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90_HB0585enr
35 ILCS 5/304 from Ch. 120, par. 3-304
Amends the Illinois Income Tax Act. Provides that if a
person other than a resident derives business income from
this State and others, the business income shall be
apportioned to this State by multiplying the income by the
sales factor (now by multiplying the income by a fraction,
the numerator of which is the sum of the property factor, the
payroll factor, and 200% of the sales factor and the
denominator of which is 4 reduced by the number of factors
other than the sales factor which have a denominator of zero
and by an additional 2 if the sales factor has a denominator
of zero). Deletes provisions in the definition of sales
factor stating that sales are in this State if the property
is shipped from this State and the purchaser is the
government or is otherwise exempt from taxation. Deletes
provision stating that sales are not in this State if the
seller and purchaser would be members of the same unitary
business group but for the fact that one of them is a person
with 80% or more of total business activity outside of the
United States and the property is purchased for resale.
Provides that the provision excluding dividends and Subpart F
income from the sales factor shall apply to taxable years
ending on or after December 31, 1995 (now taxable years
ending on or after December 31, 1995 and excluding taxable
years ending after December 31, 1997). Effective
immediately.
LRB9000853KDksA
HB0585 Enrolled LRB9000853KDksA
1 AN ACT to amend the Illinois Income Tax Act by changing
2 Sections 304, 804, and 1501.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 5. The Illinois Income Tax Act is amended by
6 changing Sections 304, 804, and 1501 as follows:
7 (35 ILCS 5/304) (from Ch. 120, par. 3-304)
8 Sec. 304. Business income of persons other than
9 residents.
10 (a) In general. The business income of a person other
11 than a resident shall be allocated to this State if such
12 person's business income is derived solely from this State.
13 If a person other than a resident derives business income
14 from this State and one or more other states, then, for tax
15 years ending on or before December 30, 1997, and except as
16 otherwise provided by this Section, such person's business
17 income shall be apportioned to this State by multiplying the
18 income by a fraction, the numerator of which is the sum of
19 the property factor (if any), the payroll factor (if any) and
20 200% of the sales factor (if any), and the denominator of
21 which is 4 reduced by the number of factors other than the
22 sales factor which have a denominator of zero and by an
23 additional 2 if the sales factor has a denominator of zero.
24 For tax years ending on or after December 31, 1997, and
25 except as otherwise provided by this Section, persons other
26 than residents who derive business income from this State and
27 one or more other states shall apportion their business
28 income to this State as provided in subsection (h) of this
29 Section.
30 (1) Property factor.
31 (A) The property factor is a fraction, the
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1 numerator of which is the average value of the person's
2 real and tangible personal property owned or rented and
3 used in the trade or business in this State during the
4 taxable year and the denominator of which is the average
5 value of all the person's real and tangible personal
6 property owned or rented and used in the trade or
7 business during the taxable year.
8 (B) Property owned by the person is valued at its
9 original cost. Property rented by the person is valued at
10 8 times the net annual rental rate. Net annual rental
11 rate is the annual rental rate paid by the person less
12 any annual rental rate received by the person from
13 sub-rentals.
14 (C) The average value of property shall be
15 determined by averaging the values at the beginning and
16 ending of the taxable year but the Director may require
17 the averaging of monthly values during the taxable year
18 if reasonably required to reflect properly the average
19 value of the person's property.
20 (2) Payroll factor.
21 (A) The payroll factor is a fraction, the numerator
22 of which is the total amount paid in this State during
23 the taxable year by the person for compensation, and the
24 denominator of which is the total compensation paid
25 everywhere during the taxable year.
26 (B) Compensation is paid in this State if:
27 (i) The individual's service is performed
28 entirely within this State;
29 (ii) The individual's service is performed
30 both within and without this State, but the service
31 performed without this State is incidental to the
32 individual's service performed within this State; or
33 (iii) Some of the service is performed within
34 this State and either the base of operations, or if
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1 there is no base of operations, the place from which
2 the service is directed or controlled is within this
3 State, or the base of operations or the place from
4 which the service is directed or controlled is not
5 in any state in which some part of the service is
6 performed, but the individual's residence is in this
7 State.
8 Beginning with taxable years ending on or after
9 December 31, 1992, for residents of states that impose a
10 comparable tax liability on residents of this State, for
11 purposes of item (i) of this paragraph (B), in the case
12 of persons who perform personal services under personal
13 service contracts for sports performances, services by
14 that person at a sporting event taking place in Illinois
15 shall be deemed to be a performance entirely within this
16 State.
17 (3) Sales factor.
18 (A) The sales factor is a fraction, the numerator
19 of which is the total sales of the person in this State
20 during the taxable year, and the denominator of which is
21 the total sales of the person everywhere during the
22 taxable year.
