96TH GENERAL ASSEMBLY
State of Illinois
2009 and 2010
HB4195


 
Introduced 2/27/2009, by Rep. Ronald A. Wait
 
SYNOPSIS AS INTRODUCED:








  



35 ILCS 5/203
 from Ch. 120, par. 2-203








 Amends the Illinois Income Tax Act. Provides that, for taxable years
ending on or after December 31, 2009, an individual taxpayer may deduct from
adjusted gross income an
amount equal to the medical, dental, and other expenses allowed as a deduction
under Section 213 of the Internal Revenue Code to the extent allowed as a
deduction from adjusted gross income in computing federal income taxes.
Provides that to obtain this subtraction modification the taxpayer must submit
to the Department, along with his or her tax return, a copy of the Schedule A
form or any successor form completed and submitted for federal income tax
purposes. Excepts the deduction from the sunset requirements. Effective
immediately.















LRB096 03880 RCE 13914 b

















FISCAL NOTE ACT MAY APPLY
















 


 


A BILL FOR









 











HB4195

LRB096 03880 RCE 13914 b






1
 AN ACT concerning 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 Section 203 as
follows:






6
 (35 ILCS 5/203) (from Ch. 120, par. 2-203)


7
 Sec. 203. Base income defined. 

8
 (a) Individuals.


9
  (1) In general. In the case of an individual, base 
10
 income means an
amount equal to the taxpayer's adjusted 
11
 gross income for the taxable
year as modified by paragraph 
12
 (2).


13
  (2) Modifications. The adjusted gross income referred 
14
 to in
paragraph (1) shall be modified by adding thereto the 
15
 sum of the
following amounts:


16
   (A) An amount equal to all amounts paid or accrued 
17
 to the taxpayer
as interest or dividends during the 
18
 taxable year to the extent excluded
from gross income 
19
 in the computation of adjusted gross income, except 
20
 stock
dividends of qualified public utilities 
21
 described in Section 305(e) of the
Internal Revenue 
22
 Code;


23
   (B) An amount equal to the amount of tax imposed by 
 


 






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1
 this Act to the
extent deducted from gross income in 
2
 the computation of adjusted gross
income for the 
3
 taxable year;


4
   (C) An amount equal to the amount received during 
5
 the taxable year
as a recovery or refund of real 
6
 property taxes paid with respect to the
taxpayer's 
7
 principal residence under the Revenue Act of
1939 and 
8
 for which a deduction was previously taken under 
9
 subparagraph (L) of
this paragraph (2) prior to July 1, 
10
 1991, the retrospective application date of
Article 4 
11
 of Public Act 87-17. In the case of multi-unit or 
12
 multi-use
structures and farm dwellings, the taxes on 
13
 the taxpayer's principal residence
shall be that 
14
 portion of the total taxes for the entire property 
15
 which is
attributable to such principal residence;


16
   (D) An amount equal to the amount of the capital 
17
 gain deduction
allowable under the Internal Revenue 
18
 Code, to the extent deducted from gross
income in the 
19
 computation of adjusted gross income;


20
   (D-5) An amount, to the extent not included in 
21
 adjusted gross income,
equal to the amount of money 
22
 withdrawn by the taxpayer in the taxable year from
a 
23
 medical care savings account and the interest earned on 
24
 the account in the
taxable year of a withdrawal 
25
 pursuant to subsection (b) of Section 20 of the
Medical 
26
 Care Savings Account Act or subsection (b) of Section 
 


 






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1
 20 of the
Medical Care Savings Account Act of 2000;


2
   (D-10) For taxable years ending after December 31, 
3
 1997, an
amount equal to any eligible remediation costs 
4
 that the individual
deducted in computing adjusted 
5
 gross income and for which the
individual claims a 
6
 credit under subsection (l) of Section 201;


7
   (D-15) For taxable years 2001 and thereafter, an 
8
 amount equal to the
bonus depreciation deduction taken 
9
 on the taxpayer's federal income tax return for the 
10
 taxable
year under subsection (k) of Section 168 of the 
11
 Internal Revenue Code;


12
   (D-16) If the taxpayer sells, transfers, abandons, 
13
 or otherwise disposes of property for which the 
14
 taxpayer was required in any taxable year to
make an 
15
 addition modification under subparagraph (D-15), then 
16
 an amount equal
to the aggregate amount of the 
17
 deductions taken in all taxable
years under 
18
 subparagraph (Z) with respect to that property.

19
   If the taxpayer continues to own property through 
20
 the last day of the last tax year for which the 
21
 taxpayer may claim a depreciation deduction for 
22
 federal income tax purposes and for which the taxpayer 
23
 was allowed in any taxable year to make a subtraction 
24
 modification under subparagraph (Z), then an amount 
25
 equal to that subtraction modification.


26
   The taxpayer is required to make the addition 
 


 






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1
 modification under this
subparagraph
only once with 
2
 respect to any one piece of property;

3
   (D-17) An amount equal to the amount otherwise 
4
 allowed as a deduction in computing base income for 
5
 interest paid, accrued, or incurred, directly or 
6
 indirectly, (i) for taxable years ending on or after 
7
 December 31, 2004, to a foreign person who would be a 
8
 member of the same unitary business group but for the 
9
 fact that foreign person's business activity outside 
10
 the United States is 80% or more of the foreign 
11
 person's total business activity and (ii) for taxable 
12
 years ending on or after December 31, 2008, to a person 
13
 who would be a member of the same unitary business 
14
 group but for the fact that the person is prohibited 
15
 under Section 1501(a)(27) from being included in the 
16
 unitary business group because he or she is ordinarily 
17
 required to apportion business income under different 
18
 subsections of Section 304. The addition modification 
19
 required by this subparagraph shall be reduced to the 
20
 extent that dividends were included in base income of 
21
 the unitary group for the same taxable year and 
22
 received by the taxpayer or by a member of the 
23
 taxpayer's unitary business group (including amounts 
24
 included in gross income under Sections 951 through 964 
25
 of the Internal Revenue Code and amounts included in 
26
 gross income under Section 78 of the Internal Revenue 
 


 






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1
 Code) with respect to the stock of the same person to 
2
 whom the interest was paid, accrued, or incurred.
3
   This paragraph shall not apply to the following:

4
    (i) an item of interest paid, accrued, or 
5
 incurred, directly or indirectly, to a person who 
6
 is subject in a foreign country or state, other 
7
 than a state which requires mandatory unitary 
8
 reporting, to a tax on or measured by net income 
9
 with respect to such interest; or
10
    (ii) an item of interest paid, accrued, or 
11
 incurred, directly or indirectly, to a person if 
12
 the taxpayer can establish, based on a 
13
 preponderance of the evidence, both of the 
14
 following:
15
     (a) the person, during the same taxable 
16
 year, paid, accrued, or incurred, the interest 
17
 to a person that is not a related member, and
18
     (b) the transaction giving rise to the 
19
 interest expense between the taxpayer and the 
20
 person did not have as a principal purpose the 
21
 avoidance of Illinois income tax, and is paid 
22
 pursuant to a contract or agreement that 
23
 reflects an arm's-length interest rate and 
24
 terms; or

25
    (iii) the taxpayer can establish, based on 
26
 clear and convincing evidence, that the interest 
 


 






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1
 paid, accrued, or incurred relates to a contract or 
2
 agreement entered into at arm's-length rates and 
3
 terms and the principal purpose for the payment is 
4
 not federal or Illinois tax avoidance; or

5
    (iv) an item of interest paid, accrued, or 
6
 incurred, directly or indirectly, to a person if 
7
 the taxpayer establishes by clear and convincing 
8
 evidence that the adjustments are unreasonable; or 
9
 if the taxpayer and the Director agree in writing 
10
 to the application or use of an alternative method 
11
 of apportionment under Section 304(f).

12
    Nothing in this subsection shall preclude the 
13
 Director from making any other adjustment 
14
 otherwise allowed under Section 404 of this Act for 
15
 any tax year beginning after the effective date of 
16
 this amendment provided such adjustment is made 
17
 pursuant to regulation adopted by the Department 
18
 and such regulations provide methods and standards 
19
 by which the Department will utilize its authority 
20
 under Section 404 of this Act;

21
   (D-18) An amount equal to the amount of intangible 
22
 expenses and costs otherwise allowed as a deduction in 
23
 computing base income, and that were paid, accrued, or 
24
 incurred, directly or indirectly, (i) for taxable 
25
 years ending on or after December 31, 2004, to a 
26
 foreign person who would be a member of the same 
 


 






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1
 unitary business group but for the fact that the 
2
 foreign person's business activity outside the United 
3
 States is 80% or more of that person's total business 
4
 activity and (ii) for taxable years ending on or after 
5
 December 31, 2008, to a person who would be a member of 
6
 the same unitary business group but for the fact that 
7
 the person is prohibited under Section 1501(a)(27) 
8
 from being included in the unitary business group 
9
 because he or she is ordinarily required to apportion 
10
 business income under different subsections of Section 
11
 304. The addition modification required by this 
12
 subparagraph shall be reduced to the extent that 
13
 dividends were included in base income of the unitary 
14
 group for the same taxable year and received by the 
15
 taxpayer or by a member of the taxpayer's unitary 
16
 business group (including amounts included in gross 
17
 income under Sections 951 through 964 of the Internal 
18
 Revenue Code and amounts included in gross income under 
19
 Section 78 of the Internal Revenue Code) with respect 
20
 to the stock of the same person to whom the intangible 
21
 expenses and costs were directly or indirectly paid, 
22
 incurred, or accrued. The preceding sentence does not 
23
 apply to the extent that the same dividends caused a 
24
 reduction to the addition modification required under 
25
 Section 203(a)(2)(D-17) of this Act. As used in this 
26
 subparagraph, the term "intangible expenses and costs" 
 


 






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1
 includes (1) expenses, losses, and costs for, or 
2
 related to, the direct or indirect acquisition, use, 
3
 maintenance or management, ownership, sale, exchange, 
4
 or any other disposition of intangible property; (2) 
5
 losses incurred, directly or indirectly, from 
6
 factoring transactions or discounting transactions; 
7
 (3) royalty, patent, technical, and copyright fees; 
8
 (4) licensing fees; and (5) other similar expenses and 
9
 costs.
For purposes of this subparagraph, "intangible 
10
 property" includes patents, patent applications, trade 
11
 names, trademarks, service marks, copyrights, mask 
12
 works, trade secrets, and similar types of intangible 
13
 assets.
14
   This paragraph shall not apply to the following:
15
    (i) any item of intangible expenses or costs 
16
 paid, accrued, or incurred, directly or 
17
 indirectly, from a transaction with a person who is 
18
 subject in a foreign country or state, other than a 
19
 state which requires mandatory unitary reporting, 
20
 to a tax on or measured by net income with respect 
21
 to such item; or
22
    (ii) any item of intangible expense or cost 
23
 paid, accrued, or incurred, directly or 
24
 indirectly, if the taxpayer can establish, based 
25
 on a preponderance of the evidence, both of the 
26
 following:
 


 






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1
     (a) the person during the same taxable 
2
 year paid, accrued, or incurred, the 
3
 intangible expense or cost to a person that is 
4
 not a related member, and
5
     (b) the transaction giving rise to the 
6
 intangible expense or cost between the 
7
 taxpayer and the person did not have as a 
8
 principal purpose the avoidance of Illinois 
9
 income tax, and is paid pursuant to a contract 
10
 or agreement that reflects arm's-length terms; 
11
 or
12
    (iii) any item of intangible expense or cost 
13
 paid, accrued, or incurred, directly or 
14
 indirectly, from a transaction with a person if the 
15
 taxpayer establishes by clear and convincing 
16
 evidence, that the adjustments are unreasonable; 
17
 or if the taxpayer and the Director agree in 
18
 writing to the application or use of an alternative 
19
 method of apportionment under Section 304(f);

20
    Nothing in this subsection shall preclude the 
21
 Director from making any other adjustment 
22
 otherwise allowed under Section 404 of this Act for 
23
 any tax year beginning after the effective date of 
24
 this amendment provided such adjustment is made 
25
 pursuant to regulation adopted by the Department 
26
 and such regulations provide methods and standards 
 


 






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1
 by which the Department will utilize its authority 
2
 under Section 404 of this Act;

3
   (D-19) For taxable years ending on or after 
4
 December 31, 2008, an amount equal to the amount of 
5
 insurance premium expenses and costs otherwise allowed 
6
 as a deduction in computing base income, and that were 
7
 paid, accrued, or incurred, directly or indirectly, to 
8
 a person who would be a member of the same unitary 
9
 business group but for the fact that the person is 
10
 prohibited under Section 1501(a)(27) from being 
11
 included in the unitary business group because he or 
12
 she is ordinarily required to apportion business 
13
 income under different subsections of Section 304. The 
14
 addition modification required by this subparagraph 
15
 shall be reduced to the extent that dividends were 
16
 included in base income of the unitary group for the 
17
 same taxable year and received by the taxpayer or by a 
18
 member of the taxpayer's unitary business group 
19
 (including amounts included in gross income under 
20
 Sections 951 through 964 of the Internal Revenue Code 
21
 and amounts included in gross income under Section 78 
22
 of the Internal Revenue Code) with respect to the stock 
23
 of the same person to whom the premiums and costs were 
24
 directly or indirectly paid, incurred, or accrued. The 
25
 preceding sentence does not apply to the extent that 
26
 the same dividends caused a reduction to the addition 
 


 






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1
 modification required under Section 203(a)(2)(D-17) or 
2
 Section 203(a)(2)(D-18) of this Act.


