State of Illinois
91st General Assembly
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[ Engrossed ][ Enrolled ][ Senate Amendment 001 ]

91_SB1326

 
                                               LRB9110268SMdv

 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, except as adjusted by
18    subsection (d-1):
19             (1)  In the case of an individual, trust or  estate,
20        for taxable years ending prior to July 1, 1989, an amount
21        equal  to  2  1/2%  of  the taxpayer's net income for the
22        taxable year.
23             (2)  In the case of an individual, trust or  estate,
24        for  taxable  years  beginning  prior to July 1, 1989 and
25        ending after June 30, 1989, an amount equal to the sum of
26        (i) 2 1/2% of the taxpayer's net income  for  the  period
27        prior to July 1, 1989, as calculated under Section 202.3,
28        and  (ii)  3% of the taxpayer's net income for the period
29        after June 30, 1989, as calculated under Section 202.3.
30             (3)  In the case of an individual, trust or  estate,
31        for  taxable  years  beginning  after  June  30, 1989, an
 
                            -2-                LRB9110268SMdv
 1        amount equal to 3% of the taxpayer's net income  for  the
 2        taxable year.
 3             (4)  (Blank).
 4             (5)  (Blank).
 5             (6)  In the case of a corporation, for taxable years
 6        ending  prior  to  July 1, 1989, an amount equal to 4% of
 7        the taxpayer's net income for the taxable year.
 8             (7)  In the case of a corporation, for taxable years
 9        beginning prior to July 1, 1989 and ending after June 30,
10        1989, an amount equal  to  the  sum  of  (i)  4%  of  the
11        taxpayer's  net  income  for  the period prior to July 1,
12        1989, as calculated under Section 202.3, and (ii) 4.8% of
13        the taxpayer's net income for the period after  June  30,
14        1989, as calculated under Section 202.3.
15             (8)  In the case of a corporation, for taxable years
16        beginning after June 30, 1989, an amount equal to 4.8% of
17        the taxpayer's net income for the taxable year.
18        (c)  Beginning   on  July  1,  1979  and  thereafter,  in
19    addition to such income tax, there is also hereby imposed the
20    Personal Property Tax Replacement Income Tax measured by  net
21    income   on   every   corporation   (including  Subchapter  S
22    corporations), partnership and trust, for each  taxable  year
23    ending  after  June  30, 1979.  Such taxes are imposed on the
24    privilege of earning or receiving income in or as a  resident
25    of  this State.  The Personal Property Tax Replacement Income
26    Tax shall be  in  addition  to  the  income  tax  imposed  by
27    subsections  (a)  and  (b) of this Section and in addition to
28    all other occupation or privilege taxes imposed by this State
29    or by any  municipal  corporation  or  political  subdivision
30    thereof.
31        (d)  Additional  Personal Property Tax Replacement Income
32    Tax Rates.  The personal property tax replacement income  tax
33    imposed by this subsection and subsection (c) of this Section
34    in  the  case  of  a  corporation,  other than a Subchapter S
 
                            -3-                LRB9110268SMdv
 1    corporation and except as adjusted by subsection (d-1), shall
 2    be an additional amount equal to 2.85% of such taxpayer's net
 3    income for the taxable year, except that beginning on January
 4    1, 1981, and thereafter, the rate of 2.85% specified in  this
 5    subsection  shall  be  reduced  to 2.5%, and in the case of a
 6    partnership, trust or a Subchapter S corporation shall be  an
 7    additional amount equal to 1.5% of such taxpayer's net income
 8    for the taxable year.
 9        (d-1)  Rate  reduction  for certain foreign insurers.  In
10    the case of a foreign insurer, as defined by Section 35A-5 of
11    the Illinois  Insurance  Code,  whose  state  or  country  of
12    domicile   imposes   on  insurers  domiciled  in  Illinois  a
13    retaliatory tax  (excluding  any  insurer  whose  reinsurance
14    premiums  from  reinsurance  assumed  are  50% or more of its
15    total insurance premiums as determined under paragraph (2) of
16    subsection (b) of Section 304, except that  for  purposes  of
17    this  determination  reinsurance premiums from reinsurance do
18    not include assumed premiums from inter-affiliate reinsurance
19    pooling arrangements), beginning with taxable years ending on
20    or after December 31, 1999  and  ending  with  taxable  years
21    ending  on  or before December 31, 2000, the sum of the rates
22    of tax imposed by subsections (b) and (d)  shall  be  reduced
23    (but  not increased) to the rate at which the total amount of
24    tax imposed under this Act, net of all credits allowed  under
25    this  Act, shall equal (i) the total amount of tax that would
26    be imposed on the foreign insurer's net income  allocable  to
27    Illinois for the taxable year by such foreign insurer's state
28    or country of domicile if that net income were subject to all
29    income taxes and taxes measured by net income imposed by such
30    foreign  insurer's  state  or country of domicile, net of all
31    credits allowed or (ii) a rate of zero  if  no  such  tax  is
32    imposed  on  such  income  by  the foreign insurer's state of
33    domicile.
34             (1)  For the purposes of  subsection  (d-1),  in  no
 
