Public Act 93-0029

SB1634 Enrolled                      LRB093 02897 SJM 02913 b

    AN ACT concerning taxes.

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

    Section  5.  The  Illinois  Income  Tax Act is amended by
changing Sections 201, 204, and 207 as follows:

    (35 ILCS 5/201) (from Ch. 120, par. 2-201)
    Sec. 201.  Tax Imposed.
    (a)  In general.  A tax measured by net income is  hereby
imposed  on  every  individual, corporation, trust and estate
for each taxable year ending  after  July  31,  1969  on  the
privilege  of earning or receiving income in or as a resident
of this State. Such tax shall be in  addition  to  all  other
occupation or privilege taxes imposed by this State or by any
municipal corporation or political subdivision thereof.
    (b)  Rates.   The  tax  imposed by subsection (a) of this
Section shall be determined as follows, except as adjusted by
subsection (d-1):
         (1)  In the case of an individual, trust or  estate,
    for taxable years ending prior to July 1, 1989, an amount
    equal  to  2  1/2%  of  the taxpayer's net income for the
    taxable year.
         (2)  In the case of an individual, trust or  estate,
    for  taxable  years  beginning  prior to July 1, 1989 and
    ending after June 30, 1989, an amount equal to the sum of
    (i) 2 1/2% of the taxpayer's net income  for  the  period
    prior to July 1, 1989, as calculated under Section 202.3,
    and  (ii)  3% of the taxpayer's net income for the period
    after June 30, 1989, as calculated under Section 202.3.
         (3)  In the case of an individual, trust or  estate,
    for  taxable  years  beginning  after  June  30, 1989, an
    amount equal to 3% of the taxpayer's net income  for  the
    taxable year.
         (4)  (Blank).
         (5)  (Blank).
         (6)  In the case of a corporation, for taxable years
    ending  prior  to  July 1, 1989, an amount equal to 4% of
    the taxpayer's net income for the taxable year.
         (7)  In the case of a corporation, for taxable years
    beginning prior to July 1, 1989 and ending after June 30,
    1989, an amount equal  to  the  sum  of  (i)  4%  of  the
    taxpayer's  net  income  for  the period prior to July 1,
    1989, as calculated under Section 202.3, and (ii) 4.8% of
    the taxpayer's net income for the period after  June  30,
    1989, as calculated under Section 202.3.
         (8)  In the case of a corporation, for taxable years
    beginning after June 30, 1989, an amount equal to 4.8% of
    the taxpayer's net income for the taxable year.
    (c)  Personal   Property   Tax  Replacement  Income  Tax.
Beginning on July 1, 1979 and thereafter, in addition to such
income  tax,  there  is  also  hereby  imposed  the  Personal
Property Tax Replacement Income Tax measured by net income on
every  corporation  (including  Subchapter  S  corporations),
partnership and trust, for each  taxable  year  ending  after
June  30,  1979.   Such taxes are imposed on the privilege of
earning or receiving income in  or  as  a  resident  of  this
State.   The  Personal  Property  Tax  Replacement Income Tax
shall be in addition to the income tax imposed by subsections
(a) and (b) of this Section and  in  addition  to  all  other
occupation or privilege taxes imposed by this State or by any
municipal corporation or political subdivision thereof.
    (d)  Additional  Personal Property Tax Replacement Income
Tax Rates.  The personal property tax replacement income  tax
imposed by this subsection and subsection (c) of this Section
in  the  case  of  a  corporation,  other than a Subchapter S
corporation and except as adjusted by subsection (d-1), shall
be an additional amount equal to 2.85% of such taxpayer's net
income for the taxable year, except that beginning on January
1, 1981, and thereafter, the rate of 2.85% specified in  this
subsection  shall  be  reduced  to 2.5%, and in the case of a
partnership, trust or a Subchapter S corporation shall be  an
additional amount equal to 1.5% of such taxpayer's net income
for the taxable year.
    (d-1)  Rate  reduction  for certain foreign insurers.  In
the case of a foreign insurer, as defined by Section 35A-5 of
the Illinois  Insurance  Code,  whose  state  or  country  of
domicile   imposes   on  insurers  domiciled  in  Illinois  a
retaliatory tax (excluding any insurer  whose  premiums  from
reinsurance  assumed  are  50% or more of its total insurance
premiums as determined under paragraph (2) of subsection  (b)
of   Section   304,   except   that   for  purposes  of  this
determination  premiums  from  reinsurance  do  not   include
premiums   from  inter-affiliate  reinsurance  arrangements),
beginning with taxable years ending on or after December  31,
1999,  the sum of the rates of tax imposed by subsections (b)
and (d) shall be reduced (but not increased) to the  rate  at
which  the total amount of tax imposed under this Act, net of
all credits allowed under this Act, shall equal (i) the total
amount of tax that would be imposed on the foreign  insurer's
net income allocable to Illinois for the taxable year by such
foreign  insurer's  state  or country of domicile if that net
income were subject to all income taxes and taxes measured by
net income imposed by such foreign insurer's state or country
of domicile, net of all credits allowed or  (ii)  a  rate  of
zero  if no such tax is imposed on such income by the foreign
insurer's  state  of  domicile.  For  the  purposes  of  this
subsection  (d-1),  an  inter-affiliate  includes  a   mutual
insurer under common management.
         (1)  For  the  purposes  of  subsection (d-1), in no
    event shall the sum  of  the  rates  of  tax  imposed  by
    subsections  (b)  and  (d)  be  reduced below the rate at
    which the sum of:
              (A)  the total amount of tax  imposed  on  such
         foreign  insurer  under this Act for a taxable year,
         net of all credits allowed under this Act, plus
              (B)  the privilege tax imposed by  Section  409
         of  the  Illinois Insurance Code, the fire insurance
         company tax  imposed  by  Section  12  of  the  Fire
         Investigation  Act,  and  the  fire department taxes
         imposed  under  Section  11-10-1  of  the   Illinois
         Municipal Code,
    equals  1.25%  for taxable years ending prior to December
    31, 2003, or 1.75% for taxable years ending on  or  after
    December  31,  2003,  of the net taxable premiums written
    for the taxable year, as described by subsection  (1)  of
    Section   409   of  the  Illinois  Insurance  Code.  This
    paragraph will in no event  increase  the  rates  imposed
    under subsections (b) and (d).
         (2)  Any  reduction  in  the rates of tax imposed by
    this subsection shall be applied first against the  rates
    imposed  by subsection (b) and only after the tax imposed
    by subsection (a) net of all credits allowed  under  this
    Section  other  than  the credit allowed under subsection
    (i) has been reduced to zero, against the  rates  imposed
    by subsection (d).
    This  subsection  (d-1)  is exempt from the provisions of
Section 250.
    (e)  Investment credit.  A taxpayer shall  be  allowed  a
credit  against  the Personal Property Tax Replacement Income
Tax for investment in qualified property.
         (1)  A taxpayer shall be allowed a credit  equal  to
    .5%  of the basis of qualified property placed in service
    during the taxable year, provided such property is placed
    in service on or after July  1,  1984.   There  shall  be
    allowed an additional credit equal to .5% of the basis of
    qualified  property  placed in service during the taxable
    year, provided such property is placed in service  on  or
    after  July  1,  1986, and the taxpayer's base employment
    within Illinois has increased by  1%  or  more  over  the
    preceding year as determined by the taxpayer's employment
    records  filed with the Illinois Department of Employment
    Security.  Taxpayers who are new  to  Illinois  shall  be
    deemed  to  have met the 1% growth in base employment for
    the first year in which they file employment records with
    the Illinois  Department  of  Employment  Security.   The
    provisions  added  to  this Section by Public Act 85-1200
    (and restored by Public Act 87-895) shall be construed as
    declaratory of existing law and not as a  new  enactment.
    If,  in  any year, the increase in base employment within
    Illinois over the preceding year is  less  than  1%,  the
    additional  credit  shall  be  limited to that percentage
    times a fraction, the numerator of which is .5%  and  the
    denominator  of  which  is  1%, but shall not exceed .5%.
    The investment credit shall not be allowed to the  extent
    that  it  would  reduce a taxpayer's liability in any tax
    year  below  zero,  nor  may  any  credit  for  qualified
    property be allowed for any year other than the  year  in
    which the property was placed in service in Illinois. For
    tax years ending on or after December 31, 1987, and on or
    before December 31, 1988, the credit shall be allowed for
    the  tax year in which the property is placed in service,
    or, if the amount of the credit exceeds the tax liability
    for that year, whether it exceeds the original  liability
    or  the  liability  as  later amended, such excess may be
    carried forward and applied to the tax liability of the 5
    taxable years following the excess credit  years  if  the
    taxpayer  (i)  makes investments which cause the creation
    of a  minimum  of  2,000  full-time  equivalent  jobs  in
    Illinois,   (ii)   is   located  in  an  enterprise  zone
    established pursuant to the Illinois Enterprise Zone  Act
    and  (iii) is certified by the Department of Commerce and
    Community Affairs  as  complying  with  the  requirements
    specified  in  clause  (i) and (ii) by July 1, 1986.  The
    Department of Commerce and Community Affairs shall notify
    the Department of  Revenue  of  all  such  certifications
    immediately.  For  tax  years  ending  after December 31,
    1988, the credit shall be allowed for  the  tax  year  in
    which  the  property  is  placed  in  service, or, if the
    amount of the credit exceeds the tax liability  for  that
    year,  whether  it  exceeds the original liability or the
    liability as later amended, such excess  may  be  carried
    forward and applied to the tax liability of the 5 taxable
    years following the excess credit years. The credit shall
    be  applied  to  the  earliest  year for which there is a
    liability. If there is credit from more than one tax year
    that is available to offset a liability,  earlier  credit
    shall be applied first.
         (2)  The  term  "qualified  property" means property
    which:
              (A)  is  tangible,   whether   new   or   used,
         including  buildings  and  structural  components of
         buildings and signs that are real property, but  not
         including land or improvements to real property that
         are not a structural component of a building such as
