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90_SB1269
35 ILCS 5/203 from Ch. 120, par. 2-203
Amends the Illinois Income Tax Act. Provides that, for
purposes of determining the base income of a corporation, the
amount of a taxpayer's adjustment under Section
832(b)(5)(B)(i) of the Internal Revenue Code shall not be
treated as an amount of interest excluded from gross income
in the computation of taxable income. Exempt from the sunset
provisions of Section 250. Effective January 1, 1999.
LRB9008807KDcd
LRB9008807KDcd
1 AN ACT to amend the Illinois Income Tax Act by changing
2 Section 203.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 5. The Illinois Income Tax Act is amended by
6 changing Section 203 as follows:
7 (35 ILCS 5/203) (from Ch. 120, par. 2-203)
8 Sec. 203. Base income defined.
9 (a) Individuals.
10 (1) In general. In the case of an individual, base
11 income means an amount equal to the taxpayer's adjusted
12 gross income for the taxable year as modified by
13 paragraph (2).
14 (2) Modifications. The adjusted gross income
15 referred to in paragraph (1) shall be modified by adding
16 thereto the sum of the following amounts:
17 (A) An amount equal to all amounts paid or
18 accrued to the taxpayer as interest or dividends
19 during the taxable year to the extent excluded from
20 gross income in the computation of adjusted gross
21 income, except stock dividends of qualified public
22 utilities described in Section 305(e) of the
23 Internal Revenue Code;
24 (B) 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 adjusted gross
27 income for the taxable year;
28 (C) An amount equal to the amount received
29 during the taxable year as a recovery or refund of
30 real property taxes paid with respect to the
31 taxpayer's principal residence under the Revenue Act
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1 of 1939 and for which a deduction was previously
2 taken under subparagraph (L) of this paragraph (2)
3 prior to July 1, 1991, the retrospective application
4 date of Article 4 of Public Act 87-17. In the case
5 of multi-unit or multi-use structures and farm
6 dwellings, the taxes on the taxpayer's principal
7 residence shall be that portion of the total taxes
8 for the entire property which is attributable to
9 such principal residence;
10 (D) An amount equal to the amount of the
11 capital gain deduction allowable under the Internal
12 Revenue Code, to the extent deducted from gross
13 income in the computation of adjusted gross income;
14 and
15 (D-5) An amount, to the extent not included in
16 adjusted gross income, equal to the amount of money
17 withdrawn by the taxpayer in the taxable year from a
18 medical care savings account and the interest earned
19 on the account in the taxable year of a withdrawal
20 pursuant to subsection (b) of Section 20 of the
21 Medical Care Savings Account Act;
22 and by deducting from the total so obtained the sum of
23 the following amounts:
24 (E) Any amount included in such total in
25 respect of any compensation (including but not
26 limited to any compensation paid or accrued to a
27 serviceman while a prisoner of war or missing in
28 action) paid to a resident by reason of being on
29 active duty in the Armed Forces of the United States
30 and in respect of any compensation paid or accrued
31 to a resident who as a governmental employee was a
32 prisoner of war or missing in action, and in respect
33 of any compensation paid to a resident in 1971 or
34 thereafter for annual training performed pursuant to
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1 Sections 502 and 503, Title 32, United States Code
2 as a member of the Illinois National Guard;
3 (F) An amount equal to all amounts included in
4 such total pursuant to the provisions of Sections
5 402(a), 402(c), 403(a), 403(b), 406(a), 407(a), and
6 408 of the Internal Revenue Code, or included in
7 such total as distributions under the provisions of
8 any retirement or disability plan for employees of
9 any governmental agency or unit, or retirement
10 payments to retired partners, which payments are
11 excluded in computing net earnings from self
12 employment by Section 1402 of the Internal Revenue
13 Code and regulations adopted pursuant thereto;
14 (G) The valuation limitation amount;
15 (H) An amount equal to the amount of any tax
16 imposed by this Act which was refunded to the
17 taxpayer and included in such total for the taxable
18 year;
19 (I) An amount equal to all amounts included in
20 such total pursuant to the provisions of Section 111
21 of the Internal Revenue Code as a recovery of items
22 previously deducted from adjusted gross income in
23 the computation of taxable income;
24 (J) An amount equal to those dividends
25 included in such total which were paid by a
26 corporation which conducts business operations in an
27 Enterprise Zone or zones created under the Illinois
28 Enterprise Zone Act, and conducts substantially all
29 of its operations in an Enterprise Zone or zones;
