96TH GENERAL ASSEMBLY
State of Illinois
2009 and 2010
HB1123


 
Introduced 2/11/2009, by Rep. Susana A Mendoza
 
SYNOPSIS AS INTRODUCED:









  



35 ILCS 5/203
 from Ch. 120, par. 2-203







 Amends the Illinois Income Tax Act. Provides that an individual may deduct the amount paid for health insurance for a live-in domestic employee. Effective immediately.
















LRB096 10292 RCE 20462 b

















FISCAL NOTE ACT MAY APPLY
















 


 


A BILL FOR









 











HB1123

LRB096 10292 RCE 20462 b






1
 AN ACT concerning revenue.


2
 Be it enacted by the People of the State of Illinois,

3
represented in the General Assembly:



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




6
 (35 ILCS 5/203) (from Ch. 120, par. 2-203)


7
 Sec. 203. Base income defined. 

8
 (a) Individuals.


9
  (1) In general. In the case of an individual, base 
10
 income means an
amount equal to the taxpayer's adjusted 
11
 gross income for the taxable
year as modified by paragraph 
12
 (2).


13
  (2) Modifications. The adjusted gross income referred 
14
 to in
paragraph (1) shall be modified by adding thereto the 
15
 sum of the
following amounts:


16
   (A) An amount equal to all amounts paid or accrued 
17
 to the taxpayer
as interest or dividends during the 
18
 taxable year to the extent excluded
from gross income 
19
 in the computation of adjusted gross income, except 
20
 stock
dividends of qualified public utilities 
21
 described in Section 305(e) of the
Internal Revenue 
22
 Code;


23
   (B) An amount equal to the amount of tax imposed by 
 


 






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1
 this Act to the
extent deducted from gross income in 
2
 the computation of adjusted gross
income for the 
3
 taxable year;


4
   (C) An amount equal to the amount received during 
5
 the taxable year
as a recovery or refund of real 
6
 property taxes paid with respect to the
taxpayer's 
7
 principal residence under the Revenue Act of
1939 and 
8
 for which a deduction was previously taken under 
9
 subparagraph (L) of
this paragraph (2) prior to July 1, 
10
 1991, the retrospective application date of
Article 4 
11
 of Public Act 87-17. In the case of multi-unit or 
12
 multi-use
structures and farm dwellings, the taxes on 
13
 the taxpayer's principal residence
shall be that 
14
 portion of the total taxes for the entire property 
15
 which is
attributable to such principal residence;


16
   (D) An amount equal to the amount of the capital 
17
 gain deduction
allowable under the Internal Revenue 
18
 Code, to the extent deducted from gross
income in the 
19
 computation of adjusted gross income;


20
   (D-5) An amount, to the extent not included in 
21
 adjusted gross income,
equal to the amount of money 
22
 withdrawn by the taxpayer in the taxable year from
a 
23
 medical care savings account and the interest earned on 
24
 the account in the
taxable year of a withdrawal 
25
 pursuant to subsection (b) of Section 20 of the
Medical 
26
 Care Savings Account Act or subsection (b) of Section 
 


 






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1
 20 of the
Medical Care Savings Account Act of 2000;


2
   (D-10) For taxable years ending after December 31, 
3
 1997, an
amount equal to any eligible remediation costs 
4
 that the individual
deducted in computing adjusted 
5
 gross income and for which the
individual claims a 
6
 credit under subsection (l) of Section 201;


7
   (D-15) For taxable years 2001 and thereafter, an 
8
 amount equal to the
bonus depreciation deduction taken 
9
 on the taxpayer's federal income tax return for the 
10
 taxable
year under subsection (k) of Section 168 of the 
11
 Internal Revenue Code;


12
   (D-16) If the taxpayer sells, transfers, abandons, 
13
 or otherwise disposes of property for which the 
14
 taxpayer was required in any taxable year to
make an 
15
 addition modification under subparagraph (D-15), then 
16
 an amount equal
to the aggregate amount of the 
17
 deductions taken in all taxable
years under 
18
 subparagraph (Z) with respect to that property.

19
   If the taxpayer continues to own property through 
20
 the last day of the last tax year for which the 
21
 taxpayer may claim a depreciation deduction for 
22
 federal income tax purposes and for which the taxpayer 
23
 was allowed in any taxable year to make a subtraction 
24
 modification under subparagraph (Z), then an amount 
25
 equal to that subtraction modification.


26
   The taxpayer is required to make the addition 
 


 






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1
 modification under this
subparagraph
only once with 
2
 respect to any one piece of property;

3
   (D-17) An amount equal to the amount otherwise 
4
 allowed as a deduction in computing base income for 
5
 interest paid, accrued, or incurred, directly or 
6
 indirectly, (i) for taxable years ending on or after 
7
 December 31, 2004, to a foreign person who would be a 
8
 member of the same unitary business group but for the 
9
 fact that foreign person's business activity outside 
10
 the United States is 80% or more of the foreign 
11
 person's total business activity and (ii) for taxable 
12
 years ending on or after December 31, 2008, to a person 
13
 who would be a member of the same unitary business 
14
 group but for the fact that the person is prohibited 
15
 under Section 1501(a)(27) from being included in the 
16
 unitary business group because he or she is ordinarily 
17
 required to apportion business income under different 
18
 subsections of Section 304. The addition modification 
19
 required by this subparagraph shall be reduced to the 
20
 extent that dividends were included in base income of 
21
 the unitary group for the same taxable year and 
22
 received by the taxpayer or by a member of the 
23
 taxpayer's unitary business group (including amounts 
24
 included in gross income under Sections 951 through 964 
25
 of the Internal Revenue Code and amounts included in 
26
 gross income under Section 78 of the Internal Revenue 
 


 






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1
 Code) with respect to the stock of the same person to 
2
 whom the interest was paid, accrued, or incurred.
3
   This paragraph shall not apply to the following:

4
    (i) an item of interest paid, accrued, or 
5
 incurred, directly or indirectly, to a person who 
6
 is subject in a foreign country or state, other 
7
 than a state which requires mandatory unitary 
8
 reporting, to a tax on or measured by net income 
9
 with respect to such interest; or
10
    (ii) an item of interest paid, accrued, or 
11
 incurred, directly or indirectly, to a person if 
12
 the taxpayer can establish, based on a 
13
 preponderance of the evidence, both of the 
14
 following:
15
     (a) the person, during the same taxable 
16
 year, paid, accrued, or incurred, the interest 
17
 to a person that is not a related member, and
18
     (b) the transaction giving rise to the 
19
 interest expense between the taxpayer and the 
20
 person did not have as a principal purpose the 
21
 avoidance of Illinois income tax, and is paid 
22
 pursuant to a contract or agreement that 
23
 reflects an arm's-length interest rate and 
24
 terms; or

25
    (iii) the taxpayer can establish, based on 
26
 clear and convincing evidence, that the interest 
 


 






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1
 paid, accrued, or incurred relates to a contract or 
2
 agreement entered into at arm's-length rates and 
3
 terms and the principal purpose for the payment is 
4
 not federal or Illinois tax avoidance; or

5
    (iv) an item of interest paid, accrued, or 
6
 incurred, directly or indirectly, to a person if 
7
 the taxpayer establishes by clear and convincing 
8
 evidence that the adjustments are unreasonable; or 
9
 if the taxpayer and the Director agree in writing 
10
 to the application or use of an alternative method 
11
 of apportionment under Section 304(f).

12
    Nothing in this subsection shall preclude the 
13
 Director from making any other adjustment 
14
 otherwise allowed under Section 404 of this Act for 
15
 any tax year beginning after the effective date of 
16
 this amendment provided such adjustment is made 
17
 pursuant to regulation adopted by the Department 
18
 and such regulations provide methods and standards 
19
 by which the Department will utilize its authority 
20
 under Section 404 of this Act;

21
   (D-18) An amount equal to the amount of intangible 
22
 expenses and costs otherwise allowed as a deduction in 
23
 computing base income, and that were paid, accrued, or 
24
 incurred, directly or indirectly, (i) for taxable 
25
 years ending on or after December 31, 2004, to a 
26
 foreign person who would be a member of the same 
 


 






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1
 unitary business group but for the fact that the 
2
 foreign person's business activity outside the United 
3
 States is 80% or more of that person's total business 
4
 activity and (ii) for taxable years ending on or after 
5
 December 31, 2008, to a person who would be a member of 
6
 the same unitary business group but for the fact that 
7
 the person is prohibited under Section 1501(a)(27) 
8
 from being included in the unitary business group 
9
 because he or she is ordinarily required to apportion 
10
 business income under different subsections of Section 
11
 304. The addition modification required by this 
12
 subparagraph shall be reduced to the extent that 
13
 dividends were included in base income of the unitary 
14
 group for the same taxable year and received by the 
15
 taxpayer or by a member of the taxpayer's unitary 
16
 business group (including amounts included in gross 
17
 income under Sections 951 through 964 of the Internal 
18
 Revenue Code and amounts included in gross income under 
19
 Section 78 of the Internal Revenue Code) with respect 
20
 to the stock of the same person to whom the intangible 
21
 expenses and costs were directly or indirectly paid, 
22
 incurred, or accrued. The preceding sentence does not 
23
 apply to the extent that the same dividends caused a 
24
 reduction to the addition modification required under 
25
 Section 203(a)(2)(D-17) of this Act. As used in this 
26
 subparagraph, the term "intangible expenses and costs" 
 


 






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1
 includes (1) expenses, losses, and costs for, or 
2
 related to, the direct or indirect acquisition, use, 
3
 maintenance or management, ownership, sale, exchange, 
4
 or any other disposition of intangible property; (2) 
5
 losses incurred, directly or indirectly, from 
6
 factoring transactions or discounting transactions; 
7
 (3) royalty, patent, technical, and copyright fees; 
8
 (4) licensing fees; and (5) other similar expenses and 
9
 costs.
For purposes of this subparagraph, "intangible 
10
 property" includes patents, patent applications, trade 
11
 names, trademarks, service marks, copyrights, mask 
12
 works, trade secrets, and similar types of intangible 
13
 assets.
14
   This paragraph shall not apply to the following:
15
    (i) any item of intangible expenses or costs 
16
 paid, accrued, or incurred, directly or 
17
 indirectly, from a transaction with a person who is 
18
 subject in a foreign country or state, other than a 
19
 state which requires mandatory unitary reporting, 
20
 to a tax on or measured by net income with respect 
21
 to such item; or
22
    (ii) any item of intangible expense or cost 
23
 paid, accrued, or incurred, directly or 
24
 indirectly, if the taxpayer can establish, based 
25
 on a preponderance of the evidence, both of the 
26
 following:
 


 






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1
     (a) the person during the same taxable 
2
 year paid, accrued, or incurred, the 
3
 intangible expense or cost to a person that is 
4
 not a related member, and
5
     (b) the transaction giving rise to the 
6
 intangible expense or cost between the 
7
 taxpayer and the person did not have as a 
8
 principal purpose the avoidance of Illinois 
9
 income tax, and is paid pursuant to a contract 
10
 or agreement that reflects arm's-length terms; 
11
 or
12
    (iii) any item of intangible expense or cost 
13
 paid, accrued, or incurred, directly or 
14
 indirectly, from a transaction with a person if the 
15
 taxpayer establishes by clear and convincing 
16
 evidence, that the adjustments are unreasonable; 
17
 or if the taxpayer and the Director agree in 
18
 writing to the application or use of an alternative 
19
 method of apportionment under Section 304(f);

20
    Nothing in this subsection shall preclude the 
21
 Director from making any other adjustment 
22
 otherwise allowed under Section 404 of this Act for 
23
 any tax year beginning after the effective date of 
24
 this amendment provided such adjustment is made 
25
 pursuant to regulation adopted by the Department 
26
 and such regulations provide methods and standards 
 


 






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1
 by which the Department will utilize its authority 
2
 under Section 404 of this Act;

3
   (D-19) For taxable years ending on or after 
4
 December 31, 2008, an amount equal to the amount of 
5
 insurance premium expenses and costs otherwise allowed 
6
 as a deduction in computing base income, and that were 
7
 paid, accrued, or incurred, directly or indirectly, to 
8
 a person who would be a member of the same unitary 
9
 business group but for the fact that the person is 
10
 prohibited under Section 1501(a)(27) from being 
11
 included in the unitary business group because he or 
12
 she is ordinarily required to apportion business 
13
 income under different subsections of Section 304. The 
14
 addition modification required by this subparagraph 
15
 shall be reduced to the extent that dividends were 
16
 included in base income of the unitary group for the 
17
 same taxable year and received by the taxpayer or by a 
18
 member of the taxpayer's unitary business group 
19
 (including amounts included in gross income under 
20
 Sections 951 through 964 of the Internal Revenue Code 
21
 and amounts included in gross income under Section 78 
22
 of the Internal Revenue Code) with respect to the stock 
23
 of the same person to whom the premiums and costs were 
24
 directly or indirectly paid, incurred, or accrued. The 
25
 preceding sentence does not apply to the extent that 
26
 the same dividends caused a reduction to the addition 
 


 






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1
 modification required under Section 203(a)(2)(D-17) or 
2
 Section 203(a)(2)(D-18) of this Act.


3
   (D-20) For taxable years beginning on or after 
4
 January 1,
2002 and ending on or before December 31, 
5
 2006, in
the
case of a distribution from a qualified 
6
 tuition program under Section 529 of
the Internal 
7
 Revenue Code, other than (i) a distribution from a 
8
 College Savings
Pool created under Section 16.5 of the 
9
 State Treasurer Act or (ii) a
distribution from the 
10
 Illinois Prepaid Tuition Trust Fund, an amount equal to

11
 the amount excluded from gross income under Section 
12
 529(c)(3)(B). For taxable years beginning on or after 
13
 January 1, 2007, in the case of a distribution from a 
14
 qualified tuition program under Section 529 of the 
15
 Internal Revenue Code, other than (i) a distribution 
16
 from a College Savings Pool created under Section 16.5 
17
 of the State Treasurer Act, (ii) a distribution from 
18
 the Illinois Prepaid Tuition Trust Fund, or (iii) a 
19
 distribution from a qualified tuition program under 
20
 Section 529 of the Internal Revenue Code that (I) 
21
 adopts and determines that its offering materials 
22
 comply with the College Savings Plans Network's 
23
 disclosure principles and (II) has made reasonable 
24
 efforts to inform in-state residents of the existence 
25
 of in-state qualified tuition programs by informing 
26
 Illinois residents directly and, where applicable, to 
 


 






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1
 inform financial intermediaries distributing the 
2
 program to inform in-state residents of the existence 
3
 of in-state qualified tuition programs at least 
4
 annually, an amount equal to the amount excluded from 
5
 gross income under Section 529(c)(3)(B).
6
   For the purposes of this subparagraph (D-20), a 
7
 qualified tuition program has made reasonable efforts 
8
 if it makes disclosures (which may use the term 
9
 "in-state program" or "in-state plan" and need not 
10
 specifically refer to Illinois or its qualified 
11
 programs by name) (i) directly to prospective 
12
 participants in its offering materials or makes a 
13
 public disclosure, such as a website posting; and (ii) 
14
 where applicable, to intermediaries selling the 
15
 out-of-state program in the same manner that the 
16
 out-of-state program distributes its offering 
17
 materials;

18
    (D-21) For taxable years beginning on or after 
19
 January 1, 2007, in the case of transfer of moneys from 
20
 a qualified tuition program under Section 529 of the 
21
 Internal Revenue Code that is administered by the State 
22
 to an out-of-state program, an amount equal to the 
23
 amount of moneys previously deducted from base income 
24
 under subsection (a)(2)(Y) of this Section.


