SB 2017 — INC TX-ABLE CONTRIBUTIONS

*LRB10009276HLH21584b* SB2017 100THEngrossed GENERALLRB100 ASSEMBLY09276 StateHLH of21584 Illinoisb andAN 2018ACT SB2017concerning Introducedrevenue. 2/10/2017, by Sen.

Dan McConchie SYNOPSIS AS INTRODUCED:

ILCS 5/203 from Ch.

120, par.

2-203 Amends the Illinois Income Tax Act.

Creates a deduction in an amount equal to the amount contributed by taxpayer during the taxable year to an ABLE account.

Provides that the deduction shall not exceed $10,000 per taxpayer in any taxable year.

Provides that the deduction is exempt from the Act's automatic sunset provision.

Effective immediately.

LRB100 09276 HLH 21584 b FISCAL NOTE ACT MAY APPLY A BILL FOR SB2017 LRB100 09276 HLH 21584 b AN ACT concerning revenue.

(B) An amount equal to the amount of tax imposed by SB2017 Engrossed - 2 - LRB100 09276 HLH 21584 b this Act to the extent deducted from gross income in the computation of adjusted gross income for the taxable year;

(D-5) An amount, to the extent not included in adjusted gross income, equal to the amount of money withdrawn by the taxpayer in the taxable year from a medical care savings account and the interest earned on the account in the taxable year of a withdrawal pursuant to subsection (b) of Section 20 of the Medical Care Savings Account Act or subsection (b) of Section SB2017 Engrossed - 3 - LRB100 09276 HLH 21584 b 20 of the Medical Care Savings Account Act of 2000;

The taxpayer is required to make the addition SB2017 Engrossed - 4 - LRB100 09276 HLH 21584 b modification under this subparagraph only once with respect to any one piece of property;

The addition modification required by this subparagraph shall be reduced to the extent that dividends were included in base income of the unitary group for the same taxable year and received by the taxpayer or by a member of the taxpayer's unitary business group (including amounts included in gross income under Sections 951 through 964 of the Internal Revenue Code and amounts included in gross income under Section 78 of the Internal Revenue SB2017 Engrossed - 5 - LRB100 09276 HLH 21584 b Code) with respect to the stock of the same person to whom the interest was paid, accrued, or incurred.

or (iii) the taxpayer can establish, based on clear and convincing evidence, that the interest SB2017 Engrossed - 6 - LRB100 09276 HLH 21584 b paid, accrued, or incurred relates to a contract or agreement entered into at arm's-length rates and terms and the principal purpose for the payment is not federal or Illinois tax avoidance;

(D-18) An amount equal to the amount of intangible expenses and costs otherwise allowed as a deduction in computing base income, and that were paid, accrued, or incurred, directly or indirectly, (i) for taxable years ending on or after December 31, 2004, to a foreign person who would be a member of the same SB2017 Engrossed - 7 - LRB100 09276 HLH 21584 b unitary business group but for the fact that the foreign person's business activity outside the United States is 80% or more of that person's total business activity and (ii) for taxable years ending on or after December 31, 2008, to a person who would be a member of the same unitary business group but for the fact that the person is prohibited under Section 1501(a)(27) from being included in the unitary business group because he or she is ordinarily required to apportion business income under different subsections of Section 304.

As used in this subparagraph, the term "intangible expenses and costs" SB2017 Engrossed - 8 - LRB100 09276 HLH 21584 b includes (1) expenses, losses, and costs for, or related to, the direct or indirect acquisition, use, maintenance or management, ownership, sale, exchange, or any other disposition of intangible property;

SB2017 Engrossed - 9 - LRB100 09276 HLH 21584 b (a) the person during the same taxable year paid, accrued, or incurred, the intangible expense or cost to a person that is not a related member, and (b) the transaction giving rise to the intangible expense or cost between the taxpayer and the person did not have as a principal purpose the avoidance of Illinois income tax, and is paid pursuant to a contract or agreement that reflects arm's-length terms;

Nothing in this subsection shall preclude the Director from making any other adjustment otherwise allowed under Section 404 of this Act for any tax year beginning after the effective date of this amendment provided such adjustment is made pursuant to regulation adopted by the Department and such regulations provide methods and standards SB2017 Engrossed - 10 - LRB100 09276 HLH 21584 b by which the Department will utilize its authority under Section 404 of this Act;

The preceding sentence does not apply to the extent that the same dividends caused a reduction to the addition SB2017 Engrossed - 11 - LRB100 09276 HLH 21584 b modification required under Section 203(a)(2)(D-17) or Section 203(a)(2)(D-18) of this Act.