30 (K) An amount equal to those dividends
31 included in such total that were paid by a
32 corporation that conducts business operations in a
33 federally designated Foreign Trade Zone or Sub-Zone
34 and that is designated a High Impact Business
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1 located in Illinois; provided that dividends
2 eligible for the deduction provided in subparagraph
3 (J) of paragraph (2) of this subsection shall not be
4 eligible for the deduction provided under this
5 subparagraph (K);
6 (L) For taxable years ending after December
7 31, 1983, an amount equal to all social security
8 benefits and railroad retirement benefits included
9 in such total pursuant to Sections 72(r) and 86 of
10 the Internal Revenue Code;
11 (M) With the exception of any amounts
12 subtracted under subparagraph (N), an amount equal
13 to the sum of all amounts disallowed as deductions
14 by Sections 171(a) (2), and 265(2) of the Internal
15 Revenue Code of 1954, as now or hereafter amended,
16 and all amounts of expenses allocable to interest
17 and disallowed as deductions by Section 265(1) of
18 the Internal Revenue Code of 1954, as now or
19 hereafter amended;
20 (N) An amount equal to all amounts included in
21 such total which are exempt from taxation by this
22 State either by reason of its statutes or
23 Constitution or by reason of the Constitution,
24 treaties or statutes of the United States; provided
25 that, in the case of any statute of this State that
26 exempts income derived from bonds or other
27 obligations from the tax imposed under this Act, the
28 amount exempted shall be the interest net of bond
29 premium amortization;
30 (O) An amount equal to any contribution made
31 to a job training project established pursuant to
32 the Tax Increment Allocation Redevelopment Act;
33 (P) An amount equal to the amount of the
34 deduction used to compute the federal income tax
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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 (Q) An amount equal to any amounts included in
6 such total, received by the taxpayer as an
7 acceleration in the payment of life, endowment or
8 annuity benefits in advance of the time they would
9 otherwise be payable as an indemnity for a terminal
10 illness;
11 (R) An amount equal to the amount of any
12 federal or State bonus paid to veterans of the
13 Persian Gulf War;
14 (S) An amount, to the extent included in
15 adjusted gross income, equal to the amount of a
16 contribution made in the taxable year on behalf of
17 the taxpayer to a medical care savings account
18 established under the Medical Care Savings Account
19 Act to the extent the contribution is accepted by
20 the account administrator as provided in that Act;
21 (T) An amount, to the extent included in
22 adjusted gross income, equal to the amount of
23 interest earned in the taxable year on a medical
24 care savings account established under the Medical
25 Care Savings Account Act on behalf of the taxpayer,
26 other than interest added pursuant to item (D-5) of
27 this paragraph (2);
28 (U) For one taxable year beginning on or after
29 January 1, 1994, an amount equal to the total amount
30 of tax imposed and paid under subsections (a) and
31 (b) of Section 201 of this Act on grant amounts
32 received by the taxpayer under the Nursing Home
33 Grant Assistance Act during the taxpayer's taxable
34 years 1992 and 1993; and
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1 (V) Beginning with tax years ending on or
2 after December 31, 1995 and ending with tax years
3 ending on or before December 31, 1999, an amount
4 equal to the amount paid by a taxpayer who is a
5 self-employed taxpayer, a partner of a partnership,
6 or a shareholder in a Subchapter S corporation for
7 health insurance or long-term care insurance for
8 that taxpayer or that taxpayer's spouse or
9 dependents, to the extent that the amount paid for
10 that health insurance or long-term care insurance
11 may be deducted under Section 213 of the Internal
12 Revenue Code of 1986, has not been deducted on the
13 federal income tax return of the taxpayer, and does
14 not exceed the taxable income attributable to that
15 taxpayer's income, self-employment income, or
16 Subchapter S corporation income; except that no
17 deduction shall be allowed under this item (V) if
18 the taxpayer is eligible to participate in any
19 health insurance or long-term care insurance plan of
20 an employer of the taxpayer or the taxpayer's
21 spouse. The amount of the health insurance and
22 long-term care insurance subtracted under this item
23 (V) shall be determined by multiplying total health
24 insurance and long-term care insurance premiums paid
25 by the taxpayer times a number that represents the
26 fractional percentage of eligible medical expenses
27 under Section 213 of the Internal Revenue Code of
28 1986 not actually deducted on the taxpayer's federal
29 income tax return.
30 (b) Corporations.
