Sen. Toi W. Hutchinson

Filed: 3/2/2017

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1 AMENDMENT TO SENATE BILL 9

2 AMENDMENT NO. ______. Amend Senate Bill 9 by replacing

3 everything after the enacting clause with the following:

4 "ARTICLE 5. BUDGET ECONOMIC STABILIZATION FUND ACT

5 Section 5-1. Short title. This Act may be cited as the

6 Budget Economic Stabilization Fund Act.

7 Section 5-5. Legislative intent.

8 The General Assembly finds that, in order to restore

9 Illinois' fiscal health, retaining a share of above-trend State

10 revenues for future needs and for reducing the need for new

11 taxes or increasing any rate of tax or otherwise modifying the

12 tax structure, including the elimination or modification of

13 deductions, exclusions, or exemptions, is a priority.

14 Section 5-10. Definitions. As used in this Act:

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1 "Above-trend revenues" means general funds revenue

2 collections that exceed 2.4% of the prior fiscal year's general

3 funds revenue collections.

4 "General funds" means the General Revenue Fund, the Common

5 School Fund, the Education Assistance Fund, and the General

6 Revenue Common School Special Account Fund.

7 "General funds revenue collections" means, for each fiscal

8 year, all gross personal and corporate income taxes, other

9 taxes, fees, and other revenues expected to be deposited into

10 the State's general funds and recurring transfers into general

11 funds from the State Lottery and gaming, but does not include

12 other transfers and federal funds.

13 "Unpaid bills" means: pending vouchers approved for

14 payment but not paid as of December 31st for each fiscal year

15 by the Office of the Comptroller; pending transfers required by

16 State statute that have been recorded but have not been paid

17 from the General Revenue Fund, Common School Fund, or Education

18 Assistance Fund; and all vouchers for invoices that have been

19 certified as a proper bill, as defined by the State Prompt

20 Payment Act, by the Departments of Healthcare and Family

21 Services, Central Management Services, Human Services,

22 Revenue, and Aging but not yet approved by the Comptroller as

23 of December 31st of each fiscal year from the General Revenue

24 Fund, Common School Fund, Education Assistance Fund, Health

25 Insurance Fund, Income Tax Refund Fund, and Healthcare Provider

26 Relief Fund.

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1 Section 5-15. Certification of the backlog of bills. The

2 amount of unpaid bills shall be reported by the Comptroller and

3 the Departments of Healthcare and Family Services, Central

4 Management Services, Human Services, Revenue, and Aging to the

5 Governor's Office of Management and Budget no later than

6 January 10th of each year. By January 15th of each year, the

7 Governor's Office of Management and Budget shall notify the

8 Comptroller, Treasurer, the Speaker and Minority Leader of the

9 House, and the President and Minority Leader of the Senate of

10 the total amount of unpaid bills as of the preceding December

11 31st.

12 Section 5-20. Payment of unpaid bills. If unpaid bills

13 total more than $1,000,000,000, the Governor shall include in

14 his or her budget for the next fiscal year an amount to pay

15 unpaid bills equal to the lesser of (i) 50% of above-trend

16 revenues that the Governor projects to be received by the State

17 in the next fiscal year or (ii) the amount of above-trend

18 revenues needed to reduce the unpaid bills to $1,000,000,000.

19 This amount to pay off unpaid bills shall be included in the

20 Governor's budget as an appropriation to the Bill Backlog

21 Payment Fund from the General Revenue Fund. Nothing in this Act

22 prohibits the Governor from including in his or her budget, or

23 the General Assembly from appropriating, additional moneys for

24 the payment of unpaid bills. If for any reason the

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1 appropriations enacted are insufficient to meet the payment of

2 unpaid bills required to be included in the Governor's budget

3 under this Section, then there is hereby appropriated, on a

4 continuing annual basis in each fiscal year, from the General

5 Revenue Fund, the amounts necessary for this payment.

6 Section 5-25. Transfers into the Budget Economic

7 Stabilization Fund.

8 (a) If unpaid bills total less than $1,000,000,000 the

9 Governor shall include in his or her budget for the next fiscal

10 year at least 50% of any above-trend revenues that the Governor

11 projects to be received in the next fiscal year for deposit to

12 the Budget Economic Stabilization Fund as an appropriation from

13 the General Revenue Fund. Except as provided in subsection (b)

14 of this Section, if for any reason the appropriations enacted

15 are insufficient to make the deposit required by this Section,

16 then this Section shall constitute a continuing appropriation

17 from the General Revenue Fund of all amounts necessary for this

18 deposit.

19 (b) If the balance of the Budget Economic Stabilization

20 Fund at the beginning of the next fiscal year is projected by

21 the Governor to exceed 5% of the general funds revenue

22 collections estimated for the next fiscal year, transfers into

23 the Budget Economic Stabilization Fund are not required for

24 that fiscal year.

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1 Section 5-30. Withdrawal from Budget Economic

2 Stabilization Fund.

3 (a) Upon the direction of the Governor at any time within a

4 fiscal year and within the limitations set forth in this

5 Section, the Comptroller and the Treasurer shall transfer the

6 amounts designated by the Governor from the Budget Economic

7 Stabilization Fund to general funds as specified by the

8 Governor. The transfer shall be made as soon as practicable on

9 or after the 30th day after the Governor has provided written

10 notice of his or her direction to transfer to the Clerk of the

11 House of Representatives, the Secretary of the Senate, and the

12 Index Department of the Office of the Secretary of State, with

13 copies of the notice provided to the Comptroller and Treasurer.

14 The notice shall be published on the website of the Governor's

15 Office of Management and Budget. The amount directed to be

16 transferred may not exceed the limits set forth in subsection

17 (c) of this Section. The Governor may direct a transfer from

18 the Budget Economic Stabilization Fund to any of the general

19 funds only if: he or she estimates that general funds revenue

20 collections for the current fiscal year will be less than the

21 general funds revenue collections as estimated at the time of

22 enactment of appropriations for the current fiscal year; the

23 transfer is necessary to provide for the health, safety, and

24 welfare of the people of the State of Illinois; and the funds

25 transferred are to be spent within previously enacted

26 appropriations.

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1 (b) In addition to transfers directed by the Governor

2 within a fiscal year, transfers or appropriations from the

3 Budget Economic Stabilization Fund for the current or next

4 fiscal year may be made by vote of the General Assembly if:

5 (1) the General Assembly projects that general funds

6 revenue collections for the current or next fiscal year are

7 less than the general funds revenue collections as

8 estimated at the time of enactment of appropriations for

9 the current fiscal year for the preceding year;

10 (2) the General Assembly finds that general funds

11 revenue collections have remained stagnant or dropped

12 during 2 consecutive fiscal quarters within the preceding

13 12 months as compared to the corresponding 2 fiscal

14 quarters of the prior fiscal year; or

15 (3) that the State Coincident Index for the State of

16 Illinois has remained stagnant or dropped over 2

17 consecutive quarters within the preceding 12 months, as

18 published in the Federal Reserve Bank of Philadelphia's

19 publication entitled "State Coincident Indexes" or its

20 successor publication.

21 (c) Transfers or appropriations from the Budget Economic

22 Stabilization Fund may not, during any fiscal year, exceed the

23 lesser of:

24 (1) 50% of the Budget Economic Stabilization Fund's

25 balance;

26 (2) in the case of appropriation enacted by the General

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1 Assembly, 50% of the difference between (i) general funds

2 revenue collections, as projected by the Commission on

3 Government Forecasting and Accountability to be received

4 in the next fiscal year, and (ii) a revised general fund

5 revenue collections projection for the current fiscal year

6 presented to the General Assembly by the Commission on

7 Government Forecasting and Accountability; or

8 (3) in the case of transfers to be directed by the

9 Governor within a fiscal year, 50% of the difference

10 between (i) general funds revenue collections, to be

11 received in the next fiscal year as projected by the

12 Governor, and (ii) a revised general fund revenue

13 collections projection for the current fiscal year as

14 projected by the Governor.

15 Section 5-35. Fund creation.

16 (a) There is created the Budget Economic Stabilization Fund

17 as a special fund in the State Treasury consisting of moneys

18 appropriated or transferred to that Fund as provided in Section

19 5-30 of this Act and as otherwise provided by law. All earnings

20 on Budget Economic Stabilization Fund investments shall be

21 deposited into that Fund.

22 (b) There is created the Bill Backlog Payment Fund as a

23 special fund in the State Treasury consisting of moneys

24 appropriated or transferred to that Fund as provided in Section -

25 25 of this Act and as otherwise provided by law. All earnings

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1 on Bill Backlog Payment Fund investments shall be deposited

2 into that Fund.

3 ARTICLE 30. AMENDATORY PROVISIONS

4 Section 30-5. The State Finance Act is amended by changing

5 Section 6z-51 and by adding Sections 5.878 and 5.879 as

6 follows:

7 (30 ILCS 105/5.878 new)

8 Sec. 5.878. The Budget Economic Stabilization Fund.

9 (30 ILCS 105/5.879 new)

10 Sec. 5.879. The Bill Backlog Payment Fund.

11 (30 ILCS 105/6z-51)

12 Sec. 6z-51. Budget Stabilization Fund.

13 (a) The Budget Stabilization Fund, a special fund in the

14 State Treasury, shall consist of moneys appropriated or

15 transferred to that Fund, as provided in Section 6z-43 and as

16 otherwise provided by law. All earnings on Budget Stabilization

17 Fund investments shall be deposited into that Fund.

18 (b) Until an initial transfer has been made to the Budget

19 Economic Stabilization Fund under Section 5-30 of the Budget

20 Economic Stabilization Fund Act, the ~~The~~ State Comptroller may

21 direct the State Treasurer to transfer moneys from the Budget

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1 Stabilization Fund to the General Revenue Fund in order to meet

2 cash flow deficits resulting from timing variations between

3 disbursements and the receipt of funds within a fiscal year.

4 Any moneys so borrowed in any fiscal year other than Fiscal

5 Year 2011 shall be repaid by June 30 of the fiscal year in

6 which they were borrowed. Any moneys so borrowed in Fiscal Year

7 2011 shall be repaid no later than July 15, 2011.

8 (c) During Fiscal Year 2017 only, amounts may be expended

9 from the Budget Stabilization Fund only pursuant to specific

10 authorization by appropriation. Any moneys expended pursuant

11 to appropriation shall not be subject to repayment.

12 (Source: P.A. 99-523, eff. 6-30-16.)

13 Section 30-10. The Illinois Income Tax Act is amended by

14 changing Sections 201, 203, 212, 222, 804, 901, and 1501 and by

15 adding Sections 201.7 and 225 as follows:

16 (35 ILCS 5/201) (from Ch. 120, par. 2-201)

17 Sec. 201. Tax Imposed.

18 (a) In general. A tax measured by net income is hereby

19 imposed on every individual, corporation, trust and estate for

20 each taxable year ending after July 31, 1969 on the privilege

21 of earning or receiving income in or as a resident of this

22 State. Such tax shall be in addition to all other occupation or

23 privilege taxes imposed by this State or by any municipal

24 corporation or political subdivision thereof.

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1 (b) Rates. The tax imposed by subsection (a) of this

2 Section shall be determined as follows, except as adjusted by

3 subsection (d-1):

4 (1) In the case of an individual, trust or estate, for

5 taxable years ending prior to July 1, 1989, an amount equal

6 to 2 1/2% of the taxpayer's net income for the taxable

7 year.

8 (2) In the case of an individual, trust or estate, for

9 taxable years beginning prior to July 1, 1989 and ending

10 after June 30, 1989, an amount equal to the sum of (i) 2

11 1/2% of the taxpayer's net income for the period prior to

12 July 1, 1989, as calculated under Section 202.3, and (ii)

13 3% of the taxpayer's net income for the period after June

14 30, 1989, as calculated under Section 202.3.

15 (3) In the case of an individual, trust or estate, for

16 taxable years beginning after June 30, 1989, and ending

17 prior to January 1, 2011, an amount equal to 3% of the

18 taxpayer's net income for the taxable year.

19 (4) In the case of an individual, trust, or estate, for

20 taxable years beginning prior to January 1, 2011, and

21 ending after December 31, 2010, an amount equal to the sum

22 of (i) 3% of the taxpayer's net income for the period prior

23 to January 1, 2011, as calculated under Section 202.5, and

24 (ii) 5% of the taxpayer's net income for the period after

25 December 31, 2010, as calculated under Section 202.5.

26 (5) In the case of an individual, trust, or estate, for

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1 taxable years beginning on or after January 1, 2011, and

2 ending prior to January 1, 2015, an amount equal to 5% of

3 the taxpayer's net income for the taxable year.

4 (5.1) In the case of an individual, trust, or estate,

5 for taxable years beginning prior to January 1, 2015, and

6 ending after December 31, 2014, an amount equal to the sum

7 of (i) 5% of the taxpayer's net income for the period prior

8 to January 1, 2015, as calculated under Section 202.5, and

9 (ii) 3.75% of the taxpayer's net income for the period

10 after December 31, 2014, as calculated under Section 202.5.

11 (5.2) In the case of an individual, trust, or estate,

12 for taxable years beginning on or after January 1, 2015,

13 and ending prior to January 1, 2017 ~~January 1, 2025~~, an

14 amount equal to 3.75% of the taxpayer's net income for the

15 taxable year.

16 (5.3) In the case of an individual, trust, or estate,

17 for taxable years beginning prior to January 1, 2017

18 ~~January 1, 2025~~, and ending after December 31, 2016

19 ~~December 31, 2024~~, an amount equal to the sum of (i) 3.75%

20 of the taxpayer's net income for the period prior to

21 January 1, 2017 ~~January 1, 2025~~, as calculated under

22 Section 202.5, and (ii) 4.99% ~~3.25%~~ of the taxpayer's net

23 income for the period after December 31, 2016 ~~December 31,~~

24 ~~2024~~, as calculated under Section 202.5.

25 (5.4) In the case of an individual, trust, or estate,

26 for taxable years beginning on or after January 1, 2017

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1 ~~January 1, 2025~~, an amount equal to 4.99% ~~3.25%~~ of the

2 taxpayer's net income for the taxable year.

3 (6) In the case of a corporation, for taxable years

4 ending prior to July 1, 1989, an amount equal to 4% of the

5 taxpayer's net income for the taxable year.

6 (7) In the case of a corporation, for taxable years

7 beginning prior to July 1, 1989 and ending after June 30,

8 1989, an amount equal to the sum of (i) 4% of the

9 taxpayer's net income for the period prior to July 1, 1989,

10 as calculated under Section 202.3, and (ii) 4.8% of the

11 taxpayer's net income for the period after June 30, 1989,

12 as calculated under Section 202.3.

13 (8) In the case of a corporation, for taxable years

14 beginning after June 30, 1989, and ending prior to January

15 1, 2011, an amount equal to 4.8% of the taxpayer's net

16 income for the taxable year.

17 (9) In the case of a corporation, for taxable years

18 beginning prior to January 1, 2011, and ending after

19 December 31, 2010, an amount equal to the sum of (i) 4.8%

20 of the taxpayer's net income for the period prior to

21 January 1, 2011, as calculated under Section 202.5, and

22 (ii) 7% of the taxpayer's net income for the period after

23 December 31, 2010, as calculated under Section 202.5.

24 (10) In the case of a corporation, for taxable years

25 beginning on or after January 1, 2011, and ending prior to

26 January 1, 2015, an amount equal to 7% of the taxpayer's

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1 net income for the taxable year.

2 (11) In the case of a corporation, for taxable years

3 beginning prior to January 1, 2015, and ending after

4 December 31, 2014, an amount equal to the sum of (i) 7% of

5 the taxpayer's net income for the period prior to January

6 1, 2015, as calculated under Section 202.5, and (ii) 5.25%

7 of the taxpayer's net income for the period after December

8 31, 2014, as calculated under Section 202.5.

9 (12) In the case of a corporation, for taxable years

10 beginning on or after January 1, 2015, and ending prior to

11 January 1, 2017 ~~January 1, 2025~~, an amount equal to 5.25%

12 of the taxpayer's net income for the taxable year.

13 (13) In the case of a corporation, for taxable years

14 beginning prior to January 1, 2017 ~~January 1, 2025~~, and

15 ending after December 31, 2016 ~~December 31, 2024~~, an amount

16 equal to the sum of (i) 5.25% of the taxpayer's net income

17 for the period prior to January 1, 2017 ~~January 1, 2025~~, as

18 calculated under Section 202.5, and (ii) 7% ~~4.8%~~ of the

19 taxpayer's net income for the period after December 31,

20 2016 ~~December 31, 2024~~, as calculated under Section 202.5.

21 (14) In the case of a corporation, for taxable years

22 beginning on or after January 1, 2017 ~~January 1, 2025~~, an

23 amount equal to 7% ~~4.8%~~ of the taxpayer's net income for

24 the taxable year.

25 The rates under this subsection (b) are subject to the

26 provisions of Section 201.5.

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1 (c) Personal Property Tax Replacement Income Tax.

2 Beginning on July 1, 1979 and thereafter, in addition to such

3 income tax, there is also hereby imposed the Personal Property

4 Tax Replacement Income Tax measured by net income on every

5 corporation (including Subchapter S corporations), partnership

6 and trust, for each taxable year ending after June 30, 1979.

7 Such taxes are imposed on the privilege of earning or receiving

8 income in or as a resident of this State. The Personal Property

9 Tax Replacement Income Tax shall be in addition to the income

10 tax imposed by subsections (a) and (b) of this Section and in

11 addition to all other occupation or privilege taxes imposed by

12 this State or by any municipal corporation or political

13 subdivision thereof.

14 (d) Additional Personal Property Tax Replacement Income

15 Tax Rates. The personal property tax replacement income tax

16 imposed by this subsection and subsection (c) of this Section

17 in the case of a corporation, other than a Subchapter S

18 corporation and except as adjusted by subsection (d-1), shall

19 be an additional amount equal to 2.85% of such taxpayer's net

20 income for the taxable year, except that beginning on January

21 1, 1981, and thereafter, the rate of 2.85% specified in this

22 subsection shall be reduced to 2.5%, and in the case of a

23 partnership, trust or a Subchapter S corporation shall be an

24 additional amount equal to 1.5% of such taxpayer's net income

25 for the taxable year.

26 (d-1) Rate reduction for certain foreign insurers. In the

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1 case of a foreign insurer, as defined by Section 35A-5 of the

2 Illinois Insurance Code, whose state or country of domicile

3 imposes on insurers domiciled in Illinois a retaliatory tax

4 (excluding any insurer whose premiums from reinsurance assumed

5 are 50% or more of its total insurance premiums as determined

6 under paragraph (2) of subsection (b) of Section 304, except

7 that for purposes of this determination premiums from

8 reinsurance do not include premiums from inter-affiliate

9 reinsurance arrangements), beginning with taxable years ending

10 on or after December 31, 1999, the sum of the rates of tax

11 imposed by subsections (b) and (d) shall be reduced (but not

12 increased) to the rate at which the total amount of tax imposed

13 under this Act, net of all credits allowed under this Act,

14 shall equal (i) the total amount of tax that would be imposed

15 on the foreign insurer's net income allocable to Illinois for

16 the taxable year by such foreign insurer's state or country of

17 domicile if that net income were subject to all income taxes

18 and taxes measured by net income imposed by such foreign

19 insurer's state or country of domicile, net of all credits

20 allowed or (ii) a rate of zero if no such tax is imposed on such

21 income by the foreign insurer's state of domicile. For the

22 purposes of this subsection (d-1), an inter-affiliate includes

23 a mutual insurer under common management.

24 (1) For the purposes of subsection (d-1), in no event

25 shall the sum of the rates of tax imposed by subsections

26 (b) and (d) be reduced below the rate at which the sum of:

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1 (A) the total amount of tax imposed on such foreign

2 insurer under this Act for a taxable year, net of all

3 credits allowed under this Act, plus

4 (B) the privilege tax imposed by Section 409 of the

5 Illinois Insurance Code, the fire insurance company

6 tax imposed by Section 12 of the Fire Investigation

7 Act, and the fire department taxes imposed under

8 Section 11-10-1 of the Illinois Municipal Code,

9 equals 1.25% for taxable years ending prior to December 31,

10 2003, or 1.75% for taxable years ending on or after

11 December 31, 2003, of the net taxable premiums written for

12 the taxable year, as described by subsection (1) of Section

13 409 of the Illinois Insurance Code. This paragraph will in

14 no event increase the rates imposed under subsections (b)

15 and (d).

16 (2) Any reduction in the rates of tax imposed by this

17 subsection shall be applied first against the rates imposed

18 by subsection (b) and only after the tax imposed by

19 subsection (a) net of all credits allowed under this

20 Section other than the credit allowed under subsection (i)

21 has been reduced to zero, against the rates imposed by

22 subsection (d).

23 This subsection (d-1) is exempt from the provisions of

24 Section 250.

25 (e) Investment credit. A taxpayer shall be allowed a credit

26 against the Personal Property Tax Replacement Income Tax for

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1 investment in qualified property.

2 (1) A taxpayer shall be allowed a credit equal to .5%

3 of the basis of qualified property placed in service during

4 the taxable year, provided such property is placed in

5 service on or after July 1, 1984. There shall be allowed an

6 additional credit equal to .5% of the basis of qualified

7 property placed in service during the taxable year,

8 provided such property is placed in service on or after

9 July 1, 1986, and the taxpayer's base employment within

10 Illinois has increased by 1% or more over the preceding

11 year as determined by the taxpayer's employment records

12 filed with the Illinois Department of Employment Security.

13 Taxpayers who are new to Illinois shall be deemed to have

14 met the 1% growth in base employment for the first year in

15 which they file employment records with the Illinois

16 Department of Employment Security. The provisions added to

17 this Section by Public Act 85-1200 (and restored by Public

18 Act 87-895) shall be construed as declaratory of existing

19 law and not as a new enactment. If, in any year, the

20 increase in base employment within Illinois over the

21 preceding year is less than 1%, the additional credit shall

22 be limited to that percentage times a fraction, the

23 numerator of which is .5% and the denominator of which is

24 1%, but shall not exceed .5%. The investment credit shall

25 not be allowed to the extent that it would reduce a

26 taxpayer's liability in any tax year below zero, nor may

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1 any credit for qualified property be allowed for any year

2 other than the year in which the property was placed in

3 service in Illinois. For tax years ending on or after

4 December 31, 1987, and on or before December 31, 1988, the

5 credit shall be allowed for the tax year in which the

6 property is placed in service, or, if the amount of the

7 credit exceeds the tax liability for that year, whether it

8 exceeds the original liability or the liability as later

9 amended, such excess may be carried forward and applied to

10 the tax liability of the 5 taxable years following the

11 excess credit years if the taxpayer (i) makes investments

12 which cause the creation of a minimum of 2,000 full-time

13 equivalent jobs in Illinois, (ii) is located in an

14 enterprise zone established pursuant to the Illinois

15 Enterprise Zone Act and (iii) is certified by the

16 Department of Commerce and Community Affairs (now

17 Department of Commerce and Economic Opportunity) as

18 complying with the requirements specified in clause (i) and

19 (ii) by July 1, 1986. The Department of Commerce and

20 Community Affairs (now Department of Commerce and Economic

21 Opportunity) shall notify the Department of Revenue of all

22 such certifications immediately. For tax years ending

23 after December 31, 1988, the credit shall be allowed for

24 the tax year in which the property is placed in service,

25 or, if the amount of the credit exceeds the tax liability

26 for that year, whether it exceeds the original liability or

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1 the liability as later amended, such excess may be carried

2 forward and applied to the tax liability of the 5 taxable

3 years following the excess credit years. The credit shall

4 be applied to the earliest year for which there is a

5 liability. If there is credit from more than one tax year

6 that is available to offset a liability, earlier credit

7 shall be applied first.

8 (2) The term "qualified property" means property

9 which:

10 (A) is tangible, whether new or used, including

11 buildings and structural components of buildings and

12 signs that are real property, but not including land or

13 improvements to real property that are not a structural

14 component of a building such as landscaping, sewer

15 lines, local access roads, fencing, parking lots, and

16 other appurtenances;

17 (B) is depreciable pursuant to Section 167 of the

18 Internal Revenue Code, except that "3-year property"

19 as defined in Section 168(c)(2)(A) of that Code is not

20 eligible for the credit provided by this subsection

21 (e);

22 (C) is acquired by purchase as defined in Section

23 179(d) of the Internal Revenue Code;

24 (D) is used in Illinois by a taxpayer who is

25 primarily engaged in manufacturing, or in mining coal

26 or fluorite, or in retailing, or was placed in service

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1 on or after July 1, 2006 in a River Edge Redevelopment

2 Zone established pursuant to the River Edge

3 Redevelopment Zone Act; and

4 (E) has not previously been used in Illinois in

5 such a manner and by such a person as would qualify for

6 the credit provided by this subsection (e) or

7 subsection (f).

8 (3) For purposes of this subsection (e),

9 "manufacturing" means the material staging and production

10 of tangible personal property by procedures commonly

11 regarded as manufacturing, processing, fabrication, or

12 assembling which changes some existing material into new

13 shapes, new qualities, or new combinations. For purposes of

14 this subsection (e) the term "mining" shall have the same

15 meaning as the term "mining" in Section 613(c) of the

16 Internal Revenue Code. For purposes of this subsection (e),

17 the term "retailing" means the sale of tangible personal

18 property for use or consumption and not for resale, or

19 services rendered in conjunction with the sale of tangible

20 personal property for use or consumption and not for

21 resale. For purposes of this subsection (e), "tangible

22 personal property" has the same meaning as when that term

23 is used in the Retailers' Occupation Tax Act, and, for

24 taxable years ending after December 31, 2008, does not

25 include the generation, transmission, or distribution of

26 electricity.

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1 (4) The basis of qualified property shall be the basis

2 used to compute the depreciation deduction for federal

3 income tax purposes.

4 (5) If the basis of the property for federal income tax

5 depreciation purposes is increased after it has been placed

6 in service in Illinois by the taxpayer, the amount of such

7 increase shall be deemed property placed in service on the

8 date of such increase in basis.

9 (6) The term "placed in service" shall have the same

10 meaning as under Section 46 of the Internal Revenue Code.

11 (7) If during any taxable year, any property ceases to

12 be qualified property in the hands of the taxpayer within

13 48 months after being placed in service, or the situs of

14 any qualified property is moved outside Illinois within 48

15 months after being placed in service, the Personal Property

16 Tax Replacement Income Tax for such taxable year shall be

17 increased. Such increase shall be determined by (i)

18 recomputing the investment credit which would have been

19 allowed for the year in which credit for such property was

20 originally allowed by eliminating such property from such

21 computation and, (ii) subtracting such recomputed credit

22 from the amount of credit previously allowed. For the

23 purposes of this paragraph (7), a reduction of the basis of

24 qualified property resulting from a redetermination of the

25 purchase price shall be deemed a disposition of qualified

26 property to the extent of such reduction.

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1 (8) Unless the investment credit is extended by law,

2 the basis of qualified property shall not include costs

3 incurred after December 31, 2018, except for costs incurred

4 pursuant to a binding contract entered into on or before

5 December 31, 2018.

6 (9) Each taxable year ending before December 31, 2000,

7 a partnership may elect to pass through to its partners the

8 credits to which the partnership is entitled under this

9 subsection (e) for the taxable year. A partner may use the

10 credit allocated to him or her under this paragraph only

11 against the tax imposed in subsections (c) and (d) of this

12 Section. If the partnership makes that election, those

13 credits shall be allocated among the partners in the

14 partnership in accordance with the rules set forth in

15 Section 704(b) of the Internal Revenue Code, and the rules

16 promulgated under that Section, and the allocated amount of

17 the credits shall be allowed to the partners for that

18 taxable year. The partnership shall make this election on

19 its Personal Property Tax Replacement Income Tax return for

20 that taxable year. The election to pass through the credits

21 shall be irrevocable.

22 For taxable years ending on or after December 31, 2000,

23 a partner that qualifies its partnership for a subtraction

24 under subparagraph (I) of paragraph (2) of subsection (d)

25 of Section 203 or a shareholder that qualifies a Subchapter

26 S corporation for a subtraction under subparagraph (S) of

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1 paragraph (2) of subsection (b) of Section 203 shall be

2 allowed a credit under this subsection (e) equal to its

3 share of the credit earned under this subsection (e) during

4 the taxable year by the partnership or Subchapter S

5 corporation, determined in accordance with the

6 determination of income and distributive share of income

7 under Sections 702 and 704 and Subchapter S of the Internal

8 Revenue Code. This paragraph is exempt from the provisions

9 of Section 250.

10 (f) Investment credit; Enterprise Zone; River Edge

11 Redevelopment Zone.

12 (1) A taxpayer shall be allowed a credit against the

13 tax imposed by subsections (a) and (b) of this Section for

14 investment in qualified property which is placed in service

15 in an Enterprise Zone created pursuant to the Illinois

16 Enterprise Zone Act or, for property placed in service on

17 or after July 1, 2006, a River Edge Redevelopment Zone

18 established pursuant to the River Edge Redevelopment Zone

19 Act. For partners, shareholders of Subchapter S

20 corporations, and owners of limited liability companies,

21 if the liability company is treated as a partnership for

22 purposes of federal and State income taxation, there shall

23 be allowed a credit under this subsection (f) to be

24 determined in accordance with the determination of income

25 and distributive share of income under Sections 702 and 704

26 and Subchapter S of the Internal Revenue Code. The credit

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1 shall be .5% of the basis for such property. The credit

2 shall be available only in the taxable year in which the

3 property is placed in service in the Enterprise Zone or

4 River Edge Redevelopment Zone and shall not be allowed to

5 the extent that it would reduce a taxpayer's liability for

6 the tax imposed by subsections (a) and (b) of this Section

7 to below zero. For tax years ending on or after December

8 31, 1985, the credit shall be allowed for the tax year in

9 which the property is placed in service, or, if the amount

10 of the credit exceeds the tax liability for that year,

11 whether it exceeds the original liability or the liability

12 as later amended, such excess may be carried forward and

13 applied to the tax liability of the 5 taxable years

14 following the excess credit year. The credit shall be

15 applied to the earliest year for which there is a

16 liability. If there is credit from more than one tax year

17 that is available to offset a liability, the credit

18 accruing first in time shall be applied first.

19 (2) The term qualified property means property which:

20 (A) is tangible, whether new or used, including

21 buildings and structural components of buildings;

22 (B) is depreciable pursuant to Section 167 of the

23 Internal Revenue Code, except that "3-year property"

24 as defined in Section 168(c)(2)(A) of that Code is not

25 eligible for the credit provided by this subsection

26 (f);

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1 (C) is acquired by purchase as defined in Section

2 179(d) of the Internal Revenue Code;

3 (D) is used in the Enterprise Zone or River Edge

4 Redevelopment Zone by the taxpayer; and

5 (E) has not been previously used in Illinois in

6 such a manner and by such a person as would qualify for

7 the credit provided by this subsection (f) or

8 subsection (e).

9 (3) The basis of qualified property shall be the basis

10 used to compute the depreciation deduction for federal

11 income tax purposes.

12 (4) If the basis of the property for federal income tax

13 depreciation purposes is increased after it has been placed

14 in service in the Enterprise Zone or River Edge

15 Redevelopment Zone by the taxpayer, the amount of such

16 increase shall be deemed property placed in service on the

17 date of such increase in basis.

18 (5) The term "placed in service" shall have the same

19 meaning as under Section 46 of the Internal Revenue Code.

20 (6) If during any taxable year, any property ceases to

21 be qualified property in the hands of the taxpayer within

22 48 months after being placed in service, or the situs of

23 any qualified property is moved outside the Enterprise Zone

24 or River Edge Redevelopment Zone within 48 months after

25 being placed in service, the tax imposed under subsections

26 (a) and (b) of this Section for such taxable year shall be

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1 increased. Such increase shall be determined by (i)

2 recomputing the investment credit which would have been

3 allowed for the year in which credit for such property was

4 originally allowed by eliminating such property from such

5 computation, and (ii) subtracting such recomputed credit

6 from the amount of credit previously allowed. For the

7 purposes of this paragraph (6), a reduction of the basis of

8 qualified property resulting from a redetermination of the

9 purchase price shall be deemed a disposition of qualified

10 property to the extent of such reduction.

11 (7) There shall be allowed an additional credit equal

12 to 0.5% of the basis of qualified property placed in

13 service during the taxable year in a River Edge

14 Redevelopment Zone, provided such property is placed in

15 service on or after July 1, 2006, and the taxpayer's base

16 employment within Illinois has increased by 1% or more over

17 the preceding year as determined by the taxpayer's

18 employment records filed with the Illinois Department of

19 Employment Security. Taxpayers who are new to Illinois

20 shall be deemed to have met the 1% growth in base

21 employment for the first year in which they file employment

22 records with the Illinois Department of Employment

23 Security. If, in any year, the increase in base employment

24 within Illinois over the preceding year is less than 1%,

25 the additional credit shall be limited to that percentage

26 times a fraction, the numerator of which is 0.5% and the

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1 denominator of which is 1%, but shall not exceed 0.5%.

2 (g) (Blank).

3 (h) Investment credit; High Impact Business.

4 (1) Subject to subsections (b) and (b-5) of Section 5.5

5 of the Illinois Enterprise Zone Act, a taxpayer shall be

6 allowed a credit against the tax imposed by subsections (a)

7 and (b) of this Section for investment in qualified

8 property which is placed in service by a Department of

9 Commerce and Economic Opportunity designated High Impact

10 Business. The credit shall be .5% of the basis for such

11 property. The credit shall not be available (i) until the

12 minimum investments in qualified property set forth in

13 subdivision (a)(3)(A) of Section 5.5 of the Illinois

14 Enterprise Zone Act have been satisfied or (ii) until the

15 time authorized in subsection (b-5) of the Illinois

16 Enterprise Zone Act for entities designated as High Impact

17 Businesses under subdivisions (a)(3)(B), (a)(3)(C), and

18 (a)(3)(D) of Section 5.5 of the Illinois Enterprise Zone

19 Act, and shall not be allowed to the extent that it would

20 reduce a taxpayer's liability for the tax imposed by

21 subsections (a) and (b) of this Section to below zero. The

22 credit applicable to such investments shall be taken in the

23 taxable year in which such investments have been completed.

24 The credit for additional investments beyond the minimum

25 investment by a designated high impact business authorized

26 under subdivision (a)(3)(A) of Section 5.5 of the Illinois

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1 Enterprise Zone Act shall be available only in the taxable

2 year in which the property is placed in service and shall

3 not be allowed to the extent that it would reduce a

4 taxpayer's liability for the tax imposed by subsections (a)

5 and (b) of this Section to below zero. For tax years ending

6 on or after December 31, 1987, the credit shall be allowed

7 for the tax year in which the property is placed in

8 service, or, if the amount of the credit exceeds the tax

9 liability for that year, whether it exceeds the original

10 liability or the liability as later amended, such excess

11 may be carried forward and applied to the tax liability of

12 the 5 taxable years following the excess credit year. The

13 credit shall be applied to the earliest year for which

14 there is a liability. If there is credit from more than one

15 tax year that is available to offset a liability, the

16 credit accruing first in time shall be applied first.

17 Changes made in this subdivision (h)(1) by Public Act

18 88-670 restore changes made by Public Act 85-1182 and

19 reflect existing law.

20 (2) The term qualified property means property which:

21 (A) is tangible, whether new or used, including

22 buildings and structural components of buildings;

23 (B) is depreciable pursuant to Section 167 of the

24 Internal Revenue Code, except that "3-year property"

25 as defined in Section 168(c)(2)(A) of that Code is not

26 eligible for the credit provided by this subsection

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1 (h);

2 (C) is acquired by purchase as defined in Section

3 179(d) of the Internal Revenue Code; and

4 (D) is not eligible for the Enterprise Zone

5 Investment Credit provided by subsection (f) of this

6 Section.

7 (3) The basis of qualified property shall be the basis

8 used to compute the depreciation deduction for federal

9 income tax purposes.

10 (4) If the basis of the property for federal income tax

11 depreciation purposes is increased after it has been placed

12 in service in a federally designated Foreign Trade Zone or

13 Sub-Zone located in Illinois by the taxpayer, the amount of

14 such increase shall be deemed property placed in service on

15 the date of such increase in basis.

16 (5) The term "placed in service" shall have the same

17 meaning as under Section 46 of the Internal Revenue Code.

18 (6) If during any taxable year ending on or before

19 December 31, 1996, any property ceases to be qualified

20 property in the hands of the taxpayer within 48 months

21 after being placed in service, or the situs of any

22 qualified property is moved outside Illinois within 48

23 months after being placed in service, the tax imposed under

24 subsections (a) and (b) of this Section for such taxable

25 year shall be increased. Such increase shall be determined

26 by (i) recomputing the investment credit which would have

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1 been allowed for the year in which credit for such property

2 was originally allowed by eliminating such property from

3 such computation, and (ii) subtracting such recomputed

4 credit from the amount of credit previously allowed. For

5 the purposes of this paragraph (6), a reduction of the

6 basis of qualified property resulting from a

7 redetermination of the purchase price shall be deemed a

8 disposition of qualified property to the extent of such

9 reduction.

10 (7) Beginning with tax years ending after December 31,

11 1996, if a taxpayer qualifies for the credit under this

12 subsection (h) and thereby is granted a tax abatement and

13 the taxpayer relocates its entire facility in violation of

14 the explicit terms and length of the contract under Section

15 18-183 of the Property Tax Code, the tax imposed under

16 subsections (a) and (b) of this Section shall be increased

17 for the taxable year in which the taxpayer relocated its

18 facility by an amount equal to the amount of credit

19 received by the taxpayer under this subsection (h).

20 (i) Credit for Personal Property Tax Replacement Income

21 Tax. For tax years ending prior to December 31, 2003, a credit

22 shall be allowed against the tax imposed by subsections (a) and

23 (b) of this Section for the tax imposed by subsections (c) and

24 (d) of this Section. This credit shall be computed by

25 multiplying the tax imposed by subsections (c) and (d) of this

26 Section by a fraction, the numerator of which is base income

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1 allocable to Illinois and the denominator of which is Illinois

2 base income, and further multiplying the product by the tax

3 rate imposed by subsections (a) and (b) of this Section.

4 Any credit earned on or after December 31, 1986 under this

5 subsection which is unused in the year the credit is computed

6 because it exceeds the tax liability imposed by subsections (a)

7 and (b) for that year (whether it exceeds the original

8 liability or the liability as later amended) may be carried

9 forward and applied to the tax liability imposed by subsections

10 (a) and (b) of the 5 taxable years following the excess credit

11 year, provided that no credit may be carried forward to any

12 year ending on or after December 31, 2003. This credit shall be

13 applied first to the earliest year for which there is a

14 liability. If there is a credit under this subsection from more

15 than one tax year that is available to offset a liability the

16 earliest credit arising under this subsection shall be applied

17 first.

18 If, during any taxable year ending on or after December 31,

19 1986, the tax imposed by subsections (c) and (d) of this

20 Section for which a taxpayer has claimed a credit under this

21 subsection (i) is reduced, the amount of credit for such tax

22 shall also be reduced. Such reduction shall be determined by

23 recomputing the credit to take into account the reduced tax

24 imposed by subsections (c) and (d). If any portion of the

25 reduced amount of credit has been carried to a different

26 taxable year, an amended return shall be filed for such taxable

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1 year to reduce the amount of credit claimed.

2 (j) Training expense credit. Beginning with tax years

3 ending on or after December 31, 1986 and prior to December 31,

4 2003, a taxpayer shall be allowed a credit against the tax

5 imposed by subsections (a) and (b) under this Section for all

6 amounts paid or accrued, on behalf of all persons employed by

7 the taxpayer in Illinois or Illinois residents employed outside

8 of Illinois by a taxpayer, for educational or vocational

9 training in semi-technical or technical fields or semi-skilled

10 or skilled fields, which were deducted from gross income in the

11 computation of taxable income. The credit against the tax

12 imposed by subsections (a) and (b) shall be 1.6% of such

13 training expenses. For partners, shareholders of subchapter S

14 corporations, and owners of limited liability companies, if the

15 liability company is treated as a partnership for purposes of

16 federal and State income taxation, there shall be allowed a

17 credit under this subsection (j) to be determined in accordance

18 with the determination of income and distributive share of

19 income under Sections 702 and 704 and subchapter S of the

20 Internal Revenue Code.

21 Any credit allowed under this subsection which is unused in

22 the year the credit is earned may be carried forward to each of

23 the 5 taxable years following the year for which the credit is

24 first computed until it is used. This credit shall be applied

25 first to the earliest year for which there is a liability. If

26 there is a credit under this subsection from more than one tax

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1 year that is available to offset a liability the earliest

2 credit arising under this subsection shall be applied first. No

3 carryforward credit may be claimed in any tax year ending on or

4 after December 31, 2003.

5 (k) Research and development credit. For tax years ending

6 after July 1, 1990 and prior to December 31, 2003, and

7 beginning again for tax years ending on or after December 31,

8 2004~~, and ending prior to January 1, 2016,~~a taxpayer shall be

9 allowed a credit against the tax imposed by subsections (a) and

10 (b) of this Section for increasing research activities in this

11 State. The credit allowed against the tax imposed by

12 subsections (a) and (b) shall be equal to 6 1/2% of the

13 qualifying expenditures for increasing research activities in

14 this State. For partners, shareholders of subchapter S

15 corporations, and owners of limited liability companies, if the

16 liability company is treated as a partnership for purposes of

17 federal and State income taxation, there shall be allowed a

18 credit under this subsection to be determined in accordance

19 with the determination of income and distributive share of

20 income under Sections 702 and 704 and subchapter S of the

21 Internal Revenue Code.

22 For purposes of this subsection, "qualifying expenditures"

23 means the qualifying expenditures as defined for the federal

24 credit for increasing research activities which would be

25 allowable under Section 41 of the Internal Revenue Code and

26 which are conducted in this State, "qualifying expenditures for

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1 increasing research activities in this State" means the excess

2 of qualifying expenditures for the taxable year in which

3 incurred over qualifying expenditures for the base period,

4 "qualifying expenditures for the base period" means(i) for tax

5 years ending prior to December 31, 2017, the average of the

6 qualifying expenditures for each year in the base period; and

7 (2) for tax years ending on or after December 31, 2017, 50% of

8 the average of the qualifying expenditures for each year in the

9 base period, and "base period" means the 3 taxable years

10 immediately preceding the taxable year for which the

11 determination is being made.

12 Any credit in excess of the tax liability for the taxable

13 year may be carried forward. A taxpayer may elect to have the

14 unused credit shown on its final completed return carried over

15 as a credit against the tax liability for the following 5

16 taxable years or until it has been fully used, whichever occurs

17 first; provided that no credit earned in a tax year ending

18 prior to December 31, 2003 may be carried forward to any year

19 ending on or after December 31, 2003.

20 If an unused credit is carried forward to a given year from

21 2 or more earlier years, that credit arising in the earliest

22 year will be applied first against the tax liability for the

23 given year. If a tax liability for the given year still

24 remains, the credit from the next earliest year will then be

25 applied, and so on, until all credits have been used or no tax

26 liability for the given year remains. Any remaining unused

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1 credit or credits then will be carried forward to the next

2 following year in which a tax liability is incurred, except

3 that no credit can be carried forward to a year which is more

4 than 5 years after the year in which the expense for which the

5 credit is given was incurred.

6 No inference shall be drawn from this amendatory Act of the

7 91st General Assembly in construing this Section for taxable

8 years beginning before January 1, 1999.

9 This subsection (k) is exempt from the provisions of

10 Section 250.

11 It is the intent of the General Assembly that the research

12 and development credit under this subsection (k) shall apply

13 continuously for all tax years ending on or after December 31,

14 2004, including, but not limited to, the period beginning on

15 January 1, 2016 and ending on the effective date of this

16 amendatory Act of the 100th General Assembly. All actions taken

17 in reliance on the continuation of the credit under this

18 subsection (k) by any taxpayer are hereby validated.

19 (l) Environmental Remediation Tax Credit.

20 (i) For tax years ending after December 31, 1997 and on

21 or before December 31, 2001, a taxpayer shall be allowed a

22 credit against the tax imposed by subsections (a) and (b)

23 of this Section for certain amounts paid for unreimbursed

24 eligible remediation costs, as specified in this

25 subsection. For purposes of this Section, "unreimbursed

26 eligible remediation costs" means costs approved by the

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1 Illinois Environmental Protection Agency ("Agency") under

2 Section 58.14 of the Environmental Protection Act that were

3 paid in performing environmental remediation at a site for

4 which a No Further Remediation Letter was issued by the

5 Agency and recorded under Section 58.10 of the

6 Environmental Protection Act. The credit must be claimed

7 for the taxable year in which Agency approval of the

8 eligible remediation costs is granted. The credit is not

9 available to any taxpayer if the taxpayer or any related

10 party caused or contributed to, in any material respect, a

11 release of regulated substances on, in, or under the site

12 that was identified and addressed by the remedial action

13 pursuant to the Site Remediation Program of the

14 Environmental Protection Act. After the Pollution Control

15 Board rules are adopted pursuant to the Illinois

16 Administrative Procedure Act for the administration and

17 enforcement of Section 58.9 of the Environmental

18 Protection Act, determinations as to credit availability

19 for purposes of this Section shall be made consistent with

20 those rules. For purposes of this Section, "taxpayer"

21 includes a person whose tax attributes the taxpayer has

22 succeeded to under Section 381 of the Internal Revenue Code

23 and "related party" includes the persons disallowed a

24 deduction for losses by paragraphs (b), (c), and (f)(1) of

25 Section 267 of the Internal Revenue Code by virtue of being

26 a related taxpayer, as well as any of its partners. The

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1 credit allowed against the tax imposed by subsections (a)

2 and (b) shall be equal to 25% of the unreimbursed eligible

3 remediation costs in excess of $100,000 per site, except

4 that the $100,000 threshold shall not apply to any site

5 contained in an enterprise zone as determined by the

6 Department of Commerce and Community Affairs (now

7 Department of Commerce and Economic Opportunity). The

8 total credit allowed shall not exceed $40,000 per year with

9 a maximum total of $150,000 per site. For partners and

10 shareholders of subchapter S corporations, there shall be

11 allowed a credit under this subsection to be determined in

12 accordance with the determination of income and

13 distributive share of income under Sections 702 and 704 and

14 subchapter S of the Internal Revenue Code.

15 (ii) A credit allowed under this subsection that is

16 unused in the year the credit is earned may be carried

17 forward to each of the 5 taxable years following the year

18 for which the credit is first earned until it is used. The

19 term "unused credit" does not include any amounts of

20 unreimbursed eligible remediation costs in excess of the

21 maximum credit per site authorized under paragraph (i).

22 This credit shall be applied first to the earliest year for

23 which there is a liability. If there is a credit under this

24 subsection from more than one tax year that is available to

25 offset a liability, the earliest credit arising under this

26 subsection shall be applied first. A credit allowed under

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1 this subsection may be sold to a buyer as part of a sale of

2 all or part of the remediation site for which the credit

3 was granted. The purchaser of a remediation site and the

4 tax credit shall succeed to the unused credit and remaining

5 carry-forward period of the seller. To perfect the

6 transfer, the assignor shall record the transfer in the

7 chain of title for the site and provide written notice to

8 the Director of the Illinois Department of Revenue of the

9 assignor's intent to sell the remediation site and the

10 amount of the tax credit to be transferred as a portion of

11 the sale. In no event may a credit be transferred to any

12 taxpayer if the taxpayer or a related party would not be

13 eligible under the provisions of subsection (i).

14 (iii) For purposes of this Section, the term "site"

15 shall have the same meaning as under Section 58.2 of the

16 Environmental Protection Act.

17 (m) Education expense credit. Beginning with tax years

18 ending after December 31, 1999, a taxpayer who is the custodian

19 of one or more qualifying pupils shall be allowed a credit

20 against the tax imposed by subsections (a) and (b) of this

21 Section for qualified education expenses incurred on behalf of

22 the qualifying pupils. The credit shall be equal to 25% of

23 qualified education expenses, but in no event may the total

24 credit under this subsection claimed by a family that is the

25 custodian of qualifying pupils exceed (i) $500 for tax years

26 ending prior to December 31, 2017, and (ii) $750 for tax years

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1 ending on or after December 31, 2017. In no event shall a

2 credit under this subsection reduce the taxpayer's liability

3 under this Act to less than zero. This subsection is exempt

4 from the provisions of Section 250 of this Act.

5 For purposes of this subsection:

6 "Qualifying pupils" means individuals who (i) are

7 residents of the State of Illinois, (ii) are under the age of

8 21 at the close of the school year for which a credit is

9 sought, and (iii) during the school year for which a credit is

10 sought were full-time pupils enrolled in a kindergarten through

11 twelfth grade education program at any school, as defined in

12 this subsection.

13 "Qualified education expense" means the amount incurred on

14 behalf of a qualifying pupil in excess of $250 for tuition,

15 book fees, and lab fees at the school in which the pupil is

16 enrolled during the regular school year.

17 "School" means any public or nonpublic elementary or

18 secondary school in Illinois that is in compliance with Title

19 VI of the Civil Rights Act of 1964 and attendance at which

20 satisfies the requirements of Section 26-1 of the School Code,

21 except that nothing shall be construed to require a child to

22 attend any particular public or nonpublic school to qualify for

23 the credit under this Section.

24 "Custodian" means, with respect to qualifying pupils, an

25 Illinois resident who is a parent, the parents, a legal

26 guardian, or the legal guardians of the qualifying pupils.

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1 (n) River Edge Redevelopment Zone site remediation tax

2 credit.

3 (i) For tax years ending on or after December 31, 2006,

4 a taxpayer shall be allowed a credit against the tax

5 imposed by subsections (a) and (b) of this Section for

6 certain amounts paid for unreimbursed eligible remediation

7 costs, as specified in this subsection. For purposes of

8 this Section, "unreimbursed eligible remediation costs"

9 means costs approved by the Illinois Environmental

10 Protection Agency ("Agency") under Section 58.14a of the

11 Environmental Protection Act that were paid in performing

12 environmental remediation at a site within a River Edge

13 Redevelopment Zone for which a No Further Remediation

14 Letter was issued by the Agency and recorded under Section

15 58.10 of the Environmental Protection Act. The credit must

16 be claimed for the taxable year in which Agency approval of

17 the eligible remediation costs is granted. The credit is

18 not available to any taxpayer if the taxpayer or any

19 related party caused or contributed to, in any material

20 respect, a release of regulated substances on, in, or under

21 the site that was identified and addressed by the remedial

22 action pursuant to the Site Remediation Program of the

23 Environmental Protection Act. Determinations as to credit

24 availability for purposes of this Section shall be made

25 consistent with rules adopted by the Pollution Control

26 Board pursuant to the Illinois Administrative Procedure

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1 Act for the administration and enforcement of Section 58.9

2 of the Environmental Protection Act. For purposes of this

3 Section, "taxpayer" includes a person whose tax attributes

4 the taxpayer has succeeded to under Section 381 of the

5 Internal Revenue Code and "related party" includes the

6 persons disallowed a deduction for losses by paragraphs

7 (b), (c), and (f)(1) of Section 267 of the Internal Revenue

8 Code by virtue of being a related taxpayer, as well as any

9 of its partners. The credit allowed against the tax imposed

10 by subsections (a) and (b) shall be equal to 25% of the

11 unreimbursed eligible remediation costs in excess of

12 $100,000 per site.

13 (ii) A credit allowed under this subsection that is

14 unused in the year the credit is earned may be carried

15 forward to each of the 5 taxable years following the year

16 for which the credit is first earned until it is used. This

17 credit shall be applied first to the earliest year for

18 which there is a liability. If there is a credit under this

19 subsection from more than one tax year that is available to

20 offset a liability, the earliest credit arising under this

21 subsection shall be applied first. A credit allowed under

22 this subsection may be sold to a buyer as part of a sale of

23 all or part of the remediation site for which the credit

24 was granted. The purchaser of a remediation site and the

25 tax credit shall succeed to the unused credit and remaining

26 carry-forward period of the seller. To perfect the

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1 transfer, the assignor shall record the transfer in the

2 chain of title for the site and provide written notice to

3 the Director of the Illinois Department of Revenue of the

4 assignor's intent to sell the remediation site and the

5 amount of the tax credit to be transferred as a portion of

6 the sale. In no event may a credit be transferred to any

7 taxpayer if the taxpayer or a related party would not be

8 eligible under the provisions of subsection (i).