23 (B) Sales of tangible personal property are in this
24 State if:
25 (i) The property is delivered or shipped to a
26 purchaser, other than the United States government,
27 within this State regardless of the f. o. b. point
28 or other conditions of the sale; or
29 (ii) The property is shipped from an office,
30 store, warehouse, factory or other place of storage
31 in this State and either the purchaser is the United
32 States government or the person is not taxable in
33 the state of the purchaser; provided, however, that
34 premises owned or leased by a person who has
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1 independently contracted with the seller for the
2 printing of newspapers, periodicals or books shall
3 not be deemed to be an office, store, warehouse,
4 factory or other place of storage for purposes of
5 this Section. Sales of tangible personal property
6 are not in this State if the seller and purchaser
7 would be members of the same unitary business group
8 but for the fact that either the seller or purchaser
9 is a person with 80% or more of total business
10 activity outside of the United States and the
11 property is purchased for resale.
12 (C) Sales, other than sales of tangible personal
13 property, are in this State if:
14 (i) The income-producing activity is performed
15 in this State; or
16 (ii) The income-producing activity is
17 performed both within and without this State and a
18 greater proportion of the income-producing activity
19 is performed within this State than without this
20 State, based on performance costs.
21 (D) For taxable years ending on or after December
22 31, 1995 and excluding taxable years ending after
23 December 31, 1997, the following items of income shall
24 not be included in the numerator or denominator of the
25 sales factor: dividends; amounts included under Section
26 78 of the Internal Revenue Code; and Subpart F income as
27 defined in Section 952 of the Internal Revenue Code. No
28 inference shall be drawn from the enactment of this
29 paragraph (D) in construing this Section for taxable
30 years ending before December 31, 1995.
31 (b) Insurance companies.
32 (1) In general. Except as otherwise provided by
33 paragraph (2), business income of an insurance company for a
34 taxable year shall be apportioned to this State by
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1 multiplying such income by a fraction, the numerator of which
2 is the direct premiums written for insurance upon property or
3 risk in this State, and the denominator of which is the
4 direct premiums written for insurance upon property or risk
5 everywhere. For purposes of this subsection, the term "direct
6 premiums written" means the total amount of direct premiums
7 written, assessments and annuity considerations as reported
8 for the taxable year on the annual statement filed by the
9 company with the Illinois Director of Insurance in the form
10 approved by the National Convention of Insurance
11 Commissioners or such other form as may be prescribed in lieu
12 thereof.
13 (2) Reinsurance. If the principal source of premiums
14 written by an insurance company consists of premiums for
15 reinsurance accepted by it, the business income of such
16 company shall be apportioned to this State by multiplying
17 such income by a fraction, the numerator of which is the sum
18 of (i) direct premiums written for insurance upon property or
19 risk in this State, plus (ii) premiums written for
20 reinsurance accepted in respect of property or risk in this
21 State, and the denominator of which is the sum of (iii)
22 direct premiums written for insurance upon property or risk
23 everywhere, plus (iv) premiums written for reinsurance
24 accepted in respect of property or risk everywhere. For
25 purposes of this paragraph, premiums written for reinsurance
26 accepted in respect of property or risk in this State,
27 whether or not otherwise determinable, may, at the election
28 of the company, be determined on the basis of the proportion
29 which premiums written for reinsurance accepted from
30 companies commercially domiciled in Illinois bears to
31 premiums written for reinsurance accepted from all sources,
32 or, alternatively, in the proportion which the sum of the
33 direct premiums written for insurance upon property or risk
34 in this State by each ceding company from which reinsurance
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1 is accepted bears to the sum of the total direct premiums
2 written by each such ceding company for the taxable year.
3 (c) Financial organizations.
4 (1) In general. Business income of a financial
5 organization shall be apportioned to this State by
6 multiplying such income by a fraction, the numerator of which
7 is its business income from sources within this State, and
8 the denominator of which is its business income from all
9 sources. For the purposes of this subsection, the business
10 income of a financial organization from sources within this
11 State is the sum of the amounts referred to in subparagraphs
12 (A) through (E) following, but excluding the adjusted income
13 of an international banking facility as determined in
14 paragraph (2):
15 (A) Fees, commissions or other compensation for
16 financial services rendered within this State;
17 (B) Gross profits from trading in stocks, bonds or
18 other securities managed within this State;
19 (C) Dividends, and interest from Illinois
20 customers, which are received within this State;
21 (D) Interest charged to customers at places of
22 business maintained within this State for carrying debit
23 balances of margin accounts, without deduction of any
24 costs incurred in carrying such accounts; and
25 (E) Any other gross income resulting from the
26 operation as a financial organization within this State.
27 In computing the amounts referred to in paragraphs (A)
28 through (E) of this subsection, any amount received by a
29 member of an affiliated group (determined under Section
30 1504(a) of the Internal Revenue Code but without
31 reference to whether any such corporation is an
32 "includible corporation" under Section 1504(b) of the
33 Internal Revenue Code) from another member of such group
34 shall be included only to the extent such amount exceeds
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1 expenses of the recipient directly related thereto.
2 (2) International Banking Facility.
3 (A) Adjusted Income. The adjusted income of an
4 international banking facility is its income reduced by
5 the amount of the floor amount.