         landscaping,   sewer   lines,  local  access  roads,
         fencing, parking lots, and other appurtenances;
              (B)  is depreciable pursuant to Section 167  of
         the  Internal  Revenue  Code,  except  that  "3-year
         property" as defined in Section 168(c)(2)(A) of that
         Code is not eligible for the credit provided by this
         subsection (e);
              (C)  is  acquired  by  purchase  as  defined in
         Section 179(d) of the Internal Revenue Code;
              (D)  is used in Illinois by a taxpayer  who  is
         primarily  engaged  in  manufacturing,  or in mining
         coal or fluorite, or in retailing; and
              (E)  has not previously been used  in  Illinois
         in  such  a  manner  and  by  such a person as would
         qualify for the credit provided by  this  subsection
         (e) or subsection (f).
         (3)  For    purposes   of   this   subsection   (e),
    "manufacturing" means the material staging and production
    of tangible  personal  property  by  procedures  commonly
    regarded  as  manufacturing,  processing, fabrication, or
    assembling which changes some existing material into  new
    shapes, new qualities, or new combinations.  For purposes
    of  this  subsection (e) the term "mining" shall have the
    same meaning as the term "mining" in  Section  613(c)  of
    the   Internal   Revenue  Code.   For  purposes  of  this
    subsection (e), the term "retailing" means  the  sale  of
    tangible   personal  property  or  services  rendered  in
    conjunction with the sale of tangible consumer  goods  or
    commodities.
         (4)  The  basis  of  qualified property shall be the
    basis used to  compute  the  depreciation  deduction  for
    federal income tax purposes.
         (5)  If the basis of the property for federal income
    tax  depreciation purposes is increased after it has been
    placed in service in Illinois by the taxpayer, the amount
    of such increase  shall  be  deemed  property  placed  in
    service on the date of such increase in basis.
         (6)  The  term  "placed  in  service" shall have the
    same meaning as under Section 46 of the Internal  Revenue
    Code.
         (7)  If during any taxable year, any property ceases
    to  be  qualified  property  in the hands of the taxpayer
    within 48 months after being placed in  service,  or  the
    situs of any qualified property is moved outside Illinois
    within  48  months  after  being  placed  in service, the
    Personal Property Tax Replacement  Income  Tax  for  such
    taxable  year shall be increased.  Such increase shall be
    determined by (i) recomputing the investment credit which
    would have been allowed for the year in which credit  for
    such  property was originally allowed by eliminating such
    property from such computation and, (ii) subtracting such
    recomputed credit from the amount  of  credit  previously
    allowed.  For  the  purposes  of  this  paragraph  (7), a
    reduction of the basis of  qualified  property  resulting
    from  a  redetermination  of  the purchase price shall be
    deemed a disposition of qualified property to the  extent
    of such reduction.
         (8)  Unless  the  investment  credit  is extended by
    law, the basis of qualified property  shall  not  include
    costs  incurred after December 31, 2003, except for costs
    incurred pursuant to a binding contract entered  into  on
    or before December 31, 2003.
         (9)  Each  taxable  year  ending before December 31,
    2000, a partnership may elect  to  pass  through  to  its
    partners the credits to which the partnership is entitled
    under  this  subsection  (e)  for  the  taxable  year.  A
    partner may use the credit allocated to him or her  under
    this   paragraph   only   against   the  tax  imposed  in
    subsections  (c)  and  (d)  of  this  Section.   If   the
    partnership  makes  that election, those credits shall be
    allocated  among  the  partners  in  the  partnership  in
    accordance with the rules set forth in Section 704(b)  of
    the  Internal  Revenue  Code,  and  the rules promulgated
    under that Section,  and  the  allocated  amount  of  the
    credits shall be allowed to the partners for that taxable
    year.   The  partnership  shall make this election on its
    Personal Property Tax Replacement Income Tax  return  for
    that  taxable  year.  The  election  to  pass through the
    credits shall be irrevocable.
         For taxable years ending on or  after  December  31,
    2000,  a  partner  that  qualifies  its partnership for a
    subtraction under subparagraph (I) of  paragraph  (2)  of
    subsection  (d)  of  Section  203  or  a shareholder that
    qualifies a Subchapter S corporation  for  a  subtraction
    under subparagraph (S) of paragraph (2) of subsection (b)
    of  Section  203  shall  be  allowed  a credit under this
    subsection (e) equal to its share of  the  credit  earned
    under  this subsection (e) during the taxable year by the
    partnership or Subchapter S  corporation,  determined  in
    accordance   with   the   determination   of  income  and
    distributive share of income under Sections 702  and  704
    and  Subchapter  S  of  the  Internal Revenue Code.  This
    paragraph is exempt from the provisions of Section 250.
      (f)  Investment credit; Enterprise Zone.
         (1)  A taxpayer shall be allowed  a  credit  against
    the  tax  imposed  by  subsections  (a)  and  (b) of this
    Section for investment in  qualified  property  which  is
    placed  in service in an Enterprise Zone created pursuant
    to the  Illinois  Enterprise  Zone  Act.   For  partners,
    shareholders  of Subchapter S corporations, and owners of
    limited liability companies, if the liability company  is
    treated  as  a  partnership  for  purposes of federal and
    State income taxation, there shall be  allowed  a  credit
    under  this subsection (f) to be determined in accordance
    with the determination of income and  distributive  share
    of  income under Sections 702 and 704 and Subchapter S of
    the Internal Revenue Code.  The credit shall  be  .5%  of
    the  basis  for  such  property.   The  credit  shall  be
    available  only in the taxable year in which the property
    is placed in service in the Enterprise Zone and shall not
    be  allowed  to  the  extent  that  it  would  reduce   a
    taxpayer's  liability  for the tax imposed by subsections
    (a) and (b) of this Section to below zero.  For tax years
    ending on or after December 31, 1985, the credit shall be
    allowed for the tax year in which the property is  placed
    in  service,  or, if the amount of the credit exceeds the
    tax liability for  that  year,  whether  it  exceeds  the
    original  liability  or  the  liability as later amended,
    such excess may be carried forward and applied to the tax
    liability of the 5 taxable  years  following  the  excess
    credit year.  The credit shall be applied to the earliest
    year  for which there is a liability.  If there is credit
    from more than one tax year that is available to offset a
    liability, the credit accruing first  in  time  shall  be
    applied first.
         (2)  The  term  qualified  property  means  property
    which:
              (A)  is   tangible,   whether   new   or  used,
         including buildings  and  structural  components  of
         buildings;
              (B)  is  depreciable pursuant to Section 167 of
         the  Internal  Revenue  Code,  except  that  "3-year
         property" as defined in Section 168(c)(2)(A) of that
         Code is not eligible for the credit provided by this
         subsection (f);
              (C)  is acquired  by  purchase  as  defined  in
         Section 179(d) of the Internal Revenue Code;
              (D)  is  used  in  the  Enterprise  Zone by the
         taxpayer; and
              (E)  has not been previously used  in  Illinois
         in  such  a  manner  and  by  such a person as would
         qualify for the credit provided by  this  subsection
         (f) or subsection (e).
         (3)  The  basis  of  qualified property shall be the
    basis used to  compute  the  depreciation  deduction  for
    federal income tax purposes.
         (4)  If the basis of the property for federal income
    tax  depreciation purposes is increased after it has been
    placed in service in the Enterprise Zone by the taxpayer,
    the amount of such  increase  shall  be  deemed  property
    placed in service on the date of such increase in basis.
         (5)  The  term  "placed  in  service" shall have the
    same meaning as under Section 46 of the Internal  Revenue
    Code.
         (6)  If during any taxable year, any property ceases
    to  be  qualified  property  in the hands of the taxpayer
    within 48 months after being placed in  service,  or  the
    situs  of  any  qualified  property  is moved outside the
    Enterprise Zone within 48 months after  being  placed  in
    service, the tax imposed under subsections (a) and (b) of
    this  Section  for  such taxable year shall be increased.
    Such increase shall be determined by (i) recomputing  the
    investment  credit  which would have been allowed for the
    year in which credit for  such  property  was  originally
    allowed   by   eliminating   such   property   from  such
    computation, and (ii) subtracting such recomputed  credit
    from  the  amount  of credit previously allowed.  For the
    purposes of this paragraph (6), a reduction of the  basis
    of qualified property resulting from a redetermination of
    the  purchase  price  shall  be  deemed  a disposition of
    qualified property to the extent of such reduction.
      (g)  Jobs Tax Credit; Enterprise Zone and Foreign Trade
Zone or Sub-Zone.
         (1)  A taxpayer conducting a trade or business in an
    enterprise zone or a High Impact Business  designated  by
    the   Department   of   Commerce  and  Community  Affairs
    conducting a trade or business in a federally  designated
    Foreign  Trade Zone or Sub-Zone shall be allowed a credit
    against the tax imposed by subsections  (a)  and  (b)  of
    this  Section in the amount of $500 per eligible employee
    hired to work in the zone during the taxable year.
         (2)  To qualify for the credit:
              (A)  the taxpayer must hire 5 or more  eligible
         employees to work in an enterprise zone or federally
         designated Foreign Trade Zone or Sub-Zone during the
         taxable year;
              (B)  the taxpayer's total employment within the
         enterprise  zone  or  federally  designated  Foreign
         Trade  Zone  or  Sub-Zone must increase by 5 or more
         full-time employees beyond  the  total  employed  in
         that  zone  at  the end of the previous tax year for
         which a jobs  tax  credit  under  this  Section  was
         taken,  or beyond the total employed by the taxpayer
         as of December 31, 1985, whichever is later; and
