Illinois General Assembly - Full Text of SB0136
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Full Text of SB0136  95th General Assembly

SB0136 95TH GENERAL ASSEMBLY


 


 
95TH GENERAL ASSEMBLY
State of Illinois
2007 and 2008
SB0136

 

Introduced 1/31/2007, by Sen. Larry K. Bomke

 

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

    Amends the Illinois Income Tax Act. Allows a deduction for taxpayers who are individuals, trusts, or estates in an amount equal to the amount spent during the taxable year for care at a long-term care facility, as defined under the Nursing Home Care Act. 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

 

 

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1         this Act to the extent deducted from gross income in
2         the computation of adjusted gross income for the
3         taxable year;
4             (C) An amount equal to the amount received during
5         the taxable year as a recovery or refund of real
6         property taxes paid with respect to the taxpayer's
7         principal residence under the Revenue Act of 1939 and
8         for which a deduction was previously taken under
9         subparagraph (L) of this paragraph (2) prior to July 1,
10         1991, the retrospective application date of Article 4
11         of Public Act 87-17. In the case of multi-unit or
12         multi-use structures and farm dwellings, the taxes on
13         the taxpayer's principal residence shall be that
14         portion of the total taxes for the entire property
15         which is attributable to such principal residence;
16             (D) An amount equal to the amount of the capital
17         gain deduction allowable under the Internal Revenue
18         Code, to the extent deducted from gross income in the
19         computation of adjusted gross income;
20             (D-5) An amount, to the extent not included in
21         adjusted gross income, equal to the amount of money
22         withdrawn by the taxpayer in the taxable year from a
23         medical care savings account and the interest earned on
24         the account in the taxable year of a withdrawal
25         pursuant to subsection (b) of Section 20 of the Medical
26         Care Savings Account Act or subsection (b) of Section

 

 

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1         20 of the Medical Care Savings Account Act of 2000;
2             (D-10) For taxable years ending after December 31,
3         1997, an amount equal to any eligible remediation costs
4         that the individual deducted in computing adjusted
5         gross income and for which the individual claims a
6         credit under subsection (l) of Section 201;
7             (D-15) For taxable years 2001 and thereafter, an
8         amount equal to the bonus depreciation deduction taken
9         on the taxpayer's federal income tax return for the
10         taxable year under subsection (k) of Section 168 of the
11         Internal Revenue Code;
12             (D-16) If the taxpayer sells, transfers, abandons,
13         or otherwise disposes of property for which the
14         taxpayer was required in any taxable year to make an
15         addition modification under subparagraph (D-15), then
16         an amount equal to the aggregate amount of the
17         deductions taken in all taxable years under
18         subparagraph (Z) with respect to that property.
19             If the taxpayer continues to own property through
20         the last day of the last tax year for which the
21         taxpayer may claim a depreciation deduction for
22         federal income tax purposes and for which the taxpayer
23         was allowed in any taxable year to make a subtraction
24         modification under subparagraph (Z), then an amount
25         equal to that subtraction modification.
26             The taxpayer is required to make the addition

 

 

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

 

 

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

 

 

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1             person if the taxpayer establishes by clear and
2             convincing evidence that the adjustments are
3             unreasonable; or if the taxpayer and the Director
4             agree in writing to the application or use of an
5             alternative method of apportionment under Section
6             304(f).
7                 Nothing in this subsection shall preclude the
8             Director from making any other adjustment
9             otherwise allowed under Section 404 of this Act for
10             any tax year beginning after the effective date of
11             this amendment provided such adjustment is made
12             pursuant to regulation adopted by the Department
13             and such regulations provide methods and standards
14             by which the Department will utilize its authority
15             under Section 404 of this Act;
16             (D-18) For taxable years ending on or after
17         December 31, 2004, an amount equal to the amount of
18         intangible expenses and costs otherwise allowed as a
19         deduction in computing base income, and that were paid,
20         accrued, or incurred, directly or indirectly, to a
21         foreign person who would be a member of the same
22         unitary business group but for the fact that the
23         foreign person's business activity outside the United
24         States is 80% or more of that person's total business
25         activity. The addition modification required by this
26         subparagraph shall be reduced to the extent that

 

 

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

 

 

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

 

 

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1             paid, accrued, or incurred, directly or
2             indirectly, from a transaction with a foreign
3             person if the taxpayer establishes by clear and
4             convincing evidence, that the adjustments are
5             unreasonable; or if the taxpayer and the Director
6             agree in writing to the application or use of an
7             alternative method of apportionment under Section
8             304(f);
9                 Nothing in this subsection shall preclude the
10             Director from making any other adjustment
11             otherwise allowed under Section 404 of this Act for
12             any tax year beginning after the effective date of
13             this amendment provided such adjustment is made
14             pursuant to regulation adopted by the Department
15             and such regulations provide methods and standards
16             by which the Department will utilize its authority
17             under Section 404 of this Act;
18             (D-20) For taxable years beginning on or after
19         January 1, 2002, in the case of a distribution from a
20         qualified tuition program under Section 529 of the
21         Internal Revenue Code, other than (i) a distribution
22         from a College Savings Pool created under Section 16.5
23         of the State Treasurer Act or (ii) a distribution from
24         the Illinois Prepaid Tuition Trust Fund, an amount
25         equal to the amount excluded from gross income under
26         Section 529(c)(3)(B);

