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90_HB3812ham001
LRB9010588KDksam
1 AMENDMENT TO HOUSE BILL 3812
2 AMENDMENT NO. . Amend House Bill 3812 by replacing
3 the title with the following:
4 "AN ACT to amend the Illinois Income Tax Act by changing
5 Sections 304, 804, and 1501."; and
6 by replacing everything after the enacting clause with the
7 following:
8 "Section 5. The Illinois Income Tax Act is amended by
9 changing Sections 304, 804, and 1501 as follows:
10 (35 ILCS 5/304) (from Ch. 120, par. 3-304)
11 Sec. 304. Business income of persons other than
12 residents.
13 (a) In general. The business income of a person other
14 than a resident shall be allocated to this State if such
15 person's business income is derived solely from this State.
16 If a person other than a resident derives business income
17 from this State and one or more other states, then, for tax
18 years ending on or before December 30, 1998, and except as
19 otherwise provided by this Section, such person's business
20 income shall be apportioned to this State by multiplying the
21 income by a fraction, the numerator of which is the sum of
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1 the property factor (if any), the payroll factor (if any) and
2 200% of the sales factor (if any), and the denominator of
3 which is 4 reduced by the number of factors other than the
4 sales factor which have a denominator of zero and by an
5 additional 2 if the sales factor has a denominator of zero.
6 For tax years ending on or after December 31, 1998, and
7 except as otherwise provided by this Section, persons other
8 than residents who derive business income from this State and
9 one or more other states shall apportion their business
10 income to this State as provided in subsection (h) of this
11 Section.
12 (1) Property factor.
13 (A) The property factor is a fraction, the
14 numerator of which is the average value of the person's
15 real and tangible personal property owned or rented and
16 used in the trade or business in this State during the
17 taxable year and the denominator of which is the average
18 value of all the person's real and tangible personal
19 property owned or rented and used in the trade or
20 business during the taxable year.
21 (B) Property owned by the person is valued at its
22 original cost. Property rented by the person is valued at
23 8 times the net annual rental rate. Net annual rental
24 rate is the annual rental rate paid by the person less
25 any annual rental rate received by the person from
26 sub-rentals.
27 (C) The average value of property shall be
28 determined by averaging the values at the beginning and
29 ending of the taxable year but the Director may require
30 the averaging of monthly values during the taxable year
31 if reasonably required to reflect properly the average
32 value of the person's property.
33 (2) Payroll factor.
34 (A) The payroll factor is a fraction, the numerator
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1 of which is the total amount paid in this State during
2 the taxable year by the person for compensation, and the
3 denominator of which is the total compensation paid
4 everywhere during the taxable year.
5 (B) Compensation is paid in this State if:
6 (i) The individual's service is performed
7 entirely within this State;
8 (ii) The individual's service is performed
9 both within and without this State, but the service
10 performed without this State is incidental to the
11 individual's service performed within this State; or
12 (iii) Some of the service is performed within
13 this State and either the base of operations, or if
14 there is no base of operations, the place from which
15 the service is directed or controlled is within this
16 State, or the base of operations or the place from
17 which the service is directed or controlled is not
18 in any state in which some part of the service is
19 performed, but the individual's residence is in this
20 State.
21 Beginning with taxable years ending on or after
22 December 31, 1992, for residents of states that impose a
23 comparable tax liability on residents of this State, for
24 purposes of item (i) of this paragraph (B), in the case
25 of persons who perform personal services under personal
26 service contracts for sports performances, services by
27 that person at a sporting event taking place in Illinois
28 shall be deemed to be a performance entirely within this
29 State.
30 (3) Sales factor.
31 (A) The sales factor is a fraction, the numerator
32 of which is the total sales of the person in this State
33 during the taxable year, and the denominator of which is
34 the total sales of the person everywhere during the
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1 taxable year.
2 (B) Sales of tangible personal property are in this
3 State if:
4 (i) The property is delivered or shipped to a
5 purchaser, other than the United States government,
6 within this State regardless of the f. o. b. point
7 or other conditions of the sale; or
8 (ii) The property is shipped from an office,
9 store, warehouse, factory or other place of storage
10 in this State and either the purchaser is the United
11 States government or the person is not taxable in
12 the state of the purchaser; provided, however, that
13 premises owned or leased by a person who has
14 independently contracted with the seller for the
15 printing of newspapers, periodicals or books shall
16 not be deemed to be an office, store, warehouse,
17 factory or other place of storage for purposes of
18 this Section. Sales of tangible personal property
19 are not in this State if the seller and purchaser
20 would be members of the same unitary business group
21 but for the fact that either the seller or purchaser
22 is a person with 80% or more of total business
23 activity outside of the United States and the
24 property is purchased for resale.