              (C)  the eligible employees  must  be  employed
         180 consecutive days in order to be deemed hired for
         purposes of this subsection.
         (3)  An  "eligible  employee"  means an employee who
    is:
              (A)  Certified by the  Department  of  Commerce
         and  Community  Affairs  as  "eligible for services"
         pursuant to regulations  promulgated  in  accordance
         with  Title  II of the Job Training Partnership Act,
         Training Services for the Disadvantaged or Title III
         of the Job Training Partnership Act, Employment  and
         Training Assistance for Dislocated Workers Program.
              (B)  Hired   after   the   enterprise  zone  or
         federally designated Foreign Trade Zone or  Sub-Zone
         was  designated or the trade or business was located
         in that zone, whichever is later.
              (C)  Employed in the enterprise zone or Foreign
         Trade Zone or Sub-Zone. An employee is  employed  in
         an  enterprise  zone or federally designated Foreign
         Trade Zone or Sub-Zone if his services are  rendered
         there  or  it  is  the  base  of  operations for the
         services performed.
              (D)  A full-time employee working  30  or  more
         hours per week.
         (4)  For  tax  years ending on or after December 31,
    1985 and prior to December 31, 1988, the credit shall  be
    allowed  for the tax year in which the eligible employees
    are hired.  For tax years ending on or after December 31,
    1988, the credit  shall  be  allowed  for  the  tax  year
    immediately  following the tax year in which the eligible
    employees are hired.  If the amount of the credit exceeds
    the tax liability for that year, whether it  exceeds  the
    original  liability  or  the  liability as later amended,
    such excess may be carried forward and applied to the tax
    liability of the 5 taxable  years  following  the  excess
    credit year.  The credit shall be applied to the earliest
    year  for  which there is a liability. If there is credit
    from more than one tax year that is available to offset a
    liability, earlier credit shall be applied first.
         (5)  The Department of Revenue shall promulgate such
    rules and regulations as may be deemed necessary to carry
    out the purposes of this subsection (g).
         (6)  The credit  shall  be  available  for  eligible
    employees hired on or after January 1, 1986.
    (h)  Investment credit; High Impact Business.
         (1)  Subject to subsections (b) and (b-5) of Section
    5.5 of the Illinois Enterprise Zone Act, a taxpayer shall
    be   allowed   a   credit  against  the  tax  imposed  by
    subsections (a) and (b) of this Section for investment in
    qualified property  which  is  placed  in  service  by  a
    Department  of  Commerce and Community Affairs designated
    High Impact Business.  The credit shall  be  .5%  of  the
    basis  for  such  property.   The  credit  shall  not  be
    available  (i) until the minimum investments in qualified
    property set forth in subdivision  (a)(3)(A)  of  Section
    5.5  of  the  Illinois  Enterprise  Zone  Act  have  been
    satisfied or (ii) until the time authorized in subsection
    (b-5)  of  the  Illinois Enterprise Zone Act for entities
    designated as High Impact Businesses  under  subdivisions
    (a)(3)(B), (a)(3)(C), and (a)(3)(D) of Section 5.5 of the
    Illinois Enterprise Zone Act, and shall not be allowed to
    the  extent  that  it would reduce a taxpayer's liability
    for the tax imposed by subsections (a) and  (b)  of  this
    Section  to  below  zero.   The credit applicable to such
    investments shall be taken in the taxable year  in  which
    such  investments  have  been  completed.  The credit for
    additional investments beyond the minimum investment by a
    designated  high   impact   business   authorized   under
    subdivision  (a)(3)(A)  of  Section  5.5  of the Illinois
    Enterprise Zone  Act  shall  be  available  only  in  the
    taxable  year  in which the property is placed in service
    and shall not be allowed to  the  extent  that  it  would
    reduce  a  taxpayer's  liability  for  the tax imposed by
    subsections (a) and (b) of this Section  to  below  zero.
    For  tax  years ending on or after December 31, 1987, the
    credit shall be allowed for the tax  year  in  which  the
    property  is  placed in service, or, if the amount of the
    credit exceeds the tax liability for that  year,  whether
    it  exceeds  the  original  liability or the liability as
    later amended, such excess may  be  carried  forward  and
    applied  to  the  tax  liability  of  the 5 taxable years
    following the excess credit year.  The  credit  shall  be
    applied  to  the  earliest  year  for  which  there  is a
    liability.  If there is credit from  more  than  one  tax
    year  that is available to offset a liability, the credit
    accruing first in time shall be applied first.
         Changes made in this subdivision  (h)(1)  by  Public
    Act 88-670 restore changes made by Public Act 85-1182 and
    reflect existing law.
         (2)  The  term  qualified  property  means  property
    which:
              (A)  is   tangible,   whether   new   or  used,
         including buildings  and  structural  components  of
         buildings;
              (B)  is  depreciable pursuant to Section 167 of
         the  Internal  Revenue  Code,  except  that  "3-year
         property" as defined in Section 168(c)(2)(A) of that
         Code is not eligible for the credit provided by this
         subsection (h);
              (C)  is acquired  by  purchase  as  defined  in
         Section 179(d) of the Internal Revenue Code; and
              (D)  is  not  eligible  for the Enterprise Zone
         Investment Credit provided by subsection (f) of this
         Section.
         (3)  The basis of qualified property  shall  be  the
    basis  used  to  compute  the  depreciation deduction for
    federal income tax purposes.
         (4)  If the basis of the property for federal income
    tax depreciation purposes is increased after it has  been
    placed in service in a federally designated Foreign Trade
    Zone or Sub-Zone located in Illinois by the taxpayer, the
    amount  of  such increase shall be deemed property placed
    in service on the date of such increase in basis.
         (5)  The term "placed in  service"  shall  have  the
    same  meaning as under Section 46 of the Internal Revenue
    Code.
         (6)  If during any taxable year ending on or  before
    December  31,  1996,  any property ceases to be qualified
    property in the hands of the taxpayer  within  48  months
    after  being  placed  in  service,  or  the  situs of any
    qualified property is moved outside  Illinois  within  48
    months  after  being  placed  in service, the tax imposed
    under subsections (a) and (b) of this  Section  for  such
    taxable  year shall be increased.  Such increase shall be
    determined by (i) recomputing the investment credit which
    would have been allowed for the year in which credit  for
    such  property was originally allowed by eliminating such
    property from such computation, and (ii) subtracting such
    recomputed credit from the amount  of  credit  previously
    allowed.   For  the  purposes  of  this  paragraph (6), a
    reduction of the basis of  qualified  property  resulting
    from  a  redetermination  of  the purchase price shall be
    deemed a disposition of qualified property to the  extent
    of such reduction.
         (7)  Beginning  with tax years ending after December
    31, 1996, if a taxpayer qualifies for  the  credit  under
    this   subsection  (h)  and  thereby  is  granted  a  tax
    abatement and the taxpayer relocates its entire  facility
    in  violation  of  the  explicit  terms and length of the
    contract under Section 18-183 of the Property  Tax  Code,
    the  tax  imposed  under  subsections (a) and (b) of this
    Section shall be increased for the taxable year in  which
    the taxpayer relocated its facility by an amount equal to
    the  amount of credit received by the taxpayer under this
    subsection (h).
    (i)  Credit for Personal Property Tax Replacement  Income
Tax.    For  tax  years  ending prior to December 31, 2003, a
credit  shall  be  allowed  against  the   tax   imposed   by
subsections  (a)  and (b) of this Section for the tax imposed
by subsections (c) and (d)  of  this  Section.   This  credit
shall   be   computed  by  multiplying  the  tax  imposed  by
subsections (c) and (d) of this Section by  a  fraction,  the
numerator  of  which is base income allocable to Illinois and
the denominator of which is Illinois base income, and further
multiplying  the  product  by  the  tax   rate   imposed   by
subsections (a) and (b) of this Section.
    Any  credit  earned  on  or after December 31, 1986 under
this subsection which is unused in the  year  the  credit  is
computed  because  it  exceeds  the  tax liability imposed by
subsections (a) and (b) for that year (whether it exceeds the
original liability or the liability as later amended) may  be
carried  forward  and applied to the tax liability imposed by
subsections (a) and (b) of the 5 taxable years following  the
excess  credit  year,  provided that no credit may be carried
forward to any year ending on or  after  December  31,  2003.
This  credit  shall be applied first to the earliest year for
which there is a liability.  If there is a credit under  this
subsection  from  more than one tax year that is available to
offset a liability the earliest  credit  arising  under  this
subsection shall be applied first.
    If,  during  any taxable year ending on or after December
31, 1986, the tax imposed by subsections (c) and (d) of  this
Section  for which a taxpayer has claimed a credit under this
subsection (i) is reduced, the amount of credit for such  tax
shall also be reduced.  Such reduction shall be determined by
recomputing  the  credit to take into account the reduced tax
imposed by subsections (c) and (d).  If any  portion  of  the
reduced  amount  of  credit  has  been carried to a different
taxable year, an amended  return  shall  be  filed  for  such
taxable year to reduce the amount of credit claimed.
    (j)  Training  expense  credit.  Beginning with tax years
ending on or after December 31, 1986 and  prior  to  December
31,  2003,  a  taxpayer shall be allowed a credit against the
tax imposed by subsections (a) and (b) under this Section for
all amounts  paid  or  accrued,  on  behalf  of  all  persons
employed  by  the  taxpayer in Illinois or Illinois residents
employed outside of Illinois by a taxpayer,  for  educational
or  vocational training in semi-technical or technical fields
or semi-skilled or skilled fields, which were  deducted  from
gross  income  in  the  computation  of  taxable income.  The
credit against the tax imposed by  subsections  (a)  and  (b)
shall  be  1.6%  of  such  training  expenses.  For partners,
shareholders of subchapter  S  corporations,  and  owners  of
