HB3086 Engrossed LRB099 10675 HLH 30934 b
1		AN ACT concerning revenue.
2		Be it enacted by the People of the State of Illinois,
3		represented in the General Assembly:
4		Section 5. The Illinois Income Tax Act is amended by
5		changing Section 1501 as follows:
6		(35 ILCS 5/1501) (from Ch. 120, par. 15-1501)
7		Sec. 1501. Definitions.
8		(a) In general. When used in this Act, where not otherwise
9		distinctly expressed or manifestly incompatible with the
10		intent thereof:
11		(1) Business income. The term "business income" means
12		all income that may be treated as apportionable business
13		income under the Constitution of the United States.
14		Business income is net of the deductions allocable thereto.
15		Such term does not include compensation or the deductions
16		allocable thereto. For each taxable year beginning on or
17		after January 1, 2003, a taxpayer may elect to treat all
18		income other than compensation as business income. This
19		election shall be made in accordance with rules adopted by
20		the Department and, once made, shall be irrevocable.
21		(1.5) Captive real estate investment trust:
22		(A) The term "captive real estate investment
23		trust" means a corporation, trust, or association:

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1		(i) that is considered a real estate
2		investment trust for the taxable year under
3		Section 856 of the Internal Revenue Code;
4		(ii) the certificates of beneficial interest
5		or shares of which are not regularly traded on an
6		established securities market; and
7		(iii) of which more than 50% of the voting
8		power or value of the beneficial interest or
9		shares, at any time during the last half of the
10		taxable year, is owned or controlled, directly,
11		indirectly, or constructively, by a single
12		corporation.
13		(B) The term "captive real estate investment
14		trust" does not include:
15		(i) a real estate investment trust of which
16		more than 50% of the voting power or value of the
17		beneficial interest or shares is owned or
18		controlled, directly, indirectly, or
19		constructively, by:
20		(a) a real estate investment trust, other
21		than a captive real estate investment trust;
22		(b) a person who is exempt from taxation
23		under Section 501 of the Internal Revenue Code,
24		and who is not required to treat income
25		received from the real estate investment trust
26		as unrelated business taxable income under

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1		Section 512 of the Internal Revenue Code;
2		(c) a listed Australian property trust, if
3		no more than 50% of the voting power or value
4		of the beneficial interest or shares of that
5		trust, at any time during the last half of the
6		taxable year, is owned or controlled, directly
7		or indirectly, by a single person;
8		(d) an entity organized as a trust,
9		provided a listed Australian property trust
10		described in subparagraph (c) owns or
11		controls, directly or indirectly, or
12		constructively, 75% or more of the voting power
13		or value of the beneficial interests or shares
14		of such entity; or
15		(e) an entity that is organized outside of
16		the laws of the United States and that
17		satisfies all of the following criteria:
18		(1) at least 75% of the entity's total
19		asset value at the close of its taxable
20		year is represented by real estate assets
21		(as defined in Section 856(c)(5)(B) of the
22		Internal Revenue Code, thereby including
23		shares or certificates of beneficial
24		interest in any real estate investment
25		trust), cash and cash equivalents, and
26		U.S. Government securities;

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1		(2) the entity is not subject to tax on
2		amounts that are distributed to its
3		beneficial owners or is exempt from
4		entity-level taxation;
5		(3) the entity distributes at least
6		85% of its taxable income (as computed in
7		the jurisdiction in which it is organized)
8		to the holders of its shares or
9		certificates of beneficial interest on an
10		annual basis;
11		(4) either (i) the shares or
12		beneficial interests of the entity are
13		regularly traded on an established
14		securities market or (ii) not more than 10%
15		of the voting power or value in the entity
16		is held, directly, indirectly, or
17		constructively, by a single entity or
18		individual; and
19		(5) the entity is organized in a
20		country that has entered into a tax treaty
21		with the United States; or
22		(ii) during its first taxable year for which it
23		elects to be treated as a real estate investment
24		trust under Section 856(c)(1) of the Internal
25		Revenue Code, a real estate investment trust the
26		certificates of beneficial interest or shares of

