ARTICLE 15. DEFINITIONS AND RULES OF INTERPRETATION.
(35 ILCS 5/1501)(from Ch. 120, par. 15‑1501) Sec. 1501. Definitions. (a) In general. When used in this Act, where not otherwise distinctly expressed or manifestly incompatible with the intent thereof: (1) Business income. The term "business income"
means all income that may be treated as apportionable business income under the Constitution of the United States. Business income is net of the deductions allocable thereto. Such term does not include compensation or the deductions allocable thereto. For each taxable year beginning on or after January 1, 2003, a taxpayer may elect to treat all income other than compensation as business income. This election shall be made in accordance with rules adopted by the Department and, once made, shall be irrevocable.
(1.5) Captive real estate investment trust: (A) The term "captive real estate investment
trust" means a corporation, trust, or association:
(i) that is considered a real estate
investment trust for the taxable year under Section 856 of the Internal Revenue Code;
(ii) the certificates of beneficial interest
or shares of which are not regularly traded on an established securities market; and
(iii) of which more than 50% of the voting
power or value of the beneficial interest or shares, at any time during the last half of the taxable year, is owned or controlled, directly, indirectly, or constructively, by a single corporation.
(B) The term "captive real estate investment
trust" does not include:
(i) a real estate investment trust of which
more than 50% of the voting power or value of the beneficial interest or shares is owned or controlled, directly, indirectly, or constructively, by:
(a) a real estate investment trust, other
than a captive real estate investment trust;
(b) a person who is exempt from taxation
under Section 501 of the Internal Revenue Code, and who is not required to treat income received from the real estate investment trust as unrelated business taxable income under Section 512 of the Internal Revenue Code;
(c) a listed Australian property trust,
if no more than 50% of the voting power or value of the beneficial interest or shares of that trust, at any time during the last half of the taxable year, is owned or controlled, directly or indirectly, by a single person;
(d) an entity organized as a trust,
provided a listed Australian property trust described in subparagraph (c) owns or controls, directly or indirectly, or constructively, 75% or more of the voting power or value of the beneficial interests or shares of such entity; or
(e) an entity that is organized outside
of the laws of the United States and that satisfies all of the following criteria:
(1) at least 75% of the entity's
total asset value at the close of its taxable year is represented by real estate assets (as defined in Section 856(c)(5)(B) of the Internal Revenue Code, thereby including shares or certificates of beneficial interest in any real estate investment trust), cash and cash equivalents, and U.S. Government securities;
(2) the entity is not subject to tax
on amounts that are distributed to its beneficial owners or is exempt from entity‑level taxation;
(3) the entity distributes at least
85% of its taxable income (as computed in the jurisdiction in which it is organized) to the holders of its shares or certificates of beneficial interest on an annual basis;
(4) either (i) the shares or
beneficial interests of the entity are regularly traded on an established securities market or (ii) not more than 10% of the voting power or value in the entity is held, directly, indirectly, or constructively, by a single entity or individual; and
(5) the entity is organized in a
country that has entered into a tax treaty with the United States; or
(ii) during its first taxable year for which
it elects to be treated as a real estate investment trust under Section 856(c)(1) of the Internal Revenue Code, a real estate investment trust the certificates of beneficial interest or shares of which are not regularly traded on an established securities market, but only if the certificates of beneficial interest or shares of the real estate investment trust are regularly traded on an established securities market prior to the earlier of the due date (including extensions) for filing its return under this Act for that first taxable year or the date it actually files that return.
(C) For the purposes of this subsection (1.5),
the constructive ownership rules prescribed under Section 318(a) of the Internal Revenue Code, as modified by Section 856(d)(5) of the Internal Revenue Code, apply in determining the ownership of stock, assets, or net profits of any person.
(2) Commercial domicile. The term "commercial
domicile" means the principal place from which the trade or business of the taxpayer is directed or managed.
(3) Compensation. The term "compensation" means
wages, salaries, commissions and any other form of remuneration paid to employees for personal services.
(4) Corporation. The term "corporation" includes
associations, joint‑stock companies, insurance companies and cooperatives. Any entity, including a limited liability company formed under the Illinois Limited Liability Company Act, shall be treated as a corporation if it is so classified for federal income tax purposes.
(5) Department. The term "Department" means the
Department of Revenue of this State.
(6) Director. The term "Director" means the Director
of Revenue of this State.
(7) Fiduciary. The term "fiduciary" means a
guardian, trustee, executor, administrator, receiver, or any person acting in any fiduciary capacity for any person.
(8) Financial organization. (A) The term "financial organization" means any
bank, bank holding company, trust company, savings bank, industrial bank, land bank, safe deposit company, private banker, savings and loan association, building and loan association, credit union, currency exchange, cooperative bank, small loan company, sales finance company, investment company, or any person which is owned by a bank or bank holding company. For the purpose of this Section a "person" will include only those persons which a bank holding company may acquire and hold an interest in, directly or indirectly, under the provisions of the Bank Holding Company Act of 1956 (12 U.S.C. 1841, et seq.), except where interests in any person must be disposed of within certain required time limits under the Bank Holding Company Act of 1956.
