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90_HB1339 30 ILCS 105/5.449 new 35 ILCS 5/211 new Creates the Economic Development Income Tax Credit Board Act. Creates the Economic Development Income Tax Credit Board and authorizes the Board to enter into tax credit agreements with taxpayers that grant income tax credits to taxpayers who create jobs. The tax credits shall be in the amount and for the duration determined by the Board on a case by case basis not to exceed 10 years. Establishes certain conditions for qualifying for a tax credit. Amends the State Finance Act to establish the Economic Development for Illinois' Economy Fund. Amends the Illinois Income Tax Act to provide for credit awarded under the Economic Development Income Credit Board Act. Effective immediately. LRB9004846DNmb LRB9004846DNmb 1 AN ACT to create the Economic Development for Illinois 2 Economy Board. 3 Be it enacted by the People of the State of Illinois, 4 represented in the General Assembly: 5 Section 1. Short title. This Act may be cited as the 6 Economic Development for Illinois Economy Board Act. 7 Section 5. Definitions. As used in this Act: 8 "Board" means the Economic Development for Illinois 9 Economy Board established by this Act. 10 "Credit amount" means the amount agreed to between the 11 Board and an applicant under this Act, but not to exceed the 12 incremental income tax withholdings attributable to the 13 applicant's project. 14 "Director" means the Director of Commerce and Community 15 Affairs. 16 "Full-time employee" means an individual who is employed 17 for consideration for at least 35 hours each week or who 18 renders any other standard of service generally accepted by 19 custom or specified by contract as full-time employment. 20 "Incremental income tax withholdings" means the total 21 amount of income taxes withheld under the Illinois Income Tax 22 Act by the taxpayer during the taxable year from the 23 compensation of new employees. 24 "New employee" means a full-time employee first employed 25 by a taxpayer in the project that is the subject of a tax 26 credit agreement and who is employed after the taxpayer 27 enters into the tax credit agreement. 28 The term "new employee" does not include any of the 29 following: 30 (1) An employee of the taxpayer who performs a job that 31 was previously performed by another employee, if that job -2- LRB9004846DNmb 1 existed for at least 6 months before hiring the new employee. 2 (2) An employee of the taxpayer who was previously 3 employed in Illinois by a related member of the taxpayer and 4 whose employment was shifted to the taxpayer after the 5 taxpayer entered into the tax credit agreement. However, if a 6 new employee performs a job that was previously performed by 7 an employee who was treated under the agreement as a new 8 employee and promoted by the taxpayer to another job, the 9 employee may be considered a new employee under the 10 agreement. 11 (3) A child, grandchild, parent, or spouse, other than a 12 spouse who is legally separated from the individual, of any 13 individual who is an employee of the taxpayer and who has a 14 direct or an indirect ownership interest of at least 5% in 15 the profits, capital, or value of the taxpayer. An ownership 16 interest shall be determined in accordance with Section 1563 17 of the Internal Revenue Code of 1986 and regulations 18 prescribed under that Section. 19 "Pass-through entity" means a Subchapter S corporation or 20 a partnership. 21 "Related member" means a person who, with respect to the 22 taxpayer during all or any portion of the taxable year, is 23 any one of the following: 24 (1) An individual stockholder, or a member of the 25 stockholder's family enumerated in Section 318 of the 26 Internal Revenue Code of 1986, if the stockholder and the 27 member of the stockholder's family own directly, indirectly, 28 beneficially, or constructively, in the aggregate, at least 29 50% of the value of the taxpayer's outstanding stock. 30 (2) A stockholder, or a stockholder's partnership, 31 estate, trust, or corporation, if the stockholder and the 32 stockholder's partnership, estate, trust, or corporation owns 33 directly, indirectly, beneficially, or constructively, in the 34 aggregate, at least 50% of the value of the taxpayer's -3- LRB9004846DNmb 1 outstanding stock. 