HB5544 98TH GENERAL ASSEMBLY

LRB098 18574 HLH 53715 b

98TH GENERAL ASSEMBLY
State of Illinois
2013 and 2014
HB5544

Introduced , by Rep. Natalie A. Manley

SYNOPSIS AS INTRODUCED:

35 ILCS 5/405

Amends the Illinois Income Tax Act. Provides that each beneficiary, other than an individual, of a trust or estate shall be allowed a deduction in the taxable year in which the final taxable year of the trust or estate ends. Provides that the deduction shall be treated as a carryover deduction. Contains provisions concerning the number of years in which the beneficiary may carry forward the deduction.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning revenue.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Illinois Income Tax Act is amended by changing Section 405 as follows:

(35 ILCS 5/405)

Sec. 405. Carryovers in certain transactions acquisitions.

(a) In the case of the acquisition of assets of a corporation by another corporation described in Section 381(a) of the Internal Revenue Code, the acquiring corporation shall succeed to and take into account, as of the close of the day of distribution or transfer, all Article 2 credits and net losses under Section 207 of the corporation from which the assets were acquired.

(b) In the case of the acquisition of assets of a partnership by another partnership in a transaction in which the acquiring partnership is considered to be a continuation of the partnership from which the assets were acquired under the provisions of Section 708 of the Internal Revenue Code and any regulations promulgated under that Section, the acquiring partnership shall succeed to and take into account, as of the close of the day of distribution or transfer, all Article 2 credits and net losses under Section 207 of the partnership from which the assets were acquired.

(b-5) No limitation under Section 382 of the Internal Revenue Code or the separate return limitation year regulations promulgated under Section 1502 of the Internal Revenue Code shall apply to the carryover of any Article 2 credit or net loss allowable under Section 207.

(c) The provisions of Public Act 91-541 this amendatory Act of the 91st General Assembly shall apply to all acquisitions occurring in taxable years ending on or after December 31, 1986; provided that if a taxpayer's Illinois income tax liability for any taxable year, as assessed under Section 903 prior to January 1, 1999, was computed without taking into account all of the Article 2 credits and net losses under Section 207 as allowed by this Section:

(1) no refund shall be payable to the taxpayer for that taxable year as the result of allowing any portion of the Article 2 credits or net losses under Section 207 that were not taken into account in computing the tax assessed prior to January 1, 1999;

(2) any deficiency which has not been paid may be reduced (but not below zero) by the allowance of some or all of the Article 2 credits or net losses under Section 207 that were not taken into account in computing the tax assessed prior to January 1, 1999; and

(3) in the case of any Article 2 credit or net loss under Section 207 that, pursuant to this subsection (c), could not be taken into account either in computing the tax assessed prior to January 1, 1999 for a taxable year or in reducing a deficiency for that taxable year under paragraph (2) of subsection (c), the allowance of such credit or loss in any other taxable year shall not be denied on the grounds that such credit or loss should properly have been claimed in that taxable year under subsection (a) or (b).

(d) On the termination of a trust or estate that is entitled to a net loss carryover deduction under Section 207 of this Act for its final taxable year that is in excess of its taxable income (before the carryover deduction) for that taxable year, each beneficiary (other than an individual) of the trust or estate shall be allowed a deduction in its taxable year in which the final taxable year of the trust or estate ends, equal to portion of that excess carryover deduction allocable to that beneficiary under the principles of Section 642(h) of the Internal Revenue Code. The deduction allowed under this subsection (d) shall be treated as a carryover deduction of the beneficiary under Section 207 of this Act as if incurred by the beneficiary, except that the deduction may be carried forward by the beneficiary only for the maximum number of taxable years for which the trust or estate would have been allowed to carry the loss forward under Section 207 of this Act, minus the number of taxable years (including the year of termination) to which the trust or estate had carried the deduction, with the taxable year in which the beneficiary is first allowed a deduction under this paragraph counting as a carryforward year of the beneficiary. This subsection (d) shall apply to trusts or estates terminating after December 31, 2013, and is exempt from the provisions of Section 250 of this Act.

(Source: P.A. 91-541, eff. 8-13-99; 91-913, eff. 1-1-01.)