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92_SB2212eng SB2212 Engrossed LRB9215616SMdv 1 AN ACT in relation to taxes. 2 Be it enacted by the People of the State of Illinois, 3 represented in the General Assembly: 4 Section 5. The Illinois Income Tax Act is amended by 5 changing Sections 201, 202, 203, 209, 502, 506, 601.1, 701, 6 905, 911, and 1501 as follows: 7 (35 ILCS 5/201) (from Ch. 120, par. 2-201) 8 Sec. 201. Tax Imposed. 9 (a) In general. A tax measured by net income is hereby 10 imposed on every individual, corporation, trust and estate 11 for each taxable year ending after July 31, 1969 on the 12 privilege of earning or receiving income in or as a resident 13 of this State. Such tax shall be in addition to all other 14 occupation or privilege taxes imposed by this State or by any 15 municipal corporation or political subdivision thereof. 16 (b) Rates. The tax imposed by subsection (a) of this 17 Section shall be determined as follows, except as adjusted by 18 subsection (d-1): 19 (1) In the case of an individual, trust or estate, 20 for taxable years ending prior to July 1, 1989, an amount 21 equal to 2 1/2% of the taxpayer's net income for the 22 taxable year. 23 (2) In the case of an individual, trust or estate, 24 for taxable years beginning prior to July 1, 1989 and 25 ending after June 30, 1989, an amount equal to the sum of 26 (i) 2 1/2% of the taxpayer's net income for the period 27 prior to July 1, 1989, as calculated under Section 202.3, 28 and (ii) 3% of the taxpayer's net income for the period 29 after June 30, 1989, as calculated under Section 202.3. 30 (3) In the case of an individual, trust or estate, 31 for taxable years beginning after June 30, 1989, an SB2212 Engrossed -2- LRB9215616SMdv 1 amount equal to 3% of the taxpayer's net income for the 2 taxable year. 3 (4) (Blank). 4 (5) (Blank). 5 (6) In the case of a corporation, for taxable years 6 ending prior to July 1, 1989, an amount equal to 4% of 7 the taxpayer's net income for the taxable year. 8 (7) In the case of a corporation, for taxable years 9 beginning prior to July 1, 1989 and ending after June 30, 10 1989, an amount equal to the sum of (i) 4% of the 11 taxpayer's net income for the period prior to July 1, 12 1989, as calculated under Section 202.3, and (ii) 4.8% of 13 the taxpayer's net income for the period after June 30, 14 1989, as calculated under Section 202.3. 15 (8) In the case of a corporation, for taxable years 16 beginning after June 30, 1989, an amount equal to 4.8% of 17 the taxpayer's net income for the taxable year. 18 (c) Personal Property Tax Replacement Income Tax. 19 Beginning on July 1, 1979 and thereafter, in addition to such 20 income tax, there is also hereby imposed the Personal 21 Property Tax Replacement Income Tax measured by net income on 22 every corporation (including Subchapter S corporations), 23 partnership and trust, for each taxable year ending after 24 June 30, 1979. Such taxes are imposed on the privilege of 25 earning or receiving income in or as a resident of this 26 State. The Personal Property Tax Replacement Income Tax 27 shall be in addition to the income tax imposed by subsections 28 (a) and (b) of this Section and in addition to all other 29 occupation or privilege taxes imposed by this State or by any 30 municipal corporation or political subdivision thereof. 31 (d) Additional Personal Property Tax Replacement Income 32 Tax Rates. The personal property tax replacement income tax 33 imposed by this subsection and subsection (c) of this Section 34 in the case of a corporation, other than a Subchapter S SB2212 Engrossed -3- LRB9215616SMdv 1 corporation and except as adjusted by subsection (d-1), shall 2 be an additional amount equal to 2.85% of such taxpayer's net 3 income for the taxable year, except that beginning on January 4 1, 1981, and thereafter, the rate of 2.85% specified in this 5 subsection shall be reduced to 2.5%, and in the case of a 6 partnership, trust or a Subchapter S corporation shall be an 7 additional amount equal to 1.5% of such taxpayer's net income 8 for the taxable year. 9 (d-1) Rate reduction for certain foreign insurers. In 10 the case of a foreign insurer, as defined by Section 35A-5 of 11 the Illinois Insurance Code, whose state or country of 12 domicile imposes on insurers domiciled in Illinois a 13 retaliatory tax (excluding any insurer whose premiums from 14 reinsurance assumed are 50% or more of its total insurance 15 premiums as determined under paragraph (2) of subsection (b) 16 of Section 304, except that for purposes of this 17 determination premiums from reinsurance do not include 18 premiums from inter-affiliate reinsurance arrangements), 19 beginning with taxable years ending on or after December 31, 20 1999, the sum of the rates of tax imposed by subsections (b) 21 and (d) shall be reduced (but not increased) to the rate at 22 which the total amount of tax imposed under this Act, net of 23 all credits allowed under this Act, shall equal (i) the total 24 amount of tax that would be imposed on the foreign insurer's 25 net income allocable to Illinois for the taxable year by such 26 foreign insurer's state or country of domicile if that net 27 income were subject to all income taxes and taxes measured by 28 net income imposed by such foreign insurer's state or country 29 of domicile, net of all credits allowed or (ii) a rate of 30 zero if no such tax is imposed on such income by the foreign 31 insurer's state of domicile. For the purposes of this 32 subsection (d-1), an inter-affiliate includes a mutual 33 insurer under common management. 34 (1) For the purposes of subsection (d-1), in no SB2212 Engrossed -4- LRB9215616SMdv 1 event shall the sum of the rates of tax imposed by 2 subsections (b) and (d) be reduced below the rate at 3 which the sum of: 4 (A) the total amount of tax imposed on such 5 foreign insurer under this Act for a taxable year, 6 net of all credits allowed under this Act, plus 7 (B) the privilege tax imposed by Section 409 8 of the Illinois Insurance Code, the fire insurance 9 company tax imposed by Section 12 of the Fire 10 Investigation Act, and the fire department taxes 11 imposed under Section 11-10-1 of the Illinois 12 Municipal Code, 13 equals 1.25% of the net taxable premiums written for the 14 taxable year, as described by subsection (1) of Section 15 409 of the Illinois Insurance Code. This paragraph will 16 in no event increase the rates imposed under subsections 17 (b) and (d). 18 (2) Any reduction in the rates of tax imposed by 19 this subsection shall be applied first against the rates 20 imposed by subsection (b) and only after the tax imposed 21 by subsection (a) net of all credits allowed under this 22 Section other than the credit allowed under subsection 23 (i) has been reduced to zero, against the rates imposed 24 by subsection (d). 25 This subsection (d-1) is exempt from the provisions of 26 Section 250. 27 (e) Investment credit. A taxpayer shall be allowed a 28 credit against the Personal Property Tax Replacement Income 29 Tax for investment in qualified property. 30 (1) A taxpayer shall be allowed a credit equal to 31 .5% of the basis of qualified property placed in service 32 during the taxable year, provided such property is placed 33 in service on or after July 1, 1984. There shall be 34 allowed an additional credit equal to .5% of the basis of SB2212 Engrossed -5- LRB9215616SMdv 1 qualified property placed in service during the taxable 2 year, provided such property is placed in service on or 3 after July 1, 1986, and the taxpayer's base employment 4 within Illinois has increased by 1% or more over the 5 preceding year as determined by the taxpayer's employment 6 records filed with the Illinois Department of Employment 7 Security. Taxpayers who are new to Illinois shall be 8 deemed to have met the 1% growth in base employment for 9 the first year in which they file employment records with 10 the Illinois Department of Employment Security. The 11 provisions added to this Section by Public Act 85-1200 12 (and restored by Public Act 87-895) shall be construed as 13 declaratory of existing law and not as a new enactment. 14 If, in any year, the increase in base employment within 15 Illinois over the preceding year is less than 1%, the 16 additional credit shall be limited to that percentage 17 times a fraction, the numerator of which is .5% and the 18 denominator of which is 1%, but shall not exceed .5%. 19 The investment credit shall not be allowed to the extent 20 that it would reduce a taxpayer's liability in any tax 21 year below zero, nor may any credit for qualified 22 property be allowed for any year other than the year in 23 which the property was placed in service in Illinois. For 24 tax years ending on or after December 31, 1987, and on or 25 before December 31, 1988, the credit shall be allowed for 26 the tax year in which the property is placed in service, 27 or, if the amount of the credit exceeds the tax liability 28 for that year, whether it exceeds the original liability 29 or the liability as later amended, such excess may be 30 carried forward and applied to the tax liability of the 5 31 taxable years following the excess credit years if the 32 taxpayer (i) makes investments which cause the creation 33 of a minimum of 2,000 full-time equivalent jobs in 34 Illinois, (ii) is located in an enterprise zone SB2212 Engrossed -6- LRB9215616SMdv 1 established pursuant to the Illinois Enterprise Zone Act 2 and (iii) is certified by the Department of Commerce and 3 Community Affairs as complying with the requirements 4 specified in clause (i) and (ii) by July 1, 1986. The 5 Department of Commerce and Community Affairs shall notify 6 the Department of Revenue of all such certifications 7 immediately. For tax years ending after December 31, 8 1988, the credit shall be allowed for the tax year in 9 which the property is placed in service, or, if the 10 amount of the credit exceeds the tax liability for that 11 year, whether it exceeds the original liability or the 12 liability as later amended, such excess may be carried 13 forward and applied to the tax liability of the 5 taxable 14 years following the excess credit years. The credit shall 15 be applied to the earliest year for which there is a 16 liability. If there is credit from more than one tax year 17 that is available to offset a liability, earlier credit 18 shall be applied first. 19 (2) The term "qualified property" means property 20 which: 21 (A) is tangible, whether new or used, 22 including buildings and structural components of 23 buildings and signs that are real property, but not 24 including land or improvements to real property that 25 are not a structural component of a building such as 26 landscaping, sewer lines, local access roads, 27 fencing, parking lots, and other appurtenances; 28 (B) is depreciable pursuant to Section 167 of 29 the Internal Revenue Code, except that "3-year 30 property" as defined in Section 168(c)(2)(A) of that 31 Code is not eligible for the credit provided by this 32 subsection (e); 33 (C) is acquired by purchase as defined in 34 Section 179(d) of the Internal Revenue Code; SB2212 Engrossed -7- LRB9215616SMdv 1 (D) is used in Illinois by a taxpayer who is 2 primarily engaged in manufacturing, or in mining 3 coal or fluorite, or in retailing; and 4 (E) has not previously been used in Illinois 5 in such a manner and by such a person as would 6 qualify for the credit provided by this subsection 7 (e) or subsection (f). 8 (3) For purposes of this subsection (e), 9 "manufacturing" means the material staging and production 10 of tangible personal property by procedures commonly 11 regarded as manufacturing, processing, fabrication, or 12 assembling which changes some existing material into new 13 shapes, new qualities, or new combinations. For purposes 14 of this subsection (e) the term "mining" shall have the 15 same meaning as the term "mining" in Section 613(c) of 16 the Internal Revenue Code. For purposes of this 17 subsection (e), the term "retailing" means the sale of 18 tangible personal property or services rendered in 19 conjunction with the sale of tangible consumer goods or 20 commodities. 21 (4) The basis of qualified property shall be the 22 basis used to compute the depreciation deduction for 23 federal income tax purposes. 24 (5) If the basis of the property for federal income 25 tax depreciation purposes is increased after it has been 26 placed in service in Illinois by the taxpayer, the amount 27 of such increase shall be deemed property placed in 28 service on the date of such increase in basis. 29 (6) The term "placed in service" shall have the 30 same meaning as under Section 46 of the Internal Revenue 31 Code. 32 (7) If during any taxable year, any property ceases 33 to be qualified property in the hands of the taxpayer 34 within 48 months after being placed in service, or the SB2212 Engrossed -8- LRB9215616SMdv 1 situs of any qualified property is moved outside Illinois 2 within 48 months after being placed in service, the 3 Personal Property Tax Replacement Income Tax for such 4 taxable year shall be increased. Such increase shall be 5 determined by (i) recomputing the investment credit which 6 would have been allowed for the year in which credit for 7 such property was originally allowed by eliminating such 8 property from such computation and, (ii) subtracting such 9 recomputed credit from the amount of credit previously 10 allowed. For the purposes of this paragraph (7), a 11 reduction of the basis of qualified property resulting 12 from a redetermination of the purchase price shall be 13 deemed a disposition of qualified property to the extent 14 of such reduction. 15 (8) Unless the investment credit is extended by 16 law, the basis of qualified property shall not include 17 costs incurred after December 31, 2003, except for costs 18 incurred pursuant to a binding contract entered into on 19 or before December 31, 2003. 20 (9) Each taxable year ending before December 31, 21 2000, a partnership may elect to pass through to its 22 partners the credits to which the partnership is entitled 23 under this subsection (e) for the taxable year. A 24 partner may use the credit allocated to him or her under 25 this paragraph only against the tax imposed in 26 subsections (c) and (d) of this Section. If the 27 partnership makes that election, those credits shall be 28 allocated among the partners in the partnership in 29 accordance with the rules set forth in Section 704(b) of 30 the Internal Revenue Code, and the rules promulgated 31 under that Section, and the allocated amount of the 32 credits shall be allowed to the partners for that taxable 33 year. The partnership shall make this election on its 34 Personal Property Tax Replacement Income Tax return for SB2212 Engrossed -9- LRB9215616SMdv 1 that taxable year. The election to pass through the 2 credits shall be irrevocable. 3 For taxable years ending on or after December 31, 4 2000, a partner that qualifies its partnership for a 5 subtraction under subparagraph (I) of paragraph (2) of 6 subsection (d) of Section 203 or a shareholder that 7 qualifies a Subchapter S corporation for a subtraction 8 under subparagraph (S) of paragraph (2) of subsection (b) 9 of Section 203 shall be allowed a credit under this 10 subsection (e) equal to its share of the credit earned 11 under this subsection (e) during the taxable year by the 12 partnership or Subchapter S corporation, determined in 13 accordance with the determination of income and 14 distributive share of income under Sections 702 and 704 15 and Subchapter S of the Internal Revenue Code. This 16 paragraph is exempt from the provisions of Section 250. 17 (f) Investment credit; Enterprise Zone. 18 (1) A taxpayer shall be allowed a credit against 19 the tax imposed by subsections (a) and (b) of this 20 Section for investment in qualified property which is 21 placed in service in an Enterprise Zone created pursuant 22 to the Illinois Enterprise Zone Act. For partners, 23 shareholders of Subchapter S corporations, and owners of 24 limited liability companies, if the liability company is 25 treated as a partnership for purposes of federal and 26 State income taxation, there shall be allowed a credit 27 under this subsection (f) to be determined in accordance 28 with the determination of income and distributive share 29 of income under Sections 702 and 704 and Subchapter S of 30 the Internal Revenue Code. The credit shall be .5% of 31 the basis for such property. The credit shall be 32 available only in the taxable year in which the property 33 is placed in service in the Enterprise Zone and shall not 34 be allowed to the extent that it would reduce a SB2212 Engrossed -10- LRB9215616SMdv 1 taxpayer's liability for the tax imposed by subsections 2 (a) and (b) of this Section to below zero. For tax years 3 ending on or after December 31, 1985, the credit shall be 4 allowed for the tax year in which the property is placed 5 in service, or, if the amount of the credit exceeds the 6 tax liability for that year, whether it exceeds the 7 original liability or the liability as later amended, 8 such excess may be carried forward and applied to the tax 9 liability of the 5 taxable years following the excess 10 credit year. The credit shall be applied to the earliest 11 year for which there is a liability. If there is credit 12 from more than one tax year that is available to offset a 13 liability, the credit accruing first in time shall be 14 applied first. 15 (2) The term qualified property means property 16 which: 17 (A) is tangible, whether new or used, 18 including buildings and structural components of 19 buildings; 20 (B) is depreciable pursuant to Section 167 of 21 the Internal Revenue Code, except that "3-year 22 property" as defined in Section 168(c)(2)(A) of that 23 Code is not eligible for the credit provided by this 24 subsection (f); 25 (C) is acquired by purchase as defined in 26 Section 179(d) of the Internal Revenue Code; 27 (D) is used in the Enterprise Zone by the 28 taxpayer; and 29 (E) has not been previously used in Illinois 30 in such a manner and by such a person as would 31 qualify for the credit provided by this subsection 32 (f) or subsection (e). 33 (3) The basis of qualified property shall be the 34 basis used to compute the depreciation deduction for SB2212 Engrossed -11- LRB9215616SMdv 1 federal income tax purposes. 2 (4) If the basis of the property for federal income 3 tax depreciation purposes is increased after it has been 4 placed in service in the Enterprise Zone by the taxpayer, 5 the amount of such increase shall be deemed property 6 placed in service on the date of such increase in basis. 7 (5) The term "placed in service" shall have the 8 same meaning as under Section 46 of the Internal Revenue 9 Code. 10 (6) If during any taxable year, any property ceases 11 to be qualified property in the hands of the taxpayer 12 within 48 months after being placed in service, or the 13 situs of any qualified property is moved outside the 14 Enterprise Zone within 48 months after being placed in 15 service, the tax imposed under subsections (a) and (b) of 16 this Section for such taxable year shall be increased. 17 Such increase shall be determined by (i) recomputing the 18 investment credit which would have been allowed for the 19 year in which credit for such property was originally 20 allowed by eliminating such property from such 21 computation, and (ii) subtracting such recomputed credit 22 from the amount of credit previously allowed. For the 23 purposes of this paragraph (6), a reduction of the basis 24 of qualified property resulting from a redetermination of 25 the purchase price shall be deemed a disposition of 26 qualified property to the extent of such reduction. 