3
   (D-20) For taxable years beginning on or after 
4
 January 1,
2002 and ending on or before December 31, 
5
 2006, in
the
case of a distribution from a qualified 
6
 tuition program under Section 529 of
the Internal 
7
 Revenue Code, other than (i) a distribution from a 
8
 College Savings
Pool created under Section 16.5 of the 
9
 State Treasurer Act or (ii) a
distribution from the 
10
 Illinois Prepaid Tuition Trust Fund, an amount equal to

11
 the amount excluded from gross income under Section 
12
 529(c)(3)(B). For taxable years beginning on or after 
13
 January 1, 2007, in the case of a distribution from a 
14
 qualified tuition program under Section 529 of the 
15
 Internal Revenue Code, other than (i) a distribution 
16
 from a College Savings Pool created under Section 16.5 
17
 of the State Treasurer Act, (ii) a distribution from 
18
 the Illinois Prepaid Tuition Trust Fund, or (iii) a 
19
 distribution from a qualified tuition program under 
20
 Section 529 of the Internal Revenue Code that (I) 
21
 adopts and determines that its offering materials 
22
 comply with the College Savings Plans Network's 
23
 disclosure principles and (II) has made reasonable 
24
 efforts to inform in-state residents of the existence 
25
 of in-state qualified tuition programs by informing 
26
 Illinois residents directly and, where applicable, to 
 


 






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1
 inform financial intermediaries distributing the 
2
 program to inform in-state residents of the existence 
3
 of in-state qualified tuition programs at least 
4
 annually, an amount equal to the amount excluded from 
5
 gross income under Section 529(c)(3)(B).
6
   For the purposes of this subparagraph (D-20), a 
7
 qualified tuition program has made reasonable efforts 
8
 if it makes disclosures (which may use the term 
9
 "in-state program" or "in-state plan" and need not 
10
 specifically refer to Illinois or its qualified 
11
 programs by name) (i) directly to prospective 
12
 participants in its offering materials or makes a 
13
 public disclosure, such as a website posting; and (ii) 
14
 where applicable, to intermediaries selling the 
15
 out-of-state program in the same manner that the 
16
 out-of-state program distributes its offering 
17
 materials;

18
    (D-21) For taxable years beginning on or after 
19
 January 1, 2007, in the case of transfer of moneys from 
20
 a qualified tuition program under Section 529 of the 
21
 Internal Revenue Code that is administered by the State 
22
 to an out-of-state program, an amount equal to the 
23
 amount of moneys previously deducted from base income 
24
 under subsection (a)(2)(Y) of this Section.


25
 and by deducting from the total so obtained the
sum of the 
26
 following amounts:


 


 






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1
   (E) For taxable years ending before December 31, 
2
 2001,
any amount included in such total in respect of 
3
 any compensation
(including but not limited to any 
4
 compensation paid or accrued to a
serviceman while a 
5
 prisoner of war or missing in action) paid to a 
6
 resident
by reason of being on active duty in the Armed 
7
 Forces of the United States
and in respect of any 
8
 compensation paid or accrued to a resident who as a

9
 governmental employee was a prisoner of war or missing 
10
 in action, and in
respect of any compensation paid to a 
11
 resident in 1971 or thereafter for
annual training 
12
 performed pursuant to Sections 502 and 503, Title 32,

13
 United States Code as a member of the Illinois National 
14
 Guard or, beginning with taxable years ending on or 
15
 after December 31, 2007, the National Guard of any 
16
 other state.
For taxable years ending on or after 
17
 December 31, 2001, any amount included in
such total in 
18
 respect of any compensation (including but not limited 
19
 to any
compensation paid or accrued to a serviceman 
20
 while a prisoner of war or missing
in action) paid to a 
21
 resident by reason of being a member of any component 
22
 of
the Armed Forces of the United States and in respect 
23
 of any compensation paid
or accrued to a resident who 
24
 as a governmental employee was a prisoner of war
or 
25
 missing in action, and in respect of any compensation 
26
 paid to a resident in
2001 or thereafter by reason of 
 


 






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1
 being a member of the Illinois National Guard or, 
2
 beginning with taxable years ending on or after 
3
 December 31, 2007, the National Guard of any other 
4
 state.
The provisions of this amendatory Act of the 
5
 92nd General Assembly are exempt
from the provisions of 
6
 Section 250;


7
   (F) An amount equal to all amounts included in such 
8
 total pursuant
to the provisions of Sections 402(a), 
9
 402(c), 403(a), 403(b), 406(a), 407(a),
and 408 of the 
10
 Internal Revenue Code, or included in such total as

11
 distributions under the provisions of any retirement 
12
 or disability plan for
employees of any governmental 
13
 agency or unit, or retirement payments to
retired 
14
 partners, which payments are excluded in computing net 
15
 earnings
from self employment by Section 1402 of the 
16
 Internal Revenue Code and
regulations adopted pursuant 
17
 thereto;


18
   (G) The valuation limitation amount;


19
   (H) An amount equal to the amount of any tax 
20
 imposed by this Act
which was refunded to the taxpayer 
21
 and included in such total for the
taxable year;


22
   (I) An amount equal to all amounts included in such 
23
 total pursuant
to the provisions of Section 111 of the 
24
 Internal Revenue Code as a
recovery of items previously 
25
 deducted from adjusted gross income in the
computation 
26
 of taxable income;


 


 






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1
   (J) An amount equal to those dividends included in 
2
 such total which were
paid by a corporation which 
3
 conducts business operations in an Enterprise
Zone or 
4
 zones created under the Illinois Enterprise Zone Act or 
5
 a River Edge Redevelopment Zone or zones created under 
6
 the River Edge Redevelopment Zone Act, and conducts

7
 substantially all of its operations in an Enterprise 
8
 Zone or zones or a River Edge Redevelopment Zone or 
9
 zones. This subparagraph (J) is exempt from the 
10
 provisions of Section 250;


11
   (K) An amount equal to those dividends included in 
12
 such total that
were paid by a corporation that 
13
 conducts business operations in a federally
designated 
14
 Foreign Trade Zone or Sub-Zone and that is designated a 
15
 High Impact
Business located in Illinois; provided 
16
 that dividends eligible for the
deduction provided in 
17
 subparagraph (J) of paragraph (2) of this subsection

18
 shall not be eligible for the deduction provided under 
19
 this subparagraph
(K);


20
   (L) For taxable years ending after December 31, 
21
 1983, an amount equal to
all social security benefits 
22
 and railroad retirement benefits included in
such 
23
 total pursuant to Sections 72(r) and 86 of the Internal 
24
 Revenue Code;


25
   (M) With the exception of any amounts subtracted 
26
 under subparagraph
(N), an amount equal to the sum of 
 


 






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1
 all amounts disallowed as
deductions by (i) Sections 
2
 171(a) (2), and 265(2) of the Internal Revenue Code
of 
3
 1954, as now or hereafter amended, and all amounts of 
4
 expenses allocable
to interest and disallowed as 
5
 deductions by Section 265(1) of the Internal
Revenue 
6
 Code of 1954, as now or hereafter amended;
and (ii) for 
7
 taxable years
ending on or after August 13, 1999, 
8
 Sections 171(a)(2), 265,
280C, and 832(b)(5)(B)(i) of 
9
 the Internal Revenue Code; the provisions of this

10
 subparagraph are exempt from the provisions of Section 
11
 250;


12
   (N) An amount equal to all amounts included in such 
13
 total which are
exempt from taxation by this State 
14
 either by reason of its statutes or
Constitution
or by 
15
 reason of the Constitution, treaties or statutes of the 
16
 United States;
provided that, in the case of any 
17
 statute of this State that exempts income
derived from 
18
 bonds or other obligations from the tax imposed under 
19
 this Act,
the amount exempted shall be the interest net 
20
 of bond premium amortization;


21
   (O) An amount equal to any contribution made to a 
22
 job training
project established pursuant to the Tax 
23
 Increment Allocation Redevelopment Act;


24
   (P) An amount equal to the amount of the deduction 
25
 used to compute the
federal income tax credit for 
26
 restoration of substantial amounts held under
claim of 
 


 






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1
 right for the taxable year pursuant to Section 1341 of 
2
 the
Internal Revenue Code of 1986;


3
   (Q) An amount equal to any amounts included in such 
4
 total, received by
the taxpayer as an acceleration in 
5
 the payment of life, endowment or annuity
benefits in 
6
 advance of the time they would otherwise be payable as 
7
 an indemnity
for a terminal illness;


8
   (R) An amount equal to the amount of any federal or 
9
 State bonus paid
to veterans of the Persian Gulf War;


10
   (S) An amount, to the extent included in adjusted 
11
 gross income, equal
to the amount of a contribution 
12
 made in the taxable year on behalf of the
taxpayer to a 
13
 medical care savings account established under the 
14
 Medical Care
Savings Account Act or the Medical Care 
15
 Savings Account Act of 2000 to the
extent the 
16
 contribution is accepted by the account
administrator 
17
 as provided in that Act;


18
   (T) An amount, to the extent included in adjusted 
19
 gross income, equal to
the amount of interest earned in 
20
 the taxable year on a medical care savings
account 
21
 established under the Medical Care Savings Account Act 
22
 or the Medical
Care Savings Account Act of 2000 on 
23
 behalf of the
taxpayer, other than interest added 
24
 pursuant to item (D-5) of this paragraph
(2);


25
   (U) For one taxable year beginning on or after 
26
 January 1,
1994, an
amount equal to the total amount of 
 


 






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1
 tax imposed and paid under subsections (a)
and (b) of 
2
 Section 201 of this Act on grant amounts received by 
3
 the taxpayer
under the Nursing Home Grant Assistance 
4
 Act during the taxpayer's taxable years
1992 and 1993;


5
   (V) Beginning with tax years ending on or after 
6
 December 31, 1995 and
ending with tax years ending on 
7
 or before December 31, 2004, an amount equal to
the 
8
 amount paid by a taxpayer who is a
self-employed 
9
 taxpayer, a partner of a partnership, or a
shareholder 
10
 in a Subchapter S corporation for health insurance or 
11
 long-term
care insurance for that taxpayer or that 
12
 taxpayer's spouse or dependents, to
the extent that the 
13
 amount paid for that health insurance or long-term care

14
 insurance may be deducted under Section 213 of the 
15
 Internal Revenue Code of
1986, has not been deducted on 
16
 the federal income tax return of the taxpayer,
and does 
17
 not exceed the taxable income attributable to that 
18
 taxpayer's income,
self-employment income, or 
19
 Subchapter S corporation income; except that no

20
 deduction shall be allowed under this item (V) if the 
21
 taxpayer is eligible to
participate in any health 
22
 insurance or long-term care insurance plan of an

23
 employer of the taxpayer or the taxpayer's
spouse. The 
24
 amount of the health insurance and long-term care 
25
 insurance
subtracted under this item (V) shall be 
26
 determined by multiplying total
health insurance and 
 


 






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1
 long-term care insurance premiums paid by the taxpayer

2
 times a number that represents the fractional 
3
 percentage of eligible medical
expenses under Section 
4
 213 of the Internal Revenue Code of 1986 not actually

5
 deducted on the taxpayer's federal income tax return;


6
   (W) For taxable years beginning on or after January 
7
 1, 1998,
all amounts included in the taxpayer's federal 
8
 gross income
in the taxable year from amounts converted 
9
 from a regular IRA to a Roth IRA.
This paragraph is 
10
 exempt from the provisions of Section
250;


11
   (X) For taxable year 1999 and thereafter, an amount 
12
 equal to the
amount of any (i) distributions, to the 
13
 extent includible in gross income for
federal income 
14
 tax purposes, made to the taxpayer because of his or 
15
 her status
as a victim of persecution for racial or 
16
 religious reasons by Nazi Germany or
any other Axis 
17
 regime or as an heir of the victim and (ii) items
of 
18
 income, to the extent
includible in gross income for 
19
 federal income tax purposes, attributable to,
derived 
20
 from or in any way related to assets stolen from, 
21
 hidden from, or
otherwise lost to a victim of

22
 persecution for racial or religious reasons by Nazi 
23
 Germany or any other Axis
regime immediately prior to, 
24
 during, and immediately after World War II,
including, 
25
 but
not limited to, interest on the proceeds receivable 
26
 as insurance
under policies issued to a victim of 
 


 






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1
 persecution for racial or religious
reasons
by Nazi 
2
 Germany or any other Axis regime by European insurance 
3
 companies
immediately prior to and during World War II;

4
 provided, however, this subtraction from federal 
5
 adjusted gross income does not
apply to assets acquired 
6
 with such assets or with the proceeds from the sale of

7
 such assets; provided, further, this paragraph shall 
8
 only apply to a taxpayer
who was the first recipient of 
9
 such assets after their recovery and who is a
victim of 
10
 persecution for racial or religious reasons
by Nazi 
11
 Germany or any other Axis regime or as an heir of the 
12
 victim. The
amount of and the eligibility for any 
13
 public assistance, benefit, or
similar entitlement is 
14
 not affected by the inclusion of items (i) and (ii) of

15
 this paragraph in gross income for federal income tax 
16
 purposes.
This paragraph is exempt from the provisions 
17
 of Section 250;


18
   (Y) For taxable years beginning on or after January 
19
 1, 2002
and ending
on or before December 31, 2004, 
20
 moneys contributed in the taxable year to a College 
21
 Savings Pool account under
Section 16.5 of the State 
22
 Treasurer Act, except that amounts excluded from
gross 
23
 income under Section 529(c)(3)(C)(i) of the Internal 
24
 Revenue Code
shall not be considered moneys 
25
 contributed under this subparagraph (Y). For taxable 
26
 years beginning on or after January 1, 2005, a maximum 
 


 






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1
 of $10,000
contributed
in the
taxable year to (i) a 
2
 College Savings Pool account under Section 16.5 of the

3
 State
Treasurer Act or (ii) the Illinois Prepaid 
4
 Tuition Trust Fund,
except that
amounts excluded from 
5
 gross income under Section 529(c)(3)(C)(i) of the

6
 Internal
Revenue Code shall not be considered moneys 
7
 contributed under this subparagraph
(Y). This

8
 subparagraph (Y) is exempt from the provisions of 
9
 Section 250;


10
   (Z) For taxable years 2001 and thereafter, for the 
11
 taxable year in
which the bonus depreciation deduction

12
 is taken on the taxpayer's federal income tax return 
13
 under
subsection (k) of Section 168 of the Internal 
14
 Revenue Code and for each
applicable taxable year 
15
 thereafter, an amount equal to "x", where:


16
    (1) "y" equals the amount of the depreciation 
17
 deduction taken for the
taxable year
on the 
18
 taxpayer's federal income tax return on property 
19
 for which the bonus
depreciation deduction
was 
20
 taken in any year under subsection (k) of Section 
21
 168 of the Internal
Revenue Code, but not including 
22
 the bonus depreciation deduction;


23
    (2) for taxable years ending on or before 
24
 December 31, 2005, "x" equals "y" multiplied by 30 
25
 and then divided by 70 (or "y"
multiplied by 
26
 0.429); and
 


 






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1
    (3) for taxable years ending after December 
2
 31, 2005:
3
     (i) for property on which a bonus 
4
 depreciation deduction of 30% of the adjusted 
5
 basis was taken, "x" equals "y" multiplied by 
6
 30 and then divided by 70 (or "y"
multiplied by 
7
 0.429); and
8
     (ii) for property on which a bonus 
9
 depreciation deduction of 50% of the adjusted 
10
 basis was taken, "x" equals "y" multiplied by 
11
 1.0.


