Bill Text: IL HB3419 | 2017-2018 | 100th General Assembly | Introduced

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Bill Title: Amends the Illinois Procurement Code. Provides that an expatriate corporation shall be considered a non-resident bidder for purposes of the Code. Provides that no business or member of a unitary business group shall submit a bid for or enter into a contract with a State agency under the Code if the business is an expatriate corporation. Defines "expatriate corporation". Amends the Illinois Income Tax Act. Provides that notwithstanding provisions of the Act, any person formed or incorporated in a foreign tax haven may be a member of a unitary business group without regard to where its business activities are conducted. Defines "foreign tax haven". Amends the General Provisions Article of the Illinois Pension Code. Requires the Illinois Investment Policy Board to make its best efforts to identify all expatriate companies and include those companies in the list of restricted companies distributed to each retirement system and the Illinois State Board of Investment.

Spectrum: Partisan Bill (Democrat 41-1)

Status: (Passed) 2017-11-09 - Public Act . . . . . . . . . 100-0551 [HB3419 Detail]

Download: Illinois-2017-HB3419-Introduced.html

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100TH GENERAL ASSEMBLY State of Illinois 2017 and 2018 HB3419 Introduced , by Rep. Jaime M. Andrade, Jr. SYNOPSIS AS INTRODUCED:
30 ILCS 500/1-15.120 new
30 ILCS 500/45-10
30 ILCS 500/50-17 new
35 ILCS 5/1501 from Ch. 120, par. 15-1501
40 ILCS 5/1-110.16
Amends the Illinois Procurement Code. Provides that an expatriate corporation shall be considered a non-resident bidder for purposes of the Code. Provides that no business or member of a unitary business group shall submit a bid for or entier into a contract with a State agency under the Code if the business is an expatriate corporation. Defines "expatriate corporation". Amends the Illinois Income Tax Act. Provides that notwithstanding provisions of the Act, any person formed or incorporated in a foreign tax haven may be a member of a unitary business group without regard to where its business activities are conducted. Defines "foreign tax haven". Amends the General Provisions Article of the Illinois Pension Code. Requires the Illinois Investment Policy Board to make its best efforts to identify all expatriate companies and include those companies in the list of restricted companies distributed to each retirement system and the Illinois State Board of Investment.
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A BILL FOR
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AN ACT concerning finance.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Illinois Procurement Code is amended by
changing Section 45-10 and by adding Sections 1-15.120 and
50-17 as follows:
(30 ILCS 500/1-15.120 new)
Sec. 1-15.120. Expatriate corporation. "Expatriate
corporation" means a foreign incorporated entity to which all
the following apply:
(1) it is publicly traded in the United States;
(2) is incorporated in a foreign tax haven as defined in
the Illinois Income Tax Act;
(3) less than 10% of the gross income of the foreign entity
is derived from activities in the tax haven;
(4) less than 10% of the employees of the foreign entity
are permanently located in the tax haven;
(5) either of the following applies:
(A) The foreign entity was established in connection
with a transaction or series of related transactions
pursuant to which: (i) the foreign entity directly or
indirectly acquired substantially all of the properties
held by a domestic corporation or all of the properties

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constituting a trade or business of a domestic partnership
or related foreign partnership; and (ii) immediately after
the acquisition, more than 50% of the publicly traded
stock, by vote or value, of the foreign entity is held by
former shareholders of the domestic corporation or by
former partners of the domestic partnership or related
foreign partnership. For purposes of item (ii), any stock
sold in a public offering related to the transaction or a
series of transactions is disregarded.
(B) The foreign entity was established in connection
with a transaction or series of related transactions
pursuant to which (i) the foreign entity directly or
indirectly acquired substantially all of the properties
held by a domestic corporation or all of the properties
constituting a trade or business of a domestic partnership
or related foreign partnership and (ii) the acquiring
foreign entity is more than 50% owned, by vote or value, by
domestic shareholders or partners.
(30 ILCS 500/45-10)
Sec. 45-10. Resident bidders and offerors.
(a) Amount of preference. When a contract is to be awarded
to the lowest responsible bidder or offeror, a resident bidder
or offeror shall be allowed a preference as against a
non-resident bidder or offeror from any state that gives or
requires a preference to bidders or offerors from that state.

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The preference shall be equal to the preference given or
required by the state of the non-resident bidder or offeror.
Further, if only non-resident bidders or offerors are bidding,
the purchasing agency is within its right to specify that
Illinois labor and manufacturing locations be used as a part of
the manufacturing process, if applicable. This specification
may be negotiated as part of the solicitation process.
(b) Residency. A resident bidder or offeror is a person
authorized to transact business in this State and having a bona
fide establishment for transacting business within this State
where it was actually transacting business on the date when any
bid for a public contract is first advertised or announced. A
resident bidder or offeror includes a foreign corporation duly
authorized to transact business in this State that has a bona
fide establishment for transacting business within this State
where it was actually transacting business on the date when any
bid for a public contract is first advertised or announced;
however, an expatriate corporation shall be considered a
non-resident bidder.
(c) Federal funds. This Section does not apply to any
contract for any project as to which federal funds are
available for expenditure when its provisions may be in
conflict with federal law or federal regulation.
(Source: P.A. 98-1076, eff. 1-1-15.)
(30 ILCS 500/50-17 new)