31 (1) In general. In the case of a corporation, base
32 income means an amount equal to the taxpayer's taxable
33 income for the taxable year as modified by paragraph (2).
34 (2) Modifications. The taxable income referred to
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1 in paragraph (1) shall be modified by adding thereto the
2 sum of the following amounts:
3 (A) An amount equal to all amounts paid or
4 accrued to the taxpayer as interest and all
5 distributions received from regulated investment
6 companies during the taxable year to the extent
7 excluded from gross income in the computation of
8 taxable income, except that the amount of a
9 taxpayer's adjustment under Section 832(b)(5)(B)(i)
10 of the Internal Revenue Code shall not be treated as
11 an amount of interest excluded from gross income in
12 the computation of taxable income; the changes made
13 by this amendatory Act of 1998 are exempt from the
14 provisions of Section 250;
15 (B) An amount equal to the amount of tax
16 imposed by this Act to the extent deducted from
17 gross income in the computation of taxable income
18 for the taxable year;
19 (C) In the case of a regulated investment
20 company, an amount equal to the excess of (i) the
21 net long-term capital gain for the taxable year,
22 over (ii) the amount of the capital gain dividends
23 designated as such in accordance with Section
24 852(b)(3)(C) of the Internal Revenue Code and any
25 amount designated under Section 852(b)(3)(D) of the
26 Internal Revenue Code, attributable to the taxable
27 year.
28 This amendatory Act of 1995 is declarative of existing
29 law and is not a new enactment.
30 (D) The amount of any net operating loss
31 deduction taken in arriving at taxable income, other
32 than a net operating loss carried forward from a
33 taxable year ending prior to December 31, 1986; and
34 (E) For taxable years in which a net operating
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1 loss carryback or carryforward from a taxable year
2 ending prior to December 31, 1986 is an element of
3 taxable income under paragraph (1) of subsection (e)
4 or subparagraph (E) of paragraph (2) of subsection
5 (e), the amount by which addition modifications
6 other than those provided by this subparagraph (E)
7 exceeded subtraction modifications in such earlier
8 taxable year, with the following limitations applied
9 in the order that they are listed:
10 (i) the addition modification relating to
11 the net operating loss carried back or forward
12 to the taxable year from any taxable year
13 ending prior to December 31, 1986 shall be
14 reduced by the amount of addition modification
15 under this subparagraph (E) which related to
16 that net operating loss and which was taken
17 into account in calculating the base income of
18 an earlier taxable year, and
19 (ii) the addition modification relating
20 to the net operating loss carried back or
21 forward to the taxable year from any taxable
22 year ending prior to December 31, 1986 shall
23 not exceed the amount of such carryback or
24 carryforward;
25 For taxable years in which there is a net
26 operating loss carryback or carryforward from more
27 than one other taxable year ending prior to December
28 31, 1986, the addition modification provided in this
29 subparagraph (E) shall be the sum of the amounts
30 computed independently under the preceding
31 provisions of this subparagraph (E) for each such
32 taxable year,
33 and by deducting from the total so obtained the sum of
34 the following amounts:
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1 (F) An amount equal to the amount of any tax
2 imposed by this Act which was refunded to the
3 taxpayer and included in such total for the taxable
4 year;
5 (G) An amount equal to any amount included in
6 such total under Section 78 of the Internal Revenue
7 Code;
8 (H) In the case of a regulated investment
9 company, an amount equal to the amount of exempt
10 interest dividends as defined in subsection (b) (5)
11 of Section 852 of the Internal Revenue Code, paid to
12 shareholders for the taxable year;
13 (I) With the exception of any amounts
14 subtracted under subparagraph (J), an amount equal
15 to the sum of all amounts disallowed as deductions
16 by Sections 171(a) (2), and 265(a)(2) and amounts
17 disallowed as interest expense by Section 291(a)(3)
18 of the Internal Revenue Code, as now or hereafter
19 amended, and all amounts of expenses allocable to
20 interest and disallowed as deductions by Section
21 265(a)(1) of the Internal Revenue Code, as now or
22 hereafter amended;
23 (J) An amount equal to all amounts included in
24 such total which are exempt from taxation by this
25 State either by reason of its statutes or
26 Constitution or by reason of the Constitution,
27 treaties or statutes of the United States; provided
28 that, in the case of any statute of this State that
29 exempts income derived from bonds or other
30 obligations from the tax imposed under this Act, the
31 amount exempted shall be the interest net of bond
32 premium amortization;
33 (K) An amount equal to those dividends
34 included in such total which were paid by a
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1 corporation which conducts business operations in an
2 Enterprise Zone or zones created under the Illinois
3 Enterprise Zone Act and conducts substantially all
4 of its operations in an Enterprise Zone or zones;
