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91_SB0214eng SB214 Engrossed LRB9101201PTpk 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 SB214 Engrossed -2- LRB9101201PTpk 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income; 14 (D-5) An amount, to the extent not included in 15 adjusted gross income, equal to the amount of money 16 withdrawn by the taxpayer in the taxable year from a 17 medical care savings account and the interest earned 18 on the account in the taxable year of a withdrawal 19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 SB214 Engrossed -3- LRB9101201PTpk 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; SB214 Engrossed -4- LRB9101201PTpk 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; SB214 Engrossed -5- LRB9101201PTpk 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 SB214 Engrossed -6- LRB9101201PTpk 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, 1999, an amount 9 equal to the amount paid by a taxpayer who is a 10 self-employed taxpayer, a partner of a partnership, 11 or a shareholder in a Subchapter S corporation for 12 health insurance or long-term care insurance for 13 that taxpayer or that taxpayer's spouse or 14 dependents, to the extent that the amount paid for 15 that health insurance or long-term care insurance 16 may be deducted under Section 213 of the Internal 17 Revenue Code of 1986, has not been deducted on the 18 federal income tax return of the taxpayer, and does 19 not exceed the taxable income attributable to that 20 taxpayer's income, self-employment income, or 21 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 SB214 Engrossed -7- LRB9101201PTpk 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, except that the amount of a 20 taxpayer's adjustment under Section 832(b)(5)(B)(i) 21 of the Internal Revenue Code shall not be treated as 22 an amount of interest excluded from gross income in 23 the computation of taxable income; the changes made 24 by this amendatory Act of the 91st General Assembly 25 are exempt from the provisions of Section 250; 26 (B) An amount equal to the amount of tax 27 imposed by this Act to the extent deducted from 28 gross income in the computation of taxable income 29 for the taxable year; 30 (C) In the case of a regulated investment 31 company, an amount equal to the excess of (i) the 32 net long-term capital gain for the taxable year, 33 over (ii) the amount of the capital gain dividends 34 designated as such in accordance with Section SB214 Engrossed -8- LRB9101201PTpk 1 852(b)(3)(C) of the Internal Revenue Code and any 2 amount designated under Section 852(b)(3)(D) of the 3 Internal Revenue Code, attributable to the taxable 4 year.(this amendatory Act of 1995 (Public Act 5 89-89) is declarative of existing law and is not a 6 new enactment);.7 (D) The amount of any net operating loss 8 deduction taken in arriving at taxable income, other 9 than a net operating loss carried forward from a 10 taxable year ending prior to December 31, 1986;and11 (E) For taxable years in which a net operating 12 loss carryback or carryforward from a taxable year 13 ending prior to December 31, 1986 is an element of 14 taxable income under paragraph (1) of subsection (e) 15 or subparagraph (E) of paragraph (2) of subsection 16 (e), the amount by which addition modifications 17 other than those provided by this subparagraph (E) 18 exceeded subtraction modifications in such earlier 19 taxable year, with the following limitations applied 20 in the order that they are listed: 21 (i) the addition modification relating to 22 the net operating loss carried back or forward 23 to the taxable year from any taxable year 24 ending prior to December 31, 1986 shall be 25 reduced by the amount of addition modification 26 under this subparagraph (E) which related to 27 that net operating loss and which was taken 28 into account in calculating the base income of 29 an earlier taxable year, and 30 (ii) the addition modification relating 31 to the net operating loss carried back or 32 forward to the taxable year from any taxable 33 year ending prior to December 31, 1986 shall 34 not exceed the amount of such carryback or SB214 Engrossed -9- LRB9101201PTpk 1 carryforward; 2 For taxable years in which there is a net 3 operating loss carryback or carryforward from more 4 than one other taxable year ending prior to December 5 31, 1986, the addition modification provided in this 6 subparagraph (E) shall be the sum of the amounts 7 computed independently under the preceding 8 provisions of this subparagraph (E) for each such 9 taxable year;,and 10 (E-5) For taxable years ending after December 11 31, 1997, an amount equal to any eligible 12 remediation costs that the corporation deducted in 13 computing adjusted gross income and for which the 14 corporation claims a credit under subsection (l) of 15 Section 201; 16 and by deducting from the total so obtained the sum of 17 the following amounts: 18 (F) An amount equal to the amount of any tax 19 imposed by this Act which was refunded to the 20 taxpayer and included in such total for the taxable 21 year; 22 (G) An amount equal to any amount included in 23 such total under Section 78 of the Internal Revenue 24 Code; 25 (H) In the case of a regulated investment 26 company, an amount equal to the amount of exempt 27 interest dividends as defined in subsection (b) (5) 28 of Section 852 of the Internal Revenue Code, paid to 29 shareholders for the taxable year; 30 (I) With the exception of any amounts 31 subtracted under subparagraph (J), an amount equal 32 to the sum of all amounts disallowed as deductions 33 by Sections 171(a) (2), and 265(a)(2) and amounts 34 disallowed as interest expense by Section 291(a)(3) SB214 Engrossed -10- LRB9101201PTpk 1 of the Internal Revenue Code, as now or hereafter 2 amended, and all amounts of expenses allocable to 3 interest and disallowed as deductions by Section 4 265(a)(1) of the Internal Revenue Code, as now or 5 hereafter amended; 6 (J) An amount equal to all amounts included in 7 such total which are exempt from taxation by this 8 State either by reason of its statutes or 9 Constitution or by reason of the Constitution, 10 treaties or statutes of the United States; provided 11 that, in the case of any statute of this State that 12 exempts income derived from bonds or other 13 obligations from the tax imposed under this Act, the 14 amount exempted shall be the interest net of bond 15 premium amortization; 16 (K) An amount equal to those dividends 17 included in such total which were paid by a 18 corporation which conducts business operations in an 19 Enterprise Zone or zones created under the Illinois 20 Enterprise Zone Act and conducts substantially all 21 of its operations in an Enterprise Zone or zones; 22 (L) An amount equal to those dividends 23 included in such total that were paid by a 24 corporation that conducts business operations in a 25 federally designated Foreign Trade Zone or Sub-Zone 26 and that is designated a High Impact Business 27 located in Illinois; provided that dividends 28 eligible for the deduction provided in subparagraph 29 (K) of paragraph 2 of this subsection shall not be 30 eligible for the deduction provided under this 31 subparagraph (L); 32 (M) For any taxpayer that is a financial 33 organization within the meaning of Section 304(c) of 34 this Act, an amount included in such total as SB214 Engrossed -11- LRB9101201PTpk 1 interest income from a loan or loans made by such 2 taxpayer to a borrower, to the extent that such a 3 loan is secured by property which is eligible for 4 the Enterprise Zone Investment Credit. To determine 5 the portion of a loan or loans that is secured by 6 property eligible for a Section 201(h) investment 7 credit to the borrower, the entire principal amount 8 of the loan or loans between the taxpayer and the 9 borrower should be divided into the basis of the 10 Section 201(h) investment credit property which 11 secures the loan or loans, using for this purpose 12 the original basis of such property on the date that 13 it was placed in service in the Enterprise Zone. 14 The subtraction modification available to taxpayer 15 in any year under this subsection shall be that 16 portion of the total interest paid by the borrower 17 with respect to such loan attributable to the 18 eligible property as calculated under the previous 19 sentence; 20 (M-1) For any taxpayer that is a financial 21 organization within the meaning of Section 304(c) of 22 this Act, an amount included in such total as 23 interest income from a loan or loans made by such 24 taxpayer to a borrower, to the extent that such a 25 loan is secured by property which is eligible for 26 the High Impact Business Investment Credit. To 27 determine the portion of a loan or loans that is 28 secured by property eligible for a Section 201(i) 29 investment credit to the borrower, the