98TH GENERAL ASSEMBLY
State of Illinois
2013 and 2014
HB5408
 
Introduced , by Rep. Michael J. Zalewski
 
SYNOPSIS AS INTRODUCED:



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

 Amends the Illinois Income Tax Act. Provides that individual taxpayers are entitled to a deduction in an amount equal to compensation paid to that taxpayer by reason of employment as a National Guard dual status military technician.



LRB098 20057 HLH 55300 b


FISCAL NOTE ACT MAY APPLY
 
 
A BILL FOR
 


HB5408LRB098 20057 HLH 55300 b



1 AN ACT concerning revenue.


2 Be it enacted by the People of the State of Illinois,

3represented in the General Assembly:



4 Section 5. The Illinois Income Tax Act is amended by 
5changing 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   (D-22) For taxable years beginning on or after 
26 January 1, 2009, in the case of a nonqualified 
 
 
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1 withdrawal or refund of moneys from a qualified tuition 
2 program under Section 529 of the Internal Revenue Code 
3 administered by the State that is not used for 
4 qualified expenses at an eligible education 
5 institution, an amount equal to the contribution 
6 component of the nonqualified withdrawal or refund 
7 that was previously deducted from base income under 
8 subsection (a)(2)(y) of this Section, provided that 
9 the withdrawal or refund did not result from the 
10 beneficiary's death or disability;
11   (D-23) An amount equal to the credit allowable to 
12 the taxpayer under Section 218(a) of this Act, 
13 determined without regard to Section 218(c) of this 
14 Act;
15 and by deducting from the total so obtained the
sum of the 
16 following amounts:
17   (E) For taxable years ending before December 31, 
18 2001,
any amount included in such total in respect of 
19 any compensation
(including but not limited to any 
20 compensation paid or accrued to a
serviceman while a 
21 prisoner of war or missing in action) paid to a 
22 resident
by reason of being on active duty in the Armed 
23 Forces of the United States
and in respect of any 
24 compensation paid or accrued to a resident who as a

25 governmental employee was a prisoner of war or missing 
26 in action, and in
respect of any compensation paid to a 
 
 
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1 resident in 1971 or thereafter for
annual training 
2 performed pursuant to Sections 502 and 503, Title 32,

3 United States Code as a member of the Illinois National 
4 Guard or, beginning with taxable years ending on or 
5 after December 31, 2007, the National Guard of any 
6 other state.
For taxable years ending on or after 
7 December 31, 2001, any amount included in
such total in 
8 respect of any compensation (including but not limited 
9 to any
compensation paid or accrued to a serviceman 
10 while a prisoner of war or missing
in action) paid to a 
11 resident by reason of being a member of any component 
12 of
the Armed Forces of the United States and in respect 
13 of any compensation paid
or accrued to a resident who 
14 as a governmental employee was a prisoner of war
or 
15 missing in action, and in respect of any compensation 
16 paid to a resident in
2001 or thereafter by reason of 
17 being a member of the Illinois National Guard or, 
18 beginning with taxable years ending on or after 
19 December 31, 2007, the National Guard of any other 
20 state, or, beginning with taxable years ending on or 
21 after December 31, 2015, by reason of employment as a 
22 National Guard dual status military technician under 
23 the provisions of Section 709, Title 32, of the United 
24 States Code.
The provisions of this subparagraph (E) 
25 are exempt
from the provisions of Section 250;
26   (F) An amount equal to all amounts included in such 
 
 
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1 total pursuant
to the provisions of Sections 402(a), 
2 402(c), 403(a), 403(b), 406(a), 407(a),
and 408 of the 
3 Internal Revenue Code, or included in such total as

4 distributions under the provisions of any retirement 
5 or disability plan for
employees of any governmental 
6 agency or unit, or retirement payments to
retired 
7 partners, which payments are excluded in computing net 
8 earnings
from self employment by Section 1402 of the 
9 Internal Revenue Code and
regulations adopted pursuant 
10 thereto;
11   (G) The valuation limitation amount;
12   (H) An amount equal to the amount of any tax 
13 imposed by this Act
which was refunded to the taxpayer 
14 and included in such total for the
taxable year;
15   (I) An amount equal to all amounts included in such 
16 total pursuant
to the provisions of Section 111 of the 
17 Internal Revenue Code as a
recovery of items previously 
18 deducted from adjusted gross income in the
computation 
19 of taxable income;
20   (J) An amount equal to those dividends included in 
21 such total which were
paid by a corporation which 
22 conducts business operations in a River Edge 
23 Redevelopment Zone or zones created under the River 
24 Edge Redevelopment Zone Act, and conducts

25 substantially all of its operations in a River Edge 
26 Redevelopment Zone or zones. This subparagraph (J) is 
 
 
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1 exempt from the provisions of Section 250;
2   (K) 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 (J) of paragraph (2) of this subsection

9 shall not be eligible for the deduction provided under 
10 this subparagraph
(K);
11   (L) For taxable years ending after December 31, 
12 1983, an amount equal to
all social security benefits 
13 and railroad retirement benefits included in
such 
14 total pursuant to Sections 72(r) and 86 of the Internal 
15 Revenue Code;
16   (M) With the exception of any amounts subtracted 
17 under subparagraph
(N), an amount equal to the sum of 
18 all amounts disallowed as
deductions by (i) Sections 
19 171(a) (2), and 265(2) of the Internal Revenue Code, 
20 and all amounts of expenses allocable
to interest and 
21 disallowed as deductions by Section 265(1) of the 
22 Internal
Revenue Code;
and (ii) for taxable years

23 ending on or after August 13, 1999, Sections 171(a)(2), 
24 265,
280C, and 832(b)(5)(B)(i) of the Internal Revenue 
25 Code, plus, for taxable years ending on or after 
26 December 31, 2011, Section 45G(e)(3) of the Internal 
 
 
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1 Revenue Code and, for taxable years ending on or after 
2 December 31, 2008, any amount included in gross income 
3 under Section 87 of the Internal Revenue Code; the 
4 provisions of this
subparagraph are exempt from the 
5 provisions of Section 250;
6   (N) An amount equal to all amounts included in such 
7 total which are
exempt from taxation by this State 
8 either by reason of its statutes or
Constitution
or by 
9 reason of the Constitution, treaties or statutes of the 
10 United States;
provided that, in the case of any 
11 statute of this State that exempts income
derived from 
12 bonds or other obligations from the tax imposed under 
13 this Act,
the amount exempted shall be the interest net 
14 of bond premium amortization;
15   (O) An amount equal to any contribution made to a 
16 job training
project established pursuant to the Tax 
17 Increment Allocation Redevelopment Act;
18   (P) An amount equal to the amount of the deduction 
19 used to compute the
federal income tax credit for 
20 restoration of substantial amounts held under
claim of 
21 right for the taxable year pursuant to Section 1341 of 
22 the
Internal Revenue Code or of any itemized deduction 
23 taken from adjusted gross income in the computation of 
24 taxable income for restoration of substantial amounts 
25 held under claim of right for the taxable year;
26   (Q) An amount equal to any amounts included in such 
 
 
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1 total, received by
the taxpayer as an acceleration in 
2 the payment of life, endowment or annuity
benefits in 
3 advance of the time they would otherwise be payable as 
4 an indemnity
for a terminal illness;
5   (R) An amount equal to the amount of any federal or 
6 State bonus paid
to veterans of the Persian Gulf War;
7   (S) An amount, to the extent included in adjusted 
8 gross income, equal
to the amount of a contribution 
9 made in the taxable year on behalf of the
taxpayer to a 
10 medical care savings account established under the 
11 Medical Care
Savings Account Act or the Medical Care 
12 Savings Account Act of 2000 to the
extent the 
13 contribution is accepted by the account
administrator 
14 as provided in that Act;
15   (T) An amount, to the extent included in adjusted 
16 gross income, equal to
the amount of interest earned in 
17 the taxable year on a medical care savings
account 
18 established under the Medical Care Savings Account Act 
19 or the Medical
Care Savings Account Act of 2000 on 
20 behalf of the
taxpayer, other than interest added 
21 pursuant to item (D-5) of this paragraph
(2);
22   (U) For one taxable year beginning on or after 
23 January 1,
1994, an
amount equal to the total amount of 
24 tax imposed and paid under subsections (a)
and (b) of 
25 Section 201 of this Act on grant amounts received by 
26 the taxpayer
under the Nursing Home Grant Assistance 
 
 
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1 Act during the taxpayer's taxable years
1992 and 1993;
2   (V) Beginning with tax years ending on or after 
3 December 31, 1995 and
ending with tax years ending on 
4 or before December 31, 2004, an amount equal to
the 
5 amount paid by a taxpayer who is a
self-employed 
6 taxpayer, a partner of a partnership, or a
shareholder 
7 in a Subchapter S corporation for health insurance or 
8 long-term
care insurance for that taxpayer or that 
9 taxpayer's spouse or dependents, to
the extent that the 
10 amount paid for that health insurance or long-term care

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

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

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

25 times a number that represents the fractional 
26 percentage of eligible medical
expenses under Section 
 
 
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1 213 of the Internal Revenue Code of 1986 not actually

2 deducted on the taxpayer's federal income tax return;
3   (W) For taxable years beginning on or after January 
4 1, 1998,
all amounts included in the taxpayer's federal 
5 gross income
in the taxable year from amounts converted 
6 from a regular IRA to a Roth IRA.
This paragraph is 
7 exempt from the provisions of Section
250;
8   (X) For taxable year 1999 and thereafter, an amount 
9 equal to the
amount of any (i) distributions, to the 
10 extent includible in gross income for
federal income 
11 tax purposes, made to the taxpayer because of his or 
12 her status
as a victim of persecution for racial or 
13 religious reasons by Nazi Germany or
any other Axis 
14 regime or as an heir of the victim and (ii) items
of 
15 income, to the extent
includible in gross income for 
16 federal income tax purposes, attributable to,
derived 
17 from or in any way related to assets stolen from, 
18 hidden from, or
otherwise lost to a victim of

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

 
 
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1 provided, however, this subtraction from federal 
2 adjusted gross income does not
apply to assets acquired 
3 with such assets or with the proceeds from the sale of

