Public Act 093-0918
 		





HB0393 Enrolled
LRB093 06218 JLS 06328 b






    AN ACT concerning insurance. 

 
    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 Section 205 as follows:
 



    (35 ILCS 5/205)  (from Ch. 120, par. 2-205)


    Sec. 205. Exempt organizations. 

    (a) Charitable, etc. organizations. The base income of an

organization which is exempt from the federal income tax by 
reason of
Section 501(a) of the Internal Revenue Code shall not 
be determined
under section 203 of this Act, but shall be its 
unrelated business
taxable income as determined under section 
512 of the Internal Revenue
Code, without any deduction for the 
tax imposed by this Act. The
standard exemption provided by 
section 204 of this Act shall not be
allowed in determining the 
net income of an organization to which this
subsection applies.

    (b) Partnerships.  A partnership as such shall not be 
subject to
the tax imposed by subsection 201 (a) and (b) of 
this Act, but shall be
subject to the replacement tax imposed 
by subsection 201 (c) and (d) of
this Act and shall compute its 
base income as described in subsection (d)
of Section 203 of 
this Act.  A partnership shall file such returns and other

information at such
time and in such manner as may be required 
under Article 5 of this Act.
The partners in a partnership 
shall be liable for the replacement tax imposed
by subsection 
201 (c) and (d) of this Act on such partnership, to the extent

such tax is not paid by the partnership, as provided under the 
laws of Illinois
governing the liability of partners for the 
obligations of a partnership.
Persons carrying on business as 
partners shall be liable for the tax
imposed by subsection 201 
(a) and (b) of this Act only in their separate
or individual 
capacities.

    (c) Subchapter S corporations. A Subchapter S corporation 
shall not
be subject to the tax imposed by subsection 201 (a) 
and
(b) of this Act but shall be subject to the replacement tax 
imposed by subsection
201 (c) and (d) of this Act and shall 
file such returns
and other information
at such time and in 
such manner as may be required under Article 5 of this Act. 

    (d) Combat zone death. An individual relieved from the 
federal
income tax for any taxable year by reason of section 
692 of the Internal
Revenue Code shall not be subject to the 
tax imposed by this Act for
such taxable year.

    (e) Certain trusts. A common trust fund described in 
Section 584
of the Internal Revenue Code, and any other trust 
to the extent that the
grantor is treated as the owner thereof 
under sections 671 through 678
of the Internal Revenue Code 
shall not be subject to the tax imposed by
this Act.

    (f) Certain business activities. A person not otherwise 
subject to the tax
imposed by this Act shall not become subject 
to the tax imposed by this Act by
reason of:


        (1) that person's ownership of tangible personal 
    property located at the
premises of
a printer in this State 
    with which the person has contracted for printing, or


        (2) activities of the person's employees or agents 
    located solely at the
premises of a printer and related to 
    quality control, distribution, or printing
services 
    performed by a printer in the State with which the person 
    has
contracted for printing.

    (g) A nonprofit risk organization that holds a certificate 
of authority under Article VIID of the Illinois Insurance Code 
is exempt from the tax imposed under this Act with respect to 
its activities or operations in furtherance of the powers 
conferred upon it under that Article VIID of the Illinois 
Insurance Code.

(Source: P.A. 88-361.)


 
    Section 10. The Illinois Insurance Code is amended by 
adding Article VIID as
follows:


 
    (215 ILCS 5/Art. VIID heading new)

ARTICLE VIID. NONPROFIT RISK ORGANIZATIONS

 
    (215 ILCS 5/123D-1 new)

    Sec. 123D-1. Purpose; construction. The purpose of this 
Article is to provide for the organization of and
issuance
of a 
certificate of authority to nonprofit risk organizations that 
insure
nonprofit
organizations and that will qualify, and 
continue to qualify, as a qualified
charitable risk
pool, as 
defined in subsection (n) of Section 501 of the Internal 
Revenue Code.

 
    (215 ILCS 5/123D-5 new)

    Sec. 123D-5. Definitions.  As used in this Article:

    "Member" means a nonprofit organization that participates 
as an insured in a nonprofit risk organization.

    "Nonmember charitable organization" has the meaning set 
forth in
subsection (n) of Section 501 of the Internal Revenue 
Code.

    "Nonprofit organizations" means organizations described in 
paragraph (3) of
subsection (c), and exempt from taxation under 
subsection (a), of Section 501
of the
Internal Revenue Code.

    "Nonprofit risk organization" means a nonprofit company 
organized to do
business solely with nonprofit organizations as 
a qualified charitable risk
pool under
subsection (n) of 
Section 501 of the Internal Revenue Code that is organized in

accordance with this Article.

    "Startup capital" has the meaning set forth in subsection 
(n) of
Section 501
of the Internal Revenue Code.


 
    (215 ILCS 5/123D-10 new)

    Sec. 123D-10. Organization of nonprofit risk 
organizations.

    (a) A company organized pursuant to Articles III or IV, 
including such
companies organized as a risk retention group in 
this State pursuant to Article
VIIB of
this Code, that 
satisfies the requirements of this Article may be organized as

a nonprofit
risk organization.

    (b) Notwithstanding any contrary provision in subsection A 
of Section 123B-3
of
this Code, a nonprofit risk organization 
may be organized as a reciprocal
insurance
company and qualify 
for organization under Article VIIB as a risk retention
group.

    (c) No nonprofit risk organization issued a certificate of 
authority
pursuant to this
Article shall be converted into a 
corporation or other entity organized for
pecuniary profit
or 
into a for-profit organization of any kind.