9 (iii) For purposes of this Section, the term "site"

10 shall have the same meaning as under Section 58.2 of the

11 Environmental Protection Act.

12 (o) For each of taxable years during the Compassionate Use

13 of Medical Cannabis Pilot Program, a surcharge is imposed on

14 all taxpayers on income arising from the sale or exchange of

15 capital assets, depreciable business property, real property

16 used in the trade or business, and Section 197 intangibles of

17 an organization registrant under the Compassionate Use of

18 Medical Cannabis Pilot Program Act. The amount of the surcharge

19 is equal to the amount of federal income tax liability for the

20 taxable year attributable to those sales and exchanges. The

21 surcharge imposed does not apply if:

22 (1) the medical cannabis cultivation center

23 registration, medical cannabis dispensary registration, or

24 the property of a registration is transferred as a result

25 of any of the following:

26 (A) bankruptcy, a receivership, or a debt

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1 adjustment initiated by or against the initial

2 registration or the substantial owners of the initial

3 registration;

4 (B) cancellation, revocation, or termination of

5 any registration by the Illinois Department of Public

6 Health;

7 (C) a determination by the Illinois Department of

8 Public Health that transfer of the registration is in

9 the best interests of Illinois qualifying patients as

10 defined by the Compassionate Use of Medical Cannabis

11 Pilot Program Act;

12 (D) the death of an owner of the equity interest in

13 a registrant;

14 (E) the acquisition of a controlling interest in

15 the stock or substantially all of the assets of a

16 publicly traded company;

17 (F) a transfer by a parent company to a wholly

18 owned subsidiary; or

19 (G) the transfer or sale to or by one person to

20 another person where both persons were initial owners

21 of the registration when the registration was issued;

22 or

23 (2) the cannabis cultivation center registration,

24 medical cannabis dispensary registration, or the

25 controlling interest in a registrant's property is

26 transferred in a transaction to lineal descendants in which

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1 no gain or loss is recognized or as a result of a

2 transaction in accordance with Section 351 of the Internal

3 Revenue Code in which no gain or loss is recognized.

4 (Source: P.A. 97-2, eff. 5-6-11; 97-636, eff. 6-1-12; 97-905,

5 eff. 8-7-12; 98-109, eff. 7-25-13; 98-122, eff. 1-1-14; 98-756,

6 eff. 7-16-14.)

7 (35 ILCS 5/201.7 new)

8 Sec. 201.7. Fiscal Year 2018 spending limitation and tax

9 reduction.

10 (a) If, in State fiscal year 2018, State spending exceeds

11 the State spending limitation set forth in subsection (b) of

12 this Section, then the tax rates set forth in subsection (b) of

13 Section 201 of this Act shall be reduced, according to the

14 procedures set forth in this Section, to 3.75% of the

15 taxpayer's net income for individuals, trusts, and estates and

16 to 5.25% of the taxpayer's net income for corporations. For all

17 taxable years following the taxable year in which the rate has

18 been reduced pursuant to this Section, the tax rate set forth

19 in subsection (b) of Section 201 of this Act shall be 3.75% of

20 the taxpayer's net income for individuals, trusts, and estates

21 and 5.25% of the taxpayer's net income for corporations.

22 (b) The State spending limitation for fiscal year 2018

23 shall be $37,875,000,000.

24 (c) Notwithstanding any other provision of law to the

25 contrary, the Auditor General shall examine each Public Act

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1 authorizing State spending from State general funds and prepare

2 a report no later than 30 days after receiving notification of

3 the Public Act from the Secretary of State or 60 days after the

4 effective date of the Public Act, whichever is earlier. The

5 Auditor General shall file the report with the Secretary of

6 State and copies with the Governor, the State Treasurer, the

7 State Comptroller, the Senate, and the House of

8 Representatives. The report shall indicate: (i) the amount of

9 State spending set forth in the applicable Public Act; (ii) the

10 total amount of State spending authorized by law for the

11 applicable fiscal year as of the date of the report; and (iii)

12 whether State spending exceeds the State spending limitation

13 set forth in subsection (b). The Auditor General may examine

14 multiple Public Acts in one consolidated report, provided that

15 each Public Act is examined within the time period mandated by

16 this subsection (c). The Auditor General shall issue reports in

17 accordance with this Section through June 30, 2018, or the

18 effective date of a reduction in the rate of tax imposed by

19 subsections (a) and (b) of Section 201 of this Act pursuant to

20 this Section, whichever is earlier.

21 At the request of the Auditor General, each State agency

22 shall, without delay, make available to the Auditor General or

23 his or her designated representative any record or information

24 requested and shall provide for examination or copying all

25 records, accounts, papers, reports, vouchers, correspondence,

26 books and other documentation in the custody of that agency,

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1 including information stored in electronic data processing

2 systems, which is related to or within the scope of a report

3 prepared under this Section. The Auditor General shall report

4 to the Governor each instance in which a State agency fails to

5 cooperate promptly and fully with his or her office as required

6 by this Section.

7 The Auditor General's report shall not be in the nature of

8 a post-audit or examination and shall not lead to the issuance

9 of an opinion as that term is defined in generally accepted

10 government auditing standards.

11 (d) If the Auditor General reports that State spending has

12 exceeded the State spending limitation set forth in subsection

13 (b) and if the Governor has not been presented with a bill or

14 bills passed by the General Assembly to reduce State spending

15 to a level that does not exceed the State spending limitation

16 within 45 calendar days of receipt of the Auditor General's

17 report, then the Governor may, for the purpose of reducing

18 State spending to a level that does not exceed the State

19 spending limitation set forth in subsection (b), designate

20 amounts to be set aside as a reserve from the amounts

21 appropriated from the State general funds for all boards,

22 commissions, agencies, institutions, authorities, colleges,

23 universities, and bodies politic and corporate of the State,

24 but not other constitutional officers, the legislative or

25 judicial branch, the office of the Executive Inspector General,

26 or the Executive Ethics Commission. Such a designation must be

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1 made within 15 calendar days after the end of that 45-day

2 period. If the Governor designates amounts to be set aside as a

3 reserve, the Governor shall give notice of the designation to

4 the Auditor General, the State Treasurer, the State

5 Comptroller, the Senate, and the House of Representatives. The

6 amounts placed in reserves shall not be transferred, obligated,

7 encumbered, expended, or otherwise committed unless so

8 authorized by law. Any amount placed in reserves is not State

9 spending and shall not be considered when calculating the total

10 amount of State spending. Any Public Act authorizing the use of

11 amounts placed in reserve by the Governor is considered State

12 spending, unless such Public Act authorizes the use of amounts

13 placed in reserves in response to a fiscal emergency under

14 subsection (g).

15 (e) If the Auditor General reports under subsection (c)

16 that State spending has exceeded the State spending limitation

17 set forth in subsection (b), then the Auditor General shall

18 issue a supplemental report no sooner than the 61st day and no

19 later than the 65th day after issuing the report pursuant to

20 subsection (c). The supplemental report shall: (i) summarize

21 details of actions taken by the General Assembly and the

22 Governor after the issuance of the initial report to reduce

23 State spending, if any, (ii) indicate whether the level of

24 State spending has changed since the initial report, and (iii)

25 indicate whether State spending exceeds the State spending

26 limitation. The Auditor General shall file the report with the

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1 Secretary of State and copies with the Governor, the State

2 Treasurer, the State Comptroller, the Senate, and the House of

3 Representatives. If the supplemental report of the Auditor

4 General provides that State spending exceeds the State spending

5 limitation, then the rate of tax imposed by subsections (a) and

6 (b) of Section 201 is reduced as provided in this Section

7 beginning on the first day of the first month to occur not less

8 than 30 days after issuance of the supplemental report.

9 (f) Should the rates of tax be reduced under this Section,

10 the tax imposed by subsections (a) and (b) of Section 201 shall

11 be determined as follows:

12 (1) In the case of an individual, trust, or estate, the

13 tax shall be imposed in an amount equal to the sum of (i)

14 the rate applicable to the taxpayer under subsection (b) of

15 Section 201 (without regard to the provisions of this

16 Section) times the taxpayer's net income for any portion of

17 the taxable year prior to the effective date of the

18 reduction and (ii) 3.75% of the taxpayer's net income for

19 any portion of the taxable year on or after the effective

20 date of the reduction.

21 (2) In the case of a corporation, the tax shall be

22 imposed in an amount equal to the sum of (i) the rate

23 applicable to the taxpayer under subsection (b) of Section

24 201 (without regard to the provisions of this Section)

25 times the taxpayer's net income for any portion of the

26 taxable year prior to the effective date of the reduction

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1 and (ii) 5.25% of the taxpayer's net income for any portion

2 of the taxable year on or after the effective date of the

3 reduction.

4 (3) For any taxpayer for whom the rate has been reduced

5 under this Section for a portion of a taxable year, the

6 taxpayer shall determine the net income for each portion of

7 the taxable year following the rules set forth in Section

8 202.5 of this Act, using the effective date of the rate

9 reduction rather than the January 1 dates found in that

10 Section, and the day before the effective date of the rate

11 reduction rather than the December 31 dates found in that

12 Section.

13 (4) If the rate applicable to the taxpayer under

14 subsection (b) of Section 201 (without regard to the

15 provisions of this Section) changes during a portion of the

16 taxable year to which that rate is applied under paragraphs

17 (1) or (2) of this subsection (f), the tax for that portion

18 of the taxable year for purposes of paragraph (1) or (2) of

19 this subsection (f) shall be determined as if that portion

20 of the taxable year were a separate taxable year, following

21 the rules set forth in Section 202.5 of this Act. If the

22 taxpayer elects to follow the rules set forth in subsection

23 (b) of Section 202.5, the taxpayer shall follow the rules

24 set forth in subsection (b) of Section 202.5 for all

25 purposes of this Section for that taxable year.

26 (g) Notwithstanding the State spending limitation set

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1 forth in subsection (b) of this Section, the Governor may

2 declare a fiscal emergency by filing a declaration with the

3 Secretary of State and copies with the State Treasurer, the

4 State Comptroller, the Senate, and the House of

5 Representatives. The declaration must be limited to only one

6 State fiscal year, set forth compelling reasons for declaring a

7 fiscal emergency, and request a specific dollar amount. Unless,

8 within 10 calendar days of receipt of the Governor's

9 declaration, the State Comptroller or State Treasurer notifies

10 the Senate and the House of Representatives that he or she does

11 not concur in the Governor's declaration, State spending

12 authorized by law to address the fiscal emergency in an amount

13 no greater than the dollar amount specified in the declaration

14 shall not be considered "State spending" for purposes of the

15 State spending limitation.

16 (h) As used in this Section:

17 "State general funds" means the General Revenue Fund, the

18 Common School Fund, the General Revenue Common School Special

19 Account Fund, the Education Assistance Fund, and the Budget

20 Stabilization Fund.

21 "State spending" means (i) the total amount authorized for

22 spending by appropriation or statutory transfer from the State

23 general funds in the applicable fiscal year, and (ii) any

24 amounts the Governor places in reserves in accordance with

25 subsection (d) that are subsequently released from reserves

26 following authorization by a Public Act. For the purpose of

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1 this definition, "appropriation" means authority to spend

2 money from a State general fund for a specific amount, purpose,

3 and time period, including any supplemental appropriation or

4 continuing appropriation, but does not include

5 reappropriations from a previous fiscal year. For the purpose

6 of this definition, "statutory transfer" means authority to

7 transfer funds from one State general fund to any other fund in

8 the State treasury, but does not include transfers made from

9 one State general fund to another State general fund.

10 "State spending limitation" means the amount described in

11 subsection (b) of this Section for the applicable fiscal year.

12 (35 ILCS 5/203) (from Ch. 120, par. 2-203)

13 Sec. 203. Base income defined.

14 (a) Individuals.

15 (1) In general. In the case of an individual, base

16 income means an amount equal to the taxpayer's adjusted

17 gross income for the taxable year as modified by paragraph

18 (2).

19 (2) Modifications. The adjusted gross income referred

20 to in paragraph (1) shall be modified by adding thereto the

21 sum of the following amounts:

22 (A) An amount equal to all amounts paid or accrued

23 to the taxpayer as interest or dividends during the

24 taxable year to the extent excluded from gross income

25 in the computation of adjusted gross income, except

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1 stock dividends of qualified public utilities

2 described in Section 305(e) of the Internal Revenue

3 Code;

4 (B) An amount equal to the amount of tax imposed by

5 this Act to the extent deducted from gross income in

6 the computation of adjusted gross income for the

7 taxable year;

8 (C) An amount equal to the amount received during

9 the taxable year as a recovery or refund of real

10 property taxes paid with respect to the taxpayer's

11 principal residence under the Revenue Act of 1939 and

12 for which a deduction was previously taken under

13 subparagraph (L) of this paragraph (2) prior to July 1,

14 1991, the retrospective application date of Article 4

15 of Public Act 87-17. In the case of multi-unit or

16 multi-use structures and farm dwellings, the taxes on

17 the taxpayer's principal residence shall be that

18 portion of the total taxes for the entire property

19 which is attributable to such principal residence;

20 (D) An amount equal to the amount of the capital

21 gain deduction allowable under the Internal Revenue

22 Code, to the extent deducted from gross income in the

23 computation of adjusted gross income;

24 (D-5) An amount, to the extent not included in

25 adjusted gross income, equal to the amount of money

26 withdrawn by the taxpayer in the taxable year from a

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1 medical care savings account and the interest earned on

2 the account in the taxable year of a withdrawal

3 pursuant to subsection (b) of Section 20 of the Medical

4 Care Savings Account Act or subsection (b) of Section

5 20 of the Medical Care Savings Account Act of 2000;

6 (D-10) For taxable years ending after December 31,

7 1997, an amount equal to any eligible remediation costs

8 that the individual deducted in computing adjusted

9 gross income and for which the individual claims a

10 credit under subsection (l) of Section 201;

11 (D-15) For taxable years 2001 and thereafter, an

12 amount equal to the bonus depreciation deduction taken

13 on the taxpayer's federal income tax return for the

14 taxable year under subsection (k) of Section 168 of the

15 Internal Revenue Code;

16 (D-16) If the taxpayer sells, transfers, abandons,

17 or otherwise disposes of property for which the

18 taxpayer was required in any taxable year to make an

19 addition modification under subparagraph (D-15), then

20 an amount equal to the aggregate amount of the

21 deductions taken in all taxable years under

22 subparagraph (Z) with respect to that property.

23 If the taxpayer continues to own property through

24 the last day of the last tax year for which the

25 taxpayer may claim a depreciation deduction for

26 federal income tax purposes and for which the taxpayer

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1 was allowed in any taxable year to make a subtraction

2 modification under subparagraph (Z), then an amount

3 equal to that subtraction modification.

4 The taxpayer is required to make the addition

5 modification under this subparagraph only once with

6 respect to any one piece of property;

7 (D-17) An amount equal to the amount otherwise

8 allowed as a deduction in computing base income for

9 interest paid, accrued, or incurred, directly or

10 indirectly, (i) for taxable years ending on or after

11 December 31, 2004, to a foreign person who would be a

12 member of the same unitary business group but for the

13 fact that foreign person's business activity outside

14 the United States is 80% or more of the foreign

15 person's total business activity and (ii) for taxable

16 years ending on or after December 31, 2008, to a person

17 who would be a member of the same unitary business

18 group but for the fact that the person is prohibited

19 under Section 1501(a)(27) from being included in the

20 unitary business group because he or she is ordinarily

21 required to apportion business income under different

22 subsections of Section 304. The addition modification

23 required by this subparagraph shall be reduced to the

24 extent that dividends were included in base income of

25 the unitary group for the same taxable year and

26 received by the taxpayer or by a member of the

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1 taxpayer's unitary business group (including amounts

2 included in gross income under Sections 951 through 964

3 of the Internal Revenue Code and amounts included in

4 gross income under Section 78 of the Internal Revenue

5 Code) with respect to the stock of the same person to

6 whom the interest was paid, accrued, or 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

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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;

25 (D-18) An amount equal to the amount of intangible

26 expenses and costs otherwise allowed as a deduction in

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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 under Sections 951 through 964 of the Internal

22 Revenue Code and amounts included in gross income under

23 Section 78 of the Internal Revenue Code) with respect

24 to the stock of the same person to whom the intangible

25 expenses and costs were directly or indirectly paid,

26 incurred, or accrued. The preceding sentence does not

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1 apply to the extent that the same dividends caused a

2 reduction to the addition modification required under

3 Section 203(a)(2)(D-17) of this Act. As used in this

4 subparagraph, the term "intangible expenses and costs"

5 includes (1) expenses, losses, and costs for, or

6 related to, the direct or indirect acquisition, use,

7 maintenance or management, ownership, sale, exchange,

8 or any other disposition of intangible property; (2)

9 losses incurred, directly or indirectly, from

10 factoring transactions or discounting transactions;

11 (3) royalty, patent, technical, and copyright fees;

12 (4) licensing fees; and (5) other similar expenses and

13 costs. For purposes of this subparagraph, "intangible

14 property" includes patents, patent applications, trade

15 names, trademarks, service marks, copyrights, mask

16 works, trade secrets, and similar types of intangible

17 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

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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

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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-19) For taxable years ending on or after

8 December 31, 2008, an amount equal to the amount of

9 insurance premium expenses and costs otherwise allowed

10 as a deduction in computing base income, and that were

11 paid, accrued, or incurred, directly or indirectly, to

12 a 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

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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(a)(2)(D-17) or

6 Section 203(a)(2)(D-18) of this Act.

7 (D-20) For taxable years beginning on or after

8 January 1, 2002 and ending on or before December 31,

9 2006, in the case of a distribution from a qualified

10 tuition program under Section 529 of the Internal

11 Revenue Code, other than (i) a distribution from a

12 College Savings Pool created under Section 16.5 of the

13 State Treasurer Act or (ii) a distribution from the

14 Illinois Prepaid Tuition Trust Fund, an amount equal to

15 the amount excluded from gross income under Section

16 529(c)(3)(B). For taxable years beginning on or after

17 January 1, 2007, in the case of a distribution from a

18 qualified tuition program under Section 529 of the

19 Internal Revenue Code, other than (i) a distribution

20 from a College Savings Pool created under Section 16.5

21 of the State Treasurer Act, (ii) a distribution from

22 the Illinois Prepaid Tuition Trust Fund, or (iii) a

23 distribution from a qualified tuition program under

24 Section 529 of the Internal Revenue Code that (I)

25 adopts and determines that its offering materials

26 comply with the College Savings Plans Network's

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1 disclosure principles and (II) has made reasonable

2 efforts to inform in-state residents of the existence

3 of in-state qualified tuition programs by informing

4 Illinois residents directly and, where applicable, to

5 inform financial intermediaries distributing the

6 program to inform in-state residents of the existence

7 of in-state qualified tuition programs at least

8 annually, an amount equal to the amount excluded from

9 gross income under Section 529(c)(3)(B).

10 For the purposes of this subparagraph (D-20), a

11 qualified tuition program has made reasonable efforts

12 if it makes disclosures (which may use the term

13 "in-state program" or "in-state plan" and need not

14 specifically refer to Illinois or its qualified

15 programs by name) (i) directly to prospective

16 participants in its offering materials or makes a

17 public disclosure, such as a website posting; and (ii)

18 where applicable, to intermediaries selling the

19 out-of-state program in the same manner that the

20 out-of-state program distributes its offering

21 materials;

22 (D-21) For taxable years beginning on or after

23 January 1, 2007, in the case of transfer of moneys from

24 a qualified tuition program under Section 529 of the

25 Internal Revenue Code that is administered by the State

26 to an out-of-state program, an amount equal to the

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1 amount of moneys previously deducted from base income

2 under subsection (a)(2)(Y) of this Section;

3 (D-22) For taxable years beginning on or after

4 January 1, 2009, in the case of a nonqualified

5 withdrawal or refund of moneys from a qualified tuition

6 program under Section 529 of the Internal Revenue Code

7 administered by the State that is not used for

8 qualified expenses at an eligible education

9 institution, an amount equal to the contribution

10 component of the nonqualified withdrawal or refund

11 that was previously deducted from base income under

12 subsection (a)(2)(y) of this Section, provided that

13 the withdrawal or refund did not result from the

14 beneficiary's death or disability;

15 (D-23) An amount equal to the credit allowable to

16 the taxpayer under Section 218(a) of this Act,

17 determined without regard to Section 218(c) of this

18 Act;

19 (D-24) For taxable years beginning on or after

20 January 1, 2017, an amount equal to the deduction

21 allowed under Section 199 of the Internal Revenue Code

22 for the taxable year;

23 and by deducting from the total so obtained the sum of the

24 following amounts:

25 (E) For taxable years ending before December 31,

26 2001, any amount included in such total in respect of

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1 any compensation (including but not limited to any

2 compensation paid or accrued to a serviceman while a

3 prisoner of war or missing in action) paid to a

4 resident by reason of being on active duty in the Armed

5 Forces of the United States and in respect of any

6 compensation paid or accrued to a resident who as a

7 governmental employee was a prisoner of war or missing

8 in action, and in respect of any compensation paid to a

9 resident in 1971 or thereafter for annual training

10 performed pursuant to Sections 502 and 503, Title 32,

11 United States Code as a member of the Illinois National

12 Guard or, beginning with taxable years ending on or

13 after December 31, 2007, the National Guard of any

14 other state. For taxable years ending on or after

15 December 31, 2001, any amount included in such total in

16 respect of any compensation (including but not limited

17 to any compensation paid or accrued to a serviceman

18 while a prisoner of war or missing in action) paid to a

19 resident by reason of being a member of any component

20 of the Armed Forces of the United States and in respect

21 of any compensation paid or accrued to a resident who

22 as a governmental employee was a prisoner of war or

23 missing in action, and in respect of any compensation

24 paid to a resident in 2001 or thereafter by reason of

25 being a member of the Illinois National Guard or,

26 beginning with taxable years ending on or after

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1 December 31, 2007, the National Guard of any other

2 state. The provisions of this subparagraph (E) are

3 exempt from the provisions of Section 250;

4 (F) An amount equal to all amounts included in such

5 total pursuant to the provisions of Sections 402(a),

6 402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the

7 Internal Revenue Code, or included in such total as

8 distributions under the provisions of any retirement

9 or disability plan for employees of any governmental

10 agency or unit, or retirement payments to retired

11 partners, which payments are excluded in computing net

12 earnings from self employment by Section 1402 of the

13 Internal Revenue Code and regulations adopted pursuant

14 thereto;

15 (G) The valuation limitation amount;

16 (H) An amount equal to the amount of any tax

17 imposed by this Act which was refunded to the taxpayer

18 and included in such total for the taxable year;

19 (I) An amount equal to all amounts included in such

20 total pursuant to the provisions of Section 111 of the

21 Internal Revenue Code as a recovery of items previously

22 deducted from adjusted gross income in the computation

23 of taxable income;

24 (J) An amount equal to those dividends included in

25 such total which were paid by a corporation which

26 conducts business operations in a River Edge

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1 Redevelopment Zone or zones created under the River

2 Edge Redevelopment Zone Act, and conducts

3 substantially all of its operations in a River Edge

4 Redevelopment Zone or zones. This subparagraph (J) is

5 exempt from the provisions of Section 250;

6 (K) An amount equal to those dividends included in

7 such total that were paid by a corporation that

8 conducts business operations in a federally designated

9 Foreign Trade Zone or Sub-Zone and that is designated a

10 High Impact Business located in Illinois; provided

11 that dividends eligible for the deduction provided in

12 subparagraph (J) of paragraph (2) of this subsection

13 shall not be eligible for the deduction provided under

14 this subparagraph (K);

15 (L) For taxable years ending after December 31,

16 1983, an amount equal to all social security benefits

17 and railroad retirement benefits included in such

18 total pursuant to Sections 72(r) and 86 of the Internal

19 Revenue Code;

20 (M) With the exception of any amounts subtracted

21 under subparagraph (N), an amount equal to the sum of

22 all amounts disallowed as deductions by (i) Sections

23 171(a) (2), and 265(2) of the Internal Revenue Code,

24 and all amounts of expenses allocable to interest and

25 disallowed as deductions by Section 265(1) of the

26 Internal Revenue Code; and (ii) for taxable years

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1 ending on or after August 13, 1999, Sections 171(a)(2),

2 265, 280C, and 832(b)(5)(B)(i) of the Internal Revenue

3 Code, plus, for taxable years ending on or after

4 December 31, 2011, Section 45G(e)(3) of the Internal

5 Revenue Code and, for taxable years ending on or after

6 December 31, 2008, any amount included in gross income

7 under Section 87 of the Internal Revenue Code; the

8 provisions of this subparagraph are exempt from the

9 provisions of Section 250;

10 (N) An amount equal to all amounts included in such

11 total which are exempt from taxation by this State

12 either by reason of its statutes or Constitution or by

13 reason of the Constitution, treaties or statutes of the

14 United States; provided that, in the case of any

15 statute of this State that exempts income derived from

16 bonds or other obligations from the tax imposed under

17 this Act, the amount exempted shall be the interest net

18 of bond premium amortization;

19 (O) An amount equal to any contribution made to a

20 job training project established pursuant to the Tax

21 Increment Allocation Redevelopment Act;

22 (P) An amount equal to the amount of the deduction

23 used to compute the federal income tax credit for

24 restoration of substantial amounts held under claim of

25 right for the taxable year pursuant to Section 1341 of

26 the Internal Revenue Code or of any itemized deduction

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1 taken from adjusted gross income in the computation of

2 taxable income for restoration of substantial amounts

3 held under claim of right for the taxable year;

4 (Q) An amount equal to any amounts included in such

5 total, received by the taxpayer as an acceleration in

6 the payment of life, endowment or annuity benefits in

7 advance of the time they would otherwise be payable as

8 an indemnity for a terminal illness;

9 (R) An amount equal to the amount of any federal or

10 State bonus paid to veterans of the Persian Gulf War;

11 (S) An amount, to the extent included in adjusted

12 gross income, equal to the amount of a contribution

13 made in the taxable year on behalf of the taxpayer to a

14 medical care savings account established under the

15 Medical Care Savings Account Act or the Medical Care

16 Savings Account Act of 2000 to the extent the

17 contribution is accepted by the account administrator

18 as provided in that Act;

19 (T) An amount, to the extent included in adjusted

20 gross income, equal to the amount of interest earned in

21 the taxable year on a medical care savings account

22 established under the Medical Care Savings Account Act

23 or the Medical Care Savings Account Act of 2000 on

24 behalf of the taxpayer, other than interest added

25 pursuant to item (D-5) of this paragraph (2);

26 (U) For one taxable year beginning on or after

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1 January 1, 1994, an amount equal to the total amount of

2 tax imposed and paid under subsections (a) and (b) of

3 Section 201 of this Act on grant amounts received by

4 the taxpayer under the Nursing Home Grant Assistance

5 Act during the taxpayer's taxable years 1992 and 1993;

6 (V) Beginning with tax years ending on or after

7 December 31, 1995 and ending with tax years ending on

8 or before December 31, 2004, an amount equal to the

9 amount paid by a taxpayer who is a self-employed

10 taxpayer, a partner of a partnership, or a shareholder

11 in a Subchapter S corporation for health insurance or

12 long-term care insurance for that taxpayer or that

13 taxpayer's spouse or dependents, to the extent that the

14 amount paid for that health insurance or long-term care

15 insurance may be deducted under Section 213 of the

16 Internal Revenue Code, has not been deducted on the

17 federal income tax return of the taxpayer, and does not

18 exceed the taxable income attributable to that

19 taxpayer's income, self-employment income, or

20 Subchapter S corporation income; except that no

21 deduction shall be allowed under this item (V) if the

22 taxpayer is eligible to participate in any health

23 insurance or long-term care insurance plan of an

24 employer of the taxpayer or the taxpayer's spouse. The

25 amount of the health insurance and long-term care

26 insurance subtracted under this item (V) shall be

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1 determined by multiplying total health insurance and

2 long-term care insurance premiums paid by the taxpayer

3 times a number that represents the fractional

4 percentage of eligible medical expenses under Section

5 213 of the Internal Revenue Code of 1986 not actually

6 deducted on the taxpayer's federal income tax return;

7 (W) For taxable years beginning on or after January

8 1, 1998, all amounts included in the taxpayer's federal

9 gross income in the taxable year from amounts converted

10 from a regular IRA to a Roth IRA. This paragraph is

11 exempt from the provisions of Section 250;

12 (X) For taxable year 1999 and thereafter, an amount

13 equal to the amount of any (i) distributions, to the

14 extent includible in gross income for federal income

15 tax purposes, made to the taxpayer because of his or

16 her status as a victim of persecution for racial or

17 religious reasons by Nazi Germany or any other Axis

18 regime or as an heir of the victim and (ii) items of

19 income, to the extent includible in gross income for

20 federal income tax purposes, attributable to, derived

21 from or in any way related to assets stolen from,

22 hidden from, or otherwise lost to a victim of

23 persecution for racial or religious reasons by Nazi

24 Germany or any other Axis regime immediately prior to,

25 during, and immediately after World War II, including,

26 but not limited to, interest on the proceeds receivable

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1 as insurance under policies issued to a victim of

2 persecution for racial or religious reasons by Nazi

3 Germany or any other Axis regime by European insurance

4 companies immediately prior to and during World War II;

5 provided, however, this subtraction from federal

6 adjusted gross income does not apply to assets acquired

7 with such assets or with the proceeds from the sale of

8 such assets; provided, further, this paragraph shall

9 only apply to a taxpayer who was the first recipient of

10 such assets after their recovery and who is a victim of

11 persecution for racial or religious reasons by Nazi

12 Germany or any other Axis regime or as an heir of the

13 victim. The amount of and the eligibility for any

14 public assistance, benefit, or similar entitlement is

15 not affected by the inclusion of items (i) and (ii) of

16 this paragraph in gross income for federal income tax

17 purposes. This paragraph is exempt from the provisions

18 of Section 250;

19 (Y) For taxable years beginning on or after January

20 1, 2002 and ending on or before December 31, 2004,

21 moneys contributed in the taxable year to a College

22 Savings Pool account under Section 16.5 of the State

23 Treasurer Act, except that amounts excluded from gross

24 income under Section 529(c)(3)(C)(i) of the Internal

25 Revenue Code shall not be considered moneys

26 contributed under this subparagraph (Y). For taxable

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1 years beginning on or after January 1, 2005, a maximum

2 of $10,000 contributed in the taxable year to (i) a

3 College Savings Pool account under Section 16.5 of the

4 State Treasurer Act or (ii) the Illinois Prepaid

5 Tuition Trust Fund, except that amounts excluded from

6 gross income under Section 529(c)(3)(C)(i) of the

7 Internal Revenue Code shall not be considered moneys

8 contributed under this subparagraph (Y). For purposes

9 of this subparagraph, contributions made by an

10 employer on behalf of an employee, or matching

11 contributions made by an employee, shall be treated as

12 made by the employee. This subparagraph (Y) is exempt

13 from the provisions of Section 250;

14 (Z) For taxable years 2001 and thereafter, for the

15 taxable year in which the bonus depreciation deduction

16 is taken on the taxpayer's federal income tax return

17 under subsection (k) of Section 168 of the Internal

18 Revenue Code and for each applicable taxable year

19 thereafter, an amount equal to "x", where:

20 (1) "y" equals the amount of the depreciation

21 deduction taken for the taxable year on the

22 taxpayer's federal income tax return on property

23 for which the bonus depreciation deduction was

24 taken in any year under subsection (k) of Section

25 168 of the Internal Revenue Code, but not including

26 the bonus depreciation deduction;

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LRB100 06347 HLH 22889 a

1 (2) for taxable years ending on or before

2 December 31, 2005, "x" equals "y" multiplied by 30

3 and then divided by 70 (or "y" multiplied by

4 0.429); and

5 (3) for taxable years ending after December

6 31, 2005:

7 (i) for property on which a bonus

8 depreciation deduction of 30% of the adjusted

9 basis was taken, "x" equals "y" multiplied by

10 30 and then divided by 70 (or "y" multiplied by

11 0.429); and

12 (ii) for property on which a bonus

13 depreciation deduction of 50% of the adjusted

14 basis was taken, "x" equals "y" multiplied by

15 1.0.

16 The aggregate amount deducted under this

17 subparagraph in all taxable years for any one piece of

18 property may not exceed the amount of the bonus

19 depreciation deduction taken on that property on the

20 taxpayer's federal income tax return under subsection

21 (k) of Section 168 of the Internal Revenue Code. This

22 subparagraph (Z) is exempt from the provisions of

23 Section 250;

24 (AA) If the taxpayer sells, transfers, abandons,

25 or otherwise disposes of property for which the

26 taxpayer was required in any taxable year to make an

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1 addition modification under subparagraph (D-15), then

2 an amount equal to that addition modification.

3 If the taxpayer continues to own property through

4 the last day of the last tax year for which the

5 taxpayer may claim a depreciation deduction for

6 federal income tax purposes and for which the taxpayer

7 was required in any taxable year to make an addition

8 modification under subparagraph (D-15), then an amount

9 equal to that addition modification.

10 The taxpayer is allowed to take the deduction under

11 this subparagraph only once with respect to any one

12 piece of property.

13 This subparagraph (AA) is exempt from the

14 provisions of Section 250;

15 (BB) Any amount included in adjusted gross income,

16 other than salary, received by a driver in a

17 ridesharing arrangement using a motor vehicle;

18 (CC) The amount of (i) any interest income (net of

19 the deductions allocable thereto) taken into account

20 for the taxable year with respect to a transaction with

21 a taxpayer that is required to make an addition

22 modification with respect to such transaction under

23 Section 203(a)(2)(D-17), 203(b)(2)(E-12),

24 203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed

25 the amount of that addition modification, and (ii) any

26 income from intangible property (net of the deductions

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1 allocable thereto) taken into account for the taxable

2 year with respect to a transaction with a taxpayer that

3 is required to make an addition modification with

4 respect to such transaction under Section

5 203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or

6 203(d)(2)(D-8), but not to exceed the amount of that

7 addition modification. This subparagraph (CC) is

8 exempt from the provisions of Section 250;

9 (DD) An amount equal to the interest income taken

10 into account for the taxable year (net of the

11 deductions allocable thereto) with respect to

12 transactions with (i) a foreign person who would be a

13 member of the taxpayer's unitary business group but for

14 the fact that the foreign person's business activity

15 outside the United States is 80% or more of that

16 person's total business activity and (ii) for taxable

17 years ending on or after December 31, 2008, to a person

18 who would be a member of the same unitary business

19 group but for the fact that the person is prohibited

20 under Section 1501(a)(27) from being included in the

21 unitary business group because he or she is ordinarily

22 required to apportion business income under different

23 subsections of Section 304, but not to exceed the

24 addition modification required to be made for the same

25 taxable year under Section 203(a)(2)(D-17) for

26 interest paid, accrued, or incurred, directly or

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1 indirectly, to the same person. This subparagraph (DD)

2 is exempt from the provisions of Section 250;

3 (EE) An amount equal to the income from intangible

4 property taken into account for the taxable year (net

5 of the deductions allocable thereto) with respect to

6 transactions with (i) a foreign person who would be a

7 member of the taxpayer's unitary business group but for

8 the fact that the foreign person's business activity

9 outside the United States is 80% or more of that

10 person's total business activity and (ii) for taxable

11 years ending on or after December 31, 2008, to a person

12 who would be a member of the same unitary business

13 group but for the fact that the person is prohibited

14 under Section 1501(a)(27) from being included in the

15 unitary business group because he or she is ordinarily

16 required to apportion business income under different

17 subsections of Section 304, but not to exceed the

18 addition modification required to be made for the same

19 taxable year under Section 203(a)(2)(D-18) for

20 intangible expenses and costs paid, accrued, or

21 incurred, directly or indirectly, to the same foreign

22 person. This subparagraph (EE) is exempt from the

23 provisions of Section 250;

24 (FF) An amount equal to any amount awarded to the

25 taxpayer during the taxable year by the Court of Claims

26 under subsection (c) of Section 8 of the Court of

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1 Claims Act for time unjustly served in a State prison.

2 This subparagraph (FF) is exempt from the provisions of

3 Section 250; and

4 (GG) For taxable years ending on or after December

5 31, 2011, in the case of a taxpayer who was required to

6 add back any insurance premiums under Section

7 203(a)(2)(D-19), such taxpayer may elect to subtract

8 that part of a reimbursement received from the

9 insurance company equal to the amount of the expense or

10 loss (including expenses incurred by the insurance

11 company) that would have been taken into account as a

12 deduction for federal income tax purposes if the

13 expense or loss had been uninsured. If a taxpayer makes

14 the election provided for by this subparagraph (GG),

15 the insurer to which the premiums were paid must add

16 back to income the amount subtracted by the taxpayer

17 pursuant to this subparagraph (GG). This subparagraph

18 (GG) is exempt from the provisions of Section 250.

19 (b) Corporations.

20 (1) In general. In the case of a corporation, base

21 income means an amount equal to the taxpayer's taxable

22 income for the taxable year as modified by paragraph (2).

23 (2) Modifications. The taxable income referred to in

24 paragraph (1) shall be modified by adding thereto the sum

25 of the following amounts:

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1 (A) An amount equal to all amounts paid or accrued

2 to the taxpayer as interest and all distributions

3 received from regulated investment companies during

4 the taxable year to the extent excluded from gross

5 income in the computation of taxable income;

6 (B) An amount equal to the amount of tax imposed by

7 this Act to the extent deducted from gross income in

8 the computation of taxable income for the taxable year;

9 (C) In the case of a regulated investment company,

10 an amount equal to the excess of (i) the net long-term

11 capital gain for the taxable year, over (ii) the amount

12 of the capital gain dividends designated as such in

13 accordance with Section 852(b)(3)(C) of the Internal

14 Revenue Code and any amount designated under Section

15 852(b)(3)(D) of the Internal Revenue Code,

16 attributable to the taxable year (this amendatory Act

17 of 1995 (Public Act 89-89) is declarative of existing

18 law and is not a new enactment);

19 (D) The amount of any net operating loss deduction

20 taken in arriving at taxable income, other than a net

21 operating loss carried forward from a taxable year

22 ending prior to December 31, 1986;

23 (E) For taxable years in which a net operating loss

24 carryback or carryforward from a taxable year ending

25 prior to December 31, 1986 is an element of taxable

26 income under paragraph (1) of subsection (e) or

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1 subparagraph (E) of paragraph (2) of subsection (e),

2 the amount by which addition modifications other than

3 those provided by this subparagraph (E) exceeded

4 subtraction modifications in such earlier taxable

5 year, with the following limitations applied in the

6 order that they are listed:

7 (i) the addition modification relating to the

8 net operating loss carried back or forward to the

9 taxable year from any taxable year ending prior to

10 December 31, 1986 shall be reduced by the amount of

11 addition modification under this subparagraph (E)

12 which related to that net operating loss and which

13 was taken into account in calculating the base

14 income of an earlier taxable year, and

15 (ii) the addition modification relating to the

16 net operating loss carried back or forward to the

17 taxable year from any taxable year ending prior to

18 December 31, 1986 shall not exceed the amount of

19 such carryback or carryforward;

20 For taxable years in which there is a net operating

21 loss carryback or carryforward from more than one other

22 taxable year ending prior to December 31, 1986, the

23 addition modification provided in this subparagraph

24 (E) shall be the sum of the amounts computed

25 independently under the preceding provisions of this

26 subparagraph (E) for each such taxable year;

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1 (E-5) For taxable years ending after December 31,

2 1997, an amount equal to any eligible remediation costs

3 that the corporation deducted in computing adjusted

4 gross income and for which the corporation claims a

5 credit under subsection (l) of Section 201;

6 (E-10) For taxable years 2001 and thereafter, an

7 amount equal to the bonus depreciation deduction taken

8 on the taxpayer's federal income tax return for the

9 taxable year under subsection (k) of Section 168 of the

10 Internal Revenue Code;

11 (E-11) If the taxpayer sells, transfers, abandons,

12 or otherwise disposes of property for which the

13 taxpayer was required in any taxable year to make an

14 addition modification under subparagraph (E-10), then

15 an amount equal to the aggregate amount of the

16 deductions taken in all taxable years under

17 subparagraph (T) with respect to that property.

18 If the taxpayer continues to own property through

19 the last day of the last tax year for which the

20 taxpayer may claim a depreciation deduction for

21 federal income tax purposes and for which the taxpayer

22 was allowed in any taxable year to make a subtraction

23 modification under subparagraph (T), then an amount

24 equal to that subtraction modification.

25 The taxpayer is required to make the addition

26 modification under this subparagraph only once with

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1 respect to any one piece of property;

2 (E-12) An amount equal to the amount otherwise

3 allowed as a deduction in computing base income for

4 interest paid, accrued, or incurred, directly or

5 indirectly, (i) for taxable years ending on or after

6 December 31, 2004, to a foreign person who would be a

7 member of the same unitary business group but for the

8 fact the foreign person's business activity outside

9 the United States is 80% or more of the foreign

10 person's total business activity and (ii) for taxable

11 years ending on or after December 31, 2008, to a person

12 who would be a member of the same unitary business

13 group but for the fact that the person is prohibited

14 under Section 1501(a)(27) from being included in the

15 unitary business group because he or she is ordinarily

16 required to apportion business income under different

17 subsections of Section 304. The addition modification

18 required by this subparagraph shall be reduced to the

19 extent that dividends were included in base income of

20 the unitary group for the same taxable year and

21 received by the taxpayer or by a member of the

22 taxpayer's unitary business group (including amounts

23 included in gross income pursuant to Sections 951

24 through 964 of the Internal Revenue Code and amounts

25 included in gross income under Section 78 of the

26 Internal Revenue Code) with respect to the stock of the

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1 same person to whom the interest was paid, accrued, or

2 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 (E-13) 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 pursuant to Sections 951 through 964 of the

18 Internal Revenue Code and amounts included in gross

19 income under Section 78 of the Internal Revenue Code)

20 with respect to the stock of the same person to whom

21 the intangible expenses and costs were directly or

22 indirectly paid, incurred, or accrued. The preceding

23 sentence shall not apply to the extent that the same

24 dividends caused a reduction to the addition

25 modification required under Section 203(b)(2)(E-12) of

26 this Act. As used in this subparagraph, the term

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1 "intangible expenses and costs" includes (1) expenses,

2 losses, and costs for, or related to, the direct or

3 indirect acquisition, use, maintenance or management,

4 ownership, sale, exchange, or any other disposition of

5 intangible property; (2) losses incurred, directly or

6 indirectly, from factoring transactions or discounting

7 transactions; (3) royalty, patent, technical, and

8 copyright fees; (4) licensing fees; and (5) other

9 similar expenses and costs. For purposes of this

10 subparagraph, "intangible property" includes patents,

11 patent applications, trade names, trademarks, service

12 marks, copyrights, mask works, trade secrets, and

13 similar types of intangible 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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LRB100 06347 HLH 22889 a

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 (E-14) 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(b)(2)(E-12) or

2 Section 203(b)(2)(E-13) of this Act;

3 (E-15) For taxable years beginning after December

4 31, 2008, any deduction for dividends paid by a captive

5 real estate investment trust that is allowed to a real

6 estate investment trust under Section 857(b)(2)(B) of

7 the Internal Revenue Code for dividends paid;

8 (E-16) An amount equal to the credit allowable to

9 the taxpayer under Section 218(a) of this Act,

10 determined without regard to Section 218(c) of this

11 Act;

12 (E-17) For taxable years beginning on or after

13 January 1, 2017, an amount equal to the deduction

14 allowed under Section 199 of the Internal Revenue Code

15 for the taxable year;

16 and by deducting from the total so obtained the sum of the

17 following amounts:

18 (F) An amount equal to the amount of any tax

19 imposed by this Act which was refunded to the taxpayer

20 and included in such total for the taxable year;

21 (G) An amount equal to any amount included in such

22 total under Section 78 of the Internal Revenue Code;

23 (H) In the case of a regulated investment company,

24 an amount equal to the amount of exempt interest

25 dividends as defined in subsection (b) (5) of Section

26 852 of the Internal Revenue Code, paid to shareholders

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1 for the taxable year;

2 (I) With the exception of any amounts subtracted

3 under subparagraph (J), an amount equal to the sum of

4 all amounts disallowed as deductions by (i) Sections

5 171(a) (2), and 265(a)(2) and amounts disallowed as

6 interest expense by Section 291(a)(3) of the Internal

7 Revenue Code, and all amounts of expenses allocable to

8 interest and disallowed as deductions by Section

9 265(a)(1) of the Internal Revenue Code; and (ii) for

10 taxable years ending on or after August 13, 1999,

11 Sections 171(a)(2), 265, 280C, 291(a)(3), and

12 832(b)(5)(B)(i) of the Internal Revenue Code, plus,

13 for tax years ending on or after December 31, 2011,

14 amounts disallowed as deductions by Section 45G(e)(3)

15 of the Internal Revenue Code and, for taxable years

16 ending on or after December 31, 2008, any amount

17 included in gross income under Section 87 of the

18 Internal Revenue Code and the policyholders' share of

19 tax-exempt interest of a life insurance company under

20 Section 807(a)(2)(B) of the Internal Revenue Code (in

21 the case of a life insurance company with gross income

22 from a decrease in reserves for the tax year) or

23 Section 807(b)(1)(B) of the Internal Revenue Code (in

24 the case of a life insurance company allowed a

25 deduction for an increase in reserves for the tax

26 year); the provisions of this subparagraph are exempt

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1 from the provisions of Section 250;

2 (J) An amount equal to all amounts included in such

3 total which are exempt from taxation by this State

4 either by reason of its statutes or Constitution or by

5 reason of the Constitution, treaties or statutes of the

6 United States; provided that, in the case of any

7 statute of this State that exempts income derived from

8 bonds or other obligations from the tax imposed under

9 this Act, the amount exempted shall be the interest net

10 of bond premium amortization;

11 (K) An amount equal to those dividends included in

12 such total which were paid by a corporation which

13 conducts business operations in a River Edge

14 Redevelopment Zone or zones created under the River

15 Edge Redevelopment Zone Act and conducts substantially

16 all of its operations in a River Edge Redevelopment

17 Zone or zones. This subparagraph (K) is exempt from the

18 provisions of Section 250;

19 (L) An amount equal to those dividends included in

20 such total that were paid by a corporation that

21 conducts business operations in a federally designated

22 Foreign Trade Zone or Sub-Zone and that is designated a

23 High Impact Business located in Illinois; provided

24 that dividends eligible for the deduction provided in

25 subparagraph (K) of paragraph 2 of this subsection

26 shall not be eligible for the deduction provided under

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1 this subparagraph (L);

2 (M) For any taxpayer that is a financial

3 organization within the meaning of Section 304(c) of

4 this Act, an amount included in such total as interest

5 income from a loan or loans made by such taxpayer to a

6 borrower, to the extent that such a loan is secured by

7 property which is eligible for the River Edge

8 Redevelopment Zone Investment Credit. To determine the

9 portion of a loan or loans that is secured by property

10 eligible for a Section 201(f) investment credit to the

11 borrower, the entire principal amount of the loan or

12 loans between the taxpayer and the borrower should be

13 divided into the basis of the Section 201(f) investment

14 credit property which secures the loan or loans, using

15 for this purpose the original basis of such property on

16 the date that it was placed in service in the River

17 Edge Redevelopment Zone. The subtraction modification

18 available to taxpayer in any year under this subsection

19 shall be that portion of the total interest paid by the

20 borrower with respect to such loan attributable to the

21 eligible property as calculated under the previous

22 sentence. This subparagraph (M) is exempt from the

23 provisions of Section 250;

24 (M-1) For any taxpayer that is a financial

25 organization within the meaning of Section 304(c) of

26 this Act, an amount included in such total as interest

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1 income from a loan or loans made by such taxpayer to a

2 borrower, to the extent that such a loan is secured by

3 property which is eligible for the High Impact Business

4 Investment Credit. To determine the portion of a loan

5 or loans that is secured by property eligible for a

6 Section 201(h) investment credit to the borrower, the

7 entire principal amount of the loan or loans between

8 the taxpayer and the borrower should be divided into

9 the basis of the Section 201(h) investment credit

10 property which secures the loan or loans, using for

11 this purpose the original basis of such property on the

12 date that it was placed in service in a federally

13 designated Foreign Trade Zone or Sub-Zone located in

14 Illinois. No taxpayer that is eligible for the

15 deduction provided in subparagraph (M) of paragraph

16 (2) of this subsection shall be eligible for the

17 deduction provided under this subparagraph (M-1). The

18 subtraction modification available to taxpayers in any

19 year under this subsection shall be that portion of the

20 total interest paid by the borrower with respect to

21 such loan attributable to the eligible property as

22 calculated under the previous sentence;

23 (N) Two times any contribution made during the

24 taxable year to a designated zone organization to the

25 extent that the contribution (i) qualifies as a

26 charitable contribution under subsection (c) of

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1 Section 170 of the Internal Revenue Code and (ii) must,

2 by its terms, be used for a project approved by the

3 Department of Commerce and Economic Opportunity under

4 Section 11 of the Illinois Enterprise Zone Act or under

5 Section 10-10 of the River Edge Redevelopment Zone Act.

6 This subparagraph (N) is exempt from the provisions of

7 Section 250;

8 (O) An amount equal to: (i) 85% for taxable years

9 ending on or before December 31, 1992, or, a percentage

10 equal to the percentage allowable under Section

11 243(a)(1) of the Internal Revenue Code of 1986 for

12 taxable years ending after December 31, 1992, of the

13 amount by which dividends included in taxable income

14 and received from a corporation that is not created or

15 organized under the laws of the United States or any

16 state or political subdivision thereof, including, for

17 taxable years ending on or after December 31, 1988,

18 dividends received or deemed received or paid or deemed

19 paid under Sections 951 through 965 of the Internal

20 Revenue Code, exceed the amount of the modification

21 provided under subparagraph (G) of paragraph (2) of

22 this subsection (b) which is related to such dividends,

23 and including, for taxable years ending on or after

24 December 31, 2008, dividends received from a captive

25 real estate investment trust; plus (ii) 100% of the

26 amount by which dividends, included in taxable income

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1 and received, including, for taxable years ending on or

2 after December 31, 1988, dividends received or deemed

3 received or paid or deemed paid under Sections 951

4 through 964 of the Internal Revenue Code and including,

5 for taxable years ending on or after December 31, 2008,

6 dividends received from a captive real estate

7 investment trust, from any such corporation specified

8 in clause (i) that would but for the provisions of

9 Section 1504 (b) (3) of the Internal Revenue Code be

10 treated as a member of the affiliated group which

11 includes the dividend recipient, exceed the amount of

12 the modification provided under subparagraph (G) of

13 paragraph (2) of this subsection (b) which is related

14 to such dividends. This subparagraph (O) is exempt from

15 the provisions of Section 250 of this Act;

16 (P) An amount equal to any contribution made to a

17 job training project established pursuant to the Tax

18 Increment Allocation Redevelopment Act;

19 (Q) An amount equal to the amount of the deduction

20 used to compute the federal income tax credit for

21 restoration of substantial amounts held under claim of

22 right for the taxable year pursuant to Section 1341 of

23 the Internal Revenue Code;

24 (R) On and after July 20, 1999, in the case of an

25 attorney-in-fact with respect to whom an interinsurer

26 or a reciprocal insurer has made the election under

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1 Section 835 of the Internal Revenue Code, 26 U.S.C.

2 835, an amount equal to the excess, if any, of the

3 amounts paid or incurred by that interinsurer or

4 reciprocal insurer in the taxable year to the

5 attorney-in-fact over the deduction allowed to that

6 interinsurer or reciprocal insurer with respect to the

7 attorney-in-fact under Section 835(b) of the Internal

8 Revenue Code for the taxable year; the provisions of

9 this subparagraph are exempt from the provisions of

10 Section 250;

11 (S) For taxable years ending on or after December

12 31, 1997, in the case of a Subchapter S corporation, an

13 amount equal to all amounts of income allocable to a

14 shareholder subject to the Personal Property Tax

15 Replacement Income Tax imposed by subsections (c) and

16 (d) of Section 201 of this Act, including amounts

17 allocable to organizations exempt from federal income

18 tax by reason of Section 501(a) of the Internal Revenue

19 Code. This subparagraph (S) is exempt from the

20 provisions of Section 250;

21 (T) For taxable years 2001 and thereafter, for the

22 taxable year in which the bonus depreciation deduction

23 is taken on the taxpayer's federal income tax return

24 under subsection (k) of Section 168 of the Internal

25 Revenue Code and for each applicable taxable year

26 thereafter, an amount equal to "x", where:

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1 (1) "y" equals the amount of the depreciation

2 deduction taken for the taxable year on the

3 taxpayer's federal income tax return on property

4 for which the bonus depreciation deduction was

5 taken in any year under subsection (k) of Section

6 168 of the Internal Revenue Code, but not including

7 the bonus depreciation deduction;

8 (2) for taxable years ending on or before

9 December 31, 2005, "x" equals "y" multiplied by 30

10 and then divided by 70 (or "y" multiplied by

11 0.429); and

12 (3) for taxable years ending after December

13 31, 2005:

14 (i) for property on which a bonus

15 depreciation deduction of 30% of the adjusted

16 basis was taken, "x" equals "y" multiplied by

17 30 and then divided by 70 (or "y" multiplied by

18 0.429); and

19 (ii) for property on which a bonus

20 depreciation deduction of 50% of the adjusted

21 basis was taken, "x" equals "y" multiplied by

22 1.0.