 

 

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1     and by deducting from the total so obtained the sum of the
2     following amounts:
3             (E) For taxable years ending before December 31,
4         2001, any amount included in such total in respect of
5         any compensation (including but not limited to any
6         compensation paid or accrued to a serviceman while a
7         prisoner of war or missing in action) paid to a
8         resident by reason of being on active duty in the Armed
9         Forces of the United States and in respect of any
10         compensation paid or accrued to a resident who as a
11         governmental employee was a prisoner of war or missing
12         in action, and in respect of any compensation paid to a
13         resident in 1971 or thereafter for annual training
14         performed pursuant to Sections 502 and 503, Title 32,
15         United States Code as a member of the Illinois National
16         Guard. For taxable years ending on or after December
17         31, 2001, any amount included in such total in respect
18         of any compensation (including but not limited to any
19         compensation paid or accrued to a serviceman while a
20         prisoner of war or missing in action) paid to a
21         resident by reason of being a member of any component
22         of the Armed Forces of the United States and in respect
23         of any compensation paid or accrued to a resident who
24         as a governmental employee was a prisoner of war or
25         missing in action, and in respect of any compensation
26         paid to a resident in 2001 or thereafter by reason of

 

 

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

 

 

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1         zones created under the Illinois Enterprise Zone Act or
2         a River Edge Redevelopment Zone or zones created under
3         the River Edge Redevelopment Zone Act, and conducts
4         substantially all of its operations in an Enterprise
5         Zone or zones or a River Edge Redevelopment Zone or
6         zones. This subparagraph (J) is exempt from the
7         provisions of Section 250;
8             (K) An amount equal to those dividends included in
9         such total that were paid by a corporation that
10         conducts business operations in a federally designated
11         Foreign Trade Zone or Sub-Zone and that is designated a
12         High Impact Business located in Illinois; provided
13         that dividends eligible for the deduction provided in
14         subparagraph (J) of paragraph (2) of this subsection
15         shall not be eligible for the deduction provided under
16         this subparagraph (K);
17             (L) For taxable years ending after December 31,
18         1983, an amount equal to all social security benefits
19         and railroad retirement benefits included in such
20         total pursuant to Sections 72(r) and 86 of the Internal
21         Revenue Code;
22             (M) With the exception of any amounts subtracted
23         under subparagraph (N), an amount equal to the sum of
24         all amounts disallowed as deductions by (i) Sections
25         171(a) (2), and 265(2) of the Internal Revenue Code of
26         1954, as now or hereafter amended, and all amounts of

 

 

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1         expenses allocable to interest and disallowed as
2         deductions by Section 265(1) of the Internal Revenue
3         Code of 1954, as now or hereafter amended; and (ii) for
4         taxable years ending on or after August 13, 1999,
5         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
6         the Internal Revenue Code; the provisions of this
7         subparagraph are exempt from the provisions of Section
8         250;
9             (N) An amount equal to all amounts included in such
10         total which are exempt from taxation by this State
11         either by reason of its statutes or Constitution or by
12         reason of the Constitution, treaties or statutes of the
13         United States; provided that, in the case of any
14         statute of this State that exempts income derived from
15         bonds or other obligations from the tax imposed under
16         this Act, the amount exempted shall be the interest net
17         of bond premium amortization;
18             (O) An amount equal to any contribution made to a
19         job training project established pursuant to the Tax
20         Increment Allocation Redevelopment Act;
21             (P) An amount equal to the amount of the deduction
22         used to compute the federal income tax credit for
23         restoration of substantial amounts held under claim of
24         right for the taxable year pursuant to Section 1341 of
25         the Internal Revenue Code of 1986;
26             (Q) An amount equal to any amounts included in such

 

 

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1         total, received by the taxpayer as an acceleration in
2         the payment of life, endowment or annuity benefits in
3         advance of the time they would otherwise be payable as
4         an indemnity for a terminal illness;
5             (R) An amount equal to the amount of any federal or
6         State bonus paid to veterans of the Persian Gulf War;
7             (S) An amount, to the extent included in adjusted
8         gross income, equal to the amount of a contribution
9         made in the taxable year on behalf of the taxpayer to a
10         medical care savings account established under the
11         Medical Care Savings Account Act or the Medical Care
12         Savings Account Act of 2000 to the extent the
13         contribution is accepted by the account administrator
14         as provided in that Act;
15             (T) An amount, to the extent included in adjusted
16         gross income, equal to the amount of interest earned in
17         the taxable year on a medical care savings account
18         established under the Medical Care Savings Account Act
19         or the Medical Care Savings Account Act of 2000 on
20         behalf of the taxpayer, other than interest added
21         pursuant to item (D-5) of this paragraph (2);
22             (U) For one taxable year beginning on or after
23         January 1, 1994, an amount equal to the total amount of
24         tax imposed and paid under subsections (a) and (b) of
25         Section 201 of this Act on grant amounts received by
26         the taxpayer under the Nursing Home Grant Assistance

