State of Illinois
90th General Assembly
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90_HB1338

      35 ILCS 5/201             from Ch. 120, par. 2-201
          Amends  the  Illinois  Income  Tax  Act.   Increases  the
      training expense credit from 1.6%  of  training  expenses  to
      3.2%  of  training  expenses  for  taxable years ending on or
      after January 1, 1997 and ending with taxable years ending on
      or before December 30, 2002.  Effective immediately.
                                                     LRB9004842DNmb
                                               LRB9004842DNmb
 1        AN ACT to amend the Illinois Income Tax Act  by  changing
 2    Section 201.
 3        Be  it  enacted  by  the People of the State of Illinois,
 4    represented in the General Assembly:
 5        Section 5.  The Illinois Income Tax  Act  is  amended  by
 6    changing Section 201 as follows:
 7        (35 ILCS 5/201) (from Ch. 120, par. 2-201)
 8        Sec. 201.  Tax Imposed.
 9        (a)  In  general.  A tax measured by net income is hereby
10    imposed on every individual, corporation,  trust  and  estate
11    for  each  taxable  year  ending  after  July 31, 1969 on the
12    privilege of earning or receiving income in or as a  resident
13    of  this  State.  Such  tax shall be in addition to all other
14    occupation or privilege taxes imposed by this State or by any
15    municipal corporation or political subdivision thereof.
16        (b)  Rates. The tax imposed by  subsection  (a)  of  this
17    Section shall be determined as follows:
18             (1)  In  the case of an individual, trust or estate,
19        for taxable years ending prior to July 1, 1989, an amount
20        equal to 2 1/2% of the  taxpayer's  net  income  for  the
21        taxable year.
22             (2)  In  the case of an individual, trust or estate,
23        for taxable years beginning prior to  July  1,  1989  and
24        ending after June 30, 1989, an amount equal to the sum of
25        (i)  2  1/2%  of the taxpayer's net income for the period
26        prior to July 1, 1989, as calculated under Section 202.3,
27        and (ii) 3% of the taxpayer's net income for  the  period
28        after June 30, 1989, as calculated under Section 202.3.
29             (3)  In  the case of an individual, trust or estate,
30        for taxable years  beginning  after  June  30,  1989,  an
31        amount  equal  to 3% of the taxpayer's net income for the
                            -2-                LRB9004842DNmb
 1        taxable year.
 2             (4)  (Blank).
 3             (5)  (Blank).
 4             (6)  In the case of a corporation, for taxable years
 5        ending prior to July 1, 1989, an amount equal  to  4%  of
 6        the taxpayer's net income for the taxable year.
 7             (7)  In the case of a corporation, for taxable years
 8        beginning prior to July 1, 1989 and ending after June 30,
 9        1989,  an  amount  equal  to  the  sum  of  (i) 4% of the
10        taxpayer's net income for the period  prior  to  July  1,
11        1989, as calculated under Section 202.3, and (ii) 4.8% of
12        the  taxpayer's  net income for the period after June 30,
13        1989, as calculated under Section 202.3.
14             (8)  In the case of a corporation, for taxable years
15        beginning after June 30, 1989, an amount equal to 4.8% of
16        the taxpayer's net income for the taxable year.
17        (c)  Beginning  on  July  1,  1979  and  thereafter,   in
18    addition to such income tax, there is also hereby imposed the
19    Personal  Property Tax Replacement Income Tax measured by net
20    income  on  every   corporation   (including   Subchapter   S
21    corporations),  partnership  and trust, for each taxable year
22    ending after June 30, 1979.  Such taxes are  imposed  on  the
23    privilege  of earning or receiving income in or as a resident
24    of this State.  The Personal Property Tax Replacement  Income
25    Tax  shall  be  in  addition  to  the  income  tax imposed by
26    subsections (a) and (b) of this Section and  in  addition  to
27    all other occupation or privilege taxes imposed by this State
28    or  by  any  municipal  corporation  or political subdivision
29    thereof.
30        (d)  Additional Personal Property Tax Replacement  Income
31    Tax  Rates.  The personal property tax replacement income tax
32    imposed by this subsection and subsection (c) of this Section
33    in the case of a  corporation,  other  than  a  Subchapter  S
34    corporation,  shall be an additional amount equal to 2.85% of
                            -3-                LRB9004842DNmb
 1    such taxpayer's net income for the taxable year, except  that
 2    beginning  on  January  1,  1981, and thereafter, the rate of
 3    2.85% specified in this subsection shall be reduced to  2.5%,
 4    and  in  the  case  of a partnership, trust or a Subchapter S
 5    corporation shall be an additional amount equal  to  1.5%  of
 6    such taxpayer's net income for the taxable year.
