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91st General Assembly
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Public Act 91-0913

HB4431 Enrolled                               LRB9110442SMdvB

    AN ACT concerning taxes, amending named Acts.

    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,  203,  405,  502,  803,  and 1501 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)  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  reinsurance
premiums  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 reinsurance premiums  do  not  include  assumed
premiums    from   inter-affiliate   pooling   arrangements),
beginning with taxable years ending on or after December  31,
1999  and  ending  with  taxable  years  ending  on or before
December 31, 2000, 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.
         (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% 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).
         (3)  The provisions of  this  subsection  (d-1)  are
    effective  only through December 31, 2000 and cease to be
    effective on January 1, 2001; but this  does  not  affect
    any claim or obligation based upon the use or application
    of  this  subsection for tax years ending on December 31,
    2000 or earlier.
    (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 subsection (b) 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  until  the  minimum
    investments  in  qualified  property set forth in Section
    5.5  of  the  Illinois  Enterprise  Zone  Act  have  been
    satisfied 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 minimum  investments  shall
    be  taken  in  the  taxable  year  in  which such minimum
    investments  have  been  completed.    The   credit   for
    additional investments beyond the minimum investment by a
    designated  high  impact business 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)  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.  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 subsection (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,  a  taxpayer  shall  be
allowed  a  credit  against the tax imposed by subsection (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.
    (k)  Research and development credit.
    Beginning  with  tax  years  ending after July 1, 1990, 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.
    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
    of 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 Section 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.  90-123,  eff.  7-21-97; 90-458, eff. 8-17-97;
90-605, eff. 6-30-98;  90-655,  eff.  7-30-98;  90-717,  eff.
8-7-98;  90-792, eff. 1-1-99; 91-9, eff. 1-1-00; 91-357, eff.
7-29-99; 91-643, eff. 8-20-99; 91-644, eff. 8-20-99;  revised
8-27-99.)

    (35 ILCS 5/203) (from Ch. 120, par. 2-203)
    Sec. 203.  Base income defined.
    (a)  Individuals.
         (1)  In general.  In the case of an individual, base
    income  means  an amount equal to the taxpayer's adjusted
    gross  income  for  the  taxable  year  as  modified   by
    paragraph (2).
         (2)  Modifications.    The   adjusted  gross  income
    referred to in paragraph (1) shall be modified by  adding
    thereto the sum of the following amounts:
              (A)  An  amount  equal  to  all amounts paid or
         accrued to the taxpayer  as  interest  or  dividends
         during  the taxable year to the extent excluded from
         gross income in the computation  of  adjusted  gross
         income,  except  stock dividends of qualified public
         utilities  described  in  Section  305(e)   of   the
         Internal Revenue Code;
              (B)  An  amount  equal  to  the  amount  of tax
         imposed by this Act  to  the  extent  deducted  from
         gross  income  in  the computation of adjusted gross
         income for the taxable year;
              (C)  An amount equal  to  the  amount  received
         during  the  taxable year as a recovery or refund of
         real  property  taxes  paid  with  respect  to   the
         taxpayer's principal residence under the Revenue Act
         of  1939  and  for  which a deduction was previously
         taken under subparagraph (L) of this  paragraph  (2)
         prior to July 1, 1991, the retrospective application
         date  of Article 4 of Public Act 87-17.  In the case
         of  multi-unit  or  multi-use  structures  and  farm
         dwellings, the taxes  on  the  taxpayer's  principal
         residence  shall  be that portion of the total taxes
         for the entire property  which  is  attributable  to
         such principal residence;
              (D)  An  amount  equal  to  the  amount  of the
         capital gain deduction allowable under the  Internal
         Revenue  Code,  to  the  extent  deducted from gross
         income in the computation of adjusted gross income;
              (D-5)  An amount, to the extent not included in
         adjusted gross income, equal to the amount of  money
         withdrawn by the taxpayer in the taxable year from a
         medical care savings account and the interest earned
         on  the  account in the taxable year of a withdrawal
         pursuant to subsection (b)  of  Section  20  of  the
         Medical Care Savings Account Act; and
              (D-10)  For taxable years ending after December
         31,   1997,   an   amount   equal  to  any  eligible
         remediation costs that the  individual  deducted  in
         computing  adjusted  gross  income and for which the
         individual claims a credit under subsection  (l)  of
         Section 201;
    and  by  deducting  from the total so obtained the sum of
    the following amounts:
              (E)  Any  amount  included  in  such  total  in
         respect  of  any  compensation  (including  but  not
         limited to any compensation paid  or  accrued  to  a
         serviceman  while  a  prisoner  of war or missing in
         action) paid to a resident by  reason  of  being  on
         active duty in the Armed Forces of the United States
         and  in  respect of any compensation paid or accrued
         to a resident who as a governmental employee  was  a
         prisoner of war or missing in action, and in respect
         of  any  compensation  paid to a resident in 1971 or
         thereafter for annual training performed pursuant to
         Sections 502 and 503, Title 32, United  States  Code
         as a member of the Illinois National Guard;
              (F)  An amount equal to all amounts included in
         such  total  pursuant  to the provisions of Sections
         402(a), 402(c), 403(a), 403(b), 406(a), 407(a),  and
         408  of  the  Internal  Revenue Code, or included in
         such total as distributions under the provisions  of
         any  retirement  or disability plan for employees of
         any  governmental  agency  or  unit,  or  retirement
         payments to retired  partners,  which  payments  are
         excluded   in   computing  net  earnings  from  self
         employment by Section 1402 of the  Internal  Revenue
         Code and regulations adopted pursuant thereto;
              (G)  The valuation limitation amount;
              (H)  An  amount  equal to the amount of any tax
         imposed by  this  Act  which  was  refunded  to  the
         taxpayer  and included in such total for the taxable
         year;
              (I)  An amount equal to all amounts included in
         such total pursuant to the provisions of Section 111
         of the Internal Revenue Code as a recovery of  items
         previously  deducted  from  adjusted gross income in
         the computation of taxable income;
              (J)  An  amount  equal   to   those   dividends
         included   in  such  total  which  were  paid  by  a
         corporation which conducts business operations in an
         Enterprise Zone or zones created under the  Illinois
         Enterprise  Zone Act, and conducts substantially all
         of its operations in an Enterprise Zone or zones;
              (K)  An  amount  equal   to   those   dividends
         included   in   such  total  that  were  paid  by  a
         corporation that conducts business operations  in  a
         federally  designated Foreign Trade Zone or Sub-Zone
         and  that  is  designated  a  High  Impact  Business
         located  in  Illinois;   provided   that   dividends
         eligible  for the deduction provided in subparagraph
         (J) of paragraph (2) of this subsection shall not be
         eligible  for  the  deduction  provided  under  this
         subparagraph (K);
              (L)  For taxable years  ending  after  December
         31,  1983,  an  amount  equal to all social security
         benefits and railroad retirement  benefits  included
         in  such  total pursuant to Sections 72(r) and 86 of
         the Internal Revenue Code;
              (M)  With  the   exception   of   any   amounts
         subtracted  under  subparagraph (N), an amount equal
         to the sum of all amounts disallowed  as  deductions
         by  (i)  Sections  171(a)  (2),  and  265(2)  of the
         Internal Revenue Code of 1954, as now  or  hereafter
         amended,  and  all  amounts of expenses allocable to
         interest and  disallowed as  deductions  by  Section
         265(1)  of the Internal Revenue Code of 1954, as now
         or hereafter amended; and  (ii)  for  taxable  years
         ending  on  or  after  August 13, 1999 the effective
         date of this amendatory  Act  of  the  91st  General
         Assembly,   Sections   171(a)(2),   265,  280C,  and
         832(b)(5)(B)(i) of the Internal  Revenue  Code;  the
         provisions  of this subparagraph are exempt from the
         provisions of Section 250;
              (N)  An amount equal to all amounts included in
         such total which are exempt from  taxation  by  this
         State   either   by   reason   of  its  statutes  or
         Constitution  or  by  reason  of  the  Constitution,
         treaties or statutes of the United States;  provided
         that,  in the case of any statute of this State that
         exempts  income  derived   from   bonds   or   other
         obligations from the tax imposed under this Act, the
         amount  exempted  shall  be the interest net of bond
         premium amortization;
              (O)  An amount equal to any  contribution  made
         to  a  job  training project established pursuant to
         the Tax Increment Allocation Redevelopment Act;
              (P)  An amount  equal  to  the  amount  of  the
         deduction  used  to  compute  the federal income tax
         credit for restoration of substantial  amounts  held
         under  claim  of right for the taxable year pursuant
         to Section 1341 of  the  Internal  Revenue  Code  of
         1986;
              (Q)  An amount equal to any amounts included in
         such   total,   received   by  the  taxpayer  as  an
         acceleration in the payment of  life,  endowment  or
         annuity  benefits  in advance of the time they would
         otherwise be payable as an indemnity for a  terminal
         illness;
              (R)  An  amount  equal  to  the  amount  of any
         federal or State  bonus  paid  to  veterans  of  the
         Persian Gulf War;
              (S)  An  amount,  to  the  extent  included  in
         adjusted  gross  income,  equal  to  the amount of a
         contribution made in the taxable year on  behalf  of
         the  taxpayer  to  a  medical  care  savings account
         established under the Medical Care  Savings  Account
         Act  to  the  extent the contribution is accepted by
         the account administrator as provided in that Act;
              (T)  An  amount,  to  the  extent  included  in
         adjusted  gross  income,  equal  to  the  amount  of
         interest earned in the taxable  year  on  a  medical
         care  savings  account established under the Medical
         Care Savings Account Act on behalf of the  taxpayer,
         other  than interest added pursuant to item (D-5) of
         this paragraph (2);
              (U)  For one taxable year beginning on or after
         January 1, 1994, an amount equal to the total amount
         of tax imposed and paid under  subsections  (a)  and
         (b)  of  Section  201  of  this Act on grant amounts
         received by the  taxpayer  under  the  Nursing  Home
         Grant  Assistance  Act during the taxpayer's taxable
         years 1992 and 1993;
              (V)  Beginning with  tax  years  ending  on  or
         after  December  31,  1995 and ending with tax years
         ending on or before December  31,  2004,  an  amount
         equal  to  the  amount  paid  by a taxpayer who is a
         self-employed taxpayer, a partner of a  partnership,
         or  a  shareholder in a Subchapter S corporation for
         health insurance or  long-term  care  insurance  for
         that   taxpayer   or   that   taxpayer's  spouse  or
         dependents, to the extent that the amount  paid  for
         that  health  insurance  or long-term care insurance
         may be deducted under Section 213  of  the  Internal
         Revenue  Code  of 1986, has not been deducted on the
         federal income tax return of the taxpayer, and  does
         not  exceed  the taxable income attributable to that
         taxpayer's  income,   self-employment   income,   or
         Subchapter  S  corporation  income;  except  that no
         deduction shall be allowed under this  item  (V)  if
         the  taxpayer  is  eligible  to  participate  in any
         health insurance or long-term care insurance plan of
         an  employer  of  the  taxpayer  or  the  taxpayer's
         spouse.  The amount  of  the  health  insurance  and
         long-term  care insurance subtracted under this item
         (V) shall be determined by multiplying total  health
         insurance and long-term care insurance premiums paid
         by  the  taxpayer times a number that represents the
         fractional percentage of eligible  medical  expenses
         under  Section  213  of the Internal Revenue Code of
         1986 not actually deducted on the taxpayer's federal
         income tax return;
              (W)  For taxable years beginning  on  or  after
         January   1,  1998,  all  amounts  included  in  the
         taxpayer's federal gross income in the taxable  year
         from  amounts converted from a regular IRA to a Roth
         IRA. This paragraph is exempt from the provisions of
         Section 250; and
              (X)  For taxable year 1999 and  thereafter,  an
         amount equal to the amount of any (i) distributions,
         to the extent includible in gross income for federal
         income tax purposes, made to the taxpayer because of
         his  or  her  status  as a victim of persecution for
         racial or religious reasons by Nazi Germany  or  any
         other  Axis  regime  or as an heir of the victim and
         (ii) items of income, to the  extent  includible  in
         gross   income  for  federal  income  tax  purposes,
         attributable to, derived from or in any way  related
         to  assets  stolen  from,  hidden from, or otherwise
         lost to  a  victim  of  persecution  for  racial  or
         religious  reasons by Nazi Germany or any other Axis
         regime immediately prior to, during, and immediately
         after World War II, including, but not  limited  to,
         interest  on  the  proceeds  receivable as insurance
         under policies issued to a victim of persecution for
         racial or religious reasons by Nazi Germany  or  any
         other  Axis  regime  by European insurance companies
         immediately  prior  to  and  during  World  War  II;
         provided, however,  this  subtraction  from  federal
         adjusted  gross  income  does  not  apply  to assets
         acquired with such assets or with the proceeds  from
         the  sale  of  such  assets; provided, further, this
         paragraph shall only apply to a taxpayer who was the
         first recipient of such assets after their  recovery
         and  who  is  a  victim of persecution for racial or
         religious reasons by Nazi Germany or any other  Axis
         regime  or  as an heir of the victim.  The amount of
         and  the  eligibility  for  any  public  assistance,
         benefit, or similar entitlement is not  affected  by
         the   inclusion  of  items  (i)  and  (ii)  of  this
         paragraph in gross income  for  federal  income  tax
         purposes.     This  paragraph  is  exempt  from  the
         provisions of Section 250.