(B) For purposes of subparagraph (A) of this
paragraph, the term "bank" includes (i) any entity that is regulated by the Comptroller of the Currency under the National Bank Act, or by the Federal Reserve Board, or by the Federal Deposit Insurance Corporation and (ii) any federally or State chartered bank operating as a credit card bank.
(C) For purposes of subparagraph (A) of this
paragraph, the term "sales finance company" has the meaning provided in the following item (i) or (ii):
(i) A person primarily engaged in one or
more of the following businesses: the business of purchasing customer receivables, the business of making loans upon the security of customer receivables, the business of making loans for the express purpose of funding purchases of tangible personal property or services by the borrower, or the business of finance leasing. For purposes of this item (i), "customer receivable" means:
(a) a retail installment contract or
retail charge agreement within the meaning of the Sales Finance Agency Act, the Retail Installment Sales Act, or the Motor Vehicle Retail Installment Sales Act;
(b) an installment, charge, credit, or
similar contract or agreement arising from the sale of tangible personal property or services in a transaction involving a deferred payment price payable in one or more installments subsequent to the sale; or
(c) the outstanding balance of a
contract or agreement described in provisions (a) or (b) of this item (i).
A customer receivable need not provide for
payment of interest on deferred payments. A sales finance company may purchase a customer receivable from, or make a loan secured by a customer receivable to, the seller in the original transaction or to a person who purchased the customer receivable directly or indirectly from that seller.
(ii) A corporation meeting each of the
following criteria:
(a) the corporation must be a member of
an "affiliated group" within the meaning of Section 1504(a) of the Internal Revenue Code, determined without regard to Section 1504(b) of the Internal Revenue Code;
(b) more than 50% of the gross income of
the corporation for the taxable year must be interest income derived from qualifying loans. A "qualifying loan" is a loan made to a member of the corporation's affiliated group that originates customer receivables (within the meaning of item (i)) or to whom customer receivables originated by a member of the affiliated group have been transferred, to the extent the average outstanding balance of loans from that corporation to members of its affiliated group during the taxable year do not exceed the limitation amount for that corporation. The "limitation amount" for a corporation is the average outstanding balances during the taxable year of customer receivables (within the meaning of item (i)) originated by all members of the affiliated group. If the average outstanding balances of the loans made by a corporation to members of its affiliated group exceed the limitation amount, the interest income of that corporation from qualifying loans shall be equal to its interest income from loans to members of its affiliated groups times a fraction equal to the limitation amount divided by the average outstanding balances of the loans made by that corporation to members of its affiliated group;
(c) the total of all shareholder's
equity (including, without limitation, paid‑in capital on common and preferred stock and retained earnings) of the corporation plus the total of all of its loans, advances, and other obligations payable or owed to members of its affiliated group may not exceed 20% of the total assets of the corporation at any time during the tax year; and
(d) more than 50% of all
interest‑bearing obligations of the affiliated group payable to persons outside the group determined in accordance with generally accepted accounting principles must be obligations of the corporation.
This amendatory Act of the 91st General Assembly
is declaratory of existing law.
(D) Subparagraphs (B) and (C) of this paragraph
are declaratory of existing law and apply retroactively, for all tax years beginning on or before December 31, 1996, to all original returns, to all amended returns filed no later than 30 days after the effective date of this amendatory Act of 1996, and to all notices issued on or before the effective date of this amendatory Act of 1996 under subsection (a) of Section 903, subsection (a) of Section 904, subsection (e) of Section 909, or Section 912. A taxpayer that is a "financial organization" that engages in any transaction with an affiliate shall be a "financial organization" for all purposes of this Act.
(E) For all tax years beginning on or before
December 31, 1996, a taxpayer that falls within the definition of a "financial organization" under subparagraphs (B) or (C) of this paragraph, but who does not fall within the definition of a "financial organization" under the Proposed Regulations issued by the Department of Revenue on July 19, 1996, may irrevocably elect to apply the Proposed Regulations for all of those years as though the Proposed Regulations had been lawfully promulgated, adopted, and in effect for all of those years. For purposes of applying subparagraphs (B) or (C) of this paragraph to all of those years, the election allowed by this subparagraph applies only to the taxpayer making the election and to those members of the taxpayer's unitary business group who are ordinarily required to apportion business income under the same subsection of Section 304 of this Act as the taxpayer making the election. No election allowed by this subparagraph shall be made under a claim filed under subsection (d) of Section 909 more than 30 days after the effective date of this amendatory Act of 1996.