 7        (e)  Investment  credit.   A  taxpayer shall be allowed a
 8    credit against the Personal Property Tax  Replacement  Income
 9    Tax for investment in qualified property.
10             (1)  A  taxpayer  shall be allowed a credit equal to
11        .5% of the basis of qualified property placed in  service
12        during the taxable year, provided such property is placed
13        in  service  on  or  after  July 1, 1984.  There shall be
14        allowed an additional credit equal to .5% of the basis of
15        qualified property placed in service during  the  taxable
16        year,  provided  such property is placed in service on or
17        after July 1, 1986, and the  taxpayer's  base  employment
18        within  Illinois  has  increased  by  1% or more over the
19        preceding year as determined by the taxpayer's employment
20        records filed with the Illinois Department of  Employment
21        Security.   Taxpayers  who  are  new to Illinois shall be
22        deemed to have met the 1% growth in base  employment  for
23        the first year in which they file employment records with
24        the  Illinois  Department  of  Employment  Security.  The
25        provisions added to this Section by  Public  Act  85-1200
26        (and restored by Public Act 87-895) shall be construed as
27        declaratory  of  existing law and not as a new enactment.
28        If, in any year, the increase in base  employment  within
29        Illinois  over  the  preceding  year is less than 1%, the
30        additional credit shall be  limited  to  that  percentage
31        times  a  fraction, the numerator of which is .5% and the
32        denominator of which is 1%, but  shall  not  exceed  .5%.
33        The  investment credit shall not be allowed to the extent
34        that it would reduce a taxpayer's liability  in  any  tax
                            -4-                LRB9004842DNmb
 1        year  below  zero,  nor  may  any  credit  for  qualified
 2        property  be  allowed for any year other than the year in
 3        which the property was placed in service in Illinois. For
 4        tax years ending on or after December 31, 1987, and on or
 5        before December 31, 1988, the credit shall be allowed for
 6        the tax year in which the property is placed in  service,
 7        or, if the amount of the credit exceeds the tax liability
 8        for  that year, whether it exceeds the original liability
 9        or the liability as later amended,  such  excess  may  be
10        carried forward and applied to the tax liability of the 5
11        taxable  years  following  the excess credit years if the
12        taxpayer (i) makes investments which cause  the  creation
13        of  a  minimum  of  2,000  full-time  equivalent  jobs in
14        Illinois,  (ii)  is  located  in   an   enterprise   zone
15        established  pursuant to the Illinois Enterprise Zone Act
16        and (iii) is certified by the Department of Commerce  and
17        Community  Affairs  as  complying  with  the requirements
18        specified in clause (i) and (ii) by July  1,  1986.   The
19        Department of Commerce and Community Affairs shall notify
20        the  Department  of  Revenue  of  all such certifications
21        immediately. For tax  years  ending  after  December  31,
22        1988,  the  credit  shall  be allowed for the tax year in
23        which the property is  placed  in  service,  or,  if  the
24        amount  of  the credit exceeds the tax liability for that
25        year, whether it exceeds the original  liability  or  the
26        liability  as  later  amended, such excess may be carried
27        forward and applied to the tax liability of the 5 taxable
28        years following the excess credit years. The credit shall
29        be applied to the earliest year  for  which  there  is  a
30        liability. If there is credit from more than one tax year
31        that  is  available to offset a liability, earlier credit
32        shall be applied first.
33             (2)  The term "qualified  property"  means  property
34        which:
                            -5-                LRB9004842DNmb
 1                  (A)  is   tangible,   whether   new   or  used,
 2             including buildings  and  structural  components  of
 3             buildings  and signs that are real property, but not
 4             including land or improvements to real property that
 5             are not a structural component of a building such as
 6             landscaping,  sewer  lines,  local   access   roads,
 7             fencing, parking lots, and other appurtenances;
 8                  (B)  is  depreciable pursuant to Section 167 of
 9             the  Internal  Revenue  Code,  except  that  "3-year
10             property" as defined in Section 168(c)(2)(A) of that
11             Code is not eligible for the credit provided by this
12             subsection (e);
13                  (C)  is acquired  by  purchase  as  defined  in
14             Section 179(d) of the Internal Revenue Code;
15                  (D)  is  used  in Illinois by a taxpayer who is
16             primarily engaged in  manufacturing,  or  in  mining
17             coal or fluorite, or in retailing; and
18                  (E)  has  not  previously been used in Illinois
19             in such a manner and  by  such  a  person  as  would
20             qualify  for  the credit provided by this subsection
21             (e) or subsection (f).