25 (C) Sales, other than sales of tangible personal
26 property, are in this State if:
27 (i) The income-producing activity is performed
28 in this State; or
29 (ii) The income-producing activity is
30 performed both within and without this State and a
31 greater proportion of the income-producing activity
32 is performed within this State than without this
33 State, based on performance costs.
34 (D) For taxable years ending on or after December
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1 31, 1995, the following items of income shall not be
2 included in the numerator or denominator of the sales
3 factor: dividends; amounts included under Section 78 of
4 the Internal Revenue Code; and Subpart F income as
5 defined in Section 952 of the Internal Revenue Code. No
6 inference shall be drawn from the enactment of this
7 paragraph (D) in construing this Section for taxable
8 years ending before December 31, 1995.
9 (b) Insurance companies.
10 (1) In general. Except as otherwise provided by
11 paragraph (2), business income of an insurance company for a
12 taxable year shall be apportioned to this State by
13 multiplying such income by a fraction, the numerator of which
14 is the direct premiums written for insurance upon property or
15 risk in this State, and the denominator of which is the
16 direct premiums written for insurance upon property or risk
17 everywhere. For purposes of this subsection, the term "direct
18 premiums written" means the total amount of direct premiums
19 written, assessments and annuity considerations as reported
20 for the taxable year on the annual statement filed by the
21 company with the Illinois Director of Insurance in the form
22 approved by the National Convention of Insurance
23 Commissioners or such other form as may be prescribed in lieu
24 thereof.
25 (2) Reinsurance. If the principal source of premiums
26 written by an insurance company consists of premiums for
27 reinsurance accepted by it, the business income of such
28 company shall be apportioned to this State by multiplying
29 such income by a fraction, the numerator of which is the sum
30 of (i) direct premiums written for insurance upon property or
31 risk in this State, plus (ii) premiums written for
32 reinsurance accepted in respect of property or risk in this
33 State, and the denominator of which is the sum of (iii)
34 direct premiums written for insurance upon property or risk
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1 everywhere, plus (iv) premiums written for reinsurance
2 accepted in respect of property or risk everywhere. For
3 purposes of this paragraph, premiums written for reinsurance
4 accepted in respect of property or risk in this State,
5 whether or not otherwise determinable, may, at the election
6 of the company, be determined on the basis of the proportion
7 which premiums written for reinsurance accepted from
8 companies commercially domiciled in Illinois bears to
9 premiums written for reinsurance accepted from all sources,
10 or, alternatively, in the proportion which the sum of the
11 direct premiums written for insurance upon property or risk
12 in this State by each ceding company from which reinsurance
13 is accepted bears to the sum of the total direct premiums
14 written by each such ceding company for the taxable year.
15 (c) Financial organizations.
16 (1) In general. Business income of a financial
17 organization shall be apportioned to this State by
18 multiplying such income by a fraction, the numerator of which
19 is its business income from sources within this State, and
20 the denominator of which is its business income from all
21 sources. For the purposes of this subsection, the business
22 income of a financial organization from sources within this
23 State is the sum of the amounts referred to in subparagraphs
24 (A) through (E) following, but excluding the adjusted income
25 of an international banking facility as determined in
26 paragraph (2):
27 (A) Fees, commissions or other compensation for
28 financial services rendered within this State;
29 (B) Gross profits from trading in stocks, bonds or
30 other securities managed within this State;
31 (C) Dividends, and interest from Illinois
32 customers, which are received within this State;
33 (D) Interest charged to customers at places of
34 business maintained within this State for carrying debit
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1 balances of margin accounts, without deduction of any
2 costs incurred in carrying such accounts; and
3 (E) Any other gross income resulting from the
4 operation as a financial organization within this State.
5 In computing the amounts referred to in paragraphs (A)
6 through (E) of this subsection, any amount received by a
7 member of an affiliated group (determined under Section
8 1504(a) of the Internal Revenue Code but without
9 reference to whether any such corporation is an
10 "includible corporation" under Section 1504(b) of the
11 Internal Revenue Code) from another member of such group
12 shall be included only to the extent such amount exceeds
13 expenses of the recipient directly related thereto.
14 (2) International Banking Facility.
15 (A) Adjusted Income. The adjusted income of an
16 international banking facility is its income reduced by
17 the amount of the floor amount.
18 (B) Floor Amount. The floor amount shall be the
19 amount, if any, determined by multiplying the income of
20 the international banking facility by a fraction, not
21 greater than one, which is determined as follows:
22 (i) The numerator shall be:
23 The average aggregate, determined on a
24 quarterly basis, of the financial organization's
25 loans to banks in foreign countries, to foreign
26 domiciled borrowers (except where secured primarily
27 by real estate) and to foreign governments and other
28 foreign official institutions, as reported for its
29 branches, agencies and offices within the state on
30 its "Consolidated Report of Condition", Schedule A,
31 Lines 2.c., 5.b., and 7.a., which was filed with the
32 Federal Deposit Insurance Corporation and other
33 regulatory authorities, for the year 1980, minus
34 The average aggregate, determined on a
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1 quarterly basis, of such loans (other than loans of
2 an international banking facility), as reported by
3 the financial institution for its branches, agencies
4 and offices within the state, on the corresponding
5 Schedule and lines of the Consolidated Report of
6 Condition for the current taxable year, provided,
7 however, that in no case shall the amount determined
8 in this clause (the subtrahend) exceed the amount
9 determined in the preceding clause (the minuend);
10 and
11 (ii) the denominator shall be the average
12 aggregate, determined on a quarterly basis, of the
13 international banking facility's loans to banks in
14 foreign countries, to foreign domiciled borrowers
15 (except where secured primarily by real estate) and
16 to foreign governments and other foreign official
17 institutions, which were recorded in its financial
18 accounts for the current taxable year.
