effective date of
30             this amendment provided such adjustment is made
31             pursuant to regulation adopted by the Department
32             and such regulations provide methods and standards
33             by which the Department will utilize its authority
34             under Section 404 of this Act;
35             (G-13) For taxable years ending on or after
36         December 31, 2004, an amount equal to the amount of

 

 

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

 

 

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1             This paragraph shall not apply to the following:
2                 (i) any item of intangible expenses or costs
3             paid, accrued, or incurred, directly or
4             indirectly, from a transaction with a foreign
5             person who is subject in a foreign country or
6             state, other than a state which requires mandatory
7             unitary reporting, to a tax on or measured by net
8             income with respect to such item; or
9                 (ii) any item of intangible expense or cost
10             paid, accrued, or incurred, directly or
11             indirectly, if the taxpayer can establish, based
12             on a preponderance of the evidence, both of the
13             following:
14                     (a) the foreign person during the same
15                 taxable year paid, accrued, or incurred, the
16                 intangible expense or cost to a person that is
17                 not a related member, and
18                     (b) the transaction giving rise to the
19                 intangible expense or cost between the
20                 taxpayer and the foreign person did not have as
21                 a principal purpose the avoidance of Illinois
22                 income tax, and is paid pursuant to a contract
23                 or agreement that reflects arm's-length terms;
24                 or
25                 (iii) any item of intangible expense or cost
26             paid, accrued, or incurred, directly or
27             indirectly, from a transaction with a foreign
28             person if the taxpayer establishes by clear and
29             convincing evidence, that the adjustments are
30             unreasonable; or if the taxpayer and the Director
31             agree in writing to the application or use of an
32             alternative method of apportionment under Section
33             304(f);
34                 Nothing in this subsection shall preclude the
35             Director from making any other adjustment
36             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     and by deducting from the total so obtained the sum of the
8     following amounts:
9             (H) An amount equal to all amounts included in such
10         total pursuant to the provisions of Sections 402(a),
11         402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
12         Internal Revenue Code or included in such total as
13         distributions under the provisions of any retirement
14         or disability plan for employees of any governmental
15         agency or unit, or retirement payments to retired
16         partners, which payments are excluded in computing net
17         earnings from self employment by Section 1402 of the
18         Internal Revenue Code and regulations adopted pursuant
19         thereto;
20             (I) The valuation limitation amount;
21             (J) An amount equal to the amount of any tax
22         imposed by this Act which was refunded to the taxpayer
23         and included in such total for the taxable year;
24             (K) An amount equal to all amounts included in
25         taxable income as modified by subparagraphs (A), (B),
26         (C), (D), (E), (F) and (G) which are exempt from
27         taxation by this State either by reason of its statutes
28         or Constitution or by reason of the Constitution,
29         treaties or statutes of the United States; provided
30         that, in the case of any statute of this State that
31         exempts income derived from bonds or other obligations
32         from the tax imposed under this Act, the amount
33         exempted shall be the interest net of bond premium
34         amortization;
35             (L) With the exception of any amounts subtracted
36         under subparagraph (K), an amount equal to the sum of

 

 

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1         all amounts disallowed as deductions by (i) Sections
2         171(a) (2) and 265(a)(2) of the Internal Revenue Code,
3         as now or hereafter amended, and all amounts of
4         expenses allocable to interest and disallowed as
5         deductions by Section 265(1) of the Internal Revenue
6         Code of 1954, as now or hereafter amended; and (ii) for
7         taxable years ending on or after August 13, 1999,
8         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
9         the Internal Revenue Code; the provisions of this
10         subparagraph are exempt from the provisions of Section
11         250;
12             (M) An amount equal to those dividends included in
13         such total which were paid by a corporation which
14         conducts business operations in an Enterprise Zone or
15         zones created under the Illinois Enterprise Zone Act
16         and conducts substantially all of its operations in an
17         Enterprise Zone or Zones;
18             (N) An amount equal to any contribution made to a
19         job training project established pursuant to the Tax
20         Increment Allocation Redevelopment Act;
21             (O) An amount equal to those dividends included in
22         such total that were paid by a corporation that
23         conducts business operations in a federally designated
24         Foreign Trade Zone or Sub-Zone and that is designated a
25         High Impact Business located in Illinois; provided
26         that dividends eligible for the deduction provided in
27         subparagraph (M) of paragraph (2) of this subsection
28         shall not be eligible for the deduction provided under
29         this subparagraph (O);
30             (P) An amount equal to the amount of the deduction
31         used to compute the federal income tax credit for
32         restoration of substantial amounts held under claim of
33         right for the taxable year pursuant to Section 1341 of
34         the Internal Revenue Code of 1986;
35             (Q) For taxable year 1999 and thereafter, an amount
36         equal to the amount of any (i) distributions, to the