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

12 this paragraph in gross income for federal income tax 
13 purposes.
This paragraph is exempt from the provisions 
14 of Section 250;
15   (Y) For taxable years beginning on or after January 
16 1, 2002
and ending
on or before December 31, 2004, 
17 moneys contributed in the taxable year to a College 
18 Savings Pool account under
Section 16.5 of the State 
19 Treasurer Act, except that amounts excluded from
gross 
20 income under Section 529(c)(3)(C)(i) of the Internal 
21 Revenue Code
shall not be considered moneys 
22 contributed under this subparagraph (Y). For taxable 
23 years beginning on or after January 1, 2005, a maximum 
24 of $10,000
contributed
in the
taxable year to (i) a 
25 College Savings Pool account under Section 16.5 of the

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

3 Internal
Revenue Code shall not be considered moneys 
4 contributed under this subparagraph
(Y). For purposes 
5 of this subparagraph, contributions made by an 
6 employer on behalf of an employee, or matching 
7 contributions made by an employee, shall be treated as 
8 made by the employee. This
subparagraph (Y) is exempt 
9 from the provisions of 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
 
 
HB5408- 23 -LRB098 20057 HLH 55300 b


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 
 
 
HB5408- 24 -LRB098 20057 HLH 55300 b


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 
 
 
HB5408- 25 -LRB098 20057 HLH 55300 b


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; 
25   (EE) An amount equal to the income from intangible 
26 property taken into account for the taxable year (net 
 
 
HB5408- 26 -LRB098 20057 HLH 55300 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) An amount equal to any amount awarded to the 
21 taxpayer during the taxable year by the Court of Claims 
22 under subsection (c) of Section 8 of the Court of 
23 Claims Act for time unjustly served in a State prison. 
24 This subparagraph (FF) is exempt from the provisions of 
25 Section 250; and 
26   (GG) For taxable years ending on or after December 
 
 
HB5408- 27 -LRB098 20057 HLH 55300 b


1 31, 2011, in the case of a taxpayer who was required to 
2 add back any insurance premiums under Section 
3 203(a)(2)(D-19), such taxpayer may elect to subtract 
4 that part of a reimbursement received from the 
5 insurance company equal to the amount of the expense or 
6 loss (including expenses incurred by the insurance 
7 company) that would have been taken into account as a 
8 deduction for federal income tax purposes if the 
9 expense or loss had been uninsured. If a taxpayer makes 
10 the election provided for by this subparagraph (GG), 
11 the insurer to which the premiums were paid must add 
12 back to income the amount subtracted by the taxpayer 
13 pursuant to this subparagraph (GG). This subparagraph 
14 (GG) is exempt from the provisions of Section 250. 

15 (b) Corporations.
16  (1) In general. In the case of a corporation, base 
17 income means an
amount equal to the taxpayer's taxable 
18 income for the taxable year as
modified by paragraph (2).
19  (2) Modifications. The taxable income referred to in 
20 paragraph (1)
shall be modified by adding thereto the sum 
21 of the following amounts:
22   (A) An amount equal to all amounts paid or accrued 
23 to the taxpayer
as interest and all distributions 
24 received from regulated investment
companies during 
25 the taxable year to the extent excluded from gross

 
 
HB5408- 28 -LRB098 20057 HLH 55300 b


1 income in the computation of taxable income;
2   (B) An amount equal to the amount of tax imposed by 
3 this Act to the
extent deducted from gross income in 
4 the computation of taxable income
for the taxable year;
5   (C) In the case of a regulated investment company, 
6 an amount equal to
the excess of (i) the net long-term 
7 capital gain for the taxable year, over
(ii) the amount 
8 of the capital gain dividends designated as such in 
9 accordance
with Section 852(b)(3)(C) of the Internal 
10 Revenue Code and any amount
designated under Section 
11 852(b)(3)(D) of the Internal Revenue Code,

12 attributable to the taxable year (this amendatory Act 
13 of 1995
(Public Act 89-89) is declarative of existing 
14 law and is not a new
enactment);
15   (D) The amount of any net operating loss deduction 
16 taken in arriving
at taxable income, other than a net 
17 operating loss carried forward from a
taxable year 
18 ending prior to December 31, 1986;
19   (E) For taxable years in which a net operating loss 
20 carryback or
carryforward from a taxable year ending 
21 prior to December 31, 1986 is an
element of taxable 
22 income under paragraph (1) of subsection (e) or

23 subparagraph (E) of paragraph (2) of subsection (e), 
24 the amount by which
addition modifications other than 
25 those provided by this subparagraph (E)
exceeded 
26 subtraction modifications in such earlier taxable 
 
 
HB5408- 29 -LRB098 20057 HLH 55300 b


1 year, with the
following limitations applied in the 
2 order that they are listed:
3    (i) the addition modification relating to the 
4 net operating loss
carried back or forward to the 
5 taxable year from any taxable year ending
prior to 
6 December 31, 1986 shall be reduced by the amount of 
7 addition
modification under this subparagraph (E) 
8 which related to that net operating
loss and which 
9 was taken into account in calculating the base 
10 income of an
earlier taxable year, and
11    (ii) the addition modification relating to the 
12 net operating loss
carried back or forward to the 
13 taxable year from any taxable year ending
prior to 
14 December 31, 1986 shall not exceed the amount of 
15 such carryback or
carryforward;
16   For taxable years in which there is a net operating 
17 loss carryback or
carryforward from more than one other 
18 taxable year ending prior to December
31, 1986, the 
19 addition modification provided in this subparagraph 
20 (E) shall
be the sum of the amounts computed 
21 independently under the preceding
provisions of this 
22 subparagraph (E) for each such taxable year;
23   (E-5) For taxable years ending after December 31, 
24 1997, an
amount equal to any eligible remediation costs 
25 that the corporation
deducted in computing adjusted 
26 gross income and for which the
corporation claims a 
 
 
HB5408- 30 -LRB098 20057 HLH 55300 b


1 credit under subsection (l) of Section 201;
2   (E-10) For taxable years 2001 and thereafter, an 
3 amount equal to the
bonus depreciation deduction taken 
4 on the taxpayer's federal income tax return for the 
5 taxable
year under subsection (k) of Section 168 of the 
6 Internal Revenue Code;
7   (E-11) If the taxpayer sells, transfers, abandons, 
8 or otherwise disposes of property for which the 
9 taxpayer was required in any taxable year to
make an 
10 addition modification under subparagraph (E-10), then 
11 an amount equal
to the aggregate amount of the 
12 deductions taken in all taxable
years under 
13 subparagraph (T) with respect to that property.
14   If the taxpayer continues to own property through 
15 the last day of the last tax year for which the 
16 taxpayer may claim a depreciation deduction for 
17 federal income tax purposes and for which the taxpayer 
18 was allowed in any taxable year to make a subtraction 
19 modification under subparagraph (T), then an amount 
20 equal to that subtraction modification.

21   The taxpayer is required to make the addition 
22 modification under this
subparagraph
only once with 
23 respect to any one piece of property;
24   (E-12) An amount equal to the amount otherwise 
25 allowed as a deduction in computing base income for 
26 interest paid, accrued, or incurred, directly or 
 
 
HB5408- 31 -LRB098 20057 HLH 55300 b


1 indirectly, (i) for taxable years ending on or after 
2 December 31, 2004, to a foreign person who would be a 
3 member of the same unitary business group but for the 
4 fact the foreign person's business activity outside 
5 the United States is 80% or more of the foreign 
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. The addition modification 
14 required by this subparagraph shall be reduced to the 
15 extent that dividends were included in base income of 
16 the unitary group for the same taxable year and 
17 received by the taxpayer or by a member of the 
18 taxpayer's unitary business group (including amounts 
19 included in gross income pursuant to Sections 951 
20 through 964 of the Internal Revenue Code and amounts 
21 included in gross income under Section 78 of the 
22 Internal Revenue Code) with respect to the stock of the 
23 same person to whom the interest was paid, accrued, or 
24 incurred.

25   This paragraph shall not apply to the following:

26    (i) an item of interest paid, accrued, or 
 
 
HB5408- 32 -LRB098 20057 HLH 55300 b


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

21    (iii) the taxpayer can establish, based on 
22 clear and convincing evidence, that the interest 
23 paid, accrued, or incurred relates to a contract or 
24 agreement entered into at arm's-length rates and 
25 terms and the principal purpose for the payment is 
26 not federal or Illinois tax avoidance; or

 
 
HB5408- 33 -LRB098 20057 HLH 55300 b


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

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

17   (E-13) An amount equal to the amount of intangible 
18 expenses and costs otherwise allowed as a deduction in 
19 computing base income, and that were paid, accrued, or 
20 incurred, directly or indirectly, (i) for taxable 
21 years ending on or after December 31, 2004, to a 
22 foreign person who would be a member of the same 
23 unitary business group but for the fact that the 
24 foreign person's business activity outside the United 
25 States is 80% or more of that person's total business 
26 activity and (ii) for taxable years ending on or after 
 
 
HB5408- 34 -LRB098 20057 HLH 55300 b


1 December 31, 2008, to a person who would be a member of 
2 the same unitary business group but for the fact that 
3 the person is prohibited under Section 1501(a)(27) 
4 from being included in the unitary business group 
5 because he or she is ordinarily required to apportion 
6 business income under different subsections of Section 
7 304. The addition modification required by this 
8 subparagraph shall be reduced to the extent that 
9 dividends were included in base income of the unitary 
10 group for the same taxable year and received by the 
11 taxpayer or by a member of the taxpayer's unitary 
12 business group (including amounts included in gross 
13 income pursuant to Sections 951 through 964 of the 
14 Internal Revenue Code and amounts included in gross 
15 income under Section 78 of the Internal Revenue Code) 
16 with respect to the stock of the same person to whom 
17 the intangible expenses and costs were directly or 
18 indirectly paid, incurred, or accrued. The preceding 
19 sentence shall not apply to the extent that the same 
20 dividends caused a reduction to the addition 
21 modification required under Section 203(b)(2)(E-12) of 
22 this Act.
As used in this subparagraph, the term 
23 "intangible expenses and costs" includes (1) expenses, 
24 losses, and costs for, or related to, the direct or 
25 indirect acquisition, use, maintenance or management, 
26 ownership, sale, exchange, or any other disposition of 
 