2 (3) A corporation, or a party related to the corporation 3 in a manner that would require an attribution of stock from 4 the corporation under the attribution rules of Section 318 of 5 the Internal Revenue Act of 1986, if the taxpayer owns 6 directly, indirectly, beneficially, or constructively at 7 least 50% of the value of the corporation's outstanding 8 stock. 9 (4) A component member as defined in Section 1563(b) of 10 the Internal Revenue Code of 1986. 11 (5) A person to or from whom there is attribution of 12 stock ownership in accordance with Section 1563(e) of the 13 Internal Revenue Code of 1986 except, for purposes of 14 determining whether a person is a related member under this 15 subdivision, 20% shall be substituted for 5% wherever 5% 16 appears in Section 1563(e) of the Internal Revenue Code of 17 1986. 18 "Taxpayer" means a person, corporation, partnership, or 19 other entity that has any State income tax liability under 20 the Illinois Income Tax Act. 21 Section 10. Income tax credit. Subject to the conditions 22 set forth in this Act, a taxpayer is entitled to a credit 23 against any tax liability under subsections (a) and (b) of 24 Section 201 of the Illinois Income Tax Act that may be 25 imposed on the taxpayer for a taxable year beginning after 26 December 31, 1997, if the taxpayer is awarded a credit by the 27 Board under this Act for that taxable year. 28 Section 15. Economic Development for Illinois Economy 29 Board. 30 (a) The Economic Development for Illinois Economy Board 31 is established. The Board consists of the following 7 32 members: -4- LRB9004846DNmb 1 (1) The Director of Commerce and Community Affairs 2 or his or her designee. 3 (2) The Director of the Bureau of the Budget or his 4 or her designee. 5 (3) The Director of Revenue or his or her designee. 6 (4) Four members appointed by the Governor, not 7 more than 2 of whom may be members of the same political 8 party. 9 (b) The Director of Commerce and Community Affairs shall 10 serve as chairperson of the Board. Four members of the Board 11 constitute a quorum to transact and vote on the business of 12 the Board. 13 (c) The Department of Commerce and Community Affairs 14 shall assist the Board in carrying out the Board's duties. 15 Section 20. Award of tax credits. 16 (a) The Board may award tax credits under this Act to 17 foster job creation in Illinois. 18 (b) The credit shall be claimed for the taxable years 19 specified in the taxpayer's tax credit agreement not to 20 exceed 10 years. 21 Section 25. Application for credit. A person that 22 proposes a project to create new jobs in Illinois may apply 23 to the Board to enter into an agreement for a tax credit 24 under this Act. The Director of Commerce and Community 25 Affairs shall prescribe the form of the application. 26 Section 30. Conditions for credit. After receipt of an 27 application, the Board may enter into an agreement with the 28 applicant for a credit under this Act if the Board determines 29 that all of the following conditions exist: 30 (1) The applicant's project will create new jobs that 31 were not jobs previously performed by employees of the -5- LRB9004846DNmb 1 applicant in Illinois. 2 (2) The applicant's project is economically sound and 3 will benefit the people of Illinois by increasing 4 opportunities for employment and strengthening the economy. 5 (3) There is at least one other state that the applicant 6 verifies is being considered for the project. 7 (4) A significant disparity is identified, using best 8 available data, in the projected costs for the applicant's 9 project compared to the costs in the competing state, 10 including the impact of the competing state's incentive 11 programs. The competing state's incentive programs shall 12 include state, local, private, and federal funds available. 13 (5) The units of local government affected by the 14 project have committed significant local incentives with 15 respect to the project. 16 (6) Receiving the tax credit is a major factor in the 17 applicant's decision to go forward with the project and not 18 receiving the tax credit will result in the applicant not 19 creating new jobs in Illinois. 20 (7) Awarding the tax credit will result in an overall 21 positive fiscal impact to the State, as certified by the 22 Bureau of the Budget using the best available data. 23 (8) The credit is not prohibited under Section 35 of 24 this Act. 25 Section 35. Relocated jobs; ineligible for credit. A 26 person is not entitled to claim the credit provided by this 27 Act for any jobs that the person relocates from one site in 28 Illinois to another site in Illinois. Determinations under 29 this Section shall be made by the Board. 