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90_SB0592sam001
LRB9000850KDksam01
1 AMENDMENT TO SENATE BILL 592
2 AMENDMENT NO. . Amend Senate Bill 592 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 (35 ILCS 5/304) (from Ch. 120, par. 3-304)
9 Sec. 304. Business income of persons other than
10 residents.
11 (a) In general. The business income of a person other
12 than a resident shall be allocated to this State if such
13 person's business income is derived solely from this State.
14 If a person other than a resident derives business income
15 from this State and one or more other states, then, for tax
16 years ending on or before December 30, 1997, and except as
17 otherwise provided by this Section, such person's business
18 income shall be apportioned to this State by multiplying the
19 income by a fraction, the numerator of which is the sum of
20 the property factor (if any), the payroll factor (if any) and
21 200% of the sales factor (if any), and the denominator of
22 which is 4 reduced by the number of factors other than the
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1 sales factor which have a denominator of zero and by an
2 additional 2 if the sales factor has a denominator of zero.
3 For tax years ending on or after December 31, 1997, and
4 except as otherwise provided by this Section, persons other
5 than residents who derive business income from this State and
6 one or more other states shall apportion their business
7 income to this State as provided in subsection (h) of this
8 Section.
9 (1) Property factor.
10 (A) The property factor is a fraction, the
11 numerator of which is the average value of the person's
12 real and tangible personal property owned or rented and
13 used in the trade or business in this State during the
14 taxable year and the denominator of which is the average
15 value of all the person's real and tangible personal
16 property owned or rented and used in the trade or
17 business during the taxable year.
18 (B) Property owned by the person is valued at its
19 original cost. Property rented by the person is valued at
20 8 times the net annual rental rate. Net annual rental
21 rate is the annual rental rate paid by the person less
22 any annual rental rate received by the person from
23 sub-rentals.
24 (C) The average value of property shall be
25 determined by averaging the values at the beginning and
26 ending of the taxable year but the Director may require
27 the averaging of monthly values during the taxable year
28 if reasonably required to reflect properly the average
29 value of the person's property.
30 (2) Payroll factor.
31 (A) The payroll factor is a fraction, the numerator
32 of which is the total amount paid in this State during
33 the taxable year by the person for compensation, and the
34 denominator of which is the total compensation paid
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1 everywhere during the taxable year.
2 (B) Compensation is paid in this State if:
3 (i) The individual's service is performed
4 entirely within this State;
5 (ii) The individual's service is performed
6 both within and without this State, but the service
7 performed without this State is incidental to the
8 individual's service performed within this State; or
9 (iii) Some of the service is performed within
10 this State and either the base of operations, or if
11 there is no base of operations, the place from which
12 the service is directed or controlled is within this
13 State, or the base of operations or the place from
14 which the service is directed or controlled is not
15 in any state in which some part of the service is
16 performed, but the individual's residence is in this
17 State.
18 Beginning with taxable years ending on or after
19 December 31, 1992, for residents of states that impose a
20 comparable tax liability on residents of this State, for
21 purposes of item (i) of this paragraph (B), in the case
22 of persons who perform personal services under personal
23 service contracts for sports performances, services by
24 that person at a sporting event taking place in Illinois
25 shall be deemed to be a performance entirely within this
26 State.
27 (3) Sales factor.
28 (A) The sales factor is a fraction, the numerator
29 of which is the total sales of the person in this State
30 during the taxable year, and the denominator of which is
31 the total sales of the person everywhere during the
32 taxable year.
33 (B) Sales of tangible personal property are in this
34 State if:
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1 (i) The property is delivered or shipped to a
2 purchaser, other than the United States government,
3 within this State regardless of the f. o. b. point
4 or other conditions of the sale; or
5 (ii) The property is shipped from an office,
6 store, warehouse, factory or other place of storage
7 in this State and either the purchaser is the United
8 States government or the person is not taxable in
9 the state of the purchaser; provided, however, that
10 premises owned or leased by a person who has
11 independently contracted with the seller for the
12 printing of newspapers, periodicals or books shall
13 not be deemed to be an office, store, warehouse,
14 factory or other place of storage for purposes of
15 this Section. Sales of tangible personal property
16 are not in this State if the seller and purchaser
17 would be members of the same unitary business group
18 but for the fact that either the seller or purchaser
19 is a person with 80% or more of total business
20 activity outside of the United States and the
21 property is purchased for resale.
22 (C) Sales, other than sales of tangible personal
23 property, are in this State if:
24 (i) The income-producing activity is performed
25 in this State; or
26 (ii) The income-producing activity is
27 performed both within and without this State and a
28 greater proportion of the income-producing activity
29 is performed within this State than without this
30 State, based on performance costs.
31 (D) For taxable years ending on or after December
32 31, 1995 and excluding taxable years ending after
33 December 31, 1997, the following items of income shall
34 not be included in the numerator or denominator of the
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1 sales factor: dividends; amounts included under Section
2 78 of the Internal Revenue Code; and Subpart F income as
3 defined in Section 952 of the Internal Revenue Code. No
4 inference shall be drawn from the enactment of this
5 paragraph (D) in construing this Section for taxable
6 years ending before December 31, 1995.