limited  liability  companies,  if  the  liability company is
treated as a partnership for purposes of  federal  and  State
income  taxation,  there shall be allowed a credit under this
subsection (j)  to  be  determined  in  accordance  with  the
determination  of  income  and  distributive  share of income
under Sections 702 and 704 and subchapter S of  the  Internal
Revenue Code.
    Any  credit allowed under this subsection which is unused
in the year the credit is earned may be  carried  forward  to
each  of the 5 taxable years following the year for which the
credit is first computed until it is used.  This credit shall
be applied first to the earliest year for which  there  is  a
liability.   If  there is a credit under this subsection from
more than  one  tax  year  that  is  available  to  offset  a
liability  the  earliest credit arising under this subsection
shall be  applied  first.   No  carryforward  credit  may  be
claimed in any tax year ending on or after December 31, 2003.
    (k)  Research and development credit.
    For  Beginning  with  tax years ending after July 1, 1990
and prior to December 31, 2003, a taxpayer shall be allowed a
credit against the tax imposed by subsections (a) and (b)  of
this  Section  for  increasing  research  activities  in this
State.   The  credit  allowed  against  the  tax  imposed  by
subsections (a) and (b) shall be  equal  to  6  1/2%  of  the
qualifying expenditures for increasing research activities in
this  State.   For  partners,  shareholders  of  subchapter S
corporations, and owners of limited liability  companies,  if
the  liability  company  is  treated  as  a  partnership  for
purposes of federal and State income taxation, there shall be
allowed  a  credit  under this subsection to be determined in
accordance with the determination of income and  distributive
share  of  income under Sections 702 and 704 and subchapter S
of the Internal Revenue Code.
    For   purposes   of    this    subsection,    "qualifying
expenditures"  means  the  qualifying expenditures as defined
for the federal credit  for  increasing  research  activities
which  would  be  allowable  under Section 41 of the Internal
Revenue  Code  and  which  are  conducted  in   this   State,
"qualifying  expenditures  for increasing research activities
in this State" means the excess  of  qualifying  expenditures
for  the  taxable  year  in  which  incurred  over qualifying
expenditures for the base  period,  "qualifying  expenditures
for  the  base  period"  means  the average of the qualifying
expenditures for each year in  the  base  period,  and  "base
period"  means  the 3 taxable years immediately preceding the
taxable year for which the determination is being made.
    Any credit in excess of the tax liability for the taxable
year may be carried forward. A taxpayer may elect to have the
unused credit shown on its  final  completed  return  carried
over  as a credit against the tax liability for the following
5 taxable years or until it has been  fully  used,  whichever
occurs  first; provided that no credit may be carried forward
to any year ending on or after December 31, 2003.
    If an unused credit is carried forward to  a  given  year
from  2  or  more  earlier  years, that credit arising in the
earliest year will be applied first against the tax liability
for the given year.  If a tax liability for  the  given  year
still  remains,  the  credit from the next earliest year will
then be applied, and so on, until all credits have been  used
or  no  tax  liability  for  the  given  year  remains.   Any
remaining  unused  credit  or  credits  then  will be carried
forward to the next following year in which a  tax  liability
is  incurred, except that no credit can be carried forward to
a year which is more than 5 years after the year in which the
expense for which the credit is given was incurred.
    Unless extended by law,  the  credit  shall  not  include
costs  incurred  after  December  31,  2004, except for costs
incurred pursuant to a binding contract entered  into  on  or
before December 31, 2004.
    No  inference  shall be drawn from this amendatory Act of
the 91st General Assembly  in  construing  this  Section  for
taxable years beginning before January 1, 1999.
    (l)  Environmental Remediation Tax Credit.
         (i)  For  tax   years ending after December 31, 1997
    and on or before December 31, 2001, a taxpayer  shall  be
    allowed  a  credit against the tax imposed by subsections
    (a) and (b) of this Section for certain amounts paid  for
    unreimbursed  eligible remediation costs, as specified in
    this  subsection.    For  purposes   of   this   Section,
    "unreimbursed  eligible  remediation  costs"  means costs
    approved by the Illinois Environmental Protection  Agency
    ("Agency")  under  Section  58.14  of  the  Environmental
    Protection Act that were paid in performing environmental
    remediation  at a site for which a No Further Remediation
    Letter was  issued  by  the  Agency  and  recorded  under
    Section  58.10  of the Environmental Protection Act.  The
    credit must be claimed for  the  taxable  year  in  which
    Agency  approval  of  the  eligible  remediation costs is
    granted.  The credit is not available to any taxpayer  if
    the  taxpayer  or any related party caused or contributed
    to, in any  material  respect,  a  release  of  regulated
    substances  on, in, or under the site that was identified
    and addressed by the remedial action pursuant to the Site
    Remediation Program of the Environmental Protection  Act.
    After  the  Pollution  Control  Board  rules  are adopted
    pursuant to the Illinois Administrative Procedure Act for
    the administration and enforcement of Section 58.9 of the
    Environmental Protection Act, determinations as to credit
    availability for purposes of this Section shall  be  made
    consistent  with  those  rules.   For  purposes  of  this
    Section,   "taxpayer"   includes   a   person  whose  tax
    attributes the taxpayer has succeeded  to  under  Section
    381  of  the  Internal  Revenue  Code and "related party"
    includes the persons disallowed a deduction for losses by
    paragraphs (b), (c), and (f)(1) of  Section  267  of  the
    Internal  Revenue  Code  by  virtue  of  being  a related
    taxpayer, as well as any of  its  partners.   The  credit
    allowed  against  the  tax imposed by subsections (a) and
    (b) shall be equal to 25% of  the  unreimbursed  eligible
    remediation  costs in excess of $100,000 per site, except
    that the $100,000 threshold shall not apply to  any  site
    contained  in  an  enterprise  zone  as determined by the
    Department of Commerce and Community Affairs.  The  total
    credit  allowed  shall not exceed $40,000 per year with a
    maximum total of $150,000 per  site.   For  partners  and
    shareholders of subchapter S corporations, there shall be
    allowed  a  credit under this subsection to be determined
    in  accordance  with  the  determination  of  income  and
    distributive share of income under Sections 702  and  704
    and subchapter S of the Internal Revenue Code.
         (ii)  A credit allowed under this subsection that is
    unused  in  the  year the credit is earned may be carried
    forward to each of the 5 taxable years following the year
    for which the credit is first earned until  it  is  used.
    The  term "unused credit" does not include any amounts of
    unreimbursed eligible remediation costs in excess of  the
    maximum  credit  per site authorized under paragraph (i).
    This credit shall be applied first to the  earliest  year
    for  which  there  is  a liability.  If there is a credit
    under this subsection from more than one tax year that is
    available to offset  a  liability,  the  earliest  credit
    arising  under this subsection shall be applied first.  A
    credit allowed under this subsection may  be  sold  to  a
    buyer as part of a sale of all or part of the remediation
    site  for which the credit was granted.  The purchaser of
    a remediation site and the tax credit  shall  succeed  to
    the  unused  credit and remaining carry-forward period of
    the seller.  To perfect the transfer, the assignor  shall
    record  the  transfer  in the chain of title for the site
    and  provide  written  notice  to  the  Director  of  the
    Illinois Department of Revenue of the  assignor's  intent
    to  sell  the  remediation site and the amount of the tax
    credit to be transferred as a portion of the sale.  In no
    event may a credit be transferred to any taxpayer if  the
    taxpayer  or  a related party would not be eligible under
    the provisions of subsection (i).
         (iii)  For purposes of this Section, the term "site"
    shall have the same meaning as under Section 58.2 of  the
    Environmental Protection Act.
    (m)  Education  expense credit.  Beginning with tax years
ending after  December  31,  1999,  a  taxpayer  who  is  the
custodian of one or more qualifying pupils shall be allowed a
credit  against the tax imposed by subsections (a) and (b) of
this Section for qualified  education  expenses  incurred  on
behalf  of  the qualifying pupils.  The credit shall be equal
to 25% of qualified education expenses, but in no  event  may
the  total  credit  under this subsection claimed by a family
that is the custodian of qualifying pupils exceed  $500.   In
no  event  shall  a  credit  under this subsection reduce the
taxpayer's liability under this Act to less than zero.   This
subsection  is  exempt  from the provisions of Section 250 of
this Act.
    For purposes of this subsection:
    "Qualifying  pupils"  means  individuals  who   (i)   are
residents of the State of Illinois, (ii) are under the age of
21  at  the  close  of  the school year for which a credit is
sought, and (iii) during the school year for which  a  credit
is  sought  were  full-time pupils enrolled in a kindergarten
through twelfth grade education program  at  any  school,  as
defined in this subsection.
    "Qualified  education  expense" means the amount incurred
on behalf of  a  qualifying  pupil  in  excess  of  $250  for
tuition,  book  fees, and lab fees at the school in which the
pupil is enrolled during the regular school year.
    "School" means any  public  or  nonpublic  elementary  or
secondary school in Illinois that is in compliance with Title
VI  of  the  Civil Rights Act of 1964 and attendance at which
satisfies the requirements of  Section  26-1  of  the  School
Code,  except  that  nothing  shall be construed to require a
child to attend any particular public or nonpublic school  to
qualify for the credit under this Section.
    "Custodian"  means, with respect to qualifying pupils, an
Illinois resident who is  a  parent,  the  parents,  a  legal
guardian, or the legal guardians of the qualifying pupils.
(Source:  P.A.  91-9,  eff.  1-1-00;  91-357,  eff.  7-29-99;
91-643,  eff.  8-20-99;  91-644,  eff.  8-20-99; 91-860, eff.
6-22-00; 91-913, eff. 1-1-01; 92-12, eff. 7-1-01; 92-16, eff.
6-28-01; 92-651, eff. 7-11-02; 92-846, eff. 8-23-02.)