27 (g) Jobs Tax Credit; Enterprise Zone and Foreign Trade 28 Zone or Sub-Zone. 29 (1) A taxpayer conducting a trade or business in an 30 enterprise zone or a High Impact Business designated by 31 the Department of Commerce and Community Affairs 32 conducting a trade or business in a federally designated 33 Foreign Trade Zone or Sub-Zone shall be allowed a credit 34 against the tax imposed by subsections (a) and (b) of SB2212 Engrossed -12- LRB9215616SMdv 1 this Section in the amount of $500 per eligible employee 2 hired to work in the zone during the taxable year. 3 (2) To qualify for the credit: 4 (A) the taxpayer must hire 5 or more eligible 5 employees to work in an enterprise zone or federally 6 designated Foreign Trade Zone or Sub-Zone during the 7 taxable year; 8 (B) the taxpayer's total employment within the 9 enterprise zone or federally designated Foreign 10 Trade Zone or Sub-Zone must increase by 5 or more 11 full-time employees beyond the total employed in 12 that zone at the end of the previous tax year for 13 which a jobs tax credit under this Section was 14 taken, or beyond the total employed by the taxpayer 15 as of December 31, 1985, whichever is later; and 16 (C) the eligible employees must be employed 17 180 consecutive days in order to be deemed hired for 18 purposes of this subsection. 19 (3) An "eligible employee" means an employee who 20 is: 21 (A) Certified by the Department of Commerce 22 and Community Affairs as "eligible for services" 23 pursuant to regulations promulgated in accordance 24 with Title II of the Job Training Partnership Act, 25 Training Services for the Disadvantaged or Title III 26 of the Job Training Partnership Act, Employment and 27 Training Assistance for Dislocated Workers Program. 28 (B) Hired after the enterprise zone or 29 federally designated Foreign Trade Zone or Sub-Zone 30 was designated or the trade or business was located 31 in that zone, whichever is later. 32 (C) Employed in the enterprise zone or Foreign 33 Trade Zone or Sub-Zone. An employee is employed in 34 an enterprise zone or federally designated Foreign SB2212 Engrossed -13- LRB9215616SMdv 1 Trade Zone or Sub-Zone if his services are rendered 2 there or it is the base of operations for the 3 services performed. 4 (D) A full-time employee working 30 or more 5 hours per week. 6 (4) For tax years ending on or after December 31, 7 1985 and prior to December 31, 1988, the credit shall be 8 allowed for the tax year in which the eligible employees 9 are hired. For tax years ending on or after December 31, 10 1988, the credit shall be allowed for the tax year 11 immediately following the tax year in which the eligible 12 employees are hired. If the amount of the credit exceeds 13 the tax liability for that year, whether it exceeds the 14 original liability or the liability as later amended, 15 such excess may be carried forward and applied to the tax 16 liability of the 5 taxable years following the excess 17 credit year. The credit shall be applied to the earliest 18 year for which there is a liability. If there is credit 19 from more than one tax year that is available to offset a 20 liability, earlier credit shall be applied first. 21 (5) The Department of Revenue shall promulgate such 22 rules and regulations as may be deemed necessary to carry 23 out the purposes of this subsection (g). 24 (6) The credit shall be available for eligible 25 employees hired on or after January 1, 1986. 26 (h) Investment credit; High Impact Business. 27 (1) Subject to subsections (b) and (b-5) of Section 28 5.5 of the Illinois Enterprise Zone Act, a taxpayer shall 29 be allowed a credit against the tax imposed by 30 subsections (a) and (b) of this Section for investment in 31 qualified property which is placed in service by a 32 Department of Commerce and Community Affairs designated 33 High Impact Business. The credit shall be .5% of the 34 basis for such property. The credit shall not be SB2212 Engrossed -14- LRB9215616SMdv 1 available (i) until the minimum investments in qualified 2 property set forth in subdivision (a)(3)(A) of Section 3 5.5 of the Illinois Enterprise Zone Act have been 4 satisfied or (ii) until the time authorized in subsection 5 (b-5) of the Illinois Enterprise Zone Act for entities 6 designated as High Impact Businesses under subdivisions 7 (a)(3)(B), (a)(3)(C), and (a)(3)(D) of Section 5.5 of the 8 Illinois Enterprise Zone Act, and shall not be allowed to 9 the extent that it would reduce a taxpayer's liability 10 for the tax imposed by subsections (a) and (b) of this 11 Section to below zero. The credit applicable to such 12 investments shall be taken in the taxable year in which 13 such investments have been completed. The credit for 14 additional investments beyond the minimum investment by a 15 designated high impact business authorized under 16 subdivision (a)(3)(A) of Section 5.5 of the Illinois 17 Enterprise Zone Act shall be available only in the 18 taxable year in which the property is placed in service 19 and shall not be allowed to the extent that it would 20 reduce a taxpayer's liability for the tax imposed by 21 subsections (a) and (b) of this Section to below zero. 22 For tax years ending on or after December 31, 1987, the 23 credit shall be allowed for the tax year in which the 24 property is placed in service, or, if the amount of the 25 credit exceeds the tax liability for that year, whether 26 it exceeds the original liability or the liability as 27 later amended, such excess may be carried forward and 28 applied to the tax liability of the 5 taxable years 29 following the excess credit year. The credit shall be 30 applied to the earliest year for which there is a 31 liability. If there is credit from more than one tax 32 year that is available to offset a liability, the credit 33 accruing first in time shall be applied first. 34 Changes made in this subdivision (h)(1) by Public SB2212 Engrossed -15- LRB9215616SMdv 1 Act 88-670 restore changes made by Public Act 85-1182 and 2 reflect existing law. 3 (2) The term qualified property means property 4 which: 5 (A) is tangible, whether new or used, 6 including buildings and structural components of 7 buildings; 8 (B) is depreciable pursuant to Section 167 of 9 the Internal Revenue Code, except that "3-year 10 property" as defined in Section 168(c)(2)(A) of that 11 Code is not eligible for the credit provided by this 12 subsection (h); 13 (C) is acquired by purchase as defined in 14 Section 179(d) of the Internal Revenue Code; and 15 (D) is not eligible for the Enterprise Zone 16 Investment Credit provided by subsection (f) of this 17 Section. 18 (3) The basis of qualified property shall be the 19 basis used to compute the depreciation deduction for 20 federal income tax purposes. 21 (4) If the basis of the property for federal income 22 tax depreciation purposes is increased after it has been 23 placed in service in a federally designated Foreign Trade 24 Zone or Sub-Zone located in Illinois by the taxpayer, the 25 amount of such increase shall be deemed property placed 26 in service on the date of such increase in basis. 27 (5) The term "placed in service" shall have the 28 same meaning as under Section 46 of the Internal Revenue 29 Code. 30 (6) If during any taxable year ending on or before 31 December 31, 1996, any property ceases to be qualified 32 property in the hands of the taxpayer within 48 months 33 after being placed in service, or the situs of any 34 qualified property is moved outside Illinois within 48 SB2212 Engrossed -16- LRB9215616SMdv 1 months after being placed in service, the tax imposed 2 under subsections (a) and (b) of this Section for such 3 taxable year shall be increased. Such increase shall be 4 determined by (i) recomputing the investment credit which 5 would have been allowed for the year in which credit for 6 such property was originally allowed by eliminating such 7 property from such computation, and (ii) subtracting such 8 recomputed credit from the amount of credit previously 9 allowed. For the purposes of this paragraph (6), a 10 reduction of the basis of qualified property resulting 11 from a redetermination of the purchase price shall be 12 deemed a disposition of qualified property to the extent 13 of such reduction. 14 (7) Beginning with tax years ending after December 15 31, 1996, if a taxpayer qualifies for the credit under 16 this subsection (h) and thereby is granted a tax 17 abatement and the taxpayer relocates its entire facility 18 in violation of the explicit terms and length of the 19 contract under Section 18-183 of the Property Tax Code, 20 the tax imposed under subsections (a) and (b) of this 21 Section shall be increased for the taxable year in which 22 the taxpayer relocated its facility by an amount equal to 23 the amount of credit received by the taxpayer under this 24 subsection (h). 25 (i) Credit for Personal Property Tax Replacement Income 26 Tax. A credit shall be allowed against the tax imposed by 27 subsections (a) and (b) of this Section for the tax imposed 28 by subsections (c) and (d) of this Section. This credit 29 shall be computed by multiplying the tax imposed by 30 subsections (c) and (d) of this Section by a fraction, the 31 numerator of which is base income allocable to Illinois and 32 the denominator of which is Illinois base income, and further 33 multiplying the product by the tax rate imposed by 34 subsections (a) and (b) of this Section. SB2212 Engrossed -17- LRB9215616SMdv 1 Any credit earned on or after December 31, 1986 under 2 this subsection which is unused in the year the credit is 3 computed because it exceeds the tax liability imposed by 4 subsections (a) and (b) for that year (whether it exceeds the 5 original liability or the liability as later amended) may be 6 carried forward and applied to the tax liability imposed by 7 subsections (a) and (b) of the 5 taxable years following the 8 excess credit year. This credit shall be applied first to 9 the earliest year for which there is a liability. If there 10 is a credit under this subsection from more than one tax year 11 that is available to offset a liability the earliest credit 12 arising under this subsection shall be applied first. 13 If, during any taxable year ending on or after December 14 31, 1986, the tax imposed by subsections (c) and (d) of this 15 Section for which a taxpayer has claimed a credit under this 16 subsection (i) is reduced, the amount of credit for such tax 17 shall also be reduced. Such reduction shall be determined by 18 recomputing the credit to take into account the reduced tax 19 imposed by subsectionssubsection(c) and (d). If any 20 portion of the reduced amount of credit has been carried to a 21 different taxable year, an amended return shall be filed for 22 such taxable year to reduce the amount of credit claimed. 23 (j) Training expense credit. Beginning with tax years 24 ending on or after December 31, 1986, a taxpayer shall be 25 allowed a credit against the tax imposed by subsections 26subsection(a) and (b) under this Section for all amounts 27 paid or accrued, on behalf of all persons employed by the 28 taxpayer in Illinois or Illinois residents employed outside 29 of Illinois by a taxpayer, for educational or vocational 30 training in semi-technical or technical fields or 31 semi-skilled or skilled fields, which were deducted from 32 gross income in the computation of taxable income. The 33 credit against the tax imposed by subsections (a) and (b) 34 shall be 1.6% of such training expenses. For partners, SB2212 Engrossed -18- LRB9215616SMdv 1 shareholders of subchapter S corporations, and owners of 2 limited liability companies, if the liability company is 3 treated as a partnership for purposes of federal and State 4 income taxation, there shall be allowed a credit under this 5 subsection (j) to be determined in accordance with the 6 determination of income and distributive share of income 7 under Sections 702 and 704 and subchapter S of the Internal 8 Revenue Code. 9 Any credit allowed under this subsection which is unused 10 in the year the credit is earned may be carried forward to 11 each of the 5 taxable years following the year for which the 12 credit is first computed until it is used. This credit shall 13 be applied first to the earliest year for which there is a 14 liability. If there is a credit under this subsection from 15 more than one tax year that is available to offset a 16 liability the earliest credit arising under this subsection 17 shall be applied first. 18 (k) Research and development credit. 19 Beginning with tax years ending after July 1, 1990, a 20 taxpayer shall be allowed a credit against the tax imposed by 21 subsections (a) and (b) of this Section for increasing 22 research activities in this State. The credit allowed 23 against the tax imposed by subsections (a) and (b) shall be 24 equal to 6 1/2% of the qualifying expenditures for increasing 25 research activities in this State. For partners, 26 shareholders of subchapter S corporations, and owners of 27 limited liability companies, if the liability company is 28 treated as a partnership for purposes of federal and State 29 income taxation, there shall be allowed a credit under this 30 subsection to be determined in accordance with the 31 determination of income and distributive share of income 32 under Sections 702 and 704 and subchapter S of the Internal 33 Revenue Code. 34 For purposes of this subsection, "qualifying SB2212 Engrossed -19- LRB9215616SMdv 1 expenditures" means the qualifying expenditures as defined 2 for the federal credit for increasing research activities 3 which would be allowable under Section 41 of the Internal 4 Revenue Code and which are conducted in this State, 5 "qualifying expenditures for increasing research activities 6 in this State" means the excess of qualifying expenditures 7 for the taxable year in which incurred over qualifying 8 expenditures for the base period, "qualifying expenditures 9 for the base period" means the average of the qualifying 10 expenditures for each year in the base period, and "base 11 period" means the 3 taxable years immediately preceding the 12 taxable year for which the determination is being made. 13 Any credit in excess of the tax liability for the taxable 14 year may be carried forward. A taxpayer may elect to have the 15 unused credit shown on its final completed return carried 16 over as a credit against the tax liability for the following 17 5 taxable years or until it has been fully used, whichever 18 occurs first. 19 If an unused credit is carried forward to a given year 20 from 2 or more earlier years, that credit arising in the 21 earliest year will be applied first against the tax liability 22 for the given year. If a tax liability for the given year 23 still remains, the credit from the next earliest year will 24 then be applied, and so on, until all credits have been used 25 or no tax liability for the given year remains. Any 26 remaining unused credit or credits then will be carried 27 forward to the next following year in which a tax liability 28 is incurred, except that no credit can be carried forward to 29 a year which is more than 5 years after the year in which the 30 expense for which the credit is given was incurred. 31 Unless extended by law, the credit shall not include 32 costs incurred after December 31, 2004, except for costs 33 incurred pursuant to a binding contract entered into on or 34 before December 31, 2004. SB2212 Engrossed -20- LRB9215616SMdv 1 No inference shall be drawn from this amendatory Act of 2 the 91st General Assembly in construing this Section for 3 taxable years beginning before January 1, 1999. 4 (l) Environmental Remediation Tax Credit. 5 (i) For tax years ending after December 31, 1997 6 and on or before December 31, 2001, a taxpayer shall be 7 allowed a credit against the tax imposed by subsections 8 (a) and (b) of this Section for certain amounts paid for 9 unreimbursed eligible remediation costs, as specified in 10 this subsection. For purposes of this Section, 11 "unreimbursed eligible remediation costs" means costs 12 approved by the Illinois Environmental Protection Agency 13 ("Agency") under Section 58.14 of the Environmental 14 Protection Act that were paid in performing environmental 15 remediation at a site for which a No Further Remediation 16 Letter was issued by the Agency and recorded under 17 Section 58.10 of the Environmental Protection Act. The 18 credit must be claimed for the taxable year in which 19 Agency approval of the eligible remediation costs is 20 granted. The credit is not available to any taxpayer if 21 the taxpayer or any related party caused or contributed 22 to, in any material respect, a release of regulated 23 substances on, in, or under the site that was identified 24 and addressed by the remedial action pursuant to the Site 25 Remediation Program of the Environmental Protection Act. 26 After the Pollution Control Board rules are adopted 27 pursuant to the Illinois Administrative Procedure Act for 28 the administration and enforcement of Section 58.9 of the 29 Environmental Protection Act, determinations as to credit 30 availability for purposes of this Section shall be made 31 consistent with those rules. For purposes of this 32 Section, "taxpayer" includes a person whose tax 33 attributes the taxpayer has succeeded to under Section 34 381 of the Internal Revenue Code and "related party" SB2212 Engrossed -21- LRB9215616SMdv 1 includes the persons disallowed a deduction for losses by 2 paragraphs (b), (c), and (f)(1) of Section 267 of the 3 Internal Revenue Code by virtue of being a related 4 taxpayer, as well as any of its partners. The credit 5 allowed against the tax imposed by subsections (a) and 6 (b) shall be equal to 25% of the unreimbursed eligible 7 remediation costs in excess of $100,000 per site, except 8 that the $100,000 threshold shall not apply to any site 9 contained in an enterprise zone as determined by the 10 Department of Commerce and Community Affairs. The total 11 credit allowed shall not exceed $40,000 per year with a 12 maximum total of $150,000 per site. For partners and 13 shareholders of subchapter S corporations, there shall be 14 allowed a credit under this subsection to be determined 15 in accordance with the determination of income and 16 distributive share of income under Sections 702 and 704 17 and subchapter S of the Internal Revenue Code. 18 (ii) A credit allowed under this subsection that is 19 unused in the year the credit is earned may be carried 20 forward to each of the 5 taxable years following the year 21 for which the credit is first earned until it is used. 22 The term "unused credit" does not include any amounts of 23 unreimbursed eligible remediation costs in excess of the 24 maximum credit per site authorized under paragraph (i). 25 This credit shall be applied first to the earliest year 26 for which there is a liability. If there is a credit 27 under this subsection from more than one tax year that is 28 available to offset a liability, the earliest credit 29 arising under this subsection shall be applied first. A 30 credit allowed under this subsection may be sold to a 31 buyer as part of a sale of all or part of the remediation 32 site for which the credit was granted. The purchaser of 33 a remediation site and the tax credit shall succeed to 34 the unused credit and remaining carry-forward period of SB2212 Engrossed -22- LRB9215616SMdv 1 the seller. To perfect the transfer, the assignor shall 2 record the transfer in the chain of title for the site 3 and provide written notice to the Director of the 4 Illinois Department of Revenue of the assignor's intent 5 to sell the remediation site and the amount of the tax 6 credit to be transferred as a portion of the sale. In no 7 event may a credit be transferred to any taxpayer if the 8 taxpayer or a related party would not be eligible under 9 the provisions of subsection (i). 