SB 2704 — INC TX-NONRESIDENT ATHLETES

(iii) "Duty days" for any person who joins a team during the period from the beginning of the professional athletic team’s official pre-season training period through the last game in which the team competes, or is scheduled to compete, shall begin on the day such person joins the team.

Conversely, duty days for any person who leaves a team during such period shall end on the day such person leaves the team.

Where a person switches teams during a taxable year, a separate duty-day calculation shall be made for the period the person was with each team.

(iv) Days for which a member of a professional athletic team is not compensated and is not performing services for the team in any manner, including days when such member of a professional athletic team has been suspended without pay and prohibited from performing any services for the team, shall not be treated as "duty days".

(v) Days for which a member of a professional athletic team is on the disabled list and does not conduct rehabilitation activities at facilities of the team and is not otherwise performing services for the team in Illinois, shall not be considered "duty days" spent in this State.

However, all days on the disabled list are considered to be included in total duty days spent both within and without this State.

(D) The term "total compensation for services SB2704 - 4 - LRB093 19455 BDD 45193 b performed as a member of a professional athletic team" means the total compensation received during the taxable year for services performed:

(i) from the beginning of the official preseason training period through the last game in which the team competes or is scheduled to compete during that taxable year;

and (ii) during the taxable year on a date that does not fall within the foregoing period (e.g., participation in instructional leagues, the "All Star Game," or promotional caravans).

The compensation includes, without limitation, salaries, wages, bonuses as described in subparagraph (iii) of this subparagraph (D), and any other type of compensation paid during the taxable year to a member of a professional athletic team for services performed in that year.

The compensation does not include strike benefits, severance pay, termination pay, contract or option year buy-out payments, expansion or relocation payments, or any other payments not related to services performed for the team.

(iii) for purposes of this subparagraph, "bonuses" included in "total compensation for services performed as a member of a professional athletic team" subject to the allocation described in Section 302(c)(1) are:

bonuses earned as a result of play (i.e., performance bonuses) during the season, including bonuses paid for championship, playoff or "bowl" games played by a team, or for selection to all-star league or other honorary positions;

and bonuses paid for signing a contract, unless the payment of the signing bonus is not conditional upon the signee playing any games for the team or performing any subsequent services for the team or even making the team, the SB2704 - 5 - LRB093 19455 BDD 45193 b signing bonus is payable separately from the salary and any other compensation, and the signing bonus is nonrefundable.

(4) Alternative methods.

It is presumed that application of the provisions of this subsection (d) will produce a fair and equitable apportionment of the compensation paid to a nonresident professional athlete.

If, however, it is demonstrated that the these provisions do not achieve a fair or equitable apportionment of compensation, then the Department may require a nonresident professional athlete to allocate or apportion his or her compensation under an alternative method, as long as the alternative method produces a fair and equitable apportionment.

In addition, a nonresident member of a professional athletic team may submit a petition for an alternative method to apportion his or her compensation where the nonresident professional athlete demonstrates that the general method provided under this subsection does not fairly or equitably apportion his or her compensation.

The proposed alternative method must be fully explained in the nonresident professional athlete’s Illinois nonresident personal income tax return.

(d) (c) Cross references.

(1) For allocation of amounts received by nonresidents from certain employee trusts, see Section 301(b)(2).

(2) For allocation of compensation by residents, see Section 301(a).

(Source:

P.A.

90-491, eff.

1-1-98;

91-239, eff.

1-1-00.) (35 ILCS 5/304) (from Ch.

120, par.

If a person other than a resident derives business income from this State and one or more other states, then, for tax years ending on or SB2704 - 6 - LRB093 19455 BDD 45193 b before December 30, 1998, and except as otherwise provided by this Section, such person’s business income shall be apportioned to this State by multiplying the income by a fraction, the numerator of which is the sum of the property factor (if any), the payroll factor (if any) and 200% of the sales factor (if any), and the denominator of which is 4 reduced by the number of factors other than the sales factor which have a denominator of zero and by an additional 2 if the sales factor has a denominator of zero.

(A) The property factor is a fraction, the numerator of which is the average value of the person’s real and tangible personal property owned or rented and used in the trade or business in this State during the taxable year and SB2704 Engrossed - 2 - LRB093 19455 BDD 45193 b the denominator of which is the average value of all the person’s real and tangible personal property owned or rented and used in the trade or business during the taxable year.