7 (b) Insurance companies.
8 (1) In general. Except as otherwise provided by
9 paragraph (2), business income of an insurance company for a
10 taxable year shall be apportioned to this State by
11 multiplying such income by a fraction, the numerator of which
12 is the direct premiums written for insurance upon property or
13 risk in this State, and the denominator of which is the
14 direct premiums written for insurance upon property or risk
15 everywhere. For purposes of this subsection, the term "direct
16 premiums written" means the total amount of direct premiums
17 written, assessments and annuity considerations as reported
18 for the taxable year on the annual statement filed by the
19 company with the Illinois Director of Insurance in the form
20 approved by the National Convention of Insurance
21 Commissioners or such other form as may be prescribed in lieu
22 thereof.
23 (2) Reinsurance. If the principal source of premiums
24 written by an insurance company consists of premiums for
25 reinsurance accepted by it, the business income of such
26 company shall be apportioned to this State by multiplying
27 such income by a fraction, the numerator of which is the sum
28 of (i) direct premiums written for insurance upon property or
29 risk in this State, plus (ii) premiums written for
30 reinsurance accepted in respect of property or risk in this
31 State, and the denominator of which is the sum of (iii)
32 direct premiums written for insurance upon property or risk
33 everywhere, plus (iv) premiums written for reinsurance
34 accepted in respect of property or risk everywhere. For
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1 purposes of this paragraph, premiums written for reinsurance
2 accepted in respect of property or risk in this State,
3 whether or not otherwise determinable, may, at the election
4 of the company, be determined on the basis of the proportion
5 which premiums written for reinsurance accepted from
6 companies commercially domiciled in Illinois bears to
7 premiums written for reinsurance accepted from all sources,
8 or, alternatively, in the proportion which the sum of the
9 direct premiums written for insurance upon property or risk
10 in this State by each ceding company from which reinsurance
11 is accepted bears to the sum of the total direct premiums
12 written by each such ceding company for the taxable year.
13 (c) Financial organizations.
14 (1) In general. Business income of a financial
15 organization shall be apportioned to this State by
16 multiplying such income by a fraction, the numerator of which
17 is its business income from sources within this State, and
18 the denominator of which is its business income from all
19 sources. For the purposes of this subsection, the business
20 income of a financial organization from sources within this
21 State is the sum of the amounts referred to in subparagraphs
22 (A) through (E) following, but excluding the adjusted income
23 of an international banking facility as determined in
24 paragraph (2):
25 (A) Fees, commissions or other compensation for
26 financial services rendered within this State;
27 (B) Gross profits from trading in stocks, bonds or
28 other securities managed within this State;
29 (C) Dividends, and interest from Illinois
30 customers, which are received within this State;
31 (D) Interest charged to customers at places of
32 business maintained within this State for carrying debit
33 balances of margin accounts, without deduction of any
34 costs incurred in carrying such accounts; and
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1 (E) Any other gross income resulting from the
2 operation as a financial organization within this State.
3 In computing the amounts referred to in paragraphs (A)
4 through (E) of this subsection, any amount received by a
5 member of an affiliated group (determined under Section
6 1504(a) of the Internal Revenue Code but without
7 reference to whether any such corporation is an
8 "includible corporation" under Section 1504(b) of the
9 Internal Revenue Code) from another member of such group
10 shall be included only to the extent such amount exceeds
11 expenses of the recipient directly related thereto.
12 (2) International Banking Facility.
13 (A) Adjusted Income. The adjusted income of an
14 international banking facility is its income reduced by
15 the amount of the floor amount.
16 (B) Floor Amount. The floor amount shall be the
17 amount, if any, determined by multiplying the income of
18 the international banking facility by a fraction, not
19 greater than one, which is determined as follows:
20 (i) The numerator shall be:
21 The average aggregate, determined on a
22 quarterly basis, of the financial organization's
23 loans to banks in foreign countries, to foreign
24 domiciled borrowers (except where secured primarily
25 by real estate) and to foreign governments and other
26 foreign official institutions, as reported for its
27 branches, agencies and offices within the state on
28 its "Consolidated Report of Condition", Schedule A,
29 Lines 2.c., 5.b., and 7.a., which was filed with the
30 Federal Deposit Insurance Corporation and other
31 regulatory authorities, for the year 1980, minus
32 The average aggregate, determined on a
33 quarterly basis, of such loans (other than loans of
34 an international banking facility), as reported by
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1 the financial institution for its branches, agencies
2 and offices within the state, on the corresponding
3 Schedule and lines of the Consolidated Report of
4 Condition for the current taxable year, provided,
5 however, that in no case shall the amount determined
6 in this clause (the subtrahend) exceed the amount
7 determined in the preceding clause (the minuend);
8 and
9 (ii) the denominator shall be the average
10 aggregate, determined on a quarterly basis, of the
11 international banking facility's loans to banks in
12 foreign countries, to foreign domiciled borrowers
13 (except where secured primarily by real estate) and
14 to foreign governments and other foreign official
15 institutions, which were recorded in its financial
16 accounts for the current taxable year.
