Page 1016

or (iv) an item of interest paid, accrued, or incurred, directly or indirectly, to a person if the taxpayer establishes by clear and convincing evidence that the adjustments are unreasonable; or if the taxpayer and the Director agree in writing to the application or use of an alternative method of apportionment under Section 304(f). For taxable years ending on or after December 31, 2025, this paragraph shall not apply to the following: (i) an item of interest paid, accrued, or incurred, directly or indirectly, to a person if the taxpayer can establish, based on a preponderance of the evidence, both of the following: (a) the person, during the same taxable year, paid, accrued, or incurred, the interest to a person that is not a related member, and (b) the transaction giving rise to the interest expense between the taxpayer and the person did not have as a principal purpose the avoidance of Illinois income tax, and is paid pursuant to a contract or agreement that reflects an arm's-length interest rate and terms; or (ii) an item of interest paid, accrued, or SB3019 Enrolled LRB104 20255 HLH 33706 b Public Act 104-0468