97TH GENERAL ASSEMBLY
State of Illinois
2011 and 2012
SB0412

 

Introduced 2/8/2011, by Sen. John J. Cullerton

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 5/201  from Ch. 120, par. 2-201

    Amends the Illinois Income Tax Act. Makes a technical change in a Section concerning the tax imposed.


LRB097 04246 HLH 44285 b

 

 

A BILL FOR

 

SB0412LRB097 04246 HLH 44285 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 Illinois Income Tax Act is amended by
5changing Section 201 as follows:
 
6    (35 ILCS 5/201)  (from Ch. 120, par. 2-201)
7    Sec. 201. Tax Imposed.
8    (a) In general. A tax measured by net income is hereby
9imposed on every individual, corporation, trust and and estate
10for each taxable year ending after July 31, 1969 on the
11privilege of earning or receiving income in or as a resident of
12this State. Such tax shall be in addition to all other
13occupation or privilege taxes imposed by this State or by any
14municipal corporation or political subdivision thereof.
15    (b) Rates. The tax imposed by subsection (a) of this
16Section shall be determined as follows, except as adjusted by
17subsection (d-1):
18        (1) In the case of an individual, trust or estate, for
19    taxable years ending prior to July 1, 1989, an amount equal
20    to 2 1/2% of the taxpayer's net income for the taxable
21    year.
22        (2) In the case of an individual, trust or estate, for
23    taxable years beginning prior to July 1, 1989 and ending

 

 

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1    after June 30, 1989, an amount equal to the sum of (i) 2
2    1/2% of the taxpayer's net income for the period prior to
3    July 1, 1989, as calculated under Section 202.3, and (ii)
4    3% of the taxpayer's net income for the period after June
5    30, 1989, as calculated under Section 202.3.
6        (3) In the case of an individual, trust or estate, for
7    taxable years beginning after June 30, 1989, an amount
8    equal to 3% of the taxpayer's net income for the taxable
9    year.
10        (4) (Blank).
11        (5) (Blank).
12        (6) In the case of a corporation, for taxable years
13    ending prior to July 1, 1989, an amount equal to 4% of the
14    taxpayer's net income for the taxable year.
15        (7) In the case of a corporation, for taxable years
16    beginning prior to July 1, 1989 and ending after June 30,
17    1989, an amount equal to the sum of (i) 4% of the
18    taxpayer's net income for the period prior to July 1, 1989,
19    as calculated under Section 202.3, and (ii) 4.8% of the
20    taxpayer's net income for the period after June 30, 1989,
21    as calculated under Section 202.3.
22        (8) In the case of a corporation, for taxable years
23    beginning after June 30, 1989, an amount equal to 4.8% of
24    the taxpayer's net income for the taxable year.
25    (c) Personal Property Tax Replacement Income Tax.
26Beginning on July 1, 1979 and thereafter, in addition to such

 

 

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1income tax, there is also hereby imposed the Personal Property
2Tax Replacement Income Tax measured by net income on every
3corporation (including Subchapter S corporations), partnership
4and trust, for each taxable year ending after June 30, 1979.
5Such taxes are imposed on the privilege of earning or receiving
6income in or as a resident of this State. The Personal Property
7Tax Replacement Income Tax shall be in addition to the income
8tax imposed by subsections (a) and (b) of this Section and in
9addition to all other occupation or privilege taxes imposed by
10this State or by any municipal corporation or political
11subdivision thereof.
12    (d) Additional Personal Property Tax Replacement Income
13Tax Rates. The personal property tax replacement income tax
14imposed by this subsection and subsection (c) of this Section
15in the case of a corporation, other than a Subchapter S
16corporation and except as adjusted by subsection (d-1), shall
17be an additional amount equal to 2.85% of such taxpayer's net
18income for the taxable year, except that beginning on January
191, 1981, and thereafter, the rate of 2.85% specified in this
20subsection shall be reduced to 2.5%, and in the case of a
21partnership, trust or a Subchapter S corporation shall be an
22additional amount equal to 1.5% of such taxpayer's net income
23for the taxable year.
24    (d-1) Rate reduction for certain foreign insurers. In the
25case of a foreign insurer, as defined by Section 35A-5 of the
26Illinois Insurance Code, whose state or country of domicile

 

 

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1imposes on insurers domiciled in Illinois a retaliatory tax
2(excluding any insurer whose premiums from reinsurance assumed
3are 50% or more of its total insurance premiums as determined
4under paragraph (2) of subsection (b) of Section 304, except
5that for purposes of this determination premiums from
6reinsurance do not include premiums from inter-affiliate
7reinsurance arrangements), beginning with taxable years ending
8on or after December 31, 1999, the sum of the rates of tax
9imposed by subsections (b) and (d) shall be reduced (but not
10increased) to the rate at which the total amount of tax imposed
11under this Act, net of all credits allowed under this Act,
12shall equal (i) the total amount of tax that would be imposed
13on the foreign insurer's net income allocable to Illinois for
14the taxable year by such foreign insurer's state or country of
15domicile if that net income were subject to all income taxes
16and taxes measured by net income imposed by such foreign
17insurer's state or country of domicile, net of all credits
18allowed or (ii) a rate of zero if no such tax is imposed on such
19income by the foreign insurer's state of domicile. For the
20purposes of this subsection (d-1), an inter-affiliate includes
21a mutual insurer under common management.
22        (1) For the purposes of subsection (d-1), in no event
23    shall the sum of the rates of tax imposed by subsections
24    (b) and (d) be reduced below the rate at which the sum of:
25            (A) the total amount of tax imposed on such foreign
26        insurer under this Act for a taxable year, net of all

