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90_SB0645sam001 SDS/90SB0645pam1/dgd 1 AMENDMENT TO SENATE BILL 645 2 AMENDMENT NO. . Amend Senate Bill 645 by replacing 3 the title with the following: 4 "AN ACT to amend the Illinois Income Tax Act by changing 5 Section 203."; 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 Section 203 as follows: 10 (35 ILCS 5/203) (from Ch. 120, par. 2-203) 11 Sec. 203. Base income defined. 12 (a) Individuals. 13 (1) In general. In the case of an individual, base 14 income means an amount equal to the taxpayer's adjusted 15 gross income for the taxable year as modified by 16 paragraph (2). 17 (2) Modifications. The adjusted gross income 18 referred to in paragraph (1) shall be modified by adding 19 thereto the sum of the following amounts: 20 (A) An amount equal to all amounts paid or 21 accrued to the taxpayer as interest or dividends -2- SDS/90SB0645pam1/dgd 1 during the taxable year to the extent excluded from 2 gross income in the computation of adjusted gross 3 income, except stock dividends of qualified public 4 utilities described in Section 305(e) of the 5 Internal Revenue Code; 6 (B) An amount equal to the amount of tax 7 imposed by this Act to the extent deducted from 8 gross income in the computation of adjusted gross 9 income for the taxable year; 10 (C) An amount equal to the amount received 11 during the taxable year as a recovery or refund of 12 real property taxes paid with respect to the 13 taxpayer's principal residence under the Revenue Act 14 of 1939 and for which a deduction was previously 15 taken under subparagraph (L) of this paragraph (2) 16 prior to July 1, 1991, the retrospective application 17 date of Article 4 of Public Act 87-17. In the case 18 of multi-unit or multi-use structures and farm 19 dwellings, the taxes on the taxpayer's principal 20 residence shall be that portion of the total taxes 21 for the entire property which is attributable to 22 such principal residence; 23 (D) An amount equal to the amount of the 24 capital gain deduction allowable under the Internal 25 Revenue Code, to the extent deducted from gross 26 income in the computation of adjusted gross income; 27 and 28 (D-5) An amount, to the extent not included in 29 adjusted gross income, equal to the amount of money 30 withdrawn by the taxpayer in the taxable year from a 31 medical care savings account and the interest earned 32 on the account in the taxable year of a withdrawal 33 pursuant to subsection (b) of Section 20 of the 34 Medical Care Savings Account Act; -3- SDS/90SB0645pam1/dgd 1 and by deducting from the total so obtained the sum of 2 the following amounts: 3 (E) Any amount included in such total in 4 respect of any compensation (including but not 5 limited to any compensation paid or accrued to a 6 serviceman while a prisoner of war or missing in 7 action) paid to a resident by reason of being on 8 active duty in the Armed Forces of the United States 9 and in respect of any compensation paid or accrued 10 to a resident who as a governmental employee was a 11 prisoner of war or missing in action, and in respect 12 of any compensation paid to a resident in 1971 or 13 thereafter for annual training performed pursuant to 14 Sections 502 and 503, Title 32, United States Code 15 as a member of the Illinois National Guard; 16 (F) An amount equal to all amounts included in 17 such total pursuant to the provisions of Sections 18 402(a), 402(c), 403(a), 403(b), 406(a), 407(a), and 19 408 of the Internal Revenue Code, or included in 20 such total as distributions under the provisions of 21 any retirement or disability plan for employees of 22 any governmental agency or unit, or retirement 23 payments to retired partners, which payments are 24 excluded in computing net earnings from self 25 employment by Section 1402 of the Internal Revenue 26 Code and regulations adopted pursuant thereto; 27 (G) The valuation limitation amount; 28 (H) An amount equal to the amount of any tax 29 imposed by this Act which was refunded to the 30 taxpayer and included in such total for the taxable 31 year; 32 (I) An amount equal to all amounts included in 33 such total pursuant to the provisions of Section 111 34 of the Internal Revenue Code as a recovery of items -4- SDS/90SB0645pam1/dgd 1 previously deducted from adjusted gross income in 2 the computation of taxable income; 3 (J) An amount equal to those dividends 4 included in such total which were paid by a 5 corporation which conducts business operations in an 6 Enterprise Zone or zones created under the Illinois 7 Enterprise Zone Act, and conducts substantially all 8 of its operations in an Enterprise Zone or zones; 9 (K) An amount equal to those dividends 10 included in such total that were paid by a 11 corporation that conducts business operations in a 12 federally designated Foreign Trade Zone or Sub-Zone 13 and that is designated a High Impact Business 14 located in Illinois; provided that dividends 15 eligible for the deduction provided in subparagraph 16 (J) of paragraph (2) of this subsection shall not be 17 eligible for the deduction provided under this 18 