17 (C) Change to Consolidated Report of Condition and
18 in Qualification. In the event the Consolidated Report
19 of Condition which is filed with the Federal Deposit
20 Insurance Corporation and other regulatory authorities is
21 altered so that the information required for determining
22 the floor amount is not found on Schedule A, lines 2.c.,
23 5.b. and 7.a., the financial institution shall notify the
24 Department and the Department may, by regulations or
25 otherwise, prescribe or authorize the use of an
26 alternative source for such information. The financial
27 institution shall also notify the Department should its
28 international banking facility fail to qualify as such,
29 in whole or in part, or should there be any amendment or
30 change to the Consolidated Report of Condition, as
31 originally filed, to the extent such amendment or change
32 alters the information used in determining the floor
33 amount.
34 (d) Transportation services. Business income derived
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1 from furnishing transportation services shall be apportioned
2 to this State in accordance with paragraphs (1) and (2):
3 (1) Such business income (other than that derived
4 from transportation by pipeline) shall be apportioned to
5 this State by multiplying such income by a fraction, the
6 numerator of which is the revenue miles of the person in
7 this State, and the denominator of which is the revenue
8 miles of the person everywhere. For purposes of this
9 paragraph, a revenue mile is the transportation of 1
10 passenger or 1 net ton of freight the distance of 1 mile
11 for a consideration. Where a person is engaged in the
12 transportation of both passengers and freight, the
13 fraction above referred to shall be determined by means
14 of an average of the passenger revenue mile fraction and
15 the freight revenue mile fraction, weighted to reflect
16 the person's
17 (A) relative railway operating income from
18 total passenger and total freight service, as
19 reported to the Interstate Commerce Commission, in
20 the case of transportation by railroad, and
21 (B) relative gross receipts from passenger and
22 freight transportation, in case of transportation
23 other than by railroad.
24 (2) Such business income derived from
25 transportation by pipeline shall be apportioned to this
26 State by multiplying such income by a fraction, the
27 numerator of which is the revenue miles of the person in
28 this State, and the denominator of which is the revenue
29 miles of the person everywhere. For the purposes of this
30 paragraph, a revenue mile is the transportation by
31 pipeline of 1 barrel of oil, 1,000 cubic feet of gas, or
32 of any specified quantity of any other substance, the
33 distance of 1 mile for a consideration.
34 (e) Combined apportionment. Where 2 or more persons are
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1 engaged in a unitary business as described in subsection
2 (a)(27) of Section 1501, a part of which is conducted in this
3 State by one or more members of the group, the business
4 income attributable to this State by any such member or
5 members shall be apportioned by means of the combined
6 apportionment method.
7 (f) Alternative allocation. If the allocation and
8 apportionment provisions of subsections (a) through (e) and
9 of subsection (h) do not fairly represent the extent of a
10 person's business activity in this State, the person may
11 petition for, or the Director may require, in respect of all
12 or any part of the person's business activity, if reasonable:
13 (1) Separate accounting;
14 (2) The exclusion of any one or more factors;
15 (3) The inclusion of one or more additional factors
16 which will fairly represent the person's business
17 activities in this State; or
18 (4) The employment of any other method to
19 effectuate an equitable allocation and apportionment of
20 the person's business income.
21 (g) Cross reference. For allocation of business income
22 by residents, see Section 301(a).
23 (h) Sales factor. For tax years ending on or after
24 December 31, 1997, persons other than residents who derive
25 business income from this State and one or more other states
26 shall apportion their business income to this State by
27 mutiplying the income by the sales factor.
28 (1) The sales factor is a fraction, the numerator
29 of which is the total sales of the person in this State
30 during the taxable year, and the denominator of which is
31 the total sales of the person everywhere during the
32 taxable year.
33 (2) Sales of tangible personal property are in this
34 State if the property is delivered or shipped to a
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1 purchaser within this State regardless of the f.o.b.
2 point or other conditions of the sale.
3 (3) Sales, other than sales of tangible personal
4 property, are in this State if:
5 (A) the income producing activity is performed
6 in this State; or
7 (B) the income producing activity is performed
8 both within and without this State and a greater
9 proportion of the income-producing activity is
10 performed within this State than without this State,
11 based on performance costs.
12 (4) For taxable years ending on or after December
13 31, 1995, the following items of income shall not be
14 included in the numerator or denominator of the sales
15 factor; dividends; amounts included under Section 78 of
16 the Internal Revenue Code; and Subpart F income as
17 defined in Section 953 of the Internal Revenue Code. No
18 inference shall be drawn from the enactment of this
19 paragraph (4) in construing this Section for taxable
20 years ending before December 31, 1995. The provisions of
21 this amendatory Act of 1997 apply to tax years ending on
22 or after December 31, 1997.