23 The aggregate amount deducted under this

24 subparagraph in all taxable years for any one piece of

25 property may not exceed the amount of the bonus

26 depreciation deduction taken on that property on the

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1 taxpayer's federal income tax return under subsection

2 (k) of Section 168 of the Internal Revenue Code. This

3 subparagraph (T) is exempt from the provisions of

4 Section 250;

5 (U) If the taxpayer sells, transfers, abandons, or

6 otherwise disposes of property for which the taxpayer

7 was required in any taxable year to make an addition

8 modification under subparagraph (E-10), then an amount

9 equal to that addition modification.

10 If the taxpayer continues to own property through

11 the last day of the last tax year for which the

12 taxpayer may claim a depreciation deduction for

13 federal income tax purposes and for which the taxpayer

14 was required in any taxable year to make an addition

15 modification under subparagraph (E-10), then an amount

16 equal to that addition modification.

17 The taxpayer is allowed to take the deduction under

18 this subparagraph only once with respect to any one

19 piece of property.

20 This subparagraph (U) is exempt from the

21 provisions of Section 250;

22 (V) The amount of: (i) any interest income (net of

23 the deductions allocable thereto) taken into account

24 for the taxable year with respect to a transaction with

25 a taxpayer that is required to make an addition

26 modification with respect to such transaction under

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1 Section 203(a)(2)(D-17), 203(b)(2)(E-12),

2 203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed

3 the amount of such addition modification, (ii) any

4 income from intangible property (net of the deductions

5 allocable thereto) taken into account for the taxable

6 year with respect to a transaction with a taxpayer that

7 is required to make an addition modification with

8 respect to such transaction under Section

9 203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or

10 203(d)(2)(D-8), but not to exceed the amount of such

11 addition modification, and (iii) any insurance premium

12 income (net of deductions allocable thereto) taken

13 into account for the taxable year with respect to a

14 transaction with a taxpayer that is required to make an

15 addition modification with respect to such transaction

16 under Section 203(a)(2)(D-19), Section

17 203(b)(2)(E-14), Section 203(c)(2)(G-14), or Section

18 203(d)(2)(D-9), but not to exceed the amount of that

19 addition modification. This subparagraph (V) is exempt

20 from the provisions of Section 250;

21 (W) An amount equal to the interest income taken

22 into account for the taxable year (net of the

23 deductions allocable thereto) with respect to

24 transactions with (i) a foreign person who would be a

25 member of the taxpayer's unitary business group but for

26 the fact that the foreign person's business activity

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1 outside the United States is 80% or more of that

2 person's total business activity and (ii) for taxable

3 years ending on or after December 31, 2008, to a person

4 who would be a member of the same unitary business

5 group but for the fact that the person is prohibited

6 under Section 1501(a)(27) from being included in the

7 unitary business group because he or she is ordinarily

8 required to apportion business income under different

9 subsections of Section 304, but not to exceed the

10 addition modification required to be made for the same

11 taxable year under Section 203(b)(2)(E-12) for

12 interest paid, accrued, or incurred, directly or

13 indirectly, to the same person. This subparagraph (W)

14 is exempt from the provisions of Section 250;

15 (X) An amount equal to the income from intangible

16 property taken into account for the taxable year (net

17 of the deductions allocable thereto) with respect to

18 transactions with (i) a foreign person who would be a

19 member of the taxpayer's unitary business group but for

20 the fact that the foreign person's business activity

21 outside the United States is 80% or more of that

22 person's total business activity and (ii) for taxable

23 years ending on or after December 31, 2008, to a person

24 who would be a member of the same unitary business

25 group but for the fact that the person is prohibited

26 under Section 1501(a)(27) from being included in the

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1 unitary business group because he or she is ordinarily

2 required to apportion business income under different

3 subsections of Section 304, but not to exceed the

4 addition modification required to be made for the same

5 taxable year under Section 203(b)(2)(E-13) for

6 intangible expenses and costs paid, accrued, or

7 incurred, directly or indirectly, to the same foreign

8 person. This subparagraph (X) is exempt from the

9 provisions of Section 250;

10 (Y) For taxable years ending on or after December

11 31, 2011, in the case of a taxpayer who was required to

12 add back any insurance premiums under Section

13 203(b)(2)(E-14), such taxpayer may elect to subtract

14 that part of a reimbursement received from the

15 insurance company equal to the amount of the expense or

16 loss (including expenses incurred by the insurance

17 company) that would have been taken into account as a

18 deduction for federal income tax purposes if the

19 expense or loss had been uninsured. If a taxpayer makes

20 the election provided for by this subparagraph (Y), the

21 insurer to which the premiums were paid must add back

22 to income the amount subtracted by the taxpayer

23 pursuant to this subparagraph (Y). This subparagraph

24 (Y) is exempt from the provisions of Section 250; and

25 (Z) The difference between the nondeductible

26 controlled foreign corporation dividends under Section

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1 965(e)(3) of the Internal Revenue Code over the taxable

2 income of the taxpayer, computed without regard to

3 Section 965(e)(2)(A) of the Internal Revenue Code, and

4 without regard to any net operating loss deduction.

5 This subparagraph (Z) is exempt from the provisions of

6 Section 250.

7 (3) Special rule. For purposes of paragraph (2) (A),

8 "gross income" in the case of a life insurance company, for

9 tax years ending on and after December 31, 1994, and prior

10 to December 31, 2011, shall mean the gross investment

11 income for the taxable year and, for tax years ending on or

12 after December 31, 2011, shall mean all amounts included in

13 life insurance gross income under Section 803(a)(3) of the

14 Internal Revenue Code.

15 (c) Trusts and estates.

16 (1) In general. In the case of a trust or estate, 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. Subject to the provisions of

20 paragraph (3), the taxable income referred to in paragraph

21 (1) shall be modified by adding thereto the sum of the

22 following amounts:

23 (A) An amount equal to all amounts paid or accrued

24 to the taxpayer as interest or dividends during the

25 taxable year to the extent excluded from gross income

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1 in the computation of taxable income;

2 (B) In the case of (i) an estate, $600; (ii) a

3 trust which, under its governing instrument, is

4 required to distribute all of its income currently,

5 $300; and (iii) any other trust, $100, but in each such

6 case, only to the extent such amount was deducted in

7 the computation of taxable income;

8 (C) An amount equal to the amount of tax imposed by

9 this Act to the extent deducted from gross income in

10 the computation of taxable income for the taxable year;

11 (D) The amount of any net operating loss deduction

12 taken in arriving at taxable income, other than a net

13 operating loss carried forward from a taxable year

14 ending prior to December 31, 1986;

15 (E) For taxable years in which a net operating loss

16 carryback or carryforward from a taxable year ending

17 prior to December 31, 1986 is an element of taxable

18 income under paragraph (1) of subsection (e) or

19 subparagraph (E) of paragraph (2) of subsection (e),

20 the amount by which addition modifications other than

21 those provided by this subparagraph (E) exceeded

22 subtraction modifications in such taxable year, with

23 the following limitations applied in the order that

24 they are listed:

25 (i) 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 be reduced by the amount of

3 addition modification under this subparagraph (E)

4 which related to that net operating loss and which

5 was taken into account in calculating the base

6 income of an earlier taxable year, and

7 (ii) the addition modification relating to the

8 net operating loss carried back or forward to the

9 taxable year from any taxable year ending prior to

10 December 31, 1986 shall not exceed the amount of

11 such carryback or carryforward;

12 For taxable years in which there is a net operating

13 loss carryback or carryforward from more than one other

14 taxable year ending prior to December 31, 1986, the

15 addition modification provided in this subparagraph

16 (E) shall be the sum of the amounts computed

17 independently under the preceding provisions of this

18 subparagraph (E) for each such taxable year;

19 (F) For taxable years ending on or after January 1,

20 1989, an amount equal to the tax deducted pursuant to

21 Section 164 of the Internal Revenue Code if the trust

22 or estate is claiming the same tax for purposes of the

23 Illinois foreign tax credit under Section 601 of this

24 Act;

25 (G) An amount equal to the amount of the capital

26 gain deduction allowable under the Internal Revenue

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1 Code, to the extent deducted from gross income in the

2 computation of taxable income;

3 (G-5) For taxable years ending after December 31,

4 1997, an amount equal to any eligible remediation costs

5 that the trust or estate deducted in computing adjusted

6 gross income and for which the trust or estate claims a

7 credit under subsection (l) of Section 201;

8 (G-10) For taxable years 2001 and thereafter, an

9 amount equal to the bonus depreciation deduction taken

10 on the taxpayer's federal income tax return for the

11 taxable year under subsection (k) of Section 168 of the

12 Internal Revenue Code; and

13 (G-11) If the taxpayer sells, transfers, abandons,

14 or otherwise disposes of property for which the

15 taxpayer was required in any taxable year to make an

16 addition modification under subparagraph (G-10), then

17 an amount equal to the aggregate amount of the

18 deductions taken in all taxable years under

19 subparagraph (R) with respect to that property.

20 If the taxpayer continues to own property through

21 the last day of the last tax year for which the

22 taxpayer may claim a depreciation deduction for

23 federal income tax purposes and for which the taxpayer

24 was allowed in any taxable year to make a subtraction

25 modification under subparagraph (R), then an amount

26 equal to that subtraction modification.

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1 The taxpayer is required to make the addition

2 modification under this subparagraph only once with

3 respect to any one piece of property;

4 (G-12) An amount equal to the amount otherwise

5 allowed as a deduction in computing base income for

6 interest paid, accrued, or incurred, directly or

7 indirectly, (i) for taxable years ending on or after

8 December 31, 2004, to a foreign person who would be a

9 member of the same unitary business group but for the

10 fact that the foreign person's business activity

11 outside the United States is 80% or more of the foreign

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. The addition modification

20 required by this subparagraph shall be reduced to the

21 extent that dividends were included in base income of

22 the unitary group for the same taxable year and

23 received by the taxpayer or by a member of the

24 taxpayer's unitary business group (including amounts

25 included in gross income pursuant to Sections 951

26 through 964 of the Internal Revenue Code and amounts

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1 included in gross income under Section 78 of the

2 Internal Revenue Code) with respect to the stock of the

3 same person to whom the interest was paid, accrued, or

4 incurred.

5 This paragraph shall not apply to the following:

6 (i) an item of interest paid, accrued, or

7 incurred, directly or indirectly, to a person who

8 is subject in a foreign country or state, other

9 than a state which requires mandatory unitary

10 reporting, to a tax on or measured by net income

11 with respect to such interest; or

12 (ii) an item of interest paid, accrued, or

13 incurred, directly or indirectly, to a person if

14 the taxpayer can establish, based on a

15 preponderance of the evidence, both of the

16 following:

17 (a) the person, during the same taxable

18 year, paid, accrued, or incurred, the interest

19 to a person that is not a related member, and

20 (b) the transaction giving rise to the

21 interest expense between the taxpayer and the

22 person did not have as a principal purpose the

23 avoidance of Illinois income tax, and is paid

24 pursuant to a contract or agreement that

25 reflects an arm's-length interest rate and

26 terms; or

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1 (iii) the taxpayer can establish, based on

2 clear and convincing evidence, that the interest

3 paid, accrued, or incurred relates to a contract or

4 agreement entered into at arm's-length rates and

5 terms and the principal purpose for the payment is

6 not federal or Illinois tax avoidance; or

7 (iv) an item of interest paid, accrued, or

8 incurred, directly or indirectly, to a person if

9 the taxpayer establishes by clear and convincing

10 evidence that the adjustments are unreasonable; or

11 if the taxpayer and the Director agree in writing

12 to the application or use of an alternative method

13 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-13) An amount equal to the amount of intangible

24 expenses and costs otherwise allowed as a deduction in

25 computing base income, and that were paid, accrued, or

26 incurred, directly or indirectly, (i) for taxable

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1 years ending on or after December 31, 2004, to a

2 foreign person who would be a member of the same

3 unitary business group but for the fact that the

4 foreign person's business activity outside the United

5 States is 80% or more of that person's total business

6 activity and (ii) for taxable years ending on or after

7 December 31, 2008, to a person who would be a member of

8 the same unitary business group but for the fact that

9 the person is prohibited under Section 1501(a)(27)

10 from being included in the unitary business group

11 because he or she is ordinarily required to apportion

12 business income under different subsections of Section

13 304. The addition modification required by this

14 subparagraph shall be reduced to the extent that

15 dividends were included in base income of the unitary

16 group for the same taxable year and received by the

17 taxpayer or by a member of the taxpayer's unitary

18 business group (including amounts included in gross

19 income pursuant to Sections 951 through 964 of the

20 Internal Revenue Code and amounts included in gross

21 income under Section 78 of the Internal Revenue Code)

22 with respect to the stock of the same person to whom

23 the intangible expenses and costs were directly or

24 indirectly paid, incurred, or accrued. The preceding

25 sentence shall not apply to the extent that the same

26 dividends caused a reduction to the addition

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1 modification required under Section 203(c)(2)(G-12) of

2 this Act. As used in this subparagraph, the term

3 "intangible expenses and costs" includes: (1)

4 expenses, losses, and costs for or related to the

5 direct or indirect acquisition, use, maintenance or

6 management, ownership, sale, exchange, or any other

7 disposition of intangible property; (2) losses

8 incurred, directly or indirectly, from factoring

9 transactions or discounting transactions; (3) royalty,

10 patent, technical, and copyright fees; (4) licensing

11 fees; and (5) other similar expenses and costs. For

12 purposes of this subparagraph, "intangible property"

13 includes patents, patent applications, trade names,

14 trademarks, service marks, copyrights, mask works,

15 trade secrets, and similar types of intangible assets.

16 This paragraph shall not apply to the following:

17 (i) any item of intangible expenses or costs

18 paid, accrued, or incurred, directly or

19 indirectly, from a transaction with a person who is

20 subject in a foreign country or state, other than a

21 state which requires mandatory unitary reporting,

22 to a tax on or measured by net income with respect

23 to such item; or

24 (ii) any item of intangible expense or cost

25 paid, accrued, or incurred, directly or

26 indirectly, if the taxpayer can establish, based

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1 on a preponderance of the evidence, both of the

2 following:

3 (a) the person during the same taxable

4 year paid, accrued, or incurred, the

5 intangible expense or cost to a person that is

6 not a related member, and

7 (b) the transaction giving rise to the

8 intangible expense or cost between the

9 taxpayer and the person did not have as a

10 principal purpose the avoidance of Illinois

11 income tax, and is paid pursuant to a contract

12 or agreement that reflects arm's-length terms;

13 or

14 (iii) any item of intangible expense or cost

15 paid, accrued, or incurred, directly or

16 indirectly, from a transaction with a person if the

17 taxpayer establishes by clear and convincing

18 evidence, that the adjustments are unreasonable;

19 or if the taxpayer and the Director agree in

20 writing to the application or use of an alternative

21 method of apportionment under Section 304(f);

22 Nothing in this subsection shall preclude the

23 Director from making any other adjustment

24 otherwise allowed under Section 404 of this Act for

25 any tax year beginning after the effective date of

26 this amendment provided such adjustment is made

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1 pursuant to regulation adopted by the Department

2 and such regulations provide methods and standards

3 by which the Department will utilize its authority

4 under Section 404 of this Act;

5 (G-14) For taxable years ending on or after

6 December 31, 2008, an amount equal to the amount of

7 insurance premium expenses and costs otherwise allowed

8 as a deduction in computing base income, and that were

9 paid, accrued, or incurred, directly or indirectly, to

10 a person who would be a member of the same unitary

11 business group but for the fact that the person is

12 prohibited under Section 1501(a)(27) from being

13 included in the unitary business group because he or

14 she is ordinarily required to apportion business

15 income under different subsections of Section 304. The

16 addition modification required by this subparagraph

17 shall be reduced to the extent that dividends were

18 included in base income of the unitary group for the

19 same taxable year and received by the taxpayer or by a

20 member of the taxpayer's unitary business group

21 (including amounts included in gross income under

22 Sections 951 through 964 of the Internal Revenue Code

23 and amounts included in gross income under Section 78

24 of the Internal Revenue Code) with respect to the stock

25 of the same person to whom the premiums and costs were

26 directly or indirectly paid, incurred, or accrued. The

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1 preceding sentence does not apply to the extent that

2 the same dividends caused a reduction to the addition

3 modification required under Section 203(c)(2)(G-12) or

4 Section 203(c)(2)(G-13) of this Act;

5 (G-15) An amount equal to the credit allowable to

6 the taxpayer under Section 218(a) of this Act,

7 determined without regard to Section 218(c) of this

8 Act;

9 (G-16) For taxable years beginning on or after

10 January 1, 2017, an amount equal to the deduction

11 allowed under Section 199 of the Internal Revenue Code

12 for the taxable year;

13 and by deducting from the total so obtained the sum of the

14 following amounts:

15 (H) An amount equal to all amounts included in such

16 total pursuant to the provisions of Sections 402(a),

17 402(c), 403(a), 403(b), 406(a), 407(a) and 408 of the

18 Internal Revenue Code or included in such total as

19 distributions under the provisions of any retirement

20 or disability plan for employees of any governmental

21 agency or unit, or retirement payments to retired

22 partners, which payments are excluded in computing net

23 earnings from self employment by Section 1402 of the

24 Internal Revenue Code and regulations adopted pursuant

25 thereto;

26 (I) The valuation limitation amount;

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1 (J) An amount equal to the amount of any tax

2 imposed by this Act which was refunded to the taxpayer

3 and included in such total for the taxable year;

4 (K) An amount equal to all amounts included in

5 taxable income as modified by subparagraphs (A), (B),

6 (C), (D), (E), (F) and (G) which are exempt from

7 taxation by this State either by reason of its statutes

8 or Constitution or by reason of the Constitution,

9 treaties or statutes of the United States; provided

10 that, in the case of any statute of this State that

11 exempts income derived from bonds or other obligations

12 from the tax imposed under this Act, the amount

13 exempted shall be the interest net of bond premium

14 amortization;

15 (L) With the exception of any amounts subtracted

16 under subparagraph (K), an amount equal to the sum of

17 all amounts disallowed as deductions by (i) Sections

18 171(a) (2) and 265(a)(2) of the Internal Revenue Code,

19 and all amounts of expenses allocable to interest and

20 disallowed as deductions by Section 265(1) of the

21 Internal Revenue Code; and (ii) for taxable years

22 ending on or after August 13, 1999, Sections 171(a)(2),

23 265, 280C, and 832(b)(5)(B)(i) of the Internal Revenue

24 Code, plus, (iii) for taxable years ending on or after

25 December 31, 2011, Section 45G(e)(3) of the Internal

26 Revenue Code and, for taxable years ending on or after

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1 December 31, 2008, any amount included in gross income

2 under Section 87 of the Internal Revenue Code; the

3 provisions of this subparagraph are exempt from the

4 provisions of Section 250;

5 (M) An amount equal to those dividends included in

6 such total which were paid by a corporation which

7 conducts business operations in a River Edge

8 Redevelopment Zone or zones created under the River

9 Edge Redevelopment Zone Act and conducts substantially

10 all of its operations in a River Edge Redevelopment

11 Zone or zones. This subparagraph (M) is exempt from the

12 provisions of Section 250;

13 (N) An amount equal to any contribution made to a

14 job training project established pursuant to the Tax

15 Increment Allocation Redevelopment Act;

16 (O) An amount equal to those dividends included in

17 such total that were paid by a corporation that

18 conducts business operations in a federally designated

19 Foreign Trade Zone or Sub-Zone and that is designated a

20 High Impact Business located in Illinois; provided

21 that dividends eligible for the deduction provided in

22 subparagraph (M) of paragraph (2) of this subsection

23 shall not be eligible for the deduction provided under

24 this subparagraph (O);

25 (P) An amount equal to the amount of the deduction

26 used to compute the federal income tax credit for

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1 restoration of substantial amounts held under claim of

2 right for the taxable year pursuant to Section 1341 of

3 the Internal Revenue Code;

4 (Q) For taxable year 1999 and thereafter, an amount

5 equal to the amount of any (i) distributions, to the

6 extent includible in gross income for federal income

7 tax purposes, made to the taxpayer because of his or

8 her status as a victim of persecution for racial or

9 religious reasons by Nazi Germany or any other Axis

10 regime or as an heir of the victim and (ii) items of

11 income, to the extent includible in gross income for

12 federal income tax purposes, attributable to, derived

13 from or in any way related to assets stolen from,

14 hidden from, or otherwise lost to a victim of

15 persecution for racial or religious reasons by Nazi

16 Germany or any other Axis regime immediately prior to,

17 during, and immediately after World War II, including,

18 but not limited to, interest on the proceeds receivable

19 as insurance under policies issued to a victim of

20 persecution for racial or religious reasons by Nazi

21 Germany or any other Axis regime by European insurance

22 companies immediately prior to and during World War II;

23 provided, however, this subtraction from federal

24 adjusted gross income does not apply to assets acquired

25 with such assets or with the proceeds from the sale of

26 such assets; provided, further, this paragraph shall

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1 only apply to a taxpayer who was the first recipient of

2 such assets after their recovery and who is a victim of

3 persecution for racial or religious reasons by Nazi

4 Germany or any other Axis regime or as an heir of the

5 victim. The amount of and the eligibility for any

6 public assistance, benefit, or similar entitlement is

7 not affected by the inclusion of items (i) and (ii) of

8 this paragraph in gross income for federal income tax

9 purposes. This paragraph is exempt from the provisions

10 of Section 250;

11 (R) For taxable years 2001 and thereafter, for the

12 taxable year in which the bonus depreciation deduction

13 is taken on the taxpayer's federal income tax return

14 under subsection (k) of Section 168 of the Internal

15 Revenue Code and for each applicable taxable year

16 thereafter, an amount equal to "x", where:

17 (1) "y" equals the amount of the depreciation

18 deduction taken for the taxable year on the

19 taxpayer's federal income tax return on property

20 for which the bonus depreciation deduction was

21 taken in any year under subsection (k) of Section

22 168 of the Internal Revenue Code, but not including

23 the bonus depreciation deduction;

24 (2) for taxable years ending on or before

25 December 31, 2005, "x" equals "y" multiplied by 30

26 and then divided by 70 (or "y" multiplied by

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1 0.429); and

2 (3) for taxable years ending after December

3 31, 2005:

4 (i) for property on which a bonus

5 depreciation deduction of 30% of the adjusted

6 basis was taken, "x" equals "y" multiplied by

7 30 and then divided by 70 (or "y" multiplied by

8 0.429); and

9 (ii) for property on which a bonus

10 depreciation deduction of 50% of the adjusted

11 basis was taken, "x" equals "y" multiplied by

12 1.0.

13 The aggregate amount deducted under this

14 subparagraph in all taxable years for any one piece of

15 property may not exceed the amount of the bonus

16 depreciation deduction taken on that property on the

17 taxpayer's federal income tax return under subsection

18 (k) of Section 168 of the Internal Revenue Code. This

19 subparagraph (R) is exempt from the provisions of

20 Section 250;

21 (S) If the taxpayer sells, transfers, abandons, or

22 otherwise disposes of property for which the taxpayer

23 was required in any taxable year to make an addition

24 modification under subparagraph (G-10), then an amount

25 equal to that addition modification.

26 If the taxpayer continues to own property through

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1 the last day of the last tax year for which the

2 taxpayer may claim a depreciation deduction for

3 federal income tax purposes and for which the taxpayer

4 was required in any taxable year to make an addition

5 modification under subparagraph (G-10), then an amount

6 equal to that addition modification.

7 The taxpayer is allowed to take the deduction under

8 this subparagraph only once with respect to any one

9 piece of property.

10 This subparagraph (S) is exempt from the

11 provisions of Section 250;

12 (T) The amount of (i) any interest income (net of

13 the deductions allocable thereto) taken into account

14 for the taxable year with respect to a transaction with

15 a taxpayer that is required to make an addition

16 modification with respect to such transaction under

17 Section 203(a)(2)(D-17), 203(b)(2)(E-12),

18 203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed

19 the amount of such addition modification and (ii) any

20 income from intangible property (net of the deductions

21 allocable thereto) taken into account for the taxable

22 year with respect to a transaction with a taxpayer that

23 is required to make an addition modification with

24 respect to such transaction under Section

25 203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or

26 203(d)(2)(D-8), but not to exceed the amount of such

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1 addition modification. This subparagraph (T) is exempt

2 from the provisions of Section 250;

3 (U) An amount equal to the interest income taken

4 into account for the taxable year (net of the

5 deductions allocable thereto) with respect to

6 transactions with (i) a foreign person who would be a

7 member of the taxpayer's unitary business group but for

8 the fact the foreign person's business activity

9 outside the United States is 80% or more of that

10 person's total business activity and (ii) for taxable

11 years ending on or after December 31, 2008, to a person

12 who would be a member of the same unitary business

13 group but for the fact that the person is prohibited

14 under Section 1501(a)(27) from being included in the

15 unitary business group because he or she is ordinarily

16 required to apportion business income under different

17 subsections of Section 304, but not to exceed the

18 addition modification required to be made for the same

19 taxable year under Section 203(c)(2)(G-12) for

20 interest paid, accrued, or incurred, directly or

21 indirectly, to the same person. This subparagraph (U)

22 is exempt from the provisions of Section 250;

23 (V) An amount equal to the income from intangible

24 property taken into account for the taxable year (net

25 of the deductions allocable thereto) with respect to

26 transactions with (i) a foreign person who would be a

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1 member of the taxpayer's unitary business group but for

2 the fact that the foreign person's business activity

3 outside the United States is 80% or more of that

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, but not to exceed the

12 addition modification required to be made for the same

13 taxable year under Section 203(c)(2)(G-13) for

14 intangible expenses and costs paid, accrued, or

15 incurred, directly or indirectly, to the same foreign

16 person. This subparagraph (V) is exempt from the

17 provisions of Section 250;

18 (W) in the case of an estate, an amount equal to

19 all amounts included in such total pursuant to the

20 provisions of Section 111 of the Internal Revenue Code

21 as a recovery of items previously deducted by the

22 decedent from adjusted gross income in the computation

23 of taxable income. This subparagraph (W) is exempt from

24 Section 250;

25 (X) an amount equal to the refund included in such

26 total of any tax deducted for federal income tax

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1 purposes, to the extent that deduction was added back

2 under subparagraph (F). This subparagraph (X) is

3 exempt from the provisions of Section 250; and

4 (Y) For taxable years ending on or after December

5 31, 2011, in the case of a taxpayer who was required to

6 add back any insurance premiums under Section

7 203(c)(2)(G-14), such taxpayer may elect to subtract

8 that part of a reimbursement received from the

9 insurance company equal to the amount of the expense or

10 loss (including expenses incurred by the insurance

11 company) that would have been taken into account as a

12 deduction for federal income tax purposes if the

13 expense or loss had been uninsured. If a taxpayer makes

14 the election provided for by this subparagraph (Y), the

15 insurer to which the premiums were paid must add back

16 to income the amount subtracted by the taxpayer

17 pursuant to this subparagraph (Y). This subparagraph

18 (Y) is exempt from the provisions of Section 250.

19 (3) Limitation. The amount of any modification

20 otherwise required under this subsection shall, under

21 regulations prescribed by the Department, be adjusted by

22 any amounts included therein which were properly paid,

23 credited, or required to be distributed, or permanently set

24 aside for charitable purposes pursuant to Internal Revenue

25 Code Section 642(c) during the taxable year.

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1 (d) Partnerships.

2 (1) In general. In the case of a partnership, base

3 income means an amount equal to the taxpayer's taxable

4 income for the taxable year as modified by paragraph (2).

5 (2) Modifications. The taxable income referred to in

6 paragraph (1) shall be modified by adding thereto the sum

7 of the following amounts:

8 (A) An amount equal to all amounts paid or accrued

9 to the taxpayer as interest or dividends during the

10 taxable year to the extent excluded from gross income

11 in the computation of taxable income;

12 (B) An amount equal to the amount of tax imposed by

13 this Act to the extent deducted from gross income for

14 the taxable year;

15 (C) The amount of deductions allowed to the

16 partnership pursuant to Section 707 (c) of the Internal

17 Revenue Code in calculating its taxable income;

18 (D) An amount equal to the amount of the capital

19 gain deduction allowable under the Internal Revenue

20 Code, to the extent deducted from gross income in the

21 computation of taxable income;

22 (D-5) For taxable years 2001 and thereafter, an

23 amount equal to the bonus depreciation deduction taken

24 on the taxpayer's federal income tax return for the

25 taxable year under subsection (k) of Section 168 of the

26 Internal Revenue Code;

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1 (D-6) If the taxpayer sells, transfers, abandons,

2 or otherwise disposes of property for which the

3 taxpayer was required in any taxable year to make an

4 addition modification under subparagraph (D-5), then

5 an amount equal to the aggregate amount of the

6 deductions taken in all taxable years under

7 subparagraph (O) with respect to that property.

8 If the taxpayer continues to own property through

9 the last day of the last tax year for which the

10 taxpayer may claim a depreciation deduction for

11 federal income tax purposes and for which the taxpayer

12 was allowed in any taxable year to make a subtraction

13 modification under subparagraph (O), then an amount

14 equal to that subtraction modification.

15 The taxpayer is required to make the addition

16 modification under this subparagraph only once with

17 respect to any one piece of property;

18 (D-7) An amount equal to the amount otherwise

19 allowed as a deduction in computing base income for

20 interest paid, accrued, or incurred, directly or

21 indirectly, (i) for taxable years ending on or after

22 December 31, 2004, to a foreign person who would be a

23 member of the same unitary business group but for the

24 fact the foreign person's business activity outside

25 the United States is 80% or more of the foreign

26 person's total business activity and (ii) for taxable

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1 years ending on or after December 31, 2008, to a person

2 who would be a member of the same unitary business

3 group but for the fact that the person is prohibited

4 under Section 1501(a)(27) from being included in the

5 unitary business group because he or she is ordinarily

6 required to apportion business income under different

7 subsections of Section 304. The addition modification

8 required by this subparagraph shall be reduced to the

9 extent that dividends were included in base income of

10 the unitary group for the same taxable year and

11 received by the taxpayer or by a member of the

12 taxpayer's unitary business group (including amounts

13 included in gross income pursuant to Sections 951

14 through 964 of the Internal Revenue Code and amounts

15 included in gross income under Section 78 of the

16 Internal Revenue Code) with respect to the stock of the

17 same person to whom the interest was paid, accrued, or

18 incurred.

19 This paragraph shall not apply to the following:

20 (i) an item of interest paid, accrued, or

21 incurred, directly or indirectly, to a person who

22 is subject in a foreign country or state, other

23 than a state which requires mandatory unitary

24 reporting, to a tax on or measured by net income

25 with respect to such interest; or

26 (ii) an item of interest paid, accrued, or

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1 incurred, directly or indirectly, to a person if

2 the taxpayer can establish, based on a

3 preponderance of the evidence, both of the

4 following:

5 (a) the person, during the same taxable

6 year, paid, accrued, or incurred, the interest

7 to a person that is not a related member, and

8 (b) the transaction giving rise to the

9 interest expense between the taxpayer and the

10 person did not have as a principal purpose the

11 avoidance of Illinois income tax, and is paid

12 pursuant to a contract or agreement that

13 reflects an arm's-length interest rate and

14 terms; or

15 (iii) the taxpayer can establish, based on

16 clear and convincing evidence, that the interest

17 paid, accrued, or incurred relates to a contract or

18 agreement entered into at arm's-length rates and

19 terms and the principal purpose for the payment is

20 not federal or Illinois tax avoidance; or

21 (iv) an item of interest paid, accrued, or

22 incurred, directly or indirectly, to a person if

23 the taxpayer establishes by clear and convincing

24 evidence that the adjustments are unreasonable; or

25 if the taxpayer and the Director agree in writing

26 to the application or use of an alternative method

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1 of apportionment under Section 304(f).

2 Nothing in this subsection shall preclude the

3 Director from making any other adjustment

4 otherwise allowed under Section 404 of this Act for

5 any tax year beginning after the effective date of

6 this amendment provided such adjustment is made

7 pursuant to regulation adopted by the Department

8 and such regulations provide methods and standards

9 by which the Department will utilize its authority

10 under Section 404 of this Act; and

11 (D-8) An amount equal to the amount of intangible

12 expenses and costs otherwise allowed as a deduction in

13 computing base income, and that were paid, accrued, or

14 incurred, directly or indirectly, (i) for taxable

15 years ending on or after December 31, 2004, to a

16 foreign person who would be a member of the same

17 unitary business group but for the fact that the

18 foreign person's business activity outside the United

19 States is 80% or more of that person's total business

20 activity and (ii) for taxable years ending on or after

21 December 31, 2008, to a person who would be a member of

22 the same unitary business group but for the fact that

23 the person is prohibited under Section 1501(a)(27)

24 from being included in the unitary business group

25 because he or she is ordinarily required to apportion

26 business income under different subsections of Section

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1 304. The addition modification required by this

2 subparagraph shall be reduced to the extent that

3 dividends were included in base income of the unitary

4 group for the same taxable year and received by the

5 taxpayer or by a member of the taxpayer's unitary

6 business group (including amounts included in gross

7 income pursuant to Sections 951 through 964 of the

8 Internal Revenue Code and amounts included in gross

9 income under Section 78 of the Internal Revenue Code)

10 with respect to the stock of the same person to whom

11 the intangible expenses and costs were directly or

12 indirectly paid, incurred or accrued. The preceding

13 sentence shall not apply to the extent that the same

14 dividends caused a reduction to the addition

15 modification required under Section 203(d)(2)(D-7) of

16 this Act. As used in this subparagraph, the term

17 "intangible expenses and costs" includes (1) expenses,

18 losses, and costs for, or related to, the direct or

19 indirect acquisition, use, maintenance or management,

20 ownership, sale, exchange, or any other disposition of

21 intangible property; (2) losses incurred, directly or

22 indirectly, from factoring transactions or discounting

23 transactions; (3) royalty, patent, technical, and

24 copyright fees; (4) licensing fees; and (5) other

25 similar expenses and costs. For purposes of this

26 subparagraph, "intangible property" includes patents,

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1 patent applications, trade names, trademarks, service

2 marks, copyrights, mask works, trade secrets, and

3 similar types of intangible assets;

4 This paragraph shall not apply to the following:

5 (i) any item of intangible expenses or costs

6 paid, accrued, or incurred, directly or

7 indirectly, from a transaction with a person who is

8 subject in a foreign country or state, other than a

9 state which requires mandatory unitary reporting,

10 to a tax on or measured by net income with respect

11 to such item; or

12 (ii) any item of intangible expense or cost

13 paid, accrued, or incurred, directly or

14 indirectly, if the taxpayer can establish, based

15 on a preponderance of the evidence, both of the

16 following:

17 (a) the person during the same taxable

18 year paid, accrued, or incurred, the

19 intangible expense or cost to a person that is

20 not a related member, and

21 (b) the transaction giving rise to the

22 intangible expense or cost between the

23 taxpayer and the person did not have as a

24 principal purpose the avoidance of Illinois

25 income tax, and is paid pursuant to a contract

26 or agreement that reflects arm's-length terms;

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1 or

2 (iii) any item of intangible expense or cost

3 paid, accrued, or incurred, directly or

4 indirectly, from a transaction with a person if the

5 taxpayer establishes by clear and convincing

6 evidence, that the adjustments are unreasonable;

7 or if the taxpayer and the Director agree in

8 writing to the application or use of an alternative

9 method of apportionment under Section 304(f);

10 Nothing in this subsection shall preclude the

11 Director from making any other adjustment

12 otherwise allowed under Section 404 of this Act for

13 any tax year beginning after the effective date of

14 this amendment provided such adjustment is made

15 pursuant to regulation adopted by the Department

16 and such regulations provide methods and standards

17 by which the Department will utilize its authority

18 under Section 404 of this Act;

19 (D-9) For taxable years ending on or after December

20 31, 2008, an amount equal to the amount of insurance

21 premium expenses and costs otherwise allowed as a

22 deduction in computing base income, and that were paid,

23 accrued, or incurred, directly or indirectly, to a

24 person who would be a member of the same unitary

25 business group but for the fact that the person is

26 prohibited under Section 1501(a)(27) from being

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1 included in the unitary business group because he or

2 she is ordinarily required to apportion business

3 income under different subsections of Section 304. The

4 addition modification required by this subparagraph

5 shall be reduced to the extent that dividends were

6 included in base income of the unitary group for the

7 same taxable year and received by the taxpayer or by a

8 member of the taxpayer's unitary business group

9 (including amounts included in gross income under

10 Sections 951 through 964 of the Internal Revenue Code

11 and amounts included in gross income under Section 78

12 of the Internal Revenue Code) with respect to the stock

13 of the same person to whom the premiums and costs were

14 directly or indirectly paid, incurred, or accrued. The

15 preceding sentence does not apply to the extent that

16 the same dividends caused a reduction to the addition

17 modification required under Section 203(d)(2)(D-7) or

18 Section 203(d)(2)(D-8) of this Act;

19 (D-10) An amount equal to the credit allowable to

20 the taxpayer under Section 218(a) of this Act,

21 determined without regard to Section 218(c) of this

22 Act;

23 (D-11) For taxable years beginning on or after

24 January 1, 2017, an amount equal to the deduction

25 allowed under Section 199 of the Internal Revenue Code

26 for the taxable year;

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1 and by deducting from the total so obtained the following

2 amounts:

3 (E) The valuation limitation amount;

4 (F) An amount equal to the amount of any tax

5 imposed by this Act which was refunded to the taxpayer

6 and included in such total for the taxable year;

7 (G) An amount equal to all amounts included in

8 taxable income as modified by subparagraphs (A), (B),

9 (C) and (D) which are exempt from taxation by this

10 State either by reason of its statutes or Constitution

11 or by reason of the Constitution, treaties or statutes

12 of the United States; provided that, in the case of any

13 statute of this State that exempts income derived from

14 bonds or other obligations from the tax imposed under

15 this Act, the amount exempted shall be the interest net

16 of bond premium amortization;

17 (H) Any income of the partnership which

18 constitutes personal service income as defined in

19 Section 1348 (b) (1) of the Internal Revenue Code (as

20 in effect December 31, 1981) or a reasonable allowance

21 for compensation paid or accrued for services rendered

22 by partners to the partnership, whichever is greater;

23 this subparagraph (H) is exempt from the provisions of

24 Section 250;

25 (I) An amount equal to all amounts of income

26 distributable to an entity subject to the Personal

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1 Property Tax Replacement Income Tax imposed by

2 subsections (c) and (d) of Section 201 of this Act

3 including amounts distributable to organizations

4 exempt from federal income tax by reason of Section

5 501(a) of the Internal Revenue Code; this subparagraph

6 (I) is exempt from the provisions of Section 250;

7 (J) With the exception of any amounts subtracted

8 under subparagraph (G), an amount equal to the sum of

9 all amounts disallowed as deductions by (i) Sections

10 171(a) (2), and 265(2) of the Internal Revenue Code,

11 and all amounts of expenses allocable to interest and

12 disallowed as deductions by Section 265(1) of the

13 Internal Revenue Code; and (ii) for taxable years

14 ending on or after August 13, 1999, Sections 171(a)(2),

15 265, 280C, and 832(b)(5)(B)(i) of the Internal Revenue

16 Code, plus, (iii) for taxable years ending on or after

17 December 31, 2011, Section 45G(e)(3) of the Internal

18 Revenue Code and, for taxable years ending on or after

19 December 31, 2008, any amount included in gross income

20 under Section 87 of the Internal Revenue Code; the

21 provisions of this subparagraph are exempt from the

22 provisions of Section 250;

23 (K) An amount equal to those dividends included in

24 such total which were paid by a corporation which

25 conducts business operations in a River Edge

26 Redevelopment Zone or zones created under the River

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1 Edge Redevelopment Zone Act and conducts substantially

2 all of its operations from a River Edge Redevelopment

3 Zone or zones. This subparagraph (K) is exempt from the

4 provisions of Section 250;

5 (L) An amount equal to any contribution made to a

6 job training project established pursuant to the Real

7 Property Tax Increment Allocation Redevelopment Act;

8 (M) An amount equal to those dividends included in

9 such total that were paid by a corporation that

10 conducts business operations in a federally designated

11 Foreign Trade Zone or Sub-Zone and that is designated a

12 High Impact Business located in Illinois; provided

13 that dividends eligible for the deduction provided in

14 subparagraph (K) of paragraph (2) of this subsection

15 shall not be eligible for the deduction provided under

16 this subparagraph (M);

17 (N) An amount equal to the amount of the deduction

18 used to compute the federal income tax credit for

19 restoration of substantial amounts held under claim of

20 right for the taxable year pursuant to Section 1341 of

21 the Internal Revenue Code;

22 (O) For taxable years 2001 and thereafter, for the

23 taxable year in which the bonus depreciation deduction

24 is taken on the taxpayer's federal income tax return

25 under subsection (k) of Section 168 of the Internal

26 Revenue Code and for each applicable taxable year

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1 thereafter, an amount equal to "x", where:

2 (1) "y" equals the amount of the depreciation

3 deduction taken for the taxable year on the

4 taxpayer's federal income tax return on property

5 for which the bonus depreciation deduction was

6 taken in any year under subsection (k) of Section

7 168 of the Internal Revenue Code, but not including

8 the bonus depreciation deduction;

9 (2) for taxable years ending on or before

10 December 31, 2005, "x" equals "y" multiplied by 30

11 and then divided by 70 (or "y" multiplied by

12 0.429); and

13 (3) for taxable years ending after December

14 31, 2005:

15 (i) for property on which a bonus

16 depreciation deduction of 30% of the adjusted

17 basis was taken, "x" equals "y" multiplied by

18 30 and then divided by 70 (or "y" multiplied by

19 0.429); and

20 (ii) for property on which a bonus

21 depreciation deduction of 50% of the adjusted

22 basis was taken, "x" equals "y" multiplied by

23 1.0.

24 The aggregate amount deducted under this

25 subparagraph in all taxable years for any one piece of

26 property may not exceed the amount of the bonus

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1 depreciation deduction taken on that property on the

2 taxpayer's federal income tax return under subsection

3 (k) of Section 168 of the Internal Revenue Code. This

4 subparagraph (O) is exempt from the provisions of

5 Section 250;

6 (P) If the taxpayer sells, transfers, abandons, or

7 otherwise disposes of property for which the taxpayer

8 was required in any taxable year to make an addition

9 modification under subparagraph (D-5), then an amount

10 equal to that addition modification.

11 If the taxpayer continues to own property through

12 the last day of the last tax year for which the

13 taxpayer may claim a depreciation deduction for

14 federal income tax purposes and for which the taxpayer

15 was required in any taxable year to make an addition

16 modification under subparagraph (D-5), then an amount

17 equal to that addition modification.

18 The taxpayer is allowed to take the deduction under

19 this subparagraph only once with respect to any one

20 piece of property.

21 This subparagraph (P) is exempt from the

22 provisions of Section 250;

23 (Q) The amount of (i) any interest income (net of

24 the deductions allocable thereto) taken into account

25 for the taxable year with respect to a transaction with

26 a taxpayer that is required to make an addition

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1 modification with respect to such transaction under

2 Section 203(a)(2)(D-17), 203(b)(2)(E-12),

3 203(c)(2)(G-12), or 203(d)(2)(D-7), but not to exceed

4 the amount of such addition modification and (ii) any

5 income from intangible property (net of the deductions

6 allocable thereto) taken into account for the taxable

7 year with respect to a transaction with a taxpayer that

8 is required to make an addition modification with

9 respect to such transaction under Section

10 203(a)(2)(D-18), 203(b)(2)(E-13), 203(c)(2)(G-13), or

11 203(d)(2)(D-8), but not to exceed the amount of such

12 addition modification. This subparagraph (Q) is exempt

13 from Section 250;

14 (R) An amount equal to the interest income taken

15 into account for the taxable year (net of the

16 deductions allocable thereto) with respect to

17 transactions with (i) a foreign person who would be a

18 member of the taxpayer's unitary business group but for

19 the fact that the foreign person's business activity

20 outside the United States is 80% or more of that

21 person's total business activity and (ii) for taxable

22 years ending on or after December 31, 2008, to a person

23 who would be a member of the same unitary business

24 group but for the fact that the person is prohibited

25 under Section 1501(a)(27) from being included in the

26 unitary business group because he or she is ordinarily

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1 required to apportion business income under different

2 subsections of Section 304, but not to exceed the

3 addition modification required to be made for the same

4 taxable year under Section 203(d)(2)(D-7) for interest

5 paid, accrued, or incurred, directly or indirectly, to

6 the same person. This subparagraph (R) is exempt from

7 Section 250;

8 (S) An amount equal to the income from intangible

9 property taken into account for the taxable year (net

10 of the deductions allocable thereto) with respect to

11 transactions with (i) a foreign person who would be a

12 member of the taxpayer's unitary business group but for

13 the fact that the foreign person's business activity

14 outside the United States is 80% or more of that

15 person's total business activity and (ii) for taxable

16 years ending on or after December 31, 2008, to a person

17 who would be a member of the same unitary business

18 group but for the fact that the person is prohibited

19 under Section 1501(a)(27) from being included in the

20 unitary business group because he or she is ordinarily

21 required to apportion business income under different

22 subsections of Section 304, but not to exceed the

23 addition modification required to be made for the same

24 taxable year under Section 203(d)(2)(D-8) for

25 intangible expenses and costs paid, accrued, or

26 incurred, directly or indirectly, to the same person.

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1 This subparagraph (S) is exempt from Section 250; and

2 (T) 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(d)(2)(D-9), 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 (T), 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 (T). This subparagraph

16 (T) is exempt from the provisions of Section 250.

17 (e) Gross income; adjusted gross income; taxable income.

18 (1) In general. Subject to the provisions of paragraph

19 (2) and subsection (b) (3), for purposes of this Section

20 and Section 803(e), a taxpayer's gross income, adjusted

21 gross income, or taxable income for the taxable year shall

22 mean the amount of gross income, adjusted gross income or

23 taxable income properly reportable for federal income tax

24 purposes for the taxable year under the provisions of the

25 Internal Revenue Code. Taxable income may be less than

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1 zero. However, for taxable years ending on or after

2 December 31, 1986, net operating loss carryforwards from

3 taxable years ending prior to December 31, 1986, may not

4 exceed the sum of federal taxable income for the taxable

5 year before net operating loss deduction, plus the excess

6 of addition modifications over subtraction modifications

7 for the taxable year. For taxable years ending prior to

8 December 31, 1986, taxable income may never be an amount in

9 excess of the net operating loss for the taxable year as

10 defined in subsections (c) and (d) of Section 172 of the

11 Internal Revenue Code, provided that when taxable income of

12 a corporation (other than a Subchapter S corporation),

13 trust, or estate is less than zero and addition

14 modifications, other than those provided by subparagraph

15 (E) of paragraph (2) of subsection (b) for corporations or

16 subparagraph (E) of paragraph (2) of subsection (c) for

17 trusts and estates, exceed subtraction modifications, an

18 addition modification must be made under those

19 subparagraphs for any other taxable year to which the

20 taxable income less than zero (net operating loss) is

21 applied under Section 172 of the Internal Revenue Code or

22 under subparagraph (E) of paragraph (2) of this subsection

23 (e) applied in conjunction with Section 172 of the Internal

24 Revenue Code.

25 (2) Special rule. For purposes of paragraph (1) of this

26 subsection, the taxable income properly reportable for

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1 federal income tax purposes shall mean:

2 (A) Certain life insurance companies. In the case

3 of a life insurance company subject to the tax imposed

4 by Section 801 of the Internal Revenue Code, life

5 insurance company taxable income, plus the amount of

6 distribution from pre-1984 policyholder surplus

7 accounts as calculated under Section 815a of the

8 Internal Revenue Code;

9 (B) Certain other insurance companies. In the case

10 of mutual insurance companies subject to the tax

11 imposed by Section 831 of the Internal Revenue Code,

12 insurance company taxable income;

13 (C) Regulated investment companies. In the case of

14 a regulated investment company subject to the tax

15 imposed by Section 852 of the Internal Revenue Code,

16 investment company taxable income;

17 (D) Real estate investment trusts. In the case of a

18 real estate investment trust subject to the tax imposed

19 by Section 857 of the Internal Revenue Code, real

20 estate investment trust taxable income;

21 (E) Consolidated corporations. In the case of a

22 corporation which is a member of an affiliated group of

23 corporations filing a consolidated income tax return

24 for the taxable year for federal income tax purposes,

25 taxable income determined as if such corporation had

26 filed a separate return for federal income tax purposes

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1 for the taxable year and each preceding taxable year

2 for which it was a member of an affiliated group. For

3 purposes of this subparagraph, the taxpayer's separate

4 taxable income shall be determined as if the election

5 provided by Section 243(b) (2) of the Internal Revenue

6 Code had been in effect for all such years;

7 (F) Cooperatives. In the case of a cooperative

8 corporation or association, the taxable income of such

9 organization determined in accordance with the

10 provisions of Section 1381 through 1388 of the Internal

11 Revenue Code, but without regard to the prohibition

12 against offsetting losses from patronage activities

13 against income from nonpatronage activities; except

14 that a cooperative corporation or association may make

15 an election to follow its federal income tax treatment

16 of patronage losses and nonpatronage losses. In the

17 event such election is made, such losses shall be

18 computed and carried over in a manner consistent with

19 subsection (a) of Section 207 of this Act and

20 apportioned by the apportionment factor reported by

21 the cooperative on its Illinois income tax return filed

22 for the taxable year in which the losses are incurred.

23 The election shall be effective for all taxable years

24 with original returns due on or after the date of the

25 election. In addition, the cooperative may file an

26 amended return or returns, as allowed under this Act,

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1 to provide that the election shall be effective for

2 losses incurred or carried forward for taxable years

3 occurring prior to the date of the election. Once made,

4 the election may only be revoked upon approval of the

5 Director. The Department shall adopt rules setting

6 forth requirements for documenting the elections and

7 any resulting Illinois net loss and the standards to be

8 used by the Director in evaluating requests to revoke

9 elections. Public Act 96-932 is declaratory of

10 existing law;

11 (G) Subchapter S corporations. In the case of: (i)

12 a Subchapter S corporation for which there is in effect

13 an election for the taxable year under Section 1362 of

14 the Internal Revenue Code, the taxable income of such

15 corporation determined in accordance with Section

16 1363(b) of the Internal Revenue Code, except that

17 taxable income shall take into account those items

18 which are required by Section 1363(b)(1) of the

19 Internal Revenue Code to be separately stated; and (ii)

20 a Subchapter S corporation for which there is in effect

21 a federal election to opt out of the provisions of the

22 Subchapter S Revision Act of 1982 and have applied

23 instead the prior federal Subchapter S rules as in

24 effect on July 1, 1982, the taxable income of such

25 corporation determined in accordance with the federal

26 Subchapter S rules as in effect on July 1, 1982; and

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1 (H) Partnerships. In the case of a partnership,

2 taxable income determined in accordance with Section

3 703 of the Internal Revenue Code, except that taxable

4 income shall take into account those items which are

5 required by Section 703(a)(1) to be separately stated

6 but which would be taken into account by an individual

7 in calculating his taxable income.

8 (3) Recapture of business expenses on disposition of

9 asset or business. Notwithstanding any other law to the

10 contrary, if in prior years income from an asset or

11 business has been classified as business income and in a

12 later year is demonstrated to be non-business income, then

13 all expenses, without limitation, deducted in such later

14 year and in the 2 immediately preceding taxable years

15 related to that asset or business that generated the

16 non-business income shall be added back and recaptured as

17 business income in the year of the disposition of the asset

18 or business. Such amount shall be apportioned to Illinois

19 using the greater of the apportionment fraction computed

20 for the business under Section 304 of this Act for the

21 taxable year or the average of the apportionment fractions

22 computed for the business under Section 304 of this Act for

23 the taxable year and for the 2 immediately preceding

24 taxable years.

25 (f) Valuation limitation amount.