25
 and by deducting from the total so obtained the
sum of the 
26
 following amounts:


 


 






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1
   (E) For taxable years ending before December 31, 
2
 2001,
any amount included in such total in respect of 
3
 any compensation
(including but not limited to any 
4
 compensation paid or accrued to a
serviceman while a 
5
 prisoner of war or missing in action) paid to a 
6
 resident
by reason of being on active duty in the Armed 
7
 Forces of the United States
and in respect of any 
8
 compensation paid or accrued to a resident who as a

9
 governmental employee was a prisoner of war or missing 
10
 in action, and in
respect of any compensation paid to a 
11
 resident in 1971 or thereafter for
annual training 
12
 performed pursuant to Sections 502 and 503, Title 32,

13
 United States Code as a member of the Illinois National 
14
 Guard or, beginning with taxable years ending on or 
15
 after December 31, 2007, the National Guard of any 
16
 other state.
For taxable years ending on or after 
17
 December 31, 2001, any amount included in
such total in 
18
 respect of any compensation (including but not limited 
19
 to any
compensation paid or accrued to a serviceman 
20
 while a prisoner of war or missing
in action) paid to a 
21
 resident by reason of being a member of any component 
22
 of
the Armed Forces of the United States and in respect 
23
 of any compensation paid
or accrued to a resident who 
24
 as a governmental employee was a prisoner of war
or 
25
 missing in action, and in respect of any compensation 
26
 paid to a resident in
2001 or thereafter by reason of 
 


 






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1
 being a member of the Illinois National Guard or, 
2
 beginning with taxable years ending on or after 
3
 December 31, 2007, the National Guard of any other 
4
 state.
The provisions of this amendatory Act of the 
5
 92nd General Assembly are exempt
from the provisions of 
6
 Section 250;


7
   (F) An amount equal to all amounts included in such 
8
 total pursuant
to the provisions of Sections 402(a), 
9
 402(c), 403(a), 403(b), 406(a), 407(a),
and 408 of the 
10
 Internal Revenue Code, or included in such total as

11
 distributions under the provisions of any retirement 
12
 or disability plan for
employees of any governmental 
13
 agency or unit, or retirement payments to
retired 
14
 partners, which payments are excluded in computing net 
15
 earnings
from self employment by Section 1402 of the 
16
 Internal Revenue Code and
regulations adopted pursuant 
17
 thereto;


18
   (G) The valuation limitation amount;


19
   (H) An amount equal to the amount of any tax 
20
 imposed by this Act
which was refunded to the taxpayer 
21
 and included in such total for the
taxable year;


22
   (I) An amount equal to all amounts included in such 
23
 total pursuant
to the provisions of Section 111 of the 
24
 Internal Revenue Code as a
recovery of items previously 
25
 deducted from adjusted gross income in the
computation 
26
 of taxable income;


 


 






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1
   (J) An amount equal to those dividends included in 
2
 such total which were
paid by a corporation which 
3
 conducts business operations in an Enterprise
Zone or 
4
 zones created under the Illinois Enterprise Zone Act or 
5
 a River Edge Redevelopment Zone or zones created under 
6
 the River Edge Redevelopment Zone Act, and conducts

7
 substantially all of its operations in an Enterprise 
8
 Zone or zones or a River Edge Redevelopment Zone or 
9
 zones. This subparagraph (J) is exempt from the 
10
 provisions of Section 250;


11
   (K) An amount equal to those dividends included in 
12
 such total that
were paid by a corporation that 
13
 conducts business operations in a federally
designated 
14
 Foreign Trade Zone or Sub-Zone and that is designated a 
15
 High Impact
Business located in Illinois; provided 
16
 that dividends eligible for the
deduction provided in 
17
 subparagraph (J) of paragraph (2) of this subsection

18
 shall not be eligible for the deduction provided under 
19
 this subparagraph
(K);


20
   (L) For taxable years ending after December 31, 
21
 1983, an amount equal to
all social security benefits 
22
 and railroad retirement benefits included in
such 
23
 total pursuant to Sections 72(r) and 86 of the Internal 
24
 Revenue Code;


25
   (M) With the exception of any amounts subtracted 
26
 under subparagraph
(N), an amount equal to the sum of 
 


 






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1
 all amounts disallowed as
deductions by (i) Sections 
2
 171(a) (2), and 265(2) of the Internal Revenue Code
of 
3
 1954, as now or hereafter amended, and all amounts of 
4
 expenses allocable
to interest and disallowed as 
5
 deductions by Section 265(1) of the Internal
Revenue 
6
 Code of 1954, as now or hereafter amended;
and (ii) for 
7
 taxable years
ending on or after August 13, 1999, 
8
 Sections 171(a)(2), 265,
280C, and 832(b)(5)(B)(i) of 
9
 the Internal Revenue Code; the provisions of this

10
 subparagraph are exempt from the provisions of Section 
11
 250;


12
   (N) An amount equal to all amounts included in such 
13
 total which are
exempt from taxation by this State 
14
 either by reason of its statutes or
Constitution
or by 
15
 reason of the Constitution, treaties or statutes of the 
16
 United States;
provided that, in the case of any 
17
 statute of this State that exempts income
derived from 
18
 bonds or other obligations from the tax imposed under 
19
 this Act,
the amount exempted shall be the interest net 
20
 of bond premium amortization;


21
   (O) An amount equal to any contribution made to a 
22
 job training
project established pursuant to the Tax 
23
 Increment Allocation Redevelopment Act;


24
   (P) An amount equal to the amount of the deduction 
25
 used to compute the
federal income tax credit for 
26
 restoration of substantial amounts held under
claim of 
 


 






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1
 right for the taxable year pursuant to Section 1341 of 
2
 the
Internal Revenue Code of 1986;


3
   (Q) An amount equal to any amounts included in such 
4
 total, received by
the taxpayer as an acceleration in 
5
 the payment of life, endowment or annuity
benefits in 
6
 advance of the time they would otherwise be payable as 
7
 an indemnity
for a terminal illness;


8
   (R) An amount equal to the amount of any federal or 
9
 State bonus paid
to veterans of the Persian Gulf War;


10
   (S) An amount, to the extent included in adjusted 
11
 gross income, equal
to the amount of a contribution 
12
 made in the taxable year on behalf of the
taxpayer to a 
13
 medical care savings account established under the 
14
 Medical Care
Savings Account Act or the Medical Care 
15
 Savings Account Act of 2000 to the
extent the 
16
 contribution is accepted by the account
administrator 
17
 as provided in that Act;


18
   (T) An amount, to the extent included in adjusted 
19
 gross income, equal to
the amount of interest earned in 
20
 the taxable year on a medical care savings
account 
21
 established under the Medical Care Savings Account Act 
22
 or the Medical
Care Savings Account Act of 2000 on 
23
 behalf of the
taxpayer, other than interest added 
24
 pursuant to item (D-5) of this paragraph
(2);


25
   (U) For one taxable year beginning on or after 
26
 January 1,
1994, an
amount equal to the total amount of 
 


 






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1
 tax imposed and paid under subsections (a)
and (b) of 
2
 Section 201 of this Act on grant amounts received by 
3
 the taxpayer
under the Nursing Home Grant Assistance 
4
 Act during the taxpayer's taxable years
1992 and 1993;


5
   (V) Beginning with tax years ending on or after 
6
 December 31, 1995 and
ending with tax years ending on 
7
 or before December 31, 2004, an amount equal to
the 
8
 amount paid by a taxpayer who is a
self-employed 
9
 taxpayer, a partner of a partnership, or a
shareholder 
10
 in a Subchapter S corporation for health insurance or 
11
 long-term
care insurance for that taxpayer or that 
12
 taxpayer's spouse or dependents, to
the extent that the 
13
 amount paid for that health insurance or long-term care

14
 insurance may be deducted under Section 213 of the 
15
 Internal Revenue Code of
1986, has not been deducted on 
16
 the federal income tax return of the taxpayer,
and does 
17
 not exceed the taxable income attributable to that 
18
 taxpayer's income,
self-employment income, or 
19
 Subchapter S corporation income; except that no

20
 deduction shall be allowed under this item (V) if the 
21
 taxpayer is eligible to
participate in any health 
22
 insurance or long-term care insurance plan of an

23
 employer of the taxpayer or the taxpayer's
spouse. The 
24
 amount of the health insurance and long-term care 
25
 insurance
subtracted under this item (V) shall be 
26
 determined by multiplying total
health insurance and 
 


 






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1
 long-term care insurance premiums paid by the taxpayer

2
 times a number that represents the fractional 
3
 percentage of eligible medical
expenses under Section 
4
 213 of the Internal Revenue Code of 1986 not actually

5
 deducted on the taxpayer's federal income tax return;


6
   (W) For taxable years beginning on or after January 
7
 1, 1998,
all amounts included in the taxpayer's federal 
8
 gross income
in the taxable year from amounts converted 
9
 from a regular IRA to a Roth IRA.
This paragraph is 
10
 exempt from the provisions of Section
250;


11
   (X) For taxable year 1999 and thereafter, an amount 
12
 equal to the
amount of any (i) distributions, to the 
13
 extent includible in gross income for
federal income 
14
 tax purposes, made to the taxpayer because of his or 
15
 her status
as a victim of persecution for racial or 
16
 religious reasons by Nazi Germany or
any other Axis 
17
 regime or as an heir of the victim and (ii) items
of 
18
 income, to the extent
includible in gross income for 
19
 federal income tax purposes, attributable to,
derived 
20
 from or in any way related to assets stolen from, 
21
 hidden from, or
otherwise lost to a victim of

22
 persecution for racial or religious reasons by Nazi 
23
 Germany or any other Axis
regime immediately prior to, 
24
 during, and immediately after World War II,
including, 
25
 but
not limited to, interest on the proceeds receivable 
26
 as insurance
under policies issued to a victim of 
 


 






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1
 persecution for racial or religious
reasons
by Nazi 
2
 Germany or any other Axis regime by European insurance 
3
 companies
immediately prior to and during World War II;

4
 provided, however, this subtraction from federal 
5
 adjusted gross income does not
apply to assets acquired 
6
 with such assets or with the proceeds from the sale of

7
 such assets; provided, further, this paragraph shall 
8
 only apply to a taxpayer
who was the first recipient of 
9
 such assets after their recovery and who is a
victim of 
10
 persecution for racial or religious reasons
by Nazi 
11
 Germany or any other Axis regime or as an heir of the 
12
 victim. The
amount of and the eligibility for any 
13
 public assistance, benefit, or
similar entitlement is 
14
 not affected by the inclusion of items (i) and (ii) of

15
 this paragraph in gross income for federal income tax 
16
 purposes.
This paragraph is exempt from the provisions 
17
 of Section 250;


18
   (Y) For taxable years beginning on or after January 
19
 1, 2002
and ending
on or before December 31, 2004, 
20
 moneys contributed in the taxable year to a College 
21
 Savings Pool account under
Section 16.5 of the State 
22
 Treasurer Act, except that amounts excluded from
gross 
23
 income under Section 529(c)(3)(C)(i) of the Internal 
24
 Revenue Code
shall not be considered moneys 
25
 contributed under this subparagraph (Y). For taxable 
26
 years beginning on or after January 1, 2005, a maximum 
 


 






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1
 of $10,000
contributed
in the
taxable year to (i) a 
2
 College Savings Pool account under Section 16.5 of the

3
 State
Treasurer Act or (ii) the Illinois Prepaid 
4
 Tuition Trust Fund,
except that
amounts excluded from 
5
 gross income under Section 529(c)(3)(C)(i) of the

6
 Internal
Revenue Code shall not be considered moneys 
7
 contributed under this subparagraph
(Y). This

8
 subparagraph (Y) is exempt from the provisions of 
9
 Section 250;


10
   (Z) For taxable years 2001 and thereafter, for the 
11
 taxable year in
which the bonus depreciation deduction

12
 is taken on the taxpayer's federal income tax return 
13
 under
subsection (k) of Section 168 of the Internal 
14
 Revenue Code and for each
applicable taxable year 
15
 thereafter, an amount equal to "x", where:


16
    (1) "y" equals the amount of the depreciation 
17
 deduction taken for the
taxable year
on the 
18
 taxpayer's federal income tax return on property 
19
 for which the bonus
depreciation deduction
was 
20
 taken in any year under subsection (k) of Section 
21
 168 of the Internal
Revenue Code, but not including 
22
 the bonus depreciation deduction;


23
    (2) for taxable years ending on or before 
24
 December 31, 2005, "x" equals "y" multiplied by 30 
25
 and then divided by 70 (or "y"
multiplied by 
26
 0.429); and
 


 






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1
    (3) for taxable years ending after December 
2
 31, 2005:
3
     (i) for property on which a bonus 
4
 depreciation deduction of 30% of the adjusted 
5
 basis was taken, "x" equals "y" multiplied by 
6
 30 and then divided by 70 (or "y"
multiplied by 
7
 0.429); and
8
     (ii) for property on which a bonus 
9
 depreciation deduction of 50% of the adjusted 
10
 basis was taken, "x" equals "y" multiplied by 
11
 1.0.