                            -4-                LRB9110268SMdv
 1        event  shall  the  sum  of  the  rates  of tax imposed by
 2        subsections (b) and (d) be  reduced  below  the  rate  at
 3        which the sum of:
 4                  (A)  the  total  amount  of tax imposed on such
 5             foreign insurer under this Act for a  taxable  year,
 6             net of all credits allowed under this Act, plus
 7                  (B)  the  privilege  tax imposed by Section 409
 8             of the Illinois Insurance Code, the  fire  insurance
 9             company  tax  imposed  by  Section  12  of  the Fire
10             Investigation Act, and  the  fire  department  taxes
11             imposed   under  Section  11-10-1  of  the  Illinois
12             Municipal Code,
13        equals 1.25% of the net taxable premiums written for  the
14        taxable  year,  as described by subsection (1) of Section
15        409 of the Illinois Insurance Code.  This paragraph  will
16        in  no event increase the rates imposed under subsections
17        (b) and (d).
18             (2)  Any reduction in the rates of  tax  imposed  by
19        this  subsection shall be applied first against the rates
20        imposed by subsection (b) and only after the tax  imposed
21        by  subsection  (a) net of all credits allowed under this
22        Section other than the credit  allowed  under  subsection
23        (i)  has  been reduced to zero, against the rates imposed
24        by subsection (d).
25             (3)  The provisions of  this  subsection  (d-1)  are
26        effective  only through December 31, 2000 and cease to be
27        effective on January 1, 2001; but this  does  not  affect
28        any claim or obligation based upon the use or application
29        of  this  subsection for tax years ending on December 31,
30        2000 or earlier.
31        This subsection (d-1) is exempt from  the  provisions  of
32    Section 250.
33        (e)  Investment  credit.   A  taxpayer shall be allowed a
34    credit against the Personal Property Tax  Replacement  Income
 
                            -5-                LRB9110268SMdv
 1    Tax for investment in qualified property.
 2             (1)  A  taxpayer  shall be allowed a credit equal to
 3        .5% of the basis of qualified property placed in  service
 4        during the taxable year, provided such property is placed
 5        in  service  on  or  after  July 1, 1984.  There shall be
 6        allowed an additional credit equal to .5% of the basis of
 7        qualified property placed in service during  the  taxable
 8        year,  provided  such property is placed in service on or
 9        after July 1, 1986, and the  taxpayer's  base  employment
10        within  Illinois  has  increased  by  1% or more over the
11        preceding year as determined by the taxpayer's employment
12        records filed with the Illinois Department of  Employment
13        Security.   Taxpayers  who  are  new to Illinois shall be
14        deemed to have met the 1% growth in base  employment  for
15        the first year in which they file employment records with
16        the  Illinois  Department  of  Employment  Security.  The
17        provisions added to this Section by  Public  Act  85-1200
18        (and restored by Public Act 87-895) shall be construed as
19        declaratory  of  existing law and not as a new enactment.
20        If, in any year, the increase in base  employment  within
21        Illinois  over  the  preceding  year is less than 1%, the
22        additional credit shall be  limited  to  that  percentage
23        times  a  fraction, the numerator of which is .5% and the
24        denominator of which is 1%, but  shall  not  exceed  .5%.
25        The  investment credit shall not be allowed to the extent
26        that it would reduce a taxpayer's liability  in  any  tax
27        year  below  zero,  nor  may  any  credit  for  qualified
28        property  be  allowed for any year other than the year in
29        which the property was placed in service in Illinois. For
30        tax years ending on or after December 31, 1987, and on or
31        before December 31, 1988, the credit shall be allowed for
32        the tax year in which the property is placed in  service,
33        or, if the amount of the credit exceeds the tax liability
34        for  that year, whether it exceeds the original liability
 
                            -6-                LRB9110268SMdv
 1        or the liability as later amended,  such  excess  may  be
 2        carried forward and applied to the tax liability of the 5
 3        taxable  years  following  the excess credit years if the
 4        taxpayer (i) makes investments which cause  the  creation
 5        of  a  minimum  of  2,000  full-time  equivalent  jobs in
 6        Illinois,  (ii)  is  located  in   an   enterprise   zone
 7        established  pursuant to the Illinois Enterprise Zone Act
 8        and (iii) is certified by the Department of Commerce  and
 9        Community  Affairs  as  complying  with  the requirements
10        specified in clause (i) and (ii) by July  1,  1986.   The
11        Department of Commerce and Community Affairs shall notify
12        the  Department  of  Revenue  of  all such certifications
13        immediately. For tax  years  ending  after  December  31,
14        1988,  the  credit  shall  be allowed for the tax year in
15        which the property is  placed  in  service,  or,  if  the
16        amount  of  the credit exceeds the tax liability for that
17        year, whether it exceeds the original  liability  or  the
18        liability  as  later  amended, such excess may be carried
19        forward and applied to the tax liability of the 5 taxable
20        years following the excess credit years. The credit shall
21        be applied to the earliest year  for  which  there  is  a
22        liability. If there is credit from more than one tax year
23        that  is  available to offset a liability, earlier credit
24        shall be applied first.
25             (2)  The term "qualified  property"  means  property
26        which:
27                  (A)  is   tangible,   whether   new   or  used,
28             including buildings  and  structural  components  of
29             buildings  and signs that are real property, but not
30             including land or improvements to real property that
31             are not a structural component of a building such as
32             landscaping,  sewer  lines,  local   access   roads,
33             fencing, parking lots, and other appurtenances;
34                  (B)  is  depreciable pursuant to Section 167 of
 