    (b)  Corporations.
         (1)  In general.  In the case of a corporation, base
    income means an amount equal to  the  taxpayer's  taxable
    income for the taxable year as modified by paragraph (2).
         (2)  Modifications.   The taxable income referred to
    in paragraph (1) shall be modified by adding thereto  the
    sum of the following amounts:
              (A)  An  amount  equal  to  all amounts paid or
         accrued  to  the  taxpayer  as  interest   and   all
         distributions  received  from  regulated  investment
         companies  during  the  taxable  year  to the extent
         excluded from gross income  in  the  computation  of
         taxable income;
              (B)  An  amount  equal  to  the  amount  of tax
         imposed by this Act  to  the  extent  deducted  from
         gross  income  in  the computation of taxable income
         for the taxable year;
              (C)  In the  case  of  a  regulated  investment
         company,  an  amount  equal to the excess of (i) the
         net long-term capital gain  for  the  taxable  year,
         over  (ii)  the amount of the capital gain dividends
         designated  as  such  in  accordance  with   Section
         852(b)(3)(C)  of  the  Internal Revenue Code and any
         amount designated under Section 852(b)(3)(D) of  the
         Internal  Revenue  Code, attributable to the taxable
         year (this amendatory Act of 1995 (Public Act 89-89)
         is declarative of existing law  and  is  not  a  new
         enactment);
              (D)  The  amount  of  any  net  operating  loss
         deduction taken in arriving at taxable income, other
         than  a  net  operating  loss carried forward from a
         taxable year ending prior to December 31, 1986;
              (E)  For taxable years in which a net operating
         loss carryback or carryforward from a  taxable  year
         ending  prior  to December 31, 1986 is an element of
         taxable income under paragraph (1) of subsection (e)
         or subparagraph (E) of paragraph (2)  of  subsection
         (e),  the  amount  by  which  addition modifications
         other than those provided by this  subparagraph  (E)
         exceeded  subtraction  modifications in such earlier
         taxable year, with the following limitations applied
         in the order that they are listed:
                   (i)  the addition modification relating to
              the net operating loss carried back or  forward
              to  the  taxable  year  from  any  taxable year
              ending prior to  December  31,  1986  shall  be
              reduced  by the amount of addition modification
              under this subparagraph (E)  which  related  to
              that  net  operating  loss  and which was taken
              into account in calculating the base income  of
              an earlier taxable year, and
                   (ii)  the  addition  modification relating
              to the  net  operating  loss  carried  back  or
              forward  to  the  taxable year from any taxable
              year ending prior to December  31,  1986  shall
              not  exceed  the  amount  of  such carryback or
              carryforward;
              For taxable years  in  which  there  is  a  net
         operating  loss  carryback or carryforward from more
         than one other taxable year ending prior to December
         31, 1986, the addition modification provided in this
         subparagraph (E) shall be the  sum  of  the  amounts
         computed    independently    under   the   preceding
         provisions of this subparagraph (E)  for  each  such
         taxable year; and
              (E-5)  For  taxable years ending after December
         31,  1997,  an  amount   equal   to   any   eligible
         remediation  costs  that the corporation deducted in
         computing adjusted gross income and  for  which  the
         corporation  claims a credit under subsection (l) of
         Section 201;
    and by deducting from the total so obtained  the  sum  of
    the following amounts:
              (F)  An  amount  equal to the amount of any tax
         imposed by  this  Act  which  was  refunded  to  the
         taxpayer  and included in such total for the taxable
         year;
              (G)  An amount equal to any amount included  in
         such  total under Section 78 of the Internal Revenue
         Code;
              (H)  In the  case  of  a  regulated  investment
         company,  an  amount  equal  to the amount of exempt
         interest dividends as defined in subsection (b)  (5)
         of Section 852 of the Internal Revenue Code, paid to
         shareholders for the taxable year;
              (I)  With   the   exception   of   any  amounts
         subtracted under subparagraph (J), an  amount  equal
         to  the  sum of all amounts disallowed as deductions
         by  (i)  Sections  171(a)  (2),  and  265(a)(2)  and
         amounts disallowed as interest  expense  by  Section
         291(a)(3)  of  the  Internal Revenue Code, as now or
         hereafter  amended,  and  all  amounts  of  expenses
         allocable to interest and disallowed  as  deductions
         by  Section  265(a)(1) of the Internal Revenue Code,
         as now or hereafter amended; and  (ii)  for  taxable
         years  ending  on  or  after  August  13,  1999  the
         effective  date  of  this amendatory Act of the 91st
         General Assembly,  Sections  171(a)(2),  265,  280C,
         291(a)(3),   and  832(b)(5)(B)(i)  of  the  Internal
         Revenue Code; the provisions  of  this  subparagraph
         are exempt from the provisions of Section 250;
              (J)  An amount equal to all amounts included in
         such  total  which  are exempt from taxation by this
         State  either  by  reason   of   its   statutes   or
         Constitution  or  by  reason  of  the  Constitution,
         treaties  or statutes of the United States; provided
         that, in the case of any statute of this State  that
         exempts   income   derived   from   bonds  or  other
         obligations from the tax imposed under this Act, the
         amount exempted shall be the interest  net  of  bond
         premium amortization;
              (K)  An   amount   equal   to  those  dividends
         included  in  such  total  which  were  paid  by   a
         corporation which conducts business operations in an
         Enterprise  Zone or zones created under the Illinois
         Enterprise Zone Act and conducts  substantially  all
         of its operations in an Enterprise Zone or zones;
              (L)  An   amount   equal   to  those  dividends
         included  in  such  total  that  were  paid   by   a
         corporation  that  conducts business operations in a
         federally designated Foreign Trade Zone or  Sub-Zone
         and  that  is  designated  a  High  Impact  Business
         located   in   Illinois;   provided  that  dividends
         eligible for the deduction provided in  subparagraph
         (K)  of  paragraph 2 of this subsection shall not be
         eligible  for  the  deduction  provided  under  this
         subparagraph (L);
              (M)  For  any  taxpayer  that  is  a  financial
         organization within the meaning of Section 304(c) of
         this Act,  an  amount  included  in  such  total  as
         interest  income  from  a loan or loans made by such
         taxpayer to a borrower, to the extent  that  such  a
         loan  is  secured  by property which is eligible for
         the Enterprise Zone Investment Credit. To  determine
         the  portion  of  a loan or loans that is secured by
         property eligible for a  Section  201(h)  investment
         credit  to the borrower, the entire principal amount
         of the loan or loans between the  taxpayer  and  the
         borrower  should  be  divided  into the basis of the
         Section  201(h)  investment  credit  property  which
         secures the loan or loans, using  for  this  purpose
         the original basis of such property on the date that
         it  was  placed  in  service in the Enterprise Zone.
         The subtraction modification available  to  taxpayer
         in  any  year  under  this  subsection shall be that
         portion of the total interest paid by  the  borrower
         with  respect  to  such  loan  attributable  to  the
         eligible  property  as calculated under the previous
         sentence;
              (M-1)  For any taxpayer  that  is  a  financial
         organization within the meaning of Section 304(c) of
         this  Act,  an  amount  included  in  such  total as
         interest income from a loan or loans  made  by  such
         taxpayer  to  a  borrower, to the extent that such a
         loan is secured by property which  is  eligible  for
         the  High  Impact  Business  Investment  Credit.  To
         determine the portion of a loan  or  loans  that  is
         secured  by  property  eligible for a Section 201(i)
         investment  credit  to  the  borrower,  the   entire
         principal  amount  of  the loan or loans between the
         taxpayer and the borrower should be divided into the
         basis  of  the  Section  201(i)  investment   credit
         property  which secures the loan or loans, using for
         this purpose the original basis of such property  on
         the  date  that  it  was  placed  in  service  in  a
         federally  designated Foreign Trade Zone or Sub-Zone
         located in Illinois.  No taxpayer that  is  eligible
         for  the  deduction  provided in subparagraph (M) of
         paragraph (2) of this subsection shall  be  eligible
         for  the  deduction provided under this subparagraph
         (M-1).  The subtraction  modification  available  to
         taxpayers in any year under this subsection shall be
         that  portion  of  the  total  interest  paid by the
         borrower with respect to such loan  attributable  to
         the   eligible  property  as  calculated  under  the
         previous sentence;
              (N)  Two times any contribution made during the
         taxable year to a designated  zone  organization  to
         the  extent that the contribution (i) qualifies as a
         charitable  contribution  under  subsection  (c)  of
         Section 170 of the Internal Revenue  Code  and  (ii)
         must,  by  its terms, be used for a project approved
         by the Department of Commerce and Community  Affairs
         under  Section  11  of  the Illinois Enterprise Zone
         Act;
              (O)  An amount equal to: (i)  85%  for  taxable
         years  ending  on or before December 31, 1992, or, a
         percentage equal to the percentage  allowable  under
         Section  243(a)(1)  of  the Internal Revenue Code of
         1986 for taxable years  ending  after  December  31,
         1992,  of  the amount by which dividends included in
         taxable income and received from a corporation  that
         is  not  created  or organized under the laws of the
         United States or any state or political  subdivision
         thereof,  including,  for taxable years ending on or
         after  December  31,  1988,  dividends  received  or
         deemed  received  or  paid  or  deemed  paid   under
         Sections  951  through  964  of the Internal Revenue
         Code, exceed the amount of the modification provided
         under subparagraph (G)  of  paragraph  (2)  of  this
         subsection  (b)  which is related to such dividends;
         plus (ii) 100% of the  amount  by  which  dividends,
         included  in taxable income and received, including,
         for taxable years ending on or  after  December  31,
         1988,  dividends received or deemed received or paid
         or deemed paid under Sections 951 through 964 of the
         Internal Revenue Code,  from  any  such  corporation
         specified  in  clause  (i)  that  would  but for the
         provisions of Section 1504 (b) (3) of  the  Internal
         Revenue   Code   be  treated  as  a  member  of  the
         affiliated  group  which   includes   the   dividend
         recipient,  exceed  the  amount  of the modification
         provided under subparagraph (G) of paragraph (2)  of
         this   subsection  (b)  which  is  related  to  such
         dividends;
              (P)  An amount equal to any  contribution  made
         to  a  job  training project established pursuant to
         the Tax Increment Allocation Redevelopment Act;
              (Q)  An amount  equal  to  the  amount  of  the
         deduction  used  to  compute  the federal income tax
         credit for restoration of substantial  amounts  held
         under  claim  of right for the taxable year pursuant
         to Section 1341 of  the  Internal  Revenue  Code  of
         1986; and
              (R)  In  the  case  of an attorney-in-fact with
         respect to whom  an  interinsurer  or  a  reciprocal
         insurer  has  made the election under Section 835 of
         the Internal Revenue Code, 26 U.S.C. 835, an  amount
         equal  to the excess, if any, of the amounts paid or
         incurred by that interinsurer or reciprocal  insurer
         in the taxable year to the attorney-in-fact over the
         deduction allowed to that interinsurer or reciprocal
         insurer  with  respect to the attorney-in-fact under
         Section 835(b) of the Internal Revenue Code for  the
         taxable year; and
              (S)  For  taxable  years  ending  on  or  after
         December  31,  1997,  in  the case of a Subchapter S
         corporation, an  amount  equal  to  all  amounts  of
         income  allocable  to  a  shareholder subject to the
         Personal Property Tax Replacement Income Tax imposed
         by subsections (c) and (d) of Section  201  of  this
         Act,  including  amounts  allocable to organizations
         exempt from federal income tax by reason of  Section
         501(a)   of   the   Internal   Revenue  Code.   This
         subparagraph (S) is exempt from  the  provisions  of
         Section 250.
         (3)  Special  rule.   For  purposes of paragraph (2)
    (A), "gross income" in  the  case  of  a  life  insurance
    company,  for  tax years ending on and after December 31,
    1994, shall mean the  gross  investment  income  for  the
    taxable year.

