100TH GENERAL ASSEMBLY
State of Illinois
2017 and 2018
HB3746
 
Introduced , by Rep. Katie Stuart
 
SYNOPSIS AS INTRODUCED:



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

 Amends the Illinois Income Tax Act. Creates a deduction for individuals, trusts, and estates for certain qualified student loan payments made during the taxable year. Provides that the deduction is excluded from the Act's automatic sunset provisions. Effective immediately.



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FISCAL NOTE ACT MAY APPLY
HOUSING AFFORDABILITY IMPACT NOTE ACT MAY APPLY
 
 
A BILL FOR
 


HB3746LRB100 09089 HLH 19242 b



1 AN ACT concerning revenue.


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

3represented in the General Assembly:



4 Section 5. The Illinois Income Tax Act is amended by 
5changing 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   (D-22) For taxable years beginning on or after 
26 January 1, 2009, in the case of a nonqualified 
 
 
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1 withdrawal or refund of moneys from a qualified tuition 
2 program under Section 529 of the Internal Revenue Code 
3 administered by the State that is not used for 
4 qualified expenses at an eligible education 
5 institution, an amount equal to the contribution 
6 component of the nonqualified withdrawal or refund 
7 that was previously deducted from base income under 
8 subsection (a)(2)(y) of this Section, provided that 
9 the withdrawal or refund did not result from the 
10 beneficiary's death or disability;
11   (D-23) An amount equal to the credit allowable to 
12 the taxpayer under Section 218(a) of this Act, 
13 determined without regard to Section 218(c) of this 
14 Act;
15 and by deducting from the total so obtained the
sum of the 
16 following amounts:
17   (E) For taxable years ending before December 31, 
18 2001,
any amount included in such total in respect of 
19 any compensation
(including but not limited to any 
20 compensation paid or accrued to a
serviceman while a 
21 prisoner of war or missing in action) paid to a 
22 resident
by reason of being on active duty in the Armed 
23 Forces of the United States
and in respect of any 
24 compensation paid or accrued to a resident who as a

25 governmental employee was a prisoner of war or missing 
26 in action, and in
respect of any compensation paid to a 
 
 
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1 resident in 1971 or thereafter for
annual training 
2 performed pursuant to Sections 502 and 503, Title 32,

3 United States Code as a member of the Illinois National 
4 Guard or, beginning with taxable years ending on or 
5 after December 31, 2007, the National Guard of any 
6 other state.
For taxable years ending on or after 
7 December 31, 2001, any amount included in
such total in 
8 respect of any compensation (including but not limited 
9 to any
compensation paid or accrued to a serviceman 
10 while a prisoner of war or missing
in action) paid to a 
11 resident by reason of being a member of any component 
12 of
the Armed Forces of the United States and in respect 
13 of any compensation paid
or accrued to a resident who 
14 as a governmental employee was a prisoner of war
or 
15 missing in action, and in respect of any compensation 
16 paid to a resident in
2001 or thereafter by reason of 
17 being a member of the Illinois National Guard or, 
18 beginning with taxable years ending on or after 
19 December 31, 2007, the National Guard of any other 
20 state.
The provisions of this subparagraph (E) are 
21 exempt
from the provisions of Section 250;
22   (F) An amount equal to all amounts included in such 
23 total pursuant
to the provisions of Sections 402(a), 
24 402(c), 403(a), 403(b), 406(a), 407(a),
and 408 of the 
25 Internal Revenue Code, or included in such total as

26 distributions under the provisions of any retirement 
 
 
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1 or disability plan for
employees of any governmental 
2 agency or unit, or retirement payments to
retired 
3 partners, which payments are excluded in computing net 
4 earnings
from self employment by Section 1402 of the 
5 Internal Revenue Code and
regulations adopted pursuant 
6 thereto;
7   (G) The valuation limitation amount;
8   (H) An amount equal to the amount of any tax 
9 imposed by this Act
which was refunded to the taxpayer 
10 and included in such total for the
taxable year;
11   (I) An amount equal to all amounts included in such 
12 total pursuant
to the provisions of Section 111 of the 
13 Internal Revenue Code as a
recovery of items previously 
14 deducted from adjusted gross income in the
computation 
15 of taxable income;
16   (J) An amount equal to those dividends included in 
17 such total which were
paid by a corporation which 
18 conducts business operations in a River Edge 
19 Redevelopment Zone or zones created under the River 
20 Edge Redevelopment Zone Act, and conducts

21 substantially all of its operations in a River Edge 
22 Redevelopment Zone or zones. This subparagraph (J) is 
23 exempt from the provisions of Section 250;
24   (K) An amount equal to those dividends included in 
25 such total that
were paid by a corporation that 
26 conducts business operations in a federally
designated 
 
 
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1 Foreign Trade Zone or Sub-Zone and that is designated a 
2 High Impact
Business located in Illinois; provided 
3 that dividends eligible for the
deduction provided in 
4 subparagraph (J) of paragraph (2) of this subsection

5 shall not be eligible for the deduction provided under 
6 this subparagraph
(K);
7   (L) For taxable years ending after December 31, 
8 1983, an amount equal to
all social security benefits 
9 and railroad retirement benefits included in
such 
10 total pursuant to Sections 72(r) and 86 of the Internal 
11 Revenue Code;
12   (M) With the exception of any amounts subtracted 
13 under subparagraph
(N), an amount equal to the sum of 
14 all amounts disallowed as
deductions by (i) Sections 
15 171(a) (2), and 265(2) of the Internal Revenue Code, 
16 and all amounts of expenses allocable
to interest and 
17 disallowed as deductions by Section 265(1) of the 
18 Internal
Revenue Code;
and (ii) for taxable years

19 ending on or after August 13, 1999, Sections 171(a)(2), 
20 265,
280C, and 832(b)(5)(B)(i) of the Internal Revenue 
21 Code, plus, for taxable years ending on or after 
22 December 31, 2011, Section 45G(e)(3) of the Internal 
23 Revenue Code and, for taxable years ending on or after 
24 December 31, 2008, any amount included in gross income 
25 under Section 87 of the Internal Revenue Code; the 
26 provisions of this
subparagraph are exempt from the 
 
 
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1 provisions of Section 250;
2   (N) An amount equal to all amounts included in such 
3 total which are
exempt from taxation by this State 
4 either by reason of its statutes or
Constitution
or by 
5 reason of the Constitution, treaties or statutes of the 
6 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   (O) An amount equal to any contribution made to a 
12 job training
project established pursuant to the Tax 
13 Increment Allocation Redevelopment Act;
14   (P) An amount equal to the amount of the deduction 
15 used to compute the
federal income tax credit for 
16 restoration of substantial amounts held under
claim of 
17 right for the taxable year pursuant to Section 1341 of 
18 the
Internal Revenue Code or of any itemized deduction 
19 taken from adjusted gross income in the computation of 
20 taxable income for restoration of substantial amounts 
21 held under claim of right for the taxable year;
22   (Q) An amount equal to any amounts included in such 
23 total, received by
the taxpayer as an acceleration in 
24 the payment of life, endowment or annuity
benefits in 
25 advance of the time they would otherwise be payable as 
26 an indemnity
for a terminal illness;
 
 
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1   (R) An amount equal to the amount of any federal or 
2 State bonus paid
to veterans of the Persian Gulf War;
3   (S) An amount, to the extent included in adjusted 
4 gross income, equal
to the amount of a contribution 
5 made in the taxable year on behalf of the
taxpayer to a 
6 medical care savings account established under the 
7 Medical Care
Savings Account Act or the Medical Care 
8 Savings Account Act of 2000 to the
extent the 
9 contribution is accepted by the account
administrator 
10 as provided in that Act;
11   (T) An amount, to the extent included in adjusted 
12 gross income, equal to
the amount of interest earned in 
13 the taxable year on a medical care savings
account 
14 established under the Medical Care Savings Account Act 
15 or the Medical
Care Savings Account Act of 2000 on 
16 behalf of the
taxpayer, other than interest added 
17 pursuant to item (D-5) of this paragraph
(2);
18   (U) For one taxable year beginning on or after 
19 January 1,
1994, an
amount equal to the total amount of 
20 tax imposed and paid under subsections (a)
and (b) of 
21 Section 201 of this Act on grant amounts received by 
22 the taxpayer
under the Nursing Home Grant Assistance 
23 Act during the taxpayer's taxable years
1992 and 1993;
24   (V) Beginning with tax years ending on or after 
25 December 31, 1995 and
ending with tax years ending on 
26 or before December 31, 2004, an amount equal to
the 
 
 
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1 amount paid by a taxpayer who is a
self-employed 
2 taxpayer, a partner of a partnership, or a
shareholder 
3 in a Subchapter S corporation for health insurance or 
4 long-term
care insurance for that taxpayer or that 
5 taxpayer's spouse or dependents, to
the extent that the 
6 amount paid for that health insurance or long-term care

7 insurance may be deducted under Section 213 of the 
8 Internal Revenue Code, has not been deducted on the 
9 federal income tax return of the taxpayer,
and does not 
10 exceed the taxable income attributable to that 
11 taxpayer's income,
self-employment income, or 
12 Subchapter S corporation income; except that no

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

16 employer of the taxpayer or the taxpayer's
spouse. The 
17 amount of the health insurance and long-term care 
18 insurance
subtracted under this item (V) shall be 
19 determined by multiplying total
health insurance and 
20 long-term care insurance premiums paid by the taxpayer

21 times a number that represents the fractional 
22 percentage of eligible medical
expenses under Section 
23 213 of the Internal Revenue Code of 1986 not actually

24 deducted on the taxpayer's federal income tax return;
25   (W) For taxable years beginning on or after January 
26 1, 1998,
all amounts included in the taxpayer's federal 
 
 
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1 gross income
in the taxable year from amounts converted 
2 from a regular IRA to a Roth IRA.
This paragraph is 
3 exempt from the provisions of Section
250;
4   (X) For taxable year 1999 and thereafter, an amount 
5 equal to the
amount of any (i) distributions, to the 
6 extent includible in gross income for
federal income 
7 tax purposes, made to the taxpayer because of his or 
8 her status
as a victim of persecution for racial or 
9 religious reasons by Nazi Germany or
any other Axis 
10 regime or as an heir of the victim and (ii) items
of 
11 income, to the extent
includible in gross income for 
12 federal income tax purposes, attributable to,
derived 
13 from or in any way related to assets stolen from, 
14 hidden from, or
otherwise lost to a victim of

15 persecution for racial or religious reasons by Nazi 
16 Germany or any other Axis
regime immediately prior to, 
17 during, and immediately after World War II,
including, 
18 but
not limited to, interest on the proceeds receivable 
19 as insurance
under policies issued to a victim of 
20 persecution for racial or religious
reasons
by Nazi 
21 Germany or any other Axis regime by European insurance 
22 companies
immediately prior to and during World War II;

23 provided, however, this subtraction from federal 
24 adjusted gross income does not
apply to assets acquired 
25 with such assets or with the proceeds from the sale of

26 such assets; provided, further, this paragraph shall 
 
 
HB3746- 21 -LRB100 09089 HLH 19242 b


1 only apply to a taxpayer
who was the first recipient of 
2 such assets after their recovery and who is a
victim of 
3 persecution for racial or religious reasons
by Nazi 
4 Germany or any other Axis regime or as an heir of the 
5 victim. The
amount of and the eligibility for any 
6 public assistance, benefit, or
similar entitlement is 
7 not affected by the inclusion of items (i) and (ii) of

8 this paragraph in gross income for federal income tax 
9 purposes.
This paragraph is exempt from the provisions 
10 of Section 250;
11   (Y) For taxable years beginning on or after January 
12 1, 2002
and ending
on or before December 31, 2004, 
13 moneys contributed in the taxable year to a College 
14 Savings Pool account under
Section 16.5 of the State 
15 Treasurer Act, except that amounts excluded from
gross 
16 income under Section 529(c)(3)(C)(i) of the Internal 
17 Revenue Code
shall not be considered moneys 
18 contributed under this subparagraph (Y). For taxable 
19 years beginning on or after January 1, 2005, a maximum 
20 of $10,000
contributed
in the
taxable year to (i) a 
21 College Savings Pool account under Section 16.5 of the