23 (Source: P.A. 89-379, eff. 1-1-96; 89-399, eff. 8-20-95;
24 89-626, eff. 8-9-96.)
25 (35 ILCS 5/804) (from Ch. 120, par. 8-804)
26 Sec. 804. Failure to Pay Estimated Tax.
27 (a) In general. In case of any underpayment of estimated
28 tax by a taxpayer, except as provided in subsection (d) or
29 (e), the taxpayer shall be liable to a penalty in an amount
30 determined at the rate prescribed by Section 3-3 of the
31 Uniform Penalty and Interest Act upon the amount of the
32 underpayment (determined under subsection (b)) for each
33 required installment.
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1 (b) Amount of underpayment. For purposes of subsection
2 (a), the amount of the underpayment shall be the excess of:
3 (1) the amount of the installment which would be
4 required to be paid under subsection (c), over
5 (2) the amount, if any, of the installment paid on
6 or before the last date prescribed for payment.
7 (c) Amount of Required Installments.
8 (1) Amount.
9 (A) In General. Except as provided in
10 paragraph (2), the amount of any required
11 installment shall be 25% of the required annual
12 payment.
13 (B) Required Annual Payment. For purposes of
14 subparagraph (A), the term "required annual payment"
15 means the lesser of
16 (i) 90% of the tax shown on the return
17 for the taxable year, or if no return is filed,
18 90% of the tax for such year, or
19 (ii) 100% of the tax shown on the return
20 of the taxpayer for the preceding taxable year
21 if a return showing a liability for tax was
22 filed by the taxpayer for the preceding taxable
23 year and such preceding year was a taxable year
24 of 12 months.
25 (2) Lower Required Installment where Annualized
26 Income Installment is Less Than Amount Determined Under
27 Paragraph (1).
28 (A) In General. In the case of any required
29 installment if a taxpayer establishes that the
30 annualized income installment is less than the
31 amount determined under paragraph (1),
32 (i) the amount of such required
33 installment shall be the annualized income
34 installment, and
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1 (ii) any reduction in a required
2 installment resulting from the application of
3 this subparagraph shall be recaptured by
4 increasing the amount of the next required
5 installment determined under paragraph (1) by
6 the amount of such reduction, and by increasing
7 subsequent required installments to the extent
8 that the reduction has not previously been
9 recaptured under this clause.
10 (B) Determination of Annualized Income
11 Installment. In the case of any required
12 installment, the annualized income installment is
13 the excess, if any, of
14 (i) an amount equal to the applicable
15 percentage of the tax for the taxable year
16 computed by placing on an annualized basis the
17 net income for months in the taxable year
18 ending before the due date for the installment,
19 over
20 (ii) the aggregate amount of any prior
21 required installments for the taxable year.
22 (C) Applicable Percentage.
23 In the case of the following The applicable
24 required installments: percentage is:
25 1st ............................... 22.5%
26 2nd ............................... 45%
27 3rd ............................... 67.5%
28 4th ............................... 90%
29 (D) Annualized Net Income; Individuals. For
30 individuals, net income shall be placed on an
31 annualized basis by:
32 (i) multiplying by 12, or in the case of
33 a taxable year of less than 12 months, by the
34 number of months in the taxable year, the net
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1 income computed without regard to the standard
2 exemption for the months in the taxable year
3 ending before the month in which the
4 installment is required to be paid;
5 (ii) dividing the resulting amount by the
6 number of months in the taxable year ending
7 before the month in which such installment date
8 falls; and
9 (iii) deducting from such amount the
10 standard exemption allowable for the taxable
11 year, such standard exemption being determined
12 as of the last date prescribed for payment of
13 the installment.
14 (E) Annualized Net Income; Corporations. For
15 corporations, net income shall be placed on an
16 annualized basis by multiplying by 12 the taxable
17 income
18 (i) for the first 3 months of the taxable
19 year, in the case of the installment required
20 to be paid in the 4th month,
21 (ii) for the first 3 months or for the
22 first 5 months of the taxable year, in the case
23 of the installment required to be paid in the
24 6th month,
25 (iii) for the first 6 months or for the
26 first 8 months of the taxable year, in the case
27 of the installment required to be paid in the
28 9th month, and
29 (iv) for the first 9 months or for the
30 first 11 months of the taxable year, in the
31 case of the installment required to be paid in
32 the 12th month of the taxable year,
33 then dividing the resulting amount by the number of
34 months in the taxable year (3, 5, 6, 8, 9, or 11 as
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1 the case may be).