(F) Finance Leases. For purposes of this
subsection, a finance lease shall be treated as a loan or other extension of credit, rather than as a lease, regardless of how the transaction is characterized for any other purpose, including the purposes of any regulatory agency to which the lessor is subject. A finance lease is any transaction in the form of a lease in which the lessee is treated as the owner of the leased asset entitled to any deduction for depreciation allowed under Section 167 of the Internal Revenue Code.
(9) Fiscal year. The term "fiscal year" means an
accounting period of 12 months ending on the last day of any month other than December.
(9.5) Fixed place of business. The term "fixed place
of business" has the same meaning as that term is given in Section 864 of the Internal Revenue Code and the related Treasury regulations.
(10) Includes and including. The terms "includes"
and "including" when used in a definition contained in this Act shall not be deemed to exclude other things otherwise within the meaning of the term defined.
(11) Internal Revenue Code. The term "Internal
Revenue Code" means the United States Internal Revenue Code of 1954 or any successor law or laws relating to federal income taxes in effect for the taxable year.
(11.5) Investment partnership. (A) The term "investment partnership" means any
entity that is treated as a partnership for federal income tax purposes that meets the following requirements:
(i) no less than 90% of the partnership's
cost of its total assets consists of qualifying investment securities, deposits at banks or other financial institutions, and office space and equipment reasonably necessary to carry on its activities as an investment partnership;
(ii) no less than 90% of its gross
income consists of interest, dividends, and gains from the sale or exchange of qualifying investment securities; and
(iii) the partnership is not a dealer in
qualifying investment securities.
(B) For purposes of this paragraph (11.5),
the term "qualifying investment securities" includes all of the following:
(i) common stock, including preferred or debt
securities convertible into common stock, and preferred stock;
(ii) bonds, debentures, and other debt
securities;
(iii) foreign and domestic currency deposits
secured by federal, state, or local governmental agencies;
(iv) mortgage or asset‑backed securities
secured by federal, state, or local governmental agencies;
(v) repurchase agreements and loan
participations;
(vi) foreign currency exchange contracts and
forward and futures contracts on foreign currencies;
(vii) stock and bond index securities and
futures contracts and other similar financial securities and futures contracts on those securities;
(viii) options for the purchase or sale of
any of the securities, currencies, contracts, or financial instruments described in items (i) to (vii), inclusive;
(ix) regulated futures contracts; (x) commodities (not described in Section
1221(a)(1) of the Internal Revenue Code) or futures, forwards, and options with respect to such commodities, provided, however, that any item of a physical commodity to which title is actually acquired in the partnership's capacity as a dealer in such commodity shall not be a qualifying investment security;
(xi) derivatives; and (xii) a partnership interest in another
partnership that is an investment partnership.
(12) Mathematical error. The term "mathematical
error" includes the following types of errors, omissions, or defects in a return filed by a taxpayer which prevents acceptance of the return as filed for processing:
(A) arithmetic errors or incorrect computations
on the return or supporting schedules;
(B) entries on the wrong lines; (C) omission of required supporting forms or
schedules or the omission of the information in whole or in part called for thereon; and
(D) an attempt to claim, exclude, deduct, or
improperly report, in a manner directly contrary to the provisions of the Act and regulations thereunder any item of income, exemption, deduction, or credit.
(13) Nonbusiness income. The term "nonbusiness
income" means all income other than business income or compensation.
ARTICLE 15. DEFINITIONS AND RULES OF INTERPRETATION.
(35 ILCS 5/1501)(from Ch. 120, par. 15‑1501) Sec. 1501. Definitions. (a) In general. When used in this Act, where not otherwise distinctly expressed or manifestly incompatible with the intent thereof: (1) Business income. The term "business income"
means all income that may be treated as apportionable business income under the Constitution of the United States. Business income is net of the deductions allocable thereto. Such term does not include compensation or the deductions allocable thereto. For each taxable year beginning on or after January 1, 2003, a taxpayer may elect to treat all income other than compensation as business income. This election shall be made in accordance with rules adopted by the Department and, once made, shall be irrevocable.
(1.5) Captive real estate investment trust: (A) The term "captive real estate investment
trust" means a corporation, trust, or association:
(i) that is considered a real estate
investment trust for the taxable year under Section 856 of the Internal Revenue Code;
(ii) the certificates of beneficial interest
or shares of which are not regularly traded on an established securities market; and
(iii) of which more than 50% of the voting
power or value of the beneficial interest or shares, at any time during the last half of the taxable year, is owned or controlled, directly, indirectly, or constructively, by a single corporation.