 

 

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1         extent includible in gross income for federal income
2         tax purposes, made to the taxpayer because of his or
3         her status as a victim of persecution for racial or
4         religious reasons by Nazi Germany or any other Axis
5         regime or as an heir of the victim and (ii) items of
6         income, to the extent includible in gross income for
7         federal income tax purposes, attributable to, derived
8         from or in any way related to assets stolen from,
9         hidden from, or otherwise lost to a victim of
10         persecution for racial or religious reasons by Nazi
11         Germany or any other Axis regime immediately prior to,
12         during, and immediately after World War II, including,
13         but not limited to, interest on the proceeds receivable
14         as insurance under policies issued to a victim of
15         persecution for racial or religious reasons by Nazi
16         Germany or any other Axis regime by European insurance
17         companies immediately prior to and during World War II;
18         provided, however, this subtraction from federal
19         adjusted gross income does not apply to assets acquired
20         with such assets or with the proceeds from the sale of
21         such assets; provided, further, this paragraph shall
22         only apply to a taxpayer who was the first recipient of
23         such assets after their recovery and who is a victim of
24         persecution for racial or religious reasons by Nazi
25         Germany or any other Axis regime or as an heir of the
26         victim. The amount of and the eligibility for any
27         public assistance, benefit, or similar entitlement is
28         not affected by the inclusion of items (i) and (ii) of
29         this paragraph in gross income for federal income tax
30         purposes. This paragraph is exempt from the provisions
31         of Section 250;
32             (R) For taxable years 2001 and thereafter, for the
33         taxable year in which the bonus depreciation deduction
34         (30% of the adjusted basis of the qualified property)
35         is taken on the taxpayer's federal income tax return
36         under subsection (k) of Section 168 of the Internal

 

 

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1         Revenue Code and for each applicable taxable year
2         thereafter, an amount equal to "x", where:
3                 (1) "y" equals the amount of the depreciation
4             deduction taken for the taxable year on the
5             taxpayer's federal income tax return on property
6             for which the bonus depreciation deduction (30% of
7             the adjusted basis of the qualified property) 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; and
11                 (2) "x" equals "y" multiplied by 30 and then
12             divided by 70 (or "y" multiplied by 0.429).
13             The aggregate amount deducted under this
14         subparagraph in all taxable years for any one piece of
15         property may not exceed the amount of the bonus
16         depreciation deduction (30% of the adjusted basis of
17         the qualified property) taken on that property on the
18         taxpayer's federal income tax return under subsection
19         (k) of Section 168 of the Internal Revenue Code;
20             (S) If the taxpayer reports a capital gain or loss
21         on the taxpayer's federal income tax return for the
22         taxable year based on a sale or transfer of property
23         for which the taxpayer was required in any taxable year
24         to make an addition modification under subparagraph
25         (G-10), then an amount equal to that addition
26         modification.
27             The taxpayer is allowed to take the deduction under
28         this subparagraph only once with respect to any one
29         piece of property;
30             (T) The amount of (i) any interest income (net of
31         the deductions allocable thereto) taken into account
32         for the taxable year with respect to a transaction with
33         a taxpayer that is required to make an addition
34         modification with respect to such transaction under
35         Section 203(a)(2)(D-17), 203(b)(2)(E-12),
36         203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed

 

 