subparagraph (K); 19 (L) For taxable years ending after December 20 31, 1983, an amount equal to all social security 21 benefits and railroad retirement benefits included 22 in such total pursuant to Sections 72(r) and 86 of 23 the Internal Revenue Code; 24 (M) With the exception of any amounts 25 subtracted under subparagraph (N), an amount equal 26 to the sum of all amounts disallowed as deductions 27 by Sections 171(a) (2), and 265(2) of the Internal 28 Revenue Code of 1954, as now or hereafter amended, 29 and all amounts of expenses allocable to interest 30 and disallowed as deductions by Section 265(1) of 31 the Internal Revenue Code of 1954, as now or 32 hereafter amended; 33 (N) An amount equal to all amounts included in 34 such total which are exempt from taxation by this -5- SDS/90SB0645pam1/dgd 1 State either by reason of its statutes or 2 Constitution or by reason of the Constitution, 3 treaties or statutes of the United States; provided 4 that, in the case of any statute of this State that 5 exempts income derived from bonds or other 6 obligations from the tax imposed under this Act, the 7 amount exempted shall be the interest net of bond 8 premium amortization; 9 (O) An amount equal to any contribution made 10 to a job training project established pursuant to 11 the Tax Increment Allocation Redevelopment Act; 12 (P) An amount equal to the amount of the 13 deduction used to compute the federal income tax 14 credit for restoration of substantial amounts held 15 under claim of right for the taxable year pursuant 16 to Section 1341 of the Internal Revenue Code of 17 1986; 18 (Q) An amount equal to any amounts included in 19 such total, received by the taxpayer as an 20 acceleration in the payment of life, endowment or 21 annuity benefits in advance of the time they would 22 otherwise be payable as an indemnity for a terminal 23 illness; 24 (R) An amount equal to the amount of any 25 federal or State bonus paid to veterans of the 26 Persian Gulf War; 27 (S) An amount, to the extent included in 28 adjusted gross income, equal to the amount of a 29 contribution made in the taxable year on behalf of 30 the taxpayer to a medical care savings account 31 established under the Medical Care Savings Account 32 Act to the extent the contribution is accepted by 33 the account administrator as provided in that Act; 34 (T) An amount, to the extent included in -6- SDS/90SB0645pam1/dgd 1 adjusted gross income, equal to the amount of 2 interest earned in the taxable year on a medical 3 care savings account established under the Medical 4 Care Savings Account Act on behalf of the taxpayer, 5 other than interest added pursuant to item (D-5) of 6 this paragraph (2); 7 (U) For one taxable year beginning on or after 8 January 1, 1994, an amount equal to the total amount 9 of tax imposed and paid under subsections (a) and 10 (b) of Section 201 of this Act on grant amounts 11 received by the taxpayer under the Nursing Home 12 Grant Assistance Act during the taxpayer's taxable 13 years 1992 and 1993;and14 (V) Beginning with tax years ending on or 15 after December 31, 1995 and ending with tax years 16 ending on or before December 31, 1999, an amount 17 equal to the amount paid by a taxpayer who is a 18 self-employed taxpayer, a partner of a partnership, 19 or a shareholder in a Subchapter S corporation for 20 health insurance or long-term care insurance for 21 that taxpayer or that taxpayer's spouse or 22 dependents, to the extent that the amount paid for 23 that health insurance or long-term care insurance 24 may be deducted under Section 213 of the Internal 25 Revenue Code of 1986, has not been deducted on the 26 federal income tax return of the taxpayer, and does 27 not exceed the taxable income attributable to that 28 taxpayer's income, self-employment income, or 29 Subchapter S corporation income; except that no 30 deduction shall be allowed under this item (V) if 31 the taxpayer is eligible to participate in any 32 health insurance or long-term care insurance plan of 33 an employer of the taxpayer or the taxpayer's 34 spouse. The amount of the health insurance and -7- SDS/90SB0645pam1/dgd 1 long-term care insurance subtracted under this item 2 (V) shall be determined by multiplying total health 3 insurance and long-term care insurance premiums paid 4 by the taxpayer times a number that represents the 5 fractional percentage of eligible medical expenses 6 under Section 213 of the Internal Revenue Code of 7 1986 not actually deducted on the taxpayer's federal 8 income tax return; and.9 (W) Beginning with taxable years beginning on 10 or after January 1, 1997 and ending with taxable 11 years ending on or before December 30, 2002, an 12 amount, not to exceed $100,000, equal to the amount 13 contributed for educational purposes by the taxpayer 14 to any public or private elementary, secondary, or 15 post-secondary school in Illinois, as certified by 16 the recipient school. 17 (b) Corporations. 18 (1) In general. In the case of a corporation, base 19 income means an amount equal to the taxpayer's taxable 20 income for the taxable year as modified by paragraph (2). 