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1		which are not regularly traded on an established
2		securities market, but only if the certificates of
3		beneficial interest or shares of the real estate
4		investment trust are regularly traded on an
5		established securities market prior to the earlier
6		of the due date (including extensions) for filing
7		its return under this Act for that first taxable
8		year or the date it actually files that return.
9		(C) For the purposes of this subsection (1.5), the
10		constructive ownership rules prescribed under Section
11		318(a) of the Internal Revenue Code, as modified by
12		Section 856(d)(5) of the Internal Revenue Code, apply
13		in determining the ownership of stock, assets, or net
14		profits of any person.
15		(D) For the purposes of this item (1.5), for
16		taxable years ending on or after August 16, 2007, the
17		voting power or value of the beneficial interest or
18		shares of a real estate investment trust does not
19		include any voting power or value of beneficial
20		interest or shares in a real estate investment trust
21		held directly or indirectly in a segregated asset
22		account by a life insurance company (as described in
23		Section 817 of the Internal Revenue Code) to the extent
24		such voting power or value is for the benefit of
25		entities or persons who are either immune from taxation
26		or exempt from taxation under subtitle A of the

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1		Internal Revenue Code.
2		(2) Commercial domicile. The term "commercial
3		domicile" means the principal place from which the trade or
4		business of the taxpayer is directed or managed.
5		(3) Compensation. The term "compensation" means wages,
6		salaries, commissions and any other form of remuneration
7		paid to employees for personal services.
8		(4) Corporation. The term "corporation" includes
9		associations, joint-stock companies, insurance companies
10		and cooperatives. Any entity, including a limited
11		liability company formed under the Illinois Limited
12		Liability Company Act, shall be treated as a corporation if
13		it is so classified for federal income tax purposes.
14		(5) Department. The term "Department" means the
15		Department of Revenue of this State.
16		(6) Director. The term "Director" means the Director of
17		Revenue of this State.
18		(7) Fiduciary. The term "fiduciary" means a guardian,
19		trustee, executor, administrator, receiver, or any person
20		acting in any fiduciary capacity for any person.
21		(8) Financial organization.
22		(A) The term "financial organization" means any
23		bank, bank holding company, trust company, savings
24		bank, industrial bank, land bank, safe deposit
25		company, private banker, savings and loan association,
26		building and loan association, credit union, currency

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1		exchange, cooperative bank, small loan company, sales
2		finance company, investment company, or any person
3		which is owned by a bank or bank holding company. For
4		the purpose of this Section a "person" will include
5		only those persons which a bank holding company may
6		acquire and hold an interest in, directly or
7		indirectly, under the provisions of the Bank Holding
8		Company Act of 1956 (12 U.S.C. 1841, et seq.), except
9		where interests in any person must be disposed of
10		within certain required time limits under the Bank
11		Holding Company Act of 1956.
12		(B) For purposes of subparagraph (A) of this
13		paragraph, the term "bank" includes (i) any entity that
14		is regulated by the Comptroller of the Currency under
15		the National Bank Act, or by the Federal Reserve Board,
16		or by the Federal Deposit Insurance Corporation and
17		(ii) any federally or State chartered bank operating as
18		a credit card bank.
19		(C) For purposes of subparagraph (A) of this
20		paragraph, the term "sales finance company" has the
21		meaning provided in the following item (i) or (ii):
22		(i) A person primarily engaged in one or more
23		of the following businesses: the business of
24		purchasing customer receivables, the business of
25		making loans upon the security of customer
26		receivables, the business of making loans for the

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1		express purpose of funding purchases of tangible
2		personal property or services by the borrower, or
3		the business of finance leasing. For purposes of
4		this item (i), "customer receivable" means:
5		(a) a retail installment contract or
6		retail charge agreement within the meaning of
7		the Sales Finance Agency Act, the Retail
8		Installment Sales Act, or the Motor Vehicle
9		Retail Installment Sales Act;
10		(b) an installment, charge, credit, or
11		similar contract or agreement arising from the
12		sale of tangible personal property or services
13		in a transaction involving a deferred payment
14		price payable in one or more installments
15		subsequent to the sale; or
16		(c) the outstanding balance of a contract
17		or agreement described in provisions (a) or (b)
18		of this item (i).
19		A customer receivable need not provide for
20		payment of interest on deferred payments. A sales
21		finance company may purchase a customer receivable
22		from, or make a loan secured by a customer
23		receivable to, the seller in the original
24		transaction or to a person who purchased the
25		customer receivable directly or indirectly from
26		that seller.

