100TH GENERAL ASSEMBLY
State of Illinois
2017 and 2018
HB3640

 

Introduced , by Rep. Ryan Spain

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 10/5-5
35 ILCS 10/5-25
35 ILCS 10/5-40
35 ILCS 10/5-77

    Amends the Economic Development for a Growing Economy Tax Credit Act. Provides that an employee of the Taxpayer who was previously employed in Illinois by the Taxpayer and whose employment was shifted to the project after the Taxpayer entered into the Agreement is not considered a new employee for purposes of the Act. Provides that the Department of Commerce and Economic Opportunity shall not enter into any new EDGE Agreements after December 31, 2021 (currently, April 30, 2017). Removes a requirement that the Department of Commerce and Economic Opportunity shall consider the magnitude of the cost differential between Illinois and the competing state when awarding credits. Makes changes concerning eligibility for the credit. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB3640LRB100 11262 HLH 21597 b

1    AN ACT concerning revenue.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Economic Development for a Growing Economy
5Tax Credit Act is amended by changing Sections 5-5, 5-25, 5-40,
6and 5-77 as follows:
 
7    (35 ILCS 10/5-5)
8    Sec. 5-5. Definitions. As used in this Act:
9    "Agreement" means the Agreement between a Taxpayer and the
10Department under the provisions of Section 5-50 of this Act.
11    "Applicant" means a Taxpayer that is operating a business
12located or that the Taxpayer plans to locate within the State
13of Illinois and that is engaged in interstate or intrastate
14commerce for the purpose of manufacturing, processing,
15assembling, warehousing, or distributing products, conducting
16research and development, providing tourism services, or
17providing services in interstate commerce, office industries,
18or agricultural processing, but excluding retail, retail food,
19health, or professional services. "Applicant" does not include
20a Taxpayer who closes or substantially reduces an operation at
21one location in the State and relocates substantially the same
22operation to another location in the State. This does not
23prohibit a Taxpayer from expanding its operations at another

 

 

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1location in the State, provided that existing operations of a
2similar nature located within the State are not closed or
3substantially reduced. This also does not prohibit a Taxpayer
4from moving its operations from one location in the State to
5another location in the State for the purpose of expanding the
6operation provided that the Department determines that
7expansion cannot reasonably be accommodated within the
8municipality in which the business is located, or in the case
9of a business located in an incorporated area of the county,
10within the county in which the business is located, after
11conferring with the chief elected official of the municipality
12or county and taking into consideration any evidence offered by
13the municipality or county regarding the ability to accommodate
14expansion within the municipality or county.
15    "Committee" means the Illinois Business Investment
16Committee created under Section 5-25 of this Act within the
17Illinois Economic Development Board.
18    "Credit" means the amount agreed to between the Department
19and Applicant under this Act, but not to exceed the Incremental
20Income Tax attributable to the Applicant's project.
21    "Department" means the Department of Commerce and Economic
22Opportunity.
23    "Director" means the Director of Commerce and Economic
24Opportunity.
25    "Full-time Employee" means an individual who is employed
26for consideration for at least 35 hours each week or who

 

 

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1renders any other standard of service generally accepted by
2industry custom or practice as full-time employment. An
3individual for whom a W-2 is issued by a Professional Employer
4Organization (PEO) is a full-time employee if employed in the
5service of the Applicant for consideration for at least 35
6hours each week or who renders any other standard of service
7generally accepted by industry custom or practice as full-time
8employment to Applicant.
9    "Incremental Income Tax" means the total amount withheld
10during the taxable year from the compensation of New Employees
11under Article 7 of the Illinois Income Tax Act arising from
12employment at a project that is the subject of an Agreement.
13    "New Employee" means:
14        (a) A Full-time Employee first employed by a Taxpayer
15    in the project that is the subject of an Agreement and who
16    is hired after the Taxpayer enters into the tax credit
17    Agreement.
18        (b) The term "New Employee" does not include:
19            (1) an employee of the Taxpayer who performs a job
20        that was previously performed by another employee, if
21        that job existed for at least 6 months before hiring
22        the employee;
23            (2) an employee of the Taxpayer who was previously
24        employed in Illinois by a Related Member of the
25        Taxpayer and whose employment was shifted to the
26        Taxpayer after the Taxpayer entered into the tax credit