21 (2) Modifications. The taxable income referred to 22 in paragraph (1) shall be modified by adding thereto the 23 sum of the following amounts: 24 (A) An amount equal to all amounts paid or 25 accrued to the taxpayer as interest and all 26 distributions received from regulated investment 27 companies during the taxable year to the extent 28 excluded from gross income in the computation of 29 taxable income; 30 (B) An amount equal to the amount of tax 31 imposed by this Act to the extent deducted from 32 gross income in the computation of taxable income 33 for the taxable year; 34 (C) In the case of a regulated investment -8- SDS/90SB0645pam1/dgd 1 company or real estate investment trust, an amount 2 equal to the excess of (i) the net long-term capital 3 gain for the taxable year, over (ii) the amount of 4 the capital gain dividends designated as such in 5 accordance with Section 852(b)(3)(C) or Section 6 857(b)(3)(C) of the Internal Revenue Code and any 7 amount designated under Section 852(b)(3)(D) of the 8 Internal Revenue Code, attributable to the taxable 9 year. 10 This amendatory Act of 1995 is declarative of existing 11 law and is not a new enactment. 12 (D) The amount of any net operating loss 13 deduction taken in arriving at taxable income, other 14 than a net operating loss carried forward from a 15 taxable year ending prior to December 31, 1986; and 16 (E) For taxable years in which a net operating 17 loss carryback or carryforward from a taxable year 18 ending prior to December 31, 1986 is an element of 19 taxable income under paragraph (1) of subsection (e) 20 or subparagraph (E) of paragraph (2) of subsection 21 (e), the amount by which addition modifications 22 other than those provided by this subparagraph (E) 23 exceeded subtraction modifications in such earlier 24 taxable year, with the following limitations applied 25 in the order that they are listed: 26 (i) the addition modification relating to 27 the net operating loss carried back or forward 28 to the taxable year from any taxable year 29 ending prior to December 31, 1986 shall be 30 reduced by the amount of addition modification 31 under this subparagraph (E) which related to 32 that net operating loss and which was taken 33 into account in calculating the base income of 34 an earlier taxable year, and -9- SDS/90SB0645pam1/dgd 1 (ii) the addition modification relating 2 to the net operating loss carried back or 3 forward to the taxable year from any taxable 4 year ending prior to December 31, 1986 shall 5 not exceed the amount of such carryback or 6 carryforward; 7 For taxable years in which there is a net 8 operating loss carryback or carryforward from more 9 than one other taxable year ending prior to December 10 31, 1986, the addition modification provided in this 11 subparagraph (E) shall be the sum of the amounts 12 computed independently under the preceding 13 provisions of this subparagraph (E) for each such 14 taxable year, 15 and by deducting from the total so obtained the sum of 16 the following amounts: 17 (F) An amount equal to the amount of any tax 18 imposed by this Act which was refunded to the 19 taxpayer and included in such total for the taxable 20 year; 21 (G) An amount equal to any amount included in 22 such total under Section 78 of the Internal Revenue 23 Code; 24 (H) In the case of a regulated investment 25 company, an amount equal to the amount of exempt 26 interest dividends as defined in subsection (b) (5) 27 of Section 852 of the Internal Revenue Code, paid to 28 shareholders for the taxable year; 29 (I) With the exception of any amounts 30 subtracted under subparagraph (J), an amount equal 31 to the sum of all amounts disallowed as deductions 32 by Sections 171(a) (2), and 265(a)(2) and amounts 33 disallowed as interest expense by Section 291(a)(3) 34 of the Internal Revenue Code, as now or hereafter -10- SDS/90SB0645pam1/dgd 1 amended, and all amounts of expenses allocable to 2 interest and disallowed as deductions by Section 3 265(a)(1) of the Internal Revenue Code, as now or 4 hereafter amended; 5 (J) An amount equal to all amounts included in 6 such total which are exempt from taxation by this 7 State either by reason of its statutes or 8 Constitution or by reason of the Constitution, 9 treaties or statutes of the United States; provided 10 that, in the case of any statute of this State that 11 exempts income derived from bonds or other 12 obligations from the tax imposed under this Act, the 13 amount exempted shall be the interest net of bond 14 premium amortization; 15 (K) An amount equal to those dividends 16 included in such total which were paid by a 17 corporation which conducts business operations in an 18 Enterprise Zone or zones created under the Illinois 19 Enterprise Zone Act and conducts substantially all 20 of its operations in an Enterprise Zone or zones; 21 (L) An amount equal to those dividends 22 included in such total that were paid by a 23 corporation that conducts business operations in a 24 federally designated Foreign Trade Zone or Sub-Zone 25 and that is designated a High Impact Business 26 located in Illinois; provided that dividends 