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Sec. 50-17. Expatriate corporations. No business or member
of a unitary business group, as defined in the Illinois Income
Tax Act, shall submit a bid for or enter into a contract with a
State agency under this Code if that business or any member of
the unitary business group is an expatriate corporation.
Section 10. The Illinois Income Tax Act is amended by
changing Section 1501 as follows:
(35 ILCS 5/1501) (from Ch. 120, par. 15-1501)
Sec. 1501. Definitions.
(a) In general. When used in this Act, where not otherwise
distinctly expressed or manifestly incompatible with the
intent thereof:
(1) Business income. The term "business income" means
all income that may be treated as apportionable business
income under the Constitution of the United States.
Business income is net of the deductions allocable thereto.
Such term does not include compensation or the deductions
allocable thereto. For each taxable year beginning on or
after January 1, 2003, a taxpayer may elect to treat all
income other than compensation as business income. This
election shall be made in accordance with rules adopted by
the Department and, once made, shall be irrevocable.
(1.5) Captive real estate investment trust:
(A) The term "captive real estate investment

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trust" means a corporation, trust, or association:
(i) that is considered a real estate
investment trust for the taxable year under
Section 856 of the Internal Revenue Code;
(ii) the certificates of beneficial interest
or shares of which are not regularly traded on an
established securities market; and
(iii) of which more than 50% of the voting
power or value of the beneficial interest or
shares, at any time during the last half of the
taxable year, is owned or controlled, directly,
indirectly, or constructively, by a single
corporation.
(B) The term "captive real estate investment
trust" does not include:
(i) a real estate investment trust of which
more than 50% of the voting power or value of the
beneficial interest or shares is owned or
controlled, directly, indirectly, or
constructively, by:
(a) a real estate investment trust, other
than a captive real estate investment trust;
(b) a person who is exempt from taxation
under Section 501 of the Internal Revenue Code,
and who is not required to treat income
received from the real estate investment trust

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as unrelated business taxable income under
Section 512 of the Internal Revenue Code;
(c) a listed Australian property trust, if
no more than 50% of the voting power or value
of the beneficial interest or shares of that
trust, at any time during the last half of the
taxable year, is owned or controlled, directly
or indirectly, by a single person;
(d) an entity organized as a trust,
provided a listed Australian property trust
described in subparagraph (c) owns or
controls, directly or indirectly, or
constructively, 75% or more of the voting power
or value of the beneficial interests or shares
of such entity; or
(e) an entity that is organized outside of
the laws of the United States and that
satisfies all of the following criteria:
(1) at least 75% of the entity's total
asset value at the close of its taxable
year is represented by real estate assets
(as defined in Section 856(c)(5)(B) of the
Internal Revenue Code, thereby including
shares or certificates of beneficial
interest in any real estate investment
trust), cash and cash equivalents, and

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U.S. Government securities;
(2) the entity is not subject to tax on
amounts that are distributed to its
beneficial owners or is exempt from
entity-level taxation;
(3) the entity distributes at least
85% of its taxable income (as computed in
the jurisdiction in which it is organized)
to the holders of its shares or
certificates of beneficial interest on an
annual basis;
(4) either (i) the shares or
beneficial interests of the entity are
regularly traded on an established
securities market or (ii) not more than 10%
of the voting power or value in the entity
is held, directly, indirectly, or
constructively, by a single entity or
individual; and
(5) the entity is organized in a
country that has entered into a tax treaty
with the United States; or
(ii) during its first taxable year for which it
elects to be treated as a real estate investment
trust under Section 856(c)(1) of the Internal
Revenue Code, a real estate investment trust the

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certificates of beneficial interest or shares of
which are not regularly traded on an established
securities market, but only if the certificates of
beneficial interest or shares of the real estate
investment trust are regularly traded on an
established securities market prior to the earlier
of the due date (including extensions) for filing
its return under this Act for that first taxable
year or the date it actually files that return.
(C) For the purposes of this subsection (1.5), the
constructive ownership rules prescribed under Section
318(a) of the Internal Revenue Code, as modified by
Section 856(d)(5) of the Internal Revenue Code, apply
in determining the ownership of stock, assets, or net
profits of any person.
(D) For the purposes of this item (1.5), for
taxable years ending on or after August 16, 2007, the
voting power or value of the beneficial interest or
shares of a real estate investment trust does not
include any voting power or value of beneficial
interest or shares in a real estate investment trust
held directly or indirectly in a segregated asset
account by a life insurance company (as described in
Section 817 of the Internal Revenue Code) to the extent
such voting power or value is for the benefit of
entities or persons who are either immune from taxation

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or exempt from taxation under subtitle A of the
Internal Revenue Code.
(2) Commercial domicile. The term "commercial
domicile" means the principal place from which the trade or
business of the taxpayer is directed or managed.
(3) Compensation. The term "compensation" means wages,
salaries, commissions and any other form of remuneration
paid to employees for personal services.
(4) Corporation. The term "corporation" includes
associations, joint-stock companies, insurance companies
and cooperatives. Any entity, including a limited
liability company formed under the Illinois Limited
Liability Company Act, shall be treated as a corporation if
it is so classified for federal income tax purposes.
(5) Department. The term "Department" means the
Department of Revenue of this State.
(6) Director. The term "Director" means the Director of
Revenue of this State.
(7) Fiduciary. The term "fiduciary" means a guardian,
trustee, executor, administrator, receiver, or any person
acting in any fiduciary capacity for any person.
(8) Financial organization.
(A) The term "financial organization" means any
bank, bank holding company, trust company, savings
bank, industrial bank, land bank, safe deposit
company, private banker, savings and loan association,