5 (L) An amount equal to those dividends
6 included in such total that were paid by a
7 corporation that conducts business operations in a
8 federally designated Foreign Trade Zone or Sub-Zone
9 and that is designated a High Impact Business
10 located in Illinois; provided that dividends
11 eligible for the deduction provided in subparagraph
12 (K) of paragraph 2 of this subsection shall not be
13 eligible for the deduction provided under this
14 subparagraph (L);
15 (M) For any taxpayer that is a financial
16 organization within the meaning of Section 304(c) of
17 this Act, an amount included in such total as
18 interest income from a loan or loans made by such
19 taxpayer to a borrower, to the extent that such a
20 loan is secured by property which is eligible for
21 the Enterprise Zone Investment Credit. To determine
22 the portion of a loan or loans that is secured by
23 property eligible for a Section 201(h) investment
24 credit to the borrower, the entire principal amount
25 of the loan or loans between the taxpayer and the
26 borrower should be divided into the basis of the
27 Section 201(h) investment credit property which
28 secures the loan or loans, using for this purpose
29 the original basis of such property on the date that
30 it was placed in service in the Enterprise Zone.
31 The subtraction modification available to taxpayer
32 in any year under this subsection shall be that
33 portion of the total interest paid by the borrower
34 with respect to such loan attributable to the
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1 eligible property as calculated under the previous
2 sentence;
3 (M-1) For any taxpayer that is a financial
4 organization within the meaning of Section 304(c) of
5 this Act, an amount included in such total as
6 interest income from a loan or loans made by such
7 taxpayer to a borrower, to the extent that such a
8 loan is secured by property which is eligible for
9 the High Impact Business Investment Credit. To
10 determine the portion of a loan or loans that is
11 secured by property eligible for a Section 201(i)
12 investment credit to the borrower, the entire
13 principal amount of the loan or loans between the
14 taxpayer and the borrower should be divided into the
15 basis of the Section 201(i) investment credit
16 property which secures the loan or loans, using for
17 this purpose the original basis of such property on
18 the date that it was placed in service in a
19 federally designated Foreign Trade Zone or Sub-Zone
20 located in Illinois. No taxpayer that is eligible
21 for the deduction provided in subparagraph (M) of
22 paragraph (2) of this subsection shall be eligible
23 for the deduction provided under this subparagraph
24 (M-1). The subtraction modification available to
25 taxpayers in any year under this subsection shall be
26 that portion of the total interest paid by the
27 borrower with respect to such loan attributable to
28 the eligible property as calculated under the
29 previous sentence;
30 (N) Two times any contribution made during the
31 taxable year to a designated zone organization to
32 the extent that the contribution (i) qualifies as a
33 charitable contribution under subsection (c) of
34 Section 170 of the Internal Revenue Code and (ii)
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1 must, by its terms, be used for a project approved
2 by the Department of Commerce and Community Affairs
3 under Section 11 of the Illinois Enterprise Zone
4 Act;
5 (O) An amount equal to: (i) 85% for taxable
6 years ending on or before December 31, 1992, or, a
7 percentage equal to the percentage allowable under
8 Section 243(a)(1) of the Internal Revenue Code of
9 1986 for taxable years ending after December 31,
10 1992, of the amount by which dividends included in
11 taxable income and received from a corporation that
12 is not created or organized under the laws of the
13 United States or any state or political subdivision
14 thereof, including, for taxable years ending on or
15 after December 31, 1988, dividends received or
16 deemed received or paid or deemed paid under
17 Sections 951 through 964 of the Internal Revenue
18 Code, exceed the amount of the modification provided
19 under subparagraph (G) of paragraph (2) of this
20 subsection (b) which is related to such dividends;
21 plus (ii) 100% of the amount by which dividends,
22 included in taxable income and received, including,
23 for taxable years ending on or after December 31,
24 1988, dividends received or deemed received or paid
25 or deemed paid under Sections 951 through 964 of the
26 Internal Revenue Code, from any such corporation
27 specified in clause (i) that would but for the
28 provisions of Section 1504 (b) (3) of the Internal
29 Revenue Code be treated as a member of the
30 affiliated group which includes the dividend
31 recipient, exceed the amount of the modification
32 provided under subparagraph (G) of paragraph (2) of
33 this subsection (b) which is related to such
34 dividends;
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1 (P) An amount equal to any contribution made
2 to a job training project established pursuant to
3 the Tax Increment Allocation Redevelopment Act; and
4 (Q) An amount equal to the amount of the
5 deduction used to compute the federal income tax
6 credit for restoration of substantial amounts held
7 under claim of right for the taxable year pursuant
8 to Section 1341 of the Internal Revenue Code of
9 1986.
