State of Illinois
92nd General Assembly
Legislation

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92_HB3287

 
                                               LRB9205000SMdv

 1        AN ACT concerning taxation.

 2        Be  it  enacted  by  the People of the State of Illinois,
 3    represented in the General Assembly:

 4        Section 5.  The Illinois Income Tax  Act  is  amended  by
 5    changing Section 203 as follows:

 6        (35 ILCS 5/203) (from Ch. 120, par. 2-203)
 7        Sec. 203.  Base income defined.
 8        (a)  Individuals.
 9             (1)  In general.  In the case of an individual, base
10        income  means  an amount equal to the taxpayer's adjusted
11        gross  income  for  the  taxable  year  as  modified   by
12        paragraph (2).
13             (2)  Modifications.    The   adjusted  gross  income
14        referred to in paragraph (1) shall be modified by  adding
15        thereto the sum of the following amounts:
16                  (A)  An  amount  equal  to  all amounts paid or
17             accrued to the taxpayer  as  interest  or  dividends
18             during  the taxable year to the extent excluded from
19             gross income in the computation  of  adjusted  gross
20             income,  except  stock dividends of qualified public
21             utilities  described  in  Section  305(e)   of   the
22             Internal Revenue Code;
23                  (B)  An  amount  equal  to  the  amount  of tax
24             imposed by this Act  to  the  extent  deducted  from
25             gross  income  in  the computation of adjusted gross
26             income for the taxable year;
27                  (C)  An amount equal  to  the  amount  received
28             during  the  taxable year as a recovery or refund of
29             real  property  taxes  paid  with  respect  to   the
30             taxpayer's principal residence under the Revenue Act
31             of  1939  and  for  which a deduction was previously
 
                            -2-                LRB9205000SMdv
 1             taken under subparagraph (L) of this  paragraph  (2)
 2             prior to July 1, 1991, the retrospective application
 3             date  of Article 4 of Public Act 87-17.  In the case
 4             of  multi-unit  or  multi-use  structures  and  farm
 5             dwellings, the taxes  on  the  taxpayer's  principal
 6             residence  shall  be that portion of the total taxes
 7             for the entire property  which  is  attributable  to
 8             such principal residence;
 9                  (D)  An  amount  equal  to  the  amount  of the
10             capital gain deduction allowable under the  Internal
11             Revenue  Code,  to  the  extent  deducted from gross
12             income in the computation of adjusted gross income;
13                  (D-5)  An amount, to the extent not included in
14             adjusted gross income, equal to the amount of  money
15             withdrawn by the taxpayer in the taxable year from a
16             medical care savings account and the interest earned
17             on  the  account in the taxable year of a withdrawal
18             pursuant to subsection (b)  of  Section  20  of  the
19             Medical  Care  Savings Account Act or subsection (b)
20             of Section 20 of the Medical  Care  Savings  Account
21             Act of 2000; and
22                  (D-10)  For taxable years ending after December
23             31,   1997,   an   amount   equal  to  any  eligible
24             remediation costs that the  individual  deducted  in
25             computing  adjusted  gross  income and for which the
26             individual claims a credit under subsection  (l)  of
27             Section 201;
28        and  by  deducting  from the total so obtained the sum of
29        the following amounts:
30                  (E)  Any  amount  included  in  such  total  in
31             respect  of  any  compensation  (including  but  not
32             limited to any compensation paid  or  accrued  to  a
33             serviceman  while  a  prisoner  of war or missing in
34             action) paid to a resident by  reason  of  being  on
 
                            -3-                LRB9205000SMdv
 1             active duty in the Armed Forces of the United States
 2             and  in  respect of any compensation paid or accrued
 3             to a resident who as a governmental employee  was  a
 4             prisoner of war or missing in action, and in respect
 5             of  any  compensation  paid to a resident in 1971 or
 6             thereafter for annual training performed pursuant to
 7             Sections 502 and 503, Title 32, United  States  Code
 8             as a member of the Illinois National Guard;
 9                  (F)  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
13             such total as distributions under the provisions  of
14             any  retirement  or disability plan for employees of
15             any  governmental  agency  or  unit,  or  retirement
16             payments to retired  partners,  which  payments  are
17             excluded   in   computing  net  earnings  from  self
18             employment by Section 1402 of the  Internal  Revenue
19             Code and regulations adopted pursuant thereto;
20                  (G)  The valuation limitation amount;
21                  (H)  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                  (I)  An amount equal to all amounts included in
26             such total pursuant to the provisions of Section 111
27             of the Internal Revenue Code as a recovery of  items
28             previously  deducted  from  adjusted gross income in
29             the computation of taxable income;
30                  (J)  An  amount  equal   to   those   dividends
31             included   in  such  total  which  were  paid  by  a
32             corporation which conducts business operations in an
33             Enterprise Zone or zones created under the  Illinois
34             Enterprise  Zone Act, and conducts substantially all
 
                            -4-                LRB9205000SMdv
 1             of its operations in an Enterprise Zone or zones;
 2                  (K)  An  amount  equal   to   those   dividends
 3             included   in   such  total  that  were  paid  by  a
 4             corporation that conducts business operations  in  a
 5             federally  designated Foreign Trade Zone or Sub-Zone
 6             and  that  is  designated  a  High  Impact  Business
 7             located  in  Illinois;   provided   that   dividends
 8             eligible  for the deduction provided in subparagraph
 9             (J) of paragraph (2) of this subsection shall not be
10             eligible  for  the  deduction  provided  under  this
11             subparagraph (K);
12                  (L)  For taxable years  ending  after  December
13             31,  1983,  an  amount  equal to all social security
14             benefits and railroad retirement  benefits  included
15             in  such  total pursuant to Sections 72(r) and 86 of
16             the Internal Revenue Code;
17                  (M)  With  the   exception   of   any   amounts
18             subtracted  under  subparagraph (N), an amount equal
19             to the sum of all amounts disallowed  as  deductions
20             by  (i)  Sections  171(a)  (2),  and  265(2)  of the
21             Internal Revenue Code of 1954, as now  or  hereafter
22             amended,  and  all  amounts of expenses allocable to
23             interest and  disallowed as  deductions  by  Section
24             265(1)  of the Internal Revenue Code of 1954, as now
25             or hereafter amended; and  (ii)  for  taxable  years
26             ending   on  or  after  August  13,  1999,  Sections
27             171(a)(2), 265, 280C,  and  832(b)(5)(B)(i)  of  the
28             Internal   Revenue  Code;  the  provisions  of  this
29             subparagraph  are  exempt  from  the  provisions  of
30             Section 250;
31                  (N)  An amount equal to all amounts included in
32             such total which are exempt from  taxation  by  this
33             State   either   by   reason   of  its  statutes  or
34             Constitution  or  by  reason  of  the  Constitution,
 