12
   The aggregate amount deducted under this 
13
 subparagraph in all taxable
years for any one piece of 
14
 property may not exceed the amount of the bonus

15
 depreciation deduction
taken on that property on the 
16
 taxpayer's federal income tax return under
subsection 
17
 (k) of Section 168 of the Internal Revenue Code. This 
18
 subparagraph (Z) is exempt from the provisions of 
19
 Section 250;


20
   (AA) If the taxpayer sells, transfers, abandons, 
21
 or otherwise disposes of
property for which the 
22
 taxpayer was required in any taxable year to make an

23
 addition modification under subparagraph (D-15), then 
24
 an amount equal to that
addition modification.


25
   If the taxpayer continues to own property through 
26
 the last day of the last tax year for which the 
 


 






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1
 taxpayer may claim a depreciation deduction for 
2
 federal income tax purposes and for which the taxpayer 
3
 was required in any taxable year to make an addition 
4
 modification under subparagraph (D-15), then an amount 
5
 equal to that addition modification.


6
   The taxpayer is allowed to take the deduction under 
7
 this subparagraph
only once with respect to any one 
8
 piece of property.
9
   This subparagraph (AA) is exempt from the 
10
 provisions of Section 250;


11
   (BB) Any amount included in adjusted gross income, 
12
 other
than
salary,
received by a driver in a 
13
 ridesharing arrangement using a motor vehicle;

14
   (CC) The amount of (i) any interest income (net of 
15
 the deductions allocable thereto) taken into account 
16
 for the taxable year with respect to a transaction with 
17
 a taxpayer that is required to make an addition 
18
 modification with respect to such transaction under 
19
 Section 203(a)(2)(D-17), 203(b)(2)(E-12), 
20
 203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed 
21
 the amount of that addition modification, and
(ii) any 
22
 income from intangible property (net of the deductions 
23
 allocable thereto) taken into account for the taxable 
24
 year with respect to a transaction with a taxpayer that 
25
 is required to make an addition modification with 
26
 respect to such transaction under Section 
 


 






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1
 203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or 
2
 203(d)(2)(D-8), but not to exceed the amount of that 
3
 addition modification. This subparagraph (CC) is 
4
 exempt from the provisions of Section 250;
5
   (DD) An amount equal to the interest income taken 
6
 into account for the taxable year (net of the 
7
 deductions allocable thereto) with respect to 
8
 transactions with (i) a foreign person who would be a 
9
 member of the taxpayer's unitary business group but for 
10
 the fact that the foreign person's business activity 
11
 outside the United States is 80% or more of that 
12
 person's total business activity and (ii) for taxable 
13
 years ending on or after December 31, 2008, to a person 
14
 who would be a member of the same unitary business 
15
 group but for the fact that the person is prohibited 
16
 under Section 1501(a)(27) from being included in the 
17
 unitary business group because he or she is ordinarily 
18
 required to apportion business income under different 
19
 subsections of Section 304, but not to exceed the 
20
 addition modification required to be made for the same 
21
 taxable year under Section 203(a)(2)(D-17) for 
22
 interest paid, accrued, or incurred, directly or 
23
 indirectly, to the same person. This subparagraph (DD) 
24
 is exempt from the provisions of Section 250; and 
25
   (EE) An amount equal to the income from intangible 
26
 property taken into account for the taxable year (net 
 


 






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LRB096 03880 RCE 13914 b





1
 of the deductions allocable thereto) with respect to 
2
 transactions with (i) a foreign person who would be a 
3
 member of the taxpayer's unitary business group but for 
4
 the fact that the foreign person's business activity 
5
 outside the United States is 80% or more of that 
6
 person's total business activity and (ii) for taxable 
7
 years ending on or after December 31, 2008, to a person 
8
 who would be a member of the same unitary business 
9
 group but for the fact that the person is prohibited 
10
 under Section 1501(a)(27) from being included in the 
11
 unitary business group because he or she is ordinarily 
12
 required to apportion business income under different 
13
 subsections of Section 304, but not to exceed the 
14
 addition modification required to be made for the same 
15
 taxable year under Section 203(a)(2)(D-18) for 
16
 intangible expenses and costs paid, accrued, or 
17
 incurred, directly or indirectly, to the same foreign 
18
 person. This subparagraph (EE) is exempt from the 
19
 provisions of Section 250.

20
   (FF) For taxable years ending on or after December 
21
 31, 2009, an amount
equal to the
medical, dental, and 
22
 other expenses allowed as a deduction under Section 213 
23
 of
the Internal Revenue Code to the extent allowed as a 
24
 deduction from adjusted
gross income in computing 
25
 federal income taxes. To obtain this subtraction

26
 modification, the taxpayer must submit to the 
 


 






HB4195
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1
 Department, along with his or her
tax return, a copy of 
2
 the Schedule A form or any successor form completed and

3
 submitted for federal income tax purposes. This 
4
 paragraph is exempt from the
provisions of Section 250. 


5
 (b) Corporations.


6
  (1) In general. In the case of a corporation, base 
7
 income means an
amount equal to the taxpayer's taxable 
8
 income for the taxable year as
modified by paragraph (2).


9
  (2) Modifications. The taxable income referred to in 
10
 paragraph (1)
shall be modified by adding thereto the sum 
11
 of the following amounts:


12
   (A) An amount equal to all amounts paid or accrued 
13
 to the taxpayer
as interest and all distributions 
14
 received from regulated investment
companies during 
15
 the taxable year to the extent excluded from gross

16
 income in the computation of taxable income;


17
   (B) An amount equal to the amount of tax imposed by 
18
 this Act to the
extent deducted from gross income in 
19
 the computation of taxable income
for the taxable year;


20
   (C) In the case of a regulated investment company, 
21
 an amount equal to
the excess of (i) the net long-term 
22
 capital gain for the taxable year, over
(ii) the amount 
23
 of the capital gain dividends designated as such in 
24
 accordance
with Section 852(b)(3)(C) of the Internal 
25
 Revenue Code and any amount
designated under Section 
 


 






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LRB096 03880 RCE 13914 b





1
 852(b)(3)(D) of the Internal Revenue Code,

2
 attributable to the taxable year (this amendatory Act 
3
 of 1995
(Public Act 89-89) is declarative of existing 
4
 law and is not a new
enactment);


5
   (D) The amount of any net operating loss deduction 
6
 taken in arriving
at taxable income, other than a net 
7
 operating loss carried forward from a
taxable year 
8
 ending prior to December 31, 1986;


9
   (E) For taxable years in which a net operating loss 
10
 carryback or
carryforward from a taxable year ending 
11
 prior to December 31, 1986 is an
element of taxable 
12
 income under paragraph (1) of subsection (e) or

13
 subparagraph (E) of paragraph (2) of subsection (e), 
14
 the amount by which
addition modifications other than 
15
 those provided by this subparagraph (E)
exceeded 
16
 subtraction modifications in such earlier taxable 
17
 year, with the
following limitations applied in the 
18
 order that they are listed:


19
    (i) the addition modification relating to the 
20
 net operating loss
carried back or forward to the 
21
 taxable year from any taxable year ending
prior to 
22
 December 31, 1986 shall be reduced by the amount of 
23
 addition
modification under this subparagraph (E) 
24
 which related to that net operating
loss and which 
25
 was taken into account in calculating the base 
26
 income of an
earlier taxable year, and


 


 






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1
    (ii) the addition modification relating to the 
2
 net operating loss
carried back or forward to the 
3
 taxable year from any taxable year ending
prior to 
4
 December 31, 1986 shall not exceed the amount of 
5
 such carryback or
carryforward;


6
   For taxable years in which there is a net operating 
7
 loss carryback or
carryforward from more than one other 
8
 taxable year ending prior to December
31, 1986, the 
9
 addition modification provided in this subparagraph 
10
 (E) shall
be the sum of the amounts computed 
11
 independently under the preceding
provisions of this 
12
 subparagraph (E) for each such taxable year;


13
   (E-5) For taxable years ending after December 31, 
14
 1997, an
amount equal to any eligible remediation costs 
15
 that the corporation
deducted in computing adjusted 
16
 gross income and for which the
corporation claims a 
17
 credit under subsection (l) of Section 201;


18
   (E-10) For taxable years 2001 and thereafter, an 
19
 amount equal to the
bonus depreciation deduction taken 
20
 on the taxpayer's federal income tax return for the 
21
 taxable
year under subsection (k) of Section 168 of the 
22
 Internal Revenue Code;


23
   (E-11) If the taxpayer sells, transfers, abandons, 
24
 or otherwise disposes of property for which the 
25
 taxpayer was required in any taxable year to
make an 
26
 addition modification under subparagraph (E-10), then 
 


 






HB4195
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LRB096 03880 RCE 13914 b





1
 an amount equal
to the aggregate amount of the 
2
 deductions taken in all taxable
years under 
3
 subparagraph (T) with respect to that property.

4
   If the taxpayer continues to own property through 
5
 the last day of the last tax year for which the 
6
 taxpayer may claim a depreciation deduction for 
7
 federal income tax purposes and for which the taxpayer 
8
 was allowed in any taxable year to make a subtraction 
9
 modification under subparagraph (T), then an amount 
10
 equal to that subtraction modification.


11
   The taxpayer is required to make the addition 
12
 modification under this
subparagraph
only once with 
13
 respect to any one piece of property;

14
   (E-12) An amount equal to the amount otherwise 
15
 allowed as a deduction in computing base income for 
16
 interest paid, accrued, or incurred, directly or 
17
 indirectly, (i) for taxable years ending on or after 
18
 December 31, 2004, to a foreign person who would be a 
19
 member of the same unitary business group but for the 
20
 fact the foreign person's business activity outside 
21
 the United States is 80% or more of the foreign 
22
 person's total business activity and (ii) for taxable 
23
 years ending on or after December 31, 2008, to a person 
24
 who would be a member of the same unitary business 
25
 group but for the fact that the person is prohibited 
26
 under Section 1501(a)(27) from being included in the 
 


 






HB4195
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LRB096 03880 RCE 13914 b





1
 unitary business group because he or she is ordinarily 
2
 required to apportion business income under different 
3
 subsections of Section 304. The addition modification 
4
 required by this subparagraph shall be reduced to the 
5
 extent that dividends were included in base income of 
6
 the unitary group for the same taxable year and 
7
 received by the taxpayer or by a member of the 
8
 taxpayer's unitary business group (including amounts 
9
 included in gross income pursuant to Sections 951 
10
 through 964 of the Internal Revenue Code and amounts 
11
 included in gross income under Section 78 of the 
12
 Internal Revenue Code) with respect to the stock of the 
13
 same person to whom the interest was paid, accrued, or 
14
 incurred.

15
   This paragraph shall not apply to the following:

16
    (i) an item of interest paid, accrued, or 
17
 incurred, directly or indirectly, to a person who 
18
 is subject in a foreign country or state, other 
19
 than a state which requires mandatory unitary 
20
 reporting, to a tax on or measured by net income 
21
 with respect to such interest; or
22
    (ii) an item of interest paid, accrued, or 
23
 incurred, directly or indirectly, to a person if 
24
 the taxpayer can establish, based on a 
25
 preponderance of the evidence, both of the 
26
 following:
 


 






HB4195
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LRB096 03880 RCE 13914 b





1
     (a) the person, during the same taxable 
2
 year, paid, accrued, or incurred, the interest 
3
 to a person that is not a related member, and
4
     (b) the transaction giving rise to the 
5
 interest expense between the taxpayer and the 
6
 person did not have as a principal purpose the 
7
 avoidance of Illinois income tax, and is paid 
8
 pursuant to a contract or agreement that 
9
 reflects an arm's-length interest rate and 
10
 terms; or

11
    (iii) the taxpayer can establish, based on 
12
 clear and convincing evidence, that the interest 
13
 paid, accrued, or incurred relates to a contract or 
14
 agreement entered into at arm's-length rates and 
15
 terms and the principal purpose for the payment is 
16
 not federal or Illinois tax avoidance; or

17
    (iv) an item of interest paid, accrued, or 
18
 incurred, directly or indirectly, to a person if 
19
 the taxpayer establishes by clear and convincing 
20
 evidence that the adjustments are unreasonable; or 
21
 if the taxpayer and the Director agree in writing 
22
 to the application or use of an alternative method 
23
 of apportionment under Section 304(f).

24
    Nothing in this subsection shall preclude the 
25
 Director from making any other adjustment 
26
 otherwise allowed under Section 404 of this Act for 
 


 






HB4195
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LRB096 03880 RCE 13914 b





1
 any tax year beginning after the effective date of 
2
 this amendment provided such adjustment is made 
3
 pursuant to regulation adopted by the Department 
4
 and such regulations provide methods and standards 
5
 by which the Department will utilize its authority 
6
 under Section 404 of this Act;

7
   (E-13) An amount equal to the amount of intangible 
8
 expenses and costs otherwise allowed as a deduction in 
9
 computing base income, and that were paid, accrued, or 
10
 incurred, directly or indirectly, (i) for taxable 
11
 years ending on or after December 31, 2004, to a 
12
 foreign person who would be a member of the same 
13
 unitary business group but for the fact that the 
14
 foreign person's business activity outside the United 
15
 States is 80% or more of that person's total business 
16
 activity and (ii) for taxable years ending on or after 
17
 December 31, 2008, to a person who would be a member of 
18
 the same unitary business group but for the fact that 
19
 the person is prohibited under Section 1501(a)(27) 
20
 from being included in the unitary business group 
21
 because he or she is ordinarily required to apportion 
22
 business income under different subsections of Section 
23
 304. The addition modification required by this 
24
 subparagraph shall be reduced to the extent that 
25
 dividends were included in base income of the unitary 
26
 group for the same taxable year and received by the 
 


 






HB4195
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LRB096 03880 RCE 13914 b





1
 taxpayer or by a member of the taxpayer's unitary 
2
 business group (including amounts included in gross 
3
 income pursuant to Sections 951 through 964 of the 
4
 Internal Revenue Code and amounts included in gross 
5
 income under Section 78 of the Internal Revenue Code) 
6
 with respect to the stock of the same person to whom 
7
 the intangible expenses and costs were directly or 
8
 indirectly paid, incurred, or accrued. The preceding 
9
 sentence shall not apply to the extent that the same 
10
 dividends caused a reduction to the addition 
11
 modification required under Section 203(b)(2)(E-12) of 
12
 this Act.
As used in this subparagraph, the term 
13
 "intangible expenses and costs" includes (1) expenses, 
14
 losses, and costs for, or related to, the direct or 
15
 indirect acquisition, use, maintenance or management, 
16
 ownership, sale, exchange, or any other disposition of 
17
 intangible property; (2) losses incurred, directly or 
18
 indirectly, from factoring transactions or discounting 
19
 transactions; (3) royalty, patent, technical, and 
20
 copyright fees; (4) licensing fees; and (5) other 
21
 similar expenses and costs.
For purposes of this 
22
 subparagraph, "intangible property" includes patents, 
23
 patent applications, trade names, trademarks, service 
24
 marks, copyrights, mask works, trade secrets, and 
25
 similar types of intangible assets.
26
   This paragraph shall not apply to the following:
 