6 (B) Floor Amount. The floor amount shall be the
7 amount, if any, determined by multiplying the income of
8 the international banking facility by a fraction, not
9 greater than one, which is determined as follows:
10 (i) The numerator shall be:
11 The average aggregate, determined on a
12 quarterly basis, of the financial organization's
13 loans to banks in foreign countries, to foreign
14 domiciled borrowers (except where secured primarily
15 by real estate) and to foreign governments and other
16 foreign official institutions, as reported for its
17 branches, agencies and offices within the state on
18 its "Consolidated Report of Condition", Schedule A,
19 Lines 2.c., 5.b., and 7.a., which was filed with the
20 Federal Deposit Insurance Corporation and other
21 regulatory authorities, for the year 1980, minus
22 The average aggregate, determined on a
23 quarterly basis, of such loans (other than loans of
24 an international banking facility), as reported by
25 the financial institution for its branches, agencies
26 and offices within the state, on the corresponding
27 Schedule and lines of the Consolidated Report of
28 Condition for the current taxable year, provided,
29 however, that in no case shall the amount determined
30 in this clause (the subtrahend) exceed the amount
31 determined in the preceding clause (the minuend);
32 and
33 (ii) the denominator shall be the average
34 aggregate, determined on a quarterly basis, of the
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1 international banking facility's loans to banks in
2 foreign countries, to foreign domiciled borrowers
3 (except where secured primarily by real estate) and
4 to foreign governments and other foreign official
5 institutions, which were recorded in its financial
6 accounts for the current taxable year.
7 (C) Change to Consolidated Report of Condition and
8 in Qualification. In the event the Consolidated Report
9 of Condition which is filed with the Federal Deposit
10 Insurance Corporation and other regulatory authorities is
11 altered so that the information required for determining
12 the floor amount is not found on Schedule A, lines 2.c.,
13 5.b. and 7.a., the financial institution shall notify the
14 Department and the Department may, by regulations or
15 otherwise, prescribe or authorize the use of an
16 alternative source for such information. The financial
17 institution shall also notify the Department should its
18 international banking facility fail to qualify as such,
19 in whole or in part, or should there be any amendment or
20 change to the Consolidated Report of Condition, as
21 originally filed, to the extent such amendment or change
22 alters the information used in determining the floor
23 amount.
24 (d) Transportation services. Business income derived
25 from furnishing transportation services shall be apportioned
26 to this State in accordance with paragraphs (1) and (2):
27 (1) Such business income (other than that derived
28 from transportation by pipeline) shall be apportioned to
29 this State by multiplying such income by a fraction, the
30 numerator of which is the revenue miles of the person in
31 this State, and the denominator of which is the revenue
32 miles of the person everywhere. For purposes of this
33 paragraph, a revenue mile is the transportation of 1
34 passenger or 1 net ton of freight the distance of 1 mile
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1 for a consideration. Where a person is engaged in the
2 transportation of both passengers and freight, the
3 fraction above referred to shall be determined by means
4 of an average of the passenger revenue mile fraction and
5 the freight revenue mile fraction, weighted to reflect
6 the person's
7 (A) relative railway operating income from
8 total passenger and total freight service, as
9 reported to the Interstate Commerce Commission, in
10 the case of transportation by railroad, and
11 (B) relative gross receipts from passenger and
12 freight transportation, in case of transportation
13 other than by railroad.
14 (2) Such business income derived from
15 transportation by pipeline shall be apportioned to this
16 State by multiplying such income by a fraction, the
17 numerator of which is the revenue miles of the person in
18 this State, and the denominator of which is the revenue
19 miles of the person everywhere. For the purposes of this
20 paragraph, a revenue mile is the transportation by
21 pipeline of 1 barrel of oil, 1,000 cubic feet of gas, or
22 of any specified quantity of any other substance, the
23 distance of 1 mile for a consideration.
24 (e) Combined apportionment. Where 2 or more persons are
25 engaged in a unitary business as described in subsection
26 (a)(27) of Section 1501, a part of which is conducted in this
27 State by one or more members of the group, the business
28 income attributable to this State by any such member or
29 members shall be apportioned by means of the combined
30 apportionment method.
31 (f) Alternative allocation. If the allocation and
32 apportionment provisions of subsections (a) through (e) and
33 of subsection (h) do not fairly represent the extent of a
34 person's business activity in this State, the person may
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1 petition for, or the Director may require, in respect of all
2 or any part of the person's business activity, if reasonable:
3 (1) Separate accounting;
4 (2) The exclusion of any one or more factors;
5 (3) The inclusion of one or more additional factors
6 which will fairly represent the person's business
7 activities in this State; or
8 (4) The employment of any other method to
9 effectuate an equitable allocation and apportionment of
10 the person's business income.
11 (g) Cross reference. For allocation of business income
12 by residents, see Section 301(a).
13 (h) Sales factor. For tax years ending on or after
14 December 31, 1997, persons other than residents who derive
15 business income from this State and one or more other states
16 shall apportion their business income to this State by
17 mutiplying the income by the sales factor.
18 (1) The sales factor is a fraction, the numerator
19 of which is the total sales of the person in this State
20 during the taxable year, and the denominator of which is
21 the total sales of the person everywhere during the
22 taxable year.
23 (2) Sales of tangible personal property are in this
24 State if the property is delivered or shipped to a
25 purchaser within this State regardless of the f.o.b.