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1         the amount of such addition modification and (ii) any
2         income from intangible property (net of the deductions
3         allocable thereto) taken into account for the taxable
4         year with respect to a transaction with a taxpayer that
5         is required to make an addition modification with
6         respect to such transaction under Section
7         203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or
8         203(d)(2)(D-8), but not to exceed the amount of such
9         addition modification;
10             (U) An amount equal to the interest income taken
11         into account for the taxable year (net of the
12         deductions allocable thereto) with respect to
13         transactions with a foreign person who would be a
14         member of the taxpayer's unitary business group but for
15         the fact the foreign person's business activity
16         outside the United States is 80% or more of that
17         person's total business activity, but not to exceed the
18         addition modification required to be made for the same
19         taxable year under Section 203(c)(2)(G-12) for
20         interest paid, accrued, or incurred, directly or
21         indirectly, to the same foreign person; and
22             (V) An amount equal to the income from intangible
23         property taken into account for the taxable year (net
24         of the deductions allocable thereto) with respect to
25         transactions with a foreign person who would be a
26         member of the taxpayer's unitary business group but for
27         the fact that the foreign person's business activity
28         outside the United States is 80% or more of that
29         person's total business activity, but not to exceed the
30         addition modification required to be made for the same
31         taxable year under Section 203(c)(2)(G-13) for
32         intangible expenses and costs paid, accrued, or
33         incurred, directly or indirectly, to the same foreign
34         person.
35         (3) Limitation. The amount of any modification
36     otherwise required under this subsection shall, under

 

 

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1     regulations prescribed by the Department, be adjusted by
2     any amounts included therein which were properly paid,
3     credited, or required to be distributed, or permanently set
4     aside for charitable purposes pursuant to Internal Revenue
5     Code Section 642(c) during the taxable year.
 
6     (d) Partnerships.
7         (1) In general. In the case of a partnership, base
8     income means an amount equal to the taxpayer's taxable
9     income for the taxable year as modified by paragraph (2).
10         (2) Modifications. The taxable income referred to in
11     paragraph (1) shall be modified by adding thereto the sum
12     of the following amounts:
13             (A) An amount equal to all amounts paid or accrued
14         to the taxpayer as interest or dividends during the
15         taxable year to the extent excluded from gross income
16         in the computation of taxable income;
17             (B) An amount equal to the amount of tax imposed by
18         this Act to the extent deducted from gross income for
19         the taxable year;
20             (C) The amount of deductions allowed to the
21         partnership pursuant to Section 707 (c) of the Internal
22         Revenue Code in calculating its taxable income;
23             (D) An amount equal to the amount of the capital
24         gain deduction allowable under the Internal Revenue
25         Code, to the extent deducted from gross income in the
26         computation of taxable income;
27             (D-5) For taxable years 2001 and thereafter, an
28         amount equal to the bonus depreciation deduction (30%
29         of the adjusted basis of the qualified property) taken
30         on the taxpayer's federal income tax return for the
31         taxable year under subsection (k) of Section 168 of the
32         Internal Revenue Code;
33             (D-6) If the taxpayer reports a capital gain or
34         loss on the taxpayer's federal income tax return for
35         the taxable year based on a sale or transfer of

 

 

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1         property for which the taxpayer was required in any
2         taxable year to make an addition modification under
3         subparagraph (D-5), then an amount equal to the
4         aggregate amount of the deductions taken in all taxable
5         years under subparagraph (O) with respect to that
6         property.
7             The taxpayer is required to make the addition
8         modification under this subparagraph only once with
9         respect to any one piece of property;
10             (D-7) For taxable years ending on or after December
11         31, 2004, an amount equal to the amount otherwise
12         allowed as a deduction in computing base income for
13         interest paid, accrued, or incurred, directly or
14         indirectly, to a foreign person who would be a member
15         of the same unitary business group but for the fact the
16         foreign person's business activity outside the United
17         States is 80% or more of the foreign person's total
18         business activity. The addition modification required
19         by this subparagraph shall be reduced to the extent
20         that dividends were included in base income of the
21         unitary group for the same taxable year and received by
22         the taxpayer or by a member of the taxpayer's unitary
23         business group (including amounts included in gross
24         income pursuant to Sections 951 through 964 of the
25         Internal Revenue Code and amounts included in gross
26         income under Section 78 of the Internal Revenue Code)
27         with respect to the stock of the same person to whom
28         the interest was paid, accrued, or incurred.
29             This paragraph shall not apply to the following:
30                 (i) an item of interest paid, accrued, or
31             incurred, directly or indirectly, to a foreign
32             person who is subject in a foreign country or
33             state, other than a state which requires mandatory
34             unitary reporting, to a tax on or measured by net
35             income with respect to such interest; or
36                 (ii) an item of interest paid, accrued, or

