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92_HB0058eng HB0058 Engrossed LRB9200807SMdv 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 HB0058 Engrossed -2- LRB9200807SMdv 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income; 14 (D-5) An amount, to the extent not included in 15 adjusted gross income, equal to the amount of money 16 withdrawn by the taxpayer in the taxable year from a 17 medical care savings account and the interest earned 18 on the account in the taxable year of a withdrawal 19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 or subsection (b) 21 of Section 20 of the Medical Care Savings Account 22 Act of 2000; and 23 (D-10) For taxable years ending after December 24 31, 1997, an amount equal to any eligible 25 remediation costs that the individual deducted in 26 computing adjusted gross income and for which the 27 individual claims a credit under subsection (l) of 28 Section 201; 29 and by deducting from the total so obtained the sum of 30 the following amounts: 31 (E) Any amount included in such total in 32 respect of any compensation (including but not 33 limited to any compensation paid or accrued to a 34 serviceman while a prisoner of war or missing in HB0058 Engrossed -3- LRB9200807SMdv 1 action) paid to a resident by reason of being on 2 active duty, or on reserve duty for taxable years 3 ending on or after December 31, 2001, in the Armed 4 Forces of the United States,andin respect of any 5 compensation paid or accrued to a resident who as a 6 governmental employee was a prisoner of war or 7 missing in action,andin respect of any 8 compensation paid to a resident in 1971 or or any 9 taxable year thereafter ending on or before December 10 30, 2001, for annual training performed pursuant to 11 Sections 502 and 503, Title 32, United States Code 12 as a member of the Illinois National Guard, and, for 13 taxable years ending on or after December 31, 2001, 14 in repsect of any compensation paid to a resident 15 for any service as a member of the Illinois National 16 Guard. This subparagraph (E) is exempt from the 17 provisions of Section 250; 18 (F) An amount equal to all amounts included in 19 such total pursuant to the provisions of Sections 20 402(a), 402(c), 403(a), 403(b), 406(a), 407(a), and 21 408 of the Internal Revenue Code, or included in 22 such total as distributions under the provisions of 23 any retirement or disability plan for employees of 24 any governmental agency or unit, or retirement 25 payments to retired partners, which payments are 26 excluded in computing net earnings from self 27 employment by Section 1402 of the Internal Revenue 28 Code and regulations adopted pursuant thereto; 29 (G) The valuation limitation amount; 30 (H) An amount equal to the amount of any tax 31 imposed by this Act which was refunded to the 32 taxpayer and included in such total for the taxable 33 year; 34 (I) An amount equal to all amounts included in HB0058 Engrossed -4- LRB9200807SMdv 1 such total pursuant to the provisions of Section 111 2 of the Internal Revenue Code as a recovery of items 3 previously deducted from adjusted gross income in 4 the computation of taxable income; 5 (J) An amount equal to those dividends 6 included in such total which were paid by a 7 corporation which conducts business operations in an 8 Enterprise Zone or zones created under the Illinois 9 Enterprise Zone Act, and conducts substantially all 10 of its operations in an Enterprise Zone or zones; 11 (K) An amount equal to those dividends 12 included in such total that were paid by a 13 corporation that conducts business operations in a 14 federally designated Foreign Trade Zone or Sub-Zone 15 and that is designated a High Impact Business 16 located in Illinois; provided that dividends 17 eligible for the deduction provided in subparagraph 18 (J) of paragraph (2) of this subsection shall not be 19 eligible for the deduction provided under this 20 subparagraph (K); 21 (L) For taxable years ending after December 22 31, 1983, an amount equal to all social security 23 benefits and railroad retirement benefits included 24 in such total pursuant to Sections 72(r) and 86 of 25 the Internal Revenue Code; 26 (M) With the exception of any amounts 27 subtracted under subparagraph (N), an amount equal 28 to the sum of all amounts disallowed as deductions 29 by (i) Sections 171(a) (2), and 265(2) of the 30 Internal Revenue Code of 1954, as now or hereafter 31 amended, and all amounts of expenses allocable to 32 interest and disallowed as deductions by Section 33 265(1) of the Internal Revenue Code of 1954, as now 34 or hereafter amended; and (ii) for taxable years HB0058 Engrossed -5- LRB9200807SMdv 1 ending on or after August 13, 1999, Sections 2 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the 3 Internal Revenue Code; the provisions of this 4 subparagraph are exempt from the provisions of 5 Section 250; 6 (N) 