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1		(ii) A corporation meeting each of the
2		following criteria:
3		(a) the corporation must be a member of an
4		"affiliated group" within the meaning of
5		Section 1504(a) of the Internal Revenue Code,
6		determined without regard to Section 1504(b)
7		of the Internal Revenue Code;
8		(b) more than 50% of the gross income of
9		the corporation for the taxable year must be
10		interest income derived from qualifying loans.
11		A "qualifying loan" is a loan made to a member
12		of the corporation's affiliated group that
13		originates customer receivables (within the
14		meaning of item (i)) or to whom customer
15		receivables originated by a member of the
16		affiliated group have been transferred, to the
17		extent the average outstanding balance of
18		loans from that corporation to members of its
19		affiliated group during the taxable year do not
20		exceed the limitation amount for that
21		corporation. The "limitation amount" for a
22		corporation is the average outstanding
23		balances during the taxable year of customer
24		receivables (within the meaning of item (i))
25		originated by all members of the affiliated
26		group. If the average outstanding balances of

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1		the loans made by a corporation to members of
2		its affiliated group exceed the limitation
3		amount, the interest income of that
4		corporation from qualifying loans shall be
5		equal to its interest income from loans to
6		members of its affiliated groups times a
7		fraction equal to the limitation amount
8		divided by the average outstanding balances of
9		the loans made by that corporation to members
10		of its affiliated group;
11		(c) the total of all shareholder's equity
12		(including, without limitation, paid-in
13		capital on common and preferred stock and
14		retained earnings) of the corporation plus the
15		total of all of its loans, advances, and other
16		obligations payable or owed to members of its
17		affiliated group may not exceed 20% of the
18		total assets of the corporation at any time
19		during the tax year; and
20		(d) more than 50% of all interest-bearing
21		obligations of the affiliated group payable to
22		persons outside the group determined in
23		accordance with generally accepted accounting
24		principles must be obligations of the
25		corporation.
26		This amendatory Act of the 91st General Assembly is

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1		declaratory of existing law.
2		(D) Subparagraphs (B) and (C) of this paragraph are
3		declaratory of existing law and apply retroactively,
4		for all tax years beginning on or before December 31,
5		1996, to all original returns, to all amended returns
6		filed no later than 30 days after the effective date of
7		this amendatory Act of 1996, and to all notices issued
8		on or before the effective date of this amendatory Act
9		of 1996 under subsection (a) of Section 903, subsection
10		(a) of Section 904, subsection (e) of Section 909, or
11		Section 912. A taxpayer that is a "financial
12		organization" that engages in any transaction with an
13		affiliate shall be a "financial organization" for all
14		purposes of this Act.
15		(E) For all tax years beginning on or before
16		December 31, 1996, a taxpayer that falls within the
17		definition of a "financial organization" under
18		subparagraphs (B) or (C) of this paragraph, but who
19		does not fall within the definition of a "financial
20		organization" under the Proposed Regulations issued by
21		the Department of Revenue on July 19, 1996, may
22		irrevocably elect to apply the Proposed Regulations
23		for all of those years as though the Proposed
24		Regulations had been lawfully promulgated, adopted,
25		and in effect for all of those years. For purposes of
26		applying subparagraphs (B) or (C) of this paragraph to

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1		all of those years, the election allowed by this
2		subparagraph applies only to the taxpayer making the
3		election and to those members of the taxpayer's unitary
4		business group who are ordinarily required to
5		apportion business income under the same subsection of
6		Section 304 of this Act as the taxpayer making the
7		election. No election allowed by this subparagraph
8		shall be made under a claim filed under subsection (d)
9		of Section 909 more than 30 days after the effective
10		date of this amendatory Act of 1996.
11		(F) Finance Leases. For purposes of this
12		subsection, a finance lease shall be treated as a loan
13		or other extension of credit, rather than as a lease,
14		regardless of how the transaction is characterized for
15		any other purpose, including the purposes of any
16		regulatory agency to which the lessor is subject. A
17		finance lease is any transaction in the form of a lease
18		in which the lessee is treated as the owner of the
19		leased asset entitled to any deduction for
20		depreciation allowed under Section 167 of the Internal
21		Revenue Code.
22		(9) Fiscal year. The term "fiscal year" means an
23		accounting period of 12 months ending on the last day of
24		any month other than December.
25		(9.5) Fixed place of business. The term "fixed place of
26		business" has the same meaning as that term is given in