                            -5-                LRB9205000SMdv
 1             treaties or statutes of the United States;  provided
 2             that,  in the case of any statute of this State that
 3             exempts  income  derived   from   bonds   or   other
 4             obligations from the tax imposed under this Act, the
 5             amount  exempted  shall  be the interest net of bond
 6             premium amortization;
 7                  (O)  An amount equal to any  contribution  made
 8             to  a  job  training project established pursuant to
 9             the Tax Increment Allocation Redevelopment Act;
10                  (P)  An amount  equal  to  the  amount  of  the
11             deduction  used  to  compute  the federal income tax
12             credit for restoration of substantial  amounts  held
13             under  claim  of right for the taxable year pursuant
14             to Section 1341 of  the  Internal  Revenue  Code  of
15             1986;
16                  (Q)  An amount equal to any amounts included in
17             such   total,   received   by  the  taxpayer  as  an
18             acceleration in the payment of  life,  endowment  or
19             annuity  benefits  in advance of the time they would
20             otherwise be payable as an indemnity for a  terminal
21             illness;
22                  (R)  An  amount  equal  to  the  amount  of any
23             federal or State  bonus  paid  to  veterans  of  the
24             Persian Gulf War;
25                  (S)  An  amount,  to  the  extent  included  in
26             adjusted  gross  income,  equal  to  the amount of a
27             contribution made in the taxable year on  behalf  of
28             the  taxpayer  to  a  medical  care  savings account
29             established under the Medical Care  Savings  Account
30             Act  or the Medical Care Savings Account Act of 2000
31             to the extent the contribution is  accepted  by  the
32             account administrator as provided in that Act;
33                  (T)  An  amount,  to  the  extent  included  in
34             adjusted  gross  income,  equal  to  the  amount  of
 
                            -6-                LRB9205000SMdv
 1             interest  earned  in  the  taxable year on a medical
 2             care savings account established under  the  Medical
 3             Care Savings Account Act or the Medical Care Savings
 4             Account Act of 2000 on behalf of the taxpayer, other
 5             than  interest  added pursuant to item (D-5) of this
 6             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;
14                  (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,  2004,  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-                LRB9205000SMdv
 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;
 9                  (W)  For taxable years beginning  on  or  after
10             January   1,  1998,  all  amounts  included  in  the
11             taxpayer's federal gross income in the taxable  year
12             from  amounts converted from a regular IRA to a Roth
13             IRA. This paragraph is exempt from the provisions of
14             Section 250; and
15                  (X)  For taxable year 1999 and  thereafter,  an
16             amount equal to the amount of any (i) distributions,
17             to the extent includible in gross income for federal
18             income tax purposes, made to the taxpayer because of
19             his  or  her  status  as a victim of persecution for
20             racial or religious reasons by Nazi Germany  or  any
21             other  Axis  regime  or as an heir of the victim and
22             (ii) items of income, to the  extent  includible  in
23             gross   income  for  federal  income  tax  purposes,
24             attributable to, derived from or in any way  related
25             to  assets  stolen  from,  hidden from, or otherwise
26             lost to  a  victim  of  persecution  for  racial  or
27             religious  reasons by Nazi Germany or any other Axis
28             regime immediately prior to, during, and immediately
29             after World War II, including, but not  limited  to,
30             interest  on  the  proceeds  receivable as insurance
31             under policies issued to a victim of persecution for
32             racial or religious reasons by Nazi Germany  or  any
33             other  Axis  regime  by European insurance companies
34             immediately  prior  to  and  during  World  War  II;
 
                            -8-                LRB9205000SMdv
 1             provided, however,  this  subtraction  from  federal
 2             adjusted  gross  income  does  not  apply  to assets
 3             acquired with such assets or with the proceeds  from
 4             the  sale  of  such  assets; provided, further, this
 5             paragraph shall only apply to a taxpayer who was the
 6             first recipient of such assets after their  recovery
 7             and  who  is  a  victim of persecution for racial or
 8             religious reasons by Nazi Germany or any other  Axis
 9             regime  or  as an heir of the victim.  The amount of
10             and  the  eligibility  for  any  public  assistance,
11             benefit, or similar entitlement is not  affected  by
12             the   inclusion  of  items  (i)  and  (ii)  of  this
13             paragraph in gross income  for  federal  income  tax
14             purposes.     This  paragraph  is  exempt  from  the
15             provisions of Section 250.