 

 

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1        credits allowed under this Act, plus
2            (B) the privilege tax imposed by Section 409 of the
3        Illinois Insurance Code, the fire insurance company
4        tax imposed by Section 12 of the Fire Investigation
5        Act, and the fire department taxes imposed under
6        Section 11-10-1 of the Illinois Municipal Code,
7    equals 1.25% for taxable years ending prior to December 31,
8    2003, or 1.75% for taxable years ending on or after
9    December 31, 2003, of the net taxable premiums written for
10    the taxable year, as described by subsection (1) of Section
11    409 of the Illinois Insurance Code. This paragraph will in
12    no event increase the rates imposed under subsections (b)
13    and (d).
14        (2) Any reduction in the rates of tax imposed by this
15    subsection shall be applied first against the rates imposed
16    by subsection (b) and only after the tax imposed by
17    subsection (a) net of all credits allowed under this
18    Section other than the credit allowed under subsection (i)
19    has been reduced to zero, against the rates imposed by
20    subsection (d).
21    This subsection (d-1) is exempt from the provisions of
22Section 250.
23    (e) Investment credit. A taxpayer shall be allowed a credit
24against the Personal Property Tax Replacement Income Tax for
25investment in qualified property.
26        (1) A taxpayer shall be allowed a credit equal to .5%

 

 

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1    of the basis of qualified property placed in service during
2    the taxable year, provided such property is placed in
3    service on or after July 1, 1984. There shall be allowed an
4    additional credit equal to .5% of the basis of qualified
5    property placed in service during the taxable year,
6    provided such property is placed in service on or after
7    July 1, 1986, and the taxpayer's base employment within
8    Illinois has increased by 1% or more over the preceding
9    year as determined by the taxpayer's employment records
10    filed with the Illinois Department of Employment Security.
11    Taxpayers who are new to Illinois shall be deemed to have
12    met the 1% growth in base employment for the first year in
13    which they file employment records with the Illinois
14    Department of Employment Security. The provisions added to
15    this Section by Public Act 85-1200 (and restored by Public
16    Act 87-895) shall be construed as declaratory of existing
17    law and not as a new enactment. If, in any year, the
18    increase in base employment within Illinois over the
19    preceding year is less than 1%, the additional credit shall
20    be limited to that percentage times a fraction, the
21    numerator of which is .5% and the denominator of which is
22    1%, but shall not exceed .5%. The investment credit shall
23    not be allowed to the extent that it would reduce a
24    taxpayer's liability in any tax year below zero, nor may
25    any credit for qualified property be allowed for any year
26    other than the year in which the property was placed in

 

 

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1    service in Illinois. For tax years ending on or after
2    December 31, 1987, and on or before December 31, 1988, the
3    credit shall be allowed for the tax year in which the
4    property is placed in service, or, if the amount of the
5    credit exceeds the tax liability for that year, whether it
6    exceeds the original liability or the liability as later
7    amended, such excess may be carried forward and applied to
8    the tax liability of the 5 taxable years following the
9    excess credit years if the taxpayer (i) makes investments
10    which cause the creation of a minimum of 2,000 full-time
11    equivalent jobs in Illinois, (ii) is located in an
12    enterprise zone established pursuant to the Illinois
13    Enterprise Zone Act and (iii) is certified by the
14    Department of Commerce and Community Affairs (now
15    Department of Commerce and Economic Opportunity) as
16    complying with the requirements specified in clause (i) and
17    (ii) by July 1, 1986. The Department of Commerce and
18    Community Affairs (now Department of Commerce and Economic
19    Opportunity) shall notify the Department of Revenue of all
20    such certifications immediately. For tax years ending
21    after December 31, 1988, the credit shall be allowed for
22    the tax year in which the property is placed in service,
23    or, if the amount of the credit exceeds the tax liability
24    for that year, whether it exceeds the original liability or
25    the liability as later amended, such excess may be carried
26    forward and applied to the tax liability of the 5 taxable

 

 

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1    years following the excess credit years. The credit shall
2    be applied to the earliest year for which there is a
3    liability. If there is credit from more than one tax year
4    that is available to offset a liability, earlier credit
5    shall be applied first.
6        (2) The term "qualified property" means property
7    which:
8            (A) is tangible, whether new or used, including
9        buildings and structural components of buildings and
10        signs that are real property, but not including land or
11        improvements to real property that are not a structural
12        component of a building such as landscaping, sewer
13        lines, local access roads, fencing, parking lots, and
14        other appurtenances;
15            (B) is depreciable pursuant to Section 167 of the
16        Internal Revenue Code, except that "3-year property"
17        as defined in Section 168(c)(2)(A) of that Code is not
18        eligible for the credit provided by this subsection
19        (e);
20            (C) is acquired by purchase as defined in Section
21        179(d) of the Internal Revenue Code;
22            (D) is used in Illinois by a taxpayer who is
23        primarily engaged in manufacturing, or in mining coal
24        or fluorite, or in retailing, or was placed in service
25        on or after July 1, 2006 in a River Edge Redevelopment
26        Zone established pursuant to the River Edge