 

 

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1         Act during the taxpayer's taxable years 1992 and 1993;
2             (V) Beginning with tax years ending on or after
3         December 31, 1995 and ending with tax years ending on
4         or before December 31, 2004, an amount equal to the
5         amount paid by a taxpayer who is a self-employed
6         taxpayer, a partner of a partnership, or a shareholder
7         in a Subchapter S corporation for health insurance or
8         long-term care insurance for that taxpayer or that
9         taxpayer's spouse or dependents, to the extent that the
10         amount paid for that health insurance or long-term care
11         insurance may be deducted under Section 213 of the
12         Internal Revenue Code of 1986, has not been deducted on
13         the federal income tax return of the taxpayer, and does
14         not exceed the taxable income attributable to that
15         taxpayer's income, self-employment income, or
16         Subchapter S corporation income; except that no
17         deduction shall be allowed under this item (V) if the
18         taxpayer is eligible to participate in any health
19         insurance or long-term care insurance plan of an
20         employer of the taxpayer or the taxpayer's spouse. The
21         amount of the health insurance and long-term care
22         insurance subtracted under this item (V) shall be
23         determined by multiplying total health insurance and
24         long-term care insurance premiums paid by the taxpayer
25         times a number that represents the fractional
26         percentage of eligible medical expenses under Section

 

 

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1         213 of the Internal Revenue Code of 1986 not actually
2         deducted on the taxpayer's federal income tax return;
3             (W) For taxable years beginning on or after January
4         1, 1998, all amounts included in the taxpayer's federal
5         gross income in the taxable year from amounts converted
6         from a regular IRA to a Roth IRA. This paragraph is
7         exempt from the provisions of Section 250;
8             (X) For taxable year 1999 and thereafter, an amount
9         equal to the amount of any (i) distributions, to the
10         extent includible in gross income for federal income
11         tax purposes, made to the taxpayer because of his or
12         her status as a victim of persecution for racial or
13         religious reasons by Nazi Germany or any other Axis
14         regime or as an heir of the victim and (ii) items of
15         income, to the extent includible in gross income for
16         federal income tax purposes, attributable to, derived
17         from or in any way related to assets stolen from,
18         hidden from, or otherwise lost to a victim of
19         persecution for racial or religious reasons by Nazi
20         Germany or any other Axis regime immediately prior to,
21         during, and immediately after World War II, including,
22         but not limited to, interest on the proceeds receivable
23         as insurance under policies issued to a victim of
24         persecution for racial or religious reasons by Nazi
25         Germany or any other Axis regime by European insurance
26         companies immediately prior to and during World War II;

 

 

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1         provided, however, this subtraction from federal
2         adjusted gross income does not apply to assets acquired
3         with such assets or with the proceeds from the sale of
4         such assets; provided, further, this paragraph shall
5         only apply to a taxpayer who was the first recipient of
6         such assets after their recovery and who is a victim of
7         persecution for racial or religious reasons by Nazi
8         Germany or any other Axis regime or as an heir of the
9         victim. The amount of and the eligibility for any
10         public assistance, benefit, or similar entitlement is
11         not affected by the inclusion of items (i) and (ii) of
12         this paragraph in gross income for federal income tax
13         purposes. This paragraph is exempt from the provisions
14         of Section 250;
15             (Y) For taxable years beginning on or after January
16         1, 2002 and ending on or before December 31, 2004,
17         moneys contributed in the taxable year to a College
18         Savings Pool account under Section 16.5 of the State
19         Treasurer Act, except that amounts excluded from gross
20         income under Section 529(c)(3)(C)(i) of the Internal
21         Revenue Code shall not be considered moneys
22         contributed under this subparagraph (Y). For taxable
23         years beginning on or after January 1, 2005, a maximum
24         of $10,000 contributed in the taxable year to (i) a
25         College Savings Pool account under Section 16.5 of the
26         State Treasurer Act or (ii) the Illinois Prepaid

 

 

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1         Tuition Trust Fund, except that amounts excluded from
2         gross income under Section 529(c)(3)(C)(i) of the
3         Internal Revenue Code shall not be considered moneys
4         contributed under this subparagraph (Y). This
5         subparagraph (Y) is exempt from the provisions of
6         Section 250;
7             (Z) For taxable years 2001 and thereafter, for the
8         taxable year in which the bonus depreciation deduction
9         is taken on the taxpayer's federal income tax return
10         under subsection (k) of Section 168 of the Internal
11         Revenue Code and for each applicable taxable year
12         thereafter, an amount equal to "x", where:
13                 (1) "y" equals the amount of the depreciation
14             deduction taken for the taxable year on the
15             taxpayer's federal income tax return on property
16             for which the bonus depreciation deduction 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;
20                 (2) for taxable years ending on or before
21             December 31, 2005, "x" equals "y" multiplied by 30
22             and then divided by 70 (or "y" multiplied by
23             0.429); and
24                 (3) for taxable years ending after December
25             31, 2005:
26                     (i) for property on which a bonus

 

 