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 (O) An amount equal to any contribution made 17 to a job training project established pursuant to 18 the Tax Increment Allocation Redevelopment Act; 19 (P) An amount equal to the amount of the 20 deduction used to compute the federal income tax 21 credit for restoration of substantial amounts held 22 under claim of right for the taxable year pursuant 23 to Section 1341 of the Internal Revenue Code of 24 1986; 25 (Q) An amount equal to any amounts included in 26 such total, received by the taxpayer as an 27 acceleration in the payment of life, endowment or 28 annuity benefits in advance of the time they would 29 otherwise be payable as an indemnity for a terminal 30 illness; 31 (R) An amount equal to the amount of any 32 federal or State bonus paid to veterans of the 33 Persian Gulf War; 34 (S) An amount, to the extent included in HB0058 Engrossed -6- LRB9200807SMdv 1 adjusted gross income, equal to the amount of a 2 contribution made in the taxable year on behalf of 3 the taxpayer to a medical care savings account 4 established under the Medical Care Savings Account 5 Act or the Medical Care Savings Account Act of 2000 6 to the extent the contribution is accepted by the 7 account administrator as provided in that Act; 8 (T) An amount, to the extent included in 9 adjusted gross income, equal to the amount of 10 interest earned in the taxable year on a medical 11 care savings account established under the Medical 12 Care Savings Account Act or the Medical Care Savings 13 Account Act of 2000 on behalf of the taxpayer, other 14 than interest added pursuant to item (D-5) of this 15 paragraph (2); 16 (U) For one taxable year beginning on or after 17 January 1, 1994, an amount equal to the total amount 18 of tax imposed and paid under subsections (a) and 19 (b) of Section 201 of this Act on grant amounts 20 received by the taxpayer under the Nursing Home 21 Grant Assistance Act during the taxpayer's taxable 22 years 1992 and 1993; 23 (V) Beginning with tax years ending on or 24 after December 31, 1995 and ending with tax years 25 ending on or before December 31, 2004, an amount 26 equal to the amount paid by a taxpayer who is a 27 self-employed taxpayer, a partner of a partnership, 28 or a shareholder in a Subchapter S corporation for 29 health insurance or long-term care insurance for 30 that taxpayer or that taxpayer's spouse or 31 dependents, to the extent that the amount paid for 32 that health insurance or long-term care insurance 33 may be deducted under Section 213 of the Internal 34 Revenue Code of 1986, has not been deducted on the HB0058 Engrossed -7- LRB9200807SMdv 1 federal income tax return of the taxpayer, and does 2 not exceed the taxable income attributable to that 3 taxpayer's income, self-employment income, or 4 Subchapter S corporation income; except that no 5 deduction shall be allowed under this item (V) if 6 the taxpayer is eligible to participate in any 7 health insurance or long-term care insurance plan of 8 an employer of the taxpayer or the taxpayer's 9 spouse. The amount of the health insurance and 10 long-term care insurance subtracted under this item 11 (V) shall be determined by multiplying total health 12 insurance and long-term care insurance premiums paid 13 by the taxpayer times a number that represents the 14 fractional percentage of eligible medical expenses 15 under Section 213 of the Internal Revenue Code of 16 1986 not actually deducted on the taxpayer's federal 17 income tax return; 18 (W) For taxable years beginning on or after 19 January 1, 1998, all amounts included in the 20 taxpayer's federal gross income in the taxable year 21 from amounts converted from a regular IRA to a Roth 22 IRA. This paragraph is exempt from the provisions of 23 Section 250; and 24 (X) For taxable year 1999 and thereafter, an 25 amount equal to the amount of any (i) distributions, 26 to the extent includible in gross income for federal 27 income tax purposes, made to the taxpayer because of 28 his or her status as a victim of persecution for 29 racial or religious reasons by Nazi Germany or any 30 other Axis regime or as an heir of the victim and 31 (ii) items of income, to the extent includible in 32 gross income for federal income tax purposes, 33 attributable to, derived from or in any way related 34 to assets stolen from, hidden from, or otherwise HB0058 Engrossed -8- LRB9200807SMdv 1 lost to a victim of persecution for racial or 2 religious reasons by Nazi Germany or any other Axis 3 regime immediately prior to, during, and immediately 4 after World War II, including, but not limited to, 5 interest on the proceeds receivable as insurance 6 under policies issued to a victim of persecution for 7 racial or religious reasons by Nazi Germany or any 8 other Axis regime by European insurance companies 9 immediately prior to and during World War II; 10 provided, however, this subtraction from federal 11 adjusted gross income does not apply to assets 12 acquired with such assets or with the proceeds from 13 the sale of such assets; provided, further, this 14 paragraph shall only apply to a taxpayer who was the 15 first recipient of such assets after their recovery 16 and who is a victim of persecution for racial or 17 religious reasons by Nazi Germany or any other Axis 18 regime or as an heir of the victim. The amount of 19 and the eligibility for any public assistance, 20 benefit, or similar entitlement is not affected by 21 the inclusion of items (i) and (ii) of this 22 paragraph in gross income for federal income tax 23 purposes. This paragraph is exempt from the 24 provisions of Section 250. 