16        (b)  Corporations.
17             (1)  In general.  In the case of a corporation, base
18        income means an amount equal to  the  taxpayer's  taxable
19        income for the taxable year as modified by paragraph (2).
20             (2)  Modifications.   The taxable income referred to
21        in paragraph (1) shall be modified by adding thereto  the
22        sum of the following amounts:
23                  (A)  An  amount  equal  to  all amounts paid or
24             accrued  to  the  taxpayer  as  interest   and   all
25             distributions  received  from  regulated  investment
26             companies  during  the  taxable  year  to the extent
27             excluded from gross income  in  the  computation  of
28             taxable income;
29                  (B)  An  amount  equal  to  the  amount  of tax
30             imposed by this Act  to  the  extent  deducted  from
31             gross  income  in  the computation of taxable income
32             for the taxable year;
33                  (C)  In the  case  of  a  regulated  investment
34             company,  an  amount  equal to the excess of (i) the
 
                            -9-                LRB9205000SMdv
 1             net long-term capital gain  for  the  taxable  year,
 2             over  (ii)  the amount of the capital gain dividends
 3             designated  as  such  in  accordance  with   Section
 4             852(b)(3)(C)  of  the  Internal Revenue Code and any
 5             amount designated under Section 852(b)(3)(D) of  the
 6             Internal  Revenue  Code, attributable to the taxable
 7             year (this amendatory Act of 1995 (Public Act 89-89)
 8             is declarative of existing law  and  is  not  a  new
 9             enactment);
10                  (D)  The  amount  of  any  net  operating  loss
11             deduction taken in arriving at taxable income, other
12             than  a  net  operating  loss carried forward from a
13             taxable year ending prior to December 31, 1986;
14                  (E)  For taxable years in which a net operating
15             loss carryback or carryforward from a  taxable  year
16             ending  prior  to December 31, 1986 is an element of
17             taxable income under paragraph (1) of subsection (e)
18             or subparagraph (E) of paragraph (2)  of  subsection
19             (e),  the  amount  by  which  addition modifications
20             other than those provided by this  subparagraph  (E)
21             exceeded  subtraction  modifications in such earlier
22             taxable year, with the following limitations applied
23             in the order that they are listed:
24                       (i)  the addition modification relating to
25                  the net operating loss carried back or  forward
26                  to  the  taxable  year  from  any  taxable year
27                  ending prior to  December  31,  1986  shall  be
28                  reduced  by the amount of addition modification
29                  under this subparagraph (E)  which  related  to
30                  that  net  operating  loss  and which was taken
31                  into account in calculating the base income  of
32                  an earlier taxable year, and
33                       (ii)  the  addition  modification relating
34                  to the  net  operating  loss  carried  back  or
 
                            -10-               LRB9205000SMdv
 1                  forward  to  the  taxable year from any taxable
 2                  year ending prior to December  31,  1986  shall
 3                  not  exceed  the  amount  of  such carryback or
 4                  carryforward;
 5                  For taxable years  in  which  there  is  a  net
 6             operating  loss  carryback or carryforward from more
 7             than one other taxable year ending prior to December
 8             31, 1986, the addition modification provided in this
 9             subparagraph (E) shall be the  sum  of  the  amounts
10             computed    independently    under   the   preceding
11             provisions of this subparagraph (E)  for  each  such
12             taxable year; and
13                  (E-5)  For  taxable years ending after December
14             31,  1997,  an  amount   equal   to   any   eligible
15             remediation  costs  that the corporation deducted in
16             computing adjusted gross income and  for  which  the
17             corporation  claims a credit under subsection (l) of
18             Section 201;
19        and by deducting from the total so obtained  the  sum  of
20        the following amounts:
21                  (F)  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                  (G)  An amount equal to any amount included  in
26             such  total under Section 78 of the Internal Revenue
27             Code;
28                  (H)  In the  case  of  a  regulated  investment
29             company,  an  amount  equal  to the amount of exempt
30             interest dividends as defined in subsection (b)  (5)
31             of Section 852 of the Internal Revenue Code, paid to
32             shareholders for the taxable year;
33                  (I)  With   the   exception   of   any  amounts
34             subtracted under subparagraph (J), an  amount  equal
 
                            -11-               LRB9205000SMdv
 1             to  the  sum of all amounts disallowed as deductions
 2             by  (i)  Sections  171(a)  (2),  and  265(a)(2)  and
 3             amounts disallowed as interest  expense  by  Section
 4             291(a)(3)  of  the  Internal Revenue Code, as now or
 5             hereafter  amended,  and  all  amounts  of  expenses
 6             allocable to interest and disallowed  as  deductions
 7             by  Section  265(a)(1) of the Internal Revenue Code,
 8             as now or hereafter amended; and  (ii)  for  taxable
 9             years  ending  on or after August 13, 1999, Sections
10             171(a)(2), 265, 280C, 291(a)(3), and 832(b)(5)(B)(i)
11             of the Internal Revenue Code; the provisions of this
12             subparagraph  are  exempt  from  the  provisions  of
13             Section 250;
14                  (J)  An amount equal to all amounts included in
15             such total which are exempt from  taxation  by  this
16             State   either   by   reason   of  its  statutes  or
17             Constitution  or  by  reason  of  the  Constitution,
18             treaties or statutes of the United States;  provided
19             that,  in the case of any statute of this State that
20             exempts  income  derived   from   bonds   or   other
21             obligations from the tax imposed under this Act, the
22             amount  exempted  shall  be the interest net of bond
23             premium amortization;
24                  (K)  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                  (L)  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
 
                            -12-               LRB9205000SMdv
 1             located  in  Illinois;   provided   that   dividends
 2             eligible  for the deduction provided in subparagraph
 3             (K) of paragraph 2 of this subsection shall  not  be
 4             eligible  for  the  deduction  provided  under  this
 5             subparagraph (L);
 6                  (M)  For  any  taxpayer  that  is  a  financial
 7             organization within the meaning of Section 304(c) of
 8             this  Act,  an  amount  included  in  such  total as
 9             interest income from a loan or loans  made  by  such
10             taxpayer  to  a  borrower, to the extent that such a
11             loan is secured by property which  is  eligible  for
12             the Enterprise Zone Investment Credit.  To determine
13             the  portion  of  a loan or loans that is secured by
14             property  eligible  for  a  Section  201(f)   201(h)
15             investment   credit  to  the  borrower,  the  entire
16             principal amount of the loan or  loans  between  the
17             taxpayer and the borrower should be divided into the
18             basis of the Section 201(f) 201(h) investment credit
19             property  which secures the loan or loans, using for
20             this purpose the original basis of such property  on
21             the  date  that  it  was  placed  in  service in the
22             Enterprise  Zone.   The   subtraction   modification
23             available   to  taxpayer  in  any  year  under  this
24             subsection  shall  be  that  portion  of  the  total
25             interest paid by the borrower with respect  to  such
26             loan   attributable  to  the  eligible  property  as
27             calculated under the previous sentence;
28                  (M-1)  For any taxpayer  that  is  a  financial
29             organization within the meaning of Section 304(c) of
30             this  Act,  an  amount  included  in  such  total as
31             interest income from a loan or loans  made  by  such
32             taxpayer  to  a  borrower, to the extent that such a
33             loan is secured by property which  is  eligible  for
34             the  High  Impact  Business  Investment  Credit.  To
 