12
   The aggregate amount deducted under this 
13
 subparagraph in all taxable
years for any one piece of 
14
 property may not exceed the amount of the bonus

15
 depreciation deduction
taken on that property on the 
16
 taxpayer's federal income tax return under
subsection 
17
 (k) of Section 168 of the Internal Revenue Code. This 
18
 subparagraph (Z) is exempt from the provisions of 
19
 Section 250;


20
   (AA) If the taxpayer sells, transfers, abandons, 
21
 or otherwise disposes of
property for which the 
22
 taxpayer was required in any taxable year to make an

23
 addition modification under subparagraph (D-15), then 
24
 an amount equal to that
addition modification.


25
   If the taxpayer continues to own property through 
26
 the last day of the last tax year for which the 
 


 






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1
 taxpayer may claim a depreciation deduction for 
2
 federal income tax purposes and for which the taxpayer 
3
 was required in any taxable year to make an addition 
4
 modification under subparagraph (D-15), then an amount 
5
 equal to that addition modification.


6
   The taxpayer is allowed to take the deduction under 
7
 this subparagraph
only once with respect to any one 
8
 piece of property.
9
   This subparagraph (AA) is exempt from the 
10
 provisions of Section 250;


11
   (BB) Any amount included in adjusted gross income, 
12
 other
than
salary,
received by a driver in a 
13
 ridesharing arrangement using a motor vehicle;

14
   (CC) The amount of (i) any interest income (net of 
15
 the deductions allocable thereto) taken into account 
16
 for the taxable year with respect to a transaction with 
17
 a taxpayer that is required to make an addition 
18
 modification with respect to such transaction under 
19
 Section 203(a)(2)(D-17), 203(b)(2)(E-12), 
20
 203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed 
21
 the amount of that addition modification, and
(ii) any 
22
 income from intangible property (net of the deductions 
23
 allocable thereto) taken into account for the taxable 
24
 year with respect to a transaction with a taxpayer that 
25
 is required to make an addition modification with 
26
 respect to such transaction under Section 
 


 






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1
 203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or 
2
 203(d)(2)(D-8), but not to exceed the amount of that 
3
 addition modification. This subparagraph (CC) is 
4
 exempt from the provisions of Section 250;
5
   (DD) An amount equal to the interest income taken 
6
 into account for the taxable year (net of the 
7
 deductions allocable thereto) with respect to 
8
 transactions with (i) a foreign person who would be a 
9
 member of the taxpayer's unitary business group but for 
10
 the fact that the foreign person's business activity 
11
 outside the United States is 80% or more of that 
12
 person's total business activity and (ii) for taxable 
13
 years ending on or after December 31, 2008, to a person 
14
 who would be a member of the same unitary business 
15
 group but for the fact that the person is prohibited 
16
 under Section 1501(a)(27) from being included in the 
17
 unitary business group because he or she is ordinarily 
18
 required to apportion business income under different 
19
 subsections of Section 304, but not to exceed the 
20
 addition modification required to be made for the same 
21
 taxable year under Section 203(a)(2)(D-17) for 
22
 interest paid, accrued, or incurred, directly or 
23
 indirectly, to the same person. This subparagraph (DD) 
24
 is exempt from the provisions of Section 250; and 
25
   (EE) An amount equal to the income from intangible 
26
 property taken into account for the taxable year (net 
 


 






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1
 of the deductions allocable thereto) with respect to 
2
 transactions with (i) a foreign person who would be a 
3
 member of the taxpayer's unitary business group but for 
4
 the fact that the foreign person's business activity 
5
 outside the United States is 80% or more of that 
6
 person's total business activity and (ii) for taxable 
7
 years ending on or after December 31, 2008, to a person 
8
 who would be a member of the same unitary business 
9
 group but for the fact that the person is prohibited 
10
 under Section 1501(a)(27) from being included in the 
11
 unitary business group because he or she is ordinarily 
12
 required to apportion business income under different 
13
 subsections of Section 304, but not to exceed the 
14
 addition modification required to be made for the same 
15
 taxable year under Section 203(a)(2)(D-18) for 
16
 intangible expenses and costs paid, accrued, or 
17
 incurred, directly or indirectly, to the same foreign 
18
 person. This subparagraph (EE) is exempt from the 
19
 provisions of Section 250.

20
   (FF) An amount equal to the premiums paid for 
21
 health insurance for a live-in domestic employee. 


22
 (b) Corporations.


23
  (1) In general. In the case of a corporation, base 
24
 income means an
amount equal to the taxpayer's taxable 
25
 income for the taxable year as
modified by paragraph (2).


 


 






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1
  (2) Modifications. The taxable income referred to in 
2
 paragraph (1)
shall be modified by adding thereto the sum 
3
 of the following amounts:


4
   (A) An amount equal to all amounts paid or accrued 
5
 to the taxpayer
as interest and all distributions 
6
 received from regulated investment
companies during 
7
 the taxable year to the extent excluded from gross

8
 income in the computation of taxable income;


9
   (B) An amount equal to the amount of tax imposed by 
10
 this Act to the
extent deducted from gross income in 
11
 the computation of taxable income
for the taxable year;


12
   (C) In the case of a regulated investment company, 
13
 an amount equal to
the excess of (i) the net long-term 
14
 capital gain for the taxable year, over
(ii) the amount 
15
 of the capital gain dividends designated as such in 
16
 accordance
with Section 852(b)(3)(C) of the Internal 
17
 Revenue Code and any amount
designated under Section 
18
 852(b)(3)(D) of the Internal Revenue Code,

19
 attributable to the taxable year (this amendatory Act 
20
 of 1995
(Public Act 89-89) is declarative of existing 
21
 law and is not a new
enactment);


22
   (D) The amount of any net operating loss deduction 
23
 taken in arriving
at taxable income, other than a net 
24
 operating loss carried forward from a
taxable year 
25
 ending prior to December 31, 1986;


26
   (E) For taxable years in which a net operating loss 
 


 






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1
 carryback or
carryforward from a taxable year ending 
2
 prior to December 31, 1986 is an
element of taxable 
3
 income under paragraph (1) of subsection (e) or

4
 subparagraph (E) of paragraph (2) of subsection (e), 
5
 the amount by which
addition modifications other than 
6
 those provided by this subparagraph (E)
exceeded 
7
 subtraction modifications in such earlier taxable 
8
 year, with the
following limitations applied in the 
9
 order that they are listed:


10
    (i) the addition modification relating to the 
11
 net operating loss
carried back or forward to the 
12
 taxable year from any taxable year ending
prior to 
13
 December 31, 1986 shall be reduced by the amount of 
14
 addition
modification under this subparagraph (E) 
15
 which related to that net operating
loss and which 
16
 was taken into account in calculating the base 
17
 income of an
earlier taxable year, and


18
    (ii) the addition modification relating to the 
19
 net operating loss
carried back or forward to the 
20
 taxable year from any taxable year ending
prior to 
21
 December 31, 1986 shall not exceed the amount of 
22
 such carryback or
carryforward;


23
   For taxable years in which there is a net operating 
24
 loss carryback or
carryforward from more than one other 
25
 taxable year ending prior to December
31, 1986, the 
26
 addition modification provided in this subparagraph 
 


 






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1
 (E) shall
be the sum of the amounts computed 
2
 independently under the preceding
provisions of this 
3
 subparagraph (E) for each such taxable year;


4
   (E-5) For taxable years ending after December 31, 
5
 1997, an
amount equal to any eligible remediation costs 
6
 that the corporation
deducted in computing adjusted 
7
 gross income and for which the
corporation claims a 
8
 credit under subsection (l) of Section 201;


9
   (E-10) For taxable years 2001 and thereafter, an 
10
 amount equal to the
bonus depreciation deduction taken 
11
 on the taxpayer's federal income tax return for the 
12
 taxable
year under subsection (k) of Section 168 of the 
13
 Internal Revenue Code;


14
   (E-11) If the taxpayer sells, transfers, abandons, 
15
 or otherwise disposes of property for which the 
16
 taxpayer was required in any taxable year to
make an 
17
 addition modification under subparagraph (E-10), then 
18
 an amount equal
to the aggregate amount of the 
19
 deductions taken in all taxable
years under 
20
 subparagraph (T) with respect to that property.

21
   If the taxpayer continues to own property through 
22
 the last day of the last tax year for which the 
23
 taxpayer may claim a depreciation deduction for 
24
 federal income tax purposes and for which the taxpayer 
25
 was allowed in any taxable year to make a subtraction 
26
 modification under subparagraph (T), then an amount 
 


 






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1
 equal to that subtraction modification.


2
   The taxpayer is required to make the addition 
3
 modification under this
subparagraph
only once with 
4
 respect to any one piece of property;

5
   (E-12) An amount equal to the amount otherwise 
6
 allowed as a deduction in computing base income for 
7
 interest paid, accrued, or incurred, directly or 
8
 indirectly, (i) for taxable years ending on or after 
9
 December 31, 2004, to a foreign person who would be a 
10
 member of the same unitary business group but for the 
11
 fact the foreign person's business activity outside 
12
 the United States is 80% or more of the foreign 
13
 person's total business activity and (ii) for taxable 
14
 years ending on or after December 31, 2008, to a person 
15
 who would be a member of the same unitary business 
16
 group but for the fact that the person is prohibited 
17
 under Section 1501(a)(27) from being included in the 
18
 unitary business group because he or she is ordinarily 
19
 required to apportion business income under different 
20
 subsections of Section 304. The addition modification 
21
 required by this subparagraph shall be reduced to the 
22
 extent that dividends were included in base income of 
23
 the unitary group for the same taxable year and 
24
 received by the taxpayer or by a member of the 
25
 taxpayer's unitary business group (including amounts 
26
 included in gross income pursuant to Sections 951 
 


 






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1
 through 964 of the Internal Revenue Code and amounts 
2
 included in gross income under Section 78 of the 
3
 Internal Revenue Code) with respect to the stock of the 
4
 same person to whom the interest was paid, accrued, or 
5
 incurred.

6
   This paragraph shall not apply to the following:

7
    (i) an item of interest paid, accrued, or 
8
 incurred, directly or indirectly, to a person who 
9
 is subject in a foreign country or state, other 
10
 than a state which requires mandatory unitary 
11
 reporting, to a tax on or measured by net income 
12
 with respect to such interest; or
13
    (ii) an item of interest paid, accrued, or 
14
 incurred, directly or indirectly, to a person if 
15
 the taxpayer can establish, based on a 
16
 preponderance of the evidence, both of the 
17
 following:
18
     (a) the person, during the same taxable 
19
 year, paid, accrued, or incurred, the interest 
20
 to a person that is not a related member, and
21
     (b) the transaction giving rise to the 
22
 interest expense between the taxpayer and the 
23
 person did not have as a principal purpose the 
24
 avoidance of Illinois income tax, and is paid 
25
 pursuant to a contract or agreement that 
26
 reflects an arm's-length interest rate and 
 


 






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1
 terms; or

2
    (iii) the taxpayer can establish, based on 
3
 clear and convincing evidence, that the interest 
4
 paid, accrued, or incurred relates to a contract or 
5
 agreement entered into at arm's-length rates and 
6
 terms and the principal purpose for the payment is 
7
 not federal or Illinois tax avoidance; or

8
    (iv) an item of interest paid, accrued, or 
9
 incurred, directly or indirectly, to a person if 
10
 the taxpayer establishes by clear and convincing 
11
 evidence that the adjustments are unreasonable; or 
12
 if the taxpayer and the Director agree in writing 
13
 to the application or use of an alternative method 
14
 of apportionment under Section 304(f).

15
    Nothing in this subsection shall preclude the 
16
 Director from making any other adjustment 
17
 otherwise allowed under Section 404 of this Act for 
18
 any tax year beginning after the effective date of 
19
 this amendment provided such adjustment is made 
20
 pursuant to regulation adopted by the Department 
21
 and such regulations provide methods and standards 
22
 by which the Department will utilize its authority 
23
 under Section 404 of this Act;

24
   (E-13) An amount equal to the amount of intangible 
25
 expenses and costs otherwise allowed as a deduction in 
26
 computing base income, and that were paid, accrued, or 
 


 






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1
 incurred, directly or indirectly, (i) for taxable 
2
 years ending on or after December 31, 2004, to a 
3
 foreign person who would be a member of the same 
4
 unitary business group but for the fact that the 
5
 foreign person's business activity outside the United 
6
 States is 80% or more of that person's total business 
7
 activity and (ii) for taxable years ending on or after 
8
 December 31, 2008, to a person who would be a member of 
9
 the same unitary business group but for the fact that 
10
 the person is prohibited under Section 1501(a)(27) 
11
 from being included in the unitary business group 
12
 because he or she is ordinarily required to apportion 
13
 business income under different subsections of Section 
14
 304. The addition modification required by this 
15
 subparagraph shall be reduced to the extent that 
16
 dividends were included in base income of the unitary 
17
 group for the same taxable year and received by the 
18
 taxpayer or by a member of the taxpayer's unitary 
19
 business group (including amounts included in gross 
20
 income pursuant to Sections 951 through 964 of the 
21
 Internal Revenue Code and amounts included in gross 
22
 income under Section 78 of the Internal Revenue Code) 
23
 with respect to the stock of the same person to whom 
24
 the intangible expenses and costs were directly or 
25
 indirectly paid, incurred, or accrued. The preceding 
26
 sentence shall not apply to the extent that the same 
 


 






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1
 dividends caused a reduction to the addition 
2
 modification required under Section 203(b)(2)(E-12) of 
3
 this Act.
As used in this subparagraph, the term 
4
 "intangible expenses and costs" includes (1) expenses, 
5
 losses, and costs for, or related to, the direct or 
6
 indirect acquisition, use, maintenance or management, 
7
 ownership, sale, exchange, or any other disposition of 
8
 intangible property; (2) losses incurred, directly or 
9
 indirectly, from factoring transactions or discounting 
10
 transactions; (3) royalty, patent, technical, and 
11
 copyright fees; (4) licensing fees; and (5) other 
12
 similar expenses and costs.
For purposes of this 
13
 subparagraph, "intangible property" includes patents, 
14
 patent applications, trade names, trademarks, service 
15
 marks, copyrights, mask works, trade secrets, and 
16
 similar types of intangible assets.
17
   This paragraph shall not apply to the following:
18
    (i) any item of intangible expenses or costs 
19
 paid, accrued, or incurred, directly or 
20
 indirectly, from a transaction with a person who is 
21
 subject in a foreign country or state, other than a 
22
 state which requires mandatory unitary reporting, 
23
 to a tax on or measured by net income with respect 
24
 to such item; or
25
    (ii) any item of intangible expense or cost 
26
 paid, accrued, or incurred, directly or 
 


 