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

25 Internal
Revenue Code shall not be considered moneys 
26 contributed under this subparagraph
(Y). For purposes 
 
 
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1 of this subparagraph, contributions made by an 
2 employer on behalf of an employee, or matching 
3 contributions made by an employee, shall be treated as 
4 made by the employee. This
subparagraph (Y) is exempt 
5 from the provisions of Section 250;
6   (Z) For taxable years 2001 and thereafter, for the 
7 taxable year in
which the bonus depreciation deduction

8 is taken on the taxpayer's federal income tax return 
9 under
subsection (k) of Section 168 of the Internal 
10 Revenue Code and for each
applicable taxable year 
11 thereafter, an amount equal to "x", where:
12    (1) "y" equals the amount of the depreciation 
13 deduction taken for the
taxable year
on the 
14 taxpayer's federal income tax return on property 
15 for which the bonus
depreciation deduction
was 
16 taken in any year under subsection (k) of Section 
17 168 of the Internal
Revenue Code, but not including 
18 the bonus depreciation deduction;
19    (2) for taxable years ending on or before 
20 December 31, 2005, "x" equals "y" multiplied by 30 
21 and then divided by 70 (or "y"
multiplied by 
22 0.429); and
23    (3) for taxable years ending after December 
24 31, 2005:
25     (i) for property on which a bonus 
26 depreciation deduction of 30% of the adjusted 
 
 
HB3746- 23 -LRB100 09089 HLH 19242 b


1 basis was taken, "x" equals "y" multiplied by 
2 30 and then divided by 70 (or "y"
multiplied by 
3 0.429); and
4     (ii) for property on which a bonus 
5 depreciation deduction of 50% of the adjusted 
6 basis was taken, "x" equals "y" multiplied by 
7 1.0.
8   The aggregate amount deducted under this 
9 subparagraph in all taxable
years for any one piece of 
10 property may not exceed the amount of the bonus

11 depreciation deduction
taken on that property on the 
12 taxpayer's federal income tax return under
subsection 
13 (k) of Section 168 of the Internal Revenue Code. This 
14 subparagraph (Z) is exempt from the provisions of 
15 Section 250;
16   (AA) If the taxpayer sells, transfers, abandons, 
17 or otherwise disposes of
property for which the 
18 taxpayer was required in any taxable year to make an

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

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 required in any taxable year to make an addition 
26 modification under subparagraph (D-15), then an amount 
 
 
HB3746- 24 -LRB100 09089 HLH 19242 b


1 equal to that addition modification.

2   The taxpayer is allowed to take the deduction under 
3 this subparagraph
only once with respect to any one 
4 piece of property.
5   This subparagraph (AA) is exempt from the 
6 provisions of Section 250;
7   (BB) Any amount included in adjusted gross income, 
8 other
than
salary,
received by a driver in a 
9 ridesharing arrangement using a motor vehicle;
10   (CC) The amount of (i) any interest income (net of 
11 the deductions allocable thereto) taken into account 
12 for the taxable year with respect to a transaction with 
13 a taxpayer that is required to make an addition 
14 modification with respect to such transaction under 
15 Section 203(a)(2)(D-17), 203(b)(2)(E-12), 
16 203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed 
17 the amount of that addition modification, and
(ii) any 
18 income from intangible property (net of the deductions 
19 allocable thereto) taken into account for the taxable 
20 year with respect to a transaction with a taxpayer that 
21 is required to make an addition modification with 
22 respect to such transaction under Section 
23 203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or 
24 203(d)(2)(D-8), but not to exceed the amount of that 
25 addition modification. This subparagraph (CC) is 
26 exempt from the provisions of Section 250;
 
 
HB3746- 25 -LRB100 09089 HLH 19242 b


1   (DD) An amount equal to the interest income taken 
2 into account for the taxable year (net of the 
3 deductions allocable thereto) with respect to 
4 transactions with (i) a foreign person who would be a 
5 member of the taxpayer's unitary business group but for 
6 the fact that the foreign person's business activity 
7 outside the United States is 80% or more of that 
8 person's total business activity and (ii) for taxable 
9 years ending on or after December 31, 2008, to a person 
10 who would be a member of the same unitary business 
11 group but for the fact that the person is prohibited 
12 under Section 1501(a)(27) from being included in the 
13 unitary business group because he or she is ordinarily 
14 required to apportion business income under different 
15 subsections of Section 304, but not to exceed the 
16 addition modification required to be made for the same 
17 taxable year under Section 203(a)(2)(D-17) for 
18 interest paid, accrued, or incurred, directly or 
19 indirectly, to the same person. This subparagraph (DD) 
20 is exempt from the provisions of Section 250; 
21   (EE) An amount equal to the income from intangible 
22 property taken into account for the taxable year (net 
23 of the deductions allocable thereto) with respect to 
24 transactions with (i) a foreign person who would be a 
25 member of the taxpayer's unitary business group but for 
26 the fact that the foreign person's business activity 
 
 
HB3746- 26 -LRB100 09089 HLH 19242 b


1 outside the United States is 80% or more of that 
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, but not to exceed the 
10 addition modification required to be made for the same 
11 taxable year under Section 203(a)(2)(D-18) for 
12 intangible expenses and costs paid, accrued, or 
13 incurred, directly or indirectly, to the same foreign 
14 person. This subparagraph (EE) is exempt from the 
15 provisions of Section 250;
16   (FF) An amount equal to any amount awarded to the 
17 taxpayer during the taxable year by the Court of Claims 
18 under subsection (c) of Section 8 of the Court of 
19 Claims Act for time unjustly served in a State prison. 
20 This subparagraph (FF) is exempt from the provisions of 
21 Section 250; and 
22   (GG) For taxable years ending on or after December 
23 31, 2011, in the case of a taxpayer who was required to 
24 add back any insurance premiums under Section 
25 203(a)(2)(D-19), such taxpayer may elect to subtract 
26 that part of a reimbursement received from the 
 
 
HB3746- 27 -LRB100 09089 HLH 19242 b


1 insurance company equal to the amount of the expense or 
2 loss (including expenses incurred by the insurance 
3 company) that would have been taken into account as a 
4 deduction for federal income tax purposes if the 
5 expense or loss had been uninsured. If a taxpayer makes 
6 the election provided for by this subparagraph (GG), 
7 the insurer to which the premiums were paid must add 
8 back to income the amount subtracted by the taxpayer 
9 pursuant to this subparagraph (GG). This subparagraph 
10 (GG) is exempt from the provisions of Section 250; and 
11 . 
12   (HH) For taxable years ending on or after December 
13 31, 2017, an amount equal to any payment made during 
14 the taxable year of any indebtedness of the taxpayer 
15 under a qualified education loan, including the 
16 payment of any interest relating to such a loan, but 
17 only to the extent that the taxpayer was not entitled 
18 to a deduction under Section 221 of the Internal 
19 Revenue Code for that payment; this subparagraph (HH) 
20 applies to payments made by the taxpayer and to 
21 payments made by the taxpayer's employer on behalf of 
22 the taxpayer; for the purposes of this subparagraph 
23 (HH), "qualified education loan" has the meaning 
24 ascribed to that term in Section 221 of the Internal 
25 Revenue Code; this subparagraph (HH) is exempt from the 
26 provisions of Section 250. 

 
 
HB3746- 28 -LRB100 09089 HLH 19242 b


1 (b) Corporations.
2  (1) In general. In the case of a corporation, 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. The taxable income referred to in 
6 paragraph (1)
shall be modified by adding thereto the sum 
7 of the following amounts:
8   (A) An amount equal to all amounts paid or accrued 
9 to the taxpayer
as interest and all distributions 
10 received from regulated investment
companies during 
11 the taxable year to the extent excluded from gross

12 income 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 in 
15 the computation of taxable income
for the taxable year;
16   (C) In the case of a regulated investment company, 
17 an amount equal to
the excess of (i) the net long-term 
18 capital gain for the taxable year, over
(ii) the amount 
19 of the capital gain dividends designated as such in 
20 accordance
with Section 852(b)(3)(C) of the Internal 
21 Revenue Code and any amount
designated under Section 
22 852(b)(3)(D) of the Internal Revenue Code,

23 attributable to the taxable year (this amendatory Act 
24 of 1995
(Public Act 89-89) is declarative of existing 
25 law and is not a new
enactment);
 
 
HB3746- 29 -LRB100 09089 HLH 19242 b


1   (D) The amount of any net operating loss deduction 
2 taken in arriving
at taxable income, other than a net 
3 operating loss carried forward from a
taxable year 
4 ending prior to December 31, 1986;
5   (E) For taxable years in which a net operating loss 
6 carryback or
carryforward from a taxable year ending 
7 prior to December 31, 1986 is an
element of taxable 
8 income under paragraph (1) of subsection (e) or

9 subparagraph (E) of paragraph (2) of subsection (e), 
10 the amount by which
addition modifications other than 
11 those provided by this subparagraph (E)
exceeded 
12 subtraction modifications in such earlier taxable 
13 year, with the
following limitations applied in the 
14 order that they are listed:
15    (i) the addition modification relating to the 
16 net operating loss
carried back or forward to the 
17 taxable year from any taxable year ending
prior to 
18 December 31, 1986 shall be reduced by the amount of 
19 addition
modification under this subparagraph (E) 
20 which related to that net operating
loss and which 
21 was taken into account in calculating the base 
22 income of an
earlier taxable year, and
23    (ii) the addition modification relating to the 
24 net operating loss
carried back or forward to the 
25 taxable year from any taxable year ending
prior to 
26 December 31, 1986 shall not exceed the amount of 
 
 
HB3746- 30 -LRB100 09089 HLH 19242 b


1 such carryback or
carryforward;
2   For taxable years in which there is a net operating 
3 loss carryback or
carryforward from more than one other 
4 taxable year ending prior to December
31, 1986, the 
5 addition modification provided in this subparagraph 
6 (E) shall
be the sum of the amounts computed 
7 independently under the preceding
provisions of this 
8 subparagraph (E) for each such taxable year;
9   (E-5) For taxable years ending after December 31, 
10 1997, an
amount equal to any eligible remediation costs 
11 that the corporation
deducted in computing adjusted 
12 gross income and for which the
corporation claims a 
13 credit under subsection (l) of Section 201;
14   (E-10) For taxable years 2001 and thereafter, an 
15 amount equal to the
bonus depreciation deduction taken 
16 on the taxpayer's federal income tax return for the 
17 taxable
year under subsection (k) of Section 168 of the 
18 Internal Revenue Code;
19   (E-11) If the taxpayer sells, transfers, abandons, 
20 or otherwise disposes of property for which the 
21 taxpayer was required in any taxable year to
make an 
22 addition modification under subparagraph (E-10), then 
23 an amount equal
to the aggregate amount of the 
24 deductions taken in all taxable
years under 
25 subparagraph (T) with respect to that property.
26   If the taxpayer continues to own property through 
 
 
HB3746- 31 -LRB100 09089 HLH 19242 b


1 the last day of the last tax year for which the 
2 taxpayer may claim a depreciation deduction for 
3 federal income tax purposes and for which the taxpayer 
4 was allowed in any taxable year to make a subtraction 
5 modification under subparagraph (T), then an amount 
6 equal to that subtraction modification.

7   The taxpayer is required to make the addition 
8 modification under this
subparagraph
only once with 
9 respect to any one piece of property;
10   (E-12) An amount equal to the amount otherwise 
11 allowed as a deduction in computing base income for 
12 interest paid, accrued, or incurred, directly or 
13 indirectly, (i) for taxable years ending on or after 
14 December 31, 2004, to a foreign person who would be a 
15 member of the same unitary business group but for the 
16 fact the foreign person's business activity outside 
17 the United States is 80% or more of the foreign 
18 person's total business activity and (ii) for taxable 
19 years ending on or after December 31, 2008, to a person 
20 who would be a member of the same unitary business 
21 group but for the fact that the person is prohibited 
22 under Section 1501(a)(27) from being included in the 
23 unitary business group because he or she is ordinarily 
24 required to apportion business income under different 
25 subsections of Section 304. The addition modification 
26 required by this subparagraph shall be reduced to the 
 
 
HB3746- 32 -LRB100 09089 HLH 19242 b


1 extent that dividends were included in base income of 
2 the unitary group for the same taxable year and 
3 received by the taxpayer or by a member of the 
4 taxpayer's unitary business group (including amounts 
5 included in gross income pursuant to Sections 951 
6 through 964 of the Internal Revenue Code and amounts 
7 included in gross income under Section 78 of the 
8 Internal Revenue Code) with respect to the stock of the 
9 same person to whom the interest was paid, accrued, or 
10 incurred.