26 point or other conditions of the sale.
27 (3) Sales, other than sales of tangible personal
28 property, are in this State if:
29 (A) the income producing activity is performed
30 in this State; or
31 (B) the income producing activity is performed
32 both within and without this State and a greater
33 proportion of the income-producing activity is
34 performed within this State than without this State,
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1 based on performance costs.
2 (4) For taxable years ending on or after December
3 31, 1995, the following items of income shall not be
4 included in the numerator or denominator of the sales
5 factor; dividends; amounts included under Section 78 of
6 the Internal Revenue Code; and Subpart F income as
7 defined in Section 953 of the Internal Revenue Code. No
8 inference shall be drawn from the enactment of this
9 paragraph (4) in construing this Section for taxable
10 years ending before December 31, 1995. The provisions of
11 this amendatory Act of 1997 apply to tax years ending on
12 or after December 31, 1997.
13 (Source: P.A. 89-379, eff. 1-1-96; 89-399, eff. 8-20-95;
14 89-626, eff. 8-9-96.)
15 (35 ILCS 5/804) (from Ch. 120, par. 8-804)
16 Sec. 804. Failure to Pay Estimated Tax.
17 (a) In general. In case of any underpayment of estimated
18 tax by a taxpayer, except as provided in subsection (d) or
19 (e), the taxpayer shall be liable to a penalty in an amount
20 determined at the rate prescribed by Section 3-3 of the
21 Uniform Penalty and Interest Act upon the amount of the
22 underpayment (determined under subsection (b)) for each
23 required installment.
24 (b) Amount of underpayment. For purposes of subsection
25 (a), the amount of the underpayment shall be the excess of:
26 (1) the amount of the installment which would be
27 required to be paid under subsection (c), over
28 (2) the amount, if any, of the installment paid on
29 or before the last date prescribed for payment.
30 (c) Amount of Required Installments.
31 (1) Amount.
32 (A) In General. Except as provided in
33 paragraph (2), the amount of any required
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1 installment shall be 25% of the required annual
2 payment.
3 (B) Required Annual Payment. For purposes of
4 subparagraph (A), the term "required annual payment"
5 means the lesser of
6 (i) 90% of the tax shown on the return
7 for the taxable year, or if no return is filed,
8 90% of the tax for such year, or
9 (ii) 100% of the tax shown on the return
10 of the taxpayer for the preceding taxable year
11 if a return showing a liability for tax was
12 filed by the taxpayer for the preceding taxable
13 year and such preceding year was a taxable year
14 of 12 months.
15 (2) Lower Required Installment where Annualized
16 Income Installment is Less Than Amount Determined Under
17 Paragraph (1).
18 (A) In General. In the case of any required
19 installment if a taxpayer establishes that the
20 annualized income installment is less than the
21 amount determined under paragraph (1),
22 (i) the amount of such required
23 installment shall be the annualized income
24 installment, and
25 (ii) any reduction in a required
26 installment resulting from the application of
27 this subparagraph shall be recaptured by
28 increasing the amount of the next required
29 installment determined under paragraph (1) by
30 the amount of such reduction, and by increasing
31 subsequent required installments to the extent
32 that the reduction has not previously been
33 recaptured under this clause.
34 (B) Determination of Annualized Income
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1 Installment. In the case of any required
2 installment, the annualized income installment is
3 the excess, if any, of
4 (i) an amount equal to the applicable
5 percentage of the tax for the taxable year
6 computed by placing on an annualized basis the
7 net income for months in the taxable year
8 ending before the due date for the installment,
9 over
10 (ii) the aggregate amount of any prior
11 required installments for the taxable year.
12 (C) Applicable Percentage.
13 In the case of the following The applicable
14 required installments: percentage is:
15 1st ............................... 22.5%
16 2nd ............................... 45%
17 3rd ............................... 67.5%
18 4th ............................... 90%
19 (D) Annualized Net Income; Individuals. For
20 individuals, net income shall be placed on an
21 annualized basis by:
22 (i) multiplying by 12, or in the case of
23 a taxable year of less than 12 months, by the
24 number of months in the taxable year, the net
25 income computed without regard to the standard
26 exemption for the months in the taxable year
27 ending before the month in which the
28 installment is required to be paid;
29 (ii) dividing the resulting amount by the
30 number of months in the taxable year ending
31 before the month in which such installment date
32 falls; and
33 (iii) deducting from such amount the
34 standard exemption allowable for the taxable
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1 year, such standard exemption being determined
2 as of the last date prescribed for payment of
3 the installment.
4 (E) Annualized Net Income; Corporations. For
5 corporations, net income shall be placed on an
6 annualized basis by multiplying by 12 the taxable
7 income
8 (i) for the first 3 months of the taxable
9 year, in the case of the installment required
10 to be paid in the 4th month,
11 (ii) for the first 3 months or for the
12 first 5 months of the taxable year, in the case
13 of the installment required to be paid in the
14 6th month,
15 (iii) for the first 6 months or for the
16 first 8 months of the taxable year, in the case
17 of the installment required to be paid in the
18 9th month, and
19 (iv) for the first 9 months or for the
20 first 11 months of the taxable year, in the
21 case of the installment required to be paid in
22 the 12th month of the taxable year,
23 then dividing the resulting amount by the number of
24 months in the taxable year (3, 5, 6, 8, 9, or 11 as
25 the case may be).