 






HB4195
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LRB096 03880 RCE 13914 b





1
    (i) any item of intangible expenses or costs 
2
 paid, accrued, or incurred, directly or 
3
 indirectly, from a transaction with a person who is 
4
 subject in a foreign country or state, other than a 
5
 state which requires mandatory unitary reporting, 
6
 to a tax on or measured by net income with respect 
7
 to such item; or
8
    (ii) any item of intangible expense or cost 
9
 paid, accrued, or incurred, directly or 
10
 indirectly, if the taxpayer can establish, based 
11
 on a preponderance of the evidence, both of the 
12
 following:
13
     (a) the person during the same taxable 
14
 year paid, accrued, or incurred, the 
15
 intangible expense or cost to a person that is 
16
 not a related member, and
17
     (b) the transaction giving rise to the 
18
 intangible expense or cost between the 
19
 taxpayer and the person did not have as a 
20
 principal purpose the avoidance of Illinois 
21
 income tax, and is paid pursuant to a contract 
22
 or agreement that reflects arm's-length terms; 
23
 or
24
    (iii) any item of intangible expense or cost 
25
 paid, accrued, or incurred, directly or 
26
 indirectly, from a transaction with a person if the 
 


 






HB4195
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LRB096 03880 RCE 13914 b





1
 taxpayer establishes by clear and convincing 
2
 evidence, that the adjustments are unreasonable; 
3
 or if the taxpayer and the Director agree in 
4
 writing to the application or use of an alternative 
5
 method of apportionment under Section 304(f);

6
    Nothing in this subsection shall preclude the 
7
 Director from making any other adjustment 
8
 otherwise allowed under Section 404 of this Act for 
9
 any tax year beginning after the effective date of 
10
 this amendment provided such adjustment is made 
11
 pursuant to regulation adopted by the Department 
12
 and such regulations provide methods and standards 
13
 by which the Department will utilize its authority 
14
 under Section 404 of this Act;

15
   (E-14) For taxable years ending on or after 
16
 December 31, 2008, an amount equal to the amount of 
17
 insurance premium expenses and costs otherwise allowed 
18
 as a deduction in computing base income, and that were 
19
 paid, accrued, or incurred, directly or indirectly, to 
20
 a person who would be a member of the same unitary 
21
 business group but for the fact that the person is 
22
 prohibited under Section 1501(a)(27) from being 
23
 included in the unitary business group because he or 
24
 she is ordinarily required to apportion business 
25
 income under different subsections of Section 304. The 
26
 addition modification required by this subparagraph 
 


 






HB4195
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LRB096 03880 RCE 13914 b





1
 shall be reduced to the extent that dividends were 
2
 included in base income of the unitary group for the 
3
 same taxable year and received by the taxpayer or by a 
4
 member of the taxpayer's unitary business group 
5
 (including amounts included in gross income under 
6
 Sections 951 through 964 of the Internal Revenue Code 
7
 and amounts included in gross income under Section 78 
8
 of the Internal Revenue Code) with respect to the stock 
9
 of the same person to whom the premiums and costs were 
10
 directly or indirectly paid, incurred, or accrued. The 
11
 preceding sentence does not apply to the extent that 
12
 the same dividends caused a reduction to the addition 
13
 modification required under Section 203(b)(2)(E-12) or 
14
 Section 203(b)(2)(E-13) of this Act;

15
   (E-15) For taxable years beginning after December 
16
 31, 2008, any deduction for dividends paid by a captive 
17
 real estate investment trust that is allowed to a real 
18
 estate investment trust under Section 857(b)(2)(B) of 
19
 the Internal Revenue Code for dividends paid;

20
 and by deducting from the total so obtained the sum of the 
21
 following
amounts:


22
   (F) An amount equal to the amount of any tax 
23
 imposed by this Act
which was refunded to the taxpayer 
24
 and included in such total for the
taxable year;


25
   (G) An amount equal to any amount included in such 
26
 total under
Section 78 of the Internal Revenue Code;


 


 






HB4195
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LRB096 03880 RCE 13914 b





1
   (H) In the case of a regulated investment company, 
2
 an amount equal
to the amount of exempt interest 
3
 dividends as defined in subsection (b)
(5) of Section 
4
 852 of the Internal Revenue Code, paid to shareholders

5
 for the taxable year;


6
   (I) With the exception of any amounts subtracted 
7
 under subparagraph
(J),
an amount equal to the sum of 
8
 all amounts disallowed as
deductions by (i) Sections 
9
 171(a) (2), and 265(a)(2) and amounts disallowed as

10
 interest expense by Section 291(a)(3) of the Internal 
11
 Revenue Code, as now
or hereafter amended, and all 
12
 amounts of expenses allocable to interest and

13
 disallowed as deductions by Section 265(a)(1) of the 
14
 Internal Revenue Code,
as now or hereafter amended;
and 
15
 (ii) for taxable years
ending on or after August 13, 
16
 1999, Sections
171(a)(2), 265,
280C, 291(a)(3), and 
17
 832(b)(5)(B)(i) of the Internal Revenue Code; the

18
 provisions of this
subparagraph are exempt from the 
19
 provisions of Section 250;


20
   (J) An amount equal to all amounts included in such 
21
 total which are
exempt from taxation by this State 
22
 either by reason of its statutes or
Constitution
or by 
23
 reason of the Constitution, treaties or statutes of the 
24
 United States;
provided that, in the case of any 
25
 statute of this State that exempts income
derived from 
26
 bonds or other obligations from the tax imposed under 
 


 






HB4195
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LRB096 03880 RCE 13914 b





1
 this Act,
the amount exempted shall be the interest net 
2
 of bond premium amortization;


3
   (K) An amount equal to those dividends included in 
4
 such total
which were paid by a corporation which 
5
 conducts
business operations in an Enterprise Zone or 
6
 zones created under
the Illinois Enterprise Zone Act or 
7
 a River Edge Redevelopment Zone or zones created under 
8
 the River Edge Redevelopment Zone Act and conducts 
9
 substantially all of its
operations in an Enterprise 
10
 Zone or zones or a River Edge Redevelopment Zone or 
11
 zones. This subparagraph (K) is exempt from the 
12
 provisions of Section 250;


13
   (L) An amount equal to those dividends included in 
14
 such total that
were paid by a corporation that 
15
 conducts business operations in a federally
designated 
16
 Foreign Trade Zone or Sub-Zone and that is designated a 
17
 High Impact
Business located in Illinois; provided 
18
 that dividends eligible for the
deduction provided in 
19
 subparagraph (K) of paragraph 2 of this subsection

20
 shall not be eligible for the deduction provided under 
21
 this subparagraph
(L);


22
   (M) For any taxpayer that is a financial 
23
 organization within the meaning
of Section 304(c) of 
24
 this Act, an amount included in such total as interest

25
 income from a loan or loans made by such taxpayer to a 
26
 borrower, to the extent
that such a loan is secured by 
 


 






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1
 property which is eligible for the Enterprise
Zone 
2
 Investment Credit or the River Edge Redevelopment Zone 
3
 Investment Credit. To determine the portion of a loan 
4
 or loans that is
secured by property eligible for a 
5
 Section 201(f) investment
credit to the borrower, the 
6
 entire principal amount of the loan or loans
between 
7
 the taxpayer and the borrower should be divided into 
8
 the basis of the
Section 201(f) investment credit 
9
 property which secures the
loan or loans, using for 
10
 this purpose the original basis of such property on
the 
11
 date that it was placed in service in the
Enterprise 
12
 Zone or the River Edge Redevelopment Zone. The 
13
 subtraction modification available to taxpayer in any

14
 year under this subsection shall be that portion of the 
15
 total interest paid
by the borrower with respect to 
16
 such loan attributable to the eligible
property as 
17
 calculated under the previous sentence. This 
18
 subparagraph (M) is exempt from the provisions of 
19
 Section 250;


20
   (M-1) For any taxpayer that is a financial 
21
 organization within the
meaning of Section 304(c) of 
22
 this Act, an amount included in such total as
interest 
23
 income from a loan or loans made by such taxpayer to a 
24
 borrower,
to the extent that such a loan is secured by 
25
 property which is eligible for
the High Impact Business 
26
 Investment Credit. To determine the portion of a
loan 
 


 






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1
 or loans that is secured by property eligible for a 
2
 Section 201(h) investment credit to the borrower, the 
3
 entire principal amount of
the loan or loans between 
4
 the taxpayer and the borrower should be divided into

5
 the basis of the Section 201(h) investment credit 
6
 property which
secures the loan or loans, using for 
7
 this purpose the original basis of such
property on the 
8
 date that it was placed in service in a federally 
9
 designated
Foreign Trade Zone or Sub-Zone located in 
10
 Illinois. No taxpayer that is
eligible for the 
11
 deduction provided in subparagraph (M) of paragraph 
12
 (2) of
this subsection shall be eligible for the 
13
 deduction provided under this
subparagraph (M-1). The 
14
 subtraction modification available to taxpayers in
any 
15
 year under this subsection shall be that portion of the 
16
 total interest
paid by the borrower with respect to 
17
 such loan attributable to the eligible
property as 
18
 calculated under the previous sentence;


19
   (N) Two times any contribution made during the 
20
 taxable year to a
designated zone organization to the 
21
 extent that the contribution (i)
qualifies as a 
22
 charitable contribution under subsection (c) of 
23
 Section 170
of the Internal Revenue Code and (ii) must, 
24
 by its terms, be used for a
project approved by the 
25
 Department of Commerce and Economic Opportunity under 
26
 Section 11 of the Illinois Enterprise Zone Act or under 
 


 






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1
 Section 10-10 of the River Edge Redevelopment Zone Act. 
2
 This subparagraph (N) is exempt from the provisions of 
3
 Section 250;


4
   (O) An amount equal to: (i) 85% for taxable years 
5
 ending on or before
December 31, 1992, or, a percentage 
6
 equal to the percentage allowable under
Section 
7
 243(a)(1) of the Internal Revenue Code of 1986 for 
8
 taxable years ending
after December 31, 1992, of the 
9
 amount by which dividends included in taxable
income 
10
 and received from a corporation that is not created or 
11
 organized under
the laws of the United States or any 
12
 state or political subdivision thereof,
including, for 
13
 taxable years ending on or after December 31, 1988, 
14
 dividends
received or deemed received or paid or deemed 
15
 paid under Sections 951 through
964 of the Internal 
16
 Revenue Code, exceed the amount of the modification

17
 provided under subparagraph (G) of paragraph (2) of 
18
 this subsection (b) which
is related to such dividends, 
19
 and including, for taxable years ending on or after 
20
 December 31, 2008, dividends received from a captive 
21
 real estate investment trust; plus (ii) 100% of the 
22
 amount by which dividends,
included in taxable income 
23
 and received, including, for taxable years ending on
or 
24
 after December 31, 1988, dividends received or deemed 
25
 received or paid or
deemed paid under Sections 951 
26
 through 964 of the Internal Revenue Code and including, 
 


 






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1
 for taxable years ending on or after December 31, 2008, 
2
 dividends received from a captive real estate 
3
 investment trust, from
any such corporation specified 
4
 in clause (i) that would but for the provisions
of 
5
 Section 1504 (b) (3) of the Internal Revenue Code be 
6
 treated as a member of
the affiliated group which 
7
 includes the dividend recipient, exceed the amount
of 
8
 the modification provided under subparagraph (G) of 
9
 paragraph (2) of this
subsection (b) which is related 
10
 to such dividends. This subparagraph (O) is exempt from 
11
 the provisions of Section 250 of this Act;


12
   (P) An amount equal to any contribution made to a 
13
 job training project
established pursuant to the Tax 
14
 Increment Allocation Redevelopment Act;


15
   (Q) An amount equal to the amount of the deduction 
16
 used to compute the
federal income tax credit for 
17
 restoration of substantial amounts held under
claim of 
18
 right for the taxable year pursuant to Section 1341 of 
19
 the
Internal Revenue Code of 1986;


20
   (R) On and after July 20, 1999, in the case of an 
21
 attorney-in-fact with respect to whom an
interinsurer 
22
 or a reciprocal insurer has made the election under 
23
 Section 835 of
the Internal Revenue Code, 26 U.S.C. 
24
 835, an amount equal to the excess, if
any, of the 
25
 amounts paid or incurred by that interinsurer or 
26
 reciprocal insurer
in the taxable year to the 
 


 






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1
 attorney-in-fact over the deduction allowed to that

2
 interinsurer or reciprocal insurer with respect to the 
3
 attorney-in-fact under
Section 835(b) of the Internal 
4
 Revenue Code for the taxable year; the provisions of 
5
 this subparagraph are exempt from the provisions of 
6
 Section 250;


7
   (S) For taxable years ending on or after December 
8
 31, 1997, in the
case of a Subchapter
S corporation, an 
9
 amount equal to all amounts of income allocable to a

10
 shareholder subject to the Personal Property Tax 
11
 Replacement Income Tax imposed
by subsections (c) and 
12
 (d) of Section 201 of this Act, including amounts

13
 allocable to organizations exempt from federal income 
14
 tax by reason of Section
501(a) of the Internal Revenue 
15
 Code. This subparagraph (S) is exempt from
the 
16
 provisions of Section 250;


17
   (T) For taxable years 2001 and thereafter, for the 
18
 taxable year in
which the bonus depreciation deduction

19
 is taken on the taxpayer's federal income tax return 
20
 under
subsection (k) of Section 168 of the Internal 
21
 Revenue Code and for each
applicable taxable year 
22
 thereafter, an amount equal to "x", where:


23
    (1) "y" equals the amount of the depreciation 
24
 deduction taken for the
taxable year
on the 
25
 taxpayer's federal income tax return on property 
26
 for which the bonus
depreciation deduction
was 
 


 






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1
 taken in any year under subsection (k) of Section 
2
 168 of the Internal
Revenue Code, but not including 
3
 the bonus depreciation deduction;


4
    (2) for taxable years ending on or before 
5
 December 31, 2005, "x" equals "y" multiplied by 30 
6
 and then divided by 70 (or "y"
multiplied by 
7
 0.429); and
8
    (3) for taxable years ending after December 
9
 31, 2005:
10
     (i) for property on which a bonus 
11
 depreciation deduction of 30% of the adjusted 
12
 basis was taken, "x" equals "y" multiplied by 
13
 30 and then divided by 70 (or "y"
multiplied by 
14
 0.429); and
15
     (ii) for property on which a bonus 
16
 depreciation deduction of 50% of the adjusted 
17
 basis was taken, "x" equals "y" multiplied by 
18
 1.0.


