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91_SB0111enr SB111 Enrolled LRB9100932PTpk 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 SB111 Enrolled -2- LRB9100932PTpk 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income; 14 (D-5) An amount, to the extent not included in 15 adjusted gross income, equal to the amount of money 16 withdrawn by the taxpayer in the taxable year from a 17 medical care savings account and the interest earned 18 on the account in the taxable year of a withdrawal 19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 SB111 Enrolled -3- LRB9100932PTpk 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; SB111 Enrolled -4- LRB9100932PTpk 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 Sections 171(a) (2), and 265(2) of the Internal 20 Revenue Code of 1954, as now or hereafter amended, 21 and all amounts of expenses allocable to interest 22 and disallowed as deductions by Section 265(1) of 23 the Internal Revenue Code of 1954, as now or 24 hereafter amended; 25 (N) An amount equal to all amounts included in 26 such total which are exempt from taxation by this 27 State either by reason of its statutes or 28 Constitution or by reason of the Constitution, 29 treaties or statutes of the United States; provided 30 that, in the case of any statute of this State that 31 exempts income derived from bonds or other 32 obligations from the tax imposed under this Act, the 33 amount exempted shall be the interest net of bond 34 premium amortization; SB111 Enrolled -5- LRB9100932PTpk 1 (O) An amount equal to any contribution made 2 to a job training project established pursuant to 3 the Tax Increment Allocation Redevelopment Act; 4 (P) 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; 10 (Q) An amount equal to any amounts included in 11 such total, received by the taxpayer as an 12 acceleration in the payment of life, endowment or 13 annuity benefits in advance of the time they would 14 otherwise be payable as an indemnity for a terminal 15 illness; 16 (R) An amount equal to the amount of any 17 federal or State bonus paid to veterans of the 18 Persian Gulf War; 19 (S) An amount, to the extent included in 20 adjusted gross income, equal to the amount of a 21 contribution made in the taxable year on behalf of 22 the taxpayer to a medical care savings account 23 established under the Medical Care Savings Account 24 Act to the extent the contribution is accepted by 25 the account administrator as provided in that Act; 26 (T) An amount, to the extent included in 27 adjusted gross income, equal to the amount of 28 interest earned in the taxable year on a medical 29 care savings account established under the Medical 30 Care Savings Account Act on behalf of the taxpayer, 31 other than interest added pursuant to item (D-5) of 32 this paragraph (2); 33 (U) For one taxable year beginning on or after 34 January 1, 1994, an amount equal to the total amount SB111 Enrolled -6- LRB9100932PTpk 1 of tax imposed and paid under subsections (a) and 2 (b) of Section 201 of this Act on grant amounts 3 received by the taxpayer under the Nursing Home 4 Grant Assistance Act during the taxpayer's taxable 5 years 1992 and 1993; 6 (V) Beginning with tax years ending on or 7 after December 31, 1995 and ending with tax years 8 ending on or before December 31, 20041999, an 9 amount equal to the amount paid by a taxpayer who is 10 a self-employed taxpayer, a partner of a 11 partnership, or a shareholder in a Subchapter S 12 corporation for health insurance or long-term care 13 insurance for that taxpayer or that taxpayer's 14 spouse or dependents, to the extent that the amount 15 paid for that health insurance or long-term care 16 insurance may be deducted under Section 213 of the 17 Internal Revenue Code of 1986, has not been deducted 18 on the federal income tax return of the taxpayer, 19 and does not exceed the taxable income attributable 20 to that taxpayer's income, self-employment income, 21 or Subchapter S corporation income; except that no 22 deduction shall be allowed under this item (V) if 23 the taxpayer is eligible to participate in any 24 health insurance or long-term care insurance plan of 25 an employer of the taxpayer or the taxpayer's 26 spouse. The amount of the health insurance and 27 long-term care insurance subtracted under this item 28 (V) shall be determined by multiplying total health 29 insurance and long-term care insurance premiums paid 30 by the taxpayer times a number that represents the 31 fractional percentage of eligible medical expenses 32 under Section 213 of the Internal Revenue Code of 33 1986 not actually deducted on the taxpayer's federal 34 income tax return; and SB111 Enrolled -7- LRB9100932PTpk 1 (W) For taxable years beginning on or after 2 January 1, 1998, all amounts included in the 3 taxpayer's federal gross income in the taxable year 4 from amounts converted from a regular IRA to a Roth 5 IRA. This paragraph is exempt from the provisions of 6 Section 250. 