10 (iii) For purposes of this Section, the term "site" 11 shall have the same meaning as under Section 58.2 of the 12 Environmental Protection Act. 13 (m) Education expense credit. 14 Beginning with tax years ending after December 31, 1999, 15 a taxpayer who is the custodian of one or more qualifying 16 pupils shall be allowed a credit against the tax imposed by 17 subsections (a) and (b) of this Section for qualified 18 education expenses incurred on behalf of the qualifying 19 pupils. The credit shall be equal to 25% of qualified 20 education expenses, but in no event may the total credit 21 under this subsectionSectionclaimed by a family that is the 22 custodian of qualifying pupils exceed $500. In no event 23 shall a credit under this subsection reduce the taxpayer's 24 liability under this Act to less than zero. This subsection 25 is exempt from the provisions of Section 250 of this Act. 26 For purposes of this subsection:;27 "Qualifying pupils" means individuals who (i) are 28 residents of the State of Illinois, (ii) are under the age of 29 21 at the close of the school year for which a credit is 30 sought, and (iii) during the school year for which a credit 31 is sought were full-time pupils enrolled in a kindergarten 32 through twelfth grade education program at any school, as 33 defined in this subsection. 34 "Qualified education expense" means the amount incurred SB2212 Engrossed -23- LRB9215616SMdv 1 on behalf of a qualifying pupil in excess of $250 for 2 tuition, book fees, and lab fees at the school in which the 3 pupil is enrolled during the regular school year. 4 "School" means any public or nonpublic elementary or 5 secondary school in Illinois that is in compliance with Title 6 VI of the Civil Rights Act of 1964 and attendance at which 7 satisfies the requirements of Section 26-1 of the School 8 Code, except that nothing shall be construed to require a 9 child to attend any particular public or nonpublic school to 10 qualify for the credit under this Section. 11 "Custodian" means, with respect to qualifying pupils, an 12 Illinois resident who is a parent, the parents, a legal 13 guardian, or the legal guardians of the qualifying pupils. 14 (Source: P.A. 91-9, eff. 1-1-00; 91-357, eff. 7-29-99; 15 91-643, eff. 8-20-99; 91-644, eff. 8-20-99; 91-860, eff. 16 6-22-00; 91-913, eff. 1-1-01; 92-12, eff. 7-1-01; 92-16, eff. 17 6-28-01; revised 12-3-01.) 18 (35 ILCS 5/202) (from Ch. 120, par. 2-202) 19 Sec. 202. Net Income Defined. In general. For purposes of 20 this Act, a taxpayer's net income for a taxable year shall be 21 that portion of his base income for such yearexcept money22and other benefits, other than salary, received by a driver23in a ridesharing arrangement using a motor vehicle,which is 24 allocable to this State under the provisions of Article 3, 25 less the standard exemption allowed by Section 204 and the 26 deduction allowed by Section 207. 27 (Source: P.A. 85-731.) 28 (35 ILCS 5/203) (from Ch. 120, par. 2-203) 29 Sec. 203. Base income defined. 30 (a) Individuals. 31 (1) In general. In the case of an individual, base 32 income means an amount equal to the taxpayer's adjusted SB2212 Engrossed -24- LRB9215616SMdv 1 gross income for the taxable year as modified by 2 paragraph (2). 3 (2) Modifications. The adjusted gross income 4 referred to in paragraph (1) shall be modified by adding 5 thereto the sum of the following amounts: 6 (A) An amount equal to all amounts paid or 7 accrued to the taxpayer as interest or dividends 8 during the taxable year to the extent excluded from 9 gross income in the computation of adjusted gross 10 income, except stock dividends of qualified public 11 utilities described in Section 305(e) of the 12 Internal Revenue Code; 13 (B) An amount equal to the amount of tax 14 imposed by this Act to the extent deducted from 15 gross income in the computation of adjusted gross 16 income for the taxable year; 17 (C) An amount equal to the amount received 18 during the taxable year as a recovery or refund of 19 real property taxes paid with respect to the 20 taxpayer's principal residence under the Revenue Act 21 of 1939 and for which a deduction was previously 22 taken under subparagraph (L) of this paragraph (2) 23 prior to July 1, 1991, the retrospective application 24 date of Article 4 of Public Act 87-17. In the case 25 of multi-unit or multi-use structures and farm 26 dwellings, the taxes on the taxpayer's principal 27 residence shall be that portion of the total taxes 28 for the entire property which is attributable to 29 such principal residence; 30 (D) 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 adjusted gross income; 34 (D-5) An amount, to the extent not included in SB2212 Engrossed -25- LRB9215616SMdv 1 adjusted gross income, equal to the amount of money 2 withdrawn by the taxpayer in the taxable year from a 3 medical care savings account and the interest earned 4 on the account in the taxable year of a withdrawal 5 pursuant to subsection (b) of Section 20 of the 6 Medical Care Savings Account Act or subsection (b) 7 of Section 20 of the Medical Care Savings Account 8 Act of 2000; and 9 (D-10) For taxable years ending after December 10 31, 1997, an amount equal to any eligible 11 remediation costs that the individual deducted in 12 computing adjusted gross income and for which the 13 individual claims a credit under subsection (l) of 14 Section 201; 15 and by deducting from the total so obtained the sum of 16 the following amounts: 17 (E) For taxable years ending before December 18 31, 2001, any amount included in such total in 19 respect of any compensation (including but not 20 limited to any compensation paid or accrued to a 21 serviceman while a prisoner of war or missing in 22 action) paid to a resident by reason of being on 23 active duty in the Armed Forces of the United States 24 and in respect of any compensation paid or accrued 25 to a resident who as a governmental employee was a 26 prisoner of war or missing in action, and in respect 27 of any compensation paid to a resident in 1971 or 28 thereafter for annual training performed pursuant to 29 Sections 502 and 503, Title 32, United States Code 30 as a member of the Illinois National Guard. For 31 taxable years ending on or after December 31, 2001, 32 any amount included in such total in respect of any 33 compensation (including but not limited to any 34 compensation paid or accrued to a serviceman while a SB2212 Engrossed -26- LRB9215616SMdv 1 prisoner of war or missing in action) paid to a 2 resident by reason of being a member of any 3 component of the Armed Forces of the United States 4 and in respect of any compensation paid or accrued 5 to a resident who as a governmental employee was a 6 prisoner of war or missing in action, and in respect 7 of any compensation paid to a resident in 2001 or 8 thereafter by reason of being a member of the 9 Illinois National Guard. The provisions of this 10 amendatory Act of the 92nd General Assembly are 11 exempt from the provisions of Section 250; 12 (F) An amount equal to all amounts included in 13 such total pursuant to the provisions of Sections 14 402(a), 402(c), 403(a), 403(b), 406(a), 407(a), and 15 408 of the Internal Revenue Code, or included in 16 such total as distributions under the provisions of 17 any retirement or disability plan for employees of 18 any governmental agency or unit, or retirement 19 payments to retired partners, which payments are 20 excluded in computing net earnings from self 21 employment by Section 1402 of the Internal Revenue 22 Code and regulations adopted pursuant thereto; 23 (G) The valuation limitation amount; 24 (H) An amount equal to the amount of any tax 25 imposed by this Act which was refunded to the 26 taxpayer and included in such total for the taxable 27 year; 28 (I) An amount equal to all amounts included in 29 such total pursuant to the provisions of Section 111 30 of the Internal Revenue Code as a recovery of items 31 previously deducted from adjusted gross income in 32 the computation of taxable income; 33 (J) An amount equal to those dividends 34 included in such total which were paid by a SB2212 Engrossed -27- LRB9215616SMdv 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 (K) 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 (J) of paragraph (2) of this subsection shall not be 13 eligible for the deduction provided under this 14 subparagraph (K); 15 (L) For taxable years ending after December 16 31, 1983, an amount equal to all social security 17 benefits and railroad retirement benefits included 18 in such total pursuant to Sections 72(r) and 86 of 19 the Internal Revenue Code; 20 (M) With the exception of any amounts 21 subtracted under subparagraph (N), an amount equal 22 to the sum of all amounts disallowed as deductions 23 by (i) Sections 171(a) (2), and 265(2) of the 24 Internal Revenue Code of 1954, as now or hereafter 25 amended, and all amounts of expenses allocable to 26 interest and disallowed as deductions by Section 27 265(1) of the Internal Revenue Code of 1954, as now 28 or hereafter amended; and (ii) for taxable years 29 ending on or after August 13, 1999, Sections 30 171(a)(2), 265, 280C, and 832(b)(5)(B)(i) of the 31 Internal Revenue Code; the provisions of this 32 subparagraph are exempt from the provisions of 33 Section 250; 34 (N) An amount equal to all amounts included in SB2212 Engrossed -28- LRB9215616SMdv 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 (O) An amount equal to any contribution made 11 to a job training project established pursuant to 12 the Tax Increment Allocation Redevelopment Act; 13 (P) An amount equal to the amount of the 14 deduction used to compute the federal income tax 15 credit for restoration of substantial amounts held 16 under claim of right for the taxable year pursuant 17 to Section 1341 of the Internal Revenue Code of 18 1986; 19 (Q) An amount equal to any amounts included in 20 such total, received by the taxpayer as an 21 acceleration in the payment of life, endowment or 22 annuity benefits in advance of the time they would 23 otherwise be payable as an indemnity for a terminal 24 illness; 25 (R) An amount equal to the amount of any 26 federal or State bonus paid to veterans of the 27 Persian Gulf War; 28 (S) An amount, to the extent included in 29 adjusted gross income, equal to the amount of a 30 contribution made in the taxable year on behalf of 31 the taxpayer to a medical care savings account 32 established under the Medical Care Savings Account 33 Act or the Medical Care Savings Account Act of 2000 34 to the extent the contribution is accepted by the SB2212 Engrossed -29- LRB9215616SMdv 1 account administrator as provided in that Act; 2 (T) An amount, to the extent included in 3 adjusted gross income, equal to the amount of 4 interest earned in the taxable year on a medical 5 care savings account established under the Medical 6 Care Savings Account Act or the Medical Care Savings 7 Account Act of 2000 on behalf of the taxpayer, other 8 than interest added pursuant to item (D-5) of this 9 paragraph (2); 10 (U) For one taxable year beginning on or after 11 January 1, 1994, an amount equal to the total amount 12 of tax imposed and paid under subsections (a) and 13 (b) of Section 201 of this Act on grant amounts 14 received by the taxpayer under the Nursing Home 15 Grant Assistance Act during the taxpayer's taxable 16 years 1992 and 1993; 17 (V) Beginning with tax years ending on or 18 after December 31, 1995 and ending with tax years 19 ending on or before December 31, 2004, an amount 20 equal to the amount paid by a taxpayer who is a 21 self-employed taxpayer, a partner of a partnership, 22 or a shareholder in a Subchapter S corporation for 23 health insurance or long-term care insurance for 24 that taxpayer or that taxpayer's spouse or 25 dependents, to the extent that the amount paid for 26 that health insurance or long-term care insurance 27 may be deducted under Section 213 of the Internal 28 Revenue Code of 1986, has not been deducted on the 29 federal income tax return of the taxpayer, and does 30 not exceed the taxable income attributable to that 31 taxpayer's income, self-employment income, or 32 Subchapter S corporation income; except that no 33 deduction shall be allowed under this item (V) if 34 the taxpayer is eligible to participate in any SB2212 Engrossed -30- LRB9215616SMdv 1 health insurance or long-term care insurance plan of 2 an employer of the taxpayer or the taxpayer's 3 spouse. The amount of the health insurance and 4 long-term care insurance subtracted under this item 5 (V) shall be determined by multiplying total health 6 insurance and long-term care insurance premiums paid 7 by the taxpayer times a number that represents the 8 fractional percentage of eligible medical expenses 9 under Section 213 of the Internal Revenue Code of 10 1986 not actually deducted on the taxpayer's federal 11 income tax return; 12 (W) For taxable years beginning on or after 13 January 1, 1998, all amounts included in the 14 taxpayer's federal gross income in the taxable year 15 from amounts converted from a regular IRA to a Roth 16 IRA. This paragraph is exempt from the provisions of 17 Section 250; 18 (X) For taxable year 1999 and thereafter, an 19 amount equal to the amount of any (i) distributions, 20 to the extent includible in gross income for federal 21 income tax purposes, made to the taxpayer because of 22 his or her status as a victim of persecution for 23 racial or religious reasons by Nazi Germany or any 24 other Axis regime or as an heir of the victim and 25 (ii) items of income, to the extent includible in 26 gross income for federal income tax purposes, 27 attributable to, derived from or in any way related 28 to assets stolen from, hidden from, or otherwise 29 lost to a victim of persecution for racial or 30 religious reasons by Nazi Germany or any other Axis 31 regime immediately prior to, during, and immediately 32 after World War II, including, but not limited to, 33 interest on the proceeds receivable as insurance 34 under policies issued to a victim of persecution for SB2212 Engrossed -31- LRB9215616SMdv 1 racial or religious reasons by Nazi Germany or any 2 other Axis regime by European insurance companies 3 immediately prior to and during World War II; 4 provided, however, this subtraction from federal 5 adjusted gross income does not apply to assets 6 acquired with such assets or with the proceeds from 7 the sale of such assets; provided, further, this 8 paragraph shall only apply to a taxpayer who was the 9 first recipient of such assets after their recovery 10 and who is a victim of persecution for racial or 11 religious reasons by Nazi Germany or any other Axis 12 regime or as an heir of the victim. The amount of 13 and the eligibility for any public assistance, 14 benefit, or similar entitlement is not affected by 15 the inclusion of items (i) and (ii) of this 16 paragraph in gross income for federal income tax 17 purposes. This paragraph is exempt from the 18 provisions of Section 250;and19 (Y) For taxable years beginning on or after 20 January 1, 2002, moneys contributed in the taxable 21 year to a College Savings Pool account under Section 22 16.5 of the State Treasurer Act. This subparagraph 23 (Y) is exempt from the provisions of Section 250; 24 and 25 (Z) Any amount included in adjusted gross 26 income, other than salary, received by a driver in a 27 ridesharing arrangement using a motor vehicle. 28 (b) Corporations. 29 (1) In general. In the case of a corporation, base 30 income means an amount equal to the taxpayer's taxable 31 income for the taxable year as modified by paragraph (2). 32 (2) Modifications. The taxable income referred to 33 in paragraph (1) shall be modified by adding thereto the 34 sum of the following amounts: SB2212 Engrossed -32- LRB9215616SMdv 1 (A) An amount equal to all amounts paid or 2 accrued to the taxpayer as interest and all 3 distributions received from regulated investment 4 companies during the taxable year to the extent 5 excluded from gross income in the computation of 6 taxable income; 7 (B) An amount equal to the amount of tax 8 imposed by this Act to the extent deducted from 9 gross income in the computation of taxable income 10 for the taxable year; 11 (C) In the case of a regulated investment 12 company, an amount equal to the excess of (i) the 13 net long-term capital gain for the taxable year, 14 over (ii) the amount of the capital gain dividends 15 designated as such in accordance with Section 16 852(b)(3)(C) of the Internal Revenue Code and any 17 amount designated under Section 852(b)(3)(D) of the 18 Internal Revenue Code, attributable to the taxable 19 year (this amendatory Act of 1995 (Public Act 89-89) 20 is declarative of existing law and is not a new 21 enactment); 22 (D) The amount of any net operating loss 23 deduction taken in arriving at taxable income, other 24 than a net operating loss carried forward from a 25 taxable year ending prior to December 31, 1986; 26 (E) For taxable years in which a net operating 27 loss carryback or carryforward from a taxable year 28 ending prior to December 31, 1986 is an element of 29 taxable income under paragraph (1) of subsection (e) 30 or subparagraph (E) of paragraph (2) of subsection 31 (e), the amount by which addition modifications 32 other than those provided by this subparagraph (E) 33 exceeded subtraction modifications in such earlier 34 taxable year, with the following limitations applied SB2212 Engrossed -33- LRB9215616SMdv 1 in the order that they are listed: 2 (i) the addition modification relating to 3 the net operating loss carried back or forward 4 to the taxable year from any taxable year 5 ending prior to December 31, 1986 shall be 6 reduced by the amount of addition modification 7 under this subparagraph (E) which related to 8 that net operating loss and which was taken 9 into account in calculating the base income of 10 an earlier taxable year, and 11 (ii) the addition modification relating 12 to the net operating loss carried back or 13 forward to the taxable year from any taxable 14 year ending prior to December 31, 1986 shall 15 not exceed the amount of such carryback or 16 carryforward; 17 For taxable years in which there is a net 18 operating loss carryback or carryforward from more 19 than one other taxable year ending prior to December 20 31, 1986, the addition modification provided in this 21 subparagraph (E) shall be the sum of the amounts 22 computed independently under the preceding 23 provisions of this subparagraph (E) for each such 24 taxable year; and 25 (E-5) For taxable years ending after December 26 31, 1997, an amount equal to any eligible 27 remediation costs that the corporation deducted in 28 computing adjusted gross income and for which the 29 corporation claims a credit under subsection (l) of 30 Section 201; 31 and by deducting from the total so obtained the sum of 32 the following amounts: 33 (F) An amount equal to the amount of any tax 34 imposed by this Act which was refunded to the SB2212 Engrossed -34- LRB9215616SMdv 1 taxpayer and included in such total for the taxable 2 year; 3 (G) An amount equal to any amount included in 4 such total under Section 78 of the Internal Revenue 5 Code; 6 (H) In the case of a regulated investment 7 company, an amount equal to the amount of exempt 8 interest dividends as defined in subsection (b) (5) 9 of Section 852 of the Internal Revenue Code, paid to 10 shareholders for the taxable year; 11 (I) With the exception of any amounts 12 subtracted under subparagraph (J), an amount equal 13 to the sum of all amounts disallowed as deductions 14 by (i) Sections 171(a) (2), and 265(a)(2) and 15 amounts disallowed as interest expense by Section 16 291(a)(3) of the Internal Revenue Code, as now or 17 hereafter