 

 

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1        Redevelopment Zone Act; and
2            (E) has not previously been used in Illinois in
3        such a manner and by such a person as would qualify for
4        the credit provided by this subsection (e) or
5        subsection (f).
6        (3) For purposes of this subsection (e),
7    "manufacturing" means the material staging and production
8    of tangible personal property by procedures commonly
9    regarded as manufacturing, processing, fabrication, or
10    assembling which changes some existing material into new
11    shapes, new qualities, or new combinations. For purposes of
12    this subsection (e) the term "mining" shall have the same
13    meaning as the term "mining" in Section 613(c) of the
14    Internal Revenue Code. For purposes of this subsection (e),
15    the term "retailing" means the sale of tangible personal
16    property for use or consumption and not for resale, or
17    services rendered in conjunction with the sale of tangible
18    personal property for use or consumption and not for
19    resale. For purposes of this subsection (e), "tangible
20    personal property" has the same meaning as when that term
21    is used in the Retailers' Occupation Tax Act, and, for
22    taxable years ending after December 31, 2008, does not
23    include the generation, transmission, or distribution of
24    electricity.
25        (4) The basis of qualified property shall be the basis
26    used to compute the depreciation deduction for federal

 

 

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1    income tax purposes.
2        (5) If the basis of the property for federal income tax
3    depreciation purposes is increased after it has been placed
4    in service in Illinois by the taxpayer, the amount of such
5    increase shall be deemed property placed in service on the
6    date of such increase in basis.
7        (6) The term "placed in service" shall have the same
8    meaning as under Section 46 of the Internal Revenue Code.
9        (7) If during any taxable year, any property ceases to
10    be qualified property in the hands of the taxpayer within
11    48 months after being placed in service, or the situs of
12    any qualified property is moved outside Illinois within 48
13    months after being placed in service, the Personal Property
14    Tax Replacement Income Tax for such taxable year shall be
15    increased. Such increase shall be determined by (i)
16    recomputing the investment credit which would have been
17    allowed for the year in which credit for such property was
18    originally allowed by eliminating such property from such
19    computation and, (ii) subtracting such recomputed credit
20    from the amount of credit previously allowed. For the
21    purposes of this paragraph (7), a reduction of the basis of
22    qualified property resulting from a redetermination of the
23    purchase price shall be deemed a disposition of qualified
24    property to the extent of such reduction.
25        (8) Unless the investment credit is extended by law,
26    the basis of qualified property shall not include costs

 

 

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1    incurred after December 31, 2013, except for costs incurred
2    pursuant to a binding contract entered into on or before
3    December 31, 2013.
4        (9) Each taxable year ending before December 31, 2000,
5    a partnership may elect to pass through to its partners the
6    credits to which the partnership is entitled under this
7    subsection (e) for the taxable year. A partner may use the
8    credit allocated to him or her under this paragraph only
9    against the tax imposed in subsections (c) and (d) of this
10    Section. If the partnership makes that election, those
11    credits shall be allocated among the partners in the
12    partnership in accordance with the rules set forth in
13    Section 704(b) of the Internal Revenue Code, and the rules
14    promulgated under that Section, and the allocated amount of
15    the credits shall be allowed to the partners for that
16    taxable year. The partnership shall make this election on
17    its Personal Property Tax Replacement Income Tax return for
18    that taxable year. The election to pass through the credits
19    shall be irrevocable.
20        For taxable years ending on or after December 31, 2000,
21    a partner that qualifies its partnership for a subtraction
22    under subparagraph (I) of paragraph (2) of subsection (d)
23    of Section 203 or a shareholder that qualifies a Subchapter
24    S corporation for a subtraction under subparagraph (S) of
25    paragraph (2) of subsection (b) of Section 203 shall be
26    allowed a credit under this subsection (e) equal to its

 

 

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1    share of the credit earned under this subsection (e) during
2    the taxable year by the partnership or Subchapter S
3    corporation, determined in accordance with the
4    determination of income and distributive share of income
5    under Sections 702 and 704 and Subchapter S of the Internal
6    Revenue Code. This paragraph is exempt from the provisions
7    of Section 250.
8    (f) Investment credit; Enterprise Zone; River Edge
9Redevelopment Zone.
10        (1) A taxpayer shall be allowed a credit against the
11    tax imposed by subsections (a) and (b) of this Section for
12    investment in qualified property which is placed in service
13    in an Enterprise Zone created pursuant to the Illinois
14    Enterprise Zone Act or, for property placed in service on
15    or after July 1, 2006, a River Edge Redevelopment Zone
16    established pursuant to the River Edge Redevelopment Zone
17    Act. For partners, shareholders of Subchapter S
18    corporations, and owners of limited liability companies,
19    if the liability company is treated as a partnership for
20    purposes of federal and State income taxation, there shall
21    be allowed a credit under this subsection (f) to be
22    determined in accordance with the determination of income
23    and distributive share of income under Sections 702 and 704
24    and Subchapter S of the Internal Revenue Code. The credit
25    shall be .5% of the basis for such property. The credit
26    shall be available only in the taxable year in which the

 

 