26 (d) Exceptions. Notwithstanding the provisions of the
27 preceding subsections, the penalty imposed by subsection (a)
28 shall not be imposed if the taxpayer was not required to file
29 an Illinois income tax return for the preceding taxable year,
30 or if the taxpayer has underpaid taxes solely because of the
31 increased rate in effect during the period from July 1, 1989
32 through December 1989, or, for individuals, if the taxpayer
33 had no tax liability for the preceding taxable year and such
34 year was a taxable year of 12 months. The penalty imposed by
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1 subsection (a) shall also not be imposed on any underpayments
2 of estimated tax due before the effective date of this
3 amendatory Act of 1997 which underpayments are solely
4 attributable to the change in apportionment from subsection
5 (a) to subsection (h) of Section 304. The provisions of this
6 amendatory Act of 1997 apply to tax years ending on or after
7 December 31, 1997.
8 (e) The penalty imposed for underpayment of estimated
9 tax by subsection (a) of this Section shall not be imposed to
10 the extent that the Department or his designate determines,
11 pursuant to Section 3-8 of the Uniform Penalty and Interest
12 Act that the penalty should not be imposed.
13 (f) Definition of tax. For purposes of subsections (b)
14 and (c), the term "tax" means the excess of the tax imposed
15 under Article 2 of this Act, over the amounts credited
16 against such tax under Sections 601(b) (3) and (4).
17 (g) Application of Section in case of tax withheld on
18 compensation. For purposes of applying this Section in the
19 case of an individual, tax withheld under Article 7 for the
20 taxable year shall be deemed a payment of estimated tax, and
21 an equal part of such amount shall be deemed paid on each
22 installment date for such taxable year, unless the taxpayer
23 establishes the dates on which all amounts were actually
24 withheld, in which case the amounts so withheld shall be
25 deemed payments of estimated tax on the dates on which such
26 amounts were actually withheld.
27 (i) Short taxable year. The application of this Section
28 to taxable years of less than 12 months shall be in
29 accordance with regulations prescribed by the Department.
30 The changes in this Section made by Public Act 84-127
31 shall apply to taxable years ending on or after January 1,
32 1986.
33 (Source: P.A. 86-678; 86-953; 86-1028; 87-205.)
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1 (35 ILCS 5/1501) (from Ch. 120, par. 15-1501)
2 Sec. 1501. Definitions.
3 (a) In general. When used in this Act, where not
4 otherwise distinctly expressed or manifestly incompatible
5 with the intent thereof:
6 (1) Business income. The term "business income"
7 means income arising from transactions and activity in
8 the regular course of the taxpayer's trade or business,
9 net of the deductions allocable thereto, and includes
10 income from tangible and intangible property if the
11 acquisition, management, and disposition of the property
12 constitute integral parts of the taxpayer's regular trade
13 or business operations. Such term does not include
14 compensation or the deductions allocable thereto.
15 (2) Commercial domicile. The term "commercial
16 domicile" means the principal place from which the trade
17 or business of the taxpayer is directed or managed.
18 (3) Compensation. The term "compensation" means
19 wages, salaries, commissions and any other form of
20 remuneration paid to employees for personal services.
21 (4) Corporation. The term "corporation" includes
22 associations, joint-stock companies, insurance companies
23 and cooperatives. Any entity, including a limited
24 liability company formed under the Illinois Limited
25 Liability Company Act, shall be treated as a corporation
26 if it is so classified for federal income tax purposes.
27 (5) Department. The term "Department" means the
28 Department of Revenue of this State.
29 (6) Director. The term "Director" means the
30 Director of Revenue of this State.
31 (7) Fiduciary. The term "fiduciary" means a
32 guardian, trustee, executor, administrator, receiver, or
33 any person acting in any fiduciary capacity for any
34 person.
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1 (8) Financial organization.
2 (A) The term "financial organization" means
3 any bank, bank holding company, trust company,
4 savings bank, industrial bank, land bank, safe
5 deposit company, private banker, savings and loan
6 association, building and loan association, credit
7 union, currency exchange, cooperative bank, small
8 loan company, sales finance company, investment
9 company, or any person which is owned by a bank or
10 bank holding company. For the purpose of this
11 Section a "person" will include only those persons
12 which a bank holding company may acquire and hold an
13 interest in, directly or indirectly, under the
14 provisions of the Bank Holding Company Act of 1956
15 (12 U.S.C. 1841, et seq.), except where interests in
16 any person must be disposed of within certain
17 required time limits under the Bank Holding Company
18 Act of 1956.
19 (B) For purposes of subparagraph (A) of this
20 paragraph, the term "bank" includes (i) any entity
21 that is regulated by the Comptroller of the Currency
22 under the National Bank Act, or by the Federal
23 Reserve Board, or by the Federal Deposit Insurance
24 Corporation and (ii) any federally or State
25 chartered bank operating as a credit card bank.