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

 

 

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1         modification under subparagraph (D-15), then an amount
2         equal to that addition modification.
3             The taxpayer is allowed to take the deduction under
4         this subparagraph only once with respect to any one
5         piece of property.
6             This subparagraph (AA) is exempt from the
7         provisions of Section 250;
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-12),
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-13), 203(c)(2)(G-13), or
25         203(d)(2)(D-8), but not to exceed the amount of that
26         addition modification;

 

 

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1             (DD) An amount equal to the interest income taken
2         into account for the taxable year (net of the
3         deductions allocable thereto) with respect to
4         transactions with a foreign person who would be a
5         member of the taxpayer's unitary business group but for
6         the fact that the foreign person's business activity
7         outside the United States is 80% or more of that
8         person's total business activity, but not to exceed the
9         addition modification required to be made for the same
10         taxable year under Section 203(a)(2)(D-17) for
11         interest paid, accrued, or incurred, directly or
12         indirectly, to the same foreign person; and
13             (EE) An amount equal to the income from intangible
14         property taken into account for the taxable year (net
15         of the deductions allocable thereto) with respect to
16         transactions with a foreign person who would be a
17         member of the taxpayer's unitary business group but for
18         the fact that the foreign person's business activity
19         outside the United States is 80% or more of that
20         person's total business activity, but not to exceed the
21         addition modification required to be made for the same
22         taxable year under Section 203(a)(2)(D-18) for
23         intangible expenses and costs paid, accrued, or
24         incurred, directly or indirectly, to the same foreign
25         person; and .
26             (FF) For taxable years ending or on after December

 

 

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1         31, 2007 and ending on or before December 30, 2012, an
2         amount equal to the amount spent during the taxable
3         year for care at a long-term care facility, as defined
4         in Section 1-113 of the Nursing Home Care Act.
 
5     (b) Corporations.
6         (1) In general. In the case of a corporation, base
7     income means an amount equal to the taxpayer's taxable
8     income for the taxable year as modified by paragraph (2).
9         (2) Modifications. The taxable income referred to in
10     paragraph (1) shall be modified by adding thereto the sum
11     of the following amounts:
12             (A) An amount equal to all amounts paid or accrued
13         to the taxpayer as interest and all distributions
14         received from regulated investment companies during
15         the taxable year to the extent excluded from gross
16         income 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 in
19         the computation of taxable income for the taxable year;
20             (C) In the case of a regulated investment company,
21         an amount equal to the excess of (i) the net long-term
22         capital gain for the taxable year, over (ii) the amount
23         of the capital gain dividends designated as such in
24         accordance with Section 852(b)(3)(C) of the Internal
25         Revenue Code and any amount designated under Section

 

 

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1         852(b)(3)(D) of the Internal Revenue Code,
2         attributable to the taxable year (this amendatory Act
3         of 1995 (Public Act 89-89) is declarative of existing
4         law and is not a new enactment);
5             (D) The amount of any net operating loss deduction
6         taken in arriving at taxable income, other than a net
7         operating loss carried forward from a taxable year
8         ending prior to December 31, 1986;
9             (E) For taxable years in which a net operating loss
10         carryback or carryforward from a taxable year ending
11         prior to December 31, 1986 is an element of taxable
12         income under paragraph (1) of subsection (e) or
13         subparagraph (E) of paragraph (2) of subsection (e),
14         the amount by which addition modifications other than
15         those provided by this subparagraph (E) exceeded
16         subtraction modifications in such earlier taxable
17         year, with the following limitations applied in the
18         order that they are listed:
19                 (i) the addition modification relating to the
20             net operating loss carried back or forward to the
21             taxable year from any taxable year ending prior to
22             December 31, 1986 shall be reduced by the amount of
23             addition modification under this subparagraph (E)
24             which related to that net operating loss and which
25             was taken into account in calculating the base
26             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 taken
20         on the taxpayer's federal income tax return for the
21         taxable year under subsection (k) of Section 168 of the
22         Internal Revenue Code; and
23             (E-11) If the taxpayer sells, transfers, abandons,
24         or otherwise disposes of property for which the
25         taxpayer was required in any taxable year to make an
26         addition modification under subparagraph (E-10), then

 

 

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

 

 

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

 

 

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

 

 

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1             under Section 404 of this Act;
2             (E-13) For taxable years ending on or after
3         December 31, 2004, an amount equal to the amount of
4         intangible expenses and costs otherwise allowed as a
5         deduction in computing base income, and that were paid,
6         accrued, or incurred, directly or indirectly, to a
7         foreign person who would be a member of the same
8         unitary business group but for the fact that the
9         foreign person's business activity outside the United
10         States is 80% or more of that person's total business
11         activity. The addition modification required by this
12         subparagraph shall be reduced to the extent that
13         dividends were included in base income of the unitary
14         group for the same taxable year and received by the
15         taxpayer or by a member of the taxpayer's unitary
16         business group (including amounts included in gross
17         income pursuant to Sections 951 through 964 of the
18         Internal Revenue Code and amounts included in gross
19         income under Section 78 of the Internal Revenue Code)
20         with respect to the stock of the same person to whom
21         the intangible expenses and costs were directly or
22         indirectly paid, incurred, or accrued. The preceding
23         sentence shall not apply to the extent that the same
24         dividends caused a reduction to the addition
25         modification required under Section 203(b)(2)(E-12) of
26         this Act. As used in this subparagraph, the term