                            -7-                LRB9110268SMdv
 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 (e);
 5                  (C)  is acquired  by  purchase  as  defined  in
 6             Section 179(d) of the Internal Revenue Code;
 7                  (D)  is  used  in Illinois by a taxpayer who is
 8             primarily engaged in  manufacturing,  or  in  mining
 9             coal or fluorite, or in retailing; and
10                  (E)  has  not  previously been used in Illinois
11             in such a manner and  by  such  a  person  as  would
12             qualify  for  the credit provided by this subsection
13             (e) or subsection (f).
14             (3)  For   purposes   of   this   subsection    (e),
15        "manufacturing" means the material staging and production
16        of  tangible  personal  property  by  procedures commonly
17        regarded as manufacturing,  processing,  fabrication,  or
18        assembling  which changes some existing material into new
19        shapes, new qualities, or new combinations.  For purposes
20        of this subsection (e) the term "mining" shall  have  the
21        same  meaning  as  the term "mining" in Section 613(c) of
22        the  Internal  Revenue  Code.   For  purposes   of   this
23        subsection  (e),  the  term "retailing" means the sale of
24        tangible  personal  property  or  services  rendered   in
25        conjunction  with  the sale of tangible consumer goods or
26        commodities.
27             (4)  The basis of qualified property  shall  be  the
28        basis  used  to  compute  the  depreciation deduction for
29        federal income tax purposes.
30             (5)  If the basis of the property for federal income
31        tax depreciation purposes is increased after it has  been
32        placed in service in Illinois by the taxpayer, the amount
33        of  such  increase  shall  be  deemed  property placed in
34        service on the date of such increase in basis.
 
                            -8-                LRB9110268SMdv
 1             (6)  The term "placed in  service"  shall  have  the
 2        same  meaning as under Section 46 of the Internal Revenue
 3        Code.
 4             (7)  If during any taxable year, any property ceases
 5        to be qualified property in the  hands  of  the  taxpayer
 6        within  48  months  after being placed in service, or the
 7        situs of any qualified property is moved outside Illinois
 8        within 48 months  after  being  placed  in  service,  the
 9        Personal  Property  Tax  Replacement  Income Tax 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  (7),  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             (8)  Unless the investment  credit  is  extended  by
22        law,  the  basis  of qualified property shall not include
23        costs incurred after December 31, 2003, except for  costs
24        incurred  pursuant  to a binding contract entered into on
25        or before December 31, 2003.
26             (9)  Each taxable year, a partnership may  elect  to
27        pass  through  to  its  partners the credits to which the
28        partnership is entitled under this subsection (e) for the
29        taxable year.  A partner may use the credit allocated  to
30        him  or  her  under  this  paragraph only against the tax
31        imposed in subsections (c) and (d) of this  Section.   If
32        the  partnership makes that election, those credits shall
33        be allocated among the partners  in  the  partnership  in
34        accordance  with the rules set forth in Section 704(b) of
 
                            -9-                LRB9110268SMdv
 1        the Internal Revenue  Code,  and  the  rules  promulgated
 2        under  that  Section,  and  the  allocated  amount of the
 3        credits shall be allowed to the partners for that taxable
 4        year.  The partnership shall make this  election  on  its
 5        Personal  Property  Tax Replacement Income Tax return for
 6        that taxable year.  The  election  to  pass  through  the
 7        credits shall be irrevocable.
 8          (f)  Investment credit; Enterprise Zone.
 9             (1)  A  taxpayer  shall  be allowed a credit against
10        the tax imposed  by  subsections  (a)  and  (b)  of  this
11        Section  for  investment  in  qualified property which is
12        placed in service in an Enterprise Zone created  pursuant
13        to  the  Illinois  Enterprise  Zone  Act.  For  partners,
14        shareholders  of Subchapter S corporations, and owners of
15        limited liability companies, if the liability company  is
16        treated  as  a  partnership  for  purposes of federal and
17        State income taxation, there shall be  allowed  a  credit
18        under  this subsection (f) to be determined in accordance
19        with the determination of income and  distributive  share
20        of  income under Sections 702 and 704 and Subchapter S of
21        the Internal Revenue Code. The credit shall be .5% of the
22        basis for such property.  The credit shall  be  available
23        only  in the taxable year in which the property is placed
24        in service in  the  Enterprise  Zone  and  shall  not  be
25        allowed  to  the extent that it would reduce a taxpayer's
26        liability for the tax imposed by subsections (a) and  (b)
27        of this Section to below zero. For tax years ending on or
28        after  December 31, 1985, the credit shall be allowed for
29        the tax year in which the property is placed in  service,
30        or, if the amount of the credit exceeds the tax liability
31        for  that year, whether it exceeds the original liability
32        or the liability as later amended,  such  excess  may  be
33        carried forward and applied to the tax liability of the 5
34        taxable  years  following  the  excess  credit  year. The
 