7 (b) Corporations. 8 (1) In general. In the case of a corporation, base 9 income means an amount equal to the taxpayer's taxable 10 income for the taxable year as modified by paragraph (2). 11 (2) Modifications. The taxable income referred to 12 in paragraph (1) shall be modified by adding thereto the 13 sum of the following amounts: 14 (A) An amount equal to all amounts paid or 15 accrued to the taxpayer as interest and all 16 distributions received from regulated investment 17 companies during the taxable year to the extent 18 excluded from gross income in the computation of 19 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 in the computation of taxable income 23 for the taxable year; 24 (C) In the case of a regulated investment 25 company, an amount equal to the excess of (i) the 26 net long-term capital gain for the taxable year, 27 over (ii) the amount of the capital gain dividends 28 designated as such in accordance with Section 29 852(b)(3)(C) of the Internal Revenue Code and any 30 amount designated under Section 852(b)(3)(D) of the 31 Internal Revenue Code, attributable to the taxable 32 year.(this amendatory Act of 1995 (Public Act 33 89-89) is declarative of existing law and is not a 34 new enactment);.SB111 Enrolled -8- LRB9100932PTpk 1 (D) The amount of any net operating loss 2 deduction taken in arriving at taxable income, other 3 than a net operating loss carried forward from a 4 taxable year ending prior to December 31, 1986;and5 (E) For taxable years in which a net operating 6 loss carryback or carryforward from a taxable year 7 ending prior to December 31, 1986 is an element of 8 taxable income under paragraph (1) of subsection (e) 9 or subparagraph (E) of paragraph (2) of subsection 10 (e), the amount by which addition modifications 11 other than those provided by this subparagraph (E) 12 exceeded subtraction modifications in such earlier 13 taxable year, with the following limitations applied 14 in the order that they are listed: 15 (i) the addition modification relating to 16 the net operating loss carried back or forward 17 to the taxable year from any taxable year 18 ending prior to December 31, 1986 shall be 19 reduced by the amount of addition modification 20 under this subparagraph (E) which related to 21 that net operating loss and which was taken 22 into account in calculating the base income of 23 an earlier taxable year, and 24 (ii) the addition modification relating 25 to the net operating loss carried back or 26 forward to the taxable year from any taxable 27 year ending prior to December 31, 1986 shall 28 not exceed the amount of such carryback or 29 carryforward; 30 For taxable years in which there is a net 31 operating loss carryback or carryforward from more 32 than one other taxable year ending prior to December 33 31, 1986, the addition modification provided in this 34 subparagraph (E) shall be the sum of the amounts SB111 Enrolled -9- LRB9100932PTpk 1 computed independently under the preceding 2 provisions of this subparagraph (E) for each such 3 taxable year;,and 4 (E-5) For taxable years ending after December 5 31, 1997, an amount equal to any eligible 6 remediation costs that the corporation deducted in 7 computing adjusted gross income and for which the 8 corporation claims a credit under subsection (l) of 9 Section 201; 10 and by deducting from the total so obtained the sum of 11 the following amounts: 12 (F) An amount equal to the amount of any tax 13 imposed by this Act which was refunded to the 14 taxpayer and included in such total for the taxable 15 year; 16 (G) An amount equal to any amount included in 17 such total under Section 78 of the Internal Revenue 18 Code; 19 (H) In the case of a regulated investment 20 company, an