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91_HB3384
LRB9112069SMdv
1 AN ACT to amend the Illinois Income Tax Act by changing
2 Section 203.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 5. The Illinois Income Tax Act is amended by
6 changing Section 203 as follows:
7 (35 ILCS 5/203) (from Ch. 120, par. 2-203)
8 Sec. 203. Base income defined.
9 (a) Individuals.
10 (1) In general. In the case of an individual, base
11 income means an amount equal to the taxpayer's adjusted
12 gross income for the taxable year as modified by
13 paragraph (2).
14 (2) Modifications. The adjusted gross income
15 referred to in paragraph (1) shall be modified by adding
16 thereto the sum of the following amounts:
17 (A) An amount equal to all amounts paid or
18 accrued to the taxpayer as interest or dividends
19 during the taxable year to the extent excluded from
20 gross income in the computation of adjusted gross
21 income, except stock dividends of qualified public
22 utilities described in Section 305(e) of the
23 Internal Revenue Code;
24 (B) An amount equal to the amount of tax
25 imposed by this Act to the extent deducted from
26 gross income in the computation of adjusted gross
27 income for the taxable year;
28 (C) An amount equal to the amount received
29 during the taxable year as a recovery or refund of
30 real property taxes paid with respect to the
31 taxpayer's principal residence under the Revenue Act
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1 of 1939 and for which a deduction was previously
2 taken under subparagraph (L) of this paragraph (2)
3 prior to July 1, 1991, the retrospective application
4 date of Article 4 of Public Act 87-17. In the case
5 of multi-unit or multi-use structures and farm
6 dwellings, the taxes on the taxpayer's principal
7 residence shall be that portion of the total taxes
8 for the entire property which is attributable to
9 such principal residence;
10 (D) An amount equal to the amount of the
11 capital gain deduction allowable under the Internal
12 Revenue Code, to the extent deducted from gross
13 income in the computation of adjusted gross income;
14 (D-5) An amount, to the extent not included in
15 adjusted gross income, equal to the amount of money
16 withdrawn by the taxpayer in the taxable year from a
17 medical care savings account and the interest earned
18 on the account in the taxable year of a withdrawal
19 pursuant to subsection (b) of Section 20 of the
20 Medical Care Savings Account Act; and
21 (D-10) For taxable years ending after December
22 31, 1997, an amount equal to any eligible
23 remediation costs that the individual deducted in
24 computing adjusted gross income and for which the
25 individual claims a credit under subsection (l) of
26 Section 201;
27 and by deducting from the total so obtained the sum of
28 the following amounts:
29 (E) Any amount included in such total in
30 respect of any compensation (including but not
31 limited to any compensation paid or accrued to a
32 serviceman while a prisoner of war or missing in
33 action) paid to a resident by reason of being on
34 active duty in the Armed Forces of the United States
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1 and in respect of any compensation paid or accrued
2 to a resident who as a governmental employee was a
3 prisoner of war or missing in action, and in respect
4 of any compensation paid to a resident in 1971 or
5 thereafter for annual training performed pursuant to
6 Sections 502 and 503, Title 32, United States Code
7 as a member of the Illinois National Guard;
8 (F) An amount equal to all amounts included in
9 such total pursuant to the provisions of Sections
10 402(a), 402(c), 403(a), 403(b), 406(a), 407(a), and
11 408 of the Internal Revenue Code, or included in
12 such total as distributions under the provisions of
13 any retirement or disability plan for employees of
14 any governmental agency or unit, or retirement
15 payments to retired partners, which payments are
16 excluded in computing net earnings from self
17 employment by Section 1402 of the Internal Revenue
18 Code and regulations adopted pursuant thereto;
19 (G) The valuation limitation amount;
20 (H) An amount equal to the amount of any tax
21 imposed by this Act which was refunded to the
22 taxpayer and included in such total for the taxable
23 year;
24 (I) An amount equal to all amounts included in
25 such total pursuant to the provisions of Section 111
26 of the Internal Revenue Code as a recovery of items
27 previously deducted from adjusted gross income in
28 the computation of taxable income;
29 (J) An amount equal to those dividends
30 included in such total which were paid by a
31 corporation which conducts business operations in an
32 Enterprise Zone or zones created under the Illinois
33 Enterprise Zone Act, and conducts substantially all
34 of its operations in an Enterprise Zone or zones;
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1 (K) An amount equal to those dividends
2 included in such total that were paid by a
3 corporation that conducts business operations in a
4 federally designated Foreign Trade Zone or Sub-Zone
5 and that is designated a High Impact Business
6 located in Illinois; provided that dividends
7 eligible for the deduction provided in subparagraph
8 (J) of paragraph (2) of this subsection shall not be
9 eligible for the deduction provided under this
10 subparagraph (K);
11 (L) For taxable years ending after December
12 31, 1983, an amount equal to all social security
13 benefits and railroad retirement benefits included
14 in such total pursuant to Sections 72(r) and 86 of
15 the Internal Revenue Code;
16 (M) With the exception of any amounts
17 subtracted under subparagraph (N), an amount equal
18 to the sum of all amounts disallowed as deductions
19 by (i) Sections 171(a) (2), and 265(2) of the
20 Internal Revenue Code of 1954, as now or hereafter
21 amended, and all amounts of expenses allocable to
22 interest and disallowed as deductions by Section
23 265(1) of the Internal Revenue Code of 1954, as now
24 or hereafter amended; and (ii) for taxable years
25 ending on or after August 13, 1999 the effective
26 date of this amendatory Act of the 91st General
27 Assembly, Sections 171(a)(2), 265, 280C, and
28 832(b)(5)(B)(i) of the Internal Revenue Code; the
29 provisions of this subparagraph are exempt from the
30 provisions of Section 250;
31 (N) An amount equal to all amounts included in
32 such total which are exempt from taxation by this