19 (C) Change to Consolidated Report of Condition and
20 in Qualification. In the event the Consolidated Report
21 of Condition which is filed with the Federal Deposit
22 Insurance Corporation and other regulatory authorities is
23 altered so that the information required for determining
24 the floor amount is not found on Schedule A, lines 2.c.,
25 5.b. and 7.a., the financial institution shall notify the
26 Department and the Department may, by regulations or
27 otherwise, prescribe or authorize the use of an
28 alternative source for such information. The financial
29 institution shall also notify the Department should its
30 international banking facility fail to qualify as such,
31 in whole or in part, or should there be any amendment or
32 change to the Consolidated Report of Condition, as
33 originally filed, to the extent such amendment or change
34 alters the information used in determining the floor
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1 amount.
2 (d) Transportation services. Business income derived
3 from furnishing transportation services shall be apportioned
4 to this State in accordance with paragraphs (1) and (2):
5 (1) Such business income (other than that derived
6 from transportation by pipeline) shall be apportioned to
7 this State by multiplying such income by a fraction, the
8 numerator of which is the revenue miles of the person in
9 this State, and the denominator of which is the revenue
10 miles of the person everywhere. For purposes of this
11 paragraph, a revenue mile is the transportation of 1
12 passenger or 1 net ton of freight the distance of 1 mile
13 for a consideration. Where a person is engaged in the
14 transportation of both passengers and freight, the
15 fraction above referred to shall be determined by means
16 of an average of the passenger revenue mile fraction and
17 the freight revenue mile fraction, weighted to reflect
18 the person's
19 (A) relative railway operating income from
20 total passenger and total freight service, as
21 reported to the Interstate Commerce Commission, in
22 the case of transportation by railroad, and
23 (B) relative gross receipts from passenger and
24 freight transportation, in case of transportation
25 other than by railroad.
26 (2) Such business income derived from
27 transportation by pipeline shall be apportioned to this
28 State by multiplying such income by a fraction, the
29 numerator of which is the revenue miles of the person in
30 this State, and the denominator of which is the revenue
31 miles of the person everywhere. For the purposes of this
32 paragraph, a revenue mile is the transportation by
33 pipeline of 1 barrel of oil, 1,000 cubic feet of gas, or
34 of any specified quantity of any other substance, the
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1 distance of 1 mile for a consideration.
2 (e) Combined apportionment. Where 2 or more persons are
3 engaged in a unitary business as described in subsection
4 (a)(27) of Section 1501, a part of which is conducted in this
5 State by one or more members of the group, the business
6 income attributable to this State by any such member or
7 members shall be apportioned by means of the combined
8 apportionment method.
9 (f) Alternative allocation. If the allocation and
10 apportionment provisions of subsections (a) through (e) and
11 of subsection (h) do not fairly represent the extent of a
12 person's business activity in this State, the person may
13 petition for, or the Director may require, in respect of all
14 or any part of the person's business activity, if reasonable:
15 (1) Separate accounting;
16 (2) The exclusion of any one or more factors;
17 (3) The inclusion of one or more additional factors
18 which will fairly represent the person's business
19 activities in this State; or
20 (4) The employment of any other method to
21 effectuate an equitable allocation and apportionment of
22 the person's business income.
23 (g) Cross reference. For allocation of business income
24 by residents, see Section 301(a).
25 (h) Sales factor. For tax years ending on or after
26 December 31, 1998, persons other than residents who derive
27 business income from this State and one or more other states
28 shall apportion their business income to this State by
29 multiplying the income by the sales factor.
30 (1) The sales factor is a fraction, the numerator
31 of which is the total sales of the person in this State
32 during the taxable year, and the denominator of which is
33 the total sales of the person everywhere during the
34 taxable year.
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1 (2) Sales of tangible personal property are in this
2 State if the property is delivered or shipped to a
3 purchaser within this State regardless of the f.o.b.
4 point or other conditions of the sale.
5 (3) Sales, other than sales of tangible personal
6 property, are in this State if:
7 (A) the income producing activity is performed
8 in this State; or
9 (B) the income producing activity is performed
10 both within and without this State and a greater
11 proportion of the income-producing activity is
12 performed within this State than without this State,
13 based on performance costs.