    (c)  Trusts and estates.
         (1)  In  general.  In the case of a trust or estate,
    base income means  an  amount  equal  to  the  taxpayer's
    taxable  income  for  the  taxable  year  as  modified by
    paragraph (2).
         (2)  Modifications.  Subject to  the  provisions  of
    paragraph   (3),   the  taxable  income  referred  to  in
    paragraph (1) shall be modified by adding thereto the sum
    of the following amounts:
              (A)  An amount equal to  all  amounts  paid  or
         accrued  to  the  taxpayer  as interest or dividends
         during the taxable year to the extent excluded  from
         gross income in the computation of taxable income;
              (B)  In the case of (i) an estate, $600; (ii) a
         trust  which,  under  its  governing  instrument, is
         required to distribute all of its income  currently,
         $300;  and  (iii) any other trust, $100, but in each
         such case,  only  to  the  extent  such  amount  was
         deducted in the computation of taxable income;
              (C)  An  amount  equal  to  the  amount  of tax
         imposed by this Act  to  the  extent  deducted  from
         gross  income  in  the computation of taxable income
         for the taxable year;
              (D)  The  amount  of  any  net  operating  loss
         deduction taken in arriving at taxable income, other
         than a net operating loss  carried  forward  from  a
         taxable year ending prior to December 31, 1986;
              (E)  For taxable years in which a net operating
         loss  carryback  or carryforward from a taxable year
         ending prior to December 31, 1986 is an  element  of
         taxable income under paragraph (1) of subsection (e)
         or  subparagraph  (E) of paragraph (2) of subsection
         (e), the  amount  by  which  addition  modifications
         other  than  those provided by this subparagraph (E)
         exceeded subtraction modifications in  such  taxable
         year,  with the following limitations applied in the
         order that they are listed:
                   (i)  the addition modification relating to
              the net operating loss carried back or  forward
              to  the  taxable  year  from  any  taxable year
              ending prior to  December  31,  1986  shall  be
              reduced  by the amount of addition modification
              under this subparagraph (E)  which  related  to
              that  net  operating  loss  and which was taken
              into account in calculating the base income  of
              an earlier taxable year, and
                   (ii)  the  addition  modification relating
              to the  net  operating  loss  carried  back  or
              forward  to  the  taxable year from any taxable
              year ending prior to December  31,  1986  shall
              not  exceed  the  amount  of  such carryback or
              carryforward;
              For taxable years  in  which  there  is  a  net
         operating  loss  carryback or carryforward from more
         than one other taxable year ending prior to December
         31, 1986, the addition modification provided in this
         subparagraph (E) shall be the  sum  of  the  amounts
         computed    independently    under   the   preceding
         provisions of this subparagraph (E)  for  each  such
         taxable year;
              (F)  For  taxable  years  ending  on  or  after
         January 1, 1989, an amount equal to the tax deducted
         pursuant to Section 164 of the Internal Revenue Code
         if  the trust or estate is claiming the same tax for
         purposes of the Illinois foreign  tax  credit  under
         Section 601 of this Act;
              (G)  An  amount  equal  to  the  amount  of the
         capital gain deduction allowable under the  Internal
         Revenue  Code,  to  the  extent  deducted from gross
         income in the computation of taxable income; and
              (G-5)  For taxable years ending after  December
         31,   1997,   an   amount   equal  to  any  eligible
         remediation costs that the trust or estate  deducted
         in computing adjusted gross income and for which the
         trust or estate claims a credit under subsection (l)
         of Section 201;
    and  by  deducting  from the total so obtained the sum of
    the following amounts:
              (H)  An amount equal to all amounts included in
         such total pursuant to the  provisions  of  Sections
         402(a),  402(c),  403(a), 403(b), 406(a), 407(a) and
         408 of the Internal Revenue Code or included in such
         total as distributions under the provisions  of  any
         retirement  or  disability plan for employees of any
         governmental agency or unit, or retirement  payments
         to  retired partners, which payments are excluded in
         computing  net  earnings  from  self  employment  by
         Section  1402  of  the  Internal  Revenue  Code  and
         regulations adopted pursuant thereto;
              (I)  The valuation limitation amount;
              (J)  An amount equal to the amount of  any  tax
         imposed  by  this  Act  which  was  refunded  to the
         taxpayer and included in such total for the  taxable
         year;
              (K)  An amount equal to all amounts included in
         taxable  income  as  modified  by subparagraphs (A),
         (B), (C), (D), (E), (F) and  (G)  which  are  exempt
         from  taxation by this State either by reason of its
         statutes  or  Constitution  or  by  reason  of   the
         Constitution,  treaties  or  statutes  of the United
         States; provided that, in the case of any statute of
         this State that exempts income derived from bonds or
         other obligations from the tax  imposed  under  this
         Act,  the  amount exempted shall be the interest net
         of bond premium amortization;
              (L)  With  the   exception   of   any   amounts
         subtracted  under  subparagraph (K), an amount equal
         to the sum of all amounts disallowed  as  deductions
         by  (i)  Sections  171(a)  (2)  and 265(a)(2) of the
         Internal Revenue Code, as now or hereafter  amended,
         and  all  amounts  of expenses allocable to interest
         and disallowed as deductions by  Section  265(1)  of
         the  Internal  Revenue  Code  of  1954,  as  now  or
         hereafter amended; and (ii) for taxable years ending
         on  or  after  August 13, 1999 the effective date of
         this amendatory Act of the  91st  General  Assembly,
         Sections  171(a)(2),  265, 280C, and 832(b)(5)(B)(i)
         of the Internal Revenue Code; the provisions of this
         subparagraph  are  exempt  from  the  provisions  of
         Section 250;
              (M)  An  amount  equal   to   those   dividends
         included   in  such  total  which  were  paid  by  a
         corporation which conducts business operations in an
         Enterprise Zone or zones created under the  Illinois
         Enterprise  Zone  Act and conducts substantially all
         of its operations in an Enterprise Zone or Zones;
              (N)  An amount equal to any  contribution  made
         to  a  job  training project established pursuant to
         the Tax Increment Allocation Redevelopment Act;
              (O)  An  amount  equal   to   those   dividends
         included   in   such  total  that  were  paid  by  a
         corporation that conducts business operations  in  a
         federally  designated Foreign Trade Zone or Sub-Zone
         and  that  is  designated  a  High  Impact  Business
         located  in  Illinois;   provided   that   dividends
         eligible  for the deduction provided in subparagraph
         (M) of paragraph (2) of this subsection shall not be
         eligible  for  the  deduction  provided  under  this
         subparagraph (O);
              (P)  An amount  equal  to  the  amount  of  the
         deduction  used  to  compute  the federal income tax
         credit for restoration of substantial  amounts  held
         under  claim  of right for the taxable year pursuant
         to Section 1341 of  the  Internal  Revenue  Code  of
         1986; and
              (Q)  For  taxable  year 1999 and thereafter, an
         amount equal to the amount of any (i) distributions,
         to the extent includible in gross income for federal
         income tax purposes, made to the taxpayer because of
         his or her status as a  victim  of  persecution  for
         racial  or  religious reasons by Nazi Germany or any
         other Axis regime or as an heir of  the  victim  and
         (ii)  items  of  income, to the extent includible in
         gross  income  for  federal  income  tax   purposes,
         attributable  to, derived from or in any way related
         to assets stolen from,  hidden  from,  or  otherwise
         lost  to  a  victim  of  persecution  for  racial or
         religious reasons by Nazi Germany or any other  Axis
         regime immediately prior to, during, and immediately
         after  World  War II, including, but not limited to,
         interest on the  proceeds  receivable  as  insurance
         under policies issued to a victim of persecution for
         racial  or  religious reasons by Nazi Germany or any
         other Axis regime by  European  insurance  companies
         immediately  prior  to  and  during  World  War  II;
         provided,  however,  this  subtraction  from federal
         adjusted gross  income  does  not  apply  to  assets
         acquired  with such assets or with the proceeds from
         the sale of such  assets;  provided,  further,  this
         paragraph shall only apply to a taxpayer who was the
         first  recipient of such assets after their recovery
         and who is a victim of  persecution  for  racial  or
         religious  reasons by Nazi Germany or any other Axis
         regime or as an heir of the victim.  The  amount  of
         and  the  eligibility  for  any  public  assistance,
         benefit,  or  similar entitlement is not affected by
         the  inclusion  of  items  (i)  and  (ii)  of   this
         paragraph  in  gross  income  for federal income tax
         purposes.  This  paragraph  is   exempt   from   the
         provisions of Section 250.
         (3)  Limitation.   The  amount  of  any modification
    otherwise required under  this  subsection  shall,  under
    regulations  prescribed by the Department, be adjusted by
    any amounts included therein which  were  properly  paid,
    credited,  or  required to be distributed, or permanently
    set aside for charitable purposes pursuant   to  Internal
    Revenue Code Section 642(c) during the taxable year.