 

 

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1             incurred, directly or indirectly, to a foreign
2             person if the taxpayer can establish, based on a
3             preponderance of the evidence, both of the
4             following:
5                     (a) the foreign person, during the same
6                 taxable year, paid, accrued, or incurred, the
7                 interest to a person that is not a related
8                 member, and
9                     (b) the transaction giving rise to the
10                 interest expense between the taxpayer and the
11                 foreign person did not have as a principal
12                 purpose the avoidance of Illinois income tax,
13                 and is paid pursuant to a contract or agreement
14                 that reflects an arm's-length interest rate
15                 and terms; or
16                 (iii) the taxpayer can establish, based on
17             clear and convincing evidence, that the interest
18             paid, accrued, or incurred relates to a contract or
19             agreement entered into at arm's-length rates and
20             terms and the principal purpose for the payment is
21             not federal or Illinois tax avoidance; or
22                 (iv) an item of interest paid, accrued, or
23             incurred, directly or indirectly, to a foreign
24             person if the taxpayer establishes by clear and
25             convincing evidence that the adjustments are
26             unreasonable; or if the taxpayer and the Director
27             agree in writing to the application or use of an
28             alternative method of apportionment under Section
29             304(f).
30                 Nothing in this subsection shall preclude the
31             Director from making any other adjustment
32             otherwise allowed under Section 404 of this Act for
33             any tax year beginning after the effective date of
34             this amendment provided such adjustment is made
35             pursuant to regulation adopted by the Department
36             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; and
3             (D-8) For taxable years ending on or after December
4         31, 2004, an amount equal to the amount of intangible
5         expenses and costs otherwise allowed as a deduction in
6         computing base income, and that were paid, accrued, or
7         incurred, directly or indirectly, to a foreign person
8         who would be a member of the same unitary business
9         group but for the fact that the foreign person's
10         business activity outside the United States is 80% or
11         more of that person's total business activity. The
12         addition modification required by this subparagraph
13         shall be reduced to the extent that dividends were
14         included in base income of the unitary group for the
15         same taxable year and received by the taxpayer or by a
16         member of the taxpayer's unitary business group
17         (including amounts included in gross income pursuant
18         to Sections 951 through 964 of the Internal Revenue
19         Code and amounts included in gross income under Section
20         78 of the Internal Revenue Code) with respect to the
21         stock of the same person to whom the intangible
22         expenses and costs were directly or indirectly paid,
23         incurred or accrued. The preceding sentence shall not
24         apply to the extent that the same dividends caused a
25         reduction to the addition modification required under
26         Section 203(d)(2)(D-7) of this Act. As used in this
27         subparagraph, the term "intangible expenses and costs"
28         includes (1) expenses, losses, and costs for, or
29         related to, the direct or indirect acquisition, use,
30         maintenance or management, ownership, sale, exchange,
31         or any other disposition of intangible property; (2)
32         losses incurred, directly or indirectly, from
33         factoring transactions or discounting transactions;
34         (3) royalty, patent, technical, and copyright fees;
35         (4) licensing fees; and (5) other similar expenses and
36         costs. For purposes of this subparagraph, "intangible

 

 

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

 

 

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1             304(f);
2                 Nothing in this subsection shall preclude the
3             Director from making any other adjustment
4             otherwise allowed under Section 404 of this Act for
5             any tax year beginning after the effective date of
6             this amendment provided such adjustment is made
7             pursuant to regulation adopted by the Department
8             and such regulations provide methods and standards
9             by which the Department will utilize its authority
10             under Section 404 of this Act;
11     and by deducting from the total so obtained the following
12     amounts:
13             (E) The valuation limitation amount;
14             (F) An amount equal to the amount of any tax
15         imposed by this Act which was refunded to the taxpayer
16         and included in such total for the taxable year;
17             (G) An amount equal to all amounts included in
18         taxable income as modified by subparagraphs (A), (B),
19         (C) and (D) which are exempt from taxation by this
20         State either by reason of its statutes or Constitution
21         or by reason of the Constitution, treaties or statutes
22         of the United States; provided that, in the case of any
23         statute of this State that exempts income derived from
24         bonds or other obligations from the tax imposed under
25         this Act, the amount exempted shall be the interest net
26         of bond premium amortization;
27             (H) Any income of the partnership which
28         constitutes personal service income as defined in
29         Section 1348 (b) (1) of the Internal Revenue Code (as
30         in effect December 31, 1981) or a reasonable allowance
31         for compensation paid or accrued for services rendered
32         by partners to the partnership, whichever is greater;
33             (I) An amount equal to all amounts of income
34         distributable to an entity subject to the Personal
35         Property Tax Replacement Income Tax imposed by
36         subsections (c) and (d) of Section 201 of this Act