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1
 indirectly, if the taxpayer can establish, based 
2
 on a preponderance of the evidence, both of the 
3
 following:
4
     (a) the person during the same taxable 
5
 year paid, accrued, or incurred, the 
6
 intangible expense or cost to a person that is 
7
 not a related member, and
8
     (b) the transaction giving rise to the 
9
 intangible expense or cost between the 
10
 taxpayer and the person did not have as a 
11
 principal purpose the avoidance of Illinois 
12
 income tax, and is paid pursuant to a contract 
13
 or agreement that reflects arm's-length terms; 
14
 or
15
    (iii) any item of intangible expense or cost 
16
 paid, accrued, or incurred, directly or 
17
 indirectly, from a transaction with a person if the 
18
 taxpayer establishes by clear and convincing 
19
 evidence, that the adjustments are unreasonable; 
20
 or if the taxpayer and the Director agree in 
21
 writing to the application or use of an alternative 
22
 method of apportionment under Section 304(f);

23
    Nothing in this subsection shall preclude the 
24
 Director from making any other adjustment 
25
 otherwise allowed under Section 404 of this Act for 
26
 any tax year beginning after the effective date of 
 


 






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1
 this amendment provided such adjustment is made 
2
 pursuant to regulation adopted by the Department 
3
 and such regulations provide methods and standards 
4
 by which the Department will utilize its authority 
5
 under Section 404 of this Act;

6
   (E-14) For taxable years ending on or after 
7
 December 31, 2008, an amount equal to the amount of 
8
 insurance premium expenses and costs otherwise allowed 
9
 as a deduction in computing base income, and that were 
10
 paid, accrued, or incurred, directly or indirectly, to 
11
 a person who would be a member of the same unitary 
12
 business group but for the fact that the person is 
13
 prohibited under Section 1501(a)(27) from being 
14
 included in the unitary business group because he or 
15
 she is ordinarily required to apportion business 
16
 income under different subsections of Section 304. The 
17
 addition modification required by this subparagraph 
18
 shall be reduced to the extent that dividends were 
19
 included in base income of the unitary group for the 
20
 same taxable year and received by the taxpayer or by a 
21
 member of the taxpayer's unitary business group 
22
 (including amounts included in gross income under 
23
 Sections 951 through 964 of the Internal Revenue Code 
24
 and amounts included in gross income under Section 78 
25
 of the Internal Revenue Code) with respect to the stock 
26
 of the same person to whom the premiums and costs were 
 


 






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1
 directly or indirectly paid, incurred, or accrued. The 
2
 preceding sentence does not apply to the extent that 
3
 the same dividends caused a reduction to the addition 
4
 modification required under Section 203(b)(2)(E-12) or 
5
 Section 203(b)(2)(E-13) of this Act;

6
   (E-15) For taxable years beginning after December 
7
 31, 2008, any deduction for dividends paid by a captive 
8
 real estate investment trust that is allowed to a real 
9
 estate investment trust under Section 857(b)(2)(B) of 
10
 the Internal Revenue Code for dividends paid;

11
 and by deducting from the total so obtained the sum of the 
12
 following
amounts:


13
   (F) An amount equal to the amount of any tax 
14
 imposed by this Act
which was refunded to the taxpayer 
15
 and included in such total for the
taxable year;


16
   (G) An amount equal to any amount included in such 
17
 total under
Section 78 of the Internal Revenue Code;


18
   (H) In the case of a regulated investment company, 
19
 an amount equal
to the amount of exempt interest 
20
 dividends as defined in subsection (b)
(5) of Section 
21
 852 of the Internal Revenue Code, paid to shareholders

22
 for the taxable year;


23
   (I) With the exception of any amounts subtracted 
24
 under subparagraph
(J),
an amount equal to the sum of 
25
 all amounts disallowed as
deductions by (i) Sections 
26
 171(a) (2), and 265(a)(2) and amounts disallowed as

 


 






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1
 interest expense by Section 291(a)(3) of the Internal 
2
 Revenue Code, as now
or hereafter amended, and all 
3
 amounts of expenses allocable to interest and

4
 disallowed as deductions by Section 265(a)(1) of the 
5
 Internal Revenue Code,
as now or hereafter amended;
and 
6
 (ii) for taxable years
ending on or after August 13, 
7
 1999, Sections
171(a)(2), 265,
280C, 291(a)(3), and 
8
 832(b)(5)(B)(i) of the Internal Revenue Code; the

9
 provisions of this
subparagraph are exempt from the 
10
 provisions of Section 250;


11
   (J) An amount equal to all amounts included in such 
12
 total which are
exempt from taxation by this State 
13
 either by reason of its statutes or
Constitution
or by 
14
 reason of the Constitution, treaties or statutes of the 
15
 United States;
provided that, in the case of any 
16
 statute of this State that exempts income
derived from 
17
 bonds or other obligations from the tax imposed under 
18
 this Act,
the amount exempted shall be the interest net 
19
 of bond premium amortization;


20
   (K) An amount equal to those dividends included in 
21
 such total
which were paid by a corporation which 
22
 conducts
business operations in an Enterprise Zone or 
23
 zones created under
the Illinois Enterprise Zone Act or 
24
 a River Edge Redevelopment Zone or zones created under 
25
 the River Edge Redevelopment Zone Act and conducts 
26
 substantially all of its
operations in an Enterprise 
 


 






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1
 Zone or zones or a River Edge Redevelopment Zone or 
2
 zones. This subparagraph (K) is exempt from the 
3
 provisions of Section 250;


4
   (L) An amount equal to those dividends included in 
5
 such total that
were paid by a corporation that 
6
 conducts business operations in a federally
designated 
7
 Foreign Trade Zone or Sub-Zone and that is designated a 
8
 High Impact
Business located in Illinois; provided 
9
 that dividends eligible for the
deduction provided in 
10
 subparagraph (K) of paragraph 2 of this subsection

11
 shall not be eligible for the deduction provided under 
12
 this subparagraph
(L);


13
   (M) For any taxpayer that is a financial 
14
 organization within the meaning
of Section 304(c) of 
15
 this Act, an amount included in such total as interest

16
 income from a loan or loans made by such taxpayer to a 
17
 borrower, to the extent
that such a loan is secured by 
18
 property which is eligible for the Enterprise
Zone 
19
 Investment Credit or the River Edge Redevelopment Zone 
20
 Investment Credit. To determine the portion of a loan 
21
 or loans that is
secured by property eligible for a 
22
 Section 201(f) investment
credit to the borrower, the 
23
 entire principal amount of the loan or loans
between 
24
 the taxpayer and the borrower should be divided into 
25
 the basis of the
Section 201(f) investment credit 
26
 property which secures the
loan or loans, using for 
 


 






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1
 this purpose the original basis of such property on
the 
2
 date that it was placed in service in the
Enterprise 
3
 Zone or the River Edge Redevelopment Zone. The 
4
 subtraction modification available to taxpayer in any

5
 year under this subsection shall be that portion of the 
6
 total interest paid
by the borrower with respect to 
7
 such loan attributable to the eligible
property as 
8
 calculated under the previous sentence. This 
9
 subparagraph (M) is exempt from the provisions of 
10
 Section 250;


11
   (M-1) For any taxpayer that is a financial 
12
 organization within the
meaning of Section 304(c) of 
13
 this Act, an amount included in such total as
interest 
14
 income from a loan or loans made by such taxpayer to a 
15
 borrower,
to the extent that such a loan is secured by 
16
 property which is eligible for
the High Impact Business 
17
 Investment Credit. To determine the portion of a
loan 
18
 or loans that is secured by property eligible for a 
19
 Section 201(h) investment credit to the borrower, the 
20
 entire principal amount of
the loan or loans between 
21
 the taxpayer and the borrower should be divided into

22
 the basis of the Section 201(h) investment credit 
23
 property which
secures the loan or loans, using for 
24
 this purpose the original basis of such
property on the 
25
 date that it was placed in service in a federally 
26
 designated
Foreign Trade Zone or Sub-Zone located in 
 


 






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1
 Illinois. No taxpayer that is
eligible for the 
2
 deduction provided in subparagraph (M) of paragraph 
3
 (2) of
this subsection shall be eligible for the 
4
 deduction provided under this
subparagraph (M-1). The 
5
 subtraction modification available to taxpayers in
any 
6
 year under this subsection shall be that portion of the 
7
 total interest
paid by the borrower with respect to 
8
 such loan attributable to the eligible
property as 
9
 calculated under the previous sentence;


10
   (N) Two times any contribution made during the 
11
 taxable year to a
designated zone organization to the 
12
 extent that the contribution (i)
qualifies as a 
13
 charitable contribution under subsection (c) of 
14
 Section 170
of the Internal Revenue Code and (ii) must, 
15
 by its terms, be used for a
project approved by the 
16
 Department of Commerce and Economic Opportunity under 
17
 Section 11 of the Illinois Enterprise Zone Act or under 
18
 Section 10-10 of the River Edge Redevelopment Zone Act. 
19
 This subparagraph (N) is exempt from the provisions of 
20
 Section 250;


21
   (O) An amount equal to: (i) 85% for taxable years 
22
 ending on or before
December 31, 1992, or, a percentage 
23
 equal to the percentage allowable under
Section 
24
 243(a)(1) of the Internal Revenue Code of 1986 for 
25
 taxable years ending
after December 31, 1992, of the 
26
 amount by which dividends included in taxable
income 
 


 






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1
 and received from a corporation that is not created or 
2
 organized under
the laws of the United States or any 
3
 state or political subdivision thereof,
including, for 
4
 taxable years ending on or after December 31, 1988, 
5
 dividends
received or deemed received or paid or deemed 
6
 paid under Sections 951 through
964 of the Internal 
7
 Revenue Code, exceed the amount of the modification

8
 provided under subparagraph (G) of paragraph (2) of 
9
 this subsection (b) which
is related to such dividends, 
10
 and including, for taxable years ending on or after 
11
 December 31, 2008, dividends received from a captive 
12
 real estate investment trust; plus (ii) 100% of the 
13
 amount by which dividends,
included in taxable income 
14
 and received, including, for taxable years ending on
or 
15
 after December 31, 1988, dividends received or deemed 
16
 received or paid or
deemed paid under Sections 951 
17
 through 964 of the Internal Revenue Code and including, 
18
 for taxable years ending on or after December 31, 2008, 
19
 dividends received from a captive real estate 
20
 investment trust, from
any such corporation specified 
21
 in clause (i) that would but for the provisions
of 
22
 Section 1504 (b) (3) of the Internal Revenue Code be 
23
 treated as a member of
the affiliated group which 
24
 includes the dividend recipient, exceed the amount
of 
25
 the modification provided under subparagraph (G) of 
26
 paragraph (2) of this
subsection (b) which is related 
 


 






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1
 to such dividends. This subparagraph (O) is exempt from 
2
 the provisions of Section 250 of this Act;


3
   (P) An amount equal to any contribution made to a 
4
 job training project
established pursuant to the Tax 
5
 Increment Allocation Redevelopment Act;


6
   (Q) An amount equal to the amount of the deduction 
7
 used to compute the
federal income tax credit for 
8
 restoration of substantial amounts held under
claim of 
9
 right for the taxable year pursuant to Section 1341 of 
10
 the
Internal Revenue Code of 1986;


11
   (R) On and after July 20, 1999, in the case of an 
12
 attorney-in-fact with respect to whom an
interinsurer 
13
 or a reciprocal insurer has made the election under 
14
 Section 835 of
the Internal Revenue Code, 26 U.S.C. 
15
 835, an amount equal to the excess, if
any, of the 
16
 amounts paid or incurred by that interinsurer or 
17
 reciprocal insurer
in the taxable year to the 
18
 attorney-in-fact over the deduction allowed to that

19
 interinsurer or reciprocal insurer with respect to the 
20
 attorney-in-fact under
Section 835(b) of the Internal 
21
 Revenue Code for the taxable year; the provisions of 
22
 this subparagraph are exempt from the provisions of 
23
 Section 250;


24
   (S) For taxable years ending on or after December 
25
 31, 1997, in the
case of a Subchapter
S corporation, an 
26
 amount equal to all amounts of income allocable to a

 


 






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1
 shareholder subject to the Personal Property Tax 
2
 Replacement Income Tax imposed
by subsections (c) and 
3
 (d) of Section 201 of this Act, including amounts

4
 allocable to organizations exempt from federal income 
5
 tax by reason of Section
501(a) of the Internal Revenue 
6
 Code. This subparagraph (S) is exempt from
the 
7
 provisions of Section 250;


8
   (T) For taxable years 2001 and thereafter, for the 
9
 taxable year in
which the bonus depreciation deduction

10
 is taken on the taxpayer's federal income tax return 
11
 under
subsection (k) of Section 168 of the Internal 
12
 Revenue Code and for each
applicable taxable year 
13
 thereafter, an amount equal to "x", where:


14
    (1) "y" equals the amount of the depreciation 
15
 deduction taken for the
taxable year
on the 
16
 taxpayer's federal income tax return on property 
17
 for which the bonus
depreciation deduction
was 
18
 taken in any year under subsection (k) of Section 
19
 168 of the Internal
Revenue Code, but not including 
20
 the bonus depreciation deduction;


21
    (2) for taxable years ending on or before 
22
 December 31, 2005, "x" equals "y" multiplied by 30 
23
 and then divided by 70 (or "y"
multiplied by 
24
 0.429); and
25
    (3) for taxable years ending after December 
26
 31, 2005:
 


 






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1
     (i) for property on which a bonus 
2
 depreciation deduction of 30% of the adjusted 
3
 basis was taken, "x" equals "y" multiplied by 
4
 30 and then divided by 70 (or "y"
multiplied by 
5
 0.429); and
6
     (ii) for property on which a bonus 
7
 depreciation deduction of 50% of the adjusted 
8
 basis was taken, "x" equals "y" multiplied by 
9
 1.0.


10
   The aggregate amount deducted under this 
11
 subparagraph in all taxable
years for any one piece of 
12
 property may not exceed the amount of the bonus

13
 depreciation deduction
taken on that property on the 
14
 taxpayer's federal income tax return under
subsection 
15
 (k) of Section 168 of the Internal Revenue Code. This 
16
 subparagraph (T) is exempt from the provisions of 
17
 Section 250;


18
   (U) If the taxpayer sells, transfers, abandons, or 
19
 otherwise disposes of
property for which the taxpayer 
20
 was required in any taxable year to make an
addition 
21
 modification under subparagraph (E-10), then an amount 
22
 equal to that
addition modification.