amended, and all amounts of expenses 18 allocable to interest and disallowed as deductions 19 by Section 265(a)(1) of the Internal Revenue Code, 20 as now or hereafter amended; and (ii) for taxable 21 years ending on or after August 13, 1999, Sections 22 171(a)(2), 265, 280C, 291(a)(3), and 832(b)(5)(B)(i) 23 of the Internal Revenue Code; the provisions of this 24 subparagraph are exempt from the provisions of 25 Section 250; 26 (J) An amount equal to all amounts included in 27 such total which are exempt from taxation by this 28 State either by reason of its statutes or 29 Constitution or by reason of the Constitution, 30 treaties or statutes of the United States; provided 31 that, in the case of any statute of this State that 32 exempts income derived from bonds or other 33 obligations from the tax imposed under this Act, the 34 amount exempted shall be the interest net of bond SB2212 Engrossed -35- LRB9215616SMdv 1 premium amortization; 2 (K) An amount equal to those dividends 3 included in such total which were paid by a 4 corporation which conducts business operations in an 5 Enterprise Zone or zones created under the Illinois 6 Enterprise Zone Act and conducts substantially all 7 of its operations in an Enterprise Zone or zones; 8 (L) 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 (L); 18 (M) For any taxpayer that is a financial 19 organization within the meaning of Section 304(c) of 20 this Act, an amount included in such total as 21 interest income from a loan or loans made by such 22 taxpayer to a borrower, to the extent that such a 23 loan is secured by property which is eligible for 24 the Enterprise Zone Investment Credit. To determine 25 the portion of a loan or loans that is secured by 26 property eligible for a Section 201(f) investment 27 credit to the borrower, the entire principal amount 28 of the loan or loans between the taxpayer and the 29 borrower should be divided into the basis of the 30 Section 201(f) investment credit property which 31 secures the loan or loans, using for this purpose 32 the original basis of such property on the date that 33 it was placed in service in the Enterprise Zone. 34 The subtraction modification available to taxpayer SB2212 Engrossed -36- LRB9215616SMdv 1 in any year under this subsection shall be that 2 portion of the total interest paid by the borrower 3 with respect to such loan attributable to the 4 eligible property as calculated under the previous 5 sentence; 6 (M-1) For any taxpayer that is a financial 7 organization within the meaning of Section 304(c) of 8 this Act, an amount included in such total as 9 interest income from a loan or loans made by such 10 taxpayer to a borrower, to the extent that such a 11 loan is secured by property which is eligible for 12 the High Impact Business Investment Credit. To 13 determine the portion of a loan or loans that is 14 secured by property eligible for a Section 201(h) 15 investment credit to the borrower, the entire 16 principal amount of the loan or loans between the 17 taxpayer and the borrower should be divided into the 18 basis of the Section 201(h) investment credit 19 property which secures the loan or loans, using for 20 this purpose the original basis of such property on 21 the date that it was placed in service in a 22 federally designated Foreign Trade Zone or Sub-Zone 23 located in Illinois. No taxpayer that is eligible 24 for the deduction provided in subparagraph (M) of 25 paragraph (2) of this subsection shall be eligible 26 for the deduction provided under this subparagraph 27 (M-1). The subtraction modification available to 28 taxpayers in any year under this subsection shall be 29 that portion of the total interest paid by the 30 borrower with respect to such loan attributable to 31 the eligible property as calculated under the 32 previous sentence; 33 (N) Two times any contribution made during the 34 taxable year to a designated zone organization to SB2212 Engrossed -37- LRB9215616SMdv 1 the extent that the contribution (i) qualifies as a 2 charitable contribution under subsection (c) of 3 Section 170 of the Internal Revenue Code and (ii) 4 must, by its terms, be used for a project approved 5 by the Department of Commerce and Community Affairs 6 under Section 11 of the Illinois Enterprise Zone 7 Act; 8 (O) An amount equal to: (i) 85% for taxable 9 years ending on or before December 31, 1992, or, a 10 percentage equal to the percentage allowable under 11 Section 243(a)(1) of the Internal Revenue Code of 12 1986 for taxable years ending after December 31, 13 1992, of the amount by which dividends included in 14 taxable income and received from a corporation that 15 is not created or organized under the laws of the 16 United States or any state or political subdivision 17 thereof, including, for taxable years ending on or 18 after December 31, 1988, dividends received or 19 deemed received or paid or deemed paid under 20 Sections 951 through 964 of the Internal Revenue 21 Code, exceed the amount of the modification provided 22 under subparagraph (G) of paragraph (2) of this 23 subsection (b) which is related to such dividends; 24 plus (ii) 100% of the amount by which dividends, 25 included in taxable income and received, including, 26 for taxable years ending on or after December 31, 27 1988, dividends received or deemed received or paid 28 or deemed paid under Sections 951 through 964 of the 29 Internal Revenue Code, from any such corporation 30 specified in clause (i) that would but for the 31 provisions of Section 1504 (b) (3) of the Internal 32 Revenue Code be treated as a member of the 33 affiliated group which includes the dividend 34 recipient, exceed the amount of the modification SB2212 Engrossed -38- LRB9215616SMdv 1 provided under subparagraph (G) of paragraph (2) of 2 this subsection (b) which is related to such 3 dividends; 4 (P) An amount equal to any contribution made 5 to a job training project established pursuant to 6 the Tax Increment Allocation Redevelopment Act; 7 (Q) An amount equal to the amount of the 8 deduction used to compute the federal income tax 9 credit for restoration of substantial amounts held 10 under claim of right for the taxable year pursuant 11 to Section 1341 of the Internal Revenue Code of 12 1986; 13 (R) In the case of an attorney-in-fact with 14 respect to whom an interinsurer or a reciprocal 15 insurer has made the election under Section 835 of 16 the Internal Revenue Code, 26 U.S.C. 835, an amount 17 equal to the excess, if any, of the amounts paid or 18 incurred by that interinsurer or reciprocal insurer 19 in the taxable year to the attorney-in-fact over the 20 deduction allowed to that interinsurer or reciprocal 21 insurer with respect to the attorney-in-fact under 22 Section 835(b) of the Internal Revenue Code for the 23 taxable year; and 24 (S) For taxable years ending on or after 25 December 31, 1997, in the case of a Subchapter S 26 corporation, an amount equal to all amounts of 27 income allocable to a shareholder subject to the 28 Personal Property Tax Replacement Income Tax imposed 29 by subsections (c) and (d) of Section 201 of this 30 Act, including amounts allocable to organizations 31 exempt from federal income tax by reason of Section 32 501(a) of the Internal Revenue Code. This 33 subparagraph (S) is exempt from the provisions of 34 Section 250. SB2212 Engrossed -39- LRB9215616SMdv 1 (3) Special rule. For purposes of paragraph (2) 2 (A), "gross income" in the case of a life insurance 3 company, for tax years ending on and after December 31, 4 1994, shall mean the gross investment income for the 5 taxable year. 6 (c) Trusts and estates. 7 (1) In general. In the case of a trust or estate, 8 base income means an amount equal to the taxpayer's 9 taxable income for the taxable year as modified by 10 paragraph (2). 11 (2) Modifications. Subject to the provisions of 12 paragraph (3), the taxable income referred to in 13 paragraph (1) shall be modified by adding thereto the sum 14 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) In the case of (i) an estate, $600; (ii) a 20 trust which, under its governing instrument, is 21 required to distribute all of its income currently, 22 $300; and (iii) any other trust, $100, but in each 23 such case, only to the extent such amount was 24 deducted in the computation of taxable income; 25 (C) An amount equal to the amount of tax 26 imposed by this Act to the extent deducted from 27 gross income in the computation of taxable income 28 for the taxable year; 29 (D) The amount of any net operating loss 30 deduction taken in arriving at taxable income, other 31 than a net operating loss carried forward from a 32 taxable year ending prior to December 31, 1986; 33 (E) For taxable years in which a net operating 34 loss carryback or carryforward from a taxable year SB2212 Engrossed -40- LRB9215616SMdv 1 ending prior to December 31, 1986 is an element of 2 taxable income under paragraph (1) of subsection (e) 3 or subparagraph (E) of paragraph (2) of subsection 4 (e), the amount by which addition modifications 5 other than those provided by this subparagraph (E) 6 exceeded subtraction modifications in such taxable 7 year, with the following limitations applied in the 8 order that they are listed: 9 (i) the addition modification relating to 10 the net operating loss carried back or forward 11 to the taxable year from any taxable year 12 ending prior to December 31, 1986 shall be 13 reduced by the amount of addition modification 14 under this subparagraph (E) which related to 15 that net operating loss and which was taken 16 into account in calculating the base income of 17 an earlier taxable year, and 18 (ii) the addition modification relating 19 to the net operating loss carried back or 20 forward to the taxable year from any taxable 21 year ending prior to December 31, 1986 shall 22 not exceed the amount of such carryback or 23 carryforward; 24 For taxable years in which there is a net 25 operating loss carryback or carryforward from more 26 than one other taxable year ending prior to December 27 31, 1986, the addition modification provided in this 28 subparagraph (E) shall be the sum of the amounts 29 computed independently under the preceding 30 provisions of this subparagraph (E) for each such 31 taxable year; 32 (F) For taxable years ending on or after 33 January 1, 1989, an amount equal to the tax deducted 34 pursuant to Section 164 of the Internal Revenue Code SB2212 Engrossed -41- LRB9215616SMdv 1 if the trust or estate is claiming the same tax for 2 purposes of the Illinois foreign tax credit under 3 Section 601 of this Act; 4 (G) An amount equal to the amount of the 5 capital gain deduction allowable under the Internal 6 Revenue Code, to the extent deducted from gross 7 income in the computation of taxable income; and 8 (G-5) For taxable years ending after December 9 31, 1997, an amount equal to any eligible 10 remediation costs that the trust or estate deducted 11 in computing adjusted gross income and for which the 12 trust or estate claims a credit under subsection (l) 13 of Section 201; 14 and by deducting from the total so obtained the sum of 15 the following amounts: 16 (H) An amount equal to all amounts included in 17 such total pursuant to the provisions of Sections 18 402(a), 402(c), 403(a), 403(b), 406(a), 407(a) and 19 408 of the Internal Revenue Code or included in such 20 total as distributions under the provisions of any 21 retirement or disability plan for employees of any 22 governmental agency or unit, or retirement payments 23 to retired partners, which payments are excluded in 24 computing net earnings from self employment by 25 Section 1402 of the Internal Revenue Code and 26 regulations adopted pursuant thereto; 27 (I) The valuation limitation amount; 28 (J) An amount equal to the amount of any tax 29 imposed by this Act which was refunded to the 30 taxpayer and included in such total for the taxable 31 year; 32 (K) An amount equal to all amounts included in 33 taxable income as modified by subparagraphs (A), 34 (B), (C), (D), (E), (F) and (G) which are exempt SB2212 Engrossed -42- LRB9215616SMdv 1 from taxation by this State either by reason of its 2 statutes or Constitution or by reason of the 3 Constitution, treaties or statutes of the United 4 States; provided that, in the case of any statute of 5 this State that exempts income derived from bonds or 6 other obligations from the tax imposed under this 7 Act, the amount exempted shall be the interest net 8 of bond premium amortization; 9 (L) With the exception of any amounts 10 subtracted under subparagraph (K), an amount equal 11 to the sum of all amounts disallowed as deductions 12 by (i) Sections 171(a) (2) and 265(a)(2) of the 13 Internal Revenue Code, as now or hereafter amended, 14 and all amounts of expenses allocable to interest 15 and disallowed as deductions by Section 265(1) of 16 the Internal Revenue Code of 1954, as now or 17 hereafter amended; and (ii) for taxable years ending 18 on or after August 13, 1999, Sections 171(a)(2), 19 265, 280C, and 832(b)(5)(B)(i) of the Internal 20 Revenue Code; the provisions of this subparagraph 21 are exempt from the provisions of Section 250; 22 (M) An amount equal to those dividends 23 included in such total which were paid by a 24 corporation which conducts business operations in an 25 Enterprise Zone or zones created under the Illinois 26 Enterprise Zone Act and conducts substantially all 27 of its operations in an Enterprise Zone or Zones; 28 (N) An amount equal to any contribution made 29 to a job training project established pursuant to 30 the Tax Increment Allocation Redevelopment Act; 31 (O) An amount equal to those dividends 32 included in such total that were paid by a 33 corporation that conducts business operations in a 34 federally designated Foreign Trade Zone or Sub-Zone SB2212 Engrossed -43- LRB9215616SMdv 1 and that is designated a High Impact Business 2 located in Illinois; provided that dividends 3 eligible for the deduction provided in subparagraph 4 (M) of paragraph (2) of this subsection shall not be 5 eligible for the deduction provided under this 6 subparagraph (O); 7 (P) An amount equal to the amount of the 8 deduction used to compute the federal income tax 9 credit for restoration of substantial amounts held 10 under claim of right for the taxable year pursuant 11 to Section 1341 of the Internal Revenue Code of 12 1986; and 13 (Q) For taxable year 1999 and thereafter, an 14 amount equal to the amount of any (i) distributions, 15 to the extent includible in gross income for federal 16 income tax purposes, made to the taxpayer because of 17 his or her status as a victim of persecution for 18 racial or religious reasons by Nazi Germany or any 19 other Axis regime or as an heir of the victim and 20 (ii) items of income, to the extent includible in 21 gross income for federal income tax purposes, 22 attributable to, derived from or in any way related 23 to assets stolen from, hidden from, or otherwise 24 lost to a victim of persecution for racial or 25 religious reasons by Nazi Germany or any other Axis 26 regime immediately prior to, during, and immediately 27 after World War II, including, but not limited to, 28 interest on the proceeds receivable as insurance 29 under policies issued to a victim of persecution for 30 racial or religious reasons by Nazi Germany or any 31 other Axis regime by European insurance companies 32 immediately prior to and during World War II; 33 provided, however, this subtraction from federal 34 adjusted gross income does not apply to assets SB2212 Engrossed -44- LRB9215616SMdv 1 acquired with such assets or with the proceeds from 2 the sale of such assets; provided, further, this 3 paragraph shall only apply to a taxpayer who was the 4 first recipient of such assets after their recovery 5 and who is a victim of persecution for racial or 6 religious reasons by Nazi Germany or any other Axis 7 regime or as an heir of the victim. The amount of 8 and the eligibility for any public assistance, 9 benefit, or similar entitlement is not affected by 10 the inclusion of items (i) and (ii) of this 11 paragraph in gross income for federal income tax 12 purposes. This paragraph is exempt from the 13 provisions of Section 250. 14 (3) Limitation. The amount of any modification 15 otherwise required under this subsection shall, under 16 regulations prescribed by the Department, be adjusted by 17 any amounts included therein which were properly paid, 18 credited, or required to be distributed, or permanently 19 set aside for charitable purposes pursuant to Internal 20 Revenue Code Section 642(c) during the taxable year. 21 (d) Partnerships. 22 (1) In general. In the case of a partnership, base 23 income means an amount equal to the taxpayer's taxable 24 income for the taxable year as modified by paragraph (2). 25 (2) Modifications. The taxable income referred to 26 in paragraph (1) shall be modified by adding thereto the 27 sum of the following amounts: 28 (A) An amount equal to all amounts paid or 29 accrued to the taxpayer as interest or dividends 30 during the taxable year to the extent excluded from 31 gross income in the computation of taxable income; 32 (B) An amount equal to the amount of tax 33 imposed by this Act to the extent deducted from 34 gross income for the taxable year; SB2212 Engrossed -45- LRB9215616SMdv 1 (C) The amount of deductions allowed to the 2 partnership pursuant to Section 707 (c) of the 3 Internal Revenue Code in calculating its taxable 4 income; and 5 (D) An amount equal to the amount of the 6 capital gain deduction allowable under the Internal 7 Revenue Code, to the extent deducted from gross 8 income in the computation of taxable income; 9 and by deducting from the total so obtained the following 10 amounts: 11 (E) The valuation limitation amount; 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 all amounts included in 17 taxable income as modified by subparagraphs (A), 18 (B), (C) and (D) which are exempt from taxation by 19 this State either by reason of its statutes or 20 Constitution or by reason of the Constitution, 21 treaties or statutes of the United States; provided 22 that, in the case of any statute of this State that 23 exempts income derived from bonds or other 24 obligations from the tax imposed under this Act, the 25 amount exempted shall be the interest net of bond 26 premium amortization; 27 (H) Any income of the partnership which 28 constitutes personal service income as defined in 29 Section 1348 (b) (1) of the Internal Revenue Code 30 (as in effect December 31, 1981) or a reasonable 31 allowance for compensation paid or accrued for 32 services rendered by partners to the partnership, 33 whichever is greater; 34 (I) An amount equal to all amounts of income SB2212 Engrossed -46- LRB9215616SMdv 1 distributable to an entity subject to the Personal 2 Property Tax Replacement Income Tax imposed by 3 subsections (c) and (d) of Section 201 of this Act 4 including amounts distributable to organizations 5 exempt from federal income tax by reason of Section 6 501(a) of the Internal Revenue Code; 7 (J) With the exception of any amounts 8 subtracted under subparagraph (G), an amount equal 9 to the sum of all amounts disallowed as deductions 10 by (i) Sections 171(a) (2), and 265(2) of the 11 Internal Revenue Code of 1954, as now or hereafter 12 amended, and all amounts of expenses allocable to 13 interest and disallowed as deductions by Section 14 265(1) of the Internal Revenue Code, as now or 15 hereafter amended; and (ii) for taxable years ending 16 on or after August 13, 1999, Sections 171(a)(2), 17 265, 280C, and 832(b)(5)(B)(i) of the Internal 18 Revenue Code; the provisions of this subparagraph 19 are exempt from the provisions of Section 250; 20 (K) An amount equal to those dividends 21 included in such total which were paid by a 22 corporation which conducts business operations in an 23 Enterprise Zone or zones created under the Illinois 24 Enterprise Zone Act, enacted by the 82nd General 25 Assembly, and conducts substantially all of its 26 operationswhich does not conduct such operations27other thanin an Enterprise Zone or Zones; 28 (L) An amount equal to any contribution made 29 to a job training project established pursuant to 30 the Real Property Tax Increment Allocation 31 Redevelopment Act; 32 (M) An amount equal to those dividends 33 included in such total that were paid by a 34 corporation that conducts business operations in a SB2212 Engrossed -47- LRB9215616SMdv 1 federally designated Foreign Trade Zone or Sub-Zone 2 and that is designated a High Impact Business 3 located in Illinois; provided that dividends 4 eligible for the deduction provided in subparagraph 5 (K) of paragraph (2) of this subsection shall not be 6 eligible for the deduction provided under this 7 subparagraph (M); and 8 (N) An amount equal to the amount of the 9 deduction used to compute the federal income tax 10 credit for restoration of substantial amounts held 11 under claim of right for the taxable year pursuant 12 to Section 1341 of the Internal Revenue Code of 13 1986. 