11   This paragraph shall not apply to the following:

12    (i) an item of interest paid, accrued, or 
13 incurred, directly or indirectly, to a person who 
14 is subject in a foreign country or state, other 
15 than a state which requires mandatory unitary 
16 reporting, to a tax on or measured by net income 
17 with respect to such interest; or
18    (ii) an item of interest paid, accrued, or 
19 incurred, directly or indirectly, to a person if 
20 the taxpayer can establish, based on a 
21 preponderance of the evidence, both of the 
22 following:
23     (a) the person, during the same taxable 
24 year, paid, accrued, or incurred, the interest 
25 to a person that is not a related member, and
26     (b) the transaction giving rise to the 
 
 
HB3746- 33 -LRB100 09089 HLH 19242 b


1 interest expense between the taxpayer and the 
2 person did not have as a principal purpose the 
3 avoidance of Illinois income tax, and is paid 
4 pursuant to a contract or agreement that 
5 reflects an arm's-length interest rate and 
6 terms; or

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

13    (iv) an item of interest paid, accrued, or 
14 incurred, directly or indirectly, to a person if 
15 the taxpayer establishes by clear and convincing 
16 evidence that the adjustments are unreasonable; or 
17 if the taxpayer and the Director agree in writing 
18 to the application or use of an alternative method 
19 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 
 
 
HB3746- 34 -LRB100 09089 HLH 19242 b


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

3   (E-13) An amount equal to the amount of intangible 
4 expenses and costs otherwise allowed as a deduction in 
5 computing base income, and that were paid, accrued, or 
6 incurred, directly or indirectly, (i) for taxable 
7 years ending on or after December 31, 2004, to a 
8 foreign person who would be a member of the same 
9 unitary business group but for the fact that the 
10 foreign person's business activity outside the United 
11 States is 80% or more of that person's total business 
12 activity and (ii) for taxable years ending on or after 
13 December 31, 2008, to a person who would be a member of 
14 the same unitary business group but for the fact that 
15 the person is prohibited under Section 1501(a)(27) 
16 from being included in the unitary business group 
17 because he or she is ordinarily required to apportion 
18 business income under different subsections of Section 
19 304. The addition modification required by this 
20 subparagraph shall be reduced to the extent that 
21 dividends were included in base income of the unitary 
22 group for the same taxable year and received by the 
23 taxpayer or by a member of the taxpayer's unitary 
24 business group (including amounts included in gross 
25 income pursuant to Sections 951 through 964 of the 
26 Internal Revenue Code and amounts included in gross 
 
 
HB3746- 35 -LRB100 09089 HLH 19242 b


1 income under Section 78 of the Internal Revenue Code) 
2 with respect to the stock of the same person to whom 
3 the intangible expenses and costs were directly or 
4 indirectly paid, incurred, or accrued. The preceding 
5 sentence shall not apply to the extent that the same 
6 dividends caused a reduction to the addition 
7 modification required under Section 203(b)(2)(E-12) of 
8 this Act.
As used in this subparagraph, the term 
9 "intangible expenses and costs" includes (1) expenses, 
10 losses, and costs for, or related to, the direct or 
11 indirect acquisition, use, maintenance or management, 
12 ownership, sale, exchange, or any other disposition of 
13 intangible property; (2) losses incurred, directly or 
14 indirectly, from factoring transactions or discounting 
15 transactions; (3) royalty, patent, technical, and 
16 copyright fees; (4) licensing fees; and (5) other 
17 similar expenses and costs.
For purposes of this 
18 subparagraph, "intangible property" includes patents, 
19 patent applications, trade names, trademarks, service 
20 marks, copyrights, mask works, trade secrets, and 
21 similar types of intangible assets.
22   This paragraph shall not apply to the following:
23    (i) any item of intangible expenses or costs 
24 paid, accrued, or incurred, directly or 
25 indirectly, from a transaction with a person who is 
26 subject in a foreign country or state, other than a 
 
 
HB3746- 36 -LRB100 09089 HLH 19242 b


1 state which requires mandatory unitary reporting, 
2 to a tax on or measured by net income with respect 
3 to such item; or
4    (ii) any item of intangible expense or cost 
5 paid, accrued, or incurred, directly or 
6 indirectly, if the taxpayer can establish, based 
7 on a preponderance of the evidence, both of the 
8 following:
9     (a) the person during the same taxable 
10 year paid, accrued, or incurred, the 
11 intangible expense or cost to a person that is 
12 not a related member, and
13     (b) the transaction giving rise to the 
14 intangible expense or cost between the 
15 taxpayer and the person did not have as a 
16 principal purpose the avoidance of Illinois 
17 income tax, and is paid pursuant to a contract 
18 or agreement that reflects arm's-length terms; 
19 or
20    (iii) any item of intangible expense or cost 
21 paid, accrued, or incurred, directly or 
22 indirectly, from a transaction with a person if the 
23 taxpayer establishes by clear and convincing 
24 evidence, that the adjustments are unreasonable; 
25 or if the taxpayer and the Director agree in 
26 writing to the application or use of an alternative 
 
 
HB3746- 37 -LRB100 09089 HLH 19242 b


1 method of apportionment under Section 304(f);

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

11   (E-14) For taxable years ending on or after 
12 December 31, 2008, an amount equal to the amount of 
13 insurance premium expenses and costs otherwise allowed 
14 as a deduction in computing base income, and that were 
15 paid, accrued, or incurred, directly or indirectly, to 
16 a person who would be a member of the same unitary 
17 business group but for the fact that the person is 
18 prohibited under Section 1501(a)(27) from being 
19 included in the unitary business group because he or 
20 she is ordinarily required to apportion business 
21 income under different subsections of Section 304. The 
22 addition modification required by this subparagraph 
23 shall be reduced to the extent that dividends were 
24 included in base income of the unitary group for the 
25 same taxable year and received by the taxpayer or by a 
26 member of the taxpayer's unitary business group 
 
 
HB3746- 38 -LRB100 09089 HLH 19242 b


1 (including amounts included in gross income under 
2 Sections 951 through 964 of the Internal Revenue Code 
3 and amounts included in gross income under Section 78 
4 of the Internal Revenue Code) with respect to the stock 
5 of the same person to whom the premiums and costs were 
6 directly or indirectly paid, incurred, or accrued. The 
7 preceding sentence does not apply to the extent that 
8 the same dividends caused a reduction to the addition 
9 modification required under Section 203(b)(2)(E-12) or 
10 Section 203(b)(2)(E-13) of this Act;

11   (E-15) For taxable years beginning after December 
12 31, 2008, any deduction for dividends paid by a captive 
13 real estate investment trust that is allowed to a real 
14 estate investment trust under Section 857(b)(2)(B) of 
15 the Internal Revenue Code for dividends paid;
16   (E-16) An amount equal to the credit allowable to 
17 the taxpayer under Section 218(a) of this Act, 
18 determined without regard to Section 218(c) of this 
19 Act;
20 and by deducting from the total so obtained the sum of the 
21 following
amounts:
22   (F) An amount equal to the amount of any tax 
23 imposed by this Act
which was refunded to the taxpayer 
24 and included in such total for the
taxable year;
25   (G) An amount equal to any amount included in such 
26 total under
Section 78 of the Internal Revenue Code;
 
 
HB3746- 39 -LRB100 09089 HLH 19242 b


1   (H) In the case of a regulated investment company, 
2 an amount equal
to the amount of exempt interest 
3 dividends as defined in subsection (b)
(5) of Section 
4 852 of the Internal Revenue Code, paid to shareholders

5 for the taxable year;
6   (I) With the exception of any amounts subtracted 
7 under subparagraph
(J),
an amount equal to the sum of 
8 all amounts disallowed as
deductions by (i) Sections 
9 171(a) (2), and 265(a)(2) and amounts disallowed as

10 interest expense by Section 291(a)(3) of the Internal 
11 Revenue Code, and all amounts of expenses allocable to 
12 interest and
disallowed as deductions by Section 
13 265(a)(1) of the Internal Revenue Code;
and (ii) for 
14 taxable years
ending on or after August 13, 1999, 
15 Sections
171(a)(2), 265,
280C, 291(a)(3), and 
16 832(b)(5)(B)(i) of the Internal Revenue Code, plus, 
17 for tax years ending on or after December 31, 2011, 
18 amounts disallowed as deductions by Section 45G(e)(3) 
19 of the Internal Revenue Code and, for taxable years 
20 ending on or after December 31, 2008, any amount 
21 included in gross income under Section 87 of the 
22 Internal Revenue Code and the policyholders' share of 
23 tax-exempt interest of a life insurance company under 
24 Section 807(a)(2)(B) of the Internal Revenue Code (in 
25 the case of a life insurance company with gross income 
26 from a decrease in reserves for the tax year) or 
 
 
HB3746- 40 -LRB100 09089 HLH 19242 b


1 Section 807(b)(1)(B) of the Internal Revenue Code (in 
2 the case of a life insurance company allowed a 
3 deduction for an increase in reserves for the tax 
4 year); the
provisions of this
subparagraph are exempt 
5 from the provisions of Section 250;
6   (J) An amount equal to all amounts included in such 
7 total which are
exempt from taxation by this State 
8 either by reason of its statutes or
Constitution
or by 
9 reason of the Constitution, treaties or statutes of the 
10 United States;
provided that, in the case of any 
11 statute of this State that exempts income
derived from 
12 bonds or other obligations from the tax imposed under 
13 this Act,
the amount exempted shall be the interest net 
14 of bond premium amortization;
15   (K) An amount equal to those dividends included in 
16 such total
which were paid by a corporation which 
17 conducts
business operations in a River Edge 
18 Redevelopment Zone or zones created under the River 
19 Edge Redevelopment Zone Act and conducts substantially 
20 all of its
operations in a River Edge Redevelopment 
21 Zone or zones. This subparagraph (K) is exempt from the 
22 provisions of Section 250;
23   (L) An amount equal to those dividends included in 
24 such total that
were paid by a corporation that 
25 conducts business operations in a federally
designated 
26 Foreign Trade Zone or Sub-Zone and that is designated a 
 
 
HB3746- 41 -LRB100 09089 HLH 19242 b


1 High Impact
Business located in Illinois; provided 
2 that dividends eligible for the
deduction provided in 
3 subparagraph (K) of paragraph 2 of this subsection

4 shall not be eligible for the deduction provided under 
5 this subparagraph
(L);
6   (M) For any taxpayer that is a financial 
7 organization within the meaning
of Section 304(c) of 
8 this Act, an amount included in such total as interest

9 income from a loan or loans made by such taxpayer to a 
10 borrower, to the extent
that such a loan is secured by 
11 property which is eligible for the River Edge 
12 Redevelopment Zone Investment Credit. To determine the 
13 portion of a loan or loans that is
secured by property 
14 eligible for a Section 201(f) investment
credit to the 
15 borrower, the entire principal amount of the loan or 
16 loans
between the taxpayer and the borrower should be 
17 divided into the basis of the
Section 201(f) investment 
18 credit property which secures the
loan or loans, using 
19 for this purpose the original basis of such property on

20 the date that it was placed in service in the River 
21 Edge Redevelopment Zone. The subtraction modification 
22 available to taxpayer in any
year under this subsection 
23 shall be that portion of the total interest paid
by the 
24 borrower with respect to such loan attributable to the 
25 eligible
property as calculated under the previous 
26 sentence. This subparagraph (M) is exempt from the 
 