33 State either by reason of its statutes or
34 Constitution or by reason of the Constitution,
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1 treaties or statutes of the United States; provided
2 that, in the case of any statute of this State that
3 exempts income derived from bonds or other
4 obligations from the tax imposed under this Act, the
5 amount exempted shall be the interest net of bond
6 premium amortization;
7 (O) An amount equal to any contribution made
8 to a job training project established pursuant to
9 the Tax Increment Allocation Redevelopment Act;
10 (P) An amount equal to the amount of the
11 deduction used to compute the federal income tax
12 credit for restoration of substantial amounts held
13 under claim of right for the taxable year pursuant
14 to Section 1341 of the Internal Revenue Code of
15 1986;
16 (Q) An amount equal to any amounts included in
17 such total, received by the taxpayer as an
18 acceleration in the payment of life, endowment or
19 annuity benefits in advance of the time they would
20 otherwise be payable as an indemnity for a terminal
21 illness;
22 (R) An amount equal to the amount of any
23 federal or State bonus paid to veterans of the
24 Persian Gulf War;
25 (S) An amount, to the extent included in
26 adjusted gross income, equal to the amount of a
27 contribution made in the taxable year on behalf of
28 the taxpayer to a medical care savings account
29 established under the Medical Care Savings Account
30 Act to the extent the contribution is accepted by
31 the account administrator as provided in that Act;
32 (T) An amount, to the extent included in
33 adjusted gross income, equal to the amount of
34 interest earned in the taxable year on a medical
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1 care savings account established under the Medical
2 Care Savings Account Act on behalf of the taxpayer,
3 other than interest added pursuant to item (D-5) of
4 this paragraph (2);
5 (U) For one taxable year beginning on or after
6 January 1, 1994, an amount equal to the total amount
7 of tax imposed and paid under subsections (a) and
8 (b) of Section 201 of this Act on grant amounts
9 received by the taxpayer under the Nursing Home
10 Grant Assistance Act during the taxpayer's taxable
11 years 1992 and 1993;
12 (V) Beginning with tax years ending on or
13 after December 31, 1995 and ending with tax years
14 ending on or before December 31, 2004, an amount
15 equal to the amount paid by a taxpayer who is a
16 self-employed taxpayer, a partner of a partnership,
17 or a shareholder in a Subchapter S corporation for
18 health insurance or long-term care insurance for
19 that taxpayer or that taxpayer's spouse or
20 dependents, to the extent that the amount paid for
21 that health insurance or long-term care insurance
22 may be deducted under Section 213 of the Internal
23 Revenue Code of 1986, has not been deducted on the
24 federal income tax return of the taxpayer, and does
25 not exceed the taxable income attributable to that
26 taxpayer's income, self-employment income, or
27 Subchapter S corporation income; except that no
28 deduction shall be allowed under this item (V) if
29 the taxpayer is eligible to participate in any
30 health insurance or long-term care insurance plan of
31 an employer of the taxpayer or the taxpayer's
32 spouse. The amount of the health insurance and
33 long-term care insurance subtracted under this item
34 (V) shall be determined by multiplying total health
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1 insurance and long-term care insurance premiums paid
2 by the taxpayer times a number that represents the
3 fractional percentage of eligible medical expenses
4 under Section 213 of the Internal Revenue Code of
5 1986 not actually deducted on the taxpayer's federal
6 income tax return;
7 (W) For taxable years beginning on or after
8 January 1, 1998, all amounts included in the
9 taxpayer's federal gross income in the taxable year
10 from amounts converted from a regular IRA to a Roth
11 IRA. This paragraph is exempt from the provisions of
12 Section 250; and
13 (X) For taxable year 1999 and thereafter, an
14 amount equal to the amount of any (i) distributions,
15 to the extent includible in gross income for federal
16 income tax purposes, made to the taxpayer because of
17 his or her status as a victim of persecution for
18 racial or religious reasons by Nazi Germany or any
19 other Axis regime or as an heir of the victim and
20 (ii) items of income, to the extent includible in
21 gross income for federal income tax purposes,
22 attributable to, derived from or in any way related
23 to assets stolen from, hidden from, or otherwise
24 lost to a victim of persecution for racial or
25 religious reasons by Nazi Germany or any other Axis
26 regime immediately prior to, during, and immediately
27 after World War II, including, but not limited to,
28 interest on the proceeds receivable as insurance
29 under policies issued to a victim of persecution for
30 racial or religious reasons by Nazi Germany or any
31 other Axis regime by European insurance companies
32 immediately prior to and during World War II;
33 provided, however, this subtraction from federal
34 adjusted gross income does not apply to assets
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1 acquired with such assets or with the proceeds from
2 the sale of such assets; provided, further, this
3 paragraph shall only apply to a taxpayer who was the
4 first recipient of such assets after their recovery
5 and who is a victim of persecution for racial or
6 religious reasons by Nazi Germany or any other Axis
7 regime or as an heir of the victim. The amount of
8 and the eligibility for any public assistance,
9 benefit, or similar entitlement is not affected by
10 the inclusion of items (i) and (ii) of this
11 paragraph in gross income for federal income tax
12 purposes. This paragraph is exempt from the
13 provisions of Section 250; and
14 (Y) Beginning with taxable years ending on or
15 after December 31, 2000, for taxpayers 62 years of
16 age and older, an amount equal to all amounts the
17 taxpayer pays during the taxable year for Medicare
18 Part B benefits under Title XVIII of the federal
19 Social Security Act for costs of, including but not
20 limited to, physician services, outpatient hospital
21 services, medical equipment and supplies, and other
22 health services and supplies. This subparagraph (Y)
23 is exempt from the provisions of Section 250.
