HB 709 — INC TX-DEPRECIATION

*LRB09408094BDD38278b* HB0709 94THEngrossed GENERALLRB094 ASSEMBLY08094 StateBDD of38278 Illinoisb andAN 2006ACT HB0709concerning Introducedrevenue. 02/01/05, by Rep.

William B.

Black SYNOPSIS AS INTRODUCED:

ILCS 5/203 from Ch.

120, par.

2-203 calculating the deduction for the depreciation of property for which a bonus depreciation deduction was taken from the taxpayer’s federal adjusted gross income.

Effective immediately.

LRB094 08094 BDD 38278 b FISCAL NOTE ACT MAY APPLY A BILL FOR HB0709 LRB094 08094 BDD 38278 b AN ACT concerning revenue.

(C) An amount equal to the amount received during the taxable year as a recovery or refund of real property taxes paid with respect to the taxpayer’s principal residence under the Revenue Act of 1939 and for which a deduction was previously taken under subparagraph (L) of this paragraph (2) prior to July 1, HB0709 Engrossed - 2 - LRB094 08094 BDD 38278 b 1991, the retrospective application date of Article 4 of Public Act 87-17.

(D-16) If the taxpayer reports a capital gain or loss on the taxpayer’s federal income tax return for the taxable year based on a sale or transfer of property for which the taxpayer was required in any taxable year to make an addition modification under subparagraph (D-15), then an amount equal to the aggregate amount of the deductions taken in all taxable HB0709 Engrossed - 3 - LRB094 08094 BDD 38278 b years under subparagraph (Z) with respect to that property.

HB0709 Engrossed - 4 - LRB094 08094 BDD 38278 b (a) the foreign person, during the same taxable year, paid, accrued, or incurred, the interest to a person that is not a related member, and (b) the transaction giving rise to the interest expense between the taxpayer and the foreign 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 an arm’s-length interest rate and terms;

(D-18) For taxable years ending on or after December 31, 2004, an amount equal to the amount of HB0709 Engrossed - 5 - LRB094 08094 BDD 38278 b intangible expenses and costs otherwise allowed as a deduction in computing base income, and that were paid, accrued, or incurred, directly or indirectly, to a foreign person who would be a member of the same 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.

HB0709 Engrossed - 6 - LRB094 08094 BDD 38278 b This paragraph shall not apply to the following:

Nothing in this subsection shall preclude the Director from making any other adjustment otherwise allowed under Section 404 of this Act for HB0709 Engrossed - 7 - LRB094 08094 BDD 38278 b 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 by which the Department will utilize its authority under Section 404 of this Act;

For taxable years ending on or after 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 a member of any component HB0709 Engrossed - 8 - LRB094 08094 BDD 38278 b of 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 resident in 2001 or thereafter by reason of being a member of the Illinois National Guard.

(K) An amount equal to those dividends included in such total that were paid by a corporation that HB0709 Engrossed - 9 - LRB094 08094 BDD 38278 b conducts business operations in a federally designated Foreign Trade Zone or Sub-Zone and that is designated a High Impact Business located in Illinois;

(O) An amount equal to any contribution made to a job training project established pursuant to the Tax HB0709 Engrossed - 10 - LRB094 08094 BDD 38278 b Increment Allocation Redevelopment Act;

(V) Beginning with tax years ending on or after December 31, 1995 and ending with tax years ending on HB0709 Engrossed - 11 - LRB094 08094 BDD 38278 b or before December 31, 2004, an amount equal to the 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 of 1986, 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;

(X) For taxable year 1999 and thereafter, an amount equal to the amount of any (i) distributions, to the extent includible in gross income for federal income tax purposes, made to the taxpayer because of his or her status as a victim of persecution for racial or religious reasons by Nazi Germany or any other Axis HB0709 Engrossed - 12 - LRB094 08094 BDD 38278 b regime or as an heir of the victim and (ii) items of income, to the extent includible in gross income for federal income tax purposes, attributable to, derived from or in any way related to assets stolen from, hidden from, or otherwise lost to a victim of persecution for racial or religious reasons by Nazi Germany or any other Axis regime immediately prior to, during, and immediately after World War II, including, but not limited to, interest on the proceeds receivable as insurance under policies issued to a victim of persecution for racial or religious reasons by Nazi Germany or any other Axis regime by European insurance companies immediately prior to and during World War II;