30 Section 40. Credit amount; criteria; Board determination. 31 (a) In determining the credit amount that should be 32 awarded, the Board shall take into consideration the -6- LRB9004846DNmb 1 following factors: 2 (1) The economy of the county where the project 3 will be located. 4 (2) The potential impact on the economy of 5 Illinois. 6 (3) The magnitude of the cost differential between 7 Illinois and the competing state. 8 (4) The incremental payroll attributable to the 9 project. 10 (5) The capital investment attributable to the 11 project. 12 (6) The amount that the average wage paid by the 13 applicant exceeds the average wage paid within the county 14 in which the project will be located. 15 (7) The costs to Illinois and the affected 16 political subdivisions with respect to the project. 17 (8) The financial assistance that is otherwise 18 provided by Illinois and the affected units of local 19 government. 20 (b) The Board shall determine the amount and duration of 21 a tax credit awarded under this Act. The duration of the 22 credit may not exceed 10 taxable years. The credit may be 23 stated as a percentage of the incremental income tax 24 withholdings attributable to the applicant's project and may 25 include a fixed dollar limitation. The credit amount may not 26 exceed the incremental income tax withholdings. A credit 27 under this Act shall not reduce the taxpayer's liability 28 under the Illinois Income Tax Act to less than zero. 29 Section 45. Tax credit agreement. The Board shall enter 30 into an agreement with an applicant that is awarded a credit 31 under this Act. The agreement must include all of the 32 following: 33 (1) A detailed description of the project that is the -7- LRB9004846DNmb 1 subject of the agreement. 2 (2) The duration of the tax credit and the first taxable 3 year for which the credit may be claimed. 4 (3) The credit amount that will be allowed for each 5 taxable year. 6 (4) A requirement that the taxpayer shall maintain 7 operations at the project location for at least 2 times the 8 number of years as the term of the tax credit. 9 (5) A specific method for determining the number of new 10 employees employed during a taxable year who are performing 11 jobs not previously performed by an employee. 12 (6) A requirement that the taxpayer shall annually 13 report to the Board the number of new employees who are 14 performing jobs not previously performed by an employee, the 15 new income tax revenue withheld in connection with the new 16 employees, and any other information the Director of Commerce 17 and Community needs to perform the Director's duties under 18 this Act. 19 (7) A requirement that the Director verify with the 20 appropriate State agencies the amounts reported under 21 paragraph (6) of this Section, and after doing so shall issue 22 a certificate to the taxpayer stating that the amounts have 23 been verified. 24 (8) A requirement that the taxpayer provide written 25 notification to the Director and the Board not more than 30 26 days after the taxpayer makes or receives a proposal that 27 would transfer the taxpayer's tax liability under the 28 Illinois Income Tax Act to a successor taxpayer. 29 (9) Any other performance conditions that the Board 30 determines are appropriate. 31 (10) A statement that the credit received under this Act 32 shall not reduce the taxpayer's liability under the Illinois 33 Income Tax Act to less than zero. -8- LRB9004846DNmb 1 Section 50. Submission of verification. A taxpayer 2 claiming a credit under this Act shall submit to the 3 Department of Revenue, along with the taxpayer's Illinois 4 Income Tax form, a copy of the Director's certificate of 5 verification under this Act for the taxable year. Failure to 6 submit a copy of the certificate, however, does not 7 invalidate a claim for a credit. 8 Section 55. Pass through entities. 9 (a) If a pass-through entity does not have tax liability 10 under the Illinois Income Tax Act against which the tax 11 credit may be applied, a shareholder or partner of the 12 pass-through entity is entitled to a tax credit equal to the 13 tax credit determined for the pass-through entity for the 14 taxable year multiplied by the percentage of the pass-through 15 entity's distributive income to which the shareholder or 16 partner is entitled. 