26 (C) For purposes of subparagraph (A) of this
27 paragraph, the term "sales finance company" means a
28 person primarily engaged in the business of
29 purchasing or making loans upon the security of
30 retail installment contracts or retail charge
31 agreements or the outstanding balances under such
32 contracts or agreements. The term includes but is
33 not limited to persons: (i) to whom the Sales
34 Finance Agency Act is rendered inapplicable by
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1 subsection (b) of Section 17 thereof; (ii) engaged
2 in consumer sales finance activities governed by the
3 Sales Finance Agency Act or that would be governed
4 by that Act if conducted in this State; (iii)
5 engaged in activities governed by the Retail
6 Installment Sales Act, including the making or
7 purchasing of retail installment contracts or retail
8 charge agreements for "goods" or "services" as
9 defined in that Act, or activities that would be
10 governed by that Act if conducted in this State;
11 (iv) engaged in activities governed by the Motor
12 Vehicle Retail Installment Sales Act or that would
13 be governed by that Act if conducted in this State;
14 (v) engaged in commercial finance activities
15 governed by the Illinois Uniform Commercial Code or
16 that would be governed by that Code if conducted in
17 this State; or (vi) engaged in the finance leasing
18 of tangible personal property where "finance
19 leasing" is activity that is the economic equivalent
20 of an extension of credit and for which a deduction
21 for depreciation under Section 167 of the Internal
22 Revenue Code of 1986 is not available to a lessor.
23 (D) Subparagraphs (B) and (C) of this
24 paragraph are declaratory of existing law and apply
25 retroactively, for all tax years beginning on or
26 before December 31, 1996, to all original returns,
27 to all amended returns filed no later than 30 days
28 after the effective date of this amendatory Act of
29 1996, and to all notices issued on or before the
30 effective date of this amendatory Act of 1996 under
31 subsection (a) of Section 903, subsection (a) of
32 Section 904, subsection (e) of Section 909, or
33 Section 912. A taxpayer that is a "financial
34 organization" that engages in any transaction with
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1 an affiliate shall be a "financial organization" for
2 all purposes of this Act.
3 (E) For all tax years beginning on or before
4 December 31, 1996, a taxpayer that falls within the
5 definition of a "financial organization" under
6 subparagraphs (B) or (C) of this paragraph, but who
7 does not fall within the definition of a "financial
8 organization" under the Proposed Regulations issued
9 by the Department of Revenue on July 19, 1996, may
10 irrevocably elect to apply the Proposed Regulations
11 for all of those years as though the Proposed
12 Regulations had been lawfully promulgated, adopted,
13 and in effect for all of those years. For purposes
14 of applying subparagraphs (B) or (C) of this
15 paragraph to all of those years, the election
16 allowed by this subparagraph applies only to the
17 taxpayer making the election and to those members of
18 the taxpayer's unitary business group who are
19 ordinarily required to apportion business income
20 under the same subsection of Section 304 of this Act
21 as the taxpayer making the election. No election
22 allowed by this subparagraph shall be made under a
23 claim filed under subsection (d) of Section 909 more
24 than 30 days after the effective date of this
25 amendatory Act of 1996.
26 (9) Fiscal year. The term "fiscal year" means an
27 accounting period of 12 months ending on the last day of
28 any month other than December.
29 (10) Includes and including. The terms "includes"
30 and "including" when used in a definition contained in
31 this Act shall not be deemed to exclude other things
32 otherwise within the meaning of the term defined.
33 (11) Internal Revenue Code. The term "Internal
34 Revenue Code" means the United States Internal Revenue
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1 Code of 1954 or any successor law or laws relating to
2 federal income taxes in effect for the taxable year.
3 (12) Mathematical error. The term "mathematical
4 error" includes the following types of errors, omissions,
5 or defects in a return filed by a taxpayer which prevents
6 acceptance of the return as filed for processing:
7 (A) arithmetic errors or incorrect
8 computations on the return or supporting schedules;
9 (B) entries on the wrong lines;
10 (C) omission of required supporting forms or
11 schedules or the omission of the information in
12 whole or in part called for thereon; and
13 (D) an attempt to claim, exclude, deduct, or
14 improperly report, in a manner directly contrary to
15 the provisions of the Act and regulations thereunder
16 any item of income, exemption, deduction, or credit.
17 (13) Nonbusiness income. The term "nonbusiness
18 income" means all income other than business income or
19 compensation.
20 (14) Nonresident. The term "nonresident" means a
21 person who is not a resident.
22 (15) Paid, incurred and accrued. The terms "paid",
23 "incurred" and "accrued" shall be construed according to
24 the method of accounting upon the basis of which the
25 person's base income is computed under this Act.
26 (16) Partnership and partner. The term
27 "partnership" includes a syndicate, group, pool, joint
28 venture or other unincorporated organization, through or
29 by means of which any business, financial operation, or
30 venture is carried on, and which is not, within the
31 meaning of this Act, a trust or estate or a corporation;
32 and the term "partner" includes a member in such
33 syndicate, group, pool, joint venture or organization.