For taxable years beginning on or after January 1, 2007, in the case of a distribution from a qualified tuition program under Section 529 of the Internal Revenue Code, other than (i) a distribution from a College Savings Pool created under Section 16.5 of the State Treasurer Act, (ii) a distribution from the Illinois Prepaid Tuition Trust Fund, or (iii) a distribution from a qualified tuition program under Section 529 of the Internal Revenue Code that (I) adopts and determines that its offering materials comply with the College Savings Plans Network's disclosure principles and (II) has made reasonable efforts to inform in-state residents of the existence of in-state qualified tuition programs by informing Illinois residents directly and, where applicable, to SB2017 Engrossed - 12 - LRB100 09276 HLH 21584 b inform financial intermediaries distributing the program to inform in-state residents of the existence of in-state qualified tuition programs at least annually, an amount equal to the amount excluded from gross income under Section 529(c)(3)(B).

(D-22) For taxable years beginning on or after January 1, 2009, in the case of a nonqualified SB2017 Engrossed - 13 - LRB100 09276 HLH 21584 b withdrawal or refund of moneys from a qualified tuition program under Section 529 of the Internal Revenue Code administered by the State that is not used for qualified expenses at an eligible education institution, an amount equal to the contribution component of the nonqualified withdrawal or refund that was previously deducted from base income under subsection (a)(2)(y) of this Section, provided that the withdrawal or refund did not result from the beneficiary's death or disability;

(E) For taxable years ending before December 31, 2001, any amount included in such total in respect of any compensation (including but not limited to any compensation paid or accrued to a serviceman while a prisoner of war or missing in action) paid to a resident by reason of being on active duty in the Armed Forces of the United States and in respect of any compensation paid or accrued to a resident who as a governmental employee was a prisoner of war or missing in action, and in respect of any compensation paid to a SB2017 Engrossed - 14 - LRB100 09276 HLH 21584 b resident in 1971 or thereafter for annual training performed pursuant to Sections 502 and 503, Title 32, United States Code as a member of the Illinois National Guard or, beginning with taxable years ending on or after December 31, 2007, the National Guard of any other state.

(F) An amount equal to all amounts included in such total pursuant to the provisions of Sections 402(a), 402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the Internal Revenue Code, or included in such total as distributions under the provisions of any retirement SB2017 Engrossed - 15 - LRB100 09276 HLH 21584 b or disability plan for employees of any governmental agency or unit, or retirement payments to retired partners, which payments are excluded in computing net earnings from self employment by Section 1402 of the Internal Revenue Code and regulations adopted pursuant thereto;

(K) An amount equal to those dividends included in such total that were paid by a corporation that conducts business operations in a federally designated SB2017 Engrossed - 16 - LRB100 09276 HLH 21584 b Foreign Trade Zone or Sub-Zone and that is designated a High Impact Business located in Illinois;

the provisions of this subparagraph are exempt from the SB2017 Engrossed - 17 - LRB100 09276 HLH 21584 b provisions of Section 250;

SB2017 Engrossed - 18 - LRB100 09276 HLH 21584 b (R) An amount equal to the amount of any federal or State bonus paid to veterans of the Persian Gulf War;

(V) Beginning with tax years ending on or after December 31, 1995 and ending with tax years ending on or before December 31, 2004, an amount equal to the SB2017 Engrossed - 19 - LRB100 09276 HLH 21584 b amount paid by a taxpayer who is a self-employed taxpayer, a partner of a partnership, or a shareholder in a Subchapter S corporation for health insurance or long-term care insurance for that taxpayer or that taxpayer's spouse or dependents, to the extent that the amount paid for that health insurance or long-term care insurance may be deducted under Section 213 of the Internal Revenue Code, has not been deducted on the federal income tax return of the taxpayer, and does not exceed the taxable income attributable to that taxpayer's income, self-employment income, or Subchapter S corporation income;

(W) For taxable years beginning on or after January 1, 1998, all amounts included in the taxpayer's federal SB2017 Engrossed - 20 - LRB100 09276 HLH 21584 b gross income in the taxable year from amounts converted from a regular IRA to a Roth IRA.

provided, further, this paragraph shall SB2017 Engrossed - 21 - LRB100 09276 HLH 21584 b only apply to a taxpayer who was the first recipient of such assets after their recovery and who is a victim of persecution for racial or religious reasons by Nazi Germany or any other Axis regime or as an heir of the victim.