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1 (1) In general. The valuation limitation amount

2 referred to in subsections (a) (2) (G), (c) (2) (I) and

3 (d)(2) (E) is an amount equal to:

4 (A) The sum of the pre-August 1, 1969 appreciation

5 amounts (to the extent consisting of gain reportable

6 under the provisions of Section 1245 or 1250 of the

7 Internal Revenue Code) for all property in respect of

8 which such gain was reported for the taxable year; plus

9 (B) The lesser of (i) the sum of the pre-August 1,

10 1969 appreciation amounts (to the extent consisting of

11 capital gain) for all property in respect of which such

12 gain was reported for federal income tax purposes for

13 the taxable year, or (ii) the net capital gain for the

14 taxable year, reduced in either case by any amount of

15 such gain included in the amount determined under

16 subsection (a) (2) (F) or (c) (2) (H).

17 (2) Pre-August 1, 1969 appreciation amount.

18 (A) If the fair market value of property referred

19 to in paragraph (1) was readily ascertainable on August

20 1, 1969, the pre-August 1, 1969 appreciation amount for

21 such property is the lesser of (i) the excess of such

22 fair market value over the taxpayer's basis (for

23 determining gain) for such property on that date

24 (determined under the Internal Revenue Code as in

25 effect on that date), or (ii) the total gain realized

26 and reportable for federal income tax purposes in

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1 respect of the sale, exchange or other disposition of

2 such property.

3 (B) If the fair market value of property referred

4 to in paragraph (1) was not readily ascertainable on

5 August 1, 1969, the pre-August 1, 1969 appreciation

6 amount for such property is that amount which bears the

7 same ratio to the total gain reported in respect of the

8 property for federal income tax purposes for the

9 taxable year, as the number of full calendar months in

10 that part of the taxpayer's holding period for the

11 property ending July 31, 1969 bears to the number of

12 full calendar months in the taxpayer's entire holding

13 period for the property.

14 (C) The Department shall prescribe such

15 regulations as may be necessary to carry out the

16 purposes of this paragraph.

17 (g) Double deductions. Unless specifically provided

18 otherwise, nothing in this Section shall permit the same item

19 to be deducted more than once.

20 (h) Legislative intention. Except as expressly provided by

21 this Section there shall be no modifications or limitations on

22 the amounts of income, gain, loss or deduction taken into

23 account in determining gross income, adjusted gross income or

24 taxable income for federal income tax purposes for the taxable

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1 year, or in the amount of such items entering into the

2 computation of base income and net income under this Act for

3 such taxable year, whether in respect of property values as of

4 August 1, 1969 or otherwise.

5 (Source: P.A. 96-45, eff. 7-15-09; 96-120, eff. 8-4-09; 96-198,

6 eff. 8-10-09; 96-328, eff. 8-11-09; 96-520, eff. 8-14-09;

7 96-835, eff. 12-16-09; 96-932, eff. 1-1-11; 96-935, eff.

8 6-21-10; 96-1214, eff. 7-22-10; 97-333, eff. 8-12-11; 97-507,

9 eff. 8-23-11; 97-905, eff. 8-7-12.)

10 (35 ILCS 5/212)

11 Sec. 212. Earned income tax credit.

12 (a) With respect to the federal earned income tax credit

13 allowed for the taxable year under Section 32 of the federal

14 Internal Revenue Code, 26 U.S.C. 32, each individual taxpayer

15 is entitled to a credit against the tax imposed by subsections

16 (a) and (b) of Section 201 in an amount equal to (i) 5% of the

17 federal tax credit for each taxable year beginning on or after

18 January 1, 2000 and ending prior to December 31, 2012, (ii)

19 7.5% of the federal tax credit for each taxable year beginning

20 on or after January 1, 2012 and ending prior to December 31,

21 2013, ~~and~~ (iii) 10% of the federal tax credit for each taxable

22 year beginning on or after January 1, 2013 and beginning prior

23 to January 1, 2017, and (iv) 15% of the federal tax credit for

24 each taxable year beginning on or after January 1, 2017.

25 For a non-resident or part-year resident, the amount of the

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1 credit under this Section shall be in proportion to the amount

2 of income attributable to this State.

3 (b) For taxable years beginning before January 1, 2003, in

4 no event shall a credit under this Section reduce the

5 taxpayer's liability to less than zero. For each taxable year

6 beginning on or after January 1, 2003, if the amount of the

7 credit exceeds the income tax liability for the applicable tax

8 year, then the excess credit shall be refunded to the taxpayer.

9 The amount of a refund shall not be included in the taxpayer's

10 income or resources for the purposes of determining eligibility

11 or benefit level in any means-tested benefit program

12 administered by a governmental entity unless required by

13 federal law.

14 (c) This Section is exempt from the provisions of Section

15 250.

16 (Source: P.A. 97-652, eff. 6-1-12.)

17 (35 ILCS 5/222)

18 Sec. 222. Live theater production credit.

19 (a) For tax years beginning on or after January 1, 2012 and

20 beginning prior to January 1, 2027, a taxpayer who has received

21 a tax credit award under the Live Theater Production Tax Credit

22 Act is entitled to a credit against the taxes imposed under

23 subsections (a) and (b) of Section 201 of this Act in an amount

24 determined under that Act by the Department of Commerce and

25 Economic Opportunity.

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1 (b) If the taxpayer is a partnership, limited liability

2 partnership, limited liability company, or Subchapter S

3 corporation, the tax credit award is allowed to the partners,

4 unit holders, or shareholders in accordance with the

5 determination of income and distributive share of income under

6 Sections 702 and 704 and Subchapter S of the Internal Revenue

7 Code.

8 (c) A sale, assignment, or transfer of the tax credit award

9 may be made by the taxpayer earning the credit within one year

10 after the credit is awarded in accordance with rules adopted by

11 the Department of Commerce and Economic Opportunity.

12 (d) The Department of Revenue, in cooperation with the

13 Department of Commerce and Economic Opportunity, shall adopt

14 rules to enforce and administer the provisions of this Section.

15 (e) The tax credit award may not be carried back. If the

16 amount of the credit exceeds the tax liability for the year,

17 the excess may be carried forward and applied to the tax

18 liability of the 5 tax years following the excess credit year.

19 The tax credit award shall be applied to the earliest year for

20 which there is a tax liability. If there are credits from more

21 than one tax year that are available to offset liability, the

22 earlier credit shall be applied first. In no event may a credit

23 under this Section reduce the taxpayer's liability to less than

24 zero.

25 (Source: P.A. 97-636, eff. 6-1-12.)

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1 (35 ILCS 5/225 new)

2 Sec. 225. Credit for instructional materials and supplies.

3 For taxable years beginning on and after January 1, 2017, a

4 taxpayer shall be allowed a credit in the amount paid by the

5 taxpayer during the taxable year for instructional materials

6 and supplies with respect to classroom based instruction in a

7 qualified school, or $250, whichever is less, provided that the

8 taxpayer is a teacher, instructor, counselor, principal, or

9 aide in a qualified school for at least 900 hours during a

10 school year.

11 The credit may not be carried back and may not reduce the

12 taxpayer's liability to less than zero. If the amount of the

13 credit exceeds the tax liability for the year, the excess may

14 be carried forward and applied to the tax liability of the 5

15 taxable years following the excess credit year. The tax credit

16 shall be applied to the earliest year for which there is a tax

17 liability. If there are credits for more than one year that are

18 available to offset a liability, the earlier credit shall be

19 applied first.

20 For purposes of this Section, the term "materials and

21 supplies" means amounts paid for instructional materials or

22 supplies that are designated for classroom use in any qualified

23 school. For purposes of this Section, the term "qualified

24 school" means a public school or non-public school located in

25 Illinois.

26 This Section is exempt from the provisions of Section 250.

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1 (35 ILCS 5/804) (from Ch. 120, par. 8-804)

2 Sec. 804. Failure to Pay Estimated Tax.

3 (a) In general. In case of any underpayment of estimated

4 tax by a taxpayer, except as provided in subsection (d) or (e),

5 the taxpayer shall be liable to a penalty in an amount

6 determined at the rate prescribed by Section 3-3 of the Uniform

7 Penalty and Interest Act upon the amount of the underpayment

8 (determined under subsection (b)) for each required

9 installment.

10 (b) Amount of underpayment. For purposes of subsection (a),

11 the amount of the underpayment shall be the excess of:

12 (1) the amount of the installment which would be

13 required to be paid under subsection (c), over

14 (2) the amount, if any, of the installment paid on or

15 before the last date prescribed for payment.

16 (c) Amount of Required Installments.

17 (1) Amount.

18 (A) In General. Except as provided in paragraphs

19 (2) and (3), the amount of any required installment

20 shall be 25% of the required annual payment.

21 (B) Required Annual Payment. For purposes of

22 subparagraph (A), the term "required annual payment"

23 means the lesser of:

24 (i) 90% of the tax shown on the return for the

25 taxable year, or if no return is filed, 90% of the

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1 tax for such year;

2 (ii) for installments due prior to February 1,

3 2011, and after January 31, 2012, 100% of the tax

4 shown on the return of the taxpayer for the

5 preceding taxable year if a return showing a

6 liability for tax was filed by the taxpayer for the

7 preceding taxable year and such preceding year was

8 a taxable year of 12 months; or

9 (iii) for installments due after January 31,

10 2011, and prior to February 1, 2012, 150% of the

11 tax shown on the return of the taxpayer for the

12 preceding taxable year if a return showing a

13 liability for tax was filed by the taxpayer for the

14 preceding taxable year and such preceding year was

15 a taxable year of 12 months.

16 (2) Lower Required Installment where Annualized Income

17 Installment is Less Than Amount Determined Under Paragraph

18 (1).

19 (A) In General. In the case of any required

20 installment if a taxpayer establishes that the

21 annualized income installment is less than the amount

22 determined under paragraph (1),

23 (i) the amount of such required installment

24 shall be the annualized income installment, and

25 (ii) any reduction in a required installment

26 resulting from the application of this

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1 subparagraph shall be recaptured by increasing the

2 amount of the next required installment determined

3 under paragraph (1) by the amount of such

4 reduction, and by increasing subsequent required

5 installments to the extent that the reduction has

6 not previously been recaptured under this clause.

7 (B) Determination of Annualized Income

8 Installment. In the case of any required installment,

9 the annualized income installment is the excess, if

10 any, of:

11 (i) an amount equal to the applicable

12 percentage of the tax for the taxable year computed

13 by placing on an annualized basis the net income

14 for months in the taxable year ending before the

15 due date for the installment, over

16 (ii) the aggregate amount of any prior

17 required installments for the taxable year.

18 (C) Applicable Percentage.

19	`In the case of the following`	`The applicable`
20	`required installments:`	`percentage is:`
21	`1st` ...............................	`22.5%`
22	`2nd` ...............................	`45%`
23	`3rd` ...............................	`67.5%`
24	`4th` ...............................	`90%`

25 (D) Annualized Net Income; Individuals. For

26 individuals, net income shall be placed on an

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1 annualized basis by:

2 (i) multiplying by 12, or in the case of a

3 taxable year of less than 12 months, by the number

4 of months in the taxable year, the net income

5 computed without regard to the standard exemption

6 for the months in the taxable year ending before

7 the month in which the installment is required to

8 be paid;

9 (ii) dividing the resulting amount by the

10 number of months in the taxable year ending before

11 the month in which such installment date falls; and

12 (iii) deducting from such amount the standard

13 exemption allowable for the taxable year, such

14 standard exemption being determined as of the last

15 date prescribed for payment of the installment.

16 (E) Annualized Net Income; Corporations. For

17 corporations, net income shall be placed on an

18 annualized basis by multiplying by 12 the taxable

19 income

20 (i) for the first 3 months of the taxable year,

21 in the case of the installment required to be paid

22 in the 4th month,

23 (ii) for the first 3 months or for the first 5

24 months of the taxable year, in the case of the

25 installment required to be paid in the 6th month,

26 (iii) for the first 6 months or for the first 8

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1 months of the taxable year, in the case of the

2 installment required to be paid in the 9th month,

3 and

4 (iv) for the first 9 months or for the first 11

5 months of the taxable year, in the case of the

6 installment required to be paid in the 12th month

7 of the taxable year,

8 then dividing the resulting amount by the number of

9 months in the taxable year (3, 5, 6, 8, 9, or 11 as the

10 case may be).

11 (3) Notwithstanding any other provision of this

12 subsection (c), in the case of a federally regulated

13 exchange that elects to apportion its income under Section

14 304(c-1) of this Act, the amount of each required

15 installment due prior to June 30 of the first taxable year

16 to which the election applies shall be 25% of the tax that

17 would have been shown on the return for that taxable year

18 if the taxpayer had not made such election.

19 (d) Exceptions. Notwithstanding the provisions of the

20 preceding subsections, the penalty imposed by subsection (a)

21 shall not be imposed if the taxpayer was not required to file

22 an Illinois income tax return for the preceding taxable year,

23 or, for individuals, if the taxpayer had no tax liability for

24 the preceding taxable year and such year was a taxable year of

25 12 months. The penalty imposed by subsection (a) shall also not

26 be imposed on any underpayments of estimated tax due before the

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1 effective date of this amendatory Act of 1998 which

2 underpayments are solely attributable to the change in

3 apportionment from subsection (a) to subsection (h) of Section

4 304. The provisions of this amendatory Act of 1998 apply to tax

5 years ending on or after December 31, 1998.

6 (e) The penalty imposed for underpayment of estimated tax

7 by subsection (a) of this Section shall not be imposed to the

8 extent that the Director or his or her designate determines,

9 pursuant to Section 3-8 of the Uniform Penalty and Interest Act

10 that the penalty should not be imposed.

11 (f) Definition of tax. For purposes of subsections (b) and

12 (c), the term "tax" means the excess of the tax imposed under

13 Article 2 of this Act, over the amounts credited against such

14 tax under Sections 601(b) (3) and (4).

15 (g) Application of Section in case of tax withheld under

16 Article 7. For purposes of applying this Section:

17 (1) tax withheld from compensation for the taxable year

18 shall be deemed a payment of estimated tax, and an equal

19 part of such amount shall be deemed paid on each

20 installment date for such taxable year, unless the taxpayer

21 establishes the dates on which all amounts were actually

22 withheld, in which case the amounts so withheld shall be

23 deemed payments of estimated tax on the dates on which such

24 amounts were actually withheld;

25 (2) amounts timely paid by a partnership, Subchapter S

26 corporation, or trust on behalf of a partner, shareholder,

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1 or beneficiary pursuant to subsection (f) of Section 502 or

2 Section 709.5 and claimed as a payment of estimated tax

3 shall be deemed a payment of estimated tax made on the last

4 day of the taxable year of the partnership, Subchapter S

5 corporation, or trust for which the income from the

6 withholding is made was computed; and

7 (3) all other amounts pursuant to Article 7 shall be

8 deemed a payment of estimated tax on the date the payment

9 is made to the taxpayer of the amount from which the tax is

10 withheld.

11 (g-5) Amounts withheld under the State Salary and Annuity

12 Withholding Act. An individual who has amounts withheld under

13 paragraph (10) of Section 4 of the State Salary and Annuity

14 Withholding Act may elect to have those amounts treated as

15 payments of estimated tax made on the dates on which those

16 amounts are actually withheld.

17 (g-10) Notwithstanding any other provision of law, no

18 penalty shall apply with respect to an underpayment of

19 estimated tax for the first, second, or third quarter of any

20 taxable year beginning on or after January 1, 2017 and

21 beginning prior to January 1, 2018 if (i) the underpayment was

22 due to the changes made by this amendatory Act of the 100th

23 General Assembly, (ii) the payment was otherwise timely made,

24 and (iii) the balance due is included with the taxpayer's

25 estimated tax payment for the fourth quarter.

26 (i) Short taxable year. The application of this Section to

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1 taxable years of less than 12 months shall be in accordance

2 with regulations prescribed by the Department.

3 The changes in this Section made by Public Act 84-127 shall

4 apply to taxable years ending on or after January 1, 1986.

5 (Source: P.A. 96-1496, eff. 1-13-11; 97-507, eff. 8-23-11;

6 97-636, eff. 6-1-12.)

7 (35 ILCS 5/901) (from Ch. 120, par. 9-901)

8 Sec. 901. Collection authority.

9 (a) In general.

10 The Department shall collect the taxes imposed by this Act.

11 The Department shall collect certified past due child support

12 amounts under Section 2505-650 of the Department of Revenue Law

13 (20 ILCS 2505/2505-650). Except as provided in subsections (c),

14 (e), (f), (g), and (h) of this Section, money collected

15 pursuant to subsections (a) and (b) of Section 201 of this Act

16 shall be paid into the General Revenue Fund in the State

17 treasury; money collected pursuant to subsections (c) and (d)

18 of Section 201 of this Act shall be paid into the Personal

19 Property Tax Replacement Fund, a special fund in the State

20 Treasury; and money collected under Section 2505-650 of the

21 Department of Revenue Law (20 ILCS 2505/2505-650) shall be paid

22 into the Child Support Enforcement Trust Fund, a special fund

23 outside the State Treasury, or to the State Disbursement Unit

24 established under Section 10-26 of the Illinois Public Aid

25 Code, as directed by the Department of Healthcare and Family

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1 Services.

2 (b) Local Government Distributive Fund.

3 Beginning August 1, 1969, and continuing through June 30,

4 1994, the Treasurer shall transfer each month from the General

5 Revenue Fund to a special fund in the State treasury, to be

6 known as the "Local Government Distributive Fund", an amount

7 equal to 1/12 of the net revenue realized from the tax imposed

8 by subsections (a) and (b) of Section 201 of this Act during

9 the preceding month. Beginning July 1, 1994, and continuing

10 through June 30, 1995, the Treasurer shall transfer each month

11 from the General Revenue Fund to the Local Government

12 Distributive Fund an amount equal to 1/11 of the net revenue

13 realized from the tax imposed by subsections (a) and (b) of

14 Section 201 of this Act during the preceding month. Beginning

15 July 1, 1995 and continuing through January 31, 2011, the

16 Treasurer shall transfer each month from the General Revenue

17 Fund to the Local Government Distributive Fund an amount equal

18 to the net of (i) 1/10 of the net revenue realized from the tax

19 imposed by subsections (a) and (b) of Section 201 of the

20 Illinois Income Tax Act during the preceding month (ii) minus,

21 beginning July 1, 2003 and ending June 30, 2004, $6,666,666,

22 and beginning July 1, 2004, zero. Beginning February 1, 2011,

23 and continuing through January 31, 2015, the Treasurer shall

24 transfer each month from the General Revenue Fund to the Local

25 Government Distributive Fund an amount equal to the sum of (i)

26 6% (10% of the ratio of the 3% individual income tax rate prior

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1 to 2011 to the 5% individual income tax rate after 2010) of the

2 net revenue realized from the tax imposed by subsections (a)

3 and (b) of Section 201 of this Act upon individuals, trusts,

4 and estates during the preceding month and (ii) 6.86% (10% of

5 the ratio of the 4.8% corporate income tax rate prior to 2011

6 to the 7% corporate income tax rate after 2010) of the net

7 revenue realized from the tax imposed by subsections (a) and

8 (b) of Section 201 of this Act upon corporations during the

9 preceding month. Beginning February 1, 2015 and continuing

10 through January 31, 2017 ~~January 31, 2025~~, the Treasurer shall

11 transfer each month from the General Revenue Fund to the Local

12 Government Distributive Fund an amount equal to the sum of (i)

13 8% (10% of the ratio of the 3% individual income tax rate prior

14 to 2011 to the 3.75% individual income tax rate after 2014) of

15 the net revenue realized from the tax imposed by subsections

16 (a) and (b) of Section 201 of this Act upon individuals,

17 trusts, and estates during the preceding month and (ii) 9.14%

18 (10% of the ratio of the 4.8% corporate income tax rate prior

19 to 2011 to the 5.25% corporate income tax rate after 2014) of

20 the net revenue realized from the tax imposed by subsections

21 (a) and (b) of Section 201 of this Act upon corporations during

22 the preceding month. Beginning February 1, 2017 ~~February 1,~~

23 ~~2025~~, the Treasurer shall transfer each month from the General

24 Revenue Fund to the Local Government Distributive Fund an

25 amount equal to the sum of (i) 6.02% ~~9.23%~~ (10% of the ratio of

26 the 3% individual income tax rate prior to 2011 to the 4.99%

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1 ~~3.25%~~ individual income tax rate beginning in 2017 ~~after 2024~~)

2 of the net revenue realized from the tax imposed by subsections

3 (a) and (b) of Section 201 of this Act upon individuals,

4 trusts, and estates during the preceding month and (ii) 6.86%

5 (10% of the ratio of the 4.8% corporate income tax rate prior

6 to 2011 to the 7% corporate income tax rate beginning in 2017)

7 ~~10%~~ of the net revenue realized from the tax imposed by

8 subsections (a) and (b) of Section 201 of this Act upon

9 corporations during the preceding month. Net revenue realized

10 for a month shall be defined as the revenue from the tax

11 imposed by subsections (a) and (b) of Section 201 of this Act

12 which is deposited in the General Revenue Fund, the Education

13 Assistance Fund, the Income Tax Surcharge Local Government

14 Distributive Fund, the Fund for the Advancement of Education,

15 and the Commitment to Human Services Fund during the month

16 minus the amount paid out of the General Revenue Fund in State

17 warrants during that same month as refunds to taxpayers for

18 overpayment of liability under the tax imposed by subsections

19 (a) and (b) of Section 201 of this Act.

20 Beginning on August 26, 2014 (the effective date of Public

21 Act 98-1052), the Comptroller shall perform the transfers

22 required by this subsection (b) no later than 60 days after he

23 or she receives the certification from the Treasurer as

24 provided in Section 1 of the State Revenue Sharing Act.

25 (c) Deposits Into Income Tax Refund Fund.

26 (1) Beginning on January 1, 1989 and thereafter, the

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1 Department shall deposit a percentage of the amounts

2 collected pursuant to subsections (a) and (b)(1), (2), and

3 (3), of Section 201 of this Act into a fund in the State

4 treasury known as the Income Tax Refund Fund. The

5 Department shall deposit 6% of such amounts during the

6 period beginning January 1, 1989 and ending on June 30,

7 1989. Beginning with State fiscal year 1990 and for each

8 fiscal year thereafter, the percentage deposited into the

9 Income Tax Refund Fund during a fiscal year shall be the

10 Annual Percentage. For fiscal years 1999 through 2001, the

11 Annual Percentage shall be 7.1%. For fiscal year 2003, the

12 Annual Percentage shall be 8%. For fiscal year 2004, the

13 Annual Percentage shall be 11.7%. Upon the effective date

14 of this amendatory Act of the 93rd General Assembly, the

15 Annual Percentage shall be 10% for fiscal year 2005. For

16 fiscal year 2006, the Annual Percentage shall be 9.75%. For

17 fiscal year 2007, the Annual Percentage shall be 9.75%. For

18 fiscal year 2008, the Annual Percentage shall be 7.75%. For

19 fiscal year 2009, the Annual Percentage shall be 9.75%. For

20 fiscal year 2010, the Annual Percentage shall be 9.75%. For

21 fiscal year 2011, the Annual Percentage shall be 8.75%. For

22 fiscal year 2012, the Annual Percentage shall be 8.75%. For

23 fiscal year 2013, the Annual Percentage shall be 9.75%. For

24 fiscal year 2014, the Annual Percentage shall be 9.5%. For

25 fiscal year 2015, the Annual Percentage shall be 10%. For

26 all other fiscal years, the Annual Percentage shall be

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1 calculated as a fraction, the numerator of which shall be

2 the amount of refunds approved for payment by the

3 Department during the preceding fiscal year as a result of

4 overpayment of tax liability under subsections (a) and

5 (b)(1), (2), and (3) of Section 201 of this Act plus the

6 amount of such refunds remaining approved but unpaid at the

7 end of the preceding fiscal year, minus the amounts

8 transferred into the Income Tax Refund Fund from the

9 Tobacco Settlement Recovery Fund, and the denominator of

10 which shall be the amounts which will be collected pursuant

11 to subsections (a) and (b)(1), (2), and (3) of Section 201

12 of this Act during the preceding fiscal year; except that

13 in State fiscal year 2002, the Annual Percentage shall in

14 no event exceed 7.6%. The Director of Revenue shall certify

15 the Annual Percentage to the Comptroller on the last

16 business day of the fiscal year immediately preceding the

17 fiscal year for which it is to be effective.

18 (2) Beginning on January 1, 1989 and thereafter, the

19 Department shall deposit a percentage of the amounts

20 collected pursuant to subsections (a) and (b)(6), (7), and

21 (8), (c) and (d) of Section 201 of this Act into a fund in

22 the State treasury known as the Income Tax Refund Fund. The

23 Department shall deposit 18% of such amounts during the

24 period beginning January 1, 1989 and ending on June 30,

25 1989. Beginning with State fiscal year 1990 and for each

26 fiscal year thereafter, the percentage deposited into the

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1 Income Tax Refund Fund during a fiscal year shall be the

2 Annual Percentage. For fiscal years 1999, 2000, and 2001,

3 the Annual Percentage shall be 19%. For fiscal year 2003,

4 the Annual Percentage shall be 27%. For fiscal year 2004,

5 the Annual Percentage shall be 32%. Upon the effective date

6 of this amendatory Act of the 93rd General Assembly, the

7 Annual Percentage shall be 24% for fiscal year 2005. For

8 fiscal year 2006, the Annual Percentage shall be 20%. For

9 fiscal year 2007, the Annual Percentage shall be 17.5%. For

10 fiscal year 2008, the Annual Percentage shall be 15.5%. For

11 fiscal year 2009, the Annual Percentage shall be 17.5%. For

12 fiscal year 2010, the Annual Percentage shall be 17.5%. For

13 fiscal year 2011, the Annual Percentage shall be 17.5%. For

14 fiscal year 2012, the Annual Percentage shall be 17.5%. For

15 fiscal year 2013, the Annual Percentage shall be 14%. For

16 fiscal year 2014, the Annual Percentage shall be 13.4%. For

17 fiscal year 2015, the Annual Percentage shall be 14%. For

18 all other fiscal years, the Annual Percentage shall be

19 calculated as a fraction, the numerator of which shall be

20 the amount of refunds approved for payment by the

21 Department during the preceding fiscal year as a result of

22 overpayment of tax liability under subsections (a) and

23 (b)(6), (7), and (8), (c) and (d) of Section 201 of this

24 Act plus the amount of such refunds remaining approved but

25 unpaid at the end of the preceding fiscal year, and the

26 denominator of which shall be the amounts which will be

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1 collected pursuant to subsections (a) and (b)(6), (7), and

2 (8), (c) and (d) of Section 201 of this Act during the

3 preceding fiscal year; except that in State fiscal year

4 2002, the Annual Percentage shall in no event exceed 23%.

5 The Director of Revenue shall certify the Annual Percentage

6 to the Comptroller on the last business day of the fiscal

7 year immediately preceding the fiscal year for which it is

8 to be effective.

9 (3) The Comptroller shall order transferred and the

10 Treasurer shall transfer from the Tobacco Settlement

11 Recovery Fund to the Income Tax Refund Fund (i) $35,000,000

12 in January, 2001, (ii) $35,000,000 in January, 2002, and

13 (iii) $35,000,000 in January, 2003.

14 (d) Expenditures from Income Tax Refund Fund.

15 (1) Beginning January 1, 1989, money in the Income Tax

16 Refund Fund shall be expended exclusively for the purpose

17 of paying refunds resulting from overpayment of tax

18 liability under Section 201 of this Act, for paying rebates

19 under Section 208.1 in the event that the amounts in the

20 Homeowners' Tax Relief Fund are insufficient for that

21 purpose, and for making transfers pursuant to this

22 subsection (d).

23 (2) The Director shall order payment of refunds

24 resulting from overpayment of tax liability under Section

25 201 of this Act from the Income Tax Refund Fund only to the

26 extent that amounts collected pursuant to Section 201 of

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1 this Act and transfers pursuant to this subsection (d) and

2 item (3) of subsection (c) have been deposited and retained

3 in the Fund.

4 (3) As soon as possible after the end of each fiscal

5 year, the Director shall order transferred and the State

6 Treasurer and State Comptroller shall transfer from the

7 Income Tax Refund Fund to the Personal Property Tax

8 Replacement Fund an amount, certified by the Director to

9 the Comptroller, equal to the excess of the amount

10 collected pursuant to subsections (c) and (d) of Section

11 201 of this Act deposited into the Income Tax Refund Fund

12 during the fiscal year over the amount of refunds resulting

13 from overpayment of tax liability under subsections (c) and

14 (d) of Section 201 of this Act paid from the Income Tax

15 Refund Fund during the fiscal year.

16 (4) As soon as possible after the end of each fiscal

17 year, the Director shall order transferred and the State

18 Treasurer and State Comptroller shall transfer from the

19 Personal Property Tax Replacement Fund to the Income Tax

20 Refund Fund an amount, certified by the Director to the

21 Comptroller, equal to the excess of the amount of refunds

22 resulting from overpayment of tax liability under

23 subsections (c) and (d) of Section 201 of this Act paid

24 from the Income Tax Refund Fund during the fiscal year over

25 the amount collected pursuant to subsections (c) and (d) of

26 Section 201 of this Act deposited into the Income Tax

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1 Refund Fund during the fiscal year.

2 (4.5) As soon as possible after the end of fiscal year

3 1999 and of each fiscal year thereafter, the Director shall

4 order transferred and the State Treasurer and State

5 Comptroller shall transfer from the Income Tax Refund Fund

6 to the General Revenue Fund any surplus remaining in the

7 Income Tax Refund Fund as of the end of such fiscal year;

8 excluding for fiscal years 2000, 2001, and 2002 amounts

9 attributable to transfers under item (3) of subsection (c)

10 less refunds resulting from the earned income tax credit.

11 (5) This Act shall constitute an irrevocable and

12 continuing appropriation from the Income Tax Refund Fund

13 for the purpose of paying refunds upon the order of the

14 Director in accordance with the provisions of this Section.

15 (e) Deposits into the Education Assistance Fund and the

16 Income Tax Surcharge Local Government Distributive Fund.

17 On July 1, 1991, and thereafter, of the amounts collected

18 pursuant to subsections (a) and (b) of Section 201 of this Act,

19 minus deposits into the Income Tax Refund Fund, the Department

20 shall deposit 7.3% into the Education Assistance Fund in the

21 State Treasury. Beginning July 1, 1991, and continuing through

22 January 31, 1993, of the amounts collected pursuant to

23 subsections (a) and (b) of Section 201 of the Illinois Income

24 Tax Act, minus deposits into the Income Tax Refund Fund, the

25 Department shall deposit 3.0% into the Income Tax Surcharge

26 Local Government Distributive Fund in the State Treasury.

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1 Beginning February 1, 1993 and continuing through June 30,

2 1993, of the amounts collected pursuant to subsections (a) and

3 (b) of Section 201 of the Illinois Income Tax Act, minus

4 deposits into the Income Tax Refund Fund, the Department shall

5 deposit 4.4% into the Income Tax Surcharge Local Government

6 Distributive Fund in the State Treasury. Beginning July 1,

7 1993, and continuing through June 30, 1994, of the amounts

8 collected under subsections (a) and (b) of Section 201 of this

9 Act, minus deposits into the Income Tax Refund Fund, the

10 Department shall deposit 1.475% into the Income Tax Surcharge

11 Local Government Distributive Fund in the State Treasury.

12 (f) Deposits into the Fund for the Advancement of

13 Education. Beginning February 1, 2015, the Department shall

14 deposit the following portions of the revenue realized from the

15 tax imposed upon individuals, trusts, and estates by

16 subsections (a) and (b) of Section 201 of this Act during the

17 preceding month, minus deposits into the Income Tax Refund

18 Fund, into the Fund for the Advancement of Education:

19 (1) beginning February 1, 2015, and prior to February

20 1, 2025, 1/30; and

21 (2) beginning February 1, 2025, 1/26.

22 If the rate of tax imposed by subsection (a) and (b) of

23 Section 201 is reduced pursuant to Section 201.5 of this Act,

24 the Department shall not make the deposits required by this

25 subsection (f) on or after the effective date of the reduction.

26 (g) Deposits into the Commitment to Human Services Fund.

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1 Beginning February 1, 2015, the Department shall deposit the

2 following portions of the revenue realized from the tax imposed

3 upon individuals, trusts, and estates by subsections (a) and

4 (b) of Section 201 of this Act during the preceding month,

5 minus deposits into the Income Tax Refund Fund, into the

6 Commitment to Human Services Fund:

7 (1) beginning February 1, 2015, and prior to February

8 1, 2025, 1/30; and

9 (2) beginning February 1, 2025, 1/26.

10 If the rate of tax imposed by subsection (a) and (b) of

11 Section 201 is reduced pursuant to Section 201.5 of this Act,

12 the Department shall not make the deposits required by this

13 subsection (g) on or after the effective date of the reduction.

14 (h) Deposits into the Tax Compliance and Administration

15 Fund. Beginning on the first day of the first calendar month to

16 occur on or after August 26, 2014 (the effective date of Public

17 Act 98-1098), each month the Department shall pay into the Tax

18 Compliance and Administration Fund, to be used, subject to

19 appropriation, to fund additional auditors and compliance

20 personnel at the Department, an amount equal to 1/12 of 5% of

21 the cash receipts collected during the preceding fiscal year by

22 the Audit Bureau of the Department from the tax imposed by

23 subsections (a), (b), (c), and (d) of Section 201 of this Act,

24 net of deposits into the Income Tax Refund Fund made from those

25 cash receipts.

26 (Source: P.A. 98-24, eff. 6-19-13; 98-674, eff. 6-30-14;

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1 98-1052, eff. 8-26-14; 98-1098, eff. 8-26-14; 99-78, eff.

2 7-20-15.)

3 (35 ILCS 5/1501) (from Ch. 120, par. 15-1501)

4 Sec. 1501. Definitions.

5 (a) In general. When used in this Act, where not otherwise

6 distinctly expressed or manifestly incompatible with the

7 intent thereof:

8 (1) Business income. The term "business income" means

9 all income that may be treated as apportionable business

10 income under the Constitution of the United States.

11 Business income is net of the deductions allocable thereto.

12 Such term does not include compensation or the deductions

13 allocable thereto. For each taxable year beginning on or

14 after January 1, 2003, a taxpayer may elect to treat all

15 income other than compensation as business income. This

16 election shall be made in accordance with rules adopted by

17 the Department and, once made, shall be irrevocable.

18 (1.5) Captive real estate investment trust:

19 (A) The term "captive real estate investment

20 trust" means a corporation, trust, or association:

21 (i) that is considered a real estate

22 investment trust for the taxable year under

23 Section 856 of the Internal Revenue Code;

24 (ii) the certificates of beneficial interest

25 or shares of which are not regularly traded on an

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1 established securities market; and

2 (iii) of which more than 50% of the voting

3 power or value of the beneficial interest or

4 shares, at any time during the last half of the

5 taxable year, is owned or controlled, directly,

6 indirectly, or constructively, by a single

7 corporation.

8 (B) The term "captive real estate investment

9 trust" does not include:

10 (i) a real estate investment trust of which

11 more than 50% of the voting power or value of the

12 beneficial interest or shares is owned or

13 controlled, directly, indirectly, or

14 constructively, by:

15 (a) a real estate investment trust, other

16 than a captive real estate investment trust;

17 (b) a person who is exempt from taxation

18 under Section 501 of the Internal Revenue Code,

19 and who is not required to treat income

20 received from the real estate investment trust

21 as unrelated business taxable income under

22 Section 512 of the Internal Revenue Code;

23 (c) a listed Australian property trust, if

24 no more than 50% of the voting power or value

25 of the beneficial interest or shares of that

26 trust, at any time during the last half of the

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1 taxable year, is owned or controlled, directly

2 or indirectly, by a single person;

3 (d) an entity organized as a trust,

4 provided a listed Australian property trust

5 described in subparagraph (c) owns or

6 controls, directly or indirectly, or

7 constructively, 75% or more of the voting power

8 or value of the beneficial interests or shares

9 of such entity; or

10 (e) an entity that is organized outside of

11 the laws of the United States and that

12 satisfies all of the following criteria:

13 (1) at least 75% of the entity's total

14 asset value at the close of its taxable

15 year is represented by real estate assets

16 (as defined in Section 856(c)(5)(B) of the

17 Internal Revenue Code, thereby including

18 shares or certificates of beneficial

19 interest in any real estate investment

20 trust), cash and cash equivalents, and

21 U.S. Government securities;

22 (2) the entity is not subject to tax on

23 amounts that are distributed to its

24 beneficial owners or is exempt from

25 entity-level taxation;

26 (3) the entity distributes at least

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1 85% of its taxable income (as computed in

2 the jurisdiction in which it is organized)

3 to the holders of its shares or

4 certificates of beneficial interest on an

5 annual basis;

6 (4) either (i) the shares or

7 beneficial interests of the entity are

8 regularly traded on an established

9 securities market or (ii) not more than 10%

10 of the voting power or value in the entity

11 is held, directly, indirectly, or

12 constructively, by a single entity or

13 individual; and

14 (5) the entity is organized in a

15 country that has entered into a tax treaty

16 with the United States; or

17 (ii) during its first taxable year for which it

18 elects to be treated as a real estate investment

19 trust under Section 856(c)(1) of the Internal

20 Revenue Code, a real estate investment trust the

21 certificates of beneficial interest or shares of

22 which are not regularly traded on an established

23 securities market, but only if the certificates of

24 beneficial interest or shares of the real estate

25 investment trust are regularly traded on an

26 established securities market prior to the earlier

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1 of the due date (including extensions) for filing

2 its return under this Act for that first taxable

3 year or the date it actually files that return.

4 (C) For the purposes of this subsection (1.5), the

5 constructive ownership rules prescribed under Section

6 318(a) of the Internal Revenue Code, as modified by

7 Section 856(d)(5) of the Internal Revenue Code, apply

8 in determining the ownership of stock, assets, or net

9 profits of any person.

10 (D) For the purposes of this item (1.5), for

11 taxable years ending on or after August 16, 2007, the

12 voting power or value of the beneficial interest or

13 shares of a real estate investment trust does not

14 include any voting power or value of beneficial

15 interest or shares in a real estate investment trust

16 held directly or indirectly in a segregated asset

17 account by a life insurance company (as described in

18 Section 817 of the Internal Revenue Code) to the extent

19 such voting power or value is for the benefit of

20 entities or persons who are either immune from taxation

21 or exempt from taxation under subtitle A of the

22 Internal Revenue Code.

23 (2) Commercial domicile. The term "commercial

24 domicile" means the principal place from which the trade or

25 business of the taxpayer is directed or managed.

26 (3) Compensation. The term "compensation" means wages,

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1 salaries, commissions and any other form of remuneration

2 paid to employees for personal services.

3 (4) Corporation. The term "corporation" includes

4 associations, joint-stock companies, insurance companies

5 and cooperatives. Any entity, including a limited

6 liability company formed under the Illinois Limited

7 Liability Company Act, shall be treated as a corporation if

8 it is so classified for federal income tax purposes.

9 (5) Department. The term "Department" means the

10 Department of Revenue of this State.

11 (6) Director. The term "Director" means the Director of

12 Revenue of this State.

13 (7) Fiduciary. The term "fiduciary" means a guardian,

14 trustee, executor, administrator, receiver, or any person

15 acting in any fiduciary capacity for any person.

16 (8) Financial organization.

17 (A) The term "financial organization" means any

18 bank, bank holding company, trust company, savings

19 bank, industrial bank, land bank, safe deposit

20 company, private banker, savings and loan association,

21 building and loan association, credit union, currency

22 exchange, cooperative bank, small loan company, sales

23 finance company, investment company, or any person

24 which is owned by a bank or bank holding company. For

25 the purpose of this Section a "person" will include

26 only those persons which a bank holding company may

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1 acquire and hold an interest in, directly or

2 indirectly, under the provisions of the Bank Holding

3 Company Act of 1956 (12 U.S.C. 1841, et seq.), except

4 where interests in any person must be disposed of

5 within certain required time limits under the Bank

6 Holding Company Act of 1956.

7 (B) For purposes of subparagraph (A) of this

8 paragraph, the term "bank" includes (i) any entity that

9 is regulated by the Comptroller of the Currency under

10 the National Bank Act, or by the Federal Reserve Board,

11 or by the Federal Deposit Insurance Corporation and

12 (ii) any federally or State chartered bank operating as

13 a credit card bank.

14 (C) For purposes of subparagraph (A) of this

15 paragraph, the term "sales finance company" has the

16 meaning provided in the following item (i) or (ii):

17 (i) A person primarily engaged in one or more

18 of the following businesses: the business of

19 purchasing customer receivables, the business of

20 making loans upon the security of customer

21 receivables, the business of making loans for the

22 express purpose of funding purchases of tangible

23 personal property or services by the borrower, or

24 the business of finance leasing. For purposes of

25 this item (i), "customer receivable" means:

26 (a) a retail installment contract or

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1 retail charge agreement within the meaning of

2 the Sales Finance Agency Act, the Retail

3 Installment Sales Act, or the Motor Vehicle

4 Retail Installment Sales Act;

5 (b) an installment, charge, credit, or

6 similar contract or agreement arising from the

7 sale of tangible personal property or services

8 in a transaction involving a deferred payment

9 price payable in one or more installments

10 subsequent to the sale; or

11 (c) the outstanding balance of a contract

12 or agreement described in provisions (a) or (b)

13 of this item (i).

14 A customer receivable need not provide for

15 payment of interest on deferred payments. A sales

16 finance company may purchase a customer receivable

17 from, or make a loan secured by a customer

18 receivable to, the seller in the original

19 transaction or to a person who purchased the

20 customer receivable directly or indirectly from

21 that seller.

22 (ii) A corporation meeting each of the

23 following criteria:

24 (a) the corporation must be a member of an

25 "affiliated group" within the meaning of

26 Section 1504(a) of the Internal Revenue Code,

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1 determined without regard to Section 1504(b)

2 of the Internal Revenue Code;

3 (b) more than 50% of the gross income of

4 the corporation for the taxable year must be

5 interest income derived from qualifying loans.

6 A "qualifying loan" is a loan made to a member

7 of the corporation's affiliated group that

8 originates customer receivables (within the

9 meaning of item (i)) or to whom customer

10 receivables originated by a member of the

11 affiliated group have been transferred, to the

12 extent the average outstanding balance of

13 loans from that corporation to members of its

14 affiliated group during the taxable year do not

15 exceed the limitation amount for that

16 corporation. The "limitation amount" for a

17 corporation is the average outstanding

18 balances during the taxable year of customer

19 receivables (within the meaning of item (i))

20 originated by all members of the affiliated

21 group. If the average outstanding balances of

22 the loans made by a corporation to members of

23 its affiliated group exceed the limitation

24 amount, the interest income of that

25 corporation from qualifying loans shall be

26 equal to its interest income from loans to

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1 members of its affiliated groups times a

2 fraction equal to the limitation amount

3 divided by the average outstanding balances of

4 the loans made by that corporation to members

5 of its affiliated group;

6 (c) the total of all shareholder's equity

7 (including, without limitation, paid-in

8 capital on common and preferred stock and

9 retained earnings) of the corporation plus the

10 total of all of its loans, advances, and other

11 obligations payable or owed to members of its

12 affiliated group may not exceed 20% of the

13 total assets of the corporation at any time

14 during the tax year; and

15 (d) more than 50% of all interest-bearing

16 obligations of the affiliated group payable to

17 persons outside the group determined in

18 accordance with generally accepted accounting

19 principles must be obligations of the

20 corporation.

21 This amendatory Act of the 91st General Assembly is

22 declaratory of existing law.

23 (D) Subparagraphs (B) and (C) of this paragraph are

24 declaratory of existing law and apply retroactively,

25 for all tax years beginning on or before December 31,

26 1996, to all original returns, to all amended returns

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1 filed no later than 30 days after the effective date of

2 this amendatory Act of 1996, and to all notices issued

3 on or before the effective date of this amendatory Act

4 of 1996 under subsection (a) of Section 903, subsection

5 (a) of Section 904, subsection (e) of Section 909, or

6 Section 912. A taxpayer that is a "financial

7 organization" that engages in any transaction with an

8 affiliate shall be a "financial organization" for all

9 purposes of this Act.

10 (E) For all tax years beginning on or before

11 December 31, 1996, a taxpayer that falls within the

12 definition of a "financial organization" under

13 subparagraphs (B) or (C) of this paragraph, but who

14 does not fall within the definition of a "financial

15 organization" under the Proposed Regulations issued by

16 the Department of Revenue on July 19, 1996, may

17 irrevocably elect to apply the Proposed Regulations

18 for all of those years as though the Proposed

19 Regulations had been lawfully promulgated, adopted,

20 and in effect for all of those years. For purposes of

21 applying subparagraphs (B) or (C) of this paragraph to

22 all of those years, the election allowed by this

23 subparagraph applies only to the taxpayer making the

24 election and to those members of the taxpayer's unitary

25 business group who are ordinarily required to

26 apportion business income under the same subsection of

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1 Section 304 of this Act as the taxpayer making the

2 election. No election allowed by this subparagraph

3 shall be made under a claim filed under subsection (d)

4 of Section 909 more than 30 days after the effective

5 date of this amendatory Act of 1996.

6 (F) Finance Leases. For purposes of this

7 subsection, a finance lease shall be treated as a loan

8 or other extension of credit, rather than as a lease,

9 regardless of how the transaction is characterized for

10 any other purpose, including the purposes of any

11 regulatory agency to which the lessor is subject. A

12 finance lease is any transaction in the form of a lease

13 in which the lessee is treated as the owner of the

14 leased asset entitled to any deduction for

15 depreciation allowed under Section 167 of the Internal

16 Revenue Code.

17 (9) Fiscal year. The term "fiscal year" means an

18 accounting period of 12 months ending on the last day of

19 any month other than December.

20 (9.5) Fixed place of business. The term "fixed place of

21 business" has the same meaning as that term is given in

22 Section 864 of the Internal Revenue Code and the related

23 Treasury regulations.

24 (10) Includes and including. The terms "includes" and

25 "including" when used in a definition contained in this Act

26 shall not be deemed to exclude other things otherwise

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1 within the meaning of the term defined.

2 (11) Internal Revenue Code. The term "Internal Revenue

3 Code" means the United States Internal Revenue Code of 1954

4 or any successor law or laws relating to federal income

5 taxes in effect for the taxable year.

6 (11.5) Investment partnership.

7 (A) The term "investment partnership" means any

8 entity that is treated as a partnership for federal

9 income tax purposes that meets the following

10 requirements:

11 (i) no less than 90% of the partnership's cost

12 of its total assets consists of qualifying

13 investment securities, deposits at banks or other

14 financial institutions, and office space and

15 equipment reasonably necessary to carry on its

16 activities as an investment partnership;

17 (ii) no less than 90% of its gross income

18 consists of interest, dividends, and gains from

19 the sale or exchange of qualifying investment

20 securities; and

21 (iii) the partnership is not a dealer in

22 qualifying investment securities.

23 (B) For purposes of this paragraph (11.5), the term

24 "qualifying investment securities" includes all of the

25 following:

26 (i) common stock, including preferred or debt

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1 securities convertible into common stock, and

2 preferred stock;

3 (ii) bonds, debentures, and other debt

4 securities;

5 (iii) foreign and domestic currency deposits

6 secured by federal, state, or local governmental

7 agencies;

8 (iv) mortgage or asset-backed securities

9 secured by federal, state, or local governmental

10 agencies;

11 (v) repurchase agreements and loan

12 participations;

13 (vi) foreign currency exchange contracts and

14 forward and futures contracts on foreign

15 currencies;

16 (vii) stock and bond index securities and

17 futures contracts and other similar financial

18 securities and futures contracts on those

19 securities;

20 (viii) options for the purchase or sale of any

21 of the securities, currencies, contracts, or

22 financial instruments described in items (i) to

23 (vii), inclusive;

24 (ix) regulated futures contracts;

25 (x) commodities (not described in Section

26 1221(a)(1) of the Internal Revenue Code) or

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1 futures, forwards, and options with respect to

2 such commodities, provided, however, that any item

3 of a physical commodity to which title is actually

4 acquired in the partnership's capacity as a dealer

5 in such commodity shall not be a qualifying

6 investment security;

7 (xi) derivatives; and

8 (xii) a partnership interest in another

9 partnership that is an investment partnership.

10 (12) Mathematical error. The term "mathematical error"

11 includes the following types of errors, omissions, or

12 defects in a return filed by a taxpayer which prevents

13 acceptance of the return as filed for processing:

14 (A) arithmetic errors or incorrect computations on

15 the return or supporting schedules;

16 (B) entries on the wrong lines;

17 (C) omission of required supporting forms or

18 schedules or the omission of the information in whole

19 or in part called for thereon; and

20 (D) an attempt to claim, exclude, deduct, or

21 improperly report, in a manner directly contrary to the

22 provisions of the Act and regulations thereunder any

23 item of income, exemption, deduction, or credit.

24 (13) Nonbusiness income. The term "nonbusiness income"

25 means all income other than business income or

26 compensation.

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1 (14) Nonresident. The term "nonresident" means a

2 person who is not a resident.

3 (15) Paid, incurred and accrued. The terms "paid",

4 "incurred" and "accrued" shall be construed according to

5 the method of accounting upon the basis of which the

6 person's base income is computed under this Act.

7 (16) Partnership and partner. The term "partnership"

8 includes a syndicate, group, pool, joint venture or other

9 unincorporated organization, through or by means of which

10 any business, financial operation, or venture is carried

11 on, and which is not, within the meaning of this Act, a

12 trust or estate or a corporation; and the term "partner"

13 includes a member in such syndicate, group, pool, joint

14 venture or organization.

15 The term "partnership" includes any entity, including

16 a limited liability company formed under the Illinois

17 Limited Liability Company Act, classified as a partnership

18 for federal income tax purposes.

19 The term "partnership" does not include a syndicate,

20 group, pool, joint venture, or other unincorporated

21 organization established for the sole purpose of playing

22 the Illinois State Lottery.

23 (17) Part-year resident. The term "part-year resident"

24 means an individual who became a resident during the

25 taxable year or ceased to be a resident during the taxable

26 year. Under Section 1501(a)(20)(A)(i) residence commences

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1 with presence in this State for other than a temporary or

2 transitory purpose and ceases with absence from this State

3 for other than a temporary or transitory purpose. Under

4 Section 1501(a)(20)(A)(ii) residence commences with the

5 establishment of domicile in this State and ceases with the

6 establishment of domicile in another State.

7 (18) Person. The term "person" shall be construed to

8 mean and include an individual, a trust, estate,

9 partnership, association, firm, company, corporation,

10 limited liability company, or fiduciary. For purposes of

11 Section 1301 and 1302 of this Act, a "person" means (i) an

12 individual, (ii) a corporation, (iii) an officer, agent, or

13 employee of a corporation, (iv) a member, agent or employee

14 of a partnership, or (v) a member, manager, employee,

15 officer, director, or agent of a limited liability company

16 who in such capacity commits an offense specified in

17 Section 1301 and 1302.

18 (18A) Records. The term "records" includes all data

19 maintained by the taxpayer, whether on paper, microfilm,

20 microfiche, or any type of machine-sensible data

21 compilation.

22 (19) Regulations. The term "regulations" includes

23 rules promulgated and forms prescribed by the Department.

24 (20) Resident. The term "resident" means:

25 (A) an individual (i) who is in this State for

26 other than a temporary or transitory purpose during the

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1 taxable year; or (ii) who is domiciled in this State

2 but is absent from the State for a temporary or

3 transitory purpose during the taxable year;

4 (B) The estate of a decedent who at his or her

5 death was domiciled in this State;

6 (C) A trust created by a will of a decedent who at

7 his death was domiciled in this State; and

8 (D) An irrevocable trust, the grantor of which was

9 domiciled in this State at the time such trust became

10 irrevocable. For purpose of this subparagraph, a trust

11 shall be considered irrevocable to the extent that the

12 grantor is not treated as the owner thereof under

13 Sections 671 through 678 of the Internal Revenue Code.

14 (21) Sales. The term "sales" means all gross receipts

15 of the taxpayer not allocated under Sections 301, 302 and

16 303.

17 (22) State. The term "state" when applied to a

18 jurisdiction other than this State means any state of the

19 United States, the District of Columbia, the Commonwealth

20 of Puerto Rico, any Territory or Possession of the United

21 States, and any foreign country, or any political

22 subdivision of any of the foregoing. For purposes of the

23 foreign tax credit under Section 601, the term "state"

24 means any state of the United States, the District of

25 Columbia, the Commonwealth of Puerto Rico, and any

26 territory or possession of the United States, or any

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1 political subdivision of any of the foregoing, effective

2 for tax years ending on or after December 31, 1989.