10 (3) Special rule. For purposes of paragraph (2)
11 (A), "gross income" in the case of a life insurance
12 company, for tax years ending on and after December 31,
13 1994, shall mean the gross investment income for the
14 taxable year.
15 (c) Trusts and estates.
16 (1) In general. In the case of a trust or estate,
17 base income means an amount equal to the taxpayer's
18 taxable income for the taxable year as modified by
19 paragraph (2).
20 (2) Modifications. Subject to the provisions of
21 paragraph (3), the taxable income referred to in
22 paragraph (1) shall be modified by adding thereto the sum
23 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) In the case of (i) an estate, $600; (ii) a
29 trust which, under its governing instrument, is
30 required to distribute all of its income currently,
31 $300; and (iii) any other trust, $100, but in each
32 such case, only to the extent such amount was
33 deducted in the computation of taxable income;
34 (C) An amount equal to the amount of tax
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1 imposed by this Act to the extent deducted from
2 gross income in the computation of taxable income
3 for the taxable year;
4 (D) The amount of any net operating loss
5 deduction taken in arriving at taxable income, other
6 than a net operating loss carried forward from a
7 taxable year ending prior to December 31, 1986;
8 (E) For taxable years in which a net operating
9 loss carryback or carryforward from a taxable year
10 ending prior to December 31, 1986 is an element of
11 taxable income under paragraph (1) of subsection (e)
12 or subparagraph (E) of paragraph (2) of subsection
13 (e), the amount by which addition modifications
14 other than those provided by this subparagraph (E)
15 exceeded subtraction modifications in such taxable
16 year, with the following limitations applied in the
17 order that they are listed:
18 (i) the addition modification relating to
19 the net operating loss carried back or forward
20 to the taxable year from any taxable year
21 ending prior to December 31, 1986 shall be
22 reduced by the amount of addition modification
23 under this subparagraph (E) which related to
24 that net operating loss and which was taken
25 into account in calculating the base income of
26 an earlier taxable year, and
27 (ii) the addition modification relating
28 to the net operating loss carried back or
29 forward to the taxable year from any taxable
30 year ending prior to December 31, 1986 shall
31 not exceed the amount of such carryback or
32 carryforward;
33 For taxable years in which there is a net
34 operating loss carryback or carryforward from more
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1 than one other taxable year ending prior to December
2 31, 1986, the addition modification provided in this
3 subparagraph (E) shall be the sum of the amounts
4 computed independently under the preceding
5 provisions of this subparagraph (E) for each such
6 taxable year;
7 (F) For taxable years ending on or after
8 January 1, 1989, an amount equal to the tax deducted
9 pursuant to Section 164 of the Internal Revenue Code
10 if the trust or estate is claiming the same tax for
11 purposes of the Illinois foreign tax credit under
12 Section 601 of this Act; and
13 (G) An amount equal to the amount of the
14 capital gain deduction allowable under the Internal
15 Revenue Code, to the extent deducted from gross
16 income in the computation of taxable income;
17 and by deducting from the total so obtained the sum of
18 the following amounts:
19 (H) An amount equal to all amounts included in
20 such total pursuant to the provisions of Sections
21 402(a), 402(c), 403(a), 403(b), 406(a), 407(a) and
22 408 of the Internal Revenue Code or included in such
23 total as distributions under the provisions of any
24 retirement or disability plan for employees of any
25 governmental agency or unit, or retirement payments
26 to retired partners, which payments are excluded in
27 computing net earnings from self employment by
28 Section 1402 of the Internal Revenue Code and
29 regulations adopted pursuant thereto;
30 (I) The valuation limitation amount;
31 (J) An amount equal to the amount of any tax
32 imposed by this Act which was refunded to the
33 taxpayer and included in such total for the taxable
34 year;
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1 (K) An amount equal to all amounts included in
2 taxable income as modified by subparagraphs (A),
3 (B), (C), (D), (E), (F) and (G) which are exempt
4 from taxation by this State either by reason of its
5 statutes or Constitution or by reason of the
6 Constitution, treaties or statutes of the United
7 States; provided that, in the case of any statute of
8 this State that exempts income derived from bonds or
9 other obligations from the tax imposed under this
10 Act, the amount exempted shall be the interest net
11 of bond premium amortization;
12 (L) With the exception of any amounts
13 subtracted under subparagraph (K), an amount equal
14 to the sum of all amounts disallowed as deductions
15 by Sections 171(a) (2) and 265(a)(2) of the Internal
16 Revenue Code, as now or hereafter amended, and all
17 amounts of expenses allocable to interest and
18 disallowed as deductions by Section 265(1) of the
19 Internal Revenue Code of 1954, as now or hereafter
20 amended;
21 (M) An amount equal to those dividends
22 included in such total which were paid by a
23 corporation which conducts business operations in an
24 Enterprise Zone or zones created under the Illinois