27 eligible for the deduction provided in subparagraph 28 (K) of paragraph 2 of this subsection shall not be 29 eligible for the deduction provided under this 30 subparagraph (L); 31 (M) For any taxpayer that is a financial 32 organization within the meaning of Section 304(c) of 33 this Act, an amount included in such total as 34 interest income from a loan or loans made by such -11- SDS/90SB0645pam1/dgd 1 taxpayer to a borrower, to the extent that such a 2 loan is secured by property which is eligible for 3 the Enterprise Zone Investment Credit. To determine 4 the portion of a loan or loans that is secured by 5 property eligible for a Section 201(h) investment 6 credit to the borrower, the entire principal amount 7 of the loan or loans between the taxpayer and the 8 borrower should be divided into the basis of the 9 Section 201(h) investment credit property which 10 secures the loan or loans, using for this purpose 11 the original basis of such property on the date that 12 it was placed in service in the Enterprise Zone. 13 The subtraction modification available to taxpayer 14 in any year under this subsection shall be that 15 portion of the total interest paid by the borrower 16 with respect to such loan attributable to the 17 eligible property as calculated under the previous 18 sentence; 19 (M-1) For any taxpayer that is a financial 20 organization within the meaning of Section 304(c) of 21 this Act, an amount included in such total as 22 interest income from a loan or loans made by such 23 taxpayer to a borrower, to the extent that such a 24 loan is secured by property which is eligible for 25 the High Impact Business Investment Credit. To 26 determine the portion of a loan or loans that is 27 secured by property eligible for a Section 201(i) 28 investment credit to the borrower, the entire 29 principal amount of the loan or loans between the 30 taxpayer and the borrower should be divided into the 31 basis of the Section 201(i) investment credit 32 property which secures the loan or loans, using for 33 this purpose the original basis of such property on 34 the date that it was placed in service in a -12- SDS/90SB0645pam1/dgd 1 federally designated Foreign Trade Zone or Sub-Zone 2 located in Illinois. No taxpayer that is eligible 3 for the deduction provided in subparagraph (M) of 4 paragraph (2) of this subsection shall be eligible 5 for the deduction provided under this subparagraph 6 (M-1). The subtraction modification available to 7 taxpayers in any year under this subsection shall be 8 that portion of the total interest paid by the 9 borrower with respect to such loan attributable to 10 the eligible property as calculated under the 11 previous sentence; 12 (N) Two times any contribution made during the 13 taxable year to a designated zone organization to 14 the extent that the contribution (i) qualifies as a 15 charitable contribution under subsection (c) of 16 Section 170 of the Internal Revenue Code and (ii) 17 must, by its terms, be used for a project approved 18 by the Department of Commerce and Community Affairs 19 under Section 11 of the Illinois Enterprise Zone 20 Act; 21 (O) An amount equal to: (i) 85% for taxable 22 years ending on or before December 31, 1992, or, a 23 percentage equal to the percentage allowable under 24 Section 243(a)(1) of the Internal Revenue Code of 25 1986 for taxable years ending after December 31, 26 1992, of the amount by which dividends included in 27 taxable income and received from a corporation that 28 is not created or organized under the laws of the 29 United States or any state or political subdivision 30 thereof, including, for taxable years ending on or 31 after December 31, 1988, dividends received or 32 deemed received or paid or deemed paid under 33 Sections 951 through 964 of the Internal Revenue 34 Code, exceed the amount of the modification provided -13- SDS/90SB0645pam1/dgd 1 under subparagraph (G) of paragraph (2) of this 2 subsection (b) which is related to such dividends; 3 plus (ii) 100% of the amount by which dividends, 4 included in taxable income and received, including, 5 for taxable years ending on or after December 31, 6 1988, dividends received or deemed received or paid 7 or deemed paid under Sections 951 through 964 of the 8 Internal Revenue Code, from any such corporation 9 specified in clause (i) that would but for the 10 provisions of Section 1504 (b) (3) of the Internal 11 Revenue Code be treated as a member of the 12 affiliated group which includes the dividend 13 recipient, exceed the amount of the modification 14 provided under subparagraph (G) of paragraph (2) of 15 this subsection (b) which is related to such 16 dividends; 17 (P) An amount equal to any contribution made 18 to a job training project established pursuant to 19 the Tax Increment Allocation Redevelopment Act;and20 (Q) An amount equal to the amount of the 21 deduction used to compute the federal income tax 22 credit for restoration of substantial amounts held 23 under claim of right for the taxable year pursuant 24 to Section 1341 of the Internal Revenue Code of 25 1986; and.26 (R) Beginning with taxable years beginning on 27 or after January 1, 1997 and ending with taxable 28 years ending on or before December 30, 2002, an 29 amount, not to exceed $100,000, equal to the amount 30 contributed for educational purposes by the taxpayer 31 to any public or private elementary, secondary, or 32 post-secondary school in Illinois, as certified by 33 the recipient school. 