entire 30 principal amount of the loan or loans between the 31 taxpayer and the borrower should be divided into the 32 basis of the Section 201(i) investment credit 33 property which secures the loan or loans, using for 34 this purpose the original basis of such property on SB214 Engrossed -12- LRB9101201PTpk 1 the date that it was placed in service in a 2 federally designated Foreign Trade Zone or Sub-Zone 3 located in Illinois. No taxpayer that is eligible 4 for the deduction provided in subparagraph (M) of 5 paragraph (2) of this subsection shall be eligible 6 for the deduction provided under this subparagraph 7 (M-1). The subtraction modification available to 8 taxpayers in any year under this subsection shall be 9 that portion of the total interest paid by the 10 borrower with respect to such loan attributable to 11 the eligible property as calculated under the 12 previous sentence; 13 (N) Two times any contribution made during the 14 taxable year to a designated zone organization to 15 the extent that the contribution (i) qualifies as a 16 charitable contribution under subsection (c) of 17 Section 170 of the Internal Revenue Code and (ii) 18 must, by its terms, be used for a project approved 19 by the Department of Commerce and Community Affairs 20 under Section 11 of the Illinois Enterprise Zone 21 Act; 22 (O) An amount equal to: (i) 85% for taxable 23 years ending on or before December 31, 1992, or, a 24 percentage equal to the percentage allowable under 25 Section 243(a)(1) of the Internal Revenue Code of 26 1986 for taxable years ending after December 31, 27 1992, of the amount by which dividends included in 28 taxable income and received from a corporation that 29 is not created or organized under the laws of the 30 United States or any state or political subdivision 31 thereof, including, for taxable years ending on or 32 after December 31, 1988, dividends received or 33 deemed received or paid or deemed paid under 34 Sections 951 through 964 of the Internal Revenue SB214 Engrossed -13- LRB9101201PTpk 1 Code, exceed the amount of the modification provided 2 under subparagraph (G) of paragraph (2) of this 3 subsection (b) which is related to such dividends; 4 plus (ii) 100% of the amount by which dividends, 5 included in taxable income and received, including, 6 for taxable years ending on or after December 31, 7 1988, dividends received or deemed received or paid 8 or deemed paid under Sections 951 through 964 of the 9 Internal Revenue Code, from any such corporation 10 specified in clause (i) that would but for the 11 provisions of Section 1504 (b) (3) of the Internal 12 Revenue Code be treated as a member of the 13 affiliated group which includes the dividend 14 recipient, exceed the amount of the modification 15 provided under subparagraph (G) of paragraph (2) of 16 this subsection (b) which is related to such 17 dividends; 18 (P) An amount equal to any contribution made 19 to a job training project established pursuant to 20 the Tax Increment Allocation Redevelopment Act; and 21 (Q) An amount equal to the amount of the 22 deduction used to compute the federal income tax 23 credit for restoration of substantial amounts held 24 under claim of right for the taxable year pursuant 25 to Section 1341 of the Internal Revenue Code of 26 1986. 27 (3) Special rule. For purposes of paragraph (2) 28 (A), "gross income" in the case of a life insurance 29 company, for tax years ending on and after December 31, 30 1994, shall mean the gross investment income for the 31 taxable year. 32 (c) Trusts and estates. 33 (1) In general. In the case of a trust or estate, 34 base income means an amount equal to the taxpayer's SB214 Engrossed -14- LRB9101201PTpk 1 taxable income for the taxable year as modified by 2 paragraph (2). 