SB3527eng 100TH GENERAL ASSEMBLY

SB3527 Engrossed LRB100 20468 HLH 35824 b

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 221 as follows:

(35 ILCS 5/221)

Sec. 221. Rehabilitation costs; qualified historic properties; River Edge Redevelopment Zone.

(a) For taxable years that begin beginning on or after January 1, 2012 and begin ending prior to January 1, 2018 January 1, 2022, there shall be allowed a tax credit against the tax imposed by subsections (a) and (b) of Section 201 of this Act in an amount equal to 25% of qualified expenditures incurred by a qualified taxpayer during the taxable year in the restoration and preservation of a qualified historic structure located in a River Edge Redevelopment Zone pursuant to a qualified rehabilitation plan, provided that the total amount of such expenditures (i) must equal $5,000 or more and (ii) must exceed 50% of the purchase price of the property.

(a-1) For taxable years that begin on or after January 1, 2018 and end prior to January 1, 2022, there shall be allowed a tax credit against the tax imposed by subsections (a) and (b) of Section 201 of this Act in an aggregate amount equal to 25% of qualified expenditures incurred by a qualified taxpayer in the restoration and preservation of a qualified historic structure located in a River Edge Redevelopment Zone pursuant to a qualified rehabilitation plan, provided that the total amount of such expenditures (i) must equal $5,000 or more and (ii) must exceed the adjusted basis of the qualified historic structure on the first day the qualified rehabilitation plan begins. If the qualified rehabilitation plan spans multiple years, the aggregate credit for the entire project shall be allowed in the last taxable year.

(b) To obtain a tax credit pursuant to this Section, the taxpayer must apply with the Department of Natural Resources Commerce and Economic Opportunity. The Department of Natural Resources Commerce and Economic Opportunity, in consultation with the Historic Preservation Agency, shall determine the amount of eligible rehabilitation costs and expenses within 30 days of receipt of a complete application. For rehabilitation projects with qualified rehabilitation costs and expenses in excess of $250,000, the taxpayer must provide to the Department of Natural Resources a third-party audit conducted by a professionally qualified, independent auditor verifying (i) the project expenses, (ii) whether they are qualified expenditures, and (iii) that the qualified expenditures exceed the adjusted basis of the qualified historic structure on the first day the qualified rehabilitation plan commenced. The Department of Natural Resources is authorized, but not required, to accept this audit to determine the amount of qualified expenditures. For projects with less than $500,000 in qualified rehabilitation costs, the taxpayer must submit a certification of costs prepared by a certified public accountant and certify that the qualified expenditures exceed the adjusted basis of the qualified historic structure on the first day the qualified rehabilitation plan commenced. The Department of Natural Resources is authorized, but not required, to accept this certification of costs to determine the amount of qualified expenditures and the amount of the credit. The Department of Natural Resources and the National Park Service Historic Preservation Agency shall determine whether the rehabilitation is consistent with the standards of the Secretary of the United States Department of the Interior for rehabilitation.

(b-1) Upon completion and review of the project, the Department of Natural Resources Commerce and Economic Opportunity shall issue a single certificate in the amount of the eligible credits equal to 25% of qualified expenditures incurred during the eligible taxable years, as defined in subsections (a) and (a-1). At the time the certificate is issued, an issuance fee up to the maximum amount of 2% of the amount of the credits issued by the certificate may be collected from the applicant to administer the provisions of this Section. If collected, this issuance fee shall be deposited into the Historic Property Administrative Fund, a special fund created in the State treasury. Subject to appropriation, moneys in the Historic Property Administrative Fund shall be provided to the Department of Natural Resources as reimbursement evenly divided between the Department of Commerce and Economic Opportunity and the Historic Preservation Agency to reimburse the Department of Commerce and Economic Opportunity and the Historic Preservation Agency for the costs associated with administering this Section. The taxpayer must attach the certificate to the tax return on which the credits are to be claimed. The Department of Commerce and Economic Opportunity may adopt rules to implement this Section.

(c) The taxpayer must attach the certificate to the tax return on which the credits are to be claimed. The tax credit under this Section may not reduce the taxpayer's liability to less than zero. If the amount of the credit exceeds the tax liability for the year, the excess credit may be carried forward and applied to the tax liability of the 5 taxable years following the excess credit year.

(c-1) If the taxpayer is a partnership, a Subchapter S corporation, or a limited liability company that has elected partnership tax treatment, the credit is allowed to the partners, shareholders, or members in accordance with the determination of income and distributive share of income under the Internal Revenue Code.

(c-3) If a recapture event occurs during the recapture period with respect to a qualified historic structure, then for any taxable year in which the credits allowed under subsection (a) or (a-1) have been applied, the tax under the applicable section of this Act shall be increased by applying the recapture percentage set forth below to the tax decrease resulting from the application of credits allowed under subsection (a) or (a-1) to the taxable year in question.