19
   The aggregate amount deducted under this 
20
 subparagraph in all taxable
years for any one piece of 
21
 property may not exceed the amount of the bonus

22
 depreciation deduction
taken on that property on the 
23
 taxpayer's federal income tax return under
subsection 
24
 (k) of Section 168 of the Internal Revenue Code. This 
25
 subparagraph (T) is exempt from the provisions of 
26
 Section 250;


 


 






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1
   (U) If the taxpayer sells, transfers, abandons, or 
2
 otherwise disposes of
property for which the taxpayer 
3
 was required in any taxable year to make an
addition 
4
 modification under subparagraph (E-10), then an amount 
5
 equal to that
addition modification.

6
   If the taxpayer continues to own property through 
7
 the last day of the last tax year for which the 
8
 taxpayer may claim a depreciation deduction for 
9
 federal income tax purposes and for which the taxpayer 
10
 was required in any taxable year to make an addition 
11
 modification under subparagraph (E-10), then an amount 
12
 equal to that addition modification.


13
   The taxpayer is allowed to take the deduction under 
14
 this subparagraph
only once with respect to any one 
15
 piece of property.
16
   This subparagraph (U) is exempt from the 
17
 provisions of Section 250;

18
   (V) The amount of: (i) any interest income (net of 
19
 the deductions allocable thereto) taken into account 
20
 for the taxable year with respect to a transaction with 
21
 a taxpayer that is required to make an addition 
22
 modification with respect to such transaction under 
23
 Section 203(a)(2)(D-17), 203(b)(2)(E-12), 
24
 203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed 
25
 the amount of such addition modification,
(ii) any 
26
 income from intangible property (net of the deductions 
 


 






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1
 allocable thereto) taken into account for the taxable 
2
 year with respect to a transaction with a taxpayer that 
3
 is required to make an addition modification with 
4
 respect to such transaction under Section 
5
 203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or 
6
 203(d)(2)(D-8), but not to exceed the amount of such 
7
 addition modification, and (iii) any insurance premium 
8
 income (net of deductions allocable thereto) taken 
9
 into account for the taxable year with respect to a 
10
 transaction with a taxpayer that is required to make an 
11
 addition modification with respect to such transaction 
12
 under Section 203(a)(2)(D-19), Section 
13
 203(b)(2)(E-14), Section 203(c)(2)(G-14), or Section 
14
 203(d)(2)(D-9), but not to exceed the amount of that 
15
 addition modification. This subparagraph (V) is exempt 
16
 from the provisions of Section 250;

17
   (W) An amount equal to the interest income taken 
18
 into account for the taxable year (net of the 
19
 deductions allocable thereto) with respect to 
20
 transactions with (i) a foreign person who would be a 
21
 member of the taxpayer's unitary business group but for 
22
 the fact that the foreign person's business activity 
23
 outside the United States is 80% or more of that 
24
 person's total business activity and (ii) for taxable 
25
 years ending on or after December 31, 2008, to a person 
26
 who would be a member of the same unitary business 
 


 






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1
 group but for the fact that the person is prohibited 
2
 under Section 1501(a)(27) from being included in the 
3
 unitary business group because he or she is ordinarily 
4
 required to apportion business income under different 
5
 subsections of Section 304, but not to exceed the 
6
 addition modification required to be made for the same 
7
 taxable year under Section 203(b)(2)(E-12) for 
8
 interest paid, accrued, or incurred, directly or 
9
 indirectly, to the same person. This subparagraph (W) 
10
 is exempt from the provisions of Section 250; and

11
   (X) An amount equal to the income from intangible 
12
 property taken into account for the taxable year (net 
13
 of the deductions allocable thereto) with respect to 
14
 transactions with (i) a foreign person who would be a 
15
 member of the taxpayer's unitary business group but for 
16
 the fact that the foreign person's business activity 
17
 outside the United States is 80% or more of that 
18
 person's total business activity and (ii) for taxable 
19
 years ending on or after December 31, 2008, to a person 
20
 who would be a member of the same unitary business 
21
 group but for the fact that the person is prohibited 
22
 under Section 1501(a)(27) from being included in the 
23
 unitary business group because he or she is ordinarily 
24
 required to apportion business income under different 
25
 subsections of Section 304, but not to exceed the 
26
 addition modification required to be made for the same 
 


 






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1
 taxable year under Section 203(b)(2)(E-13) for 
2
 intangible expenses and costs paid, accrued, or 
3
 incurred, directly or indirectly, to the same foreign 
4
 person. This subparagraph (X) is exempt from the 
5
 provisions of Section 250.
(Y)

6
  (3) Special rule. For purposes of paragraph (2) (A), 
7
 "gross income"
in the case of a life insurance company, for 
8
 tax years ending on and after
December 31, 1994,
shall mean 
9
 the gross investment income for the taxable year.



10
 (c) Trusts and estates.


11
  (1) In general. In the case of a trust or estate, base 
12
 income means
an amount equal to the taxpayer's taxable 
13
 income for the taxable year as
modified by paragraph (2).


14
  (2) Modifications. Subject to the provisions of 
15
 paragraph (3), the
taxable income referred to in paragraph 
16
 (1) shall be modified by adding
thereto the sum of the 
17
 following amounts:


18
   (A) An amount equal to all amounts paid or accrued 
19
 to the taxpayer
as interest or dividends during the 
20
 taxable year to the extent excluded
from gross income 
21
 in the computation of taxable income;


22
   (B) In the case of (i) an estate, $600; (ii) a 
23
 trust which, under
its governing instrument, is 
24
 required to distribute all of its income
currently, 
25
 $300; and (iii) any other trust, $100, but in each such 
 


 






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1
 case,
only to the extent such amount was deducted in 
2
 the computation of
taxable income;


3
   (C) An amount equal to the amount of tax imposed by 
4
 this Act to the
extent deducted from gross income in 
5
 the computation of taxable income
for the taxable year;


6
   (D) The amount of any net operating loss deduction 
7
 taken in arriving at
taxable income, other than a net 
8
 operating loss carried forward from a
taxable year 
9
 ending prior to December 31, 1986;


10
   (E) For taxable years in which a net operating loss 
11
 carryback or
carryforward from a taxable year ending 
12
 prior to December 31, 1986 is an
element of taxable 
13
 income under paragraph (1) of subsection (e) or 
14
 subparagraph
(E) of paragraph (2) of subsection (e), 
15
 the amount by which addition
modifications other than 
16
 those provided by this subparagraph (E) exceeded

17
 subtraction modifications in such taxable year, with 
18
 the following limitations
applied in the order that 
19
 they are listed:


20
    (i) the addition modification relating to the 
21
 net operating loss
carried back or forward to the 
22
 taxable year from any taxable year ending
prior to 
23
 December 31, 1986 shall be reduced by the amount of 
24
 addition
modification under this subparagraph (E) 
25
 which related to that net
operating loss and which 
26
 was taken into account in calculating the base

 


 






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1
 income of an earlier taxable year, and


2
    (ii) the addition modification relating to the 
3
 net operating loss
carried back or forward to the 
4
 taxable year from any taxable year ending
prior to 
5
 December 31, 1986 shall not exceed the amount of 
6
 such carryback or
carryforward;


7
   For taxable years in which there is a net operating 
8
 loss carryback or
carryforward from more than one other 
9
 taxable year ending prior to December
31, 1986, the 
10
 addition modification provided in this subparagraph 
11
 (E) shall
be the sum of the amounts computed 
12
 independently under the preceding
provisions of this 
13
 subparagraph (E) for each such taxable year;


14
   (F) For taxable years ending on or after January 1, 
15
 1989, an amount
equal to the tax deducted pursuant to 
16
 Section 164 of the Internal Revenue
Code if the trust 
17
 or estate is claiming the same tax for purposes of the

18
 Illinois foreign tax credit under Section 601 of this 
19
 Act;


20
   (G) An amount equal to the amount of the capital 
21
 gain deduction
allowable under the Internal Revenue 
22
 Code, to the extent deducted from
gross income in the 
23
 computation of taxable income;


24
   (G-5) For taxable years ending after December 31, 
25
 1997, an
amount equal to any eligible remediation costs 
26
 that the trust or estate
deducted in computing adjusted 
 


 






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1
 gross income and for which the trust
or estate claims a 
2
 credit under subsection (l) of Section 201;


3
   (G-10) For taxable years 2001 and thereafter, an 
4
 amount equal to the
bonus depreciation deduction taken 
5
 on the taxpayer's federal income tax return for the 
6
 taxable
year under subsection (k) of Section 168 of the 
7
 Internal Revenue Code; and


8
   (G-11) If the taxpayer sells, transfers, abandons, 
9
 or otherwise disposes of property for which the 
10
 taxpayer was required in any taxable year to
make an 
11
 addition modification under subparagraph (G-10), then 
12
 an amount equal
to the aggregate amount of the 
13
 deductions taken in all taxable
years under 
14
 subparagraph (R) with respect to that property.

15
   If the taxpayer continues to own property through 
16
 the last day of the last tax year for which the 
17
 taxpayer may claim a depreciation deduction for 
18
 federal income tax purposes and for which the taxpayer 
19
 was allowed in any taxable year to make a subtraction 
20
 modification under subparagraph (R), then an amount 
21
 equal to that subtraction modification.


22
   The taxpayer is required to make the addition 
23
 modification under this
subparagraph
only once with 
24
 respect to any one piece of property;

25
   (G-12) An amount equal to the amount otherwise 
26
 allowed as a deduction in computing base income for 
 


 






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1
 interest paid, accrued, or incurred, directly or 
2
 indirectly, (i) for taxable years ending on or after 
3
 December 31, 2004, to a foreign person who would be a 
4
 member of the same unitary business group but for the 
5
 fact that the foreign person's business activity 
6
 outside the United States is 80% or more of the foreign 
7
 person's total business activity and (ii) for taxable 
8
 years ending on or after December 31, 2008, to a person 
9
 who would be a member of the same unitary business 
10
 group but for the fact that the person is prohibited 
11
 under Section 1501(a)(27) from being included in the 
12
 unitary business group because he or she is ordinarily 
13
 required to apportion business income under different 
14
 subsections of Section 304. The addition modification 
15
 required by this subparagraph shall be reduced to the 
16
 extent that dividends were included in base income of 
17
 the unitary group for the same taxable year and 
18
 received by the taxpayer or by a member of the 
19
 taxpayer's unitary business group (including amounts 
20
 included in gross income pursuant to Sections 951 
21
 through 964 of the Internal Revenue Code and amounts 
22
 included in gross income under Section 78 of the 
23
 Internal Revenue Code) with respect to the stock of the 
24
 same person to whom the interest was paid, accrued, or 
25
 incurred.

26
   This paragraph shall not apply to the following:

 


 






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1
    (i) an item of interest paid, accrued, or 
2
 incurred, directly or indirectly, to a person who 
3
 is subject in a foreign country or state, other 
4
 than a state which requires mandatory unitary 
5
 reporting, to a tax on or measured by net income 
6
 with respect to such interest; or
7
    (ii) an item of interest paid, accrued, or 
8
 incurred, directly or indirectly, to a person if 
9
 the taxpayer can establish, based on a 
10
 preponderance of the evidence, both of the 
11
 following:
12
     (a) the person, during the same taxable 
13
 year, paid, accrued, or incurred, the interest 
14
 to a person that is not a related member, and
15
     (b) the transaction giving rise to the 
16
 interest expense between the taxpayer and the 
17
 person did not have as a principal purpose the 
18
 avoidance of Illinois income tax, and is paid 
19
 pursuant to a contract or agreement that 
20
 reflects an arm's-length interest rate and 
21
 terms; or

22
    (iii) the taxpayer can establish, based on 
23
 clear and convincing evidence, that the interest 
24
 paid, accrued, or incurred relates to a contract or 
25
 agreement entered into at arm's-length rates and 
26
 terms and the principal purpose for the payment is 
 


 






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1
 not federal or Illinois tax avoidance; or

2
    (iv) an item of interest paid, accrued, or 
3
 incurred, directly or indirectly, to a person if 
4
 the taxpayer establishes by clear and convincing 
5
 evidence that the adjustments are unreasonable; or 
6
 if the taxpayer and the Director agree in writing 
7
 to the application or use of an alternative method 
8
 of apportionment under Section 304(f).