22             (3)  For   purposes   of   this   subsection    (e),
23        "manufacturing" means the material staging and production
24        of  tangible  personal  property  by  procedures commonly
25        regarded as manufacturing,  processing,  fabrication,  or
26        assembling  which changes some existing material into new
27        shapes, new qualities, or new combinations.  For purposes
28        of this subsection (e) the term "mining" shall  have  the
29        same  meaning  as  the term "mining" in Section 613(c) of
30        the  Internal  Revenue  Code.   For  purposes   of   this
31        subsection  (e),  the  term "retailing" means the sale of
32        tangible  personal  property  or  services  rendered   in
33        conjunction  with  the sale of tangible consumer goods or
34        commodities.
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 1             (4)  The basis of qualified property  shall  be  the
 2        basis  used  to  compute  the  depreciation deduction for
 3        federal income tax purposes.
 4             (5)  If the basis of the property for federal income
 5        tax depreciation purposes is increased after it has  been
 6        placed in service in Illinois by the taxpayer, the amount
 7        of  such  increase  shall  be  deemed  property placed in
 8        service on the date of such increase in basis.
 9             (6)  The term "placed in  service"  shall  have  the
10        same  meaning as under Section 46 of the Internal Revenue
11        Code.
12             (7)  If during any taxable year, any property ceases
13        to be qualified property in the  hands  of  the  taxpayer
14        within  48  months  after being placed in service, or the
15        situs of any qualified property is moved outside Illinois
16        within 48 months  after  being  placed  in  service,  the
17        Personal  Property  Tax  Replacement  Income Tax for such
18        taxable year shall be increased.  Such increase shall  be
19        determined by (i) recomputing the investment credit which
20        would  have been allowed for the year in which credit for
21        such property was originally allowed by eliminating  such
22        property from such computation and, (ii) subtracting such
23        recomputed  credit  from  the amount of credit previously
24        allowed. For  the  purposes  of  this  paragraph  (7),  a
25        reduction  of  the  basis of qualified property resulting
26        from a redetermination of the  purchase  price  shall  be
27        deemed  a disposition of qualified property to the extent
28        of such reduction.
29             (8)  Unless the investment  credit  is  extended  by
30        law,  the  basis  of qualified property shall not include
31        costs incurred after December 31, 2003, except for  costs
32        incurred  pursuant  to a binding contract entered into on
33        or before December 31, 2003.
34        (f)  Investment credit; Enterprise Zone.
                            -7-                LRB9004842DNmb
 1             (1)  A taxpayer shall be allowed  a  credit  against
 2        the  tax  imposed  by  subsections  (a)  and  (b) of this
 3        Section for investment in  qualified  property  which  is
 4        placed  in service in an Enterprise Zone created pursuant
 5        to the Illinois Enterprise Zone Act. For partners and for
 6        shareholders of Subchapter S corporations, there shall be
 7        allowed  a  credit  under  this  subsection  (f)  to   be
 8        determined in accordance with the determination of income
 9        and  distributive  share of income under Sections 702 and
10        704 and Subchapter S of the Internal  Revenue  Code.  The
11        credit  shall be .5% of the basis for such property.  The
12        credit shall be available only in  the  taxable  year  in
13        which the property is placed in service in the Enterprise
14        Zone and shall not be allowed to the extent that it would
15        reduce  a  taxpayer's  liability  for  the tax imposed by
16        subsections (a) and (b) of this Section  to  below  zero.
17        For  tax  years ending on or after December 31, 1985, the
18        credit shall be allowed for the tax  year  in  which  the
19        property  is  placed in service, or, if the amount of the
20        credit exceeds the tax liability for that  year,  whether
21        it  exceeds  the  original  liability or the liability as
22        later amended, such excess may  be  carried  forward  and
23        applied  to  the  tax  liability  of  the 5 taxable years
24        following the excess credit year.  The  credit  shall  be
25        applied  to  the  earliest  year  for  which  there  is a
26        liability. If there is credit from more than one tax year
27        that is available  to  offset  a  liability,  the  credit
28        accruing first in time shall be applied first.