    (d)  Partnerships.
         (1)  In  general. In the case of a partnership, base
    income means an amount equal to  the  taxpayer's  taxable
    income for the taxable year as modified by paragraph (2).
         (2)  Modifications.  The  taxable income referred to
    in paragraph (1) shall be modified by adding thereto  the
    sum of the following amounts:
              (A)  An  amount  equal  to  all amounts paid or
         accrued to the taxpayer  as  interest  or  dividends
         during  the taxable year to the extent excluded from
         gross income in the computation of taxable income;
              (B)  An amount  equal  to  the  amount  of  tax
         imposed  by  this  Act  to  the extent deducted from
         gross income for the taxable year;
              (C)  The amount of deductions  allowed  to  the
         partnership  pursuant  to  Section  707  (c)  of the
         Internal Revenue Code  in  calculating  its  taxable
         income; and
              (D)  An  amount  equal  to  the  amount  of the
         capital gain deduction allowable under the  Internal
         Revenue  Code,  to  the  extent  deducted from gross
         income in the computation of taxable income;
    and by deducting from the total so obtained the following
    amounts:
              (E)  The valuation limitation amount;
              (F)  An amount equal to the amount of  any  tax
         imposed  by  this  Act  which  was  refunded  to the
         taxpayer and included in such total for the  taxable
         year;
              (G)  An amount equal to all amounts included in
         taxable  income  as  modified  by subparagraphs (A),
         (B), (C) and (D) which are exempt from  taxation  by
         this  State  either  by  reason  of  its statutes or
         Constitution  or  by  reason  of  the  Constitution,
         treaties or statutes of the United States;  provided
         that,  in the case of any statute of this State that
         exempts  income  derived   from   bonds   or   other
         obligations from the tax imposed under this Act, the
         amount  exempted  shall  be the interest net of bond
         premium amortization;
              (H)  Any  income  of  the   partnership   which
         constitutes  personal  service  income as defined in
         Section 1348 (b) (1) of the  Internal  Revenue  Code
         (as  in  effect  December  31, 1981) or a reasonable
         allowance  for  compensation  paid  or  accrued  for
         services rendered by partners  to  the  partnership,
         whichever is greater;
              (I)  An  amount  equal to all amounts of income
         distributable to an entity subject to  the  Personal
         Property  Tax  Replacement  Income  Tax  imposed  by
         subsections  (c)  and (d) of Section 201 of this Act
         including  amounts  distributable  to  organizations
         exempt from federal income tax by reason of  Section
         501(a) of the Internal Revenue Code;
              (J)  With   the   exception   of   any  amounts
         subtracted under subparagraph (G), an  amount  equal
         to  the  sum of all amounts disallowed as deductions
         by (i)  Sections  171(a)  (2),  and  265(2)  of  the
         Internal  Revenue  Code of 1954, as now or hereafter
         amended, and all amounts of  expenses  allocable  to
         interest  and  disallowed  as  deductions by Section
         265(1) of the  Internal  Revenue  Code,  as  now  or
         hereafter amended; and (ii) for taxable years ending
         on  or  after  August 13, 1999 the effective date of
         this amendatory Act of the  91st  General  Assembly,
         Sections  171(a)(2),  265, 280C, and 832(b)(5)(B)(i)
         of the Internal Revenue Code; the provisions of this
         subparagraph  are  exempt  from  the  provisions  of
         Section 250;
              (K)  An  amount  equal   to   those   dividends
         included   in  such  total  which  were  paid  by  a
         corporation which conducts business operations in an
         Enterprise Zone or zones created under the  Illinois
         Enterprise  Zone  Act,  enacted  by the 82nd General
         Assembly, and which does not conduct such operations
         other than in an Enterprise Zone or Zones;
              (L)  An amount equal to any  contribution  made
         to  a  job  training project established pursuant to
         the   Real   Property   Tax   Increment   Allocation
         Redevelopment Act;
              (M)  An  amount  equal   to   those   dividends
         included   in   such  total  that  were  paid  by  a
         corporation that conducts business operations  in  a
         federally  designated Foreign Trade Zone or Sub-Zone
         and  that  is  designated  a  High  Impact  Business
         located  in  Illinois;   provided   that   dividends
         eligible  for the deduction provided in subparagraph
         (K) of paragraph (2) of this subsection shall not be
         eligible  for  the  deduction  provided  under  this
         subparagraph (M); and
              (N)  An amount  equal  to  the  amount  of  the
         deduction  used  to  compute  the federal income tax
         credit for restoration of substantial  amounts  held
         under  claim  of right for the taxable year pursuant
         to Section 1341 of  the  Internal  Revenue  Code  of
         1986.

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

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

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

    (h)  Legislative intention.  Except as expressly provided
by   this   Section   there  shall  be  no  modifications  or
limitations on the amounts of income, gain, loss or deduction
taken into account  in  determining  gross  income,  adjusted
gross  income  or  taxable  income  for  federal  income  tax
purposes for the taxable year, or in the amount of such items
entering  into  the computation of base income and net income
under this Act for such taxable year, whether in  respect  of
property values as of August 1, 1969 or otherwise.
(Source:  P.A.  90-491,  eff.  1-1-98;  90-717,  eff. 8-7-98;
90-770, eff. 8-14-98;  91-192,  eff.  7-20-99;  91-205,  eff.
7-20-99;  91-357, eff. 7-29-99; 91-541, eff. 8-13-99; 91-676,
eff. 12-23-99; revised 1-5-00.)

