Illinois General Assembly - Full Text of HB1542
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Full Text of HB1542  100th General Assembly



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1    AN ACT concerning civil law.
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4    Section 5. The Principal and Income Act is amended by
5changing Sections 10 and 15 as follows:
6    (760 ILCS 15/10)  (from Ch. 30, par. 510)
7    Sec. 10. Disposition of natural resources.
8    (a) If any part of the principal consists of a right to
9receive royalties, overriding or limited royalties, working
10interests, production payments, net profit interests, or other
11interest in minerals, oil, gas or other natural resources in,
12on or under land, except timber, water, soil, sod, dirt, peat,
13turf or mosses, the receipts from taking the natural resources
14from the land shall be allocated as follows:
15        (1) if received as rent on a lease or extension
16    payments on a lease, the receipts are income;
17        (2) if received from a production payment, the receipts
18    are income to the extent of any factor for interest or its
19    equivalent provided in the governing instrument. There
20    shall be allocated to principal the fraction of the balance
21    of the receipts which the unrecovered cost of the
22    production payment bears to the balance owed on the
23    production payment, exclusive of any factor for interest or



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1    its equivalent. The receipts not allocated to principal are
2    income;
3        (3) except for oil or gas from non-coal formations, if
4    received as a royalty, overriding or limited royalty, or
5    bonus, or from a working, net profit, or any other interest
6    in minerals, oil, gas, or other natural resources, receipts
7    not provided for in the preceding paragraphs of this
8    Section shall be apportioned on a yearly basis in
9    accordance with this paragraph whether or not any natural
10    resource was being taken from the land at the time the
11    trust was established. The trustee shall allocate to
12    principal as an allowance for depletion the greater of (i)
13    that portion, if any, of the gross receipts that is allowed
14    as a depletion deduction for federal income tax purposes
15    and (ii) 10% of the gross receipts, except that that
16    allocation shall not exceed 50% of the net receipts
17    remaining after payment of all expenses, direct and
18    indirect, computed without the allowance for depletion.
19    The trustee shall allocate the balance of the gross
20    receipts, after payment therefrom of all expenses, direct
21    and indirect, to income; .
22        (4) for oil or gas from non-coal formations, proceeds
23    from the sale of such minerals produced and received as
24    royalty, overriding royalty, limited royalty, working
25    interest, net profit interest, time-limited interest or
26    term interest, or lease bonus shall be deemed income.



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1    (b) If an item of depletable property of a type specified
2in this Section is held on the effective date of this Act,
3receipts from the property shall be allocated in the manner
4used before the effective date of this Act, but as to all
5depletable property acquired after the effective date of this
6Act by an existing or new trust, the method of allocation
7provided herein shall be used.
8    (c) If any part of the principal consists of timber, water,
9soil, sod, dirt, peat, turf, or mosses, the receipts from those
10resources shall be allocated in accordance with Section 3.
11(Source: P.A. 87-714.)
12    (760 ILCS 15/15)  (from Ch. 30, par. 515)
13    Sec. 15. Non-trust estates.
14    (a) The provisions of this Act, as far as applicable, shall
15apply to nontrust estates subject to any agreement of the
16parties or any specific direction by statute or otherwise, and
17the references to trusts and trustees shall be read as applying
18to nontrust estates and to legal tenants (including life
19tenants, tenants for terms of years, or any other period of
20tenancy) and remaindermen as the context requires; except that
21if either a legal tenant or a remainderman has incurred a
22charge for his benefit without the consent or agreement of the
23other, he shall pay that charge in full.
24    (b) If the costs of an improvement, including special taxes
25or assessments, representing an addition to value of property



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1forming part of the principal cannot reasonably be expected to
2outlast the legal tenancy, the costs shall be paid by the legal
3tenant. If the improvement can reasonably be expected to
4outlast the legal tenancy, only a portion of the costs shall be
5paid by the legal tenant and the balance by the remainderman.
6The portion payable by the legal tenant shall be that fraction
7of the total found by dividing the present value of the legal
8tenancy by the present value of an estate of the same form as
9that of the legal tenancy but limited to a period corresponding
10to the reasonably expected duration of the improvement. The
11computation of present value of the legal tenancy shall be
12computed on the basis of two-thirds of the value determined by
13use of the tables set forth under Section 7520 of the Internal
14Revenue Code of 1986 and the regulations thereunder for the
15calculation of the values of annuities, life estates, and terms
16for years, and no other evidence of duration or expectancy
17shall be considered, except that any legal tenancy or remainder
18interest acquired for consideration based on those tables shall
19be computed on the basis of the tables in effect at the time
20acquired. The method of computing the present value of a legal
21tenancy established in this subsection shall apply to all legal
22tenancies and remainders created after January 1, 1992 and to
23all legal tenancies and remainders which were acquired for
24consideration if the amount of the consideration was based on
25the tables set forth under Section 2031 or 7520 of the Internal
26Revenue Code then in effect.



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1    (c) If a legal tenant has leased any lands for agricultural
2or farming operations and his legal tenancy terminates on or
3after the day any rent has become due and payable, he or his
4representative is entitled to recover that rent from the
5lessee; and if a legal tenancy terminates before the rent under
6the lease is fully paid, the legal tenant or his representative
7is entitled to recover from the lessee:
8        (1) that portion of the rent not due which the number
9    of days from the beginning of the period for which the rent
10    is not due to the date of the termination of the legal
11    tenancy bears to the total number of days in the period for
12    which the rent is unpaid; and
13        (2) that portion of the landlord's share of actual
14    expenses paid before the termination of the legal tenancy
15    and not previously recovered by him, which the number of
16    days in the lease period on and after the termination bears
17    to the total number of days in the lease period.
18    (d) This Section does not apply to life estates and
19remainder interests in oil or gas from non-coal formations, or
20royalties or overriding royalties created under leases of such
22(Source: P.A. 82-390; 87-714.)