17 (b) The credit provided under subsection (a) is in 18 addition to a tax credit to which a shareholder or partner of 19 a pass-through entity is otherwise entitled under a separate 20 agreement under this Act. A pass-through entity and a 21 shareholder or partner of the pass-through entity may not 22 claim more than one credit under the same agreement. 23 Section 60. Noncompliance; assessment. If the Director 24 determines that a taxpayer who has received a credit under 25 this Act is not complying with the requirements of the tax 26 credit agreement or all of the provisions of this Act, the 27 Director shall, after giving the taxpayer an opportunity to 28 explain and remedy the noncompliance, notify the Department 29 of Revenue of the noncompliance and request an assessment. 30 The Director shall state the amount of the assessment, which 31 may not exceed the sum of any previously allowed credits 32 under this Act. After receiving the notice, the Department of -9- LRB9004846DNmb 1 Revenue shall make an assessment against the taxpayer for the 2 amount stated in the Director's notice. 3 Section 65. Annual report. On or before March 31 each 4 year, the Director shall submit a report to the Board and to 5 the General Assembly on the tax credit program under this 6 Act. The report shall include information on the number of 7 agreements that were entered into under this Act during the 8 preceding calendar year, a description of the project that is 9 the subject of each agreement, an update on the status of 10 projects under agreements entered into before the preceding 11 calendar year, and the sum of the credits awarded under this 12 Act. 13 Section 70. Periodic evaluation. Every 2 years the 14 Department of Commerce and Community Affairs and the 15 Department of Revenue shall evaluate the tax credit program. 16 The evaluation shall include an assessment of the 17 effectiveness of the program in creating new jobs in Illinois 18 and of the revenue impact of the program. The evaluation may 19 include a review of the practices and experiences of other 20 states with similar programs. The Director of Commerce and 21 Community Affairs shall submit a report on the evaluation to 22 the Governor and the General Assembly after June 30 and 23 before November 1 of each odd-numbered year. 24 Section 75. Rules. The Department of Commerce and 25 Community Affair may adopt rules necessary to implement this 26 Act. The rules may provide for recipients of tax credits 27 under this Act to be charged fees to cover administrative 28 costs of the tax credit program. Fees collected shall be 29 deposited in the Economic Development for Illinois' Economy 30 Fund. -10- LRB9004846DNmb 1 Section 80. Economic Development for Illinois' Economy 2 Fund. 3 (a) The Economic Development for Illinois' Economy Fund 4 is established in the State Treasury to be used exclusively 5 for the purposes of this Act, including paying for the costs 6 of administering this Act. The Fund shall be administered by 7 the Department of Commerce and Community Affairs. 8 (b) The Fund consists of collected fees, appropriations 9 from the General Assembly, and gifts and grants to the Fund. 10 (c) The Treasurer shall invest the money in the Fund not 11 currently needed to meet the obligations of the Fund in the 12 same manner as other public funds may be invested. Interest 13 that accrues from these investments shall be deposited into 14 the Fund. 15 (d) The money in the Fund at the end of the fiscal year 16 does not revert to the General Revenue Fund but remains in 17 the Fund to be used exclusively for the purposes of this Act. 18 Expenditures from the Fund are subject to appropriation by 19 the General Assembly. 20 Section 90. The State Finance Act is amended by adding 21 Section 5.449 as follows: 22 (30 ILCS 105/5.449 new) 23 Sec. 5.449. The Economic Development for Illinois' 24 Economy Fund. 25 Section 95. The Illinois Income Tax Act is amended by 26 adding Section 211 as follows: 27 (35 ILCS 5/211 new) 28 Sec. 211. Economic Development Income Tax Credit. A 29 taxpayer qualified to receive a tax credit under the Economic 30 Development Income Tax Credit Board Act is entitled to a -11- LRB9004846DNmb 1 credit against the tax imposed under subsection (a) and (b) 2 of Section 201 as determined under the Economic Development 3 Income Tax Credit Board Act. 4 Section 99. Effective date. This Act take effect upon 5 becoming law.
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