    (35 ILCS 5/405)
    Sec. 405.  Carryovers in certain acquisitions.
    (a)  In the case  of  the  acquisition  of  assets  of  a
corporation  by  another  corporation  described  in  Section
381(a)   of   the   Internal   Revenue  Code,  the  acquiring
corporation shall succeed to and take into account, as of the
close of the day of distribution or transfer, all  Article  2
credits  and  net losses under Section 207 of the corporation
from which the assets were where acquired, without limitation
under Section  382  of  the  Internal  Revenue  Code  or  the
separate return limitation year regulations promulgated under
Section 1502 of the Internal Revenue Code.
    (b)  In  the  case  of  the  acquisition  of  assets of a
partnership by another partnership in a transaction in  which
the  acquiring partnership is considered to be a continuation
of the partnership from which the assets were acquired  under
the  provisions  of  Section 708 of the Internal Revenue Code
and any  regulations  promulgated  under  that  Section,  the
acquiring partnership shall succeed to and take into account,
as  of  the close of the day of distribution or transfer, all
Article 2 credits and net losses under  Section  207  of  the
partnership from which the assets were acquired.
    (b-5)  No  limitation  under  Section 382 of the Internal
Revenue  Code  or  the  separate   return   limitation   year
regulations  promulgated  under  Section 1502 of the Internal
Revenue Code shall apply to the carryover of  any  Article  2
credit or net loss allowable under Section 207.
    (c)  The  provisions  of  this amendatory Act of the 91st
General Assembly shall apply to all acquisitions occurring in
taxable years ending on or after December 31, 1986;  provided
that  if  a  taxpayer's Illinois income tax liability for any
taxable year, as assessed under Section 903 prior to  January
1,  1999, was computed without taking into account all of the
Article 2 credits and net losses under Section 207 as allowed
by this Section:
         (1)  no refund shall be payable to the taxpayer  for
    that  taxable  year as the result of allowing any portion
    of the Article 2 credits or net losses under Section  207
    that  were  not  taken  into account in computing the tax
    assessed prior to January 1, 1999;
         (2)  any deficiency which has not been paid  may  be
    reduced  (but not below zero) by the allowance of some or
    all of the Article 2 credits or net losses under  Section
    207 that were not taken into account in computing the tax
    assessed prior to January 1, 1999; and
         (3)  in the case of any Article 2 credit or net loss
    under  Section 207 that, pursuant to this subsection (c),
    could not be taken into account either in  computing  the
    tax  assessed prior to January 1, 1999 for a taxable year
    or in reducing a deficiency for that taxable  year  under
    paragraph  (2)  of  subsection (c), the allowance of such
    credit or loss in any other taxable  year  shall  not  be
    denied  on  the  grounds  that such credit or loss should
    properly have been claimed in  that  taxable  year  under
    subsection (a) or (b).
(Source: P.A. 91-541, eff. 8-13-99.)

    (35 ILCS 5/502) (from Ch. 120, par. 5-502)
    Sec. 502.  Returns and notices.
    (a)  In  general.  A  return  with  respect  to the taxes
imposed by this Act shall be made by  every  person  for  any
taxable year:
         (1)  For  which  such  person  is  liable  for a tax
    imposed by this Act, or
         (2)  In the case of a resident or in the case  of  a
    corporation  which  is  qualified  to do business in this
    State, for which  such  person  is  required  to  make  a
    federal  income  tax  return,  regardless of whether such
    person is liable for a tax imposed by this Act.  However,
    this paragraph shall not require a  resident  to  make  a
    return  if such person has an Illinois base income of the
    basic amount in Section 204(b)  or  less  and  is  either
    claimed  as  a  dependent  on another person's tax return
    under the Internal Revenue Code of 1986, or is claimed as
    a dependent on another person's  tax  return  under  this
    Act.
    (b)  Fiduciaries and receivers.
         (1)  Decedents.  If  an  individual is deceased, any
    return or notice required of such individual  under  this
    Act  shall  be  made  by  his executor, administrator, or
    other person charged with the property of such decedent.
         (2)  Individuals   under   a   disability.   If   an
    individual is unable to make a return or notice  required
    under  this  Act,  the  return or notice required of such
    individual shall be made by his  duly  authorized  agent,
    guardian, fiduciary or other person charged with the care
    of the person or property of such individual.
         (3)  Estates and trusts. Returns or notices required
    of  an  estate  or a trust shall be made by the fiduciary
    thereof.
         (4)  Receivers,   trustees   and    assignees    for
    corporations.  In  a  case  where  a receiver, trustee in
    bankruptcy, or assignee, by order of a court of competent
    jurisdiction, by operation  of  law,  or  otherwise,  has
    possession  of or holds title to all or substantially all
    the property or business of a corporation, whether or not
    such  property  or  business  is  being  operated,   such
    receiver, trustee, or assignee shall make the returns and
    notices  required  of such corporation in the same manner
    and form  as  corporations  are  required  to  make  such
    returns and notices.
    (c)  Joint returns by husband and wife.
         (1)  Except  as  provided  in  paragraph  (3),  if a
    husband and wife file a joint federal income  tax  return
    for  a  taxable year they shall file a joint return under
    this Act for such  taxable  year  and  their  liabilities
    shall be joint and several, but if the federal income tax
    liability  of  either  spouse is determined on a separate
    federal income  tax  return,  they  shall  file  separate
    returns under this Act.
         (2)  If neither spouse is required to file a federal
    income tax return and either or both are required to file
    a  return under this Act, they may elect to file separate
    or joint returns and  pursuant  to  such  election  their
    liabilities shall be separate or joint and several.
         (3)  If either husband or wife is a resident and the
    other  is a nonresident, they shall file separate returns
    in this State on such forms as may  be  required  by  the
    Department  in which event their tax liabilities shall be
    separate; but they may elect to determine their joint net
    income and file a joint return as if both were  residents
    and  in  such  case, their liabilities shall be joint and
    several.
         (4)  Innocent spouses.
              (A) However, for tax  liabilities  arising  and
         paid  prior to the effective date of this amendatory
         Act of the 91st General Assembly, an innocent spouse
         shall be relieved of liability  for  tax  (including
         interest  and  penalties)  for  any taxable year for
         which a joint return has been made, upon  submission
         of  proof that the Internal Revenue Service has made
         a  determination  under  Section  6013(e)   of   the
         Internal  Revenue  Code,  for the same taxable year,
         which  determination  relieved   the   spouse   from
         liability  for  federal income taxes. If there is no
         federal income tax liability at issue for  the  same
         taxable  year,  the  Department  shall  rely  on the
         provisions of Section 6013(e) to  determine  whether
         the  person  requesting innocent spouse abatement of
         tax, penalty,  and  interest  is  entitled  to  that
         relief.
              (B)  For  tax  liabilities  arising  after  the
         effective  date  of  this amendatory Act of the 91st
         General  Assembly  or  which  arose  prior  to  that
         effective  date,  but  remain  unpaid  as   of   the
         effective  date,  if an individual who filed a joint
         return for any taxable year  has  made  an  election
         under this paragraph, the individual's liability for
         any  tax  shown on the joint return shall not exceed
         the individual's  separate  return  amount  and  the
         individual's  liability  for any deficiency assessed
         for that taxable year shall not exceed  the  portion
         of   the   deficiency   properly  allocable  to  the
         individual.  For purposes of this paragraph:
                   (i)  An election properly made pursuant to
              Section 6015 of the Internal Revenue Code shall
              constitute an election  under  this  paragraph,
              provided   that   the  election  shall  not  be
              effective until the individual has notified the
              Department of the  election  in  the  form  and
              manner prescribed by the Department.
                   (ii)  If  no  election has been made under
              Section  6015,  the  individual  may  make   an
              election  under  this paragraph in the form and
              manner prescribed by the  Department,  provided
              that  no election may be made if the Department
              finds  that  assets  were  transferred  between
              individuals filing a joint return as part of  a
              scheme  by such individuals to avoid payment of
              Illinois income tax and the election shall  not
              eliminate  the  individual's  liability for any
              portion of  a  deficiency  attributable  to  an
              error on the return of which the individual had
              actual knowledge as of the date of filing.
                   (iii)  In  determining the separate return
              amount   or   portion   of    any    deficiency
              attributable  to  an individual, the Department
              shall follow the provisions in Section  6015(b)
              and (c) of the Internal Revenue Code.
                   (iv)  In  determining  the  validity of an
              individual's election under  subparagraph  (ii)
              and  in  determining  an  electing individual's
              separate  return  amount  or  portion  of   any
              deficiency   under   subparagraph   (iii),  any
              determination made  by  the  Secretary  of  the
              Treasury  under Section 6015(a) of the Internal
              Revenue Code regarding criteria for eligibility
              or under Section 6015(b) or (c) of the Internal
              Revenue Code regarding the  allocation  of  any
              item  of  income, deduction, payment, or credit
              between  an  individual  making   the   federal
              election  and that individual's spouse shall be
              conclusively presumed  to  be  correct.    With
              respect  to any item that is not the subject of
              a  determination  by  the  Secretary   of   the
              Treasury,  in  any  proceeding  involving  this
              subsection,  the individual making the election
              shall have the burden of proof with respect  to
              any  item except that the Department shall have
              the burden of proof with respect  to  items  in
              subdivision (ii).
                   (v)  Any  election  made  by an individual
              under this subsection shall apply to all  years
              for  which that individual and the spouse named
              in the election have filed a joint return.
                   (vi)  After receiving a  notice  that  the
              federal   election   has  been  made  or  after
              receiving an election under  subdivision  (ii),
              the  Department shall take no collection action
              against  the  electing   individual   for   any
              liability  arising  from a joint return covered
              by  the  election  until  the  Department   has
              notified  the  electing  individual  in writing
              that the election is invalid or of the  portion
              of  the  liability the Department has allocated
              to the electing  individual.   Within  60  days
              (150  days  if  the  individual  is outside the
              United  States)  after  the  issuance  of  such
              notification, the individual may file a written
              protest of the denial of the election or of the
              Department's  determination  of  the  liability
              allocated to him or her and shall be granted  a
              hearing   within   the   Department  under  the
              provisions of Section 908.   If  a  protest  is
              filed,  the Department shall take no collection
              action against the  electing  individual  until
              the  decision  regarding the protest has become
              final under subsection (d) of Section  908  or,
              if  administrative  review  of the Department's
              decision is requested under Section 1201, until
              the decision of the court becomes final.
    (d)  Partnerships.  Every  partnership  having  any  base
income allocable to this State  in  accordance  with  section
305(c)  shall  retain  information  concerning  all  items of
income, gain, loss and deduction; the names and addresses  of
all  of  the partners, or names and addresses of members of a
limited liability company, or  other  persons  who  would  be
entitled  to  share  in the base income of the partnership if
distributed; the amount of the distributive  share  of  each;
and such other pertinent information as the Department may by
forms  or  regulations  prescribe. The partnership shall make
that information available to the Department  when  requested
by the Department.
    (e)  For  taxable  years  ending on or after December 31,
1985, and  before  December  31,  1993,  taxpayers  that  are
corporations  (other  than  Subchapter S corporations) having
the same taxable year  and  that  are  members  of  the  same
unitary  business  group  may  elect  to  be  treated  as one
taxpayer for purposes of any original return, amended  return
which  includes the same taxpayers of the unitary group which
joined  in  the  election  to  file  the   original   return,
extension,  claim  for  refund,  assessment,  collection  and
payment  and determination of the group's tax liability under
this Act. This subsection (e) does not permit the election to
be made for some, but not all,  of  the  purposes  enumerated
above.  For  taxable  years  ending  on or after December 31,
1987,   corporate   members   (other   than   Subchapter    S
corporations)  of the same unitary business group making this
subsection (e) election are not required  to  have  the  same
taxable year.
    For  taxable  years ending on or after December 31, 1993,
taxpayers that are  corporations  (other  than  Subchapter  S
corporations)  and  that  are  members   of  the same unitary
business group shall be treated as one taxpayer for  purposes
of  any  original  return,  amended return which includes the
same taxpayers of the unitary group which  joined  in  filing
the original return, extension, claim for refund, assessment,
collection  and  payment and determination of the group's tax
liability under this Act.
    (f)  The Department may promulgate regulations to  permit
nonresident  individual  partners  of  the  same partnership,
nonresident Subchapter S corporation shareholders of the same
Subchapter  S  corporation,   and   nonresident   individuals
transacting  an insurance business in Illinois under a Lloyds
plan of operation, and nonresident individual members of  the
same   limited   liability  company  that  is  treated  as  a
partnership under Section 1501 (a)(16) of this Act,  to  file
composite   individual  income  tax  returns  reflecting  the
composite income of such individuals  allocable  to  Illinois
and  to  make  composite individual income tax payments.  The
Department may  by  regulation  also  permit  such  composite
returns  to include the income tax owed by Illinois residents
attributable to their income from partnerships, Subchapter  S
corporations,  insurance  businesses organized under a Lloyds
plan of operation, or limited liability  companies  that  are
treated  as  partnership  under  Section 1501 (a)(16) of this
Act, in which case such Illinois residents will be  permitted
to claim credits on their individual returns for their shares
of  the composite tax payments.  This paragraph of subsection
(f) applies to taxable years ending on or after December  31,
1987.
    For  taxable  years ending on or after December 31, 1999,
the Department may, by regulation, also  permit  any  persons
transacting  an  insurance  business organized under a Lloyds
plan of operation to file composite  returns  reflecting  the
income  of  such  persons  allocable  to Illinois and the tax
rates applicable to such persons under  Section  201  and  to
make  composite  tax  payments and shall, by regulation, also
provide   that   the   income   and   apportionment   factors
attributable to the  transaction  of  an  insurance  business
organized  under  a  Lloyds  plan  of operation by any person
joining in the  filing  of  a  composite  return  shall,  for
purposes  of allocating and apportioning income under Article
3 of this Act and computing net income under Section  202  of
this Act, be excluded from any other income and apportionment
factors  of  that person or of any unitary business group, as
defined in subdivision (a)(27) of Section 1501, to which that
person may belong.
    (g)  The Department may  adopt  rules  to  authorize  the
electronic  filing  of  any return required to be filed under
this Section.
(Source: P.A. 90-613, eff. 7-9-98; 91-541, eff. 8-13-99.)