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building and loan association, credit union, currency
exchange, cooperative bank, small loan company, sales
finance company, investment company, or any person
which is owned by a bank or bank holding company. For
the purpose of this Section a "person" will include
only those persons which a bank holding company may
acquire and hold an interest in, directly or
indirectly, under the provisions of the Bank Holding
Company Act of 1956 (12 U.S.C. 1841, et seq.), except
where interests in any person must be disposed of
within certain required time limits under the Bank
Holding Company Act of 1956.
(B) For purposes of subparagraph (A) of this
paragraph, the term "bank" includes (i) any entity that
is regulated by the Comptroller of the Currency under
the National Bank Act, or by the Federal Reserve Board,
or by the Federal Deposit Insurance Corporation and
(ii) any federally or State chartered bank operating as
a credit card bank.
(C) For purposes of subparagraph (A) of this
paragraph, the term "sales finance company" has the
meaning provided in the following item (i) or (ii):
(i) A person primarily engaged in one or more
of the following businesses: the business of
purchasing customer receivables, the business of
making loans upon the security of customer

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receivables, the business of making loans for the
express purpose of funding purchases of tangible
personal property or services by the borrower, or
the business of finance leasing. For purposes of
this item (i), "customer receivable" means:
(a) a retail installment contract or
retail charge agreement within the meaning of
the Sales Finance Agency Act, the Retail
Installment Sales Act, or the Motor Vehicle
Retail Installment Sales Act;
(b) an installment, charge, credit, or
similar contract or agreement arising from the
sale of tangible personal property or services
in a transaction involving a deferred payment
price payable in one or more installments
subsequent to the sale; or
(c) the outstanding balance of a contract
or agreement described in provisions (a) or (b)
of this item (i).
A customer receivable need not provide for
payment of interest on deferred payments. A sales
finance company may purchase a customer receivable
from, or make a loan secured by a customer
receivable to, the seller in the original
transaction or to a person who purchased the
customer receivable directly or indirectly from

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that seller.
(ii) A corporation meeting each of the
following criteria:
(a) the corporation must be a member of an
"affiliated group" within the meaning of
Section 1504(a) of the Internal Revenue Code,
determined without regard to Section 1504(b)
of the Internal Revenue Code;
(b) more than 50% of the gross income of
the corporation for the taxable year must be
interest income derived from qualifying loans.
A "qualifying loan" is a loan made to a member
of the corporation's affiliated group that
originates customer receivables (within the
meaning of item (i)) or to whom customer
receivables originated by a member of the
affiliated group have been transferred, to the
extent the average outstanding balance of
loans from that corporation to members of its
affiliated group during the taxable year do not
exceed the limitation amount for that
corporation. The "limitation amount" for a
corporation is the average outstanding
balances during the taxable year of customer
receivables (within the meaning of item (i))
originated by all members of the affiliated

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group. If the average outstanding balances of
the loans made by a corporation to members of
its affiliated group exceed the limitation
amount, the interest income of that
corporation from qualifying loans shall be
equal to its interest income from loans to
members of its affiliated groups times a
fraction equal to the limitation amount
divided by the average outstanding balances of
the loans made by that corporation to members
of its affiliated group;
(c) the total of all shareholder's equity
(including, without limitation, paid-in
capital on common and preferred stock and
retained earnings) of the corporation plus the
total of all of its loans, advances, and other
obligations payable or owed to members of its
affiliated group may not exceed 20% of the
total assets of the corporation at any time
during the tax year; and
(d) more than 50% of all interest-bearing
obligations of the affiliated group payable to
persons outside the group determined in
accordance with generally accepted accounting
principles must be obligations of the
corporation.

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This amendatory Act of the 91st General Assembly is
declaratory of existing law.
(D) Subparagraphs (B) and (C) of this paragraph are
declaratory of existing law and apply retroactively,
for all tax years beginning on or before December 31,
1996, to all original returns, to all amended returns
filed no later than 30 days after the effective date of
this amendatory Act of 1996, and to all notices issued
on or before the effective date of this amendatory Act
of 1996 under subsection (a) of Section 903, subsection
(a) of Section 904, subsection (e) of Section 909, or
Section 912. A taxpayer that is a "financial
organization" that engages in any transaction with an
affiliate shall be a "financial organization" for all
purposes of this Act.
(E) For all tax years beginning on or before
December 31, 1996, a taxpayer that falls within the
definition of a "financial organization" under
subparagraphs (B) or (C) of this paragraph, but who
does not fall within the definition of a "financial
organization" under the Proposed Regulations issued by
the Department of Revenue on July 19, 1996, may
irrevocably elect to apply the Proposed Regulations
for all of those years as though the Proposed
Regulations had been lawfully promulgated, adopted,
and in effect for all of those years. For purposes of