3 (23) Taxable year. The term "taxable year" means the

4 calendar year, or the fiscal year ending during such

5 calendar year, upon the basis of which the base income is

6 computed under this Act. "Taxable year" means, in the case

7 of a return made for a fractional part of a year under the

8 provisions of this Act, the period for which such return is

9 made.

10 (24) Taxpayer. The term "taxpayer" means any person

11 subject to the tax imposed by this Act.

12 (25) International banking facility. The term

13 international banking facility shall have the same meaning

14 as is set forth in the Illinois Banking Act or as is set

15 forth in the laws of the United States or regulations of

16 the Board of Governors of the Federal Reserve System.

17 (26) Income Tax Return Preparer.

18 (A) The term "income tax return preparer" means any

19 person who prepares for compensation, or who employs

20 one or more persons to prepare for compensation, any

21 return of tax imposed by this Act or any claim for

22 refund of tax imposed by this Act. The preparation of a

23 substantial portion of a return or claim for refund

24 shall be treated as the preparation of that return or

25 claim for refund.

26 (B) A person is not an income tax return preparer

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1 if all he or she does is

2 (i) furnish typing, reproducing, or other

3 mechanical assistance;

4 (ii) prepare returns or claims for refunds for

5 the employer by whom he or she is regularly and

6 continuously employed;

7 (iii) prepare as a fiduciary returns or claims

8 for refunds for any person; or

9 (iv) prepare claims for refunds for a taxpayer

10 in response to any notice of deficiency issued to

11 that taxpayer or in response to any waiver of

12 restriction after the commencement of an audit of

13 that taxpayer or of another taxpayer if a

14 determination in the audit of the other taxpayer

15 directly or indirectly affects the tax liability

16 of the taxpayer whose claims he or she is

17 preparing.

18 (27) Unitary business group.

19 (A) The term "unitary business group" means a group

20 of persons related through common ownership whose

21 business activities are integrated with, dependent

22 upon and contribute to each other. The group will not

23 include those members whose business activity outside

24 the United States is 80% or more of any such member's

25 total business activity; for purposes of this

26 paragraph and clause (a)(3)(B)(ii) of Section 304,

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1 business activity within the United States shall be

2 measured by means of the factors ordinarily applicable

3 under subsections (a), (b), (c), (d), or (h) of Section

4 304 except that, in the case of members ordinarily

5 required to apportion business income by means of the 3

6 factor formula of property, payroll and sales

7 specified in subsection (a) of Section 304, including

8 the formula as weighted in subsection (h) of Section

9 304, such members shall not use the sales factor in the

10 computation and the results of the property and payroll

11 factor computations of subsection (a) of Section 304

12 shall be divided by 2 (by one if either the property or

13 payroll factor has a denominator of zero). The

14 computation required by the preceding sentence shall,

15 in each case, involve the division of the member's

16 property, payroll, or revenue miles in the United

17 States, insurance premiums on property or risk in the

18 United States, or financial organization business

19 income from sources within the United States, as the

20 case may be, by the respective worldwide figures for

21 such items. Common ownership in the case of

22 corporations is the direct or indirect control or

23 ownership of more than 50% of the outstanding voting

24 stock of the persons carrying on unitary business

25 activity. Unitary business activity can ordinarily be

26 illustrated where the activities of the members are:

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1 (1) in the same general line (such as manufacturing,

2 wholesaling, retailing of tangible personal property,

3 insurance, transportation or finance); or (2) are

4 steps in a vertically structured enterprise or process

5 (such as the steps involved in the production of

6 natural resources, which might include exploration,

7 mining, refining, and marketing); and, in either

8 instance, the members are functionally integrated

9 through the exercise of strong centralized management

10 (where, for example, authority over such matters as

11 purchasing, financing, tax compliance, product line,

12 personnel, marketing and capital investment is not

13 left to each member).

14 (B) In no event, for taxable years beginning prior

15 to January 1, 2017, and excepting any unitary business

16 group that apportions business income under Section

17 304(b) of this Act and is subject to the insurance

18 premium tax imposed under the Illinois Insurance Code,

19 shall any unitary business group include members which

20 are ordinarily required to apportion business income

21 under different subsections of Section 304 except that

22 for tax years ending on or after December 31, 1987 this

23 prohibition shall not apply to a holding company that

24 would otherwise be a member of a unitary business group

25 with taxpayers that apportion business income under

26 any of subsections (b), (c), (c-1), or (d) of Section

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1 304. If a unitary business group would, but for the

2 preceding sentence, include members that are

3 ordinarily required to apportion business income under

4 different subsections of Section 304, then for each

5 subsection of Section 304 for which there are two or

6 more members, there shall be a separate unitary

7 business group composed of such members. For purposes

8 of the preceding two sentences, a member is "ordinarily

9 required to apportion business income" under a

10 particular subsection of Section 304 if it would be

11 required to use the apportionment method prescribed by

12 such subsection except for the fact that it derives

13 business income solely from Illinois. As used in this

14 paragraph, the phrase "United States" means ~~only~~ the 50

15 states and the District of Columbia and ~~, but~~ does not

16 include any territory or possession of the United

17 States, but, for taxable years ending on or after

18 December 31, 2017, does include ~~or~~ any area over which

19 the United States has asserted jurisdiction or claimed

20 exclusive rights with respect to the exploration for or

21 exploitation of natural resources.

22 (C) Holding companies.

23 (i) For purposes of this subparagraph, a

24 "holding company" is a corporation (other than a

25 corporation that is a financial organization under

26 paragraph (8) of this subsection (a) of Section

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1 1501 because it is a bank holding company under the

2 provisions of the Bank Holding Company Act of 1956

3 (12 U.S.C. 1841, et seq.) or because it is owned by

4 a bank or a bank holding company) that owns a

5 controlling interest in one or more other

6 taxpayers ("controlled taxpayers"); that, during

7 the period that includes the taxable year and the 2

8 immediately preceding taxable years or, if the

9 corporation was formed during the current or

10 immediately preceding taxable year, the taxable

11 years in which the corporation has been in

12 existence, derived substantially all its gross

13 income from dividends, interest, rents, royalties,

14 fees or other charges received from controlled

15 taxpayers for the provision of services, and gains

16 on the sale or other disposition of interests in

17 controlled taxpayers or in property leased or

18 licensed to controlled taxpayers or used by the

19 taxpayer in providing services to controlled

20 taxpayers; and that incurs no substantial expenses

21 other than expenses (including interest and other

22 costs of borrowing) incurred in connection with

23 the acquisition and holding of interests in

24 controlled taxpayers and in the provision of

25 services to controlled taxpayers or in the leasing

26 or licensing of property to controlled taxpayers.

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1 (ii) The income of a holding company which is a

2 member of more than one unitary business group

3 shall be included in each unitary business group of

4 which it is a member on a pro rata basis, by

5 including in each unitary business group that

6 portion of the base income of the holding company

7 that bears the same proportion to the total base

8 income of the holding company as the gross receipts

9 of the unitary business group bears to the combined

10 gross receipts of all unitary business groups (in

11 both cases without regard to the holding company)

12 or on any other reasonable basis, consistently

13 applied.

14 (iii) A holding company shall apportion its

15 business income under the subsection of Section

16 304 used by the other members of its unitary

17 business group. The apportionment factors of a

18 holding company which would be a member of more

19 than one unitary business group shall be included

20 with the apportionment factors of each unitary

21 business group of which it is a member on a pro

22 rata basis using the same method used in clause

23 (ii).

24 (iv) The provisions of this subparagraph (C)

25 are intended to clarify existing law.

26 (D) If including the base income and factors of a

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1 holding company in more than one unitary business group

2 under subparagraph (C) does not fairly reflect the

3 degree of integration between the holding company and

4 one or more of the unitary business groups, the

5 dependence of the holding company and one or more of

6 the unitary business groups upon each other, or the

7 contributions between the holding company and one or

8 more of the unitary business groups, the holding

9 company may petition the Director, under the

10 procedures provided under Section 304(f), for

11 permission to include all base income and factors of

12 the holding company only with members of a unitary

13 business group apportioning their business income

14 under one subsection of subsections (a), (b), (c), or

15 (d) of Section 304. If the petition is granted, the

16 holding company shall be included in a unitary business

17 group only with persons apportioning their business

18 income under the selected subsection of Section 304

19 until the Director grants a petition of the holding

20 company either to be included in more than one unitary

21 business group under subparagraph (C) or to include its

22 base income and factors only with members of a unitary

23 business group apportioning their business income

24 under a different subsection of Section 304.

25 (E) If the unitary business group members'

26 accounting periods differ, the common parent's

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1 accounting period or, if there is no common parent, the

2 accounting period of the member that is expected to

3 have, on a recurring basis, the greatest Illinois

4 income tax liability must be used to determine whether

5 to use the apportionment method provided in subsection

6 (a) or subsection (h) of Section 304. The prohibition

7 against membership in a unitary business group for

8 taxpayers ordinarily required to apportion income

9 under different subsections of Section 304 does not

10 apply to taxpayers required to apportion income under

11 subsection (a) and subsection (h) of Section 304. The

12 provisions of this amendatory Act of 1998 apply to tax

13 years ending on or after December 31, 1998.

14 (28) Subchapter S corporation. The term "Subchapter S

15 corporation" means a corporation for which there is in

16 effect an election under Section 1362 of the Internal

17 Revenue Code, or for which there is a federal election to

18 opt out of the provisions of the Subchapter S Revision Act

19 of 1982 and have applied instead the prior federal

20 Subchapter S rules as in effect on July 1, 1982.

21 (30) Foreign person. The term "foreign person" means

22 any person who is a nonresident alien individual and any

23 nonindividual entity, regardless of where created or

24 organized, whose business activity outside the United

25 States is 80% or more of the entity's total business

26 activity.

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1 (b) Other definitions.

2 (1) Words denoting number, gender, and so forth, when

3 used in this Act, where not otherwise distinctly expressed

4 or manifestly incompatible with the intent thereof:

5 (A) Words importing the singular include and apply

6 to several persons, parties or things;

7 (B) Words importing the plural include the

8 singular; and

9 (C) Words importing the masculine gender include

10 the feminine as well.

11 (2) "Company" or "association" as including successors

12 and assigns. The word "company" or "association", when used

13 in reference to a corporation, shall be deemed to embrace

14 the words "successors and assigns of such company or

15 association", and in like manner as if these last-named

16 words, or words of similar import, were expressed.

17 (3) Other terms. Any term used in any Section of this

18 Act with respect to the application of, or in connection

19 with, the provisions of any other Section of this Act shall

20 have the same meaning as in such other Section.

21 (Source: P.A. 99-213, eff. 7-31-15.)

22 Section 30-15. The Film Production Services Tax Credit Act

23 of 2008 is amended by changing Section 42 as follows:

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1 (35 ILCS 16/42)

2 Sec. 42. Sunset of credits. The application of credits

3 awarded pursuant to this Act shall be limited by a reasonable

4 and appropriate sunset date. A taxpayer shall not be entitled

5 to take a credit awarded pursuant to this Act for tax years

6 beginning on or after January 1, 2027 ~~10 years after the~~

7 ~~effective date of this amendatory Act of the 97th General~~

8 ~~Assembly. After the initial 10-year sunset, the General~~

9 ~~Assembly may extend the sunset date by 5-year intervals~~.

10 (Source: P.A. 97-2, eff. 5-6-11; 97-3, eff. 5-6-11.)

11 Section 30-20. The Use Tax Act is amended by changing

12 Sections 2, 3, 3-5, 3-10, 3-10.5, 3-45, 3-50, 3-55, 3-65, 3-75,

13 3a, 4, 5, 6, 7, 8, 9, 10, and 11 and by adding Section 2a-2 as

14 follows:

15 (35 ILCS 105/2) (from Ch. 120, par. 439.2)

16 Sec. 2. Definitions.

17 "Use" means the exercise by any person of any right or

18 power over tangible personal property incident to the ownership

19 of that property or the exercise by any person of any right or

20 power over, or the enjoyment of, a taxable service, except that

21 it does not include the sale of such property or taxable

22 servicein any form as tangible personal propertyor a taxable

23 servicein the regular course of business to the extent that

24 such property or taxable service is not first subjected to a

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1 use for which it was purchased, and does not include the use of

2 such property or taxable serviceby its owner for demonstration

3 purposes: Provided that the property or service purchased is

4 deemed to be purchased for the purpose of resale, despite first

5 being used, to the extent to which it is resold as an

6 ingredient of an intentionally produced product or by-product

7 of manufacturing or is otherwise transferred to the purchaser

8 of tangible personal property or taxable service. "Use" does

9 not mean the demonstration use or interim use of tangible

10 personal property or a taxable service by a retailer before he

11 sells that tangible personal propertyor taxable service. For

12 watercraft or aircraft, if the period of demonstration use or

13 interim use by the retailer exceeds 18 months, the retailer

14 shall pay on the retailers' original cost price the tax imposed

15 by this Act, and no credit for that tax is permitted if the

16 watercraft or aircraft is subsequently sold by the retailer.

17 "Use" does not mean the physical incorporation of tangible

18 personal property, to the extent not first subjected to a use

19 for which it was purchased, as an ingredient or constituent,

20 into other tangible personal property (a) which is sold in the

21 regular course of business or (b) which the person

22 incorporating such ingredient or constituent therein has

23 undertaken at the time of such purchase to cause to be

24 transported in interstate commerce to destinations outside the

25 State of Illinois: Provided that the property purchased is

26 deemed to be purchased for the purpose of resale, despite first

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1 being used, to the extent to which it is resold as an

2 ingredient of an intentionally produced product or by-product

3 of manufacturing.

4 "Watercraft" means a Class 2, Class 3, or Class 4

5 watercraft as defined in Section 3-2 of the Boat Registration

6 and Safety Act, a personal watercraft, or any boat equipped

7 with an inboard motor.

8 "Purchase at retail" means the acquisition of the ownership

9 of or title to tangible personal propertyor the acquisition of

10 a taxable service through a sale at retail.

11 "Purchaser" means anyone who, through a sale at retail,

12 acquires a taxable service orthe ownership of tangible

13 personal property for a valuable consideration.

14 "Sale at retail" means any transfer of the ownership of or

15 title to tangible personal property to a purchaseror the

16 performance of a taxable service for a purchaser, for the

17 purpose of use, and not for the purpose of resale in any form

18 as tangible personal property or taxable serviceto the extent

19 not first subjected to a use for which it was purchased, for a

20 valuable consideration: Provided that the property purchased

21 is deemed to be purchased for the purpose of resale, despite

22 first being used, to the extent to which it is resold as an

23 ingredient of an intentionally produced product or by-product

24 of manufacturing. For this purpose, slag produced as an

25 incident to manufacturing pig iron or steel and sold is

26 considered to be an intentionally produced by-product of

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1 manufacturing. "Sale at retail" includes any such transfer made

2 for resale unless made in compliance with Section 2c of the

3 Retailers' Occupation Tax Act, as incorporated by reference

4 into Section 12 of this Act. Transactions whereby the

5 possession of the property is transferred but the seller

6 retains the title as security for payment of the selling price

7 are sales.

8 "Sale at retail" shall also be construed to include any

9 Illinois florist's sales transaction in which the purchase

10 order is received in Illinois by a florist and the sale is for

11 use or consumption, but the Illinois florist has a florist in

12 another state deliver the property to the purchaser or the

13 purchaser's donee in such other state.

14 Nonreusable tangible personal property that is used by

15 persons engaged in the business of operating a restaurant,

16 cafeteria, or drive-in is a sale for resale when it is

17 transferred to customers in the ordinary course of business as

18 part of the sale of food or beverages and is used to deliver,

19 package, or consume food or beverages, regardless of where

20 consumption of the food or beverages occurs. Examples of those

21 items include, but are not limited to nonreusable, paper and

22 plastic cups, plates, baskets, boxes, sleeves, buckets or other

23 containers, utensils, straws, placemats, napkins, doggie bags,

24 and wrapping or packaging materials that are transferred to

25 customers as part of the sale of food or beverages in the

26 ordinary course of business.

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1 The purchase, employment and transfer of such tangible

2 personal property as newsprint and ink for the primary purpose

3 of conveying news (with or without other information) is not a

4 purchase, use or sale of tangible personal property.

5 "Selling price" means the consideration for a sale valued

6 in money whether received in money or otherwise, including

7 cash, credits, property other than as hereinafter provided, and

8 services, but not including the value of or credit given for

9 traded-in tangible personal property where the item that is

10 traded-in is of like kind and character as that which is being

11 sold, and shall be determined without any deduction on account

12 of the cost of the property sold, the cost of materials used,

13 labor or service cost or any other expense whatsoever, but does

14 not include interest or finance charges which appear as

15 separate items on the bill of sale or sales contract nor

16 charges that are added to prices by sellers on account of the

17 seller's tax liability under the "Retailers' Occupation Tax

18 Act", or on account of the seller's duty to collect, from the

19 purchaser, the tax that is imposed by this Act, or, except as

20 otherwise provided with respect to any cigarette tax imposed by

21 a home rule unit, on account of the seller's tax liability

22 under any local occupation tax administered by the Department,

23 or, except as otherwise provided with respect to any cigarette

24 tax imposed by a home rule unit on account of the seller's duty

25 to collect, from the purchasers, the tax that is imposed under

26 any local use tax administered by the Department. Effective

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1 December 1, 1985, "selling price" shall include charges that

2 are added to prices by sellers on account of the seller's tax

3 liability under the Cigarette Tax Act, on account of the

4 seller's duty to collect, from the purchaser, the tax imposed

5 under the Cigarette Use Tax Act, and on account of the seller's

6 duty to collect, from the purchaser, any cigarette tax imposed

7 by a home rule unit.

8 Notwithstanding any law to the contrary, for any motor

9 vehicle, as defined in Section 1-146 of the Vehicle Code, that

10 is sold on or after January 1, 2015 for the purpose of leasing

11 the vehicle for a defined period that is longer than one year

12 and (1) is a motor vehicle of the second division that: (A) is

13 a self-contained motor vehicle designed or permanently

14 converted to provide living quarters for recreational,

15 camping, or travel use, with direct walk through access to the

16 living quarters from the driver's seat; (B) is of the van

17 configuration designed for the transportation of not less than

18 7 nor more than 16 passengers; or (C) has a gross vehicle

19 weight rating of 8,000 pounds or less or (2) is a motor vehicle

20 of the first division, "selling price" or "amount of sale"

21 means the consideration received by the lessor pursuant to the

22 lease contract, including amounts due at lease signing and all

23 monthly or other regular payments charged over the term of the

24 lease. Also included in the selling price is any amount

25 received by the lessor from the lessee for the leased vehicle

26 that is not calculated at the time the lease is executed,

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1 including, but not limited to, excess mileage charges and

2 charges for excess wear and tear. For sales that occur in

3 Illinois, with respect to any amount received by the lessor

4 from the lessee for the leased vehicle that is not calculated

5 at the time the lease is executed, the lessor who purchased the

6 motor vehicle does not incur the tax imposed by the Use Tax Act

7 on those amounts, and the retailer who makes the retail sale of

8 the motor vehicle to the lessor is not required to collect the

9 tax imposed by this Act or to pay the tax imposed by the

10 Retailers' Occupation Tax Act on those amounts. However, the

11 lessor who purchased the motor vehicle assumes the liability

12 for reporting and paying the tax on those amounts directly to

13 the Department in the same form (Illinois Retailers' Occupation

14 Tax, and local retailers' occupation taxes, if applicable) in

15 which the retailer would have reported and paid such tax if the

16 retailer had accounted for the tax to the Department. For

17 amounts received by the lessor from the lessee that are not

18 calculated at the time the lease is executed, the lessor must

19 file the return and pay the tax to the Department by the due

20 date otherwise required by this Act for returns other than

21 transaction returns. If the retailer is entitled under this Act

22 to a discount for collecting and remitting the tax imposed

23 under this Act to the Department with respect to the sale of

24 the motor vehicle to the lessor, then the right to the discount

25 provided in this Act shall be transferred to the lessor with

26 respect to the tax paid by the lessor for any amount received

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1 by the lessor from the lessee for the leased vehicle that is

2 not calculated at the time the lease is executed; provided that

3 the discount is only allowed if the return is timely filed and

4 for amounts timely paid. The "selling price" of a motor vehicle

5 that is sold on or after January 1, 2015 for the purpose of

6 leasing for a defined period of longer than one year shall not

7 be reduced by the value of or credit given for traded-in

8 tangible personal property owned by the lessor, nor shall it be

9 reduced by the value of or credit given for traded-in tangible

10 personal property owned by the lessee, regardless of whether

11 the trade-in value thereof is assigned by the lessee to the

12 lessor. In the case of a motor vehicle that is sold for the

13 purpose of leasing for a defined period of longer than one

14 year, the sale occurs at the time of the delivery of the

15 vehicle, regardless of the due date of any lease payments. A

16 lessor who incurs a Retailers' Occupation Tax liability on the

17 sale of a motor vehicle coming off lease may not take a credit

18 against that liability for the Use Tax the lessor paid upon the

19 purchase of the motor vehicle (or for any tax the lessor paid

20 with respect to any amount received by the lessor from the

21 lessee for the leased vehicle that was not calculated at the

22 time the lease was executed) if the selling price of the motor

23 vehicle at the time of purchase was calculated using the

24 definition of "selling price" as defined in this paragraph.

25 Notwithstanding any other provision of this Act to the

26 contrary, lessors shall file all returns and make all payments

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1 required under this paragraph to the Department by electronic

2 means in the manner and form as required by the Department.

3 This paragraph does not apply to leases of motor vehicles for

4 which, at the time the lease is entered into, the term of the

5 lease is not a defined period, including leases with a defined

6 initial period with the option to continue the lease on a

7 month-to-month or other basis beyond the initial defined

8 period.

9 The phrase "like kind and character" shall be liberally

10 construed (including but not limited to any form of motor

11 vehicle for any form of motor vehicle, or any kind of farm or

12 agricultural implement for any other kind of farm or

13 agricultural implement), while not including a kind of item

14 which, if sold at retail by that retailer, would be exempt from

15 retailers' occupation tax and use tax as an isolated or

16 occasional sale.

17 "Department" means the Department of Revenue.

18 "Person" means any natural individual, firm, partnership,

19 association, joint stock company, joint adventure, public or

20 private corporation, limited liability company, or a receiver,

21 executor, trustee, guardian or other representative appointed

22 by order of any court.

23 "Retailer" means and includes every person engaged in the

24 business of making sales at retail as defined in this Section.

25 A person who holds himself or herself out as being engaged

26 (or who habitually engages) in selling tangible personal

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1 property or taxable servicesat retail is a retailer hereunder

2 with respect to such sales (and not primarily in a nontaxable

3 service occupation) notwithstanding the fact that such person

4 designs and produces such tangible personal propertyor taxable

5 serviceon special order for the purchaser and in such a way as

6 to render the property or service of value only to such

7 purchaser, if such tangible personal propertyor taxable

8 serviceso produced on special order serves substantially the

9 same function as stock or standard items of tangible personal

10 property or taxable service that are sold at retail.

11 A person whose activities are organized and conducted

12 primarily as a not-for-profit service enterprise, and who

13 engages in selling tangible personal propertyor taxable

14 services at retail (whether to the public or merely to members

15 and their guests) is a retailer with respect to such

16 transactions, excepting only a person organized and operated

17 exclusively for charitable, religious or educational purposes

18 either (1), to the extent of sales by such person to its

19 members, students, patients or inmates of tangible personal

20 property to be used primarily for the purposes of such person,

21 or (2), to the extent of sales by such person of tangible

22 personal property or taxable services which are ~~is~~not sold or

23 offered for sale by persons organized for profit. The selling

24 of school books and school supplies by schools at retail to

25 students is not "primarily for the purposes of" the school

26 which does such selling. This paragraph does not apply to nor

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1 subject to taxation occasional dinners, social or similar

2 activities of a person organized and operated exclusively for

3 charitable, religious or educational purposes, whether or not

4 such activities are open to the public.

5 A person who is the recipient of a grant or contract under

6 Title VII of the Older Americans Act of 1965 (P.L. 92-258) and

7 serves meals to participants in the federal Nutrition Program

8 for the Elderly in return for contributions established in

9 amount by the individual participant pursuant to a schedule of

10 suggested fees as provided for in the federal Act is not a

11 retailer under this Act with respect to such transactions.

12 Persons who engage in the business of transferring tangible

13 personal propertyor taxable services upon the redemption of

14 trading stamps are retailers hereunder when engaged in such

15 business.

16 The isolated or occasional sale of tangible personal

17 property or taxable servicesat retail by a person who does not

18 hold himself out as being engaged (or who does not habitually

19 engage) in selling such tangible personal property or taxable

20 servicesat retail or a sale through a bulk vending machine

21 does not make such person a retailer hereunder. However, any

22 person who is engaged in a business which is not subject to the

23 tax imposed by the "Retailers' Occupation Tax Act" because of

24 involving the sale of or a contract to sell real estate or a

25 construction contract to improve real estate, but who, in the

26 course of conducting such business, transfers tangible

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1 personal property to users or consumers in the finished form in

2 which it was purchased, and which does not become real estate,

3 under any provision of a construction contract or real estate

4 sale or real estate sales agreement entered into with some

5 other person arising out of or because of such nontaxable

6 business, is a retailer to the extent of the value of the

7 tangible personal property so transferred. If, in such

8 transaction, a separate charge is made for the tangible

9 personal property so transferred, the value of such property,

10 for the purposes of this Act, is the amount so separately

11 charged, but not less than the cost of such property to the

12 transferor; if no separate charge is made, the value of such

13 property, for the purposes of this Act, is the cost to the

14 transferor of such tangible personal property.

15 "Retailer maintaining a place of business in this State",

16 or any like term, means and includes any of the following

17 retailers:

18 1. A retailer having or maintaining within this State,

19 directly or by a subsidiary, an office, distribution house,

20 sales house, warehouse or other place of business, or any

21 agent or other representative operating within this State

22 under the authority of the retailer or its subsidiary,

23 irrespective of whether such place of business or agent or

24 other representative is located here permanently or

25 temporarily, or whether such retailer or subsidiary is

26 licensed to do business in this State. However, the

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1 ownership of property that is located at the premises of a

2 printer with which the retailer has contracted for printing

3 and that consists of the final printed product, property

4 that becomes a part of the final printed product, or copy

5 from which the printed product is produced shall not result

6 in the retailer being deemed to have or maintain an office,

7 distribution house, sales house, warehouse, or other place

8 of business within this State.

9 1.1. A retailer having a contract with a person located

10 in this State under which the person, for a commission or

11 other consideration based upon the sale of tangible

12 personal property or taxable services by the retailer,

13 directly or indirectly refers potential customers to the

14 retailer by providing to the potential customers a

15 promotional code or other mechanism that allows the

16 retailer to track purchases referred by such persons.

17 Examples of mechanisms that allow the retailer to track

18 purchases referred by such persons include but are not

19 limited to the use of a link on the person's Internet

20 website, promotional codes distributed through the

21 person's hand-delivered or mailed material, and

22 promotional codes distributed by the person through radio

23 or other broadcast media. The provisions of this paragraph

24 1.1 shall apply only if the cumulative gross receipts from

25 sales of tangible personal property or taxable service by

26 the retailer to customers who are referred to the retailer

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1 by all persons in this State under such contracts exceed

2 $10,000 during the preceding 4 quarterly periods ending on

3 the last day of March, June, September, and December. A

4 retailer meeting the requirements of this paragraph 1.1

5 shall be presumed to be maintaining a place of business in

6 this State but may rebut this presumption by submitting

7 proof that the referrals or other activities pursued within

8 this State by such persons were not sufficient to meet the

9 nexus standards of the United States Constitution during

10 the preceding 4 quarterly periods.

11 1.2. Beginning July 1, 2011, a retailer having a

12 contract with a person located in this State under which:

13 A. the retailer sells the same or substantially

14 similar line of products or taxable services as the

15 person located in this State and does so using an

16 identical or substantially similar name, trade name,

17 or trademark as the person located in this State; and

18 B. the retailer provides a commission or other

19 consideration to the person located in this State based

20 upon the sale of tangible personal property or taxable

21 service by the retailer.

22 The provisions of this paragraph 1.2 shall apply only if

23 the cumulative gross receipts from sales of tangible

24 personal property or taxable service by the retailer to

25 customers in this State under all such contracts exceed

26 $10,000 during the preceding 4 quarterly periods ending on

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1 the last day of March, June, September, and December.

2 2. A retailer soliciting orders for tangible personal

3 property or taxable serviceby means of a telecommunication

4 or television shopping system (which utilizes toll free

5 numbers) which is intended by the retailer to be broadcast

6 by cable television or other means of broadcasting, to

7 consumers located in this State.

8 3. A retailer, pursuant to a contract with a

9 broadcaster or publisher located in this State, soliciting

10 orders for tangible personal property or taxable serviceby

11 means of advertising which is disseminated primarily to

12 consumers located in this State and only secondarily to

13 bordering jurisdictions.

14 4. A retailer soliciting orders for tangible personal

15 property or taxable serviceby mail if the solicitations

16 are substantial and recurring and if the retailer benefits

17 from any banking, financing, debt collection,

18 telecommunication, or marketing activities occurring in

19 this State or benefits from the location in this State of

20 authorized installation, servicing, or repair facilities.

21 5. A retailer that is owned or controlled by the same

22 interests that own or control any retailer engaging in

23 business in the same or similar line of business in this

24 State.

25 6. A retailer having a franchisee or licensee operating

26 under its trade name if the franchisee or licensee is

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1 required to collect the tax under this Section.

2 7. A retailer, pursuant to a contract with a cable

3 television operator located in this State, soliciting

4 orders for tangible personal property or taxable serviceby

5 means of advertising which is transmitted or distributed

6 over a cable television system in this State.

7 8. A retailer engaging in activities in Illinois, which

8 activities in the state in which the retail business

9 engaging in such activities is located would constitute

10 maintaining a place of business in that state.

11 "Bulk vending machine" means a vending machine, containing

12 unsorted confections, nuts, toys, or other items designed

13 primarily to be used or played with by children which, when a

14 coin or coins of a denomination not larger than $0.50 are

15 inserted, are dispensed in equal portions, at random and

16 without selection by the customer.

17 (Source: P.A. 98-628, eff. 1-1-15; 98-1080, eff. 8-26-14;

18 98-1089, eff. 1-1-15; 99-78, eff. 7-20-15.)

19 (35 ILCS 105/2a-2 new)

20 Sec. 2a-2. Taxable services. Beginning January 1, 2018,

21 "taxable service" means any of the following services:

22 (1) Providing space for storage.

23 (A) "Storage" means the retaining or keeping of

24 tangible personal property in this State for any

25 purpose. For purposes of this Section, tangible

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1 personal property, does not include "grain" as defined

2 in the Public Grain Warehouse and Warehouse Receipts

3 Act.

4 (B) "Space for storage" means (i) secure areas,

5 such as rooms, units, compartments or containers,

6 whether accessible from outside or from within a

7 building, that are designated for the use of a

8 purchaser, where the purchaser can store and retrieve

9 property, including self-storage units, mini-storage

10 units, and areas by any other name; (ii) any parking

11 lot, ramp, or parking garage for a vehicle, whether the

12 vehicle is parked by the operator of the vehicle or by

13 an attendant; (iii) any aircraft parking area, ramp, or

14 hanger; (iv) any boat slip, dock, or dry dock; (v) any

15 recreational vehicle parking area or garage; and (vi)

16 any other areas for storage or parking of tangible

17 personal property.

18 (C) "Self-storage or mini-storage" includes

19 storage lockers or storage units in apartment

20 complexes (if the locker or unit is utilized at the

21 tenant's option and includes payment of a fee in

22 addition to apartment rental), and in amusement parks,

23 water parks, recreational facilities, and other

24 locations where lockers are rented for self-storage.

25 (2) Repair, servicing, alteration, fitting, cleaning,

26 painting, coating, towing, inspection, or maintenance of

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1 tangible personal property or tangible personal property

2 that has been affixed to real estate; this paragraph (2)

3 does not apply to new construction, reconstruction, or

4 expansion of a building or structure.

5 (3) Landscaping services. "Landscaping services" means

6 services performed by a person who arranges and modifies

7 the natural condition of a given parcel or tract of land so

8 as to render the land suitable for public or private use or

9 enjoyment. Landscaping services include, but are not

10 limited to, mowing, watering, and aerating lawns; weeding;

11 mulching; raking leaves; tree and shrub trimming and

12 removal; planting of trees, shrubs, flowering and

13 non-flowering plants, and sod; spraying; fertilizing;

14 applying chemicals; lawn and garden installation;

15 constructing, remodeling, or repairing irrigation or lawn

16 sprinkler systems, patios (other than asphalt, tar,

17 macadam, or poured concrete), walkways (other than

18 asphalt, tar, macadam, or poured concrete), fences,

19 trellises, and retaining walls; grading (such as the

20 filling or leveling of topsoil for lawns and gardens), and

21 snow plowing and removal.

22 (4) Laundry, drycleaning, cloth pressing, dyeing, or

23 linen service, except when the service is performed by the

24 purchaser through the use of coin-operated, self-service

25 machines.

26 (5) Cable television service as defined in 47 U.S.C.

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1 522(6), video and audio streaming services, and direct

2 broadcast satellite service. "Direct broadcast satellite

3 service" includes the distribution or broadcasting of

4 programming or services by satellite, including audio or

5 video programming, to receiving equipment located at a

6 purchaser's premises. "Video and audio streaming service"

7 means the method used to deliver multimedia elements

8 including but not limited to video and audio from a data

9 streaming service provider to an end user.

10 (6) Private detective, private alarm, and private

11 security service for which the provider of the service is

12 required to be licensed pursuant to the Private Detective,

13 Private Alarm, Private Security, Fingerprint Vendor, and

14 Locksmith Act of 2004, or would be required to be so

15 licensed in performing those services in this State.

16 (7) Structural pest control services. "Structural pest

17 control services" means use of any device or the

18 application of any substance to prevent, repel, mitigate,

19 curb, control, or eradicate any structural pest in, on,

20 under, or around a structure, or within a part of, or

21 materials used in building, a structure; the use of any

22 pesticide, including insecticides, fungicides and other

23 wood treatment products, attractants, repellents,

24 rodenticides, fumigants, or mechanical devices for

25 preventing, controlling, eradicating, identifying,

26 mitigating, diminishing, or curbing insects, vermin, rats,

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1 mice, or other pests in, on, under, or around a structure,

2 or within a part of, or materials used in building, a

3 structure; vault fumigation and fumigation of box cars,

4 trucks, ships, airplanes, docks, warehouses, and common

5 carriers or soliciting to perform any of the foregoing

6 functions.

7 (8) Personal care services, including skin care, the

8 application of cosmetics, manicuring, pedicuring, hair

9 removal, tattooing, body piercing, tanning, massage, and

10 other similar services. "Personal care services" does not

11 include personal care services provided by or on the order

12 of a licensed physician, licensed chiropractor, physician

13 assistant, advanced practice nurse, registered nurse, or

14 licensed practical nurse, or the cutting, coloring, or

15 styling of an individual's hair.

16 (35 ILCS 105/3) (from Ch. 120, par. 439.3)

17 Sec. 3. Tax imposed. A tax is imposed upon the privilege of

18 using in this Statea taxable service or tangible personal

19 property purchased at retail from a retailer, including

20 computer software, and including photographs, negatives, and

21 positives that are the product of photoprocessing, but not

22 including products of photoprocessing produced for use in

23 motion pictures for commercial exhibition. Beginning January

24 1, 2001, prepaid telephone calling arrangements shall be

25 considered tangible personal property subject to the tax

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1 imposed under this Act regardless of the form in which those

2 arrangements may be embodied, transmitted, or fixed by any

3 method now known or hereafter developed. Purchases of (1)

4 electricity delivered to customers by wire; (2) natural or

5 artificial gas that is delivered to customers through pipes,

6 pipelines, or mains; and (3) water that is delivered to

7 customers through pipes, pipelines, or mains are not subject to

8 tax under this Act. The provisions of this amendatory Act of

9 the 98th General Assembly are declaratory of existing law as to

10 the meaning and scope of this Act.

11 (Source: P.A. 98-583, eff. 1-1-14.)

12 (35 ILCS 105/3-5)

13 Sec. 3-5. Exemptions. Use of the following tangible

14 personal property or taxable serviceis exempt from the tax

15 imposed by this Act:

16 (1) Personal property or taxable services purchased from a

17 corporation, society, association, foundation, institution, or

18 organization, other than a limited liability company, that is

19 organized and operated as a not-for-profit service enterprise

20 for the benefit of persons 65 years of age or older if the

21 personal property or taxable servicewas not purchased by the

22 enterprise for the purpose of resale by the enterprise.

23 (2) Personal property or taxable service purchased by a

24 not-for-profit Illinois county fair association for use in

25 conducting, operating, or promoting the county fair.

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1 (3) Personal property or taxable services purchased by a

2 not-for-profit arts or cultural organization that establishes,

3 by proof required by the Department by rule, that it has

4 received an exemption under Section 501(c)(3) of the Internal

5 Revenue Code and that is organized and operated primarily for

6 the presentation or support of arts or cultural programming,

7 activities, or services. These organizations include, but are

8 not limited to, music and dramatic arts organizations such as

9 symphony orchestras and theatrical groups, arts and cultural

10 service organizations, local arts councils, visual arts

11 organizations, and media arts organizations. On and after the

12 effective date of this amendatory Act of the 92nd General

13 Assembly, however, an entity otherwise eligible for this

14 exemption shall not make tax-free purchases unless it has an

15 active identification number issued by the Department.

16 (4) Personal property or taxable services purchased by a

17 governmental body, by a corporation, society, association,

18 foundation, or institution organized and operated exclusively

19 for charitable, religious, or educational purposes, or by a

20 not-for-profit corporation, society, association, foundation,

21 institution, or organization that has no compensated officers

22 or employees and that is organized and operated primarily for

23 the recreation of persons 55 years of age or older. A limited

24 liability company may qualify for the exemption under this

25 paragraph only if the limited liability company is organized

26 and operated exclusively for educational purposes. On and after

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1 July 1, 1987, however, no entity otherwise eligible for this

2 exemption shall make tax-free purchases unless it has an active

3 exemption identification number issued by the Department.

4 (5) Until July 1, 2003, a passenger car that is a

5 replacement vehicle to the extent that the purchase price of

6 the car is subject to the Replacement Vehicle Tax.

7 (6) Until July 1, 2003 and beginning again on September 1,

8 2004 through August 30, 2014, graphic arts machinery and

9 equipment, including repair and replacement parts, both new and

10 used, and including that manufactured on special order,

11 certified by the purchaser to be used primarily for graphic

12 arts production, and including machinery and equipment

13 purchased for lease. Equipment includes chemicals or chemicals

14 acting as catalysts but only if the chemicals or chemicals

15 acting as catalysts effect a direct and immediate change upon a

16 graphic arts product. Beginning on July 1, 2017, graphic arts

17 machinery and equipment is included in the manufacturing and

18 assembling machinery and equipment exemption under paragraph

19 (18).

20 (7) Farm chemicals.

21 (8) Legal tender, currency, medallions, or gold or silver

22 coinage issued by the State of Illinois, the government of the

23 United States of America, or the government of any foreign

24 country, and bullion.

25 (9) Personal property purchased from a teacher-sponsored

26 student organization affiliated with an elementary or

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1 secondary school located in Illinois.

2 (10) A motor vehicle that is used for automobile renting,

3 as defined in the Automobile Renting Occupation and Use Tax

4 Act.

5 (11) Farm machinery and equipment, both new and used,

6 including that manufactured on special order, certified by the

7 purchaser to be used primarily for production agriculture or

8 State or federal agricultural programs, including individual

9 replacement parts for the machinery and equipment, including

10 machinery and equipment purchased for lease, and including

11 implements of husbandry defined in Section 1-130 of the

12 Illinois Vehicle Code, farm machinery and agricultural

13 chemical and fertilizer spreaders, and nurse wagons required to

14 be registered under Section 3-809 of the Illinois Vehicle Code,

15 but excluding other motor vehicles required to be registered

16 under the Illinois Vehicle Code. Horticultural polyhouses or

17 hoop houses used for propagating, growing, or overwintering

18 plants shall be considered farm machinery and equipment under

19 this item (11). Agricultural chemical tender tanks and dry

20 boxes shall include units sold separately from a motor vehicle

21 required to be licensed and units sold mounted on a motor

22 vehicle required to be licensed if the selling price of the

23 tender is separately stated.

24 Farm machinery and equipment shall include precision

25 farming equipment that is installed or purchased to be

26 installed on farm machinery and equipment including, but not

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1 limited to, tractors, harvesters, sprayers, planters, seeders,

2 or spreaders. Precision farming equipment includes, but is not

3 limited to, soil testing sensors, computers, monitors,

4 software, global positioning and mapping systems, and other

5 such equipment.

6 Farm machinery and equipment also includes computers,

7 sensors, software, and related equipment used primarily in the

8 computer-assisted operation of production agriculture

9 facilities, equipment, and activities such as, but not limited

10 to, the collection, monitoring, and correlation of animal and

11 crop data for the purpose of formulating animal diets and

12 agricultural chemicals. This item (11) is exempt from the

13 provisions of Section 3-90.

14 (12) Until June 30, 2013, fuel and petroleum products sold

15 to or used by an air common carrier, certified by the carrier

16 to be used for consumption, shipment, or storage in the conduct

17 of its business as an air common carrier, for a flight destined

18 for or returning from a location or locations outside the

19 United States without regard to previous or subsequent domestic

20 stopovers.

21 Beginning July 1, 2013, fuel and petroleum products sold to

22 or used by an air carrier, certified by the carrier to be used

23 for consumption, shipment, or storage in the conduct of its

24 business as an air common carrier, for a flight that (i) is

25 engaged in foreign trade or is engaged in trade between the

26 United States and any of its possessions and (ii) transports at

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1 least one individual or package for hire from the city of

2 origination to the city of final destination on the same

3 aircraft, without regard to a change in the flight number of

4 that aircraft.

5 (13) Proceeds of mandatory service charges separately

6 stated on customers' bills for the purchase and consumption of

7 food and beveragesor taxable services purchased at retail from

8 a retailer, to the extent that the proceeds of the service

9 charge are in fact turned over as tips or as a substitute for

10 tips to the employees who participate directly in preparing,

11 serving, hosting or cleaning up the food or beverage function

12 with respect to which the service charge is imposed.

13 (14) Until July 1, 2003, oil field exploration, drilling,

14 and production equipment, including (i) rigs and parts of rigs,

15 rotary rigs, cable tool rigs, and workover rigs, (ii) pipe and

16 tubular goods, including casing and drill strings, (iii) pumps

17 and pump-jack units, (iv) storage tanks and flow lines, (v) any

18 individual replacement part for oil field exploration,

19 drilling, and production equipment, and (vi) machinery and

20 equipment purchased for lease; but excluding motor vehicles

21 required to be registered under the Illinois Vehicle Code.

22 (15) Photoprocessing machinery and equipment, including

23 repair and replacement parts, both new and used, including that

24 manufactured on special order, certified by the purchaser to be

25 used primarily for photoprocessing, and including

26 photoprocessing machinery and equipment purchased for lease.

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1 (16) Coal and aggregate exploration, mining, off-highway

2 hauling, processing, maintenance, and reclamation equipment,

3 including replacement parts and equipment, and including

4 equipment purchased for lease, but excluding motor vehicles

5 required to be registered under the Illinois Vehicle Code. The

6 changes made to this Section by Public Act 97-767 apply on and

7 after July 1, 2003, but no claim for credit or refund is

8 allowed on or after August 16, 2013 (the effective date of

9 Public Act 98-456) for such taxes paid during the period

10 beginning July 1, 2003 and ending on August 16, 2013 (the

11 effective date of Public Act 98-456).

12 (17) Until July 1, 2003, distillation machinery and

13 equipment, sold as a unit or kit, assembled or installed by the

14 retailer, certified by the user to be used only for the

15 production of ethyl alcohol that will be used for consumption

16 as motor fuel or as a component of motor fuel for the personal

17 use of the user, and not subject to sale or resale.

18 (18) Manufacturing and assembling machinery and equipment

19 used primarily in the process of manufacturing or assembling

20 tangible personal property for wholesale or retail sale or

21 lease, whether that sale or lease is made directly by the

22 manufacturer or by some other person, whether the materials

23 used in the process are owned by the manufacturer or some other

24 person, or whether that sale or lease is made apart from or as

25 an incident to the seller's engaging in the service occupation

26 of producing machines, tools, dies, jigs, patterns, gauges, or

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1 other similar items of no commercial value on special order for

2 a particular purchaser. The exemption provided by this

3 paragraph (18) does not include machinery and equipment used in

4 (i) the generation of electricity for wholesale or retail sale;

5 (ii) the generation or treatment of natural or artificial gas

6 for wholesale or retail sale that is delivered to customers

7 through pipes, pipelines, or mains; or (iii) the treatment of

8 water for wholesale or retail sale that is delivered to

9 customers through pipes, pipelines, or mains. The provisions of

10 Public Act 98-583 are declaratory of existing law as to the

11 meaning and scope of this exemption. Beginning on July 1, 2017,

12 the exemption provided by this paragraph (18) includes, but is

13 not limited to, graphic arts machinery and equipment, as

14 defined in paragraph (6) of this Section. Beginning on July 1,

15 2017, the exemption provided by this paragraph (18) includes,

16 but is not limited to, production related tangible personal

17 property, as defined in Section 3-50 of this Act. The exemption

18 provided by this paragraph (18) is exempt from the provisions

19 of Section 3-90.

20 (19) Personal property delivered to a purchaser or

21 purchaser's donee inside Illinois when the purchase order for

22 that personal property was received by a florist located

23 outside Illinois who has a florist located inside Illinois

24 deliver the personal property.

25 (20) Semen used for artificial insemination of livestock

26 for direct agricultural production.

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1 (21) Horses, or interests in horses, registered with and

2 meeting the requirements of any of the Arabian Horse Club

3 Registry of America, Appaloosa Horse Club, American Quarter

4 Horse Association, United States Trotting Association, or

5 Jockey Club, as appropriate, used for purposes of breeding or

6 racing for prizes. This item (21) is exempt from the provisions

7 of Section 3-90, and the exemption provided for under this item

8 (21) applies for all periods beginning May 30, 1995, but no

9 claim for credit or refund is allowed on or after January 1,

10 2008 for such taxes paid during the period beginning May 30,

11 2000 and ending on January 1, 2008.

12 (22) Computers and communications equipment utilized for

13 any hospital purpose and equipment used in the diagnosis,

14 analysis, or treatment of hospital patients purchased by a

15 lessor who leases the equipment, under a lease of one year or

16 longer executed or in effect at the time the lessor would

17 otherwise be subject to the tax imposed by this Act, to a

18 hospital that has been issued an active tax exemption

19 identification number by the Department under Section 1g of the

20 Retailers' Occupation Tax Act. If the equipment is leased in a

21 manner that does not qualify for this exemption or is used in

22 any other non-exempt manner, the lessor shall be liable for the

23 tax imposed under this Act or the Service Use Tax Act, as the

24 case may be, based on the fair market value of the property at

25 the time the non-qualifying use occurs. No lessor shall collect

26 or attempt to collect an amount (however designated) that

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1 purports to reimburse that lessor for the tax imposed by this

2 Act or the Service Use Tax Act, as the case may be, if the tax

3 has not been paid by the lessor. If a lessor improperly

4 collects any such amount from the lessee, the lessee shall have

5 a legal right to claim a refund of that amount from the lessor.

6 If, however, that amount is not refunded to the lessee for any

7 reason, the lessor is liable to pay that amount to the

8 Department.

9 (23) Personal property purchased by a lessor who leases the

10 property, under a lease of one year or longer executed or in

11 effect at the time the lessor would otherwise be subject to the

12 tax imposed by this Act, to a governmental body that has been

13 issued an active sales tax exemption identification number by

14 the Department under Section 1g of the Retailers' Occupation

15 Tax Act. If the property is leased in a manner that does not

16 qualify for this exemption or used in any other non-exempt

17 manner, the lessor shall be liable for the tax imposed under

18 this Act or the Service Use Tax Act, as the case may be, based

19 on the fair market value of the property at the time the

20 non-qualifying use occurs. No lessor shall collect or attempt

21 to collect an amount (however designated) that purports to

22 reimburse that lessor for the tax imposed by this Act or the

23 Service Use Tax Act, as the case may be, if the tax has not been

24 paid by the lessor. If a lessor improperly collects any such

25 amount from the lessee, the lessee shall have a legal right to

26 claim a refund of that amount from the lessor. If, however,

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1 that amount is not refunded to the lessee for any reason, the

2 lessor is liable to pay that amount to the Department.

3 (24) Beginning with taxable years ending on or after

4 December 31, 1995 and ending with taxable years ending on or

5 before December 31, 2004, personal property that is donated for

6 disaster relief to be used in a State or federally declared

7 disaster area in Illinois or bordering Illinois by a

8 manufacturer or retailer that is registered in this State to a

9 corporation, society, association, foundation, or institution

10 that has been issued a sales tax exemption identification

11 number by the Department that assists victims of the disaster

12 who reside within the declared disaster area.

13 (25) Beginning with taxable years ending on or after

14 December 31, 1995 and ending with taxable years ending on or

15 before December 31, 2004, personal property that is used in the

16 performance of infrastructure repairs in this State, including

17 but not limited to municipal roads and streets, access roads,

18 bridges, sidewalks, waste disposal systems, water and sewer

19 line extensions, water distribution and purification

20 facilities, storm water drainage and retention facilities, and

21 sewage treatment facilities, resulting from a State or

22 federally declared disaster in Illinois or bordering Illinois

23 when such repairs are initiated on facilities located in the

24 declared disaster area within 6 months after the disaster.

25 (26) Beginning July 1, 1999, game or game birds purchased

26 at a "game breeding and hunting preserve area" as that term is

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1 used in the Wildlife Code. This paragraph is exempt from the

2 provisions of Section 3-90.

3 (27) A motor vehicle, as that term is defined in Section

4 1-146 of the Illinois Vehicle Code, that is donated to a

5 corporation, limited liability company, society, association,

6 foundation, or institution that is determined by the Department

7 to be organized and operated exclusively for educational

8 purposes. For purposes of this exemption, "a corporation,

9 limited liability company, society, association, foundation,

10 or institution organized and operated exclusively for

11 educational purposes" means all tax-supported public schools,

12 private schools that offer systematic instruction in useful

13 branches of learning by methods common to public schools and

14 that compare favorably in their scope and intensity with the

15 course of study presented in tax-supported schools, and

16 vocational or technical schools or institutes organized and

17 operated exclusively to provide a course of study of not less

18 than 6 weeks duration and designed to prepare individuals to

19 follow a trade or to pursue a manual, technical, mechanical,

20 industrial, business, or commercial occupation.

21 (28) Beginning January 1, 2000, personal property,

22 including food, purchased through fundraising events for the

23 benefit of a public or private elementary or secondary school,

24 a group of those schools, or one or more school districts if

25 the events are sponsored by an entity recognized by the school

26 district that consists primarily of volunteers and includes

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1 parents and teachers of the school children. This paragraph

2 does not apply to fundraising events (i) for the benefit of

3 private home instruction or (ii) for which the fundraising

4 entity purchases the personal property sold at the events from

5 another individual or entity that sold the property for the

6 purpose of resale by the fundraising entity and that profits

7 from the sale to the fundraising entity. This paragraph is

8 exempt from the provisions of Section 3-90.

9 (29) Beginning January 1, 2000 and through December 31,

10 2001, new or used automatic vending machines that prepare and

11 serve hot food and beverages, including coffee, soup, and other

12 items, and replacement parts for these machines. Beginning

13 January 1, 2002 and through June 30, 2003, machines and parts

14 for machines used in commercial, coin-operated amusement and

15 vending business if a use or occupation tax is paid on the

16 gross receipts derived from the use of the commercial,

17 coin-operated amusement and vending machines. This paragraph

18 is exempt from the provisions of Section 3-90.