34 (3) Special rule. For purposes of paragraph (2) -14- SDS/90SB0645pam1/dgd 1 (A), "gross income" in the case of a life insurance 2 company, for tax years ending on and after December 31, 3 1994, shall mean the gross investment income for the 4 taxable year. 5 (c) Trusts and estates. 6 (1) In general. In the case of a trust or estate, 7 base income means an amount equal to the taxpayer's 8 taxable income for the taxable year as modified by 9 paragraph (2). 10 (2) Modifications. Subject to the provisions of 11 paragraph (3), the taxable income referred to in 12 paragraph (1) shall be modified by adding thereto the sum 13 of the following amounts: 14 (A) An amount equal to all amounts paid or 15 accrued to the taxpayer as interest or dividends 16 during the taxable year to the extent excluded from 17 gross income in the computation of taxable income; 18 (B) In the case of (i) an estate, $600; (ii) a 19 trust which, under its governing instrument, is 20 required to distribute all of its income currently, 21 $300; and (iii) any other trust, $100, but in each 22 such case, only to the extent such amount was 23 deducted in the computation of taxable income; 24 (C) An amount equal to the amount of tax 25 imposed by this Act to the extent deducted from 26 gross income in the computation of taxable income 27 for the taxable year; 28 (D) The amount of any net operating loss 29 deduction taken in arriving at taxable income, other 30 than a net operating loss carried forward from a 31 taxable year ending prior to December 31, 1986; 32 (E) For taxable years in which a net operating 33 loss carryback or carryforward from a taxable year 34 ending prior to December 31, 1986 is an element of -15- SDS/90SB0645pam1/dgd 1 taxable income under paragraph (1) of subsection (e) 2 or subparagraph (E) of paragraph (2) of subsection 3 (e), the amount by which addition modifications 4 other than those provided by this subparagraph (E) 5 exceeded subtraction modifications in such taxable 6 year, with the following limitations applied in the 7 order that they are listed: 8 (i) the addition modification relating to 9 the net operating loss carried back or forward 10 to the taxable year from any taxable year 11 ending prior to December 31, 1986 shall be 12 reduced by the amount of addition modification 13 under this subparagraph (E) which related to 14 that net operating loss and which was taken 15 into account in calculating the base income of 16 an earlier taxable year, and 17 (ii) the addition modification relating 18 to the net operating loss carried back or 19 forward to the taxable year from any taxable 20 year ending prior to December 31, 1986 shall 21 not exceed the amount of such carryback or 22 carryforward; 23 For taxable years in which there is a net 24 operating loss carryback or carryforward from more 25 than one other taxable year ending prior to December 26 31, 1986, the addition modification provided in this 27 subparagraph (E) shall be the sum of the amounts 28 computed independently under the preceding 29 provisions of this subparagraph (E) for each such 30 taxable year; 31 (F) For taxable years ending on or after 32 January 1, 1989, an amount equal to the tax deducted 33 pursuant to Section 164 of the Internal Revenue Code 34 if the trust or estate is claiming the same tax for -16- SDS/90SB0645pam1/dgd 1 purposes of the Illinois foreign tax credit under 2 Section 601 of this Act; and 3 (G) An amount equal to the amount of the 4 capital gain deduction allowable under the Internal 5 Revenue Code, to the extent deducted from gross 6 income in the computation of taxable income; 7 and by deducting from the total so obtained the sum of 8 the following amounts: 9 (H) An amount equal to all amounts included in 10 such total pursuant to the provisions of Sections 11 402(a), 402(c), 403(a), 403(b), 406(a), 407(a) and 12 408 of the Internal Revenue Code or included in such 13 total as distributions under the provisions of any 14 retirement or disability plan for employees of any 15 governmental agency or unit, or retirement payments 16 to retired partners, which payments are excluded in 17 computing net earnings from self employment by 18 Section 1402 of the Internal Revenue Code and 19 regulations adopted pursuant thereto; 20 (I) The valuation limitation amount; 21 (J) An amount equal to the amount of any tax 22 imposed by this Act which was refunded to the 23 taxpayer and included in such total for the taxable 24 year; 25 (K) An amount equal to all amounts included in 26 taxable income as modified by subparagraphs (A), 27 (B), (C), (D), (E), (F) and (G) which are exempt 28 from taxation by this State either by reason of its 29 statutes or Constitution or by reason of the 30 Constitution, treaties or statutes of the