25 Enterprise Zone Act and conducts substantially all
26 of its operations in an Enterprise Zone or Zones;
27 (N) An amount equal to any contribution made
28 to a job training project established pursuant to
29 the Tax Increment Allocation Redevelopment Act;
30 (O) An amount equal to those dividends
31 included in such total that were paid by a
32 corporation that conducts business operations in a
33 federally designated Foreign Trade Zone or Sub-Zone
34 and that is designated a High Impact Business
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1 located in Illinois; provided that dividends
2 eligible for the deduction provided in subparagraph
3 (M) of paragraph (2) of this subsection shall not be
4 eligible for the deduction provided under this
5 subparagraph (O); and
6 (P) An amount equal to the amount of the
7 deduction used to compute the federal income tax
8 credit for restoration of substantial amounts held
9 under claim of right for the taxable year pursuant
10 to Section 1341 of the Internal Revenue Code of
11 1986.
12 (3) Limitation. The amount of any modification
13 otherwise required under this subsection shall, under
14 regulations prescribed by the Department, be adjusted by
15 any amounts included therein which were properly paid,
16 credited, or required to be distributed, or permanently
17 set aside for charitable purposes pursuant to Internal
18 Revenue Code Section 642(c) during the taxable year.
19 (d) Partnerships.
20 (1) In general. In the case of a partnership, base
21 income means an amount equal to the taxpayer's taxable
22 income for the taxable year as modified by paragraph (2).
23 (2) Modifications. The taxable income referred to
24 in paragraph (1) shall be modified by adding thereto the
25 sum of the following amounts:
26 (A) An amount equal to all amounts paid or
27 accrued to the taxpayer as interest or dividends
28 during the taxable year to the extent excluded from
29 gross income in the computation of 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 for the taxable year; and
33 (C) The amount of deductions allowed to the
34 partnership pursuant to Section 707 (c) of the
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1 Internal Revenue Code in calculating its taxable
2 income;
3 (D) 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 following
8 amounts:
9 (E) The valuation limitation amount;
10 (F) An amount equal to the amount of any tax
11 imposed by this Act which was refunded to the
12 taxpayer and included in such total for the taxable
13 year;
14 (G) An amount equal to all amounts included in
15 taxable income as modified by subparagraphs (A),
16 (B), (C) and (D) which are exempt from taxation by
17 this State either by reason of its statutes or
18 Constitution or by reason of the Constitution,
19 treaties or statutes of the United States; provided
20 that, in the case of any statute of this State that
21 exempts income derived from bonds or other
22 obligations from the tax imposed under this Act, the
23 amount exempted shall be the interest net of bond
24 premium amortization;
25 (H) Any income of the partnership which
26 constitutes personal service income as defined in
27 Section 1348 (b) (1) of the Internal Revenue Code
28 (as in effect December 31, 1981) or a reasonable
29 allowance for compensation paid or accrued for
30 services rendered by partners to the partnership,
31 whichever is greater;
32 (I) An amount equal to all amounts of income
33 distributable to an entity subject to the Personal
34 Property Tax Replacement Income Tax imposed by
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1 subsections (c) and (d) of Section 201 of this Act
2 including amounts distributable to organizations
3 exempt from federal income tax by reason of Section
4 501(a) of the Internal Revenue Code;
5 (J) With the exception of any amounts
6 subtracted under subparagraph (G), an amount equal
7 to the sum of all amounts disallowed as deductions
8 by Sections 171(a) (2), and 265(2) of the Internal
9 Revenue Code of 1954, as now or hereafter amended,
10 and all amounts of expenses allocable to interest
11 and disallowed as deductions by Section 265(1) of
12 the Internal Revenue Code, as now or hereafter
13 amended;
14 (K) An amount equal to those dividends
15 included in such total which were paid by a
16 corporation which conducts business operations in an
17 Enterprise Zone or zones created under the Illinois
18 Enterprise Zone Act, enacted by the 82nd General
19 Assembly, and which does not conduct such operations
20 other than in an Enterprise Zone or Zones;
21 (L) An amount equal to any contribution made
22 to a job training project established pursuant to
23 the Real Property Tax Increment Allocation
24 Redevelopment Act;
25 (M) An amount equal to those dividends
26 included in such total that were paid by a
27 corporation that conducts business operations in a
28 federally designated Foreign Trade Zone or Sub-Zone
29 and that is designated a High Impact Business
30 located in Illinois; provided that dividends
31 eligible for the deduction provided in subparagraph
32 (K) of paragraph (2) of this subsection shall not be
33 eligible for the deduction provided under this
34 subparagraph (M); and
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1 (N) An amount equal to the amount of the
2 deduction used to compute the federal income tax
3 credit for restoration of substantial amounts held
4 under claim of right for the taxable year pursuant
5 to Section 1341 of the Internal Revenue Code of
6 1986.