 
HB3746- 42 -LRB100 09089 HLH 19242 b


1 provisions of Section 250;
2   (M-1) For any taxpayer that is a financial 
3 organization within the
meaning of Section 304(c) of 
4 this Act, an amount included in such total as
interest 
5 income from a loan or loans made by such taxpayer to a 
6 borrower,
to the extent that such a loan is secured by 
7 property which is eligible for
the High Impact Business 
8 Investment Credit. To determine the portion of a
loan 
9 or loans that is secured by property eligible for a 
10 Section 201(h) investment credit to the borrower, the 
11 entire principal amount of
the loan or loans between 
12 the taxpayer and the borrower should be divided into

13 the basis of the Section 201(h) investment credit 
14 property which
secures the loan or loans, using for 
15 this purpose the original basis of such
property on the 
16 date that it was placed in service in a federally 
17 designated
Foreign Trade Zone or Sub-Zone located in 
18 Illinois. No taxpayer that is
eligible for the 
19 deduction provided in subparagraph (M) of paragraph 
20 (2) of
this subsection shall be eligible for the 
21 deduction provided under this
subparagraph (M-1). The 
22 subtraction modification available to taxpayers in
any 
23 year under this subsection shall be that portion of the 
24 total interest
paid by the borrower with respect to 
25 such loan attributable to the eligible
property as 
26 calculated under the previous sentence;
 
 
HB3746- 43 -LRB100 09089 HLH 19242 b


1   (N) Two times any contribution made during the 
2 taxable year to a
designated zone organization to the 
3 extent that the contribution (i)
qualifies as a 
4 charitable contribution under subsection (c) of 
5 Section 170
of the Internal Revenue Code and (ii) must, 
6 by its terms, be used for a
project approved by the 
7 Department of Commerce and Economic Opportunity under 
8 Section 11 of the Illinois Enterprise Zone Act or under 
9 Section 10-10 of the River Edge Redevelopment Zone Act. 
10 This subparagraph (N) is exempt from the provisions of 
11 Section 250;
12   (O) An amount equal to: (i) 85% for taxable years 
13 ending on or before
December 31, 1992, or, a percentage 
14 equal to the percentage allowable under
Section 
15 243(a)(1) of the Internal Revenue Code of 1986 for 
16 taxable years ending
after December 31, 1992, of the 
17 amount by which dividends included in taxable
income 
18 and received from a corporation that is not created or 
19 organized under
the laws of the United States or any 
20 state or political subdivision thereof,
including, for 
21 taxable years ending on or after December 31, 1988, 
22 dividends
received or deemed received or paid or deemed 
23 paid under Sections 951 through
965 of the Internal 
24 Revenue Code, exceed the amount of the modification

25 provided under subparagraph (G) of paragraph (2) of 
26 this subsection (b) which
is related to such dividends, 
 
 
HB3746- 44 -LRB100 09089 HLH 19242 b


1 and including, for taxable years ending on or after 
2 December 31, 2008, dividends received from a captive 
3 real estate investment trust; plus (ii) 100% of the 
4 amount by which dividends,
included in taxable income 
5 and received, including, for taxable years ending on
or 
6 after December 31, 1988, dividends received or deemed 
7 received or paid or
deemed paid under Sections 951 
8 through 964 of the Internal Revenue Code and including, 
9 for taxable years ending on or after December 31, 2008, 
10 dividends received from a captive real estate 
11 investment trust, from
any such corporation specified 
12 in clause (i) that would but for the provisions
of 
13 Section 1504 (b) (3) of the Internal Revenue Code be 
14 treated as a member of
the affiliated group which 
15 includes the dividend recipient, exceed the amount
of 
16 the modification provided under subparagraph (G) of 
17 paragraph (2) of this
subsection (b) which is related 
18 to such dividends. This subparagraph (O) is exempt from 
19 the provisions of Section 250 of this Act;
20   (P) An amount equal to any contribution made to a 
21 job training project
established pursuant to the Tax 
22 Increment Allocation Redevelopment Act;
23   (Q) An amount equal to the amount of the deduction 
24 used to compute the
federal income tax credit for 
25 restoration of substantial amounts held under
claim of 
26 right for the taxable year pursuant to Section 1341 of 
 
 
HB3746- 45 -LRB100 09089 HLH 19242 b


1 the
Internal Revenue Code;
2   (R) On and after July 20, 1999, in the case of an 
3 attorney-in-fact with respect to whom an
interinsurer 
4 or a reciprocal insurer has made the election under 
5 Section 835 of
the Internal Revenue Code, 26 U.S.C. 
6 835, an amount equal to the excess, if
any, of the 
7 amounts paid or incurred by that interinsurer or 
8 reciprocal insurer
in the taxable year to the 
9 attorney-in-fact over the deduction allowed to that

10 interinsurer or reciprocal insurer with respect to the 
11 attorney-in-fact under
Section 835(b) of the Internal 
12 Revenue Code for the taxable year; the provisions of 
13 this subparagraph are exempt from the provisions of 
14 Section 250;
15   (S) For taxable years ending on or after December 
16 31, 1997, in the
case of a Subchapter
S corporation, an 
17 amount equal to all amounts of income allocable to a

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

21 allocable to organizations exempt from federal income 
22 tax by reason of Section
501(a) of the Internal Revenue 
23 Code. This subparagraph (S) is exempt from
the 
24 provisions of Section 250;
25   (T) For taxable years 2001 and thereafter, for the 
26 taxable year in
which the bonus depreciation deduction

 
 
HB3746- 46 -LRB100 09089 HLH 19242 b


1 is taken on the taxpayer's federal income tax return 
2 under
subsection (k) of Section 168 of the Internal 
3 Revenue Code and for each
applicable taxable year 
4 thereafter, an amount equal to "x", where:
5    (1) "y" equals the amount of the depreciation 
6 deduction taken for the
taxable year
on the 
7 taxpayer's federal income tax return on property 
8 for which the bonus
depreciation deduction
was 
9 taken in any year under subsection (k) of Section 
10 168 of the Internal
Revenue Code, but not including 
11 the bonus depreciation deduction;
12    (2) for taxable years ending on or before 
13 December 31, 2005, "x" equals "y" multiplied by 30 
14 and then divided by 70 (or "y"
multiplied by 
15 0.429); and
16    (3) for taxable years ending after December 
17 31, 2005:
18     (i) for property on which a bonus 
19 depreciation deduction of 30% of the adjusted 
20 basis was taken, "x" equals "y" multiplied by 
21 30 and then divided by 70 (or "y"
multiplied by 
22 0.429); and
23     (ii) for property on which a bonus 
24 depreciation deduction of 50% of the adjusted 
25 basis was taken, "x" equals "y" multiplied by 
26 1.0.
 
 
HB3746- 47 -LRB100 09089 HLH 19242 b


1   The aggregate amount deducted under this 
2 subparagraph in all taxable
years for any one piece of 
3 property may not exceed the amount of the bonus

4 depreciation deduction
taken on that property on the 
5 taxpayer's federal income tax return under
subsection 
6 (k) of Section 168 of the Internal Revenue Code. This 
7 subparagraph (T) is exempt from the provisions of 
8 Section 250;
9   (U) If the taxpayer sells, transfers, abandons, or 
10 otherwise disposes of
property for which the taxpayer 
11 was required in any taxable year to make an
addition 
12 modification under subparagraph (E-10), then an amount 
13 equal to that
addition modification.
14   If the taxpayer continues to own property through 
15 the last day of the last tax year for which the 
16 taxpayer may claim a depreciation deduction for 
17 federal income tax purposes and for which the taxpayer 
18 was required in any taxable year to make an addition 
19 modification under subparagraph (E-10), then an amount 
20 equal to that addition modification.

21   The taxpayer is allowed to take the deduction under 
22 this subparagraph
only once with respect to any one 
23 piece of property.
24   This subparagraph (U) is exempt from the 
25 provisions of Section 250;
26   (V) The amount of: (i) any interest income (net of 
 
 
HB3746- 48 -LRB100 09089 HLH 19242 b


1 the deductions allocable thereto) taken into account 
2 for the taxable year with respect to a transaction with 
3 a taxpayer that is required to make an addition 
4 modification with respect to such transaction under 
5 Section 203(a)(2)(D-17), 203(b)(2)(E-12), 
6 203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed 
7 the amount of such addition modification,
(ii) any 
8 income from intangible property (net of the deductions 
9 allocable thereto) taken into account for the taxable 
10 year with respect to a transaction with a taxpayer that 
11 is required to make an addition modification with 
12 respect to such transaction under Section 
13 203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or 
14 203(d)(2)(D-8), but not to exceed the amount of such 
15 addition modification, and (iii) any insurance premium 
16 income (net of deductions allocable thereto) taken 
17 into account for the taxable year with respect to a 
18 transaction with a taxpayer that is required to make an 
19 addition modification with respect to such transaction 
20 under Section 203(a)(2)(D-19), Section 
21 203(b)(2)(E-14), Section 203(c)(2)(G-14), or Section 
22 203(d)(2)(D-9), but not to exceed the amount of that 
23 addition modification. This subparagraph (V) is exempt 
24 from the provisions of Section 250;

25   (W) An amount equal to the interest income taken 
26 into account for the taxable year (net of the 
 
 
HB3746- 49 -LRB100 09089 HLH 19242 b


1 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(b)(2)(E-12) for 
16 interest paid, accrued, or incurred, directly or 
17 indirectly, to the same person. This subparagraph (W) 
18 is exempt from the provisions of Section 250;

19   (X) An amount equal to the income from intangible 
20 property taken into account for the taxable year (net 
21 of the deductions allocable thereto) with respect to 
22 transactions with (i) a foreign person who would be a 
23 member of the taxpayer's unitary business group but for 
24 the fact that the foreign person's business activity 
25 outside the United States is 80% or more of that 
26 person's total business activity and (ii) for taxable 
 
 
HB3746- 50 -LRB100 09089 HLH 19242 b


1 years ending on or after December 31, 2008, to a person 
2 who would be a member of the same unitary business 
3 group but for the fact that the person is prohibited 
4 under Section 1501(a)(27) from being included in the 
5 unitary business group because he or she is ordinarily 
6 required to apportion business income under different 
7 subsections of Section 304, but not to exceed the 
8 addition modification required to be made for the same 
9 taxable year under Section 203(b)(2)(E-13) for 
10 intangible expenses and costs paid, accrued, or 
11 incurred, directly or indirectly, to the same foreign 
12 person. This subparagraph (X) is exempt from the 
13 provisions of Section 250;

14   (Y) For taxable years ending on or after December 
15 31, 2011, in the case of a taxpayer who was required to 
16 add back any insurance premiums under Section 
17 203(b)(2)(E-14), such taxpayer may elect to subtract 
18 that part of a reimbursement received from the 
19 insurance company equal to the amount of the expense or 
20 loss (including expenses incurred by the insurance 
21 company) that would have been taken into account as a 
22 deduction for federal income tax purposes if the 
23 expense or loss had been uninsured. If a taxpayer makes 
24 the election provided for by this subparagraph (Y), the 
25 insurer to which the premiums were paid must add back 
26 to income the amount subtracted by the taxpayer 
 
 
HB3746- 51 -LRB100 09089 HLH 19242 b


1 pursuant to this subparagraph (Y). This subparagraph 
2 (Y) is exempt from the provisions of Section 250; and 
3   (Z) The difference between the nondeductible 
4 controlled foreign corporation dividends under Section 
5 965(e)(3) of the Internal Revenue Code over the taxable 
6 income of the taxpayer, computed without regard to 
7 Section 965(e)(2)(A) of the Internal Revenue Code, and 
8 without regard to any net operating loss deduction. 
9 This subparagraph (Z) is exempt from the provisions of 
10 Section 250. 
11  (3) Special rule. For purposes of paragraph (2) (A), 
12 "gross income"
in the case of a life insurance company, for 
13 tax years ending on and after
December 31, 1994,
and prior 
14 to December 31, 2011, shall mean the gross investment 
15 income for the taxable year and, for tax years ending on or 
16 after December 31, 2011, shall mean all amounts included in 
17 life insurance gross income under Section 803(a)(3) of the 
18 Internal Revenue Code.