24 (b) Corporations.
25 (1) In general. In the case of a corporation, base
26 income means an amount equal to the taxpayer's taxable
27 income for the taxable year as modified by paragraph (2).
28 (2) Modifications. The taxable income referred to
29 in paragraph (1) shall be modified by adding thereto the
30 sum of the following amounts:
31 (A) An amount equal to all amounts paid or
32 accrued to the taxpayer as interest and all
33 distributions received from regulated investment
34 companies during the taxable year to the extent
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1 excluded from gross income in the computation of
2 taxable income;
3 (B) An amount equal to the amount of tax
4 imposed by this Act to the extent deducted from
5 gross income in the computation of taxable income
6 for the taxable year;
7 (C) In the case of a regulated investment
8 company, an amount equal to the excess of (i) the
9 net long-term capital gain for the taxable year,
10 over (ii) the amount of the capital gain dividends
11 designated as such in accordance with Section
12 852(b)(3)(C) of the Internal Revenue Code and any
13 amount designated under Section 852(b)(3)(D) of the
14 Internal Revenue Code, attributable to the taxable
15 year (this amendatory Act of 1995 (Public Act 89-89)
16 is declarative of existing law and is not a new
17 enactment);
18 (D) The amount of any net operating loss
19 deduction taken in arriving at taxable income, other
20 than a net operating loss carried forward from a
21 taxable year ending prior to December 31, 1986;
22 (E) For taxable years in which a net operating
23 loss carryback or carryforward from a taxable year
24 ending prior to December 31, 1986 is an element of
25 taxable income under paragraph (1) of subsection (e)
26 or subparagraph (E) of paragraph (2) of subsection
27 (e), the amount by which addition modifications
28 other than those provided by this subparagraph (E)
29 exceeded subtraction modifications in such earlier
30 taxable year, with the following limitations applied
31 in the order that they are listed:
32 (i) the addition modification relating to
33 the net operating loss carried back or forward
34 to the taxable year from any taxable year
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1 ending prior to December 31, 1986 shall be
2 reduced by the amount of addition modification
3 under this subparagraph (E) which related to
4 that net operating loss and which was taken
5 into account in calculating the base income of
6 an earlier taxable year, and
7 (ii) the addition modification relating
8 to the net operating loss carried back or
9 forward to the taxable year from any taxable
10 year ending prior to December 31, 1986 shall
11 not exceed the amount of such carryback or
12 carryforward;
13 For taxable years in which there is a net
14 operating loss carryback or carryforward from more
15 than one other taxable year ending prior to December
16 31, 1986, the addition modification provided in this
17 subparagraph (E) shall be the sum of the amounts
18 computed independently under the preceding
19 provisions of this subparagraph (E) for each such
20 taxable year; and
21 (E-5) For taxable years ending after December
22 31, 1997, an amount equal to any eligible
23 remediation costs that the corporation deducted in
24 computing adjusted gross income and for which the
25 corporation claims a credit under subsection (l) of
26 Section 201;
27 and by deducting from the total so obtained the sum of
28 the following amounts:
29 (F) An amount equal to the amount of any tax
30 imposed by this Act which was refunded to the
31 taxpayer and included in such total for the taxable
32 year;
33 (G) An amount equal to any amount included in
34 such total under Section 78 of the Internal Revenue
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1 Code;
2 (H) In the case of a regulated investment
3 company, an amount equal to the amount of exempt
4 interest dividends as defined in subsection (b) (5)
5 of Section 852 of the Internal Revenue Code, paid to
6 shareholders for the taxable year;
7 (I) With the exception of any amounts
8 subtracted under subparagraph (J), an amount equal
9 to the sum of all amounts disallowed as deductions
10 by (i) Sections 171(a) (2), and 265(a)(2) and
11 amounts disallowed as interest expense by Section
12 291(a)(3) of the Internal Revenue Code, as now or
13 hereafter amended, and all amounts of expenses
14 allocable to interest and disallowed as deductions
15 by Section 265(a)(1) of the Internal Revenue Code,
16 as now or hereafter amended; and (ii) for taxable
17 years ending on or after August 13, 1999 the
18 effective date of this amendatory Act of the 91st
19 General Assembly, Sections 171(a)(2), 265, 280C, and
20 832(b)(5)(B)(i) of the Internal Revenue Code; the
21 provisions of this subparagraph are exempt from the
22 provisions of Section 250;
23 (J) An amount equal to all amounts included in
24 such total which are exempt from taxation by this
25 State either by reason of its statutes or
26 Constitution or by reason of the Constitution,
27 treaties or statutes of the United States; provided
28 that, in the case of any statute of this State that
29 exempts income derived from bonds or other
30 obligations from the tax imposed under this Act, the
31 amount exempted shall be the interest net of bond
32 premium amortization;
33 (K) An amount equal to those dividends
34 included in such total which were paid by a
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1 corporation which conducts business operations in an
2 Enterprise Zone or zones created under the Illinois
3 Enterprise Zone Act and conducts substantially all
4 of its operations in an Enterprise Zone or zones;
5 (L) An amount equal to those dividends
6 included in such total that were paid by a
7 corporation that conducts business operations in a