14 (4) The following items of income shall not be
15 included in the numerator or denominator of the sales
16 factor: dividends; amounts included under Section 78 of
17 the Internal Revenue Code; and Subpart F income as
18 defined in Section 952 of the Internal Revenue Code.
19 (Source: P.A. 89-379, eff. 1-1-96; 89-399, eff. 8-20-95;
20 89-626, eff. 8-9-96; 90-562, eff. 12-16-97.)
21 (35 ILCS 5/804) (from Ch. 120, par. 8-804)
22 Sec. 804. Failure to Pay Estimated Tax.
23 (a) In general. In case of any underpayment of estimated
24 tax by a taxpayer, except as provided in subsection (d) or
25 (e), the taxpayer shall be liable to a penalty in an amount
26 determined at the rate prescribed by Section 3-3 of the
27 Uniform Penalty and Interest Act upon the amount of the
28 underpayment (determined under subsection (b)) for each
29 required installment.
30 (b) Amount of underpayment. For purposes of subsection
31 (a), the amount of the underpayment shall be the excess of:
32 (1) the amount of the installment which would be
33 required to be paid under subsection (c), over
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1 (2) the amount, if any, of the installment paid on
2 or before the last date prescribed for payment.
3 (c) Amount of Required Installments.
4 (1) Amount.
5 (A) In General. Except as provided in
6 paragraph (2), the amount of any required
7 installment shall be 25% of the required annual
8 payment.
9 (B) Required Annual Payment. For purposes of
10 subparagraph (A), the term "required annual payment"
11 means the lesser of
12 (i) 90% of the tax shown on the return
13 for the taxable year, or if no return is filed,
14 90% of the tax for such year, or
15 (ii) 100% of the tax shown on the return
16 of the taxpayer for the preceding taxable year
17 if a return showing a liability for tax was
18 filed by the taxpayer for the preceding taxable
19 year and such preceding year was a taxable year
20 of 12 months.
21 (2) Lower Required Installment where Annualized
22 Income Installment is Less Than Amount Determined Under
23 Paragraph (1).
24 (A) In General. In the case of any required
25 installment if a taxpayer establishes that the
26 annualized income installment is less than the
27 amount determined under paragraph (1),
28 (i) the amount of such required
29 installment shall be the annualized income
30 installment, and
31 (ii) any reduction in a required
32 installment resulting from the application of
33 this subparagraph shall be recaptured by
34 increasing the amount of the next required
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1 installment determined under paragraph (1) by
2 the amount of such reduction, and by increasing
3 subsequent required installments to the extent
4 that the reduction has not previously been
5 recaptured under this clause.
6 (B) Determination of Annualized Income
7 Installment. In the case of any required
8 installment, the annualized income installment is
9 the excess, if any, of
10 (i) an amount equal to the applicable
11 percentage of the tax for the taxable year
12 computed by placing on an annualized basis the
13 net income for months in the taxable year
14 ending before the due date for the installment,
15 over
16 (ii) the aggregate amount of any prior
17 required installments for the taxable year.
18 (C) Applicable Percentage.
19 In the case of the following The applicable
20 required installments: percentage is:
21 1st ............................... 22.5%
22 2nd ............................... 45%
23 3rd ............................... 67.5%
24 4th ............................... 90%
25 (D) Annualized Net Income; Individuals. For
26 individuals, net income shall be placed on an
27 annualized basis by:
28 (i) multiplying by 12, or in the case of
29 a taxable year of less than 12 months, by the
30 number of months in the taxable year, the net
31 income computed without regard to the standard
32 exemption for the months in the taxable year
33 ending before the month in which the
34 installment is required to be paid;
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1 (ii) dividing the resulting amount by the
2 number of months in the taxable year ending
3 before the month in which such installment date
4 falls; and
5 (iii) deducting from such amount the
6 standard exemption allowable for the taxable
7 year, such standard exemption being determined
8 as of the last date prescribed for payment of
9 the installment.
10 (E) Annualized Net Income; Corporations. For
11 corporations, net income shall be placed on an
12 annualized basis by multiplying by 12 the taxable
13 income
14 (i) for the first 3 months of the taxable
15 year, in the case of the installment required
16 to be paid in the 4th month,
17 (ii) for the first 3 months or for the
18 first 5 months of the taxable year, in the case
19 of the installment required to be paid in the
20 6th month,
21 (iii) for the first 6 months or for the
22 first 8 months of the taxable year, in the case
23 of the installment required to be paid in the
24 9th month, and
25 (iv) for the first 9 months or for the
26 first 11 months of the taxable year, in the
27 case of the installment required to be paid in
28 the 12th month of the taxable year,
29 then dividing the resulting amount by the number of
30 months in the taxable year (3, 5, 6, 8, 9, or 11 as
31 the case may be).