19 (c) Trusts and estates.
20  (1) In general. In the case of a trust or estate, base 
21 income means
an amount equal to the taxpayer's taxable 
22 income for the taxable year as
modified by paragraph (2).
23  (2) Modifications. Subject to the provisions of 
24 paragraph (3), the
taxable income referred to in paragraph 
25 (1) shall be modified by adding
thereto the sum of the 
 
 
HB3746- 52 -LRB100 09089 HLH 19242 b


1 following amounts:
2   (A) An amount equal to all amounts paid or accrued 
3 to the taxpayer
as interest or dividends during the 
4 taxable year to the extent excluded
from gross income 
5 in the computation of taxable income;
6   (B) In the case of (i) an estate, $600; (ii) a 
7 trust which, under
its governing instrument, is 
8 required to distribute all of its income
currently, 
9 $300; and (iii) any other trust, $100, but in each such 
10 case,
only to the extent such amount was deducted in 
11 the computation of
taxable income;
12   (C) An amount equal to the amount of tax imposed by 
13 this Act to the
extent deducted from gross income in 
14 the computation of taxable income
for the taxable year;
15   (D) The amount of any net operating loss deduction 
16 taken in arriving at
taxable income, other than a net 
17 operating loss carried forward from a
taxable year 
18 ending prior to December 31, 1986;
19   (E) For taxable years in which a net operating loss 
20 carryback or
carryforward from a taxable year ending 
21 prior to December 31, 1986 is an
element of taxable 
22 income under paragraph (1) of subsection (e) or 
23 subparagraph
(E) of paragraph (2) of subsection (e), 
24 the amount by which addition
modifications other than 
25 those provided by this subparagraph (E) exceeded

26 subtraction modifications in such taxable year, with 
 
 
HB3746- 53 -LRB100 09089 HLH 19242 b


1 the following limitations
applied in the order that 
2 they are listed:
3    (i) the addition modification relating to the 
4 net operating loss
carried back or forward to the 
5 taxable year from any taxable year ending
prior to 
6 December 31, 1986 shall be reduced by the amount of 
7 addition
modification under this subparagraph (E) 
8 which related to that net
operating loss and which 
9 was taken into account in calculating the base

10 income of an earlier taxable year, and
11    (ii) 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 not exceed the amount of 
15 such carryback or
carryforward;
16   For taxable years in which there is a net operating 
17 loss carryback or
carryforward from more than one other 
18 taxable year ending prior to December
31, 1986, the 
19 addition modification provided in this subparagraph 
20 (E) shall
be the sum of the amounts computed 
21 independently under the preceding
provisions of this 
22 subparagraph (E) for each such taxable year;
23   (F) For taxable years ending on or after January 1, 
24 1989, an amount
equal to the tax deducted pursuant to 
25 Section 164 of the Internal Revenue
Code if the trust 
26 or estate is claiming the same tax for purposes of the

 
 
HB3746- 54 -LRB100 09089 HLH 19242 b


1 Illinois foreign tax credit under Section 601 of this 
2 Act;
3   (G) An amount equal to the amount of the capital 
4 gain deduction
allowable under the Internal Revenue 
5 Code, to the extent deducted from
gross income in the 
6 computation of taxable income;
7   (G-5) For taxable years ending after December 31, 
8 1997, an
amount equal to any eligible remediation costs 
9 that the trust or estate
deducted in computing adjusted 
10 gross income and for which the trust
or estate claims a 
11 credit under subsection (l) of Section 201;
12   (G-10) For taxable years 2001 and thereafter, an 
13 amount equal to the
bonus depreciation deduction taken 
14 on the taxpayer's federal income tax return for the 
15 taxable
year under subsection (k) of Section 168 of the 
16 Internal Revenue Code; and
17   (G-11) If the taxpayer sells, transfers, abandons, 
18 or otherwise disposes of property for which the 
19 taxpayer was required in any taxable year to
make an 
20 addition modification under subparagraph (G-10), then 
21 an amount equal
to the aggregate amount of the 
22 deductions taken in all taxable
years under 
23 subparagraph (R) with respect to that property.
24   If the taxpayer continues to own property through 
25 the last day of the last tax year for which the 
26 taxpayer may claim a depreciation deduction for 
 
 
HB3746- 55 -LRB100 09089 HLH 19242 b


1 federal income tax purposes and for which the taxpayer 
2 was allowed in any taxable year to make a subtraction 
3 modification under subparagraph (R), then an amount 
4 equal to that subtraction modification.

5   The taxpayer is required to make the addition 
6 modification under this
subparagraph
only once with 
7 respect to any one piece of property;
8   (G-12) An amount equal to the amount otherwise 
9 allowed as a deduction in computing base income for 
10 interest paid, accrued, or incurred, directly or 
11 indirectly, (i) for taxable years ending on or after 
12 December 31, 2004, to a foreign person who would be a 
13 member of the same unitary business group but for the 
14 fact that the foreign person's business activity 
15 outside the United States is 80% or more of the foreign 
16 person's total business activity and (ii) for taxable 
17 years ending on or after December 31, 2008, to a person 
18 who would be a member of the same unitary business 
19 group but for the fact that the person is prohibited 
20 under Section 1501(a)(27) from being included in the 
21 unitary business group because he or she is ordinarily 
22 required to apportion business income under different 
23 subsections of Section 304. The addition modification 
24 required by this subparagraph shall be reduced to the 
25 extent that dividends were included in base income of 
26 the unitary group for the same taxable year and 
 
 
HB3746- 56 -LRB100 09089 HLH 19242 b


1 received by the taxpayer or by a member of the 
2 taxpayer's unitary business group (including amounts 
3 included in gross income pursuant to Sections 951 
4 through 964 of the Internal Revenue Code and amounts 
5 included in gross income under Section 78 of the 
6 Internal Revenue Code) with respect to the stock of the 
7 same person to whom the interest was paid, accrued, or 
8 incurred.

9   This paragraph shall not apply to the following:

10    (i) an item of interest paid, accrued, or 
11 incurred, directly or indirectly, to a person who 
12 is subject in a foreign country or state, other 
13 than a state which requires mandatory unitary 
14 reporting, to a tax on or measured by net income 
15 with respect to such interest; or
16    (ii) an item of interest paid, accrued, or 
17 incurred, directly or indirectly, to a person if 
18 the taxpayer can establish, based on a 
19 preponderance of the evidence, both of the 
20 following:
21     (a) the person, during the same taxable 
22 year, paid, accrued, or incurred, the interest 
23 to a person that is not a related member, and
24     (b) the transaction giving rise to the 
25 interest expense between the taxpayer and the 
26 person did not have as a principal purpose the 
 
 
HB3746- 57 -LRB100 09089 HLH 19242 b


1 avoidance of Illinois income tax, and is paid 
2 pursuant to a contract or agreement that 
3 reflects an arm's-length interest rate and 
4 terms; or

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

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

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

 
 
HB3746- 58 -LRB100 09089 HLH 19242 b


1   (G-13) An amount equal to the amount of intangible 
2 expenses and costs otherwise allowed as a deduction in 
3 computing base income, and that were paid, accrued, or 
4 incurred, directly or indirectly, (i) for taxable 
5 years ending on or after December 31, 2004, to a 
6 foreign person who would be a member of the same 
7 unitary business group but for the fact that the 
8 foreign person's business activity outside the United 
9 States is 80% or more of that person's total business 
10 activity and (ii) for taxable years ending on or after 
11 December 31, 2008, to a person who would be a member of 
12 the same unitary business group but for the fact that 
13 the person is prohibited under Section 1501(a)(27) 
14 from being included in the unitary business group 
15 because he or she is ordinarily required to apportion 
16 business income under different subsections of Section 
17 304. The addition modification required by this 
18 subparagraph shall be reduced to the extent that 
19 dividends were included in base income of the unitary 
20 group for the same taxable year and received by the 
21 taxpayer or by a member of the taxpayer's unitary 
22 business group (including amounts included in gross 
23 income pursuant to Sections 951 through 964 of the 
24 Internal Revenue Code and amounts included in gross 
25 income under Section 78 of the Internal Revenue Code) 
26 with respect to the stock of the same person to whom 
 
 
HB3746- 59 -LRB100 09089 HLH 19242 b


1 the intangible expenses and costs were directly or 
2 indirectly paid, incurred, or accrued. The preceding 
3 sentence shall not apply to the extent that the same 
4 dividends caused a reduction to the addition 
5 modification required under Section 203(c)(2)(G-12) of 
6 this Act. As used in this subparagraph, the term 
7 "intangible expenses and costs" includes: (1) 
8 expenses, losses, and costs for or related to the 
9 direct or indirect acquisition, use, maintenance or 
10 management, ownership, sale, exchange, or any other 
11 disposition of intangible property; (2) losses 
12 incurred, directly or indirectly, from factoring 
13 transactions or discounting transactions; (3) royalty, 
14 patent, technical, and copyright fees; (4) licensing 
15 fees; and (5) other similar expenses and costs. For 
16 purposes of this subparagraph, "intangible property" 
17 includes patents, patent applications, trade names, 
18 trademarks, service marks, copyrights, mask works, 
19 trade secrets, and similar types of intangible assets.
20   This paragraph shall not apply to the following:
21    (i) any item of intangible expenses or costs 
22 paid, accrued, or incurred, directly or 
23 indirectly, from a transaction with a person who is 
24 subject in a foreign country or state, other than a 
25 state which requires mandatory unitary reporting, 
26 to a tax on or measured by net income with respect 
 
 
HB3746- 60 -LRB100 09089 HLH 19242 b


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

26    Nothing in this subsection shall preclude the 
 
 
HB3746- 61 -LRB100 09089 HLH 19242 b


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-14) For taxable years ending on or after 
10 December 31, 2008, an amount equal to the amount of 
11 insurance premium expenses and costs otherwise allowed 
12 as a deduction in computing base income, and that were 
13 paid, accrued, or incurred, directly or indirectly, to 
14 a person who would be a member of the same unitary 
15 business group but for the fact that the person is 
16 prohibited under Section 1501(a)(27) from being 
17 included in the unitary business group because he or 
18 she is ordinarily required to apportion business 
19 income under different subsections of Section 304. The 
20 addition modification required by this subparagraph 
21 shall be reduced to the extent that dividends were 
22 included in base income of the unitary group for the 
23 same taxable year and received by the taxpayer or by a 
24 member of the taxpayer's unitary business group 
25 (including amounts included in gross income under 
26 Sections 951 through 964 of the Internal Revenue Code 
 
 
HB3746- 62 -LRB100 09089 HLH 19242 b


1 and amounts included in gross income under Section 78 
2 of the Internal Revenue Code) with respect to the stock 
3 of the same person to whom the premiums and costs were 
4 directly or indirectly paid, incurred, or accrued. The 
5 preceding sentence does not apply to the extent that 
6 the same dividends caused a reduction to the addition 
7 modification required under Section 203(c)(2)(G-12) or 
8 Section 203(c)(2)(G-13) of this Act;
9   (G-15) An amount equal to the credit allowable to 
10 the taxpayer under Section 218(a) of this Act, 
11 determined without regard to Section 218(c) of this 
12 Act;
13 and by deducting from the total so obtained the sum of the 
14 following
amounts:
15   (H) An amount equal to all amounts included in such 
16 total pursuant
to the provisions of Sections 402(a), 
17 402(c), 403(a), 403(b), 406(a), 407(a)
and 408 of the 
18 Internal Revenue Code or included in such total as

19 distributions under the provisions of any retirement 
20 or disability plan for
employees of any governmental 
21 agency or unit, or retirement payments to
retired 
22 partners, which payments are excluded in computing net 
23 earnings
from self employment by Section 1402 of the 
24 Internal Revenue Code and
regulations adopted pursuant 
25 thereto;
26   (I) The valuation limitation amount;
 