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1		Section 864 of the Internal Revenue Code and the related
2		Treasury regulations.
3		(10) Includes and including. The terms "includes" and
4		"including" when used in a definition contained in this Act
5		shall not be deemed to exclude other things otherwise
6		within the meaning of the term defined.
7		(11) Internal Revenue Code. The term "Internal Revenue
8		Code" means the United States Internal Revenue Code of 1954
9		or any successor law or laws relating to federal income
10		taxes in effect for the taxable year.
11		(11.5) Investment partnership.
12		(A) The term "investment partnership" means any
13		entity that is treated as a partnership for federal
14		income tax purposes that meets the following
15		requirements:
16		(i) no less than 90% of the partnership's cost
17		of its total assets consists of qualifying
18		investment securities, deposits at banks or other
19		financial institutions, and office space and
20		equipment reasonably necessary to carry on its
21		activities as an investment partnership;
22		(ii) no less than 90% of its gross income
23		consists of interest, dividends, and gains from
24		the sale or exchange of qualifying investment
25		securities; and
26		(iii) the partnership is not a dealer in

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1		qualifying investment securities.
2		(B) For purposes of this paragraph (11.5), the term
3		"qualifying investment securities" includes all of the
4		following:
5		(i) common stock, including preferred or debt
6		securities convertible into common stock, and
7		preferred stock;
8		(ii) bonds, debentures, and other debt
9		securities;
10		(iii) foreign and domestic currency deposits
11		secured by federal, state, or local governmental
12		agencies;
13		(iv) mortgage or asset-backed securities
14		secured by federal, state, or local governmental
15		agencies;
16		(v) repurchase agreements and loan
17		participations;
18		(vi) foreign currency exchange contracts and
19		forward and futures contracts on foreign
20		currencies;
21		(vii) stock and bond index securities and
22		futures contracts and other similar financial
23		securities and futures contracts on those
24		securities;
25		(viii) options for the purchase or sale of any
26		of the securities, currencies, contracts, or

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1		financial instruments described in items (i) to
2		(vii), inclusive;
3		(ix) regulated futures contracts;
4		(x) commodities (not described in Section
5		1221(a)(1) of the Internal Revenue Code) or
6		futures, forwards, and options with respect to
7		such commodities, provided, however, that any item
8		of a physical commodity to which title is actually
9		acquired in the partnership's capacity as a dealer
10		in such commodity shall not be a qualifying
11		investment security;
12		(xi) derivatives; and
13		(xii) a partnership interest in another
14		partnership that is an investment partnership.
15		(12) Mathematical error. The term "mathematical error"
16		includes the following types of errors, omissions, or
17		defects in a return filed by a taxpayer which prevents
18		acceptance of the return as filed for processing:
19		(A) arithmetic errors or incorrect computations on
20		the return or supporting schedules;
21		(B) entries on the wrong lines;
22		(C) omission of required supporting forms or
23		schedules or the omission of the information in whole
24		or in part called for thereon; and
25		(D) an attempt to claim, exclude, deduct, or
26		improperly report, in a manner directly contrary to the

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1		provisions of the Act and regulations thereunder any
2		item of income, exemption, deduction, or credit.
3		(13) Nonbusiness income. The term "nonbusiness income"
4		means all income other than business income or
5		compensation.
6		(14) Nonresident. The term "nonresident" means a
7		person who is not a resident.
8		(15) Paid, incurred and accrued. The terms "paid",
9		"incurred" and "accrued" shall be construed according to
10		the method of accounting upon the basis of which the
11		person's base income is computed under this Act.
12		(16) Partnership and partner. The term "partnership"
13		includes a syndicate, group, pool, joint venture or other
14		unincorporated organization, through or by means of which
15		any business, financial operation, or venture is carried
16		on, and which is not, within the meaning of this Act, a
17		trust or estate or a corporation; and the term "partner"
18		includes a member in such syndicate, group, pool, joint
19		venture or organization.
20		The term "partnership" includes any entity, including
21		a limited liability company formed under the Illinois
22		Limited Liability Company Act, classified as a partnership
23		for federal income tax purposes.
24		The term "partnership" does not include a syndicate,
25		group, pool, joint venture, or other unincorporated
26		organization established for the sole purpose of playing