9
    Nothing in this subsection shall preclude the 
10
 Director from making any other adjustment 
11
 otherwise allowed under Section 404 of this Act for 
12
 any tax year beginning after the effective date of 
13
 this amendment provided such adjustment is made 
14
 pursuant to regulation adopted by the Department 
15
 and such regulations provide methods and standards 
16
 by which the Department will utilize its authority 
17
 under Section 404 of this Act;

18
   (G-13) An amount equal to the amount of intangible 
19
 expenses and costs otherwise allowed as a deduction in 
20
 computing base income, and that were paid, accrued, or 
21
 incurred, directly or indirectly, (i) for taxable 
22
 years ending on or after December 31, 2004, to a 
23
 foreign person who would be a member of the same 
24
 unitary business group but for the fact that the 
25
 foreign person's business activity outside the United 
26
 States is 80% or more of that person's total business 
 


 






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1
 activity and (ii) for taxable years ending on or after 
2
 December 31, 2008, to a person who would be a member of 
3
 the same unitary business group but for the fact that 
4
 the person is prohibited under Section 1501(a)(27) 
5
 from being included in the unitary business group 
6
 because he or she is ordinarily required to apportion 
7
 business income under different subsections of Section 
8
 304. The addition modification required by this 
9
 subparagraph shall be reduced to the extent that 
10
 dividends were included in base income of the unitary 
11
 group for the same taxable year and received by the 
12
 taxpayer or by a member of the taxpayer's unitary 
13
 business group (including amounts included in gross 
14
 income pursuant to Sections 951 through 964 of the 
15
 Internal Revenue Code and amounts included in gross 
16
 income under Section 78 of the Internal Revenue Code) 
17
 with respect to the stock of the same person to whom 
18
 the intangible expenses and costs were directly or 
19
 indirectly paid, incurred, or accrued. The preceding 
20
 sentence shall not apply to the extent that the same 
21
 dividends caused a reduction to the addition 
22
 modification required under Section 203(c)(2)(G-12) of 
23
 this Act. As used in this subparagraph, the term 
24
 "intangible expenses and costs" includes: (1) 
25
 expenses, losses, and costs for or related to the 
26
 direct or indirect acquisition, use, maintenance or 
 


 






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1
 management, ownership, sale, exchange, or any other 
2
 disposition of intangible property; (2) losses 
3
 incurred, directly or indirectly, from factoring 
4
 transactions or discounting transactions; (3) royalty, 
5
 patent, technical, and copyright fees; (4) licensing 
6
 fees; and (5) other similar expenses and costs. For 
7
 purposes of this subparagraph, "intangible property" 
8
 includes patents, patent applications, trade names, 
9
 trademarks, service marks, copyrights, mask works, 
10
 trade secrets, and similar types of intangible assets.
11
   This paragraph shall not apply to the following:
12
    (i) any item of intangible expenses or costs 
13
 paid, accrued, or incurred, directly or 
14
 indirectly, from a transaction with a person who is 
15
 subject in a foreign country or state, other than a 
16
 state which requires mandatory unitary reporting, 
17
 to a tax on or measured by net income with respect 
18
 to such item; or
19
    (ii) any item of intangible expense or cost 
20
 paid, accrued, or incurred, directly or 
21
 indirectly, if the taxpayer can establish, based 
22
 on a preponderance of the evidence, both of the 
23
 following:
24
     (a) the person during the same taxable 
25
 year paid, accrued, or incurred, the 
26
 intangible expense or cost to a person that is 
 


 






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1
 not a related member, and
2
     (b) the transaction giving rise to the 
3
 intangible expense or cost between the 
4
 taxpayer and the person did not have as a 
5
 principal purpose the avoidance of Illinois 
6
 income tax, and is paid pursuant to a contract 
7
 or agreement that reflects arm's-length terms; 
8
 or
9
    (iii) any item of intangible expense or cost 
10
 paid, accrued, or incurred, directly or 
11
 indirectly, from a transaction with a person if the 
12
 taxpayer establishes by clear and convincing 
13
 evidence, that the adjustments are unreasonable; 
14
 or if the taxpayer and the Director agree in 
15
 writing to the application or use of an alternative 
16
 method of apportionment under Section 304(f);

17
    Nothing in this subsection shall preclude the 
18
 Director from making any other adjustment 
19
 otherwise allowed under Section 404 of this Act for 
20
 any tax year beginning after the effective date of 
21
 this amendment provided such adjustment is made 
22
 pursuant to regulation adopted by the Department 
23
 and such regulations provide methods and standards 
24
 by which the Department will utilize its authority 
25
 under Section 404 of this Act;

26
   (G-14) For taxable years ending on or after 
 


 






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1
 December 31, 2008, an amount equal to the amount of 
2
 insurance premium expenses and costs otherwise allowed 
3
 as a deduction in computing base income, and that were 
4
 paid, accrued, or incurred, directly or indirectly, to 
5
 a person who would be a member of the same unitary 
6
 business group but for the fact that the person is 
7
 prohibited under Section 1501(a)(27) from being 
8
 included in the unitary business group because he or 
9
 she is ordinarily required to apportion business 
10
 income under different subsections of Section 304. The 
11
 addition modification required by this subparagraph 
12
 shall be reduced to the extent that dividends were 
13
 included in base income of the unitary group for the 
14
 same taxable year and received by the taxpayer or by a 
15
 member of the taxpayer's unitary business group 
16
 (including amounts included in gross income under 
17
 Sections 951 through 964 of the Internal Revenue Code 
18
 and amounts included in gross income under Section 78 
19
 of the Internal Revenue Code) with respect to the stock 
20
 of the same person to whom the premiums and costs were 
21
 directly or indirectly paid, incurred, or accrued. The 
22
 preceding sentence does not apply to the extent that 
23
 the same dividends caused a reduction to the addition 
24
 modification required under Section 203(c)(2)(G-12) or 
25
 Section 203(c)(2)(G-13) of this Act.

26
 and by deducting from the total so obtained the sum of the 
 


 






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1
 following
amounts:


2
   (H) An amount equal to all amounts included in such 
3
 total pursuant
to the provisions of Sections 402(a), 
4
 402(c), 403(a), 403(b), 406(a), 407(a)
and 408 of the 
5
 Internal Revenue Code or included in such total as

6
 distributions under the provisions of any retirement 
7
 or disability plan for
employees of any governmental 
8
 agency or unit, or retirement payments to
retired 
9
 partners, which payments are excluded in computing net 
10
 earnings
from self employment by Section 1402 of the 
11
 Internal Revenue Code and
regulations adopted pursuant 
12
 thereto;


13
   (I) The valuation limitation amount;


14
   (J) An amount equal to the amount of any tax 
15
 imposed by this Act
which was refunded to the taxpayer 
16
 and included in such total for the
taxable year;


17
   (K) An amount equal to all amounts included in 
18
 taxable income as
modified by subparagraphs (A), (B), 
19
 (C), (D), (E), (F) and (G) which
are exempt from 
20
 taxation by this State either by reason of its statutes 
21
 or
Constitution
or by reason of the Constitution, 
22
 treaties or statutes of the United States;
provided 
23
 that, in the case of any statute of this State that 
24
 exempts income
derived from bonds or other obligations 
25
 from the tax imposed under this Act,
the amount 
26
 exempted shall be the interest net of bond premium 
 


 






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1
 amortization;


2
   (L) With the exception of any amounts subtracted 
3
 under subparagraph
(K),
an amount equal to the sum of 
4
 all amounts disallowed as
deductions by (i) Sections 
5
 171(a) (2) and 265(a)(2) of the Internal Revenue
Code, 
6
 as now or hereafter amended, and all amounts of 
7
 expenses allocable
to interest and disallowed as 
8
 deductions by Section 265(1) of the Internal
Revenue 
9
 Code of 1954, as now or hereafter amended;
and (ii) for 
10
 taxable years
ending on or after August 13, 1999, 
11
 Sections
171(a)(2), 265,
280C, and 832(b)(5)(B)(i) of 
12
 the Internal Revenue Code; the provisions of this

13
 subparagraph are exempt from the provisions of Section 
14
 250;


15
   (M) An amount equal to those dividends included in 
16
 such total
which were paid by a corporation which 
17
 conducts business operations in an
Enterprise Zone or 
18
 zones created under the Illinois Enterprise Zone Act or 
19
 a River Edge Redevelopment Zone or zones created under 
20
 the River Edge Redevelopment Zone Act and
conducts 
21
 substantially all of its operations in an Enterprise 
22
 Zone or Zones or a River Edge Redevelopment Zone or 
23
 zones. This subparagraph (M) is exempt from the 
24
 provisions of Section 250;


25
   (N) An amount equal to any contribution made to a 
26
 job training
project established pursuant to the Tax 
 


 






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1
 Increment Allocation
Redevelopment Act;


2
   (O) An amount equal to those dividends included in 
3
 such total
that were paid by a corporation that 
4
 conducts business operations in a
federally designated 
5
 Foreign Trade Zone or Sub-Zone and that is designated
a 
6
 High Impact Business located in Illinois; provided 
7
 that dividends eligible
for the deduction provided in 
8
 subparagraph (M) of paragraph (2) of this
subsection 
9
 shall not be eligible for the deduction provided under 
10
 this
subparagraph (O);


11
   (P) An amount equal to the amount of the deduction 
12
 used to compute the
federal income tax credit for 
13
 restoration of substantial amounts held under
claim of 
14
 right for the taxable year pursuant to Section 1341 of 
15
 the
Internal Revenue Code of 1986;


16
   (Q) For taxable year 1999 and thereafter, an amount 
17
 equal to the
amount of any
(i) distributions, to the 
18
 extent includible in gross income for
federal income 
19
 tax purposes, made to the taxpayer because of
his or 
20
 her status as a victim of
persecution for racial or 
21
 religious reasons by Nazi Germany or any other Axis

22
 regime or as an heir of the victim and (ii) items
of 
23
 income, to the extent
includible in gross income for 
24
 federal income tax purposes, attributable to,
derived 
25
 from or in any way related to assets stolen from, 
26
 hidden from, or
otherwise lost to a victim of

 


 






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1
 persecution for racial or religious reasons by Nazi

2
 Germany or any other Axis regime
immediately prior to, 
3
 during, and immediately after World War II, including,

4
 but
not limited to, interest on the proceeds receivable 
5
 as insurance
under policies issued to a victim of 
6
 persecution for racial or religious
reasons by Nazi 
7
 Germany or any other Axis regime by European insurance

8
 companies
immediately prior to and during World War II;

9
 provided, however, this subtraction from federal 
10
 adjusted gross income does not
apply to assets acquired 
11
 with such assets or with the proceeds from the sale of

12
 such assets; provided, further, this paragraph shall 
13
 only apply to a taxpayer
who was the first recipient of 
14
 such assets after their recovery and who is a
victim of

15
 persecution for racial or religious reasons
by Nazi 
16
 Germany or any other Axis regime or as an heir of the 
17
 victim. The
amount of and the eligibility for any 
18
 public assistance, benefit, or
similar entitlement is 
19
 not affected by the inclusion of items (i) and (ii) of

20
 this paragraph in gross income for federal income tax 
21
 purposes.
This paragraph is exempt from the provisions 
22
 of Section 250;


23
   (R) For taxable years 2001 and thereafter, for the 
24
 taxable year in
which the bonus depreciation deduction

25
 is taken on the taxpayer's federal income tax return 
26
 under
subsection (k) of Section 168 of the Internal 
 


 






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1
 Revenue Code and for each
applicable taxable year 
2
 thereafter, an amount equal to "x", where:


3
    (1) "y" equals the amount of the depreciation 
4
 deduction taken for the
taxable year
on the 
5
 taxpayer's federal income tax return on property 
6
 for which the bonus
depreciation deduction
was 
7
 taken in any year under subsection (k) of Section 
8
 168 of the Internal
Revenue Code, but not including 
9
 the bonus depreciation deduction;


10
    (2) for taxable years ending on or before 
11
 December 31, 2005, "x" equals "y" multiplied by 30 
12
 and then divided by 70 (or "y"
multiplied by 
13
 0.429); and
14
    (3) for taxable years ending after December 
15
 31, 2005:
16
     (i) for property on which a bonus 
17
 depreciation deduction of 30% of the adjusted 
18
 basis was taken, "x" equals "y" multiplied by 
19
 30 and then divided by 70 (or "y"
multiplied by 
20
 0.429); and
21
     (ii) for property on which a bonus 
22
 depreciation deduction of 50% of the adjusted 
23
 basis was taken, "x" equals "y" multiplied by 
24
 1.0.


25
   The aggregate amount deducted under this 
26
 subparagraph in all taxable
years for any one piece of 
 


 






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1
 property may not exceed the amount of the bonus

2
 depreciation deduction
taken on that property on the 
3
 taxpayer's federal income tax return under
subsection 
4
 (k) of Section 168 of the Internal Revenue Code. This 
5
 subparagraph (R) is exempt from the provisions of 
6
 Section 250;


7
   (S) If the taxpayer sells, transfers, abandons, or 
8
 otherwise disposes of
property for which the taxpayer 
9
 was required in any taxable year to make an
addition 
10
 modification under subparagraph (G-10), then an amount 
11
 equal to that
addition modification.

12
   If the taxpayer continues to own property through 
13
 the last day of the last tax year for which the 
14
 taxpayer may claim a depreciation deduction for 
15
 federal income tax purposes and for which the taxpayer 
16
 was required in any taxable year to make an addition 
17
 modification under subparagraph (G-10), then an amount 
18
 equal to that addition modification.


19
   The taxpayer is allowed to take the deduction under 
20
 this subparagraph
only once with respect to any one 
21
 piece of property.
22
   This subparagraph (S) is exempt from the 
23
 provisions of Section 250;

24
   (T) The amount of (i) any interest income (net of 
25
 the deductions allocable thereto) taken into account 
26
 for the taxable year with respect to a transaction with 
 


 






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1
 a taxpayer that is required to make an addition 
2
 modification with respect to such transaction under 
3
 Section 203(a)(2)(D-17), 203(b)(2)(E-12), 
4
 203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed 
5
 the amount of such addition modification and
(ii) any 
6
 income from intangible property (net of the deductions 
7
 allocable thereto) taken into account for the taxable 
8
 year with respect to a transaction with a taxpayer that 
9
 is required to make an addition modification with 
10
 respect to such transaction under Section 
11
 203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or 
12
 203(d)(2)(D-8), but not to exceed the amount of such 
13
 addition modification. This subparagraph (T) is exempt 
14
 from the provisions of Section 250;

15
   (U) An amount equal to the interest income taken 
16
 into account for the taxable year (net of the 
17
 deductions allocable thereto) with respect to 
18
 transactions with (i) a foreign person who would be a 
19
 member of the taxpayer's unitary business group but for 
20
 the fact the foreign person's business activity 
21
 outside the United States is 80% or more of that 
22
 person's total business activity and (ii) for taxable 
23
 years ending on or after December 31, 2008, to a person 
24
 who would be a member of the same unitary business 
25
 group but for the fact that the person is prohibited 
26
 under Section 1501(a)(27) from being included in the 
 


 






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1
 unitary business group because he or she is ordinarily 
2
 required to apportion business income under different 
3
 subsections of Section 304, but not to exceed the 
4
 addition modification required to be made for the same 
5
 taxable year under Section 203(c)(2)(G-12) for 
6
 interest paid, accrued, or incurred, directly or 
7
 indirectly, to the same person. This subparagraph (U) 
8
 is exempt from the provisions of Section 250; and 
9
   (V) An amount equal to the income from intangible 
10
 property taken into account for the taxable year (net 
11
 of the deductions allocable thereto) with respect to 
12
 transactions with (i) a foreign person who would be a 
13
 member of the taxpayer's unitary business group but for 
14
 the fact that the foreign person's business activity 
15
 outside the United States is 80% or more of that 
16
 person's total business activity and (ii) for taxable 
17
 years ending on or after December 31, 2008, to a person 
18
 who would be a member of the same unitary business 
19
 group but for the fact that the person is prohibited 
20
 under Section 1501(a)(27) from being included in the 
21
 unitary business group because he or she is ordinarily 
22
 required to apportion business income under different 
23
 subsections of Section 304, but not to exceed the 
24
 addition modification required to be made for the same 
25
 taxable year under Section 203(c)(2)(G-13) for 
26
 intangible expenses and costs paid, accrued, or 
 


 






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1
 incurred, directly or indirectly, to the same foreign 
2
 person. This subparagraph (V) is exempt from the 
3
 provisions of Section 250.
(W)

4
  (3) Limitation. The amount of any modification 
5
 otherwise required
under this subsection shall, under 
6
 regulations prescribed by the
Department, be adjusted by 
7
 any amounts included therein which were
properly paid, 
8
 credited, or required to be distributed, or permanently set

9
 aside for charitable purposes pursuant to Internal Revenue 
10
 Code Section
642(c) during the taxable year.