                            -13-               LRB9205000SMdv
 1             determine the portion of a loan  or  loans  that  is
 2             secured  by  property  eligible for a Section 201(h)
 3             201(i) investment credit to the borrower, the entire
 4             principal amount of the loan or  loans  between  the
 5             taxpayer and the borrower should be divided into the
 6             basis of the Section 201(h) 201(i) investment credit
 7             property  which secures the loan or loans, using for
 8             this purpose the original basis of such property  on
 9             the  date  that  it  was  placed  in  service  in  a
10             federally  designated Foreign Trade Zone or Sub-Zone
11             located in Illinois.  No taxpayer that  is  eligible
12             for  the  deduction  provided in subparagraph (M) of
13             paragraph (2) of this subsection shall  be  eligible
14             for  the  deduction provided under this subparagraph
15             (M-1).  The subtraction  modification  available  to
16             taxpayers in any year under this subsection shall be
17             that  portion  of  the  total  interest  paid by the
18             borrower with respect to such loan  attributable  to
19             the   eligible  property  as  calculated  under  the
20             previous sentence;
21                  (N)  Two times any contribution made during the
22             taxable year to a designated  zone  organization  to
23             the  extent that the contribution (i) qualifies as a
24             charitable  contribution  under  subsection  (c)  of
25             Section 170 of the Internal Revenue  Code  and  (ii)
26             must,  by  its terms, be used for a project approved
27             by the Department of Commerce and Community  Affairs
28             under  Section  11  of  the Illinois Enterprise Zone
29             Act;
30                  (O)  An amount equal to: (i)  85%  for  taxable
31             years  ending  on or before December 31, 1992, or, a
32             percentage equal to the percentage  allowable  under
33             Section  243(a)(1)  of  the Internal Revenue Code of
34             1986 for taxable years  ending  after  December  31,
 
                            -14-               LRB9205000SMdv
 1             1992,  of  the amount by which dividends included in
 2             taxable income and received from a corporation  that
 3             is  not  created  or organized under the laws of the
 4             United States or any state or political  subdivision
 5             thereof,  including,  for taxable years ending on or
 6             after  December  31,  1988,  dividends  received  or
 7             deemed  received  or  paid  or  deemed  paid   under
 8             Sections  951  through  964  of the Internal Revenue
 9             Code, exceed the amount of the modification provided
10             under subparagraph (G)  of  paragraph  (2)  of  this
11             subsection  (b)  which is related to such dividends;
12             plus (ii) 100% of the  amount  by  which  dividends,
13             included  in taxable income and received, including,
14             for taxable years ending on or  after  December  31,
15             1988,  dividends received or deemed received or paid
16             or deemed paid under Sections 951 through 964 of the
17             Internal Revenue Code,  from  any  such  corporation
18             specified  in  clause  (i)  that  would  but for the
19             provisions of Section 1504 (b) (3) of  the  Internal
20             Revenue   Code   be  treated  as  a  member  of  the
21             affiliated  group  which   includes   the   dividend
22             recipient,  exceed  the  amount  of the modification
23             provided under subparagraph (G) of paragraph (2)  of
24             this   subsection  (b)  which  is  related  to  such
25             dividends; provided, however,  that  no  subtraction
26             shall  be  allowed  under  this  subparagraph  to  a
27             Subchapter  S  corporation  for  any tax year ending
28             after December 31, 2001;
29                  (P)  An amount equal to any  contribution  made
30             to  a  job  training project established pursuant to
31             the Tax Increment Allocation Redevelopment Act;
32                  (Q)  An amount  equal  to  the  amount  of  the
33             deduction  used  to  compute  the federal income tax
34             credit for restoration of substantial  amounts  held
 
                            -15-               LRB9205000SMdv
 1             under  claim  of right for the taxable year pursuant
 2             to Section 1341 of  the  Internal  Revenue  Code  of
 3             1986;
 4                  (R)  In  the  case  of an attorney-in-fact with
 5             respect to whom  an  interinsurer  or  a  reciprocal
 6             insurer  has  made the election under Section 835 of
 7             the Internal Revenue Code, 26 U.S.C. 835, an  amount
 8             equal  to the excess, if any, of the amounts paid or
 9             incurred by that interinsurer or reciprocal  insurer
10             in the taxable year to the attorney-in-fact over the
11             deduction allowed to that interinsurer or reciprocal
12             insurer  with  respect to the attorney-in-fact under
13             Section 835(b) of the Internal Revenue Code for  the
14             taxable year; and
15                  (S)  For  taxable  years  ending  on  or  after
16             December  31,  1997,  in  the case of a Subchapter S
17             corporation, an  amount  equal  to  all  amounts  of
18             income  allocable  to  a  shareholder subject to the
19             Personal Property Tax Replacement Income Tax imposed
20             by subsections (c) and (d) of Section  201  of  this
21             Act,  including  amounts  allocable to organizations
22             exempt from federal income tax by reason of  Section
23             501(a)   of   the   Internal   Revenue  Code.   This
24             subparagraph (S) is exempt from  the  provisions  of
25             Section 250.
26             (3)  Special  rule.   For  purposes of paragraph (2)
27        (A), "gross income" in  the  case  of  a  life  insurance
28        company,  for  tax years ending on and after December 31,
29        1994, shall mean the  gross  investment  income  for  the
30        taxable year.