8 federally designated Foreign Trade Zone or Sub-Zone
9 and that is designated a High Impact Business
10 located in Illinois; provided that dividends
11 eligible for the deduction provided in subparagraph
12 (K) of paragraph 2 of this subsection shall not be
13 eligible for the deduction provided under this
14 subparagraph (L);
15 (M) For any taxpayer that is a financial
16 organization within the meaning of Section 304(c) of
17 this Act, an amount included in such total as
18 interest income from a loan or loans made by such
19 taxpayer to a borrower, to the extent that such a
20 loan is secured by property which is eligible for
21 the Enterprise Zone Investment Credit. To determine
22 the portion of a loan or loans that is secured by
23 property eligible for a Section 201(h) investment
24 credit to the borrower, the entire principal amount
25 of the loan or loans between the taxpayer and the
26 borrower should be divided into the basis of the
27 Section 201(h) investment credit property which
28 secures the loan or loans, using for this purpose
29 the original basis of such property on the date that
30 it was placed in service in the Enterprise Zone.
31 The subtraction modification available to taxpayer
32 in any year under this subsection shall be that
33 portion of the total interest paid by the borrower
34 with respect to such loan attributable to the
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1 eligible property as calculated under the previous
2 sentence;
3 (M-1) For any taxpayer that is a financial
4 organization within the meaning of Section 304(c) of
5 this Act, an amount included in such total as
6 interest income from a loan or loans made by such
7 taxpayer to a borrower, to the extent that such a
8 loan is secured by property which is eligible for
9 the High Impact Business Investment Credit. To
10 determine the portion of a loan or loans that is
11 secured by property eligible for a Section 201(i)
12 investment credit to the borrower, the entire
13 principal amount of the loan or loans between the
14 taxpayer and the borrower should be divided into the
15 basis of the Section 201(i) investment credit
16 property which secures the loan or loans, using for
17 this purpose the original basis of such property on
18 the date that it was placed in service in a
19 federally designated Foreign Trade Zone or Sub-Zone
20 located in Illinois. No taxpayer that is eligible
21 for the deduction provided in subparagraph (M) of
22 paragraph (2) of this subsection shall be eligible
23 for the deduction provided under this subparagraph
24 (M-1). The subtraction modification available to
25 taxpayers in any year under this subsection shall be
26 that portion of the total interest paid by the
27 borrower with respect to such loan attributable to
28 the eligible property as calculated under the
29 previous sentence;
30 (N) Two times any contribution made during the
31 taxable year to a designated zone organization to
32 the extent that the contribution (i) qualifies as a
33 charitable contribution under subsection (c) of
34 Section 170 of the Internal Revenue Code and (ii)
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1 must, by its terms, be used for a project approved
2 by the Department of Commerce and Community Affairs
3 under Section 11 of the Illinois Enterprise Zone
4 Act;
5 (O) An amount equal to: (i) 85% for taxable
6 years ending on or before December 31, 1992, or, a
7 percentage equal to the percentage allowable under
8 Section 243(a)(1) of the Internal Revenue Code of
9 1986 for taxable years ending after December 31,
10 1992, of the amount by which dividends included in
11 taxable income and received from a corporation that
12 is not created or organized under the laws of the
13 United States or any state or political subdivision
14 thereof, including, for taxable years ending on or
15 after December 31, 1988, dividends received or
16 deemed received or paid or deemed paid under
17 Sections 951 through 964 of the Internal Revenue
18 Code, exceed the amount of the modification provided
19 under subparagraph (G) of paragraph (2) of this
20 subsection (b) which is related to such dividends;
21 plus (ii) 100% of the amount by which dividends,
22 included in taxable income and received, including,
23 for taxable years ending on or after December 31,
24 1988, dividends received or deemed received or paid
25 or deemed paid under Sections 951 through 964 of the
26 Internal Revenue Code, from any such corporation
27 specified in clause (i) that would but for the
28 provisions of Section 1504 (b) (3) of the Internal
29 Revenue Code be treated as a member of the
30 affiliated group which includes the dividend
31 recipient, exceed the amount of the modification
32 provided under subparagraph (G) of paragraph (2) of
33 this subsection (b) which is related to such
34 dividends;
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1 (P) An amount equal to any contribution made
2 to a job training project established pursuant to
3 the Tax Increment Allocation Redevelopment Act;
4 (Q) An amount equal to the amount of the
5 deduction used to compute the federal income tax
6 credit for restoration of substantial amounts held
7 under claim of right for the taxable year pursuant
8 to Section 1341 of the Internal Revenue Code of
9 1986; and
10 (R) In the case of an attorney-in-fact with
11 respect to whom an interinsurer or a reciprocal
12 insurer has made the election under Section 835 of
13 the Internal Revenue Code, 26 U.S.C. 835, an amount
14 equal to the excess, if any, of the amounts paid or
15 incurred by that interinsurer or reciprocal insurer
16 in the taxable year to the attorney-in-fact over the
17 deduction allowed to that interinsurer or reciprocal
18 insurer with respect to the attorney-in-fact under
19 Section 835(b) of the Internal Revenue Code for the
20 taxable year.