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1    property is placed in service in the Enterprise Zone or
2    River Edge Redevelopment Zone and shall not be allowed to
3    the extent that it would reduce a taxpayer's liability for
4    the tax imposed by subsections (a) and (b) of this Section
5    to below zero. For tax years ending on or after December
6    31, 1985, the credit shall be allowed for the tax year in
7    which the property is placed in service, or, if the amount
8    of the credit exceeds the tax liability for that year,
9    whether it exceeds the original liability or the liability
10    as later amended, such excess may be carried forward and
11    applied to the tax liability of the 5 taxable years
12    following the excess credit year. The credit shall be
13    applied to the earliest year for which there is a
14    liability. If there is credit from more than one tax year
15    that is available to offset a liability, the credit
16    accruing first in time shall be applied first.
17        (2) The term qualified property means property which:
18            (A) is tangible, whether new or used, including
19        buildings and structural components of buildings;
20            (B) is depreciable pursuant to Section 167 of the
21        Internal Revenue Code, except that "3-year property"
22        as defined in Section 168(c)(2)(A) of that Code is not
23        eligible for the credit provided by this subsection
24        (f);
25            (C) is acquired by purchase as defined in Section
26        179(d) of the Internal Revenue Code;

 

 

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1            (D) is used in the Enterprise Zone or River Edge
2        Redevelopment Zone by the taxpayer; and
3            (E) has not been previously used in Illinois in
4        such a manner and by such a person as would qualify for
5        the credit provided by this subsection (f) or
6        subsection (e).
7        (3) The basis of qualified property shall be the basis
8    used to compute the depreciation deduction for federal
9    income tax purposes.
10        (4) If the basis of the property for federal income tax
11    depreciation purposes is increased after it has been placed
12    in service in the Enterprise Zone or River Edge
13    Redevelopment Zone by the taxpayer, the amount of such
14    increase shall be deemed property placed in service on the
15    date of such increase in basis.
16        (5) The term "placed in service" shall have the same
17    meaning as under Section 46 of the Internal Revenue Code.
18        (6) If during any taxable year, any property ceases to
19    be qualified property in the hands of the taxpayer within
20    48 months after being placed in service, or the situs of
21    any qualified property is moved outside the Enterprise Zone
22    or River Edge Redevelopment Zone within 48 months after
23    being placed in service, the tax imposed under subsections
24    (a) and (b) of this Section for such taxable year shall be
25    increased. Such increase shall be determined by (i)
26    recomputing the investment credit which would have been

 

 

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1    allowed for the year in which credit for such property was
2    originally allowed by eliminating such property from such
3    computation, and (ii) subtracting such recomputed credit
4    from the amount of credit previously allowed. For the
5    purposes of this paragraph (6), a reduction of the basis of
6    qualified property resulting from a redetermination of the
7    purchase price shall be deemed a disposition of qualified
8    property to the extent of such reduction.
9        (7) There shall be allowed an additional credit equal
10    to 0.5% of the basis of qualified property placed in
11    service during the taxable year in a River Edge
12    Redevelopment Zone, provided such property is placed in
13    service on or after July 1, 2006, and the taxpayer's base
14    employment within Illinois has increased by 1% or more over
15    the preceding year as determined by the taxpayer's
16    employment records filed with the Illinois Department of
17    Employment Security. Taxpayers who are new to Illinois
18    shall be deemed to have met the 1% growth in base
19    employment for the first year in which they file employment
20    records with the Illinois Department of Employment
21    Security. If, in any year, the increase in base employment
22    within Illinois over the preceding year is less than 1%,
23    the additional credit shall be limited to that percentage
24    times a fraction, the numerator of which is 0.5% and the
25    denominator of which is 1%, but shall not exceed 0.5%.
26    (g) Jobs Tax Credit; Enterprise Zone, River Edge

 

 

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1Redevelopment Zone, and Foreign Trade Zone or Sub-Zone.
2        (1) A taxpayer conducting a trade or business in an
3    enterprise zone or a High Impact Business designated by the
4    Department of Commerce and Economic Opportunity or for
5    taxable years ending on or after December 31, 2006, in a
6    River Edge Redevelopment Zone conducting a trade or
7    business in a federally designated Foreign Trade Zone or
8    Sub-Zone shall be allowed a credit against the tax imposed
9    by subsections (a) and (b) of this Section in the amount of
10    $500 per eligible employee hired to work in the zone during
11    the taxable year.
12        (2) To qualify for the credit:
13            (A) the taxpayer must hire 5 or more eligible
14        employees to work in an enterprise zone, River Edge
15        Redevelopment Zone, or federally designated Foreign
16        Trade Zone or Sub-Zone during the taxable year;
17            (B) the taxpayer's total employment within the
18        enterprise zone, River Edge Redevelopment Zone, or
19        federally designated Foreign Trade Zone or Sub-Zone
20        must increase by 5 or more full-time employees beyond
21        the total employed in that zone at the end of the
22        previous tax year for which a jobs tax credit under
23        this Section was taken, or beyond the total employed by
24        the taxpayer as of December 31, 1985, whichever is
25        later; and
26            (C) the eligible employees must be employed 180

 

 