3 (2) Modifications. Subject to the provisions of 4 paragraph (3), the taxable income referred to in 5 paragraph (1) shall be modified by adding thereto the sum 6 of the following amounts: 7 (A) An amount equal to all amounts paid or 8 accrued to the taxpayer as interest or dividends 9 during the taxable year to the extent excluded from 10 gross income in the computation of taxable income; 11 (B) In the case of (i) an estate, $600; (ii) a 12 trust which, under its governing instrument, is 13 required to distribute all of its income currently, 14 $300; and (iii) any other trust, $100, but in each 15 such case, only to the extent such amount was 16 deducted in the computation of taxable income; 17 (C) An amount equal to the amount of tax 18 imposed by this Act to the extent deducted from 19 gross income in the computation of taxable income 20 for the taxable year; 21 (D) The amount of any net operating loss 22 deduction taken in arriving at taxable income, other 23 than a net operating loss carried forward from a 24 taxable year ending prior to December 31, 1986; 25 (E) For taxable years in which a net operating 26 loss carryback or carryforward from a taxable year 27 ending prior to December 31, 1986 is an element of 28 taxable income under paragraph (1) of subsection (e) 29 or subparagraph (E) of paragraph (2) of subsection 30 (e), the amount by which addition modifications 31 other than those provided by this subparagraph (E) 32 exceeded subtraction modifications in such taxable 33 year, with the following limitations applied in the 34 order that they are listed: SB214 Engrossed -15- LRB9101201PTpk 1 (i) the addition modification relating to 2 the net operating loss carried back or forward 3 to the taxable year from any taxable year 4 ending prior to December 31, 1986 shall be 5 reduced by the amount of addition modification 6 under this subparagraph (E) which related to 7 that net operating loss and which was taken 8 into account in calculating the base income of 9 an earlier taxable year, and 10 (ii) the addition modification relating 11 to the net operating loss carried back or 12 forward to the taxable year from any taxable 13 year ending prior to December 31, 1986 shall 14 not exceed the amount of such carryback or 15 carryforward; 16 For taxable years in which there is a net 17 operating loss carryback or carryforward from more 18 than one other taxable year ending prior to December 19 31, 1986, the addition modification provided in this 20 subparagraph (E) shall be the sum of the amounts 21 computed independently under the preceding 22 provisions of this subparagraph (E) for each such 23 taxable year; 24 (F) For taxable years ending on or after 25 January 1, 1989, an amount equal to the tax deducted 26 pursuant to Section 164 of the Internal Revenue Code 27 if the trust or estate is claiming the same tax for 28 purposes of the Illinois foreign tax credit under 29 Section 601 of this Act; 30 (G) An amount equal to the amount of the 31 capital gain deduction allowable under the Internal 32 Revenue Code, to the extent deducted from gross 33 income in the computation of taxable income; and 34 (G-5) For taxable years ending after December SB214 Engrossed -16- LRB9101201PTpk 1 31, 1997, an amount equal to any eligible 2 remediation costs that the trust or estate deducted 3 in computing adjusted gross income and for which the 4 trust or estate claims a credit under subsection (l) 5 of Section 201; 6 and by deducting from the total so obtained the sum of 7 the following amounts: 8 (H) 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 such 12 total as distributions under the provisions of any 13 retirement or disability plan for employees of any 14 governmental agency or unit, or retirement payments 15 to retired partners, which payments are excluded in 16 computing net earnings from self employment by 17 Section 1402 of the Internal Revenue Code and 18 regulations adopted pursuant thereto; 19 (I) The valuation limitation amount; 20 (J) 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 (K) An amount equal to all amounts included in 25 taxable income as modified by subparagraphs (A), 26 (B), (C), (D), (E), (F) and (G) which are exempt 27 from taxation by this State either by reason of its 28 statutes or Constitution or by reason of the 29 Constitution, treaties or statutes of the United 30 States; provided that, in the case of any statute of 31 this State that exempts income derived from bonds or 32 other obligations from the tax imposed under this 33 Act, the amount exempted shall be the interest net 34 of bond premium amortization; SB214 Engrossed -17- LRB9101201PTpk 1 (L) With the exception of any amounts 2 subtracted under subparagraph (K), an amount equal 3 to the sum of all amounts disallowed as deductions 4 by Sections 171(a) (2) and 265(a)(2) of the Internal 5 Revenue Code, as now or hereafter amended, and all 6 amounts of expenses allocable to interest and 7 disallowed as deductions by Section 265(1) of the 8 Internal Revenue Code of 1954, as now or hereafter 9 amended; 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); and 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. SB214 Engrossed -18- LRB9101201PTpk 1 (3) Limitation. The amount of any modification 2 otherwise required under this subsection shall, under 3 regulations prescribed by the Department, be adjusted by 4 any amounts included therein which were properly paid, 5 credited, or required to be distributed, or permanently 6 set aside for charitable purposes pursuant to Internal 7 Revenue Code Section 642(c) during the taxable year. 8 (d) Partnerships. 