    (35 ILCS 5/803) (from Ch. 120, par. 8-803)
    Sec. 803.  Payment of Estimated Tax.
    (a)  Every  taxpayer  other  than   an   estate,   trust,
partnership,  Subchapter  S corporation or farmer is required
to pay estimated tax for the taxable year, in such amount and
with such forms as the Department  shall  prescribe,  if  the
amount payable as estimated tax can reasonably be expected to
be  more  than  (i)  $250  for  taxable  years  ending before
December 31, 2001 and $500 for taxable  years  ending  on  or
after December 31, 2001 or (ii) $400 for corporations.
    (b)  Estimated  tax  defined.   The  term "estimated tax"
means the excess of:
    (1)  The amount which the taxpayer estimates  to  be  his
tax under this Act for the taxable year, over
    (2)  The  amount  which he estimates to be the sum of any
amounts to be withheld on account of or credited against such
tax.
    (c)  Joint payment.  If they are eligible to  do  so  for
federal  tax  purposes,  a husband and wife may pay estimated
tax as if they were one taxpayer, in which case the liability
with respect to the estimated tax shall be joint and several.
If a joint payment is made but the husband and wife elect  to
determine   their   taxes  under  this  Act  separately,  the
estimated tax for such year may be treated as  the  estimated
tax  of  either  husband  or  wife, or may be divided between



them, as they may elect.
    (d)  There  shall  be  paid  4  equal   installments   of
estimated tax for each taxable year, payable as follows:
    Required Installment:      Due Date:
             1st               April 15
             2nd               June 15
             3rd               September 15
             4th               Individuals: January 15 of the
                               following taxable year
                               Corporations: December 15
    (e)  Farmers.   An  individual,  having gross income from
farming for the taxable year which is at  least  2/3  of  his
total estimated gross income for such year.
    (f)  Application  to short taxable years. The application
of this section to taxable years of less than 12 months shall
be  in  accordance  with  regulations   prescribed   by   the
Department.
    (g)  Fiscal  years. In the application of this section to
the case of a taxable year beginning on any date  other  than
January  1,  there  shall  be  substituted,  for  the  months
specified  in  subsections  (d)  and  (e),  the  months which
correspond thereto.
    (h)  Installments paid in  advance.  Any  installment  of
estimated  tax may be paid before the date prescribed for its
payment.
    The changes in this Section made by this  amendatory  Act
of  1985  shall  apply  to  taxable  years ending on or after
January 1, 1986.
(Source: P.A. 86-678.)

