State of Illinois
91st General Assembly
Legislation

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[ Introduced ][ Enrolled ][ Senate Amendment 001 ]

91_SB1326eng

 
SB1326 Engrossed                               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
 
SB1326 Engrossed            -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
 
SB1326 Engrossed            -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. For the  purposes  of  this  subsection  (d-1),  an
34    inter-affiliate   includes  a  mutual  insurer  under  common
 
SB1326 Engrossed            -4-                LRB9110268SMdv
 1    management.
 2             (1)  For the purposes of  subsection  (d-1),  in  no
 3        event  shall  the  sum  of  the  rates  of tax imposed by
 4        subsections (b) and (d) be  reduced  below  the  rate  at
 5        which the sum of:
 6                  (A)  the  total  amount  of tax imposed on such
 7             foreign insurer under this Act for a  taxable  year,
 8             net of all credits allowed under this Act, plus
 9                  (B)  the  privilege  tax imposed by Section 409
10             of the Illinois Insurance Code, the  fire  insurance
11             company  tax  imposed  by  Section  12  of  the Fire
12             Investigation Act, and  the  fire  department  taxes
13             imposed   under  Section  11-10-1  of  the  Illinois
14             Municipal Code,
15        equals 1.25% of the net taxable premiums written for  the
16        taxable  year,  as described by subsection (1) of Section
17        409 of the Illinois Insurance Code.  This paragraph  will
18        in  no event increase the rates imposed under subsections
19        (b) and (d).
20             (2)  Any reduction in the rates of  tax  imposed  by
21        this  subsection shall be applied first against the rates
22        imposed by subsection (b) and only after the tax  imposed
23        by  subsection  (a) net of all credits allowed under this
24        Section other than the credit  allowed  under  subsection
25        (i)  has  been reduced to zero, against the rates imposed
26        by subsection (d).
27             (3)  The provisions of  this  subsection  (d-1)  are
28        effective  only through December 31, 2000 and cease to be
29        effective on January 1, 2001; but this  does  not  affect
30        any claim or obligation based upon the use or application
31        of  this  subsection for tax years ending on December 31,
32        2000 or earlier.
33        This subsection (d-1) is exempt from  the  provisions  of
34    Section 250.
 
SB1326 Engrossed            -5-                LRB9110268SMdv
 1        (e)  Investment  credit.   A  taxpayer shall be allowed a
 2    credit against the Personal Property Tax  Replacement  Income
 3    Tax for investment in qualified property.
 4             (1)  A  taxpayer  shall be allowed a credit equal to
 5        .5% of the basis of qualified property placed in  service
 6        during the taxable year, provided such property is placed
 7        in  service  on  or  after  July 1, 1984.  There shall be
 8        allowed an additional credit equal to .5% of the basis of
 9        qualified property placed in service during  the  taxable
10        year,  provided  such property is placed in service on or
11        after July 1, 1986, and the  taxpayer's  base  employment
12        within  Illinois  has  increased  by  1% or more over the
13        preceding year as determined by the taxpayer's employment
14        records filed with the Illinois Department of  Employment
15        Security.   Taxpayers  who  are  new to Illinois shall be
16        deemed to have met the 1% growth in base  employment  for
17        the first year in which they file employment records with
18        the  Illinois  Department  of  Employment  Security.  The
19        provisions added to this Section by  Public  Act  85-1200
20        (and restored by Public Act 87-895) shall be construed as
21        declaratory  of  existing law and not as a new enactment.
22        If, in any year, the increase in base  employment  within
23        Illinois  over  the  preceding  year is less than 1%, the
24        additional credit shall be  limited  to  that  percentage
25        times  a  fraction, the numerator of which is .5% and the
26        denominator of which is 1%, but  shall  not  exceed  .5%.
27        The  investment credit shall not be allowed to the extent
28        that it would reduce a taxpayer's liability  in  any  tax
29        year  below  zero,  nor  may  any  credit  for  qualified
30        property  be  allowed for any year other than the year in
31        which the property was placed in service in Illinois. For
32        tax years ending on or after December 31, 1987, and on or
33        before December 31, 1988, the credit shall be allowed for
34        the tax year in which the property is placed in  service,
 