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1		the Illinois State Lottery.
2		(17) Part-year resident. The term "part-year resident"
3		means an individual who became a resident during the
4		taxable year or ceased to be a resident during the taxable
5		year. Under Section 1501(a)(20)(A)(i) residence commences
6		with presence in this State for other than a temporary or
7		transitory purpose and ceases with absence from this State
8		for other than a temporary or transitory purpose. Under
9		Section 1501(a)(20)(A)(ii) residence commences with the
10		establishment of domicile in this State and ceases with the
11		establishment of domicile in another State.
12		(18) Person. The term "person" shall be construed to
13		mean and include an individual, a trust, estate,
14		partnership, association, firm, company, corporation,
15		limited liability company, or fiduciary. For purposes of
16		Section 1301 and 1302 of this Act, a "person" means (i) an
17		individual, (ii) a corporation, (iii) an officer, agent, or
18		employee of a corporation, (iv) a member, agent or employee
19		of a partnership, or (v) a member, manager, employee,
20		officer, director, or agent of a limited liability company
21		who in such capacity commits an offense specified in
22		Section 1301 and 1302.
23		(18A) Records. The term "records" includes all data
24		maintained by the taxpayer, whether on paper, microfilm,
25		microfiche, or any type of machine-sensible data
26		compilation.

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1		(19) Regulations. The term "regulations" includes
2		rules promulgated and forms prescribed by the Department.
3		(20) Resident. The term "resident" means:
4		(A) an individual (i) who is in this State for
5		other than a temporary or transitory purpose during the
6		taxable year; or (ii) who is domiciled in this State
7		but is absent from the State for a temporary or
8		transitory purpose during the taxable year;
9		(B) The estate of a decedent who at his or her
10		death was domiciled in this State;
11		(C) A trust created by a will of a decedent who at
12		his death was domiciled in this State; and
13		(D) An irrevocable trust, the grantor of which was
14		domiciled in this State at the time such trust became
15		irrevocable. For purpose of this subparagraph, a trust
16		shall be considered irrevocable to the extent that the
17		grantor is not treated as the owner thereof under
18		Sections 671 through 678 of the Internal Revenue Code.
19		(21) Sales. The term "sales" means all gross receipts
20		of the taxpayer not allocated under Sections 301, 302 and
21		303.
22		(22) State. The term "state" when applied to a
23		jurisdiction other than this State means any state of the
24		United States, the District of Columbia, the Commonwealth
25		of Puerto Rico, any Territory or Possession of the United
26		States, and any foreign country, or any political

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1		subdivision of any of the foregoing. For purposes of the
2		foreign tax credit under Section 601, the term "state"
3		means any state of the United States, the District of
4		Columbia, the Commonwealth of Puerto Rico, and any
5		territory or possession of the United States, or any
6		political subdivision of any of the foregoing, effective
7		for tax years ending on or after December 31, 1989.
8		(23) Taxable year. The term "taxable year" means the
9		calendar year, or the fiscal year ending during such
10		calendar year, upon the basis of which the base income is
11		computed under this Act. "Taxable year" means, in the case
12		of a return made for a fractional part of a year under the
13		provisions of this Act, the period for which such return is
14		made.
15		(24) Taxpayer. The term "taxpayer" means any person
16		subject to the tax imposed by this Act.
17		(25) International banking facility. The term
18		international banking facility shall have the same meaning
19		as is set forth in the Illinois Banking Act or as is set
20		forth in the laws of the United States or regulations of
21		the Board of Governors of the Federal Reserve System.
22		(26) Income Tax Return Preparer.
23		(A) The term "income tax return preparer" means any
24		person who prepares for compensation, or who employs
25		one or more persons to prepare for compensation, any
26		return of tax imposed by this Act or any claim for