                            -10-               LRB9110268SMdv
 1        credit shall be applied to the earliest  year  for  which
 2        there  is  a liability. If there is credit from more than
 3        one tax year that is available to offset a liability, the
 4        credit accruing first in time shall be applied first.
 5             (2)  The  term  qualified  property  means  property
 6        which:
 7                  (A)  is  tangible,   whether   new   or   used,
 8             including  buildings  and  structural  components of
 9             buildings;
10                  (B)  is depreciable pursuant to Section 167  of
11             the  Internal  Revenue  Code,  except  that  "3-year
12             property" as defined in Section 168(c)(2)(A) of that
13             Code is not eligible for the credit provided by this
14             subsection (f);
15                  (C)  is  acquired  by  purchase  as  defined in
16             Section 179(d) of the Internal Revenue Code;
17                  (D)  is used in  the  Enterprise  Zone  by  the
18             taxpayer; and
19                  (E)  has  not  been previously used in Illinois
20             in such a manner and  by  such  a  person  as  would
21             qualify  for  the credit provided by this subsection
22             (f) or subsection (e).
23             (3)  The basis of qualified property  shall  be  the
24        basis  used  to  compute  the  depreciation deduction for
25        federal income tax purposes.
26             (4)  If the basis of the property for federal income
27        tax depreciation purposes is increased after it has  been
28        placed in service in the Enterprise Zone by the taxpayer,
29        the  amount  of  such  increase  shall be deemed property
30        placed in service on the date of such increase in basis.
31             (5)  The term "placed in  service"  shall  have  the
32        same  meaning as under Section 46 of the Internal Revenue
33        Code.
34             (6)  If during any taxable year, any property ceases
 
                            -11-               LRB9110268SMdv
 1        to be qualified property in the  hands  of  the  taxpayer
 2        within  48  months  after being placed in service, or the
 3        situs of any qualified  property  is  moved  outside  the
 4        Enterprise  Zone  within  48 months after being placed in
 5        service, the tax imposed under subsections (a) and (b) of
 6        this Section for such taxable year  shall  be  increased.
 7        Such  increase shall be determined by (i) recomputing the
 8        investment credit which would have been allowed  for  the
 9        year  in  which  credit  for such property was originally
10        allowed  by   eliminating   such   property   from   such
11        computation,  and (ii) subtracting such recomputed credit
12        from the amount of credit previously  allowed.   For  the
13        purposes  of this paragraph (6), a reduction of the basis
14        of qualified property resulting from a redetermination of
15        the purchase price  shall  be  deemed  a  disposition  of
16        qualified property to the extent of such reduction.
17          (g)  Jobs Tax Credit; Enterprise Zone and Foreign Trade
18    Zone or Sub-Zone.
19             (1)  A taxpayer conducting a trade or business in an
20        enterprise  zone  or a High Impact Business designated by
21        the  Department  of  Commerce   and   Community   Affairs
22        conducting  a trade or business in a federally designated
23        Foreign Trade Zone or Sub-Zone shall be allowed a  credit
24        against  the  tax  imposed  by subsections (a) and (b) of
25        this Section in the amount of $500 per eligible  employee
26        hired to work in the zone during the taxable year.
27             (2)  To qualify for the credit:
28                  (A)  the  taxpayer must hire 5 or more eligible
29             employees to work in an enterprise zone or federally
30             designated Foreign Trade Zone or Sub-Zone during the
31             taxable year;
32                  (B)  the taxpayer's total employment within the
33             enterprise  zone  or  federally  designated  Foreign
34             Trade Zone or Sub-Zone must increase by  5  or  more
 
                            -12-               LRB9110268SMdv
 1             full-time  employees  beyond  the  total employed in
 2             that zone at the end of the previous  tax  year  for
 3             which  a  jobs  tax  credit  under  this Section was
 4             taken, or beyond the total employed by the  taxpayer
 5             as of December 31, 1985, whichever is later; and
 6                  (C)  the  eligible  employees  must be employed
 7             180 consecutive days in order to be deemed hired for
 8             purposes of this subsection.
 9             (3)  An "eligible employee" means  an  employee  who
10        is:
11                  (A)  Certified  by  the  Department of Commerce
12             and Community Affairs  as  "eligible  for  services"
13             pursuant  to  regulations  promulgated in accordance
14             with Title II of the Job Training  Partnership  Act,
15             Training Services for the Disadvantaged or Title III
16             of  the Job Training Partnership Act, Employment and
17             Training Assistance for Dislocated Workers Program.
18                  (B)  Hired  after  the   enterprise   zone   or
19             federally  designated Foreign Trade Zone or Sub-Zone
20             was designated or the trade or business was  located
21             in that zone, whichever is later.
22                  (C)  Employed in the enterprise zone or Foreign
23             Trade  Zone  or Sub-Zone. An employee is employed in
24             an enterprise zone or federally  designated  Foreign
25             Trade  Zone or Sub-Zone if his services are rendered
26             there or it  is  the  base  of  operations  for  the
27             services performed.
28                  (D)  A  full-time  employee  working 30 or more
29             hours per week.
30             (4)  For tax years ending on or after  December  31,
31        1985  and prior to December 31, 1988, the credit shall be
32        allowed for the tax year in which the eligible  employees
33        are hired.  For tax years ending on or after December 31,
34        1988,  the  credit  shall  be  allowed  for  the tax year
 