SB1326 Engrossed            -6-                LRB9110268SMdv
 1        or, if the amount of the credit exceeds the tax liability
 2        for  that year, whether it exceeds the original liability
 3        or the liability as later amended,  such  excess  may  be
 4        carried forward and applied to the tax liability of the 5
 5        taxable  years  following  the excess credit years if the
 6        taxpayer (i) makes investments which cause  the  creation
 7        of  a  minimum  of  2,000  full-time  equivalent  jobs in
 8        Illinois,  (ii)  is  located  in   an   enterprise   zone
 9        established  pursuant to the Illinois Enterprise Zone Act
10        and (iii) is certified by the Department of Commerce  and
11        Community  Affairs  as  complying  with  the requirements
12        specified in clause (i) and (ii) by July  1,  1986.   The
13        Department of Commerce and Community Affairs shall notify
14        the  Department  of  Revenue  of  all such certifications
15        immediately. For tax  years  ending  after  December  31,
16        1988,  the  credit  shall  be allowed for the tax year in
17        which the property is  placed  in  service,  or,  if  the
18        amount  of  the credit exceeds the tax liability for that
19        year, whether it exceeds the original  liability  or  the
20        liability  as  later  amended, such excess may be carried
21        forward and applied to the tax liability of the 5 taxable
22        years following the excess credit years. The credit shall
23        be applied to the earliest year  for  which  there  is  a
24        liability. If there is credit from more than one tax year
25        that  is  available to offset a liability, earlier credit
26        shall be applied first.
27             (2)  The term "qualified  property"  means  property
28        which:
29                  (A)  is   tangible,   whether   new   or  used,
30             including buildings  and  structural  components  of
31             buildings  and signs that are real property, but not
32             including land or improvements to real property that
33             are not a structural component of a building such as
34             landscaping,  sewer  lines,  local   access   roads,
 
SB1326 Engrossed            -7-                LRB9110268SMdv
 1             fencing, parking lots, and other appurtenances;
 2                  (B)  is  depreciable pursuant to Section 167 of
 3             the  Internal  Revenue  Code,  except  that  "3-year
 4             property" as defined in Section 168(c)(2)(A) of that
 5             Code is not eligible for the credit provided by this
 6             subsection (e);
 7                  (C)  is acquired  by  purchase  as  defined  in
 8             Section 179(d) of the Internal Revenue Code;
 9                  (D)  is  used  in Illinois by a taxpayer who is
10             primarily engaged in  manufacturing,  or  in  mining
11             coal or fluorite, or in retailing; and
12                  (E)  has  not  previously been used in Illinois
13             in such a manner and  by  such  a  person  as  would
14             qualify  for  the credit provided by this subsection
15             (e) or subsection (f).
16             (3)  For   purposes   of   this   subsection    (e),
17        "manufacturing" means the material staging and production
18        of  tangible  personal  property  by  procedures commonly
19        regarded as manufacturing,  processing,  fabrication,  or
20        assembling  which changes some existing material into new
21        shapes, new qualities, or new combinations.  For purposes
22        of this subsection (e) the term "mining" shall  have  the
23        same  meaning  as  the term "mining" in Section 613(c) of
24        the  Internal  Revenue  Code.   For  purposes   of   this
25        subsection  (e),  the  term "retailing" means the sale of
26        tangible  personal  property  or  services  rendered   in
27        conjunction  with  the sale of tangible consumer goods or
28        commodities.
29             (4)  The basis of qualified property  shall  be  the
30        basis  used  to  compute  the  depreciation deduction for
31        federal income tax purposes.
32             (5)  If the basis of the property for federal income
33        tax depreciation purposes is increased after it has  been
34        placed in service in Illinois by the taxpayer, the amount
 
SB1326 Engrossed            -8-                LRB9110268SMdv
 1        of  such  increase  shall  be  deemed  property placed in
 2        service on the date of such increase in basis.
 3             (6)  The term "placed in  service"  shall  have  the
 4        same  meaning as under Section 46 of the Internal Revenue
 5        Code.
 6             (7)  If during any taxable year, any property ceases
 7        to be qualified property in the  hands  of  the  taxpayer
 8        within  48  months  after being placed in service, or the
 9        situs of any qualified property is moved outside Illinois
10        within 48 months  after  being  placed  in  service,  the
11        Personal  Property  Tax  Replacement  Income Tax for such
12        taxable year shall be increased.  Such increase shall  be
13        determined by (i) recomputing the investment credit which
14        would  have been allowed for the year in which credit for
15        such property was originally allowed by eliminating  such
16        property from such computation and, (ii) subtracting such
17        recomputed  credit  from  the amount of credit previously
18        allowed. For  the  purposes  of  this  paragraph  (7),  a
19        reduction  of  the  basis of qualified property resulting
20        from a redetermination of the  purchase  price  shall  be
21        deemed  a disposition of qualified property to the extent
22        of such reduction.
23             (8)  Unless the investment  credit  is  extended  by
24        law,  the  basis  of qualified property shall not include
25        costs incurred after December 31, 2003, except for  costs
26        incurred  pursuant  to a binding contract entered into on
27        or before December 31, 2003.
28             (9)  Each taxable year, a partnership may  elect  to
29        pass  through  to  its  partners the credits to which the
30        partnership is entitled under this subsection (e) for the
31        taxable year.  A partner may use the credit allocated  to
32        him  or  her  under  this  paragraph only against the tax
33        imposed in subsections (c) and (d) of this  Section.   If
34        the  partnership makes that election, those credits shall
 