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applying subparagraphs (B) or (C) of this paragraph to
all of those years, the election allowed by this
subparagraph applies only to the taxpayer making the
election and to those members of the taxpayer's unitary
business group who are ordinarily required to
apportion business income under the same subsection of
Section 304 of this Act as the taxpayer making the
election. No election allowed by this subparagraph
shall be made under a claim filed under subsection (d)
of Section 909 more than 30 days after the effective
date of this amendatory Act of 1996.
(F) Finance Leases. For purposes of this
subsection, a finance lease shall be treated as a loan
or other extension of credit, rather than as a lease,
regardless of how the transaction is characterized for
any other purpose, including the purposes of any
regulatory agency to which the lessor is subject. A
finance lease is any transaction in the form of a lease
in which the lessee is treated as the owner of the
leased asset entitled to any deduction for
depreciation allowed under Section 167 of the Internal
Revenue Code.
(9) Fiscal year. The term "fiscal year" means an
accounting period of 12 months ending on the last day of
any month other than December.
(9.5) Fixed place of business. The term "fixed place of

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business" has the same meaning as that term is given in
Section 864 of the Internal Revenue Code and the related
Treasury regulations.
(10) Includes and including. The terms "includes" and
"including" when used in a definition contained in this Act
shall not be deemed to exclude other things otherwise
within the meaning of the term defined.
(11) Internal Revenue Code. The term "Internal Revenue
Code" means the United States Internal Revenue Code of 1954
or any successor law or laws relating to federal income
taxes in effect for the taxable year.
(11.5) Investment partnership.
(A) The term "investment partnership" means any
entity that is treated as a partnership for federal
income tax purposes that meets the following
requirements:
(i) no less than 90% of the partnership's cost
of its total assets consists of qualifying
investment securities, deposits at banks or other
financial institutions, and office space and
equipment reasonably necessary to carry on its
activities as an investment partnership;
(ii) no less than 90% of its gross income
consists of interest, dividends, and gains from
the sale or exchange of qualifying investment
securities; and

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(iii) the partnership is not a dealer in
qualifying investment securities.
(B) For purposes of this paragraph (11.5), the term
"qualifying investment securities" includes all of the
following:
(i) common stock, including preferred or debt
securities convertible into common stock, and
preferred stock;
(ii) bonds, debentures, and other debt
securities;
(iii) foreign and domestic currency deposits
secured by federal, state, or local governmental
agencies;
(iv) mortgage or asset-backed securities
secured by federal, state, or local governmental
agencies;
(v) repurchase agreements and loan
participations;
(vi) foreign currency exchange contracts and
forward and futures contracts on foreign
currencies;
(vii) stock and bond index securities and
futures contracts and other similar financial
securities and futures contracts on those
securities;
(viii) options for the purchase or sale of any

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of the securities, currencies, contracts, or
financial instruments described in items (i) to
(vii), inclusive;
(ix) regulated futures contracts;
(x) commodities (not described in Section
1221(a)(1) of the Internal Revenue Code) or
futures, forwards, and options with respect to
such commodities, provided, however, that any item
of a physical commodity to which title is actually
acquired in the partnership's capacity as a dealer
in such commodity shall not be a qualifying
investment security;
(xi) derivatives; and
(xii) a partnership interest in another
partnership that is an investment partnership.
(12) Mathematical error. The term "mathematical error"
includes the following types of errors, omissions, or
defects in a return filed by a taxpayer which prevents
acceptance of the return as filed for processing:
(A) arithmetic errors or incorrect computations on
the return or supporting schedules;
(B) entries on the wrong lines;
(C) omission of required supporting forms or
schedules or the omission of the information in whole
or in part called for thereon; and
(D) an attempt to claim, exclude, deduct, or

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improperly report, in a manner directly contrary to the
provisions of the Act and regulations thereunder any
item of income, exemption, deduction, or credit.
(13) Nonbusiness income. The term "nonbusiness income"
means all income other than business income or
compensation.
(14) Nonresident. The term "nonresident" means a
person who is not a resident.
(15) Paid, incurred and accrued. The terms "paid",
"incurred" and "accrued" shall be construed according to
the method of accounting upon the basis of which the
person's base income is computed under this Act.
(16) Partnership and partner. The term "partnership"
includes a syndicate, group, pool, joint venture or other
unincorporated organization, through or by means of which
any business, financial operation, or venture is carried
on, and which is not, within the meaning of this Act, a
trust or estate or a corporation; and the term "partner"
includes a member in such syndicate, group, pool, joint
venture or organization.
The term "partnership" includes any entity, including
a limited liability company formed under the Illinois
Limited Liability Company Act, classified as a partnership
for federal income tax purposes.
The term "partnership" does not include a syndicate,
group, pool, joint venture, or other unincorporated

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organization established for the sole purpose of playing
the Illinois State Lottery.
(17) Part-year resident. The term "part-year resident"
means an individual who became a resident during the
taxable year or ceased to be a resident during the taxable
year. Under Section 1501(a)(20)(A)(i) residence commences
with presence in this State for other than a temporary or
transitory purpose and ceases with absence from this State
for other than a temporary or transitory purpose. Under
Section 1501(a)(20)(A)(ii) residence commences with the
establishment of domicile in this State and ceases with the
establishment of domicile in another State.
(18) Person. The term "person" shall be construed to
mean and include an individual, a trust, estate,
partnership, association, firm, company, corporation,
limited liability company, or fiduciary. For purposes of
Section 1301 and 1302 of this Act, a "person" means (i) an
individual, (ii) a corporation, (iii) an officer, agent, or
employee of a corporation, (iv) a member, agent or employee
of a partnership, or (v) a member, manager, employee,
officer, director, or agent of a limited liability company
who in such capacity commits an offense specified in
Section 1301 and 1302.
(18A) Records. The term "records" includes all data
maintained by the taxpayer, whether on paper, microfilm,
microfiche, or any type of machine-sensible data