                            -13-               LRB9110268SMdv
 1        immediately following the tax year in which the  eligible
 2        employees are hired.  If the amount of the credit exceeds
 3        the  tax  liability for that year, whether it exceeds the
 4        original liability or the  liability  as  later  amended,
 5        such excess may be carried forward and applied to the tax
 6        liability  of  the  5  taxable years following the excess
 7        credit year.  The credit shall be applied to the earliest
 8        year for which there is a liability. If there  is  credit
 9        from more than one tax year that is available to offset a
10        liability, earlier credit shall be applied first.
11             (5)  The Department of Revenue shall promulgate such
12        rules and regulations as may be deemed necessary to carry
13        out the purposes of this subsection (g).
14             (6)  The  credit  shall  be  available  for eligible
15        employees hired on or after January 1, 1986.
16             (h)  Investment credit; High Impact Business.
17             (1)  Subject to subsection (b) of Section 5.5 of the
18        Illinois Enterprise Zone Act, a taxpayer shall be allowed
19        a credit against the tax imposed by subsections  (a)  and
20        (b)  of this Section for investment in qualified property
21        which is placed in service by a  Department  of  Commerce
22        and  Community  Affairs  designated High Impact Business.
23        The credit shall be .5% of the basis for  such  property.
24        The  credit  shall  not  be  available  until the minimum
25        investments in qualified property set  forth  in  Section
26        5.5  of  the  Illinois  Enterprise  Zone  Act  have  been
27        satisfied  and shall not be allowed to the extent that it
28        would reduce a taxpayer's liability for the  tax  imposed
29        by subsections (a) and (b) of this Section to below zero.
30        The  credit  applicable to such minimum investments shall
31        be taken in  the  taxable  year  in  which  such  minimum
32        investments   have   been   completed.   The  credit  for
33        additional investments beyond the minimum investment by a
34        designated high impact business shall be  available  only
 
                            -14-               LRB9110268SMdv
 1        in  the  taxable  year in which the property is placed in
 2        service and shall not be allowed to the  extent  that  it
 3        would  reduce  a taxpayer's liability for the tax imposed
 4        by subsections (a) and (b) of this Section to below zero.
 5        For tax years ending on or after December 31,  1987,  the
 6        credit  shall  be  allowed  for the tax year in which the
 7        property is placed in service, or, if the amount  of  the
 8        credit  exceeds  the tax liability for that year, whether
 9        it exceeds the original liability  or  the  liability  as
10        later  amended,  such  excess  may be carried forward and
11        applied to the tax  liability  of  the  5  taxable  years
12        following  the  excess  credit year.  The credit shall be
13        applied to  the  earliest  year  for  which  there  is  a
14        liability.   If  there  is  credit from more than one tax
15        year that is available to offset a liability, the  credit
16        accruing first in time shall be applied first.
17             Changes  made  in  this subdivision (h)(1) by Public
18        Act 88-670 restore changes made by Public Act 85-1182 and
19        reflect existing law.
20             (2)  The  term  qualified  property  means  property
21        which:
22                  (A)  is  tangible,   whether   new   or   used,
23             including  buildings  and  structural  components of
24             buildings;
25                  (B)  is depreciable pursuant to Section 167  of
26             the  Internal  Revenue  Code,  except  that  "3-year
27             property" as defined in Section 168(c)(2)(A) of that
28             Code is not eligible for the credit provided by this
29             subsection (h);
30                  (C)  is  acquired  by  purchase  as  defined in
31             Section 179(d) of the Internal Revenue Code; and
32                  (D)  is not eligible for  the  Enterprise  Zone
33             Investment Credit provided by subsection (f) of this
34             Section.
 