9 (1) In general. In the case of a partnership, base 10 income means an amount equal to the taxpayer's taxable 11 income for the taxable year as modified by paragraph (2). 12 (2) Modifications. The taxable income referred to 13 in paragraph (1) shall be modified by adding thereto the 14 sum of the following amounts: 15 (A) An amount equal to all amounts paid or 16 accrued to the taxpayer as interest or dividends 17 during the taxable year to the extent excluded from 18 gross income in the computation of taxable income; 19 (B) An amount equal to the amount of tax 20 imposed by this Act to the extent deducted from 21 gross income for the taxable year;and22 (C) The amount of deductions allowed to the 23 partnership pursuant to Section 707 (c) of the 24 Internal Revenue Code in calculating its taxable 25 income; and 26 (D) An amount equal to the amount of the 27 capital gain deduction allowable under the Internal 28 Revenue Code, to the extent deducted from gross 29 income in the computation of taxable income; 30 and by deducting from the total so obtained the following 31 amounts: 32 (E) The valuation limitation amount; 33 (F) An amount equal to the amount of any tax 34 imposed by this Act which was refunded to the SB214 Engrossed -19- LRB9101201PTpk 1 taxpayer and included in such total for the taxable 2 year; 3 (G) An amount equal to all amounts included in 4 taxable income as modified by subparagraphs (A), 5 (B), (C) and (D) which are exempt from taxation by 6 this State either by reason of its statutes or 7 Constitution or by reason of the Constitution, 8 treaties or statutes of the United States; provided 9 that, in the case of any statute of this State that 10 exempts income derived from bonds or other 11 obligations from the tax imposed under this Act, the 12 amount exempted shall be the interest net of bond 13 premium amortization; 14 (H) Any income of the partnership which 15 constitutes personal service income as defined in 16 Section 1348 (b) (1) of the Internal Revenue Code 17 (as in effect December 31, 1981) or a reasonable 18 allowance for compensation paid or accrued for 19 services rendered by partners to the partnership, 20 whichever is greater; 21 (I) An amount equal to all amounts of income 22 distributable to an entity subject to the Personal 23 Property Tax Replacement Income Tax imposed by 24 subsections (c) and (d) of Section 201 of this Act 25 including amounts distributable to organizations 26 exempt from federal income tax by reason of Section 27 501(a) of the Internal Revenue Code; 28 (J) With the exception of any amounts 29 subtracted under subparagraph (G), an amount equal 30 to the sum of all amounts disallowed as deductions 31 by Sections 171(a) (2), and 265(2) of the Internal 32 Revenue Code of 1954, as now or hereafter amended, 33 and all amounts of expenses allocable to interest 34 and disallowed as deductions by Section 265(1) of SB214 Engrossed -20- LRB9101201PTpk 1 the Internal Revenue Code, as now or hereafter 2 amended; 3 (K) An amount equal to those dividends 4 included in such total which were paid by a 5 corporation which conducts business operations in an 6 Enterprise Zone or zones created under the Illinois 7 Enterprise Zone Act, enacted by the 82nd General 8 Assembly, and which does not conduct such operations 9 other than in an Enterprise Zone or Zones; 10 (L) An amount equal to any contribution made 11 to a job training project established pursuant to 12 the Real Property Tax Increment Allocation 13 Redevelopment Act; 14 (M) An amount equal to those dividends 15 included in such total that were paid by a 16 corporation that conducts business operations in a 17 federally designated Foreign Trade Zone or Sub-Zone 18 and that is designated a High Impact Business 19 located in Illinois; provided that dividends 20 eligible for the deduction provided in subparagraph 21 (K) of paragraph (2) of this subsection shall not be 22 eligible for the deduction provided under this 23 subparagraph (M); and 24 (N) An amount equal to the amount of the 25 deduction used to compute the federal income tax 26 credit for restoration of substantial amounts held 27 under claim of right for the taxable year pursuant 28 to Section 1341 of the Internal Revenue Code of 29 1986. 