 
HB5408- 35 -LRB098 20057 HLH 55300 b


1 intangible property; (2) losses incurred, directly or 
2 indirectly, from factoring transactions or discounting 
3 transactions; (3) royalty, patent, technical, and 
4 copyright fees; (4) licensing fees; and (5) other 
5 similar expenses and costs.
For purposes of this 
6 subparagraph, "intangible property" includes patents, 
7 patent applications, trade names, trademarks, service 
8 marks, copyrights, mask works, trade secrets, and 
9 similar types of intangible assets.
10   This paragraph shall not apply to the following:
11    (i) any item of intangible expenses or costs 
12 paid, accrued, or incurred, directly or 
13 indirectly, from a transaction with a person who is 
14 subject in a foreign country or state, other than a 
15 state which requires mandatory unitary reporting, 
16 to a tax on or measured by net income with respect 
17 to such item; or
18    (ii) any item of intangible expense or cost 
19 paid, accrued, or incurred, directly or 
20 indirectly, if the taxpayer can establish, based 
21 on a preponderance of the evidence, both of the 
22 following:
23     (a) the person during the same taxable 
24 year paid, accrued, or incurred, the 
25 intangible expense or cost to a person that is 
26 not a related member, and
 
 
HB5408- 36 -LRB098 20057 HLH 55300 b


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

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

25   (E-14) For taxable years ending on or after 
26 December 31, 2008, an amount equal to the amount of 
 
 
HB5408- 37 -LRB098 20057 HLH 55300 b


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

25   (E-15) For taxable years beginning after December 
26 31, 2008, any deduction for dividends paid by a captive 
 
 
HB5408- 38 -LRB098 20057 HLH 55300 b


1 real estate investment trust that is allowed to a real 
2 estate investment trust under Section 857(b)(2)(B) of 
3 the Internal Revenue Code for dividends paid;
4   (E-16) An amount equal to the credit allowable to 
5 the taxpayer under Section 218(a) of this Act, 
6 determined without regard to Section 218(c) of this 
7 Act;
8 and by deducting from the total so obtained the sum of the 
9 following
amounts:
10   (F) An amount equal to the amount of any tax 
11 imposed by this Act
which was refunded to the taxpayer 
12 and included in such total for the
taxable year;
13   (G) An amount equal to any amount included in such 
14 total under
Section 78 of the Internal Revenue Code;
15   (H) In the case of a regulated investment company, 
16 an amount equal
to the amount of exempt interest 
17 dividends as defined in subsection (b)
(5) of Section 
18 852 of the Internal Revenue Code, paid to shareholders

19 for the taxable year;
20   (I) With the exception of any amounts subtracted 
21 under subparagraph
(J),
an amount equal to the sum of 
22 all amounts disallowed as
deductions by (i) Sections 
23 171(a) (2), and 265(a)(2) and amounts disallowed as

24 interest expense by Section 291(a)(3) of the Internal 
25 Revenue Code, and all amounts of expenses allocable to 
26 interest and
disallowed as deductions by Section 
 
 
HB5408- 39 -LRB098 20057 HLH 55300 b


1 265(a)(1) of the Internal Revenue Code;
and (ii) for 
2 taxable years
ending on or after August 13, 1999, 
3 Sections
171(a)(2), 265,
280C, 291(a)(3), and 
4 832(b)(5)(B)(i) of the Internal Revenue Code, plus, 
5 for tax years ending on or after December 31, 2011, 
6 amounts disallowed as deductions by Section 45G(e)(3) 
7 of the Internal Revenue Code and, for taxable years 
8 ending on or after December 31, 2008, any amount 
9 included in gross income under Section 87 of the 
10 Internal Revenue Code and the policyholders' share of 
11 tax-exempt interest of a life insurance company under 
12 Section 807(a)(2)(B) of the Internal Revenue Code (in 
13 the case of a life insurance company with gross income 
14 from a decrease in reserves for the tax year) or 
15 Section 807(b)(1)(B) of the Internal Revenue Code (in 
16 the case of a life insurance company allowed a 
17 deduction for an increase in reserves for the tax 
18 year); the
provisions of this
subparagraph are exempt 
19 from the 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 
 
 
HB5408- 40 -LRB098 20057 HLH 55300 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 a River Edge 
6 Redevelopment Zone or zones created under the River 
7 Edge Redevelopment Zone Act and conducts substantially 
8 all of its
operations in a River Edge Redevelopment 
9 Zone or zones. This subparagraph (K) is exempt from the 
10 provisions of Section 250;
11   (L) 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 (K) of paragraph 2 of this subsection

18 shall not be eligible for the deduction provided under 
19 this subparagraph
(L);
20   (M) 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 River Edge 
26 Redevelopment Zone Investment Credit. To determine the 
 
 
HB5408- 41 -LRB098 20057 HLH 55300 b


1 portion of a loan or loans that is
secured by property 
2 eligible for a Section 201(f) investment
credit to the 
3 borrower, the entire principal amount of the loan or 
4 loans
between the taxpayer and the borrower should be 
5 divided into the basis of the
Section 201(f) investment 
6 credit property which secures the
loan or loans, using 
7 for this purpose the original basis of such property on

8 the date that it was placed in service in the River 
9 Edge Redevelopment Zone. The subtraction modification 
10 available to taxpayer in any
year under this subsection 
11 shall be that portion of the total interest paid
by the 
12 borrower with respect to such loan attributable to the 
13 eligible
property as calculated under the previous 
14 sentence. This subparagraph (M) is exempt from the 
15 provisions of Section 250;
16   (M-1) For any taxpayer that is a financial 
17 organization within the
meaning of Section 304(c) of 
18 this Act, an amount included in such total as
interest 
19 income from a loan or loans made by such taxpayer to a 
20 borrower,
to the extent that such a loan is secured by 
21 property which is eligible for
the High Impact Business 
22 Investment Credit. To determine the portion of a
loan 
23 or loans that is secured by property eligible for a 
24 Section 201(h) investment credit to the borrower, the 
25 entire principal amount of
the loan or loans between 
26 the taxpayer and the borrower should be divided into

 
 
HB5408- 42 -LRB098 20057 HLH 55300 b


1 the basis of the Section 201(h) investment credit 
2 property which
secures the loan or loans, using for 
3 this purpose the original basis of such
property on the 
4 date that it was placed in service in a federally 
5 designated
Foreign Trade Zone or Sub-Zone located in 
6 Illinois. No taxpayer that is
eligible for the 
7 deduction provided in subparagraph (M) of paragraph 
8 (2) of
this subsection shall be eligible for the 
9 deduction provided under this
subparagraph (M-1). The 
10 subtraction modification available to taxpayers in
any 
11 year under this subsection shall be that portion of the 
12 total interest
paid by the borrower with respect to 
13 such loan attributable to the eligible
property as 
14 calculated under the previous sentence;
15   (N) Two times any contribution made during the 
16 taxable year to a
designated zone organization to the 
17 extent that the contribution (i)
qualifies as a 
18 charitable contribution under subsection (c) of 
19 Section 170
of the Internal Revenue Code and (ii) must, 
20 by its terms, be used for a
project approved by the 
21 Department of Commerce and Economic Opportunity under 
22 Section 11 of the Illinois Enterprise Zone Act or under 
23 Section 10-10 of the River Edge Redevelopment Zone Act. 
24 This subparagraph (N) is exempt from the provisions of 
25 Section 250;
26   (O) An amount equal to: (i) 85% for taxable years 
 
 
HB5408- 43 -LRB098 20057 HLH 55300 b


1 ending on or before
December 31, 1992, or, a percentage 
2 equal to the percentage allowable under
Section 
3 243(a)(1) of the Internal Revenue Code of 1986 for 
4 taxable years ending
after December 31, 1992, of the 
5 amount by which dividends included in taxable
income 
6 and received from a corporation that is not created or 
7 organized under
the laws of the United States or any 
8 state or political subdivision thereof,
including, for 
9 taxable years ending on or after December 31, 1988, 
10 dividends
received or deemed received or paid or deemed 
11 paid under Sections 951 through
965 of the Internal 
12 Revenue Code, exceed the amount of the modification

13 provided under subparagraph (G) of paragraph (2) of 
14 this subsection (b) which
is related to such dividends, 
15 and including, for taxable years ending on or after 
16 December 31, 2008, dividends received from a captive 
17 real estate investment trust; plus (ii) 100% of the 
18 amount by which dividends,
included in taxable income 
19 and received, including, for taxable years ending on
or 
20 after December 31, 1988, dividends received or deemed 
21 received or paid or
deemed paid under Sections 951 
22 through 964 of the Internal Revenue Code and including, 
23 for taxable years ending on or after December 31, 2008, 
24 dividends received from a captive real estate 
25 investment trust, from
any such corporation specified 
26 in clause (i) that would but for the provisions
of 
 
 
HB5408- 44 -LRB098 20057 HLH 55300 b


1 Section 1504 (b) (3) of the Internal Revenue Code be 
2 treated as a member of
the affiliated group which 
3 includes the dividend recipient, exceed the amount
of 
4 the modification provided under subparagraph (G) of 
5 paragraph (2) of this
subsection (b) which is related 
6 to such dividends. This subparagraph (O) is exempt from 
7 the provisions of Section 250 of this Act;
8   (P) An amount equal to any contribution made to a 
9 job training project
established pursuant to the Tax 
10 Increment Allocation Redevelopment Act;
11   (Q) 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;
16   (R) On and after July 20, 1999, in the case of an 
17 attorney-in-fact with respect to whom an
interinsurer 
18 or a reciprocal insurer has made the election under 
19 Section 835 of
the Internal Revenue Code, 26 U.S.C. 
20 835, an amount equal to the excess, if
any, of the 
21 amounts paid or incurred by that interinsurer or 
22 reciprocal insurer
in the taxable year to the 
23 attorney-in-fact over the deduction allowed to that

24 interinsurer or reciprocal insurer with respect to the 
25 attorney-in-fact under
Section 835(b) of the Internal 
26 Revenue Code for the taxable year; the provisions of 
 
 
HB5408- 45 -LRB098 20057 HLH 55300 b


1 this subparagraph are exempt from the provisions of 
2 Section 250;
3   (S) For taxable years ending on or after December 
4 31, 1997, in the
case of a Subchapter
S corporation, an 
5 amount equal to all amounts of income allocable to a

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

9 allocable to organizations exempt from federal income 
10 tax by reason of Section
501(a) of the Internal Revenue 
11 Code. This subparagraph (S) is exempt from
the 
12 provisions of Section 250;
13   (T) For taxable years 2001 and thereafter, for the 
14 taxable year in
which the bonus depreciation deduction