 

 

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

 

 

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1                     (a) the foreign person during the same
2                 taxable year paid, accrued, or incurred, the
3                 intangible expense or cost to a person that is
4                 not a related member, and
5                     (b) the transaction giving rise to the
6                 intangible expense or cost between the
7                 taxpayer and the foreign person did not have as
8                 a principal purpose the avoidance of Illinois
9                 income tax, and is paid pursuant to a contract
10                 or agreement that reflects arm's-length terms;
11                 or
12                 (iii) any item of intangible expense or cost
13             paid, accrued, or incurred, directly or
14             indirectly, from a transaction with a 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

 

 

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1             and such regulations provide methods and standards
2             by which the Department will utilize its authority
3             under Section 404 of this Act;
4     and by deducting from the total so obtained the sum of the
5     following amounts:
6             (F) An amount equal to the amount of any tax
7         imposed by this Act which was refunded to the taxpayer
8         and included in such total for the taxable year;
9             (G) An amount equal to any amount included in such
10         total under Section 78 of the Internal Revenue Code;
11             (H) In the case of a regulated investment company,
12         an amount equal to the amount of exempt interest
13         dividends as defined in subsection (b) (5) of Section
14         852 of the Internal Revenue Code, paid to shareholders
15         for the taxable year;
16             (I) With the exception of any amounts subtracted
17         under subparagraph (J), an amount equal to the sum of
18         all amounts disallowed as deductions by (i) Sections
19         171(a) (2), and 265(a)(2) and amounts disallowed as
20         interest expense by Section 291(a)(3) of the Internal
21         Revenue Code, as now or hereafter amended, and all
22         amounts of expenses allocable to interest and
23         disallowed as deductions by Section 265(a)(1) of the
24         Internal Revenue Code, as now or hereafter amended; and
25         (ii) for taxable years ending on or after August 13,
26         1999, Sections 171(a)(2), 265, 280C, 291(a)(3), and

 

 

SB0136 - 32 - LRB095 07663 BDD 27815 b

1         832(b)(5)(B)(i) of the Internal Revenue Code; the
2         provisions of this subparagraph are exempt from the
3         provisions of Section 250;
4             (J) An amount equal to all amounts included in such
5         total which are exempt from taxation by this State
6         either by reason of its statutes or Constitution or by
7         reason of the Constitution, treaties or statutes of the
8         United States; provided that, in the case of any
9         statute of this State that exempts income derived from
10         bonds or other obligations from the tax imposed under
11         this Act, the amount exempted shall be the interest net
12         of bond premium amortization;
13             (K) An amount equal to those dividends included in
14         such total which were paid by a corporation which
15         conducts business operations in an Enterprise Zone or
16         zones created under the Illinois Enterprise Zone Act or
17         a River Edge Redevelopment Zone or zones created under
18         the River Edge Redevelopment Zone Act and conducts
19         substantially all of its operations in an Enterprise
20         Zone or zones or a River Edge Redevelopment Zone or
21         zones. This subparagraph (K) is exempt from the
22         provisions of Section 250;
23             (L) An amount equal to those dividends included in
24         such total that were paid by a corporation that
25         conducts business operations in a federally designated
26         Foreign Trade Zone or Sub-Zone and that is designated a

 

 

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

 

 

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1         calculated under the previous sentence. This
2         subparagraph (M) is exempt from the provisions of
3         Section 250;
4             (M-1) For any taxpayer that is a financial
5         organization within the meaning of Section 304(c) of
6         this Act, an amount included in such total as interest
7         income from a loan or loans made by such taxpayer to a
8         borrower, to the extent that such a loan is secured by
9         property which is eligible for the High Impact Business
10         Investment Credit. To determine the portion of a loan
11         or loans that is secured by property eligible for a
12         Section 201(h) investment credit to the borrower, the
13         entire principal amount of the loan or loans between
14         the taxpayer and the borrower should be divided into
15         the basis of the Section 201(h) investment credit
16         property which secures the loan or loans, using for
17         this purpose the original basis of such property on the
18         date that it was placed in service in a federally
19         designated Foreign Trade Zone or Sub-Zone located in
20         Illinois. No taxpayer that is eligible for the
21         deduction provided in subparagraph (M) of paragraph
22         (2) of this subsection shall be eligible for the
23         deduction provided under this subparagraph (M-1). The
24         subtraction modification available to taxpayers in any
25         year under this subsection shall be that portion of the
26         total interest paid by the borrower with respect to

 

 

SB0136 - 35 - LRB095 07663 BDD 27815 b

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

 

 

