HB 4454 — INC TX-ACCOUNTING

*LRB09516946BDD42991b* HB4454 95THEngrossed GENERALLRB095 ASSEMBLY16946 StateBDD of42991 Illinoisb andAN 2008ACT HB4454concerning byrevenue. Rep.

Mark H.

Beaubien, Jr.

- Barbara Flynn Currie SYNOPSIS AS INTRODUCED:

ILCS 5/404 from Ch.

120, par.

4-404 Amends the Illinois Income Tax Act.

In a Section authorizing the Director of Revenue to make certain adjustments to base income if it appears to the Director that any agreement, understanding, or arrangement exists between any persons that causes any person’s base income allocable to this State to be improperly or inaccurately reflected, limits the provision to non-business income and provides that the Director may not make these adjustment before the Department of Revenue adopts rules concerning the adjustments.

Provides that, unless the principal purpose of the agreement, understanding, or arrangement is for the avoidance of federal or Illinois income tax, any adjustment made by the Director and the rules required to be adopted must be in accordance with certain provisions of the Internal Revenue Code.

Effective immediately.

LRB095 16946 BDD 42991 b FISCAL NOTE ACT MAY APPLY A BILL FOR HB4454 LRB095 16946 BDD 42991 b AN ACT concerning revenue.

(a) If it appears to the Director determines that any agreement, understanding or arrangement exists between any persons which causes any person’s base income allocable to this State to be improperly or inaccurately reflected, the Director may adjust such items of income and deduction, and any related apportionment factor taken into account in allocating non-businessthat income to this State, to such extent as may reasonably be required to determine the base income of such person properly allocable to this State.

(b) TheUnless Directorthe mayprincipal notpurpose makeof anythe adjustmentagreement, underunderstanding, subsectionor (a)arrangement beforeis for the Departmentavoidance adoptsof rulesa settingtax forthon theor methodsmeasured andby standardsnet byincome whichimposed theby Directorany mayState, exerciseany authorityadjustment under this Section.Section must be made in accordance with Section 482 of the Internal Revenue Code, as amended, and any applicable federal regulations.

TheFor rulesany musttaxable setyear, forthunless theestablished typesby a preponderance of agreements,the understandings,evidence andto arrangementsthe thatcontrary, an HB4454 Engrossed - 2 - LRB095 16946 BDD 42991 b agreement, understanding, or arrangement for the Directorprincipal willpurpose considerof toavoidance causeof a person’stax baseon or measured by net income allocableimposed toby thisany State is presumed to exist between one or more members of a unitary business group and a person who would be improperlya member of that unitary business group if not for the prohibitions in item (27) of subsection (a) of Section 1501 of this Act against including in a unitary business group persons who apportion their business incomes under different subsections of Section 304 of this Act or inaccuratelyagainst reflected.inclusion in any unitary business group of a person who conducts 80% or more of his or her business activity outside the United States, if that excluded person:

HB4454(1) -has 2de -minimis LRB095real 16946or BDDtangible 42991personal bproperty (c)or Unlesspayroll thefor principal purpose of the agreement,taxable understanding,year, oras arrangementdetermined is for thepurposes avoidance of federal or state income tax, any adjustment made under this Section and the rules required to be adopted under subsection (b)(a) mustof be in accordance with Section 482304 of thethis InternalAct; Revenue Code, as amended, and the related Treasury Regulations.

(2) earns a return for the taxable year on all of its real and tangible personal property that is substantially more than the aggregate return earned by the members of the unitary business group on all of real and tangible personal property of the unitary business group;

for purposes of this paragraph (2) the return on real and tangible personal property of a person for a taxable year is equal to the base income of that person for that taxable year, divided by that person’s real and tangible personal property for that taxable year, as determined for purposes of subsection (a) of Section 304 of this Act;

or HB4454 Engrossed - 3 - LRB095 16946 BDD 42991 b (3) conducts substantially all of its business activity, as shown by gross receipts for the taxable year, with one or more persons who are members of the unitary business group or who would be members of that unitary business group if not for the prohibitions in item (27) of subsection (a) of Section 1501 of this Act against including in a unitary business group persons who apportion their business incomes under different subsections of Section 304 of this Act or against inclusion in any unitary business group of a person that conducts 80% or more of its business activity outside the United States.

(c) The Director may not make an adjustment to base income under this Section that has the same effect as retroactively applying any amendments to this Act made by Public Act 93-0840, Public Act 95-0233, or Public Act 95-0707.

(d) Notwithstanding any other rulemaking authority that may exist, neither the Governor nor any agency or agency head under the jurisdiction of the Governor has any authority to make or promulgate rules to implement or enforce the provisions of this amendatory Act of the 95th General Assembly.

If, however, the Governor believes that rules are necessary to implement or enforce the provisions of this amendatory Act of the 95th General Assembly, the Governor may suggest rules to the General Assembly by filing them with the Clerk of the House and the Secretary of the Senate and by requesting that the General Assembly authorize such rulemaking by law, enact those HB4454 Engrossed - 4 - LRB095 16946 BDD 42991 b suggested rules into law, or take any other appropriate action in the General Assembly’s discretion.

Nothing contained in this amendatory Act of the 95th General Assembly shall be interpreted to grant rulemaking authority under any other Illinois statute where such authority is not otherwise explicitly given.

For the purposes of this paragraph, "rules" is given the meaning contained in Section 1-70 of the Illinois Administrative Procedure Act, and "agency" and "agency head" are given the meanings contained in Sections 1-20 and 1-25 of the Illinois Administrative Procedure Act to the extent that such definitions apply to agencies or agency heads under the jurisdiction of the Governor.