amount equal to the amount of exempt 21 interest dividends as defined in subsection (b) (5) 22 of Section 852 of the Internal Revenue Code, paid to 23 shareholders for the taxable year; 24 (I) With the exception of any amounts 25 subtracted under subparagraph (J), an amount equal 26 to the sum of all amounts disallowed as deductions 27 by Sections 171(a) (2), and 265(a)(2) and amounts 28 disallowed as interest expense by Section 291(a)(3) 29 of the Internal Revenue Code, as now or hereafter 30 amended, and all amounts of expenses allocable to 31 interest and disallowed as deductions by Section 32 265(a)(1) of the Internal Revenue Code, as now or 33 hereafter amended; 34 (J) An amount equal to all amounts included in SB111 Enrolled -10- LRB9100932PTpk 1 such total which are exempt from taxation by this 2 State either by reason of its statutes or 3 Constitution or by reason of the Constitution, 4 treaties or statutes of the United States; provided 5 that, in the case of any statute of this State that 6 exempts income derived from bonds or other 7 obligations from the tax imposed under this Act, the 8 amount exempted shall be the interest net of bond 9 premium amortization; 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 and conducts substantially all 15 of its operations in an Enterprise Zone or zones; 16 (L) An amount equal to those dividends 17 included in such total that were paid by a 18 corporation that conducts business operations in a 19 federally designated Foreign Trade Zone or Sub-Zone 20 and that is designated a High Impact Business 21 located in Illinois; provided that dividends 22 eligible for the deduction provided in subparagraph 23 (K) of paragraph 2 of this subsection shall not be 24 eligible for the deduction provided under this 25 subparagraph (L); 26 (M) For any taxpayer that is a financial 27 organization within the meaning of Section 304(c) of 28 this Act, an amount included in such total as 29 interest income from a loan or loans made by such 30 taxpayer to a borrower, to the extent that such a 31 loan is secured by property which is eligible for 32 the Enterprise Zone Investment Credit. To determine 33 the portion of a loan or loans that is secured by 34 property eligible for a Section 201(h) investment SB111 Enrolled -11- LRB9100932PTpk 1 credit to the borrower, the entire principal amount 2 of the loan or loans between the taxpayer and the 3 borrower should be divided into the basis of the 4 Section 201(h) investment credit property which 5 secures the loan or loans, using for this purpose 6 the original basis of such property on the date that 7 it was placed in service in the Enterprise Zone. 8 The subtraction modification available to taxpayer 9 in any year under this subsection shall be that 10 portion of the total interest paid by the borrower 11 with respect to such loan attributable to the 12 eligible property as calculated under the previous 13 sentence; 14 (M-1) For any taxpayer that is a financial 15 organization within the meaning of Section 304(c) of 16 this Act, an amount included in such total as 17 interest income from a loan or loans made by such 18 taxpayer to a borrower, to the extent that such a 19 loan is secured by property which is eligible for 20 the High Impact Business Investment Credit. To 21 determine the portion of a loan or loans that is 22 secured by property eligible for a Section 201(i) 23 investment credit to the borrower, the entire 24 principal amount of the loan or loans between the 25 taxpayer and the borrower should be divided into the 26 basis of the Section 201(i) investment credit 27 property which secures the loan or loans, using for 28 this purpose the original basis of such property on 29 the date that it was placed in service in a 30 federally designated Foreign Trade Zone or Sub-Zone 31 located in Illinois. No taxpayer that is eligible 32 for the deduction provided in subparagraph (M) of 33 paragraph (2) of this subsection shall be eligible 34 for the deduction provided under this subparagraph SB111 Enrolled -12- LRB9100932PTpk 1 (M-1). The subtraction modification available to 2 taxpayers in any year under this subsection shall be 3 that portion of the total interest paid by the 4 borrower with respect to such loan attributable to 5 the eligible property as calculated under the 6 previous sentence; 7 (N) Two times