30 (e) Gross income; adjusted gross income; taxable income. 31 (1) In general. Subject to the provisions of 32 paragraph (2) and subsection (b) (3), for purposes of 33 this Section and Section 803(e), a taxpayer's gross 34 income, adjusted gross income, or taxable income for the SB214 Engrossed -21- LRB9101201PTpk 1 taxable year shall mean the amount of gross income, 2 adjusted gross income or taxable income properly 3 reportable for federal income tax purposes for the 4 taxable year under the provisions of the Internal Revenue 5 Code. Taxable income may be less than zero. However, for 6 taxable years ending on or after December 31, 1986, net 7 operating loss carryforwards from taxable years ending 8 prior to December 31, 1986, may not exceed the sum of 9 federal taxable income for the taxable year before net 10 operating loss deduction, plus the excess of addition 11 modifications over subtraction modifications for the 12 taxable year. For taxable years ending prior to December 13 31, 1986, taxable income may never be an amount in excess 14 of the net operating loss for the taxable year as defined 15 in subsections (c) and (d) of Section 172 of the Internal 16 Revenue Code, provided that when taxable income of a 17 corporation (other than a Subchapter S corporation), 18 trust, or estate is less than zero and addition 19 modifications, other than those provided by subparagraph 20 (E) of paragraph (2) of subsection (b) for corporations 21 or subparagraph (E) of paragraph (2) of subsection (c) 22 for trusts and estates, exceed subtraction modifications, 23 an addition modification must be made under those 24 subparagraphs for any other taxable year to which the 25 taxable income less than zero (net operating loss) is 26 applied under Section 172 of the Internal Revenue Code or 27 under subparagraph (E) of paragraph (2) of this 28 subsection (e) applied in conjunction with Section 172 of 29 the Internal Revenue Code. 30 (2) Special rule. For purposes of paragraph (1) of 31 this subsection, the taxable income properly reportable 32 for federal income tax purposes shall mean: 33 (A) Certain life insurance companies. In the 34 case of a life insurance company subject to the tax SB214 Engrossed -22- LRB9101201PTpk 1 imposed by Section 801 of the Internal Revenue Code, 2 life insurance company taxable income, plus the 3 amount of distribution from pre-1984 policyholder 4 surplus accounts as calculated under Section 815a of 5 the Internal Revenue Code; 6 (B) Certain other insurance companies. In the 7 case of mutual insurance companies subject to the 8 tax imposed by Section 831 of the Internal Revenue 9 Code, insurance company taxable income; 10 (C) Regulated investment companies. In the 11 case of a regulated investment company subject to 12 the tax imposed by Section 852 of the Internal 13 Revenue Code, investment company taxable income; 14 (D) Real estate investment trusts. In the 15 case of a real estate investment trust subject to 16 the tax imposed by Section 857 of the Internal 17 Revenue Code, real estate investment trust taxable 18 income; 19 (E) Consolidated corporations. In the case of 20 a corporation which is a member of an affiliated 21 group of corporations filing a consolidated income 22 tax return for the taxable year for federal income 23 tax purposes, taxable income determined as if such 24 corporation had filed a separate return for federal 25 income tax purposes for the taxable year and each 26 preceding taxable year for which it was a member of 27 an affiliated group. For purposes of this 28 subparagraph, the taxpayer's separate taxable income 29 shall be determined as if the election provided by 30 Section 243(b) (2) of the Internal Revenue Code had 31 been in effect for all such years; 32 (F) Cooperatives. In the case of a 33 cooperative corporation or association, the taxable 34 income of such organization determined in accordance SB214 Engrossed -23- LRB9101201PTpk 1 with the provisions of Section 1381 through 1388 of 2 the Internal Revenue Code; 3 (G) Subchapter S corporations. In the case 4 of: (i) a Subchapter S corporation for