 
HB3746- 63 -LRB100 09089 HLH 19242 b


1   (J) An amount equal to the amount of any tax 
2 imposed by this Act
which was refunded to the taxpayer 
3 and included in such total for the
taxable year;
4   (K) An amount equal to all amounts included in 
5 taxable income as
modified by subparagraphs (A), (B), 
6 (C), (D), (E), (F) and (G) which
are exempt from 
7 taxation by this State either by reason of its statutes 
8 or
Constitution
or by reason of the Constitution, 
9 treaties or statutes of the United States;
provided 
10 that, in the case of any statute of this State that 
11 exempts income
derived from bonds or other obligations 
12 from the tax imposed under this Act,
the amount 
13 exempted shall be the interest net of bond premium 
14 amortization;
15   (L) With the exception of any amounts subtracted 
16 under subparagraph
(K),
an amount equal to the sum of 
17 all amounts disallowed as
deductions by (i) Sections 
18 171(a) (2) and 265(a)(2) of the Internal Revenue
Code, 
19 and all amounts of expenses allocable
to interest and 
20 disallowed as deductions by Section 265(1) of the 
21 Internal
Revenue Code;
and (ii) for taxable years

22 ending on or after August 13, 1999, Sections
171(a)(2), 
23 265,
280C, and 832(b)(5)(B)(i) of the Internal Revenue 
24 Code, plus, (iii) for taxable years ending on or after 
25 December 31, 2011, Section 45G(e)(3) of the Internal 
26 Revenue Code and, for taxable years ending on or after 
 
 
HB3746- 64 -LRB100 09089 HLH 19242 b


1 December 31, 2008, any amount included in gross income 
2 under Section 87 of the Internal Revenue Code; the 
3 provisions of this
subparagraph are exempt from the 
4 provisions of Section 250;
5   (M) An amount equal to those dividends included in 
6 such total
which were paid by a corporation which 
7 conducts business operations in a River Edge 
8 Redevelopment Zone or zones created under the River 
9 Edge Redevelopment Zone Act and
conducts substantially 
10 all of its operations in a River Edge Redevelopment 
11 Zone or zones. This subparagraph (M) is exempt from the 
12 provisions of Section 250;
13   (N) An amount equal to any contribution made to a 
14 job training
project established pursuant to the Tax 
15 Increment Allocation
Redevelopment Act;
16   (O) An amount equal to those dividends included in 
17 such total
that were paid by a corporation that 
18 conducts business operations in a
federally designated 
19 Foreign Trade Zone or Sub-Zone and that is designated
a 
20 High Impact Business located in Illinois; provided 
21 that dividends eligible
for the deduction provided in 
22 subparagraph (M) of paragraph (2) of this
subsection 
23 shall not be eligible for the deduction provided under 
24 this
subparagraph (O);
25   (P) An amount equal to the amount of the deduction 
26 used to compute the
federal income tax credit for 
 
 
HB3746- 65 -LRB100 09089 HLH 19242 b


1 restoration of substantial amounts held under
claim of 
2 right for the taxable year pursuant to Section 1341 of 
3 the
Internal Revenue Code;
4   (Q) For taxable year 1999 and thereafter, an amount 
5 equal to the
amount of any
(i) distributions, to the 
6 extent includible in gross income for
federal income 
7 tax purposes, made to the taxpayer because of
his or 
8 her status as a victim of
persecution for racial or 
9 religious reasons by Nazi Germany or any other Axis

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

15 persecution for racial or religious reasons by Nazi

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

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

22 companies
immediately prior to and during World War II;

23 provided, however, this subtraction from federal 
24 adjusted gross income does not
apply to assets acquired 
25 with such assets or with the proceeds from the sale of

26 such assets; provided, further, this paragraph shall 
 
 
HB3746- 66 -LRB100 09089 HLH 19242 b


1 only apply to a taxpayer
who was the first recipient of 
2 such assets after their recovery and who is a
victim of

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

8 this paragraph in gross income for federal income tax 
9 purposes.
This paragraph is exempt from the provisions 
10 of Section 250;
11   (R) For taxable years 2001 and thereafter, for the 
12 taxable year in
which the bonus depreciation deduction

13 is taken on the taxpayer's federal income tax return 
14 under
subsection (k) of Section 168 of the Internal 
15 Revenue Code and for each
applicable taxable year 
16 thereafter, an amount equal to "x", where:
17    (1) "y" equals the amount of the depreciation 
18 deduction taken for the
taxable year
on the 
19 taxpayer's federal income tax return on property 
20 for which the bonus
depreciation deduction
was 
21 taken in any year under subsection (k) of Section 
22 168 of the Internal
Revenue Code, but not including 
23 the bonus depreciation deduction;
24    (2) for taxable years ending on or before 
25 December 31, 2005, "x" equals "y" multiplied by 30 
26 and then divided by 70 (or "y"
multiplied by 
 
 
HB3746- 67 -LRB100 09089 HLH 19242 b


1 0.429); and
2    (3) for taxable years ending after December 
3 31, 2005:
4     (i) for property on which a bonus 
5 depreciation deduction of 30% of the adjusted 
6 basis was taken, "x" equals "y" multiplied by 
7 30 and then divided by 70 (or "y"
multiplied by 
8 0.429); and
9     (ii) for property on which a bonus 
10 depreciation deduction of 50% of the adjusted 
11 basis was taken, "x" equals "y" multiplied by 
12 1.0.
13   The aggregate amount deducted under this 
14 subparagraph in all taxable
years for any one piece of 
15 property may not exceed the amount of the bonus

16 depreciation deduction
taken on that property on the 
17 taxpayer's federal income tax return under
subsection 
18 (k) of Section 168 of the Internal Revenue Code. This 
19 subparagraph (R) is exempt from the provisions of 
20 Section 250;
21   (S) If the taxpayer sells, transfers, abandons, or 
22 otherwise disposes of
property for which the taxpayer 
23 was required in any taxable year to make an
addition 
24 modification under subparagraph (G-10), then an amount 
25 equal to that
addition modification.
26   If the taxpayer continues to own property through 
 
 
HB3746- 68 -LRB100 09089 HLH 19242 b


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

7   The taxpayer is allowed to take the deduction under 
8 this subparagraph
only once with respect to any one 
9 piece of property.
10   This subparagraph (S) is exempt from the 
11 provisions of Section 250;
12   (T) The amount of (i) any interest income (net of 
13 the deductions allocable thereto) taken into account 
14 for the taxable year with respect to a transaction with 
15 a taxpayer that is required to make an addition 
16 modification with respect to such transaction under 
17 Section 203(a)(2)(D-17), 203(b)(2)(E-12), 
18 203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed 
19 the amount of such addition modification and
(ii) any 
20 income from intangible property (net of the deductions 
21 allocable thereto) taken into account for the taxable 
22 year with respect to a transaction with a taxpayer that 
23 is required to make an addition modification with 
24 respect to such transaction under Section 
25 203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or 
26 203(d)(2)(D-8), but not to exceed the amount of such 
 
 
HB3746- 69 -LRB100 09089 HLH 19242 b


1 addition modification. This subparagraph (T) is exempt 
2 from the provisions of Section 250;

3   (U) An amount equal to the interest income taken 
4 into account for the taxable year (net of the 
5 deductions allocable thereto) with respect to 
6 transactions with (i) a foreign person who would be a 
7 member of the taxpayer's unitary business group but for 
8 the fact the foreign person's business activity 
9 outside the United States is 80% or more of that 
10 person's total business activity and (ii) for taxable 
11 years ending on or after December 31, 2008, to a person 
12 who would be a member of the same unitary business 
13 group but for the fact that the person is prohibited 
14 under Section 1501(a)(27) from being included in the 
15 unitary business group because he or she is ordinarily 
16 required to apportion business income under different 
17 subsections of Section 304, but not to exceed the 
18 addition modification required to be made for the same 
19 taxable year under Section 203(c)(2)(G-12) for 
20 interest paid, accrued, or incurred, directly or 
21 indirectly, to the same person. This subparagraph (U) 
22 is exempt from the provisions of Section 250; 
23   (V) An amount equal to the income from intangible 
24 property taken into account for the taxable year (net 
25 of the deductions allocable thereto) with respect to 
26 transactions with (i) a foreign person who would be a 
 
 
HB3746- 70 -LRB100 09089 HLH 19242 b


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

18   (W) in the case of an estate, an amount equal to 
19 all amounts included in such total pursuant to the 
20 provisions of Section 111 of the Internal Revenue Code 
21 as a recovery of items previously deducted by the 
22 decedent from adjusted gross income in the computation 
23 of taxable income. This subparagraph (W) is exempt from 
24 Section 250; 
25   (X) an amount equal to the refund included in such 
26 total of any tax deducted for federal income tax 
 
 
HB3746- 71 -LRB100 09089 HLH 19242 b


1 purposes, to the extent that deduction was added back 
2 under subparagraph (F). This subparagraph (X) is 
3 exempt from the provisions of Section 250; and
4   (Y) For taxable years ending on or after December 
5 31, 2011, in the case of a taxpayer who was required to 
6 add back any insurance premiums under Section 
7 203(c)(2)(G-14), such taxpayer may elect to subtract 
8 that part of a reimbursement received from the 
9 insurance company equal to the amount of the expense or 
10 loss (including expenses incurred by the insurance 
11 company) that would have been taken into account as a 
12 deduction for federal income tax purposes if the 
13 expense or loss had been uninsured. If a taxpayer makes 
14 the election provided for by this subparagraph (Y), the 
15 insurer to which the premiums were paid must add back 
16 to income the amount subtracted by the taxpayer 
17 pursuant to this subparagraph (Y). This subparagraph 
18 (Y) is exempt from the provisions of Section 250; and .
19   (Z) For taxable years ending on or after December 
20 31, 2017, an amount equal to any payment made during 
21 the taxable year of any indebtedness of the taxpayer 
22 under a qualified education loan, including the 
23 payment of any interest relating to such a loan, but 
24 only to the extent that the taxpayer was not entitled 
25 to a deduction under Section 221 of the Internal 
26 Revenue Code for that payment; this subparagraph (Z) 
 
 
HB3746- 72 -LRB100 09089 HLH 19242 b


1 applies to payments made by the taxpayer and to 
2 payments made by the taxpayer's employer on behalf of 
3 the taxpayer; for the purposes of this subparagraph 
4 (Z), "qualified education loan" has the meaning 
5 ascribed to that term in Section 221 of the Internal 
6 Revenue Code; this subparagraph (Z) is exempt from the 
7 provisions of Section 250. 
8  (3) Limitation. The amount of any modification 
9 otherwise required
under this subsection shall, under 
10 regulations prescribed by the
Department, be adjusted by 
11 any amounts included therein which were
properly paid, 
12 credited, or required to be distributed, or permanently set

13 aside for charitable purposes pursuant to Internal Revenue 
14 Code Section
642(c) during the taxable year.

15 (d) Partnerships.
16  (1) In general. In the case of a partnership, base 
17 income means an
amount equal to the taxpayer's taxable 
18 income for the taxable year as
modified by paragraph (2).
19  (2) Modifications. The taxable income referred to in 
20 paragraph (1)
shall be modified by adding thereto the sum 
21 of the following amounts:
22   (A) An amount equal to all amounts paid or accrued 
23 to the taxpayer as
interest or dividends during the 
24 taxable year to the extent excluded from
gross income 
25 in the computation of taxable income;
 
 
HB3746- 73 -LRB100 09089 HLH 19242 b


1   (B) An amount equal to the amount of tax imposed by 
2 this Act to the
extent deducted from gross income for 
3 the taxable year;
4   (C) The amount of deductions allowed to the 
5 partnership pursuant to
Section 707 (c) of the Internal 
6 Revenue Code in calculating its taxable income;
7   (D) An amount equal to the amount of the capital 
8 gain deduction
allowable under the Internal Revenue 
9 Code, to the extent deducted from
gross income in the 
10 computation of taxable income;
11   (D-5) For taxable years 2001 and thereafter, an 
12 amount equal to the
bonus depreciation deduction taken 
13 on the taxpayer's federal income tax return for the 
14 taxable
year under subsection (k) of Section 168 of the 
15 Internal Revenue Code;
16   (D-6) If the taxpayer sells, transfers, abandons, 
17 or otherwise disposes of
property for which the 
18 taxpayer was required in any taxable year to make an

19 addition modification under subparagraph (D-5), then 
20 an amount equal to the
aggregate amount of the 
21 deductions taken in all taxable years
under 
22 subparagraph (O) with respect to that property.
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 
 
 
HB3746- 74 -LRB100 09089 HLH 19242 b


1 was allowed in any taxable year to make a subtraction 
2 modification under subparagraph (O), then an amount 
3 equal to that subtraction modification.