(B) The term "captive real estate investment
trust" does not include:
(i) a real estate investment trust of which
more than 50% of the voting power or value of the beneficial interest or shares is owned or controlled, directly, indirectly, or constructively, by:
(a) a real estate investment trust, other
than a captive real estate investment trust;
(b) a person who is exempt from taxation
under Section 501 of the Internal Revenue Code, and who is not required to treat income received from the real estate investment trust as unrelated business taxable income under Section 512 of the Internal Revenue Code;
(c) a listed Australian property trust,
if no more than 50% of the voting power or value of the beneficial interest or shares of that trust, at any time during the last half of the taxable year, is owned or controlled, directly or indirectly, by a single person;
(d) an entity organized as a trust,
provided a listed Australian property trust described in subparagraph (c) owns or controls, directly or indirectly, or constructively, 75% or more of the voting power or value of the beneficial interests or shares of such entity; or
(e) an entity that is organized outside
of the laws of the United States and that satisfies all of the following criteria:
(1) at least 75% of the entity's
total asset value at the close of its taxable year is represented by real estate assets (as defined in Section 856(c)(5)(B) of the Internal Revenue Code, thereby including shares or certificates of beneficial interest in any real estate investment trust), cash and cash equivalents, and U.S. Government securities;
(2) the entity is not subject to tax
on amounts that are distributed to its beneficial owners or is exempt from entity‑level taxation;
(3) the entity distributes at least
85% of its taxable income (as computed in the jurisdiction in which it is organized) to the holders of its shares or certificates of beneficial interest on an annual basis;
(4) either (i) the shares or
beneficial interests of the entity are regularly traded on an established securities market or (ii) not more than 10% of the voting power or value in the entity is held, directly, indirectly, or constructively, by a single entity or individual; and
(5) the entity is organized in a
country that has entered into a tax treaty with the United States; or
(ii) during its first taxable year for which
it elects to be treated as a real estate investment trust under Section 856(c)(1) of the Internal Revenue Code, a real estate investment trust the certificates of beneficial interest or shares of which are not regularly traded on an established securities market, but only if the certificates of beneficial interest or shares of the real estate investment trust are regularly traded on an established securities market prior to the earlier of the due date (including extensions) for filing its return under this Act for that first taxable year or the date it actually files that return.
(C) For the purposes of this subsection (1.5),
the constructive ownership rules prescribed under Section 318(a) of the Internal Revenue Code, as modified by Section 856(d)(5) of the Internal Revenue Code, apply in determining the ownership of stock, assets, or net profits of any person.
(2) Commercial domicile. The term "commercial
domicile" means the principal place from which the trade or business of the taxpayer is directed or managed.
(3) Compensation. The term "compensation" means
wages, salaries, commissions and any other form of remuneration paid to employees for personal services.
(4) Corporation. The term "corporation" includes
associations, joint‑stock companies, insurance companies and cooperatives. Any entity, including a limited liability company formed under the Illinois Limited Liability Company Act, shall be treated as a corporation if it is so classified for federal income tax purposes.
(5) Department. The term "Department" means the
Department of Revenue of this State.
(6) Director. The term "Director" means the Director
of Revenue of this State.
(7) Fiduciary. The term "fiduciary" means a
guardian, trustee, executor, administrator, receiver, or any person acting in any fiduciary capacity for any person.
(8) Financial organization. (A) The term "financial organization" means any
bank, bank holding company, trust company, savings bank, industrial bank, land bank, safe deposit company, private banker, savings and loan association, building and loan association, credit union, currency exchange, cooperative bank, small loan company, sales finance company, investment company, or any person which is owned by a bank or bank holding company. For the purpose of this Section a "person" will include only those persons which a bank holding company may acquire and hold an interest in, directly or indirectly, under the provisions of the Bank Holding Company Act of 1956 (12 U.S.C. 1841, et seq.), except where interests in any person must be disposed of within certain required time limits under the Bank Holding Company Act of 1956.
(B) For purposes of subparagraph (A) of this
paragraph, the term "bank" includes (i) any entity that is regulated by the Comptroller of the Currency under the National Bank Act, or by the Federal Reserve Board, or by the Federal Deposit Insurance Corporation and (ii) any federally or State chartered bank operating as a credit card bank.
(C) For purposes of subparagraph (A) of this
paragraph, the term "sales finance company" has the meaning provided in the following item (i) or (ii):
(i) A person primarily engaged in one or
more of the following businesses: the business of purchasing customer receivables, the business of making loans upon the security of customer receivables, the business of making loans for the express purpose of funding purchases of tangible personal property or services by the borrower, or the business of finance leasing. For purposes of this item (i), "customer receivable" means:
(a) a retail installment contract or
retail charge agreement within the meaning of the Sales Finance Agency Act, the Retail Installment Sales Act, or the Motor Vehicle Retail Installment Sales Act;
(b) an installment, charge, credit, or
similar contract or agreement arising from the sale of tangible personal property or services in a transaction involving a deferred payment price payable in one or more installments subsequent to the sale; or
(c) the outstanding balance of a
contract or agreement described in provisions (a) or (b) of this item (i).
A customer receivable need not provide for
payment of interest on deferred payments. A sales finance company may purchase a customer receivable from, or make a loan secured by a customer receivable to, the seller in the original transaction or to a person who purchased the customer receivable directly or indirectly from that seller.