29             (2)  The  term  qualified  property  means  property
30        which:
31                  (A)  is   tangible,   whether   new   or  used,
32             including buildings  and  structural  components  of
33             buildings;
34                  (B)  is  depreciable pursuant to Section 167 of
                            -8-                LRB9004842DNmb
 1             the  Internal  Revenue  Code,  except  that  "3-year
 2             property" as defined in Section 168(c)(2)(A) of that
 3             Code is not eligible for the credit provided by this
 4             subsection (f);
 5                  (C)  is acquired  by  purchase  as  defined  in
 6             Section 179(d) of the Internal Revenue Code;
 7                  (D)  is  used  in  the  Enterprise  Zone by the
 8             taxpayer; and
 9                  (E)  has not been previously used  in  Illinois
10             in  such  a  manner  and  by  such a person as would
11             qualify for the credit provided by  this  subsection
12             (f) or subsection (e).
13             (3)  The  basis  of  qualified property shall be the
14        basis used to  compute  the  depreciation  deduction  for
15        federal income tax purposes.
16             (4)  If the basis of the property for federal income
17        tax  depreciation purposes is increased after it has been
18        placed in service in the Enterprise Zone by the taxpayer,
19        the amount of such  increase  shall  be  deemed  property
20        placed in service on the date of such increase in basis.
21             (5)  The  term  "placed  in  service" shall have the
22        same meaning as under Section 46 of the Internal  Revenue
23        Code.
24             (6)  If during any taxable year, any property ceases
25        to  be  qualified  property  in the hands of the taxpayer
26        within 48 months after being placed in  service,  or  the
27        situs  of  any  qualified  property  is moved outside the
28        Enterprise Zone within 48 months after  being  placed  in
29        service, the tax imposed under subsections (a) and (b) of
30        this  Section  for  such taxable year shall be increased.
31        Such increase shall be determined by (i) recomputing  the
32        investment  credit  which would have been allowed for the
33        year in which credit for  such  property  was  originally
34        allowed   by   eliminating   such   property   from  such
                            -9-                LRB9004842DNmb
 1        computation, and (ii) subtracting such recomputed  credit
 2        from  the  amount  of credit previously allowed.  For the
 3        purposes of this paragraph (6), a reduction of the  basis
 4        of qualified property resulting from a redetermination of
 5        the  purchase  price  shall  be  deemed  a disposition of
 6        qualified property to the extent of such reduction.
 7             (g)  Jobs Tax Credit; Enterprise  Zone  and  Foreign
 8    Trade Zone or Sub-Zone.
 9             (1)  A taxpayer conducting a trade or business in an
10        enterprise  zone  or a High Impact Business designated by
11        the  Department  of  Commerce   and   Community   Affairs
12        conducting  a trade or business in a federally designated
13        Foreign Trade Zone or Sub-Zone shall be allowed a  credit
14        against  the  tax  imposed  by subsections (a) and (b) of
15        this Section in the amount of $500 per eligible  employee
16        hired to work in the zone during the taxable year.
17             (2)  To qualify for the credit:
18                  (A)  the  taxpayer must hire 5 or more eligible
19             employees to work in an enterprise zone or federally
20             designated Foreign Trade Zone or Sub-Zone during the
21             taxable year;
22                  (B)  the taxpayer's total employment within the
23             enterprise  zone  or  federally  designated  Foreign
24             Trade Zone or Sub-Zone must increase by  5  or  more
25             full-time  employees  beyond  the  total employed in
26             that zone at the end of the previous  tax  year  for
27             which  a  jobs  tax  credit  under  this Section was
28             taken, or beyond the total employed by the  taxpayer
29             as of December 31, 1985, whichever is later; and
30                  (C)  the  eligible  employees  must be employed
31             180 consecutive days in order to be deemed hired for
32             purposes of this subsection.
33             (3)  An "eligible employee" means  an  employee  who
34        is:
                            -10-               LRB9004842DNmb
 1                  (A)  Certified  by  the  Department of Commerce
 2             and Community Affairs  as  "eligible  for  services"
 3             pursuant  to  regulations  promulgated in accordance
 4             with Title II of the Job Training  Partnership  Act,
 5             Training Services for the Disadvantaged or Title III
 6             of  the Job Training Partnership Act, Employment and
 7             Training Assistance for Dislocated Workers Program.
 8                  (B)  Hired  after  the   enterprise   zone   or
 9             federally  designated Foreign Trade Zone or Sub-Zone
10             was designated or the trade or business was  located
11             in that zone, whichever is later.