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1        consecutive days in order to be deemed hired for
2        purposes of this subsection.
3        (3) An "eligible employee" means an employee who is:
4            (A) Certified by the Department of Commerce and
5        Economic Opportunity as "eligible for services"
6        pursuant to regulations promulgated in accordance with
7        Title II of the Job Training Partnership Act, Training
8        Services for the Disadvantaged or Title III of the Job
9        Training Partnership Act, Employment and Training
10        Assistance for Dislocated Workers Program.
11            (B) Hired after the enterprise zone, River Edge
12        Redevelopment Zone, or federally designated Foreign
13        Trade Zone or Sub-Zone was designated or the trade or
14        business was located in that zone, whichever is later.
15            (C) Employed in the enterprise zone, River Edge
16        Redevelopment Zone, or Foreign Trade Zone or Sub-Zone.
17        An employee is employed in an enterprise zone or
18        federally designated Foreign Trade Zone or Sub-Zone if
19        his services are rendered there or it is the base of
20        operations for the services performed.
21            (D) A full-time employee working 30 or more hours
22        per week.
23        (4) For tax years ending on or after December 31, 1985
24    and prior to December 31, 1988, the credit shall be allowed
25    for the tax year in which the eligible employees are hired.
26    For tax years ending on or after December 31, 1988, the

 

 

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1    credit shall be allowed for the tax year immediately
2    following the tax year in which the eligible employees are
3    hired. If the amount of the credit exceeds the tax
4    liability for that year, whether it exceeds the original
5    liability or the liability as later amended, such excess
6    may be carried forward and applied to the tax liability of
7    the 5 taxable years following the excess credit year. The
8    credit shall be applied to the earliest year for which
9    there is a liability. If there is credit from more than one
10    tax year that is available to offset a liability, earlier
11    credit shall be applied first.
12        (5) The Department of Revenue shall promulgate such
13    rules and regulations as may be deemed necessary to carry
14    out the purposes of this subsection (g).
15        (6) The credit shall be available for eligible
16    employees hired on or after January 1, 1986.
17    (h) Investment credit; High Impact Business.
18        (1) Subject to subsections (b) and (b-5) of Section 5.5
19    of the Illinois Enterprise Zone Act, a taxpayer shall be
20    allowed a credit against the tax imposed by subsections (a)
21    and (b) of this Section for investment in qualified
22    property which is placed in service by a Department of
23    Commerce and Economic Opportunity designated High Impact
24    Business. The credit shall be .5% of the basis for such
25    property. The credit shall not be available (i) until the
26    minimum investments in qualified property set forth in

 

 

SB0412- 19 -LRB097 04246 HLH 44285 b

1    subdivision (a)(3)(A) of Section 5.5 of the Illinois
2    Enterprise Zone Act have been satisfied or (ii) until the
3    time authorized in subsection (b-5) of the Illinois
4    Enterprise Zone Act for entities designated as High Impact
5    Businesses under subdivisions (a)(3)(B), (a)(3)(C), and
6    (a)(3)(D) of Section 5.5 of the Illinois Enterprise Zone
7    Act, and shall not be allowed to the extent that it would
8    reduce a taxpayer's liability for the tax imposed by
9    subsections (a) and (b) of this Section to below zero. The
10    credit applicable to such investments shall be taken in the
11    taxable year in which such investments have been completed.
12    The credit for additional investments beyond the minimum
13    investment by a designated high impact business authorized
14    under subdivision (a)(3)(A) of Section 5.5 of the Illinois
15    Enterprise Zone Act shall be available only in the taxable
16    year in which the property is placed in service and shall
17    not be allowed to the extent that it would reduce a
18    taxpayer's liability for the tax imposed by subsections (a)
19    and (b) of this Section to below zero. For tax years ending
20    on or after December 31, 1987, the credit shall be allowed
21    for the tax year in which the property is placed in
22    service, or, if the amount of the credit exceeds the tax
23    liability for that year, whether it exceeds the original
24    liability or the liability as later amended, such excess
25    may be carried forward and applied to the tax liability of
26    the 5 taxable years following the excess credit year. The

 

 

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1    credit shall be applied to the earliest year for which
2    there is a liability. If there is credit from more than one
3    tax year that is available to offset a liability, the
4    credit accruing first in time shall be applied first.
5        Changes made in this subdivision (h)(1) by Public Act
6    88-670 restore changes made by Public Act 85-1182 and
7    reflect existing law.
8        (2) The term qualified property means property which:
9            (A) is tangible, whether new or used, including
10        buildings and structural components of buildings;
11            (B) is depreciable pursuant to Section 167 of the
12        Internal Revenue Code, except that "3-year property"
13        as defined in Section 168(c)(2)(A) of that Code is not
14        eligible for the credit provided by this subsection
15        (h);
16            (C) is acquired by purchase as defined in Section
17        179(d) of the Internal Revenue Code; and
18            (D) is not eligible for the Enterprise Zone
19        Investment Credit provided by subsection (f) of this
20        Section.
21        (3) The basis of qualified property shall be the basis
22    used to compute the depreciation deduction for federal
23    income tax purposes.
24        (4) If the basis of the property for federal income tax
25    depreciation purposes is increased after it has been placed
26    in service in a federally designated Foreign Trade Zone or

 

 