19 (30) Beginning January 1, 2001 and through June 30, 2016,

20 food for human consumption that is to be consumed off the

21 premises where it is sold (other than alcoholic beverages, soft

22 drinks, and food that has been prepared for immediate

23 consumption) and prescription and nonprescription medicines,

24 drugs, medical appliances, and insulin, urine testing

25 materials, syringes, and needles used by diabetics, for human

26 use, when purchased for use by a person receiving medical

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1 assistance under Article V of the Illinois Public Aid Code who

2 resides in a licensed long-term care facility, as defined in

3 the Nursing Home Care Act, or in a licensed facility as defined

4 in the ID/DD Community Care Act, the MC/DD Act, or the

5 Specialized Mental Health Rehabilitation Act of 2013.

6 (31) Beginning on the effective date of this amendatory Act

7 of the 92nd General Assembly, computers and communications

8 equipment utilized for any hospital purpose and equipment used

9 in the diagnosis, analysis, or treatment of hospital patients

10 purchased by a lessor who leases the equipment, under a lease

11 of one year or longer executed or in effect at the time the

12 lessor would otherwise be subject to the tax imposed by this

13 Act, to a hospital that has been issued an active tax exemption

14 identification number by the Department under Section 1g of the

15 Retailers' Occupation Tax Act. If the equipment is leased in a

16 manner that does not qualify for this exemption or is used in

17 any other nonexempt manner, the lessor shall be liable for the

18 tax imposed under this Act or the Service Use Tax Act, as the

19 case may be, based on the fair market value of the property at

20 the time the nonqualifying use occurs. No lessor shall collect

21 or attempt to collect an amount (however designated) that

22 purports to reimburse that lessor for the tax imposed by this

23 Act or the Service Use Tax Act, as the case may be, if the tax

24 has not been paid by the lessor. If a lessor improperly

25 collects any such amount from the lessee, the lessee shall have

26 a legal right to claim a refund of that amount from the lessor.

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1 If, however, that amount is not refunded to the lessee for any

2 reason, the lessor is liable to pay that amount to the

3 Department. This paragraph is exempt from the provisions of

4 Section 3-90.

5 (32) Beginning on the effective date of this amendatory Act

6 of the 92nd General Assembly, personal property purchased by a

7 lessor who leases the property, under a lease of one year or

8 longer executed or in effect at the time the lessor would

9 otherwise be subject to the tax imposed by this Act, to a

10 governmental body that has been issued an active sales tax

11 exemption identification number by the Department under

12 Section 1g of the Retailers' Occupation Tax Act. If the

13 property is leased in a manner that does not qualify for this

14 exemption or used in any other nonexempt manner, the lessor

15 shall be liable for the tax imposed under this Act or the

16 Service Use Tax Act, as the case may be, based on the fair

17 market value of the property at the time the nonqualifying use

18 occurs. No lessor shall collect or attempt to collect an amount

19 (however designated) that purports to reimburse that lessor for

20 the tax imposed by this Act or the Service Use Tax Act, as the

21 case may be, if the tax has not been paid by the lessor. If a

22 lessor improperly collects any such amount from the lessee, the

23 lessee shall have a legal right to claim a refund of that

24 amount from the lessor. If, however, that amount is not

25 refunded to the lessee for any reason, the lessor is liable to

26 pay that amount to the Department. This paragraph is exempt

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1 from the provisions of Section 3-90.

2 (33) On and after July 1, 2003 and through June 30, 2004,

3 the use in this State of motor vehicles of the second division

4 with a gross vehicle weight in excess of 8,000 pounds and that

5 are subject to the commercial distribution fee imposed under

6 Section 3-815.1 of the Illinois Vehicle Code. Beginning on July

7 1, 2004 and through June 30, 2005, the use in this State of

8 motor vehicles of the second division: (i) with a gross vehicle

9 weight rating in excess of 8,000 pounds; (ii) that are subject

10 to the commercial distribution fee imposed under Section

11 3-815.1 of the Illinois Vehicle Code; and (iii) that are

12 primarily used for commercial purposes. Through June 30, 2005,

13 this exemption applies to repair and replacement parts added

14 after the initial purchase of such a motor vehicle if that

15 motor vehicle is used in a manner that would qualify for the

16 rolling stock exemption otherwise provided for in this Act. For

17 purposes of this paragraph, the term "used for commercial

18 purposes" means the transportation of persons or property in

19 furtherance of any commercial or industrial enterprise,

20 whether for-hire or not.

21 (34) Beginning January 1, 2008, tangible personal property

22 used in the construction or maintenance of a community water

23 supply, as defined under Section 3.145 of the Environmental

24 Protection Act, that is operated by a not-for-profit

25 corporation that holds a valid water supply permit issued under

26 Title IV of the Environmental Protection Act. This paragraph is

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1 exempt from the provisions of Section 3-90.

2 (35) Beginning January 1, 2010, materials, parts,

3 equipment, components, and furnishings incorporated into or

4 upon an aircraft as part of the modification, refurbishment,

5 completion, replacement, repair, or maintenance of the

6 aircraft. This exemption includes consumable supplies used in

7 the modification, refurbishment, completion, replacement,

8 repair, and maintenance of aircraft, but excludes any

9 materials, parts, equipment, components, and consumable

10 supplies used in the modification, replacement, repair, and

11 maintenance of aircraft engines or power plants, whether such

12 engines or power plants are installed or uninstalled upon any

13 such aircraft. "Consumable supplies" include, but are not

14 limited to, adhesive, tape, sandpaper, general purpose

15 lubricants, cleaning solution, latex gloves, and protective

16 films. This exemption applies only to the use of qualifying

17 tangible personal property by persons who modify, refurbish,

18 complete, repair, replace, or maintain aircraft and who (i)

19 hold an Air Agency Certificate and are empowered to operate an

20 approved repair station by the Federal Aviation

21 Administration, (ii) have a Class IV Rating, and (iii) conduct

22 operations in accordance with Part 145 of the Federal Aviation

23 Regulations. The exemption does not include aircraft operated

24 by a commercial air carrier providing scheduled passenger air

25 service pursuant to authority issued under Part 121 or Part 129

26 of the Federal Aviation Regulations. The changes made to this

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1 paragraph (35) by Public Act 98-534 are declarative of existing

2 law.

3 (36) Tangible personal property purchased by a

4 public-facilities corporation, as described in Section

5 11-65-10 of the Illinois Municipal Code, for purposes of

6 constructing or furnishing a municipal convention hall, but

7 only if the legal title to the municipal convention hall is

8 transferred to the municipality without any further

9 consideration by or on behalf of the municipality at the time

10 of the completion of the municipal convention hall or upon the

11 retirement or redemption of any bonds or other debt instruments

12 issued by the public-facilities corporation in connection with

13 the development of the municipal convention hall. This

14 exemption includes existing public-facilities corporations as

15 provided in Section 11-65-25 of the Illinois Municipal Code.

16 This paragraph is exempt from the provisions of Section 3-90.

17 (37) Beginning January 1, 2017, menstrual pads, tampons,

18 and menstrual cups.

19 (38) Beginning January 1, 2018, taxable services performed

20 on or to tangible personal property the sale of which is exempt

21 from taxation under this Act. This paragraph is exempt from the

22 provisions of Section 2-70.

23 (39) Beginning January 1, 2018, taxable services performed

24 in a transaction that would be exempt from taxation under this

25 Act if it involved solely the sale of tangible personal

26 property. Such exemption could be due to the nature of the

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1 seller or of the service provider, the purchaser or service

2 recipient, or other features of the transaction, including but

3 not limited to the location or sale-for-resale nature of the

4 transaction. Any such exemption applies to transactions

5 involving solely the sale of tangible personal property, solely

6 the performance of taxable service, or some combination

7 thereof. This paragraph is exempt from the provisions of

8 Section 2-70.

9 (40) Beginning January 1, 2018, taxable services performed

10 for or provided to businesses making purchases of service for

11 the benefit of or in furtherance of the business. This

12 paragraph is exempt from the provisions of Section 2-70.

13 (Source: P.A. 98-104, eff. 7-22-13; 98-422, eff. 8-16-13;

14 98-456, eff. 8-16-13; 98-534, eff. 8-23-13; 98-574, eff.

15 1-1-14; 98-583, eff. 1-1-14; 98-756, eff. 7-16-14; 99-180, eff.

16 7-29-15; 99-855, eff. 8-19-16.)

17 (35 ILCS 105/3-10)

18 Sec. 3-10. Rate of tax. Unless otherwise provided in this

19 Section, the tax imposed by this Act is at the rate of 6.25% of

20 either the selling price or the fair market value, if any, of

21 the tangible personal property. Beginning on July 1, 2017, the

22 tax is also imposed at the rate of 6.25% of either the selling

23 price or the fair market value, if any, of taxable services. In

24 all cases where propertyor service functionally used or

25 consumed is the same as the property or servicethat was

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1 purchased at retail, then the tax is imposed on the selling

2 price of the propertyor taxable service. In all cases where

3 property functionally used or consumed is a by-product or waste

4 product that has been refined, manufactured, or produced from

5 property purchased at retail, then the tax is imposed on the

6 lower of the fair market value, if any, of the specific

7 property so used in this State or on the selling price of the

8 property purchased at retail. For purposes of this Section

9 "fair market value" means the price at which property or

10 servicewould change hands between a willing buyer and a

11 willing seller, neither being under any compulsion to buy or

12 sell and both having reasonable knowledge of the relevant

13 facts. The fair market value shall be established by Illinois

14 sales by the taxpayer of the same propertyor service as that

15 functionally used or consumed, or if there are no such sales by

16 the taxpayer, then comparable sales or purchases of propertyor

17 service of like kind and character in Illinois.

18 Beginning on July 1, 2000 and through December 31, 2000,

19 with respect to motor fuel, as defined in Section 1.1 of the

20 Motor Fuel Tax Law, and gasohol, as defined in Section 3-40 of

21 the Use Tax Act, the tax is imposed at the rate of 1.25%.

22 Beginning on August 6, 2010 through August 15, 2010, with

23 respect to sales tax holiday items as defined in Section 3-6 of

24 this Act, the tax is imposed at the rate of 1.25%.

25 With respect to gasohol, the tax imposed by this Act

26 applies to (i) 70% of the proceeds of sales made on or after

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1 January 1, 1990, and before July 1, 2003, (ii) 80% of the

2 proceeds of sales made on or after July 1, 2003 and on or

3 before December 31, 2018, and (iii) 100% of the proceeds of

4 sales made thereafter. If, at any time, however, the tax under

5 this Act on sales of gasohol is imposed at the rate of 1.25%,

6 then the tax imposed by this Act applies to 100% of the

7 proceeds of sales of gasohol made during that time.

8 With respect to majority blended ethanol fuel, the tax

9 imposed by this Act does not apply to the proceeds of sales

10 made on or after July 1, 2003 and on or before December 31,

11 2018 but applies to 100% of the proceeds of sales made

12 thereafter.

13 With respect to biodiesel blends with no less than 1% and

14 no more than 10% biodiesel, the tax imposed by this Act applies

15 to (i) 80% of the proceeds of sales made on or after July 1,

16 2003 and on or before December 31, 2018 and (ii) 100% of the

17 proceeds of sales made thereafter. If, at any time, however,

18 the tax under this Act on sales of biodiesel blends with no

19 less than 1% and no more than 10% biodiesel is imposed at the

20 rate of 1.25%, then the tax imposed by this Act applies to 100%

21 of the proceeds of sales of biodiesel blends with no less than

22 1% and no more than 10% biodiesel made during that time.

23 With respect to 100% biodiesel and biodiesel blends with

24 more than 10% but no more than 99% biodiesel, the tax imposed

25 by this Act does not apply to the proceeds of sales made on or

26 after July 1, 2003 and on or before December 31, 2018 but

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1 applies to 100% of the proceeds of sales made thereafter.

2 With respect to food for human consumption that is to be

3 consumed off the premises where it is sold (other than

4 alcoholic beverages, soft drinks, and food that has been

5 prepared for immediate consumption) and prescription and

6 nonprescription medicines, drugs, medical appliances, products

7 classified as Class III medical devices by the United States

8 Food and Drug Administration that are used for cancer treatment

9 pursuant to a prescription, as well as any accessories and

10 components related to those devices, modifications to a motor

11 vehicle for the purpose of rendering it usable by a person with

12 a disability, and insulin, urine testing materials, syringes,

13 and needles used by diabetics, for human use, the tax is

14 imposed at the rate of 1%. For the purposes of this Section,

15 until September 1, 2009: the term "soft drinks" means any

16 complete, finished, ready-to-use, non-alcoholic drink, whether

17 carbonated or not, including but not limited to soda water,

18 cola, fruit juice, vegetable juice, carbonated water, and all

19 other preparations commonly known as soft drinks of whatever

20 kind or description that are contained in any closed or sealed

21 bottle, can, carton, or container, regardless of size; but

22 "soft drinks" does not include coffee, tea, non-carbonated

23 water, infant formula, milk or milk products as defined in the

24 Grade A Pasteurized Milk and Milk Products Act, or drinks

25 containing 50% or more natural fruit or vegetable juice.

26 Notwithstanding any other provisions of this Act,

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1 beginning September 1, 2009, "soft drinks" means non-alcoholic

2 beverages that contain natural or artificial sweeteners. "Soft

3 drinks" do not include beverages that contain milk or milk

4 products, soy, rice or similar milk substitutes, or greater

5 than 50% of vegetable or fruit juice by volume.

6 Until August 1, 2009, and notwithstanding any other

7 provisions of this Act, "food for human consumption that is to

8 be consumed off the premises where it is sold" includes all

9 food sold through a vending machine, except soft drinks and

10 food products that are dispensed hot from a vending machine,

11 regardless of the location of the vending machine. Beginning

12 August 1, 2009, and notwithstanding any other provisions of

13 this Act, "food for human consumption that is to be consumed

14 off the premises where it is sold" includes all food sold

15 through a vending machine, except soft drinks, candy, and food

16 products that are dispensed hot from a vending machine,

17 regardless of the location of the vending machine.

18 Notwithstanding any other provisions of this Act,

19 beginning September 1, 2009, "food for human consumption that

20 is to be consumed off the premises where it is sold" does not

21 include candy. For purposes of this Section, "candy" means a

22 preparation of sugar, honey, or other natural or artificial

23 sweeteners in combination with chocolate, fruits, nuts or other

24 ingredients or flavorings in the form of bars, drops, or

25 pieces. "Candy" does not include any preparation that contains

26 flour or requires refrigeration.

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1 Notwithstanding any other provisions of this Act,

2 beginning September 1, 2009, "nonprescription medicines and

3 drugs" does not include grooming and hygiene products. For

4 purposes of this Section, "grooming and hygiene products"

5 includes, but is not limited to, soaps and cleaning solutions,

6 shampoo, toothpaste, mouthwash, antiperspirants, and sun tan

7 lotions and screens, unless those products are available by

8 prescription only, regardless of whether the products meet the

9 definition of "over-the-counter-drugs". For the purposes of

10 this paragraph, "over-the-counter-drug" means a drug for human

11 use that contains a label that identifies the product as a drug

12 as required by 21 C.F.R. � 201.66. The "over-the-counter-drug"

13 label includes:

14 (A) A "Drug Facts" panel; or

15 (B) A statement of the "active ingredient(s)" with a

16 list of those ingredients contained in the compound,

17 substance or preparation.

18 Beginning on the effective date of this amendatory Act of

19 the 98th General Assembly, "prescription and nonprescription

20 medicines and drugs" includes medical cannabis purchased from a

21 registered dispensing organization under the Compassionate Use

22 of Medical Cannabis Pilot Program Act.

23 If the property that is purchased at retail from a retailer

24 is acquired outside Illinois and used outside Illinois before

25 being brought to Illinois for use here and is taxable under

26 this Act, the "selling price" on which the tax is computed

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1 shall be reduced by an amount that represents a reasonable

2 allowance for depreciation for the period of prior out-of-state

3 use.

4 (Source: P.A. 98-122, eff. 1-1-14; 99-143, eff. 7-27-15;

5 99-858, eff. 8-19-16.)

6 (35 ILCS 105/3-10.5)

7 Sec. 3-10.5. Direct payment of retailers' occupation tax

8 and applicable local retailers' occupation tax by purchaser;

9 purchaser relieved of paying use tax and local retailers'

10 occupation tax reimbursement liabilities to retailer.

11 (a) A retailer who makes a retail sale of tangible personal

12 property or taxable serviceto a purchaser who provides the

13 retailer with a copy of the purchaser's valid Direct Pay Permit

14 issued under Section 2-10.5 of the Retailers' Occupation Tax

15 Act is not required under Section 3-45 of this Act to collect

16 the tax imposed by this Act on that sale.

17 (b) A purchaser who makes a purchase from a retailer who

18 would otherwise incur retailers' occupation tax liability on

19 the transaction and who provides the retailer with a copy of a

20 valid Direct Pay Permit issued under Section 2-10.5 of the

21 Retailers' Occupation Tax Act does not incur the tax imposed by

22 this Act on the purchase. The purchaser assumes the retailer's

23 obligation to pay the retailers' occupation tax directly to the

24 Department, including all local retailers' occupation tax

25 liabilities applicable to that retail sale.

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1 (c) A purchaser who makes a purchase from a retailer who

2 would not incur retailers' occupation tax liability on the

3 transaction and who provides the retailer with a copy of a

4 valid Direct Pay Permit issued under Section 2-10.5 of the

5 Retailers' Occupation Tax Act incurs the tax imposed by this

6 Act on the purchase. If, on any transaction, the retailer is

7 entitled under this Act to a discount for collecting and

8 remitting the tax imposed under this Act to the Department, the

9 right to the discount provided in Section 9 of this Act shall

10 be transferred to the Permit holder. If the retailer would not

11 be entitled to a discount as provided in Section 9 of this Act,

12 then the Permit holder is not entitled to a discount.

13 (Source: P.A. 92-484, eff. 8-23-01.)

14 (35 ILCS 105/3-45) (from Ch. 120, par. 439.3-45)

15 Sec. 3-45. Collection. The tax imposed by this Act shall be

16 collected from the purchaser by a retailer maintaining a place

17 of business in this State or a retailer authorized by the

18 Department under Section 6 of this Act, and shall be remitted

19 to the Department as provided in Section 9 of this Act, except

20 as provided in Section 3-10.5 of this Act.

21 The tax imposed by this Act that is not paid to a retailer

22 under this Section shall be paid to the Department directly by

23 any person using the property within this State as provided in

24 Section 10 of this Act.

25 Retailers shall collect the tax from users by adding the

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1 tax to the selling price of tangible personal propertyor

2 taxable service, when sold for use, in the manner prescribed by

3 the Department. The Department may adopt and promulgate

4 reasonable rules and regulations for the adding of the tax by

5 retailers to selling prices by prescribing bracket systems for

6 the purpose of enabling the retailers to add and collect, as

7 far as practicable, the amount of the tax.

8 If a seller collects use tax measured by receipts that are

9 not subject to use tax, or if a seller, in collecting use tax

10 measured by receipts that are subject to tax under this Act,

11 collects more from the purchaser than the required amount of

12 the use tax on the transaction, the purchaser shall have a

13 legal right to claim a refund of that amount from the seller.

14 If, however, that amount is not refunded to the purchaser for

15 any reason, the seller is liable to pay that amount to the

16 Department. This paragraph does not apply to an amount

17 collected by the seller as use tax on receipts that are subject

18 to tax under this Act as long as the collection is made in

19 compliance with the tax collection brackets prescribed by the

20 Department in its rules and regulations.

21 (Source: P.A. 91-51, eff. 6-30-99; 92-484, eff. 8-23-01.)

22 (35 ILCS 105/3-50) (from Ch. 120, par. 439.3-50)

23 Sec. 3-50. Manufacturing and assembly exemption. The

24 manufacturing and assembling machinery and equipment exemption

25 includes machinery and equipment that replaces machinery and

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1 equipment in an existing manufacturing facility as well as

2 machinery and equipment that are for use in an expanded or new

3 manufacturing facility. The machinery and equipment exemption

4 also includes machinery and equipment used in the general

5 maintenance or repair of exempt machinery and equipment or for

6 in-house manufacture of exempt machinery and equipment.

7 Beginning on July 1, 2017, the manufacturing and assembling

8 machinery and equipment exemption also includes graphic arts

9 machinery and equipment, as defined in paragraph (6) of Section

10 3-5. Beginning on July 1, 2017, the manufacturing and

11 assembling machinery and equipment exemption also includes

12 production related tangible personal property, as defined in

13 this Section. The machinery and equipment exemption does not

14 include machinery and equipment used in (i) the generation of

15 electricity for wholesale or retail sale; (ii) the generation

16 or treatment of natural or artificial gas for wholesale or

17 retail sale that is delivered to customers through pipes,

18 pipelines, or mains; or (iii) the treatment of water for

19 wholesale or retail sale that is delivered to customers through

20 pipes, pipelines, or mains. The provisions of this amendatory

21 Act of the 98th General Assembly are declaratory of existing

22 law as to the meaning and scope of this exemption. For the

23 purposes of this exemption, terms have the following meanings:

24 (1) "Manufacturing process" means the production of an

25 article of tangible personal property, whether the article

26 is a finished product or an article for use in the process

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1 of manufacturing or assembling a different article of

2 tangible personal property, by a procedure commonly

3 regarded as manufacturing, processing, fabricating, or

4 refining that changes some existing material into a

5 material with a different form, use, or name. In relation

6 to a recognized integrated business composed of a series of

7 operations that collectively constitute manufacturing, or

8 individually constitute manufacturing operations, the

9 manufacturing process commences with the first operation

10 or stage of production in the series and does not end until

11 the completion of the final product in the last operation

12 or stage of production in the series. For purposes of this

13 exemption, photoprocessing is a manufacturing process of

14 tangible personal property for wholesale or retail sale.

15 (2) "Assembling process" means the production of an

16 article of tangible personal property, whether the article

17 is a finished product or an article for use in the process

18 of manufacturing or assembling a different article of

19 tangible personal property, by the combination of existing

20 materials in a manner commonly regarded as assembling that

21 results in an article or material of a different form, use,

22 or name.

23 (3) "Machinery" means major mechanical machines or

24 major components of those machines contributing to a

25 manufacturing or assembling process.

26 (4) "Equipment" includes an independent device or tool

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1 separate from machinery but essential to an integrated

2 manufacturing or assembly process; including computers

3 used primarily in a manufacturer's computer assisted

4 design, computer assisted manufacturing (CAD/CAM) system;

5 any subunit or assembly comprising a component of any

6 machinery or auxiliary, adjunct, or attachment parts of

7 machinery, such as tools, dies, jigs, fixtures, patterns,

8 and molds; and any parts that require periodic replacement

9 in the course of normal operation; but does not include

10 hand tools. Equipment includes chemicals or chemicals

11 acting as catalysts but only if the chemicals or chemicals

12 acting as catalysts effect a direct and immediate change

13 upon a product being manufactured or assembled for

14 wholesale or retail sale or lease.

15 (5) "Production related tangible personal property"

16 means all tangible personal property that is used or

17 consumed by the purchaser in a manufacturing facility in

18 which a manufacturing process takes place and includes,

19 without limitation, tangible personal property that is

20 purchased for incorporation into real estate within a

21 manufacturing facility and tangible personal property that

22 is used or consumed in activities such as research and

23 development, preproduction material handling, receiving,

24 quality control, inventory control, storage, staging, and

25 packaging for shipping and transportation purposes.

26 "Production related tangible personal property" does not

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1 include (i) tangible personal property that is used, within

2 or without a manufacturing facility, in sales, purchasing,

3 accounting, fiscal management, marketing, personnel

4 recruitment or selection, or landscaping or (ii) tangible

5 personal property that is required to be titled or

6 registered with a department, agency, or unit of federal,

7 State, or local government.

8 The manufacturing and assembling machinery and equipment

9 exemption includes production related tangible personal

10 property that is purchased (i) on or after July 1, 2007 and on

11 or before June 30, 2008 or (ii) on and after July 1, 2017. The

12 exemption for production related tangible personal property

13 purchased on or after July 1, 2007 and on or before June 30,

14 2008 is subject to both of the following limitations:

15 (1) The maximum amount of the exemption for any one

16 taxpayer may not exceed 5% of the purchase price of

17 production related tangible personal property that is

18 purchased on or after July 1, 2007 and on or before June

19 30, 2008. A credit under Section 3-85 of this Act may not

20 be earned by the purchase of production related tangible

21 personal property for which an exemption is received under

22 this Section.

23 (2) The maximum aggregate amount of the exemptions for

24 production related tangible personal property awarded

25 under this Act and the Retailers' Occupation Tax Act to all

26 taxpayers may not exceed $10,000,000. If the claims for the

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1 exemption exceed $10,000,000, then the Department shall

2 reduce the amount of the exemption to each taxpayer on a

3 pro rata basis.

4 The Department may adopt rules to implement and administer the

5 exemption for production related tangible personal property.

6 The manufacturing and assembling machinery and equipment

7 exemption includes the sale of materials to a purchaser who

8 produces exempted types of machinery, equipment, or tools and

9 who rents or leases that machinery, equipment, or tools to a

10 manufacturer of tangible personal property. This exemption

11 also includes the sale of materials to a purchaser who

12 manufactures those materials into an exempted type of

13 machinery, equipment, or tools that the purchaser uses himself

14 or herself in the manufacturing of tangible personal property.

15 This exemption includes the sale of exempted types of machinery

16 or equipment to a purchaser who is not the manufacturer, but

17 who rents or leases the use of the property to a manufacturer.

18 The purchaser of the machinery and equipment who has an active

19 resale registration number shall furnish that number to the

20 seller at the time of purchase. A user of the machinery,

21 equipment, or tools without an active resale registration

22 number shall prepare a certificate of exemption for each

23 transaction stating facts establishing the exemption for that

24 transaction, and that certificate shall be available to the

25 Department for inspection or audit. The Department shall

26 prescribe the form of the certificate. Informal rulings,

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1 opinions, or letters issued by the Department in response to an

2 inquiry or request for an opinion from any person regarding the

3 coverage and applicability of this exemption to specific

4 devices shall be published, maintained as a public record, and

5 made available for public inspection and copying. If the

6 informal ruling, opinion, or letter contains trade secrets or

7 other confidential information, where possible, the Department

8 shall delete that information before publication. Whenever

9 informal rulings, opinions, or letters contain a policy of

10 general applicability, the Department shall formulate and

11 adopt that policy as a rule in accordance with the Illinois

12 Administrative Procedure Act.

13 The manufacturing and assembling machinery and equipment

14 exemption, including the addition of production related

15 tangible personal property, is exempt from the provisions of

16 Section 3-90.

17 (Source: P.A. 98-583, eff. 1-1-14.)

18 (35 ILCS 105/3-55) (from Ch. 120, par. 439.3-55)

19 Sec. 3-55. Multistate exemption. To prevent actual or

20 likely multistate taxation, the tax imposed by this Act does

21 not apply to the use of tangible personal property in this

22 State under the following circumstances:

23 (a) The use, in this State, of tangible personal property

24 acquired outside this State by a nonresident individual and

25 brought into this State by the individual for his or her own

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1 use while temporarily within this State or while passing

2 through this State.

3 (b) The use, in this State, of tangible personal property

4 by an interstate carrier for hire as rolling stock moving in

5 interstate commerce or by lessors under a lease of one year or

6 longer executed or in effect at the time of purchase of

7 tangible personal property by interstate carriers for-hire for

8 use as rolling stock moving in interstate commerce as long as

9 so used by the interstate carriers for-hire, and equipment

10 operated by a telecommunications provider, licensed as a common

11 carrier by the Federal Communications Commission, which is

12 permanently installed in or affixed to aircraft moving in

13 interstate commerce.

14 (c) The use, in this State, by owners, lessors, or shippers

15 of tangible personal property that is utilized by interstate

16 carriers for hire for use as rolling stock moving in interstate

17 commerce as long as so used by the interstate carriers for

18 hire, and equipment operated by a telecommunications provider,

19 licensed as a common carrier by the Federal Communications

20 Commission, which is permanently installed in or affixed to

21 aircraft moving in interstate commerce.

22 (d) The use, in this State, of tangible personal property

23 or taxable servicethat is acquired outside this State and

24 caused to be brought into or performed inthis State by a

25 person who has already paid a tax in another State in respect

26 to the sale, purchase, or use of that property, to the extent

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1 of the amount of the tax properly due and paid in the other

2 State.

3 (e) The temporary storage, in this State, of tangible

4 personal property that is acquired outside this State and that,

5 after being brought into this State and stored here

6 temporarily, is used solely outside this State or is physically

7 attached to or incorporated into other tangible personal

8 property that is used solely outside this State, or is altered

9 by converting, fabricating, manufacturing, printing,

10 processing, or shaping, and, as altered, is used solely outside

11 this State.

12 (f) The temporary storage in this State of building

13 materials and fixtures that are acquired either in this State

14 or outside this State by an Illinois registered combination

15 retailer and construction contractor, and that the purchaser

16 thereafter uses outside this State by incorporating that

17 property into real estate located outside this State.

18 (g) The use or purchase of tangible personal property by a

19 common carrier by rail or motor that receives the physical

20 possession of the property in Illinois, and that transports the

21 property, or shares with another common carrier in the

22 transportation of the property, out of Illinois on a standard

23 uniform bill of lading showing the seller of the property as

24 the shipper or consignor of the property to a destination

25 outside Illinois, for use outside Illinois.

26 (h) Except as provided in subsection (h-1), the use, in

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1 this State, of a motor vehicle that was sold in this State to a

2 nonresident, even though the motor vehicle is delivered to the

3 nonresident in this State, if the motor vehicle is not to be

4 titled in this State, and if a drive-away permit is issued to

5 the motor vehicle as provided in Section 3-603 of the Illinois

6 Vehicle Code or if the nonresident purchaser has vehicle

7 registration plates to transfer to the motor vehicle upon

8 returning to his or her home state. The issuance of the

9 drive-away permit or having the out-of-state registration

10 plates to be transferred shall be prima facie evidence that the

11 motor vehicle will not be titled in this State.

12 (h-1) The exemption under subsection (h) does not apply if

13 the state in which the motor vehicle will be titled does not

14 allow a reciprocal exemption for the use in that state of a

15 motor vehicle sold and delivered in that state to an Illinois

16 resident but titled in Illinois. The tax collected under this

17 Act on the sale of a motor vehicle in this State to a resident

18 of another state that does not allow a reciprocal exemption

19 shall be imposed at a rate equal to the state's rate of tax on

20 taxable property in the state in which the purchaser is a

21 resident, except that the tax shall not exceed the tax that

22 would otherwise be imposed under this Act. At the time of the

23 sale, the purchaser shall execute a statement, signed under

24 penalty of perjury, of his or her intent to title the vehicle

25 in the state in which the purchaser is a resident within 30

26 days after the sale and of the fact of the payment to the State

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1 of Illinois of tax in an amount equivalent to the state's rate

2 of tax on taxable property in his or her state of residence and

3 shall submit the statement to the appropriate tax collection

4 agency in his or her state of residence. In addition, the

5 retailer must retain a signed copy of the statement in his or

6 her records. Nothing in this subsection shall be construed to

7 require the removal of the vehicle from this state following

8 the filing of an intent to title the vehicle in the purchaser's

9 state of residence if the purchaser titles the vehicle in his

10 or her state of residence within 30 days after the date of

11 sale. The tax collected under this Act in accordance with this

12 subsection (h-1) shall be proportionately distributed as if the

13 tax were collected at the 6.25% general rate imposed under this

14 Act.

15 (h-2) The following exemptions apply with respect to

16 certain aircraft:

17 (1) Beginning on July 1, 2007, no tax is imposed under

18 this Act on the purchase of an aircraft, as defined in

19 Section 3 of the Illinois Aeronautics Act, if all of the

20 following conditions are met:

21 (A) the aircraft leaves this State within 15 days

22 after the later of either the issuance of the final

23 billing for the purchase of the aircraft or the

24 authorized approval for return to service, completion

25 of the maintenance record entry, and completion of the

26 test flight and ground test for inspection, as required

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1 by 14 C.F.R. 91.407;

2 (B) the aircraft is not based or registered in this

3 State after the purchase of the aircraft; and

4 (C) the purchaser provides the Department with a

5 signed and dated certification, on a form prescribed by

6 the Department, certifying that the requirements of

7 this item (1) are met. The certificate must also

8 include the name and address of the purchaser, the

9 address of the location where the aircraft is to be

10 titled or registered, the address of the primary

11 physical location of the aircraft, and other

12 information that the Department may reasonably

13 require.

14 (2) Beginning on July 1, 2007, no tax is imposed under

15 this Act on the use of an aircraft, as defined in Section 3

16 of the Illinois Aeronautics Act, that is temporarily

17 located in this State for the purpose of a prepurchase

18 evaluation if all of the following conditions are met:

19 (A) the aircraft is not based or registered in this

20 State after the prepurchase evaluation; and

21 (B) the purchaser provides the Department with a

22 signed and dated certification, on a form prescribed by

23 the Department, certifying that the requirements of

24 this item (2) are met. The certificate must also

25 include the name and address of the purchaser, the

26 address of the location where the aircraft is to be

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1 titled or registered, the address of the primary

2 physical location of the aircraft, and other

3 information that the Department may reasonably

4 require.

5 (3) Beginning on July 1, 2007, no tax is imposed under

6 this Act on the use of an aircraft, as defined in Section 3

7 of the Illinois Aeronautics Act, that is temporarily

8 located in this State for the purpose of a post-sale

9 customization if all of the following conditions are met:

10 (A) the aircraft leaves this State within 15 days

11 after the authorized approval for return to service,

12 completion of the maintenance record entry, and

13 completion of the test flight and ground test for

14 inspection, as required by 14 C.F.R. 91.407;

15 (B) the aircraft is not based or registered in this

16 State either before or after the post-sale

17 customization; and

18 (C) the purchaser provides the Department with a

19 signed and dated certification, on a form prescribed by

20 the Department, certifying that the requirements of

21 this item (3) are met. The certificate must also

22 include the name and address of the purchaser, the

23 address of the location where the aircraft is to be

24 titled or registered, the address of the primary

25 physical location of the aircraft, and other

26 information that the Department may reasonably

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1 require.

2 If tax becomes due under this subsection (h-2) because of

3 the purchaser's use of the aircraft in this State, the

4 purchaser shall file a return with the Department and pay the

5 tax on the fair market value of the aircraft. This return and

6 payment of the tax must be made no later than 30 days after the

7 aircraft is used in a taxable manner in this State. The tax is

8 based on the fair market value of the aircraft on the date that

9 it is first used in a taxable manner in this State.

10 For purposes of this subsection (h-2):

11 "Based in this State" means hangared, stored, or otherwise

12 used, excluding post-sale customizations as defined in this

13 Section, for 10 or more days in each 12-month period

14 immediately following the date of the sale of the aircraft.

15 "Post-sale customization" means any improvement,

16 maintenance, or repair that is performed on an aircraft

17 following a transfer of ownership of the aircraft.

18 "Prepurchase evaluation" means an examination of an

19 aircraft to provide a potential purchaser with information

20 relevant to the potential purchase.

21 "Registered in this State" means an aircraft registered

22 with the Department of Transportation, Aeronautics Division,

23 or titled or registered with the Federal Aviation

24 Administration to an address located in this State.

25 This subsection (h-2) is exempt from the provisions of

26 Section 3-90.

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1 (i) Beginning July 1, 1999, the use, in this State, of fuel

2 acquired outside this State and brought into this State in the

3 fuel supply tanks of locomotives engaged in freight hauling and

4 passenger service for interstate commerce. This subsection is

5 exempt from the provisions of Section 3-90.

6 (j) Beginning on January 1, 2002 and through June 30, 2016,

7 the use of tangible personal property purchased from an

8 Illinois retailer by a taxpayer engaged in centralized

9 purchasing activities in Illinois who will, upon receipt of the

10 property in Illinois, temporarily store the property in

11 Illinois (i) for the purpose of subsequently transporting it

12 outside this State for use or consumption thereafter solely

13 outside this State or (ii) for the purpose of being processed,

14 fabricated, or manufactured into, attached to, or incorporated

15 into other tangible personal property to be transported outside

16 this State and thereafter used or consumed solely outside this

17 State. The Director of Revenue shall, pursuant to rules adopted

18 in accordance with the Illinois Administrative Procedure Act,

19 issue a permit to any taxpayer in good standing with the

20 Department who is eligible for the exemption under this

21 subsection (j). The permit issued under this subsection (j)

22 shall authorize the holder, to the extent and in the manner

23 specified in the rules adopted under this Act, to purchase

24 tangible personal property from a retailer exempt from the

25 taxes imposed by this Act. Taxpayers shall maintain all

26 necessary books and records to substantiate the use and

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1 consumption of all such tangible personal property outside of

2 the State of Illinois.

3 (Source: P.A. 97-73, eff. 6-30-11.)

4 (35 ILCS 105/3-65) (from Ch. 120, par. 439.3-65)

5 Sec. 3-65. R.O.T. nontaxability. If the seller of tangible

6 personal propertyor taxable servicefor use would not be

7 taxable under the Retailers' Occupation Tax Act despite all

8 elements of the sale occurring in Illinois, then the tax

9 imposed by this Act does not apply to the use of the tangible

10 personal propertyor taxable service in this State.

11 (Source: P.A. 91-51, eff. 6-30-99.)

12 (35 ILCS 105/3-75) (from Ch. 120, par. 439.3-75)

13 Sec. 3-75. Serviceman transfer. Tangible personal property

14 purchased by a serviceman, as defined in Section 2 of the

15 Service Occupation Tax Act, is subject to the tax imposed by

16 this Act when purchased for transfer by the serviceman

17 incidental to completion of a maintenance agreement. Effective

18 January 1, 2018, purchases of tangible personal property

19 purchased for transfer incidental to performance of a taxable

20 service is not subject to the tax imposed by this Act.

21 (Source: P.A. 91-51, eff. 6-30-99.)

22 (35 ILCS 105/3a) (from Ch. 120, par. 439.3a)

23 Sec. 3a. The tax imposed by the Act shall when collected be

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1 stated as a distinct item separate and apart from the selling

2 price of the tangible personal propertyor taxable service.

3 However, where it is not possible to state the sales tax

4 separately in situations such as sales from vending machines or

5 sales of liquor by the drink the Department may by rule exempt

6 such sales from this requirement so long as purchasers are

7 notified by a sign that the tax is included in the selling

8 price.

9 (Source: P.A. 84-229.)

10 (35 ILCS 105/4) (from Ch. 120, par. 439.4)

11 Sec. 4. Evidence that tangible personal property or taxable

12 servicewas sold by any person for delivery to a person

13 residing or engaged in business in this State shall be prima

14 facie evidence that such tangible personal property or taxable

15 servicewas sold for use in this State.

16 (Source: Laws 1955, p. 2027.)

17 (35 ILCS 105/5) (from Ch. 120, par. 439.5)

18 Sec. 5. Except as to motor vehicles and other items of

19 tangible personal property that must be titled or registered

20 under an Illinois law, but that cannot be so titled or

21 registered without a use tax receipt or exemption determination

22 from the Department, every retailer maintaining a place of

23 business in this State and making sales of tangible personal

24 property or taxable service for use in this State (whether

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1 those sales are made within or without this State) shall, when

2 collecting the tax as provided in Section 3-45 of this Act from

3 the purchaser, give to the purchaser (if demanded by the

4 purchaser) a receipt for the tax in the manner and form

5 prescribed by the Department. The receipt shall be sufficient

6 to relieve the purchaser from further liability for the tax to

7 which the receipt may refer. Each retailer shall list with the

8 Department the names and addresses of all of his or her agents

9 operating in this State and the location of any and all of his

10 or her distribution or sales houses, offices, or other places

11 of business in this State.

12 (Source: P.A. 86-1475.)

13 (35 ILCS 105/7) (from Ch. 120, par. 439.7)

14 Sec. 7.

15 It is unlawful for any retailer to advertise or hold out or

16 state to the public or to any purchaser, consumer or user,

17 directly or indirectly, that the tax or any part thereof

18 imposed by Section 3 hereof will be assumed or absorbed by the

19 retailer or that it will not be added to the selling price of

20 the property or taxable service sold, or if added that it or

21 any part thereof will be refunded other than when the retailer

22 refunds the selling price and tax because of the merchandise's

23 being returned to the retailer (or the taxable service

24 transaction's being partially or wholly cancelled) or other

25 than when the retailer credits or refunds the tax to the

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1 purchaser to support a claim filed with the Department under

2 the Retailers' Occupation Tax Act or under this Act. Any person

3 violating any of the provisions of this Section within this

4 State shall be guilty of a Class A misdemeanor.

5 (Source: P.A. 77-2830.)

6 (35 ILCS 105/9) (from Ch. 120, par. 439.9)

7 Sec. 9. Except as to motor vehicles, watercraft, aircraft,

8 and trailers that are required to be registered with an agency

9 of this State, each retailer required or authorized to collect

10 the tax imposed by this Act shall pay to the Department the

11 amount of such tax (except as otherwise provided) at the time

12 when he is required to file his return for the period during

13 which such tax was collected, less a discount of 2.1% prior to

14 January 1, 1990, and 1.75% on and after January 1, 1990, or $5

15 per calendar year, whichever is greater, which is allowed to

16 reimburse the retailer for expenses incurred in collecting the

17 tax, keeping records, preparing and filing returns, remitting

18 the tax and supplying data to the Department on request. In the

19 case of retailers who report and pay the tax on a transaction

20 by transaction basis, as provided in this Section, such

21 discount shall be taken with each such tax remittance instead

22 of when such retailer files his periodic return. The Department

23 may disallow the discount for retailers whose certificate of

24 registration is revoked at the time the return is filed, but

25 only if the Department's decision to revoke the certificate of

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1 registration has become final. A retailer need not remit that

2 part of any tax collected by him to the extent that he is

3 required to remit and does remit the tax imposed by the

4 Retailers' Occupation Tax Act, with respect to the sale of the

5 same property.

6 Where such tangible personal property or taxable service is

7 sold under a conditional sales contract, or under any other

8 form of sale wherein the payment of the principal sum, or a

9 part thereof, is extended beyond the close of the period for

10 which the return is filed, the retailer, in collecting the tax

11 (except as to motor vehicles, watercraft, aircraft, and

12 trailers that are required to be registered with an agency of

13 this State), may collect for each tax return period, only the

14 tax applicable to that part of the selling price actually

15 received during such tax return period.

16 Except as provided in this Section, on or before the

17 twentieth day of each calendar month, such retailer shall file

18 a return for the preceding calendar month. Such return shall be

19 filed on forms prescribed by the Department and shall furnish

20 such information as the Department may reasonably require.

21 The Department may require returns to be filed on a

22 quarterly basis. If so required, a return for each calendar

23 quarter shall be filed on or before the twentieth day of the

24 calendar month following the end of such calendar quarter. The

25 taxpayer shall also file a return with the Department for each

26 of the first two months of each calendar quarter, on or before

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1 the twentieth day of the following calendar month, stating:

2 1. The name of the seller;

3 2. The address of the principal place of business from

4 which he engages in the business of selling tangible

5 personal property at retail in this State;

6 3. The total amount of taxable receipts received by him

7 during the preceding calendar month from sales of tangible

8 personal property by him during such preceding calendar

9 month, including receipts from charge and time sales, but

10 less all deductions allowed by law;

11 4. The amount of credit provided in Section 2d of this

12 Act;

13 5. The amount of tax due;

14 5-5. The signature of the taxpayer; and

15 6. Such other reasonable information as the Department

16 may require.

17 If a taxpayer fails to sign a return within 30 days after

18 the proper notice and demand for signature by the Department,

19 the return shall be considered valid and any amount shown to be

20 due on the return shall be deemed assessed.

21 Beginning October 1, 1993, a taxpayer who has an average

22 monthly tax liability of $150,000 or more shall make all

23 payments required by rules of the Department by electronic

24 funds transfer. Beginning October 1, 1994, a taxpayer who has

25 an average monthly tax liability of $100,000 or more shall make

26 all payments required by rules of the Department by electronic

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1 funds transfer. Beginning October 1, 1995, a taxpayer who has

2 an average monthly tax liability of $50,000 or more shall make

3 all payments required by rules of the Department by electronic

4 funds transfer. Beginning October 1, 2000, a taxpayer who has

5 an annual tax liability of $200,000 or more shall make all

6 payments required by rules of the Department by electronic

7 funds transfer. The term "annual tax liability" shall be the

8 sum of the taxpayer's liabilities under this Act, and under all

9 other State and local occupation and use tax laws administered

10 by the Department, for the immediately preceding calendar year.

11 The term "average monthly tax liability" means the sum of the

12 taxpayer's liabilities under this Act, and under all other

13 State and local occupation and use tax laws administered by the

14 Department, for the immediately preceding calendar year

15 divided by 12. Beginning on October 1, 2002, a taxpayer who has

16 a tax liability in the amount set forth in subsection (b) of

17 Section 2505-210 of the Department of Revenue Law shall make

18 all payments required by rules of the Department by electronic

19 funds transfer.

20 Before August 1 of each year beginning in 1993, the

21 Department shall notify all taxpayers required to make payments

22 by electronic funds transfer. All taxpayers required to make

23 payments by electronic funds transfer shall make those payments

24 for a minimum of one year beginning on October 1.

25 Any taxpayer not required to make payments by electronic

26 funds transfer may make payments by electronic funds transfer

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1 with the permission of the Department.

2 All taxpayers required to make payment by electronic funds

3 transfer and any taxpayers authorized to voluntarily make

4 payments by electronic funds transfer shall make those payments

5 in the manner authorized by the Department.

6 The Department shall adopt such rules as are necessary to

7 effectuate a program of electronic funds transfer and the

8 requirements of this Section.

9 Before October 1, 2000, if the taxpayer's average monthly

10 tax liability to the Department under this Act, the Retailers'

11 Occupation Tax Act, the Service Occupation Tax Act, the Service

12 Use Tax Act was $10,000 or more during the preceding 4 complete

13 calendar quarters, he shall file a return with the Department

14 each month by the 20th day of the month next following the

15 month during which such tax liability is incurred and shall

16 make payments to the Department on or before the 7th, 15th,

17 22nd and last day of the month during which such liability is

18 incurred. On and after October 1, 2000, if the taxpayer's

19 average monthly tax liability to the Department under this Act,

20 the Retailers' Occupation Tax Act, the Service Occupation Tax

21 Act, and the Service Use Tax Act was $20,000 or more during the

22 preceding 4 complete calendar quarters, he shall file a return

23 with the Department each month by the 20th day of the month

24 next following the month during which such tax liability is

25 incurred and shall make payment to the Department on or before

26 the 7th, 15th, 22nd and last day of the month during which such

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1 liability is incurred. If the month during which such tax

2 liability is incurred began prior to January 1, 1985, each

3 payment shall be in an amount equal to 1/4 of the taxpayer's

4 actual liability for the month or an amount set by the

5 Department not to exceed 1/4 of the average monthly liability

6 of the taxpayer to the Department for the preceding 4 complete

7 calendar quarters (excluding the month of highest liability and

8 the month of lowest liability in such 4 quarter period). If the

9 month during which such tax liability is incurred begins on or

10 after January 1, 1985, and prior to January 1, 1987, each

11 payment shall be in an amount equal to 22.5% of the taxpayer's

12 actual liability for the month or 27.5% of the taxpayer's

13 liability for the same calendar month of the preceding year. If

14 the month during which such tax liability is incurred begins on

15 or after January 1, 1987, and prior to January 1, 1988, each

16 payment shall be in an amount equal to 22.5% of the taxpayer's

17 actual liability for the month or 26.25% of the taxpayer's

18 liability for the same calendar month of the preceding year. If

19 the month during which such tax liability is incurred begins on

20 or after January 1, 1988, and prior to January 1, 1989, or

21 begins on or after January 1, 1996, each payment shall be in an

22 amount equal to 22.5% of the taxpayer's actual liability for

23 the month or 25% of the taxpayer's liability for the same

24 calendar month of the preceding year. If the month during which

25 such tax liability is incurred begins on or after January 1,

26 1989, and prior to January 1, 1996, each payment shall be in an

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1 amount equal to 22.5% of the taxpayer's actual liability for

2 the month or 25% of the taxpayer's liability for the same

3 calendar month of the preceding year or 100% of the taxpayer's

4 actual liability for the quarter monthly reporting period. The

5 amount of such quarter monthly payments shall be credited

6 against the final tax liability of the taxpayer's return for

7 that month. Before October 1, 2000, once applicable, the

8 requirement of the making of quarter monthly payments to the

9 Department shall continue until such taxpayer's average

10 monthly liability to the Department during the preceding 4

11 complete calendar quarters (excluding the month of highest

12 liability and the month of lowest liability) is less than

13 $9,000, or until such taxpayer's average monthly liability to

14 the Department as computed for each calendar quarter of the 4

15 preceding complete calendar quarter period is less than

16 $10,000. However, if a taxpayer can show the Department that a

17 substantial change in the taxpayer's business has occurred

18 which causes the taxpayer to anticipate that his average

19 monthly tax liability for the reasonably foreseeable future

20 will fall below the $10,000 threshold stated above, then such

21 taxpayer may petition the Department for change in such

22 taxpayer's reporting status. On and after October 1, 2000, once

23 applicable, the requirement of the making of quarter monthly

24 payments to the Department shall continue until such taxpayer's

25 average monthly liability to the Department during the

26 preceding 4 complete calendar quarters (excluding the month of

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1 highest liability and the month of lowest liability) is less

2 than $19,000 or until such taxpayer's average monthly liability

3 to the Department as computed for each calendar quarter of the

4 4 preceding complete calendar quarter period is less than

5 $20,000. However, if a taxpayer can show the Department that a

6 substantial change in the taxpayer's business has occurred

7 which causes the taxpayer to anticipate that his average

8 monthly tax liability for the reasonably foreseeable future

9 will fall below the $20,000 threshold stated above, then such

10 taxpayer may petition the Department for a change in such

11 taxpayer's reporting status. The Department shall change such

12 taxpayer's reporting status unless it finds that such change is

13 seasonal in nature and not likely to be long term. If any such

14 quarter monthly payment is not paid at the time or in the

15 amount required by this Section, then the taxpayer shall be

16 liable for penalties and interest on the difference between the

17 minimum amount due and the amount of such quarter monthly

18 payment actually and timely paid, except insofar as the

19 taxpayer has previously made payments for that month to the

20 Department in excess of the minimum payments previously due as

21 provided in this Section. The Department shall make reasonable

22 rules and regulations to govern the quarter monthly payment

23 amount and quarter monthly payment dates for taxpayers who file

24 on other than a calendar monthly basis.

25 If any such payment provided for in this Section exceeds

26 the taxpayer's liabilities under this Act, the Retailers'

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1 Occupation Tax Act, the Service Occupation Tax Act and the

2 Service Use Tax Act, as shown by an original monthly return,

3 the Department shall issue to the taxpayer a credit memorandum

4 no later than 30 days after the date of payment, which

5 memorandum may be submitted by the taxpayer to the Department

6 in payment of tax liability subsequently to be remitted by the

7 taxpayer to the Department or be assigned by the taxpayer to a

8 similar taxpayer under this Act, the Retailers' Occupation Tax

9 Act, the Service Occupation Tax Act or the Service Use Tax Act,

10 in accordance with reasonable rules and regulations to be

11 prescribed by the Department, except that if such excess

12 payment is shown on an original monthly return and is made

13 after December 31, 1986, no credit memorandum shall be issued,

14 unless requested by the taxpayer. If no such request is made,

15 the taxpayer may credit such excess payment against tax

16 liability subsequently to be remitted by the taxpayer to the

17 Department under this Act, the Retailers' Occupation Tax Act,

18 the Service Occupation Tax Act or the Service Use Tax Act, in

19 accordance with reasonable rules and regulations prescribed by

20 the Department. If the Department subsequently determines that

21 all or any part of the credit taken was not actually due to the

22 taxpayer, the taxpayer's 2.1% or 1.75% vendor's discount shall

23 be reduced by 2.1% or 1.75% of the difference between the

24 credit taken and that actually due, and the taxpayer shall be

25 liable for penalties and interest on such difference.

26 If the retailer is otherwise required to file a monthly

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1 return and if the retailer's average monthly tax liability to

2 the Department does not exceed $200, the Department may

3 authorize his returns to be filed on a quarter annual basis,

4 with the return for January, February, and March of a given

5 year being due by April 20 of such year; with the return for

6 April, May and June of a given year being due by July 20 of such

7 year; with the return for July, August and September of a given

8 year being due by October 20 of such year, and with the return

9 for October, November and December of a given year being due by

10 January 20 of the following year.

11 If the retailer is otherwise required to file a monthly or

12 quarterly return and if the retailer's average monthly tax

13 liability to the Department does not exceed $50, the Department

14 may authorize his returns to be filed on an annual basis, with

15 the return for a given year being due by January 20 of the

16 following year.

17 Such quarter annual and annual returns, as to form and

18 substance, shall be subject to the same requirements as monthly

19 returns.