14 (e) Gross income; adjusted gross income; taxable income. 15 (1) In general. Subject to the provisions of 16 paragraph (2) and subsection (b) (3), for purposes of 17 this Section and Section 803(e), a taxpayer's gross 18 income, adjusted gross income, or taxable income for the 19 taxable year shall mean the amount of gross income, 20 adjusted gross income or taxable income properly 21 reportable for federal income tax purposes for the 22 taxable year under the provisions of the Internal Revenue 23 Code. Taxable income may be less than zero. However, for 24 taxable years ending on or after December 31, 1986, net 25 operating loss carryforwards from taxable years ending 26 prior to December 31, 1986, may not exceed the sum of 27 federal taxable income for the taxable year before net 28 operating loss deduction, plus the excess of addition 29 modifications over subtraction modifications for the 30 taxable year. For taxable years ending prior to December 31 31, 1986, taxable income may never be an amount in excess 32 of the net operating loss for the taxable year as defined 33 in subsections (c) and (d) of Section 172 of the Internal 34 Revenue Code, provided that when taxable income of a SB2212 Engrossed -48- LRB9215616SMdv 1 corporation (other than a Subchapter S corporation), 2 trust, or estate is less than zero and addition 3 modifications, other than those provided by subparagraph 4 (E) of paragraph (2) of subsection (b) for corporations 5 or subparagraph (E) of paragraph (2) of subsection (c) 6 for trusts and estates, exceed subtraction modifications, 7 an addition modification must be made under those 8 subparagraphs for any other taxable year to which the 9 taxable income less than zero (net operating loss) is 10 applied under Section 172 of the Internal Revenue Code or 11 under subparagraph (E) of paragraph (2) of this 12 subsection (e) applied in conjunction with Section 172 of 13 the Internal Revenue Code. 14 (2) Special rule. For purposes of paragraph (1) of 15 this subsection, the taxable income properly reportable 16 for federal income tax purposes shall mean: 17 (A) Certain life insurance companies. In the 18 case of a life insurance company subject to the tax 19 imposed by Section 801 of the Internal Revenue Code, 20 life insurance company taxable income, plus the 21 amount of distribution from pre-1984 policyholder 22 surplus accounts as calculated under Section 815a of 23 the Internal Revenue Code; 24 (B) Certain other insurance companies. In the 25 case of mutual insurance companies subject to the 26 tax imposed by Section 831 of the Internal Revenue 27 Code, insurance company taxable income; 28 (C) Regulated investment companies. In the 29 case of a regulated investment company subject to 30 the tax imposed by Section 852 of the Internal 31 Revenue Code, investment company taxable income; 32 (D) Real estate investment trusts. In the 33 case of a real estate investment trust subject to 34 the tax imposed by Section 857 of the Internal SB2212 Engrossed -49- LRB9215616SMdv 1 Revenue Code, real estate investment trust taxable 2 income; 3 (E) Consolidated corporations. In the case of 4 a corporation which is a member of an affiliated 5 group of corporations filing a consolidated income 6 tax return for the taxable year for federal income 7 tax purposes, taxable income determined as if such 8 corporation had filed a separate return for federal 9 income tax purposes for the taxable year and each 10 preceding taxable year for which it was a member of 11 an affiliated group. For purposes of this 12 subparagraph, the taxpayer's separate taxable income 13 shall be determined as if the election provided by 14 Section 243(b) (2) of the Internal Revenue Code had 15 been in effect for all such years; 16 (F) Cooperatives. In the case of a 17 cooperative corporation or association, the taxable 18 income of such organization determined in accordance 19 with the provisions of Section 1381 through 1388 of 20 the Internal Revenue Code; 21 (G) Subchapter S corporations. In the case 22 of: (i) a Subchapter S corporation for which there 23 is in effect an election for the taxable year under 24 Section 1362 of the Internal Revenue Code, the 25 taxable income of such corporation determined in 26 accordance with Section 1363(b) of the Internal 27 Revenue Code, except that taxable income shall take 28 into account those items which are required by 29 Section 1363(b)(1) of the Internal Revenue Code to 30 be separately stated; and (ii) a Subchapter S 31 corporation for which there is in effect a federal 32 election to opt out of the provisions of the 33 Subchapter S Revision Act of 1982 and have applied 34 instead the prior federal Subchapter S rules as in SB2212 Engrossed -50- LRB9215616SMdv 1 effect on July 1, 1982, the taxable income of such 2 corporation determined in accordance with the 3 federal Subchapter S rules as in effect on July 1, 4 1982; and 5 (H) Partnerships. In the case of a 6 partnership, taxable income determined in accordance 7 with Section 703 of the Internal Revenue Code, 8 except that taxable income shall take into account 9 those items which are required by Section 703(a)(1) 10 to be separately stated but which would be taken 11 into account by an individual in calculating his 12 taxable income. 13 (f) Valuation limitation amount. 14 (1) In general. The valuation limitation amount 15 referred to in subsections (a) (2) (G), (c) (2) (I) and 16 (d)(2) (E) is an amount equal to: 17 (A) The sum of the pre-August 1, 1969 18 appreciation amounts (to the extent consisting of 19 gain reportable under the provisions of Section 1245 20 or 1250 of the Internal Revenue Code) for all 21 property in respect of which such gain was reported 22 for the taxable year; plus 23 (B) The lesser of (i) the sum of the 24 pre-August 1, 1969 appreciation amounts (to the 25 extent consisting of capital gain) for all property 26 in respect of which such gain was reported for 27 federal income tax purposes for the taxable year, or 28 (ii) the net capital gain for the taxable year, 29 reduced in either case by any amount of such gain 30 included in the amount determined under subsection 31 (a) (2) (F) or (c) (2) (H). 32 (2) Pre-August 1, 1969 appreciation amount. 33 (A) If the fair market value of property 34 referred to in paragraph (1) was readily SB2212 Engrossed -51- LRB9215616SMdv 1 ascertainable on August 1, 1969, the pre-August 1, 2 1969 appreciation amount for such property is the 3 lesser of (i) the excess of such fair market value 4 over the taxpayer's basis (for determining gain) for 5 such property on that date (determined under the 6 Internal Revenue Code as in effect on that date), or 7 (ii) the total gain realized and reportable for 8 federal income tax purposes in respect of the sale, 9 exchange or other disposition of such property. 10 (B) If the fair market value of property 11 referred to in paragraph (1) was not readily 12 ascertainable on August 1, 1969, the pre-August 1, 13 1969 appreciation amount for such property is that 14 amount which bears the same ratio to the total gain 15 reported in respect of the property for federal 16 income tax purposes for the taxable year, as the 17 number of full calendar months in that part of the 18 taxpayer's holding period for the property ending 19 July 31, 1969 bears to the number of full calendar 20 months in the taxpayer's entire holding period for 21 the property. 22 (C) The Department shall prescribe such 23 regulations as may be necessary to carry out the 24 purposes of this paragraph. 25 (g) Double deductions. Unless specifically provided 26 otherwise, nothing in this Section shall permit the same item 27 to be deducted more than once. 28 (h) Legislative intention. Except as expressly provided 29 by this Section there shall be no modifications or 30 limitations on the amounts of income, gain, loss or deduction 31 taken into account in determining gross income, adjusted 32 gross income or taxable income for federal income tax 33 purposes for the taxable year, or in the amount of such items SB2212 Engrossed -52- LRB9215616SMdv 1 entering into the computation of base income and net income 2 under this Act for such taxable year, whether in respect of 3 property values as of August 1, 1969 or otherwise. 4 (Source: P.A. 91-192, eff. 7-20-99; 91-205, eff. 7-20-99; 5 91-357, eff. 7-29-99; 91-541, eff. 8-13-99; 91-676, eff. 6 12-23-99; 91-845, eff. 6-22-00; 91-913, eff. 1-1-01; 92-16, 7 eff. 6-28-01; 92-244, eff. 8-3-01; 92-439, eff. 8-17-01; 8 revised 9-21-01.) 9 (35 ILCS 5/209) 10 Sec. 209. Tax Credit for "TECH-PREP" youth vocational 11 programs. 12 (a) Beginning with tax years ending on or after June 30, 13 1995, every taxpayer who is primarily engaged in 14 manufacturing is allowed a credit against the tax imposed by 15 subsections (a) and (b) of Section 201 in an amount equal to 16 20% of the taxpayer's direct payroll expenditures for which a 17 credit has not already been claimed under subsection (j) of 18 Section 201 of this Act, in the tax year for which the credit 19 is claimed, for cooperative secondary school youth vocational 20 programs in Illinois which are certified as qualifying 21 TECH-PREP programs by the State Board of Educationand the22Department of Revenuebecause the programs prepare students 23 to be technically skilled workers and meet the performance 24 standards of business and industry and the admission 25 standards of higher education. The credit may also be claimed 26 for personal services rendered to the taxpayer by a TECH-PREP 27 student or instructor (i) which would be subject to the 28 provisions of Article 7 of this Act if the student or 29 instructor was an employee of the taxpayer and (ii) for which 30 no credit under this Section is claimed by another taxpayer. 31 (b) If the amount of the credit exceeds the tax 32 liability for the year, the excess may be carried forward and 33 applied to the tax liability of the 2 taxable years following SB2212 Engrossed -53- LRB9215616SMdv 1 the excess credit year. The credit shall be applied to the 2 earliest year for which there is a tax liability. If there 3 are credits from more than one tax year that are available to 4 offset a liability, the earlier credit shall be applied 5 first. 6 (c) A taxpayer claiming the credit provided by this 7 Section shall maintain and record such information regarding 8 its participation in a qualifying TECH-PREP program as the 9 Department may require by regulation. When claiming the 10 credit provided by this Section, the taxpayer shall provide 11 such information regarding the taxpayer's participation in a 12 qualifying TECH-PREP program as the Department of Revenue may 13 require by regulation. 14 (d) This Section does not apply to those programs with 15 national standards that have been or in the future are 16 approved by the U.S. Department of Labor, Bureau of 17 Apprenticeship Training or any federal agency succeeding to 18 the responsibilities of that Bureau. 19 (Source: P.A. 88-505; 89-399, eff. 8-20-95.) 20 (35 ILCS 5/502) (from Ch. 120, par. 5-502) 21 Sec. 502. Returns and notices. 22 (a) In general. A return with respect to the taxes 23 imposed by this Act shall be made by every person for any 24 taxable year: 25 (1) For which such person is liable for a tax 26 imposed by this Act, or 27 (2) In the case of a resident or in the case of a 28 corporation which is qualified to do business in this 29 State, for which such person is required to make a 30 federal income tax return, regardless of whether such 31 person is liable for a tax imposed by this Act. However, 32 this paragraph shall not require a resident to make a 33 return if such person has an Illinois base income of the SB2212 Engrossed -54- LRB9215616SMdv 1 basic amount in Section 204(b) or less and is either 2 claimed as a dependent on another person's tax return 3 under the Internal Revenue Code of 1986, or is claimed as 4 a dependent on another person's tax return under this 5 Act. 6 (b) Fiduciaries and receivers. 7 (1) Decedents. If an individual is deceased, any 8 return or notice required of such individual under this 9 Act shall be made by his executor, administrator, or 10 other person charged with the property of such decedent. 11 (2) Individuals under a disability. If an 12 individual is unable to make a return or notice required 13 under this Act, the return or notice required of such 14 individual shall be made by his duly authorized agent, 15 guardian, fiduciary or other person charged with the care 16 of the person or property of such individual. 17 (3) Estates and trusts. Returns or notices required 18 of an estate or a trust shall be made by the fiduciary 19 thereof. 20 (4) Receivers, trustees and assignees for 21 corporations. In a case where a receiver, trustee in 22 bankruptcy, or assignee, by order of a court of competent 23 jurisdiction, by operation of law, or otherwise, has 24 possession of or holds title to all or substantially all 25 the property or business of a corporation, whether or not 26 such property or business is being operated, such 27 receiver, trustee, or assignee shall make the returns and 28 notices required of such corporation in the same manner 29 and form as corporations are required to make such 30 returns and notices. 31 (c) Joint returns by husband and wife. 32 (1) Except as provided in paragraph (3), if a 33 husband and wife file a joint federal income tax return 34 for a taxable year they shall file a joint return under SB2212 Engrossed -55- LRB9215616SMdv 1 this Act for such taxable year and their liabilities 2 shall be joint and several, but if the federal income tax 3 liability of either spouse is determined on a separate 4 federal income tax return, they shall file separate 5 returns under this Act. 6 (2) If neither spouse is required to file a federal 7 income tax return and either or both are required to file 8 a return under this Act, they may elect to file separate 9 or joint returns and pursuant to such election their 10 liabilities shall be separate or joint and several. 11 (3) If either husband or wife is a resident and the 12 other is a nonresident, they shall file separate returns 13 in this State on such forms as may be required by the 14 Department in which event their tax liabilities shall be 15 separate; but they may elect to determine their joint net 16 income and file a joint return as if both were residents 17 and in such case, their liabilities shall be joint and 18 several. 19 (4) Innocent spouses. 20 (A) However, for tax liabilities arising and 21 paid prior to August 13, 1999the effective date of22this amendatory Act of the 91st General Assembly, an 23 innocent spouse shall be relieved of liability for 24 tax (including interest and penalties) for any 25 taxable year for which a joint return has been made, 26 upon submission of proof that the Internal Revenue 27 Service has made a determination under Section 28 6013(e) of the Internal Revenue Code, for the same 29 taxable year, which determination relieved the 30 spouse from liability for federal income taxes. If 31 there is no federal income tax liability at issue 32 for the same taxable year, the Department shall rely 33 on the provisions of Section 6013(e) to determine 34 whether the person requesting innocent spouse SB2212 Engrossed -56- LRB9215616SMdv 1 abatement of tax, penalty, and interest is entitled 2 to that relief. 3 (B) For tax liabilities arising on and after 4 August 13, 1999the effective date of this5amendatory Act of the 91st General Assemblyor which 6 arose prior to thateffectivedate, but remain 7 unpaid as of thatthe effectivedate, if an 8 individual who filed a joint return for any taxable 9 year has made an election under this paragraph, the 10 individual's liability for any tax shown on the 11 joint return shall not exceed the individual's 12 separate return amount and the individual's 13 liability for any deficiency assessed for that 14 taxable year shall not exceed the portion of the 15 deficiency properly allocable to the individual. 16 For purposes of this paragraph: 17 (i) An election properly made pursuant to 18 Section 6015 of the Internal Revenue Code shall 19 constitute an election under this paragraph, 20 provided that the election shall not be 21 effective until the individual has notified the 22 Department of the election in the form and 23 manner prescribed by the Department. 24 (ii) If no election has been made under 25 Section 6015, the individual may make an 26 election under this paragraph in the form and 27 manner prescribed by the Department, provided 28 that no election may be made if the Department 29 finds that assets were transferred between 30 individuals filing a joint return as part of a 31 scheme by such individuals to avoid payment of 32 Illinois income tax and the election shall not 33 eliminate the individual's liability for any 34 portion of a deficiency attributable to an SB2212 Engrossed -57- LRB9215616SMdv 1 error on the return of which the individual had 2 actual knowledge as of the date of filing. 3 (iii) In determining the separate return 4 amount or portion of any deficiency 5 attributable to an individual, the Department 6 shall follow the provisions in subsections (c) 7 and (d) of Section 60156015(b) and (c)of the 8 Internal Revenue Code. 9 (iv) In determining the validity of an 10 individual's election under subparagraph (ii) 11 and in determining an electing individual's 12 separate return amount or portion of any 13 deficiency under subparagraph (iii), any 14 determination made by the Secretary of the 15 Treasury, by the United States Tax Court on 16 petition for review of a determination by the 17 Secretary of the Treasury, or on appeal from 18 the United States Tax Court under Section 6015 196015(a)of the Internal Revenue Code regarding 20 criteria for eligibility or under subsection 21 (d) of Section 60156015(b) or (c)of the 22 Internal Revenue Code regarding the allocation 23 of any item of income, deduction, payment, or 24 credit between an individual making the federal 25 election and that individual's spouse shall be 26 conclusively presumed to be correct. With 27 respect to any item that is not the subject of 28 a determination by the Secretary of the 29 Treasury or the federal courts, in any 30 proceeding involving this subsection, the 31 individual making the election shall have the 32 burden of proof with respect to any item except 33 that the Department shall have the burden of 34 proof with respect to items in subdivision SB2212 Engrossed -58- LRB9215616SMdv 1 (ii). 