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1         provided under subparagraph (G) of paragraph (2) of
2         this subsection (b) which is related to such dividends;
3         plus (ii) 100% of the amount by which dividends,
4         included in taxable income and received, including,
5         for taxable years ending on or after December 31, 1988,
6         dividends received or deemed received or paid or deemed
7         paid under Sections 951 through 964 of the Internal
8         Revenue Code, from any such corporation specified in
9         clause (i) that would but for the provisions of Section
10         1504 (b) (3) of the Internal Revenue Code be treated as
11         a member of the affiliated group which includes the
12         dividend recipient, exceed the amount of the
13         modification provided under subparagraph (G) of
14         paragraph (2) of this subsection (b) which is related
15         to such dividends;
16             (P) An amount equal to any contribution made to a
17         job training project established pursuant to the Tax
18         Increment Allocation Redevelopment Act;
19             (Q) An amount equal to the amount of the deduction
20         used to compute the federal income tax credit for
21         restoration of substantial amounts held under claim of
22         right for the taxable year pursuant to Section 1341 of
23         the Internal Revenue Code of 1986;
24             (R) On and after July 20, 1999, in the case of an
25         attorney-in-fact with respect to whom an interinsurer
26         or a reciprocal insurer has made the election under

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1                 (iv) an item of interest paid, accrued, or
2             incurred, directly or indirectly, to a foreign
3             person if the taxpayer establishes by clear and
4             convincing evidence that the adjustments are
5             unreasonable; or if the taxpayer and the Director
6             agree in writing to the application or use of an
7             alternative method of apportionment under Section
8             304(f).
9                 Nothing in this subsection shall preclude the
10             Director from making any other adjustment
11             otherwise allowed under Section 404 of this Act for
12             any tax year beginning after the effective date of
13             this amendment provided such adjustment is made
14             pursuant to regulation adopted by the Department
15             and such regulations provide methods and standards
16             by which the Department will utilize its authority
17             under Section 404 of this Act;
18             (G-13) For taxable years ending on or after
19         December 31, 2004, an amount equal to the amount of
20         intangible expenses and costs otherwise allowed as a
21         deduction in computing base income, and that were paid,
22         accrued, or incurred, directly or indirectly, to a
23         foreign person who would be a member of the same
24         unitary business group but for the fact that the
25         foreign person's business activity outside the United
26         States is 80% or more of that person's total business

 

 

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

 

 

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

 

 

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1                 or
2                 (iii) any item of intangible expense or cost
3             paid, accrued, or incurred, directly or
4             indirectly, from a transaction with a foreign
5             person if the taxpayer establishes by clear and
6             convincing evidence, that the adjustments are
7             unreasonable; or if the taxpayer and the Director
8             agree in writing to the application or use of an
9             alternative method of apportionment under Section
10             304(f);
11                 Nothing in this subsection shall preclude the
12             Director from making any other adjustment
13             otherwise allowed under Section 404 of this Act for
14             any tax year beginning after the effective date of
15             this amendment provided such adjustment is made
16             pursuant to regulation adopted by the Department
17             and such regulations provide methods and standards
18             by which the Department will utilize its authority
19             under Section 404 of this Act;
20     and by deducting from the total so obtained the sum of the
21     following amounts:
22             (H) An amount equal to all amounts included in such
23         total pursuant to the provisions of Sections 402(a),
24         402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the
25         Internal Revenue Code or included in such total as
26         distributions under the provisions of any retirement

 

 

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1         or disability plan for employees of any governmental
2         agency or unit, or retirement payments to retired
3         partners, which payments are excluded in computing net
4         earnings from self employment by Section 1402 of the
5         Internal Revenue Code and regulations adopted pursuant
6         thereto;
7             (I) The valuation limitation amount;
8             (J) An amount equal to the amount of any tax
9         imposed by this Act which was refunded to the taxpayer
10         and included in such total for the taxable year;
11             (K) An amount equal to all amounts included in
12         taxable income as modified by subparagraphs (A), (B),
13         (C), (D), (E), (F) and (G) which are exempt from
14         taxation by this State either by reason of its statutes
15         or Constitution or by reason of the Constitution,
16         treaties or statutes of the United States; provided
17         that, in the case of any statute of this State that
18         exempts income derived from bonds or other obligations
19         from the tax imposed under this Act, the amount
20         exempted shall be the interest net of bond premium
21         amortization;
22             (L) With the exception of any amounts subtracted
23         under subparagraph (K), an amount equal to the sum of
24         all amounts disallowed as deductions by (i) Sections
25         171(a) (2) and 265(a)(2) of the Internal Revenue Code,
26         as now or hereafter amended, and all amounts of

 

 

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1         expenses allocable to interest and disallowed as
2         deductions by Section 265(1) of the Internal Revenue
3         Code of 1954, as now or hereafter amended; and (ii) for
4         taxable years ending on or after August 13, 1999,
5         Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of
6         the Internal Revenue Code; the provisions of this
7         subparagraph are exempt from the provisions of Section
8         250;
9             (M) An amount equal to those dividends included in
10         such total which were paid by a corporation which
11         conducts business operations in an Enterprise Zone or
12         zones created under the Illinois Enterprise Zone Act or
13         a River Edge Redevelopment Zone or zones created under
14         the River Edge Redevelopment Zone Act and conducts
15         substantially all of its operations in an Enterprise
16         Zone or Zones or a River Edge Redevelopment Zone or
17         zones. This subparagraph (M) is exempt from the
18         provisions of Section 250;
19             (N) An amount equal to any contribution made to a
20         job training project established pursuant to the Tax
21         Increment Allocation Redevelopment Act;
22             (O) An amount equal to those dividends included in
23         such total that were paid by a corporation that
24         conducts business operations in a federally designated
25         Foreign Trade Zone or Sub-Zone and that is designated a
26         High Impact Business located in Illinois; provided