 

 

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1        Agreement; or
2            (3) a child, grandchild, parent, or spouse, other
3        than a spouse who is legally separated from the
4        individual, of any individual who has a direct or an
5        indirect ownership interest of at least 5% in the
6        profits, capital, or value of the Taxpayer; or .
7            (4) an employee of the Taxpayer who was previously
8        employed in Illinois by the Taxpayer and whose
9        employment was shifted to the project after the
10        Taxpayer entered into the Agreement.
11        (c) Notwithstanding paragraph (1) of subsection (b),
12    an employee may be considered a New Employee under the
13    Agreement if the employee performs a job that was
14    previously performed by an employee who was:
15            (1) treated under the Agreement as a New Employee;
16        and
17            (2) promoted by the Taxpayer to another job.
18        (d) Notwithstanding subsection (a), the Department may
19    award Credit to an Applicant with respect to an employee
20    hired prior to the date of the Agreement if:
21            (1) the Applicant is in receipt of a letter from
22        the Department stating an intent to enter into a credit
23        Agreement;
24            (2) the letter described in paragraph (1) is issued
25        by the Department not later than 15 days after the
26        effective date of this Act; and

 

 

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1            (3) the employee was hired after the date the
2        letter described in paragraph (1) was issued.
3    "Noncompliance Date" means, in the case of a Taxpayer that
4is not complying with the requirements of the Agreement or the
5provisions of this Act, the day following the last date upon
6which the Taxpayer was in compliance with the requirements of
7the Agreement and the provisions of this Act, as determined by
8the Director, pursuant to Section 5-65.
9    "Pass Through Entity" means an entity that is exempt from
10the tax under subsection (b) or (c) of Section 205 of the
11Illinois Income Tax Act.
12    "Professional Employer Organization" (PEO) means an
13employee leasing company, as defined in Section 206.1(A)(2) of
14the Illinois Unemployment Insurance Act.
15    "Related Member" means a person that, with respect to the
16Taxpayer during any portion of the taxable year, is any one of
17the following:
18        (1) An individual stockholder, if the stockholder and
19    the members of the stockholder's family (as defined in
20    Section 318 of the Internal Revenue Code) own directly,
21    indirectly, beneficially, or constructively, in the
22    aggregate, at least 50% of the value of the Taxpayer's
23    outstanding stock.
24        (2) A partnership, estate, or trust and any partner or
25    beneficiary, if the partnership, estate, or trust, and its
26    partners or beneficiaries own directly, indirectly,

 

 

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1    beneficially, or constructively, in the aggregate, at
2    least 50% of the profits, capital, stock, or value of the
3    Taxpayer.
4        (3) A corporation, and any party related to the
5    corporation in a manner that would require an attribution
6    of stock from the corporation to the party or from the
7    party to the corporation under the attribution rules of
8    Section 318 of the Internal Revenue Code, if the Taxpayer
9    owns directly, indirectly, beneficially, or constructively
10    at least 50% of the value of the corporation's outstanding
11    stock.
12        (4) A corporation and any party related to that
13    corporation in a manner that would require an attribution
14    of stock from the corporation to the party or from the
15    party to the corporation under the attribution rules of
16    Section 318 of the Internal Revenue Code, if the
17    corporation and all such related parties own in the
18    aggregate at least 50% of the profits, capital, stock, or
19    value of the Taxpayer.
20        (5) A person to or from whom there is attribution of
21    stock ownership in accordance with Section 1563(e) of the
22    Internal Revenue Code, except, for purposes of determining
23    whether a person is a Related Member under this paragraph,
24    20% shall be substituted for 5% wherever 5% appears in
25    Section 1563(e) of the Internal Revenue Code.
26    "Taxpayer" means an individual, corporation, partnership,

 

 

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1or other entity that has any Illinois Income Tax liability.
2(Source: P.A. 94-793, eff. 5-19-06; 95-375, eff. 8-23-07.)
 