32 (d) Exceptions. Notwithstanding the provisions of the
33 preceding subsections, the penalty imposed by subsection (a)
34 shall not be imposed if the taxpayer was not required to file
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1 an Illinois income tax return for the preceding taxable year,
2 or if the taxpayer has underpaid taxes solely because of the
3 increased rate in effect during the period from July 1, 1989
4 through December 1989, or, for individuals, if the taxpayer
5 had no tax liability for the preceding taxable year and such
6 year was a taxable year of 12 months. The penalty imposed by
7 subsection (a) shall also not be imposed on any underpayments
8 of estimated tax due before the effective date of this
9 amendatory Act of 1998 which underpayments are solely
10 attributable to the change in apportionment from subsection
11 (a) to subsection (h) of Section 304. The provisions of this
12 amendatory Act of 1998 apply to tax years ending on or after
13 December 31, 1998.
14 (e) The penalty imposed for underpayment of estimated
15 tax by subsection (a) of this Section shall not be imposed to
16 the extent that the Department or his designate determines,
17 pursuant to Section 3-8 of the Uniform Penalty and Interest
18 Act that the penalty should not be imposed.
19 (f) Definition of tax. For purposes of subsections (b)
20 and (c), the term "tax" means the excess of the tax imposed
21 under Article 2 of this Act, over the amounts credited
22 against such tax under Sections 601(b) (3) and (4).
23 (g) Application of Section in case of tax withheld on
24 compensation. For purposes of applying this Section in the
25 case of an individual, tax withheld under Article 7 for the
26 taxable year shall be deemed a payment of estimated tax, and
27 an equal part of such amount shall be deemed paid on each
28 installment date for such taxable year, unless the taxpayer
29 establishes the dates on which all amounts were actually
30 withheld, in which case the amounts so withheld shall be
31 deemed payments of estimated tax on the dates on which such
32 amounts were actually withheld.
33 (g-5) Amounts withheld under the State Salary and
34 Annuity Withholding Act. An individual who has amounts
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1 withheld under paragraph (10) of Section 4 of the State
2 Salary and Annuity Withholding Act may elect to have those
3 amounts treated as payments of estimated tax made on the
4 dates on which those amounts are actually withheld.
5 (i) Short taxable year. The application of this Section
6 to taxable years of less than 12 months shall be in
7 accordance with regulations prescribed by the Department.
8 The changes in this Section made by Public Act 84-127
9 shall apply to taxable years ending on or after January 1,
10 1986.
11 (Source: P.A. 90-448, eff. 8-16-97.)
12 (35 ILCS 5/1501) (from Ch. 120, par. 15-1501)
13 Sec. 1501. Definitions.
14 (a) In general. When used in this Act, where not
15 otherwise distinctly expressed or manifestly incompatible
16 with the intent thereof:
17 (1) Business income. The term "business income"
18 means income arising from transactions and activity in
19 the regular course of the taxpayer's trade or business,
20 net of the deductions allocable thereto, and includes
21 income from tangible and intangible property if the
22 acquisition, management, and disposition of the property
23 constitute integral parts of the taxpayer's regular trade
24 or business operations. Such term does not include
25 compensation or the deductions allocable thereto.
26 (2) Commercial domicile. The term "commercial
27 domicile" means the principal place from which the trade
28 or business of the taxpayer is directed or managed.
29 (3) Compensation. The term "compensation" means
30 wages, salaries, commissions and any other form of
31 remuneration paid to employees for personal services.
32 (4) Corporation. The term "corporation" includes
33 associations, joint-stock companies, insurance companies
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1 and cooperatives. Any entity, including a limited
2 liability company formed under the Illinois Limited
3 Liability Company Act, shall be treated as a corporation
4 if it is so classified for federal income tax purposes.
5 (5) Department. The term "Department" means the
6 Department of Revenue of this State.
7 (6) Director. The term "Director" means the
8 Director of Revenue of this State.
9 (7) Fiduciary. The term "fiduciary" means a
10 guardian, trustee, executor, administrator, receiver, or
11 any person acting in any fiduciary capacity for any
12 person.
13 (8) Financial organization.
14 (A) The term "financial organization" means
15 any bank, bank holding company, trust company,
16 savings bank, industrial bank, land bank, safe
17 deposit company, private banker, savings and loan
18 association, building and loan association, credit
19 union, currency exchange, cooperative bank, small
20 loan company, sales finance company, investment
21 company, or any person which is owned by a bank or
22 bank holding company. For the purpose of this
23 Section a "person" will include only those persons
24 which a bank holding company may acquire and hold an
25 interest in, directly or indirectly, under the
26 provisions of the Bank Holding Company Act of 1956
27 (12 U.S.C. 1841, et seq.), except where interests in
28 any person must be disposed of within certain
29 required time limits under the Bank Holding Company
30 Act of 1956.
31 (B) For purposes of subparagraph (A) of this
32 paragraph, the term "bank" includes (i) any entity
33 that is regulated by the Comptroller of the Currency
34 under the National Bank Act, or by the Federal
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1 Reserve Board, or by the Federal Deposit Insurance
2 Corporation and (ii) any federally or State
3 chartered bank operating as a credit card bank.