any contribution made during the 8 taxable year to a designated zone organization to 9 the extent that the contribution (i) qualifies as a 10 charitable contribution under subsection (c) of 11 Section 170 of the Internal Revenue Code and (ii) 12 must, by its terms, be used for a project approved 13 by the Department of Commerce and Community Affairs 14 under Section 11 of the Illinois Enterprise Zone 15 Act; 16 (O) An amount equal to: (i) 85% for taxable 17 years ending on or before December 31, 1992, or, a 18 percentage equal to the percentage allowable under 19 Section 243(a)(1) of the Internal Revenue Code of 20 1986 for taxable years ending after December 31, 21 1992, of the amount by which dividends included in 22 taxable income and received from a corporation that 23 is not created or organized under the laws of the 24 United States or any state or political subdivision 25 thereof, including, for taxable years ending on or 26 after December 31, 1988, dividends received or 27 deemed received or paid or deemed paid under 28 Sections 951 through 964 of the Internal Revenue 29 Code, exceed the amount of the modification provided 30 under subparagraph (G) of paragraph (2) of this 31 subsection (b) which is related to such dividends; 32 plus (ii) 100% of the amount by which dividends, 33 included in taxable income and received, including, 34 for taxable years ending on or after December 31, SB111 Enrolled -13- LRB9100932PTpk 1 1988, dividends received or deemed received or paid 2 or deemed paid under Sections 951 through 964 of the 3 Internal Revenue Code, from any such corporation 4 specified in clause (i) that would but for the 5 provisions of Section 1504 (b) (3) of the Internal 6 Revenue Code be treated as a member of the 7 affiliated group which includes the dividend 8 recipient, exceed the amount of the modification 9 provided under subparagraph (G) of paragraph (2) of 10 this subsection (b) which is related to such 11 dividends; 12 (P) An amount equal to any contribution made 13 to a job training project established pursuant to 14 the Tax Increment Allocation Redevelopment Act; and 15 (Q) An amount equal to the amount of the 16 deduction used to compute the federal income tax 17 credit for restoration of substantial amounts held 18 under claim of right for the taxable year pursuant 19 to Section 1341 of the Internal Revenue Code of 20 1986. 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: SB111 Enrolled -14- LRB9100932PTpk 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 SB111 Enrolled -15- LRB9100932PTpk 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 SB111 Enrolled -16- LRB9100932PTpk 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 Sections 171(a) (2) and 265(a)(2) of the Internal 33 Revenue Code, as now or hereafter amended, and all 34 amounts of expenses allocable to interest and SB111 Enrolled -17- LRB9100932PTpk 1 disallowed as deductions by Section 265(1) of the 2 Internal Revenue Code of 1954, as now or hereafter 3 amended; 4 (M) An amount equal to those dividends 5 included in such total which were paid by a 6 corporation which conducts business operations in an 7 Enterprise Zone or zones created under the Illinois 8 Enterprise Zone Act and conducts substantially all 9 of its operations in an Enterprise Zone or Zones; 10 (N) An amount equal to any contribution made 11 to a job training project established pursuant to 12 the Tax Increment Allocation Redevelopment Act; 13 (O) An amount equal to those dividends 14 included in such total that were paid by a 15 corporation that conducts business operations in a 16 federally designated Foreign Trade Zone or Sub-Zone 17 and that is designated a High Impact Business 18 located in Illinois; provided that dividends 19 eligible for the deduction provided in subparagraph 20 (M) of paragraph (2) of this subsection shall not be 21 eligible for the deduction provided under this 22 subparagraph (O); and 23 (P) An amount equal to the amount of the 24 deduction used to compute the federal income tax 25 credit for restoration of substantial amounts held 26 under claim of right for the taxable year pursuant 27 to Section 1341 of the Internal Revenue Code of 28 1986. 