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compilation.
(19) Regulations. The term "regulations" includes
rules promulgated and forms prescribed by the Department.
(20) Resident. The term "resident" means:
(A) an individual (i) who is in this State for
other than a temporary or transitory purpose during the
taxable year; or (ii) who is domiciled in this State
but is absent from the State for a temporary or
transitory purpose during the taxable year;
(B) The estate of a decedent who at his or her
death was domiciled in this State;
(C) A trust created by a will of a decedent who at
his death was domiciled in this State; and
(D) An irrevocable trust, the grantor of which was
domiciled in this State at the time such trust became
irrevocable. For purpose of this subparagraph, a trust
shall be considered irrevocable to the extent that the
grantor is not treated as the owner thereof under
Sections 671 through 678 of the Internal Revenue Code.
(21) Sales. The term "sales" means all gross receipts
of the taxpayer not allocated under Sections 301, 302 and
303.
(22) State. The term "state" when applied to a
jurisdiction other than this State means any state of the
United States, the District of Columbia, the Commonwealth
of Puerto Rico, any Territory or Possession of the United

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States, and any foreign country, or any political
subdivision of any of the foregoing. For purposes of the
foreign tax credit under Section 601, the term "state"
means any state of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, and any
territory or possession of the United States, or any
political subdivision of any of the foregoing, effective
for tax years ending on or after December 31, 1989.
(23) Taxable year. The term "taxable year" means the
calendar year, or the fiscal year ending during such
calendar year, upon the basis of which the base income is
computed under this Act. "Taxable year" means, in the case
of a return made for a fractional part of a year under the
provisions of this Act, the period for which such return is
made.
(24) Taxpayer. The term "taxpayer" means any person
subject to the tax imposed by this Act.
(25) International banking facility. The term
international banking facility shall have the same meaning
as is set forth in the Illinois Banking Act or as is set
forth in the laws of the United States or regulations of
the Board of Governors of the Federal Reserve System.
(26) Income Tax Return Preparer.
(A) The term "income tax return preparer" means any
person who prepares for compensation, or who employs
one or more persons to prepare for compensation, any

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return of tax imposed by this Act or any claim for
refund of tax imposed by this Act. The preparation of a
substantial portion of a return or claim for refund
shall be treated as the preparation of that return or
claim for refund.
(B) A person is not an income tax return preparer
if all he or she does is
(i) furnish typing, reproducing, or other
mechanical assistance;
(ii) prepare returns or claims for refunds for
the employer by whom he or she is regularly and
continuously employed;
(iii) prepare as a fiduciary returns or claims
for refunds for any person; or
(iv) prepare claims for refunds for a taxpayer
in response to any notice of deficiency issued to
that taxpayer or in response to any waiver of
restriction after the commencement of an audit of
that taxpayer or of another taxpayer if a
determination in the audit of the other taxpayer
directly or indirectly affects the tax liability
of the taxpayer whose claims he or she is
preparing.
(27) Unitary business group.
(A) The term "unitary business group" means a group
of persons related through common ownership whose

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business activities are integrated with, dependent
upon and contribute to each other. The group will not
include those members whose business activity outside
the United States is 80% or more of any such member's
total business activity; for purposes of this
paragraph and clause (a)(3)(B)(ii) of Section 304,
business activity within the United States shall be
measured by means of the factors ordinarily applicable
under subsections (a), (b), (c), (d), or (h) of Section
304 except that, in the case of members ordinarily
required to apportion business income by means of the 3
factor formula of property, payroll and sales
specified in subsection (a) of Section 304, including
the formula as weighted in subsection (h) of Section
304, such members shall not use the sales factor in the
computation and the results of the property and payroll
factor computations of subsection (a) of Section 304
shall be divided by 2 (by one if either the property or
payroll factor has a denominator of zero). The
computation required by the preceding sentence shall,
in each case, involve the division of the member's
property, payroll, or revenue miles in the United
States, insurance premiums on property or risk in the
United States, or financial organization business
income from sources within the United States, as the
case may be, by the respective worldwide figures for

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such items. Common ownership in the case of
corporations is the direct or indirect control or
ownership of more than 50% of the outstanding voting
stock of the persons carrying on unitary business
activity. Unitary business activity can ordinarily be
illustrated where the activities of the members are:
(1) in the same general line (such as manufacturing,
wholesaling, retailing of tangible personal property,
insurance, transportation or finance); or (2) are
steps in a vertically structured enterprise or process
(such as the steps involved in the production of
natural resources, which might include exploration,
mining, refining, and marketing); and, in either
instance, the members are functionally integrated
through the exercise of strong centralized management
(where, for example, authority over such matters as
purchasing, financing, tax compliance, product line,
personnel, marketing and capital investment is not
left to each member).
(B) In no event, shall any unitary business group
include members which are ordinarily required to
apportion business income under different subsections
of Section 304 except that for tax years ending on or
after December 31, 1987 this prohibition shall not
apply to a holding company that would otherwise be a
member of a unitary business group with taxpayers that