21 (3) Special rule. For purposes of paragraph (2)
22 (A), "gross income" in the case of a life insurance
23 company, for tax years ending on and after December 31,
24 1994, shall mean the gross investment income for the
25 taxable year.
26 (c) Trusts and estates.
27 (1) In general. In the case of a trust or estate,
28 base income means an amount equal to the taxpayer's
29 taxable income for the taxable year as modified by
30 paragraph (2).
31 (2) Modifications. Subject to the provisions of
32 paragraph (3), the taxable income referred to in
33 paragraph (1) shall be modified by adding thereto the sum
34 of the following amounts:
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1 (A) An amount equal to all amounts paid or
2 accrued to the taxpayer as interest or dividends
3 during the taxable year to the extent excluded from
4 gross income in the computation of taxable income;
5 (B) In the case of (i) an estate, $600; (ii) a
6 trust which, under its governing instrument, is
7 required to distribute all of its income currently,
8 $300; and (iii) any other trust, $100, but in each
9 such case, only to the extent such amount was
10 deducted in the computation of taxable income;
11 (C) An amount equal to the amount of tax
12 imposed by this Act to the extent deducted from
13 gross income in the computation of taxable income
14 for the taxable year;
15 (D) The amount of any net operating loss
16 deduction taken in arriving at taxable income, other
17 than a net operating loss carried forward from a
18 taxable year ending prior to December 31, 1986;
19 (E) For taxable years in which a net operating
20 loss carryback or carryforward from a taxable year
21 ending prior to December 31, 1986 is an element of
22 taxable income under paragraph (1) of subsection (e)
23 or subparagraph (E) of paragraph (2) of subsection
24 (e), the amount by which addition modifications
25 other than those provided by this subparagraph (E)
26 exceeded subtraction modifications in such taxable
27 year, with the following limitations applied in the
28 order that they are listed:
29 (i) the addition modification relating to
30 the net operating loss carried back or forward
31 to the taxable year from any taxable year
32 ending prior to December 31, 1986 shall be
33 reduced by the amount of addition modification
34 under this subparagraph (E) which related to
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1 that net operating loss and which was taken
2 into account in calculating the base income of
3 an earlier taxable year, and
4 (ii) the addition modification relating
5 to the net operating loss carried back or
6 forward to the taxable year from any taxable
7 year ending prior to December 31, 1986 shall
8 not exceed the amount of such carryback or
9 carryforward;
10 For taxable years in which there is a net
11 operating loss carryback or carryforward from more
12 than one other taxable year ending prior to December
13 31, 1986, the addition modification provided in this
14 subparagraph (E) shall be the sum of the amounts
15 computed independently under the preceding
16 provisions of this subparagraph (E) for each such
17 taxable year;
18 (F) For taxable years ending on or after
19 January 1, 1989, an amount equal to the tax deducted
20 pursuant to Section 164 of the Internal Revenue Code
21 if the trust or estate is claiming the same tax for
22 purposes of the Illinois foreign tax credit under
23 Section 601 of this Act;
24 (G) An amount equal to the amount of the
25 capital gain deduction allowable under the Internal
26 Revenue Code, to the extent deducted from gross
27 income in the computation of taxable income; and
28 (G-5) For taxable years ending after December
29 31, 1997, an amount equal to any eligible
30 remediation costs that the trust or estate deducted
31 in computing adjusted gross income and for which the
32 trust or estate claims a credit under subsection (l)
33 of Section 201;
34 and by deducting from the total so obtained the sum of
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1 the following amounts:
2 (H) An amount equal to all amounts included in
3 such total pursuant to the provisions of Sections
4 402(a), 402(c), 403(a), 403(b), 406(a), 407(a) and
5 408 of the Internal Revenue Code or included in such
6 total as distributions under the provisions of any
7 retirement or disability plan for employees of any
8 governmental agency or unit, or retirement payments
9 to retired partners, which payments are excluded in
10 computing net earnings from self employment by
11 Section 1402 of the Internal Revenue Code and
12 regulations adopted pursuant thereto;
13 (I) The valuation limitation amount;
14 (J) An amount equal to the amount of any tax
15 imposed by this Act which was refunded to the
16 taxpayer and included in such total for the taxable
17 year;
18 (K) An amount equal to all amounts included in
19 taxable income as modified by subparagraphs (A),