United 31 States; provided that, in the case of any statute of 32 this State that exempts income derived from bonds or 33 other obligations from the tax imposed under this 34 Act, the amount exempted shall be the interest net -17- SDS/90SB0645pam1/dgd 1 of bond premium amortization; 2 (L) With the exception of any amounts 3 subtracted under subparagraph (K), an amount equal 4 to the sum of all amounts disallowed as deductions 5 by Sections 171(a) (2) and 265(a)(2) of the Internal 6 Revenue Code, as now or hereafter amended, and all 7 amounts of expenses allocable to interest and 8 disallowed as deductions by Section 265(1) of the 9 Internal Revenue Code of 1954, as now or hereafter 10 amended; 11 (M) An amount equal to those dividends 12 included in such total which were paid by a 13 corporation which conducts business operations in an 14 Enterprise Zone or zones created under the Illinois 15 Enterprise Zone Act and conducts substantially all 16 of its operations in an Enterprise Zone or Zones; 17 (N) An amount equal to any contribution made 18 to a job training project established pursuant to 19 the Tax Increment Allocation Redevelopment Act; 20 (O) An amount equal to those dividends 21 included in such total that were paid by a 22 corporation that conducts business operations in a 23 federally designated Foreign Trade Zone or Sub-Zone 24 and that is designated a High Impact Business 25 located in Illinois; provided that dividends 26 eligible for the deduction provided in subparagraph 27 (M) of paragraph (2) of this subsection shall not be 28 eligible for the deduction provided under this 29 subparagraph (O);and30 (P) An amount equal to the amount of the 31 deduction used to compute the federal income tax 32 credit for restoration of substantial amounts held 33 under claim of right for the taxable year pursuant 34 to Section 1341 of the Internal Revenue Code of -18- SDS/90SB0645pam1/dgd 1 1986; and.2 (Q) Beginning with taxable years beginning on 3 or after January 1, 1997 and ending with taxable 4 years ending on or before December 30, 2002, an 5 amount, not to exceed $100,000, equal to the amount 6 contributed for educational purposes by the taxpayer 7 to any public or private elementary, secondary, or 8 post-secondary school in Illinois, as certified by 9 the recipient school. 10 (3) Limitation. The amount of any modification 11 otherwise required under this subsection shall, under 12 regulations prescribed by the Department, be adjusted by 13 any amounts included therein which were properly paid, 14 credited, or required to be distributed, or permanently 15 set aside for charitable purposes pursuant to Internal 16 Revenue Code Section 642(c) during the taxable year. 17 (d) Partnerships. 18 (1) In general. In the case of a partnership, base 19 income means an amount equal to the taxpayer's taxable 20 income for the taxable year as modified by paragraph (2). 21 (2) Modifications. The taxable income referred to 22 in paragraph (1) shall be modified by adding thereto the 23 sum of the following amounts: 24 (A) An amount equal to all amounts paid or 25 accrued to the taxpayer as interest or dividends 26 during the taxable year to the extent excluded from 27 gross income in the computation of taxable income; 28 (B) An amount equal to the amount of tax 29 imposed by this Act to the extent deducted from 30 gross income for the taxable year; and 31 (C) The amount of deductions allowed to the 32 partnership pursuant to Section 707 (c) of the 33 Internal Revenue Code in calculating its taxable 34 income; -19- SDS/90SB0645pam1/dgd 1 (D) An amount equal to the amount of the 2 capital gain deduction allowable under the Internal 3 Revenue Code, to the extent deducted from gross 4 income in the computation of taxable income; 5 and by deducting from the total so obtained the following 6 amounts: 7 (E) The valuation limitation amount; 8 (F) An amount equal to the amount of any tax 9 imposed by this Act which was refunded to the 10 taxpayer and included in such total for the taxable 11 year; 12 (G) An amount equal to all amounts included in 13 taxable income as modified by subparagraphs (A), 14 (B), (C) and (D) which are exempt from taxation by 15 this State either by reason of its statutes or 16 Constitution or by reason of the Constitution, 17 treaties or statutes of the United States; provided 18 that, in the case of any statute of this State that 19 exempts income derived from bonds or other 20 obligations from the tax imposed under this Act, the 21 amount exempted shall be the interest net of bond 22 premium amortization; 23 (H) Any income of the partnership which 24 constitutes personal service income as defined in 25 Section 1348 (b) (1) of the Internal Revenue Code 26 (as in effect December 31, 1981) or a reasonable 27 allowance for compensation paid or accrued for 28 services rendered by partners to the partnership, 29 whichever is greater; 30 (I) An amount equal to all amounts of income 31 distributable to an entity subject to the Personal 32 Property Tax Replacement Income Tax imposed by 33 subsections (c) and (d) of Section 201 of this Act 34 including