(ii) A corporation meeting each of the
following criteria:
(a) the corporation must be a member of
an "affiliated group" within the meaning of Section 1504(a) of the Internal Revenue Code, determined without regard to Section 1504(b) of the Internal Revenue Code;
(b) more than 50% of the gross income of
the corporation for the taxable year must be interest income derived from qualifying loans. A "qualifying loan" is a loan made to a member of the corporation's affiliated group that originates customer receivables (within the meaning of item (i)) or to whom customer receivables originated by a member of the affiliated group have been transferred, to the extent the average outstanding balance of loans from that corporation to members of its affiliated group during the taxable year do not exceed the limitation amount for that corporation. The "limitation amount" for a corporation is the average outstanding balances during the taxable year of customer receivables (within the meaning of item (i)) originated by all members of the affiliated group. If the average outstanding balances of the loans made by a corporation to members of its affiliated group exceed the limitation amount, the interest income of that corporation from qualifying loans shall be equal to its interest income from loans to members of its affiliated groups times a fraction equal to the limitation amount divided by the average outstanding balances of the loans made by that corporation to members of its affiliated group;
(c) the total of all shareholder's
equity (including, without limitation, paid‑in capital on common and preferred stock and retained earnings) of the corporation plus the total of all of its loans, advances, and other obligations payable or owed to members of its affiliated group may not exceed 20% of the total assets of the corporation at any time during the tax year; and
(d) more than 50% of all
interest‑bearing obligations of the affiliated group payable to persons outside the group determined in accordance with generally accepted accounting principles must be obligations of the corporation.
This amendatory Act of the 91st General Assembly
is declaratory of existing law.
(D) Subparagraphs (B) and (C) of this paragraph
are declaratory of existing law and apply retroactively, for all tax years beginning on or before December 31, 1996, to all original returns, to all amended returns filed no later than 30 days after the effective date of this amendatory Act of 1996, and to all notices issued on or before the effective date of this amendatory Act of 1996 under subsection (a) of Section 903, subsection (a) of Section 904, subsection (e) of Section 909, or Section 912. A taxpayer that is a "financial organization" that engages in any transaction with an affiliate shall be a "financial organization" for all purposes of this Act.
(E) For all tax years beginning on or before
December 31, 1996, a taxpayer that falls within the definition of a "financial organization" under subparagraphs (B) or (C) of this paragraph, but who does not fall within the definition of a "financial organization" under the Proposed Regulations issued by the Department of Revenue on July 19, 1996, may irrevocably elect to apply the Proposed Regulations for all of those years as though the Proposed Regulations had been lawfully promulgated, adopted, and in effect for all of those years. For purposes of applying subparagraphs (B) or (C) of this paragraph to all of those years, the election allowed by this subparagraph applies only to the taxpayer making the election and to those members of the taxpayer's unitary business group who are ordinarily required to apportion business income under the same subsection of Section 304 of this Act as the taxpayer making the election. No election allowed by this subparagraph shall be made under a claim filed under subsection (d) of Section 909 more than 30 days after the effective date of this amendatory Act of 1996.
(F) Finance Leases. For purposes of this
subsection, a finance lease shall be treated as a loan or other extension of credit, rather than as a lease, regardless of how the transaction is characterized for any other purpose, including the purposes of any regulatory agency to which the lessor is subject. A finance lease is any transaction in the form of a lease in which the lessee is treated as the owner of the leased asset entitled to any deduction for depreciation allowed under Section 167 of the Internal Revenue Code.
(9) Fiscal year. The term "fiscal year" means an
accounting period of 12 months ending on the last day of any month other than December.
(9.5) Fixed place of business. The term "fixed place
of business" has the same meaning as that term is given in Section 864 of the Internal Revenue Code and the related Treasury regulations.
(10) Includes and including. The terms "includes"
and "including" when used in a definition contained in this Act shall not be deemed to exclude other things otherwise within the meaning of the term defined.
(11) Internal Revenue Code. The term "Internal
Revenue Code" means the United States Internal Revenue Code of 1954 or any successor law or laws relating to federal income taxes in effect for the taxable year.
(11.5) Investment partnership. (A) The term "investment partnership" means any
entity that is treated as a partnership for federal income tax purposes that meets the following requirements:
(i) no less than 90% of the partnership's
cost of its total assets consists of qualifying investment securities, deposits at banks or other financial institutions, and office space and equipment reasonably necessary to carry on its activities as an investment partnership;
(ii) no less than 90% of its gross
income consists of interest, dividends, and gains from the sale or exchange of qualifying investment securities; and
(iii) the partnership is not a dealer in
qualifying investment securities.