25 (b) Corporations. 26 (1) In general. In the case of a corporation, base 27 income means an amount equal to the taxpayer's taxable 28 income for the taxable year as modified by paragraph (2). 29 (2) Modifications. The taxable income referred to 30 in paragraph (1) shall be modified by adding thereto the 31 sum of the following amounts: 32 (A) An amount equal to all amounts paid or 33 accrued to the taxpayer as interest and all 34 distributions received from regulated investment HB0058 Engrossed -9- LRB9200807SMdv 1 companies during the taxable year to the extent 2 excluded from gross income in the computation of 3 taxable income; 4 (B) An amount equal to the amount of tax 5 imposed by this Act to the extent deducted from 6 gross income in the computation of taxable income 7 for the taxable year; 8 (C) In the case of a regulated investment 9 company, an amount equal to the excess of (i) the 10 net long-term capital gain for the taxable year, 11 over (ii) the amount of the capital gain dividends 12 designated as such in accordance with Section 13 852(b)(3)(C) of the Internal Revenue Code and any 14 amount designated under Section 852(b)(3)(D) of the 15 Internal Revenue Code, attributable to the taxable 16 year (this amendatory Act of 1995 (Public Act 89-89) 17 is declarative of existing law and is not a new 18 enactment); 19 (D) The amount of any net operating loss 20 deduction taken in arriving at taxable income, other 21 than a net operating loss carried forward from a 22 taxable year ending prior to December 31, 1986; 23 (E) For taxable years in which a net operating 24 loss carryback or carryforward from a taxable year 25 ending prior to December 31, 1986 is an element of 26 taxable income under paragraph (1) of subsection (e) 27 or subparagraph (E) of paragraph (2) of subsection 28 (e), the amount by which addition modifications 29 other than those provided by this subparagraph (E) 30 exceeded subtraction modifications in such earlier 31 taxable year, with the following limitations applied 32 in the order that they are listed: 33 (i) the addition modification relating to 34 the net operating loss carried back or forward HB0058 Engrossed -10- LRB9200807SMdv 1 to the taxable year from any taxable year 2 ending prior to December 31, 1986 shall be 3 reduced by the amount of addition modification 4 under this subparagraph (E) which related to 5 that net operating loss and which was taken 6 into account in calculating the base income of 7 an earlier taxable year, and 8 (ii) the addition modification relating 9 to the net operating loss carried back or 10 forward to the taxable year from any taxable 11 year ending prior to December 31, 1986 shall 12 not exceed the amount of such carryback or 13 carryforward; 14 For taxable years in which there is a net 15 operating loss carryback or carryforward from more 16 than one other taxable year ending prior to December 17 31, 1986, the addition modification provided in this 18 subparagraph (E) shall be the sum of the amounts 19 computed independently under the preceding 20 provisions of this subparagraph (E) for each such 21 taxable year; and 22 (E-5) For taxable years ending after December 23 31, 1997, an amount equal to any eligible 24 remediation costs that the corporation deducted in 25 computing adjusted gross income and for which the 26 corporation claims a credit under subsection (l) of 27 Section 201; 28 and by deducting from the total so obtained the sum of 29 the following amounts: 30 (F) An amount equal to the amount of any tax 31 imposed by this Act which was refunded to the 32 taxpayer and included in such total for the taxable 33 year; 34 (G) An amount equal to any amount included in HB0058 Engrossed -11- LRB9200807SMdv 1 such total under Section 78 of the Internal Revenue 2 Code; 3 (H) In the case of a regulated investment 4 company, an amount equal to the amount of exempt 5 interest dividends as defined in subsection (b) (5) 6 of Section 852 of the Internal Revenue Code, paid to 7 shareholders for the taxable year; 8 (I) With the exception of any amounts 9 subtracted under subparagraph (J), an amount equal 10 to the sum of all amounts disallowed as deductions 11 by (i) Sections 171(a) (2), and 