amounts distributable to organizations -20- SDS/90SB0645pam1/dgd 1 exempt from federal income tax by reason of Section 2 501(a) of the Internal Revenue Code; 3 (J) With the exception of any amounts 4 subtracted under subparagraph (G), an amount equal 5 to the sum of all amounts disallowed as deductions 6 by Sections 171(a) (2), and 265(2) of the Internal 7 Revenue Code of 1954, as now or hereafter amended, 8 and all amounts of expenses allocable to interest 9 and disallowed as deductions by Section 265(1) of 10 the Internal Revenue Code, as now or hereafter 11 amended; 12 (K) An amount equal to those dividends 13 included in such total which were paid by a 14 corporation which conducts business operations in an 15 Enterprise Zone or zones created under the Illinois 16 Enterprise Zone Act, enacted by the 82nd General 17 Assembly, and which does not conduct such operations 18 other than in an Enterprise Zone or Zones; 19 (L) An amount equal to any contribution made 20 to a job training project established pursuant to 21 the Real Property Tax Increment Allocation 22 Redevelopment Act; 23 (M) An amount equal to those dividends 24 included in such total that were paid by a 25 corporation that conducts business operations in a 26 federally designated Foreign Trade Zone or Sub-Zone 27 and that is designated a High Impact Business 28 located in Illinois; provided that dividends 29 eligible for the deduction provided in subparagraph 30 (K) of paragraph (2) of this subsection shall not be 31 eligible for the deduction provided under this 32 subparagraph (M); and 33 (N) An amount equal to the amount of the 34 deduction used to compute the federal income tax -21- SDS/90SB0645pam1/dgd 1 credit for restoration of substantial amounts held 2 under claim of right for the taxable year pursuant 3 to Section 1341 of the Internal Revenue Code of 4 1986. 5 (e) Gross income; adjusted gross income; taxable income. 6 (1) In general. Subject to the provisions of 7 paragraph (2) and subsection (b) (3), for purposes of 8 this Section and Section 803(e), a taxpayer's gross 9 income, adjusted gross income, or taxable income for the 10 taxable year shall mean the amount of gross income, 11 adjusted gross income or taxable income properly 12 reportable for federal income tax purposes for the 13 taxable year under the provisions of the Internal Revenue 14 Code. Taxable income may be less than zero. However, for 15 taxable years ending on or after December 31, 1986, net 16 operating loss carryforwards from taxable years ending 17 prior to December 31, 1986, may not exceed the sum of 18 federal taxable income for the taxable year before net 19 operating loss deduction, plus the excess of addition 20 modifications over subtraction modifications for the 21 taxable year. For taxable years ending prior to December 22 31, 1986, taxable income may never be an amount in excess 23 of the net operating loss for the taxable year as defined 24 in subsections (c) and (d) of Section 172 of the Internal 25 Revenue Code, provided that when taxable income of a 26 corporation (other than a Subchapter S corporation), 27 trust, or estate is less than zero and addition 28 modifications, other than those provided by subparagraph 29 (E) of paragraph (2) of subsection (b) for corporations 30 or subparagraph (E) of paragraph (2) of subsection (c) 31 for trusts and estates, exceed subtraction modifications, 32 an addition modification must be made under those 33 subparagraphs for any other taxable year to which the 34 taxable income less than zero (net operating loss) is -22- SDS/90SB0645pam1/dgd 1 applied under Section 172 of the Internal Revenue Code or 2 under subparagraph (E) of paragraph (2) of this 3 subsection (e) applied in conjunction with Section 172 of 4 the Internal Revenue Code. 5 (2) Special rule. For purposes of paragraph (1) of 6 this subsection, the taxable income properly reportable 7 for federal income tax purposes shall mean: 8 (A) Certain life insurance companies. In the 9 case of a life insurance company subject to the tax 10 imposed by Section 801 of the Internal Revenue Code, 11 life insurance company taxable income, plus the 12 amount of distribution from pre-1984 policyholder 13 surplus accounts as calculated under Section 815a of 14 the Internal Revenue Code; 15 (B) Certain other insurance companies. In the 16 case of mutual insurance companies subject to the 17 tax imposed by Section 831 of the Internal Revenue 18 Code, insurance company taxable income; 19 (C) Regulated investment companies. In the 20 case of a regulated investment company subject to 21 the tax imposed by Section 852 of the Internal 22 Revenue Code, investment company taxable income; 23 (D) Real estate investment trusts. In the 24 case of a real estate investment trust subject to 25 the tax imposed by Section 857 of the Internal 26 Revenue Code, real estate investment trust taxable 27 income; 28 (E) Consolidated corporations. In the case of 29 a corporation which is a member of an affiliated 30 group of corporations filing a consolidated income 31 tax return for the taxable year for federal income 32 tax purposes, taxable