29 (3) Limitation. The amount of any modification 30 otherwise required under this subsection shall, under 31 regulations prescribed by the Department, be adjusted by 32 any amounts included therein which were properly paid, 33 credited, or required to be distributed, or permanently 34 set aside for charitable purposes pursuant to Internal SB111 Enrolled -18- LRB9100932PTpk 1 Revenue Code Section 642(c) during the taxable year. 2 (d) Partnerships. 3 (1) In general. In the case of a partnership, base 4 income means an amount equal to the taxpayer's taxable 5 income for the taxable year as modified by paragraph (2). 6 (2) Modifications. The taxable income referred to 7 in paragraph (1) shall be modified by adding thereto the 8 sum of the following amounts: 9 (A) An amount equal to all amounts paid or 10 accrued to the taxpayer as interest or dividends 11 during the taxable year to the extent excluded from 12 gross income in the computation of taxable income; 13 (B) An amount equal to the amount of tax 14 imposed by this Act to the extent deducted from 15 gross income for the taxable year;and16 (C) The amount of deductions allowed to the 17 partnership pursuant to Section 707 (c) of the 18 Internal Revenue Code in calculating its taxable 19 income; and 20 (D) An amount equal to the amount of the 21 capital gain deduction allowable under the Internal 22 Revenue Code, to the extent deducted from gross 23 income in the computation of taxable income; 24 and by deducting from the total so obtained the following 25 amounts: 26 (E) The valuation limitation amount; 27 (F) An amount equal to the amount of any tax 28 imposed by this Act which was refunded to the 29 taxpayer and included in such total for the taxable 30 year; 31 (G) An amount equal to all amounts included in 32 taxable income as modified by subparagraphs (A), 33 (B), (C) and (D) which are exempt from taxation by 34 this State either by reason of its statutes or SB111 Enrolled -19- LRB9100932PTpk 1 Constitution or by reason of the Constitution, 2 treaties or statutes of the United States; provided 3 that, in the case of any statute of this State that 4 exempts income derived from bonds or other 5 obligations from the tax imposed under this Act, the 6 amount exempted shall be the interest net of bond 7 premium amortization; 8 (H) Any income of the partnership which 9 constitutes personal service income as defined in 10 Section 1348 (b) (1) of the Internal Revenue Code 11 (as in effect December 31, 1981) or a reasonable 12 allowance for compensation paid or accrued for 13 services rendered by partners to the partnership, 14 whichever is greater; 15 (I) An amount equal to all amounts of income 16 distributable to an entity subject to the Personal 17 Property Tax Replacement Income Tax imposed by 18 subsections (c) and (d) of Section 201 of this Act 19 including amounts distributable to organizations 20 exempt from federal income tax by reason of Section 21 501(a) of the Internal Revenue Code; 22 (J) With the exception of any amounts 23 subtracted under subparagraph (G), an amount equal 24 to the sum of all amounts disallowed as deductions 25 by Sections 171(a) (2), and 265(2) of the Internal 26 Revenue Code of 1954, as now or hereafter amended, 27 and all amounts of expenses allocable to interest 28 and disallowed as deductions by Section 265(1) of 29 the Internal Revenue Code, as now or hereafter 30 amended; 31 (K) An amount equal to those dividends 32 included in such total which were paid by a 33 corporation which conducts business operations in an 34 Enterprise Zone or zones created under the Illinois SB111 Enrolled -20- LRB9100932PTpk 1 Enterprise Zone Act, enacted by the 82nd General 2 Assembly, and which does not conduct such operations 3 other than in an Enterprise Zone or Zones; 4 (L) An amount equal to any contribution made 5 to a job training project established pursuant to 6 the Real Property Tax Increment Allocation 7 Redevelopment Act; 8 (M) An amount equal to those dividends 9 included in such total that were paid by a 10 corporation that conducts business operations in a 11 federally designated Foreign Trade Zone or Sub-Zone 12 and that is designated a High Impact Business 13 located in Illinois; provided that dividends 14 eligible for the deduction provided in subparagraph 15 (K) of paragraph (2) of this subsection shall not be 16 eligible for the deduction provided under this 17 subparagraph (M); and 18 (N) An amount equal to the amount of the 19 deduction used to compute the federal income tax 20 credit for restoration of substantial amounts held 21 under claim of right for the taxable year pursuant 22 to Section 1341 of the Internal Revenue Code of 23 1986. 