HB3419 - 26 - LRB100 08561 MLM 18686 b
apportion business income under any of subsections
(b), (c), (c-1), or (d) of Section 304. If a unitary
business group would, but for the preceding sentence,
include members that are ordinarily required to
apportion business income under different subsections
of Section 304, then for each subsection of Section 304
for which there are two or more members, there shall be
a separate unitary business group composed of such
members. For purposes of the preceding two sentences, a
member is "ordinarily required to apportion business
income" under a particular subsection of Section 304 if
it would be required to use the apportionment method
prescribed by such subsection except for the fact that
it derives business income solely from Illinois. As
used in this paragraph, the phrase "United States"
means only the 50 states and the District of Columbia,
but does not include any territory or possession of the
United States or any area over which the United States
has asserted jurisdiction or claimed exclusive rights
with respect to the exploration for or exploitation of
natural resources.
(C) Holding companies.
(i) For purposes of this subparagraph, a
"holding company" is a corporation (other than a
corporation that is a financial organization under
paragraph (8) of this subsection (a) of Section

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1501 because it is a bank holding company under the
provisions of the Bank Holding Company Act of 1956
(12 U.S.C. 1841, et seq.) or because it is owned by
a bank or a bank holding company) that owns a
controlling interest in one or more other
taxpayers ("controlled taxpayers"); that, during
the period that includes the taxable year and the 2
immediately preceding taxable years or, if the
corporation was formed during the current or
immediately preceding taxable year, the taxable
years in which the corporation has been in
existence, derived substantially all its gross
income from dividends, interest, rents, royalties,
fees or other charges received from controlled
taxpayers for the provision of services, and gains
on the sale or other disposition of interests in
controlled taxpayers or in property leased or
licensed to controlled taxpayers or used by the
taxpayer in providing services to controlled
taxpayers; and that incurs no substantial expenses
other than expenses (including interest and other
costs of borrowing) incurred in connection with
the acquisition and holding of interests in
controlled taxpayers and in the provision of
services to controlled taxpayers or in the leasing
or licensing of property to controlled taxpayers.

HB3419 - 28 - LRB100 08561 MLM 18686 b
(ii) The income of a holding company which is a
member of more than one unitary business group
shall be included in each unitary business group of
which it is a member on a pro rata basis, by
including in each unitary business group that
portion of the base income of the holding company
that bears the same proportion to the total base
income of the holding company as the gross receipts
of the unitary business group bears to the combined
gross receipts of all unitary business groups (in
both cases without regard to the holding company)
or on any other reasonable basis, consistently
applied.
(iii) A holding company shall apportion its
business income under the subsection of Section
304 used by the other members of its unitary
business group. The apportionment factors of a
holding company which would be a member of more
than one unitary business group shall be included
with the apportionment factors of each unitary
business group of which it is a member on a pro
rata basis using the same method used in clause
(ii).
(iv) The provisions of this subparagraph (C)
are intended to clarify existing law.
(D) If including the base income and factors of a

HB3419 - 29 - LRB100 08561 MLM 18686 b
holding company in more than one unitary business group
under subparagraph (C) does not fairly reflect the
degree of integration between the holding company and
one or more of the unitary business groups, the
dependence of the holding company and one or more of
the unitary business groups upon each other, or the
contributions between the holding company and one or
more of the unitary business groups, the holding
company may petition the Director, under the
procedures provided under Section 304(f), for
permission to include all base income and factors of
the holding company only with members of a unitary
business group apportioning their business income
under one subsection of subsections (a), (b), (c), or
(d) of Section 304. If the petition is granted, the
holding company shall be included in a unitary business
group only with persons apportioning their business
income under the selected subsection of Section 304
until the Director grants a petition of the holding
company either to be included in more than one unitary
business group under subparagraph (C) or to include its
base income and factors only with members of a unitary
business group apportioning their business income
under a different subsection of Section 304.
(E) If the unitary business group members'
accounting periods differ, the common parent's

HB3419 - 30 - LRB100 08561 MLM 18686 b
accounting period or, if there is no common parent, the
accounting period of the member that is expected to
have, on a recurring basis, the greatest Illinois
income tax liability must be used to determine whether
to use the apportionment method provided in subsection
(a) or subsection (h) of Section 304. The prohibition
against membership in a unitary business group for
taxpayers ordinarily required to apportion income
under different subsections of Section 304 does not
apply to taxpayers required to apportion income under
subsection (a) and subsection (h) of Section 304. The
provisions of this amendatory Act of 1998 apply to tax
years ending on or after December 31, 1998.
(28) Subchapter S corporation. The term "Subchapter S
corporation" means a corporation for which there is in
effect an election under Section 1362 of the Internal
Revenue Code, or for which there is a federal election to
opt out of the provisions of the Subchapter S Revision Act
of 1982 and have applied instead the prior federal
Subchapter S rules as in effect on July 1, 1982.
(30) Foreign person. The term "foreign person" means
any person who is a nonresident alien individual and any
nonindividual entity, regardless of where created or
organized, whose business activity outside the United
States is 80% or more of the entity's total business
activity.