11
 (d) Partnerships.


12
  (1) In general. In the case of a partnership, base 
13
 income means an
amount equal to the taxpayer's taxable 
14
 income for the taxable year as
modified by paragraph (2).


15
  (2) Modifications. The taxable income referred to in 
16
 paragraph (1)
shall be modified by adding thereto the sum 
17
 of the following amounts:


18
   (A) An amount equal to all amounts paid or accrued 
19
 to the taxpayer as
interest or dividends during the 
20
 taxable year to the extent excluded from
gross income 
21
 in the computation of taxable income;


22
   (B) An amount equal to the amount of tax imposed by 
23
 this Act to the
extent deducted from gross income for 
24
 the taxable year;


25
   (C) The amount of deductions allowed to the 
 


 






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1
 partnership pursuant to
Section 707 (c) of the Internal 
2
 Revenue Code in calculating its taxable income;


3
   (D) An amount equal to the amount of the capital 
4
 gain deduction
allowable under the Internal Revenue 
5
 Code, to the extent deducted from
gross income in the 
6
 computation of taxable income;


7
   (D-5) For taxable years 2001 and thereafter, an 
8
 amount equal to the
bonus depreciation deduction taken 
9
 on the taxpayer's federal income tax return for the 
10
 taxable
year under subsection (k) of Section 168 of the 
11
 Internal Revenue Code;


12
   (D-6) If the taxpayer sells, transfers, abandons, 
13
 or otherwise disposes of
property for which the 
14
 taxpayer was required in any taxable year to make an

15
 addition modification under subparagraph (D-5), then 
16
 an amount equal to the
aggregate amount of the 
17
 deductions taken in all taxable years
under 
18
 subparagraph (O) with respect to that property.

19
   If the taxpayer continues to own property through 
20
 the last day of the last tax year for which the 
21
 taxpayer may claim a depreciation deduction for 
22
 federal income tax purposes and for which the taxpayer 
23
 was allowed in any taxable year to make a subtraction 
24
 modification under subparagraph (O), then an amount 
25
 equal to that subtraction modification.


26
   The taxpayer is required to make the addition 
 


 






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1
 modification under this
subparagraph
only once with 
2
 respect to any one piece of property;

3
   (D-7) An amount equal to the amount otherwise 
4
 allowed as a deduction in computing base income for 
5
 interest paid, accrued, or incurred, directly or 
6
 indirectly, (i) for taxable years ending on or after 
7
 December 31, 2004, to a foreign person who would be a 
8
 member of the same unitary business group but for the 
9
 fact the foreign person's business activity outside 
10
 the United States is 80% or more of the foreign 
11
 person's total business activity and (ii) for taxable 
12
 years ending on or after December 31, 2008, to a person 
13
 who would be a member of the same unitary business 
14
 group but for the fact that the person is prohibited 
15
 under Section 1501(a)(27) from being included in the 
16
 unitary business group because he or she is ordinarily 
17
 required to apportion business income under different 
18
 subsections of Section 304. The addition modification 
19
 required by this subparagraph shall be reduced to the 
20
 extent that dividends were included in base income of 
21
 the unitary group for the same taxable year and 
22
 received by the taxpayer or by a member of the 
23
 taxpayer's unitary business group (including amounts 
24
 included in gross income pursuant to Sections 951 
25
 through 964 of the Internal Revenue Code and amounts 
26
 included in gross income under Section 78 of the 
 


 






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1
 Internal Revenue Code) with respect to the stock of the 
2
 same person to whom the interest was paid, accrued, or 
3
 incurred.

4
   This paragraph shall not apply to the following:

5
    (i) an item of interest paid, accrued, or 
6
 incurred, directly or indirectly, to a person who 
7
 is subject in a foreign country or state, other 
8
 than a state which requires mandatory unitary 
9
 reporting, to a tax on or measured by net income 
10
 with respect to such interest; or
11
    (ii) an item of interest paid, accrued, or 
12
 incurred, directly or indirectly, to a person if 
13
 the taxpayer can establish, based on a 
14
 preponderance of the evidence, both of the 
15
 following:
16
     (a) the person, during the same taxable 
17
 year, paid, accrued, or incurred, the interest 
18
 to a person that is not a related member, and
19
     (b) the transaction giving rise to the 
20
 interest expense between the taxpayer and the 
21
 person did not have as a principal purpose the 
22
 avoidance of Illinois income tax, and is paid 
23
 pursuant to a contract or agreement that 
24
 reflects an arm's-length interest rate and 
25
 terms; or

26
    (iii) the taxpayer can establish, based on 
 


 






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1
 clear and convincing evidence, that the interest 
2
 paid, accrued, or incurred relates to a contract or 
3
 agreement entered into at arm's-length rates and 
4
 terms and the principal purpose for the payment is 
5
 not federal or Illinois tax avoidance; or

6
    (iv) an item of interest paid, accrued, or 
7
 incurred, directly or indirectly, to a person if 
8
 the taxpayer establishes by clear and convincing 
9
 evidence that the adjustments are unreasonable; or 
10
 if the taxpayer and the Director agree in writing 
11
 to the application or use of an alternative method 
12
 of apportionment under Section 304(f).

13
    Nothing in this subsection shall preclude the 
14
 Director from making any other adjustment 
15
 otherwise allowed under Section 404 of this Act for 
16
 any tax year beginning after the effective date of 
17
 this amendment provided such adjustment is made 
18
 pursuant to regulation adopted by the Department 
19
 and such regulations provide methods and standards 
20
 by which the Department will utilize its authority 
21
 under Section 404 of this Act; and

22
   (D-8) An amount equal to the amount of intangible 
23
 expenses and costs otherwise allowed as a deduction in 
24
 computing base income, and that were paid, accrued, or 
25
 incurred, directly or indirectly, (i) for taxable 
26
 years ending on or after December 31, 2004, to a 
 


 






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1
 foreign person who would be a member of the same 
2
 unitary business group but for the fact that the 
3
 foreign person's business activity outside the United 
4
 States is 80% or more of that person's total business 
5
 activity and (ii) for taxable years ending on or after 
6
 December 31, 2008, to a person who would be a member of 
7
 the same unitary business group but for the fact that 
8
 the person is prohibited under Section 1501(a)(27) 
9
 from being included in the unitary business group 
10
 because he or she is ordinarily required to apportion 
11
 business income under different subsections of Section 
12
 304. The addition modification required by this 
13
 subparagraph shall be reduced to the extent that 
14
 dividends were included in base income of the unitary 
15
 group for the same taxable year and received by the 
16
 taxpayer or by a member of the taxpayer's unitary 
17
 business group (including amounts included in gross 
18
 income pursuant to Sections 951 through 964 of the 
19
 Internal Revenue Code and amounts included in gross 
20
 income under Section 78 of the Internal Revenue Code) 
21
 with respect to the stock of the same person to whom 
22
 the intangible expenses and costs were directly or 
23
 indirectly paid, incurred or accrued. The preceding 
24
 sentence shall not apply to the extent that the same 
25
 dividends caused a reduction to the addition 
26
 modification required under Section 203(d)(2)(D-7) of 
 


 






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1
 this Act. As used in this subparagraph, the term 
2
 "intangible expenses and costs" includes (1) expenses, 
3
 losses, and costs for, or related to, the direct or 
4
 indirect acquisition, use, maintenance or management, 
5
 ownership, sale, exchange, or any other disposition of 
6
 intangible property; (2) losses incurred, directly or 
7
 indirectly, from factoring transactions or discounting 
8
 transactions; (3) royalty, patent, technical, and 
9
 copyright fees; (4) licensing fees; and (5) other 
10
 similar expenses and costs. For purposes of this 
11
 subparagraph, "intangible property" includes patents, 
12
 patent applications, trade names, trademarks, service 
13
 marks, copyrights, mask works, trade secrets, and 
14
 similar types of intangible assets;
15
   This paragraph shall not apply to the following:
16
    (i) any item of intangible expenses or costs 
17
 paid, accrued, or incurred, directly or 
18
 indirectly, from a transaction with a person who is 
19
 subject in a foreign country or state, other than a 
20
 state which requires mandatory unitary reporting, 
21
 to a tax on or measured by net income with respect 
22
 to such item; or
23
    (ii) any item of intangible expense or cost 
24
 paid, accrued, or incurred, directly or 
25
 indirectly, if the taxpayer can establish, based 
26
 on a preponderance of the evidence, both of the 
 


 






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1
 following:
2
     (a) the person during the same taxable 
3
 year paid, accrued, or incurred, the 
4
 intangible expense or cost to a person that is 
5
 not a related member, and
6
     (b) the transaction giving rise to the 
7
 intangible expense or cost between the 
8
 taxpayer and the person did not have as a 
9
 principal purpose the avoidance of Illinois 
10
 income tax, and is paid pursuant to a contract 
11
 or agreement that reflects arm's-length terms; 
12
 or
13
    (iii) any item of intangible expense or cost 
14
 paid, accrued, or incurred, directly or 
15
 indirectly, from a transaction with a person if the 
16
 taxpayer establishes by clear and convincing 
17
 evidence, that the adjustments are unreasonable; 
18
 or if the taxpayer and the Director agree in 
19
 writing to the application or use of an alternative 
20
 method of apportionment under Section 304(f);

21
    Nothing in this subsection shall preclude the 
22
 Director from making any other adjustment 
23
 otherwise allowed under Section 404 of this Act for 
24
 any tax year beginning after the effective date of 
25
 this amendment provided such adjustment is made 
26
 pursuant to regulation adopted by the Department 
 


 






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1
 and such regulations provide methods and standards 
2
 by which the Department will utilize its authority 
3
 under Section 404 of this Act;

4
   (D-9) For taxable years ending on or after December 
5
 31, 2008, an amount equal to the amount of insurance 
6
 premium expenses and costs otherwise allowed as a 
7
 deduction in computing base income, and that were paid, 
8
 accrued, or incurred, directly or indirectly, to a 
9
 person who would be a member of the same unitary 
10
 business group but for the fact that the person is 
11
 prohibited under Section 1501(a)(27) from being 
12
 included in the unitary business group because he or 
13
 she is ordinarily required to apportion business 
14
 income under different subsections of Section 304. The 
15
 addition modification required by this subparagraph 
16
 shall be reduced to the extent that dividends were 
17
 included in base income of the unitary group for the 
18
 same taxable year and received by the taxpayer or by a 
19
 member of the taxpayer's unitary business group 
20
 (including amounts included in gross income under 
21
 Sections 951 through 964 of the Internal Revenue Code 
22
 and amounts included in gross income under Section 78 
23
 of the Internal Revenue Code) with respect to the stock 
24
 of the same person to whom the premiums and costs were 
25
 directly or indirectly paid, incurred, or accrued. The 
26
 preceding sentence does not apply to the extent that 
 


 






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1
 the same dividends caused a reduction to the addition 
2
 modification required under Section 203(d)(2)(D-7) or 
3
 Section 203(d)(2)(D-8) of this Act.

4
 and by deducting from the total so obtained the following 
5
 amounts:


6
   (E) The valuation limitation amount;


7
   (F) An amount equal to the amount of any tax 
8
 imposed by this Act which
was refunded to the taxpayer 
9
 and included in such total for the taxable year;


10
   (G) An amount equal to all amounts included in 
11
 taxable income as
modified by subparagraphs (A), (B), 
12
 (C) and (D) which are exempt from
taxation by this 
13
 State either by reason of its statutes or Constitution 
14
 or
by reason of
the Constitution, treaties or statutes 
15
 of the United States;
provided that, in the case of any 
16
 statute of this State that exempts income
derived from 
17
 bonds or other obligations from the tax imposed under 
18
 this Act,
the amount exempted shall be the interest net 
19
 of bond premium amortization;


20
   (H) Any income of the partnership which 
21
 constitutes personal service
income as defined in 
22
 Section 1348 (b) (1) of the Internal Revenue Code (as

23
 in effect December 31, 1981) or a reasonable allowance 
24
 for compensation
paid or accrued for services rendered 
25
 by partners to the partnership,
whichever is greater;


26
   (I) An amount equal to all amounts of income 
 


 






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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 subtracted 
8
 under subparagraph
(G),
an amount equal to the sum of 
9
 all amounts disallowed as deductions
by (i) Sections 
10
 171(a) (2), and 265(2) of the Internal Revenue Code of 
11
 1954,
as now or hereafter amended, and all amounts of 
12
 expenses allocable to
interest and disallowed as 
13
 deductions by Section 265(1) of the Internal
Revenue 
14
 Code, as now or hereafter amended;
and (ii) for taxable 
15
 years
ending on or after August 13, 1999, Sections

16
 171(a)(2), 265,
280C, and 832(b)(5)(B)(i) of the 
17
 Internal Revenue Code; the provisions of this

18
 subparagraph are exempt from the provisions of Section 
19
 250;


20
   (K) An amount equal to those dividends included in 
21
 such total which were
paid by a corporation which 
22
 conducts business operations in an Enterprise
Zone or 
23
 zones created under the Illinois Enterprise Zone Act, 
24
 enacted by
the 82nd General Assembly, or a River Edge 
25
 Redevelopment Zone or zones created under the River 
26
 Edge Redevelopment Zone Act and
conducts substantially 
 


 






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1
 all of its operations
in an Enterprise Zone or Zones or 
2
 from a River Edge Redevelopment Zone or zones. This 
3
 subparagraph (K) is exempt from the provisions of 
4
 Section 250;


5
   (L) An amount equal to any contribution made to a 
6
 job training project
established pursuant to the Real 
7
 Property Tax Increment Allocation
Redevelopment Act;


8
   (M) An amount equal to those dividends included in 
9
 such total
that were paid by a corporation that 
10
 conducts business operations in a
federally designated 
11
 Foreign Trade Zone or Sub-Zone and that is designated a

12
 High Impact Business located in Illinois; provided 
13
 that dividends eligible
for the deduction provided in 
14
 subparagraph (K) of paragraph (2) of this
subsection 
15
 shall not be eligible for the deduction provided under 
16
 this
subparagraph (M);


17
   (N) An amount equal to the amount of the deduction 
18
 used to compute the
federal income tax credit for 
19
 restoration of substantial amounts held under
claim of 
20
 right for the taxable year pursuant to Section 1341 of 
21
 the
Internal Revenue Code of 1986;


22
   (O) For taxable years 2001 and thereafter, for the 
23
 taxable year in
which the bonus depreciation deduction

24
 is taken on the taxpayer's federal income tax return 
25
 under
subsection (k) of Section 168 of the Internal 
26
 Revenue Code and for each
applicable taxable year 
 


 






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1
 thereafter, an amount equal to "x", where:


2
    (1) "y" equals the amount of the depreciation 
3
 deduction taken for the
taxable year
on the 
4
 taxpayer's federal income tax return on property 
5
 for which the bonus
depreciation deduction
was 
6
 taken in any year under subsection (k) of Section 
7
 168 of the Internal
Revenue Code, but not including 
8
 the bonus depreciation deduction;


9
    (2) for taxable years ending on or before 
10
 December 31, 2005, "x" equals "y" multiplied by 30 
11
 and then divided by 70 (or "y"
multiplied by 
12
 0.429); and
13
    (3) for taxable years ending after December 
14
 31, 2005:
15
     (i) for property on which a bonus 
16
 depreciation deduction of 30% of the adjusted 
17
 basis was taken, "x" equals "y" multiplied by 
18
 30 and then divided by 70 (or "y"
multiplied by 
19
 0.429); and
20
     (ii) for property on which a bonus 
21
 depreciation deduction of 50% of the adjusted 
22
 basis was taken, "x" equals "y" multiplied by 
23
 1.0.