12                  (C)  Employed in the enterprise zone or Foreign
13             Trade  Zone  or Sub-Zone. An employee is employed in
14             an enterprise zone or federally  designated  Foreign
15             Trade  Zone or Sub-Zone if his services are rendered
16             there or it  is  the  base  of  operations  for  the
17             services performed.
18                  (D)  A  full-time  employee  working 30 or more
19             hours per week.
20             (4)  For tax years ending on or after  December  31,
21        1985  and prior to December 31, 1988, the credit shall be
22        allowed for the tax year in which the eligible  employees
23        are hired.  For tax years ending on or after December 31,
24        1988,  the  credit  shall  be  allowed  for  the tax year
25        immediately following the tax year in which the  eligible
26        employees are hired.  If the amount of the credit exceeds
27        the  tax  liability for that year, whether it exceeds the
28        original liability or the  liability  as  later  amended,
29        such excess may be carried forward and applied to the tax
30        liability  of  the  5  taxable years following the excess
31        credit year.  The credit shall be applied to the earliest
32        year for which there is a liability. If there  is  credit
33        from more than one tax year that is available to offset a
34        liability, earlier credit shall be applied first.
                            -11-               LRB9004842DNmb
 1             (5)  The Department of Revenue shall promulgate such
 2        rules and regulations as may be deemed necessary to carry
 3        out the purposes of this subsection (g).
 4             (6)  The  credit  shall  be  available  for eligible
 5        employees hired on or after January 1, 1986.
 6             (h)  Investment credit; High Impact Business.
 7             (1)  Subject to subsection (b) of Section 5.5 of the
 8        Illinois Enterprise Zone Act, a taxpayer shall be allowed
 9        a credit against the tax imposed by subsections  (a)  and
10        (b)  of this Section for investment in qualified property
11        which is placed in service by a  Department  of  Commerce
12        and  Community  Affairs  designated High Impact Business.
13        The credit shall be .5% of the basis for  such  property.
14        The  credit  shall  not  be  available  until the minimum
15        investments in qualified property set  forth  in  Section
16        5.5  of  the  Illinois  Enterprise  Zone  Act  have  been
17        satisfied  and shall not be allowed to the extent that it
18        would reduce a taxpayer's liability for the  tax  imposed
19        by subsections (a) and (b) of this Section to below zero.
20        The  credit  applicable to such minimum investments shall
21        be taken in  the  taxable  year  in  which  such  minimum
22        investments   have   been   completed.   The  credit  for
23        additional investments beyond the minimum investment by a
24        designated high impact business shall be  available  only
25        in  the  taxable  year in which the property is placed in
26        service and shall not be allowed to the  extent  that  it
27        would  reduce  a taxpayer's liability for the tax imposed
28        by subsections (a) and (b) of this Section to below zero.
29        For tax years ending on or after December 31,  1987,  the
30        credit  shall  be  allowed  for the tax year in which the
31        property is placed in service, or, if the amount  of  the
32        credit  exceeds  the tax liability for that year, whether
33        it exceeds the original liability  or  the  liability  as
34        later  amended,  such  excess  may be carried forward and
                            -12-               LRB9004842DNmb
 1        applied to the tax  liability  of  the  5  taxable  years
 2        following  the  excess  credit year.  The credit shall be
 3        applied to  the  earliest  year  for  which  there  is  a
 4        liability.   If  there  is  credit from more than one tax
 5        year that is available to offset a liability, the  credit
 6        accruing first in time shall be applied first.
 7             Changes  made  in  this subdivision (h)(1) by Public
 8        Act 88-670 restore changes made by Public Act 85-1182 and
 9        reflect existing law.
10             (2)  The  term  qualified  property  means  property
11        which:
12                  (A)  is  tangible,   whether   new   or   used,
13             including  buildings  and  structural  components of
14             buildings;
15                  (B)  is depreciable pursuant to Section 167  of
16             the  Internal  Revenue  Code,  except  that  "3-year
17             property" as defined in Section 168(c)(2)(A) of that
18             Code is not eligible for the credit provided by this
19             subsection (h);
20                  (C)  is  acquired  by  purchase  as  defined in
21             Section 179(d) of the Internal Revenue Code; and
22                  (D)  is not eligible for  the  Enterprise  Zone
23             Investment Credit provided by subsection (f) of this
24             Section.
25             (3)  The  basis  of  qualified property shall be the
26        basis used to  compute  the  depreciation  deduction  for
27        federal income tax purposes.