SB1326 Engrossed            -9-                LRB9110268SMdv
 1        be allocated among the partners  in  the  partnership  in
 2        accordance  with the rules set forth in Section 704(b) of
 3        the Internal Revenue  Code,  and  the  rules  promulgated
 4        under  that  Section,  and  the  allocated  amount of the
 5        credits shall be allowed to the partners for that taxable
 6        year.  The partnership shall make this  election  on  its
 7        Personal  Property  Tax Replacement Income Tax return for
 8        that taxable year.  The  election  to  pass  through  the
 9        credits shall be irrevocable.
10          (f)  Investment credit; Enterprise Zone.
11             (1)  A  taxpayer  shall  be allowed a credit against
12        the tax imposed  by  subsections  (a)  and  (b)  of  this
13        Section  for  investment  in  qualified property which is
14        placed in service in an Enterprise Zone created  pursuant
15        to  the  Illinois  Enterprise  Zone  Act.  For  partners,
16        shareholders  of Subchapter S corporations, and owners of
17        limited liability companies, if the liability company  is
18        treated  as  a  partnership  for  purposes of federal and
19        State income taxation, there shall be  allowed  a  credit
20        under  this subsection (f) to be determined in accordance
21        with the determination of income and  distributive  share
22        of  income under Sections 702 and 704 and Subchapter S of
23        the Internal Revenue Code. The credit shall be .5% of the
24        basis for such property.  The credit shall  be  available
25        only  in the taxable year in which the property is placed
26        in service in  the  Enterprise  Zone  and  shall  not  be
27        allowed  to  the extent that it would reduce a taxpayer's
28        liability for the tax imposed by subsections (a) and  (b)
29        of this Section to below zero. For tax years ending on or
30        after  December 31, 1985, the credit shall be allowed for
31        the tax year in which the property is placed in  service,
32        or, if the amount of the credit exceeds the tax liability
33        for  that year, whether it exceeds the original liability
34        or the liability as later amended,  such  excess  may  be
 
SB1326 Engrossed            -10-               LRB9110268SMdv
 1        carried forward and applied to the tax liability of the 5
 2        taxable  years  following  the  excess  credit  year. The
 3        credit shall be applied to the earliest  year  for  which
 4        there  is  a liability. If there is credit from more than
 5        one tax year that is available to offset a liability, the
 6        credit accruing first in time shall be applied first.
 7             (2)  The  term  qualified  property  means  property
 8        which:
 9                  (A)  is  tangible,   whether   new   or   used,
10             including  buildings  and  structural  components of
11             buildings;
12                  (B)  is depreciable pursuant to Section 167  of
13             the  Internal  Revenue  Code,  except  that  "3-year
14             property" as defined in Section 168(c)(2)(A) of that
15             Code is not eligible for the credit provided by this
16             subsection (f);
17                  (C)  is  acquired  by  purchase  as  defined in
18             Section 179(d) of the Internal Revenue Code;
19                  (D)  is used in  the  Enterprise  Zone  by  the
20             taxpayer; and
21                  (E)  has  not  been previously used in Illinois
22             in such a manner and  by  such  a  person  as  would
23             qualify  for  the credit provided by this subsection
24             (f) or subsection (e).
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 the Enterprise Zone by the taxpayer,
31        the  amount  of  such  increase  shall be deemed property
32        placed in service on the date of such increase in basis.
33             (5)  The term "placed in  service"  shall  have  the
34        same  meaning as under Section 46 of the Internal Revenue
 