    (35 ILCS 5/204) (from Ch. 120, par. 2-204)
    Sec. 204.  Standard Exemption.
    (a)  Allowance of  exemption.  In  computing  net  income
under  this  Act,  there shall be allowed as an exemption the
sum of the amounts determined under subsections (b), (c)  and
(d),  multiplied  by a fraction the numerator of which is the
amount of the taxpayer's base income allocable to this  State
for  the  taxable  year  and  the denominator of which is the
taxpayer's total base income for the taxable year.
    (b)  Basic amount. For the purpose of subsection  (a)  of
this Section, except as provided by subsection (a) of Section
205  and in this subsection, each taxpayer shall be allowed a
basic amount of $1000, except that for corporations the basic
amount shall be  zero  for  tax  years  ending  on  or  after
December 31, 2003, and for individuals the basic amount shall
be:
         (1)  for  taxable  years ending on or after December
    31, 1998 and prior to December 31, 1999, $1,300;
         (2)  for taxable years ending on or  after  December
    31, 1999 and prior to December 31, 2000, $1,650;
         (3)  for  taxable  years ending on or after December
    31, 2000, $2,000.
For taxable years ending on or after  December  31,  1992,  a
taxpayer  whose Illinois base income exceeds the basic amount
and who is claimed as a dependent  on  another  person's  tax
return  under  the Internal Revenue Code of 1986 shall not be
allowed any basic amount under this subsection.
    (c)  Additional amount for individuals. In the case of an
individual taxpayer, there shall be allowed for  the  purpose
of  subsection  (a), in addition to the basic amount provided
by subsection (b), an additional exemption equal to the basic
amount for each exemption in excess of one allowable to  such
individual taxpayer for the taxable year under Section 151 of
the Internal Revenue Code.
    (d)  Additional exemptions for an individual taxpayer and
his or her spouse.  In the case of an individual taxpayer and
his or her spouse, he or she shall each be allowed additional
exemptions as follows:
         (1)  Additional  exemption for taxpayer or spouse 65
    years of age or older.
              (A)  For taxpayer.  An additional exemption  of
         $1,000  for  the  taxpayer if he or she has attained
         the age of 65 before the end of the taxable year.
              (B)  For spouse when  a  joint  return  is  not
         filed.   An  additional  exemption of $1,000 for the
         spouse of the taxpayer if a joint return is not made
         by the taxpayer and his spouse, and  if  the  spouse
         has  attained  the  age of 65 before the end of such
         taxable year, and, for the calendar  year  in  which
         the  taxable  year  of  the  taxpayer begins, has no
         gross income and is not  the  dependent  of  another
         taxpayer.
         (2)  Additional  exemption for blindness of taxpayer
    or spouse.
              (A)  For taxpayer.  An additional exemption  of
         $1,000 for the taxpayer if he or she is blind at the
         end of the taxable year.
              (B)  For  spouse  when  a  joint  return is not
         filed.  An additional exemption of  $1,000  for  the
         spouse  of the taxpayer if a separate return is made
         by the taxpayer, and if the spouse is blind and, for
         the calendar year in which the taxable year  of  the
         taxpayer  begins, has no gross income and is not the
         dependent of another taxpayer. For purposes of  this
         paragraph,  the  determination of whether the spouse
         is blind shall be made as of the end of the  taxable
         year of the taxpayer; except that if the spouse dies
         during such taxable year such determination shall be
         made as of the time of such death.
              (C)  Blindness  defined.   For purposes of this
         subsection, an individual is blind only  if  his  or
         her  central visual acuity does not exceed 20/200 in
         the better eye with correcting lenses, or if his  or
         her  visual  acuity  is  greater  than 20/200 but is
         accompanied by a limitation in the fields of  vision
         such  that  the widest diameter of the visual fields
         subtends an angle no greater than 20 degrees.
    (e)  Cross reference. See Article 3  for  the  manner  of
determining base income allocable to this State.
    (f)  Application  of  Section  250.  Section 250 does not
apply to the amendments to this Section made  by  Public  Act
90-613.
(Source: P.A. 90-613, eff. 7-9-98; 91-357, eff. 7-29-99.)