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1    Sub-Zone located in Illinois by the taxpayer, the amount of
2    such increase shall be deemed property placed in service on
3    the date of such increase in basis.
4        (5) The term "placed in service" shall have the same
5    meaning as under Section 46 of the Internal Revenue Code.
6        (6) If during any taxable year ending on or before
7    December 31, 1996, any property ceases to be qualified
8    property in the hands of the taxpayer within 48 months
9    after being placed in service, or the situs of any
10    qualified property is moved outside Illinois within 48
11    months after being placed in service, the tax imposed under
12    subsections (a) and (b) of this Section for such taxable
13    year shall be increased. Such increase shall be determined
14    by (i) recomputing the investment credit which would have
15    been allowed for the year in which credit for such property
16    was originally allowed by eliminating such property from
17    such computation, and (ii) subtracting such recomputed
18    credit from the amount of credit previously allowed. For
19    the purposes of this paragraph (6), a reduction of the
20    basis of qualified property resulting from a
21    redetermination of the purchase price shall be deemed a
22    disposition of qualified property to the extent of such
23    reduction.
24        (7) Beginning with tax years ending after December 31,
25    1996, if a taxpayer qualifies for the credit under this
26    subsection (h) and thereby is granted a tax abatement and

 

 

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1    the taxpayer relocates its entire facility in violation of
2    the explicit terms and length of the contract under Section
3    18-183 of the Property Tax Code, the tax imposed under
4    subsections (a) and (b) of this Section shall be increased
5    for the taxable year in which the taxpayer relocated its
6    facility by an amount equal to the amount of credit
7    received by the taxpayer under this subsection (h).
8    (i) Credit for Personal Property Tax Replacement Income
9Tax. For tax years ending prior to December 31, 2003, a credit
10shall be allowed against the tax imposed by subsections (a) and
11(b) of this Section for the tax imposed by subsections (c) and
12(d) of this Section. This credit shall be computed by
13multiplying the tax imposed by subsections (c) and (d) of this
14Section by a fraction, the numerator of which is base income
15allocable to Illinois and the denominator of which is Illinois
16base income, and further multiplying the product by the tax
17rate imposed by subsections (a) and (b) of this Section.
18    Any credit earned on or after December 31, 1986 under this
19subsection which is unused in the year the credit is computed
20because it exceeds the tax liability imposed by subsections (a)
21and (b) for that year (whether it exceeds the original
22liability or the liability as later amended) may be carried
23forward and applied to the tax liability imposed by subsections
24(a) and (b) of the 5 taxable years following the excess credit
25year, provided that no credit may be carried forward to any
26year ending on or after December 31, 2003. This credit shall be

 

 

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1applied first to the earliest year for which there is a
2liability. If there is a credit under this subsection from more
3than one tax year that is available to offset a liability the
4earliest credit arising under this subsection shall be applied
5first.
6    If, during any taxable year ending on or after December 31,
71986, the tax imposed by subsections (c) and (d) of this
8Section for which a taxpayer has claimed a credit under this
9subsection (i) is reduced, the amount of credit for such tax
10shall also be reduced. Such reduction shall be determined by
11recomputing the credit to take into account the reduced tax
12imposed by subsections (c) and (d). If any portion of the
13reduced amount of credit has been carried to a different
14taxable year, an amended return shall be filed for such taxable
15year to reduce the amount of credit claimed.
16    (j) Training expense credit. Beginning with tax years
17ending on or after December 31, 1986 and prior to December 31,
182003, a taxpayer shall be allowed a credit against the tax
19imposed by subsections (a) and (b) under this Section for all
20amounts paid or accrued, on behalf of all persons employed by
21the taxpayer in Illinois or Illinois residents employed outside
22of Illinois by a taxpayer, for educational or vocational
23training in semi-technical or technical fields or semi-skilled
24or skilled fields, which were deducted from gross income in the
25computation of taxable income. The credit against the tax
26imposed by subsections (a) and (b) shall be 1.6% of such

 

 

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1training expenses. For partners, shareholders of subchapter S
2corporations, and owners of limited liability companies, if the
3liability company is treated as a partnership for purposes of
4federal and State income taxation, there shall be allowed a
5credit under this subsection (j) to be determined in accordance
6with the determination of income and distributive share of
7income under Sections 702 and 704 and subchapter S of the
8Internal Revenue Code.
9    Any credit allowed under this subsection which is unused in
10the year the credit is earned may be carried forward to each of
11the 5 taxable years following the year for which the credit is
12first computed until it is used. This credit shall be applied
13first to the earliest year for which there is a liability. If
14there is a credit under this subsection from more than one tax
15year that is available to offset a liability the earliest
16credit arising under this subsection shall be applied first. No
17carryforward credit may be claimed in any tax year ending on or
18after December 31, 2003.
19    (k) Research and development credit.
20    For tax years ending after July 1, 1990 and prior to
21December 31, 2003, and beginning again for tax years ending on
22or after December 31, 2004, and ending prior to January 1,
232011, a taxpayer shall be allowed a credit against the tax
24imposed by subsections (a) and (b) of this Section for
25increasing research activities in this State. The credit
26allowed against the tax imposed by subsections (a) and (b)

 

 

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1shall be equal to 6 1/2% of the qualifying expenditures for
2increasing research activities in this State. For partners,
3shareholders of subchapter S corporations, and owners of
4limited liability companies, if the liability company is
5treated as a partnership for purposes of federal and State
6income taxation, there shall be allowed a credit under this
7subsection to be determined in accordance with the
8determination of income and distributive share of income under
9Sections 702 and 704 and subchapter S of the Internal Revenue
10Code.
11    For purposes of this subsection, "qualifying expenditures"
12means the qualifying expenditures as defined for the federal
13credit for increasing research activities which would be
14allowable under Section 41 of the Internal Revenue Code and
15which are conducted in this State, "qualifying expenditures for
16increasing research activities in this State" means the excess
17of qualifying expenditures for the taxable year in which
18incurred over qualifying expenditures for the base period,
19"qualifying expenditures for the base period" means the average
20of the qualifying expenditures for each year in the base
21period, and "base period" means the 3 taxable years immediately
22preceding the taxable year for which the determination is being
23made.
24    Any credit in excess of the tax liability for the taxable
25year may be carried forward. A taxpayer may elect to have the
26unused credit shown on its final completed return carried over