265(a)(2) and 12 amounts disallowed as interest expense by Section 13 291(a)(3) of the Internal Revenue Code, as now or 14 hereafter amended, and all amounts of expenses 15 allocable to interest and disallowed as deductions 16 by Section 265(a)(1) of the Internal Revenue Code, 17 as now or hereafter amended; and (ii) for taxable 18 years ending on or after August 13, 1999, Sections 19 171(a)(2), 265, 280C, 291(a)(3), and 832(b)(5)(B)(i) 20 of the Internal Revenue Code; the provisions of this 21 subparagraph are exempt from the provisions of 22 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 HB0058 Engrossed -12- LRB9200807SMdv 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(f)201(h)24 investment credit to the borrower, the entire 25 principal amount of the loan or loans between the 26 taxpayer and the borrower should be divided into the 27 basis of the Section 201(f)201(h)investment credit 28 property which secures the loan or loans, using for 29 this purpose the original basis of such property on 30 the date that it was placed in service in the 31 Enterprise Zone. The subtraction modification 32 available to taxpayer in any year under this 33 subsection shall be that portion of the total 34 interest paid by the borrower with respect to such HB0058 Engrossed -13- LRB9200807SMdv 1 loan attributable to the eligible property as 2 calculated under the previous 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(h) 12201(i)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(h)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) HB0058 Engrossed -14- LRB9200807SMdv 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; HB0058 Engrossed -15- LRB9200807SMdv 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; 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; and 21 (S) For taxable years ending on or after 22 December 31, 1997, in the case of a Subchapter S 23 corporation, an amount equal to all amounts of 24 income allocable to a shareholder subject to the 25 Personal Property Tax Replacement Income Tax imposed 26 by subsections (c) and (d) of Section 201 of this 27 Act, including amounts allocable to organizations 28 exempt from federal income tax by reason of Section 29 501(a) of the Internal Revenue Code. This 30 subparagraph (S) is exempt from the provisions of 31 Section 250. 32 (3) Special rule. For purposes of paragraph (2) 33 (A), "gross income" in the case of a life insurance 34 company, for tax years ending on and after December 31, HB0058 Engrossed -16- LRB9200807SMdv 1 1994, shall mean the gross investment income for the 2 taxable year. 3 (c) Trusts and estates. 4 (1) In general. In the case of a trust or estate, 5 base income means an amount equal to the taxpayer's 6 taxable income for the taxable year as modified by 7 paragraph (2). 8 (2) Modifications. Subject to the provisions of 9 paragraph (3), the taxable income referred to in 10 paragraph (1) shall be modified by adding thereto the sum 11 of the following amounts: 12 (A) An amount equal to all amounts paid or 13 accrued to the taxpayer as interest or dividends 14 during the taxable year to the extent excluded from 15 gross income in the computation of taxable income; 16 (B) In the case of (i) an estate, $600; (ii) a 17 trust which, under its governing instrument, is 18 required to distribute all of its income currently, 19 $300; and (iii) any other trust, $100, but in each 20 such case, only to the extent such amount was 21 deducted in the computation of taxable income; 22 (C) An amount equal to the amount of tax 23 imposed by this Act to the extent deducted from 24 gross income in the computation of taxable income 25 for the taxable year; 26 (D) The amount of any net operating loss 27 deduction taken in arriving at taxable income, other 28 than a net operating loss carried forward from a 29 taxable year ending prior to December 31, 1986; 30 (E) For taxable years in which a net operating 31 loss carryback or carryforward from a taxable year 32 ending prior to December 31, 1986 is an element of 33 taxable income under paragraph (1) of subsection (e) 34 or subparagraph (E) of paragraph (2) of subsection HB0058 Engrossed -17- LRB9200807SMdv 1 (e), the amount by which addition modifications 2 other than those provided by this subparagraph (E) 3 exceeded subtraction modifications in such taxable 4 year, with the following limitations applied in the 5 order that they are listed: 6 (i) the addition modification relating to 7 the net operating loss carried back or forward 8 to the taxable year from any taxable year 9 ending prior to December 31, 1986 shall be 10 reduced by the amount of addition modification 11 under this subparagraph (E) which related to 12 that net operating loss and which was taken 13 into account in calculating the base income of 14 an earlier taxable year, and 15 (ii) the addition modification relating 16 to the net operating loss carried