 

 

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1         that dividends eligible for the deduction provided in
2         subparagraph (M) of paragraph (2) of this subsection
3         shall not be eligible for the deduction provided under
4         this subparagraph (O);
5             (P) An amount equal to the amount of the deduction
6         used to compute the federal income tax credit for
7         restoration of substantial amounts held under claim of
8         right for the taxable year pursuant to Section 1341 of
9         the Internal Revenue Code of 1986;
10             (Q) For taxable year 1999 and thereafter, an amount
11         equal to the amount of any (i) distributions, to the
12         extent includible in gross income for federal income
13         tax purposes, made to the taxpayer because of his or
14         her status as a victim of persecution for racial or
15         religious reasons by Nazi Germany or any other Axis
16         regime or as an heir of the victim and (ii) items of
17         income, to the extent includible in gross income for
18         federal income tax purposes, attributable to, derived
19         from or in any way related to assets stolen from,
20         hidden from, or otherwise lost to a victim of
21         persecution for racial or religious reasons by Nazi
22         Germany or any other Axis regime immediately prior to,
23         during, and immediately after World War II, including,
24         but not limited to, interest on the proceeds receivable
25         as insurance under policies issued to a victim of
26         persecution for racial or religious reasons by Nazi

 

 

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1         Germany or any other Axis regime by European insurance
2         companies immediately prior to and during World War II;
3         provided, however, this subtraction from federal
4         adjusted gross income does not apply to assets acquired
5         with such assets or with the proceeds from the sale of
6         such assets; provided, further, this paragraph shall
7         only apply to a taxpayer who was the first recipient of
8         such assets after their recovery and who is a victim of
9         persecution for racial or religious reasons by Nazi
10         Germany or any other Axis regime or as an heir of the
11         victim. The amount of and the eligibility for any
12         public assistance, benefit, or similar entitlement is
13         not affected by the inclusion of items (i) and (ii) of
14         this paragraph in gross income for federal income tax
15         purposes. This paragraph is exempt from the provisions
16         of Section 250;
17             (R) For taxable years 2001 and thereafter, for the
18         taxable year in which the bonus depreciation deduction
19         is taken on the taxpayer's federal income tax return
20         under subsection (k) of Section 168 of the Internal
21         Revenue Code and for each applicable taxable year
22         thereafter, an amount equal to "x", where:
23                 (1) "y" equals the amount of the depreciation
24             deduction taken for the taxable year on the
25             taxpayer's federal income tax return on property
26             for which the bonus depreciation deduction was

 

 

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

 

 

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

 

 

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

 

 

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1         person's total business activity, but not to exceed the
2         addition modification required to be made for the same
3         taxable year under Section 203(c)(2)(G-13) for
4         intangible expenses and costs paid, accrued, or
5         incurred, directly or indirectly, to the same foreign
6         person; and .
7             (W) For taxable years ending or on after December
8         31, 2007 and ending on or before December 30, 2012, an
9         amount equal to the amount spent during the taxable
10         year for care at a long-term care facility, as defined
11         in Section 1-113 of the Nursing Home Care Act.
12         (3) Limitation. The amount of any modification
13     otherwise required under this subsection shall, under
14     regulations prescribed by the Department, be adjusted by
15     any amounts included therein which were properly paid,
16     credited, or required to be distributed, or permanently set
17     aside for charitable purposes pursuant to Internal Revenue
18     Code Section 642(c) during the taxable year.
 
19     (d) Partnerships.
20         (1) In general. In the case of a partnership, base
21     income means an amount equal to the taxpayer's taxable
22     income for the taxable year as modified by paragraph (2).
23         (2) Modifications. The taxable income referred to in
24     paragraph (1) shall be modified by adding thereto the sum
25     of the following amounts:

 

 

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

 

 

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1             If the taxpayer continues to own property through
2         the last day of the last tax year for which the
3         taxpayer may claim a depreciation deduction for
4         federal income tax purposes and for which the taxpayer
5         was allowed in any taxable year to make a subtraction
6         modification under subparagraph (O), then an amount
7         equal to that subtraction modification.
8             The taxpayer is required to make the addition
9         modification under this subparagraph only once with
10         respect to any one piece of property;
11             (D-7) For taxable years ending on or after December
12         31, 2004, an amount equal to the amount otherwise
13         allowed as a deduction in computing base income for
14         interest paid, accrued, or incurred, directly or
15         indirectly, to a foreign person who would be a member
16         of the same unitary business group but for the fact the
17         foreign person's business activity outside the United
18         States is 80% or more of the foreign person's total
19         business activity. The addition modification required
20         by this subparagraph shall be reduced to the extent
21         that dividends were included in base income of the
22         unitary group for the same taxable year and received by
23         the taxpayer or by a member of the taxpayer's unitary
24         business group (including amounts included in gross
25         income pursuant to Sections 951 through 964 of the
26         Internal Revenue Code and amounts included in gross