income determined as if such 33 corporation had filed a separate return for federal 34 income tax purposes for the taxable year and each -23- SDS/90SB0645pam1/dgd 1 preceding taxable year for which it was a member of 2 an affiliated group. For purposes of this 3 subparagraph, the taxpayer's separate taxable income 4 shall be determined as if the election provided by 5 Section 243(b) (2) of the Internal Revenue Code had 6 been in effect for all such years; 7 (F) Cooperatives. In the case of a 8 cooperative corporation or association, the taxable 9 income of such organization determined in accordance 10 with the provisions of Section 1381 through 1388 of 11 the Internal Revenue Code; 12 (G) Subchapter S corporations. In the case 13 of: (i) a Subchapter S corporation for which there 14 is in effect an election for the taxable year under 15 Section 1362 of the Internal Revenue Code, the 16 taxable income of such corporation determined in 17 accordance with Section 1363(b) of the Internal 18 Revenue Code, except that taxable income shall take 19 into account those items which are required by 20 Section 1363(b)(1) of the Internal Revenue Code to 21 be separately stated; and (ii) a Subchapter S 22 corporation for which there is in effect a federal 23 election to opt out of the provisions of the 24 Subchapter S Revision Act of 1982 and have applied 25 instead the prior federal Subchapter S rules as in 26 effect on July 1, 1982, the taxable income of such 27 corporation determined in accordance with the 28 federal Subchapter S rules as in effect on July 1, 29 1982; and 30 (H) Partnerships. In the case of a 31 partnership, taxable income determined in accordance 32 with Section 703 of the Internal Revenue Code, 33 except that taxable income shall take into account 34 those items which are required by Section 703(a)(1) -24- SDS/90SB0645pam1/dgd 1 to be separately stated but which would be taken 2 into account by an individual in calculating his 3 taxable income. 4 (f) Valuation limitation amount. 5 (1) In general. The valuation limitation amount 6 referred to in subsections (a) (2) (G), (c) (2) (I) and 7 (d)(2) (E) is an amount equal to: 8 (A) The sum of the pre-August 1, 1969 9 appreciation amounts (to the extent consisting of 10 gain reportable under the provisions of Section 1245 11 or 1250 of the Internal Revenue Code) for all 12 property in respect of which such gain was reported 13 for the taxable year; plus 14 (B) The lesser of (i) the sum of the 15 pre-August 1, 1969 appreciation amounts (to the 16 extent consisting of capital gain) for all property 17 in respect of which such gain was reported for 18 federal income tax purposes for the taxable year, or 19 (ii) the net capital gain for the taxable year, 20 reduced in either case by any amount of such gain 21 included in the amount determined under subsection 22 (a) (2) (F) or (c) (2) (H). 23 (2) Pre-August 1, 1969 appreciation amount. 24 (A) If the fair market value of property 25 referred to in paragraph (1) was readily 26 ascertainable on August 1, 1969, the pre-August 1, 27 1969 appreciation amount for such property is the 28 lesser of (i) the excess of such fair market value 29 over the taxpayer's basis (for determining gain) for 30 such property on that date (determined under the 31 Internal Revenue Code as in effect on that date), or 32 (ii) the total gain realized and reportable for 33 federal income tax purposes in respect of the sale, 34 exchange or other disposition of such property. -25- SDS/90SB0645pam1/dgd 1 (B) If the fair market value of property 2 referred to in paragraph (1) was not readily 3 ascertainable on August 1, 1969, the pre-August 1, 4 1969 appreciation amount for such property is that 5 amount which bears the same ratio to the total gain 6 reported in respect of the property for federal 7 income tax purposes for the taxable year, as the 8 number of full calendar months in that part of the 9 taxpayer's holding period for the property ending 10 July 31, 1969 bears to the number of full calendar 11 months in the taxpayer's entire holding period for 12 the property. 13 (C) The Department shall prescribe such 14 regulations as may be necessary to carry out the 15 purposes of this paragraph. 16 (g) Double deductions. Unless specifically provided 17 otherwise, nothing in this Section shall permit the same item 18 to be deducted more than once. 19 (h) Legislative intention. Except as expressly provided 20 by this Section there shall be no modifications or 21 limitations on the amounts of income, gain, loss or deduction 22 taken into account in determining gross income, adjusted 23 gross income or taxable income for federal income tax 24 purposes for the taxable year, or in the amount of such items 25 entering into the computation of base income and net income 26 under this Act for such taxable year, whether in respect of 27 property values as of August 1, 1969 or otherwise. 28 (Source: P.A. 88-195; 88-648, eff. 9-16-94; 88-669, eff. 29 11-29-94; 88-670, eff. 12-2-94; 89-89, eff. 6-30-95; 89-235, 30 eff. 8-4-95; 89-418, eff. 11-15-95; 89-460, eff. 5-24-96; 31 89-626, eff. 8-9-96.)".