Full Text of SB2208 93rd General Assembly
SB2208ham001 93RD GENERAL ASSEMBLY
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Revenue Committee
Filed: 5/19/2004
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| AMENDMENT TO SENATE BILL 2208
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| AMENDMENT NO. ______. Amend Senate Bill 2208 by replacing | 3 |
| everything after the enacting clause with the following:
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| "Section 5. The Illinois Income Tax Act is amended by | 5 |
| changing Section 1501 as follows:
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| (35 ILCS 5/1501) (from Ch. 120, par. 15-1501)
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| Sec. 1501. Definitions.
| 8 |
| (a) In general. When used in this Act, where not
otherwise | 9 |
| distinctly expressed or manifestly incompatible with the | 10 |
| intent
thereof:
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| (1) Business income. The term "business income" means | 12 |
| income arising from
transactions and activity in the | 13 |
| regular course of the taxpayer's trade
or business, net of | 14 |
| the deductions allocable thereto, and includes income
from | 15 |
| tangible and intangible property if the acquisition, | 16 |
| management, and
disposition of the property constitute | 17 |
| integral parts of the taxpayer's
regular trade or business | 18 |
| operations. Such term does not include compensation
or the | 19 |
| deductions allocable thereto.
For each taxable year | 20 |
| beginning on or after January 1, 2003, a taxpayer may
elect | 21 |
| to treat all income other than compensation as business | 22 |
| income. This
election shall be made in accordance with | 23 |
| rules adopted by the Department and,
once made, shall be | 24 |
| irrevocable.
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| (2) Commercial domicile. The term "commercial | 2 |
| domicile" means the
principal
place from which the trade or | 3 |
| business of the taxpayer is directed or managed.
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| (3) Compensation. The term "compensation" means wages, | 5 |
| salaries,
commissions
and any other form of remuneration | 6 |
| paid to employees for personal services.
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| (4) Corporation. The term "corporation" includes | 8 |
| associations, joint-stock
companies, insurance companies | 9 |
| and cooperatives. Any entity, including a
limited | 10 |
| liability company formed under the Illinois Limited | 11 |
| Liability Company
Act, shall be treated as a corporation if | 12 |
| it is so classified for federal
income tax purposes.
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| (5) Department. The term "Department" means the | 14 |
| Department of Revenue of
this State.
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| (6) Director. The term "Director" means the Director of | 16 |
| Revenue of this
State.
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| (7) Fiduciary. The term "fiduciary" means a guardian, | 18 |
| trustee, executor,
administrator, receiver, or any person | 19 |
| acting in any fiduciary capacity for any
person.
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| (8) Financial organization.
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| (A) The term "financial organization" means
any
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| bank, bank holding company, trust company, savings | 23 |
| bank, industrial bank,
land bank, safe deposit | 24 |
| company, private banker, savings and loan association,
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| building and loan association, credit union, currency | 26 |
| exchange, cooperative
bank, small loan company, sales | 27 |
| finance company, investment company, or any
person | 28 |
| which is owned by a bank or bank holding company. For | 29 |
| the purpose of
this Section a "person" will include | 30 |
| only those persons which a bank holding
company may | 31 |
| acquire and hold an interest in, directly or | 32 |
| indirectly, under the
provisions of the Bank Holding | 33 |
| Company Act of 1956 (12 U.S.C. 1841, et seq.),
except | 34 |
| where interests in any person must be disposed of |
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| within certain
required time limits under the Bank | 2 |
| Holding Company Act of 1956.
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| (B) For purposes of subparagraph (A) of this | 4 |
| paragraph, the term
"bank" includes (i) any entity that | 5 |
| is regulated by the Comptroller of the
Currency under | 6 |
| the National Bank Act, or by the Federal Reserve Board, | 7 |
| or by
the
Federal Deposit Insurance Corporation and | 8 |
| (ii) any federally or State chartered
bank
operating as | 9 |
| a credit card bank.