(B) For purposes of this paragraph (11.5),
the term "qualifying investment securities" includes all of the following:
(i) common stock, including preferred or debt
securities convertible into common stock, and preferred stock;
(ii) bonds, debentures, and other debt
securities;
(iii) foreign and domestic currency deposits
secured by federal, state, or local governmental agencies;
(iv) mortgage or asset‑backed securities
secured by federal, state, or local governmental agencies;
(v) repurchase agreements and loan
participations;
(vi) foreign currency exchange contracts and
forward and futures contracts on foreign currencies;
(vii) stock and bond index securities and
futures contracts and other similar financial securities and futures contracts on those securities;
(viii) options for the purchase or sale of
any of the securities, currencies, contracts, or financial instruments described in items (i) to (vii), inclusive;
(ix) regulated futures contracts; (x) commodities (not described in Section
1221(a)(1) of the Internal Revenue Code) or futures, forwards, and options with respect to such commodities, provided, however, that any item of a physical commodity to which title is actually acquired in the partnership's capacity as a dealer in such commodity shall not be a qualifying investment security;
(xi) derivatives; and (xii) a partnership interest in another
partnership that is an investment partnership.
(12) Mathematical error. The term "mathematical
error" includes the following types of errors, omissions, or defects in a return filed by a taxpayer which prevents acceptance of the return as filed for processing:
(A) arithmetic errors or incorrect computations
on the return or supporting schedules;
(B) entries on the wrong lines; (C) omission of required supporting forms or
schedules or the omission of the information in whole or in part called for thereon; and
(D) an attempt to claim, exclude, deduct, or
improperly report, in a manner directly contrary to the provisions of the Act and regulations thereunder any item of income, exemption, deduction, or credit.
(13) Nonbusiness income. The term "nonbusiness
income" means all income other than business income or compensation.
ARTICLE 15. DEFINITIONS AND RULES OF INTERPRETATION.
(35 ILCS 5/1501)(from Ch. 120, par. 15‑1501) Sec. 1501. Definitions. (a) In general. When used in this Act, where not otherwise distinctly expressed or manifestly incompatible with the intent thereof: (1) Business income. The term "business income"
means all income that may be treated as apportionable business income under the Constitution of the United States. Business income is net of the deductions allocable thereto. Such term does not include compensation or the deductions allocable thereto. For each taxable year beginning on or after January 1, 2003, a taxpayer may elect to treat all income other than compensation as business income. This election shall be made in accordance with rules adopted by the Department and, once made, shall be irrevocable.
(1.5) Captive real estate investment trust: (A) The term "captive real estate investment
trust" means a corporation, trust, or association:
(i) that is considered a real estate
investment trust for the taxable year under Section 856 of the Internal Revenue Code;
(ii) the certificates of beneficial interest
or shares of which are not regularly traded on an established securities market; and
(iii) of which more than 50% of the voting
power or value of the beneficial interest or shares, at any time during the last half of the taxable year, is owned or controlled, directly, indirectly, or constructively, by a single corporation.
(B) The term "captive real estate investment
trust" does not include:
(i) a real estate investment trust of which
more than 50% of the voting power or value of the beneficial interest or shares is owned or controlled, directly, indirectly, or constructively, by:
(a) a real estate investment trust, other
than a captive real estate investment trust;
(b) a person who is exempt from taxation
under Section 501 of the Internal Revenue Code, and who is not required to treat income received from the real estate investment trust as unrelated business taxable income under Section 512 of the Internal Revenue Code;
(c) a listed Australian property trust,
if no more than 50% of the voting power or value of the beneficial interest or shares of that trust, at any time during the last half of the taxable year, is owned or controlled, directly or indirectly, by a single person;
(d) an entity organized as a trust,
provided a listed Australian property trust described in subparagraph (c) owns or controls, directly or indirectly, or constructively, 75% or more of the voting power or value of the beneficial interests or shares of such entity; or
(e) an entity that is organized outside
of the laws of the United States and that satisfies all of the following criteria:
(1) at least 75% of the entity's
total asset value at the close of its taxable year is represented by real estate assets (as defined in Section 856(c)(5)(B) of the Internal Revenue Code, thereby including shares or certificates of beneficial interest in any real estate investment trust), cash and cash equivalents, and U.S. Government securities;
(2) the entity is not subject to tax
on amounts that are distributed to its beneficial owners or is exempt from entity‑level taxation;
(3) the entity distributes at least
85% of its taxable income (as computed in the jurisdiction in which it is organized) to the holders of its shares or certificates of beneficial interest on an annual basis;
(4) either (i) the shares or
beneficial interests of the entity are regularly traded on an established securities market or (ii) not more than 10% of the voting power or value in the entity is held, directly, indirectly, or constructively, by a single entity or individual; and
(5) the entity is organized in a
country that has entered into a tax treaty with the United States; or
(ii) during its first taxable year for which
it elects to be treated as a real estate investment trust under Section 856(c)(1) of the Internal Revenue Code, a real estate investment trust the certificates of beneficial interest or shares of which are not regularly traded on an established securities market, but only if the certificates of beneficial interest or shares of the real estate investment trust are regularly traded on an established securities market prior to the earlier of the due date (including extensions) for filing its return under this Act for that first taxable year or the date it actually files that return.