2 (v) Any election made by an individual 3 under this subsection shall apply to all years 4 for which that individual and the spouse named 5 in the election have filed a joint return. 6 (vi) After receiving a notice that the 7 federal election has been made or after 8 receiving an election under subdivision (ii), 9 the Department shall take no collection action 10 against the electing individual for any 11 liability arising from a joint return covered 12 by the election until the Department has 13 notified the electing individual in writing 14 that the election is invalid or of the portion 15 of the liability the Department has allocated 16 to the electing individual. Within 60 days 17 (150 days if the individual is outside the 18 United States) after the issuance of such 19 notification, the individual may file a written 20 protest of the denial of the election or of the 21 Department's determination of the liability 22 allocated to him or her and shall be granted a 23 hearing within the Department under the 24 provisions of Section 908. If a protest is 25 filed, the Department shall take no collection 26 action against the electing individual until 27 the decision regarding the protest has become 28 final under subsection (d) of Section 908 or, 29 if administrative review of the Department's 30 decision is requested under Section 1201, until 31 the decision of the court becomes final. 32 (d) Partnerships. Every partnership having any base 33 income allocable to this State in accordance with section 34 305(c) shall retain information concerning all items of SB2212 Engrossed -59- LRB9215616SMdv 1 income, gain, loss and deduction; the names and addresses of 2 all of the partners, or names and addresses of members of a 3 limited liability company, or other persons who would be 4 entitled to share in the base income of the partnership if 5 distributed; the amount of the distributive share of each; 6 and such other pertinent information as the Department may by 7 forms or regulations prescribe. The partnership shall make 8 that information available to the Department when requested 9 by the Department. 10 (e) For taxable years ending on or after December 31, 11 1985, and before December 31, 1993, taxpayers that are 12 corporations (other than Subchapter S corporations) having 13 the same taxable year and that are members of the same 14 unitary business group may elect to be treated as one 15 taxpayer for purposes of any original return, amended return 16 which includes the same taxpayers of the unitary group which 17 joined in the election to file the original return, 18 extension, claim for refund, assessment, collection and 19 payment and determination of the group's tax liability under 20 this Act. This subsection (e) does not permit the election to 21 be made for some, but not all, of the purposes enumerated 22 above. For taxable years ending on or after December 31, 23 1987, corporate members (other than Subchapter S 24 corporations) of the same unitary business group making this 25 subsection (e) election are not required to have the same 26 taxable year. 27 For taxable years ending on or after December 31, 1993, 28 taxpayers that are corporations (other than Subchapter S 29 corporations) and that are members of the same unitary 30 business group shall be treated as one taxpayer for purposes 31 of any original return, amended return which includes the 32 same taxpayers of the unitary group which joined in filing 33 the original return, extension, claim for refund, assessment, 34 collection and payment and determination of the group's tax SB2212 Engrossed -60- LRB9215616SMdv 1 liability under this Act. 2 (f) The Department may promulgate regulations to permit 3 nonresident individual partners of the same partnership, 4 nonresident Subchapter S corporation shareholders of the same 5 Subchapter S corporation, and nonresident individuals 6 transacting an insurance business in Illinois under a Lloyds 7 plan of operation, and nonresident individual members of the 8 same limited liability company that is treated as a 9 partnership under Section 1501 (a)(16) of this Act, to file 10 composite individual income tax returns reflecting the 11 composite income of such individuals allocable to Illinois 12 and to make composite individual income tax payments. The 13 Department may by regulation also permit such composite 14 returns to include the income tax owed by Illinois residents 15 attributable to their income from partnerships, Subchapter S 16 corporations, insurance businesses organized under a Lloyds 17 plan of operation, or limited liability companies that are 18 treated as partnership under Section 1501 (a)(16) of this 19 Act, in which case such Illinois residents will be permitted 20 to claim credits on their individual returns for their shares 21 of the composite tax payments. This paragraph of subsection 22 (f) applies to taxable years ending on or after December 31, 23 1987. 24 For taxable years ending on or after December 31, 1999, 25 the Department may, by regulation, also permit any persons 26 transacting an insurance business organized under a Lloyds 27 plan of operation to file composite returns reflecting the 28 income of such persons allocable to Illinois and the tax 29 rates applicable to such persons under Section 201 and to 30 make composite tax payments and shall, by regulation, also 31 provide that the income and apportionment factors 32 attributable to the transaction of an insurance business 33 organized under a Lloyds plan of operation by any person 34 joining in the filing of a composite return shall, for SB2212 Engrossed -61- LRB9215616SMdv 1 purposes of allocating and apportioning income under Article 2 3 of this Act and computing net income under Section 202 of 3 this Act, be excluded from any other income and apportionment 4 factors of that person or of any unitary business group, as 5 defined in subdivision (a)(27) of Section 1501, to which that 6 person may belong. 7 (g) The Department may adopt rules to authorize the 8 electronic filing of any return required to be filed under 9 this Section. 10 (Source: P.A. 90-613, eff. 7-9-98; 91-541, eff. 8-13-99; 11 91-913, eff. 1-1-01.) 12 (35 ILCS 5/506) (from Ch. 120, par. 5-506) 13 Sec. 506. Federal Returns. 14 (a) In general. Any person required to make a return 15 for a taxable year under this Act may, at any time that a 16 deficiency could be assessed or a refund claimed under this 17 Act in respect of any item reported or properly reportable on 18 such return or any amendment thereof, be required to furnish 19 to the Department a true and correct copy of any return which 20 may pertain to such item and which was filed by such person 21 under the provisions of the Internal Revenue Code. 22 (b) Changes affecting federal income tax. A person shall 23 notify the Department if:In the event24 (1) the taxable income, any item of income or 25 deduction, the income tax liability, or any tax credit 26 reported in a federal income tax return of thatany27 person for any year is altered by amendment of such 28 return or as a result of any other recomputation or 29 redetermination of federal taxable income or loss, and 30 such alteration reflects a change or settlement with 31 respect to any item or items, affecting the computation 32 of such person's net income, net loss, or of any credit 33 provided by Article 2 of this Act for any year under this SB2212 Engrossed -62- LRB9215616SMdv 1 Act, or in the number of personal exemptions allowable to 2 such person under Section 151 of the Internal Revenue 3 Code, or 4 (2) the amount of tax required to be withheld by 5 that person from compensation paid to employees and 6 required to be reported by that person on a federal 7 return is altered by amendment of the return or by any 8 other recomputation or redetermination that is agreed to 9 or finally determined on or after January 1, 2003, and 10 the alteration affects the amount of compensation subject 11 to withholding by that person under Section 701 of this 12 Actsuch person shall notify the Department of such13alteration. 14 Such notification shall be in the form of an amended return 15 or such other form as the Department may by regulations 16 prescribe, shall contain the person's name and address and 17 such other information as the Department may by regulations 18 prescribe, shall be signed by such person or his duly 19 authorized representative, and shall be filed not later than 20 120 days after such alteration has been agreed to or finally 21 determined for federal income tax purposes or any federal 22 income tax deficiency or refund, tentative carryback 23 adjustment, abatement or credit resulting therefrom has been 24 assessed or paid, whichever shall first occur. 25 (Source: P.A. 90-491, eff. 1-1-98.) 26 (35 ILCS 5/601.1) (Ch. 120, par. 6-601.1) 27 Sec. 601.1. Payment by electronic funds transfer. 28 (a) Beginning on October 1, 1993, a taxpayer who has an 29 average monthly tax liability of $150,000 or more under 30 Article 7 of this Act shall make all payments required by 31 rules of the Department by electronic funds transfer. 32 Beginning October 1, 1993, a taxpayer who has an average 33 quarterly estimated tax payment obligation of $450,000 or SB2212 Engrossed -63- LRB9215616SMdv 1 more under Article 8 of this Act shall make all payments 2 required by rules of the Department by electronic funds 3 transfer. Beginning on October 1, 1994, a taxpayer who has 4 an average monthly tax liability of $100,000 or more under 5 Article 7 of this Act shall make all payments required by 6 rules of the Department by electronic funds transfer. 7 Beginning October 1, 1994, a taxpayer who has an average 8 quarterly estimated tax payment obligation of $300,000 or 9 more under Article 8 of this Act shall make all payments 10 required by rules of the Department by electronic funds 11 transfer. Beginning on October 1, 1995, a taxpayer who has 12 an average monthly tax liability of $50,000 or more under 13 Article 7 of this Act shall make all payments required by 14 rules of the Department by electronic funds transfer. 15 Beginning October 1, 1995, a taxpayer who has an average 16 quarterly estimated tax payment obligation of $150,000 or 17 more under Article 8 of this Act shall make all payments 18 required by rules of the Department by electronic funds 19 transfer. Beginning on October 1, 2000, and for all liability 20 periods thereafter, a taxpayer who has an average annual tax 21 liability of $200,000 or more under Article 7 of this Act 22 shall make all payments required by rules of the Department 23 by electronic funds transfer. Beginning October 1, 2000, a 24 taxpayer who has an average quarterly estimated tax payment 25 obligation of $50,000 or more under Article 8 of this Act 26 shall make all payments required by rules of the Department 27 by electronic funds transfer. Beginning on October 1, 2002, a 28 taxpayer who has a tax liability in the amount set forth in 29 subsection (b) of Section 2505-210 of the Department of 30 Revenue Law shall make all payments required by rules of the 31 Department by electronic funds transfer. Beginning on October 32 1, 2002, a taxpayer who has a tax liability in the amount set 33 forth in subsection (b) of Section 2505-210 of the Department 34 of Revenue Law shall make all payments required by rules of SB2212 Engrossed -64- LRB9215616SMdv 1 the Department by electronic funds transfer. 2 (b) Any taxpayer who is not required to make payments by 3 electronic funds transfer may make payments by electronic 4 funds transfer with the permission of the Department. 5 (c) All taxpayers required to make payments by 6 electronic funds transfer and any taxpayers who wish to 7 voluntarily make payments by electronic funds transfer shall 8 make those payments in the manner authorized by the 9 Department. 10 (d) The Department shall notify all taxpayers required 11 to make payments by electronic funds transfer. All 12 taxpayers notified by the Department shall make payments by 13 electronic funds transfer for a minimum of one year beginning 14 on October 1. In determining the threshold amounts under 15 subsection (a), the Department shall calculate the averages 16 as follows: 17 (1) the total liability under Article 7 for the 18 preceding tax year (and, prior to October 1, 2000, 19 divided by 12); or 20 (2) for purposes of estimated payments under 21 Article 8, the total tax obligation of the taxpayer for 22 the previous tax year divided by 4. 23 (e) The Department shall adopt such rules as are 24 necessary to effectuate a program of electronic funds 25 transfer and the requirements of this Section. 26 (Source: P.A. 91-541, eff. 8-13-99; 92-492, eff. 1-1-02.) 27 (35 ILCS 5/701) (from Ch. 120, par. 7-701) 28 Sec. 701. Requirement and Amount of Withholding. 29 (a) In General. Every employer maintaining an office or 30 transacting business within this State and required under the 31 provisions of the Internal Revenue Code to withhold a tax on: 32 (1) compensation paid in this State (as determined 33 under Section 304 (a) (2) (B) to an individual; or SB2212 Engrossed -65- LRB9215616SMdv 1 (2) payments described in subsection (b) shall 2 deduct and withhold from such compensation for each 3 payroll period (as defined in Section 3401 of the 4 Internal Revenue Code) an amount equal to the amount by 5 which such individual's compensation exceeds the 6 proportionate part of this withholding exemption 7 (computed as provided in Section 702) attributable to the 8 payroll period for which such compensation is payable 9 multiplied by a percentage equal to the percentage tax 10 rate for individuals provided in subsection (b) of 11 Section 201. 12 (b) Payment to Residents. 13 Any payment (including compensation) to a resident by a 14 payor maintaining an office or transacting business within 15 this State (including any agency, officer, or employee of 16 this State or of any political subdivision of this State) and 17 on which withholding of tax is required under the provisions 18 of the Internal Revenue Code shall be deemed to be 19 compensation paid in this State by an employer to an employee 20 for the purposes of Article 7 and Section 601 (b) (1) to the 21 extent such payment is included in the recipient's base 22 income and not subjected to withholding by another state. 23 (c) Special Definitions. 24 Withholding shall be considered required under the 25 provisions of the Internal Revenue Code to the extent the 26 Internal Revenue Code either requires withholding or allows 27 for voluntary withholding the payor and recipient have 28 entered into such a voluntary withholding agreement. For the 29 purposes of Article 7 and Section 1002 (c) the term 30 "employer" includes any payor who is required to withhold tax 31 pursuant to this Section. 32 (d) Reciprocal Exemption. 33 The Director may enter into an agreement with the taxing 34 authorities of any state which imposes a tax on or measured SB2212 Engrossed -66- LRB9215616SMdv 1 by income to provide that compensation paid in such state to 2 residents of this State shall be exempt from withholding of 3 such tax; in such case, any compensation paid in this State 4 to residents of such state shall be exempt from withholding. 5 All reciprocal agreements shall be subject to the 6 requirements of Section 2505-575 of the Department of Revenue 7 Law (20 ILCS 2505/2505-575). 8 (e) Notwithstanding subsection (a) (2) of this Section, 9 no withholding is required on payments for which withholding 10 is required under Section 3405 or 3406 of the Internal 11 Revenue Code of 1954. 12 (Source: P.A. 90-491, eff. 1-1-98; 91-239, eff. 1-1-00.) 13 (35 ILCS 5/905) (from Ch. 120, par. 9-905) 14 Sec. 905. Limitations on Notices of Deficiency. 15 (a) In general. Except as otherwise provided in this 16 Act: 17 (1) A notice of deficiency shall be issued not 18 later than 3 years after the date the return was filed, 19 and 20 (2) No deficiency shall be assessed or collected 21 with respect to the year for which the return was filed 22 unless such notice is issued within such period. 23 (b) Omission of more than 25% of income. If the taxpayer 24 omits from base income an amount properly includible therein 25 which is in excess of 25% of the amount of base income stated 26 in the return, a notice of deficiency may be issued not later 27 than 6 years after the return was filed. For purposes of this 28 paragraph, there shall not be taken into account any amount 29 which is omitted in the return if such amount is disclosed in 30 the return, or in a statement attached to the return, in a 31 manner adequate to apprise the Department of the nature and 32 the amount of such item. 33 (c) No return or fraudulent return. If no return is SB2212 Engrossed -67- LRB9215616SMdv 1 filed or a false and fraudulent return is filed with intent 2 to evade the tax imposed by this Act, a notice of deficiency 3 may be issued at any time. 4 (d) Failure to report federal change. If a taxpayer 5 fails to notify the Department in any case where notification 6 is required by Section 304(c) or 506(b), or fails to report a 7 change or correction which is treated in the same manner as 8 if it were a deficiency for federal income tax purposes, a 9 notice of deficiency may be issued (i) at any time or (ii) on 10 or after August 13, 1999the effective date of this11amendatory Act of the 91st General Assembly, at any time for 12 the taxable year for which the notification is required or 13 for any taxable year to which the taxpayer may carry an 14 Article 2 credit, or a Section 207 loss, earned, incurred, or 15 used in the year for which the notification is required; 16 provided, however, that the amount of any proposed assessment 17 set forth in the notice shall be limited to the amount of any 18 deficiency resulting under this Act from the recomputation of 19 the taxpayer's net income, Article 2 credits, or Section 207 20 loss earned, incurred, or used in the taxable year for which 21 the notification is required after giving effect to the item 22 or items required to be reported. 23 (e) Report of federal change. 24 (1) Before August 13, 1999the effective date of25this amendatory Act of the 91st General Assembly, in any 26 case where notification of an alteration is given as 27 required by Section 506(b), a notice of deficiency may be 28 issued at any time within 2 years after the date such 29 notification is given, provided, however, that the amount 30 of any proposed assessment set forth in such notice shall 31 be limited to the amount of any deficiency resulting 32 under this Act from recomputation of the taxpayer's net 33 income, net loss, or Article 2 credits for the taxable 34 year after giving effect to the item or items reflected SB2212 Engrossed -68- LRB9215616SMdv 1 in the reported alteration. 2 (2) On and after August 13, 1999the effective date3of this amendatory Act of the 91st General Assembly, in 4 any case where notification of an alteration is given as 5 required by Section 506(b), a notice of deficiency may be 6 issued at any time within 2 years after the date such 7 notification is given for the taxable year for which the 8 notification is given or for any taxable year to which 9 the taxpayer may carry an Article 2 credit, or a Section 10 207 loss, earned, incurred, or used in the year for which 11 the notification is given, provided, however, that the 12 amount of any proposed assessment set forth in such 13 notice shall be limited to the amount of any deficiency 14 resulting under this Act from recomputation of the 15 taxpayer's net income, Article 2 credits, or Section 207 16 loss earned, incurred, or used in the taxable year for 17 which the notification is given after giving effect to 18 the item or items reflected in the reported alteration. 