3    (35 ILCS 10/5-25)
4    Sec. 5-25. Review of Application.
5    (a) In addition to those duties granted under the Illinois
6Economic Development Board Act, the Illinois Economic
7Development Board shall form a Business Investment Committee
8for the purpose of making recommendations for applications. At
9the request of the Board, the Director of Commerce and Economic
10Opportunity or his or her designee, the Director of the
11Governor's Office of Management and Budget or his or her
12designee, the Director of Revenue or his or her designee, the
13Director of Employment Security or his or her designee, and an
14elected official of the affected locality, such as the chair of
15the county board or the mayor, may serve as members of the
16Committee to assist with its analysis and deliberations.
17    (b) At the Department's request, the Committee shall
18convene, make inquiries, and conduct studies in the manner and
19by the methods as it deems desirable, review information with
20respect to Applicants, and make recommendations for projects to
21benefit the State. In making its recommendation that an
22Applicant's application for Credit should or should not be
23accepted, which shall occur within a reasonable time frame as
24determined by the nature of the application, the Committee
25shall determine that all the following conditions exist:

 

 

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1        (1) The Applicant's project intends, as required by
2    subsection (b) of Section 5-20 to make the required
3    investment in the State and intends to hire the required
4    number of New Employees in Illinois as a result of that
5    project.
6        (2) The Applicant's project is economically sound and
7    will benefit the people of the State of Illinois by
8    increasing opportunities for employment and strengthen the
9    economy of Illinois.
10        (3) (Blank). That, if not for the Credit, the project
11    would not occur in Illinois, which may be demonstrated by
12    any means including, but not limited to, evidence the
13    Applicant has multi-state location options and could
14    reasonably and efficiently locate outside of the State, or
15    demonstration that at least one other state is being
16    considered for the project, or evidence the receipt of the
17    Credit is a major factor in the Applicant's decision and
18    that without the Credit, the Applicant likely would not
19    create new jobs in Illinois, or demonstration that
20    receiving the Credit is essential to the Applicant's
21    decision to create or retain new jobs in the State.
22        (4) (Blank). A cost differential is identified, using
23    best available data, in the projected costs for the
24    Applicant's project compared to the costs in the competing
25    state, including the impact of the competing state's
26    incentive programs. The competing state's incentive

 

 

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1    programs shall include state, local, private, and federal
2    funds available.
3        (5) The political subdivisions affected by the project
4    have committed local incentives with respect to the
5    project, considering local ability to assist.
6        (6) Awarding the Credit will result in an overall
7    positive fiscal impact to the State, as certified by the
8    Committee using the best available data.
9        (7) The Credit is not prohibited by Section 5-35 of
10    this Act.
11(Source: P.A. 94-793, eff. 5-19-06.)
 
12    (35 ILCS 10/5-40)
13    Sec. 5-40. Determination of Amount of the Credit. In
14determining the amount of the Credit that should be awarded,
15the Committee shall provide guidance on, and the Department
16shall take into consideration, the following factors:
17        (1) The number and location of jobs created and
18    retained in relation to the economy of the county where the
19    projected investment is to occur.
20        (2) The potential impact on the economy of Illinois.
21        (3) (Blank). The magnitude of the cost differential
22    between Illinois and the competing state.
23        (4) The incremental payroll attributable to the
24    project.
25        (5) The capital investment attributable to the

 

 

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1    project.
2        (6) The amount of the average wage and benefits paid by
3    the Applicant in relation to the wage and benefits of the
4    area of the project.
5        (7) The costs to Illinois and the affected political
6    subdivisions with respect to the project.
7        (8) The financial assistance that is otherwise
8    provided by Illinois and the affected political
9    subdivisions.
10(Source: P.A. 91-476, eff. 8-11-99.)
 
11    (35 ILCS 10/5-77)
12    Sec. 5-77. Sunset of new Agreements. The Department shall
13not enter into any new Agreements under the provisions of
14Section 5-50 of this Act after December 31, 2021 April 30,
152017.
16(Source: P.A. 99-925, eff. 1-20-17.)
 
17    Section 99. Effective date. This Act takes effect upon
18becoming law.