                            -15-               LRB9110268SMdv
 1             (3)  The  basis  of  qualified property shall be the
 2        basis used to  compute  the  depreciation  deduction  for
 3        federal income tax purposes.
 4             (4)  If the basis of the property for federal income
 5        tax  depreciation purposes is increased after it has been
 6        placed in service in a federally designated Foreign Trade
 7        Zone or Sub-Zone located in Illinois by the taxpayer, the
 8        amount of such increase shall be deemed  property  placed
 9        in service on the date of such increase in basis.
10             (5)  The  term  "placed  in  service" shall have the
11        same meaning as under Section 46 of the Internal  Revenue
12        Code.
13             (6)  If  during any taxable year ending on or before
14        December 31, 1996, any property ceases  to  be  qualified
15        property  in  the  hands of the taxpayer within 48 months
16        after being placed  in  service,  or  the  situs  of  any
17        qualified  property  is  moved outside Illinois within 48
18        months after being placed in  service,  the  tax  imposed
19        under  subsections  (a)  and (b) of this Section for such
20        taxable year shall be increased.  Such increase shall  be
21        determined by (i) recomputing the investment credit which
22        would  have been allowed for the year in which credit for
23        such property was originally allowed by eliminating  such
24        property from such computation, and (ii) subtracting such
25        recomputed  credit  from  the amount of credit previously
26        allowed.  For the  purposes  of  this  paragraph  (6),  a
27        reduction  of  the  basis of qualified property resulting
28        from a redetermination of the  purchase  price  shall  be
29        deemed  a disposition of qualified property to the extent
30        of such reduction.
31             (7)  Beginning with tax years ending after  December
32        31,  1996,  if  a taxpayer qualifies for the credit under
33        this  subsection  (h)  and  thereby  is  granted  a   tax
34        abatement  and the taxpayer relocates its entire facility
 
                            -16-               LRB9110268SMdv
 1        in violation of the explicit  terms  and  length  of  the
 2        contract  under  Section 18-183 of the Property Tax Code,
 3        the tax imposed under subsections (a)  and  (b)  of  this
 4        Section  shall be increased for the taxable year in which
 5        the taxpayer relocated its facility by an amount equal to
 6        the amount of credit received by the taxpayer under  this
 7        subsection (h).
 8        (i)  A credit shall be allowed against the tax imposed by
 9    subsections  (a)  and (b) of this Section for the tax imposed
10    by subsections (c) and (d)  of  this  Section.   This  credit
11    shall   be   computed  by  multiplying  the  tax  imposed  by
12    subsections (c) and (d) of this Section by  a  fraction,  the
13    numerator  of  which is base income allocable to Illinois and
14    the denominator of which is Illinois base income, and further
15    multiplying  the  product  by  the  tax   rate   imposed   by
16    subsections (a) and (b) of this Section.
17        Any  credit  earned  on  or after December 31, 1986 under
18    this subsection which is unused in the  year  the  credit  is
19    computed  because  it  exceeds  the  tax liability imposed by
20    subsections (a) and (b) for that year (whether it exceeds the
21    original liability or the liability as later amended) may  be
22    carried  forward  and applied to the tax liability imposed by
23    subsections (a) and (b) of the 5 taxable years following  the
24    excess  credit  year.   This credit shall be applied first to
25    the earliest year for which there is a liability.   If  there
26    is a credit under this subsection from more than one tax year
27    that  is  available to offset a liability the earliest credit
28    arising under this subsection shall be applied first.
29        If, during any taxable year ending on or  after  December
30    31,  1986, the tax imposed by subsections (c) and (d) of this
31    Section for which a taxpayer has claimed a credit under  this
32    subsection  (i) is reduced, the amount of credit for such tax
33    shall also be reduced.  Such reduction shall be determined by
34    recomputing the credit to take into account the  reduced  tax
 
                            -17-               LRB9110268SMdv
 1    imposed  by  subsection  (c)  and (d).  If any portion of the
 2    reduced amount of credit has  been  carried  to  a  different
 3    taxable  year,  an  amended  return  shall  be filed for such
 4    taxable year to reduce the amount of credit claimed.
 5        (j)  Training expense credit.  Beginning with  tax  years
 6    ending  on  or  after  December 31, 1986, a taxpayer shall be
 7    allowed a credit against the tax imposed  by  subsection  (a)
 8    and  (b)  under this Section for all amounts paid or accrued,
 9    on behalf of all persons employed by the taxpayer in Illinois
10    or Illinois residents  employed  outside  of  Illinois  by  a
11    taxpayer,   for   educational   or   vocational  training  in
12    semi-technical or technical fields or semi-skilled or skilled
13    fields,  which  were  deducted  from  gross  income  in   the
14    computation  of  taxable  income.  The credit against the tax
15    imposed by subsections (a) and (b)  shall  be  1.6%  of  such
16    training  expenses.  For partners, shareholders of subchapter
17    S corporations, and owners of limited liability companies, if
18    the  liability  company  is  treated  as  a  partnership  for
19    purposes of federal and State income taxation, there shall be
20    allowed a credit under this subsection (j) to  be  determined
21    in   accordance   with   the   determination  of  income  and
22    distributive share of income under Sections 702 and  704  and
23    subchapter S of the Internal Revenue Code.
24        Any  credit allowed under this subsection which is unused
25    in the year the credit is earned may be  carried  forward  to
26    each  of the 5 taxable years following the year for which the
27    credit is first computed until it is used.  This credit shall
28    be applied first to the earliest year for which  there  is  a
29    liability.   If  there is a credit under this subsection from
30    more than  one  tax  year  that  is  available  to  offset  a
31    liability  the  earliest credit arising under this subsection
32    shall be applied first.
33        (k)  Research and development credit.
34        Beginning with tax years ending after  July  1,  1990,  a
 