20 (B), (C), (D), (E), (F) and (G) which are exempt
21 from taxation by this State either by reason of its
22 statutes or Constitution or by reason of the
23 Constitution, treaties or statutes of the United
24 States; provided that, in the case of any statute of
25 this State that exempts income derived from bonds or
26 other obligations from the tax imposed under this
27 Act, the amount exempted shall be the interest net
28 of bond premium amortization;
29 (L) With the exception of any amounts
30 subtracted under subparagraph (K), an amount equal
31 to the sum of all amounts disallowed as deductions
32 by (i) Sections 171(a) (2) and 265(a)(2) of the
33 Internal Revenue Code, as now or hereafter amended,
34 and all amounts of expenses allocable to interest
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1 and disallowed as deductions by Section 265(1) of
2 the Internal Revenue Code of 1954, as now or
3 hereafter amended; and (ii) for taxable years ending
4 on or after August 13, 1999 the effective date of
5 this amendatory Act of the 91st General Assembly,
6 Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i)
7 of the Internal Revenue Code; the provisions of this
8 subparagraph are exempt from the provisions of
9 Section 250;
10 (M) An amount equal to those dividends
11 included in such total which were paid by a
12 corporation which conducts business operations in an
13 Enterprise Zone or zones created under the Illinois
14 Enterprise Zone Act and conducts substantially all
15 of its operations in an Enterprise Zone or Zones;
16 (N) An amount equal to any contribution made
17 to a job training project established pursuant to
18 the Tax Increment Allocation Redevelopment Act;
19 (O) An amount equal to those dividends
20 included in such total that were paid by a
21 corporation that conducts business operations in a
22 federally designated Foreign Trade Zone or Sub-Zone
23 and that is designated a High Impact Business
24 located in Illinois; provided that dividends
25 eligible for the deduction provided in subparagraph
26 (M) of paragraph (2) of this subsection shall not be
27 eligible for the deduction provided under this
28 subparagraph (O);
29 (P) An amount equal to the amount of the
30 deduction used to compute the federal income tax
31 credit for restoration of substantial amounts held
32 under claim of right for the taxable year pursuant
33 to Section 1341 of the Internal Revenue Code of
34 1986; and
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1 (Q) For taxable year 1999 and thereafter, an
2 amount equal to the amount of any (i) distributions,
3 to the extent includible in gross income for federal
4 income tax purposes, made to the taxpayer because of
5 his or her status as a victim of persecution for
6 racial or religious reasons by Nazi Germany or any
7 other Axis regime or as an heir of the victim and
8 (ii) items of income, to the extent includible in
9 gross income for federal income tax purposes,
10 attributable to, derived from or in any way related
11 to assets stolen from, hidden from, or otherwise
12 lost to a victim of persecution for racial or
13 religious reasons by Nazi Germany or any other Axis
14 regime immediately prior to, during, and immediately
15 after World War II, including, but not limited to,
16 interest on the proceeds receivable as insurance
17 under policies issued to a victim of persecution for
18 racial or religious reasons by Nazi Germany or any
19 other Axis regime by European insurance companies
20 immediately prior to and during World War II;
21 provided, however, this subtraction from federal
22 adjusted gross income does not apply to assets
23 acquired with such assets or with the proceeds from
24 the sale of such assets; provided, further, this
25 paragraph shall only apply to a taxpayer who was the
26 first recipient of such assets after their recovery
27 and who is a victim of persecution for racial or
28 religious reasons by Nazi Germany or any other Axis
29 regime or as an heir of the victim. The amount of
30 and the eligibility for any public assistance,
31 benefit, or similar entitlement is not affected by
32 the inclusion of items (i) and (ii) of this
33 paragraph in gross income for federal income tax
34 purposes. This paragraph is exempt from the
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1 provisions of Section 250.
2 (3) Limitation. The amount of any modification
3 otherwise required under this subsection shall, under
4 regulations prescribed by the Department, be adjusted by
5 any amounts included therein which were properly paid,
6 credited, or required to be distributed, or permanently
7 set aside for charitable purposes pursuant to Internal
8 Revenue Code Section 642(c) during the taxable year.
9 (d) Partnerships.
10 (1) In general. In the case of a partnership, base
11 income means an amount equal to the taxpayer's taxable
12 income for the taxable year as modified by paragraph (2).