23
   If the taxpayer continues to own property through 
24
 the last day of the last tax year for which the 
25
 taxpayer may claim a depreciation deduction for 
26
 federal income tax purposes and for which the taxpayer 
 


 






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1
 was required in any taxable year to make an addition 
2
 modification under subparagraph (E-10), then an amount 
3
 equal to that addition modification.


4
   The taxpayer is allowed to take the deduction under 
5
 this subparagraph
only once with respect to any one 
6
 piece of property.
7
   This subparagraph (U) is exempt from the 
8
 provisions of Section 250;

9
   (V) The amount of: (i) any interest income (net of 
10
 the deductions allocable thereto) taken into account 
11
 for the taxable year with respect to a transaction with 
12
 a taxpayer that is required to make an addition 
13
 modification with respect to such transaction under 
14
 Section 203(a)(2)(D-17), 203(b)(2)(E-12), 
15
 203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed 
16
 the amount of such addition modification,
(ii) any 
17
 income from intangible property (net of the deductions 
18
 allocable thereto) taken into account for the taxable 
19
 year with respect to a transaction with a taxpayer that 
20
 is required to make an addition modification with 
21
 respect to such transaction under Section 
22
 203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or 
23
 203(d)(2)(D-8), but not to exceed the amount of such 
24
 addition modification, and (iii) any insurance premium 
25
 income (net of deductions allocable thereto) taken 
26
 into account for the taxable year with respect to a 
 


 






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1
 transaction with a taxpayer that is required to make an 
2
 addition modification with respect to such transaction 
3
 under Section 203(a)(2)(D-19), Section 
4
 203(b)(2)(E-14), Section 203(c)(2)(G-14), or Section 
5
 203(d)(2)(D-9), but not to exceed the amount of that 
6
 addition modification. This subparagraph (V) is exempt 
7
 from the provisions of Section 250;

8
   (W) An amount equal to the interest income taken 
9
 into account for the taxable year (net of the 
10
 deductions allocable thereto) with respect to 
11
 transactions with (i) a foreign person who would be a 
12
 member of the taxpayer's unitary business group but for 
13
 the fact that the foreign person's business activity 
14
 outside the United States is 80% or more of that 
15
 person's total business activity and (ii) for taxable 
16
 years ending on or after December 31, 2008, to a person 
17
 who would be a member of the same unitary business 
18
 group but for the fact that the person is prohibited 
19
 under Section 1501(a)(27) from being included in the 
20
 unitary business group because he or she is ordinarily 
21
 required to apportion business income under different 
22
 subsections of Section 304, but not to exceed the 
23
 addition modification required to be made for the same 
24
 taxable year under Section 203(b)(2)(E-12) for 
25
 interest paid, accrued, or incurred, directly or 
26
 indirectly, to the same person. This subparagraph (W) 
 


 






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1
 is exempt from the provisions of Section 250; and

2
   (X) An amount equal to the income from intangible 
3
 property taken into account for the taxable year (net 
4
 of the deductions allocable thereto) with respect to 
5
 transactions with (i) a foreign person who would be a 
6
 member of the taxpayer's unitary business group but for 
7
 the fact that the foreign person's business activity 
8
 outside the United States is 80% or more of that 
9
 person's total business activity and (ii) for taxable 
10
 years ending on or after December 31, 2008, to a person 
11
 who would be a member of the same unitary business 
12
 group but for the fact that the person is prohibited 
13
 under Section 1501(a)(27) from being included in the 
14
 unitary business group because he or she is ordinarily 
15
 required to apportion business income under different 
16
 subsections of Section 304, but not to exceed the 
17
 addition modification required to be made for the same 
18
 taxable year under Section 203(b)(2)(E-13) for 
19
 intangible expenses and costs paid, accrued, or 
20
 incurred, directly or indirectly, to the same foreign 
21
 person. This subparagraph (X) is exempt from the 
22
 provisions of Section 250.
(Y)

23
  (3) Special rule. For purposes of paragraph (2) (A), 
24
 "gross income"
in the case of a life insurance company, for 
25
 tax years ending on and after
December 31, 1994,
shall mean 
26
 the gross investment income for the taxable year.



 


 






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1
 (c) Trusts and estates.


2
  (1) In general. In the case of a trust or estate, base 
3
 income means
an amount equal to the taxpayer's taxable 
4
 income for the taxable year as
modified by paragraph (2).


5
  (2) Modifications. Subject to the provisions of 
6
 paragraph (3), the
taxable income referred to in paragraph 
7
 (1) shall be modified by adding
thereto the sum of the 
8
 following amounts:


9
   (A) An amount equal to all amounts paid or accrued 
10
 to the taxpayer
as interest or dividends during the 
11
 taxable year to the extent excluded
from gross income 
12
 in the computation of taxable income;


13
   (B) In the case of (i) an estate, $600; (ii) a 
14
 trust which, under
its governing instrument, is 
15
 required to distribute all of its income
currently, 
16
 $300; and (iii) any other trust, $100, but in each such 
17
 case,
only to the extent such amount was deducted in 
18
 the computation of
taxable income;


19
   (C) An amount equal to the amount of tax imposed by 
20
 this Act to the
extent deducted from gross income in 
21
 the computation of taxable income
for the taxable year;


22
   (D) The amount of any net operating loss deduction 
23
 taken in arriving at
taxable income, other than a net 
24
 operating loss carried forward from a
taxable year 
25
 ending prior to December 31, 1986;


 


 






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1
   (E) For taxable years in which a net operating loss 
2
 carryback or
carryforward from a taxable year ending 
3
 prior to December 31, 1986 is an
element of taxable 
4
 income under paragraph (1) of subsection (e) or 
5
 subparagraph
(E) of paragraph (2) of subsection (e), 
6
 the amount by which addition
modifications other than 
7
 those provided by this subparagraph (E) exceeded

8
 subtraction modifications in such taxable year, with 
9
 the following limitations
applied in the order that 
10
 they are listed:


11
    (i) the addition modification relating to the 
12
 net operating loss
carried back or forward to the 
13
 taxable year from any taxable year ending
prior to 
14
 December 31, 1986 shall be reduced by the amount of 
15
 addition
modification under this subparagraph (E) 
16
 which related to that net
operating loss and which 
17
 was taken into account in calculating the base

18
 income of an earlier taxable year, and


19
    (ii) the addition modification relating to the 
20
 net operating loss
carried back or forward to the 
21
 taxable year from any taxable year ending
prior to 
22
 December 31, 1986 shall not exceed the amount of 
23
 such carryback or
carryforward;


24
   For taxable years in which there is a net operating 
25
 loss carryback or
carryforward from more than one other 
26
 taxable year ending prior to December
31, 1986, the 
 


 






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1
 addition modification provided in this subparagraph 
2
 (E) shall
be the sum of the amounts computed 
3
 independently under the preceding
provisions of this 
4
 subparagraph (E) for each such taxable year;


5
   (F) For taxable years ending on or after January 1, 
6
 1989, an amount
equal to the tax deducted pursuant to 
7
 Section 164 of the Internal Revenue
Code if the trust 
8
 or estate is claiming the same tax for purposes of the

9
 Illinois foreign tax credit under Section 601 of this 
10
 Act;


11
   (G) An amount equal to the amount of the capital 
12
 gain deduction
allowable under the Internal Revenue 
13
 Code, to the extent deducted from
gross income in the 
14
 computation of taxable income;


15
   (G-5) For taxable years ending after December 31, 
16
 1997, an
amount equal to any eligible remediation costs 
17
 that the trust or estate
deducted in computing adjusted 
18
 gross income and for which the trust
or estate claims a 
19
 credit under subsection (l) of Section 201;


20
   (G-10) For taxable years 2001 and thereafter, an 
21
 amount equal to the
bonus depreciation deduction taken 
22
 on the taxpayer's federal income tax return for the 
23
 taxable
year under subsection (k) of Section 168 of the 
24
 Internal Revenue Code; and


25
   (G-11) If the taxpayer sells, transfers, abandons, 
26
 or otherwise disposes of property for which the 
 


 






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1
 taxpayer was required in any taxable year to
make an 
2
 addition modification under subparagraph (G-10), then 
3
 an amount equal
to the aggregate amount of the 
4
 deductions taken in all taxable
years under 
5
 subparagraph (R) with respect to that property.

6
   If the taxpayer continues to own property through 
7
 the last day of the last tax year for which the 
8
 taxpayer may claim a depreciation deduction for 
9
 federal income tax purposes and for which the taxpayer 
10
 was allowed in any taxable year to make a subtraction 
11
 modification under subparagraph (R), then an amount 
12
 equal to that subtraction modification.


13
   The taxpayer is required to make the addition 
14
 modification under this
subparagraph
only once with 
15
 respect to any one piece of property;

16
   (G-12) An amount equal to the amount otherwise 
17
 allowed as a deduction in computing base income for 
18
 interest paid, accrued, or incurred, directly or 
19
 indirectly, (i) for taxable years ending on or after 
20
 December 31, 2004, to a foreign person who would be a 
21
 member of the same unitary business group but for the 
22
 fact that the foreign person's business activity 
23
 outside the United States is 80% or more of the foreign 
24
 person's total business activity and (ii) for taxable 
25
 years ending on or after December 31, 2008, to a person 
26
 who would be a member of the same unitary business 
 


 






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1
 group but for the fact that the person is prohibited 
2
 under Section 1501(a)(27) from being included in the 
3
 unitary business group because he or she is ordinarily 
4
 required to apportion business income under different 
5
 subsections of Section 304. The addition modification 
6
 required by this subparagraph shall be reduced to the 
7
 extent that dividends were included in base income of 
8
 the unitary group for the same taxable year and 
9
 received by the taxpayer or by a member of the 
10
 taxpayer's unitary business group (including amounts 
11
 included in gross income pursuant to Sections 951 
12
 through 964 of the Internal Revenue Code and amounts 
13
 included in gross income under Section 78 of the 
14
 Internal Revenue Code) with respect to the stock of the 
15
 same person to whom the interest was paid, accrued, or 
16
 incurred.

17
   This paragraph shall not apply to the following:

18
    (i) an item of interest paid, accrued, or 
19
 incurred, directly or indirectly, to a person who 
20
 is subject in a foreign country or state, other 
21
 than a state which requires mandatory unitary 
22
 reporting, to a tax on or measured by net income 
23
 with respect to such interest; or
24
    (ii) an item of interest paid, accrued, or 
25
 incurred, directly or indirectly, to a person if 
26
 the taxpayer can establish, based on a 
 


 






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1
 preponderance of the evidence, both of the 
2
 following:
3
     (a) the person, during the same taxable 
4
 year, paid, accrued, or incurred, the interest 
5
 to a person that is not a related member, and
6
     (b) the transaction giving rise to the 
7
 interest expense between the taxpayer and the 
8
 person did not have as a principal purpose the 
9
 avoidance of Illinois income tax, and is paid 
10
 pursuant to a contract or agreement that 
11
 reflects an arm's-length interest rate and 
12
 terms; or

13
    (iii) the taxpayer can establish, based on 
14
 clear and convincing evidence, that the interest 
15
 paid, accrued, or incurred relates to a contract or 
16
 agreement entered into at arm's-length rates and 
17
 terms and the principal purpose for the payment is 
18
 not federal or Illinois tax avoidance; or

19
    (iv) an item of interest paid, accrued, or 
20
 incurred, directly or indirectly, to a person if 
21
 the taxpayer establishes by clear and convincing 
22
 evidence that the adjustments are unreasonable; or 
23
 if the taxpayer and the Director agree in writing 
24
 to the application or use of an alternative method 
25
 of apportionment under Section 304(f).

26
    Nothing in this subsection shall preclude the 
 


 






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1
 Director from making any other adjustment 
2
 otherwise allowed under Section 404 of this Act for 
3
 any tax year beginning after the effective date of 
4
 this amendment provided such adjustment is made 
5
 pursuant to regulation adopted by the Department 
6
 and such regulations provide methods and standards 
7
 by which the Department will utilize its authority 
8
 under Section 404 of this Act;

9
   (G-13) An amount equal to the amount of intangible 
10
 expenses and costs otherwise allowed as a deduction in 
11
 computing base income, and that were paid, accrued, or 
12
 incurred, directly or indirectly, (i) for taxable 
13
 years ending on or after December 31, 2004, to a 
14
 foreign person who would be a member of the same 
15
 unitary business group but for the fact that the 
16
 foreign person's business activity outside the United 
17
 States is 80% or more of that person's total business 
18
 activity and (ii) for taxable years ending on or after 
19
 December 31, 2008, to a person who would be a member of 
20
 the same unitary business group but for the fact that 
21
 the person is prohibited under Section 1501(a)(27) 
22
 from being included in the unitary business group 
23
 because he or she is ordinarily required to apportion 
24
 business income under different subsections of Section 
25
 304. The addition modification required by this 
26
 subparagraph shall be reduced to the extent that 
 


 






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1
 dividends were included in base income of the unitary 
2
 group for the same taxable year and received by the 
3
 taxpayer or by a member of the taxpayer's unitary 
4
 business group (including amounts included in gross 
5
 income pursuant to Sections 951 through 964 of the 
6
 Internal Revenue Code and amounts included in gross 
7
 income under Section 78 of the Internal Revenue Code) 
8
 with respect to the stock of the same person to whom 
9
 the intangible expenses and costs were directly or 
10
 indirectly paid, incurred, or accrued. The preceding 
11
 sentence shall not apply to the extent that the same 
12
 dividends caused a reduction to the addition 
13
 modification required under Section 203(c)(2)(G-12) of 
14
 this Act. As used in this subparagraph, the term 
15
 "intangible expenses and costs" includes: (1) 
16
 expenses, losses, and costs for or related to the 
17
 direct or indirect acquisition, use, maintenance or 
18
 management, ownership, sale, exchange, or any other 
19
 disposition of intangible property; (2) losses 
20
 incurred, directly or indirectly, from factoring 
21
 transactions or discounting transactions; (3) royalty, 
22
 patent, technical, and copyright fees; (4) licensing 
23
 fees; and (5) other similar expenses and costs. For 
24
 purposes of this subparagraph, "intangible property" 
25
 includes patents, patent applications, trade names, 
26
 trademarks, service marks, copyrights, mask works, 
 


 