    (35 ILCS 5/207) (from Ch. 120, par. 2-207)
    Sec. 207.  Net Losses.
    (a)  If  after applying all of the modifications provided
for in paragraph (2) of  Section  203(b),  paragraph  (2)  of
Section  203(c)  and  paragraph (2) of Section 203(d) and the
allocation and apportionment provisions of Article 3 of  this
Act, the taxpayer's net income results in a loss;
         (1)  for  any  taxable year ending prior to December
    31, 1999, such loss shall be allowed as  a  carryover  or
    carryback  deduction  in the manner allowed under Section
    172 of the Internal Revenue Code; and
         (2)  for  any  taxable  year  ending  on  or   after
    December  31,  1999  and prior to December 31, 2003, such
    loss shall be allowed as a carryback to  each  of  the  2
    taxable years preceding the taxable year of such loss and
    shall  be  a  net  operating  carryover to each of the 20
    taxable years following the taxable year  of  such  loss;
    and
         (3)  for   any  taxable  year  ending  on  or  after
    December 31, 2003, such loss shall be allowed  as  a  net
    operating  carryover  to  each  of  the  12 taxable years
    following the taxable year of such loss.
    (a-5)  Election to  relinquish  carryback  and  order  of
application of losses.
              (A)  For  losses  incurred  in tax years ending
         prior to December 31, 2003, the taxpayer  may  elect
         to  relinquish  the  entire  carryback  period  with
         respect  to  such loss.  Such election shall be made
         in the form and manner prescribed by the  Department
         and  shall  be  made  by  the  due  date  (including
         extensions of time) for filing the taxpayer's return
         for the taxable year in which such loss is incurred,
         and such election, once made, shall be irrevocable.
              (B)  The  entire  amount  of such loss shall be
         carried to the earliest taxable year to  which  such
         loss  may be carried.  The amount of such loss which
         shall be carried to each of the other taxable  years
         shall  be  the excess, if any, of the amount of such
         loss over the sum of the deductions for carryback or
         carryover of such loss allowable  for  each  of  the
         prior  taxable  years  to  which  such  loss  may be
         carried.
    (b)  Any loss determined under  subsection  (a)  of  this
Section  must  be carried back or carried forward in the same
manner for purposes of subsections (a) and (b) of Section 201
of this Act as for purposes of subsections  (c)  and  (d)  of
Section 201 of this Act.
(Source: P.A. 91-541, eff. 8-13-99.)