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| (C) For purposes of subparagraph (A) of this | 11 |
| paragraph, the term
"sales finance company" has the | 12 |
| meaning provided in the following item (i) or
(ii):
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| (i) A person primarily engaged in one or more | 14 |
| of the following
businesses: the business of | 15 |
| purchasing customer receivables, the business
of | 16 |
| making loans upon the security of customer | 17 |
| receivables, the
business of making loans for the | 18 |
| express purpose of funding purchases of
tangible | 19 |
| personal property or services by the borrower, or | 20 |
| the business of
finance leasing. For purposes of | 21 |
| this item (i), "customer receivable"
means:
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| (a) a retail installment contract or | 23 |
| retail charge agreement within
the
meaning
of | 24 |
| the Sales Finance Agency Act, the Retail | 25 |
| Installment Sales Act, or the
Motor Vehicle | 26 |
| Retail Installment Sales Act;
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| (b) an installment, charge, credit, or | 28 |
| similar contract or agreement
arising from
the | 29 |
| sale of tangible personal property or services | 30 |
| in a transaction involving
a deferred payment | 31 |
| price payable in one or more installments | 32 |
| subsequent
to the sale; or
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| (c) the outstanding balance of a contract | 34 |
| or agreement described in
provisions
(a) or (b) |
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| of this item (i).
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| A customer receivable need not provide for | 3 |
| payment of interest on
deferred
payments. A sales | 4 |
| finance company may purchase a customer receivable | 5 |
| from, or
make a loan secured by a customer | 6 |
| receivable to, the seller in the original
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| transaction or to a person who purchased the | 8 |
| customer receivable directly or
indirectly from | 9 |
| that seller.
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| (ii) A corporation meeting each of the | 11 |
| following criteria:
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| (a) the corporation must be a member of an | 13 |
| "affiliated group" within
the
meaning of | 14 |
| Section 1504(a) of the Internal Revenue Code, | 15 |
| determined
without regard to Section 1504(b) | 16 |
| of the Internal Revenue Code;
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| (b) more than 50% of the gross income of | 18 |
| the corporation for the
taxable
year
must be | 19 |
| interest income derived from qualifying loans. | 20 |
| A "qualifying
loan" is a loan made to a member | 21 |
| of the corporation's affiliated group that
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| originates customer receivables (within the | 23 |
| meaning of item (i)) or to whom
customer | 24 |
| receivables originated by a member of the | 25 |
| affiliated group have been
transferred, to
the | 26 |
| extent the average outstanding balance of | 27 |
| loans from that corporation
to members of its | 28 |
| affiliated group during the taxable year do not | 29 |
| exceed
the limitation amount for that | 30 |
| corporation. The "limitation amount" for a
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| corporation is the average outstanding | 32 |
| balances during the taxable year of
customer | 33 |
| receivables (within the meaning of item (i)) | 34 |
| originated by
all members of the affiliated |
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| group.
If the average outstanding balances of | 2 |
| the
loans made by a corporation to members of | 3 |
| its affiliated group exceed the
limitation | 4 |
| amount, the interest income of that | 5 |
| corporation from qualifying
loans shall be | 6 |
| equal to its interest income from loans to | 7 |
| members of its
affiliated groups times a | 8 |
| fraction equal to the limitation amount | 9 |
| divided by
the average outstanding balances of | 10 |
| the loans made by that corporation to
members | 11 |
| of its affiliated group;
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| (c) the total of all shareholder's equity | 13 |
| (including, without
limitation,
paid-in
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| capital on common and preferred stock and | 15 |
| retained earnings) of the
corporation plus the | 16 |
| total of all of its loans, advances, and other
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| obligations payable or owed to members of its | 18 |
| affiliated group may not
exceed 20% of the | 19 |
| total assets of the corporation at any time | 20 |
| during the tax
year; and
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| (d) more than 50% of all interest-bearing | 22 |
| obligations of the
affiliated group payable to | 23 |
| persons outside the group determined in | 24 |
| accordance
with generally accepted accounting | 25 |
| principles must be obligations of the
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| corporation.
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| This amendatory Act of the 91st General Assembly is | 28 |
| declaratory of
existing
law.
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| (D) Subparagraphs
(B) and (C) of this paragraph are | 30 |
| declaratory of
existing law and apply retroactively, | 31 |
| for all tax years beginning on or before
December 31, | 32 |
| 1996,
to all original returns, to all amended returns | 33 |
| filed no later than 30
days after the effective date of | 34 |
| this amendatory Act of 1996, and to all
notices issued |
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| on or before the effective date of this amendatory Act | 2 |
| of 1996
under subsection (a) of Section 903, subsection | 3 |
| (a) of Section 904,
subsection (e) of Section 909, or | 4 |
| Section 912.