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1
 trade secrets, and similar types of intangible assets.
2
   This paragraph shall not apply to the following:
3
    (i) any item of intangible expenses or costs 
4
 paid, accrued, or incurred, directly or 
5
 indirectly, from a transaction with a person who is 
6
 subject in a foreign country or state, other than a 
7
 state which requires mandatory unitary reporting, 
8
 to a tax on or measured by net income with respect 
9
 to such item; or
10
    (ii) any item of intangible expense or cost 
11
 paid, accrued, or incurred, directly or 
12
 indirectly, if the taxpayer can establish, based 
13
 on a preponderance of the evidence, both of the 
14
 following:
15
     (a) the person during the same taxable 
16
 year paid, accrued, or incurred, the 
17
 intangible expense or cost to a person that is 
18
 not a related member, and
19
     (b) the transaction giving rise to the 
20
 intangible expense or cost between the 
21
 taxpayer and the person did not have as a 
22
 principal purpose the avoidance of Illinois 
23
 income tax, and is paid pursuant to a contract 
24
 or agreement that reflects arm's-length terms; 
25
 or
26
    (iii) any item of intangible expense or cost 
 


 






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1
 paid, accrued, or incurred, directly or 
2
 indirectly, from a transaction with a person if the 
3
 taxpayer establishes by clear and convincing 
4
 evidence, that the adjustments are unreasonable; 
5
 or if the taxpayer and the Director agree in 
6
 writing to the application or use of an alternative 
7
 method of apportionment under Section 304(f);

8
    Nothing in this subsection shall preclude the 
9
 Director from making any other adjustment 
10
 otherwise allowed under Section 404 of this Act for 
11
 any tax year beginning after the effective date of 
12
 this amendment provided such adjustment is made 
13
 pursuant to regulation adopted by the Department 
14
 and such regulations provide methods and standards 
15
 by which the Department will utilize its authority 
16
 under Section 404 of this Act;

17
   (G-14) For taxable years ending on or after 
18
 December 31, 2008, an amount equal to the amount of 
19
 insurance premium expenses and costs otherwise allowed 
20
 as a deduction in computing base income, and that were 
21
 paid, accrued, or incurred, directly or indirectly, to 
22
 a person who would be a member of the same unitary 
23
 business group but for the fact that the person is 
24
 prohibited under Section 1501(a)(27) from being 
25
 included in the unitary business group because he or 
26
 she is ordinarily required to apportion business 
 


 






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1
 income under different subsections of Section 304. The 
2
 addition modification required by this subparagraph 
3
 shall be reduced to the extent that dividends were 
4
 included in base income of the unitary group for the 
5
 same taxable year and received by the taxpayer or by a 
6
 member of the taxpayer's unitary business group 
7
 (including amounts included in gross income under 
8
 Sections 951 through 964 of the Internal Revenue Code 
9
 and amounts included in gross income under Section 78 
10
 of the Internal Revenue Code) with respect to the stock 
11
 of the same person to whom the premiums and costs were 
12
 directly or indirectly paid, incurred, or accrued. The 
13
 preceding sentence does not apply to the extent that 
14
 the same dividends caused a reduction to the addition 
15
 modification required under Section 203(c)(2)(G-12) or 
16
 Section 203(c)(2)(G-13) of this Act.

17
 and by deducting from the total so obtained the sum of the 
18
 following
amounts:


19
   (H) An amount equal to all amounts included in such 
20
 total pursuant
to the provisions of Sections 402(a), 
21
 402(c), 403(a), 403(b), 406(a), 407(a)
and 408 of the 
22
 Internal Revenue Code or included in such total as

23
 distributions under the provisions of any retirement 
24
 or disability plan for
employees of any governmental 
25
 agency or unit, or retirement payments to
retired 
26
 partners, which payments are excluded in computing net 
 


 






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1
 earnings
from self employment by Section 1402 of the 
2
 Internal Revenue Code and
regulations adopted pursuant 
3
 thereto;


4
   (I) The valuation limitation amount;


5
   (J) An amount equal to the amount of any tax 
6
 imposed by this Act
which was refunded to the taxpayer 
7
 and included in such total for the
taxable year;


8
   (K) An amount equal to all amounts included in 
9
 taxable income as
modified by subparagraphs (A), (B), 
10
 (C), (D), (E), (F) and (G) which
are exempt from 
11
 taxation by this State either by reason of its statutes 
12
 or
Constitution
or by reason of the Constitution, 
13
 treaties or statutes of the United States;
provided 
14
 that, in the case of any statute of this State that 
15
 exempts income
derived from bonds or other obligations 
16
 from the tax imposed under this Act,
the amount 
17
 exempted shall be the interest net of bond premium 
18
 amortization;


19
   (L) With the exception of any amounts subtracted 
20
 under subparagraph
(K),
an amount equal to the sum of 
21
 all amounts disallowed as
deductions by (i) Sections 
22
 171(a) (2) and 265(a)(2) of the Internal Revenue
Code, 
23
 as now or hereafter amended, and all amounts of 
24
 expenses allocable
to interest and disallowed as 
25
 deductions by Section 265(1) of the Internal
Revenue 
26
 Code of 1954, as now or hereafter amended;
and (ii) for 
 


 






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1
 taxable years
ending on or after August 13, 1999, 
2
 Sections
171(a)(2), 265,
280C, and 832(b)(5)(B)(i) of 
3
 the Internal Revenue Code; the provisions of this

4
 subparagraph are exempt from the provisions of Section 
5
 250;


6
   (M) An amount equal to those dividends included in 
7
 such total
which were paid by a corporation which 
8
 conducts business operations in an
Enterprise Zone or 
9
 zones created under the Illinois Enterprise Zone Act or 
10
 a River Edge Redevelopment Zone or zones created under 
11
 the River Edge Redevelopment Zone Act and
conducts 
12
 substantially all of its operations in an Enterprise 
13
 Zone or Zones or a River Edge Redevelopment Zone or 
14
 zones. This subparagraph (M) is exempt from the 
15
 provisions of Section 250;


16
   (N) An amount equal to any contribution made to a 
17
 job training
project established pursuant to the Tax 
18
 Increment Allocation
Redevelopment Act;


19
   (O) An amount equal to those dividends included in 
20
 such total
that were paid by a corporation that 
21
 conducts business operations in a
federally designated 
22
 Foreign Trade Zone or Sub-Zone and that is designated
a 
23
 High Impact Business located in Illinois; provided 
24
 that dividends eligible
for the deduction provided in 
25
 subparagraph (M) of paragraph (2) of this
subsection 
26
 shall not be eligible for the deduction provided under 
 


 






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1
 this
subparagraph (O);


2
   (P) An amount equal to the amount of the deduction 
3
 used to compute the
federal income tax credit for 
4
 restoration of substantial amounts held under
claim of 
5
 right for the taxable year pursuant to Section 1341 of 
6
 the
Internal Revenue Code of 1986;


7
   (Q) For taxable year 1999 and thereafter, an amount 
8
 equal to the
amount of any
(i) distributions, to the 
9
 extent includible in gross income for
federal income 
10
 tax purposes, made to the taxpayer because of
his or 
11
 her status as a victim of
persecution for racial or 
12
 religious reasons by Nazi Germany or any other Axis

13
 regime or as an heir of the victim and (ii) items
of 
14
 income, to the extent
includible in gross income for 
15
 federal income tax purposes, attributable to,
derived 
16
 from or in any way related to assets stolen from, 
17
 hidden from, or
otherwise lost to a victim of

18
 persecution for racial or religious reasons by Nazi

19
 Germany or any other Axis regime
immediately prior to, 
20
 during, and immediately after World War II, including,

21
 but
not limited to, interest on the proceeds receivable 
22
 as insurance
under policies issued to a victim of 
23
 persecution for racial or religious
reasons by Nazi 
24
 Germany or any other Axis regime by European insurance

25
 companies
immediately prior to and during World War II;

26
 provided, however, this subtraction from federal 
 


 






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1
 adjusted gross income does not
apply to assets acquired 
2
 with such assets or with the proceeds from the sale of

3
 such assets; provided, further, this paragraph shall 
4
 only apply to a taxpayer
who was the first recipient of 
5
 such assets after their recovery and who is a
victim of

6
 persecution for racial or religious reasons
by Nazi 
7
 Germany or any other Axis regime or as an heir of the 
8
 victim. The
amount of and the eligibility for any 
9
 public assistance, benefit, or
similar entitlement is 
10
 not affected by the inclusion of items (i) and (ii) of

11
 this paragraph in gross income for federal income tax 
12
 purposes.
This paragraph is exempt from the provisions 
13
 of Section 250;


14
   (R) For taxable years 2001 and thereafter, for the 
15
 taxable year in
which the bonus depreciation deduction

16
 is taken on the taxpayer's federal income tax return 
17
 under
subsection (k) of Section 168 of the Internal 
18
 Revenue Code and for each
applicable taxable year 
19
 thereafter, an amount equal to "x", where:


20
    (1) "y" equals the amount of the depreciation 
21
 deduction taken for the
taxable year
on the 
22
 taxpayer's federal income tax return on property 
23
 for which the bonus
depreciation deduction
was 
24
 taken in any year under subsection (k) of Section 
25
 168 of the Internal
Revenue Code, but not including 
26
 the bonus depreciation deduction;


 


 






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1
    (2) for taxable years ending on or before 
2
 December 31, 2005, "x" equals "y" multiplied by 30 
3
 and then divided by 70 (or "y"
multiplied by 
4
 0.429); and
5
    (3) for taxable years ending after December 
6
 31, 2005:
7
     (i) for property on which a bonus 
8
 depreciation deduction of 30% of the adjusted 
9
 basis was taken, "x" equals "y" multiplied by 
10
 30 and then divided by 70 (or "y"
multiplied by 
11
 0.429); and
12
     (ii) for property on which a bonus 
13
 depreciation deduction of 50% of the adjusted 
14
 basis was taken, "x" equals "y" multiplied by 
15
 1.0.


16
   The aggregate amount deducted under this 
17
 subparagraph in all taxable
years for any one piece of 
18
 property may not exceed the amount of the bonus

19
 depreciation deduction
taken on that property on the 
20
 taxpayer's federal income tax return under
subsection 
21
 (k) of Section 168 of the Internal Revenue Code. This 
22
 subparagraph (R) is exempt from the provisions of 
23
 Section 250;


24
   (S) If the taxpayer sells, transfers, abandons, or 
25
 otherwise disposes of
property for which the taxpayer 
26
 was required in any taxable year to make an
addition 
 


 






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1
 modification under subparagraph (G-10), then an amount 
2
 equal to that
addition modification.

3
   If the taxpayer continues to own property through 
4
 the last day of the last tax year for which the 
5
 taxpayer may claim a depreciation deduction for 
6
 federal income tax purposes and for which the taxpayer 
7
 was required in any taxable year to make an addition 
8
 modification under subparagraph (G-10), then an amount 
9
 equal to that addition modification.


10
   The taxpayer is allowed to take the deduction under 
11
 this subparagraph
only once with respect to any one 
12
 piece of property.
13
   This subparagraph (S) is exempt from the 
14
 provisions of Section 250;

15
   (T) The amount of (i) any interest income (net of 
16
 the deductions allocable thereto) taken into account 
17
 for the taxable year with respect to a transaction with 
18
 a taxpayer that is required to make an addition 
19
 modification with respect to such transaction under 
20
 Section 203(a)(2)(D-17), 203(b)(2)(E-12), 
21
 203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed 
22
 the amount of such addition modification and
(ii) any 
23
 income from intangible property (net of the deductions 
24
 allocable thereto) taken into account for the taxable 
25
 year with respect to a transaction with a taxpayer that 
26
 is required to make an addition modification with 
 


 






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1
 respect to such transaction under Section 
2
 203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or 
3
 203(d)(2)(D-8), but not to exceed the amount of such 
4
 addition modification. This subparagraph (T) is exempt 
5
 from the provisions of Section 250;

6
   (U) An amount equal to the interest income taken 
7
 into account for the taxable year (net of the 
8
 deductions allocable thereto) with respect to 
9
 transactions with (i) a foreign person who would be a 
10
 member of the taxpayer's unitary business group but for 
11
 the fact the foreign person's business activity 
12
 outside the United States is 80% or more of that 
13
 person's total business activity and (ii) for taxable 
14
 years ending on or after December 31, 2008, to a person 
15
 who would be a member of the same unitary business 
16
 group but for the fact that the person is prohibited 
17
 under Section 1501(a)(27) from being included in the 
18
 unitary business group because he or she is ordinarily 
19
 required to apportion business income under different 
20
 subsections of Section 304, but not to exceed the 
21
 addition modification required to be made for the same 
22
 taxable year under Section 203(c)(2)(G-12) for 
23
 interest paid, accrued, or incurred, directly or 
24
 indirectly, to the same person. This subparagraph (U) 
25
 is exempt from the provisions of Section 250; and 
26
   (V) An amount equal to the income from intangible 
 


 






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1
 property taken into account for the taxable year (net 
2
 of the deductions allocable thereto) with respect to 
3
 transactions with (i) a foreign person who would be a 
4
 member of the taxpayer's unitary business group but for 
5
 the fact that the foreign person's business activity 
6
 outside the United States is 80% or more of that 
7
 person's total business activity and (ii) for taxable 
8
 years ending on or after December 31, 2008, to a person 
9
 who would be a member of the same unitary business 
10
 group but for the fact that the person is prohibited 
11
 under Section 1501(a)(27) from being included in the 
12
 unitary business group because he or she is ordinarily 
13
 required to apportion business income under different 
14
 subsections of Section 304, but not to exceed the 
15
 addition modification required to be made for the same 
16
 taxable year under Section 203(c)(2)(G-13) for 
17
 intangible expenses and costs paid, accrued, or 
18
 incurred, directly or indirectly, to the same foreign 
19
 person. This subparagraph (V) is exempt from the 
20
 provisions of Section 250.
(W)

21
  (3) Limitation. The amount of any modification 
22
 otherwise required
under this subsection shall, under 
23
 regulations prescribed by the
Department, be adjusted by 
24
 any amounts included therein which were
properly paid, 
25
 credited, or required to be distributed, or permanently set

26
 aside for charitable purposes pursuant to Internal Revenue 
 


 






HB1123
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1
 Code Section
642(c) during the taxable year.



2
 (d) Partnerships.


3
  (1) In general. In the case of a partnership, base 
4
 income means an
amount equal to the taxpayer's taxable 
5
 income for the taxable year as
modified by paragraph (2).