31        (c)  Trusts and estates.
32             (1)  In  general.  In the case of a trust or estate,
33        base income means  an  amount  equal  to  the  taxpayer's
34        taxable  income  for  the  taxable  year  as  modified by
 
                            -16-               LRB9205000SMdv
 1        paragraph (2).
 2             (2)  Modifications.  Subject to  the  provisions  of
 3        paragraph   (3),   the  taxable  income  referred  to  in
 4        paragraph (1) shall be modified by adding thereto the sum
 5        of the following amounts:
 6                  (A)  An amount equal to  all  amounts  paid  or
 7             accrued  to  the  taxpayer  as interest or dividends
 8             during the taxable year to the extent excluded  from
 9             gross income in the computation of taxable income;
10                  (B)  In the case of (i) an estate, $600; (ii) a
11             trust  which,  under  its  governing  instrument, is
12             required to distribute all of its income  currently,
13             $300;  and  (iii) any other trust, $100, but in each
14             such case,  only  to  the  extent  such  amount  was
15             deducted in the computation of taxable income;
16                  (C)  An  amount  equal  to  the  amount  of tax
17             imposed by this Act  to  the  extent  deducted  from
18             gross  income  in  the computation of taxable income
19             for the taxable year;
20                  (D)  The  amount  of  any  net  operating  loss
21             deduction taken in arriving at taxable income, other
22             than a net operating loss  carried  forward  from  a
23             taxable year ending prior to December 31, 1986;
24                  (E)  For taxable years in which a net operating
25             loss  carryback  or carryforward from a taxable year
26             ending prior to December 31, 1986 is an  element  of
27             taxable income under paragraph (1) of subsection (e)
28             or  subparagraph  (E) of paragraph (2) of subsection
29             (e), the  amount  by  which  addition  modifications
30             other  than  those provided by this subparagraph (E)
31             exceeded subtraction modifications in  such  taxable
32             year,  with the following limitations applied in the
33             order that they are listed:
34                       (i)  the addition modification relating to
 
                            -17-               LRB9205000SMdv
 1                  the net operating loss carried back or  forward
 2                  to  the  taxable  year  from  any  taxable year
 3                  ending prior to  December  31,  1986  shall  be
 4                  reduced  by the amount of addition modification
 5                  under this subparagraph (E)  which  related  to
 6                  that  net  operating  loss  and which was taken
 7                  into account in calculating the base income  of
 8                  an earlier taxable year, and
 9                       (ii)  the  addition  modification relating
10                  to the  net  operating  loss  carried  back  or
11                  forward  to  the  taxable year from any taxable
12                  year ending prior to December  31,  1986  shall
13                  not  exceed  the  amount  of  such carryback or
14                  carryforward;
15                  For taxable years  in  which  there  is  a  net
16             operating  loss  carryback or carryforward from more
17             than one other taxable year ending prior to December
18             31, 1986, the addition modification provided in this
19             subparagraph (E) shall be the  sum  of  the  amounts
20             computed    independently    under   the   preceding
21             provisions of this subparagraph (E)  for  each  such
22             taxable year;
23                  (F)  For  taxable  years  ending  on  or  after
24             January 1, 1989, an amount equal to the tax deducted
25             pursuant to Section 164 of the Internal Revenue Code
26             if  the trust or estate is claiming the same tax for
27             purposes of the Illinois foreign  tax  credit  under
28             Section 601 of this Act;
29                  (G)  An  amount  equal  to  the  amount  of the
30             capital gain deduction allowable under the  Internal
31             Revenue  Code,  to  the  extent  deducted from gross
32             income in the computation of taxable income; and
33                  (G-5)  For taxable years ending after  December
34             31,   1997,   an   amount   equal  to  any  eligible
 
                            -18-               LRB9205000SMdv
 1             remediation costs that the trust or estate  deducted
 2             in computing adjusted gross income and for which the
 3             trust or estate claims a credit under subsection (l)
 4             of Section 201;
 5        and  by  deducting  from the total so obtained the sum of
 6        the following amounts:
 7                  (H)  An amount equal to all amounts included in
 8             such total pursuant to the  provisions  of  Sections
 9             402(a),  402(c),  403(a), 403(b), 406(a), 407(a) and
10             408 of the Internal Revenue Code or included in such
11             total as distributions under the provisions  of  any
12             retirement  or  disability plan for employees of any
13             governmental agency or unit, or retirement  payments
14             to  retired partners, which payments are excluded in
15             computing  net  earnings  from  self  employment  by
16             Section  1402  of  the  Internal  Revenue  Code  and
17             regulations adopted pursuant thereto;
18                  (I)  The valuation limitation amount;
19                  (J)  An amount equal to the amount of  any  tax
20             imposed  by  this  Act  which  was  refunded  to the
21             taxpayer and included in such total for the  taxable
22             year;
23                  (K)  An amount equal to all amounts included in
24             taxable  income  as  modified  by subparagraphs (A),
25             (B), (C), (D), (E), (F) and  (G)  which  are  exempt
26             from  taxation by this State either by reason of its
27             statutes  or  Constitution  or  by  reason  of   the
28             Constitution,  treaties  or  statutes  of the United
29             States; provided that, in the case of any statute of
30             this State that exempts income derived from bonds or
31             other obligations from the tax  imposed  under  this
32             Act,  the  amount exempted shall be the interest net
33             of bond premium amortization;
34                  (L)  With  the   exception   of   any   amounts
 