HB3419 - 31 - LRB100 08561 MLM 18686 b
(31) Foreign tax haven.
(A) Notwithstanding any provision of item (27),
any person formed or incorporated in a foreign tax
haven may be a member of a unitary business group
without regard to where its business activities are
conducted.
(B) The term "foreign tax haven" includes Andorra,
Anguilla, Antigua and Barbuda, Aruba, the Bahamas,
Bahrain, Barbados, Belize, Bermuda, British Virgin
Islands, Cayman Islands, Cook Islands, Turks and
Caicos Islands, Dominica, Gibraltar, Grenada,
Guernsey-Sark-Alderney, Isle of Man, Jersey, Liberia,
Liechtenstein, Luxemburg, Maldives, Marshall Islands,
Monaco, Montserrat, Nauru, Netherlands Antilles, Niue,
Panama, Samoa, Seychelles, St. Kitts and Nevis, St.
Lucia, St. Vincent and the Grenadines, Tonga, U.S.
Virgin Islands, and Vanuatu.
(C) The term "foreign tax haven" also includes any
foreign country that does not impose a substantial
business income tax or other substantial business
activity tax, as determined by the Department by rule.
(D) The provisions of this item (31) apply to tax
years ending on or after December 31, 2018.
(b) Other definitions.
(1) Words denoting number, gender, and so forth, when

HB3419 - 32 - LRB100 08561 MLM 18686 b
used in this Act, where not otherwise distinctly expressed
or manifestly incompatible with the intent thereof:
(A) Words importing the singular include and apply
to several persons, parties or things;
(B) Words importing the plural include the
singular; and
(C) Words importing the masculine gender include
the feminine as well.
(2) "Company" or "association" as including successors
and assigns. The word "company" or "association", when used
in reference to a corporation, shall be deemed to embrace
the words "successors and assigns of such company or
association", and in like manner as if these last-named
words, or words of similar import, were expressed.
(3) Other terms. Any term used in any Section of this
Act with respect to the application of, or in connection
with, the provisions of any other Section of this Act shall
have the same meaning as in such other Section.
(Source: P.A. 99-213, eff. 7-31-15.)
Section 15. The Illinois Pension Code is amended by
changing Section 1-110.16 as follows:
(40 ILCS 5/1-110.16)
Sec. 1-110.16. Transactions prohibited by retirement
systems; companies that boycott Israel, Iran-restricted

HB3419 - 33 - LRB100 08561 MLM 18686 b
companies, and Sudan-restricted companies, and expatriate
corporations.
(a) As used in this Section:
"Boycott Israel" means engaging in actions that are
politically motivated and are intended to penalize,
inflict economic harm on, or otherwise limit commercial
relations with the State of Israel or companies based in
the State of Israel or in territories controlled by the
State of Israel.
"Company" means any sole proprietorship, organization,
association, corporation, partnership, joint venture,
limited partnership, limited liability partnership,
limited liability company, or other entity or business
association, including all wholly owned subsidiaries,
majority-owned subsidiaries, parent companies, or
affiliates of those entities or business associations,
that exist for the purpose of making profit.
"Illinois Investment Policy Board" means the board
established under subsection (b) of this Section.
"Direct holdings" in a company means all publicly
traded securities of that company that are held directly by
the retirement system in an actively managed account or
fund in which the retirement system owns all shares or
interests.
"Expatriate corporation" has the meaning ascribed to
it in Section 1-15.120 of the Illinois Procurement Code.

HB3419 - 34 - LRB100 08561 MLM 18686 b
"Indirect holdings" in a company means all securities
of that company that are held in an account or fund, such
as a mutual fund, managed by one or more persons not
employed by the retirement system, in which the retirement
system owns shares or interests together with other
investors not subject to the provisions of this Section or
that are held in an index fund.
"Iran-restricted company" means a company that meets
the qualifications under Section 1-110.15 of this Code.
"Private market fund" means any private equity fund,
private equity funds of funds, venture capital fund, hedge
fund, hedge fund of funds, real estate fund, or other
investment vehicle that is not publicly traded.
"Restricted companies" means companies that boycott
Israel, Iran-restricted companies, and Sudan-restricted
companies.
"Retirement system" means a retirement system
established under Article 2, 14, 15, 16, or 18 of this Code
or the Illinois State Board of Investment.
"Sudan-restricted company" means a company that meets
the qualifications under Section 1-110.6 of this Code.
(b) There shall be established an Illinois Investment
Policy Board. The Illinois Investment Policy Board shall
consist of 7 members. Each board of a pension fund or
investment board created under Article 15, 16, or 22A of this
Code shall appoint one member, and the Governor shall appoint 4

HB3419 - 35 - LRB100 08561 MLM 18686 b
members.
(c) Notwithstanding any provision of law to the contrary,
beginning January 1, 2016, Sections 110.15 and 1-110.6 of this
Code shall be administered in accordance with this Section.
(d) By April 1, 2016, the Illinois Investment Policy Board
shall make its best efforts to identify all Iran-restricted
companies, Sudan-restricted companies, and companies that
boycott Israel and assemble those identified companies into a
list of restricted companies, to be distributed to each
retirement system.
These efforts shall include the following, as appropriate
in the Illinois Investment Policy Board's judgment:
(1) reviewing and relying on publicly available
information regarding Iran-restricted companies,
Sudan-restricted companies, and companies that boycott
Israel, including information provided by nonprofit
organizations, research firms, and government entities;
(2) contacting asset managers contracted by the
retirement systems that invest in Iran-restricted
companies, Sudan-restricted companies, and companies that
boycott Israel;
(3) contacting other institutional investors that have
divested from or engaged with Iran-restricted companies,
Sudan-restricted companies, and companies that boycott
Israel; and
(4) retaining an independent research firm to identify