2 (d) Exceptions. Notwithstanding the provisions of the
3 preceding subsections, the penalty imposed by subsection (a)
4 shall not be imposed if the taxpayer was not required to file
5 an Illinois income tax return for the preceding taxable year,
6 or if the taxpayer has underpaid taxes solely because of the
7 increased rate in effect during the period from July 1, 1989
8 through December 1989, or, for individuals, if the taxpayer
9 had no tax liability for the preceding taxable year and such
10 year was a taxable year of 12 months. The penalty imposed by
11 subsection (a) shall also not be imposed on any underpayments
12 of estimated tax due before the effective date of this
13 amendatory Act of 1997 which underpayments are solely
14 attributable to the change in apportionment from subsection
15 (a) to subsection (h) of Section 304. The provisions of this
16 amendatory Act of 1997 apply to tax years ending on or after
17 December 31, 1997.
18 (e) The penalty imposed for underpayment of estimated
19 tax by subsection (a) of this Section shall not be imposed to
20 the extent that the Department or his designate determines,
21 pursuant to Section 3-8 of the Uniform Penalty and Interest
22 Act that the penalty should not be imposed.
23 (f) Definition of tax. For purposes of subsections (b)
24 and (c), the term "tax" means the excess of the tax imposed
25 under Article 2 of this Act, over the amounts credited
26 against such tax under Sections 601(b) (3) and (4).
27 (g) Application of Section in case of tax withheld on
28 compensation. For purposes of applying this Section in the
29 case of an individual, tax withheld under Article 7 for the
30 taxable year shall be deemed a payment of estimated tax, and
31 an equal part of such amount shall be deemed paid on each
32 installment date for such taxable year, unless the taxpayer
33 establishes the dates on which all amounts were actually
34 withheld, in which case the amounts so withheld shall be
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1 deemed payments of estimated tax on the dates on which such
2 amounts were actually withheld.
3 (i) Short taxable year. The application of this Section
4 to taxable years of less than 12 months shall be in
5 accordance with regulations prescribed by the Department.
6 The changes in this Section made by Public Act 84-127
7 shall apply to taxable years ending on or after January 1,
8 1986.
9 (Source: P.A. 86-678; 86-953; 86-1028; 87-205.)
10 (35 ILCS 5/1501) (from Ch. 120, par. 15-1501)
11 Sec. 1501. Definitions.
12 (a) In general. When used in this Act, where not
13 otherwise distinctly expressed or manifestly incompatible
14 with the intent thereof:
15 (1) Business income. The term "business income"
16 means income arising from transactions and activity in
17 the regular course of the taxpayer's trade or business,
18 net of the deductions allocable thereto, and includes
19 income from tangible and intangible property if the
20 acquisition, management, and disposition of the property
21 constitute integral parts of the taxpayer's regular trade
22 or business operations. Such term does not include
23 compensation or the deductions allocable thereto.
24 (2) Commercial domicile. The term "commercial
25 domicile" means the principal place from which the trade
26 or business of the taxpayer is directed or managed.
27 (3) Compensation. The term "compensation" means
28 wages, salaries, commissions and any other form of
29 remuneration paid to employees for personal services.
30 (4) Corporation. The term "corporation" includes
31 associations, joint-stock companies, insurance companies
32 and cooperatives. Any entity, including a limited
33 liability company formed under the Illinois Limited
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1 Liability Company Act, shall be treated as a corporation
2 if it is so classified for federal income tax purposes.
3 (5) Department. The term "Department" means the
4 Department of Revenue of this State.
5 (6) Director. The term "Director" means the
6 Director of Revenue of this State.
7 (7) Fiduciary. The term "fiduciary" means a
8 guardian, trustee, executor, administrator, receiver, or
9 any person acting in any fiduciary capacity for any
10 person.
11 (8) Financial organization.
12 (A) The term "financial organization" means
13 any bank, bank holding company, trust company,
14 savings bank, industrial bank, land bank, safe
15 deposit company, private banker, savings and loan
16 association, building and loan association, credit
17 union, currency exchange, cooperative bank, small
18 loan company, sales finance company, investment
19 company, or any person which is owned by a bank or
20 bank holding company. For the purpose of this
21 Section a "person" will include only those persons
22 which a bank holding company may acquire and hold an
23 interest in, directly or indirectly, under the
24 provisions of the Bank Holding Company Act of 1956
25 (12 U.S.C. 1841, et seq.), except where interests in
26 any person must be disposed of within certain
27 required time limits under the Bank Holding Company
28 Act of 1956.
29 (B) For purposes of subparagraph (A) of this
30 paragraph, the term "bank" includes (i) any entity
31 that is regulated by the Comptroller of the Currency
32 under the National Bank Act, or by the Federal
33 Reserve Board, or by the Federal Deposit Insurance
34 Corporation and (ii) any federally or State
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1 chartered bank operating as a credit card bank.