A taxpayer that is a "financial | 5 |
| organization" that engages in any transaction
with an | 6 |
| affiliate shall be a "financial organization" for all | 7 |
| purposes of this
Act.
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| (E) For all tax years beginning on or
before | 9 |
| December 31, 1996, a taxpayer that falls within the | 10 |
| definition
of a
"financial organization" under | 11 |
| subparagraphs (B) or (C) of this paragraph, but
who | 12 |
| does
not fall within the definition of a "financial | 13 |
| organization" under the Proposed
Regulations issued by | 14 |
| the Department of Revenue on July 19, 1996, may
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| irrevocably elect to apply the Proposed Regulations | 16 |
| for all of those years as
though the Proposed | 17 |
| Regulations had been lawfully promulgated, adopted, | 18 |
| and in
effect for all of those years. For purposes of | 19 |
| applying subparagraphs (B) or
(C) of
this
paragraph to | 20 |
| all of those years, the election allowed by this | 21 |
| subparagraph
applies only to the taxpayer making the | 22 |
| election and to those members of the
taxpayer's unitary | 23 |
| business group who are ordinarily required to | 24 |
| apportion
business income under the same subsection of | 25 |
| Section 304 of this Act as the
taxpayer making the | 26 |
| election. No election allowed by this subparagraph | 27 |
| shall
be made under a claim
filed under subsection (d) | 28 |
| of Section 909 more than 30 days after the
effective | 29 |
| date of this amendatory Act of 1996.
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| (F) Finance Leases. For purposes of this | 31 |
| subsection, a finance lease
shall be treated as a loan | 32 |
| or other extension of credit, rather than as a
lease,
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| regardless of how the transaction is characterized for | 34 |
| any other purpose,
including the purposes of any |
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| regulatory agency to which the lessor is subject.
A | 2 |
| finance lease is any transaction in the form of a lease | 3 |
| in which the lessee
is treated as the owner of the | 4 |
| leased asset entitled to any deduction for
| 5 |
| depreciation allowed under Section 167 of the Internal | 6 |
| Revenue Code.
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| (9) Fiscal year. The term "fiscal year" means an | 8 |
| accounting period of
12 months ending on the last day of | 9 |
| any month other than December.
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| (10) Includes and including. The terms "includes" and | 11 |
| "including" when
used in a definition contained in this Act | 12 |
| shall not be deemed to exclude
other things otherwise | 13 |
| within the meaning of the term defined.
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| (11) Internal Revenue Code. The term "Internal Revenue | 15 |
| Code" means the
United States Internal Revenue Code of 1954 | 16 |
| or any successor law or laws
relating to federal income | 17 |
| taxes in effect for the taxable year.
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| (12) Mathematical error. The term "mathematical error" | 19 |
| includes the
following types of errors, omissions, or | 20 |
| defects in a return filed by a
taxpayer which prevents | 21 |
| acceptance of the return as filed for processing:
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| (A) arithmetic errors or incorrect computations on | 23 |
| the return or
supporting schedules;
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| (B) entries on the wrong lines;
| 25 |
| (C) omission of required supporting forms or | 26 |
| schedules or the omission
of the information in whole | 27 |
| or in part called for thereon; and
| 28 |
| (D) an attempt to claim, exclude, deduct, or | 29 |
| improperly report, in a
manner
directly contrary to the | 30 |
| provisions of the Act and regulations thereunder
any | 31 |
| item of income, exemption, deduction, or credit.
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| (13) Nonbusiness income. The term "nonbusiness income" | 33 |
| means all income
other than business income or | 34 |
| compensation.
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| (14) Nonresident. The term "nonresident" means a | 2 |
| person who is not a
resident.
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| (15) Paid, incurred and accrued. The terms "paid", | 4 |
| "incurred" and
"accrued"
shall be construed according to | 5 |
| the method of accounting upon the basis
of which the | 6 |
| person's base income is computed under this Act.
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| (16) Partnership and partner. The term "partnership" | 8 |
| includes a syndicate,
group, pool, joint venture or other | 9 |
| unincorporated organization, through
or by means of which | 10 |
| any business, financial operation, or venture is carried
| 11 |
| on, and which is not, within the meaning of this Act, a | 12 |
| trust or estate
or a corporation; and the term "partner" | 13 |
| includes a member in such syndicate,
group, pool, joint | 14 |
| venture or organization.