 

 

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1         including amounts distributable to organizations
2         exempt from federal income tax by reason of Section
3         501(a) of the Internal Revenue Code;
4             (J) With the exception of any amounts subtracted
5         under subparagraph (G), an amount equal to the sum of
6         all amounts disallowed as deductions by (i) Sections
7         171(a) (2), and 265(2) of the Internal Revenue Code of
8         1954, as now or hereafter amended, and all amounts of
9         expenses allocable to interest and disallowed as
10         deductions by Section 265(1) of the Internal Revenue
11         Code, as now or hereafter amended; and (ii) for taxable
12         years ending on or after August 13, 1999, Sections
13         171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the
14         Internal Revenue Code; the provisions of this
15         subparagraph are exempt from the provisions of Section
16         250;
17             (K) 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,
21         enacted by the 82nd General Assembly, and conducts
22         substantially all of its operations in an Enterprise
23         Zone or Zones;
24             (L) An amount equal to any contribution made to a
25         job training project established pursuant to the Real
26         Property Tax Increment Allocation Redevelopment Act;
27             (M) An amount equal to those dividends included in
28         such total that were paid by a corporation that
29         conducts business operations in a federally designated
30         Foreign Trade Zone or Sub-Zone and that is designated a
31         High Impact Business located in Illinois; provided
32         that dividends eligible for the deduction provided in
33         subparagraph (K) of paragraph (2) of this subsection
34         shall not be eligible for the deduction provided under
35         this subparagraph (M);
36             (N) An amount equal to the amount of the deduction

 

 

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1         used to compute the federal income tax credit for
2         restoration of substantial amounts held under claim of
3         right for the taxable year pursuant to Section 1341 of
4         the Internal Revenue Code of 1986;
5             (O) For taxable years 2001 and thereafter, for the
6         taxable year in which the bonus depreciation deduction
7         (30% of the adjusted basis of the qualified property)
8         is taken on the taxpayer's federal income tax return
9         under subsection (k) of Section 168 of the Internal
10         Revenue Code and for each applicable taxable year
11         thereafter, an amount equal to "x", where:
12                 (1) "y" equals the amount of the depreciation
13             deduction taken for the taxable year on the
14             taxpayer's federal income tax return on property
15             for which the bonus depreciation deduction (30% of
16             the adjusted basis of the qualified property) was
17             taken in any year under subsection (k) of Section
18             168 of the Internal Revenue Code, but not including
19             the bonus depreciation deduction; and
20                 (2) "x" equals "y" multiplied by 30 and then
21             divided by 70 (or "y" multiplied by 0.429).
22             The aggregate amount deducted under this
23         subparagraph in all taxable years for any one piece of
24         property may not exceed the amount of the bonus
25         depreciation deduction (30% of the adjusted basis of
26         the qualified property) taken on that property on the
27         taxpayer's federal income tax return under subsection
28         (k) of Section 168 of the Internal Revenue Code;
29             (P) If the taxpayer reports a capital gain or loss
30         on the taxpayer's federal income tax return for the
31         taxable year based on a sale or transfer of property
32         for which the taxpayer was required in any taxable year
33         to make an addition modification under subparagraph
34         (D-5), then an amount equal to that addition
35         modification.
36             The taxpayer is allowed to take the deduction under

 

 