back or 17 forward to the taxable year from any taxable 18 year ending prior to December 31, 1986 shall 19 not exceed the amount of such carryback or 20 carryforward; 21 For taxable years in which there is a net 22 operating loss carryback or carryforward from more 23 than one other taxable year ending prior to December 24 31, 1986, the addition modification provided in this 25 subparagraph (E) shall be the sum of the amounts 26 computed independently under the preceding 27 provisions of this subparagraph (E) for each such 28 taxable year; 29 (F) For taxable years ending on or after 30 January 1, 1989, an amount equal to the tax deducted 31 pursuant to Section 164 of the Internal Revenue Code 32 if the trust or estate is claiming the same tax for 33 purposes of the Illinois foreign tax credit under 34 Section 601 of this Act; HB0058 Engrossed -18- LRB9200807SMdv 1 (G) An amount equal to the amount of the 2 capital gain deduction allowable under the Internal 3 Revenue Code, to the extent deducted from gross 4 income in the computation of taxable income; and 5 (G-5) For taxable years ending after December 6 31, 1997, an amount equal to any eligible 7 remediation costs that the trust or estate deducted 8 in computing adjusted gross income and for which the 9 trust or estate claims a credit under subsection (l) 10 of Section 201; 11 and by deducting from the total so obtained the sum of 12 the following amounts: 13 (H) An amount equal to all amounts included in 14 such total pursuant to the provisions of Sections 15 402(a), 402(c), 403(a), 403(b), 406(a), 407(a) and 16 408 of the Internal Revenue Code or included in such 17 total as distributions under the provisions of any 18 retirement or disability plan for employees of any 19 governmental agency or unit, or retirement payments 20 to retired partners, which payments are excluded in 21 computing net earnings from self employment by 22 Section 1402 of the Internal Revenue Code and 23 regulations adopted pursuant thereto; 24 (I) The valuation limitation amount; 25 (J) An amount equal to the amount of any tax 26 imposed by this Act which was refunded to the 27 taxpayer and included in such total for the taxable 28 year; 29 (K) An amount equal to all amounts included in 30 taxable income as modified by subparagraphs (A), 31 (B), (C), (D), (E), (F) and (G) which are exempt 32 from taxation by this State either by reason of its 33 statutes or Constitution or by reason of the 34 Constitution, treaties or statutes of the United HB0058 Engrossed -19- LRB9200807SMdv 1 States; provided that, in the case of any statute of 2 this State that exempts income derived from bonds or 3 other obligations from the tax imposed under this 4 Act, the amount exempted shall be the interest net 5 of bond premium amortization; 6 (L) With the exception of any amounts 7 subtracted under subparagraph (K), an amount equal 8 to the sum of all amounts disallowed as deductions 9 by (i) Sections 171(a) (2) and 265(a)(2) of the 10 Internal Revenue Code, as now or hereafter amended, 11 and all amounts of expenses allocable to interest 12 and disallowed as deductions by Section 265(1) of 13 the Internal Revenue Code of 1954, as now or 14 hereafter amended; and (ii) for taxable years ending 15 on or after August 13, 1999, Sections 171(a)(2), 16 265, 280C, and 832(b)(5)(B)(i) of the Internal 17 Revenue Code; the provisions of this subparagraph 18 are exempt from the provisions of Section 250; 19 (M) An amount equal to those dividends 20 included in such total which were paid by a 21 corporation which conducts business operations in an 22 Enterprise Zone or zones created under the Illinois 23 Enterprise Zone Act and conducts substantially all 24 of its operations in an Enterprise Zone or Zones; 25 (N) An amount equal to any contribution made 26 to a job training project established pursuant to 27 the Tax Increment Allocation Redevelopment Act; 28 (O) An amount equal to those dividends 29 included in such total that were paid by a 30 corporation that conducts business operations in a 31 federally designated Foreign Trade Zone or Sub-Zone 32 and that is designated a High Impact Business 33 located in Illinois; provided that dividends 34 eligible for the deduction provided in subparagraph HB0058 Engrossed -20- LRB9200807SMdv 1 (M) of paragraph (2) of this subsection shall not be 2 eligible for the deduction provided under this 3 subparagraph (O); 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; and 10 (Q) For taxable year 1999 and thereafter, an 11 amount equal to the amount of any (i) distributions, 12 to the extent includible in gross income for federal 13 income tax purposes, made to the taxpayer because of 14 his or her status as a victim of persecution for 15 racial or religious reasons by Nazi Germany or any 16 other Axis regime or as an heir of the victim and 17 (ii) items of income, to the extent includible in 18 gross income