6
  (2) Modifications. The taxable income referred to in 
7
 paragraph (1)
shall be modified by adding thereto the sum 
8
 of the following amounts:


9
   (A) An amount equal to all amounts paid or accrued 
10
 to the taxpayer as
interest or dividends during the 
11
 taxable year to the extent excluded from
gross income 
12
 in the computation of taxable income;


13
   (B) An amount equal to the amount of tax imposed by 
14
 this Act to the
extent deducted from gross income for 
15
 the taxable year;


16
   (C) The amount of deductions allowed to the 
17
 partnership pursuant to
Section 707 (c) of the Internal 
18
 Revenue Code in calculating its taxable income;


19
   (D) An amount equal to the amount of the capital 
20
 gain deduction
allowable under the Internal Revenue 
21
 Code, to the extent deducted from
gross income in the 
22
 computation of taxable income;


23
   (D-5) For taxable years 2001 and thereafter, an 
24
 amount equal to the
bonus depreciation deduction taken 
25
 on the taxpayer's federal income tax return for the 
 


 






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1
 taxable
year under subsection (k) of Section 168 of the 
2
 Internal Revenue Code;


3
   (D-6) If the taxpayer sells, transfers, abandons, 
4
 or otherwise disposes of
property for which the 
5
 taxpayer was required in any taxable year to make an

6
 addition modification under subparagraph (D-5), then 
7
 an amount equal to the
aggregate amount of the 
8
 deductions taken in all taxable years
under 
9
 subparagraph (O) with respect to that property.

10
   If the taxpayer continues to own property through 
11
 the last day of the last tax year for which the 
12
 taxpayer may claim a depreciation deduction for 
13
 federal income tax purposes and for which the taxpayer 
14
 was allowed in any taxable year to make a subtraction 
15
 modification under subparagraph (O), then an amount 
16
 equal to that subtraction modification.


17
   The taxpayer is required to make the addition 
18
 modification under this
subparagraph
only once with 
19
 respect to any one piece of property;

20
   (D-7) An amount equal to the amount otherwise 
21
 allowed as a deduction in computing base income for 
22
 interest paid, accrued, or incurred, directly or 
23
 indirectly, (i) for taxable years ending on or after 
24
 December 31, 2004, to a foreign person who would be a 
25
 member of the same unitary business group but for the 
26
 fact the foreign person's business activity outside 
 


 






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1
 the United States is 80% or more of the foreign 
2
 person's total business activity and (ii) for taxable 
3
 years ending on or after December 31, 2008, to a person 
4
 who would be a member of the same unitary business 
5
 group but for the fact that the person is prohibited 
6
 under Section 1501(a)(27) from being included in the 
7
 unitary business group because he or she is ordinarily 
8
 required to apportion business income under different 
9
 subsections of Section 304. The addition modification 
10
 required by this subparagraph shall be reduced to the 
11
 extent that dividends were included in base income of 
12
 the unitary group for the same taxable year and 
13
 received by the taxpayer or by a member of the 
14
 taxpayer's unitary business group (including amounts 
15
 included in gross income pursuant to Sections 951 
16
 through 964 of the Internal Revenue Code and amounts 
17
 included in gross income under Section 78 of the 
18
 Internal Revenue Code) with respect to the stock of the 
19
 same person to whom the interest was paid, accrued, or 
20
 incurred.

21
   This paragraph shall not apply to the following:

22
    (i) an item of interest paid, accrued, or 
23
 incurred, directly or indirectly, to a person who 
24
 is subject in a foreign country or state, other 
25
 than a state which requires mandatory unitary 
26
 reporting, to a tax on or measured by net income 
 


 






HB1123
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1
 with respect to such interest; or
2
    (ii) an item of interest paid, accrued, or 
3
 incurred, directly or indirectly, to a person if 
4
 the taxpayer can establish, based on a 
5
 preponderance of the evidence, both of the 
6
 following:
7
     (a) the person, during the same taxable 
8
 year, paid, accrued, or incurred, the interest 
9
 to a person that is not a related member, and
10
     (b) the transaction giving rise to the 
11
 interest expense between the taxpayer and the 
12
 person did not have as a principal purpose the 
13
 avoidance of Illinois income tax, and is paid 
14
 pursuant to a contract or agreement that 
15
 reflects an arm's-length interest rate and 
16
 terms; or

17
    (iii) the taxpayer can establish, based on 
18
 clear and convincing evidence, that the interest 
19
 paid, accrued, or incurred relates to a contract or 
20
 agreement entered into at arm's-length rates and 
21
 terms and the principal purpose for the payment is 
22
 not federal or Illinois tax avoidance; or

23
    (iv) an item of interest paid, accrued, or 
24
 incurred, directly or indirectly, to a person if 
25
 the taxpayer establishes by clear and convincing 
26
 evidence that the adjustments are unreasonable; or 
 


 






HB1123
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1
 if the taxpayer and the Director agree in writing 
2
 to the application or use of an alternative method 
3
 of apportionment under Section 304(f).

4
    Nothing in this subsection shall preclude the 
5
 Director from making any other adjustment 
6
 otherwise allowed under Section 404 of this Act for 
7
 any tax year beginning after the effective date of 
8
 this amendment provided such adjustment is made 
9
 pursuant to regulation adopted by the Department 
10
 and such regulations provide methods and standards 
11
 by which the Department will utilize its authority 
12
 under Section 404 of this Act; and

13
   (D-8) An amount equal to the amount of intangible 
14
 expenses and costs otherwise allowed as a deduction in 
15
 computing base income, and that were paid, accrued, or 
16
 incurred, directly or indirectly, (i) for taxable 
17
 years ending on or after December 31, 2004, to a 
18
 foreign person who would be a member of the same 
19
 unitary business group but for the fact that the 
20
 foreign person's business activity outside the United 
21
 States is 80% or more of that person's total business 
22
 activity and (ii) for taxable years ending on or after 
23
 December 31, 2008, to a person who would be a member of 
24
 the same unitary business group but for the fact that 
25
 the person is prohibited under Section 1501(a)(27) 
26
 from being included in the unitary business group 
 


 






HB1123
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1
 because he or she is ordinarily required to apportion 
2
 business income under different subsections of Section 
3
 304. The addition modification required by this 
4
 subparagraph shall be reduced to the extent that 
5
 dividends were included in base income of the unitary 
6
 group for the same taxable year and received by the 
7
 taxpayer or by a member of the taxpayer's unitary 
8
 business group (including amounts included in gross 
9
 income pursuant to Sections 951 through 964 of the 
10
 Internal Revenue Code and amounts included in gross 
11
 income under Section 78 of the Internal Revenue Code) 
12
 with respect to the stock of the same person to whom 
13
 the intangible expenses and costs were directly or 
14
 indirectly paid, incurred or accrued. The preceding 
15
 sentence shall not apply to the extent that the same 
16
 dividends caused a reduction to the addition 
17
 modification required under Section 203(d)(2)(D-7) of 
18
 this Act. As used in this subparagraph, the term 
19
 "intangible expenses and costs" includes (1) expenses, 
20
 losses, and costs for, or related to, the direct or 
21
 indirect acquisition, use, maintenance or management, 
22
 ownership, sale, exchange, or any other disposition of 
23
 intangible property; (2) losses incurred, directly or 
24
 indirectly, from factoring transactions or discounting 
25
 transactions; (3) royalty, patent, technical, and 
26
 copyright fees; (4) licensing fees; and (5) other 
 


 






HB1123
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1
 similar expenses and costs. For purposes of this 
2
 subparagraph, "intangible property" includes patents, 
3
 patent applications, trade names, trademarks, service 
4
 marks, copyrights, mask works, trade secrets, and 
5
 similar types of intangible assets;
6
   This paragraph shall not apply to the following:
7
    (i) any item of intangible expenses or costs 
8
 paid, accrued, or incurred, directly or 
9
 indirectly, from a transaction with a person who is 
10
 subject in a foreign country or state, other than a 
11
 state which requires mandatory unitary reporting, 
12
 to a tax on or measured by net income with respect 
13
 to such item; or
14
    (ii) any item of intangible expense or cost 
15
 paid, accrued, or incurred, directly or 
16
 indirectly, if the taxpayer can establish, based 
17
 on a preponderance of the evidence, both of the 
18
 following:
19
     (a) the person during the same taxable 
20
 year paid, accrued, or incurred, the 
21
 intangible expense or cost to a person that is 
22
 not a related member, and
23
     (b) the transaction giving rise to the 
24
 intangible expense or cost between the 
25
 taxpayer and the person did not have as a 
26
 principal purpose the avoidance of Illinois 
 


 






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1
 income tax, and is paid pursuant to a contract 
2
 or agreement that reflects arm's-length terms; 
3
 or
4
    (iii) any item of intangible expense or cost 
5
 paid, accrued, or incurred, directly or 
6
 indirectly, from a transaction with a person if the 
7
 taxpayer establishes by clear and convincing 
8
 evidence, that the adjustments are unreasonable; 
9
 or if the taxpayer and the Director agree in 
10
 writing to the application or use of an alternative 
11
 method of apportionment under Section 304(f);

12
    Nothing in this subsection shall preclude the 
13
 Director from making any other adjustment 
14
 otherwise allowed under Section 404 of this Act for 
15
 any tax year beginning after the effective date of 
16
 this amendment provided such adjustment is made 
17
 pursuant to regulation adopted by the Department 
18
 and such regulations provide methods and standards 
19
 by which the Department will utilize its authority 
20
 under Section 404 of this Act;

21
   (D-9) For taxable years ending on or after December 
22
 31, 2008, an amount equal to the amount of insurance 
23
 premium expenses and costs otherwise allowed as a 
24
 deduction in computing base income, and that were paid, 
25
 accrued, or incurred, directly or indirectly, to a 
26
 person who would be a member of the same unitary 
 


 






HB1123
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LRB096 10292 RCE 20462 b





1
 business group but for the fact that the person is 
2
 prohibited under Section 1501(a)(27) from being 
3
 included in the unitary business group because he or 
4
 she is ordinarily required to apportion business 
5
 income under different subsections of Section 304. The 
6
 addition modification required by this subparagraph 
7
 shall be reduced to the extent that dividends were 
8
 included in base income of the unitary group for the 
9
 same taxable year and received by the taxpayer or by a 
10
 member of the taxpayer's unitary business group 
11
 (including amounts included in gross income under 
12
 Sections 951 through 964 of the Internal Revenue Code 
13
 and amounts included in gross income under Section 78 
14
 of the Internal Revenue Code) with respect to the stock 
15
 of the same person to whom the premiums and costs were 
16
 directly or indirectly paid, incurred, or accrued. The 
17
 preceding sentence does not apply to the extent that 
18
 the same dividends caused a reduction to the addition 
19
 modification required under Section 203(d)(2)(D-7) or 
20
 Section 203(d)(2)(D-8) of this Act.

21
 and by deducting from the total so obtained the following 
22
 amounts:


23
   (E) The valuation limitation amount;


24
   (F) An amount equal to the amount of any tax 
25
 imposed by this Act which
was refunded to the taxpayer 
26
 and included in such total for the taxable year;


 


 






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1
   (G) An amount equal to all amounts included in 
2
 taxable income as
modified by subparagraphs (A), (B), 
3
 (C) and (D) which are exempt from
taxation by this 
4
 State either by reason of its statutes or Constitution 
5
 or
by reason of
the Constitution, treaties or statutes 
6
 of the United States;
provided that, in the case of any 
7
 statute of this State that exempts income
derived from 
8
 bonds or other obligations from the tax imposed under 
9
 this Act,
the amount exempted shall be the interest net 
10
 of bond premium amortization;


11
   (H) Any income of the partnership which 
12
 constitutes personal service
income as defined in 
13
 Section 1348 (b) (1) of the Internal Revenue Code (as

14
 in effect December 31, 1981) or a reasonable allowance 
15
 for compensation
paid or accrued for services rendered 
16
 by partners to the partnership,
whichever is greater;


17
   (I) An amount equal to all amounts of income 
18
 distributable to an entity
subject to the Personal 
19
 Property Tax Replacement Income Tax imposed by

20
 subsections (c) and (d) of Section 201 of this Act 
21
 including amounts
distributable to organizations 
22
 exempt from federal income tax by reason of
Section 
23
 501(a) of the Internal Revenue Code;


24
   (J) With the exception of any amounts subtracted 
25
 under subparagraph
(G),
an amount equal to the sum of 
26
 all amounts disallowed as deductions
by (i) Sections 
 


 






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1
 171(a) (2), and 265(2) of the Internal Revenue Code of 
2
 1954,
as now or hereafter amended, and all amounts of 
3
 expenses allocable to
interest and disallowed as 
4
 deductions by Section 265(1) of the Internal
Revenue 
5
 Code, as now or hereafter amended;
and (ii) for taxable 
6
 years
ending on or after August 13, 1999, Sections

7
 171(a)(2), 265,
280C, and 832(b)(5)(B)(i) of the 
8
 Internal Revenue Code; the provisions of this

9
 subparagraph are exempt from the provisions of Section 
10
 250;


11
   (K) An amount equal to those dividends included in 
12
 such total which were
paid by a corporation which 
13
 conducts business operations in an Enterprise
Zone or 
14
 zones created under the Illinois Enterprise Zone Act, 
15
 enacted by
the 82nd General Assembly, or a River Edge 
16
 Redevelopment Zone or zones created under the River 
17
 Edge Redevelopment Zone Act and
conducts substantially 
18
 all of its operations
in an Enterprise Zone or Zones or 
19
 from a River Edge Redevelopment Zone or zones. This 
20
 subparagraph (K) is exempt from the provisions of 
21
 Section 250;


22
   (L) An amount equal to any contribution made to a 
23
 job training project
established pursuant to the Real 
24
 Property Tax Increment Allocation
Redevelopment Act;


25
   (M) An amount equal to those dividends included in 
26
 such total
that were paid by a corporation that 
 


 






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1
 conducts business operations in a
federally designated 
2
 Foreign Trade Zone or Sub-Zone and that is designated a

3
 High Impact Business located in Illinois; provided 
4
 that dividends eligible
for the deduction provided in 
5
 subparagraph (K) of paragraph (2) of this
subsection 
6
 shall not be eligible for the deduction provided under 
7
 this
subparagraph (M);


8
   (N) An amount equal to the amount of the deduction 
9
 used to compute the
federal income tax credit for 
10
 restoration of substantial amounts held under
claim of 
11
 right for the taxable year pursuant to Section 1341 of 
12
 the
Internal Revenue Code of 1986;


13
   (O) For taxable years 2001 and thereafter, for the 
14
 taxable year in
which the bonus depreciation deduction

15
 is taken on the taxpayer's federal income tax return 
16
 under
subsection (k) of Section 168 of the Internal 
17
 Revenue Code and for each
applicable taxable year 
18
 thereafter, an amount equal to "x", where:


19
    (1) "y" equals the amount of the depreciation 
20
 deduction taken for the
taxable year
on the 
21
 taxpayer's federal income tax return on property 
22
 for which the bonus
depreciation deduction
was 
23
 taken in any year under subsection (k) of Section 
24
 168 of the Internal
Revenue Code, but not including 
25
 the bonus depreciation deduction;


26
    (2) for taxable years ending on or before 
 


 






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1
 December 31, 2005, "x" equals "y" multiplied by 30 
2
 and then divided by 70 (or "y"
multiplied by 
3
 0.429); and
4
    (3) for taxable years ending after December 
5
 31, 2005:
6
     (i) for property on which a bonus 
7
 depreciation deduction of 30% of the adjusted 
8
 basis was taken, "x" equals "y" multiplied by 
9
 30 and then divided by 70 (or "y"
multiplied by 
10
 0.429); and
11
     (ii) for property on which a bonus 
12
 depreciation deduction of 50% of the adjusted 
13
 basis was taken, "x" equals "y" multiplied by 
14
 1.0.