(C) For the purposes of this subsection (1.5),
the constructive ownership rules prescribed under Section 318(a) of the Internal Revenue Code, as modified by Section 856(d)(5) of the Internal Revenue Code, apply in determining the ownership of stock, assets, or net profits of any person.
(2) Commercial domicile. The term "commercial
domicile" means the principal place from which the trade or business of the taxpayer is directed or managed.
(3) Compensation. The term "compensation" means
wages, salaries, commissions and any other form of remuneration paid to employees for personal services.
(4) Corporation. The term "corporation" includes
associations, joint‑stock companies, insurance companies and cooperatives. Any entity, including a limited liability company formed under the Illinois Limited Liability Company Act, shall be treated as a corporation if it is so classified for federal income tax purposes.
(5) Department. The term "Department" means the
Department of Revenue of this State.
(6) Director. The term "Director" means the Director
of Revenue of this State.
(7) Fiduciary. The term "fiduciary" means a
guardian, trustee, executor, administrator, receiver, or any person acting in any fiduciary capacity for any person.
(8) Financial organization. (A) The term "financial organization" means any
bank, bank holding company, trust company, savings bank, industrial bank, land bank, safe deposit company, private banker, savings and loan association, building and loan association, credit union, currency exchange, cooperative bank, small loan company, sales finance company, investment company, or any person which is owned by a bank or bank holding company. For the purpose of this Section a "person" will include only those persons which a bank holding company may acquire and hold an interest in, directly or indirectly, under the provisions of the Bank Holding Company Act of 1956 (12 U.S.C. 1841, et seq.), except where interests in any person must be disposed of within certain required time limits under the Bank Holding Company Act of 1956.
(B) For purposes of subparagraph (A) of this
paragraph, the term "bank" includes (i) any entity that is regulated by the Comptroller of the Currency under the National Bank Act, or by the Federal Reserve Board, or by the Federal Deposit Insurance Corporation and (ii) any federally or State chartered bank operating as a credit card bank.
(C) For purposes of subparagraph (A) of this
paragraph, the term "sales finance company" has the meaning provided in the following item (i) or (ii):
(i) A person primarily engaged in one or
more of the following businesses: the business of purchasing customer receivables, the business of making loans upon the security of customer receivables, the business of making loans for the express purpose of funding purchases of tangible personal property or services by the borrower, or the business of finance leasing. For purposes of this item (i), "customer receivable" means:
(a) a retail installment contract or
retail charge agreement within the meaning of the Sales Finance Agency Act, the Retail Installment Sales Act, or the Motor Vehicle Retail Installment Sales Act;
(b) an installment, charge, credit, or
similar contract or agreement arising from the sale of tangible personal property or services in a transaction involving a deferred payment price payable in one or more installments subsequent to the sale; or
(c) the outstanding balance of a
contract or agreement described in provisions (a) or (b) of this item (i).
A customer receivable need not provide for
payment of interest on deferred payments. A sales finance company may purchase a customer receivable from, or make a loan secured by a customer receivable to, the seller in the original transaction or to a person who purchased the customer receivable directly or indirectly from that seller.
(ii) A corporation meeting each of the
following criteria:
(a) the corporation must be a member of
an "affiliated group" within the meaning of Section 1504(a) of the Internal Revenue Code, determined without regard to Section 1504(b) of the Internal Revenue Code;
(b) more than 50% of the gross income of
the corporation for the taxable year must be interest income derived from qualifying loans. A "qualifying loan" is a loan made to a member of the corporation's affiliated group that originates customer receivables (within the meaning of item (i)) or to whom customer receivables originated by a member of the affiliated group have been transferred, to the extent the average outstanding balance of loans from that corporation to members of its affiliated group during the taxable year do not exceed the limitation amount for that corporation. The "limitation amount" for a corporation is the average outstanding balances during the taxable year of customer receivables (within the meaning of item (i)) originated by all members of the affiliated group. If the average outstanding balances of the loans made by a corporation to members of its affiliated group exceed the limitation amount, the interest income of that corporation from qualifying loans shall be equal to its interest income from loans to members of its affiliated groups times a fraction equal to the limitation amount divided by the average outstanding balances of the loans made by that corporation to members of its affiliated group;
(c) the total of all shareholder's
equity (including, without limitation, paid‑in capital on common and preferred stock and retained earnings) of the corporation plus the total of all of its loans, advances, and other obligations payable or owed to members of its affiliated group may not exceed 20% of the total assets of the corporation at any time during the tax year; and
(d) more than 50% of all
interest‑bearing obligations of the affiliated group payable to persons outside the group determined in accordance with generally accepted accounting principles must be obligations of the corporation.