for federal income tax purposes, 19 attributable to, derived from or in any way related 20 to assets stolen from, hidden from, or otherwise 21 lost to a victim of persecution for racial or 22 religious reasons by Nazi Germany or any other Axis 23 regime immediately prior to, during, and immediately 24 after World War II, including, but not limited to, 25 interest on the proceeds receivable as insurance 26 under policies issued to a victim of persecution for 27 racial or religious reasons by Nazi Germany or any 28 other Axis regime by European insurance companies 29 immediately prior to and during World War II; 30 provided, however, this subtraction from federal 31 adjusted gross income does not apply to assets 32 acquired with such assets or with the proceeds from 33 the sale of such assets; provided, further, this 34 paragraph shall only apply to a taxpayer who was the HB0058 Engrossed -21- LRB9200807SMdv 1 first recipient of such assets after their recovery 2 and who is a victim of persecution for racial or 3 religious reasons by Nazi Germany or any other Axis 4 regime or as an heir of the victim. The amount of 5 and the eligibility for any public assistance, 6 benefit, or similar entitlement is not affected by 7 the inclusion of items (i) and (ii) of this 8 paragraph in gross income for federal income tax 9 purposes. This paragraph is exempt from the 10 provisions of Section 250. 11 (3) Limitation. The amount of any modification 12 otherwise required under this subsection shall, under 13 regulations prescribed by the Department, be adjusted by 14 any amounts included therein which were properly paid, 15 credited, or required to be distributed, or permanently 16 set aside for charitable purposes pursuant to Internal 17 Revenue Code Section 642(c) during the taxable year. 18 (d) Partnerships. 19 (1) In general. In the case of a partnership, base 20 income means an amount equal to the taxpayer's taxable 21 income for the taxable year as modified by paragraph (2). 22 (2) Modifications. The taxable income referred to 23 in paragraph (1) shall be modified by adding thereto the 24 sum of the following amounts: 25 (A) An amount equal to all amounts paid or 26 accrued to the taxpayer as interest or dividends 27 during the taxable year to the extent excluded from 28 gross income in the computation of taxable income; 29 (B) An amount equal to the amount of tax 30 imposed by this Act to the extent deducted from 31 gross income for the taxable year; 32 (C) The amount of deductions allowed to the 33 partnership pursuant to Section 707 (c) of the 34 Internal Revenue Code in calculating its taxable HB0058 Engrossed -22- LRB9200807SMdv 1 income; and 2 (D) An amount equal to the amount of the 3 capital gain deduction allowable under the Internal 4 Revenue Code, to the extent deducted from gross 5 income in the computation of taxable income; 6 and by deducting from the total so obtained the following 7 amounts: 8 (E) The valuation limitation amount; 9 (F) An amount equal to the amount of any tax 10 imposed by this Act which was refunded to the 11 taxpayer and included in such total for the taxable 12 year; 13 (G) An amount equal to all amounts included in 14 taxable income as modified by subparagraphs (A), 15 (B), (C) and (D) which are exempt from taxation by 16 this State either by reason of its statutes or 17 Constitution or by reason of the Constitution, 18 treaties or statutes of the United States; provided 19 that, in the case of any statute of this State that 20 exempts income derived from bonds or other 21 obligations from the tax imposed under this Act, the 22 amount exempted shall be the interest net of bond 23 premium amortization; 24 (H) Any income of the partnership which 25 constitutes personal service income as defined in 26 Section 1348 (b) (1) of the Internal Revenue Code 27 (as in effect December 31, 1981) or a reasonable 28 allowance for compensation paid or accrued for 29 services rendered by partners to the partnership, 30 whichever is greater; 31 (I) An amount equal to all amounts of income 32 distributable to an entity subject to the Personal 33 Property Tax Replacement Income Tax imposed by 34 subsections (c) and (d) of Section 201 of this Act HB0058 Engrossed -23- LRB9200807SMdv 1 including amounts distributable to organizations 2 exempt from federal income tax by reason of Section 3 501(a) of the Internal Revenue Code; 4 (J) With the exception of any amounts 5 subtracted under subparagraph (G), an amount equal 6 to the sum of all amounts disallowed as deductions 7 by (i) Sections 171(a) (2), and 265(2) of the 8 Internal Revenue Code of 1954, as now or hereafter 9 amended, and all amounts of expenses allocable to 10 interest and disallowed as deductions by Section 11 265(1) of the Internal Revenue Code, as now or 12 hereafter amended; and (ii) for taxable years ending 13 on or after August 13, 1999, Sections 171(a)(2), 14 265, 280C, and 