15 is taken on the taxpayer's federal income tax return 
16 under
subsection (k) of Section 168 of the Internal 
17 Revenue Code and for each
applicable taxable year 
18 thereafter, an amount equal to "x", where:
19    (1) "y" equals the amount of the depreciation 
20 deduction taken for the
taxable year
on the 
21 taxpayer's federal income tax return on property 
22 for which the bonus
depreciation deduction
was 
23 taken in any year under subsection (k) of Section 
24 168 of the Internal
Revenue Code, but not including 
25 the bonus depreciation deduction;
26    (2) for taxable years ending on or before 
 
 
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1 December 31, 2005, "x" equals "y" multiplied by 30 
2 and then divided by 70 (or "y"
multiplied by 
3 0.429); and
4    (3) for taxable years ending after December 
5 31, 2005:
6     (i) for property on which a bonus 
7 depreciation deduction of 30% of the adjusted 
8 basis was taken, "x" equals "y" multiplied by 
9 30 and then divided by 70 (or "y"
multiplied by 
10 0.429); and
11     (ii) for property on which a bonus 
12 depreciation deduction of 50% of the adjusted 
13 basis was taken, "x" equals "y" multiplied by 
14 1.0.
15   The aggregate amount deducted under this 
16 subparagraph in all taxable
years for any one piece of 
17 property may not exceed the amount of the bonus

18 depreciation deduction
taken on that property on the 
19 taxpayer's federal income tax return under
subsection 
20 (k) of Section 168 of the Internal Revenue Code. This 
21 subparagraph (T) is exempt from the provisions of 
22 Section 250;
23   (U) If the taxpayer sells, transfers, abandons, or 
24 otherwise disposes of
property for which the taxpayer 
25 was required in any taxable year to make an
addition 
26 modification under subparagraph (E-10), then an amount 
 
 
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1 equal to that
addition modification.
2   If the taxpayer continues to own property through 
3 the last day of the last tax year for which the 
4 taxpayer may claim a depreciation deduction for 
5 federal income tax purposes and for which the taxpayer 
6 was required in any taxable year to make an addition 
7 modification under subparagraph (E-10), then an amount 
8 equal to that addition modification.

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

13   (W) An amount equal to the interest income taken 
14 into account for the taxable year (net of the 
15 deductions allocable thereto) with respect to 
16 transactions with (i) a foreign person who would be a 
17 member of the taxpayer's unitary business group but for 
18 the fact that the foreign person's business activity 
19 outside the United States is 80% or more of that 
20 person's total business activity and (ii) for taxable 
21 years ending on or after December 31, 2008, to a person 
22 who would be a member of the same unitary business 
23 group but for the fact that the person is prohibited 
24 under Section 1501(a)(27) from being included in the 
25 unitary business group because he or she is ordinarily 
26 required to apportion business income under different 
 
 
HB5408- 49 -LRB098 20057 HLH 55300 b


1 subsections of Section 304, but not to exceed the 
2 addition modification required to be made for the same 
3 taxable year under Section 203(b)(2)(E-12) for 
4 interest paid, accrued, or incurred, directly or 
5 indirectly, to the same person. This subparagraph (W) 
6 is exempt from the provisions of Section 250;

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

2   (Y) For taxable years ending on or after December 
3 31, 2011, in the case of a taxpayer who was required to 
4 add back any insurance premiums under Section 
5 203(b)(2)(E-14), such taxpayer may elect to subtract 
6 that part of a reimbursement received from the 
7 insurance company equal to the amount of the expense or 
8 loss (including expenses incurred by the insurance 
9 company) that would have been taken into account as a 
10 deduction for federal income tax purposes if the 
11 expense or loss had been uninsured. If a taxpayer makes 
12 the election provided for by this subparagraph (Y), the 
13 insurer to which the premiums were paid must add back 
14 to income the amount subtracted by the taxpayer 
15 pursuant to this subparagraph (Y). This subparagraph 
16 (Y) is exempt from the provisions of Section 250; and 
17   (Z) The difference between the nondeductible 
18 controlled foreign corporation dividends under Section 
19 965(e)(3) of the Internal Revenue Code over the taxable 
20 income of the taxpayer, computed without regard to 
21 Section 965(e)(2)(A) of the Internal Revenue Code, and 
22 without regard to any net operating loss deduction. 
23 This subparagraph (Z) is exempt from the provisions of 
24 Section 250. 
25  (3) Special rule. For purposes of paragraph (2) (A), 
26 "gross income"
in the case of a life insurance company, for 
 
 
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1 tax years ending on and after
December 31, 1994,
and prior 
2 to December 31, 2011, shall mean the gross investment 
3 income for the taxable year and, for tax years ending on or 
4 after December 31, 2011, shall mean all amounts included in 
5 life insurance gross income under Section 803(a)(3) of the 
6 Internal Revenue Code.

7 (c) Trusts and estates.
8  (1) In general. In the case of a trust or estate, base 
9 income means
an amount equal to the taxpayer's taxable 
10 income for the taxable year as
modified by paragraph (2).
11  (2) Modifications. Subject to the provisions of 
12 paragraph (3), the
taxable income referred to in paragraph 
13 (1) shall be modified by adding
thereto the sum of the 
14 following amounts:
15   (A) An amount equal to all amounts paid or accrued 
16 to the taxpayer
as interest or dividends during the 
17 taxable year to the extent excluded
from gross income 
18 in the computation of taxable income;
19   (B) In the case of (i) an estate, $600; (ii) a 
20 trust which, under
its governing instrument, is 
21 required to distribute all of its income
currently, 
22 $300; and (iii) any other trust, $100, but in each such 
23 case,
only to the extent such amount was deducted in 
24 the computation of
taxable income;
25   (C) 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 taxable income
for the taxable year;
3   (D) The amount of any net operating loss deduction 
4 taken in arriving at
taxable income, other than a net 
5 operating loss carried forward from a
taxable year 
6 ending prior to December 31, 1986;
7   (E) For taxable years in which a net operating loss 
8 carryback or
carryforward from a taxable year ending 
9 prior to December 31, 1986 is an
element of taxable 
10 income under paragraph (1) of subsection (e) or 
11 subparagraph
(E) of paragraph (2) of subsection (e), 
12 the amount by which addition
modifications other than 
13 those provided by this subparagraph (E) exceeded

14 subtraction modifications in such taxable year, with 
15 the following limitations
applied in the order that 
16 they are listed:
17    (i) the addition modification relating to the 
18 net operating loss
carried back or forward to the 
19 taxable year from any taxable year ending
prior to 
20 December 31, 1986 shall be reduced by the amount of 
21 addition
modification under this subparagraph (E) 
22 which related to that net
operating loss and which 
23 was taken into account in calculating the base

24 income of an earlier taxable year, and
25    (ii) the addition modification relating to the 
26 net operating loss
carried back or forward to the 
 
 
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1 taxable year from any taxable year ending
prior to 
2 December 31, 1986 shall not exceed the amount of 
3 such carryback or
carryforward;
4   For taxable years in which there is a net operating 
5 loss carryback or
carryforward from more than one other 
6 taxable year ending prior to December
31, 1986, the 
7 addition modification provided in this subparagraph 
8 (E) shall
be the sum of the amounts computed 
9 independently under the preceding
provisions of this 
10 subparagraph (E) for each such taxable year;
11   (F) For taxable years ending on or after January 1, 
12 1989, an amount
equal to the tax deducted pursuant to 
13 Section 164 of the Internal Revenue
Code if the trust 
14 or estate is claiming the same tax for purposes of the

15 Illinois foreign tax credit under Section 601 of this 
16 Act;
17   (G) An amount equal to the amount of the capital 
18 gain deduction
allowable under the Internal Revenue 
19 Code, to the extent deducted from
gross income in the 
20 computation of taxable income;
21   (G-5) For taxable years ending after December 31, 
22 1997, an
amount equal to any eligible remediation costs 
23 that the trust or estate
deducted in computing adjusted 
24 gross income and for which the trust
or estate claims a 
25 credit under subsection (l) of Section 201;
26   (G-10) For taxable years 2001 and thereafter, an 
 
 
HB5408- 54 -LRB098 20057 HLH 55300 b


1 amount equal to the
bonus depreciation deduction taken 
2 on the taxpayer's federal income tax return for the 
3 taxable
year under subsection (k) of Section 168 of the 
4 Internal Revenue Code; and
5   (G-11) If the taxpayer sells, transfers, abandons, 
6 or otherwise disposes of property for which the 
7 taxpayer was required in any taxable year to
make an 
8 addition modification under subparagraph (G-10), then 
9 an amount equal
to the aggregate amount of the 
10 deductions taken in all taxable
years under 
11 subparagraph (R) with respect to that property.
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 allowed in any taxable year to make a subtraction 
17 modification under subparagraph (R), then an amount 
18 equal to that subtraction modification.

19   The taxpayer is required to make the addition 
20 modification under this
subparagraph
only once with 
21 respect to any one piece of property;
22   (G-12) An amount equal to the amount otherwise 
23 allowed as a deduction in computing base income for 
24 interest paid, accrued, or incurred, directly or 
25 indirectly, (i) for taxable years ending on or after 
26 December 31, 2004, to a foreign person who would be a 
 
 
HB5408- 55 -LRB098 20057 HLH 55300 b


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

23   This paragraph shall not apply to the following:

24    (i) an item of interest paid, accrued, or 
25 incurred, directly or indirectly, to a person who 
26 is subject in a foreign country or state, other 
 
 
HB5408- 56 -LRB098 20057 HLH 55300 b


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

19    (iii) the taxpayer can establish, based on 
20 clear and convincing evidence, that the interest 
21 paid, accrued, or incurred relates to a contract or 
22 agreement entered into at arm's-length rates and 
23 terms and the principal purpose for the payment is 
24 not federal or Illinois tax avoidance; or

25    (iv) an item of interest paid, accrued, or 
26 incurred, directly or indirectly, to a person if 
 
 
HB5408- 57 -LRB098 20057 HLH 55300 b


1 the taxpayer establishes by clear and convincing 
2 evidence that the adjustments are unreasonable; or 
3 if the taxpayer and the Director agree in writing 
4 to the application or use of an alternative method 
5 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   (G-13) An amount equal to the amount of intangible 
16 expenses and costs otherwise allowed as a deduction in 
17 computing base income, and that were paid, accrued, or 
18 incurred, directly or indirectly, (i) for taxable 
19 years ending on or after December 31, 2004, to a 
20 foreign person who would be a member of the same 
21 unitary business group but for the fact that the 
22 foreign person's business activity outside the United 
23 States is 80% or more of that person's total business 
24 activity and (ii) for taxable years ending on or after 
25 December 31, 2008, to a person who would be a member of 
26 the same unitary business group but for the fact that 
 