20 Notwithstanding any other provision in this Act concerning

21 the time within which a retailer may file his return, in the

22 case of any retailer who ceases to engage in a kind of business

23 which makes him responsible for filing returns under this Act,

24 such retailer shall file a final return under this Act with the

25 Department not more than one month after discontinuing such

26 business.

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1 In addition, with respect to motor vehicles, watercraft,

2 aircraft, and trailers that are required to be registered with

3 an agency of this State, every retailer selling this kind of

4 tangible personal property shall file, with the Department,

5 upon a form to be prescribed and supplied by the Department, a

6 separate return for each such item of tangible personal

7 property which the retailer sells, except that if, in the same

8 transaction, (i) a retailer of aircraft, watercraft, motor

9 vehicles or trailers transfers more than one aircraft,

10 watercraft, motor vehicle or trailer to another aircraft,

11 watercraft, motor vehicle or trailer retailer for the purpose

12 of resale or (ii) a retailer of aircraft, watercraft, motor

13 vehicles, or trailers transfers more than one aircraft,

14 watercraft, motor vehicle, or trailer to a purchaser for use as

15 a qualifying rolling stock as provided in Section 3-55 of this

16 Act, then that seller may report the transfer of all the

17 aircraft, watercraft, motor vehicles or trailers involved in

18 that transaction to the Department on the same uniform

19 invoice-transaction reporting return form. For purposes of

20 this Section, "watercraft" means a Class 2, Class 3, or Class 4

21 watercraft as defined in Section 3-2 of the Boat Registration

22 and Safety Act, a personal watercraft, or any boat equipped

23 with an inboard motor.

24 The transaction reporting return in the case of motor

25 vehicles or trailers that are required to be registered with an

26 agency of this State, shall be the same document as the Uniform

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1 Invoice referred to in Section 5-402 of the Illinois Vehicle

2 Code and must show the name and address of the seller; the name

3 and address of the purchaser; the amount of the selling price

4 including the amount allowed by the retailer for traded-in

5 property, if any; the amount allowed by the retailer for the

6 traded-in tangible personal property, if any, to the extent to

7 which Section 2 of this Act allows an exemption for the value

8 of traded-in property; the balance payable after deducting such

9 trade-in allowance from the total selling price; the amount of

10 tax due from the retailer with respect to such transaction; the

11 amount of tax collected from the purchaser by the retailer on

12 such transaction (or satisfactory evidence that such tax is not

13 due in that particular instance, if that is claimed to be the

14 fact); the place and date of the sale; a sufficient

15 identification of the property sold; such other information as

16 is required in Section 5-402 of the Illinois Vehicle Code, and

17 such other information as the Department may reasonably

18 require.

19 The transaction reporting return in the case of watercraft

20 and aircraft must show the name and address of the seller; the

21 name and address of the purchaser; the amount of the selling

22 price including the amount allowed by the retailer for

23 traded-in property, if any; the amount allowed by the retailer

24 for the traded-in tangible personal property, if any, to the

25 extent to which Section 2 of this Act allows an exemption for

26 the value of traded-in property; the balance payable after

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1 deducting such trade-in allowance from the total selling price;

2 the amount of tax due from the retailer with respect to such

3 transaction; the amount of tax collected from the purchaser by

4 the retailer on such transaction (or satisfactory evidence that

5 such tax is not due in that particular instance, if that is

6 claimed to be the fact); the place and date of the sale, a

7 sufficient identification of the property sold, and such other

8 information as the Department may reasonably require.

9 Such transaction reporting return shall be filed not later

10 than 20 days after the date of delivery of the item that is

11 being sold, but may be filed by the retailer at any time sooner

12 than that if he chooses to do so. The transaction reporting

13 return and tax remittance or proof of exemption from the tax

14 that is imposed by this Act may be transmitted to the

15 Department by way of the State agency with which, or State

16 officer with whom, the tangible personal property must be

17 titled or registered (if titling or registration is required)

18 if the Department and such agency or State officer determine

19 that this procedure will expedite the processing of

20 applications for title or registration.

21 With each such transaction reporting return, the retailer

22 shall remit the proper amount of tax due (or shall submit

23 satisfactory evidence that the sale is not taxable if that is

24 the case), to the Department or its agents, whereupon the

25 Department shall issue, in the purchaser's name, a tax receipt

26 (or a certificate of exemption if the Department is satisfied

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1 that the particular sale is tax exempt) which such purchaser

2 may submit to the agency with which, or State officer with

3 whom, he must title or register the tangible personal property

4 that is involved (if titling or registration is required) in

5 support of such purchaser's application for an Illinois

6 certificate or other evidence of title or registration to such

7 tangible personal property.

8 No retailer's failure or refusal to remit tax under this

9 Act precludes a user, who has paid the proper tax to the

10 retailer, from obtaining his certificate of title or other

11 evidence of title or registration (if titling or registration

12 is required) upon satisfying the Department that such user has

13 paid the proper tax (if tax is due) to the retailer. The

14 Department shall adopt appropriate rules to carry out the

15 mandate of this paragraph.

16 If the user who would otherwise pay tax to the retailer

17 wants the transaction reporting return filed and the payment of

18 tax or proof of exemption made to the Department before the

19 retailer is willing to take these actions and such user has not

20 paid the tax to the retailer, such user may certify to the fact

21 of such delay by the retailer, and may (upon the Department

22 being satisfied of the truth of such certification) transmit

23 the information required by the transaction reporting return

24 and the remittance for tax or proof of exemption directly to

25 the Department and obtain his tax receipt or exemption

26 determination, in which event the transaction reporting return

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1 and tax remittance (if a tax payment was required) shall be

2 credited by the Department to the proper retailer's account

3 with the Department, but without the 2.1% or 1.75% discount

4 provided for in this Section being allowed. When the user pays

5 the tax directly to the Department, he shall pay the tax in the

6 same amount and in the same form in which it would be remitted

7 if the tax had been remitted to the Department by the retailer.

8 Where a retailer collects the tax with respect to the

9 selling price of tangible personal propertyor taxable service

10 which he sells and the purchaser thereafter returns such

11 tangible personal property or cancels the providing of taxable

12 serviceand the retailer refunds the selling price thereof to

13 the purchaser, such retailer shall also refund, to the

14 purchaser, the tax so collected from the purchaser. When filing

15 his return for the period in which he refunds such tax to the

16 purchaser, the retailer may deduct the amount of the tax so

17 refunded by him to the purchaser from any other use tax which

18 such retailer may be required to pay or remit to the

19 Department, as shown by such return, if the amount of the tax

20 to be deducted was previously remitted to the Department by

21 such retailer. If the retailer has not previously remitted the

22 amount of such tax to the Department, he is entitled to no

23 deduction under this Act upon refunding such tax to the

24 purchaser.

25 Any retailer filing a return under this Section shall also

26 include (for the purpose of paying tax thereon) the total tax

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1 covered by such return upon the selling price of tangible

2 personal property or taxable servicepurchased by him at retail

3 from a retailer, but as to which the tax imposed by this Act

4 was not collected from the retailer filing such return, and

5 such retailer shall remit the amount of such tax to the

6 Department when filing such return.

7 If experience indicates such action to be practicable, the

8 Department may prescribe and furnish a combination or joint

9 return which will enable retailers, who are required to file

10 returns hereunder and also under the Retailers' Occupation Tax

11 Act, to furnish all the return information required by both

12 Acts on the one form.

13 Where the retailer has more than one business registered

14 with the Department under separate registration under this Act,

15 such retailer may not file each return that is due as a single

16 return covering all such registered businesses, but shall file

17 separate returns for each such registered business.

18 Beginning January 1, 1990, each month the Department shall

19 pay into the State and Local Sales Tax Reform Fund, a special

20 fund in the State Treasury which is hereby created, the net

21 revenue realized for the preceding month from the 1% tax on

22 sales of food for human consumption which is to be consumed off

23 the premises where it is sold (other than alcoholic beverages,

24 soft drinks and food which has been prepared for immediate

25 consumption) and prescription and nonprescription medicines,

26 drugs, medical appliances, products classified as Class III

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1 medical devices by the United States Food and Drug

2 Administration that are used for cancer treatment pursuant to a

3 prescription, as well as any accessories and components related

4 to those devices, and insulin, urine testing materials,

5 syringes and needles used by diabetics.

6 Beginning January 1, 1990, each month the Department shall

7 pay into the County and Mass Transit District Fund 4% of the

8 net revenue realized for the preceding month from the 6.25%

9 general rate on the selling price of tangible personal property

10 which is purchased outside Illinois at retail from a retailer

11 and which is titled or registered by an agency of this State's

12 government.

13 Beginning January 1, 1990, each month the Department shall

14 pay into the State and Local Sales Tax Reform Fund, a special

15 fund in the State Treasury, 20% of the net revenue realized for

16 the preceding month from the 6.25% general rate on the selling

17 price of tangible personal property, other than tangible

18 personal property which is purchased outside Illinois at retail

19 from a retailer and which is titled or registered by an agency

20 of this State's government.

21 From July 1, 2017 through June 30, 2018, no deposits shall

22 be made into the State and Local Sales Tax Reform Fund from the

23 net revenue realized from the 6.25% general rate on taxable

24 services. Beginning July 1, 2018 and through June 30, 2019,

25 each month the Department shall pay into the State and Local

26 Sales Tax Reform Fund 7% of the net revenue realized for the

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1 preceding month from the 6.25% general rate on the selling

2 price of taxable services. Beginning July 1, 2019 and through

3 June 30, 2020, each month the Department shall pay into the

4 State and Local Sales Tax Reform Fund 13% of the net revenue

5 realized for the preceding month from the 6.25% general rate on

6 the selling price of taxable services. Beginning July 1, 2020,

7 each month the Department shall pay into the State and Local

8 Sales Tax Reform Fund 20% of the net revenue realized for the

9 preceding month from the 6.25% general rate on the selling

10 price of taxable services.

11 Beginning August 1, 2000, each month the Department shall

12 pay into the State and Local Sales Tax Reform Fund 100% of the

13 net revenue realized for the preceding month from the 1.25%

14 rate on the selling price of motor fuel and gasohol. Beginning

15 September 1, 2010, each month the Department shall pay into the

16 State and Local Sales Tax Reform Fund 100% of the net revenue

17 realized for the preceding month from the 1.25% rate on the

18 selling price of sales tax holiday items.

19 Beginning January 1, 1990, each month the Department shall

20 pay into the Local Government Tax Fund 16% of the net revenue

21 realized for the preceding month from the 6.25% general rate on

22 the selling price of tangible personal property which is

23 purchased outside Illinois at retail from a retailer and which

24 is titled or registered by an agency of this State's

25 government.

26 Beginning October 1, 2009, each month the Department shall

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1 pay into the Capital Projects Fund an amount that is equal to

2 an amount estimated by the Department to represent 80% of the

3 net revenue realized for the preceding month from the sale of

4 candy, grooming and hygiene products, and soft drinks that had

5 been taxed at a rate of 1% prior to September 1, 2009 but that

6 are now taxed at 6.25%.

7 Beginning July 1, 2011, each month the Department shall pay

8 into the Clean Air Act Permit Fund 80% of the net revenue

9 realized for the preceding month from the 6.25% general rate on

10 the selling price of sorbents used in Illinois in the process

11 of sorbent injection as used to comply with the Environmental

12 Protection Act or the federal Clean Air Act, but the total

13 payment into the Clean Air Act Permit Fund under this Act and

14 the Retailers' Occupation Tax Act shall not exceed $2,000,000

15 in any fiscal year.

16 Beginning July 1, 2013, each month the Department shall pay

17 into the Underground Storage Tank Fund from the proceeds

18 collected under this Act, the Service Use Tax Act, the Service

19 Occupation Tax Act, and the Retailers' Occupation Tax Act an

20 amount equal to the average monthly deficit in the Underground

21 Storage Tank Fund during the prior year, as certified annually

22 by the Illinois Environmental Protection Agency, but the total

23 payment into the Underground Storage Tank Fund under this Act,

24 the Service Use Tax Act, the Service Occupation Tax Act, and

25 the Retailers' Occupation Tax Act shall not exceed $18,000,000

26 in any State fiscal year. As used in this paragraph, the

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1 "average monthly deficit" shall be equal to the difference

2 between the average monthly claims for payment by the fund and

3 the average monthly revenues deposited into the fund, excluding

4 payments made pursuant to this paragraph.

5 Beginning July 1, 2015, of the remainder of the moneys

6 received by the Department under this Act, the Service Use Tax

7 Act, the Service Occupation Tax Act, and the Retailers'

8 Occupation Tax Act, each month the Department shall deposit

9 $500,000 into the State Crime Laboratory Fund.

10 Of the remainder of the moneys received by the Department

11 pursuant to this Act, (a) 1.75% thereof shall be paid into the

12 Build Illinois Fund and (b) prior to July 1, 1989, 2.2% and on

13 and after July 1, 1989, 3.8% thereof shall be paid into the

14 Build Illinois Fund; provided, however, that if in any fiscal

15 year the sum of (1) the aggregate of 2.2% or 3.8%, as the case

16 may be, of the moneys received by the Department and required

17 to be paid into the Build Illinois Fund pursuant to Section 3

18 of the Retailers' Occupation Tax Act, Section 9 of the Use Tax

19 Act, Section 9 of the Service Use Tax Act, and Section 9 of the

20 Service Occupation Tax Act, such Acts being hereinafter called

21 the "Tax Acts" and such aggregate of 2.2% or 3.8%, as the case

22 may be, of moneys being hereinafter called the "Tax Act

23 Amount", and (2) the amount transferred to the Build Illinois

24 Fund from the State and Local Sales Tax Reform Fund shall be

25 less than the Annual Specified Amount (as defined in Section 3

26 of the Retailers' Occupation Tax Act), an amount equal to the

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1 difference shall be immediately paid into the Build Illinois

2 Fund from other moneys received by the Department pursuant to

3 the Tax Acts; and further provided, that if on the last

4 business day of any month the sum of (1) the Tax Act Amount

5 required to be deposited into the Build Illinois Bond Account

6 in the Build Illinois Fund during such month and (2) the amount

7 transferred during such month to the Build Illinois Fund from

8 the State and Local Sales Tax Reform Fund shall have been less

9 than 1/12 of the Annual Specified Amount, an amount equal to

10 the difference shall be immediately paid into the Build

11 Illinois Fund from other moneys received by the Department

12 pursuant to the Tax Acts; and, further provided, that in no

13 event shall the payments required under the preceding proviso

14 result in aggregate payments into the Build Illinois Fund

15 pursuant to this clause (b) for any fiscal year in excess of

16 the greater of (i) the Tax Act Amount or (ii) the Annual

17 Specified Amount for such fiscal year; and, further provided,

18 that the amounts payable into the Build Illinois Fund under

19 this clause (b) shall be payable only until such time as the

20 aggregate amount on deposit under each trust indenture securing

21 Bonds issued and outstanding pursuant to the Build Illinois

22 Bond Act is sufficient, taking into account any future

23 investment income, to fully provide, in accordance with such

24 indenture, for the defeasance of or the payment of the

25 principal of, premium, if any, and interest on the Bonds

26 secured by such indenture and on any Bonds expected to be

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1 issued thereafter and all fees and costs payable with respect

2 thereto, all as certified by the Director of the Bureau of the

3 Budget (now Governor's Office of Management and Budget). If on

4 the last business day of any month in which Bonds are

5 outstanding pursuant to the Build Illinois Bond Act, the

6 aggregate of the moneys deposited in the Build Illinois Bond

7 Account in the Build Illinois Fund in such month shall be less

8 than the amount required to be transferred in such month from

9 the Build Illinois Bond Account to the Build Illinois Bond

10 Retirement and Interest Fund pursuant to Section 13 of the

11 Build Illinois Bond Act, an amount equal to such deficiency

12 shall be immediately paid from other moneys received by the

13 Department pursuant to the Tax Acts to the Build Illinois Fund;

14 provided, however, that any amounts paid to the Build Illinois

15 Fund in any fiscal year pursuant to this sentence shall be

16 deemed to constitute payments pursuant to clause (b) of the

17 preceding sentence and shall reduce the amount otherwise

18 payable for such fiscal year pursuant to clause (b) of the

19 preceding sentence. The moneys received by the Department

20 pursuant to this Act and required to be deposited into the

21 Build Illinois Fund are subject to the pledge, claim and charge

22 set forth in Section 12 of the Build Illinois Bond Act.

23 Subject to payment of amounts into the Build Illinois Fund

24 as provided in the preceding paragraph or in any amendment

25 thereto hereafter enacted, the following specified monthly

26 installment of the amount requested in the certificate of the

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1 Chairman of the Metropolitan Pier and Exposition Authority

2 provided under Section 8.25f of the State Finance Act, but not

3 in excess of the sums designated as "Total Deposit", shall be

4 deposited in the aggregate from collections under Section 9 of

5 the Use Tax Act, Section 9 of the Service Use Tax Act, Section

6 9 of the Service Occupation Tax Act, and Section 3 of the

7 Retailers' Occupation Tax Act into the McCormick Place

8 Expansion Project Fund in the specified fiscal years.

9	`Fiscal Year`	`Total Deposit`
10	`1993`	`$0`
11	`1994`	`53,000,000`
12	`1995`	`58,000,000`
13	`1996`	`61,000,000`
14	`1997`	`64,000,000`
15	`1998`	`68,000,000`
16	`1999`	`71,000,000`
17	`2000`	`75,000,000`
18	`2001`	`80,000,000`
19	`2002`	`93,000,000`
20	`2003`	`99,000,000`
21	`2004`	`103,000,000`
22	`2005`	`108,000,000`
23	`2006`	`113,000,000`
24	`2007`	`119,000,000`
25	`2008`	`126,000,000`
26	`2009`	`132,000,000`

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1	`2010`	`139,000,000`
2	`2011`	`146,000,000`
3	`2012`	`153,000,000`
4	`2013`	`161,000,000`
5	`2014`	`170,000,000`
6	`2015`	`179,000,000`
7	`2016`	`189,000,000`
8	`2017`	`199,000,000`
9	`2018`	`210,000,000`
10	`2019`	`221,000,000`
11	`2020`	`233,000,000`
12	`2021`	`246,000,000`
13	`2022`	`260,000,000`
14	`2023`	`275,000,000`
15	`2024`	`275,000,000`
16	`2025`	`275,000,000`
17	`2026`	`279,000,000`
18	`2027`	`292,000,000`
19	`2028`	`307,000,000`
20	`2029`	`322,000,000`
21	`2030`	`338,000,000`
22	`2031`	`350,000,000`
23	`2032`	`350,000,000`
24	`and`
25	`each fiscal year`
26	`thereafter that bonds`

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1		`are outstanding under`
2		`Section 13.2 of the`
3		`Metropolitan Pier and`
4		`Exposition Authority Act,`
5		`but not after fiscal year 2060.`

6 Beginning July 20, 1993 and in each month of each fiscal

7 year thereafter, one-eighth of the amount requested in the

8 certificate of the Chairman of the Metropolitan Pier and

9 Exposition Authority for that fiscal year, less the amount

10 deposited into the McCormick Place Expansion Project Fund by

11 the State Treasurer in the respective month under subsection

12 (g) of Section 13 of the Metropolitan Pier and Exposition

13 Authority Act, plus cumulative deficiencies in the deposits

14 required under this Section for previous months and years,

15 shall be deposited into the McCormick Place Expansion Project

16 Fund, until the full amount requested for the fiscal year, but

17 not in excess of the amount specified above as "Total Deposit",

18 has been deposited.

19 Subject to payment of amounts into the Build Illinois Fund

20 and the McCormick Place Expansion Project Fund pursuant to the

21 preceding paragraphs or in any amendments thereto hereafter

22 enacted, beginning July 1, 1993 and ending on September 30,

23 2013, the Department shall each month pay into the Illinois Tax

24 Increment Fund 0.27% of 80% of the net revenue realized for the

25 preceding month from the 6.25% general rate on the selling

26 price of tangible personal property.

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1 Subject to payment of amounts into the Build Illinois Fund

2 and the McCormick Place Expansion Project Fund pursuant to the

3 preceding paragraphs or in any amendments thereto hereafter

4 enacted, beginning with the receipt of the first report of

5 taxes paid by an eligible business and continuing for a 25-year

6 period, the Department shall each month pay into the Energy

7 Infrastructure Fund 80% of the net revenue realized from the

8 6.25% general rate on the selling price of Illinois-mined coal

9 that was sold to an eligible business. For purposes of this

10 paragraph, the term "eligible business" means a new electric

11 generating facility certified pursuant to Section 605-332 of

12 the Department of Commerce and Economic Opportunity Law of the

13 Civil Administrative Code of Illinois.

14 Subject to payment of amounts into the Build Illinois Fund,

15 the McCormick Place Expansion Project Fund, the Illinois Tax

16 Increment Fund, and the Energy Infrastructure Fund pursuant to

17 the preceding paragraphs or in any amendments to this Section

18 hereafter enacted, beginning on the first day of the first

19 calendar month to occur on or after August 26, 2014 (the

20 effective date of Public Act 98-1098) ~~this amendatory Act of~~

21 ~~the 98th General Assembly~~, each month, from the collections

22 made under Section 9 of the Use Tax Act, Section 9 of the

23 Service Use Tax Act, Section 9 of the Service Occupation Tax

24 Act, and Section 3 of the Retailers' Occupation Tax Act, the

25 Department shall pay into the Tax Compliance and Administration

26 Fund, to be used, subject to appropriation, to fund additional

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1 auditors and compliance personnel at the Department of Revenue,

2 an amount equal to 1/12 of 5% of 80% of the cash receipts

3 collected during the preceding fiscal year by the Audit Bureau

4 of the Department under the Use Tax Act, the Service Use Tax

5 Act, the Service Occupation Tax Act, the Retailers' Occupation

6 Tax Act, and associated local occupation and use taxes

7 administered by the Department.

8 Of the remainder of the moneys received by the Department

9 pursuant to this Act, 75% thereof shall be paid into the State

10 Treasury and 25% shall be reserved in a special account and

11 used only for the transfer to the Common School Fund as part of

12 the monthly transfer from the General Revenue Fund in

13 accordance with Section 8a of the State Finance Act.

14 As soon as possible after the first day of each month, upon

15 certification of the Department of Revenue, the Comptroller

16 shall order transferred and the Treasurer shall transfer from

17 the General Revenue Fund to the Motor Fuel Tax Fund an amount

18 equal to 1.7% of 80% of the net revenue realized under this Act

19 for the second preceding month. Beginning April 1, 2000, this

20 transfer is no longer required and shall not be made.

21 Net revenue realized for a month shall be the revenue

22 collected by the State pursuant to this Act, less the amount

23 paid out during that month as refunds to taxpayers for

24 overpayment of liability.

25 For greater simplicity of administration, manufacturers,

26 importers and wholesalers whose products are sold at retail in

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1 Illinois by numerous retailers, and who wish to do so, may

2 assume the responsibility for accounting and paying to the

3 Department all tax accruing under this Act with respect to such

4 sales, if the retailers who are affected do not make written

5 objection to the Department to this arrangement.

6 (Source: P.A. 98-24, eff. 6-19-13; 98-109, eff. 7-25-13;

7 98-496, eff. 1-1-14; 98-756, eff. 7-16-14; 98-1098, eff.

8 8-26-14; 99-352, eff. 8-12-15; 99-858, eff. 8-19-16; 99-933,

9 eff. 1-27-17; revised 2-3-17.)

10 (35 ILCS 105/10) (from Ch. 120, par. 439.10)

11 Sec. 10. Except as to motor vehicles, aircraft, watercraft,

12 and trailers, and except as to cigarettes as defined in the

13 Cigarette Use Tax Act, when tangible personal propertyor

14 (beginning January 1, 2018 a taxable service)is purchased from

15 a retailer for use in this State by a purchaser who did not pay

16 the tax imposed by this Act to the retailer, and who does not

17 file returns with the Department as a retailer under Section 9

18 of this Act, such purchaser (by the last day of the month

19 following the calendar month in which such purchaser makes any

20 payment upon the selling price of such property) shall, except

21 as otherwise provided in this Section, file a return with the

22 Department and pay the tax upon that portion of the selling

23 price so paid by the purchaser during the preceding calendar

24 month. When tangible personal property, including but not

25 limited to motor vehicles and aircraft, is purchased by a

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1 lessor, under a lease for one year or longer, executed or in

2 effect at the time of purchase to an interstate carrier for

3 hire, who did not pay the tax imposed by this Act to the

4 retailer, such lessor (by the last day of the month following

5 the calendar month in which such property reverts to the use of

6 such lessor) shall file a return with the Department and pay

7 the tax upon the fair market value of such property on the date

8 of such reversion. However, in determining the fair market

9 value at the time of reversion, the fair market value of such

10 property shall not exceed the original purchase price of the

11 property that was paid by the lessor at the time of purchase.

12 Such return shall be filed on a form prescribed by the

13 Department and shall contain such information as the Department

14 may reasonably require. Such return and payment from the

15 purchaser shall be submitted to the Department sooner than the

16 last day of the month after the month in which the purchase is

17 made to the extent that that may be necessary in order to

18 secure the title to a motor vehicle or the certificate of

19 registration for an aircraft. However, except as to motor

20 vehicles and aircraft, and except as to cigarettes as defined

21 in the Cigarette Use Tax Act, if the purchaser's annual use tax

22 liability does not exceed $600, the purchaser may file the

23 return on an annual basis on or before April 15th of the year

24 following the year use tax liability was incurred. Individual

25 purchasers with an annual use tax liability that does not

26 exceed $600 may, in lieu of the filing and payment requirements

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1 in this Section, file and pay in compliance with Section 502.1

2 of the Illinois Income Tax Act.

3 If cigarettes, as defined in the Cigarette Use Tax Act, are

4 purchased from a retailer for use in this State by a purchaser

5 who did not pay the tax imposed by this Act to the retailer,

6 and who does not file returns with the Department as a retailer

7 under Section 9 of this Act, such purchaser must, within 30

8 days after acquiring the cigarettes, file a return with the

9 Department and pay the tax upon that portion of the selling

10 price so paid by the purchaser for the cigarettes.

11 In addition with respect to motor vehicles, aircraft,

12 watercraft, and trailers, a purchaser of such tangible personal

13 property for use in this State, who purchases such tangible

14 personal property from an out-of-state retailer, shall file

15 with the Department, upon a form to be prescribed and supplied

16 by the Department, a return for each such item of tangible

17 personal property purchased, except that if, in the same

18 transaction, (i) a purchaser of motor vehicles, aircraft,

19 watercraft, or trailers who is a retailer of motor vehicles,

20 aircraft, watercraft, or trailers purchases more than one motor

21 vehicle, aircraft, watercraft, or trailer for the purpose of

22 resale or (ii) a purchaser of motor vehicles, aircraft,

23 watercraft, or trailers purchases more than one motor vehicle,

24 aircraft, watercraft, or trailer for use as qualifying rolling

25 stock as provided in Section 3-55 of this Act, then the

26 purchaser may report the purchase of all motor vehicles,

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1 aircraft, watercraft, or trailers involved in that transaction

2 to the Department on a single return prescribed by the

3 Department. Such return in the case of motor vehicles and

4 aircraft must show the name and address of the seller, the

5 name, address of purchaser, the amount of the selling price

6 including the amount allowed by the retailer for traded in

7 property, if any; the amount allowed by the retailer for the

8 traded-in tangible personal property, if any, to the extent to

9 which Section 2 of this Act allows an exemption for the value

10 of traded-in property; the balance payable after deducting such

11 trade-in allowance from the total selling price; the amount of

12 tax due from the purchaser with respect to such transaction;

13 the amount of tax collected from the purchaser by the retailer

14 on such transaction (or satisfactory evidence that such tax is

15 not due in that particular instance if that is claimed to be

16 the fact); the place and date of the sale, a sufficient

17 identification of the property sold, and such other information

18 as the Department may reasonably require.

19 Such return shall be filed not later than 30 days after

20 such motor vehicle or aircraft is brought into this State for

21 use.

22 For purposes of this Section, "watercraft" means a Class 2,

23 Class 3, or Class 4 watercraft as defined in Section 3-2 of the

24 Boat Registration and Safety Act, a personal watercraft, or any

25 boat equipped with an inboard motor.

26 The return and tax remittance or proof of exemption from

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1 the tax that is imposed by this Act may be transmitted to the

2 Department by way of the State agency with which, or State

3 officer with whom, the tangible personal property must be

4 titled or registered (if titling or registration is required)

5 if the Department and such agency or State officer determine

6 that this procedure will expedite the processing of

7 applications for title or registration.

8 With each such return, the purchaser shall remit the proper

9 amount of tax due (or shall submit satisfactory evidence that

10 the sale is not taxable if that is the case), to the Department

11 or its agents, whereupon the Department shall issue, in the

12 purchaser's name, a tax receipt (or a certificate of exemption

13 if the Department is satisfied that the particular sale is tax

14 exempt) which such purchaser may submit to the agency with

15 which, or State officer with whom, he must title or register

16 the tangible personal property that is involved (if titling or

17 registration is required) in support of such purchaser's

18 application for an Illinois certificate or other evidence of

19 title or registration to such tangible personal property.

20 When a purchaser pays a tax imposed by this Act directly to

21 the Department, the Department (upon request therefor from such

22 purchaser) shall issue an appropriate receipt to such purchaser

23 showing that he has paid such tax to the Department. Such

24 receipt shall be sufficient to relieve the purchaser from

25 further liability for the tax to which such receipt may refer.

26 A user who is liable to pay use tax directly to the

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1 Department only occasionally and not on a frequently recurring

2 basis, and who is not required to file returns with the

3 Department as a retailer under Section 9 of this Act, or under

4 the "Retailers' Occupation Tax Act", or as a registrant with

5 the Department under the "Service Occupation Tax Act" or the

6 "Service Use Tax Act", need not register with the Department.

7 However, if such a user has a frequently recurring direct use

8 tax liability to pay to the Department, such user shall be

9 required to register with the Department on forms prescribed by

10 the Department and to obtain and display a certificate of

11 registration from the Department. In that event, all of the

12 provisions of Section 9 of this Act concerning the filing of

13 regular monthly, quarterly or annual tax returns and all of the

14 provisions of Section 2a of the "Retailers' Occupation Tax Act"

15 concerning the requirements for registrants to post bond or

16 other security with the Department, as the provisions of such

17 sections now exist or may hereafter be amended, shall apply to

18 such users to the same extent as if such provisions were

19 included herein.

20 (Source: P.A. 96-520, eff. 8-14-09; 96-1000, eff. 7-2-10;

21 96-1388, eff. 7-29-10.)

22 (35 ILCS 105/11) (from Ch. 120, par. 439.11)

23 Sec. 11. Every retailer required or authorized to collect

24 taxes hereunder and every person using in this State tangible

25 personal property or taxable servicepurchased at retail from a

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1 retailer on or after the effective date hereof shall keep such

2 records, receipts, invoices and other pertinent books,

3 documents, memoranda and papers as the Department shall

4 require, in such form as the Department shall require. The

5 Department may adopt rules that establish requirements,

6 including record forms and formats, for records required to be

7 kept and maintained by taxpayers. For purposes of this Section,

8 "records" means all data maintained by the taxpayer, including

9 data on paper, microfilm, microfiche or any type of

10 machine-sensible data compilation. For the purpose of

11 administering and enforcing the provisions hereof, the

12 Department, or any officer or employee of the Department

13 designated, in writing, by the Director thereof, may hold

14 investigations and hearings concerning any matters covered

15 herein and may examine any books, papers, records, documents or

16 memoranda of any retailer or purchaser bearing upon the sales

17 or purchases of tangible personal property, the privilege of

18 using which is taxed hereunder, and may require the attendance

19 of such person or any officer or employee of such person, or of

20 any person having knowledge of the facts, and may take

21 testimony and require proof for its information.

22 (Source: P.A. 88-480.)

23 Section 30-25. The Service Use Tax Act is amended by

24 changing Sections 2 and 3-5 as follows:

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1 (35 ILCS 110/2) (from Ch. 120, par. 439.32)

2 Sec. 2. Definitions.

3 "Use" means the exercise by any person of any right or

4 power over tangible personal property incident to the ownership

5 of that property, but does not include the sale or use for

6 demonstration by him of that property in any form as tangible

7 personal property in the regular course of business. "Use" does

8 not mean the interim use of tangible personal property nor the

9 physical incorporation of tangible personal property, as an

10 ingredient or constituent, into other tangible personal

11 property, (a) which is sold in the regular course of business

12 or (b) which the person incorporating such ingredient or

13 constituent therein has undertaken at the time of such purchase

14 to cause to be transported in interstate commerce to

15 destinations outside the State of Illinois.

16 "Purchased from a serviceman" means the acquisition of the

17 ownership of, or title to, tangible personal property through a

18 sale of service.

19 "Purchaser" means any person who, through a sale of

20 service, acquires the ownership of, or title to, any tangible

21 personal property.

22 "Cost price" means the consideration paid by the serviceman

23 for a purchase valued in money, whether paid in money or

24 otherwise, including cash, credits and services, and shall be

25 determined without any deduction on account of the supplier's

26 cost of the property sold or on account of any other expense

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1 incurred by the supplier. When a serviceman contracts out part

2 or all of the services required in his sale of service, it

3 shall be presumed that the cost price to the serviceman of the

4 property transferred to him or her by his or her subcontractor

5 is equal to 50% of the subcontractor's charges to the

6 serviceman in the absence of proof of the consideration paid by

7 the subcontractor for the purchase of such property.

8 "Selling price" means the consideration for a sale valued

9 in money whether received in money or otherwise, including

10 cash, credits and service, and shall be determined without any

11 deduction on account of the serviceman's cost of the property

12 sold, the cost of materials used, labor or service cost or any

13 other expense whatsoever, but does not include interest or

14 finance charges which appear as separate items on the bill of

15 sale or sales contract nor charges that are added to prices by

16 sellers on account of the seller's duty to collect, from the

17 purchaser, the tax that is imposed by this Act.

18 "Department" means the Department of Revenue.

19 "Person" means any natural individual, firm, partnership,

20 association, joint stock company, joint venture, public or

21 private corporation, limited liability company, and any

22 receiver, executor, trustee, guardian or other representative

23 appointed by order of any court.

24 "Sale of service" means any transaction except:

25 (1) a retail sale of tangible personal property taxable

26 under the Retailers' Occupation Tax Act or under the Use

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1 Tax Act.

2 (2) a sale of tangible personal property for the

3 purpose of resale made in compliance with Section 2c of the

4 Retailers' Occupation Tax Act.

5 (3) except as hereinafter provided, a sale or transfer

6 of tangible personal property as an incident to the

7 rendering of service for or by any governmental body, or

8 for or by any corporation, society, association,

9 foundation or institution organized and operated

10 exclusively for charitable, religious or educational

11 purposes or any not-for-profit corporation, society,

12 association, foundation, institution or organization which

13 has no compensated officers or employees and which is

14 organized and operated primarily for the recreation of

15 persons 55 years of age or older. A limited liability

16 company may qualify for the exemption under this paragraph

17 only if the limited liability company is organized and

18 operated exclusively for educational purposes.

19 (4) a sale or transfer of tangible personal property as

20 an incident to the rendering of service for interstate

21 carriers for hire for use as rolling stock moving in

22 interstate commerce or by lessors under a lease of one year

23 or longer, executed or in effect at the time of purchase of

24 personal property, to interstate carriers for hire for use

25 as rolling stock moving in interstate commerce so long as

26 so used by such interstate carriers for hire, and equipment

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1 operated by a telecommunications provider, licensed as a

2 common carrier by the Federal Communications Commission,

3 which is permanently installed in or affixed to aircraft

4 moving in interstate commerce.

5 (4a) a sale or transfer of tangible personal property

6 as an incident to the rendering of service for owners,

7 lessors, or shippers of tangible personal property which is

8 utilized by interstate carriers for hire for use as rolling

9 stock moving in interstate commerce so long as so used by

10 interstate carriers for hire, and equipment operated by a

11 telecommunications provider, licensed as a common carrier

12 by the Federal Communications Commission, which is

13 permanently installed in or affixed to aircraft moving in

14 interstate commerce.

15 (4a-5) on and after July 1, 2003 and through June 30,

16 2004, a sale or transfer of a motor vehicle of the second

17 division with a gross vehicle weight in excess of 8,000

18 pounds as an incident to the rendering of service if that

19 motor vehicle is subject to the commercial distribution fee

20 imposed under Section 3-815.1 of the Illinois Vehicle Code.

21 Beginning on July 1, 2004 and through June 30, 2005, the

22 use in this State of motor vehicles of the second division:

23 (i) with a gross vehicle weight rating in excess of 8,000

24 pounds; (ii) that are subject to the commercial

25 distribution fee imposed under Section 3-815.1 of the

26 Illinois Vehicle Code; and (iii) that are primarily used

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1 for commercial purposes. Through June 30, 2005, this

2 exemption applies to repair and replacement parts added

3 after the initial purchase of such a motor vehicle if that

4 motor vehicle is used in a manner that would qualify for

5 the rolling stock exemption otherwise provided for in this

6 Act. For purposes of this paragraph, "used for commercial

7 purposes" means the transportation of persons or property

8 in furtherance of any commercial or industrial enterprise

9 whether for-hire or not.

10 (5) a sale or transfer of machinery and equipment used

11 primarily in the process of the manufacturing or

12 assembling, either in an existing, an expanded or a new

13 manufacturing facility, of tangible personal property for

14 wholesale or retail sale or lease, whether such sale or

15 lease is made directly by the manufacturer or by some other

16 person, whether the materials used in the process are owned

17 by the manufacturer or some other person, or whether such

18 sale or lease is made apart from or as an incident to the

19 seller's engaging in a service occupation and the

20 applicable tax is a Service Use Tax or Service Occupation

21 Tax, rather than Use Tax or Retailers' Occupation Tax. The

22 exemption provided by this paragraph (5) does not include

23 machinery and equipment used in (i) the generation of

24 electricity for wholesale or retail sale; (ii) the

25 generation or treatment of natural or artificial gas for

26 wholesale or retail sale that is delivered to customers

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1 through pipes, pipelines, or mains; or (iii) the treatment

2 of water for wholesale or retail sale that is delivered to

3 customers through pipes, pipelines, or mains. The

4 provisions of this amendatory Act of the 98th General

5 Assembly are declaratory of existing law as to the meaning

6 and scope of this exemption. The exemption under this

7 paragraph (5) is exempt from the provisions of Section

8 3-75.

9 (5a) the repairing, reconditioning or remodeling, for

10 a common carrier by rail, of tangible personal property

11 which belongs to such carrier for hire, and as to which

12 such carrier receives the physical possession of the

13 repaired, reconditioned or remodeled item of tangible

14 personal property in Illinois, and which such carrier

15 transports, or shares with another common carrier in the

16 transportation of such property, out of Illinois on a

17 standard uniform bill of lading showing the person who

18 repaired, reconditioned or remodeled the property to a

19 destination outside Illinois, for use outside Illinois.

20 (5b) a sale or transfer of tangible personal property

21 which is produced by the seller thereof on special order in

22 such a way as to have made the applicable tax the Service

23 Occupation Tax or the Service Use Tax, rather than the

24 Retailers' Occupation Tax or the Use Tax, for an interstate

25 carrier by rail which receives the physical possession of

26 such property in Illinois, and which transports such

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1 property, or shares with another common carrier in the

2 transportation of such property, out of Illinois on a

3 standard uniform bill of lading showing the seller of the

4 property as the shipper or consignor of such property to a

5 destination outside Illinois, for use outside Illinois.

6 (6) until July 1, 2003, a sale or transfer of

7 distillation machinery and equipment, sold as a unit or kit

8 and assembled or installed by the retailer, which machinery

9 and equipment is certified by the user to be used only for

10 the production of ethyl alcohol that will be used for

11 consumption as motor fuel or as a component of motor fuel

12 for the personal use of such user and not subject to sale

13 or resale.

14 (7) at the election of any serviceman not required to

15 be otherwise registered as a retailer under Section 2a of

16 the Retailers' Occupation Tax Act, made for each fiscal

17 year sales of service in which the aggregate annual cost

18 price of tangible personal property transferred as an

19 incident to the sales of service is less than 35%, or 75%

20 in the case of servicemen transferring prescription drugs

21 or servicemen engaged in graphic arts production, of the

22 aggregate annual total gross receipts from all sales of

23 service. The purchase of such tangible personal property by

24 the serviceman shall be subject to tax under the Retailers'

25 Occupation Tax Act and the Use Tax Act. However, if a

26 primary serviceman who has made the election described in

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1 this paragraph subcontracts service work to a secondary

2 serviceman who has also made the election described in this

3 paragraph, the primary serviceman does not incur a Use Tax

4 liability if the secondary serviceman (i) has paid or will

5 pay Use Tax on his or her cost price of any tangible

6 personal property transferred to the primary serviceman

7 and (ii) certifies that fact in writing to the primary

8 serviceman.

9 Tangible personal property transferred incident to the

10 completion of a maintenance agreement is exempt from the tax

11 imposed pursuant to this Act.

12 Exemption (5) also includes machinery and equipment used in

13 the general maintenance or repair of such exempt machinery and

14 equipment or for in-house manufacture of exempt machinery and

15 equipment. On and after July 1, 2017, exemption (5) also

16 includes production related tangible personal property, as

17 defined in Section 3-50 of the Use Tax Act. On and after July

18 1, 2017, exemption (5) also includes graphic arts machinery and

19 equipment, as defined in paragraph (5) of Section 3-5. The

20 machinery and equipment exemption does not include machinery

21 and equipment used in (i) the generation of electricity for

22 wholesale or retail sale; (ii) the generation or treatment of

23 natural or artificial gas for wholesale or retail sale that is

24 delivered to customers through pipes, pipelines, or mains; or

25 (iii) the treatment of water for wholesale or retail sale that

26 is delivered to customers through pipes, pipelines, or mains.

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1 The provisions of this amendatory Act of the 98th General

2 Assembly are declaratory of existing law as to the meaning and

3 scope of this exemption. For the purposes of exemption (5),

4 each of these terms shall have the following meanings: (1)

5 "manufacturing process" shall mean the production of any

6 article of tangible personal property, whether such article is

7 a finished product or an article for use in the process of

8 manufacturing or assembling a different article of tangible

9 personal property, by procedures commonly regarded as

10 manufacturing, processing, fabricating, or refining which

11 changes some existing material or materials into a material

12 with a different form, use or name. In relation to a recognized

13 integrated business composed of a series of operations which

14 collectively constitute manufacturing, or individually

15 constitute manufacturing operations, the manufacturing process

16 shall be deemed to commence with the first operation or stage

17 of production in the series, and shall not be deemed to end

18 until the completion of the final product in the last operation

19 or stage of production in the series; and further, for purposes

20 of exemption (5), photoprocessing is deemed to be a

21 manufacturing process of tangible personal property for

22 wholesale or retail sale; (2) "assembling process" shall mean

23 the production of any article of tangible personal property,

24 whether such article is a finished product or an article for

25 use in the process of manufacturing or assembling a different

26 article of tangible personal property, by the combination of

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1 existing materials in a manner commonly regarded as assembling

2 which results in a material of a different form, use or name;

3 (3) "machinery" shall mean major mechanical machines or major

4 components of such machines contributing to a manufacturing or

5 assembling process; and (4) "equipment" shall include any

6 independent device or tool separate from any machinery but

7 essential to an integrated manufacturing or assembly process;

8 including computers used primarily in a manufacturer's

9 computer assisted design, computer assisted manufacturing

10 (CAD/CAM) system; or any subunit or assembly comprising a

11 component of any machinery or auxiliary, adjunct or attachment

12 parts of machinery, such as tools, dies, jigs, fixtures,

13 patterns and molds; or any parts which require periodic

14 replacement in the course of normal operation; but shall not

15 include hand tools. Equipment includes chemicals or chemicals

16 acting as catalysts but only if the chemicals or chemicals

17 acting as catalysts effect a direct and immediate change upon a

18 product being manufactured or assembled for wholesale or retail

19 sale or lease. The purchaser of such machinery and equipment

20 who has an active resale registration number shall furnish such

21 number to the seller at the time of purchase. The user of such

22 machinery and equipment and tools without an active resale

23 registration number shall prepare a certificate of exemption

24 for each transaction stating facts establishing the exemption

25 for that transaction, which certificate shall be available to

26 the Department for inspection or audit. The Department shall

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1 prescribe the form of the certificate.

2 Any informal rulings, opinions or letters issued by the

3 Department in response to an inquiry or request for any opinion

4 from any person regarding the coverage and applicability of

5 exemption (5) to specific devices shall be published,

6 maintained as a public record, and made available for public

7 inspection and copying. If the informal ruling, opinion or

8 letter contains trade secrets or other confidential

9 information, where possible the Department shall delete such

10 information prior to publication. Whenever such informal

11 rulings, opinions, or letters contain any policy of general

12 applicability, the Department shall formulate and adopt such

13 policy as a rule in accordance with the provisions of the

14 Illinois Administrative Procedure Act.

15 On and after July 1, 1987, no entity otherwise eligible

16 under exemption (3) of this Section shall make tax free

17 purchases unless it has an active exemption identification

18 number issued by the Department.

19 The purchase, employment and transfer of such tangible

20 personal property as newsprint and ink for the primary purpose

21 of conveying news (with or without other information) is not a

22 purchase, use or sale of service or of tangible personal

23 property within the meaning of this Act.

24 "Serviceman" means any person who is engaged in the

25 occupation of making sales of service.

26 "Sale at retail" means "sale at retail" as defined in the

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1 Retailers' Occupation Tax Act.

2 "Supplier" means any person who makes sales of tangible

3 personal property to servicemen for the purpose of resale as an

4 incident to a sale of service.

5 "Serviceman maintaining a place of business in this State",

6 or any like term, means and includes any serviceman:

7 1. having or maintaining within this State, directly or

8 by a subsidiary, an office, distribution house, sales

9 house, warehouse or other place of business, or any agent

10 or other representative operating within this State under

11 the authority of the serviceman or its subsidiary,

12 irrespective of whether such place of business or agent or

13 other representative is located here permanently or

14 temporarily, or whether such serviceman or subsidiary is

15 licensed to do business in this State;

16 1.1. having a contract with a person located in this

17 State under which the person, for a commission or other

18 consideration based on the sale of service by the

19 serviceman, directly or indirectly refers potential

20 customers to the serviceman by providing to the potential

21 customers a promotional code or other mechanism that allows

22 the serviceman to track purchases referred by such persons.

23 Examples of mechanisms that allow the serviceman to track

24 purchases referred by such persons include but are not

25 limited to the use of a link on the person's Internet

26 website, promotional codes distributed through the

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1 person's hand-delivered or mailed material, and

2 promotional codes distributed by the person through radio

3 or other broadcast media. The provisions of this paragraph

4 1.1 shall apply only if the cumulative gross receipts from

5 sales of service by the serviceman to customers who are

6 referred to the serviceman by all persons in this State

7 under such contracts exceed $10,000 during the preceding 4

8 quarterly periods ending on the last day of March, June,

9 September, and December; a serviceman meeting the

10 requirements of this paragraph 1.1 shall be presumed to be

11 maintaining a place of business in this State but may rebut

12 this presumption by submitting proof that the referrals or

13 other activities pursued within this State by such persons

14 were not sufficient to meet the nexus standards of the

15 United States Constitution during the preceding 4

16 quarterly periods;

17 1.2. beginning July 1, 2011, having a contract with a

18 person located in this State under which:

19 A. the serviceman sells the same or substantially

20 similar line of services as the person located in this

21 State and does so using an identical or substantially

22 similar name, trade name, or trademark as the person

23 located in this State; and

24 B. the serviceman provides a commission or other

25 consideration to the person located in this State based

26 upon the sale of services by the serviceman.

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1 The provisions of this paragraph 1.2 shall apply only if

2 the cumulative gross receipts from sales of service by the

3 serviceman to customers in this State under all such

4 contracts exceed $10,000 during the preceding 4 quarterly

5 periods ending on the last day of March, June, September,

6 and December;

7 2. soliciting orders for tangible personal property by

8 means of a telecommunication or television shopping system

9 (which utilizes toll free numbers) which is intended by the

10 retailer to be broadcast by cable television or other means

11 of broadcasting, to consumers located in this State;

12 3. pursuant to a contract with a broadcaster or

13 publisher located in this State, soliciting orders for

14 tangible personal property by means of advertising which is

15 disseminated primarily to consumers located in this State

16 and only secondarily to bordering jurisdictions;

17 4. soliciting orders for tangible personal property by

18 mail if the solicitations are substantial and recurring and

19 if the retailer benefits from any banking, financing, debt

20 collection, telecommunication, or marketing activities

21 occurring in this State or benefits from the location in

22 this State of authorized installation, servicing, or

23 repair facilities;

24 5. being owned or controlled by the same interests

25 which own or control any retailer engaging in business in

26 the same or similar line of business in this State;

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1 6. having a franchisee or licensee operating under its

2 trade name if the franchisee or licensee is required to

3 collect the tax under this Section;

4 7. pursuant to a contract with a cable television

5 operator located in this State, soliciting orders for

6 tangible personal property by means of advertising which is

7 transmitted or distributed over a cable television system

8 in this State; or

9 8. engaging in activities in Illinois, which

10 activities in the state in which the supply business

11 engaging in such activities is located would constitute

12 maintaining a place of business in that state.

13 (Source: P.A. 98-583, eff. 1-1-14; 98-1089, eff. 1-1-15.)

14 (35 ILCS 110/3-5)

15 Sec. 3-5. Exemptions. Use of the following tangible

16 personal property is exempt from the tax imposed by this Act:

17 (1) Personal property purchased from a corporation,

18 society, association, foundation, institution, or

19 organization, other than a limited liability company, that is

20 organized and operated as a not-for-profit service enterprise

21 for the benefit of persons 65 years of age or older if the

22 personal property was not purchased by the enterprise for the

23 purpose of resale by the enterprise.

24 (2) Personal property purchased by a non-profit Illinois

25 county fair association for use in conducting, operating, or

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1 promoting the county fair.

2 (3) Personal property purchased by a not-for-profit arts or

3 cultural organization that establishes, by proof required by

4 the Department by rule, that it has received an exemption under

5 Section 501(c)(3) of the Internal Revenue Code and that is

6 organized and operated primarily for the presentation or

7 support of arts or cultural programming, activities, or

8 services. These organizations include, but are not limited to,

9 music and dramatic arts organizations such as symphony

10 orchestras and theatrical groups, arts and cultural service

11 organizations, local arts councils, visual arts organizations,

12 and media arts organizations. On and after the effective date

13 of this amendatory Act of the 92nd General Assembly, however,

14 an entity otherwise eligible for this exemption shall not make

15 tax-free purchases unless it has an active identification

16 number issued by the Department.

17 (4) Legal tender, currency, medallions, or gold or silver

18 coinage issued by the State of Illinois, the government of the

19 United States of America, or the government of any foreign

20 country, and bullion.

21 (5) Until July 1, 2003 and beginning again on September 1,

22 2004 through August 30, 2014, graphic arts machinery and

23 equipment, including repair and replacement parts, both new and

24 used, and including that manufactured on special order or

25 purchased for lease, certified by the purchaser to be used

26 primarily for graphic arts production. Equipment includes

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1 chemicals or chemicals acting as catalysts but only if the

2 chemicals or chemicals acting as catalysts effect a direct and

3 immediate change upon a graphic arts product.Beginning on July

4 1, 2017, graphic arts machinery and equipment is included in

5 the manufacturing and assembling machinery and equipment

6 exemption under Section 2 of this Act.

7 (6) Personal property purchased from a teacher-sponsored

8 student organization affiliated with an elementary or

9 secondary school located in Illinois.

10 (7) Farm machinery and equipment, both new and used,

11 including that manufactured on special order, certified by the

12 purchaser to be used primarily for production agriculture or

13 State or federal agricultural programs, including individual

14 replacement parts for the machinery and equipment, including

15 machinery and equipment purchased for lease, and including

16 implements of husbandry defined in Section 1-130 of the

17 Illinois Vehicle Code, farm machinery and agricultural

18 chemical and fertilizer spreaders, and nurse wagons required to

19 be registered under Section 3-809 of the Illinois Vehicle Code,

20 but excluding other motor vehicles required to be registered

21 under the Illinois Vehicle Code. Horticultural polyhouses or

22 hoop houses used for propagating, growing, or overwintering

23 plants shall be considered farm machinery and equipment under

24 this item (7). Agricultural chemical tender tanks and dry boxes

25 shall include units sold separately from a motor vehicle

26 required to be licensed and units sold mounted on a motor

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1 vehicle required to be licensed if the selling price of the

2 tender is separately stated.