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| The term "partnership" includes any entity, including | 16 |
| a limited
liability company formed under the Illinois
| 17 |
| Limited Liability Company Act, classified as a partnership | 18 |
| for federal income tax purposes.
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| The term "partnership" does not include a syndicate, | 20 |
| group, pool,
joint venture, or other unincorporated | 21 |
| organization established for the
sole purpose of playing | 22 |
| the Illinois State Lottery.
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| (17) Part-year resident. The term "part-year resident" | 24 |
| means an individual
who became a resident during the | 25 |
| taxable year or ceased to be a resident
during the taxable | 26 |
| year. Under Section 1501(a)(20)(A)(i) residence
commences | 27 |
| with presence in this State for other than a temporary or | 28 |
| transitory
purpose and ceases with absence from this State | 29 |
| for other than a temporary or
transitory purpose. Under | 30 |
| Section 1501(a)(20)(A)(ii) residence commences
with the | 31 |
| establishment of domicile in this State and ceases with the
| 32 |
| establishment of domicile in another State.
| 33 |
| (18) Person. The term "person" shall be construed to | 34 |
| mean and include
an individual, a trust, estate, |
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| partnership, association, firm, company,
corporation, | 2 |
| limited liability company, or fiduciary. For purposes of | 3 |
| Section
1301 and 1302 of this Act, a "person" means (i) an | 4 |
| individual, (ii) a
corporation, (iii) an officer, agent, or | 5 |
| employee of a
corporation, (iv) a member, agent or employee | 6 |
| of a partnership, or (v)
a member,
manager, employee, | 7 |
| officer, director, or agent of a limited liability company
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| who in such capacity commits an offense specified in | 9 |
| Section 1301 and 1302.
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| (18A) Records. The term "records" includes all data | 11 |
| maintained by the
taxpayer, whether on paper, microfilm, | 12 |
| microfiche, or any type of
machine-sensible data | 13 |
| compilation.
| 14 |
| (19) Regulations. The term "regulations" includes | 15 |
| rules promulgated and
forms prescribed by the Department.
| 16 |
| (20) Resident. The term "resident" means:
| 17 |
| (A) an individual (i) who is
in this State for | 18 |
| other than a temporary or transitory purpose during the
| 19 |
| taxable year; or (ii) who is domiciled in this State | 20 |
| but is absent from
the State for a temporary or | 21 |
| transitory purpose during the taxable year;
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| (B) The estate of a decedent who at his or her | 23 |
| death was domiciled in
this
State;
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| (C) A trust created by a will of a decedent who at | 25 |
| his death was
domiciled
in this State; and
| 26 |
| (D) An irrevocable trust, the grantor of which was | 27 |
| domiciled in this
State
at the time such trust became | 28 |
| irrevocable. For purpose of this subparagraph,
a trust | 29 |
| shall be considered irrevocable to the extent that the | 30 |
| grantor is
not treated as the owner thereof under | 31 |
| Sections 671 through 678 of the Internal
Revenue Code.
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| (21) Sales. The term "sales" means all gross receipts | 33 |
| of the taxpayer
not allocated under Sections 301, 302 and | 34 |
| 303.
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| (22) State. The term "state" when applied to a | 2 |
| jurisdiction other than
this State means any state of the | 3 |
| United States, the District of Columbia,
the Commonwealth | 4 |
| of Puerto Rico, any Territory or Possession of the United
| 5 |
| States, and any foreign country, or any political | 6 |
| subdivision of any of the
foregoing. For purposes of the | 7 |
| foreign tax credit under Section 601, the
term "state" | 8 |
| means any state of the United States, the District of | 9 |
| Columbia,
the Commonwealth of Puerto Rico, and any | 10 |
| territory or possession of the
United States, or any | 11 |
| political subdivision of any of the foregoing,
effective | 12 |
| for tax years ending on or after December 31, 1989.