13 (2) Modifications. The taxable income referred to
14 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
17 accrued to the taxpayer as interest or dividends
18 during the taxable year to the extent excluded from
19 gross income in the computation of taxable income;
20 (B) An amount equal to the amount of tax
21 imposed by this Act to the extent deducted from
22 gross income for the taxable year;
23 (C) The amount of deductions allowed to the
24 partnership pursuant to Section 707 (c) of the
25 Internal Revenue Code in calculating its taxable
26 income; and
27 (D) An amount equal to the amount of the
28 capital gain deduction allowable under the Internal
29 Revenue Code, to the extent deducted from gross
30 income in the computation of taxable income;
31 and by deducting from the total so obtained the following
32 amounts:
33 (E) The valuation limitation amount;
34 (F) An amount equal to the amount of any tax
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1 imposed by this Act which was refunded to the
2 taxpayer and included in such total for the taxable
3 year;
4 (G) An amount equal to all amounts included in
5 taxable income as modified by subparagraphs (A),
6 (B), (C) and (D) which are exempt from taxation by
7 this State either by reason of its statutes or
8 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
12 obligations from the tax imposed under this Act, the
13 amount exempted shall be the interest net of bond
14 premium amortization;
15 (H) Any income of the partnership which
16 constitutes personal service income as defined in
17 Section 1348 (b) (1) of the Internal Revenue Code
18 (as in effect December 31, 1981) or a reasonable
19 allowance for compensation paid or accrued for
20 services rendered by partners to the partnership,
21 whichever is greater;
22 (I) An amount equal to all amounts of income
23 distributable to an entity subject to the Personal
24 Property Tax Replacement Income Tax imposed by
25 subsections (c) and (d) of Section 201 of this Act
26 including amounts distributable to organizations
27 exempt from federal income tax by reason of Section
28 501(a) of the Internal Revenue Code;
29 (J) With the exception of any amounts
30 subtracted under subparagraph (G), an amount equal
31 to the sum of all amounts disallowed as deductions
32 by (i) Sections 171(a) (2), and 265(2) of the
33 Internal Revenue Code of 1954, as now or hereafter
34 amended, and all amounts of expenses allocable to
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1 interest and disallowed as deductions by Section
2 265(1) of the Internal Revenue Code, as now or
3 hereafter amended; and (ii) for taxable years ending
4 on or after August 13, 1999 the effective date of
5 this amendatory Act of the 91st General Assembly,
6 Sections 171(a)(2), 265, 280C, and 832(b)(5)(B)(i)
7 of the Internal Revenue Code; the provisions of this
8 subparagraph are exempt from the provisions of
9 Section 250;
10 (K) An amount equal to those dividends
11 included in such total which were paid by a
12 corporation which conducts business operations in an
13 Enterprise Zone or zones created under the Illinois
14 Enterprise Zone Act, enacted by the 82nd General
15 Assembly, and which does not conduct such operations
16 other than in an Enterprise Zone or Zones;
17 (L) An amount equal to any contribution made
18 to a job training project established pursuant to
19 the Real Property Tax Increment Allocation
20 Redevelopment Act;
21 (M) An amount equal to those dividends
22 included in such total that were paid by a
23 corporation that conducts business operations in a
24 federally designated Foreign Trade Zone or Sub-Zone
25 and that is designated a High Impact Business
26 located in Illinois; provided that dividends
27 eligible for the deduction provided in subparagraph
28 (K) of paragraph (2) of this subsection shall not be
29 eligible for the deduction provided under this
30 subparagraph (M); and
31 (N) An amount equal to the amount of the
32 deduction used to compute the federal income tax
33 credit for restoration of substantial amounts held
34 under claim of right for the taxable year pursuant
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1 to Section 1341 of the Internal Revenue Code of
2 1986.
3 (e) Gross income; adjusted gross income; taxable income.
4 (1) In general. Subject to the provisions of
5 paragraph (2) and subsection (b) (3), for purposes of
6 this Section and Section 803(e), a taxpayer's gross
7 income, adjusted gross income, or taxable income for the
8 taxable year shall mean the amount of gross income,
9 adjusted gross income or taxable income properly
10 reportable for federal income tax purposes for the
11 taxable year under the provisions of the Internal Revenue
12 Code. Taxable income may be less than zero. However, for
13 taxable years ending on or after December 31, 1986, net
14 operating loss carryforwards from taxable years ending
15 prior to December 31, 1986, may not exceed the sum of
16 federal taxable income for the taxable year before net
17 operating loss deduction, plus the excess of addition
18 modifications over subtraction modifications for the
19 taxable year. For taxable years ending prior to December
20 31, 1986, taxable income may never be an amount in excess
21 of the net operating loss for the taxable year as defined
22 in subsections (c) and (d) of Section 172 of the Internal
23 Revenue Code, provided that when taxable income of a
24 corporation (other than a Subchapter S corporation),
25 trust, or estate is less than zero and addition
26 modifications, other than those provided by subparagraph
27 (E) of paragraph (2) of subsection (b) for corporations
28 or subparagraph (E) of paragraph (2) of subsection (c)
29 for trusts and estates, exceed subtraction modifications,
30 an addition modification must be made under those
31 subparagraphs for any other taxable year to which the
32 taxable income less than zero (net operating loss) is
33 applied under Section 172 of the Internal Revenue Code or
34 under subparagraph (E) of paragraph (2) of this
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1 subsection (e) applied in conjunction with Section 172 of
2 the Internal Revenue Code.