4 (C) For purposes of subparagraph (A) of this
5 paragraph, the term "sales finance company" means a
6 person primarily engaged in the business of
7 purchasing or making loans upon the security of
8 retail installment contracts or retail charge
9 agreements or the outstanding balances under such
10 contracts or agreements. The term includes but is
11 not limited to persons: (i) to whom the Sales
12 Finance Agency Act is rendered inapplicable by
13 subsection (b) of Section 17 thereof; (ii) engaged
14 in consumer sales finance activities governed by the
15 Sales Finance Agency Act or that would be governed
16 by that Act if conducted in this State; (iii)
17 engaged in activities governed by the Retail
18 Installment Sales Act, including the making or
19 purchasing of retail installment contracts or retail
20 charge agreements for "goods" or "services" as
21 defined in that Act, or activities that would be
22 governed by that Act if conducted in this State;
23 (iv) engaged in activities governed by the Motor
24 Vehicle Retail Installment Sales Act or that would
25 be governed by that Act if conducted in this State;
26 (v) engaged in commercial finance activities
27 governed by the Illinois Uniform Commercial Code or
28 that would be governed by that Code if conducted in
29 this State; or (vi) engaged in the finance leasing
30 of tangible personal property where "finance
31 leasing" is activity that is the economic equivalent
32 of an extension of credit and for which a deduction
33 for depreciation under Section 167 of the Internal
34 Revenue Code of 1986 is not available to a lessor.
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1 (D) Subparagraphs (B) and (C) of this
2 paragraph are declaratory of existing law and apply
3 retroactively, for all tax years beginning on or
4 before December 31, 1996, to all original returns,
5 to all amended returns filed no later than 30 days
6 after the effective date of this amendatory Act of
7 1996, and to all notices issued on or before the
8 effective date of this amendatory Act of 1996 under
9 subsection (a) of Section 903, subsection (a) of
10 Section 904, subsection (e) of Section 909, or
11 Section 912. A taxpayer that is a "financial
12 organization" that engages in any transaction with
13 an affiliate shall be a "financial organization" for
14 all purposes of this Act.
15 (E) For all tax years beginning on or before
16 December 31, 1996, a taxpayer that falls within the
17 definition of a "financial organization" under
18 subparagraphs (B) or (C) of this paragraph, but who
19 does not fall within the definition of a "financial
20 organization" under the Proposed Regulations issued
21 by the Department of Revenue on July 19, 1996, may
22 irrevocably elect to apply the Proposed Regulations
23 for all of those years as though the Proposed
24 Regulations had been lawfully promulgated, adopted,
25 and in effect for all of those years. For purposes
26 of applying subparagraphs (B) or (C) of this
27 paragraph to all of those years, the election
28 allowed by this subparagraph applies only to the
29 taxpayer making the election and to those members of
30 the taxpayer's unitary business group who are
31 ordinarily required to apportion business income
32 under the same subsection of Section 304 of this Act
33 as the taxpayer making the election. No election
34 allowed by this subparagraph shall be made under a
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1 claim filed under subsection (d) of Section 909 more
2 than 30 days after the effective date of this
3 amendatory Act of 1996.
4 (9) Fiscal year. The term "fiscal year" means an
5 accounting period of 12 months ending on the last day of
6 any month other than December.
7 (10) Includes and including. The terms "includes"
8 and "including" when used in a definition contained in
9 this Act shall not be deemed to exclude other things
10 otherwise within the meaning of the term defined.
11 (11) Internal Revenue Code. The term "Internal
12 Revenue Code" means the United States Internal Revenue
13 Code of 1954 or any successor law or laws relating to
14 federal income taxes in effect for the taxable year.
15 (12) Mathematical error. The term "mathematical
16 error" includes the following types of errors, omissions,
17 or defects in a return filed by a taxpayer which prevents
18 acceptance of the return as filed for processing:
19 (A) arithmetic errors or incorrect
20 computations on the return or supporting schedules;
21 (B) entries on the wrong lines;
22 (C) omission of required supporting forms or
23 schedules or the omission of the information in
24 whole or in part called for thereon; and
25 (D) an attempt to claim, exclude, deduct, or
26 improperly report, in a manner directly contrary to
27 the provisions of the Act and regulations thereunder
28 any item of income, exemption, deduction, or credit.
29 (13) Nonbusiness income. The term "nonbusiness
30 income" means all income other than business income or
31 compensation.
32 (14) Nonresident. The term "nonresident" means a
33 person who is not a resident.
34 (15) Paid, incurred and accrued. The terms "paid",
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1 "incurred" and "accrued" shall be construed according to
2 the method of accounting upon the basis of which the
3 person's base income is computed under this Act.