 
HB5408- 58 -LRB098 20057 HLH 55300 b


1 the person is prohibited under Section 1501(a)(27) 
2 from being included in the unitary business group 
3 because he or she is ordinarily required to apportion 
4 business income under different subsections of Section 
5 304. The addition modification required by this 
6 subparagraph shall be reduced to the extent that 
7 dividends were included in base income of the unitary 
8 group for the same taxable year and received by the 
9 taxpayer or by a member of the taxpayer's unitary 
10 business group (including amounts included in gross 
11 income pursuant to Sections 951 through 964 of the 
12 Internal Revenue Code and amounts included in gross 
13 income under Section 78 of the Internal Revenue Code) 
14 with respect to the stock of the same person to whom 
15 the intangible expenses and costs were directly or 
16 indirectly paid, incurred, or accrued. The preceding 
17 sentence shall not apply to the extent that the same 
18 dividends caused a reduction to the addition 
19 modification required under Section 203(c)(2)(G-12) of 
20 this Act. As used in this subparagraph, the term 
21 "intangible expenses and costs" includes: (1) 
22 expenses, losses, and costs for or related to the 
23 direct or indirect acquisition, use, maintenance or 
24 management, ownership, sale, exchange, or any other 
25 disposition of intangible property; (2) losses 
26 incurred, directly or indirectly, from factoring 
 
 
HB5408- 59 -LRB098 20057 HLH 55300 b


1 transactions or discounting transactions; (3) royalty, 
2 patent, technical, and copyright fees; (4) licensing 
3 fees; and (5) other similar expenses and costs. For 
4 purposes of this subparagraph, "intangible property" 
5 includes patents, patent applications, trade names, 
6 trademarks, service marks, copyrights, mask works, 
7 trade secrets, and similar types of intangible assets.
8   This paragraph shall not apply to the following:
9    (i) any item of intangible expenses or costs 
10 paid, accrued, or incurred, directly or 
11 indirectly, from a transaction with a person who is 
12 subject in a foreign country or state, other than a 
13 state which requires mandatory unitary reporting, 
14 to a tax on or measured by net income with respect 
15 to such item; or
16    (ii) any item of intangible expense or cost 
17 paid, accrued, or incurred, directly or 
18 indirectly, if the taxpayer can establish, based 
19 on a preponderance of the evidence, both of the 
20 following:
21     (a) the person during the same taxable 
22 year paid, accrued, or incurred, the 
23 intangible expense or cost to a person that is 
24 not a related member, and
25     (b) the transaction giving rise to the 
26 intangible expense or cost between the 
 
 
HB5408- 60 -LRB098 20057 HLH 55300 b


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

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

23   (G-14) For taxable years ending on or after 
24 December 31, 2008, an amount equal to the amount of 
25 insurance premium expenses and costs otherwise allowed 
26 as a deduction in computing base income, and that were 
 
 
HB5408- 61 -LRB098 20057 HLH 55300 b


1 paid, accrued, or incurred, directly or indirectly, to 
2 a person who would be a member of the same unitary 
3 business group but for the fact that the person is 
4 prohibited under Section 1501(a)(27) from being 
5 included in the unitary business group because he or 
6 she is ordinarily required to apportion business 
7 income under different subsections of Section 304. The 
8 addition modification required by this subparagraph 
9 shall be reduced to the extent that dividends were 
10 included in base income of the unitary group for the 
11 same taxable year and received by the taxpayer or by a 
12 member of the taxpayer's unitary business group 
13 (including amounts included in gross income under 
14 Sections 951 through 964 of the Internal Revenue Code 
15 and amounts included in gross income under Section 78 
16 of the Internal Revenue Code) with respect to the stock 
17 of the same person to whom the premiums and costs were 
18 directly or indirectly paid, incurred, or accrued. The 
19 preceding sentence does not apply to the extent that 
20 the same dividends caused a reduction to the addition 
21 modification required under Section 203(c)(2)(G-12) or 
22 Section 203(c)(2)(G-13) of this Act;
23   (G-15) An amount equal to the credit allowable to 
24 the taxpayer under Section 218(a) of this Act, 
25 determined without regard to Section 218(c) of this 
26 Act;
 
 
HB5408- 62 -LRB098 20057 HLH 55300 b


1 and by deducting from the total so obtained the sum of the 
2 following
amounts:
3   (H) An amount equal to all amounts included in such 
4 total pursuant
to the provisions of Sections 402(a), 
5 402(c), 403(a), 403(b), 406(a), 407(a)
and 408 of the 
6 Internal Revenue Code or included in such total as

7 distributions under the provisions of any retirement 
8 or disability plan for
employees of any governmental 
9 agency or unit, or retirement payments to
retired 
10 partners, which payments are excluded in computing net 
11 earnings
from self employment by Section 1402 of the 
12 Internal Revenue Code and
regulations adopted pursuant 
13 thereto;
14   (I) The valuation limitation amount;
15   (J) An amount equal to the amount of any tax 
16 imposed by this Act
which was refunded to the taxpayer 
17 and included in such total for the
taxable year;
18   (K) An amount equal to all amounts included in 
19 taxable income as
modified by subparagraphs (A), (B), 
20 (C), (D), (E), (F) and (G) which
are exempt from 
21 taxation by this State either by reason of its statutes 
22 or
Constitution
or by reason of the Constitution, 
23 treaties or statutes of the United States;
provided 
24 that, in the case of any statute of this State that 
25 exempts income
derived from bonds or other obligations 
26 from the tax imposed under this Act,
the amount 
 
 
HB5408- 63 -LRB098 20057 HLH 55300 b


1 exempted shall be the interest net of bond premium 
2 amortization;
3   (L) With the exception of any amounts subtracted 
4 under subparagraph
(K),
an amount equal to the sum of 
5 all amounts disallowed as
deductions by (i) Sections 
6 171(a) (2) and 265(a)(2) of the Internal Revenue
Code, 
7 and all amounts of expenses allocable
to interest and 
8 disallowed as deductions by Section 265(1) of the 
9 Internal
Revenue Code;
and (ii) for taxable years

10 ending on or after August 13, 1999, Sections
171(a)(2), 
11 265,
280C, and 832(b)(5)(B)(i) of the Internal Revenue 
12 Code, plus, (iii) for taxable years ending on or after 
13 December 31, 2011, Section 45G(e)(3) of the Internal 
14 Revenue Code and, for taxable years ending on or after 
15 December 31, 2008, any amount included in gross income 
16 under Section 87 of the Internal Revenue Code; the 
17 provisions of this
subparagraph are exempt from the 
18 provisions of Section 250;
19   (M) An amount equal to those dividends included in 
20 such total
which were paid by a corporation which 
21 conducts business operations in a River Edge 
22 Redevelopment Zone or zones created under the River 
23 Edge Redevelopment Zone Act and
conducts substantially 
24 all of its operations in a River Edge Redevelopment 
25 Zone or zones. This subparagraph (M) is exempt from the 
26 provisions of Section 250;
 
 
HB5408- 64 -LRB098 20057 HLH 55300 b


1   (N) An amount equal to any contribution made to a 
2 job training
project established pursuant to the Tax 
3 Increment Allocation
Redevelopment Act;
4   (O) An amount equal to those dividends included in 
5 such total
that were paid by a corporation that 
6 conducts business operations in a
federally designated 
7 Foreign Trade Zone or Sub-Zone and that is designated
a 
8 High Impact Business located in Illinois; provided 
9 that dividends eligible
for the deduction provided in 
10 subparagraph (M) of paragraph (2) of this
subsection 
11 shall not be eligible for the deduction provided under 
12 this
subparagraph (O);
13   (P) An amount equal to the amount of the deduction 
14 used to compute the
federal income tax credit for 
15 restoration of substantial amounts held under
claim of 
16 right for the taxable year pursuant to Section 1341 of 
17 the
Internal Revenue Code;
18   (Q) For taxable year 1999 and thereafter, an amount 
19 equal to the
amount of any
(i) distributions, to the 
20 extent includible in gross income for
federal income 
21 tax purposes, made to the taxpayer because of
his or 
22 her status as a victim of
persecution for racial or 
23 religious reasons by Nazi Germany or any other Axis

24 regime or as an heir of the victim and (ii) items
of 
25 income, to the extent
includible in gross income for 
26 federal income tax purposes, attributable to,
derived 
 
 
HB5408- 65 -LRB098 20057 HLH 55300 b


1 from or in any way related to assets stolen from, 
2 hidden from, or
otherwise lost to a victim of

3 persecution for racial or religious reasons by Nazi

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

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

10 companies
immediately prior to and during World War II;

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

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

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

22 this paragraph in gross income for federal income tax 
23 purposes.
This paragraph is exempt from the provisions 
24 of Section 250;
25   (R) For taxable years 2001 and thereafter, for the 
26 taxable year in
which the bonus depreciation deduction

 
 
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1 is taken on the taxpayer's federal income tax return 
2 under
subsection (k) of Section 168 of the Internal 
3 Revenue Code and for each
applicable taxable year 
4 thereafter, an amount equal to "x", where:
5    (1) "y" equals the amount of the depreciation 
6 deduction taken for the
taxable year
on the 
7 taxpayer's federal income tax return on property 
8 for which the bonus
depreciation deduction
was 
9 taken in any year under subsection (k) of Section 
10 168 of the Internal
Revenue Code, but not including 
11 the bonus depreciation deduction;
12    (2) for taxable years ending on or before 
13 December 31, 2005, "x" equals "y" multiplied by 30 
14 and then divided by 70 (or "y"
multiplied by 
15 0.429); and
16    (3) for taxable years ending after December 
17 31, 2005:
18     (i) for property on which a bonus 
19 depreciation deduction of 30% of the adjusted 
20 basis was taken, "x" equals "y" multiplied by 
21 30 and then divided by 70 (or "y"
multiplied by 
22 0.429); and
23     (ii) for property on which a bonus 
24 depreciation deduction of 50% of the adjusted 
25 basis was taken, "x" equals "y" multiplied by 
26 1.0.
 