2 (C) For purposes of subparagraph (A) of this
3 paragraph, the term "sales finance company" means a
4 person primarily engaged in the business of
5 purchasing or making loans upon the security of
6 retail installment contracts or retail charge
7 agreements or the outstanding balances under such
8 contracts or agreements. The term includes but is
9 not limited to persons: (i) to whom the Sales
10 Finance Agency Act is rendered inapplicable by
11 subsection (b) of Section 17 thereof; (ii) engaged
12 in consumer sales finance activities governed by the
13 Sales Finance Agency Act or that would be governed
14 by that Act if conducted in this State; (iii)
15 engaged in activities governed by the Retail
16 Installment Sales Act, including the making or
17 purchasing of retail installment contracts or retail
18 charge agreements for "goods" or "services" as
19 defined in that Act, or activities that would be
20 governed by that Act if conducted in this State;
21 (iv) engaged in activities governed by the Motor
22 Vehicle Retail Installment Sales Act or that would
23 be governed by that Act if conducted in this State;
24 (v) engaged in commercial finance activities
25 governed by the Illinois Uniform Commercial Code or
26 that would be governed by that Code if conducted in
27 this State; or (vi) engaged in the finance leasing
28 of tangible personal property where "finance
29 leasing" is activity that is the economic equivalent
30 of an extension of credit and for which a deduction
31 for depreciation under Section 167 of the Internal
32 Revenue Code of 1986 is not available to a lessor.
33 (D) Subparagraphs (B) and (C) of this
34 paragraph are declaratory of existing law and apply
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1 retroactively, for all tax years beginning on or
2 before December 31, 1996, to all original returns,
3 to all amended returns filed no later than 30 days
4 after the effective date of this amendatory Act of
5 1996, and to all notices issued on or before the
6 effective date of this amendatory Act of 1996 under
7 subsection (a) of Section 903, subsection (a) of
8 Section 904, subsection (e) of Section 909, or
9 Section 912. A taxpayer that is a "financial
10 organization" that engages in any transaction with
11 an affiliate shall be a "financial organization" for
12 all purposes of this Act.
13 (E) For all tax years beginning on or before
14 December 31, 1996, a taxpayer that falls within the
15 definition of a "financial organization" under
16 subparagraphs (B) or (C) of this paragraph, but who
17 does not fall within the definition of a "financial
18 organization" under the Proposed Regulations issued
19 by the Department of Revenue on July 19, 1996, may
20 irrevocably elect to apply the Proposed Regulations
21 for all of those years as though the Proposed
22 Regulations had been lawfully promulgated, adopted,
23 and in effect for all of those years. For purposes
24 of applying subparagraphs (B) or (C) of this
25 paragraph to all of those years, the election
26 allowed by this subparagraph applies only to the
27 taxpayer making the election and to those members of
28 the taxpayer's unitary business group who are
29 ordinarily required to apportion business income
30 under the same subsection of Section 304 of this Act
31 as the taxpayer making the election. No election
32 allowed by this subparagraph shall be made under a
33 claim filed under subsection (d) of Section 909 more
34 than 30 days after the effective date of this
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1 amendatory Act of 1996.
2 (9) Fiscal year. The term "fiscal year" means an
3 accounting period of 12 months ending on the last day of
4 any month other than December.
5 (10) Includes and including. The terms "includes"
6 and "including" when used in a definition contained in
7 this Act shall not be deemed to exclude other things
8 otherwise within the meaning of the term defined.
9 (11) Internal Revenue Code. The term "Internal
10 Revenue Code" means the United States Internal Revenue
11 Code of 1954 or any successor law or laws relating to
12 federal income taxes in effect for the taxable year.
13 (12) Mathematical error. The term "mathematical
14 error" includes the following types of errors, omissions,
15 or defects in a return filed by a taxpayer which prevents
16 acceptance of the return as filed for processing:
17 (A) arithmetic errors or incorrect
18 computations on the return or supporting schedules;
19 (B) entries on the wrong lines;
20 (C) omission of required supporting forms or
21 schedules or the omission of the information in
22 whole or in part called for thereon; and
23 (D) an attempt to claim, exclude, deduct, or
24 improperly report, in a manner directly contrary to
25 the provisions of the Act and regulations thereunder
26 any item of income, exemption, deduction, or credit.
27 (13) Nonbusiness income. The term "nonbusiness
28 income" means all income other than business income or
29 compensation.
30 (14) Nonresident. The term "nonresident" means a
31 person who is not a resident.
32 (15) Paid, incurred and accrued. The terms "paid",
33 "incurred" and "accrued" shall be construed according to
34 the method of accounting upon the basis of which the
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1 person's base income is computed under this Act.
2 (16) Partnership and partner. The term
3 "partnership" includes a syndicate, group, pool, joint
4 venture or other unincorporated organization, through or
5 by means of which any business, financial operation, or
6 venture is carried on, and which is not, within the
7 meaning of this Act, a trust or estate or a corporation;
8 and the term "partner" includes a member in such
9 syndicate, group, pool, joint venture or organization.
10 Any entity, including a limited liability company
11 formed under the Illinois Limited Liability Company Act,
12 shall be treated as a partnership if it is so classified
13 for federal income tax purposes.
14 For purposes of the tax imposed at subsection (c) of
15 Section 201 of this Act, the term "partnership" does not
16 include a syndicate, group, pool, joint venture or other
17 unincorporated organization established for the sole
18 purpose of playing the Illinois State Lottery.