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| (23) Taxable year. The term "taxable year" means the | 14 |
| calendar year, or
the fiscal year ending during such | 15 |
| calendar year, upon the basis of which
the base income is | 16 |
| computed under this Act. "Taxable year" means, in the
case | 17 |
| of a return made for a fractional part of a year under the | 18 |
| provisions
of this Act, the period for which such return is | 19 |
| made.
| 20 |
| (24) Taxpayer. The term "taxpayer" means any person | 21 |
| subject to the tax
imposed by this Act.
| 22 |
| (25) International banking facility. The term | 23 |
| international banking
facility shall have the same meaning | 24 |
| as is set forth in the Illinois Banking
Act or as is set | 25 |
| forth in the laws of the United States or regulations of
| 26 |
| the Board of Governors of the Federal Reserve System.
| 27 |
| (26) Income Tax Return Preparer.
| 28 |
| (A) The term "income tax return preparer"
means any | 29 |
| person who prepares for compensation, or who employs | 30 |
| one or more
persons to prepare for compensation, any | 31 |
| return of tax imposed by this Act
or any claim for | 32 |
| refund of tax imposed by this Act. The preparation of a
| 33 |
| substantial portion of a return or claim for refund | 34 |
| shall be treated as
the preparation of that return or |
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| claim for refund.
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| (B) A person is not an income tax return preparer | 3 |
| if all he or she does
is
| 4 |
| (i) furnish typing, reproducing, or other | 5 |
| mechanical assistance;
| 6 |
| (ii) prepare returns or claims for refunds for | 7 |
| the employer by whom he
or she is regularly and | 8 |
| continuously employed;
| 9 |
| (iii) prepare as a fiduciary returns or claims | 10 |
| for refunds for any
person; or
| 11 |
| (iv) prepare claims for refunds for a taxpayer | 12 |
| in response to any
notice
of deficiency issued to | 13 |
| that taxpayer or in response to any waiver of
| 14 |
| restriction after the commencement of an audit of | 15 |
| that taxpayer or of another
taxpayer if a | 16 |
| determination in the audit of the other taxpayer | 17 |
| directly or
indirectly affects the tax liability | 18 |
| of the taxpayer whose claims he or she is
| 19 |
| preparing.
| 20 |
| (27) Unitary business group. The term "unitary | 21 |
| business group" means
a group of persons related through | 22 |
| common ownership whose business activities
are integrated | 23 |
| with, dependent upon and contribute to each other. The | 24 |
| group
will not include those members whose business | 25 |
| activity outside the United
States is 80% or more of any | 26 |
| such member's total business activity; for
purposes of this | 27 |
| paragraph and clause (a)(3)(B)(ii) of Section 304,
| 28 |
| business
activity within the United States shall be | 29 |
| measured by means of the factors
ordinarily applicable | 30 |
| under subsections (a), (b), (c), (d), or (h)
of Section
304 | 31 |
| except that, in the case of members ordinarily required to | 32 |
| apportion
business income by means of the 3 factor formula | 33 |
| of property, payroll and sales
specified in subsection (a) | 34 |
| of Section 304, including the
formula as weighted in |
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| subsection (h) of Section 304, such members shall
not use | 2 |
| the sales factor in the computation and the results of the | 3 |
| property
and payroll factor computations of subsection (a) | 4 |
| of Section 304 shall be
divided by 2 (by one if either
the | 5 |
| property or payroll factor has a denominator of zero). The | 6 |
| computation
required by the preceding sentence shall, in | 7 |
| each case, involve the division of
the member's property, | 8 |
| payroll, or revenue miles in the United States,
insurance | 9 |
| premiums on property or risk in the United States, or | 10 |
| financial
organization business income from sources within | 11 |
| the United States, as the
case may be, by the respective | 12 |
| worldwide figures for such items. Common
ownership in the | 13 |
| case of corporations is the direct or indirect control or
| 14 |
| ownership of more than 50% of the outstanding voting stock | 15 |
| of the persons
carrying on unitary business activity. | 16 |
| Unitary business activity can
ordinarily be illustrated | 17 |
| where the activities of the members are: (1) in the
same | 18 |
| general line (such as manufacturing, wholesaling, | 19 |
| retailing of tangible
personal property, insurance, | 20 |
| transportation or finance); or (2) are steps in a
| 21 |
| vertically structured enterprise or process (such as the | 22 |
| steps involved in the