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1		refund of tax imposed by this Act. The preparation of a
2		substantial portion of a return or claim for refund
3		shall be treated as the preparation of that return or
4		claim for refund.
5		(B) A person is not an income tax return preparer
6		if all he or she does is
7		(i) furnish typing, reproducing, or other
8		mechanical assistance;
9		(ii) prepare returns or claims for refunds for
10		the employer by whom he or she is regularly and
11		continuously employed;
12		(iii) prepare as a fiduciary returns or claims
13		for refunds for any person; or
14		(iv) prepare claims for refunds for a taxpayer
15		in response to any notice of deficiency issued to
16		that taxpayer or in response to any waiver of
17		restriction after the commencement of an audit of
18		that taxpayer or of another taxpayer if a
19		determination in the audit of the other taxpayer
20		directly or indirectly affects the tax liability
21		of the taxpayer whose claims he or she is
22		preparing.
23		(27) Unitary business group.
24		(A) The term "unitary business group" means a group
25		of persons related through common ownership whose
26		business activities are integrated with, dependent

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1		upon and contribute to each other. The group will not
2		include those members whose business activity outside
3		the United States is 80% or more of any such member's
4		total business activity; for purposes of this
5		paragraph and clause (a)(3)(B)(ii) of Section 304,
6		business activity within the United States shall be
7		measured by means of the factors ordinarily applicable
8		under subsections (a), (b), (c), (d), or (h) of Section
9		304 except that, in the case of members ordinarily
10		required to apportion business income by means of the 3
11		factor formula of property, payroll and sales
12		specified in subsection (a) of Section 304, including
13		the formula as weighted in subsection (h) of Section
14		304, such members shall not use the sales factor in the
15		computation and the results of the property and payroll
16		factor computations of subsection (a) of Section 304
17		shall be divided by 2 (by one if either the property or
18		payroll factor has a denominator of zero). The
19		computation required by the preceding sentence shall,
20		in each case, involve the division of the member's
21		property, payroll, or revenue miles in the United
22		States, insurance premiums on property or risk in the
23		United States, or financial organization business
24		income from sources within the United States, as the
25		case may be, by the respective worldwide figures for
26		such items. Common ownership in the case of

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1		corporations is the direct or indirect control or
2		ownership of more than 50% of the outstanding voting
3		stock of the persons carrying on unitary business
4		activity. Unitary business activity can ordinarily be
5		illustrated where the activities of the members are:
6		(1) in the same general line (such as manufacturing,
7		wholesaling, retailing of tangible personal property,
8		insurance, transportation or finance); or (2) are
9		steps in a vertically structured enterprise or process
10		(such as the steps involved in the production of
11		natural resources, which might include exploration,
12		mining, refining, and marketing); and, in either
13		instance, the members are functionally integrated
14		through the exercise of strong centralized management
15		(where, for example, authority over such matters as
16		purchasing, financing, tax compliance, product line,
17		personnel, marketing and capital investment is not
18		left to each member).
19		(B) In no event, shall any unitary business group
20		include members which are ordinarily required to
21		apportion business income under different subsections
22		of Section 304 except that for tax years ending on or
23		after December 31, 1987 this prohibition shall not
24		apply to a holding company that would otherwise be a
25		member of a unitary business group with taxpayers that
26		apportion business income under any of subsections

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1		(b), (c), (c-1), or (d) of Section 304. If a unitary
2		business group would, but for the preceding sentence,
3		include members that are ordinarily required to
4		apportion business income under different subsections
5		of Section 304, then for each subsection of Section 304
6		for which there are two or more members, there shall be
7		a separate unitary business group composed of such
8		members. For purposes of the preceding two sentences, a
9		member is "ordinarily required to apportion business
10		income" under a particular subsection of Section 304 if
11		it would be required to use the apportionment method
12		prescribed by such subsection except for the fact that
13		it derives business income solely from Illinois. As
14		used in this paragraph, the phrase "United States"
15		means only the 50 states and the District of Columbia,
16		but does not include any territory or possession of the
17		United States or any area over which the United States
18		has asserted jurisdiction or claimed exclusive rights
19		with respect to the exploration for or exploitation of
20		natural resources.
21		(C) Holding companies.
22		(i) For purposes of this subparagraph, a
23		"holding company" is a corporation (other than a
24		corporation that is a financial organization under
25		paragraph (8) of this subsection (a) of Section
26		1501 because it is a bank holding company under the