19 (17) Part-year resident. The term "part-year
20 resident" means an individual who became a resident
21 during the taxable year or ceased to be a resident during
22 the taxable year. Under Section 1501 (a) (20) (A) (i)
23 residence commences with presence in this State for other
24 than a temporary or transitory purpose and ceases with
25 absence from this State for other than a temporary or
26 transitory purpose. Under Section 1501 (a) (20) (A) (ii)
27 residence commences with the establishment of domicile in
28 this State and ceases with the establishment of domicile
29 in another State.
30 (18) Person. The term "person" shall be construed
31 to mean and include an individual, a trust, estate,
32 partnership, association, firm, company, corporation,
33 limited liability company, or fiduciary. For purposes of
34 Section 1301 and 1302 of this Act, a "person" means (i)
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1 an individual, (ii) a corporation, (iii) an officer,
2 agent, or employee of a corporation, (iv) a member, agent
3 or employee of a partnership, or (v) a member, manager,
4 employee, officer, director, or agent of a limited
5 liability company who in such capacity commits an offense
6 specified in Section 1301 and 1302.
7 (18A) Records. The term "records" includes all
8 data maintained by the taxpayer, whether on paper,
9 microfilm, microfiche, or any type of machine-sensible
10 data compilation.
11 (19) Regulations. The term "regulations" includes
12 rules promulgated and forms prescribed by the Department.
13 (20) Resident. The term "resident" means:
14 (A) an individual (i) who is in this State for
15 other than a temporary or transitory purpose during
16 the taxable year; or (ii) who is domiciled in this
17 State but is absent from the State for a temporary
18 or transitory purpose during the taxable year;
19 (B) The estate of a decedent who at his or her
20 death was domiciled in this State;
21 (C) A trust created by a will of a decedent
22 who at his death was domiciled in this State; and
23 (D) An irrevocable trust, the grantor of which
24 was domiciled in this State at the time such trust
25 became irrevocable. For purpose of this
26 subparagraph, a trust shall be considered
27 irrevocable to the extent that the grantor is not
28 treated as the owner thereof under Sections 671
29 through 678 of the Internal Revenue Code.
30 (21) Sales. The term "sales" means all gross
31 receipts of the taxpayer not allocated under Sections
32 301, 302 and 303.
33 (22) State. The term "state" when applied to a
34 jurisdiction other than this State means any state of the
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1 United States, the District of Columbia, the Commonwealth
2 of Puerto Rico, any Territory or Possession of the United
3 States, and any foreign country, or any political
4 subdivision of any of the foregoing. For purposes of the
5 foreign tax credit under Section 601, the term "state"
6 means any state of the United States, the District of
7 Columbia, the Commonwealth of Puerto Rico, and any
8 territory or possession of the United States, or any
9 political subdivision of any of the foregoing, effective
10 for tax years ending on or after December 31, 1989.
11 (23) Taxable year. The term "taxable year" means
12 the calendar year, or the fiscal year ending during such
13 calendar year, upon the basis of which the base income is
14 computed under this Act. "Taxable year" means, in the
15 case of a return made for a fractional part of a year
16 under the provisions of this Act, the period for which
17 such return is made.
18 (24) Taxpayer. The term "taxpayer" means any person
19 subject to the tax imposed by this Act.
20 (25) International banking facility. The term
21 international banking facility shall have the same
22 meaning as is set forth in the Illinois Banking Act or as
23 is set forth in the laws of the United States or
24 regulations of the Board of Governors of the Federal
25 Reserve System.
26 (26) Income Tax Return Preparer.
27 (A) The term "income tax return preparer"
28 means any person who prepares for compensation, or
29 who employs one or more persons to prepare for
30 compensation, any return of tax imposed by this Act
31 or any claim for refund of tax imposed by this Act.
32 The preparation of a substantial portion of a return
33 or claim for refund shall be treated as the
34 preparation of that return or claim for refund.
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1 (B) A person is not an income tax return
2 preparer if all he or she does is
3 (i) furnish typing, reproducing, or other
4 mechanical assistance;
5 (ii) prepare returns or claims for
6 refunds for the employer by whom he or she is
7 regularly and continuously employed;
8 (iii) prepare as a fiduciary returns or
9 claims for refunds for any person; or
10 (iv) prepare claims for refunds for a
11 taxpayer in response to any notice of
12 deficiency issued to that taxpayer or in
13 response to any waiver of restriction after the
14 commencement of an audit of that taxpayer or of
15 another taxpayer if a determination in the
16 audit of the other taxpayer directly or
17 indirectly affects the tax liability of the
18 taxpayer whose claims he or she is preparing.