                            -19-               LRB9205000SMdv
 1             subtracted  under  subparagraph (K), an amount equal
 2             to the sum of all amounts disallowed  as  deductions
 3             by  (i)  Sections  171(a)  (2)  and 265(a)(2) of the
 4             Internal Revenue Code, as now or hereafter  amended,
 5             and  all  amounts  of expenses allocable to interest
 6             and disallowed as deductions by  Section  265(1)  of
 7             the  Internal  Revenue  Code  of  1954,  as  now  or
 8             hereafter amended; and (ii) for taxable years ending
 9             on  or  after  August  13, 1999, Sections 171(a)(2),
10             265,  280C,  and  832(b)(5)(B)(i)  of  the  Internal
11             Revenue Code; the provisions  of  this  subparagraph
12             are exempt from the provisions of Section 250;
13                  (M)  An   amount   equal   to  those  dividends
14             included  in  such  total  which  were  paid  by   a
15             corporation which conducts business operations in an
16             Enterprise  Zone or zones created under the Illinois
17             Enterprise Zone Act and conducts  substantially  all
18             of its operations in an Enterprise Zone or Zones;
19                  (N)  An  amount  equal to any contribution made
20             to a job training project  established  pursuant  to
21             the Tax Increment Allocation Redevelopment Act;
22                  (O)  An   amount   equal   to  those  dividends
23             included  in  such  total  that  were  paid   by   a
24             corporation  that  conducts business operations in a
25             federally designated Foreign Trade Zone or  Sub-Zone
26             and  that  is  designated  a  High  Impact  Business
27             located   in   Illinois;   provided  that  dividends
28             eligible for the deduction provided in  subparagraph
29             (M) of paragraph (2) of this subsection shall not be
30             eligible  for  the  deduction  provided  under  this
31             subparagraph (O);
32                  (P)  An  amount  equal  to  the  amount  of the
33             deduction used to compute  the  federal  income  tax
34             credit  for  restoration of substantial amounts held
 
                            -20-               LRB9205000SMdv
 1             under claim of right for the taxable  year  pursuant
 2             to  Section  1341  of  the  Internal Revenue Code of
 3             1986; and
 4                  (Q)  For taxable year 1999 and  thereafter,  an
 5             amount equal to the amount of any (i) distributions,
 6             to the extent includible in gross income for federal
 7             income tax purposes, made to the taxpayer because of
 8             his  or  her  status  as a victim of persecution for
 9             racial or religious reasons by Nazi Germany  or  any
10             other  Axis  regime  or as an heir of the victim and
11             (ii) items of income, to the  extent  includible  in
12             gross   income  for  federal  income  tax  purposes,
13             attributable to, derived from or in any way  related
14             to  assets  stolen  from,  hidden from, or otherwise
15             lost to  a  victim  of  persecution  for  racial  or
16             religious  reasons by Nazi Germany or any other Axis
17             regime immediately prior to, during, and immediately
18             after World War II, including, but not  limited  to,
19             interest  on  the  proceeds  receivable as insurance
20             under policies issued to a victim of persecution for
21             racial or religious reasons by Nazi Germany  or  any
22             other  Axis  regime  by European insurance companies
23             immediately  prior  to  and  during  World  War  II;
24             provided, however,  this  subtraction  from  federal
25             adjusted  gross  income  does  not  apply  to assets
26             acquired with such assets or with the proceeds  from
27             the  sale  of  such  assets; provided, further, this
28             paragraph shall only apply to a taxpayer who was the
29             first recipient of such assets after their  recovery
30             and  who  is  a victim of  persecution for racial or
31             religious reasons by Nazi Germany or any other  Axis
32             regime  or  as an heir of the victim.  The amount of
33             and  the  eligibility  for  any  public  assistance,
34             benefit, or similar entitlement is not  affected  by
 
                            -21-               LRB9205000SMdv
 1             the   inclusion  of  items  (i)  and  (ii)  of  this
 2             paragraph in gross income  for  federal  income  tax
 3             purposes.   This   paragraph   is  exempt  from  the
 4             provisions of Section 250.
 5             (3)  Limitation.  The  amount  of  any  modification
 6        otherwise  required  under  this  subsection shall, under
 7        regulations prescribed by the Department, be adjusted  by
 8        any  amounts  included  therein which were properly paid,
 9        credited, or required to be distributed,  or  permanently
10        set  aside  for charitable purposes pursuant  to Internal
11        Revenue Code Section 642(c) during the taxable year.

12        (d)  Partnerships.
13             (1)  In general. In the case of a partnership,  base
14        income  means  an  amount equal to the taxpayer's taxable
15        income for the taxable year as modified by paragraph (2).
16             (2)  Modifications. The taxable income  referred  to
17        in  paragraph (1) shall be modified by adding thereto the
18        sum of the following amounts:
19                  (A)  An amount equal to  all  amounts  paid  or
20             accrued  to  the  taxpayer  as interest or dividends
21             during the taxable year to the extent excluded  from
22             gross income in the computation of taxable income;
23                  (B)  An  amount  equal  to  the  amount  of tax
24             imposed by this Act  to  the  extent  deducted  from
25             gross income for the taxable year;
26                  (C)  The  amount  of  deductions allowed to the
27             partnership pursuant  to  Section  707  (c)  of  the
28             Internal  Revenue  Code  in  calculating its taxable
29             income; and
30                  (D)  An amount  equal  to  the  amount  of  the
31             capital  gain deduction allowable under the Internal
32             Revenue Code, to  the  extent  deducted  from  gross
33             income in the computation of taxable income;
34        and by deducting from the total so obtained the following
 