 
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1   The aggregate amount deducted under this 
2 subparagraph in all taxable
years for any one piece of 
3 property may not exceed the amount of the bonus

4 depreciation deduction
taken on that property on the 
5 taxpayer's federal income tax return under
subsection 
6 (k) of Section 168 of the Internal Revenue Code. This 
7 subparagraph (R) is exempt from the provisions of 
8 Section 250;
9   (S) If the taxpayer sells, transfers, abandons, or 
10 otherwise disposes of
property for which the taxpayer 
11 was required in any taxable year to make an
addition 
12 modification under subparagraph (G-10), then an amount 
13 equal to that
addition modification.
14   If the taxpayer continues to own property through 
15 the last day of the last tax year for which the 
16 taxpayer may claim a depreciation deduction for 
17 federal income tax purposes and for which the taxpayer 
18 was required in any taxable year to make an addition 
19 modification under subparagraph (G-10), then an amount 
20 equal to that addition modification.

21   The taxpayer is allowed to take the deduction under 
22 this subparagraph
only once with respect to any one 
23 piece of property.
24   This subparagraph (S) is exempt from the 
25 provisions of Section 250;
26   (T) The amount of (i) any interest income (net of 
 
 
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1 the deductions allocable thereto) taken into account 
2 for the taxable year with respect to a transaction with 
3 a taxpayer that is required to make an addition 
4 modification with respect to such transaction under 
5 Section 203(a)(2)(D-17), 203(b)(2)(E-12), 
6 203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed 
7 the amount of such addition modification and
(ii) any 
8 income from intangible property (net of the deductions 
9 allocable thereto) taken into account for the taxable 
10 year with respect to a transaction with a taxpayer that 
11 is required to make an addition modification with 
12 respect to such transaction under Section 
13 203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or 
14 203(d)(2)(D-8), but not to exceed the amount of such 
15 addition modification. This subparagraph (T) is exempt 
16 from the provisions of Section 250;

17   (U) 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 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(c)(2)(G-12) for 
8 interest paid, accrued, or incurred, directly or 
9 indirectly, to the same person. This subparagraph (U) 
10 is exempt from the provisions of Section 250; 
11   (V) 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(c)(2)(G-13) for 
2 intangible expenses and costs paid, accrued, or 
3 incurred, directly or indirectly, to the same foreign 
4 person. This subparagraph (V) is exempt from the 
5 provisions of Section 250;

6   (W) in the case of an estate, an amount equal to 
7 all amounts included in such total pursuant to the 
8 provisions of Section 111 of the Internal Revenue Code 
9 as a recovery of items previously deducted by the 
10 decedent from adjusted gross income in the computation 
11 of taxable income. This subparagraph (W) is exempt from 
12 Section 250; 
13   (X) an amount equal to the refund included in such 
14 total of any tax deducted for federal income tax 
15 purposes, to the extent that deduction was added back 
16 under subparagraph (F). This subparagraph (X) is 
17 exempt from the provisions of Section 250; and
18   (Y) For taxable years ending on or after December 
19 31, 2011, in the case of a taxpayer who was required to 
20 add back any insurance premiums under Section 
21 203(c)(2)(G-14), such taxpayer may elect to subtract 
22 that part of a reimbursement received from the 
23 insurance company equal to the amount of the expense or 
24 loss (including expenses incurred by the insurance 
25 company) that would have been taken into account as a 
26 deduction for federal income tax purposes if the 
 
 
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1 expense or loss had been uninsured. If a taxpayer makes 
2 the election provided for by this subparagraph (Y), the 
3 insurer to which the premiums were paid must add back 
4 to income the amount subtracted by the taxpayer 
5 pursuant to this subparagraph (Y). This subparagraph 
6 (Y) is exempt from the provisions of Section 250.
7  (3) Limitation. The amount of any modification 
8 otherwise required
under this subsection shall, under 
9 regulations prescribed by the
Department, be adjusted by 
10 any amounts included therein which were
properly paid, 
11 credited, or required to be distributed, or permanently set

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

14 (d) Partnerships.
15  (1) In general. In the case of a partnership, base 
16 income means an
amount equal to the taxpayer's taxable 
17 income for the taxable year as
modified by paragraph (2).
18  (2) Modifications. The taxable income referred to in 
19 paragraph (1)
shall be modified by adding thereto the sum 
20 of the following amounts:
21   (A) An amount equal to all amounts paid or accrued 
22 to the taxpayer as
interest or dividends during the 
23 taxable year to the extent excluded from
gross income 
24 in the computation of taxable income;
25   (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 for 
2 the taxable year;
3   (C) The amount of deductions allowed to the 
4 partnership pursuant to
Section 707 (c) of the Internal 
5 Revenue Code in calculating its taxable income;
6   (D) An amount equal to the amount of the capital 
7 gain deduction
allowable under the Internal Revenue 
8 Code, to the extent deducted from
gross income in the 
9 computation of taxable income;
10   (D-5) For taxable years 2001 and thereafter, an 
11 amount equal to the
bonus depreciation deduction taken 
12 on the taxpayer's federal income tax return for the 
13 taxable
year under subsection (k) of Section 168 of the 
14 Internal Revenue Code;
15   (D-6) If the taxpayer sells, transfers, abandons, 
16 or otherwise disposes of
property for which the 
17 taxpayer was required in any taxable year to make an

18 addition modification under subparagraph (D-5), then 
19 an amount equal to the
aggregate amount of the 
20 deductions taken in all taxable years
under 
21 subparagraph (O) with respect to that property.
22   If the taxpayer continues to own property through 
23 the last day of the last tax year for which the 
24 taxpayer may claim a depreciation deduction for 
25 federal income tax purposes and for which the taxpayer 
26 was allowed in any taxable year to make a subtraction 
 
 
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1 modification under subparagraph (O), then an amount 
2 equal to that subtraction modification.

3   The taxpayer is required to make the addition 
4 modification under this
subparagraph
only once with 
5 respect to any one piece of property;
6   (D-7) An amount equal to the amount otherwise 
7 allowed as a deduction in computing base income for 
8 interest paid, accrued, or incurred, directly or 
9 indirectly, (i) for taxable years ending on or after 
10 December 31, 2004, to a foreign person who would be a 
11 member of the same unitary business group but for the 
12 fact the foreign person's business activity outside 
13 the United States is 80% or more of the foreign 
14 person's total business activity and (ii) for taxable 
15 years ending on or after December 31, 2008, to a person 
16 who would be a member of the same unitary business 
17 group but for the fact that the person is prohibited 
18 under Section 1501(a)(27) from being included in the 
19 unitary business group because he or she is ordinarily 
20 required to apportion business income under different 
21 subsections of Section 304. The addition modification 
22 required by this subparagraph shall be reduced to the 
23 extent that dividends were included in base income of 
24 the unitary group for the same taxable year and 
25 received by the taxpayer or by a member of the 
26 taxpayer's unitary business group (including amounts 
 
 
HB5408- 74 -LRB098 20057 HLH 55300 b


1 included in gross income pursuant to Sections 951 
2 through 964 of the Internal Revenue Code and amounts 
3 included in gross income under Section 78 of the 
4 Internal Revenue Code) with respect to the stock of the 
5 same person to whom the interest was paid, accrued, or 
6 incurred.

7   This paragraph shall not apply to the following:

8    (i) an item of interest paid, accrued, or 
9 incurred, directly or indirectly, to a person who 
10 is subject in a foreign country or state, other 
11 than a state which requires mandatory unitary 
12 reporting, to a tax on or measured by net income 
13 with respect to such interest; or
14    (ii) an item of interest paid, accrued, or 
15 incurred, directly or indirectly, to a person if 
16 the taxpayer can establish, based on a 
17 preponderance of the evidence, both of the 
18 following:
19     (a) the person, during the same taxable 
20 year, paid, accrued, or incurred, the interest 
21 to a person that is not a related member, and
22     (b) the transaction giving rise to the 
23 interest expense between the taxpayer and the 
24 person did not have as a principal purpose the 
25 avoidance of Illinois income tax, and is paid 
26 pursuant to a contract or agreement that 
 
 
HB5408- 75 -LRB098 20057 HLH 55300 b


1 reflects an arm's-length interest rate and 
2 terms; or

3    (iii) the taxpayer can establish, based on 
4 clear and convincing evidence, that the interest 
5 paid, accrued, or incurred relates to a contract or 
6 agreement entered into at arm's-length rates and 
7 terms and the principal purpose for the payment is 
8 not federal or Illinois tax avoidance; or

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

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

25   (D-8) An amount equal to the amount of intangible 
26 expenses and costs otherwise allowed as a deduction in 
 
 
HB5408- 76 -LRB098 20057 HLH 55300 b


1 computing base income, and that were paid, accrued, or 
2 incurred, directly or indirectly, (i) for taxable 
3 years ending on or after December 31, 2004, to a 
4 foreign person who would be a member of the same 
5 unitary business group but for the fact that the 
6 foreign person's business activity outside the United 
7 States is 80% or more of that person's total business 
8 activity and (ii) for taxable years ending on or after 
9 December 31, 2008, to a person who would be a member of 
10 the same unitary business group but for the fact that 
11 the person is prohibited under Section 1501(a)(27) 
12 from being included in the unitary business group 
13 because he or she is ordinarily required to apportion 
14 business income under different subsections of Section 
15 304. The addition modification required by this 
16 subparagraph shall be reduced to the extent that 
17 dividends were included in base income of the unitary 
18 group for the same taxable year and received by the 
19 taxpayer or by a member of the taxpayer's unitary 
20 business group (including amounts included in gross 
21 income pursuant to Sections 951 through 964 of the 
22 Internal Revenue Code and amounts included in gross 
23 income under Section 78 of the Internal Revenue Code) 
24 with respect to the stock of the same person to whom 
25 the intangible expenses and costs were directly or 
26 indirectly paid, incurred or accrued. The preceding 
 
 
HB5408- 77 -LRB098 20057 HLH 55300 b


1 sentence shall not apply to the extent that the same 
2 dividends caused a reduction to the addition 
3 modification required under Section 203(d)(2)(D-7) of 
4 this Act. As used in this subparagraph, the term 
5 "intangible expenses and costs" includes (1) expenses, 
6 losses, and costs for, or related to, the direct or 
7 indirect acquisition, use, maintenance or management, 
8 ownership, sale, exchange, or any other disposition of 
9 intangible property; (2) losses incurred, directly or 
10 indirectly, from factoring transactions or discounting 
11 transactions; (3) royalty, patent, technical, and 
12 copyright fees; (4) licensing fees; and (5) other 
13 similar expenses and costs. For purposes of this 
14 subparagraph, "intangible property" includes patents, 
15 patent applications, trade names, trademarks, service 
16 marks, copyrights, mask works, trade secrets, and 
17 similar types of intangible assets;
18   This paragraph shall not apply to the following:
19    (i) any item of intangible expenses or costs 
20 paid, accrued, or incurred, directly or 
21 indirectly, from a transaction with a person who is 
22 subject in a foreign country or state, other than a 
23 state which requires mandatory unitary reporting, 
24 to a tax on or measured by net income with respect 
25 to such item; or
26    (ii) any item of intangible expense or cost 
 