4 (16) Partnership and partner. The term
5 "partnership" includes a syndicate, group, pool, joint
6 venture or other unincorporated organization, through or
7 by means of which any business, financial operation, or
8 venture is carried on, and which is not, within the
9 meaning of this Act, a trust or estate or a corporation;
10 and the term "partner" includes a member in such
11 syndicate, group, pool, joint venture or organization.
12 Any entity, including a limited liability company
13 formed under the Illinois Limited Liability Company Act,
14 shall be treated as a partnership if it is so classified
15 for federal income tax purposes.
16 For purposes of the tax imposed at subsection (c) of
17 Section 201 of this Act, the term "partnership" does not
18 include a syndicate, group, pool, joint venture or other
19 unincorporated organization established for the sole
20 purpose of playing the Illinois State Lottery.
21 (17) Part-year resident. The term "part-year
22 resident" means an individual who became a resident
23 during the taxable year or ceased to be a resident during
24 the taxable year. Under Section 1501 (a) (20) (A) (i)
25 residence commences with presence in this State for other
26 than a temporary or transitory purpose and ceases with
27 absence from this State for other than a temporary or
28 transitory purpose. Under Section 1501 (a) (20) (A) (ii)
29 residence commences with the establishment of domicile in
30 this State and ceases with the establishment of domicile
31 in another State.
32 (18) Person. The term "person" shall be construed
33 to mean and include an individual, a trust, estate,
34 partnership, association, firm, company, corporation,
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1 limited liability company, or fiduciary. For purposes of
2 Section 1301 and 1302 of this Act, a "person" means (i)
3 an individual, (ii) a corporation, (iii) an officer,
4 agent, or employee of a corporation, (iv) a member, agent
5 or employee of a partnership, or (v) a member, manager,
6 employee, officer, director, or agent of a limited
7 liability company who in such capacity commits an offense
8 specified in Section 1301 and 1302.
9 (18A) Records. The term "records" includes all
10 data maintained by the taxpayer, whether on paper,
11 microfilm, microfiche, or any type of machine-sensible
12 data compilation.
13 (19) Regulations. The term "regulations" includes
14 rules promulgated and forms prescribed by the Department.
15 (20) Resident. The term "resident" means:
16 (A) an individual (i) who is in this State for
17 other than a temporary or transitory purpose during
18 the taxable year; or (ii) who is domiciled in this
19 State but is absent from the State for a temporary
20 or transitory purpose during the taxable year;
21 (B) The estate of a decedent who at his or her
22 death was domiciled in this State;
23 (C) A trust created by a will of a decedent
24 who at his death was domiciled in this State; and
25 (D) An irrevocable trust, the grantor of which
26 was domiciled in this State at the time such trust
27 became irrevocable. For purpose of this
28 subparagraph, a trust shall be considered
29 irrevocable to the extent that the grantor is not
30 treated as the owner thereof under Sections 671
31 through 678 of the Internal Revenue Code.
32 (21) Sales. The term "sales" means all gross
33 receipts of the taxpayer not allocated under Sections
34 301, 302 and 303.
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1 (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.
13 (23) Taxable year. The term "taxable year" means
14 the 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
17 case of a return made for a fractional part of a year
18 under the provisions of this Act, the period for which
19 such return is 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
24 meaning as is set forth in the Illinois Banking Act or as
25 is set forth in the laws of the United States or
26 regulations of the Board of Governors of the Federal
27 Reserve System.
28 (26) Income Tax Return Preparer.
29 (A) The term "income tax return preparer"
30 means any person who prepares for compensation, or
31 who employs one or more persons to prepare for
32 compensation, any return of tax imposed by this Act
33 or any claim for refund of tax imposed by this Act.
34 The preparation of a substantial portion of a return
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1 or claim for refund shall be treated as the
2 preparation of that return or claim for refund.
3 (B) A person is not an income tax return
4 preparer if all he or she does is
5 (i) furnish typing, reproducing, or other
6 mechanical assistance;
7 (ii) prepare returns or claims for
8 refunds for the employer by whom he or she is
9 regularly and continuously employed;
10 (iii) prepare as a fiduciary returns or
11 claims for refunds for any person; or
12 (iv) prepare claims for refunds for a
13 taxpayer in response to any notice of
14 deficiency issued to that taxpayer or in
15 response to any waiver of restriction after the
16 commencement of an audit of that taxpayer or of
17 another taxpayer if a determination in the
18 audit of the other taxpayer directly or
19 indirectly affects the tax liability of the
20 taxpayer whose claims he or she is preparing.