                            -18-               LRB9110268SMdv
 1    taxpayer shall be allowed a credit against the tax imposed by
 2    subsections  (a)  and  (b)  of  this  Section  for increasing
 3    research  activities  in  this  State.   The  credit  allowed
 4    against the tax imposed by subsections (a) and (b)  shall  be
 5    equal to 6 1/2% of the qualifying expenditures for increasing
 6    research activities in this State. For partners, shareholders
 7    of subchapter S corporations, and owners of limited liability
 8    companies,   if   the  liability  company  is  treated  as  a
 9    partnership  for  purposes  of  federal  and   State   income
10    taxation,   there  shall  be  allowed  a  credit  under  this
11    subsection  to  be  determined   in   accordance   with   the
12    determination  of  income  and  distributive  share of income
13    under Sections 702 and 704 and subchapter S of  the  Internal
14    Revenue Code.
15        For    purposes    of    this   subsection,   "qualifying
16    expenditures" means the qualifying  expenditures  as  defined
17    for  the  federal  credit  for increasing research activities
18    which would be allowable under Section  41  of  the  Internal
19    Revenue   Code   and  which  are  conducted  in  this  State,
20    "qualifying expenditures for increasing  research  activities
21    in  this  State"  means the excess of qualifying expenditures
22    for the  taxable  year  in  which  incurred  over  qualifying
23    expenditures  for  the  base period, "qualifying expenditures
24    for the base period" means  the  average  of  the  qualifying
25    expenditures  for  each  year  in  the base period, and "base
26    period" means the 3 taxable years immediately  preceding  the
27    taxable year for which the determination is being made.
28        Any credit in excess of the tax liability for the taxable
29    year may be carried forward. A taxpayer may elect to have the
30    unused  credit  shown  on  its final completed return carried
31    over as a credit against the tax liability for the  following
32    5  taxable  years  or until it has been fully used, whichever
33    occurs first.
34        If an unused credit is carried forward to  a  given  year
 
                            -19-               LRB9110268SMdv
 1    from  2  or  more  earlier  years, that credit arising in the
 2    earliest year will be applied first against the tax liability
 3    for the given year.  If a tax liability for  the  given  year
 4    still  remains,  the  credit from the next earliest year will
 5    then be applied, and so on, until all credits have been  used
 6    or  no  tax  liability  for  the  given  year  remains.   Any
 7    remaining  unused  credit  or  credits  then  will be carried
 8    forward to the next following year in which a  tax  liability
 9    is  incurred, except that no credit can be carried forward to
10    a year which is more than 5 years after the year in which the
11    expense for which the credit is given was incurred.
12        Unless extended by law,  the  credit  shall  not  include
13    costs  incurred  after  December  31,  2004, except for costs
14    incurred pursuant to a binding contract entered  into  on  or
15    before December 31, 2004.
16        No  inference  shall be drawn from this amendatory Act of
17    the 91st General Assembly  in  construing  this  Section  for
18    taxable years beginning before January 1, 1999.
19        (l)  Environmental Remediation Tax Credit.
20             (i)  For  tax   years ending after December 31, 1997
21        and on or before December 31, 2001, a taxpayer  shall  be
22        allowed  a  credit against the tax imposed by subsections
23        (a) and (b) of this Section for certain amounts paid  for
24        unreimbursed  eligible remediation costs, as specified in
25        this  subsection.   For   purposes   of   this   Section,
26        "unreimbursed  eligible  remediation  costs"  means costs
27        approved by the Illinois Environmental Protection  Agency
28        ("Agency")  under  Section  58.14  of  the  Environmental
29        Protection Act that were paid in performing environmental
30        remediation  at a site for which a No Further Remediation
31        Letter was  issued  by  the  Agency  and  recorded  under
32        Section  58.10  of the Environmental Protection Act.  The
33        credit must be claimed for  the  taxable  year  in  which
34        Agency  approval  of  the  eligible  remediation costs is
 
                            -20-               LRB9110268SMdv
 1        granted.  The credit is not available to any taxpayer  if
 2        the  taxpayer  or any related party caused or contributed
 3        to, in any  material  respect,  a  release  of  regulated
 4        substances  on, in, or under the site that was identified
 5        and addressed by the remedial action pursuant to the Site
 6        Remediation Program of the Environmental Protection  Act.
 7        After  the  Pollution  Control  Board  rules  are adopted
 8        pursuant to the Illinois Administrative Procedure Act for
 9        the administration and enforcement of Section 58.9 of the
10        Environmental Protection Act, determinations as to credit
11        availability for purposes of this Section shall  be  made
12        consistent  with  those  rules.   For  purposes  of  this
13        Section,   "taxpayer"   includes   a   person  whose  tax
14        attributes the taxpayer has succeeded  to  under  Section
15        381  of  the  Internal  Revenue  Code and "related party"
16        includes the persons disallowed a deduction for losses by
17        paragraphs (b), (c), and (f)(1) of  Section  267  of  the
18        Internal  Revenue  Code  by  virtue  of  being  a related
19        taxpayer, as well as any of  its  partners.   The  credit
20        allowed  against  the  tax imposed by subsections (a) and
21        (b) shall be equal to 25% of  the  unreimbursed  eligible
22        remediation  costs in excess of $100,000 per site, except
23        that the $100,000 threshold shall not apply to  any  site
24        contained  in  an  enterprise  zone  as determined by the
25        Department of Commerce and Community Affairs.  The  total
26        credit  allowed  shall not exceed $40,000 per year with a
27        maximum total of $150,000 per  site.   For  partners  and
28        shareholders of subchapter S corporations, there shall be
29        allowed  a  credit under this subsection to be determined
30        in  accordance  with  the  determination  of  income  and
31        distributive share of income under Sections 702  and  704
32        of subchapter S of the Internal Revenue Code.
33             (ii)  A credit allowed under this subsection that is
34        unused  in  the  year the credit is earned may be carried
 