19 (f) Extension by agreement. Where, before the expiration 20 of the time prescribed in this section for the issuance of a 21 notice of deficiency, both the Department and the taxpayer 22 shall have consented in writing to its issuance after such 23 time, such notice may be issued at any time prior to the 24 expiration of the period agreed upon. In the case of a 25 taxpayer who is a partnership, Subchapter S corporation, or 26 trust and who enters into an agreement with the Department 27 pursuant to this subsection on or after January 1, 2003, a 28 notice of deficiency may be issued to the partners, 29 shareholders, or beneficiaries of the taxpayer at any time 30 prior to the expiration of the period agreed upon. Any 31 proposed assessment set forth in the notice, however, shall 32 be limited to the amount of any deficiency resulting under 33 this Act from recomputation of items of income, deduction, 34 credits, or other amounts of the taxpayer that are taken into SB2212 Engrossed -69- LRB9215616SMdv 1 account by the partner, shareholder, or beneficiary in 2 computing its liability under this Act. The period so agreed 3 upon may be extended by subsequent agreements in writing made 4 before the expiration of the period previously agreed upon. 5 (g) Erroneous refunds. In any case in which there has 6 been an erroneous refund of tax payable under this Act, a 7 notice of deficiency may be issued at any time within 2 years 8 from the making of such refund, or within 5 years from the 9 making of such refund if it appears that any part of the 10 refund was induced by fraud or the misrepresentation of a 11 material fact, provided, however, that the amount of any 12 proposed assessment set forth in such notice shall be limited 13 to the amount of such erroneous refund. 14 Beginning July 1, 1993, in any case in which there has 15 been a refund of tax payable under this Act attributable to a 16 net loss carryback as provided for in Section 207, and that 17 refund is subsequently determined to be an erroneous refund 18 due to a reduction in the amount of the net loss which was 19 originally carried back, a notice of deficiency for the 20 erroneous refund amount may be issued at any time during the 21 same time period in which a notice of deficiency can be 22 issued on the loss year creating the carryback amount and 23 subsequent erroneous refund. The amount of any proposed 24 assessment set forth in the notice shall be limited to the 25 amount of such erroneous refund. 26 (h) Time return deemed filed. For purposes of this 27 Section a tax return filed before the last day prescribed by 28 law (including any extension thereof) shall be deemed to have 29 been filed on such last day. 30 (i) Request for prompt determination of liability. For 31 purposes of Subsection (a)(1), in the case of a tax return 32 required under this Act in respect of a decedent, or by his 33 estate during the period of administration, or by a 34 corporation, the period referred to in such Subsection shall SB2212 Engrossed -70- LRB9215616SMdv 1 be 18 months after a written request for prompt determination 2 of liability is filed with the Department (at such time and 3 in such form and manner as the Department shall by 4 regulations prescribe) by the executor, administrator, or 5 other fiduciary representing the estate of such decedent, or 6 by such corporation, but not more than 3 years after the date 7 the return was filed. This Subsection shall not apply in the 8 case of a corporation unless: 9 (1) (A) Such written request notifies the 10 Department that the corporation contemplates dissolution 11 at or before the expiration of such 18-month period, (B) 12 the dissolution is begun in good faith before the 13 expiration of such 18-month period, and (C) the 14 dissolution is completed; 15 (2) (A) Such written request notifies the 16 Department that a dissolution has in good faith been 17 begun, and (B) the dissolution is completed; or 18 (3) A dissolution has been completed at the time 19 such written request is made. 20 (j) Withholding tax. In the case of returns required 21 under Article 7 of this Act (with respect to any amounts 22 withheld as tax or any amounts required to have been withheld 23 as tax) a notice of deficiency shall be issued not later than 24 3 years after the 15th day of the 4th month following the 25 close of the calendar year in which such withholding was 26 required. 27 (k) Penalties for failure to make information reports. 28 A notice of deficiency for the penalties provided by 29 Subsection 1405.1(c) of this Act may not be issued more than 30 3 years after the due date of the reports with respect to 31 which the penalties are asserted. 32 (l) Penalty for failure to file withholding returns. A 33 notice of deficiency for penalties provided by Section 1004 34 of this Act for taxpayer's failure to file withholding SB2212 Engrossed -71- LRB9215616SMdv 1 returns may not be issued more than three years after the 2 15th day of the 4th month following the close of the calendar 3 year in which the withholding giving rise to taxpayer's 4 obligation to file those returns occurred. 5 (m) Transferee liability. A notice of deficiency may be 6 issued to a transferee relative to a liability asserted under 7 Section 1405 during time periods defined as follows: 8 1) Initial Transferee. In the case of the 9 liability of an initial transferee, up to 2 years after 10 the expiration of the period of limitation for assessment 11 against the transferor, except that if a court proceeding 12 for review of the assessment against the transferor has 13 begun, then up to 2 years after the return of the 14 certified copy of the judgment in the court proceeding. 15 2) Transferee of Transferee. In the case of the 16 liability of a transferee, up to 2 years after the 17 expiration of the period of limitation for assessment 18 against the preceding transferee, but not more than 3 19 years after the expiration of the period of limitation 20 for assessment against the initial transferor; except 21 that if, before the expiration of the period of 22 limitation for the assessment of the liability of the 23 transferee, a court proceeding for the collection of the 24 tax or liability in respect thereof has been begun 25 against the initial transferor or the last preceding 26 transferee, as the case may be, then the period of 27 limitation for assessment of the liability of the 28 transferee shall expire 2 years after the return of the 29 certified copy of the judgment in the court proceeding. 30 (n) Notice of decrease in net loss. On and after the 31 effective date of this amendatory Act of the 92nd General 32 Assembly, no notice of deficiency shall be issued as the 33 result of a decrease determined by the Department in the net 34 loss incurred by a taxpayer under Section 207 of this Act SB2212 Engrossed -72- LRB9215616SMdv 1 unless the Department has notified the taxpayer of the 2 proposed decrease within 3 years after the return reporting 3 the loss was filed or within one year after an amended return 4 reporting an increase in the loss was filed, provided that in 5 the case of an amended return, a decrease proposed by the 6 Department more than 3 years after the original return was 7 filed may not exceed the increase claimed by the taxpayer on 8 the original return. 9 (Source: P.A. 90-491, eff. 1-1-98; 91-541, eff. 8-13-99.) 10 (35 ILCS 5/911) (from Ch. 120, par. 9-911) 11 Sec. 911. Limitations on Claims for Refund. 12 (a) In general. Except as otherwise provided in this 13 Act: 14 (1) A claim for refund shall be filed not later 15 than 3 years after the date the return was filed (in the 16 case of returns required under Article 7 of this Act 17 respecting any amounts withheld as tax, not later than 3 18 years after the 15th day of the 4th month following the 19 close of the calendar year in which such withholding was 20 made), or one year after the date the tax was paid, 21 whichever is the later; and 22 (2) No credit or refund shall be allowed or made 23 with respect to the year for which the claim was filed 24 unless such claim is filed within such period. 25 (b) Federal changes. 26 (1) In general. In any case where notification of 27 an alteration is required by Section 506 (b), a claim for 28 refund may be filed within 2 years after the date on 29 which such notification was due (regardless of whether 30 such notice was given), but the amount recoverable 31 pursuant to a claim filed under this Section shall be 32 limited to the amount of any overpayment resulting under 33 this Act from recomputation of the taxpayer's net income, SB2212 Engrossed -73- LRB9215616SMdv 1 net loss, or Article 2 credits for the taxable year after 2 giving effect to the item or items reflected in the 3 alteration required to be reported. 4 (2) Tentative carryback adjustments paid before 5 January 1, 1974. If, as the result of the payment before 6 January 1, 1974 of a federal tentative carryback 7 adjustment, a notification of an alteration is required 8 under Section 506 (b), a claim for refund may be filed at 9 any time before January 1, 1976, but the amount 10 recoverable pursuant to a claim filed under this Section 11 shall be limited to the amount of any overpayment 12 resulting under this Act from recomputation of the 13 taxpayer's base income for the taxable year after giving 14 effect to the federal alteration resulting from the 15 tentative carryback adjustment irrespective of any 16 limitation imposed in paragraph (l) of this subsection. 17 (c) Extension by agreement. Where, before the 18 expiration of the time prescribed in this section for the 19 filing of a claim for refund, both the Department and the 20 claimant shall have consented in writing to its filing after 21 such time, such claim may be filed at any time prior to the 22 expiration of the period agreed upon. The period so agreed 23 upon may be extended by subsequent agreements in writing made 24 before the expiration of the period previously agreed upon. 25 In the case of a taxpayer who is a partnership, Subchapter S 26 corporation, or trust and who enters into an agreement with 27 the Department pursuant to this subsection on or after 28 January 1, 2003, a claim for refund may be issued to the 29 partners, shareholders, or beneficiaries of the taxpayer at 30 any time prior to the expiration of the period agreed upon. 31 Any refund allowed pursuant to the claim, however, shall be 32 limited to the amount of any overpayment of tax due under 33 this Act that results from recomputation of items of income, 34 deduction, credits, or other amounts of the taxpayer that are SB2212 Engrossed -74- LRB9215616SMdv 1 taken into account by the partner, shareholder, or 2 beneficiary in computing its liability under this Act. 3 (d) Limit on amount of credit or refund. 4 (1) Limit where claim filed within 3-year period. 5 If the claim was filed by the claimant during the 3-year 6 period prescribed in subsection (a), the amount of the 7 credit or refund shall not exceed the portion of the tax 8 paid within the period, immediately preceding the filing 9 of the claim, equal to 3 years plus the period of any 10 extension of time for filing the return. 11 (2) Limit where claim not filed within 3-year 12 period. If the claim was not filed within such 3-year 13 period, the amount of the credit or refund shall not 14 exceed the portion of the tax paid during the one year 15 immediately preceding the filing of the claim. 16 (e) Time return deemed filed. For purposes of this 17 section a tax return filed before the last day prescribed by 18 law for the filing of such return (including any extensions 19 thereof) shall be deemed to have been filed on such last day. 20 (f) No claim for refund based on the taxpayer's taking a 21 credit for estimated tax payments as provided by Section 601 22 (b) (2) or for any amount paid by a taxpayer pursuant to 23 Section 602(a) or for any amount of credit for tax withheld 24 pursuant to Section 701 may be filed more than 3 years after 25 the due date, as provided by Section 505, of the return which 26 was required to be filed relative to the taxable year for 27 which the payments were made or for which the tax was 28 withheld. The changes in this subsection (f) made by this 29 amendatory Act of 1987 shall apply to all taxable years 30 ending on or after December 31, 1969. 31 (g) Special Period of Limitation with Respect to Net 32 Loss Carrybacks. If the claim for refund relates to an 33 overpayment attributable to a net loss carryback as provided 34 by Section 207, in lieu of the 3 year period of limitation SB2212 Engrossed -75- LRB9215616SMdv 1 prescribed in subsection (a), the period shall be that period 2 which ends 3 years after the time prescribed by law for 3 filing the return (including extensions thereof) for the 4 taxable year of the net loss which results in such carryback 5 (or, on and after August 13, 1999the effective date of this6amendatory Act of the 91st General Assembly, with respect to 7 a change in the carryover of an Article 2 credit to a taxable 8 year resulting from the carryback of a Section 207 loss 9 incurred in a taxable year beginning on or after January 1, 10 2000, the period shall be that period that ends 3 years after 11 the time prescribed by law for filing the return (including 12 extensions of that time) for that subsequent taxable year), 13 or the period prescribed in subsection (c) in respect of such 14 taxable year, whichever expires later. In the case of such a 15 claim, the amount of the refund may exceed the portion of the 16 tax paid within the period provided in subsection (d) to the 17 extent of the amount of the overpayment attributable to such 18 carryback. On and after August 13, 1999the effective date of19this amendatory Act of the 91st General Assembly, if the 20 claim for refund relates to an overpayment attributable to 21 the carryover of an Article 2 credit, or of a Section 207 22 loss, earned, incurred (in a taxable year beginning on or 23 after January 1, 2000), or used in a year for which a 24 notification of a change affecting federal taxable income 25 must be filed under subsection (b) of Section 506, the claim 26 may be filed within the period prescribed in paragraph (1) of 27 subsection (b) in respect of the year for which the 28 notification is required. In the case of such a claim, the 29 amount of the refund may exceed the portion of the tax paid 30 within the period provided in subsection (d) to the extent of 31 the amount of the overpayment attributable to the 32 recomputation of the taxpayer's Article 2 credits, or Section 33 207 loss, earned, incurred, or used in the taxable year for 34 which the notification is given. SB2212 Engrossed -76- LRB9215616SMdv 1 (h) Claim for refund based on net loss. On and after 2 the effective date of this amendatory Act of the 92nd General 3 Assembly, no claim for refund shall be allowed to the extent 4 the refund is the result of an amount of net loss incurred 5 under Section 207 of this Act that was not reported to the 6 Department within 3 years of the due date (including 7 extensions) of the return for the loss year on either the 8 original return filed by the taxpayer or on amended return. 9 (Source: P.A. 90-491, eff. 1-1-98; 91-541, eff. 8-13-99.) 10 (35 ILCS 5/1501) (from Ch. 120, par. 15-1501) 11 Sec. 1501. Definitions. 12 (a) In general. When used in this Act, where not 13 otherwise distinctly expressed or manifestly incompatible 14 with the intent thereof: 15 (1) Business income. The term "business income" 16 means income arising from transactions and activity in 17 the regular course of the taxpayer's trade or business, 18 net of the deductions allocable thereto, and includes 19 income from tangible and intangible property if the 20 acquisition, management, and disposition of the property 21 constitute integral parts of the taxpayer's regular trade 22 or business operations. Such term does not include 23 compensation or the deductions allocable thereto. For 24 each taxable year beginning on or after January 1, 2003, 25 a taxpayer may elect to treat all income other than 26 compensation as business income. This election shall be 27 made in accordance with rules adopted by the Department 28 and, once made, shall be irrevocable. 29 (2) Commercial domicile. The term "commercial 30 domicile" means the principal place from which the trade 31 or business of the taxpayer is directed or managed. 32 (3) Compensation. The term "compensation" means 33 wages, salaries, commissions and any other form of SB2212 Engrossed -77- LRB9215616SMdv 1 remuneration paid to employees for personal services. 2 (4) Corporation. The term "corporation" includes 3 associations, joint-stock companies, insurance companies 4 and cooperatives. Any entity, including a limited 5 liability company formed under the Illinois Limited 6 Liability Company Act, shall be treated as a corporation 7 if it is so classified for federal income tax purposes. 8 (5) Department. The term "Department" means the 9 Department of Revenue of this State. 10 (6) Director. The term "Director" means the 11 Director of Revenue of this State. 12 (7) Fiduciary. The term "fiduciary" means a 13 guardian, trustee, executor, administrator, receiver, or 14 any person acting in any fiduciary capacity for any 15 person. 16 (8) Financial organization. 17 (A) The term "financial organization" means 18 any bank, bank holding company, trust company, 19 savings bank, industrial bank, land bank, safe 20 deposit company, private banker, savings and loan 21 association, building and loan association, credit 22 union, currency exchange, cooperative bank, small 23 loan company, sales finance company, investment 24 company, or any person which is owned by a bank or 25 bank holding company. For the purpose of this 26 Section a "person" will include only those persons 27 which a bank holding company may acquire and hold an 28 interest in, directly or indirectly, under the 29 provisions of the Bank Holding Company Act of 1956 30 (12 U.S.C. 1841, et seq.), except where interests in 31 any person must be disposed of within certain 32 required time limits under the Bank Holding Company 33 Act of 1956. 34 (B) For purposes of subparagraph (A) of this SB2212 Engrossed -78- LRB9215616SMdv 1 paragraph, the term "bank" includes (i) any entity 2 that is regulated by the Comptroller of the Currency 3 under the National Bank Act, or by the Federal 4 Reserve Board, or by the Federal Deposit Insurance 5 Corporation and (ii) any federally or State 6 chartered bank operating as a credit card bank. 7 (C) For purposes of subparagraph (A) of this 8 paragraph, the term "sales finance company" has the 9 meaning provided in the following item (i) or (ii): 10 (i) A person primarily engaged in one or 11 more of the following businesses: the business 12 of purchasing customer receivables, the 13 business of making loans upon the security of 14 customer receivables, the business of making 15 loans for the express purpose of funding 16 purchases of tangible personal property or 17 services by the borrower, or the business of 18 finance leasing. For purposes of this item 19 (i), "customer receivable" means: 20 (a) a retail installment contract or 21 retail charge agreement within the meaning of 22 the Sales Finance Agency Act, the Retail 23 Installment Sales Act, or the Motor Vehicle 24 Retail Installment Sales Act; 25 (b) an installment, charge, credit, or 26 similar contract or agreement arising from the 27 sale of tangible personal property or services 28 in a transaction involving a deferred payment 29 price payable in one or more installments 30 subsequent to the sale; or 31 (c) the outstanding balance of a contract 32 or agreement described in provisions (a) or (b) 33 of this item (i). 