4   The taxpayer is required to make the addition 
5 modification under this
subparagraph
only once with 
6 respect to any one piece of property;
7   (D-7) An amount equal to the amount otherwise 
8 allowed as a deduction in computing base income for 
9 interest paid, accrued, or incurred, directly or 
10 indirectly, (i) for taxable years ending on or after 
11 December 31, 2004, to a foreign person who would be a 
12 member of the same unitary business group but for the 
13 fact the foreign person's business activity outside 
14 the United States is 80% or more of the foreign 
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. The addition modification 
23 required by this subparagraph shall be reduced to the 
24 extent that dividends were included in base income of 
25 the unitary group for the same taxable year and 
26 received by the taxpayer or by a member of the 
 
 
HB3746- 75 -LRB100 09089 HLH 19242 b


1 taxpayer's unitary business group (including amounts 
2 included in gross income pursuant to Sections 951 
3 through 964 of the Internal Revenue Code and amounts 
4 included in gross income under Section 78 of the 
5 Internal Revenue Code) with respect to the stock of the 
6 same person to whom the interest was paid, accrued, or 
7 incurred.

8   This paragraph shall not apply to the following:

9    (i) an item of interest paid, accrued, or 
10 incurred, directly or indirectly, to a person who 
11 is subject in a foreign country or state, other 
12 than a state which requires mandatory unitary 
13 reporting, to a tax on or measured by net income 
14 with respect to such interest; or
15    (ii) an item of interest paid, accrued, or 
16 incurred, directly or indirectly, to a person if 
17 the taxpayer can establish, based on a 
18 preponderance of the evidence, both of the 
19 following:
20     (a) the person, during the same taxable 
21 year, paid, accrued, or incurred, the interest 
22 to a person that is not a related member, and
23     (b) the transaction giving rise to the 
24 interest expense between the taxpayer and the 
25 person did not have as a principal purpose the 
26 avoidance of Illinois income tax, and is paid 
 
 
HB3746- 76 -LRB100 09089 HLH 19242 b


1 pursuant to a contract or agreement that 
2 reflects an arm's-length interest rate and 
3 terms; or

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

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

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

26   (D-8) An amount equal to the amount of intangible 
 
 
HB3746- 77 -LRB100 09089 HLH 19242 b


1 expenses and costs otherwise allowed as a deduction in 
2 computing base income, and that were paid, accrued, or 
3 incurred, directly or indirectly, (i) for taxable 
4 years ending on or after December 31, 2004, to a 
5 foreign person who would be a member of the same 
6 unitary business group but for the fact that the 
7 foreign person's business activity outside the United 
8 States is 80% or more of that person's total business 
9 activity and (ii) for taxable years ending on or after 
10 December 31, 2008, to a person who would be a member of 
11 the same unitary business group but for the fact that 
12 the person is prohibited under Section 1501(a)(27) 
13 from being included in the unitary business group 
14 because he or she is ordinarily required to apportion 
15 business income under different subsections of Section 
16 304. The addition modification required by this 
17 subparagraph shall be reduced to the extent that 
18 dividends were included in base income of the unitary 
19 group for the same taxable year and received by the 
20 taxpayer or by a member of the taxpayer's unitary 
21 business group (including amounts included in gross 
22 income pursuant to Sections 951 through 964 of the 
23 Internal Revenue Code and amounts included in gross 
24 income under Section 78 of the Internal Revenue Code) 
25 with respect to the stock of the same person to whom 
26 the intangible expenses and costs were directly or 
 
 
HB3746- 78 -LRB100 09089 HLH 19242 b


1 indirectly paid, incurred or accrued. The preceding 
2 sentence shall not apply to the extent that the same 
3 dividends caused a reduction to the addition 
4 modification required under Section 203(d)(2)(D-7) of 
5 this Act. As used in this subparagraph, the term 
6 "intangible expenses and costs" includes (1) expenses, 
7 losses, and costs for, or related to, the direct or 
8 indirect acquisition, use, maintenance or management, 
9 ownership, sale, exchange, or any other disposition of 
10 intangible property; (2) losses incurred, directly or 
11 indirectly, from factoring transactions or discounting 
12 transactions; (3) royalty, patent, technical, and 
13 copyright fees; (4) licensing fees; and (5) other 
14 similar expenses and costs. For purposes of this 
15 subparagraph, "intangible property" includes patents, 
16 patent applications, trade names, trademarks, service 
17 marks, copyrights, mask works, trade secrets, and 
18 similar types of intangible assets;
19   This paragraph shall not apply to the following:
20    (i) any item of intangible expenses or costs 
21 paid, accrued, or incurred, directly or 
22 indirectly, from a transaction with a person who is 
23 subject in a foreign country or state, other than a 
24 state which requires mandatory unitary reporting, 
25 to a tax on or measured by net income with respect 
26 to such item; or
 
 
HB3746- 79 -LRB100 09089 HLH 19242 b


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

25    Nothing in this subsection shall preclude the 
26 Director from making any other adjustment 
 
 
HB3746- 80 -LRB100 09089 HLH 19242 b


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

8   (D-9) For taxable years ending on or after December 
9 31, 2008, an amount equal to the amount of insurance 
10 premium expenses and costs otherwise allowed as a 
11 deduction in computing base income, and that were paid, 
12 accrued, or incurred, directly or indirectly, to a 
13 person who would be a member of the same unitary 
14 business group but for the fact that the person is 
15 prohibited under Section 1501(a)(27) from being 
16 included in the unitary business group because he or 
17 she is ordinarily required to apportion business 
18 income under different subsections of Section 304. The 
19 addition modification required by this subparagraph 
20 shall be reduced to the extent that dividends were 
21 included in base income of the unitary group for the 
22 same taxable year and received by the taxpayer or by a 
23 member of the taxpayer's unitary business group 
24 (including amounts included in gross income under 
25 Sections 951 through 964 of the Internal Revenue Code 
26 and amounts included in gross income under Section 78 
 
 
HB3746- 81 -LRB100 09089 HLH 19242 b


1 of the Internal Revenue Code) with respect to the stock 
2 of the same person to whom the premiums and costs were 
3 directly or indirectly paid, incurred, or accrued. The 
4 preceding sentence does not apply to the extent that 
5 the same dividends caused a reduction to the addition 
6 modification required under Section 203(d)(2)(D-7) or 
7 Section 203(d)(2)(D-8) of this Act;
8   (D-10) An amount equal to the credit allowable to 
9 the taxpayer under Section 218(a) of this Act, 
10 determined without regard to Section 218(c) of this 
11 Act;
12 and by deducting from the total so obtained the following 
13 amounts:
14   (E) The valuation limitation amount;
15   (F) An amount equal to the amount of any tax 
16 imposed by this Act which
was refunded to the taxpayer 
17 and included in such total for the taxable year;
18   (G) An amount equal to all amounts included in 
19 taxable income as
modified by subparagraphs (A), (B), 
20 (C) and (D) which are exempt from
taxation by this 
21 State either by reason of its statutes or Constitution 
22 or
by reason of
the Constitution, treaties or statutes 
23 of the United States;
provided that, in the case of any 
24 statute of this State that exempts income
derived from 
25 bonds or other obligations from the tax imposed under 
26 this Act,
the amount exempted shall be the interest net 
 
 
HB3746- 82 -LRB100 09089 HLH 19242 b


1 of bond premium amortization;
2   (H) Any income of the partnership which 
3 constitutes personal service
income as defined in 
4 Section 1348 (b) (1) of the Internal Revenue Code (as

5 in effect December 31, 1981) or a reasonable allowance 
6 for compensation
paid or accrued for services rendered 
7 by partners to the partnership,
whichever is greater; 
8 this subparagraph (H) is exempt from the provisions of 
9 Section 250;
10   (I) An amount equal to all amounts of income 
11 distributable to an entity
subject to the Personal 
12 Property Tax Replacement Income Tax imposed by

13 subsections (c) and (d) of Section 201 of this Act 
14 including amounts
distributable to organizations 
15 exempt from federal income tax by reason of
Section 
16 501(a) of the Internal Revenue Code; this subparagraph 
17 (I) is exempt from the provisions of Section 250;
18   (J) With the exception of any amounts subtracted 
19 under subparagraph
(G),
an amount equal to the sum of 
20 all amounts disallowed as deductions
by (i) Sections 
21 171(a) (2), and 265(2) of the Internal Revenue Code, 
22 and all amounts of expenses allocable to
interest and 
23 disallowed as deductions by Section 265(1) of the 
24 Internal
Revenue Code;
and (ii) for taxable years

25 ending on or after August 13, 1999, Sections
171(a)(2), 
26 265,
280C, and 832(b)(5)(B)(i) of the Internal Revenue 
 
 
HB3746- 83 -LRB100 09089 HLH 19242 b


1 Code, plus, (iii) for taxable years ending on or after 
2 December 31, 2011, Section 45G(e)(3) of the Internal 
3 Revenue Code and, for taxable years ending on or after 
4 December 31, 2008, any amount included in gross income 
5 under Section 87 of the Internal Revenue Code; the 
6 provisions of this
subparagraph are exempt from the 
7 provisions of Section 250;
8   (K) An amount equal to those dividends included in 
9 such total which were
paid by a corporation which 
10 conducts business operations in a River Edge 
11 Redevelopment Zone or zones created under the River 
12 Edge Redevelopment Zone Act and
conducts substantially 
13 all of its operations
from a River Edge Redevelopment 
14 Zone or zones. This subparagraph (K) is exempt from the 
15 provisions of Section 250;
16   (L) An amount equal to any contribution made to a 
17 job training project
established pursuant to the Real 
18 Property Tax Increment Allocation
Redevelopment Act;
19   (M) 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 (K) of paragraph (2) of this
subsection 
26 shall not be eligible for the deduction provided under 
 
 
HB3746- 84 -LRB100 09089 HLH 19242 b


1 this
subparagraph (M);
2   (N) 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;
7   (O) For taxable years 2001 and thereafter, for the 
8 taxable year in
which the bonus depreciation deduction

9 is taken on the taxpayer's federal income tax return 
10 under
subsection (k) of Section 168 of the Internal 
11 Revenue Code and for each
applicable taxable year 
12 thereafter, an amount equal to "x", where:
13    (1) "y" equals the amount of the depreciation 
14 deduction taken for the
taxable year
on the 
15 taxpayer's federal income tax return on property 
16 for which the bonus
depreciation deduction
was 
17 taken in any year under subsection (k) of Section 
18 168 of the Internal
Revenue Code, but not including 
19 the bonus depreciation deduction;
20    (2) for taxable years ending on or before 
21 December 31, 2005, "x" equals "y" multiplied by 30 
22 and then divided by 70 (or "y"
multiplied by 
23 0.429); and
24    (3) for taxable years ending after December 
25 31, 2005:
26     (i) for property on which a bonus 
 
 
HB3746- 85 -LRB100 09089 HLH 19242 b


1 depreciation deduction of 30% of the adjusted 
2 basis was taken, "x" equals "y" multiplied by 
3 30 and then divided by 70 (or "y"
multiplied by 
4 0.429); and
5     (ii) for property on which a bonus 
6 depreciation deduction of 50% of the adjusted 
7 basis was taken, "x" equals "y" multiplied by 
8 1.0.
9   The aggregate amount deducted under this 
10 subparagraph in all taxable
years for any one piece of 
11 property may not exceed the amount of the bonus

12 depreciation deduction
taken on that property on the 
13 taxpayer's federal income tax return under
subsection 
14 (k) of Section 168 of the Internal Revenue Code. This 
15 subparagraph (O) is exempt from the provisions of 
16 Section 250;
17   (P) If the taxpayer sells, transfers, abandons, or 
18 otherwise disposes of
property for which the taxpayer 
19 was required in any taxable year to make an
addition 
20 modification under subparagraph (D-5), then an amount 
21 equal to that
addition modification.
22   If the taxpayer continues to own property through 
23 the last day of the last tax year for which the 
24 taxpayer may claim a depreciation deduction for 
25 federal income tax purposes and for which the taxpayer 
26 was required in any taxable year to make an addition 
 
 
HB3746- 86 -LRB100 09089 HLH 19242 b


1 modification under subparagraph (D-5), then an amount 
2 equal to that addition modification.