For purposes of this subsection, the recapture percentage shall be determined as follows:

(1) if the recapture event occurs within the first year after commencement of the recapture period, then the recapture percentage is 100%;

(2) if the recapture event occurs within the second year after commencement of the recapture period, then the recapture percentage is 80%;

(3) if the recapture event occurs within the third year after commencement of the recapture period, then the recapture percentage is 60%;

(4) if the recapture event occurs within the fourth year after commencement of the recapture period, then the recapture percentage is 40%; and

(5) if the recapture event occurs within the fifth year after commencement of the recapture period, then the recapture percentage is 20%.

In the case of any recapture event, the carryforwards under subsection (c) above shall be adjusted by reason of such event.

(c-4) Subject to appropriation and prior to equal disbursement to the Department of Natural Resources, moneys in the Historic Property Administrative Fund shall be used, on a biennial basis beginning at the end of the second fiscal year after the effective date of this amendatory Act of the 100th General Assembly, to hire a qualified third party to prepare a biennial report to assess the overall economic impact to the State from the qualified rehabilitation projects under this Act completed in that year and in previous years. The overall economic impact shall include at least: (i) the direct and indirect or induced economic impacts of completed projects; (ii) temporary, permanent, and construction jobs created; (iii) sales, income, and property tax generation before, during construction, and after completion; and (iv) indirect neighborhood impact after completion.

(c-5) The Department of Natural Resources may adopt rules to implement this Section in addition to the rules expressly authorized herein.

(d) As used in this Section, the following terms have the following meanings.

"Placed in service" means the date the historic structure or the rehabilitated portion thereof is first placed in a condition or state of readiness or occupancy and is operational for its specifically assigned function or use. If the property remains in service during the rehabilitation, the placed in service date will be commensurate with the date of completion of the rehabilitation project as per the qualified rehabilitation plan.

"Qualified expenditure" means all the costs and expenses defined as qualified rehabilitation expenditures under Section 47 of the federal Internal Revenue Code that were incurred in connection with a qualified historic structure.

"Qualified historic structure" means a certified historic structure as defined under Section 47(c)(3) of the federal Internal Revenue Code.

"Qualified rehabilitation plan" means a project that is approved by the Department of Natural Resources and the National Park Service Historic Preservation Agency as being consistent with the standards in effect on the effective date of this amendatory Act of the 97th General Assembly for rehabilitation as adopted by the federal Secretary of the Interior.

"Qualified taxpayer" means the owner of the qualified historic structure or any other person who qualifies for the federal rehabilitation credit allowed by Section 47 of the federal Internal Revenue Code with respect to that qualified historic structure. Partners, shareholders of subchapter S corporations, and owners of limited liability companies (if the limited liability company is treated as a partnership for purposes of federal and State income taxation) are entitled to a credit under this Section to be determined in accordance with the determination of income and distributive share of income under Sections 702 and 703 and subchapter S of the Internal Revenue Code, provided that credits granted to a partnership, a limited liability company taxed as a partnership, or other multiple owners of property shall be passed through to the partners, members, or owners respectively on a pro rata basis or pursuant to an executed agreement among the partners, members, or owners documenting any alternate distribution method.

"Recapture event" means any of the following events occurring during the recapture period:

(1) failure to place in service the rehabilitated portions of the qualified historic structure, or failure to maintain the rehabilitated portions of the qualified historic structure in service after they are placed in service; provided that a recapture event under this paragraph (1) shall not include a removal from service for a reasonable period of time to conduct maintenance and repairs that are reasonably necessary to protect the health and safety of the public or to protect the structural integrity of the qualified historic structure or a neighboring structure;

(2) demolition or other alteration of the qualified historic structure in a manner that is inconsistent with the qualified rehabilitation plan or the Secretary of the Interior's Standards for Rehabilitation;

(3) disposition of the rehabilitated qualified historic structure in whole or a proportional disposition of a partnership interest therein, except as otherwise permitted by this Section; or

(4) use of the qualified historic structure in a manner that is inconsistent with the qualified rehabilitation plan or that is otherwise inconsistent with the provisions and intent of this Section.

A recapture event occurring in one taxable year shall be deemed continuing to subsequent taxable years unless and until corrected.

The following dispositions of a qualified historic structure shall not be deemed to be a recapture event for purposes of this Section:

(1) a transfer by reason of death;

(2) a transfer between spouses incident to divorce;

(3) a sale by and leaseback to an entity that, when the rehabilitated portions of the qualified historic structure are placed in service, will be a lessee of the qualified historic structure, but only for so long as the entity continues to be a lessee; and

(4) a mere change in the form of conducting the trade or business by the owner (or, if applicable, the lessee) of the qualified historic structure, so long as the property interest in such qualified historic structure is retained in such trade or business and the owner or lessee retains a substantial interest in such trade or business.

"Recapture period" means the 5-year period beginning on the date that the qualified historic structure or rehabilitated portions thereof are placed in service.

(Source: P.A. 99-914, eff. 12-20-16; 100-236, eff. 8-18-17.)