This amendatory Act of the 91st General Assembly
is declaratory of existing law.
(D) Subparagraphs (B) and (C) of this paragraph
are declaratory of existing law and apply retroactively, for all tax years beginning on or before December 31, 1996, to all original returns, to all amended returns filed no later than 30 days after the effective date of this amendatory Act of 1996, and to all notices issued on or before the effective date of this amendatory Act of 1996 under subsection (a) of Section 903, subsection (a) of Section 904, subsection (e) of Section 909, or Section 912. A taxpayer that is a "financial organization" that engages in any transaction with an affiliate shall be a "financial organization" for all purposes of this Act.
(E) For all tax years beginning on or before
December 31, 1996, a taxpayer that falls within the definition of a "financial organization" under subparagraphs (B) or (C) of this paragraph, but who does not fall within the definition of a "financial organization" under the Proposed Regulations issued by the Department of Revenue on July 19, 1996, may irrevocably elect to apply the Proposed Regulations for all of those years as though the Proposed Regulations had been lawfully promulgated, adopted, and in effect for all of those years. For purposes of applying subparagraphs (B) or (C) of this paragraph to all of those years, the election allowed by this subparagraph applies only to the taxpayer making the election and to those members of the taxpayer's unitary business group who are ordinarily required to apportion business income under the same subsection of Section 304 of this Act as the taxpayer making the election. No election allowed by this subparagraph shall be made under a claim filed under subsection (d) of Section 909 more than 30 days after the effective date of this amendatory Act of 1996.
(F) Finance Leases. For purposes of this
subsection, a finance lease shall be treated as a loan or other extension of credit, rather than as a lease, regardless of how the transaction is characterized for any other purpose, including the purposes of any regulatory agency to which the lessor is subject. A finance lease is any transaction in the form of a lease in which the lessee is treated as the owner of the leased asset entitled to any deduction for depreciation allowed under Section 167 of the Internal Revenue Code.
(9) Fiscal year. The term "fiscal year" means an
accounting period of 12 months ending on the last day of any month other than December.
(9.5) Fixed place of business. The term "fixed place
of business" has the same meaning as that term is given in Section 864 of the Internal Revenue Code and the related Treasury regulations.
(10) Includes and including. The terms "includes"
and "including" when used in a definition contained in this Act shall not be deemed to exclude other things otherwise within the meaning of the term defined.
(11) Internal Revenue Code. The term "Internal
Revenue Code" means the United States Internal Revenue Code of 1954 or any successor law or laws relating to federal income taxes in effect for the taxable year.
(11.5) Investment partnership. (A) The term "investment partnership" means any
entity that is treated as a partnership for federal income tax purposes that meets the following requirements:
(i) no less than 90% of the partnership's
cost of its total assets consists of qualifying investment securities, deposits at banks or other financial institutions, and office space and equipment reasonably necessary to carry on its activities as an investment partnership;
(ii) no less than 90% of its gross
income consists of interest, dividends, and gains from the sale or exchange of qualifying investment securities; and
(iii) the partnership is not a dealer in
qualifying investment securities.
(B) For purposes of this paragraph (11.5),
the term "qualifying investment securities" includes all of the following:
(i) common stock, including preferred or debt
securities convertible into common stock, and preferred stock;
(ii) bonds, debentures, and other debt
securities;
(iii) foreign and domestic currency deposits
secured by federal, state, or local governmental agencies;
(iv) mortgage or asset‑backed securities
secured by federal, state, or local governmental agencies;
(v) repurchase agreements and loan
participations;
(vi) foreign currency exchange contracts and
forward and futures contracts on foreign currencies;
(vii) stock and bond index securities and
futures contracts and other similar financial securities and futures contracts on those securities;
(viii) options for the purchase or sale of
any of the securities, currencies, contracts, or financial instruments described in items (i) to (vii), inclusive;
(ix) regulated futures contracts; (x) commodities (not described in Section
1221(a)(1) of the Internal Revenue Code) or futures, forwards, and options with respect to such commodities, provided, however, that any item of a physical commodity to which title is actually acquired in the partnership's capacity as a dealer in such commodity shall not be a qualifying investment security;
(xi) derivatives; and (xii) a partnership interest in another
partnership that is an investment partnership.
(12) Mathematical error. The term "mathematical
error" includes the following types of errors, omissions, or defects in a return filed by a taxpayer which prevents acceptance of the return as filed for processing:
(A) arithmetic errors or incorrect computations
on the return or supporting schedules;
(B) entries on the wrong lines; (C) omission of required supporting forms or
schedules or the omission of the information in whole or in part called for thereon; and
(D) an attempt to claim, exclude, deduct, or
improperly report, in a manner directly contrary to the provisions of the Act and regulations thereunder any item of income, exemption, deduction, or credit.
(13) Nonbusiness income. The term "nonbusiness
income" means all income other than business income or compensation.