                            -21-               LRB9110268SMdv
 1        forward to each of the 5 taxable years following the year
 2        for which the credit is first earned until  it  is  used.
 3        The  term "unused credit" does not include any amounts of
 4        unreimbursed eligible remediation costs in excess of  the
 5        maximum  credit  per site authorized under paragraph (i).
 6        This credit shall be applied first to the  earliest  year
 7        for  which  there  is  a liability.  If there is a credit
 8        under this subsection from more than one tax year that is
 9        available to offset  a  liability,  the  earliest  credit
10        arising  under this subsection shall be applied first.  A
11        credit allowed under this subsection may  be  sold  to  a
12        buyer as part of a sale of all or part of the remediation
13        site  for which the credit was granted.  The purchaser of
14        a remediation site and the tax credit  shall  succeed  to
15        the  unused  credit and remaining carry-forward period of
16        the seller.  To perfect the transfer, the assignor  shall
17        record  the  transfer  in the chain of title for the site
18        and  provide  written  notice  to  the  Director  of  the
19        Illinois Department of Revenue of the  assignor's  intent
20        to  sell  the  remediation site and the amount of the tax
21        credit to be transferred as a portion of the sale.  In no
22        event may a credit be transferred to any taxpayer if  the
23        taxpayer  or  a related party would not be eligible under
24        the provisions of subsection (i).
25             (iii)  For purposes of this Section, the term "site"
26        shall have the same meaning as under Section 58.2 of  the
27        Environmental Protection Act.
28        (m)  Education expense credit.
29        Beginning  with tax years ending after December 31, 1999,
30    a taxpayer who is the custodian of  one  or  more  qualifying
31    pupils  shall  be allowed a credit against the tax imposed by
32    subsections  (a)  and  (b)  of  this  Section  for  qualified
33    education expenses  incurred  on  behalf  of  the  qualifying
34    pupils.   The  credit  shall  be  equal  to  25% of qualified
 
                            -22-               LRB9110268SMdv
 1    education expenses, but in no  event  may  the  total  credit
 2    under  this Section claimed by a family that is the custodian
 3    of qualifying pupils exceed $500. In no event shall a  credit
 4    under  this  subsection reduce the taxpayer's liability under
 5    this Act to less than zero. This subsection  is  exempt  from
 6    the provisions of Section 250 of this Act.
 7        For purposes of this subsection;
 8        "Qualifying   pupils"   means  individuals  who  (i)  are
 9    residents of the State of Illinois, (ii) are under the age of
10    21 at the close of the school year  for  which  a  credit  is
11    sought,  and  (iii) during the school year for which a credit
12    is sought were full-time pupils enrolled  in  a  kindergarten
13    through  twelfth  grade  education  program at any school, as
14    defined in this subsection.
15        "Qualified education expense" means the  amount  incurred
16    on  behalf  of  a  qualifying  pupil  in  excess  of $250 for
17    tuition, book fees, and lab fees at the school in  which  the
18    pupil is enrolled during the regular school year.
19        "School"  means  any  public  or  nonpublic elementary or
20    secondary school in Illinois that is in compliance with Title
21    VI of the Civil Rights Act of 1964 and  attendance  at  which
22    satisfies  the  requirements  of  Section  26-1 of the School
23    Code, except that nothing shall be  construed  to  require  a
24    child  to attend any particular public or nonpublic school to
25    qualify for the credit under this Section.
26        "Custodian" means, with respect to qualifying pupils,  an
27    Illinois  resident  who  is  a  parent,  the parents, a legal
28    guardian, or the legal guardians of the qualifying pupils.
29    (Source: P.A. 90-123, eff.  7-21-97;  90-458,  eff.  8-17-97;
30    90-605,  eff.  6-30-98;  90-655,  eff.  7-30-98; 90-717, eff.
31    8-7-98; 90-792, eff. 1-1-99; 91-9, eff. 1-1-00; 91-357,  eff.
32    7-29-99;  91-643, eff. 8-20-99; 91-644, eff. 8-20-99; revised
33    8-27-99.)
 
                            -23-               LRB9110268SMdv
 1        Section 99.  Effective date.  This Act takes effect  upon
 2    becoming law.

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