    (35 ILCS 5/1501) (from Ch. 120, par. 15-1501)
    Sec. 1501.  Definitions.
    (a)  In  general.  When  used  in  this  Act,  where  not
otherwise distinctly  expressed  or  manifestly  incompatible
with the intent thereof:
         (1)  Business  income.  The  term  "business income"
    means income arising from transactions  and  activity  in
    the  regular  course of the taxpayer's trade or business,
    net of the deductions  allocable  thereto,  and  includes
    income  from  tangible  and  intangible  property  if the
    acquisition, management, and disposition of the  property
    constitute integral parts of the taxpayer's regular trade
    or  business  operations.  Such  term  does  not  include
    compensation or the deductions allocable thereto.
         (2)  Commercial   domicile.   The  term  "commercial
    domicile" means the principal place from which the  trade
    or business of the taxpayer is directed or managed.
         (3)  Compensation.  The  term  "compensation"  means
    wages,  salaries,  commissions  and  any  other  form  of
    remuneration paid to employees for personal services.
         (4)  Corporation.  The  term  "corporation" includes
    associations, joint-stock companies, insurance  companies
    and   cooperatives.   Any  entity,  including  a  limited
    liability  company  formed  under  the  Illinois  Limited
    Liability Company Act, shall be treated as a  corporation
    if it is so classified for federal income tax purposes.
         (5)  Department.  The  term  "Department"  means the
    Department of Revenue of this State.
         (6)  Director.  The  term   "Director"   means   the
    Director of Revenue of this State.
         (7)  Fiduciary.   The   term   "fiduciary"  means  a
    guardian, trustee, executor, administrator, receiver,  or
    any  person  acting  in  any  fiduciary  capacity for any
    person.
         (8)  Financial organization.
              (A)  The term  "financial  organization"  means
         any  bank,  bank  holding  company,  trust  company,
         savings  bank,  industrial  bank,  land  bank,  safe
         deposit  company,  private  banker, savings and loan
         association, building and loan  association,  credit
         union,  currency  exchange,  cooperative bank, small
         loan  company,  sales  finance  company,  investment
         company, or any person which is owned by a  bank  or
         bank  holding  company.   For  the  purpose  of this
         Section a "person" will include only  those  persons
         which a bank holding company may acquire and hold an
         interest  in,  directly  or  indirectly,  under  the
         provisions  of  the Bank Holding Company Act of 1956
         (12 U.S.C. 1841, et seq.), except where interests in
         any  person  must  be  disposed  of  within  certain
         required time limits under the Bank Holding  Company
         Act of 1956.
              (B)  For  purposes  of subparagraph (A) of this
         paragraph, the term "bank" includes (i)  any  entity
         that is regulated by the Comptroller of the Currency
         under  the  National  Bank  Act,  or  by the Federal
         Reserve Board, or by the Federal  Deposit  Insurance
         Corporation   and   (ii)   any  federally  or  State
         chartered bank operating as a credit card bank.
              (C)  For purposes of subparagraph (A)  of  this
         paragraph,  the term "sales finance company" has the
         meaning provided in the following item (i) or (ii):
                   (i)  A person primarily engaged in one  or
              more of the following businesses:  the business
              of   purchasing   customer   receivables,   the
              business  of  making loans upon the security of
              customer receivables, the  business  of  making
              loans   for  the  express  purpose  of  funding
              purchases  of  tangible  personal  property  or
              services by the borrower, or  the  business  of
              finance  leasing.   For  purposes  of this item
              (i), "customer receivable" means:
                   (a)  a  retail  installment  contract   or
              retail  charge  agreement within the meaning of
              the  Sales  Finance  Agency  Act,  the   Retail
              Installment  Sales  Act,  or  the Motor Vehicle
              Retail Installment Sales Act;
                   (b)  an installment,  charge,  credit,  or
              similar  contract or agreement arising from the
              sale of tangible personal property or  services
              in  a  transaction involving a deferred payment
              price  payable  in  one  or  more  installments
              subsequent to the sale; or
                   (c)  the outstanding balance of a contract
              or agreement described in provisions (a) or (b)
              of this item (i).
              A customer  receivable  need  not  provide  for
         payment  of  interest on deferred payments.  A sales
         finance company may purchase a  customer  receivable
         from,   or   make  a  loan  secured  by  a  customer
         receivable  to,   the   seller   in   the   original
         transaction   or  to  a  person  who  purchased  the
         customer receivable directly or indirectly from that
         seller.
                   (ii)  A corporation meeting  each  of  the
              following criteria:
                   (a)  the  corporation  must be a member of
              an "affiliated group"  within  the  meaning  of
              Section  1504(a)  of the Internal Revenue Code,
              determined without regard to Section 1504(b) of
              the Internal Revenue Code;
                   (b)  more than 50% of the gross income  of
              the  corporation  for  the taxable year must be
              interest income derived from qualifying  loans.
              A  "qualifying loan" is a loan made to a member
              of  the  corporation's  affiliated  group  that
              originates  customer  receivables  (within  the
              meaning  of  item  (i))  or  to  whom  customer
              receivables  originated  by  a  member  of  the
              affiliated group have been transferred, to  the
              extent the average outstanding balance of loans
              from   that   corporation  to  members  of  its
              affiliated group during the taxable year do not
              exceed   the   limitation   amount   for   that
              corporation.  The  "limitation  amount"  for  a
              corporation is the average outstanding balances
              during the taxable year of customer receivables
              (within  the meaning of item (i)) originated by
              all members of the affiliated group.    If  the
              average  outstanding balances of the loans made
              by a corporation to members of  its  affiliated
              group   exceed   the   limitation  amount,  the
              interest  income  of  that   corporation   from
              qualifying loans shall be equal to its interest
              income  from loans to members of its affiliated
              groups times a fraction equal to the limitation
              amount  divided  by  the  average   outstanding
              balances  of the loans made by that corporation
              to members of its affiliated group;
                   (c)  the total of all shareholder's equity
              (including, without limitation, paid-in capital
              on common  and  preferred  stock  and  retained
              earnings)  of the corporation plus the total of
              all  of  its   loans,   advances,   and   other
              obligations  payable  or owed to members of its
              affiliated group may  not  exceed  20%  of  the
              total  assets  of  the  corporation at any time
              during the tax year; and
                   (d)  more than 50% of all interest-bearing
              obligations of the affiliated group payable  to
              persons   outside   the   group  determined  in
              accordance with generally  accepted  accounting
              principles   must   be   obligations   of   the
              corporation.
         This  amendatory Act of the 91st General Assembly is
    declaratory of existing law.
              (D)  Subparagraphs  (B)   and   (C)   of   this
         paragraph  are declaratory of existing law and apply
         retroactively, for all tax  years  beginning  on  or
         before  December 31, 1996,  to all original returns,
         to all amended returns filed no later than  30  days
         after  the  effective date of this amendatory Act of
         1996, and to all notices issued  on  or  before  the
         effective  date of this amendatory Act of 1996 under
         subsection (a) of Section  903,  subsection  (a)  of
         Section  904,  subsection  (e)  of  Section  909, or
         Section  912.  A  taxpayer  that  is  a   "financial
         organization"  that  engages in any transaction with
         an affiliate shall be a "financial organization" for
         all purposes of this Act.
              (E)  For all tax years beginning on  or  before
         December  31, 1996, a taxpayer that falls within the
         definition  of  a  "financial  organization"   under
         subparagraphs  (B) or (C) of this paragraph, but who
         does not fall within the definition of a  "financial
         organization"  under the Proposed Regulations issued
         by the Department of Revenue on July 19,  1996,  may
         irrevocably  elect to apply the Proposed Regulations
         for all  of  those  years  as  though  the  Proposed
         Regulations  had been lawfully promulgated, adopted,
         and in effect for all of those years.  For  purposes
         of   applying  subparagraphs  (B)  or  (C)  of  this
         paragraph  to  all  of  those  years,  the  election
         allowed by this subparagraph  applies  only  to  the
         taxpayer making the election and to those members of
         the   taxpayer's  unitary  business  group  who  are
         ordinarily required  to  apportion  business  income
         under the same subsection of Section 304 of this Act
         as  the  taxpayer  making the election.  No election
         allowed by this subparagraph shall be made  under  a
         claim filed under subsection (d) of Section 909 more
         than  30  days  after  the  effective  date  of this
         amendatory Act of 1996.
              (F)  Finance  Leases.   For  purposes  of  this
         subsection, a finance lease shall be  treated  as  a
         loan  or other extension of credit, rather than as a
         lease,  regardless  of  how   the   transaction   is
         characterized  for  any other purpose, including the
         purposes of  any  regulatory  agency  to  which  the
         lessor   is   subject.    A  finance  lease  is  any
         transaction in the form of  a  lease  in  which  the
         lessee  is  treated as the owner of the leased asset
         entitled to any deduction for  depreciation  allowed
         under Section 167 of the Internal Revenue Code.
         (9)  Fiscal  year.  The  term "fiscal year" means an
    accounting period of 12 months ending on the last day  of
    any month other than December.
         (10)  Includes  and  including. The terms "includes"
    and "including" when used in a  definition  contained  in
    this  Act  shall  not  be  deemed to exclude other things
    otherwise within the meaning of the term defined.
         (11)  Internal  Revenue  Code.  The  term  "Internal
    Revenue Code" means the United  States  Internal  Revenue
    Code  of  1954  or  any successor law or laws relating to
    federal income taxes in effect for the taxable year.
         (12)  Mathematical  error.  The  term  "mathematical
    error" includes the following types of errors, omissions,
    or defects in a return filed by a taxpayer which prevents
    acceptance of the return as filed for processing:
              (A)  arithmetic     errors     or     incorrect
         computations on the return or supporting schedules;
              (B)  entries on the wrong lines;
              (C)  omission of required supporting  forms  or
         schedules  or  the  omission  of  the information in
         whole or in part called for thereon; and
              (D)  an attempt to claim, exclude,  deduct,  or
         improperly  report, in a manner directly contrary to
         the provisions of the Act and regulations thereunder
         any item of income, exemption, deduction, or credit.
         (13)  Nonbusiness  income.  The  term   "nonbusiness
    income"  means  all  income other than business income or
    compensation.
         (14)  Nonresident. The term  "nonresident"  means  a
    person who is not a resident.
         (15)  Paid,  incurred and accrued. The terms "paid",
    "incurred" and "accrued" shall be construed according  to
    the  method  of  accounting  upon  the basis of which the
    person's base income is computed under this Act.
         (16)  Partnership    and    partner.    The     term
    "partnership"  includes  a  syndicate, group, pool, joint
    venture or other unincorporated organization, through  or
    by  means  of which any business, financial operation, or
    venture is carried on,  and  which  is  not,  within  the
    meaning  of this Act, a trust or estate or a corporation;
    and  the  term  "partner"  includes  a  member  in   such
    syndicate, group, pool, joint venture or organization.
         The   term   "partnership"   includes   any  entity,
    including a limited liability company  formed  under  the
    Illinois  Limited Liability Company Act, shall be treated
    as a partnership if it is so classified as a  partnership
    for federal income tax purposes.
         For purposes of the tax imposed at subsection (c) of
    Section  201 of this Act, The term "partnership" does not
    include a syndicate, group, pool, joint venture, or other
    unincorporated  organization  established  for  the  sole
    purpose of playing the Illinois State Lottery.
         (17)  Part-year  resident.   The   term   "part-year
    resident"  means  an  individual  who  became  a resident
    during the taxable year or ceased to be a resident during
    the taxable year. Under Section 1501  (a)  (20)  (A)  (i)
    residence commences with presence in this State for other
    than  a  temporary  or transitory purpose and ceases with
    absence from this State for other  than  a  temporary  or
    transitory  purpose. Under Section 1501 (a) (20) (A) (ii)
    residence commences with the establishment of domicile in
    this State and ceases with the establishment of  domicile
    in another State.
         (18)  Person.  The  term "person" shall be construed
    to mean and  include  an  individual,  a  trust,  estate,
    partnership,  association,  firm,  company,  corporation,
    limited  liability company, or fiduciary. For purposes of
    Section 1301 and 1302 of this Act, a "person"  means  (i)
    an  individual,  (ii)  a  corporation,  (iii) an officer,
    agent, or employee of a corporation, (iv) a member, agent
    or employee of a partnership, or (v) a  member,  manager,
    employee,  officer,  director,  or  agent  of  a  limited
    liability company who in such capacity commits an offense
    specified in Section 1301 and 1302.
         (18A)  Records.   The  term  "records"  includes all
    data  maintained  by  the  taxpayer,  whether  on  paper,
    microfilm, microfiche, or any  type  of  machine-sensible
    data compilation.
         (19)  Regulations.  The  term "regulations" includes
    rules promulgated and forms prescribed by the Department.
         (20)  Resident. The term "resident" means:
              (A)  an individual (i) who is in this State for
         other than a temporary or transitory purpose  during
         the  taxable  year; or (ii) who is domiciled in this
         State but is absent from the State for  a  temporary
         or transitory purpose during the taxable year;
              (B)  The estate of a decedent who at his or her
         death was domiciled in this State;
              (C)  A  trust  created  by a will of a decedent
         who at his death was domiciled in this State; and
              (D)  An irrevocable trust, the grantor of which
         was domiciled in this State at the time  such  trust
         became    irrevocable.    For    purpose   of   this
         subparagraph,   a   trust   shall   be    considered
         irrevocable  to  the  extent that the grantor is not
         treated as the  owner  thereof  under  Sections  671
         through 678 of the Internal Revenue Code.
         (21)  Sales.   The  term  "sales"  means  all  gross
    receipts of the taxpayer  not  allocated  under  Sections
    301, 302 and 303.
         (22)  State.  The  term  "state"  when  applied to a
    jurisdiction other than this State means any state of the
    United States, the District of Columbia, the Commonwealth
    of Puerto Rico, any Territory or Possession of the United
    States,  and  any  foreign  country,  or  any   political
    subdivision of any of the foregoing.  For purposes of the
    foreign  tax  credit  under Section 601, the term "state"
    means any state of the United  States,  the  District  of
    Columbia,  the  Commonwealth  of  Puerto  Rico,  and  any
    territory  or  possession  of  the  United States, or any
    political subdivision of any of the foregoing,  effective
    for tax years ending on or after December 31, 1989.
         (23)  Taxable  year.  The  term "taxable year" means
    the calendar year, or the fiscal year ending during  such
    calendar year, upon the basis of which the base income is
    computed  under  this  Act.  "Taxable year" means, in the
    case of a return made for a fractional  part  of  a  year
    under  the  provisions  of this Act, the period for which
    such return is made.
         (24)  Taxpayer. The term "taxpayer" means any person
    subject to the tax imposed by this Act.
         (25)  International  banking  facility.   The   term
    international   banking  facility  shall  have  the  same
    meaning as is set forth in the Illinois Banking Act or as
    is set  forth  in  the  laws  of  the  United  States  or
    regulations  of  the  Board  of  Governors of the Federal
    Reserve System.
         (26)  Income Tax Return Preparer.
              (A)  The  term  "income  tax  return  preparer"
         means any person who prepares for  compensation,  or
         who  employs  one  or  more  persons  to prepare for
         compensation, any return of tax imposed by this  Act
         or  any claim for refund of tax imposed by this Act.
         The preparation of a substantial portion of a return
         or  claim  for  refund  shall  be  treated  as   the
         preparation of that return or claim for refund.
              (B)  A  person  is  not  an  income  tax return
         preparer if all he or she does is
                   (i)  furnish typing, reproducing, or other
              mechanical assistance;
                   (ii)  prepare  returns   or   claims   for
              refunds  for  the employer by whom he or she is
              regularly and continuously employed;
                   (iii)  prepare as a fiduciary  returns  or
              claims for refunds for any person; or
                   (iv)  prepare  claims  for  refunds  for a
              taxpayer  in  response   to   any   notice   of
              deficiency   issued  to  that  taxpayer  or  in
              response to any waiver of restriction after the
              commencement of an audit of that taxpayer or of
              another taxpayer  if  a  determination  in  the
              audit   of   the  other  taxpayer  directly  or
              indirectly affects the  tax  liability  of  the
              taxpayer whose claims he or she is preparing.
         (27)  Unitary  business  group.   The  term "unitary
    business group" means a group of persons related  through
    common ownership whose business activities are integrated
    with,  dependent  upon and contribute to each other.  The
    group will  not  include  those  members  whose  business
    activity  outside the United States is 80% or more of any
    such member's total business activity;  for  purposes  of
    this  paragraph  and  clause  (a) (3) (B) (ii) of Section
    304, business activity within the United States shall  be
    measured  by  means  of the factors ordinarily applicable
    under subsections (a), (b), (c), (d), or (h)  of  Section
    304  except  that,  in  the  case  of  members ordinarily
    required to apportion business income by means of  the  3
    factor  formula  of property, payroll and sales specified
    in subsection (a) of Section 304, including  the  formula
    as  weighted  in  subsection  (h)  of  Section  304, such
    members shall not use the sales factor in the computation
    and the  results  of  the  property  and  payroll  factor
    computations  of  subsection  (a) of Section 304 shall be
    divided by 2 (by one if either the  property  or  payroll
    factor  has  a  denominator  of  zero).  The  computation
    required  by  the preceding sentence shall, in each case,
    involve the division of the member's  property,  payroll,
    or revenue miles in the United States, insurance premiums
    on  property  or  risk in the United States, or financial
    organization business  income  from  sources  within  the
    United  States,  as  the  case  may be, by the respective
    worldwide figures for such items.   Common  ownership  in
    the  case  of  corporations  is  the  direct  or indirect
    control or ownership of more than 50% of the  outstanding
    voting  stock of the persons carrying on unitary business
    activity.  Unitary business activity  can  ordinarily  be
    illustrated where the activities of the members are:  (1)
    in   the   same  general  line  (such  as  manufacturing,
    wholesaling, retailing  of  tangible  personal  property,
    insurance,  transportation  or finance); or (2) are steps
    in a vertically structured enterprise or process (such as
    the  steps  involved  in  the   production   of   natural
    resources,   which  might  include  exploration,  mining,
    refining, and marketing); and, in  either  instance,  the
    members  are functionally integrated through the exercise
    of strong centralized  management  (where,  for  example,
    authority over such matters as purchasing, financing, tax
    compliance,   product   line,  personnel,  marketing  and
    capital investment is not left to  each  member).  In  no
    event,  however,  will any unitary business group include
    members  which  are  ordinarily  required  to   apportion
    business  income  under  different subsections of Section
    304 except that for tax years ending on or after December
    31, 1987 this prohibition shall not apply  to  a  unitary
    business  group  composed of one or more taxpayers all of
    which apportion business income  pursuant  to  subsection
    (b)  of  Section  304, or all of which apportion business
    income pursuant to subsection (d) of Section 304,  and  a
    holding  company  of  such  single-factor  taxpayers (see
    definition of "financial organization" for rule regarding
    holding companies  of  financial  organizations).   If  a
    unitary  business  group  would,  but  for  the preceding
    sentence, include members that are ordinarily required to
    apportion business income under different subsections  of
    Section  304, then for each subsection of Section 304 for
    which there are two or more members,  there  shall  be  a
    separate unitary business group composed of such members.
    For  purposes of the preceding two sentences, a member is
    "ordinarily required to apportion business income"  under
    a  particular  subsection  of  Section 304 if it would be
    required to use the apportionment  method  prescribed  by
    such  subsection  except  for  the  fact  that it derives
    business income solely from  Illinois.   If  the  unitary
    business  group  members'  accounting periods differ, the
    common parent's accounting period  or,  if  there  is  no
    common  parent,  the accounting period of the member that
    is expected to have, on a recurring basis,  the  greatest
    Illinois  income  tax liability must be used to determine
    whether to  use  the  apportionment  method  provided  in
    subsection  (a)  or  subsection  (h) of Section 304.  The
    prohibition against  membership  in  a  unitary  business
    group  for  taxpayers  ordinarily  required  to apportion
    income under different subsections of  Section  304  does
    not apply to taxpayers required to apportion income under
    subsection  (a)  and  subsection (h) of Section 304.  The
    provisions of this amendatory Act of 1998  apply  to  tax
    years ending on or after December 31, 1998.
         (28)  Subchapter    S    corporation.     The   term
    "Subchapter S corporation" means a corporation for  which
    there  is in effect an election under Section 1362 of the
    Internal Revenue Code, or for which there  is  a  federal
    election to opt out of the provisions of the Subchapter S
    Revision  Act  of 1982 and have applied instead the prior
    federal Subchapter S rules as in effect on July 1, 1982.

