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


Rep. Brandon W. Phelps

Filed: 3/24/2017





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2    AMENDMENT NO. ______. Amend House Bill 1542 by replacing
3everything after the enacting clause with the following:
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;



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



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1    receipts, after payment therefrom of all expenses, direct
2    and indirect, to income; .
3        (4) for oil or gas from non-coal formations, proceeds
4    from the sale of such minerals produced and received as
5    royalty, overriding royalty, limited royalty, working
6    interest, net profit interest, time-limited interest or
7    term interest, or lease bonus shall be deemed income.
8    (b) If an item of depletable property of a type specified
9in this Section is held on the effective date of this Act,
10receipts from the property shall be allocated in the manner
11used before the effective date of this Act, but as to all
12depletable property acquired after the effective date of this
13Act by an existing or new trust, the method of allocation
14provided herein shall be used.
15    (c) If any part of the principal consists of timber, water,
16soil, sod, dirt, peat, turf, or mosses, the receipts from those
17resources shall be allocated in accordance with Section 3.
18(Source: P.A. 87-714.)
19    (760 ILCS 15/15)  (from Ch. 30, par. 515)
20    Sec. 15. Non-trust estates.
21    (a) The provisions of this Act, as far as applicable, shall
22apply to nontrust estates subject to any agreement of the
23parties or any specific direction by statute or otherwise, and
24the references to trusts and trustees shall be read as applying
25to nontrust estates and to legal tenants (including life



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1tenants, tenants for terms of years, or any other period of
2tenancy) and remaindermen as the context requires; except that
3if either a legal tenant or a remainderman has incurred a
4charge for his benefit without the consent or agreement of the
5other, he shall pay that charge in full.
6    (b) If the costs of an improvement, including special taxes
7or assessments, representing an addition to value of property
8forming part of the principal cannot reasonably be expected to
9outlast the legal tenancy, the costs shall be paid by the legal
10tenant. If the improvement can reasonably be expected to
11outlast the legal tenancy, only a portion of the costs shall be
12paid by the legal tenant and the balance by the remainderman.
13The portion payable by the legal tenant shall be that fraction
14of the total found by dividing the present value of the legal
15tenancy by the present value of an estate of the same form as
16that of the legal tenancy but limited to a period corresponding
17to the reasonably expected duration of the improvement. The
18computation of present value of the legal tenancy shall be
19computed on the basis of two-thirds of the value determined by
20use of the tables set forth under Section 7520 of the Internal
21Revenue Code of 1986 and the regulations thereunder for the
22calculation of the values of annuities, life estates, and terms
23for years, and no other evidence of duration or expectancy
24shall be considered, except that any legal tenancy or remainder
25interest acquired for consideration based on those tables shall
26be computed on the basis of the tables in effect at the time



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1acquired. The method of computing the present value of a legal
2tenancy established in this subsection shall apply to all legal
3tenancies and remainders created after January 1, 1992 and to
4all legal tenancies and remainders which were acquired for
5consideration if the amount of the consideration was based on
6the tables set forth under Section 2031 or 7520 of the Internal
7Revenue Code then in effect.
8    (c) If a legal tenant has leased any lands for agricultural
9or farming operations and his legal tenancy terminates on or
10after the day any rent has become due and payable, he or his
11representative is entitled to recover that rent from the
12lessee; and if a legal tenancy terminates before the rent under
13the lease is fully paid, the legal tenant or his representative
14is entitled to recover from the lessee:
15        (1) that portion of the rent not due which the number
16    of days from the beginning of the period for which the rent
17    is not due to the date of the termination of the legal
18    tenancy bears to the total number of days in the period for
19    which the rent is unpaid; and
20        (2) that portion of the landlord's share of actual
21    expenses paid before the termination of the legal tenancy
22    and not previously recovered by him, which the number of
23    days in the lease period on and after the termination bears
24    to the total number of days in the lease period.
25    (d) This Section does not apply to life estates and
26remainder interests in oil or gas from non-coal formations, or



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1royalties or overriding royalties created under leases of such
3(Source: P.A. 82-390; 87-714.)".