7 (e) Gross income; adjusted gross income; taxable income.
8 (1) In general. Subject to the provisions of
9 paragraph (2) and subsection (b) (3), for purposes of
10 this Section and Section 803(e), a taxpayer's gross
11 income, adjusted gross income, or taxable income for the
12 taxable year shall mean the amount of gross income,
13 adjusted gross income or taxable income properly
14 reportable for federal income tax purposes for the
15 taxable year under the provisions of the Internal Revenue
16 Code. Taxable income may be less than zero. However, for
17 taxable years ending on or after December 31, 1986, net
18 operating loss carryforwards from taxable years ending
19 prior to December 31, 1986, may not exceed the sum of
20 federal taxable income for the taxable year before net
21 operating loss deduction, plus the excess of addition
22 modifications over subtraction modifications for the
23 taxable year. For taxable years ending prior to December
24 31, 1986, taxable income may never be an amount in excess
25 of the net operating loss for the taxable year as defined
26 in subsections (c) and (d) of Section 172 of the Internal
27 Revenue Code, provided that when taxable income of a
28 corporation (other than a Subchapter S corporation),
29 trust, or estate is less than zero and addition
30 modifications, other than those provided by subparagraph
31 (E) of paragraph (2) of subsection (b) for corporations
32 or subparagraph (E) of paragraph (2) of subsection (c)
33 for trusts and estates, exceed subtraction modifications,
34 an addition modification must be made under those
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1 subparagraphs for any other taxable year to which the
2 taxable income less than zero (net operating loss) is
3 applied under Section 172 of the Internal Revenue Code or
4 under subparagraph (E) of paragraph (2) of this
5 subsection (e) applied in conjunction with Section 172 of
6 the Internal Revenue Code.
7 (2) Special rule. For purposes of paragraph (1) of
8 this subsection, the taxable income properly reportable
9 for federal income tax purposes shall mean:
10 (A) Certain life insurance companies. In the
11 case of a life insurance company subject to the tax
12 imposed by Section 801 of the Internal Revenue Code,
13 life insurance company taxable income, plus the
14 amount of distribution from pre-1984 policyholder
15 surplus accounts as calculated under Section 815a of
16 the Internal Revenue Code;
17 (B) Certain other insurance companies. In the
18 case of mutual insurance companies subject to the
19 tax imposed by Section 831 of the Internal Revenue
20 Code, insurance company taxable income;
21 (C) Regulated investment companies. In the
22 case of a regulated investment company subject to
23 the tax imposed by Section 852 of the Internal
24 Revenue Code, investment company taxable income;
25 (D) Real estate investment trusts. In the
26 case of a real estate investment trust subject to
27 the tax imposed by Section 857 of the Internal
28 Revenue Code, real estate investment trust taxable
29 income;
30 (E) Consolidated corporations. In the case of
31 a corporation which is a member of an affiliated
32 group of corporations filing a consolidated income
33 tax return for the taxable year for federal income
34 tax purposes, taxable income determined as if such
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1 corporation had filed a separate return for federal
2 income tax purposes for the taxable year and each
3 preceding taxable year for which it was a member of
4 an affiliated group. For purposes of this
5 subparagraph, the taxpayer's separate taxable income
6 shall be determined as if the election provided by
7 Section 243(b) (2) of the Internal Revenue Code had
8 been in effect for all such years;
9 (F) Cooperatives. In the case of a
10 cooperative corporation or association, the taxable
11 income of such organization determined in accordance
12 with the provisions of Section 1381 through 1388 of
13 the Internal Revenue Code;
14 (G) Subchapter S corporations. In the case
15 of: (i) a Subchapter S corporation for which there
16 is in effect an election for the taxable year under
17 Section 1362 of the Internal Revenue Code, the
18 taxable income of such corporation determined in