34 Any entity, including a limited liability company
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1 formed under the Illinois Limited Liability Company Act,
2 shall be treated as a partnership if it is so classified
3 for federal income tax purposes.
4 For purposes of the tax imposed at subsection (c) of
5 Section 201 of this Act, the term "partnership" does not
6 include a syndicate, group, pool, joint venture or other
7 unincorporated organization established for the sole
8 purpose of playing the Illinois State Lottery.
9 (17) Part-year resident. The term "part-year
10 resident" means an individual who became a resident
11 during the taxable year or ceased to be a resident during
12 the taxable year. Under Section 1501 (a) (20) (A) (i)
13 residence commences with presence in this State for other
14 than a temporary or transitory purpose and ceases with
15 absence from this State for other than a temporary or
16 transitory purpose. Under Section 1501 (a) (20) (A) (ii)
17 residence commences with the establishment of domicile in
18 this State and ceases with the establishment of domicile
19 in another State.
20 (18) Person. The term "person" shall be construed
21 to mean and include an individual, a trust, estate,
22 partnership, association, firm, company, corporation,
23 limited liability company, or fiduciary. For purposes of
24 Section 1301 and 1302 of this Act, a "person" means (i)
25 an individual, (ii) a corporation, (iii) an officer,
26 agent, or employee of a corporation, (iv) a member, agent
27 or employee of a partnership, or (v) a member, manager,
28 employee, officer, director, or agent of a limited
29 liability company who in such capacity commits an offense
30 specified in Section 1301 and 1302.
31 (18A) Records. The term "records" includes all
32 data maintained by the taxpayer, whether on paper,
33 microfilm, microfiche, or any type of machine-sensible
34 data compilation.
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1 (19) Regulations. The term "regulations" includes
2 rules promulgated and forms prescribed by the Department.
3 (20) Resident. The term "resident" means:
4 (A) an individual (i) who is in this State for
5 other than a temporary or transitory purpose during
6 the taxable year; or (ii) who is domiciled in this
7 State but is absent from the State for a temporary
8 or transitory purpose during the taxable year;
9 (B) The estate of a decedent who at his or her
10 death was domiciled in this State;
11 (C) A trust created by a will of a decedent
12 who at his death was domiciled in this State; and
13 (D) An irrevocable trust, the grantor of which
14 was domiciled in this State at the time such trust
15 became irrevocable. For purpose of this
16 subparagraph, a trust shall be considered
17 irrevocable to the extent that the grantor is not
18 treated as the owner thereof under Sections 671
19 through 678 of the Internal Revenue Code.
20 (21) Sales. The term "sales" means all gross
21 receipts of the taxpayer not allocated under Sections
22 301, 302 and 303.
23 (22) State. The term "state" when applied to a
24 jurisdiction other than this State means any state of the
25 United States, the District of Columbia, the Commonwealth
26 of Puerto Rico, any Territory or Possession of the United
27 States, and any foreign country, or any political
28 subdivision of any of the foregoing. For purposes of the
29 foreign tax credit under Section 601, the term "state"
30 means any state of the United States, the District of
31 Columbia, the Commonwealth of Puerto Rico, and any
32 territory or possession of the United States, or any
33 political subdivision of any of the foregoing, effective
34 for tax years ending on or after December 31, 1989.
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1 (23) Taxable year. The term "taxable year" means
2 the calendar year, or the fiscal year ending during such
3 calendar year, upon the basis of which the base income is
4 computed under this Act. "Taxable year" means, in the
5 case of a return made for a fractional part of a year
6 under the provisions of this Act, the period for which
7 such return is made.
8 (24) Taxpayer. The term "taxpayer" means any person
9 subject to the tax imposed by this Act.
10 (25) International banking facility. The term
11 international banking facility shall have the same
12 meaning as is set forth in the Illinois Banking Act or as
13 is set forth in the laws of the United States or
14 regulations of the Board of Governors of the Federal
15 Reserve System.
16 (26) Income Tax Return Preparer.
17 (A) The term "income tax return preparer"
18 means any person who prepares for compensation, or
19 who employs one or more persons to prepare for
20 compensation, any return of tax imposed by this Act
21 or any claim for refund of tax imposed by this Act.
22 The preparation of a substantial portion of a return
23 or claim for refund shall be treated as the
24 preparation of that return or claim for refund.
25 (B) A person is not an income tax return
26 preparer if all he or she does is
27 (i) furnish typing, reproducing, or other
28 mechanical assistance;
29 (ii) prepare returns or claims for
30 refunds for the employer by whom he or she is
31 regularly and continuously employed;
32 (iii) prepare as a fiduciary returns or
33 claims for refunds for any person; or
34 (iv) prepare claims for refunds for a
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1 taxpayer in response to any notice of
2 deficiency issued to that taxpayer or in
3 response to any waiver of restriction after the
4 commencement of an audit of that taxpayer or of
5 another taxpayer if a determination in the
6 audit of the other taxpayer directly or
7 indirectly affects the tax liability of the
8 taxpayer whose claims he or she is preparing.