 

 

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

 

 

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

 

 

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1         computing base income, and that were paid, accrued, or
2         incurred, directly or indirectly, to a foreign person
3         who would be a member of the same unitary business
4         group but for the fact that the foreign person's
5         business activity outside the United States is 80% or
6         more of that person's total business activity. The
7         addition modification required by this subparagraph
8         shall be reduced to the extent that dividends were
9         included in base income of the unitary group for the
10         same taxable year and received by the taxpayer or by a
11         member of the taxpayer's unitary business group
12         (including amounts included in gross income pursuant
13         to Sections 951 through 964 of the Internal Revenue
14         Code and amounts included in gross income under Section
15         78 of the Internal Revenue Code) with respect to the
16         stock of the same person to whom the intangible
17         expenses and costs were directly or indirectly paid,
18         incurred or accrued. The preceding sentence shall not
19         apply to the extent that the same dividends caused a
20         reduction to the addition modification required under
21         Section 203(d)(2)(D-7) of this Act. As used in this
22         subparagraph, the term "intangible expenses and costs"
23         includes (1) expenses, losses, and costs for, or
24         related to, the direct or indirect acquisition, use,
25         maintenance or management, ownership, sale, exchange,
26         or any other disposition of intangible property; (2)

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1             (L) An amount equal to any contribution made to a
2         job training project established pursuant to the Real
3         Property Tax Increment Allocation Redevelopment Act;
4             (M) An amount equal to those dividends included in
5         such total that were paid by a corporation that
6         conducts business operations in a federally designated
7         Foreign Trade Zone or Sub-Zone and that is designated a
8         High Impact Business located in Illinois; provided
9         that dividends eligible for the deduction provided in
10         subparagraph (K) of paragraph (2) of this subsection
11         shall not be eligible for the deduction provided under
12         this subparagraph (M);
13             (N) An amount equal to the amount of the deduction
14         used to compute the federal income tax credit for
15         restoration of substantial amounts held under claim of
16         right for the taxable year pursuant to Section 1341 of
17         the Internal Revenue Code of 1986;
18             (O) For taxable years 2001 and thereafter, for the
19         taxable year in which the bonus depreciation deduction
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

 

 

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

 

 

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

 

 

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

 

 

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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

 

 

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

 

 

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

 

 

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1         provisions of Section 1381 through 1388 of the Internal
2         Revenue Code;
3             (G) Subchapter S corporations. In the case of: (i)
4         a Subchapter S corporation for which there is in effect
5         an election for the taxable year under Section 1362 of
6         the Internal Revenue Code, the taxable income of such
7         corporation determined in accordance with Section
8         1363(b) of the Internal Revenue Code, except that
9         taxable income shall take into account those items
10         which are required by Section 1363(b)(1) of the
11         Internal Revenue Code to be separately stated; and (ii)
12         a Subchapter S corporation for which there is in effect
13         a federal election to opt out of the provisions of the
14         Subchapter S Revision Act of 1982 and have applied
15         instead the prior federal Subchapter S rules as in
16         effect on July 1, 1982, the taxable income of such
17         corporation determined in accordance with the federal
18         Subchapter S rules as in effect on July 1, 1982; and
19             (H) Partnerships. In the case of a partnership,
20         taxable income determined in accordance with Section
21         703 of the Internal Revenue Code, except that taxable
22         income shall take into account those items which are
23         required by Section 703(a)(1) to be separately stated
24         but which would be taken into account by an individual
25         in calculating his taxable income.
26         (3) Recapture of business expenses on disposition of

 

 

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

 

 

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

 

 

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1         that part of the taxpayer's holding period for the
2         property ending July 31, 1969 bears to the number of
3         full calendar months in the taxpayer's entire holding
4         period for the property.
5             (C) The Department shall prescribe such
6         regulations as may be necessary to carry out the
7         purposes of this paragraph.
 
8     (g) Double deductions. Unless specifically provided
9 otherwise, nothing in this Section shall permit the same item
10 to be deducted more than once.
 
11     (h) Legislative intention. Except as expressly provided by
12 this Section there shall be no modifications or limitations on
13 the amounts of income, gain, loss or deduction taken into
14 account in determining gross income, adjusted gross income or
15 taxable income for federal income tax purposes for the taxable
16 year, or in the amount of such items entering into the
17 computation of base income and net income under this Act for
18 such taxable year, whether in respect of property values as of
19 August 1, 1969 or otherwise.
20 (Source: P.A. 93-812, eff. 7-26-04; 93-840, eff. 7-30-04;
21 94-776, eff. 5-19-06; 94-789, eff. 5-19-06; 94-1021, eff.
22 7-12-06; 94-1074, eff. 12-26-06; revised 1-2-07.)
 
23     Section 99. Effective date. This Act takes effect upon
24 becoming law.