 

 

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1as a credit against the tax liability for the following 5
2taxable years or until it has been fully used, whichever occurs
3first; provided that no credit earned in a tax year ending
4prior to December 31, 2003 may be carried forward to any year
5ending on or after December 31, 2003, and no credit may be
6carried forward to any taxable year ending on or after January
71, 2011.
8    If an unused credit is carried forward to a given year from
92 or more earlier years, that credit arising in the earliest
10year will be applied first against the tax liability for the
11given year. If a tax liability for the given year still
12remains, the credit from the next earliest year will then be
13applied, and so on, until all credits have been used or no tax
14liability for the given year remains. Any remaining unused
15credit or credits then will be carried forward to the next
16following year in which a tax liability is incurred, except
17that no credit can be carried forward to a year which is more
18than 5 years after the year in which the expense for which the
19credit is given was incurred.
20    No inference shall be drawn from this amendatory Act of the
2191st General Assembly in construing this Section for taxable
22years beginning before January 1, 1999.
23    (l) Environmental Remediation Tax Credit.
24        (i) For tax years ending after December 31, 1997 and on
25    or before December 31, 2001, a taxpayer shall be allowed a
26    credit against the tax imposed by subsections (a) and (b)

 

 

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1    of this Section for certain amounts paid for unreimbursed
2    eligible remediation costs, as specified in this
3    subsection. For purposes of this Section, "unreimbursed
4    eligible remediation costs" means costs approved by the
5    Illinois Environmental Protection Agency ("Agency") under
6    Section 58.14 of the Environmental Protection Act that were
7    paid in performing environmental remediation at a site for
8    which a No Further Remediation Letter was issued by the
9    Agency and recorded under Section 58.10 of the
10    Environmental Protection Act. The credit must be claimed
11    for the taxable year in which Agency approval of the
12    eligible remediation costs is granted. The credit is not
13    available to any taxpayer if the taxpayer or any related
14    party caused or contributed to, in any material respect, a
15    release of regulated substances on, in, or under the site
16    that was identified and addressed by the remedial action
17    pursuant to the Site Remediation Program of the
18    Environmental Protection Act. After the Pollution Control
19    Board rules are adopted pursuant to the Illinois
20    Administrative Procedure Act for the administration and
21    enforcement of Section 58.9 of the Environmental
22    Protection Act, determinations as to credit availability
23    for purposes of this Section shall be made consistent with
24    those rules. For purposes of this Section, "taxpayer"
25    includes a person whose tax attributes the taxpayer has
26    succeeded to under Section 381 of the Internal Revenue Code

 

 

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1    and "related party" includes the persons disallowed a
2    deduction for losses by paragraphs (b), (c), and (f)(1) of
3    Section 267 of the Internal Revenue Code by virtue of being
4    a related taxpayer, as well as any of its partners. The
5    credit allowed against the tax imposed by subsections (a)
6    and (b) shall be equal to 25% of the unreimbursed eligible
7    remediation costs in excess of $100,000 per site, except
8    that the $100,000 threshold shall not apply to any site
9    contained in an enterprise zone as determined by the
10    Department of Commerce and Community Affairs (now
11    Department of Commerce and Economic Opportunity). The
12    total credit allowed shall not exceed $40,000 per year with
13    a maximum total of $150,000 per site. For partners and
14    shareholders of subchapter S corporations, there shall be
15    allowed a credit under this subsection to be determined in
16    accordance with the determination of income and
17    distributive share of income under Sections 702 and 704 and
18    subchapter S of the Internal Revenue Code.
19        (ii) A credit allowed under this subsection that is
20    unused in the year the credit is earned may be carried
21    forward to each of the 5 taxable years following the year
22    for which the credit is first earned until it is used. The
23    term "unused credit" does not include any amounts of
24    unreimbursed eligible remediation costs in excess of the
25    maximum credit per site authorized under paragraph (i).
26    This credit shall be applied first to the earliest year for

 

 

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1    which there is a liability. If there is a credit under this
2    subsection from more than one tax year that is available to
3    offset a liability, the earliest credit arising under this
4    subsection shall be applied first. A credit allowed under
5    this subsection may be sold to a buyer as part of a sale of
6    all or part of the remediation site for which the credit
7    was granted. The purchaser of a remediation site and the
8    tax credit shall succeed to the unused credit and remaining
9    carry-forward period of the seller. To perfect the
10    transfer, the assignor shall record the transfer in the
11    chain of title for the site and provide written notice to
12    the Director of the Illinois Department of Revenue of the
13    assignor's intent to sell the remediation site and the
14    amount of the tax credit to be transferred as a portion of
15    the sale. In no event may a credit be transferred to any
16    taxpayer if the taxpayer or a related party would not be
17    eligible under the provisions of subsection (i).
18        (iii) For purposes of this Section, the term "site"
19    shall have the same meaning as under Section 58.2 of the
20    Environmental Protection Act.
21    (m) Education expense credit. Beginning with tax years
22ending after December 31, 1999, a taxpayer who is the custodian
23of one or more qualifying pupils shall be allowed a credit
24against the tax imposed by subsections (a) and (b) of this
25Section for qualified education expenses incurred on behalf of
26the qualifying pupils. The credit shall be equal to 25% of