9 (27) Unitary business group. The term "unitary
10 business group" means a group of persons related through
11 common ownership whose business activities are integrated
12 with, dependent upon and contribute to each other. The
13 group will not include those members whose business
14 activity outside the United States is 80% or more of any
15 such member's total business activity; for purposes of
16 this paragraph and clause (a) (3) (B) (ii) of Section
17 304, business activity within the United States shall be
18 measured by means of the factors ordinarily applicable
19 under subsections (a), (b), (c), and (d), or (h) of
20 Section 304 except that, in the case of members
21 ordinarily required to apportion business income by means
22 of the 3 factor formula of property, payroll and sales
23 specified in subsection (a) of Section 304, or the
24 single-factor sales formula specified in subsection (h)
25 of Section 304, such members shall not use the sales
26 factor in the computation and the results of the property
27 and payroll factor computations of subsection (a) of
28 Section 304 shall be divided by 2 (by one if either the
29 property or payroll factor has a denominator of zero).
30 The computation required by the preceding sentence shall,
31 in each case, involve the division of the member's
32 property, payroll, or revenue miles in the United States,
33 insurance premiums on property or risk in the United
34 States, or financial organization business income from
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1 sources within the United States, as the case may be, by
2 the respective worldwide figures for such items. Common
3 ownership in the case of corporations is the direct or
4 indirect control or ownership of more than 50% of the
5 outstanding voting stock of the persons carrying on
6 unitary business activity. Unitary business activity can
7 ordinarily be illustrated where the activities of the
8 members are: (1) in the same general line (such as
9 manufacturing, wholesaling, retailing of tangible
10 personal property, insurance, transportation or finance);
11 or (2) are steps in a vertically structured enterprise or
12 process (such as the steps involved in the production of
13 natural resources, which might include exploration,
14 mining, refining, and marketing); and, in either
15 instance, the members are functionally integrated through
16 the exercise of strong centralized management (where, for
17 example, authority over such matters as purchasing,
18 financing, tax compliance, product line, personnel,
19 marketing and capital investment is not left to each
20 member). In no event, however, will any unitary business
21 group include members which are ordinarily required to
22 apportion business income under different subsections of
23 Section 304 except that for tax years ending on or after
24 December 31, 1987 this prohibition shall not apply to a
25 unitary business group composed of one or more taxpayers
26 all of which apportion business income pursuant to
27 subsection (b) of Section 304, or all of which apportion
28 business income pursuant to subsection (d) of Section
29 304, and a holding company of such single-factor
30 taxpayers (see definition of "financial organization" for
31 rule regarding holding companies of financial
32 organizations). If a unitary business group would, but
33 for the preceding sentence, include members that are
34 ordinarily required to apportion business income under
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1 different subsections of Section 304, then for each
2 subsection of Section 304 for which there are two or more
3 members, there shall be a separate unitary business group
4 composed of such members. For purposes of the preceding
5 two sentences, a member is "ordinarily required to
6 apportion business income" under a particular subsection
7 of Section 304 if it would be required to use the
8 apportionment method prescribed by such subsection except
9 for the fact that it derives business income solely from
10 Illinois. If the unitary business group members'
11 accounting periods differ, the common parent's accounting
12 period or, if there is no common parent, the accounting
13 period of the member that is expected to have, on a
14 recurring basis, the greatest Illinois income tax
15 liability must be used to determine whether to use the
16 apportionment method provided in subsection (a) or
17 subsection (h) of Section 304. The prohibition against
18 membership in a unitary business group for taxpayers
19 ordinarily required to apportion income under different
20 subsections of Section 304 does not apply to taxpayers
21 required to apportion income under subsection (a) and
22 subsection (h) of Section 304. The provisions of this
23 amendatory Act of 1997 apply to tax years ending on or
24 after December 31, 1997.
25 (28) Subchapter S corporation. The term
26 "Subchapter S corporation" means a corporation for which
27 there is in effect an election under Section 1362 of the
28 Internal Revenue Code, or for which there is a federal
29 election to opt out of the provisions of the Subchapter S
30 Revision Act of 1982 and have applied instead the prior
31 federal Subchapter S rules as in effect on July 1, 1982.
32 (b) Other definitions.
33 (1) Words denoting number, gender, and so forth,
34 when used in this Act, where not otherwise distinctly
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1 expressed or manifestly incompatible with the intent
2 thereof:
3 (A) Words importing the singular include and
4 apply to several persons, parties or things;
5 (B) Words importing the plural include the
6 singular; and
7 (C) Words importing the masculine gender
8 include the feminine as well.
9 (2) "Company" or "association" as including
10 successors and assigns. The word "company" or
11 "association", when used in reference to a corporation,
12 shall be deemed to embrace the words "successors and
13 assigns of such company or association", and in like
14 manner as if these last-named words, or words of similar
15 import, were expressed.
16 (3) Other terms. Any term used in any Section of
17 this Act with respect to the application of, or in
18 connection with, the provisions of any other Section of
19 this Act shall have the same meaning as in such other
20 Section.
21 (Source: P.A. 88-480; 89-399, eff. 8-20-95; 89-711, eff.
22 2-14-97.)
23 Section 99. Effective date. This Act takes effect upon
24 becoming law.