 
HB5408- 78 -LRB098 20057 HLH 55300 b


1 paid, accrued, or incurred, directly or 
2 indirectly, if the taxpayer can establish, based 
3 on a preponderance of the evidence, both of the 
4 following:
5     (a) the person during the same taxable 
6 year paid, accrued, or incurred, the 
7 intangible expense or cost to a person that is 
8 not a related member, and
9     (b) the transaction giving rise to the 
10 intangible expense or cost between the 
11 taxpayer and the person did not have as a 
12 principal purpose the avoidance of Illinois 
13 income tax, and is paid pursuant to a contract 
14 or agreement that reflects arm's-length terms; 
15 or
16    (iii) any item of intangible expense or cost 
17 paid, accrued, or incurred, directly or 
18 indirectly, from a transaction with a person if the 
19 taxpayer establishes by clear and convincing 
20 evidence, that the adjustments are unreasonable; 
21 or if the taxpayer and the Director agree in 
22 writing to the application or use of an alternative 
23 method 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 
 
 
HB5408- 79 -LRB098 20057 HLH 55300 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   (D-9) For taxable years ending on or after December 
8 31, 2008, an amount equal to the amount of insurance 
9 premium expenses and costs otherwise allowed as a 
10 deduction in computing base income, and that were paid, 
11 accrued, or incurred, directly or indirectly, to a 
12 person who would be a member of the same unitary 
13 business group but for the fact that the person is 
14 prohibited under Section 1501(a)(27) from being 
15 included in the unitary business group because he or 
16 she is ordinarily required to apportion business 
17 income under different subsections of Section 304. The 
18 addition modification required by this subparagraph 
19 shall be reduced to the extent that dividends were 
20 included in base income of the unitary group for the 
21 same taxable year and received by the taxpayer or by a 
22 member of the taxpayer's unitary business group 
23 (including amounts included in gross income under 
24 Sections 951 through 964 of the Internal Revenue Code 
25 and amounts included in gross income under Section 78 
26 of the Internal Revenue Code) with respect to the stock 
 
 
HB5408- 80 -LRB098 20057 HLH 55300 b


1 of the same person to whom the premiums and costs were 
2 directly or indirectly paid, incurred, or accrued. The 
3 preceding sentence does not apply to the extent that 
4 the same dividends caused a reduction to the addition 
5 modification required under Section 203(d)(2)(D-7) or 
6 Section 203(d)(2)(D-8) of this Act;
7   (D-10) An amount equal to the credit allowable to 
8 the taxpayer under Section 218(a) of this Act, 
9 determined without regard to Section 218(c) of this 
10 Act;
11 and by deducting from the total so obtained the following 
12 amounts:
13   (E) The valuation limitation amount;
14   (F) 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   (G) An amount equal to all amounts included in 
18 taxable income as
modified by subparagraphs (A), (B), 
19 (C) and (D) which are exempt from
taxation by this 
20 State either by reason of its statutes or Constitution 
21 or
by reason of
the Constitution, treaties or statutes 
22 of the United States;
provided that, in the case of any 
23 statute of this State that exempts income
derived from 
24 bonds or other obligations from the tax imposed under 
25 this Act,
the amount exempted shall be the interest net 
26 of bond premium amortization;
 
 
HB5408- 81 -LRB098 20057 HLH 55300 b


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

4 in effect December 31, 1981) or a reasonable allowance 
5 for compensation
paid or accrued for services rendered 
6 by partners to the partnership,
whichever is greater; 
7 this subparagraph (H) is exempt from the provisions of 
8 Section 250;
9   (I) An amount equal to all amounts of income 
10 distributable to an entity
subject to the Personal 
11 Property Tax Replacement Income Tax imposed by

12 subsections (c) and (d) of Section 201 of this Act 
13 including amounts
distributable to organizations 
14 exempt from federal income tax by reason of
Section 
15 501(a) of the Internal Revenue Code; this subparagraph 
16 (I) is exempt from the provisions of Section 250;
17   (J) With the exception of any amounts subtracted 
18 under subparagraph
(G),
an amount equal to the sum of 
19 all amounts disallowed as deductions
by (i) Sections 
20 171(a) (2), and 265(2) of the Internal Revenue Code, 
21 and all amounts of expenses allocable to
interest and 
22 disallowed as deductions by Section 265(1) of the 
23 Internal
Revenue Code;
and (ii) for taxable years

24 ending on or after August 13, 1999, Sections
171(a)(2), 
25 265,
280C, and 832(b)(5)(B)(i) of the Internal Revenue 
26 Code, plus, (iii) for taxable years ending on or after 
 
 
HB5408- 82 -LRB098 20057 HLH 55300 b


1 December 31, 2011, Section 45G(e)(3) of the Internal 
2 Revenue Code and, for taxable years ending on or after 
3 December 31, 2008, any amount included in gross income 
4 under Section 87 of the Internal Revenue Code; the 
5 provisions of this
subparagraph are exempt from the 
6 provisions of Section 250;
7   (K) An amount equal to those dividends included in 
8 such total which were
paid by a corporation which 
9 conducts business operations in a River Edge 
10 Redevelopment Zone or zones created under the River 
11 Edge Redevelopment Zone Act and
conducts substantially 
12 all of its operations
from a River Edge Redevelopment 
13 Zone or zones. This subparagraph (K) is exempt from the 
14 provisions of Section 250;
15   (L) An amount equal to any contribution made to a 
16 job training project
established pursuant to the Real 
17 Property Tax Increment Allocation
Redevelopment Act;
18   (M) An amount equal to those dividends included in 
19 such total
that were paid by a corporation that 
20 conducts business operations in a
federally designated 
21 Foreign Trade Zone or Sub-Zone and that is designated a

22 High Impact Business located in Illinois; provided 
23 that dividends eligible
for the deduction provided in 
24 subparagraph (K) of paragraph (2) of this
subsection 
25 shall not be eligible for the deduction provided under 
26 this
subparagraph (M);
 
 
HB5408- 83 -LRB098 20057 HLH 55300 b


1   (N) An amount equal to the amount of the deduction 
2 used to compute the
federal income tax credit for 
3 restoration of substantial amounts held under
claim of 
4 right for the taxable year pursuant to Section 1341 of 
5 the
Internal Revenue Code;
6   (O) For taxable years 2001 and thereafter, for the 
7 taxable year in
which the bonus depreciation deduction

8 is taken on the taxpayer's federal income tax return 
9 under
subsection (k) of Section 168 of the Internal 
10 Revenue Code and for each
applicable taxable year 
11 thereafter, an amount equal to "x", where:
12    (1) "y" equals the amount of the depreciation 
13 deduction taken for the
taxable year
on the 
14 taxpayer's federal income tax return on property 
15 for which the bonus
depreciation deduction
was 
16 taken in any year under subsection (k) of Section 
17 168 of the Internal
Revenue Code, but not including 
18 the bonus depreciation deduction;
19    (2) for taxable years ending on or before 
20 December 31, 2005, "x" equals "y" multiplied by 30 
21 and then divided by 70 (or "y"
multiplied by 
22 0.429); and
23    (3) for taxable years ending after December 
24 31, 2005:
25     (i) for property on which a bonus 
26 depreciation deduction of 30% of the adjusted 
 
 
HB5408- 84 -LRB098 20057 HLH 55300 b


1 basis was taken, "x" equals "y" multiplied by 
2 30 and then divided by 70 (or "y"
multiplied by 
3 0.429); and
4     (ii) for property on which a bonus 
5 depreciation deduction of 50% of the adjusted 
6 basis was taken, "x" equals "y" multiplied by 
7 1.0.
8   The aggregate amount deducted under this 
9 subparagraph in all taxable
years for any one piece of 
10 property may not exceed the amount of the bonus

11 depreciation deduction
taken on that property on the 
12 taxpayer's federal income tax return under
subsection 
13 (k) of Section 168 of the Internal Revenue Code. This 
14 subparagraph (O) is exempt from the provisions of 
15 Section 250;
16   (P) If the taxpayer sells, transfers, abandons, or 
17 otherwise disposes of
property for which the taxpayer 
18 was required in any taxable year to make an
addition 
19 modification under subparagraph (D-5), then an amount 
20 equal to that
addition modification.
21   If the taxpayer continues to own property through 
22 the last day of the last tax year for which the 
23 taxpayer may claim a depreciation deduction for 
24 federal income tax purposes and for which the taxpayer 
25 was required in any taxable year to make an addition 
26 modification under subparagraph (D-5), then an amount 
 
 
HB5408- 85 -LRB098 20057 HLH 55300 b


1 equal to that addition modification.