For taxable years beginning on or after January 1, 2005, a maximum HB0709 Engrossed - 13 - LRB094 08094 BDD 38278 b of $10,000 contributed in the taxable year to (i) a College Savings Pool account under Section 16.5 of the State Treasurer Act or (ii) the Illinois Prepaid Tuition Trust Fund, except that amounts excluded from gross income under Section 529(c)(3)(C)(i) of the Internal Revenue Code shall not be considered moneys contributed under this subparagraph (Y).

The aggregate amount deducted under this subparagraph in all taxable years for any one piece of property may not exceed the amount of the bonus depreciation deduction (30% of the adjusted basis of the qualified property) taken on that property on the HB0709 Engrossed - 14 - LRB094 08094 BDD 38278 b taxpayer’s federal income tax return under subsection (k) of Section 168 of the Internal Revenue Code;

(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 a foreign person who would be a member of the taxpayer’s unitary business group but for HB0709 Engrossed - 15 - LRB094 08094 BDD 38278 b the fact that the foreign person’s business activity outside the United States is 80% or more of that person’s total business activity, 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 foreign person;

HB0709 Engrossed - 16 - LRB094 08094 BDD 38278 b (C) In the case of a regulated investment company, an amount equal to the excess of (i) the net long-term capital gain for the taxable year, over (ii) the amount of the capital gain dividends designated as such in accordance with Section 852(b)(3)(C) of the Internal Revenue Code and any amount designated under Section 852(b)(3)(D) of the Internal Revenue Code, attributable to the taxable year (this amendatory Act of 1995 (Public Act 89-89) is declarative of existing law and is not a new enactment);

(i) the addition modification relating to the net operating loss carried back or forward to the taxable year from any taxable year ending prior to December 31, 1986 shall be reduced by the amount of addition modification under this subparagraph (E) which related to that net operating loss and which was taken into account in calculating the base income of an earlier taxable year, and (ii) the addition modification relating to the net operating loss carried back or forward to the taxable year from any taxable year ending prior to December 31, 1986 shall not exceed the amount of HB0709 Engrossed - 17 - LRB094 08094 BDD 38278 b such carryback or carryforward;

(E-12) For taxable years ending on or after December 31, 2004, an amount equal to the amount otherwise allowed as a deduction in computing base income for interest paid, accrued, or incurred, directly or indirectly, to a foreign person who would HB0709 Engrossed - 18 - LRB094 08094 BDD 38278 b be a member of the same unitary business group but for the fact the foreign person’s business activity outside the United States is 80% or more of the foreign person’s total business activity.

(a) the foreign person, during the same taxable year, paid, accrued, or incurred, the interest to a person that is not a related member, and (b) the transaction giving rise to the interest expense between the taxpayer and the foreign person did not have as a principal purpose the avoidance of Illinois income tax, and is paid pursuant to a contract or agreement HB0709 Engrossed - 19 - LRB094 08094 BDD 38278 b that reflects an arm’s-length interest rate and terms;

The addition modification required by this subparagraph shall be reduced to the extent that HB0709 Engrossed - 20 - LRB094 08094 BDD 38278 b 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 pursuant to Sections 951 through 964 of the Internal Revenue Code and amounts included in gross income under Section 78 of the Internal Revenue Code) with respect to the stock of the same person to whom the intangible expenses and costs were directly or indirectly paid, incurred, or accrued.

or (ii) any item of intangible expense or cost HB0709 Engrossed - 21 - LRB094 08094 BDD 38278 b paid, accrued, or incurred, directly or indirectly, if the taxpayer can establish, based on a preponderance of the evidence, both of the following:

(F) An amount equal to the amount of any tax HB0709 Engrossed - 22 - LRB094 08094 BDD 38278 b imposed by this Act which was refunded to the taxpayer and included in such total for the taxable year;