SB2704 - 7 - LRB093 19455 BDD 45193 b (A) The payroll factor is a fraction, the numerator of which is the total amount paid in this State during the taxable year by the person for compensation, and the denominator of which is the total compensation paid everywhere during the taxable year.

(iv)SB2704 TheEngrossed compensation- paid3 to- aLRB093 nonresident19455 professionalBDD athlete45193 shallb be(iv) assignedCompensation paid to thisnonresident Stateprofessional underathletes. subsection (c) of Section 302.

(a) General.

The Illinois source income of a nonresident individual who is a member of a professional athletic team includes the portion of the individual’s total compensation for services performed as a member of a professional athletic team during the taxable year which the number of duty days spent within this State performing services for the team in any manner during the taxable year bears to the total number of duty days spent both within and without this State during the taxable year.

(b) Travel days.

Travel days that do not involve either a game, practice, team meeting, or other similar team event are not considered duty days spent in this State.

However, such travel days are considered in the total duty days spent both within and without this State.

(c) Definitions.

For purposes of this subpart (iv):

(1) The term "professional athletic team" includes, but is not limited to, any professional baseball, basketball, football, soccer, or hockey team.

(2) The term "member of a professional athletic team" includes those employees who are active players, players on the disabled list, and any other persons required to travel and who travel with and perform services on behalf of a professional athletic team on a regular basis.

This includes, but is not limited to, coaches, managers, and trainers.

(3) Except as provided in items (C) and (D) of this subpart (3), the term "duty days" means all days during the taxable year from the beginning of the professional athletic team’s official SB2704 Engrossed - 4 - LRB093 19455 BDD 45193 b pre-season training period through the last game in which the team competes or is scheduled to compete.

Duty days shall be counted for the year in which they occur, including where a team’s official pre-season training period through the last game in which the team competes or is scheduled to compete, occurs during more than one tax year.

(A) Duty days shall also include days on which a member of a professional athletic team performs service for a team on a date that does not fall within the foregoing period (e.g., participation in instructional leagues, the "All Star Game," or promotional "caravans").

Performing a service for a professional athletic team includes conducting training and rehabilitation activities, when such activities are conducted at team facilities.

(B) Also included in duty days are game days, practice days, days spent at team meetings, promotional caravans, preseason training camps, and days served with the team through all post-season games in which the team competes or is scheduled to compete.

(C) Duty days for any person who joins a team during the period from the beginning of the professional athletic team’s official pre-season training period through the last game in which the team competes, or is scheduled to compete, shall begin on the day that person joins the team.

Conversely, duty days for any person who leaves a team during this period shall end on the day that person leaves the team.

Where a person switches teams during a taxable year, a separate duty-day calculation shall be made for the period the SB2704 Engrossed - 5 - LRB093 19455 BDD 45193 b person was with each team.

(D) Days for which a member of a professional athletic team is not compensated and is not performing services for the team in any manner, including days when such member of a professional athletic team has been suspended without pay and prohibited from performing any services for the team, shall not be treated as duty days.

(E) Days for which a member of a professional athletic team is on the disabled list and does not conduct rehabilitation activities at facilities of the team, and is not otherwise performing services for the team in Illinois, shall not be considered duty days spent in this State.

All days on the disabled list, however, are considered to be included in total duty days spent both within and without this State.

(4) The term "total compensation for services performed as a member of a professional athletic team" means the total compensation received during the taxable year for services performed:

(A) from the beginning of the official preseason training period through the last game in which the team competes or is scheduled to compete during that taxable year;

and (B) during the taxable year on a date which does not fall within the foregoing period (e.g., participation in instructional leagues, the "All Star Game," or promotional caravans).

This compensation shall include, but is not limited to, salaries, wages, bonuses as described in this subpart, and any other type of compensation paid during the taxable year to a member of a professional athletic team for services performed SB2704 Engrossed - 6 - LRB093 19455 BDD 45193 b in that year.

This compensation does not include strike benefits, severance pay, termination pay, contract or option year buy-out payments, expansion or relocation payments, or any other payments not related to services performed for the team.

For purposes of this subparagraph, "bonuses" included in "total compensation for services performed as a member of a professional athletic team" subject to the allocation described in Section 302(c)(1) are:

bonuses earned as a result of play (i.e., performance bonuses) during the season, including bonuses paid for championship, playoff or "bowl" games played by a team, or for selection to all-star league or other honorary positions;

and bonuses paid for signing a contract, unless the payment of the signing bonus is not conditional upon the signee playing any games for the team or performing any subsequent services for the team or even making the team, the signing bonus is payable separately from the salary and any other compensation, and the signing bonus is nonrefundable.