24 (e) Gross income; adjusted gross income; taxable income. 25 (1) In general. Subject to the provisions of 26 paragraph (2) and subsection (b) (3), for purposes of 27 this Section and Section 803(e), a taxpayer's gross 28 income, adjusted gross income, or taxable income for the 29 taxable year shall mean the amount of gross income, 30 adjusted gross income or taxable income properly 31 reportable for federal income tax purposes for the 32 taxable year under the provisions of the Internal Revenue 33 Code. Taxable income may be less than zero. However, for 34 taxable years ending on or after December 31, 1986, net SB111 Enrolled -21- LRB9100932PTpk 1 operating loss carryforwards from taxable years ending 2 prior to December 31, 1986, may not exceed the sum of 3 federal taxable income for the taxable year before net 4 operating loss deduction, plus the excess of addition 5 modifications over subtraction modifications for the 6 taxable year. For taxable years ending prior to December 7 31, 1986, taxable income may never be an amount in excess 8 of the net operating loss for the taxable year as defined 9 in subsections (c) and (d) of Section 172 of the Internal 10 Revenue Code, provided that when taxable income of a 11 corporation (other than a Subchapter S corporation), 12 trust, or estate is less than zero and addition 13 modifications, other than those provided by subparagraph 14 (E) of paragraph (2) of subsection (b) for corporations 15 or subparagraph (E) of paragraph (2) of subsection (c) 16 for trusts and estates, exceed subtraction modifications, 17 an addition modification must be made under those 18 subparagraphs for any other taxable year to which the 19 taxable income less than zero (net operating loss) is 20 applied under Section 172 of the Internal Revenue Code or 21 under subparagraph (E) of paragraph (2) of this 22 subsection (e) applied in conjunction with Section 172 of 23 the Internal Revenue Code. 24 (2) Special rule. For purposes of paragraph (1) of 25 this subsection, the taxable income properly reportable 26 for federal income tax purposes shall mean: 27 (A) Certain life insurance companies. In the 28 case of a life insurance company subject to the tax 29 imposed by Section 801 of the Internal Revenue Code, 30 life insurance company taxable income, plus the 31 amount of distribution from pre-1984 policyholder 32 surplus accounts as calculated under Section 815a of 33 the Internal Revenue Code; 34 (B) Certain other insurance companies. In the SB111 Enrolled -22- LRB9100932PTpk 1 case of mutual insurance companies subject to the 2 tax imposed by Section 831 of the Internal Revenue 3 Code, insurance company taxable income; 4 (C) Regulated investment companies. In the 5 case of a regulated investment company subject to 6 the tax imposed by Section 852 of the Internal 7 Revenue Code, investment company taxable income; 8 (D) Real estate investment trusts. In the 9 case of a real estate investment trust subject to 10 the tax imposed by Section 857 of the Internal 11 Revenue Code, real estate investment trust taxable 12 income; 13 (E) Consolidated corporations. In the case of 14 a corporation which is a member of an affiliated 15 group of corporations filing a consolidated income 16 tax return for the taxable year for federal income 17 tax purposes, taxable income determined as if such 18 corporation had filed a separate return for federal 19 income tax purposes for the taxable year and each 20 preceding taxable year for which it was a member of 21 an affiliated group. For purposes of this 22 subparagraph, the taxpayer's separate taxable income 23 shall be determined as if the election provided by 24 Section 243(b) (2) of the Internal Revenue Code had 25 been in effect for all such years; 26 (F) Cooperatives. In the case of a 27 cooperative corporation or association, the taxable 28 income of such organization determined in accordance 29 with the provisions of Section 1381 through 1388 of 30 the Internal Revenue Code; 31 (G) Subchapter S corporations. In the case 32 of: (i) a Subchapter S corporation for which there 33 is in effect an election for the taxable year under 34 Section 1362 of the Internal Revenue