24
   The aggregate amount deducted under this 
25
 subparagraph in all taxable
years for any one piece of 
26
 property may not exceed the amount of the bonus

 


 






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1
 depreciation deduction
taken on that property on the 
2
 taxpayer's federal income tax return under
subsection 
3
 (k) of Section 168 of the Internal Revenue Code. This 
4
 subparagraph (O) is exempt from the provisions of 
5
 Section 250;


6
   (P) If the taxpayer sells, transfers, abandons, or 
7
 otherwise disposes of
property for which the taxpayer 
8
 was required in any taxable year to make an
addition 
9
 modification under subparagraph (D-5), then an amount 
10
 equal to that
addition modification.

11
   If the taxpayer continues to own property through 
12
 the last day of the last tax year for which the 
13
 taxpayer may claim a depreciation deduction for 
14
 federal income tax purposes and for which the taxpayer 
15
 was required in any taxable year to make an addition 
16
 modification under subparagraph (D-5), then an amount 
17
 equal to that addition modification.


18
   The taxpayer is allowed to take the deduction under 
19
 this subparagraph
only once with respect to any one 
20
 piece of property.
21
   This subparagraph (P) is exempt from the 
22
 provisions of Section 250;

23
   (Q) The amount of (i) any interest income (net of 
24
 the deductions allocable thereto) taken into account 
25
 for the taxable year with respect to a transaction with 
26
 a taxpayer that is required to make an addition 
 


 






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1
 modification with respect to such transaction under 
2
 Section 203(a)(2)(D-17), 203(b)(2)(E-12), 
3
 203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed 
4
 the amount of such addition modification and
(ii) any 
5
 income from intangible property (net of the deductions 
6
 allocable thereto) taken into account for the taxable 
7
 year with respect to a transaction with a taxpayer that 
8
 is required to make an addition modification with 
9
 respect to such transaction under Section 
10
 203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or 
11
 203(d)(2)(D-8), but not to exceed the amount of such 
12
 addition modification. This subparagraph (Q) is exempt 
13
 from Section 250;

14
   (R) An amount equal to the interest income taken 
15
 into account for the taxable year (net of the 
16
 deductions allocable thereto) with respect to 
17
 transactions with (i) a foreign person who would be a 
18
 member of the taxpayer's unitary business group but for 
19
 the fact that the foreign person's business activity 
20
 outside the United States is 80% or more of that 
21
 person's total business activity and (ii) for taxable 
22
 years ending on or after December 31, 2008, to a person 
23
 who would be a member of the same unitary business 
24
 group but for the fact that the person is prohibited 
25
 under Section 1501(a)(27) from being included in the 
26
 unitary business group because he or she is ordinarily 
 


 






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1
 required to apportion business income under different 
2
 subsections of Section 304, but not to exceed the 
3
 addition modification required to be made for the same 
4
 taxable year under Section 203(d)(2)(D-7) for interest 
5
 paid, accrued, or incurred, directly or indirectly, to 
6
 the same person. This subparagraph (R) is exempt from 
7
 Section 250; and 
8
   (S) An amount equal to the income from intangible 
9
 property taken into account for the taxable year (net 
10
 of the deductions allocable thereto) with respect to 
11
 transactions with (i) a foreign person who would be a 
12
 member of the taxpayer's unitary business group but for 
13
 the fact that the foreign person's business activity 
14
 outside the United States is 80% or more of that 
15
 person's total business activity and (ii) for taxable 
16
 years ending on or after December 31, 2008, to a person 
17
 who would be a member of the same unitary business 
18
 group but for the fact that the person is prohibited 
19
 under Section 1501(a)(27) from being included in the 
20
 unitary business group because he or she is ordinarily 
21
 required to apportion business income under different 
22
 subsections of Section 304, but not to exceed the 
23
 addition modification required to be made for the same 
24
 taxable year under Section 203(d)(2)(D-8) for 
25
 intangible expenses and costs paid, accrued, or 
26
 incurred, directly or indirectly, to the same person. 
 


 






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1
 This subparagraph (S) is exempt from Section 250.
(T)


2
 (e) Gross income; adjusted gross income; taxable income.


3
  (1) In general. Subject to the provisions of paragraph 
4
 (2) and
subsection (b) (3), for purposes of this Section 
5
 and Section 803(e), a
taxpayer's gross income, adjusted 
6
 gross income, or taxable income for
the taxable year shall 
7
 mean the amount of gross income, adjusted gross
income or 
8
 taxable income properly reportable for federal income tax

9
 purposes for the taxable year under the provisions of the 
10
 Internal
Revenue Code. Taxable income may be less than 
11
 zero. However, for taxable
years ending on or after 
12
 December 31, 1986, net operating loss
carryforwards from 
13
 taxable years ending prior to December 31, 1986, may not

14
 exceed the sum of federal taxable income for the taxable 
15
 year before net
operating loss deduction, plus the excess 
16
 of addition modifications over
subtraction modifications 
17
 for the taxable year. For taxable years ending
prior to 
18
 December 31, 1986, taxable income may never be an amount in 
19
 excess
of the net operating loss for the taxable year as 
20
 defined in subsections
(c) and (d) of Section 172 of the 
21
 Internal Revenue Code, provided that when
taxable income of 
22
 a corporation (other than a Subchapter S corporation),

23
 trust, or estate is less than zero and addition 
24
 modifications, other than
those provided by subparagraph 
25
 (E) of paragraph (2) of subsection (b) for
corporations or 
 


 






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1
 subparagraph (E) of paragraph (2) of subsection (c) for

2
 trusts and estates, exceed subtraction modifications, an 
3
 addition
modification must be made under those 
4
 subparagraphs for any other taxable
year to which the 
5
 taxable income less than zero (net operating loss) is

6
 applied under Section 172 of the Internal Revenue Code or 
7
 under
subparagraph (E) of paragraph (2) of this subsection 
8
 (e) applied in
conjunction with Section 172 of the Internal 
9
 Revenue Code.


10
  (2) Special rule. For purposes of paragraph (1) of this 
11
 subsection,
the taxable income properly reportable for 
12
 federal income tax purposes
shall mean:


13
   (A) Certain life insurance companies. In the case 
14
 of a life
insurance company subject to the tax imposed 
15
 by Section 801 of the
Internal Revenue Code, life 
16
 insurance company taxable income, plus the
amount of 
17
 distribution from pre-1984 policyholder surplus 
18
 accounts as
calculated under Section 815a of the 
19
 Internal Revenue Code;


20
   (B) Certain other insurance companies. In the case 
21
 of mutual
insurance companies subject to the tax 
22
 imposed by Section 831 of the
Internal Revenue Code, 
23
 insurance company taxable income;


24
   (C) Regulated investment companies. In the case of 
25
 a regulated
investment company subject to the tax 
26
 imposed by Section 852 of the
Internal Revenue Code, 
 


 






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1
 investment company taxable income;


2
   (D) Real estate investment trusts. In the case of a 
3
 real estate
investment trust subject to the tax imposed 
4
 by Section 857 of the
Internal Revenue Code, real 
5
 estate investment trust taxable income;


6
   (E) Consolidated corporations. In the case of a 
7
 corporation which
is a member of an affiliated group of 
8
 corporations filing a consolidated
income tax return 
9
 for the taxable year for federal income tax purposes,

10
 taxable income determined as if such corporation had 
11
 filed a separate
return for federal income tax purposes 
12
 for the taxable year and each
preceding taxable year 
13
 for which it was a member of an affiliated group.
For 
14
 purposes of this subparagraph, the taxpayer's separate 
15
 taxable
income shall be determined as if the election 
16
 provided by Section
243(b) (2) of the Internal Revenue 
17
 Code had been in effect for all such years;


18
   (F) Cooperatives. In the case of a cooperative 
19
 corporation or
association, the taxable income of such 
20
 organization determined in
accordance with the 
21
 provisions of Section 1381 through 1388 of the
Internal 
22
 Revenue Code;


23
   (G) Subchapter S corporations. In the case of: (i) 
24
 a Subchapter S
corporation for which there is in effect 
25
 an election for the taxable year
under Section 1362 of 
26
 the Internal Revenue Code, the taxable income of such

 


 






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1
 corporation determined in accordance with Section 
2
 1363(b) of the Internal
Revenue Code, except that 
3
 taxable income shall take into
account those items 
4
 which are required by Section 1363(b)(1) of the

5
 Internal Revenue Code to be separately stated; and (ii) 
6
 a Subchapter
S corporation for which there is in effect 
7
 a federal election to opt out of
the provisions of the 
8
 Subchapter S Revision Act of 1982 and have applied

9
 instead the prior federal Subchapter S rules as in 
10
 effect on July 1, 1982,
the taxable income of such 
11
 corporation determined in accordance with the
federal 
12
 Subchapter S rules as in effect on July 1, 1982; and


13
   (H) Partnerships. In the case of a partnership, 
14
 taxable income
determined in accordance with Section 
15
 703 of the Internal Revenue Code,
except that taxable 
16
 income shall take into account those items which are

17
 required by Section 703(a)(1) to be separately stated 
18
 but which would be
taken into account by an individual 
19
 in calculating his taxable income.

20
  (3) Recapture of business expenses on disposition of 
21
 asset or business. Notwithstanding any other law to the 
22
 contrary, if in prior years income from an asset or 
23
 business has been classified as business income and in a 
24
 later year is demonstrated to be non-business income, then 
25
 all expenses, without limitation, deducted in such later 
26
 year and in the 2 immediately preceding taxable years 
 


 






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1
 related to that asset or business that generated the 
2
 non-business income shall be added back and recaptured as 
3
 business income in the year of the disposition of the asset 
4
 or business. Such amount shall be apportioned to Illinois 
5
 using the greater of the apportionment fraction computed 
6
 for the business under Section 304 of this Act for the 
7
 taxable year or the average of the apportionment fractions 
8
 computed for the business under Section 304 of this Act for 
9
 the taxable year and for the 2 immediately preceding 
10
 taxable years.



11
 (f) Valuation limitation amount.


12
  (1) In general. The valuation limitation amount 
13
 referred to in
subsections (a) (2) (G), (c) (2) (I) and 
14
 (d)(2) (E) is an amount equal to:


15
   (A) The sum of the pre-August 1, 1969 appreciation 
16
 amounts (to the
extent consisting of gain reportable 
17
 under the provisions of Section
1245 or 1250 of the 
18
 Internal Revenue Code) for all property in respect
of 
19
 which such gain was reported for the taxable year; plus


20
   (B) The lesser of (i) the sum of the pre-August 1, 
21
 1969 appreciation
amounts (to the extent consisting of 
22
 capital gain) for all property in
respect of which such 
23
 gain was reported for federal income tax purposes
for 
24
 the taxable year, or (ii) the net capital gain for the 
25
 taxable year,
reduced in either case by any amount of 
 


 






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1
 such gain included in the amount
determined under 
2
 subsection (a) (2) (F) or (c) (2) (H).


3
  (2) Pre-August 1, 1969 appreciation amount.


4
   (A) If the fair market value of property referred 
5
 to in paragraph
(1) was readily ascertainable on August 
6
 1, 1969, the pre-August 1, 1969
appreciation amount for 
7
 such property is the lesser of (i) the excess of
such 
8
 fair market value over the taxpayer's basis (for 
9
 determining gain)
for such property on that date 
10
 (determined under the Internal Revenue
Code as in 
11
 effect on that date), or (ii) the total gain realized 
12
 and
reportable for federal income tax purposes in 
13
 respect of the sale,
exchange or other disposition of 
14
 such property.


15
   (B) If the fair market value of property referred 
16
 to in paragraph
(1) was not readily ascertainable on 
17
 August 1, 1969, the pre-August 1,
1969 appreciation 
18
 amount for such property is that amount which bears
the 
19
 same ratio to the total gain reported in respect of the 
20
 property for
federal income tax purposes for the 
21
 taxable year, as the number of full
calendar months in 
22
 that part of the taxpayer's holding period for the

23
 property ending July 31, 1969 bears to the number of 
24
 full calendar
months in the taxpayer's entire holding 
25
 period for the
property.


26
   (C) The Department shall prescribe such 
 


 






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1
 regulations as may be
necessary to carry out the 
2
 purposes of this paragraph.



3
 (g) Double deductions. Unless specifically provided 
4
otherwise, nothing
in this Section shall permit the same item 
5
to be deducted more than once.



6
 (h) Legislative intention. Except as expressly provided by 
7
this
Section there shall be no modifications or limitations on 
8
the amounts
of income, gain, loss or deduction taken into 
9
account in determining
gross income, adjusted gross income or 
10
taxable income for federal income
tax purposes for the taxable 
11
year, or in the amount of such items
entering into the 
12
computation of base income and net income under this
Act for 
13
such taxable year, whether in respect of property values as of

14
August 1, 1969 or otherwise.

15
(Source: P.A. 94-776, eff. 5-19-06; 94-789, eff. 5-19-06; 
16
94-1021, eff. 7-12-06; 94-1074, eff. 12-26-06; 95-23, eff. 
17
8-3-07; 95-233, eff. 8-16-07; 95-286, eff. 8-20-07; 95-331, 
18
eff. 8-21-07; 95-707, eff. 1-11-08; 95-876, eff. 8-21-08; 
19
revised 10-15-08.)




20
 Section 99. Effective date. This Act takes effect upon 
21