19 (27) Unitary business group. The term "unitary
20 business group" means a group of persons related through
21 common ownership whose business activities are integrated
22 with, dependent upon and contribute to each other. The
23 group will not include those members whose business
24 activity outside the United States is 80% or more of any
25 such member's total business activity; for purposes of
26 this paragraph and clause (a) (3) (B) (ii) of Section
27 304, business activity within the United States shall be
28 measured by means of the factors ordinarily applicable
29 under subsections (a), (b), (c), and (d), or (h) of
30 Section 304 except that, in the case of members
31 ordinarily required to apportion business income by means
32 of the 3 factor formula of property, payroll and sales
33 specified in subsection (a) of Section 304, or the
34 single-factor sales formula specified in subsection (h)
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1 of Section 304, such members shall not use the sales
2 factor in the computation and the results of the property
3 and payroll factor computations of subsection (a) of
4 Section 304 shall be divided by 2 (by one if either the
5 property or payroll factor has a denominator of zero).
6 The computation required by the preceding sentence shall,
7 in each case, involve the division of the member's
8 property, payroll, or revenue miles in the United States,
9 insurance premiums on property or risk in the United
10 States, or financial organization business income from
11 sources within the United States, as the case may be, by
12 the respective worldwide figures for such items. Common
13 ownership in the case of corporations is the direct or
14 indirect control or ownership of more than 50% of the
15 outstanding voting stock of the persons carrying on
16 unitary business activity. Unitary business activity can
17 ordinarily be illustrated where the activities of the
18 members are: (1) in the same general line (such as
19 manufacturing, wholesaling, retailing of tangible
20 personal property, insurance, transportation or finance);
21 or (2) are steps in a vertically structured enterprise or
22 process (such as the steps involved in the production of
23 natural resources, which might include exploration,
24 mining, refining, and marketing); and, in either
25 instance, the members are functionally integrated through
26 the exercise of strong centralized management (where, for
27 example, authority over such matters as purchasing,
28 financing, tax compliance, product line, personnel,
29 marketing and capital investment is not left to each
30 member). In no event, however, will any unitary business
31 group include members which are ordinarily required to
32 apportion business income under different subsections of
33 Section 304 except that for tax years ending on or after
34 December 31, 1987 this prohibition shall not apply to a
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1 unitary business group composed of one or more taxpayers
2 all of which apportion business income pursuant to
3 subsection (b) of Section 304, or all of which apportion
4 business income pursuant to subsection (d) of Section
5 304, and a holding company of such single-factor
6 taxpayers (see definition of "financial organization" for
7 rule regarding holding companies of financial
8 organizations). If a unitary business group would, but
9 for the preceding sentence, include members that are
10 ordinarily required to apportion business income under
11 different subsections of Section 304, then for each
12 subsection of Section 304 for which there are two or more
13 members, there shall be a separate unitary business group
14 composed of such members. For purposes of the preceding
15 two sentences, a member is "ordinarily required to
16 apportion business income" under a particular subsection
17 of Section 304 if it would be required to use the
18 apportionment method prescribed by such subsection except
19 for the fact that it derives business income solely from
20 Illinois. If the unitary business group members'
21 accounting periods differ, the common parent's accounting
22 period or, if there is no common parent, the accounting
23 period of the member that is expected to have, on a
24 recurring basis, the greatest Illinois income tax
25 liability must be used to determine whether to use the
26 apportionment method provided in subsection (a) or
27 subsection (h) of Section 304. The prohibition against
28 membership in a unitary business group for taxpayers
29 ordinarily required to apportion income under different
30 subsections of Section 304 does not apply to taxpayers
31 required to apportion income under subsection (a) and
32 subsection (h) of Section 304. The provisions of this
33 amendatory Act of 1997 apply to tax years ending on or
34 after December 31, 1997.
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1 (28) Subchapter S corporation. The term
2 "Subchapter S corporation" means a corporation for which
3 there is in effect an election under Section 1362 of the
4 Internal Revenue Code, or for which there is a federal
5 election to opt out of the provisions of the Subchapter S
6 Revision Act of 1982 and have applied instead the prior
7 federal Subchapter S rules as in effect on July 1, 1982.
8 (b) Other definitions.
9 (1) Words denoting number, gender, and so forth,
10 when used in this Act, where not otherwise distinctly
11 expressed or manifestly incompatible with the intent
12 thereof:
13 (A) Words importing the singular include and
14 apply to several persons, parties or things;
15 (B) Words importing the plural include the
16 singular; and
17 (C) Words importing the masculine gender
18 include the feminine as well.
19 (2) "Company" or "association" as including
20 successors and assigns. The word "company" or
21 "association", when used in reference to a corporation,
22 shall be deemed to embrace the words "successors and
23 assigns of such company or association", and in like
24 manner as if these last-named words, or words of similar
25 import, were expressed.
26 (3) Other terms. Any term used in any Section of
27 this Act with respect to the application of, or in
28 connection with, the provisions of any other Section of
29 this Act shall have the same meaning as in such other
30 Section.
31 (Source: P.A. 88-480; 89-399, eff. 8-20-95; 89-711, eff.
32 2-14-97.)
33 Section 99. Effective date. This Act takes effect upon
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1 becoming law.".