 
    (215 ILCS 5/123D-15 new)

    Sec. 123D-15. Conduct of insurance business by nonprofit 
risk
organizations.

    (a) The Director may, pursuant to this Article, issue a 
certificate of
authority to write the kinds of insurance 
enumerated in Classes 2 and 3 of Section 4 to a
nonprofit risk 
organization that is a company organized pursuant to Articles

III or IV,
including such companies organized as a risk 
retention group in this State
pursuant to
Article VIIB, if such 
organization:

        (1) complies with the applicable requirements of 
    Articles III or IV
and
VIIB, if organized as a risk 
    retention group; and

        (2) has an initial paid-up capital and surplus at least 
    equal to the
amount of
applicable paid-up capital and 
    surplus required by Articles III or IV for
a
newly

    organized company doing the same kind or kinds of insurance 
    business.

Thereafter, every such nonprofit risk organization shall 
maintain capital and
surplus at
least equal to the amount of 
applicable capital and surplus required to be
maintained by

companies under Articles III or IV doing the same kind or kinds 
of
insurance
business.

    (b) Every certificate of authority to engage in an 
insurance business issued
by the
Director to any nonprofit risk 
organization pursuant to the provisions of this
Article shall

specify the company's name, the location of its principal 
office, the name and
principal
address of its attorney-in-fact, 
if any, and the kind or kinds of insurance
business that it
is 
authorized to engage in this State.


 
    (215 ILCS 5/123D-20 new)

    Sec. 123D-20. Relevant criteria.

    (a) A nonprofit risk
organization
must meet all of the 
following criteria:

        (1) Be organized and operated solely to insure risks of 
    its members.

        (2) Directly provide information to its members with 
    respect to loss
control
and risk management.

        (3) Be comprised solely of members.

        (4) Be organized under this Article.

        (5) Be exempt from Illinois income taxes with respect 
    to its activities or operations in furtherance of the 
    powers conferred upon it by this Article.

        (6) Obtain at least $1,000,000 in startup capital from 
    nonmember
charitable organizations. The startup capital 
    may take the form of
advancements
or borrowings in the form 
    permitted by Section 56 or 76 of this Code,
as
applicable. 
    Startup capital may be used to satisfy the financial 
    requirements
contained in this Article applicable to a 
    nonprofit risk organization only to
the
extent the Director 
    determines that it complies with those requirements.

        (7) Be controlled by a board of directors elected by 
    its members.

        (8) Require in its organizational documents that:

            (A) each member of the nonprofit risk organization 
        shall at all
times be an organization described in 
        paragraph (3) of subsection (c) of
Section 501 of the 
        Internal Revenue Code and exempt from tax under

        subsection (a) of Section 501 of the Internal Revenue 
        Code;

            (B) any member that receives a final determination 
        that it no
longer qualifies as an organization 
        described in paragraph (3) of
subsection (c) of Section 
        501 of the Internal Revenue Code shall
immediately 
        notify the nonprofit risk organization of the 
        determination
and the effective date of the 
        determination; and

            (C) each policy of insurance issued by the 
        nonprofit risk
organization shall provide that the 
        policy does not cover the insured with
respect to 
        events occurring after the date the final 
        determination was
issued to the insured.
        (b) An organization shall not cease to qualify as a 
    nonprofit risk organization solely by reason of the failure 
    of any of its members to continue to be an organization 
    described in paragraph (3) of subsection (c) of Section 501 
    of the Internal Revenue Code if, within a reasonable period 
    of time after the nonprofit risk organization is notified 
    as required under subparagraph (8)(B) of subsection (a) of 
    this Section, the nonprofit risk organization takes such 
    action as may be reasonably necessary to remove the member 
    from the nonprofit risk organization.


 
    (215 ILCS 5/123D-25 new)

    Sec. 123D-25. Applicability of other provisions of this 
Code. Except as otherwise provided in this Article, where 
inconsistent with
this
Article, or where the context otherwise 
requires, all of the provisions of this
Code and the
rules of 
the Director relating to all insurers and those relating to a 
company
organized
pursuant to Articles III or IV or a risk 
retention group organized in this
State pursuant
to Article 
VIIB transacting the same kind or kinds of insurance shall be

applicable to a
nonprofit risk organization organized and 
issued a certificate of authority
pursuant to this
Article. 
Where any of such provisions of law refer to a corporation, 
company,
or insurer,
those references, when read in connection 
with and applicable to this Article,
shall mean
such a 
nonprofit risk organization.

 
    (215 ILCS 5/123D-30 new)

    Sec. 123D-30. Residual market participation exemption;

security
funds. A nonprofit risk organization shall not be 
permitted or required to join
or
contribute financially to any 
plan, pool, association, or guaranty or
insolvency fund in
this 
State, nor shall any nonprofit risk organization, nor its 
insureds nor any
claimants
against the insureds, nor its parent 
nor any affiliated company, nor any member
organization of its 
association, receive any benefit from any such plan, pool

association,
or guaranty or insolvency fund for claims arising 
out of the operations of the
nonprofit
risk organization. Each 
nonprofit risk organization must inform each insured,
in both 
the
application for insurance and in the policy issued to the 
insured, that (i)
the nonprofit
risk organization is not 
subject to all of the insurance laws and rules of this
State, 
and (ii)
State insurance insolvency guaranty funds are not 
available to  the insured for
claims
arising out of the 
operations of the nonprofit risk organization.

 
    (215 ILCS 5/123D-35 new)

    Sec. 123D-35. Rules.  The Director shall adopt such rules 
as may be
necessary
for
the implementation of this Article.





Effective Date:  1/1/2005