    (b)  Other definitions.
         (1)  Words denoting number, gender,  and  so  forth,
    when  used  in  this  Act, where not otherwise distinctly
    expressed or  manifestly  incompatible  with  the  intent
    thereof:
              (A)  Words  importing  the singular include and
         apply to several persons, parties or things;
              (B)  Words importing  the  plural  include  the
         singular; and
              (C)  Words   importing   the  masculine  gender
         include the feminine as well.
         (2)  "Company"   or   "association"   as   including
    successors   and   assigns.   The   word   "company"   or
    "association", when used in reference to  a  corporation,
    shall  be  deemed  to  embrace  the words "successors and
    assigns of such company  or  association",  and  in  like
    manner  as if these last-named words, or words of similar
    import, were expressed.
         (3)  Other terms. Any term used in  any  Section  of
    this  Act  with  respect  to  the  application  of, or in
    connection with, the provisions of any other  Section  of
    this  Act  shall  have  the same meaning as in such other
    Section.
(Source: P.A. 90-613, eff. 7-9-98; 91-535, eff. 1-1-00)

    Section 99.   Effective  date.   This  Act  takes  effect
January 1, 2001.
                            INDEX
           Statutes amended in order of appearance
35 ILCS 5/201             from Ch. 120, par. 2-201
35 ILCS 5/203             from Ch. 120, par. 2-203
35 ILCS 5/405
35 ILCS 5/803             from Ch. 120, par. 8-803
35 ILCS 5/1501            from Ch. 120, par. 15-1501
35 ILCS 105/3-5           from Ch. 120, par. 439.3-5
35 ILCS 105/3-70          from Ch. 120, par. 439.3-70
35 ILCS 105/9             from Ch. 120, par. 439.9
35 ILCS 105/10            from Ch. 120, par. 439.10
35 ILCS 105/22            from Ch. 120, par. 439.22
35 ILCS 110/20            from Ch. 120, par. 439.50
35 ILCS 115/3-5           from Ch. 120, par. 439.103-5
35 ILCS 115/20            from Ch. 120, par. 439.120
35 ILCS 120/3             from Ch. 120, par. 442
35 ILCS 120/6             from Ch. 120, par. 445
35 ILCS 130/4             from Ch. 120, par. 453.4
35 ILCS 130/6             from Ch. 120, par. 453.6
35 ILCS 135/4             from Ch. 120, par. 453.34
35 ILCS 135/6             from Ch. 120, par. 453.36

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