                            -22-               LRB9205000SMdv
 1        amounts:
 2                  (E)  The valuation limitation amount;
 3                  (F)  An  amount  equal to the amount of any tax
 4             imposed by  this  Act  which  was  refunded  to  the
 5             taxpayer  and included in such total for the taxable
 6             year;
 7                  (G)  An amount equal to all amounts included in
 8             taxable income as  modified  by  subparagraphs  (A),
 9             (B),  (C)  and (D) which are exempt from taxation by
10             this State either  by  reason  of  its  statutes  or
11             Constitution  or  by  reason  of  the  Constitution,
12             treaties  or statutes of the United States; provided
13             that, in the case of any statute of this State  that
14             exempts   income   derived   from   bonds  or  other
15             obligations from the tax imposed under this Act, the
16             amount exempted shall be the interest  net  of  bond
17             premium amortization;
18                  (H)  Any   income   of  the  partnership  which
19             constitutes personal service income  as  defined  in
20             Section  1348  (b)  (1) of the Internal Revenue Code
21             (as in effect December 31,  1981)  or  a  reasonable
22             allowance  for  compensation  paid  or  accrued  for
23             services  rendered  by  partners to the partnership,
24             whichever is greater;
25                  (I)  An amount equal to all amounts  of  income
26             distributable  to  an entity subject to the Personal
27             Property  Tax  Replacement  Income  Tax  imposed  by
28             subsections (c) and (d) of Section 201 of  this  Act
29             including  amounts  distributable  to  organizations
30             exempt  from federal income tax by reason of Section
31             501(a) of the Internal Revenue Code;
32                  (J)  With  the   exception   of   any   amounts
33             subtracted  under  subparagraph (G), an amount equal
34             to the sum of all amounts disallowed  as  deductions
 
                            -23-               LRB9205000SMdv
 1             by  (i)  Sections  171(a)  (2),  and  265(2)  of the
 2             Internal Revenue Code of 1954, as now  or  hereafter
 3             amended,  and  all  amounts of expenses allocable to
 4             interest and disallowed  as  deductions  by  Section
 5             265(1)  of  the  Internal  Revenue  Code,  as now or
 6             hereafter amended; and (ii) for taxable years ending
 7             on or after August  13,  1999,  Sections  171(a)(2),
 8             265,  280C,  and  832(b)(5)(B)(i)  of  the  Internal
 9             Revenue  Code;  the  provisions of this subparagraph
10             are exempt from the provisions of Section 250;
11                  (K)  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,  enacted  by the 82nd General
16             Assembly, and which does not conduct such operations
17             other than in an Enterprise Zone or Zones;
18                  (L)  An amount equal to any  contribution  made
19             to  a  job  training project established pursuant to
20             the   Real   Property   Tax   Increment   Allocation
21             Redevelopment Act;
22                  (M)  An  amount  equal   to   those   dividends
23             included   in   such  total  that  were  paid  by  a
24             corporation that conducts business operations  in  a
25             federally  designated Foreign Trade Zone or Sub-Zone
26             and  that  is  designated  a  High  Impact  Business
27             located  in  Illinois;   provided   that   dividends
28             eligible  for the deduction provided in subparagraph
29             (K) of paragraph (2) of this subsection shall not be
30             eligible  for  the  deduction  provided  under  this
31             subparagraph (M); and
32                  (N)  An amount  equal  to  the  amount  of  the
33             deduction  used  to  compute  the federal income tax
34             credit for restoration of substantial  amounts  held
 
                            -24-               LRB9205000SMdv
 1             under  claim  of right for the taxable year pursuant
 2             to Section 1341 of  the  Internal  Revenue  Code  of
 3             1986.

 4        (e)  Gross income; adjusted gross income; taxable income.
 5             (1)  In  general.   Subject  to  the  provisions  of
 6        paragraph  (2)  and  subsection  (b) (3), for purposes of
 7        this Section  and  Section  803(e),  a  taxpayer's  gross
 8        income,  adjusted gross income, or taxable income for the
 9        taxable year shall  mean  the  amount  of  gross  income,
10        adjusted   gross   income   or  taxable  income  properly
11        reportable  for  federal  income  tax  purposes  for  the
12        taxable year under the provisions of the Internal Revenue
13        Code. Taxable income may be less than zero. However,  for
14        taxable  years  ending on or after December 31, 1986, net
15        operating loss carryforwards from  taxable  years  ending
16        prior  to  December  31,  1986, may not exceed the sum of
17        federal taxable income for the taxable  year  before  net
18        operating  loss  deduction,  plus  the excess of addition
19        modifications  over  subtraction  modifications  for  the
20        taxable year.  For taxable years ending prior to December
21        31, 1986, taxable income may never be an amount in excess
22        of the net operating loss for the taxable year as defined
23        in subsections (c) and (d) of Section 172 of the Internal
24        Revenue Code, provided that  when  taxable  income  of  a
25        corporation  (other  than  a  Subchapter  S corporation),
26        trust,  or  estate  is  less  than  zero   and   addition
27        modifications,  other than those provided by subparagraph
28        (E) of paragraph (2) of subsection (b)  for  corporations
29        or  subparagraph  (E)  of paragraph (2) of subsection (c)
30        for trusts and estates, exceed subtraction modifications,
31        an  addition  modification  must  be  made  under   those
32        subparagraphs  for  any  other  taxable year to which the
33        taxable income less than zero  (net  operating  loss)  is
34        applied under Section 172 of the Internal Revenue Code or
 
                            -25-               LRB9205000SMdv
 1        under   subparagraph   (E)   of  paragraph  (2)  of  this
 2        subsection (e) applied in conjunction with Section 172 of
 3        the Internal Revenue Code.
 4             (2)  Special rule.  For purposes of paragraph (1) of
 5        this subsection, the taxable income  properly  reportable
 6        for federal income tax purposes shall mean:
 7                  (A)  Certain  life insurance companies.  In the
 8             case of a life insurance company subject to the  tax
 9             imposed by Section 801 of the Internal Revenue Code,
10             life  insurance  company  taxable  income,  plus the
11             amount of distribution  from  pre-1984  policyholder
12             surplus accounts as calculated under Section 815a of
13             the Internal Revenue Code;
14                  (B)  Certain other insurance companies.  In the
15             case  of  mutual  insurance companies subject to the
16             tax imposed by Section 831 of the  Internal  Revenue
17             Code, insurance company taxable income;
18                  (C)  Regulated  investment  companies.   In the
19             case of a regulated investment  company  subject  to
20             the  tax  imposed  by  Section  852  of the Internal
21             Revenue Code, investment company taxable income;
22                  (D)  Real estate  investment  trusts.   In  the
23             case  of  a  real estate investment trust subject to
24             the tax imposed  by  Section  857  of  the  Internal
25             Revenue  Code,  real estate investment trust taxable
26             income;
27                  (E)  Consolidated corporations.  In the case of
28             a corporation which is a  member  of  an  affiliated
29             group  of  corporations filing a consolidated income
30             tax return for the taxable year for  federal  income
31             tax  purposes,  taxable income determined as if such
32             corporation had filed a separate return for  federal
33             income  tax  purposes  for the taxable year and each
34             preceding taxable year for which it was a member  of
 