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1         this subparagraph only once with respect to any one
2         piece of property;
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;
19             (R) An amount equal to the interest income taken
20         into account for the taxable year (net of the
21         deductions allocable thereto) with respect to
22         transactions with a foreign person who would be a
23         member of the taxpayer's unitary business group but for
24         the fact that the foreign person's business activity
25         outside the United States is 80% or more of that
26         person's total business activity, but not to exceed the
27         addition modification required to be made for the same
28         taxable year under Section 203(d)(2)(D-7) for interest
29         paid, accrued, or incurred, directly or indirectly, to
30         the same foreign person; and
31             (S) An amount equal to the income from intangible
32         property taken into account for the taxable year (net
33         of the deductions allocable thereto) with respect to
34         transactions with a foreign person who would be a
35         member of the taxpayer's unitary business group but for
36         the fact that the foreign person's business activity

 

 

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1         outside the United States is 80% or more of that
2         person's total business activity, 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 foreign
7         person.
 
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
26     defined in subsections (c) and (d) of Section 172 of the
27     Internal Revenue Code, provided that when taxable income of
28     a corporation (other than a Subchapter S corporation),
29     trust, or estate is less than zero and addition
30     modifications, other than those provided by subparagraph
31     (E) of paragraph (2) of subsection (b) for corporations or
32     subparagraph (E) of paragraph (2) of subsection (c) for
33     trusts and estates, exceed subtraction modifications, an
34     addition modification must be made under those
35     subparagraphs for any other taxable year to which the

 

 

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1     taxable income less than zero (net operating loss) is
2     applied under Section 172 of the Internal Revenue Code or
3     under subparagraph (E) of paragraph (2) of this subsection
4     (e) applied in conjunction with Section 172 of the Internal
5     Revenue Code.
6         (2) Special rule. For purposes of paragraph (1) of this
7     subsection, the taxable income properly reportable for
8     federal income tax purposes shall mean:
9             (A) Certain life insurance companies. In the case
10         of a life insurance company subject to the tax imposed
11         by Section 801 of the Internal Revenue Code, life
12         insurance company taxable income, plus the amount of
13         distribution from pre-1984 policyholder surplus
14         accounts as calculated under Section 815a of the
15         Internal Revenue Code;
16             (B) Certain other insurance companies. In the case
17         of mutual insurance companies subject to the tax
18         imposed by Section 831 of the Internal Revenue Code,
19         insurance company taxable income;
20             (C) Regulated investment companies. In the case of
21         a regulated investment company subject to the tax
22         imposed by Section 852 of the Internal Revenue Code,
23         investment company taxable income;
24             (D) Real estate investment trusts. In the case of a
25         real estate investment trust subject to the tax imposed
26         by Section 857 of the Internal Revenue Code, real
27         estate investment trust taxable income;
28             (E) Consolidated corporations. In the case of a
29         corporation which is a member of an affiliated group of
30         corporations filing a consolidated income tax return
31         for the taxable year for federal income tax purposes,
32         taxable income determined as if such corporation had
33         filed a separate return for federal income tax purposes
34         for the taxable year and each preceding taxable year
35         for which it was a member of an affiliated group. For
36         purposes of this subparagraph, the taxpayer's separate

 

 

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1         taxable income shall be determined as if the election
2         provided by Section 243(b) (2) of the Internal Revenue
3         Code had been in effect for all such years;
4             (F) Cooperatives. In the case of a cooperative
5         corporation or association, the taxable income of such
6         organization determined in accordance with the
7         provisions of Section 1381 through 1388 of the Internal
8         Revenue Code;
9             (G) Subchapter S corporations. In the case of: (i)
10         a Subchapter S corporation for which there is in effect
11         an election for the taxable year under Section 1362 of
12         the Internal Revenue Code, the taxable income of such
13         corporation determined in accordance with Section
14         1363(b) of the Internal Revenue Code, except that
15         taxable income shall take into account those items
16         which are required by Section 1363(b)(1) of the
17         Internal Revenue Code to be separately stated; and (ii)
18         a Subchapter S corporation for which there is in effect
19         a federal election to opt out of the provisions of the
20         Subchapter S Revision Act of 1982 and have applied
21         instead the prior federal Subchapter S rules as in
22         effect on July 1, 1982, the taxable income of such
23         corporation determined in accordance with the federal
24         Subchapter S rules as in effect on July 1, 1982; and
25             (H) Partnerships. In the case of a partnership,
26         taxable income determined in accordance with Section
27         703 of the Internal Revenue Code, except that taxable
28         income shall take into account those items which are
29         required by Section 703(a)(1) to be separately stated
30         but which would be taken into account by an individual
31         in calculating his taxable income.
32         (3) Recapture of business expenses on disposition of
33     asset or business. Notwithstanding any other law to the
34     contrary, if in prior years income from an asset or
35     business has been classified as business income and in a
36     later year is demonstrated to be non-business income, then