3   The taxpayer is allowed to take the deduction under 
4 this subparagraph
only once with respect to any one 
5 piece of property.
6   This subparagraph (P) is exempt from the 
7 provisions of Section 250;
8   (Q) The amount of (i) any interest income (net of 
9 the deductions allocable thereto) taken into account 
10 for the taxable year with respect to a transaction with 
11 a taxpayer that is required to make an addition 
12 modification with respect to such transaction under 
13 Section 203(a)(2)(D-17), 203(b)(2)(E-12), 
14 203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed 
15 the amount of such addition modification and
(ii) any 
16 income from intangible property (net of the deductions 
17 allocable thereto) taken into account for the taxable 
18 year with respect to a transaction with a taxpayer that 
19 is required to make an addition modification with 
20 respect to such transaction under Section 
21 203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or 
22 203(d)(2)(D-8), but not to exceed the amount of such 
23 addition modification. This subparagraph (Q) is exempt 
24 from Section 250;

25   (R) An amount equal to the interest income taken 
26 into account for the taxable year (net of the 
 
 
HB3746- 87 -LRB100 09089 HLH 19242 b


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

13   (T) For taxable years ending on or after December 
14 31, 2011, in the case of a taxpayer who was required to 
15 add back any insurance premiums under Section 
16 203(d)(2)(D-9), such taxpayer may elect to subtract 
17 that part of a reimbursement received from the 
18 insurance company equal to the amount of the expense or 
19 loss (including expenses incurred by the insurance 
20 company) that would have been taken into account as a 
21 deduction for federal income tax purposes if the 
22 expense or loss had been uninsured. If a taxpayer makes 
23 the election provided for by this subparagraph (T), the 
24 insurer to which the premiums were paid must add back 
25 to income the amount subtracted by the taxpayer 
26 pursuant to this subparagraph (T). This subparagraph 
 
 
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1 (T) is exempt from the provisions of Section 250. 

2 (e) Gross income; adjusted gross income; taxable income.
3  (1) In general. Subject to the provisions of paragraph 
4 (2) and
subsection (b) (3), for purposes of this Section 
5 and Section 803(e), a
taxpayer's gross income, adjusted 
6 gross income, or taxable income for
the taxable year shall 
7 mean the amount of gross income, adjusted gross
income or 
8 taxable income properly reportable for federal income tax

9 purposes for the taxable year under the provisions of the 
10 Internal
Revenue Code. Taxable income may be less than 
11 zero. However, for taxable
years ending on or after 
12 December 31, 1986, net operating loss
carryforwards from 
13 taxable years ending prior to December 31, 1986, may not

14 exceed the sum of federal taxable income for the taxable 
15 year before net
operating loss deduction, plus the excess 
16 of addition modifications over
subtraction modifications 
17 for the taxable year. For taxable years ending
prior to 
18 December 31, 1986, taxable income may never be an amount in 
19 excess
of the net operating loss for the taxable year as 
20 defined in subsections
(c) and (d) of Section 172 of the 
21 Internal Revenue Code, provided that when
taxable income of 
22 a corporation (other than a Subchapter S corporation),

23 trust, or estate is less than zero and addition 
24 modifications, other than
those provided by subparagraph 
25 (E) of paragraph (2) of subsection (b) for
corporations or 
 
 
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1 subparagraph (E) of paragraph (2) of subsection (c) for

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

6 applied under Section 172 of the Internal Revenue Code or 
7 under
subparagraph (E) of paragraph (2) of this subsection 
8 (e) applied in
conjunction with Section 172 of the Internal 
9 Revenue Code.
10  (2) Special rule. For purposes of paragraph (1) of this 
11 subsection,
the taxable income properly reportable for 
12 federal income tax purposes
shall mean:
13   (A) Certain life insurance companies. In the case 
14 of a life
insurance company subject to the tax imposed 
15 by Section 801 of the
Internal Revenue Code, life 
16 insurance company taxable income, plus the
amount of 
17 distribution from pre-1984 policyholder surplus 
18 accounts as
calculated under Section 815a of the 
19 Internal Revenue Code;
20   (B) Certain other insurance companies. In the case 
21 of mutual
insurance companies subject to the tax 
22 imposed by Section 831 of the
Internal Revenue Code, 
23 insurance company taxable income;
24   (C) Regulated investment companies. In the case of 
25 a regulated
investment company subject to the tax 
26 imposed by Section 852 of the
Internal Revenue Code, 
 
 
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1 investment company taxable income;
2   (D) Real estate investment trusts. In the case of a 
3 real estate
investment trust subject to the tax imposed 
4 by Section 857 of the
Internal Revenue Code, real 
5 estate investment trust taxable income;
6   (E) Consolidated corporations. In the case of a 
7 corporation which
is a member of an affiliated group of 
8 corporations filing a consolidated
income tax return 
9 for the taxable year for federal income tax purposes,

10 taxable income determined as if such corporation had 
11 filed a separate
return for federal income tax purposes 
12 for the taxable year and each
preceding taxable year 
13 for which it was a member of an affiliated group.
For 
14 purposes of this subparagraph, the taxpayer's separate 
15 taxable
income shall be determined as if the election 
16 provided by Section
243(b) (2) of the Internal Revenue 
17 Code had been in effect for all such years;
18   (F) Cooperatives. In the case of a cooperative 
19 corporation or
association, the taxable income of such 
20 organization determined in
accordance with the 
21 provisions of Section 1381 through 1388 of the
Internal 
22 Revenue Code, but without regard to the prohibition 
23 against offsetting losses from patronage activities 
24 against income from nonpatronage activities; except 
25 that a cooperative corporation or association may make 
26 an election to follow its federal income tax treatment 
 
 
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1 of patronage losses and nonpatronage losses. In the 
2 event such election is made, such losses shall be 
3 computed and carried over in a manner consistent with 
4 subsection (a) of Section 207 of this Act and 
5 apportioned by the apportionment factor reported by 
6 the cooperative on its Illinois income tax return filed 
7 for the taxable year in which the losses are incurred. 
8 The election shall be effective for all taxable years 
9 with original returns due on or after the date of the 
10 election. In addition, the cooperative may file an 
11 amended return or returns, as allowed under this Act, 
12 to provide that the election shall be effective for 
13 losses incurred or carried forward for taxable years 
14 occurring prior to the date of the election. Once made, 
15 the election may only be revoked upon approval of the 
16 Director. The Department shall adopt rules setting 
17 forth requirements for documenting the elections and 
18 any resulting Illinois net loss and the standards to be 
19 used by the Director in evaluating requests to revoke 
20 elections. Public Act 96-932 is declaratory of 
21 existing law; 
22   (G) Subchapter S corporations. In the case of: (i) 
23 a Subchapter S
corporation for which there is in effect 
24 an election for the taxable year
under Section 1362 of 
25 the Internal Revenue Code, the taxable income of such

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

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

8 instead the prior federal Subchapter S rules as in 
9 effect on July 1, 1982,
the taxable income of such 
10 corporation determined in accordance with the
federal 
11 Subchapter S rules as in effect on July 1, 1982; and
12   (H) Partnerships. In the case of a partnership, 
13 taxable income
determined in accordance with Section 
14 703 of the Internal Revenue Code,
except that taxable 
15 income shall take into account those items which are

16 required by Section 703(a)(1) to be separately stated 
17 but which would be
taken into account by an individual 
18 in calculating his taxable income.
19  (3) Recapture of business expenses on disposition of 
20 asset or business. Notwithstanding any other law to the 
21 contrary, if in prior years income from an asset or 
22 business has been classified as business income and in a 
23 later year is demonstrated to be non-business income, then 
24 all expenses, without limitation, deducted in such later 
25 year and in the 2 immediately preceding taxable years 
26 related to that asset or business that generated the 
 
 
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1 non-business income shall be added back and recaptured as 
2 business income in the year of the disposition of the asset 
3 or business. Such amount shall be apportioned to Illinois 
4 using the greater of the apportionment fraction computed 
5 for the business under Section 304 of this Act for the 
6 taxable year or the average of the apportionment fractions 
7 computed for the business under Section 304 of this Act for 
8 the taxable year and for the 2 immediately preceding 
9 taxable years.


10 (f) Valuation limitation amount.
11  (1) In general. The valuation limitation amount 
12 referred to in
subsections (a) (2) (G), (c) (2) (I) and 
13 (d)(2) (E) is an amount equal to:
14   (A) The sum of the pre-August 1, 1969 appreciation 
15 amounts (to the
extent consisting of gain reportable 
16 under the provisions of Section
1245 or 1250 of the 
17 Internal Revenue Code) for all property in respect
of 
18 which such gain was reported for the taxable year; plus
19   (B) The lesser of (i) the sum of the pre-August 1, 
20 1969 appreciation
amounts (to the extent consisting of 
21 capital gain) for all property in
respect of which such 
22 gain was reported for federal income tax purposes
for 
23 the taxable year, or (ii) the net capital gain for the 
24 taxable year,
reduced in either case by any amount of 
25 such gain included in the amount
determined under 
 
 
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1 subsection (a) (2) (F) or (c) (2) (H).
2  (2) Pre-August 1, 1969 appreciation amount.
3   (A) If the fair market value of property referred 
4 to in paragraph
(1) was readily ascertainable on August 
5 1, 1969, the pre-August 1, 1969
appreciation amount for 
6 such property is the lesser of (i) the excess of
such 
7 fair market value over the taxpayer's basis (for 
8 determining gain)
for such property on that date 
9 (determined under the Internal Revenue
Code as in 
10 effect on that date), or (ii) the total gain realized 
11 and
reportable for federal income tax purposes in 
12 respect of the sale,
exchange or other disposition of 
13 such property.
14   (B) If the fair market value of property referred 
15 to in paragraph
(1) was not readily ascertainable on 
16 August 1, 1969, the pre-August 1,
1969 appreciation 
17 amount for such property is that amount which bears
the 
18 same ratio to the total gain reported in respect of the 
19 property for
federal income tax purposes for the 
20 taxable year, as the number of full
calendar months in 
21 that part of the taxpayer's holding period for the

22 property ending July 31, 1969 bears to the number of 
23 full calendar
months in the taxpayer's entire holding 
24 period for the
property.
25   (C) The Department shall prescribe such 
26 regulations as may be
necessary to carry out the 
 
 
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1 purposes of this paragraph.

2 (g) Double deductions. Unless specifically provided 
3otherwise, nothing
in this Section shall permit the same item 
4to be deducted more than once.

5 (h) Legislative intention. Except as expressly provided by 
6this
Section there shall be no modifications or limitations on 
7the amounts
of income, gain, loss or deduction taken into 
8account in determining
gross income, adjusted gross income or 
9taxable income for federal income
tax purposes for the taxable 
10year, or in the amount of such items
entering into the 
11computation of base income and net income under this
Act for 
12such taxable year, whether in respect of property values as of

13August 1, 1969 or otherwise.
14(Source: P.A. 96-45, eff. 7-15-09; 96-120, eff. 8-4-09; 96-198, 
15eff. 8-10-09; 96-328, eff. 8-11-09; 96-520, eff. 8-14-09; 
1696-835, eff. 12-16-09; 96-932, eff. 1-1-11; 96-935, eff. 
176-21-10; 96-1214, eff. 7-22-10; 97-333, eff. 8-12-11; 97-507, 
18eff. 8-23-11; 97-905, eff. 8-7-12.)


19 Section 99. Effective date. This Act takes effect upon 
20becoming law.