production of natural resources, | 23 |
| which might include exploration, mining,
refining, and | 24 |
| marketing); and, in either instance, the members are | 25 |
| functionally
integrated through the exercise of strong | 26 |
| centralized management (where, for
example, authority over | 27 |
| such matters as purchasing, financing, tax compliance,
| 28 |
| product line, personnel, marketing and capital investment | 29 |
| is not left to each
member). For tax years ending before | 30 |
| December 31, 2004, no
In no event, however, will any
| 31 |
| unitary business group may include members
which are | 32 |
| ordinarily required to apportion business income under | 33 |
| different
subsections of Section 304 except that for tax | 34 |
| years ending on or after
December 31, 1987 and before |
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| December 31, 2004, this prohibition shall not apply to a | 2 |
| unitary business group
composed of one or more taxpayers | 3 |
| all of which apportion business income
pursuant to | 4 |
| subsection (b) of Section 304, or all of which apportion | 5 |
| business
income pursuant to subsection (d) of Section 304, | 6 |
| and a holding company of such
single-factor taxpayers (see | 7 |
| definition of "financial organization" for rule
regarding | 8 |
| holding companies of financial organizations). If a | 9 |
| unitary business
group would, but for the preceding | 10 |
| sentence, include members that are
ordinarily required to | 11 |
| apportion business income under different subsections of
| 12 |
| Section 304, then for each subsection of Section 304 for | 13 |
| which there are two or
more members, there shall be a | 14 |
| separate unitary business group composed of such
members. | 15 |
| For purposes of the preceding two sentences, a member is | 16 |
| "ordinarily
required to apportion business income" under a | 17 |
| particular subsection of Section
304 if it would be | 18 |
| required to use the apportionment method prescribed by such
| 19 |
| subsection except for the fact that it derives business | 20 |
| income solely from
Illinois. If the unitary business group | 21 |
| members' accounting periods differ,
the common parent's | 22 |
| accounting period or, if there is no common parent, the
| 23 |
| accounting period of the member that is expected to have, | 24 |
| on a recurring basis,
the greatest Illinois income tax | 25 |
| liability must be used to determine whether to
use the | 26 |
| apportionment method provided in subsection (a) or | 27 |
| subsection (h) of
Section 304. The
prohibition against | 28 |
| membership in a unitary business group for taxpayers
| 29 |
| ordinarily required to apportion income under different | 30 |
| subsections of Section
304 does not apply to taxpayers | 31 |
| required to apportion income under subsection
(a) and | 32 |
| subsection (h) of Section
304. The provisions of this | 33 |
| amendatory Act of 1998 apply to tax
years ending on or | 34 |
| after December 31, 1998.
|
|
|
|
09300SB2208ham001 |
- 14 - |
LRB093 15827 RCE 51236 a |
|
| 1 |
| (28) Subchapter S corporation. The term "Subchapter S | 2 |
| corporation"
means a corporation for which there is in | 3 |
| effect an election under Section
1362 of the Internal | 4 |
| Revenue Code, or for which there is a federal election
to | 5 |
| opt out of the provisions of the Subchapter S Revision Act | 6 |
| of 1982 and
have applied instead the prior federal | 7 |
| Subchapter S rules as in effect on July
1, 1982.
| 8 |
| (b) Other definitions.
| 9 |
| (1) Words denoting number, gender, and so forth,
when | 10 |
| used in this Act, where not otherwise distinctly expressed | 11 |
| or manifestly
incompatible with the intent thereof:
| 12 |
| (A) Words importing the singular include and apply | 13 |
| to several persons,
parties or things;
| 14 |
| (B) Words importing the plural include the | 15 |
| singular; and
| 16 |
| (C) Words importing the masculine gender include | 17 |
| the feminine as well.
| 18 |
| (2) "Company" or "association" as including successors | 19 |
| and assigns. The
word "company" or "association", when used | 20 |
| in reference to a corporation,
shall be deemed to embrace | 21 |
| the words "successors and assigns of such company
or | 22 |
| association", and in like manner as if these last-named | 23 |
| words, or words
of similar import, were expressed.
| 24 |
| (3) Other terms. Any term used in any Section of this | 25 |
| Act with respect
to the application of, or in connection | 26 |
| with, the provisions of any other
Section of this Act shall | 27 |
| have the same meaning as in such other Section.
| 28 |
| (Source: P.A. 91-535, eff. 1-1-00; 91-913, eff.
1-1-01; 92-846, | 29 |
| eff. 8-23-02.)".
|
|