832(b)(5)(B)(i) of the Internal 15 Revenue Code; the provisions of this subparagraph 16 are exempt from the provisions of Section 250; 17 (K) An amount equal to those dividends 18 included in such total which were paid by a 19 corporation which conducts business operations in an 20 Enterprise Zone or zones created under the Illinois 21 Enterprise Zone Act, enacted by the 82nd General 22 Assembly, and which does not conduct such operations 23 other than in an Enterprise Zone or Zones; 24 (L) An amount equal to any contribution made 25 to a job training project established pursuant to 26 the Real Property Tax Increment Allocation 27 Redevelopment Act; 28 (M) An amount equal to those dividends 29 included in such total that were paid by a 30 corporation that conducts business operations in a 31 federally designated Foreign Trade Zone or Sub-Zone 32 and that is designated a High Impact Business 33 located in Illinois; provided that dividends 34 eligible for the deduction provided in subparagraph HB0058 Engrossed -24- LRB9200807SMdv 1 (K) of paragraph (2) of this subsection shall not be 2 eligible for the deduction provided under this 3 subparagraph (M); and 4 (N) 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 (e) Gross income; adjusted gross income; taxable income. 11 (1) In general. Subject to the provisions of 12 paragraph (2) and subsection (b) (3), for purposes of 13 this Section and Section 803(e), a taxpayer's gross 14 income, adjusted gross income, or taxable income for the 15 taxable year shall mean the amount of gross income, 16 adjusted gross income or taxable income properly 17 reportable for federal income tax purposes for the 18 taxable year under the provisions of the Internal Revenue 19 Code. Taxable income may be less than zero. However, for 20 taxable years ending on or after December 31, 1986, net 21 operating loss carryforwards from taxable years ending 22 prior to December 31, 1986, may not exceed the sum of 23 federal taxable income for the taxable year before net 24 operating loss deduction, plus the excess of addition 25 modifications over subtraction modifications for the 26 taxable year. For taxable years ending prior to December 27 31, 1986, taxable income may never be an amount in excess 28 of the net operating loss for the taxable year as defined 29 in subsections (c) and (d) of Section 172 of the Internal 30 Revenue Code, provided that when taxable income of a 31 corporation (other than a Subchapter S corporation), 32 trust, or estate is less than zero and addition 33 modifications, other than those provided by subparagraph 34 (E) of paragraph (2) of subsection (b) for corporations HB0058 Engrossed -25- LRB9200807SMdv 1 or subparagraph (E) of paragraph (2) of subsection (c) 2 for trusts and estates, exceed subtraction modifications, 3 an addition modification must be made under those 4 subparagraphs for any other taxable year to which the 5 taxable income less than zero (net operating loss) is 6 applied under Section 172 of the Internal Revenue Code or 7 under subparagraph (E) of paragraph (2) of this 8 subsection (e) applied in conjunction with Section 172 of 9 the Internal Revenue Code. 10 (2) Special rule. For purposes of paragraph (1) of 11 this subsection, the taxable income properly reportable 12 for federal income tax purposes shall mean: 13 (A) Certain life insurance companies. In the 14 case of a life insurance company subject to the tax 15 imposed by Section 801 of the Internal Revenue Code, 16 life insurance company taxable income, plus the 17 amount of distribution from pre-1984 policyholder 18 surplus accounts as calculated under Section 815a of 19 the Internal Revenue Code; 20 (B) Certain other insurance companies. In the 21 case of mutual insurance companies subject to the 22 tax imposed by Section 831 of the Internal Revenue 23 Code, insurance company taxable income; 24 (C) Regulated investment companies. In the 25 case of a regulated investment company subject to 26 the tax imposed by Section 852 of the Internal 27 Revenue Code, investment company taxable income; 28 (D) Real estate investment trusts. In the 29 case of a real estate investment trust subject to 30 the tax imposed by Section 857 of the Internal 31 Revenue Code, real estate investment trust taxable 32 income; 33 (E) Consolidated corporations. In the case of 34 a corporation which is a member of an affiliated HB0058 Engrossed -26- LRB9200807SMdv 1 group of corporations filing a consolidated income 2 tax return for the taxable year for federal income 3 tax purposes, taxable income determined as if such 4 corporation had filed a separate return for federal 5 income tax purposes for the taxable year and each 6 preceding taxable year for which it was a member of 7 an affiliated group. For purposes of this 8 subparagraph, the taxpayer's separate taxable income 9 shall be determined as if the election provided by 10 Section 243(b) (2) of