which there 5 is in effect an election for the taxable year under 6 Section 1362 of the Internal Revenue Code, the 7 taxable income of such corporation determined in 8 accordance with Section 1363(b) of the Internal 9 Revenue Code, except that taxable income shall take 10 into account those items which are required by 11 Section 1363(b)(1) of the Internal Revenue Code to 12 be separately stated; and (ii) a Subchapter S 13 corporation for which there is in effect a federal 14 election to opt out of the provisions of the 15 Subchapter S Revision Act of 1982 and have applied 16 instead the prior federal Subchapter S rules as in 17 effect on July 1, 1982, the taxable income of such 18 corporation determined in accordance with the 19 federal Subchapter S rules as in effect on July 1, 20 1982; and 21 (H) Partnerships. In the case of a 22 partnership, taxable income determined in accordance 23 with Section 703 of the Internal Revenue Code, 24 except that taxable income shall take into account 25 those items which are required by Section 703(a)(1) 26 to be separately stated but which would be taken 27 into account by an individual in calculating his 28 taxable income. 29 (f) Valuation limitation amount. 30 (1) In general. The valuation limitation amount 31 referred to in subsections (a) (2) (G), (c) (2) (I) and 32 (d)(2) (E) is an amount equal to: 33 (A) The sum of the pre-August 1, 1969 34 appreciation amounts (to the extent consisting of SB214 Engrossed -24- LRB9101201PTpk 1 gain reportable under the provisions of Section 1245 2 or 1250 of the Internal Revenue Code) for all 3 property in respect of which such gain was reported 4 for the taxable year; plus 5 (B) The lesser of (i) the sum of the 6 pre-August 1, 1969 appreciation amounts (to the 7 extent consisting of capital gain) for all property 8 in respect of which such gain was reported for 9 federal income tax purposes for the taxable year, or 10 (ii) the net capital gain for the taxable year, 11 reduced in either case by any amount of such gain 12 included in the amount determined under subsection 13 (a) (2) (F) or (c) (2) (H). 14 (2) Pre-August 1, 1969 appreciation amount. 15 (A) If the fair market value of property 16 referred to in paragraph (1) was readily 17 ascertainable on August 1, 1969, the pre-August 1, 18 1969 appreciation amount for such property is the 19 lesser of (i) the excess of such fair market value 20 over the taxpayer's basis (for determining gain) for 21 such property on that date (determined under the 22 Internal Revenue Code as in effect on that date), or 23 (ii) the total gain realized and reportable for 24 federal income tax purposes in respect of the sale, 25 exchange or other disposition of such property. 26 (B) If the fair market value of property 27 referred to in paragraph (1) was not readily 28 ascertainable on August 1, 1969, the pre-August 1, 29 1969 appreciation amount for such property is that 30 amount which bears the same ratio to the total gain 31 reported in respect of the property for federal 32 income tax purposes for the taxable year, as the 33 number of full calendar months in that part of the 34 taxpayer's holding period for the property ending SB214 Engrossed -25- LRB9101201PTpk 1 July 31, 1969 bears to the number of full calendar 2 months in the taxpayer's entire holding period for 3 the property. 4 (C) The Department shall prescribe such 5 regulations as may be necessary to carry out the 6 purposes of this paragraph. 7 (g) Double deductions. Unless specifically provided 8 otherwise, nothing in this Section shall permit the same item 9 to be deducted more than once. 10 (h) Legislative intention. Except as expressly provided 11 by this Section there shall be no modifications or 12 limitations on the amounts of income, gain, loss or deduction 13 taken into account in determining gross income, adjusted 14 gross income or taxable income for federal income tax 15 purposes for the taxable year, or in the amount of such items 16 entering into the computation of base income and net income 17 under this Act for such taxable year, whether in respect of 18 property values as of August 1, 1969 or otherwise. 19 (Source: P.A. 89-89, eff. 6-30-95; 89-235, eff. 8-4-95; 20 89-418, eff. 11-15-95; 89-460, eff. 5-24-96; 89-626, eff. 21 8-9-96; 90-491, eff. 1-1-98; 90-717, eff. 8-7-98; 90-770, 22 eff. 8-14-98; revised 9-21-98.) 23 Section 99. Effective date. This Act takes effect 24 January 1, 2000.