                            -26-               LRB9205000SMdv
 1             an   affiliated   group.   For   purposes   of  this
 2             subparagraph, the taxpayer's separate taxable income
 3             shall be determined as if the election  provided  by
 4             Section  243(b) (2) of the Internal Revenue Code had
 5             been in effect for all such years;
 6                  (F)  Cooperatives.    In   the   case   of    a
 7             cooperative  corporation or association, the taxable
 8             income of such organization determined in accordance
 9             with the provisions of Section 1381 through 1388  of
10             the Internal Revenue Code;
11                  (G)  Subchapter  S  corporations.   In the case
12             of: (i) a Subchapter S corporation for  which  there
13             is  in effect an election for the taxable year under
14             Section 1362  of  the  Internal  Revenue  Code,  the
15             taxable  income  of  such  corporation determined in
16             accordance with  Section  1363(b)  of  the  Internal
17             Revenue  Code, except that taxable income shall take
18             into account  those  items  which  are  required  by
19             Section  1363(b)(1)  of the Internal Revenue Code to
20             be  separately  stated;  and  (ii)  a  Subchapter  S
21             corporation for which there is in effect  a  federal
22             election  to  opt  out  of  the  provisions  of  the
23             Subchapter  S  Revision Act of 1982 and have applied
24             instead the prior federal Subchapter S rules  as  in
25             effect  on  July 1, 1982, the taxable income of such
26             corporation  determined  in  accordance   with   the
27             federal  Subchapter  S rules as in effect on July 1,
28             1982; and
29                  (H)  Partnerships.    In   the   case   of    a
30             partnership, taxable income determined in accordance
31             with  Section  703  of  the  Internal  Revenue Code,
32             except that taxable income shall take  into  account
33             those  items which are required by Section 703(a)(1)
34             to be separately stated but  which  would  be  taken
 
                            -27-               LRB9205000SMdv
 1             into  account  by  an  individual in calculating his
 2             taxable income.

 3        (f)  Valuation limitation amount.
 4             (1)  In general.  The  valuation  limitation  amount
 5        referred  to  in subsections (a) (2) (G), (c) (2) (I) and
 6        (d)(2) (E) is an amount equal to:
 7                  (A)  The  sum  of  the   pre-August   1,   1969
 8             appreciation  amounts  (to  the extent consisting of
 9             gain reportable under the provisions of Section 1245
10             or 1250  of  the  Internal  Revenue  Code)  for  all
11             property  in respect of which such gain was reported
12             for the taxable year; plus
13                  (B)  The  lesser  of  (i)  the   sum   of   the
14             pre-August  1,  1969  appreciation  amounts  (to the
15             extent consisting of capital gain) for all  property
16             in  respect  of  which  such  gain  was reported for
17             federal income tax purposes for the taxable year, or
18             (ii) the net capital  gain  for  the  taxable  year,
19             reduced  in  either  case by any amount of such gain
20             included in the amount determined  under  subsection
21             (a) (2) (F) or (c) (2) (H).
22             (2)  Pre-August 1, 1969 appreciation amount.
23                  (A)  If  the  fair  market  value  of  property
24             referred   to   in   paragraph   (1)   was   readily
25             ascertainable  on  August 1, 1969, the pre-August 1,
26             1969 appreciation amount for such  property  is  the
27             lesser  of  (i) the excess of such fair market value
28             over the taxpayer's basis (for determining gain) for
29             such property on that  date  (determined  under  the
30             Internal Revenue Code as in effect on that date), or
31             (ii)  the  total  gain  realized  and reportable for
32             federal income tax purposes in respect of the  sale,
33             exchange or other disposition of such property.
34                  (B)  If  the  fair  market  value  of  property
 
                            -28-               LRB9205000SMdv
 1             referred   to  in  paragraph  (1)  was  not  readily
 2             ascertainable on August 1, 1969, the  pre-August  1,
 3             1969  appreciation  amount for such property is that
 4             amount which bears the same ratio to the total  gain
 5             reported  in  respect  of  the  property for federal
 6             income tax purposes for the  taxable  year,  as  the
 7             number  of  full calendar months in that part of the
 8             taxpayer's holding period for  the  property  ending
 9             July  31,  1969 bears to the number of full calendar
10             months in the taxpayer's entire holding  period  for
11             the property.
12                  (C)  The   Department   shall   prescribe  such
13             regulations as may be necessary  to  carry  out  the
14             purposes of this paragraph.

15        (g)  Double  deductions.   Unless  specifically  provided
16    otherwise, nothing in this Section shall permit the same item
17    to be deducted more than once.

18        (h)  Legislative intention.  Except as expressly provided
19    by   this   Section   there  shall  be  no  modifications  or
20    limitations on the amounts of income, gain, loss or deduction
21    taken into account  in  determining  gross  income,  adjusted
22    gross  income  or  taxable  income  for  federal  income  tax
23    purposes for the taxable year, or in the amount of such items
24    entering  into  the computation of base income and net income
25    under this Act for such taxable year, whether in  respect  of
26    property values as of August 1, 1969 or otherwise.
27    (Source:  P.A.  90-491,  eff.  1-1-98;  90-717,  eff. 8-7-98;
28    90-770, eff. 8-14-98;  91-192,  eff.  7-20-99;  91-205,  eff.
29    7-20-99;  91-357, eff. 7-29-99; 91-541, eff. 8-13-99; 91-676,
30    eff. 12-23-99; 91-845, eff.  6-22-00;  91-913,  eff.  1-1-01;
31    revised 1-15-01.)

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