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1		provisions of the Bank Holding Company Act of 1956
2		(12 U.S.C. 1841, et seq.) or because it is owned by
3		a bank or a bank holding company) that owns a
4		controlling interest in one or more other
5		taxpayers ("controlled taxpayers"); that, during
6		the period that includes the taxable year and the 2
7		immediately preceding taxable years or, if the
8		corporation was formed during the current or
9		immediately preceding taxable year, the taxable
10		years in which the corporation has been in
11		existence, derived substantially all its gross
12		income from dividends, interest, rents, royalties,
13		fees or other charges received from controlled
14		taxpayers for the provision of services, and gains
15		on the sale or other disposition of interests in
16		controlled taxpayers or in property leased or
17		licensed to controlled taxpayers or used by the
18		taxpayer in providing services to controlled
19		taxpayers; and that incurs no substantial expenses
20		other than expenses (including interest and other
21		costs of borrowing) incurred in connection with
22		the acquisition and holding of interests in
23		controlled taxpayers and in the provision of
24		services to controlled taxpayers or in the leasing
25		or licensing of property to controlled taxpayers.
26		(ii) The income of a holding company which is a

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1		member of more than one unitary business group
2		shall be included in each unitary business group of
3		which it is a member on a pro rata basis, by
4		including in each unitary business group that
5		portion of the base income of the holding company
6		that bears the same proportion to the total base
7		income of the holding company as the gross receipts
8		of the unitary business group bears to the combined
9		gross receipts of all unitary business groups (in
10		both cases without regard to the holding company)
11		or on any other reasonable basis, consistently
12		applied.
13		(iii) A holding company shall apportion its
14		business income under the subsection of Section
15		304 used by the other members of its unitary
16		business group. The apportionment factors of a
17		holding company which would be a member of more
18		than one unitary business group shall be included
19		with the apportionment factors of each unitary
20		business group of which it is a member on a pro
21		rata basis using the same method used in clause
22		(ii).
23		(iv) The provisions of this subparagraph (C)
24		are intended to clarify existing law.
25		(D) If including the base income and factors of a
26		holding company in more than one unitary business group

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1		under subparagraph (C) does not fairly reflect the
2		degree of integration between the holding company and
3		one or more of the unitary business groups, the
4		dependence of the holding company and one or more of
5		the unitary business groups upon each other, or the
6		contributions between the holding company and one or
7		more of the unitary business groups, the holding
8		company may petition the Director, under the
9		procedures provided under Section 304(f), for
10		permission to include all base income and factors of
11		the holding company only with members of a unitary
12		business group apportioning their business income
13		under one subsection of subsections (a), (b), (c), or
14		(d) of Section 304. If the petition is granted, the
15		holding company shall be included in a unitary business
16		group only with persons apportioning their business
17		income under the selected subsection of Section 304
18		until the Director grants a petition of the holding
19		company either to be included in more than one unitary
20		business group under subparagraph (C) or to include its
21		base income and factors only with members of a unitary
22		business group apportioning their business income
23		under a different subsection of Section 304.
24		(E) If the unitary business group members'
25		accounting periods differ, the common parent's
26		accounting period or, if there is no common parent, the

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1		accounting period of the member that is expected to
2		have, on a recurring basis, the greatest Illinois
3		income tax liability must be used to determine whether
4		to use the apportionment method provided in subsection
5		(a) or subsection (h) of Section 304. The prohibition
6		against membership in a unitary business group for
7		taxpayers ordinarily required to apportion income
8		under different subsections of Section 304 does not
9		apply to taxpayers required to apportion income under
10		subsection (a) and subsection (h) of Section 304. The
11		provisions of this amendatory Act of 1998 apply to tax
12		years ending on or after December 31, 1998.
13		(28) Subchapter S corporation. The term "Subchapter S
14		corporation" means a corporation for which there is in
15		effect an election under Section 1362 of the Internal
16		Revenue Code, or for which there is a federal election to
17		opt out of the provisions of the Subchapter S Revision Act
18		of 1982 and have applied instead the prior federal
19		Subchapter S rules as in effect on July 1, 1982.
20		(30) Foreign person. The term "foreign person" means
21		any person who is a nonresident alien individual and any
22		nonindividual entity, regardless of where created or
23		organized, whose business activity outside the United
24		States is 80% or more of the entity's total business
25		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. 96-641, eff. 8-24-09; 97-507, eff. 8-23-11;
22		97-636, eff. 6-1-12.)
23		Section 99. Effective date. This Act takes effect upon
24		becoming law.