 

 

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1qualified education expenses, but in no event may the total
2credit under this subsection claimed by a family that is the
3custodian of qualifying pupils exceed $500. In no event shall a
4credit under this subsection reduce the taxpayer's liability
5under this Act to less than zero. This subsection is exempt
6from the provisions of Section 250 of this Act.
7    For purposes of this subsection:
8    "Qualifying pupils" means individuals who (i) are
9residents of the State of Illinois, (ii) are under the age of
1021 at the close of the school year for which a credit is
11sought, and (iii) during the school year for which a credit is
12sought were full-time pupils enrolled in a kindergarten through
13twelfth grade education program at any school, as defined in
14this subsection.
15    "Qualified education expense" means the amount incurred on
16behalf of a qualifying pupil in excess of $250 for tuition,
17book fees, and lab fees at the school in which the pupil is
18enrolled during the regular school year.
19    "School" means any public or nonpublic elementary or
20secondary school in Illinois that is in compliance with Title
21VI of the Civil Rights Act of 1964 and attendance at which
22satisfies the requirements of Section 26-1 of the School Code,
23except that nothing shall be construed to require a child to
24attend any particular public or nonpublic school to qualify for
25the credit under this Section.
26    "Custodian" means, with respect to qualifying pupils, an

 

 

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1Illinois resident who is a parent, the parents, a legal
2guardian, or the legal guardians of the qualifying pupils.
3    (n) River Edge Redevelopment Zone site remediation tax
4credit.
5        (i) For tax years ending on or after December 31, 2006,
6    a taxpayer shall be allowed a credit against the tax
7    imposed by subsections (a) and (b) of this Section for
8    certain amounts paid for unreimbursed eligible remediation
9    costs, as specified in this subsection. For purposes of
10    this Section, "unreimbursed eligible remediation costs"
11    means costs approved by the Illinois Environmental
12    Protection Agency ("Agency") under Section 58.14a of the
13    Environmental Protection Act that were paid in performing
14    environmental remediation at a site within a River Edge
15    Redevelopment Zone for which a No Further Remediation
16    Letter was issued by the Agency and recorded under Section
17    58.10 of the Environmental Protection Act. The credit must
18    be claimed for the taxable year in which Agency approval of
19    the eligible remediation costs is granted. The credit is
20    not available to any taxpayer if the taxpayer or any
21    related party caused or contributed to, in any material
22    respect, a release of regulated substances on, in, or under
23    the site that was identified and addressed by the remedial
24    action pursuant to the Site Remediation Program of the
25    Environmental Protection Act. Determinations as to credit
26    availability for purposes of this Section shall be made

 

 

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1    consistent with rules adopted by the Pollution Control
2    Board pursuant to the Illinois Administrative Procedure
3    Act for the administration and enforcement of Section 58.9
4    of the Environmental Protection Act. For purposes of this
5    Section, "taxpayer" includes a person whose tax attributes
6    the taxpayer has succeeded to under Section 381 of the
7    Internal Revenue Code and "related party" includes the
8    persons disallowed a deduction for losses by paragraphs
9    (b), (c), and (f)(1) of Section 267 of the Internal Revenue
10    Code by virtue of being a related taxpayer, as well as any
11    of its partners. The credit allowed against the tax imposed
12    by subsections (a) and (b) shall be equal to 25% of the
13    unreimbursed eligible remediation costs in excess of
14    $100,000 per site.
15        (ii) A credit allowed under this subsection that is
16    unused in the year the credit is earned may be carried
17    forward to each of the 5 taxable years following the year
18    for which the credit is first earned until it is used. This
19    credit shall be applied first to the earliest year for
20    which there is a liability. If there is a credit under this
21    subsection from more than one tax year that is available to
22    offset a liability, the earliest credit arising under this
23    subsection shall be applied first. A credit allowed under
24    this subsection may be sold to a buyer as part of a sale of
25    all or part of the remediation site for which the credit
26    was granted. The purchaser of a remediation site and the

 

 

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1    tax credit shall succeed to the unused credit and remaining
2    carry-forward period of the seller. To perfect the
3    transfer, the assignor shall record the transfer in the
4    chain of title for the site and provide written notice to
5    the Director of the Illinois Department of Revenue of the
6    assignor's intent to sell the remediation site and the
7    amount of the tax credit to be transferred as a portion of
8    the sale. In no event may a credit be transferred to any
9    taxpayer if the taxpayer or a related party would not be
10    eligible under the provisions of subsection (i).
11        (iii) For purposes of this Section, the term "site"
12    shall have the same meaning as under Section 58.2 of the
13    Environmental Protection Act.
14        (iv) This subsection is exempt from the provisions of
15    Section 250.
16(Source: P.A. 95-454, eff. 8-27-07; 96-115, eff. 7-31-09;
1796-116, eff. 7-31-09; 96-937, eff. 6-23-10; 96-1000, eff.
187-2-10.)