15
   The aggregate amount deducted under this 
16
 subparagraph in all taxable
years for any one piece of 
17
 property may not exceed the amount of the bonus

18
 depreciation deduction
taken on that property on the 
19
 taxpayer's federal income tax return under
subsection 
20
 (k) of Section 168 of the Internal Revenue Code. This 
21
 subparagraph (O) is exempt from the provisions of 
22
 Section 250;


23
   (P) If the taxpayer sells, transfers, abandons, or 
24
 otherwise disposes of
property for which the taxpayer 
25
 was required in any taxable year to make an
addition 
26
 modification under subparagraph (D-5), then an amount 
 


 






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1
 equal to that
addition modification.

2
   If the taxpayer continues to own property through 
3
 the last day of the last tax year for which the 
4
 taxpayer may claim a depreciation deduction for 
5
 federal income tax purposes and for which the taxpayer 
6
 was required in any taxable year to make an addition 
7
 modification under subparagraph (D-5), then an amount 
8
 equal to that addition modification.


9
   The taxpayer is allowed to take the deduction under 
10
 this subparagraph
only once with respect to any one 
11
 piece of property.
12
   This subparagraph (P) is exempt from the 
13
 provisions of Section 250;

14
   (Q) The amount of (i) any interest income (net of 
15
 the deductions allocable thereto) taken into account 
16
 for the taxable year with respect to a transaction with 
17
 a taxpayer that is required to make an addition 
18
 modification with respect to such transaction under 
19
 Section 203(a)(2)(D-17), 203(b)(2)(E-12), 
20
 203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed 
21
 the amount of such addition modification and
(ii) any 
22
 income from intangible property (net of the deductions 
23
 allocable thereto) taken into account for the taxable 
24
 year with respect to a transaction with a taxpayer that 
25
 is required to make an addition modification with 
26
 respect to such transaction under Section 
 


 






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1
 203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or 
2
 203(d)(2)(D-8), but not to exceed the amount of such 
3
 addition modification. This subparagraph (Q) is exempt 
4
 from Section 250;

5
   (R) An amount equal to the interest income taken 
6
 into account for the taxable year (net of the 
7
 deductions allocable thereto) with respect to 
8
 transactions with (i) a foreign person who would be a 
9
 member of the taxpayer's unitary business group but for 
10
 the fact that the foreign person's business activity 
11
 outside the United States is 80% or more of that 
12
 person's total business activity and (ii) for taxable 
13
 years ending on or after December 31, 2008, to a person 
14
 who would be a member of the same unitary business 
15
 group but for the fact that the person is prohibited 
16
 under Section 1501(a)(27) from being included in the 
17
 unitary business group because he or she is ordinarily 
18
 required to apportion business income under different 
19
 subsections of Section 304, but not to exceed the 
20
 addition modification required to be made for the same 
21
 taxable year under Section 203(d)(2)(D-7) for interest 
22
 paid, accrued, or incurred, directly or indirectly, to 
23
 the same person. This subparagraph (R) is exempt from 
24
 Section 250; and 
25
   (S) An amount equal to the income from intangible 
26
 property taken into account for the taxable year (net 
 


 






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1
 of the deductions allocable thereto) with respect to 
2
 transactions with (i) a foreign person who would be a 
3
 member of the taxpayer's unitary business group but for 
4
 the fact that the foreign person's business activity 
5
 outside the United States is 80% or more of that 
6
 person's total business activity and (ii) for taxable 
7
 years ending on or after December 31, 2008, to a person 
8
 who would be a member of the same unitary business 
9
 group but for the fact that the person is prohibited 
10
 under Section 1501(a)(27) from being included in the 
11
 unitary business group because he or she is ordinarily 
12
 required to apportion business income under different 
13
 subsections of Section 304, but not to exceed the 
14
 addition modification required to be made for the same 
15
 taxable year under Section 203(d)(2)(D-8) for 
16
 intangible expenses and costs paid, accrued, or 
17
 incurred, directly or indirectly, to the same person. 
18
 This subparagraph (S) is exempt from Section 250.
(T)


19
 (e) Gross income; adjusted gross income; taxable income.


20
  (1) In general. Subject to the provisions of paragraph 
21
 (2) and
subsection (b) (3), for purposes of this Section 
22
 and Section 803(e), a
taxpayer's gross income, adjusted 
23
 gross income, or taxable income for
the taxable year shall 
24
 mean the amount of gross income, adjusted gross
income or 
25
 taxable income properly reportable for federal income tax

 


 






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1
 purposes for the taxable year under the provisions of the 
2
 Internal
Revenue Code. Taxable income may be less than 
3
 zero. However, for taxable
years ending on or after 
4
 December 31, 1986, net operating loss
carryforwards from 
5
 taxable years ending prior to December 31, 1986, may not

6
 exceed the sum of federal taxable income for the taxable 
7
 year before net
operating loss deduction, plus the excess 
8
 of addition modifications over
subtraction modifications 
9
 for the taxable year. For taxable years ending
prior to 
10
 December 31, 1986, taxable income may never be an amount in 
11
 excess
of the net operating loss for the taxable year as 
12
 defined in subsections
(c) and (d) of Section 172 of the 
13
 Internal Revenue Code, provided that when
taxable income of 
14
 a corporation (other than a Subchapter S corporation),

15
 trust, or estate is less than zero and addition 
16
 modifications, other than
those provided by subparagraph 
17
 (E) of paragraph (2) of subsection (b) for
corporations or 
18
 subparagraph (E) of paragraph (2) of subsection (c) for

19
 trusts and estates, exceed subtraction modifications, an 
20
 addition
modification must be made under those 
21
 subparagraphs for any other taxable
year to which the 
22
 taxable income less than zero (net operating loss) is

23
 applied under Section 172 of the Internal Revenue Code or 
24
 under
subparagraph (E) of paragraph (2) of this subsection 
25
 (e) applied in
conjunction with Section 172 of the Internal 
26
 Revenue Code.


 


 






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1
  (2) Special rule. For purposes of paragraph (1) of this 
2
 subsection,
the taxable income properly reportable for 
3
 federal income tax purposes
shall mean:


4
   (A) Certain life insurance companies. In the case 
5
 of a life
insurance company subject to the tax imposed 
6
 by Section 801 of the
Internal Revenue Code, life 
7
 insurance company taxable income, plus the
amount of 
8
 distribution from pre-1984 policyholder surplus 
9
 accounts as
calculated under Section 815a of the 
10
 Internal Revenue Code;


11
   (B) Certain other insurance companies. In the case 
12
 of mutual
insurance companies subject to the tax 
13
 imposed by Section 831 of the
Internal Revenue Code, 
14
 insurance company taxable income;


15
   (C) Regulated investment companies. In the case of 
16
 a regulated
investment company subject to the tax 
17
 imposed by Section 852 of the
Internal Revenue Code, 
18
 investment company taxable income;


19
   (D) Real estate investment trusts. In the case of a 
20
 real estate
investment trust subject to the tax imposed 
21
 by Section 857 of the
Internal Revenue Code, real 
22
 estate investment trust taxable income;


23
   (E) Consolidated corporations. In the case of a 
24
 corporation which
is a member of an affiliated group of 
25
 corporations filing a consolidated
income tax return 
26
 for the taxable year for federal income tax purposes,

 


 






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1
 taxable income determined as if such corporation had 
2
 filed a separate
return for federal income tax purposes 
3
 for the taxable year and each
preceding taxable year 
4
 for which it was a member of an affiliated group.
For 
5
 purposes of this subparagraph, the taxpayer's separate 
6
 taxable
income shall be determined as if the election 
7
 provided by Section
243(b) (2) of the Internal Revenue 
8
 Code had been in effect for all such years;


9
   (F) Cooperatives. In the case of a cooperative 
10
 corporation or
association, the taxable income of such 
11
 organization determined in
accordance with the 
12
 provisions of Section 1381 through 1388 of the
Internal 
13
 Revenue Code;


14
   (G) Subchapter S corporations. In the case of: (i) 
15
 a Subchapter S
corporation for which there is in effect 
16
 an election for the taxable year
under Section 1362 of 
17
 the Internal Revenue Code, the taxable income of such

18
 corporation determined in accordance with Section 
19
 1363(b) of the Internal
Revenue Code, except that 
20
 taxable income shall take into
account those items 
21
 which are required by Section 1363(b)(1) of the

22
 Internal Revenue Code to be separately stated; and (ii) 
23
 a Subchapter
S corporation for which there is in effect 
24
 a federal election to opt out of
the provisions of the 
25
 Subchapter S Revision Act of 1982 and have applied

26
 instead the prior federal Subchapter S rules as in 
 


 






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1
 effect on July 1, 1982,
the taxable income of such 
2
 corporation determined in accordance with the
federal 
3
 Subchapter S rules as in effect on July 1, 1982; and


4
   (H) Partnerships. In the case of a partnership, 
5
 taxable income
determined in accordance with Section 
6
 703 of the Internal Revenue Code,
except that taxable 
7
 income shall take into account those items which are

8
 required by Section 703(a)(1) to be separately stated 
9
 but which would be
taken into account by an individual 
10
 in calculating his taxable income.

11
  (3) Recapture of business expenses on disposition of 
12
 asset or business. Notwithstanding any other law to the 
13
 contrary, if in prior years income from an asset or 
14
 business has been classified as business income and in a 
15
 later year is demonstrated to be non-business income, then 
16
 all expenses, without limitation, deducted in such later 
17
 year and in the 2 immediately preceding taxable years 
18
 related to that asset or business that generated the 
19
 non-business income shall be added back and recaptured as 
20
 business income in the year of the disposition of the asset 
21
 or business. Such amount shall be apportioned to Illinois 
22
 using the greater of the apportionment fraction computed 
23
 for the business under Section 304 of this Act for the 
24
 taxable year or the average of the apportionment fractions 
25
 computed for the business under Section 304 of this Act for 
26
 the taxable year and for the 2 immediately preceding 
 


 






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1
 taxable years.



2
 (f) Valuation limitation amount.


3
  (1) In general. The valuation limitation amount 
4
 referred to in
subsections (a) (2) (G), (c) (2) (I) and 
5
 (d)(2) (E) is an amount equal to:


6
   (A) The sum of the pre-August 1, 1969 appreciation 
7
 amounts (to the
extent consisting of gain reportable 
8
 under the provisions of Section
1245 or 1250 of the 
9
 Internal Revenue Code) for all property in respect
of 
10
 which such gain was reported for the taxable year; plus


11
   (B) The lesser of (i) the sum of the pre-August 1, 
12
 1969 appreciation
amounts (to the extent consisting of 
13
 capital gain) for all property in
respect of which such 
14
 gain was reported for federal income tax purposes
for 
15
 the taxable year, or (ii) the net capital gain for the 
16
 taxable year,
reduced in either case by any amount of 
17
 such gain included in the amount
determined under 
18
 subsection (a) (2) (F) or (c) (2) (H).


19
  (2) Pre-August 1, 1969 appreciation amount.


20
   (A) If the fair market value of property referred 
21
 to in paragraph
(1) was readily ascertainable on August 
22
 1, 1969, the pre-August 1, 1969
appreciation amount for 
23
 such property is the lesser of (i) the excess of
such 
24
 fair market value over the taxpayer's basis (for 
25
 determining gain)
for such property on that date 
 


 






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1
 (determined under the Internal Revenue
Code as in 
2
 effect on that date), or (ii) the total gain realized 
3
 and
reportable for federal income tax purposes in 
4
 respect of the sale,
exchange or other disposition of 
5
 such property.


6
   (B) If the fair market value of property referred 
7
 to in paragraph
(1) was not readily ascertainable on 
8
 August 1, 1969, the pre-August 1,
1969 appreciation 
9
 amount for such property is that amount which bears
the 
10
 same ratio to the total gain reported in respect of the 
11
 property for
federal income tax purposes for the 
12
 taxable year, as the number of full
calendar months in 
13
 that part of the taxpayer's holding period for the

14
 property ending July 31, 1969 bears to the number of 
15
 full calendar
months in the taxpayer's entire holding 
16
 period for the
property.


17
   (C) The Department shall prescribe such 
18
 regulations as may be
necessary to carry out the 
19
 purposes of this paragraph.



20
 (g) Double deductions. Unless specifically provided 
21
otherwise, nothing
in this Section shall permit the same item 
22
to be deducted more than once.



23
 (h) Legislative intention. Except as expressly provided by 
24
this
Section there shall be no modifications or limitations on 
 


 






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1
the amounts
of income, gain, loss or deduction taken into 
2
account in determining
gross income, adjusted gross income or 
3
taxable income for federal income
tax purposes for the taxable 
4
year, or in the amount of such items
entering into the 
5
computation of base income and net income under this
Act for 
6
such taxable year, whether in respect of property values as of

7
August 1, 1969 or otherwise.

8
(Source: P.A. 94-776, eff. 5-19-06; 94-789, eff. 5-19-06; 
9
94-1021, eff. 7-12-06; 94-1074, eff. 12-26-06; 95-23, eff. 
10
8-3-07; 95-233, eff. 8-16-07; 95-286, eff. 8-20-07; 95-331, 
11
eff. 8-21-07; 95-707, eff. 1-11-08; 95-876, eff. 8-21-08; 
12
revised 10-15-08.)



13
 Section 99. Effective date. This Act takes effect upon 
14
becoming law.