    Section  10.  The  Illinois  Insurance Code is amended by
changing Sections 445 and 531.13 as follows:

    (215 ILCS 5/445) (from Ch. 73, par. 1057)
    Sec. 445.  Surplus line.
    (1)  Surplus   line   defined;   surplus   line   insurer
requirements.  Surplus line  insurance  is  insurance  on  an
Illinois  risk  of  the kinds specified in Classes 2 and 3 of
Section 4 of this Code procured from an unauthorized  insurer
or a domestic surplus line insurer as defined in Section 445a
after  the insurance producer representing the insured or the
surplus line producer is unable, after  diligent  effort,  to
procure  said insurance from insurers which are authorized to

transact business in this State other than  domestic  surplus
line insurers as defined in Section 445a.
    Insurance  producers  may  procure surplus line insurance
only if licensed  as  a  surplus  line  producer  under  this
Section   and   may  procure  that  insurance  only  from  an
unauthorized insurer or from a domestic surplus line  insurer
as defined in Section 445a:
         (a)  that  based  upon  information available to the
    surplus line producer has a policyholders surplus of  not
    less  than  $15,000,000  determined  in  accordance  with
    accounting   rules  that  are  applicable  to  authorized
    insurers; and
         (b)  that has standards of solvency  and  management
    that  are  adequate  for the protection of policyholders;
    and
         (c)  where an unauthorized insurer does not meet the
    standards set forth in (a) and (b) above, a surplus  line
    producer  may,  if necessary, procure insurance from that
    insurer only if prior written warning  of  such  fact  or
    condition  is  given  to  the  insured  by  the insurance
    producer or surplus line producer.
    (2)  Surplus  line  producer;  license.    Any   licensed
producer  who is a resident of this State, or any nonresident
who qualifies under Section 500-40,  may  be  licensed  as  a
surplus line producer upon:
         (a)  completing a prelicensing course of study.  The
    course  provided  for  by this Section shall be conducted
    under rules and regulations prescribed by  the  Director.
    The  Director  may  administer  the  course  or  may make
    arrangements,  including  contracting  with  an   outside
    educational  service,  for  administering  the course and
    collecting the non-refundable  application  fee  provided
    for  in  this  subsection.   Any  charges assessed by the
    Director or the educational service for administering the
    course  shall  be  paid  directly   by   the   individual
    applicants.   Each  applicant required to take the course
    shall enclose with the application a  non-refundable  $10
    application  fee  payable to the Director plus a separate
    course administration fee.   An applicant  who  fails  to
    appear  for the course as scheduled, or appears but fails
    to complete the course, shall  not  be  entitled  to  any
    refund,  and shall be required to submit a new request to
    attend the course together with all  the  requisite  fees
    before  being  rescheduled  for another course at a later
    date; and
         (b)  payment of an annual license fee of $200; and
         (c)  procurement of  the  surety  bond  required  in
    subsection (4) of this Section.
    A surplus line producer so licensed shall keep a separate
account  of the business transacted thereunder which shall be
open at all times to the inspection of the  Director  or  his
representative.
    The prelicensing course of study requirement in (a) above
shall  not  apply  to  insurance  producers who were licensed
under  the  Illinois  surplus  line  law  on  or  before  the
effective date of this amendatory Act  of  the  92nd  General
Assembly.
    (3)  Taxes and reports.
         (a)  Surplus line tax and penalty for late payment.
         A surplus line producer shall file with the Director
    on  or  before  February  1  and  August 1 of each year a
    report in the form prescribed  by  the  Director  on  all
    surplus   line   insurance   procured  from  unauthorized
    insurers during  the  preceding  6  month  period  ending
    December 31 or June 30 respectively, and on the filing of
    such  report  shall  pay  to the Director for the use and
    benefit of the State a sum equal to 3.5% 3% of the  gross
    premiums  less  returned  premiums  upon all surplus line
    insurance procured or cancelled during  the  preceding  6
    months.
         Any  surplus line producer who fails to pay the full
    amount due under this subsection is liable,  in  addition
    to  the amount due, for such penalty and interest charges
    as are provided for under Section 412 of this Code.   The
    Director,  through the Attorney General, may institute an
    action in  the  name  of  the  People  of  the  State  of
    Illinois, in any court of competent jurisdiction, for the
    recovery  of  the amount of such taxes and penalties due,
    and prosecute the same to final judgment, and  take  such
    steps as are necessary to collect the same.
         (b)  Fire Marshal Tax.
         Each  surplus  line  producer  shall  file  with the
    Director on or before March 31 of each year a  report  in
    the form prescribed by the Director on all fire insurance
    procured  from unauthorized insurers subject to tax under
    Section 12 of the Fire Investigation Act and shall pay to
    the Director the fire marshal tax required thereunder.
         (c)  Taxes and fees charged to insured.   The  taxes
    imposed under this subsection and the countersigning fees
    charged  by  the Surplus Line Association of Illinois may
    be charged to and collected from surplus line insureds.
    (4)  Bond.  Each surplus line producer, as a condition to
receiving a surplus line producer's  license,  shall  execute
and  deliver  to  the Director a surety bond to the People of
the State in the penal sum of $20,000, with a surety which is
authorized to transact business in  this  State,  conditioned
that  the  surplus line producer will pay to the Director the
tax, interest and penalties levied under  subsection  (3)  of
this Section.
    (5)  Submission  of documents to Surplus Line Association
of Illinois. A  surplus  line  producer  shall  submit  every
insurance  contract  issued  under  his or her license to the
Surplus  Line  Association  of  Illinois  for  recording  and
countersignature.  The submission and countersignature may be
effected through electronic means.  The submission shall  set
forth:
         (a)  the name of the insured;
         (b)  the  description  and  location  of the insured
    property or risk;
         (c)  the amount insured;
         (d)  the gross premiums charged or returned;
         (e)  the  name  of  the  unauthorized   insurer   or
    domestic  surplus line insurer as defined in Section 445a
    from whom coverage has been procured;
         (f)  the kind or kinds of insurance procured; and
         (g)  amount of premium subject to  tax  required  by
    Section 12 of the Fire Investigation Act.
         Proposals,  endorsements,  and other documents which
    are incidental to the insurance but which do  not  affect
    the   premium   charged  are  exempted  from  filing  and
    countersignature.
         The submission of insuring contracts to the  Surplus
    Line  Association of Illinois constitutes a certification
    by the surplus line producer or by the insurance producer
    who presented the risk to the surplus line  producer  for
    placement  as  a  surplus  line  risk that after diligent
    effort the required insurance could not be procured  from
    insurers  which  are  authorized  to transact business in
    this State other than domestic surplus line  insurers  as
    defined  in  Section  445a  and that such procurement was
    otherwise in accordance with the surplus line law.
    (6)  Countersignature required.  It shall be unlawful for
an insurance producer to  deliver  any  unauthorized  insurer
contract  or  domestic  surplus  line insurer contract unless
such insurance contract is countersigned by the Surplus  Line
Association of Illinois.
    (7)  Inspection  of  records.   A  surplus  line producer
shall maintain separate records of  the  business  transacted
under  his  or  her  license,  including  complete  copies of
surplus line insurance contracts maintained on  paper  or  by
electronic  means,  which  records shall be open at all times
for inspection by  the  Director  and  by  the  Surplus  Line
Association of Illinois.
    (8)  Violations  and penalties.  The Director may suspend
or revoke or refuse to renew a surplus line producer  license
for  any violation of this Code. In addition to or in lieu of
suspension or revocation, the Director may subject a  surplus
line  producer  to  a  civil penalty of up to $1,000 for each
cause  for  suspension  or  revocation.   Such   penalty   is
enforceable  under  subsection  (5)  of  Section 403A of this
Code.
    (9)  Director may declare  insurer  ineligible.   If  the
Director  determines  that  the  further  assumption of risks
might be hazardous to the policyholders  of  an  unauthorized
insurer,  the Director may order the Surplus Line Association
of Illinois not to countersign insurance contracts evidencing
insurance in such insurer and order surplus line producers to
cease procuring insurance from such insurer.
    (10)  Service  of  process  upon   Director.    Insurance
contracts  delivered  under  this  Section  from unauthorized
insurers shall contain a provision designating  the  Director
and  his successors in office the true and lawful attorney of
the insurer upon whom may be served all lawful process in any
action, suit or proceeding arising  out  of  such  insurance.
Service  of  process  made  upon  the  Director  to  be valid
hereunder must state the name of the insured, the name of the
unauthorized insurer and identify the contract of  insurance.
The Director at his option is authorized to forward a copy of
the  process  to the Surplus Line Association of Illinois for
delivery to the unauthorized  insurer  or  the  Director  may
deliver  the  process  to  the  unauthorized insurer by other
means which he considers to be reasonably prompt and certain.
    (11)  The Illinois Surplus Line law  does  not  apply  to
insurance of property and operations of railroads or aircraft
engaged  in  interstate  or  foreign  commerce,  insurance of
vessels, crafts or hulls, cargoes,  marine  builder's  risks,
marine  protection  and  indemnity,  or other risks including
strikes and war risks insured under ocean or wet marine forms
of policies.
    (12)  Surplus line insurance procured under this Section,
including insurance procured from  a  domestic  surplus  line
insurer,  is  not  subject  to the provisions of the Illinois
Insurance Code other than Sections 123,  123.1,  401,  401.1,
402,  403,  403A,  408, 412, 445, 445.1, 445.2, 445.3, 445.4,
and all of the provisions of Article XXXI to the extent  that
the  provisions of Article XXXI are not inconsistent with the
terms of this Act.
(Source: P.A. 92-386, eff. 1-1-02.)