HB3419 - 36 - LRB100 08561 MLM 18686 b
Iran-restricted companies, Sudan-restricted companies, and
companies that boycott Israel.
The Illinois Investment Policy Board shall review the list
of restricted companies on a quarterly basis based on evolving
information from, among other sources, those listed in this
subsection (d) and distribute any updates to the list of
restricted companies to the retirement systems.
By April 1, 2018, the Illinois Investment Policy Board
shall make its best efforts to identify all expatriate
corporations and include those companies in the list of
restricted companies distributed to each retirement system.
These efforts shall include the following, as appropriate in
the Illinois Investment Policy Board's judgment:
(1) reviewing and relying on publicly available
information regarding expatriate corporations, including
information provided by nonprofit organizations, research
firms, and government entities;
(2) contacting asset managers contracted by the
retirement systems that invest in expatriate corporations;
(3) contacting other institutional investors that have
divested from or engaged with expatriate corporations; and
(4) retaining an independent research firm to identify
expatriate corporations.
(e) The Illinois Investment Policy Board shall adhere to
the following procedures for companies on the list of
restricted companies:

HB3419 - 37 - LRB100 08561 MLM 18686 b
(1) For each company newly identified in subsection
(d), the Illinois Investment Policy Board shall send a
written notice informing the company of its status and that
it may become subject to divestment by the retirement
systems.
(2) If, following the Illinois Investment Policy
Board's engagement pursuant to this subsection (e) with a
restricted company, that company ceases activity that
designates the company to be an Iran-restricted company, a
Sudan-restricted company, or a company that boycotts
Israel, or an expatriate corporation, the company shall be
removed from the list of restricted companies and the
provisions of this Section shall cease to apply to it
unless it resumes such activities.
(f) The retirement system shall adhere to the following
procedures for companies on the list of restricted companies:
(1) The retirement system shall identify those
companies on the list of restricted companies in which the
retirement system owns direct holdings and indirect
holdings.
(2) The retirement system shall instruct its
investment advisors to sell, redeem, divest, or withdraw
all direct holdings of restricted companies from the
retirement system's assets under management in an orderly
and fiduciarily responsible manner within 12 months after
the company's most recent appearance on the list of

HB3419 - 38 - LRB100 08561 MLM 18686 b
restricted companies.
(3) The retirement system may not acquire securities of
restricted companies.
(4) The provisions of this subsection (f) do not apply
to the retirement system's indirect holdings or private
market funds. The Illinois Investment Policy Board shall
submit letters to the managers of those investment funds
containing restricted companies requesting that they
consider removing the companies from the fund or create a
similar actively managed fund having indirect holdings
devoid of the companies. If the manager creates a similar
fund, the retirement system shall replace all applicable
investments with investments in the similar fund in an
expedited timeframe consistent with prudent investing
standards.
(g) Upon request, and at least annually, each retirement
system shall provide the Illinois Investment Policy Board with
information regarding investments sold, redeemed, divested, or
withdrawn in compliance with this Section.
(h) Notwithstanding any provision of this Section to the
contrary, a retirement system may cease divesting from
companies pursuant to subsection (f) if clear and convincing
evidence shows that the value of investments in such companies
becomes equal to or less than 0.5% of the market value of all
assets under management by the retirement system. For any
cessation of divestment authorized by this subsection (h), the

HB3419 - 39 - LRB100 08561 MLM 18686 b
retirement system shall provide a written notice to the
Illinois Investment Policy Board in advance of the cessation of
divestment, setting forth the reasons and justification,
supported by clear and convincing evidence, for its decision to
cease divestment under subsection (f).
(i) The cost associated with the activities of the Illinois
Investment Policy Board shall be borne by the boards of each
pension fund or investment board created under Article 15, 16,
or 22A of this Code.
(j) With respect to actions taken in compliance with this
Section, including all good-faith determinations regarding
companies as required by this Section, the retirement system
and Illinois Investment Policy Board are exempt from any
conflicting statutory or common law obligations, including any
fiduciary duties under this Article and any obligations with
respect to choice of asset managers, investment funds, or
investments for the retirement system's securities portfolios.
(k) It is not the intent of the General Assembly in
enacting this amendatory Act of the 99th General Assembly to
cause divestiture from any company based in the United States
of America. The Illinois Investment Policy Board shall consider
this intent when developing or reviewing the list of restricted
companies.
(l) If any provision of this amendatory Act of the 99th
General Assembly or its application to any person or
circumstance is held invalid, the invalidity of that provision

HB3419 - 40 - LRB100 08561 MLM 18686 b
or application does not affect other provisions or applications
of this amendatory Act of the 99th General Assembly that can be
given effect without the invalid provision or application.
(m) If any provision of this amendatory Act of the 100th
General Assembly or its application to any person or
circumstance is held invalid, the invalidity of that provision
or application does not affect other provisions or applications
of this amendatory Act of the 100th General Assembly that can
be given effect without the invalid provision or application.
(Source: P.A. 99-128, eff. 7-23-15.)