(K) An amount equal to those dividends included in such total which were paid by a corporation which conducts business operations in an Enterprise Zone or zones created under the Illinois Enterprise Zone Act HB0709 Engrossed - 23 - LRB094 08094 BDD 38278 b and conducts substantially all of its operations in an Enterprise Zone or zones;

(M-1) For any taxpayer that is a financial organization within the meaning of Section 304(c) of this Act, an amount included in such total as interest income from a loan or loans made by such taxpayer to a borrower, to the extent that such a loan is secured by HB0709 Engrossed - 24 - LRB094 08094 BDD 38278 b property which is eligible for the High Impact Business Investment Credit.

(i) 85% for taxable years ending on or before December 31, 1992, or, a percentage equal to the percentage allowable under Section 243(a)(1) of the Internal Revenue Code of 1986 for taxable years ending after December 31, 1992, of the amount by which dividends included in taxable income and received from a corporation that is not created or organized under the laws of the United States or any HB0709 Engrossed - 25 - LRB094 08094 BDD 38278 b state or political subdivision thereof, including, for taxable years ending on or after December 31, 1988, dividends received or deemed received or paid or deemed paid under Sections 951 through 964 of the Internal Revenue Code, exceed the amount of the modification provided under subparagraph (G) of paragraph (2) of this subsection (b) which is related to such dividends;

835, an amount equal to the excess, if any, of the amounts paid or incurred by that interinsurer or reciprocal insurer in the taxable year to the attorney-in-fact over the deduction allowed to that interinsurer or reciprocal insurer with respect HB0709 Engrossed - 26 - LRB094 08094 BDD 38278 b to the attorney-in-fact under Section 835(b) of the Internal Revenue Code for the taxable year;

The aggregate amount deducted under this subparagraph in all taxable years for any one piece of HB0709 Engrossed - 27 - LRB094 08094 BDD 38278 b property may not exceed the amount of the bonus depreciation deduction (30% of the adjusted basis of the qualified property) taken on that property on the taxpayer’s federal income tax return under subsection (k) of Section 168 of the Internal Revenue Code;

(W) 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 a foreign person who would be a member of the taxpayer’s unitary business group but for HB0709 Engrossed - 28 - LRB094 08094 BDD 38278 b the fact that the foreign person’s business activity outside the United States is 80% or more of that person’s total business activity, but not to exceed the addition modification required to be made for the same taxable year under Section 203(b)(2)(E-12) for interest paid, accrued, or incurred, directly or indirectly, to the same foreign person;

(A) An amount equal to all amounts paid or accrued to the taxpayer as interest or dividends during the taxable year to the extent excluded from gross income HB0709 Engrossed - 29 - LRB094 08094 BDD 38278 b in the computation of taxable income;

(i) the addition modification relating to the net operating loss carried back or forward to the taxable year from any taxable year ending prior to December 31, 1986 shall be reduced by the amount of addition modification under this subparagraph (E) which related to that net operating loss and which was taken into account in calculating the base income of an earlier taxable year, and (ii) the addition modification relating to the net operating loss carried back or forward to the taxable year from any taxable year ending prior to December 31, 1986 shall not exceed the amount of HB0709 Engrossed - 30 - LRB094 08094 BDD 38278 b such carryback or carryforward;

and (G-11) If the taxpayer reports a capital gain or loss on the taxpayer’s federal income tax return for the taxable year based on a sale or transfer of property for which the taxpayer was required in any taxable year to make an addition modification under subparagraph (G-10), then an amount equal to the aggregate amount of the deductions taken in all taxable HB0709 Engrossed - 31 - LRB094 08094 BDD 38278 b years under subparagraph (R) with respect to that property.

or (ii) an item of interest paid, accrued, or incurred, directly or indirectly, to a foreign person if the taxpayer can establish, based on a preponderance of the evidence, both of the HB0709 Engrossed - 32 - LRB094 08094 BDD 38278 b following:

(G-13) For taxable years ending on or after HB0709 Engrossed - 33 - LRB094 08094 BDD 38278 b December 31, 2004, 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, to a foreign person who would be a member of the same 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.