3 (2) Special rule. For purposes of paragraph (1) of
4 this subsection, the taxable income properly reportable
5 for federal income tax purposes shall mean:
6 (A) Certain life insurance companies. In the
7 case of a life insurance company subject to the tax
8 imposed by Section 801 of the Internal Revenue Code,
9 life insurance company taxable income, plus the
10 amount of distribution from pre-1984 policyholder
11 surplus accounts as calculated under Section 815a of
12 the Internal Revenue Code;
13 (B) Certain other insurance companies. In the
14 case of mutual insurance companies subject to the
15 tax imposed by Section 831 of the Internal Revenue
16 Code, insurance company taxable income;
17 (C) Regulated investment companies. In the
18 case of a regulated investment company subject to
19 the tax imposed by Section 852 of the Internal
20 Revenue Code, investment company taxable income;
21 (D) Real estate investment trusts. In the
22 case of a real estate investment trust subject to
23 the tax imposed by Section 857 of the Internal
24 Revenue Code, real estate investment trust taxable
25 income;
26 (E) Consolidated corporations. In the case of
27 a corporation which is a member of an affiliated
28 group of corporations filing a consolidated income
29 tax return for the taxable year for federal income
30 tax purposes, taxable income determined as if such
31 corporation had filed a separate return for federal
32 income tax purposes for the taxable year and each
33 preceding taxable year for which it was a member of
34 an affiliated group. For purposes of this
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1 subparagraph, the taxpayer's separate taxable income
2 shall be determined as if the election provided by
3 Section 243(b) (2) of the Internal Revenue Code had
4 been in effect for all such years;
5 (F) Cooperatives. In the case of a
6 cooperative corporation or association, the taxable
7 income of such organization determined in accordance
8 with the provisions of Section 1381 through 1388 of
9 the Internal Revenue Code;
10 (G) Subchapter S corporations. In the case
11 of: (i) a Subchapter S corporation for which there
12 is in effect an election for the taxable year under
13 Section 1362 of the Internal Revenue Code, the
14 taxable income of such corporation determined in
15 accordance with Section 1363(b) of the Internal
16 Revenue Code, except that taxable income shall take
17 into account those items which are required by
18 Section 1363(b)(1) of the Internal Revenue Code to
19 be separately stated; and (ii) a Subchapter S
20 corporation for which there is in effect a federal
21 election to opt out of the provisions of the
22 Subchapter S Revision Act of 1982 and have applied
23 instead the prior federal Subchapter S rules as in
24 effect on July 1, 1982, the taxable income of such
25 corporation determined in accordance with the
26 federal Subchapter S rules as in effect on July 1,
27 1982; and
28 (H) Partnerships. In the case of a
29 partnership, taxable income determined in accordance
30 with Section 703 of the Internal Revenue Code,
31 except that taxable income shall take into account
32 those items which are required by Section 703(a)(1)
33 to be separately stated but which would be taken
34 into account by an individual in calculating his
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1 taxable income.
2 (f) Valuation limitation amount.
3 (1) In general. The valuation limitation amount
4 referred to in subsections (a) (2) (G), (c) (2) (I) and
5 (d)(2) (E) is an amount equal to:
6 (A) The sum of the pre-August 1, 1969
7 appreciation amounts (to the extent consisting of
8 gain reportable under the provisions of Section 1245
9 or 1250 of the Internal Revenue Code) for all
10 property in respect of which such gain was reported
11 for the taxable year; plus
12 (B) The lesser of (i) the sum of the
13 pre-August 1, 1969 appreciation amounts (to the
14 extent consisting of capital gain) for all property
15 in respect of which such gain was reported for
16 federal income tax purposes for the taxable year, or
17 (ii) the net capital gain for the taxable year,
18 reduced in either case by any amount of such gain
19 included in the amount determined under subsection
20 (a) (2) (F) or (c) (2) (H).
21 (2) Pre-August 1, 1969 appreciation amount.
22 (A) If the fair market value of property
23 referred to in paragraph (1) was readily
24 ascertainable on August 1, 1969, the pre-August 1,
25 1969 appreciation amount for such property is the
26 lesser of (i) the excess of such fair market value
27 over the taxpayer's basis (for determining gain) for
28 such property on that date (determined under the
29 Internal Revenue Code as in effect on that date), or
30 (ii) the total gain realized and reportable for
31 federal income tax purposes in respect of the sale,
32 exchange or other disposition of such property.
33 (B) If the fair market value of property
34 referred to in paragraph (1) was not readily
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1 ascertainable on August 1, 1969, the pre-August 1,
2 1969 appreciation amount for such property is that
3 amount which bears the same ratio to the total gain
4 reported in respect of the property for federal
5 income tax purposes for the taxable year, as the
6 number of full calendar months in that part of the
7 taxpayer's holding period for the property ending
8 July 31, 1969 bears to the number of full calendar
9 months in the taxpayer's entire holding period for
10 the property.
11 (C) The Department shall prescribe such
12 regulations as may be necessary to carry out the
13 purposes of this paragraph.
14 (g) Double deductions. Unless specifically provided
15 otherwise, nothing in this Section shall permit the same item
16 to be deducted more than once.
17 (h) Legislative intention. Except as expressly provided
18 by this Section there shall be no modifications or
19 limitations on the amounts of income, gain, loss or deduction
20 taken into account in determining gross income, adjusted
21 gross income or taxable income for federal income tax
22 purposes for the taxable year, or in the amount of such items
23 entering into the computation of base income and net income
24 under this Act for such taxable year, whether in respect of
25 property values as of August 1, 1969 or otherwise.
26 (Source: P.A. 90-491, eff. 1-1-98; 90-717, eff. 8-7-98;
27 90-770, eff. 8-14-98; 91-192, eff. 7-20-99; 91-205, eff.
28 7-20-99; 91-357, eff. 7-29-99; 91-541, eff. 8-13-99; 91-676,
29 eff. 12-23-99; revised 1-5-00.)
30 Section 99. Effective date. This Act takes effect upon
31 becoming law.