For purposes SB2017 Engrossed - 22 - LRB100 09276 HLH 21584 b of this subparagraph, contributions made by an employer on behalf of an employee, or matching contributions made by an employee, shall be treated as made by the employee.

(i) for property on which a bonus depreciation deduction of 30% of the adjusted SB2017 Engrossed - 23 - LRB100 09276 HLH 21584 b basis was taken, "x" equals "y" multiplied by 30 and then divided by 70 (or "y" multiplied by 0.429);

If the taxpayer continues to own property through the last day of the last tax year for which the taxpayer may claim a depreciation deduction for federal income tax purposes and for which the taxpayer was required in any taxable year to make an addition modification under subparagraph (D-15), then an amount SB2017 Engrossed - 24 - LRB100 09276 HLH 21584 b equal to that addition modification.

SB2017 Engrossed - 25 - LRB100 09276 HLH 21584 b (DD) An amount equal to the interest income taken into account for the taxable year (net of the deductions allocable thereto) with respect to transactions with (i) a foreign person who would be a member of the taxpayer's unitary business group but for the fact that the foreign person's business activity outside the United States is 80% or more of that person's total business activity and (ii) for taxable years ending on or after December 31, 2008, to a person who would be a member of the same unitary business group but for the fact that the person is prohibited under Section 1501(a)(27) from being included in the unitary business group because he or she is ordinarily required to apportion business income under different subsections of Section 304, but not to exceed the addition modification required to be made for the same taxable year under Section 203(a)(2)(D-17) for interest paid, accrued, or incurred, directly or indirectly, to the same person.

(EE) An amount equal to the income from intangible property taken into account for the taxable year (net of the deductions allocable thereto) with respect to transactions with (i) a foreign person who would be a member of the taxpayer's unitary business group but for the fact that the foreign person's business activity SB2017 Engrossed - 26 - LRB100 09276 HLH 21584 b outside the United States is 80% or more of that person's total business activity and (ii) for taxable years ending on or after December 31, 2008, to a person who would be a member of the same unitary business group but for the fact that the person is prohibited under Section 1501(a)(27) from being included in the unitary business group because he or she is ordinarily required to apportion business income under different subsections of Section 304, but not to exceed the addition modification required to be made for the same taxable year under Section 203(a)(2)(D-18) for intangible expenses and costs paid, accrued, or incurred, directly or indirectly, to the same foreign person.

and (GG) For taxable years ending on or after December 31, 2011, in the case of a taxpayer who was required to add back any insurance premiums under Section 203(a)(2)(D-19), such taxpayer may elect to subtract that part of a reimbursement received from the SB2017 Engrossed - 27 - LRB100 09276 HLH 21584 b insurance company equal to the amount of the expense or loss (including expenses incurred by the insurance company) that would have been taken into account as a deduction for federal income tax purposes if the expense or loss had been uninsured.

The taxable income referred to in paragraph (1) shall be modified by adding thereto the sum SB2017 Engrossed - 28 - LRB100 09276 HLH 21584 b of the following amounts:

(E) For taxable years in which a net operating loss carryback or carryforward from a taxable year ending prior to December 31, 1986 is an element of taxable SB2017 Engrossed - 29 - LRB100 09276 HLH 21584 b income under paragraph (1) of subsection (e) or subparagraph (E) of paragraph (2) of subsection (e), the amount by which addition modifications other than those provided by this subparagraph (E) exceeded subtraction modifications in such earlier taxable year, with the following limitations applied in the order that they are listed:

For taxable years in which there is a net operating loss carryback or carryforward from more than one other taxable year ending prior to December 31, 1986, the addition modification provided in this subparagraph (E) shall be the sum of the amounts computed independently under the preceding provisions of this SB2017 Engrossed - 30 - LRB100 09276 HLH 21584 b subparagraph (E) for each such taxable year;

The taxpayer is required to make the addition SB2017 Engrossed - 31 - LRB100 09276 HLH 21584 b modification under this subparagraph only once with respect to any one piece of property;