 

 

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1     all expenses, without limitation, deducted in such later
2     year and in the 2 immediately preceding taxable years
3     related to that asset or business that generated the
4     non-business income shall be added back and recaptured as
5     business income in the year of the disposition of the asset
6     or business. Such amount shall be apportioned to Illinois
7     using the greater of the apportionment fraction computed
8     for the business under Section 304 of this Act for the
9     taxable year or the average of the apportionment fractions
10     computed for the business under Section 304 of this Act for
11     the taxable year and for the 2 immediately preceding
12     taxable years.
13     (f) Valuation limitation amount.
14         (1) In general. The valuation limitation amount
15     referred to in subsections (a) (2) (G), (c) (2) (I) and
16     (d)(2) (E) is an amount equal to:
17             (A) The sum of the pre-August 1, 1969 appreciation
18         amounts (to the extent consisting of gain reportable
19         under the provisions of Section 1245 or 1250 of the
20         Internal Revenue Code) for all property in respect of
21         which such gain was reported for the taxable year; plus
22             (B) The lesser of (i) the sum of the pre-August 1,
23         1969 appreciation amounts (to the extent consisting of
24         capital gain) for all property in respect of which such
25         gain was reported for federal income tax purposes for
26         the taxable year, or (ii) the net capital gain for the
27         taxable year, reduced in either case by any amount of
28         such gain included in the amount determined under
29         subsection (a) (2) (F) or (c) (2) (H).
30         (2) Pre-August 1, 1969 appreciation amount.
31             (A) If the fair market value of property referred
32         to in paragraph (1) was readily ascertainable on August
33         1, 1969, the pre-August 1, 1969 appreciation amount for
34         such property is the lesser of (i) the excess of such
35         fair market value over the taxpayer's basis (for
36         determining gain) for such property on that date

 

 

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1         (determined under the Internal Revenue Code as in
2         effect on that date), or (ii) the total gain realized
3         and reportable for federal income tax purposes in
4         respect of the sale, exchange or other disposition of
5         such property.
6             (B) If the fair market value of property referred
7         to in paragraph (1) was not readily ascertainable on
8         August 1, 1969, the pre-August 1, 1969 appreciation
9         amount for such property is that amount which bears the
10         same ratio to the total gain reported in respect of the
11         property for federal income tax purposes for the
12         taxable year, as the number of full calendar months in
13         that part of the taxpayer's holding period for the
14         property ending July 31, 1969 bears to the number of
15         full calendar months in the taxpayer's entire holding
16         period for the property.
17             (C) The Department shall prescribe such
18         regulations as may be necessary to carry out the
19         purposes of this paragraph.
 
20     (g) Double deductions. Unless specifically provided
21 otherwise, nothing in this Section shall permit the same item
22 to be deducted more than once.
 
23     (h) Legislative intention. Except as expressly provided by
24 this Section there shall be no modifications or limitations on
25 the amounts of income, gain, loss or deduction taken into
26 account in determining gross income, adjusted gross income or
27 taxable income for federal income tax purposes for the taxable
28 year, or in the amount of such items entering into the
29 computation of base income and net income under this Act for
30 such taxable year, whether in respect of property values as of
31 August 1, 1969 or otherwise.
32 (Source: P.A. 92-16, eff. 6-28-01; 92-244, eff. 8-3-01; 92-439,
33 eff. 8-17-01; 92-603, eff. 6-28-02; 92-626, eff. 7-11-02;
34 92-651, eff. 7-11-02; 92-846, eff. 8-23-02; 93-812, eff.

 

 

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1 7-26-04; 93-840, eff. 7-30-04; revised 10-12-04.)
 
2     Section 99. Effective date. This Act takes effect upon
3 becoming law.