2   The taxpayer is allowed to take the deduction under 
3 this subparagraph
only once with respect to any one 
4 piece of property.
5   This subparagraph (P) is exempt from the 
6 provisions of Section 250;
7   (Q) The amount of (i) any interest income (net of 
8 the deductions allocable thereto) taken into account 
9 for the taxable year with respect to a transaction with 
10 a taxpayer that is required to make an addition 
11 modification with respect to such transaction under 
12 Section 203(a)(2)(D-17), 203(b)(2)(E-12), 
13 203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed 
14 the amount of such addition modification and
(ii) any 
15 income from intangible property (net of the deductions 
16 allocable thereto) taken into account for the taxable 
17 year with respect to a transaction with a taxpayer that 
18 is required to make an addition modification with 
19 respect to such transaction under Section 
20 203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or 
21 203(d)(2)(D-8), but not to exceed the amount of such 
22 addition modification. This subparagraph (Q) is exempt 
23 from Section 250;

24   (R) An amount equal to the interest income taken 
25 into account for the taxable year (net of the 
26 deductions allocable thereto) with respect to 
 
 
HB5408- 86 -LRB098 20057 HLH 55300 b


1 transactions with (i) a foreign person who would be a 
2 member of the taxpayer's unitary business group but for 
3 the fact that the foreign person's business activity 
4 outside the United States is 80% or more of that 
5 person's total business activity and (ii) for taxable 
6 years ending on or after December 31, 2008, to a person 
7 who would be a member of the same unitary business 
8 group but for the fact that the person is prohibited 
9 under Section 1501(a)(27) from being included in the 
10 unitary business group because he or she is ordinarily 
11 required to apportion business income under different 
12 subsections of Section 304, but not to exceed the 
13 addition modification required to be made for the same 
14 taxable year under Section 203(d)(2)(D-7) for interest 
15 paid, accrued, or incurred, directly or indirectly, to 
16 the same person. This subparagraph (R) is exempt from 
17 Section 250; 
18   (S) An amount equal to the income from intangible 
19 property taken into account for the taxable year (net 
20 of the deductions allocable thereto) with respect to 
21 transactions with (i) a foreign person who would be a 
22 member of the taxpayer's unitary business group but for 
23 the fact that the foreign person's business activity 
24 outside the United States is 80% or more of that 
25 person's total business activity and (ii) for taxable 
26 years ending on or after December 31, 2008, to a person 
 
 
HB5408- 87 -LRB098 20057 HLH 55300 b


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

12   (T) For taxable years ending on or after December 
13 31, 2011, in the case of a taxpayer who was required to 
14 add back any insurance premiums under Section 
15 203(d)(2)(D-9), such taxpayer may elect to subtract 
16 that part of a reimbursement received from the 
17 insurance company equal to the amount of the expense or 
18 loss (including expenses incurred by the insurance 
19 company) that would have been taken into account as a 
20 deduction for federal income tax purposes if the 
21 expense or loss had been uninsured. If a taxpayer makes 
22 the election provided for by this subparagraph (T), the 
23 insurer to which the premiums were paid must add back 
24 to income the amount subtracted by the taxpayer 
25 pursuant to this subparagraph (T). This subparagraph 
26 (T) is exempt from the provisions of Section 250. 

 
 
HB5408- 88 -LRB098 20057 HLH 55300 b


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

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

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

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

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

5 applied under Section 172 of the Internal Revenue Code or 
6 under
subparagraph (E) of paragraph (2) of this subsection 
7 (e) applied in
conjunction with Section 172 of the Internal 
8 Revenue Code.
9  (2) Special rule. For purposes of paragraph (1) of this 
10 subsection,
the taxable income properly reportable for 
11 federal income tax purposes
shall mean:
12   (A) Certain life insurance companies. In the case 
13 of a life
insurance company subject to the tax imposed 
14 by Section 801 of the
Internal Revenue Code, life 
15 insurance company taxable income, plus the
amount of 
16 distribution from pre-1984 policyholder surplus 
17 accounts as
calculated under Section 815a of the 
18 Internal Revenue Code;
19   (B) Certain other insurance companies. In the case 
20 of mutual
insurance companies subject to the tax 
21 imposed by Section 831 of the
Internal Revenue Code, 
22 insurance company taxable income;
23   (C) Regulated investment companies. In the case of 
24 a regulated
investment company subject to the tax 
25 imposed by Section 852 of the
Internal Revenue Code, 
26 investment company taxable income;
 
 
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1   (D) Real estate investment trusts. In the case of a 
2 real estate
investment trust subject to the tax imposed 
3 by Section 857 of the
Internal Revenue Code, real 
4 estate investment trust taxable income;
5   (E) Consolidated corporations. In the case of a 
6 corporation which
is a member of an affiliated group of 
7 corporations filing a consolidated
income tax return 
8 for the taxable year for federal income tax purposes,

9 taxable income determined as if such corporation had 
10 filed a separate
return for federal income tax purposes 
11 for the taxable year and each
preceding taxable year 
12 for which it was a member of an affiliated group.
For 
13 purposes of this subparagraph, the taxpayer's separate 
14 taxable
income shall be determined as if the election 
15 provided by Section
243(b) (2) of the Internal Revenue 
16 Code had been in effect for all such years;
17   (F) Cooperatives. In the case of a cooperative 
18 corporation or
association, the taxable income of such 
19 organization determined in
accordance with the 
20 provisions of Section 1381 through 1388 of the
Internal 
21 Revenue Code, but without regard to the prohibition 
22 against offsetting losses from patronage activities 
23 against income from nonpatronage activities; except 
24 that a cooperative corporation or association may make 
25 an election to follow its federal income tax treatment 
26 of patronage losses and nonpatronage losses. In the 
 
 
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1 event such election is made, such losses shall be 
2 computed and carried over in a manner consistent with 
3 subsection (a) of Section 207 of this Act and 
4 apportioned by the apportionment factor reported by 
5 the cooperative on its Illinois income tax return filed 
6 for the taxable year in which the losses are incurred. 
7 The election shall be effective for all taxable years 
8 with original returns due on or after the date of the 
9 election. In addition, the cooperative may file an 
10 amended return or returns, as allowed under this Act, 
11 to provide that the election shall be effective for 
12 losses incurred or carried forward for taxable years 
13 occurring prior to the date of the election. Once made, 
14 the election may only be revoked upon approval of the 
15 Director. The Department shall adopt rules setting 
16 forth requirements for documenting the elections and 
17 any resulting Illinois net loss and the standards to be 
18 used by the Director in evaluating requests to revoke 
19 elections. Public Act 96-932 is declaratory of 
20 existing law; 
21   (G) Subchapter S corporations. In the case of: (i) 
22 a Subchapter S
corporation for which there is in effect 
23 an election for the taxable year
under Section 1362 of 
24 the Internal Revenue Code, the taxable income of such

25 corporation determined in accordance with Section 
26 1363(b) of the Internal
Revenue Code, except that 
 
 
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1 taxable income shall take into
account those items 
2 which are required by Section 1363(b)(1) of the

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

7 instead the prior federal Subchapter S rules as in 
8 effect on July 1, 1982,
the taxable income of such 
9 corporation determined in accordance with the
federal 
10 Subchapter S rules as in effect on July 1, 1982; and
11   (H) Partnerships. In the case of a partnership, 
12 taxable income
determined in accordance with Section 
13 703 of the Internal Revenue Code,
except that taxable 
14 income shall take into account those items which are

15 required by Section 703(a)(1) to be separately stated 
16 but which would be
taken into account by an individual 
17 in calculating his taxable income.
18  (3) Recapture of business expenses on disposition of 
19 asset or business. Notwithstanding any other law to the 
20 contrary, if in prior years income from an asset or 
21 business has been classified as business income and in a 
22 later year is demonstrated to be non-business income, then 
23 all expenses, without limitation, deducted in such later 
24 year and in the 2 immediately preceding taxable years 
25 related to that asset or business that generated the 
26 non-business income shall be added back and recaptured as 
 
 
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1 business income in the year of the disposition of the asset 
2 or business. Such amount shall be apportioned to Illinois 
3 using the greater of the apportionment fraction computed 
4 for the business under Section 304 of this Act for the 
5 taxable year or the average of the apportionment fractions 
6 computed for the business under Section 304 of this Act for 
7 the taxable year and for the 2 immediately preceding 
8 taxable years.


9 (f) Valuation limitation amount.
10  (1) In general. The valuation limitation amount 
11 referred to in
subsections (a) (2) (G), (c) (2) (I) and 
12 (d)(2) (E) is an amount equal to:
13   (A) The sum of the pre-August 1, 1969 appreciation 
14 amounts (to the
extent consisting of gain reportable 
15 under the provisions of Section
1245 or 1250 of the 
16 Internal Revenue Code) for all property in respect
of 
17 which such gain was reported for the taxable year; plus
18   (B) The lesser of (i) the sum of the pre-August 1, 
19 1969 appreciation
amounts (to the extent consisting of 
20 capital gain) for all property in
respect of which such 
21 gain was reported for federal income tax purposes
for 
22 the taxable year, or (ii) the net capital gain for the 
23 taxable year,
reduced in either case by any amount of 
24 such gain included in the amount
determined under 
25 subsection (a) (2) (F) or (c) (2) (H).
 
 
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1  (2) Pre-August 1, 1969 appreciation amount.
2   (A) If the fair market value of property referred 
3 to in paragraph
(1) was readily ascertainable on August 
4 1, 1969, the pre-August 1, 1969
appreciation amount for 
5 such property is the lesser of (i) the excess of
such 
6 fair market value over the taxpayer's basis (for 
7 determining gain)
for such property on that date 
8 (determined under the Internal Revenue
Code as in 
9 effect on that date), or (ii) the total gain realized 
10 and
reportable for federal income tax purposes in 
11 respect of the sale,
exchange or other disposition of 
12 such property.
13   (B) If the fair market value of property referred 
14 to in paragraph
(1) was not readily ascertainable on 
15 August 1, 1969, the pre-August 1,
1969 appreciation 
16 amount for such property is that amount which bears
the 
17 same ratio to the total gain reported in respect of the 
18 property for
federal income tax purposes for the 
19 taxable year, as the number of full
calendar months in 
20 that part of the taxpayer's holding period for the

21 property ending July 31, 1969 bears to the number of 
22 full calendar
months in the taxpayer's entire holding 
23 period for the
property.
24   (C) The Department shall prescribe such 
25 regulations as may be
necessary to carry out the 
26 purposes of this paragraph.

 
 
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1 (g) Double deductions. Unless specifically provided 
2otherwise, nothing
in this Section shall permit the same item 
3to be deducted more than once.

4 (h) Legislative intention. Except as expressly provided by 
5this
Section there shall be no modifications or limitations on 
6the amounts
of income, gain, loss or deduction taken into 
7account in determining
gross income, adjusted gross income or 
8taxable income for federal income
tax purposes for the taxable 
9year, or in the amount of such items
entering into the 
10computation of base income and net income under this
Act for 
11such taxable year, whether in respect of property values as of

12August 1, 1969 or otherwise.
13(Source: P.A. 96-45, eff. 7-15-09; 96-120, eff. 8-4-09; 96-198, 
14eff. 8-10-09; 96-328, eff. 8-11-09; 96-520, eff. 8-14-09; 
1596-835, eff. 12-16-09; 96-932, eff. 1-1-11; 96-935, eff. 
166-21-10; 96-1214, eff. 7-22-10; 97-333, eff. 8-12-11; 97-507, 
17eff. 8-23-11; 97-905, eff. 8-7-12.)