(A) The sales factor is a fraction, the numerator of which is the total sales of the person in this State during the taxable year, and the denominator of which is the total SB2704 Engrossed - 87 - LRB093 19455 BDD 45193 b sales of the person everywhere during the taxable year.

(I) A patent is utilized in a state to the extent that it is employed in production, fabrication, manufacturing, or other processing in the state or to the extent that a patented product SB2704 Engrossed - 98 - LRB093 19455 BDD 45193 b is produced in the state.

(B-2) Gross receipts from the license, sale, or other disposition of patents, copyrights, trademarks, and similar items of intangible personal property may be included in the numerator or denominator of the sales SB2704 Engrossed - 109 - LRB093 19455 BDD 45193 b factor only if gross receipts from licenses, sales, or other disposition of such items comprise more than 50% of the taxpayer’s total gross receipts included in gross income during the tax year and during each of the 2 immediately preceding tax years;

provided that, if a taxpayer’s Illinois income tax liability for any tax year, as assessed under Section 903 prior to January 1, 1999, was computed in a manner contrary to the provisions of paragraphs (B-1) or (B-2), no refund shall be payable to SB2704 Engrossed - 1110 - LRB093 19455 BDD 45193 b the taxpayer for that tax year to the extent such refund is the result of applying the provisions of paragraph (B-1) or (B-2) retroactively.

For purposes of this paragraph, premiums SB2704 Engrossed - 1211 - LRB093 19455 BDD 45193 b written for reinsurance accepted in respect of property or risk in this State, whether or not otherwise determinable, may, at the election of the company, be determined on the basis of the proportion which premiums written for reinsurance accepted from companies commercially domiciled in Illinois bears to premiums written for reinsurance accepted from all sources, or, alternatively, in the proportion which the sum of the direct premiums written for insurance upon property or risk in this State by each ceding company from which reinsurance is accepted bears to the sum of the total direct premiums written by each such ceding company for the taxable year.

and (E) Any other gross income resulting from the operation as a financial organization within this SB2704 Engrossed - 1312 - LRB093 19455 BDD 45193 b State.

The average aggregate, determined on a quarterly basis, of the financial organization’s loans to banks in foreign countries, to foreign domiciled borrowers (except where secured primarily by real estate) and to foreign governments and other foreign official institutions, as reported for its branches, agencies and offices within the state on its "Consolidated Report of Condition", Schedule A, Lines 2.c., 5.b., and 7.a., which was filed with the Federal Deposit Insurance Corporation and other regulatory authorities, for the year 1980, minus The average aggregate, determined on a quarterly basis, of such loans (other than loans of an international banking facility), as reported by the financial institution for its branches, SB2704 Engrossed - 1413 - LRB093 19455 BDD 45193 b agencies and offices within the state, on the corresponding Schedule and lines of the Consolidated Report of Condition for the current taxable year, provided, however, that in no case shall the amount determined in this clause (the subtrahend) exceed the amount determined in the preceding clause (the minuend);

(1) Such business income (other than that derived from SB2704 Engrossed - 1514 - LRB093 19455 BDD 45193 b transportation by pipeline) shall be apportioned to this State by multiplying such income by a fraction, the numerator of which is the revenue miles of the person in this State, and the denominator of which is the revenue miles of the person everywhere.

SB2704 Engrossed - 1615 - LRB093 19455 BDD 45193 b (f) Alternative allocation.

SB2704 Engrossed - 1716 - LRB093 19455 BDD 45193 b (Source:

Any amount of SB2704 Engrossed - 1817 - LRB093 19455 BDD 45193 b estimated tax paid by a taxpayer pursuant to Article 8 for a taxable year shall be deemed to have been paid on account of the tax imposed by this Act for such taxable year.

If the net income of a taxpayer includes amounts included in his base income by reason of Section 668 or 669 of the Internal Revenue Code (relating to accumulation and capital gain distributions by a trust, respectively), the tax imposed on such taxpayer by this Act shall be credited with his pro rata portion of the taxes imposed by this Act on such trust for preceding taxable years which would not SB2704 Engrossed - 1918 - LRB093 19455 BDD 45193 b have been payable for such preceding years if the trust had in fact made distributions to its beneficiaries at the times and in the amounts specified in Sections 666 and 669 of the Internal Revenue Code.

8-21-02.) Section 99.

Effective date.

This Act takes effect upon becoming law.