3 Farm machinery and equipment shall include precision

4 farming equipment that is installed or purchased to be

5 installed on farm machinery and equipment including, but not

6 limited to, tractors, harvesters, sprayers, planters, seeders,

7 or spreaders. Precision farming equipment includes, but is not

8 limited to, soil testing sensors, computers, monitors,

9 software, global positioning and mapping systems, and other

10 such equipment.

11 Farm machinery and equipment also includes computers,

12 sensors, software, and related equipment used primarily in the

13 computer-assisted operation of production agriculture

14 facilities, equipment, and activities such as, but not limited

15 to, the collection, monitoring, and correlation of animal and

16 crop data for the purpose of formulating animal diets and

17 agricultural chemicals. This item (7) is exempt from the

18 provisions of Section 3-75.

19 (8) Until June 30, 2013, fuel and petroleum products sold

20 to or used by an air common carrier, certified by the carrier

21 to be used for consumption, shipment, or storage in the conduct

22 of its business as an air common carrier, for a flight destined

23 for or returning from a location or locations outside the

24 United States without regard to previous or subsequent domestic

25 stopovers.

26 Beginning July 1, 2013, fuel and petroleum products sold to

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1 or used by an air carrier, certified by the carrier to be used

2 for consumption, shipment, or storage in the conduct of its

3 business as an air common carrier, for a flight that (i) is

4 engaged in foreign trade or is engaged in trade between the

5 United States and any of its possessions and (ii) transports at

6 least one individual or package for hire from the city of

7 origination to the city of final destination on the same

8 aircraft, without regard to a change in the flight number of

9 that aircraft.

10 (9) Proceeds of mandatory service charges separately

11 stated on customers' bills for the purchase and consumption of

12 food and beverages acquired as an incident to the purchase of a

13 service from a serviceman, to the extent that the proceeds of

14 the service charge are in fact turned over as tips or as a

15 substitute for tips to the employees who participate directly

16 in preparing, serving, hosting or cleaning up the food or

17 beverage function with respect to which the service charge is

18 imposed.

19 (10) Until July 1, 2003, oil field exploration, drilling,

20 and production equipment, including (i) rigs and parts of rigs,

21 rotary rigs, cable tool rigs, and workover rigs, (ii) pipe and

22 tubular goods, including casing and drill strings, (iii) pumps

23 and pump-jack units, (iv) storage tanks and flow lines, (v) any

24 individual replacement part for oil field exploration,

25 drilling, and production equipment, and (vi) machinery and

26 equipment purchased for lease; but excluding motor vehicles

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1 required to be registered under the Illinois Vehicle Code.

2 (11) Proceeds from the sale of photoprocessing machinery

3 and equipment, including repair and replacement parts, both new

4 and used, including that manufactured on special order,

5 certified by the purchaser to be used primarily for

6 photoprocessing, and including photoprocessing machinery and

7 equipment purchased for lease.

8 (12) Coal and aggregate exploration, mining, off-highway

9 hauling, processing, maintenance, and reclamation equipment,

10 including replacement parts and equipment, and including

11 equipment purchased for lease, but excluding motor vehicles

12 required to be registered under the Illinois Vehicle Code. The

13 changes made to this Section by Public Act 97-767 apply on and

14 after July 1, 2003, but no claim for credit or refund is

15 allowed on or after August 16, 2013 (the effective date of

16 Public Act 98-456) for such taxes paid during the period

17 beginning July 1, 2003 and ending on August 16, 2013 (the

18 effective date of Public Act 98-456).

19 (13) Semen used for artificial insemination of livestock

20 for direct agricultural production.

21 (14) Horses, or interests in horses, registered with and

22 meeting the requirements of any of the Arabian Horse Club

23 Registry of America, Appaloosa Horse Club, American Quarter

24 Horse Association, United States Trotting Association, or

25 Jockey Club, as appropriate, used for purposes of breeding or

26 racing for prizes. This item (14) is exempt from the provisions

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1 of Section 3-75, and the exemption provided for under this item

2 (14) applies for all periods beginning May 30, 1995, but no

3 claim for credit or refund is allowed on or after the effective

4 date of this amendatory Act of the 95th General Assembly for

5 such taxes paid during the period beginning May 30, 2000 and

6 ending on the effective date of this amendatory Act of the 95th

7 General Assembly.

8 (15) Computers and communications equipment utilized for

9 any hospital purpose and equipment used in the diagnosis,

10 analysis, or treatment of hospital patients purchased by a

11 lessor who leases the equipment, under a lease of one year or

12 longer executed or in effect at the time the lessor would

13 otherwise be subject to the tax imposed by this Act, to a

14 hospital that has been issued an active tax exemption

15 identification number by the Department under Section 1g of the

16 Retailers' Occupation Tax Act. If the equipment is leased in a

17 manner that does not qualify for this exemption or is used in

18 any other non-exempt manner, the lessor shall be liable for the

19 tax imposed under this Act or the Use Tax Act, as the case may

20 be, based on the fair market value of the property at the time

21 the non-qualifying use occurs. No lessor shall collect or

22 attempt to collect an amount (however designated) that purports

23 to reimburse that lessor for the tax imposed by this Act or the

24 Use Tax Act, as the case may be, if the tax has not been paid by

25 the lessor. If a lessor improperly collects any such amount

26 from the lessee, the lessee shall have a legal right to claim a

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1 refund of that amount from the lessor. If, however, that amount

2 is not refunded to the lessee for any reason, the lessor is

3 liable to pay that amount to the Department.

4 (16) Personal property purchased by a lessor who leases the

5 property, under a lease of one year or longer executed or in

6 effect at the time the lessor would otherwise be subject to the

7 tax imposed by this Act, to a governmental body that has been

8 issued an active tax exemption identification number by the

9 Department under Section 1g of the Retailers' Occupation Tax

10 Act. If the property is leased in a manner that does not

11 qualify for this exemption or is used in any other non-exempt

12 manner, the lessor shall be liable for the tax imposed under

13 this Act or the Use Tax Act, as the case may be, based on the

14 fair market value of the property at the time the

15 non-qualifying use occurs. No lessor shall collect or attempt

16 to collect an amount (however designated) that purports to

17 reimburse that lessor for the tax imposed by this Act or the

18 Use Tax Act, as the case may be, if the tax has not been paid by

19 the lessor. If a lessor improperly collects any such amount

20 from the lessee, the lessee shall have a legal right to claim a

21 refund of that amount from the lessor. If, however, that amount

22 is not refunded to the lessee for any reason, the lessor is

23 liable to pay that amount to the Department.

24 (17) Beginning with taxable years ending on or after

25 December 31, 1995 and ending with taxable years ending on or

26 before December 31, 2004, personal property that is donated for

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1 disaster relief to be used in a State or federally declared

2 disaster area in Illinois or bordering Illinois by a

3 manufacturer or retailer that is registered in this State to a

4 corporation, society, association, foundation, or institution

5 that has been issued a sales tax exemption identification

6 number by the Department that assists victims of the disaster

7 who reside within the declared disaster area.

8 (18) Beginning with taxable years ending on or after

9 December 31, 1995 and ending with taxable years ending on or

10 before December 31, 2004, personal property that is used in the

11 performance of infrastructure repairs in this State, including

12 but not limited to municipal roads and streets, access roads,

13 bridges, sidewalks, waste disposal systems, water and sewer

14 line extensions, water distribution and purification

15 facilities, storm water drainage and retention facilities, and

16 sewage treatment facilities, resulting from a State or

17 federally declared disaster in Illinois or bordering Illinois

18 when such repairs are initiated on facilities located in the

19 declared disaster area within 6 months after the disaster.

20 (19) Beginning July 1, 1999, game or game birds purchased

21 at a "game breeding and hunting preserve area" as that term is

22 used in the Wildlife Code. This paragraph is exempt from the

23 provisions of Section 3-75.

24 (20) A motor vehicle, as that term is defined in Section

25 1-146 of the Illinois Vehicle Code, that is donated to a

26 corporation, limited liability company, society, association,

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1 foundation, or institution that is determined by the Department

2 to be organized and operated exclusively for educational

3 purposes. For purposes of this exemption, "a corporation,

4 limited liability company, society, association, foundation,

5 or institution organized and operated exclusively for

6 educational purposes" means all tax-supported public schools,

7 private schools that offer systematic instruction in useful

8 branches of learning by methods common to public schools and

9 that compare favorably in their scope and intensity with the

10 course of study presented in tax-supported schools, and

11 vocational or technical schools or institutes organized and

12 operated exclusively to provide a course of study of not less

13 than 6 weeks duration and designed to prepare individuals to

14 follow a trade or to pursue a manual, technical, mechanical,

15 industrial, business, or commercial occupation.

16 (21) Beginning January 1, 2000, personal property,

17 including food, purchased through fundraising events for the

18 benefit of a public or private elementary or secondary school,

19 a group of those schools, or one or more school districts if

20 the events are sponsored by an entity recognized by the school

21 district that consists primarily of volunteers and includes

22 parents and teachers of the school children. This paragraph

23 does not apply to fundraising events (i) for the benefit of

24 private home instruction or (ii) for which the fundraising

25 entity purchases the personal property sold at the events from

26 another individual or entity that sold the property for the

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1 purpose of resale by the fundraising entity and that profits

2 from the sale to the fundraising entity. This paragraph is

3 exempt from the provisions of Section 3-75.

4 (22) Beginning January 1, 2000 and through December 31,

5 2001, new or used automatic vending machines that prepare and

6 serve hot food and beverages, including coffee, soup, and other

7 items, and replacement parts for these machines. Beginning

8 January 1, 2002 and through June 30, 2003, machines and parts

9 for machines used in commercial, coin-operated amusement and

10 vending business if a use or occupation tax is paid on the

11 gross receipts derived from the use of the commercial,

12 coin-operated amusement and vending machines. This paragraph

13 is exempt from the provisions of Section 3-75.

14 (23) Beginning August 23, 2001 and through June 30, 2016,

15 food for human consumption that is to be consumed off the

16 premises where it is sold (other than alcoholic beverages, soft

17 drinks, and food that has been prepared for immediate

18 consumption) and prescription and nonprescription medicines,

19 drugs, medical appliances, and insulin, urine testing

20 materials, syringes, and needles used by diabetics, for human

21 use, when purchased for use by a person receiving medical

22 assistance under Article V of the Illinois Public Aid Code who

23 resides in a licensed long-term care facility, as defined in

24 the Nursing Home Care Act, or in a licensed facility as defined

25 in the ID/DD Community Care Act, the MC/DD Act, or the

26 Specialized Mental Health Rehabilitation Act of 2013.

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1 (24) Beginning on the effective date of this amendatory Act

2 of the 92nd General Assembly, computers and communications

3 equipment utilized for any hospital purpose and equipment used

4 in the diagnosis, analysis, or treatment of hospital patients

5 purchased by a lessor who leases the equipment, under a lease

6 of one year or longer executed or in effect at the time the

7 lessor would otherwise be subject to the tax imposed by this

8 Act, to a hospital that has been issued an active tax exemption

9 identification number by the Department under Section 1g of the

10 Retailers' Occupation Tax Act. If the equipment is leased in a

11 manner that does not qualify for this exemption or is used in

12 any other nonexempt manner, the lessor shall be liable for the

13 tax imposed under this Act or the Use Tax Act, as the case may

14 be, based on the fair market value of the property at the time

15 the nonqualifying use occurs. No lessor shall collect or

16 attempt to collect an amount (however designated) that purports

17 to reimburse that lessor for the tax imposed by this Act or the

18 Use Tax Act, as the case may be, if the tax has not been paid by

19 the lessor. If a lessor improperly collects any such amount

20 from the lessee, the lessee shall have a legal right to claim a

21 refund of that amount from the lessor. If, however, that amount

22 is not refunded to the lessee for any reason, the lessor is

23 liable to pay that amount to the Department. This paragraph is

24 exempt from the provisions of Section 3-75.

25 (25) Beginning on the effective date of this amendatory Act

26 of the 92nd General Assembly, personal property purchased by a

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1 lessor who leases the property, under a lease of one year or

2 longer executed or in effect at the time the lessor would

3 otherwise be subject to the tax imposed by this Act, to a

4 governmental body that has been issued an active tax exemption

5 identification number by the Department under Section 1g of the

6 Retailers' Occupation Tax Act. If the property is leased in a

7 manner that does not qualify for this exemption or is used in

8 any other nonexempt manner, the lessor shall be liable for the

9 tax imposed under this Act or the Use Tax Act, as the case may

10 be, based on the fair market value of the property at the time

11 the nonqualifying use occurs. No lessor shall collect or

12 attempt to collect an amount (however designated) that purports

13 to reimburse that lessor for the tax imposed by this Act or the

14 Use Tax Act, as the case may be, if the tax has not been paid by

15 the lessor. If a lessor improperly collects any such amount

16 from the lessee, the lessee shall have a legal right to claim a

17 refund of that amount from the lessor. If, however, that amount

18 is not refunded to the lessee for any reason, the lessor is

19 liable to pay that amount to the Department. This paragraph is

20 exempt from the provisions of Section 3-75.

21 (26) Beginning January 1, 2008, tangible personal property

22 used in the construction or maintenance of a community water

23 supply, as defined under Section 3.145 of the Environmental

24 Protection Act, that is operated by a not-for-profit

25 corporation that holds a valid water supply permit issued under

26 Title IV of the Environmental Protection Act. This paragraph is

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1 exempt from the provisions of Section 3-75.

2 (27) Beginning January 1, 2010, materials, parts,

3 equipment, components, and furnishings incorporated into or

4 upon an aircraft as part of the modification, refurbishment,

5 completion, replacement, repair, or maintenance of the

6 aircraft. This exemption includes consumable supplies used in

7 the modification, refurbishment, completion, replacement,

8 repair, and maintenance of aircraft, but excludes any

9 materials, parts, equipment, components, and consumable

10 supplies used in the modification, replacement, repair, and

11 maintenance of aircraft engines or power plants, whether such

12 engines or power plants are installed or uninstalled upon any

13 such aircraft. "Consumable supplies" include, but are not

14 limited to, adhesive, tape, sandpaper, general purpose

15 lubricants, cleaning solution, latex gloves, and protective

16 films. This exemption applies only to the use of qualifying

17 tangible personal property transferred incident to the

18 modification, refurbishment, completion, replacement, repair,

19 or maintenance of aircraft by persons who (i) hold an Air

20 Agency Certificate and are empowered to operate an approved

21 repair station by the Federal Aviation Administration, (ii)

22 have a Class IV Rating, and (iii) conduct operations in

23 accordance with Part 145 of the Federal Aviation Regulations.

24 The exemption does not include aircraft operated by a

25 commercial air carrier providing scheduled passenger air

26 service pursuant to authority issued under Part 121 or Part 129

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1 of the Federal Aviation Regulations. The changes made to this

2 paragraph (27) by Public Act 98-534 are declarative of existing

3 law.

4 (28) Tangible personal property purchased by a

5 public-facilities corporation, as described in Section

6 11-65-10 of the Illinois Municipal Code, for purposes of

7 constructing or furnishing a municipal convention hall, but

8 only if the legal title to the municipal convention hall is

9 transferred to the municipality without any further

10 consideration by or on behalf of the municipality at the time

11 of the completion of the municipal convention hall or upon the

12 retirement or redemption of any bonds or other debt instruments

13 issued by the public-facilities corporation in connection with

14 the development of the municipal convention hall. This

15 exemption includes existing public-facilities corporations as

16 provided in Section 11-65-25 of the Illinois Municipal Code.

17 This paragraph is exempt from the provisions of Section 3-75.

18 (29) Beginning January 1, 2017, menstrual pads, tampons,

19 and menstrual cups.

20 (Source: P.A. 98-104, eff. 7-22-13; 98-422, eff. 8-16-13;

21 98-456, eff. 8-16-13; 98-534, eff. 8-23-13; 98-756, eff.

22 7-16-14; 99-180, eff. 7-29-15; 99-855, eff. 8-19-16.)

23 Section 30-30. The Service Occupation Tax Act is amended by

24 changing Sections 2 and 3-5 as follows:

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1 (35 ILCS 115/2) (from Ch. 120, par. 439.102)

2 Sec. 2. "Transfer" means any transfer of the title to

3 property or of the ownership of property whether or not the

4 transferor retains title as security for the payment of amounts

5 due him from the transferee.

6 "Cost Price" means the consideration paid by the serviceman

7 for a purchase valued in money, whether paid in money or

8 otherwise, including cash, credits and services, and shall be

9 determined without any deduction on account of the supplier's

10 cost of the property sold or on account of any other expense

11 incurred by the supplier. When a serviceman contracts out part

12 or all of the services required in his sale of service, it

13 shall be presumed that the cost price to the serviceman of the

14 property transferred to him by his or her subcontractor is

15 equal to 50% of the subcontractor's charges to the serviceman

16 in the absence of proof of the consideration paid by the

17 subcontractor for the purchase of such property.

18 "Department" means the Department of Revenue.

19 "Person" means any natural individual, firm, partnership,

20 association, joint stock company, joint venture, public or

21 private corporation, limited liability company, and any

22 receiver, executor, trustee, guardian or other representative

23 appointed by order of any court.

24 "Sale of Service" means any transaction except:

25 (a) A retail sale of tangible personal property taxable

26 under the Retailers' Occupation Tax Act or under the Use Tax

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1 Act.

2 (b) A sale of tangible personal property for the purpose of

3 resale made in compliance with Section 2c of the Retailers'

4 Occupation Tax Act.

5 (c) Except as hereinafter provided, a sale or transfer of

6 tangible personal property as an incident to the rendering of

7 service for or by any governmental body or for or by any

8 corporation, society, association, foundation or institution

9 organized and operated exclusively for charitable, religious

10 or educational purposes or any not-for-profit corporation,

11 society, association, foundation, institution or organization

12 which has no compensated officers or employees and which is

13 organized and operated primarily for the recreation of persons

14 55 years of age or older. A limited liability company may

15 qualify for the exemption under this paragraph only if the

16 limited liability company is organized and operated

17 exclusively for educational purposes.

18 (d) A sale or transfer of tangible personal property as an

19 incident to the rendering of service for interstate carriers

20 for hire for use as rolling stock moving in interstate commerce

21 or lessors under leases of one year or longer, executed or in

22 effect at the time of purchase, to interstate carriers for hire

23 for use as rolling stock moving in interstate commerce, and

24 equipment operated by a telecommunications provider, licensed

25 as a common carrier by the Federal Communications Commission,

26 which is permanently installed in or affixed to aircraft moving

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1 in interstate commerce.

2 (d-1) A sale or transfer of tangible personal property as

3 an incident to the rendering of service for owners, lessors or

4 shippers of tangible personal property which is utilized by

5 interstate carriers for hire for use as rolling stock moving in

6 interstate commerce, and equipment operated by a

7 telecommunications provider, licensed as a common carrier by

8 the Federal Communications Commission, which is permanently

9 installed in or affixed to aircraft moving in interstate

10 commerce.

11 (d-1.1) On and after July 1, 2003 and through June 30,

12 2004, a sale or transfer of a motor vehicle of the second

13 division with a gross vehicle weight in excess of 8,000 pounds

14 as an incident to the rendering of service if that motor

15 vehicle is subject to the commercial distribution fee imposed

16 under Section 3-815.1 of the Illinois Vehicle Code. Beginning

17 on July 1, 2004 and through June 30, 2005, the use in this

18 State of motor vehicles of the second division: (i) with a

19 gross vehicle weight rating in excess of 8,000 pounds; (ii)

20 that are subject to the commercial distribution fee imposed

21 under Section 3-815.1 of the Illinois Vehicle Code; and (iii)

22 that are primarily used for commercial purposes. Through June

23 30, 2005, this exemption applies to repair and replacement

24 parts added after the initial purchase of such a motor vehicle

25 if that motor vehicle is used in a manner that would qualify

26 for the rolling stock exemption otherwise provided for in this

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1 Act. For purposes of this paragraph, "used for commercial

2 purposes" means the transportation of persons or property in

3 furtherance of any commercial or industrial enterprise whether

4 for-hire or not.

5 (d-2) The repairing, reconditioning or remodeling, for a

6 common carrier by rail, of tangible personal property which

7 belongs to such carrier for hire, and as to which such carrier

8 receives the physical possession of the repaired,

9 reconditioned or remodeled item of tangible personal property

10 in Illinois, and which such carrier transports, or shares with

11 another common carrier in the transportation of such property,

12 out of Illinois on a standard uniform bill of lading showing

13 the person who repaired, reconditioned or remodeled the

14 property as the shipper or consignor of such property to a

15 destination outside Illinois, for use outside Illinois.

16 (d-3) A sale or transfer of tangible personal property

17 which is produced by the seller thereof on special order in

18 such a way as to have made the applicable tax the Service

19 Occupation Tax or the Service Use Tax, rather than the

20 Retailers' Occupation Tax or the Use Tax, for an interstate

21 carrier by rail which receives the physical possession of such

22 property in Illinois, and which transports such property, or

23 shares with another common carrier in the transportation of

24 such property, out of Illinois on a standard uniform bill of

25 lading showing the seller of the property as the shipper or

26 consignor of such property to a destination outside Illinois,

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1 for use outside Illinois.

2 (d-4) Until January 1, 1997, a sale, by a registered

3 serviceman paying tax under this Act to the Department, of

4 special order printed materials delivered outside Illinois and

5 which are not returned to this State, if delivery is made by

6 the seller or agent of the seller, including an agent who

7 causes the product to be delivered outside Illinois by a common

8 carrier or the U.S. postal service.

9 (e) A sale or transfer of machinery and equipment used

10 primarily in the process of the manufacturing or assembling,

11 either in an existing, an expanded or a new manufacturing

12 facility, of tangible personal property for wholesale or retail

13 sale or lease, whether such sale or lease is made directly by

14 the manufacturer or by some other person, whether the materials

15 used in the process are owned by the manufacturer or some other

16 person, or whether such sale or lease is made apart from or as

17 an incident to the seller's engaging in a service occupation

18 and the applicable tax is a Service Occupation Tax or Service

19 Use Tax, rather than Retailers' Occupation Tax or Use Tax. The

20 exemption provided by this paragraph (e) does not include

21 machinery and equipment used in (i) the generation of

22 electricity for wholesale or retail sale; (ii) the generation

23 or treatment of natural or artificial gas for wholesale or

24 retail sale that is delivered to customers through pipes,

25 pipelines, or mains; or (iii) the treatment of water for

26 wholesale or retail sale that is delivered to customers through

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1 pipes, pipelines, or mains. The provisions of this amendatory

2 Act of the 98th General Assembly are declaratory of existing

3 law as to the meaning and scope of this exemption. The

4 exemption under this subsection (e) is exempt from the

5 provisions of Section 3-75.

6 (f) Until July 1, 2003, the sale or transfer of

7 distillation machinery and equipment, sold as a unit or kit and

8 assembled or installed by the retailer, which machinery and

9 equipment is certified by the user to be used only for the

10 production of ethyl alcohol that will be used for consumption

11 as motor fuel or as a component of motor fuel for the personal

12 use of such user and not subject to sale or resale.

13 (g) At the election of any serviceman not required to be

14 otherwise registered as a retailer under Section 2a of the

15 Retailers' Occupation Tax Act, made for each fiscal year sales

16 of service in which the aggregate annual cost price of tangible

17 personal property transferred as an incident to the sales of

18 service is less than 35% (75% in the case of servicemen

19 transferring prescription drugs or servicemen engaged in

20 graphic arts production) of the aggregate annual total gross

21 receipts from all sales of service. The purchase of such

22 tangible personal property by the serviceman shall be subject

23 to tax under the Retailers' Occupation Tax Act and the Use Tax

24 Act. However, if a primary serviceman who has made the election

25 described in this paragraph subcontracts service work to a

26 secondary serviceman who has also made the election described

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1 in this paragraph, the primary serviceman does not incur a Use

2 Tax liability if the secondary serviceman (i) has paid or will

3 pay Use Tax on his or her cost price of any tangible personal

4 property transferred to the primary serviceman and (ii)

5 certifies that fact in writing to the primary serviceman.

6 Tangible personal property transferred incident to the

7 completion of a maintenance agreement is exempt from the tax

8 imposed pursuant to this Act.

9 Exemption (e) also includes machinery and equipment used in

10 the general maintenance or repair of such exempt machinery and

11 equipment or for in-house manufacture of exempt machinery and

12 equipment.On and after July 1, 2017, exemption (e) also

13 includes production related tangible personal property, as

14 defined in Section 2-45 of the Retailers' Occupation Tax Act.

15 On and after July 1, 2017, exemption (e) also includes graphic

16 arts machinery and equipment, as defined in paragraph (5) of

17 Section 3-5. The machinery and equipment exemption does not

18 include machinery and equipment used in (i) the generation of

19 electricity for wholesale or retail sale; (ii) the generation

20 or treatment of natural or artificial gas for wholesale or

21 retail sale that is delivered to customers through pipes,

22 pipelines, or mains; or (iii) the treatment of water for

23 wholesale or retail sale that is delivered to customers through

24 pipes, pipelines, or mains. The provisions of this amendatory

25 Act of the 98th General Assembly are declaratory of existing

26 law as to the meaning and scope of this exemption. For the

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1 purposes of exemption (e), each of these terms shall have the

2 following meanings: (1) "manufacturing process" shall mean the

3 production of any article of tangible personal property,

4 whether such article is a finished product or an article for

5 use in the process of manufacturing or assembling a different

6 article of tangible personal property, by procedures commonly

7 regarded as manufacturing, processing, fabricating, or

8 refining which changes some existing material or materials into

9 a material with a different form, use or name. In relation to a

10 recognized integrated business composed of a series of

11 operations which collectively constitute manufacturing, or

12 individually constitute manufacturing operations, the

13 manufacturing process shall be deemed to commence with the

14 first operation or stage of production in the series, and shall

15 not be deemed to end until the completion of the final product

16 in the last operation or stage of production in the series; and

17 further for purposes of exemption (e), photoprocessing is

18 deemed to be a manufacturing process of tangible personal

19 property for wholesale or retail sale; (2) "assembling process"

20 shall mean the production of any article of tangible personal

21 property, whether such article is a finished product or an

22 article for use in the process of manufacturing or assembling a

23 different article of tangible personal property, by the

24 combination of existing materials in a manner commonly regarded

25 as assembling which results in a material of a different form,

26 use or name; (3) "machinery" shall mean major mechanical

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1 machines or major components of such machines contributing to a

2 manufacturing or assembling process; and (4) "equipment" shall

3 include any independent device or tool separate from any

4 machinery but essential to an integrated manufacturing or

5 assembly process; including computers used primarily in a

6 manufacturer's computer assisted design, computer assisted

7 manufacturing (CAD/CAM) system; or any subunit or assembly

8 comprising a component of any machinery or auxiliary, adjunct

9 or attachment parts of machinery, such as tools, dies, jigs,

10 fixtures, patterns and molds; or any parts which require

11 periodic replacement in the course of normal operation; but

12 shall not include hand tools. Equipment includes chemicals or

13 chemicals acting as catalysts but only if the chemicals or

14 chemicals acting as catalysts effect a direct and immediate

15 change upon a product being manufactured or assembled for

16 wholesale or retail sale or lease. The purchaser of such

17 machinery and equipment who has an active resale registration

18 number shall furnish such number to the seller at the time of

19 purchase. The purchaser of such machinery and equipment and

20 tools without an active resale registration number shall

21 furnish to the seller a certificate of exemption for each

22 transaction stating facts establishing the exemption for that

23 transaction, which certificate shall be available to the

24 Department for inspection or audit.

25 Except as provided in Section 2d of this Act, the rolling

26 stock exemption applies to rolling stock used by an interstate

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1 carrier for hire, even just between points in Illinois, if such

2 rolling stock transports, for hire, persons whose journeys or

3 property whose shipments originate or terminate outside

4 Illinois.

5 Any informal rulings, opinions or letters issued by the

6 Department in response to an inquiry or request for any opinion

7 from any person regarding the coverage and applicability of

8 exemption (e) to specific devices shall be published,

9 maintained as a public record, and made available for public

10 inspection and copying. If the informal ruling, opinion or

11 letter contains trade secrets or other confidential

12 information, where possible the Department shall delete such

13 information prior to publication. Whenever such informal

14 rulings, opinions, or letters contain any policy of general

15 applicability, the Department shall formulate and adopt such

16 policy as a rule in accordance with the provisions of the

17 Illinois Administrative Procedure Act.

18 On and after July 1, 1987, no entity otherwise eligible

19 under exemption (c) of this Section shall make tax free

20 purchases unless it has an active exemption identification

21 number issued by the Department.

22 "Serviceman" means any person who is engaged in the

23 occupation of making sales of service.

24 "Sale at Retail" means "sale at retail" as defined in the

25 Retailers' Occupation Tax Act.

26 "Supplier" means any person who makes sales of tangible

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1 personal property to servicemen for the purpose of resale as an

2 incident to a sale of service.

3 (Source: P.A. 98-583, eff. 1-1-14.)

4 (35 ILCS 115/3-5)

5 Sec. 3-5. Exemptions. The following tangible personal

6 property is exempt from the tax imposed by this Act:

7 (1) Personal property sold by a corporation, society,

8 association, foundation, institution, or organization, other

9 than a limited liability company, that is organized and

10 operated as a not-for-profit service enterprise for the benefit

11 of persons 65 years of age or older if the personal property

12 was not purchased by the enterprise for the purpose of resale

13 by the enterprise.

14 (2) Personal property purchased by a not-for-profit

15 Illinois county fair association for use in conducting,

16 operating, or promoting the county fair.

17 (3) Personal property purchased by any not-for-profit arts

18 or cultural organization that establishes, by proof required by

19 the Department by rule, that it has received an exemption under

20 Section 501(c)(3) of the Internal Revenue Code and that is

21 organized and operated primarily for the presentation or

22 support of arts or cultural programming, activities, or

23 services. These organizations include, but are not limited to,

24 music and dramatic arts organizations such as symphony

25 orchestras and theatrical groups, arts and cultural service

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1 organizations, local arts councils, visual arts organizations,

2 and media arts organizations. On and after the effective date

3 of this amendatory Act of the 92nd General Assembly, however,

4 an entity otherwise eligible for this exemption shall not make

5 tax-free purchases unless it has an active identification

6 number issued by the Department.

7 (4) Legal tender, currency, medallions, or gold or silver

8 coinage issued by the State of Illinois, the government of the

9 United States of America, or the government of any foreign

10 country, and bullion.

11 (5) Until July 1, 2003 and beginning again on September 1,

12 2004 through August 30, 2014, graphic arts machinery and

13 equipment, including repair and replacement parts, both new and

14 used, and including that manufactured on special order or

15 purchased for lease, certified by the purchaser to be used

16 primarily for graphic arts production. Equipment includes

17 chemicals or chemicals acting as catalysts but only if the

18 chemicals or chemicals acting as catalysts effect a direct and

19 immediate change upon a graphic arts product.Beginning on July

20 1, 2017, graphic arts machinery and equipment is included in

21 the manufacturing and assembling machinery and equipment

22 exemption under Section 2 of this Act.

23 (6) Personal property sold by a teacher-sponsored student

24 organization affiliated with an elementary or secondary school

25 located in Illinois.

26 (7) Farm machinery and equipment, both new and used,

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1 including that manufactured on special order, certified by the

2 purchaser to be used primarily for production agriculture or

3 State or federal agricultural programs, including individual

4 replacement parts for the machinery and equipment, including

5 machinery and equipment purchased for lease, and including

6 implements of husbandry defined in Section 1-130 of the

7 Illinois Vehicle Code, farm machinery and agricultural

8 chemical and fertilizer spreaders, and nurse wagons required to

9 be registered under Section 3-809 of the Illinois Vehicle Code,

10 but excluding other motor vehicles required to be registered

11 under the Illinois Vehicle Code. Horticultural polyhouses or

12 hoop houses used for propagating, growing, or overwintering

13 plants shall be considered farm machinery and equipment under

14 this item (7). Agricultural chemical tender tanks and dry boxes

15 shall include units sold separately from a motor vehicle

16 required to be licensed and units sold mounted on a motor

17 vehicle required to be licensed if the selling price of the

18 tender is separately stated.

19 Farm machinery and equipment shall include precision

20 farming equipment that is installed or purchased to be

21 installed on farm machinery and equipment including, but not

22 limited to, tractors, harvesters, sprayers, planters, seeders,

23 or spreaders. Precision farming equipment includes, but is not

24 limited to, soil testing sensors, computers, monitors,

25 software, global positioning and mapping systems, and other

26 such equipment.

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1 Farm machinery and equipment also includes computers,

2 sensors, software, and related equipment used primarily in the

3 computer-assisted operation of production agriculture

4 facilities, equipment, and activities such as, but not limited

5 to, the collection, monitoring, and correlation of animal and

6 crop data for the purpose of formulating animal diets and

7 agricultural chemicals. This item (7) is exempt from the

8 provisions of Section 3-55.

9 (8) Until June 30, 2013, fuel and petroleum products sold

10 to or used by an air common carrier, certified by the carrier

11 to be used for consumption, shipment, or storage in the conduct

12 of its business as an air common carrier, for a flight destined

13 for or returning from a location or locations outside the

14 United States without regard to previous or subsequent domestic

15 stopovers.

16 Beginning July 1, 2013, fuel and petroleum products sold to

17 or used by an air carrier, certified by the carrier to be used

18 for consumption, shipment, or storage in the conduct of its

19 business as an air common carrier, for a flight that (i) is

20 engaged in foreign trade or is engaged in trade between the

21 United States and any of its possessions and (ii) transports at

22 least one individual or package for hire from the city of

23 origination to the city of final destination on the same

24 aircraft, without regard to a change in the flight number of

25 that aircraft.

26 (9) Proceeds of mandatory service charges separately

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1 stated on customers' bills for the purchase and consumption of

2 food and beverages, to the extent that the proceeds of the

3 service charge are in fact turned over as tips or as a

4 substitute for tips to the employees who participate directly

5 in preparing, serving, hosting or cleaning up the food or

6 beverage function with respect to which the service charge is

7 imposed.

8 (10) Until July 1, 2003, oil field exploration, drilling,

9 and production equipment, including (i) rigs and parts of rigs,

10 rotary rigs, cable tool rigs, and workover rigs, (ii) pipe and

11 tubular goods, including casing and drill strings, (iii) pumps

12 and pump-jack units, (iv) storage tanks and flow lines, (v) any

13 individual replacement part for oil field exploration,

14 drilling, and production equipment, and (vi) machinery and

15 equipment purchased for lease; but excluding motor vehicles

16 required to be registered under the Illinois Vehicle Code.

17 (11) Photoprocessing machinery and equipment, including

18 repair and replacement parts, both new and used, including that

19 manufactured on special order, certified by the purchaser to be

20 used primarily for photoprocessing, and including

21 photoprocessing machinery and equipment purchased for lease.

22 (12) Coal and aggregate exploration, mining, off-highway

23 hauling, processing, maintenance, and reclamation equipment,

24 including replacement parts and equipment, and including

25 equipment purchased for lease, but excluding motor vehicles

26 required to be registered under the Illinois Vehicle Code. The

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1 changes made to this Section by Public Act 97-767 apply on and

2 after July 1, 2003, but no claim for credit or refund is

3 allowed on or after August 16, 2013 (the effective date of

4 Public Act 98-456) for such taxes paid during the period

5 beginning July 1, 2003 and ending on August 16, 2013 (the

6 effective date of Public Act 98-456).

7 (13) Beginning January 1, 1992 and through June 30, 2016,

8 food for human consumption that is to be consumed off the

9 premises where it is sold (other than alcoholic beverages, soft

10 drinks and food that has been prepared for immediate

11 consumption) and prescription and non-prescription medicines,

12 drugs, medical appliances, and insulin, urine testing

13 materials, syringes, and needles used by diabetics, for human

14 use, when purchased for use by a person receiving medical

15 assistance under Article V of the Illinois Public Aid Code who

16 resides in a licensed long-term care facility, as defined in

17 the Nursing Home Care Act, or in a licensed facility as defined

18 in the ID/DD Community Care Act, the MC/DD Act, or the

19 Specialized Mental Health Rehabilitation Act of 2013.

20 (14) Semen used for artificial insemination of livestock

21 for direct agricultural production.

22 (15) Horses, or interests in horses, registered with and

23 meeting the requirements of any of the Arabian Horse Club

24 Registry of America, Appaloosa Horse Club, American Quarter

25 Horse Association, United States Trotting Association, or

26 Jockey Club, as appropriate, used for purposes of breeding or

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1 racing for prizes. This item (15) is exempt from the provisions

2 of Section 3-55, and the exemption provided for under this item

3 (15) applies for all periods beginning May 30, 1995, but no

4 claim for credit or refund is allowed on or after January 1,

5 2008 (the effective date of Public Act 95-88) for such taxes

6 paid during the period beginning May 30, 2000 and ending on

7 January 1, 2008 (the effective date of Public Act 95-88).

8 (16) Computers and communications equipment utilized for

9 any hospital purpose and equipment used in the diagnosis,

10 analysis, or treatment of hospital patients sold to a lessor

11 who leases the equipment, under a lease of one year or longer

12 executed or in effect at the time of the purchase, to a

13 hospital that has been issued an active tax exemption

14 identification number by the Department under Section 1g of the

15 Retailers' Occupation Tax Act.

16 (17) Personal property sold to a lessor who leases the

17 property, under a lease of one year or longer executed or in

18 effect at the time of the purchase, to a governmental body that

19 has been issued an active tax exemption identification number

20 by the Department under Section 1g of the Retailers' Occupation

21 Tax Act.

22 (18) Beginning with taxable years ending on or after

23 December 31, 1995 and ending with taxable years ending on or

24 before December 31, 2004, personal property that is donated for

25 disaster relief to be used in a State or federally declared

26 disaster area in Illinois or bordering Illinois by a

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1 manufacturer or retailer that is registered in this State to a

2 corporation, society, association, foundation, or institution

3 that has been issued a sales tax exemption identification

4 number by the Department that assists victims of the disaster

5 who reside within the declared disaster area.

6 (19) Beginning with taxable years ending on or after

7 December 31, 1995 and ending with taxable years ending on or

8 before December 31, 2004, personal property that is used in the

9 performance of infrastructure repairs in this State, including

10 but not limited to municipal roads and streets, access roads,

11 bridges, sidewalks, waste disposal systems, water and sewer

12 line extensions, water distribution and purification

13 facilities, storm water drainage and retention facilities, and

14 sewage treatment facilities, resulting from a State or

15 federally declared disaster in Illinois or bordering Illinois

16 when such repairs are initiated on facilities located in the

17 declared disaster area within 6 months after the disaster.

18 (20) Beginning July 1, 1999, game or game birds sold at a

19 "game breeding and hunting preserve area" as that term is used

20 in the Wildlife Code. This paragraph is exempt from the

21 provisions of Section 3-55.

22 (21) A motor vehicle, as that term is defined in Section

23 1-146 of the Illinois Vehicle Code, that is donated to a

24 corporation, limited liability company, society, association,

25 foundation, or institution that is determined by the Department

26 to be organized and operated exclusively for educational

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1 purposes. For purposes of this exemption, "a corporation,

2 limited liability company, society, association, foundation,

3 or institution organized and operated exclusively for

4 educational purposes" means all tax-supported public schools,

5 private schools that offer systematic instruction in useful

6 branches of learning by methods common to public schools and

7 that compare favorably in their scope and intensity with the

8 course of study presented in tax-supported schools, and

9 vocational or technical schools or institutes organized and

10 operated exclusively to provide a course of study of not less

11 than 6 weeks duration and designed to prepare individuals to

12 follow a trade or to pursue a manual, technical, mechanical,

13 industrial, business, or commercial occupation.

14 (22) Beginning January 1, 2000, personal property,

15 including food, purchased through fundraising events for the

16 benefit of a public or private elementary or secondary school,

17 a group of those schools, or one or more school districts if

18 the events are sponsored by an entity recognized by the school

19 district that consists primarily of volunteers and includes

20 parents and teachers of the school children. This paragraph

21 does not apply to fundraising events (i) for the benefit of

22 private home instruction or (ii) for which the fundraising

23 entity purchases the personal property sold at the events from

24 another individual or entity that sold the property for the

25 purpose of resale by the fundraising entity and that profits

26 from the sale to the fundraising entity. This paragraph is

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1 exempt from the provisions of Section 3-55.

2 (23) Beginning January 1, 2000 and through December 31,

3 2001, new or used automatic vending machines that prepare and

4 serve hot food and beverages, including coffee, soup, and other

5 items, and replacement parts for these machines. Beginning

6 January 1, 2002 and through June 30, 2003, machines and parts

7 for machines used in commercial, coin-operated amusement and

8 vending business if a use or occupation tax is paid on the

9 gross receipts derived from the use of the commercial,

10 coin-operated amusement and vending machines. This paragraph

11 is exempt from the provisions of Section 3-55.

12 (24) Beginning on the effective date of this amendatory Act

13 of the 92nd General Assembly, computers and communications

14 equipment utilized for any hospital purpose and equipment used

15 in the diagnosis, analysis, or treatment of hospital patients

16 sold to a lessor who leases the equipment, under a lease of one

17 year or longer executed or in effect at the time of the

18 purchase, to a hospital that has been issued an active tax

19 exemption identification number by the Department under

20 Section 1g of the Retailers' Occupation Tax Act. This paragraph

21 is exempt from the provisions of Section 3-55.

22 (25) Beginning on the effective date of this amendatory Act

23 of the 92nd General Assembly, personal property sold to a

24 lessor who leases the property, under a lease of one year or

25 longer executed or in effect at the time of the purchase, to a

26 governmental body that has been issued an active tax exemption

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1 identification number by the Department under Section 1g of the

2 Retailers' Occupation Tax Act. This paragraph is exempt from

3 the provisions of Section 3-55.

4 (26) Beginning on January 1, 2002 and through June 30,

5 2016, tangible personal property purchased from an Illinois

6 retailer by a taxpayer engaged in centralized purchasing

7 activities in Illinois who will, upon receipt of the property

8 in Illinois, temporarily store the property in Illinois (i) for

9 the purpose of subsequently transporting it outside this State

10 for use or consumption thereafter solely outside this State or

11 (ii) for the purpose of being processed, fabricated, or

12 manufactured into, attached to, or incorporated into other

13 tangible personal property to be transported outside this State

14 and thereafter used or consumed solely outside this State. The

15 Director of Revenue shall, pursuant to rules adopted in

16 accordance with the Illinois Administrative Procedure Act,

17 issue a permit to any taxpayer in good standing with the

18 Department who is eligible for the exemption under this

19 paragraph (26). The permit issued under this paragraph (26)

20 shall authorize the holder, to the extent and in the manner

21 specified in the rules adopted under this Act, to purchase

22 tangible personal property from a retailer exempt from the

23 taxes imposed by this Act. Taxpayers shall maintain all

24 necessary books and records to substantiate the use and

25 consumption of all such tangible personal property outside of

26 the State of Illinois.

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1 (27) Beginning January 1, 2008, tangible personal property

2 used in the construction or maintenance of a community water

3 supply, as defined under Section 3.145 of the Environmental

4 Protection Act, that is operated by a not-for-profit

5 corporation that holds a valid water supply permit issued under

6 Title IV of the Environmental Protection Act. This paragraph is

7 exempt from the provisions of Section 3-55.

8 (28) Tangible personal property sold to a

9 public-facilities corporation, as described in Section

10 11-65-10 of the Illinois Municipal Code, for purposes of

11 constructing or furnishing a municipal convention hall, but

12 only if the legal title to the municipal convention hall is

13 transferred to the municipality without any further

14 consideration by or on behalf of the municipality at the time

15 of the completion of the municipal convention hall or upon the

16 retirement or redemption of any bonds or other debt instruments

17 issued by the public-facilities corporation in connection with

18 the development of the municipal convention hall. This

19 exemption includes existing public-facilities corporations as

20 provided in Section 11-65-25 of the Illinois Municipal Code.

21 This paragraph is exempt from the provisions of Section 3-55.

22 (29) Beginning January 1, 2010, materials, parts,

23 equipment, components, and furnishings incorporated into or

24 upon an aircraft as part of the modification, refurbishment,

25 completion, replacement, repair, or maintenance of the

26 aircraft. This exemption includes consumable supplies used in

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1 the modification, refurbishment, completion, replacement,

2 repair, and maintenance of aircraft, but excludes any

3 materials, parts, equipment, components, and consumable

4 supplies used in the modification, replacement, repair, and

5 maintenance of aircraft engines or power plants, whether such

6 engines or power plants are installed or uninstalled upon any

7 such aircraft. "Consumable supplies" include, but are not

8 limited to, adhesive, tape, sandpaper, general purpose

9 lubricants, cleaning solution, latex gloves, and protective

10 films. This exemption applies only to the transfer of

11 qualifying tangible personal property incident to the

12 modification, refurbishment, completion, replacement, repair,

13 or maintenance of an aircraft by persons who (i) hold an Air

14 Agency Certificate and are empowered to operate an approved

15 repair station by the Federal Aviation Administration, (ii)

16 have a Class IV Rating, and (iii) conduct operations in

17 accordance with Part 145 of the Federal Aviation Regulations.

18 The exemption does not include aircraft operated by a

19 commercial air carrier providing scheduled passenger air

20 service pursuant to authority issued under Part 121 or Part 129

21 of the Federal Aviation Regulations. The changes made to this

22 paragraph (29) by Public Act 98-534 are declarative of existing

23 law.

24 (30) Beginning January 1, 2017, menstrual pads, tampons,

25 and menstrual cups.

26 (Source: P.A. 98-104, eff. 7-22-13; 98-422, eff. 8-16-13;

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1 98-456, eff. 8-16-13; 98-534, eff. 8-23-13; 98-756, eff.

2 7-16-14; 99-180, eff. 7-29-15; 99-855, eff. 8-19-16.)

3 Section 30-35. The Retailers' Occupation Tax Act is amended

4 by changing Sections 1, 2, 2-5, 2-10, 2-10.5, 2-12, 2-45, 2-55,

5 2a, 2b, 2c, 3, 7, and 13 and by adding Section 1b as follows:

6 (35 ILCS 120/1) (from Ch. 120, par. 440)

7 Sec. 1. Definitions. "Sale at retail" means any transfer of

8 the ownership of or title to tangible personal property to a

9 purchaser or the performance of a taxable service for a

10 purchaser, for the purpose of use or consumption, and not for

11 the purpose of resale in any form as tangible personal property

12 or taxable service to the extent not first subjected to a use

13 for which it was purchased, for a valuable consideration:

14 Provided that the propertyor service purchased is deemed to be

15 purchased for the purpose of resale, despite first being used,

16 to the extent to which it is resold as an ingredient of an

17 intentionally produced product or byproduct of manufacturing

18 or otherwise transferred to the purchaser of tangible personal

19 property or taxable service. For this purpose, slag produced as

20 an incident to manufacturing pig iron or steel and sold is

21 considered to be an intentionally produced byproduct of

22 manufacturing. Transactions whereby the possession of the

23 property is transferred but the seller retains the title as

24 security for payment of the selling price shall be deemed to be

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1 sales.

2 "Sale at retail" shall be construed to include any transfer

3 of the ownership of or title to tangible personal property to a

4 purchaser or the performance of a taxable service for a

5 purchaser, for use or consumption by any other person to whom

6 such purchaser may transfer the tangible personal propertyor

7 taxable service without a valuable consideration, and to

8 include any transfer, whether made for or without a valuable

9 consideration, for resale in any form as tangible personal

10 property or taxable serviceunless made in compliance with

11 Section 2c of this Act.

12 Sales of tangible personal property, which property, to the

13 extent not first subjected to a use for which it was purchased,

14 as an ingredient or constituent, goes into and forms a part of

15 tangible personal property subsequently the subject of a "Sale

16 at retail", or transferred to a purchaser of a taxable service

17 that is a "sale at retail"are not sales at retail as defined

18 in this Act: Provided that the property purchased is deemed to

19 be purchased for the purpose of resale, despite first being

20 used, to the extent to which it is resold as an ingredient of

21 an intentionally produced product or byproduct of

22 manufacturing.

23 "Sale at retail" shall be construed to include any Illinois

24 florist's sales transaction in which the purchase order is

25 received in Illinois by a florist and the sale is for use or

26 consumption, but the Illinois florist has a florist in another

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1 state deliver the property to the purchaser or the purchaser's

2 donee in such other state.

3 Nonreusable tangible personal property that is used by

4 persons engaged in the business of operating a restaurant,

5 cafeteria, or drive-in is a sale for resale when it is

6 transferred to customers in the ordinary course of business as

7 part of the sale of food or beverages and is used to deliver,

8 package, or consume food or beverages, regardless of where

9 consumption of the food or beverages occurs. Examples of those

10 items include, but are not limited to nonreusable, paper and

11 plastic cups, plates, baskets, boxes, sleeves, buckets or other

12 containers, utensils, straws, placemats, napkins, doggie bags,

13 and wrapping or packaging materials that are transferred to

14 customers as part of the sale of food or beverages in the

15 ordinary course of business.

16 The purchase, employment and transfer of such tangible

17 personal property as newsprint and ink for the primary purpose

18 of conveying news (with or without other information) is not a

19 purchase, use or sale of tangible personal property.

20 A person whose activities are organized and conducted

21 primarily as a not-for-profit service enterprise, and who

22 engages in selling tangible personal propertyor taxable

23 service at retail (whether to the public or merely to members

24 and their guests) is engaged in the business of selling

25 tangible personal propertyor taxable service at retail with

26 respect to such transactions, excepting only a person organized

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1 and operated exclusively for charitable, religious or

2 educational purposes either (1), to the extent of sales by such

3 person to its members, students, patients or inmates of

4 tangible personal property or taxable serviceto be used

5 primarily for the purposes of such person, or (2), to the

6 extent of sales by such person of tangible personal propertyor

7 taxable servicewhich is not sold or offered for sale by

8 persons organized for profit. The selling of school books and

9 school supplies by schools at retail to students is not

10 "primarily for the purposes of" the school which does such

11 selling. The provisions of this paragraph shall not apply to

12 nor subject to taxation occasional dinners, socials or similar

13 activities of a person organized and operated exclusively for

14 charitable, religious or educational purposes, whether or not

15 such activities are open to the public.

16 A person who is the recipient of a grant or contract under

17 Title VII of the Older Americans Act of 1965 (P.L. 92-258) and

18 serves meals to participants in the federal Nutrition Program

19 for the Elderly in return for contributions established in

20 amount by the individual participant pursuant to a schedule of

21 suggested fees as provided for in the federal Act is not

22 engaged in the business of selling tangible personal property

23 or taxable serviceat retail with respect to such transactions.

24 "Purchaser" means anyone who, through a sale at retail,

25 acquires the ownership of or title to tangible personal

26 property or taxable servicefor a valuable consideration.

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1 "Reseller of motor fuel" means any person engaged in the

2 business of selling or delivering or transferring title of

3 motor fuel to another person other than for use or consumption.

4 No person shall act as a reseller of motor fuel within this

5 State without first being registered as a reseller pursuant to

6 Section 2c or a retailer pursuant to Section 2a.

7 "Selling price" or the "amount of sale" means the

8 consideration for a sale valued in money whether received in

9 money or otherwise, including cash, credits, property, other

10 than as hereinafter provided, and services, but not including

11 the value of or credit given for traded-in tangible personal

12 property where the item that is traded-in is of like kind and

13 character as that which is being sold, and shall be determined

14 without any deduction on account of the cost of the property

15 sold, the cost of materials used, labor or service cost or any

16 other expense whatsoever, but does not include charges that are

17 added to prices by sellers on account of the seller's tax

18 liability under this Act, or on account of the seller's duty to

19 collect, from the purchaser, the tax that is imposed by the Use

20 Tax Act, or, except as otherwise provided with respect to any

21 cigarette tax imposed by a home rule unit, on account of the

22 seller's tax liability under any local occupation tax

23 administered by the Department, or, except as otherwise

24 provided with respect to any cigarette tax imposed by a home

25 rule unit on account of the seller's duty to collect, from the

26 purchasers, the tax that is imposed under any local use tax

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1 administered by the Department. Effective December 1, 1985,

2 "selling price" shall include charges that are added to prices

3 by sellers on account of the seller's tax liability under the

4 Cigarette Tax Act, on account of the sellers' duty to collect,

5 from the purchaser, the tax imposed under the Cigarette Use Tax

6 Act, and on account of the seller's duty to collect, from the

7 purchaser, any cigarette tax imposed by a home rule unit.