21 (27) Unitary business group. The term "unitary
22 business group" means a group of persons related through
23 common ownership whose business activities are integrated
24 with, dependent upon and contribute to each other. The
25 group will not include those members whose business
26 activity outside the United States is 80% or more of any
27 such member's total business activity; for purposes of
28 this paragraph and clause (a) (3) (B) (ii) of Section
29 304, business activity within the United States shall be
30 measured by means of the factors ordinarily applicable
31 under subsections (a), (b), (c), and (d), or (h) of
32 Section 304 except that, in the case of members
33 ordinarily required to apportion business income by means
34 of the 3 factor formula of property, payroll and sales
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1 specified in subsection (a) of Section 304, or the
2 single-factor sales formula specified in subsection (h)
3 of Section 304, such members shall not use the sales
4 factor in the computation and the results of the property
5 and payroll factor computations of subsection (a) of
6 Section 304 shall be divided by 2 (by one if either the
7 property or payroll factor has a denominator of zero).
8 The computation required by the preceding sentence shall,
9 in each case, involve the division of the member's
10 property, payroll, or revenue miles in the United States,
11 insurance premiums on property or risk in the United
12 States, or financial organization business income from
13 sources within the United States, as the case may be, by
14 the respective worldwide figures for such items. Common
15 ownership in the case of corporations is the direct or
16 indirect control or ownership of more than 50% of the
17 outstanding voting stock of the persons carrying on
18 unitary business activity. Unitary business activity can
19 ordinarily be illustrated where the activities of the
20 members are: (1) in the same general line (such as
21 manufacturing, wholesaling, retailing of tangible
22 personal property, insurance, transportation or finance);
23 or (2) are steps in a vertically structured enterprise or
24 process (such as the steps involved in the production of
25 natural resources, which might include exploration,
26 mining, refining, and marketing); and, in either
27 instance, the members are functionally integrated through
28 the exercise of strong centralized management (where, for
29 example, authority over such matters as purchasing,
30 financing, tax compliance, product line, personnel,
31 marketing and capital investment is not left to each
32 member). In no event, however, will any unitary business
33 group include members which are ordinarily required to
34 apportion business income under different subsections of
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1 Section 304 except that for tax years ending on or after
2 December 31, 1987 this prohibition shall not apply to a
3 unitary business group composed of one or more taxpayers
4 all of which apportion business income pursuant to
5 subsection (b) of Section 304, or all of which apportion
6 business income pursuant to subsection (d) of Section
7 304, and a holding company of such single-factor
8 taxpayers (see definition of "financial organization" for
9 rule regarding holding companies of financial
10 organizations). If a unitary business group would, but
11 for the preceding sentence, include members that are
12 ordinarily required to apportion business income under
13 different subsections of Section 304, then for each
14 subsection of Section 304 for which there are two or more
15 members, there shall be a separate unitary business group
16 composed of such members. For purposes of the preceding
17 two sentences, a member is "ordinarily required to
18 apportion business income" under a particular subsection
19 of Section 304 if it would be required to use the
20 apportionment method prescribed by such subsection except
21 for the fact that it derives business income solely from
22 Illinois. If the unitary business group members'
23 accounting periods differ, the common parent's accounting
24 period or, if there is no common parent, the accounting
25 period of the member that is expected to have, on a
26 recurring basis, the greatest Illinois income tax
27 liability must be used to determine whether to use the
28 apportionment method provided in subsection (a) or
29 subsection (h) of Section 304. The prohibition against
30 membership in a unitary business group for taxpayers
31 ordinarily required to apportion income under different
32 subsections of Section 304 does not apply to taxpayers
33 required to apportion income under subsection (a) and
34 subsection (h) of Section 304. The provisions of this
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1 amendatory Act of 1998 apply to tax years ending on or
2 after December 31, 1998.
3 (28) Subchapter S corporation. The term
4 "Subchapter S corporation" means a corporation for which
5 there is in effect an election under Section 1362 of the
6 Internal Revenue Code, or for which there is a federal
7 election to opt out of the provisions of the Subchapter S
8 Revision Act of 1982 and have applied instead the prior
9 federal Subchapter S rules as in effect on July 1, 1982.
10 (b) Other definitions.
11 (1) Words denoting number, gender, and so forth,
12 when used in this Act, where not otherwise distinctly
13 expressed or manifestly incompatible with the intent
14 thereof:
15 (A) Words importing the singular include and
16 apply to several persons, parties or things;
17 (B) Words importing the plural include the
18 singular; and
19 (C) Words importing the masculine gender
20 include the feminine as well.
21 (2) "Company" or "association" as including
22 successors and assigns. The word "company" or
23 "association", when used in reference to a corporation,
24 shall be deemed to embrace the words "successors and
25 assigns of such company or association", and in like
26 manner as if these last-named words, or words of similar
27 import, were expressed.
28 (3) Other terms. Any term used in any Section of
29 this Act with respect to the application of, or in
30 connection with, the provisions of any other Section of
31 this Act shall have the same meaning as in such other
32 Section.
33 (Source: P.A. 88-480; 89-399, eff. 8-20-95; 89-711, eff.
34 2-14-97.)
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1 Section 99. Effective date. This Act takes effect upon
2 becoming law.".