State of Illinois
90th General Assembly
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90_SB0227

      35 ILCS 5/201             from Ch. 120, par. 2-201
          Amends  the  Illinois  Income  Tax  Act.   Provides  that
      beginning with tax years ending after December  31,  1997,  a
      taxpayer  who  is the custodian of a qualified pupil shall be
      allowed an income tax credit equal  to  $500  per  pupil  for
      qualified  education  expenses.   Provides that any credit in
      excess  of  the  tax  liability  shall  be  refunded  to  the
      taxpayer.  Provides that the pupil must be (i) a resident  of
      Illinois,  (ii)  under  21  years  of age at the close of the
      school year for which the  credit  is  sought,  and  (iii)  a
      full-time  pupil  enrolled  in a kindergarten through twelfth
      grade education program at any public or nonpublic elementary
      school that meets certain standards.  Provides that qualified
      education expenses are costs  in  excess  of  $250  that  are
      incurred  on  behalf of the pupil for services at the school.
      Provides that the credit is available to the parent, parents,
      or legal guardian of the pupil.  Exempts the credit from  the
      sunset provisions.
                                                     LRB9002061KDpk
                                               LRB9002061KDpk
 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-                LRB9002061KDpk
 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-                LRB9002061KDpk
 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-                LRB9002061KDpk
 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-                LRB9002061KDpk
 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.
                            -6-                LRB9002061KDpk
 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-                LRB9002061KDpk
 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-                LRB9002061KDpk
 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-                LRB9002061KDpk
 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-               LRB9002061KDpk
 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-               LRB9002061KDpk
 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-               LRB9002061KDpk
 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-               LRB9002061KDpk
 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-               LRB9002061KDpk
 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-               LRB9002061KDpk
 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 1.6% of such
 6    training expenses.  For  partners  and  for  shareholders  of
 7    subchapter  S  corporations,  there shall be allowed a credit
 8    under this subsection (j) to be determined in accordance with
 9    the determination of income and distributive share of  income
10    under  Sections  702 and 704 and subchapter S of the Internal
11    Revenue Code.
12        Any credit allowed under this subsection which is  unused
13    in  the  year  the credit is earned may be carried forward to
14    each of the 5 taxable years following the year for which  the
15    credit is first computed until it is used.  This credit shall
16    be  applied  first  to the earliest year for which there is a
17    liability.  If there is a credit under this  subsection  from
18    more  than  one  tax  year  that  is  available  to  offset a
19    liability the earliest credit arising under  this  subsection
20    shall be applied first.
21        (k)  Research and development credit.
22        Beginning  with  tax  years  ending after July 1, 1990, a
23    taxpayer shall be allowed a credit against the tax imposed by
24    subsections (a)  and  (b)  of  this  Section  for  increasing
25    research  activities  in  this  State.   The  credit  allowed
26    against  the  tax imposed by subsections (a) and (b) shall be
27    equal to 6 1/2% of the qualifying expenditures for increasing
28    research activities in this State.
29        For   purposes   of    this    subsection,    "qualifying
30    expenditures"  means  the  qualifying expenditures as defined
31    for the federal credit  for  increasing  research  activities
32    which  would  be  allowable  under Section 41 of the Internal
33    Revenue  Code  and  which  are  conducted  in   this   State,
34    "qualifying  expenditures  for increasing research activities
                            -16-               LRB9002061KDpk
 1    in this State" means the excess  of  qualifying  expenditures
 2    for  the  taxable  year  in  which  incurred  over qualifying
 3    expenditures for the base  period,  "qualifying  expenditures
 4    for  the  base  period"  means  the average of the qualifying
 5    expenditures for each year in  the  base  period,  and  "base
 6    period"  means  the 3 taxable years immediately preceding the
 7    taxable year for which the determination is being made.
 8        Any credit in excess of the tax liability for the taxable
 9    year may be carried forward. A taxpayer may elect to have the
10    unused credit shown on its  final  completed  return  carried
11    over  as a credit against the tax liability for the following
12    5 taxable years or until it has been  fully  used,  whichever
13    occurs first.
14        If  an  unused  credit is carried forward to a given year
15    from 2 or more earlier years,  that  credit  arising  in  the
16    earliest year will be applied first against the tax liability
17    for  the  given  year.  If a tax liability for the given year
18    still remains, the credit from the next  earliest  year  will
19    then  be applied, and so on, until all credits have been used
20    or  no  tax  liability  for  the  given  year  remains.   Any
21    remaining unused credit  or  credits  then  will  be  carried
22    forward  to  the next following year in which a tax liability
23    is incurred, except that no credit can be carried forward  to
24    a year which is more than 5 years after the year in which the
25    expense for which the credit is given was incurred.
26        Unless  extended  by  law,  the  credit shall not include
27    costs incurred after December  31,  1999,  except  for  costs
28    incurred  pursuant  to  a binding contract entered into on or
29    before December 31, 1999.
30        (l)  Education expense credit.
31        Beginning with tax years ending after December 31,  1997,
32    a  taxpayer  who is the custodian of a qualifying pupil shall
33    be allowed a credit against the tax  imposed  by  subsections
34    (a)  and (b) of this Section for qualified education expenses
                            -17-               LRB9002061KDpk
 1    incurred on behalf of the qualifying pupil.  The credit shall
 2    be equal to $500 per elementary or  secondary  school  pupil.
 3    Any  credit  in  excess  of the tax liability for the taxable
 4    year shall be refunded to the taxpayer.  This  subsection  is
 5    exempt from the provisions of Section 250 of this Act.
 6        For purposes of this subsection;
 7        "Qualifying  pupil"  means  an  individual  who  (i) is a
 8    resident of the State of Illinois, (ii) is under the  age  of
 9    21  at  the  close  of  the school year for which a credit is
10    sought, and (iii) during the school year for which  a  credit
11    is  sought  was  a full-time pupil enrolled in a kindergarten
12    through twelfth grade education program  at  any  school,  as
13    defined in this subsection.
14        "Qualified  education  expense"  means costs in excess of
15    $250 that are incurred on behalf of a  qualifying  pupil  for
16    services  at the school in which the pupil is enrolled during
17    the regular school year.
18        "School" means any  public  or  nonpublic  elementary  or
19    secondary school in Illinois that is in compliance with Title
20    VI  of  the  Civil Rights Act of 1964 and attendance at which
21    satisfies the requirements of  Section  26-1  of  the  School
22    Code,  except that nothing in Section 26-1 shall be construed
23    to require  a  child  to  attend  any  particular  public  or
24    nonpublic school.
25        "Custodian" means, with respect to a qualifying pupil, an
26    Illinois  resident  who  is  the  parent,  parents,  or legal
27    guardian of the qualifying pupil.
28    (Source: P.A. 88-45; 88-89;  88-141;  88-547,  eff.  6-30-94;
29    88-670,  eff.  12-2-94;  89-235,  eff.  8-4-95;  89-519, eff.
30    7-18-96; 89-591, eff. 8-1-96.)

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