SB1326 Engrossed            -11-               LRB9110268SMdv
 1        Code.
 2             (6)  If during any taxable year, any property ceases
 3        to be qualified property in the  hands  of  the  taxpayer
 4        within  48  months  after being placed in service, or the
 5        situs of any qualified  property  is  moved  outside  the
 6        Enterprise  Zone  within  48 months after being placed in
 7        service, the tax imposed under subsections (a) and (b) of
 8        this Section for such taxable year  shall  be  increased.
 9        Such  increase shall be determined by (i) recomputing the
10        investment credit which would have been allowed  for  the
11        year  in  which  credit  for such property was originally
12        allowed  by   eliminating   such   property   from   such
13        computation,  and (ii) subtracting such recomputed credit
14        from the amount of credit previously  allowed.   For  the
15        purposes  of this paragraph (6), a reduction of the basis
16        of qualified property resulting from a redetermination of
17        the purchase price  shall  be  deemed  a  disposition  of
18        qualified property to the extent of such reduction.
19          (g)  Jobs Tax Credit; Enterprise Zone and Foreign Trade
20    Zone or Sub-Zone.
21             (1)  A taxpayer conducting a trade or business in an
22        enterprise  zone  or a High Impact Business designated by
23        the  Department  of  Commerce   and   Community   Affairs
24        conducting  a trade or business in a federally designated
25        Foreign Trade Zone or Sub-Zone shall be allowed a  credit
26        against  the  tax  imposed  by subsections (a) and (b) of
27        this Section in the amount of $500 per eligible  employee
28        hired to work in the zone during the taxable year.
29             (2)  To qualify for the credit:
30                  (A)  the  taxpayer must hire 5 or more eligible
31             employees to work in an enterprise zone or federally
32             designated Foreign Trade Zone or Sub-Zone during the
33             taxable year;
34                  (B)  the taxpayer's total employment within the
 
SB1326 Engrossed            -12-               LRB9110268SMdv
 1             enterprise  zone  or  federally  designated  Foreign
 2             Trade Zone or Sub-Zone must increase by  5  or  more
 3             full-time  employees  beyond  the  total employed in
 4             that zone at the end of the previous  tax  year  for
 5             which  a  jobs  tax  credit  under  this Section was
 6             taken, or beyond the total employed by the  taxpayer
 7             as of December 31, 1985, whichever is later; and
 8                  (C)  the  eligible  employees  must be employed
 9             180 consecutive days in order to be deemed hired for
10             purposes of this subsection.
11             (3)  An "eligible employee" means  an  employee  who
12        is:
13                  (A)  Certified  by  the  Department of Commerce
14             and Community Affairs  as  "eligible  for  services"
15             pursuant  to  regulations  promulgated in accordance
16             with Title II of the Job Training  Partnership  Act,
17             Training Services for the Disadvantaged or Title III
18             of  the Job Training Partnership Act, Employment and
19             Training Assistance for Dislocated Workers Program.
20                  (B)  Hired  after  the   enterprise   zone   or
21             federally  designated Foreign Trade Zone or Sub-Zone
22             was designated or the trade or business was  located
23             in that zone, whichever is later.
24                  (C)  Employed in the enterprise zone or Foreign
25             Trade  Zone  or Sub-Zone. An employee is employed in
26             an enterprise zone or federally  designated  Foreign
27             Trade  Zone or Sub-Zone if his services are rendered
28             there or it  is  the  base  of  operations  for  the
29             services performed.
30                  (D)  A  full-time  employee  working 30 or more
31             hours per week.
32             (4)  For tax years ending on or after  December  31,
33        1985  and prior to December 31, 1988, the credit shall be
34        allowed for the tax year in which the eligible  employees
 
SB1326 Engrossed            -13-               LRB9110268SMdv
 1        are hired.  For tax years ending on or after December 31,
 2        1988,  the  credit  shall  be  allowed  for  the tax year
 3        immediately following the tax year in which the  eligible
 4        employees are hired.  If the amount of the credit exceeds
 5        the  tax  liability for that year, whether it exceeds the
 6        original liability or the  liability  as  later  amended,
 7        such excess may be carried forward and applied to the tax
 8        liability  of  the  5  taxable years following the excess
 9        credit year.  The credit shall be applied to the earliest
10        year for which there is a liability. If there  is  credit
11        from more than one tax year that is available to offset a
12        liability, earlier credit shall be applied first.
13             (5)  The Department of Revenue shall promulgate such
14        rules and regulations as may be deemed necessary to carry
15        out the purposes of this subsection (g).
16             (6)  The  credit  shall  be  available  for eligible
17        employees hired on or after January 1, 1986.
18             (h)  Investment credit; High Impact Business.
19             (1)  Subject to subsection (b) of Section 5.5 of the
20        Illinois Enterprise Zone Act, a taxpayer shall be allowed
21        a credit against the tax imposed by subsections  (a)  and
22        (b)  of this Section for investment in qualified property
23        which is placed in service by a  Department  of  Commerce
24        and  Community  Affairs  designated High Impact Business.
25        The credit shall be .5% of the basis for  such  property.
26        The  credit  shall  not  be  available  until the minimum
27        investments in qualified property set  forth  in  Section
28        5.5  of  the  Illinois  Enterprise  Zone  Act  have  been
29        satisfied  and shall not be allowed to the extent that it
30        would reduce a taxpayer's liability for the  tax  imposed
31        by subsections (a) and (b) of this Section to below zero.
32        The  credit  applicable to such minimum investments shall
33        be taken in  the  taxable  year  in  which  such  minimum
34        investments   have   been   completed.   The  credit  for
 