28             (4)  If the basis of the property for federal income
29        tax  depreciation purposes is increased after it has been
30        placed in service in a federally designated Foreign Trade
31        Zone or Sub-Zone located in Illinois by the taxpayer, the
32        amount of such increase shall be deemed  property  placed
33        in service on the date of such increase in basis.
34             (5)  The  term  "placed  in  service" shall have the
                            -13-               LRB9004842DNmb
 1        same meaning as under Section 46 of the Internal  Revenue
 2        Code.
 3             (6)  If  during any taxable year ending on or before
 4        December 31, 1996, any property ceases  to  be  qualified
 5        property  in  the  hands of the taxpayer within 48 months
 6        after being placed  in  service,  or  the  situs  of  any
 7        qualified  property  is  moved outside Illinois within 48
 8        months after being placed in  service,  the  tax  imposed
 9        under  subsections  (a)  and (b) of this Section for such
10        taxable year shall be increased.  Such increase shall  be
11        determined by (i) recomputing the investment credit which
12        would  have been allowed for the year in which credit for
13        such property was originally allowed by eliminating  such
14        property from such computation, and (ii) subtracting such
15        recomputed  credit  from  the amount of credit previously
16        allowed.  For the  purposes  of  this  paragraph  (6),  a
17        reduction  of  the  basis of qualified property resulting
18        from a redetermination of the  purchase  price  shall  be
19        deemed  a disposition of qualified property to the extent
20        of such reduction.
21             (7)  Beginning with tax years ending after  December
22        31,  1996,  if  a taxpayer qualifies for the credit under
23        this  subsection  (h)  and  thereby  is  granted  a   tax
24        abatement  and the taxpayer relocates its entire facility
25        in violation of the explicit  terms  and  length  of  the
26        contract  under  Section 18-183 of the Property Tax Code,
27        the tax imposed under subsections (a)  and  (b)  of  this
28        Section  shall be increased for the taxable year in which
29        the taxpayer relocated its facility by an amount equal to
30        the amount of credit received by the taxpayer under  this
31        subsection (h).
32        (i)  A credit shall be allowed against the tax imposed by
33    subsections  (a)  and (b) of this Section for the tax imposed
34    by subsections (c) and (d)  of  this  Section.   This  credit
                            -14-               LRB9004842DNmb
 1    shall   be   computed  by  multiplying  the  tax  imposed  by
 2    subsections (c) and (d) of this Section by  a  fraction,  the
 3    numerator  of  which is base income allocable to Illinois and
 4    the denominator of which is Illinois base income, and further
 5    multiplying  the  product  by  the  tax   rate   imposed   by
 6    subsections (a) and (b) of this Section.
 7        Any  credit  earned  on  or after December 31, 1986 under
 8    this subsection which is unused in the  year  the  credit  is
 9    computed  because  it  exceeds  the  tax liability imposed by
10    subsections (a) and (b) for that year (whether it exceeds the
11    original liability or the liability as later amended) may  be
12    carried  forward  and applied to the tax liability imposed by
13    subsections (a) and (b) of the 5 taxable years following  the
14    excess  credit  year.   This credit shall be applied first to
15    the earliest year for which there is a liability.   If  there
16    is a credit under this subsection from more than one tax year
17    that  is  available to offset a liability the earliest credit
18    arising under this subsection shall be applied first.
19        If, during any taxable year ending on or  after  December
20    31,  1986, the tax imposed by subsections (c) and (d) of this
21    Section for which a taxpayer has claimed a credit under  this
22    subsection  (i) is reduced, the amount of credit for such tax
23    shall also be reduced.  Such reduction shall be determined by
24    recomputing the credit to take into account the  reduced  tax
25    imposed  by  subsection  (c)  and (d).  If any portion of the
26    reduced amount of credit has  been  carried  to  a  different
27    taxable  year,  an  amended  return  shall  be filed for such
28    taxable year to reduce the amount of credit claimed.