the Internal Revenue Code had 11 been in effect for all such years; 12 (F) Cooperatives. In the case of a 13 cooperative corporation or association, the taxable 14 income of such organization determined in accordance 15 with the provisions of Section 1381 through 1388 of 16 the Internal Revenue Code; 17 (G) Subchapter S corporations. In the case 18 of: (i) a Subchapter S corporation for which there 19 is in effect an election for the taxable year under 20 Section 1362 of the Internal Revenue Code, the 21 taxable income of such corporation determined in 22 accordance with Section 1363(b) of the Internal 23 Revenue Code, except that taxable income shall take 24 into account those items which are required by 25 Section 1363(b)(1) of the Internal Revenue Code to 26 be separately stated; and (ii) a Subchapter S 27 corporation for which there is in effect a federal 28 election to opt out of the provisions of the 29 Subchapter S Revision Act of 1982 and have applied 30 instead the prior federal Subchapter S rules as in 31 effect on July 1, 1982, the taxable income of such 32 corporation determined in accordance with the 33 federal Subchapter S rules as in effect on July 1, 34 1982; and HB0058 Engrossed -27- LRB9200807SMdv 1 (H) Partnerships. In the case of a 2 partnership, taxable income determined in accordance 3 with Section 703 of the Internal Revenue Code, 4 except that taxable income shall take into account 5 those items which are required by Section 703(a)(1) 6 to be separately stated but which would be taken 7 into account by an individual in calculating his 8 taxable income. 9 (f) Valuation limitation amount. 10 (1) In general. The valuation limitation amount 11 referred to in subsections (a) (2) (G), (c) (2) (I) and 12 (d)(2) (E) is an amount equal to: 13 (A) The sum of the pre-August 1, 1969 14 appreciation amounts (to the extent consisting of 15 gain reportable under the provisions of Section 1245 16 or 1250 of the Internal Revenue Code) for all 17 property in respect of which such gain was reported 18 for the taxable year; plus 19 (B) The lesser of (i) the sum of the 20 pre-August 1, 1969 appreciation amounts (to the 21 extent consisting of capital gain) for all property 22 in respect of which such gain was reported for 23 federal income tax purposes for the taxable year, or 24 (ii) the net capital gain for the taxable year, 25 reduced in either case by any amount of such gain 26 included in the amount determined under subsection 27 (a) (2) (F) or (c) (2) (H). 28 (2) Pre-August 1, 1969 appreciation amount. 29 (A) If the fair market value of property 30 referred to in paragraph (1) was readily 31 ascertainable on August 1, 1969, the pre-August 1, 32 1969 appreciation amount for such property is the 33 lesser of (i) the excess of such fair market value 34 over the taxpayer's basis (for determining gain) for HB0058 Engrossed -28- LRB9200807SMdv 1 such property on that date (determined under the 2 Internal Revenue Code as in effect on that date), or 3 (ii) the total gain realized and reportable for 4 federal income tax purposes in respect of the sale, 5 exchange or other disposition of such property. 6 (B) If the fair market value of property 7 referred to in paragraph (1) was not readily 8 ascertainable on August 1, 1969, the pre-August 1, 9 1969 appreciation amount for such property is that 10 amount which bears the same ratio to the total gain 11 reported in respect of the property for federal 12 income tax purposes for the taxable year, as the 13 number of full calendar months in that part of the 14 taxpayer's holding period for the property ending 15 July 31, 1969 bears to the number of full calendar 16 months in the taxpayer's entire holding period for 17 the property. 18 (C) The Department shall prescribe such 19 regulations as may be necessary to carry out the 20 purposes of this paragraph. 21 (g) Double deductions. Unless specifically provided 22 otherwise, nothing in this Section shall permit the same item 23 to be deducted more than once. 24 (h) Legislative intention. Except as expressly provided 25 by this Section there shall be no modifications or 26 limitations on the amounts of income, gain, loss or deduction 27 taken into account in determining gross income, adjusted 28 gross income or taxable income for federal income tax 29 purposes for the taxable year, or in the amount of such items 30 entering into the computation of base income and net income 31 under this Act for such taxable year, whether in respect of 32 property values as of August 1, 1969 or otherwise. 33 (Source: P.A. 90-491, eff. 1-1-98; 90-717, eff. 8-7-98; HB0058 Engrossed -29- LRB9200807SMdv 1 90-770, eff. 8-14-98; 91-192, eff. 7-20-99; 91-205, eff. 2 7-20-99; 91-357, eff. 7-29-99; 91-541, eff. 8-13-99; 91-676, 3 eff. 12-23-99; 91-845, eff. 6-22-00; 91-913, eff. 1-1-01; 4 revised 10-24-00) 5 Section 99. Effective date. This Act takes effect upon 6 becoming law.