34 A customer receivable need not provide for SB2212 Engrossed -79- LRB9215616SMdv 1 payment of interest on deferred payments. A sales 2 finance company may purchase a customer receivable 3 from, or make a loan secured by a customer 4 receivable to, the seller in the original 5 transaction or to a person who purchased the 6 customer receivable directly or indirectly from that 7 seller. 8 (ii) A corporation meeting each of the 9 following criteria: 10 (a) the corporation must be a member of 11 an "affiliated group" within the meaning of 12 Section 1504(a) of the Internal Revenue Code, 13 determined without regard to Section 1504(b) of 14 the Internal Revenue Code; 15 (b) more than 50% of the gross income of 16 the corporation for the taxable year must be 17 interest income derived from qualifying loans. 18 A "qualifying loan" is a loan made to a member 19 of the corporation's affiliated group that 20 originates customer receivables (within the 21 meaning of item (i)) or to whom customer 22 receivables originated by a member of the 23 affiliated group have been transferred, to the 24 extent the average outstanding balance of loans 25 from that corporation to members of its 26 affiliated group during the taxable year do not 27 exceed the limitation amount for that 28 corporation. The "limitation amount" for a 29 corporation is the average outstanding balances 30 during the taxable year of customer receivables 31 (within the meaning of item (i)) originated by 32 all members of the affiliated group. If the 33 average outstanding balances of the loans made 34 by a corporation to members of its affiliated SB2212 Engrossed -80- LRB9215616SMdv 1 group exceed the limitation amount, the 2 interest income of that corporation from 3 qualifying loans shall be equal to its interest 4 income from loans to members of its affiliated 5 groups times a fraction equal to the limitation 6 amount divided by the average outstanding 7 balances of the loans made by that corporation 8 to members of its affiliated group; 9 (c) the total of all shareholder's equity 10 (including, without limitation, paid-in capital 11 on common and preferred stock and retained 12 earnings) of the corporation plus the total of 13 all of its loans, advances, and other 14 obligations payable or owed to members of its 15 affiliated group may not exceed 20% of the 16 total assets of the corporation at any time 17 during the tax year; and 18 (d) more than 50% of all interest-bearing 19 obligations of the affiliated group payable to 20 persons outside the group determined in 21 accordance with generally accepted accounting 22 principles must be obligations of the 23 corporation. 24 This amendatory Act of the 91st General Assembly is 25 declaratory of existing law. 26 (D) Subparagraphs (B) and (C) of this 27 paragraph are declaratory of existing law and apply 28 retroactively, for all tax years beginning on or 29 before December 31, 1996, to all original returns, 30 to all amended returns filed no later than 30 days 31 after the effective date of this amendatory Act of 32 1996, and to all notices issued on or before the 33 effective date of this amendatory Act of 1996 under 34 subsection (a) of Section 903, subsection (a) of SB2212 Engrossed -81- LRB9215616SMdv 1 Section 904, subsection (e) of Section 909, or 2 Section 912. A taxpayer that is a "financial 3 organization" that engages in any transaction with 4 an affiliate shall be a "financial organization" for 5 all purposes of this Act. 6 (E) For all tax years beginning on or before 7 December 31, 1996, a taxpayer that falls within the 8 definition of a "financial organization" under 9 subparagraphs (B) or (C) of this paragraph, but who 10 does not fall within the definition of a "financial 11 organization" under the Proposed Regulations issued 12 by the Department of Revenue on July 19, 1996, may 13 irrevocably elect to apply the Proposed Regulations 14 for all of those years as though the Proposed 15 Regulations had been lawfully promulgated, adopted, 16 and in effect for all of those years. For purposes 17 of applying subparagraphs (B) or (C) of this 18 paragraph to all of those years, the election 19 allowed by this subparagraph applies only to the 20 taxpayer making the election and to those members of 21 the taxpayer's unitary business group who are 22 ordinarily required to apportion business income 23 under the same subsection of Section 304 of this Act 24 as the taxpayer making the election. No election 25 allowed by this subparagraph shall be made under a 26 claim filed under subsection (d) of Section 909 more 27 than 30 days after the effective date of this 28 amendatory Act of 1996. 29 (F) Finance Leases. For purposes of this 30 subsection, a finance lease shall be treated as a 31 loan or other extension of credit, rather than as a 32 lease, regardless of how the transaction is 33 characterized for any other purpose, including the 34 purposes of any regulatory agency to which the SB2212 Engrossed -82- LRB9215616SMdv 1 lessor is subject. A finance lease is any 2 transaction in the form of a lease in which the 3 lessee is treated as the owner of the leased asset 4 entitled to any deduction for depreciation allowed 5 under Section 167 of the Internal Revenue Code. 6 (9) Fiscal year. The term "fiscal year" means an 7 accounting period of 12 months ending on the last day of 8 any month other than December. 9 (10) Includes and including. The terms "includes" 10 and "including" when used in a definition contained in 11 this Act shall not be deemed to exclude other things 12 otherwise within the meaning of the term defined. 13 (11) Internal Revenue Code. The term "Internal 14 Revenue Code" means the United States Internal Revenue 15 Code of 1954 or any successor law or laws relating to 16 federal income taxes in effect for the taxable year. 17 (12) Mathematical error. The term "mathematical 18 error" includes the following types of errors, omissions, 19 or defects in a return filed by a taxpayer which prevents 20 acceptance of the return as filed for processing: 21 (A) arithmetic errors or incorrect 22 computations on the return or supporting schedules; 23 (B) entries on the wrong lines; 24 (C) omission of required supporting forms or 25 schedules or the omission of the information in 26 whole or in part called for thereon; and 27 (D) an attempt to claim, exclude, deduct, or 28 improperly report, in a manner directly contrary to 29 the provisions of the Act and regulations thereunder 30 any item of income, exemption, deduction, or credit. 31 (13) Nonbusiness income. The term "nonbusiness 32 income" means all income other than business income or 33 compensation. 34 (14) Nonresident. The term "nonresident" means a SB2212 Engrossed -83- LRB9215616SMdv 1 person who is not a resident. 2 (15) Paid, incurred and accrued. The terms "paid", 3 "incurred" and "accrued" shall be construed according to 4 the method of accounting upon the basis of which the 5 person's base income is computed under this Act. 6 (16) Partnership and partner. The term 7 "partnership" includes a syndicate, group, pool, joint 8 venture or other unincorporated organization, through or 9 by means of which any business, financial operation, or 10 venture is carried on, and which is not, within the 11 meaning of this Act, a trust or estate or a corporation; 12 and the term "partner" includes a member in such 13 syndicate, group, pool, joint venture or organization. 14 The term "partnership" includes any entity, 15 including a limited liability company formed under the 16 Illinois Limited Liability Company Act, classified as a 17 partnership for federal income tax purposes. 18 The term "partnership" does not include a syndicate, 19 group, pool, joint venture, or other unincorporated 20 organization established for the sole purpose of playing 21 the Illinois State Lottery. 22 (17) Part-year resident. The term "part-year 23 resident" means an individual who became a resident 24 during the taxable year or ceased to be a resident during 25 the taxable year. Under Section 1501 (a) (20) (A) (i) 26 residence commences with presence in this State for other 27 than a temporary or transitory purpose and ceases with 28 absence from this State for other than a temporary or 29 transitory purpose. Under Section 1501 (a) (20) (A) (ii) 30 residence commences with the establishment of domicile in 31 this State and ceases with the establishment of domicile 32 in another State. 33 (18) Person. The term "person" shall be construed 34 to mean and include an individual, a trust, estate, SB2212 Engrossed -84- LRB9215616SMdv 1 partnership, association, firm, company, corporation, 2 limited liability company, or fiduciary. For purposes of 3 Section 1301 and 1302 of this Act, a "person" means (i) 4 an individual, (ii) a corporation, (iii) an officer, 5 agent, or employee of a corporation, (iv) a member, agent 6 or employee of a partnership, or (v) a member, manager, 7 employee, officer, director, or agent of a limited 8 liability company who in such capacity commits an offense 9 specified in Section 1301 and 1302. 10 (18A) Records. The term "records" includes all 11 data maintained by the taxpayer, whether on paper, 12 microfilm, microfiche, or any type of machine-sensible 13 data compilation. 14 (19) Regulations. The term "regulations" includes 15 rules promulgated and forms prescribed by the Department. 16 (20) Resident. The term "resident" means: 17 (A) an individual (i) who is in this State for 18 other than a temporary or transitory purpose during 19 the taxable year; or (ii) who is domiciled in this 20 State but is absent from the State for a temporary 21 or transitory purpose during the taxable year; 22 (B) The estate of a decedent who at his or her 23 death was domiciled in this State; 24 (C) A trust created by a will of a decedent 25 who at his death was domiciled in this State; and 26 (D) An irrevocable trust, the grantor of which 27 was domiciled in this State at the time such trust 28 became irrevocable. For purpose of this 29 subparagraph, a trust shall be considered 30 irrevocable to the extent that the grantor is not 31 treated as the owner thereof under Sections 671 32 through 678 of the Internal Revenue Code. 33 (21) Sales. The term "sales" means all gross 34 receipts of the taxpayer not allocated under Sections SB2212 Engrossed -85- LRB9215616SMdv 1 301, 302 and 303. 2 (22) State. The term "state" when applied to a 3 jurisdiction other than this State means any state of the 4 United States, the District of Columbia, the Commonwealth 5 of Puerto Rico, any Territory or Possession of the United 6 States, and any foreign country, or any political 7 subdivision of any of the foregoing. For purposes of the 8 foreign tax credit under Section 601, the term "state" 9 means any state of the United States, the District of 10 Columbia, the Commonwealth of Puerto Rico, and any 11 territory or possession of the United States, or any 12 political subdivision of any of the foregoing, effective 13 for tax years ending on or after December 31, 1989. 14 (23) Taxable year. The term "taxable year" means 15 the calendar year, or the fiscal year ending during such 16 calendar year, upon the basis of which the base income is 17 computed under this Act. "Taxable year" means, in the 18 case of a return made for a fractional part of a year 19 under the provisions of this Act, the period for which 20 such return is made. 21 (24) Taxpayer. The term "taxpayer" means any person 22 subject to the tax imposed by this Act. 23 (25) International banking facility. The term 24 international banking facility shall have the same 25 meaning as is set forth in the Illinois Banking Act or as 26 is set forth in the laws of the United States or 27 regulations of the Board of Governors of the Federal 28 Reserve System. 29 (26) Income Tax Return Preparer. 30 (A) The term "income tax return preparer" 31 means any person who prepares for compensation, or 32 who employs one or more persons to prepare for 33 compensation, any return of tax imposed by this Act 34 or any claim for refund of tax imposed by this Act. SB2212 Engrossed -86- LRB9215616SMdv 1 The preparation of a substantial portion of a return 2 or claim for refund shall be treated as the 3 preparation of that return or claim for refund. 4 (B) A person is not an income tax return 5 preparer if all he or she does is 6 (i) furnish typing, reproducing, or other 7 mechanical assistance; 8 (ii) prepare returns or claims for 9 refunds for the employer by whom he or she is 10 regularly and continuously employed; 11 (iii) prepare as a fiduciary returns or 12 claims for refunds for any person; or 13 (iv) prepare claims for refunds for a 14 taxpayer in response to any notice of 15 deficiency issued to that taxpayer or in 16 response to any waiver of restriction after the 17 commencement of an audit of that taxpayer or of 18 another taxpayer if a determination in the 19 audit of the other taxpayer directly or 20 indirectly affects the tax liability of the 21 taxpayer whose claims he or she is preparing. 22 (27) Unitary business group. The term "unitary 23 business group" means a group of persons related through 24 common ownership whose business activities are integrated 25 with, dependent upon and contribute to each other. The 26 group will not include those members whose business 27 activity outside the United States is 80% or more of any 28 such member's total business activity; for purposes of 29 this paragraph and clause (a) (3) (B) (ii) of Section 30 304, business activity within the United States shall be 31 measured by means of the factors ordinarily applicable 32 under subsections (a), (b), (c), (d), or (h) of Section 33 304 except that, in the case of members ordinarily 34 required to apportion business income by means of the 3 SB2212 Engrossed -87- LRB9215616SMdv 1 factor formula of property, payroll and sales specified 2 in subsection (a) of Section 304, including the formula 3 as weighted in subsection (h) of Section 304, such 4 members shall not use the sales factor in the computation 5 and the results of the property and payroll factor 6 computations of subsection (a) of Section 304 shall be 7 divided by 2 (by one if either the property or payroll 8 factor has a denominator of zero). The computation 9 required by the preceding sentence shall, in each case, 10 involve the division of the member's property, payroll, 11 or revenue miles in the United States, insurance premiums 12 on property or risk in the United States, or financial 13 organization business income from sources within the 14 United States, as the case may be, by the respective 15 worldwide figures for such items. Common ownership in 16 the case of corporations is the direct or indirect 17 control or ownership of more than 50% of the outstanding 18 voting stock of the persons carrying on unitary business 19 activity. Unitary business activity can ordinarily be 20 illustrated where the activities of the members are: (1) 21 in the same general line (such as manufacturing, 22 wholesaling, retailing of tangible personal property, 23 insurance, transportation or finance); or (2) are steps 24 in a vertically structured enterprise or process (such as 25 the steps involved in the production of natural 26 resources, which might include exploration, mining, 27 refining, and marketing); and, in either instance, the 28 members are functionally integrated through the exercise 29 of strong centralized management (where, for example, 30 authority over such matters as purchasing, financing, tax 31 compliance, product line, personnel, marketing and 32 capital investment is not left to each member). In no 33 event, however, will any unitary business group include 34 members which are ordinarily required to apportion SB2212 Engrossed -88- LRB9215616SMdv 1 business income under different subsections of Section 2 304 except that for tax years ending on or after December 3 31, 1987 this prohibition shall not apply to a unitary 4 business group composed of one or more taxpayers all of 5 which apportion business income pursuant to subsection 6 (b) of Section 304, or all of which apportion business 7 income pursuant to subsection (d) of Section 304, and a 8 holding company of such single-factor taxpayers (see 9 definition of "financial organization" for rule regarding 10 holding companies of financial organizations). If a 11 unitary business group would, but for the preceding 12 sentence, include members that are ordinarily required to 13 apportion business income under different subsections of 14 Section 304, then for each subsection of Section 304 for 15 which there are two or more members, there shall be a 16 separate unitary business group composed of such members. 17 For purposes of the preceding two sentences, a member is 18 "ordinarily required to apportion business income" under 19 a particular subsection of Section 304 if it would be 20 required to use the apportionment method prescribed by 21 such subsection except for the fact that it derives 22 business income solely from Illinois. If the unitary 23 business group members' accounting periods differ, the 24 common parent's accounting period or, if there is no 25 common parent, the accounting period of the member that 26 is expected to have, on a recurring basis, the greatest 27 Illinois income tax liability must be used to determine 28 whether to use the apportionment method provided in 29 subsection (a) or subsection (h) of Section 304. The 30 prohibition against membership in a unitary business 31 group for taxpayers ordinarily required to apportion 32 income under different subsections of Section 304 does 33 not apply to taxpayers required to apportion income under 34 subsection (a) and subsection (h) of Section 304. The SB2212 Engrossed -89- LRB9215616SMdv 1 provisions of this amendatory Act of 1998 apply to tax 2 years ending on or after December 31, 1998. 3 (28) Subchapter S corporation. The term 4 "Subchapter S corporation" means a corporation for which 5 there is in effect an election under Section 1362 of the 6 Internal Revenue Code, or for which there is a federal 7 election to opt out of the provisions of the Subchapter S 8 Revision Act of 1982 and have applied instead the prior 9 federal Subchapter S rules as in effect on July 1, 1982. 10 (b) Other definitions. 11 (1) Words denoting number, gender, and so forth, 12 when used in this Act, where not otherwise distinctly 13 expressed or manifestly incompatible with the intent 14 thereof: 15 (A) Words importing the singular include and 16 apply to several persons, parties or things; 17 (B) Words importing the plural include the 18 singular; and 19 (C) Words importing the masculine gender 20 include the feminine as well. 21 (2) "Company" or "association" as including 22 successors and assigns. The word "company" or 23 "association", when used in reference to a corporation, 24 shall be deemed to embrace the words "successors and 25 assigns of such company or association", and in like 26 manner as if these last-named words, or words of similar 27 import, were expressed. 28 (3) Other terms. Any term used in any Section of 29 this Act with respect to the application of, or in 30 connection with, the provisions of any other Section of 31 this Act shall have the same meaning as in such other 32 Section. 33 (Source: P.A. 90-613, eff. 7-9-98; 91-535, eff. 1-1-00; 34 91-913, eff. 1-1-01.) SB2212 Engrossed -90- LRB9215616SMdv 1 Section 99. Effective date. This Act takes effect upon 2 becoming law. SB2212 Engrossed -91- LRB9215616SMdv 1 INDEX 2 Statutes amended in order of appearance 3 35 ILCS 5/201 from Ch. 120, par. 2-201 4 35 ILCS 5/202 from Ch. 120, par. 2-202 5 35 ILCS 5/203 from Ch. 120, par. 2-203 6 35 ILCS 5/209 7 35 ILCS 5/502 from Ch. 120, par. 5-502 8 35 ILCS 5/506 from Ch. 120, par. 5-506 9 35 ILCS 5/601.1 Ch. 120, par. 6-601.1 10 35 ILCS 5/701 from Ch. 120, par. 7-701 11 35 ILCS 5/905 from Ch. 120, par. 9-905 12 35 ILCS 5/911 from Ch. 120, par. 9-911 13 35 ILCS 5/1501 from Ch. 120, par. 15-1501