19 accordance with Section 1363(b) of the Internal
20 Revenue Code, except that taxable income shall take
21 into account those items which are required by
22 Section 1363(b)(1) of the Internal Revenue Code to
23 be separately stated; and (ii) a Subchapter S
24 corporation for which there is in effect a federal
25 election to opt out of the provisions of the
26 Subchapter S Revision Act of 1982 and have applied
27 instead the prior federal Subchapter S rules as in
28 effect on July 1, 1982, the taxable income of such
29 corporation determined in accordance with the
30 federal Subchapter S rules as in effect on July 1,
31 1982; and
32 (H) Partnerships. In the case of a
33 partnership, taxable income determined in accordance
34 with Section 703 of the Internal Revenue Code,
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1 except that taxable income shall take into account
2 those items which are required by Section 703(a)(1)
3 to be separately stated but which would be taken
4 into account by an individual in calculating his
5 taxable income.
6 (f) Valuation limitation amount.
7 (1) In general. The valuation limitation amount
8 referred to in subsections (a) (2) (G), (c) (2) (I) and
9 (d)(2) (E) is an amount equal to:
10 (A) The sum of the pre-August 1, 1969
11 appreciation amounts (to the extent consisting of
12 gain reportable under the provisions of Section 1245
13 or 1250 of the Internal Revenue Code) for all
14 property in respect of which such gain was reported
15 for the taxable year; plus
16 (B) The lesser of (i) the sum of the
17 pre-August 1, 1969 appreciation amounts (to the
18 extent consisting of capital gain) for all property
19 in respect of which such gain was reported for
20 federal income tax purposes for the taxable year, or
21 (ii) the net capital gain for the taxable year,
22 reduced in either case by any amount of such gain
23 included in the amount determined under subsection
24 (a) (2) (F) or (c) (2) (H).
25 (2) Pre-August 1, 1969 appreciation amount.
26 (A) If the fair market value of property
27 referred to in paragraph (1) was readily
28 ascertainable on August 1, 1969, the pre-August 1,
29 1969 appreciation amount for such property is the
30 lesser of (i) the excess of such fair market value
31 over the taxpayer's basis (for determining gain) for
32 such property on that date (determined under the
33 Internal Revenue Code as in effect on that date), or
34 (ii) the total gain realized and reportable for
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1 federal income tax purposes in respect of the sale,
2 exchange or other disposition of such property.
3 (B) If the fair market value of property
4 referred to in paragraph (1) was not readily
5 ascertainable on August 1, 1969, the pre-August 1,
6 1969 appreciation amount for such property is that
7 amount which bears the same ratio to the total gain
8 reported in respect of the property for federal
9 income tax purposes for the taxable year, as the
10 number of full calendar months in that part of the
11 taxpayer's holding period for the property ending
12 July 31, 1969 bears to the number of full calendar
13 months in the taxpayer's entire holding period for
14 the property.
15 (C) The Department shall prescribe such
16 regulations as may be necessary to carry out the
17 purposes of this paragraph.
18 (g) Double deductions. Unless specifically provided
19 otherwise, nothing in this Section shall permit the same item
20 to be deducted more than once.
21 (h) Legislative intention. Except as expressly provided
22 by this Section there shall be no modifications or
23 limitations on the amounts of income, gain, loss or deduction
24 taken into account in determining gross income, adjusted
25 gross income or taxable income for federal income tax
26 purposes for the taxable year, or in the amount of such items
27 entering into the computation of base income and net income
28 under this Act for such taxable year, whether in respect of
29 property values as of August 1, 1969 or otherwise.
30 (Source: P.A. 89-89, eff. 6-30-95; 89-235, eff. 8-4-95;
31 89-418, eff. 11-15-95; 89-460, eff. 5-24-96; 89-626, eff.
32 8-9-96; 90-491, eff. 1-1-98.)
33 Section 99. Effective date. This Act takes effect
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1 January 1, 1999.