    (215 ILCS 5/531.13) (from Ch. 73, par. 1065.80-13)
    Sec. 531.13.  Tax offset.  In  the  event  the  aggregate
Class  A,  B and C assessments for all member insurers do not
exceed $3,000,000 in any one calendar year, no member insurer
shall receive a tax offset.  However, for  any  one  calendar
year  before  1998  in  which  the  total of such assessments
exceeds $3,000,000, the amount in excess of $3,000,000  shall
be subject to a tax offset to the extent of 20% of the amount
of such assessment for each of the 5 calendar years following
the  year in which such assessment was paid, and ending prior
to January 1, 2003, and each member insurer  may  offset  the
proportionate  amount  of  such  excess  paid  by the insurer
against its liabilities for the tax  imposed  by  subsections
(a)  and  (b)  of Section 201 of the Illinois Income Tax Act.
The provisions of this Section shall expire and be  given  no
effect  for any tax period commencing on and after January 1,
2003.
(Source: P.A. 90-583, eff. 5-29-98.)

    Section 15.  The Health Maintenance Organization  Act  is
amended by changing Section 6-13 as follows:

    (215 ILCS 125/6-13) (from Ch. 111 1/2, par. 1418.13)
    Sec.  6-13.  Tax offset. In the event the aggregate Class
A and B assessments  for  all  member  organizations  do  not
exceed  $3,000,000  in  any  one  calendar  year,  no  member
organization shall receive a tax offset.  However, in any one
calendar  year in which the total of such assessments exceeds
$3,000,000, the amount  in  excess  of  $3,000,000  shall  be
subject to a tax offset to the extent of 20% of the amount of
such assessment for each of the five calendar years following
the  year in which such assessment was paid, and ending prior
to January 1, 2003, and each member organization  may  offset
the   proportionate   amount  of  such  excess  paid  by  the
organization against its liabilities for the tax  imposed  by
subsections (a) and (b) of Section 201 of the Illinois Income
Tax  Act.  The provisions of this Section shall expire and be
given no effect on and after January 1, 2004.
(Source: P.A. 85-20.)

    Section 99.  Effective date.  This Act takes effect  upon
becoming law.

Effective Date: 6/20/2003