29        (j)  Training expense credit.  Beginning with  tax  years
30    ending  on  or  after  December 31, 1986, a taxpayer shall be
31    allowed a credit against the tax imposed  by  subsection  (a)
32    and  (b)  under this Section for all amounts paid or accrued,
33    on behalf of all persons employed by the taxpayer in Illinois
34    or Illinois residents  employed  outside  of  Illinois  by  a
                            -15-               LRB9004842DNmb
 1    taxpayer,   for   educational   or   vocational  training  in
 2    semi-technical or technical fields or semi-skilled or skilled
 3    fields,  which  were  deducted  from  gross  income  in   the
 4    computation  of  taxable  income.  The credit against the tax
 5    imposed by subsections (a) and (b) shall be (i) 1.6% of  such
 6    training  expenses  for  taxable  years  ending  on or before
 7    December 31, 1996  and  taxable  years  ending  on  or  after
 8    December 31, 2002 and (ii) 3.2% of such training expenses for
 9    taxable  years  ending on or after January 1, 1997 and ending
10    with taxable years ending on or before December 30, 2002. For
11    partners and for shareholders of subchapter  S  corporations,
12    there  shall be allowed a credit under this subsection (j) to
13    be determined in accordance with the determination of  income
14    and  distributive  share of income under Sections 702 and 704
15    and subchapter S of the Internal Revenue Code.
16        Any credit allowed under this subsection which is  unused
17    in  the  year  the credit is earned may be carried forward to
18    each of the 5 taxable years following the year for which  the
19    credit is first computed until it is used.  This credit shall
20    be  applied  first  to the earliest year for which there is a
21    liability.  If there is a credit under this  subsection  from
22    more  than  one  tax  year  that  is  available  to  offset a
23    liability the earliest credit arising under  this  subsection
24    shall be applied first.
25        (k)  Research and development credit.
26        Beginning  with  tax  years  ending after July 1, 1990, a
27    taxpayer shall be allowed a credit against the tax imposed by
28    subsections (a)  and  (b)  of  this  Section  for  increasing
29    research  activities  in  this  State.   The  credit  allowed
30    against  the  tax imposed by subsections (a) and (b) shall be
31    equal to 6 1/2% of the qualifying expenditures for increasing
32    research activities in this State.
33        For   purposes   of    this    subsection,    "qualifying
34    expenditures"  means  the  qualifying expenditures as defined
                            -16-               LRB9004842DNmb
 1    for the federal credit  for  increasing  research  activities
 2    which  would  be  allowable  under Section 41 of the Internal
 3    Revenue  Code  and  which  are  conducted  in   this   State,
 4    "qualifying  expenditures  for increasing research activities
 5    in this State" means the excess  of  qualifying  expenditures
 6    for  the  taxable  year  in  which  incurred  over qualifying
 7    expenditures for the base  period,  "qualifying  expenditures
 8    for  the  base  period"  means  the average of the qualifying
 9    expenditures for each year in  the  base  period,  and  "base
10    period"  means  the 3 taxable years immediately preceding the
11    taxable year for which the determination is being made.
12        Any credit in excess of the tax liability for the taxable
13    year may be carried forward. A taxpayer may elect to have the
14    unused credit shown on its  final  completed  return  carried
15    over  as a credit against the tax liability for the following
16    5 taxable years or until it has been  fully  used,  whichever
17    occurs first.
18        If  an  unused  credit is carried forward to a given year
19    from 2 or more earlier years,  that  credit  arising  in  the
20    earliest year will be applied first against the tax liability
21    for  the  given  year.  If a tax liability for the given year
22    still remains, the credit from the next  earliest  year  will
23    then  be applied, and so on, until all credits have been used
24    or  no  tax  liability  for  the  given  year  remains.   Any
25    remaining unused credit  or  credits  then  will  be  carried
26    forward  to  the next following year in which a tax liability
27    is incurred, except that no credit can be carried forward  to
28    a year which is more than 5 years after the year in which the
29    expense for which the credit is given was incurred.
30        Unless  extended  by  law,  the  credit shall not include
31    costs incurred after December  31,  1999,  except  for  costs
32    incurred  pursuant  to  a binding contract entered into on or
33    before December 31, 1999.
34    (Source: P.A. 88-45; 88-89;  88-141;  88-547,  eff.  6-30-94;
                            -17-               LRB9004842DNmb
 1    88-670,  eff.  12-2-94;  89-235,  eff.  8-4-95;  89-519, eff.
 2    7-18-96; 89-591, eff. 8-1-96.)
 3        Section 99.  Effective date.  This Act takes effect  upon
 4    becoming law.

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