Code, the SB111 Enrolled -23- LRB9100932PTpk 1 taxable income of such corporation determined in 2 accordance with Section 1363(b) of the Internal 3 Revenue Code, except that taxable income shall take 4 into account those items which are required by 5 Section 1363(b)(1) of the Internal Revenue Code to 6 be separately stated; and (ii) a Subchapter S 7 corporation for which there is in effect a federal 8 election to opt out of the provisions of the 9 Subchapter S Revision Act of 1982 and have applied 10 instead the prior federal Subchapter S rules as in 11 effect on July 1, 1982, the taxable income of such 12 corporation determined in accordance with the 13 federal Subchapter S rules as in effect on July 1, 14 1982; and 15 (H) Partnerships. In the case of a 16 partnership, taxable income determined in accordance 17 with Section 703 of the Internal Revenue Code, 18 except that taxable income shall take into account 19 those items which are required by Section 703(a)(1) 20 to be separately stated but which would be taken 21 into account by an individual in calculating his 22 taxable income. 23 (f) Valuation limitation amount. 24 (1) In general. The valuation limitation amount 25 referred to in subsections (a) (2) (G), (c) (2) (I) and 26 (d)(2) (E) is an amount equal to: 27 (A) The sum of the pre-August 1, 1969 28 appreciation amounts (to the extent consisting of 29 gain reportable under the provisions of Section 1245 30 or 1250 of the Internal Revenue Code) for all 31 property in respect of which such gain was reported 32 for the taxable year; plus 33 (B) The lesser of (i) the sum of the 34 pre-August 1, 1969 appreciation amounts (to the SB111 Enrolled -24- LRB9100932PTpk 1 extent consisting of capital gain) for all property 2 in respect of which such gain was reported for 3 federal income tax purposes for the taxable year, or 4 (ii) the net capital gain for the taxable year, 5 reduced in either case by any amount of such gain 6 included in the amount determined under subsection 7 (a) (2) (F) or (c) (2) (H). 8 (2) Pre-August 1, 1969 appreciation amount. 9 (A) If the fair market value of property 10 referred to in paragraph (1) was readily 11 ascertainable on August 1, 1969, the pre-August 1, 12 1969 appreciation amount for such property is the 13 lesser of (i) the excess of such fair market value 14 over the taxpayer's basis (for determining gain) for 15 such property on that date (determined under the 16 Internal Revenue Code as in effect on that date), or 17 (ii) the total gain realized and reportable for 18 federal income tax purposes in respect of the sale, 19 exchange or other disposition of such property. 20 (B) If the fair market value of property 21 referred to in paragraph (1) was not readily 22 ascertainable on August 1, 1969, the pre-August 1, 23 1969 appreciation amount for such property is that 24 amount which bears the same ratio to the total gain 25 reported in respect of the property for federal 26 income tax purposes for the taxable year, as the 27 number of full calendar months in that part of the 28 taxpayer's holding period for the property ending 29 July 31, 1969 bears to the number of full calendar 30 months in the taxpayer's entire holding period for 31 the property. 32 (C) The Department shall prescribe such 33 regulations as may be necessary to carry out the 34 purposes of this paragraph. SB111 Enrolled -25- LRB9100932PTpk 1 (g) Double deductions. Unless specifically provided 2 otherwise, nothing in this Section shall permit the same item 3 to be deducted more than once. 4 (h) Legislative intention. Except as expressly provided 5 by this Section there shall be no modifications or 6 limitations on the amounts of income, gain, loss or deduction 7 taken into account in determining gross income, adjusted 8 gross income or taxable income for federal income tax 9 purposes for the taxable year, or in the amount of such items 10 entering into the computation of base income and net income 11 under this Act for such taxable year, whether in respect of 12 property values as of August 1, 1969 or otherwise. 13 (Source: P.A. 89-89, eff. 6-30-95; 89-235, eff. 8-4-95; 14 89-418, eff. 11-15-95; 89-460, eff. 5-24-96; 89-626, eff. 15 8-9-96; 90-491, eff. 1-1-98; 90-717, eff. 8-7-98; 90-770, 16 eff. 8-14-98; revised 9-21-98.) 17 Section 99. Effective date. This Act takes effect upon 18 becoming law.