SB1326 Engrossed            -14-               LRB9110268SMdv
 1        additional investments beyond the minimum investment by a
 2        designated high impact business shall be  available  only
 3        in  the  taxable  year in which the property is placed in
 4        service and shall not be allowed to the  extent  that  it
 5        would  reduce  a taxpayer's liability for the tax imposed
 6        by subsections (a) and (b) of this Section to below zero.
 7        For tax years ending on or after December 31,  1987,  the
 8        credit  shall  be  allowed  for the tax year in which the
 9        property is placed in service, or, if the amount  of  the
10        credit  exceeds  the tax liability for that year, whether
11        it exceeds the original liability  or  the  liability  as
12        later  amended,  such  excess  may be carried forward and
13        applied to the tax  liability  of  the  5  taxable  years
14        following  the  excess  credit year.  The credit shall be
15        applied to  the  earliest  year  for  which  there  is  a
16        liability.   If  there  is  credit from more than one tax
17        year that is available to offset a liability, the  credit
18        accruing first in time shall be applied first.
19             Changes  made  in  this subdivision (h)(1) by Public
20        Act 88-670 restore changes made by Public Act 85-1182 and
21        reflect existing law.
22             (2)  The  term  qualified  property  means  property
23        which:
24                  (A)  is  tangible,   whether   new   or   used,
25             including  buildings  and  structural  components of
26             buildings;
27                  (B)  is depreciable pursuant to Section 167  of
28             the  Internal  Revenue  Code,  except  that  "3-year
29             property" as defined in Section 168(c)(2)(A) of that
30             Code is not eligible for the credit provided by this
31             subsection (h);
32                  (C)  is  acquired  by  purchase  as  defined in
33             Section 179(d) of the Internal Revenue Code; and
34                  (D)  is not eligible for  the  Enterprise  Zone
 
SB1326 Engrossed            -15-               LRB9110268SMdv
 1             Investment Credit provided by subsection (f) of this
 2             Section.
 3             (3)  The  basis  of  qualified property shall be the
 4        basis used to  compute  the  depreciation  deduction  for
 5        federal income tax purposes.
 6             (4)  If the basis of the property for federal income
 7        tax  depreciation purposes is increased after it has been
 8        placed in service in a federally designated Foreign Trade
 9        Zone or Sub-Zone located in Illinois by the taxpayer, the
10        amount of such increase shall be deemed  property  placed
11        in service on the date of such increase in basis.
12             (5)  The  term  "placed  in  service" shall have the
13        same meaning as under Section 46 of the Internal  Revenue
14        Code.
15             (6)  If  during any taxable year ending on or before
16        December 31, 1996, any property ceases  to  be  qualified
17        property  in  the  hands of the taxpayer within 48 months
18        after being placed  in  service,  or  the  situs  of  any
19        qualified  property  is  moved outside Illinois within 48
20        months after being placed in  service,  the  tax  imposed
21        under  subsections  (a)  and (b) of this Section for such
22        taxable year shall be increased.  Such increase shall  be
23        determined by (i) recomputing the investment credit which
24        would  have been allowed for the year in which credit for
25        such property was originally allowed by eliminating  such
26        property from such computation, and (ii) subtracting such
27        recomputed  credit  from  the amount of credit previously
28        allowed.  For the  purposes  of  this  paragraph  (6),  a
29        reduction  of  the  basis of qualified property resulting
30        from a redetermination of the  purchase  price  shall  be
31        deemed  a disposition of qualified property to the extent
32        of such reduction.
33             (7)  Beginning with tax years ending after  December
34        31,  1996,  if  a taxpayer qualifies for the credit under
 
SB1326 Engrossed            -16-               LRB9110268SMdv
 1        this  subsection  (h)  and  thereby  is  granted  a   tax
 2        abatement  and the taxpayer relocates its entire facility
 3        in violation of the explicit  terms  and  length  of  the
 4        contract  under  Section 18-183 of the Property Tax Code,
 5        the tax imposed under subsections (a)  and  (b)  of  this
 6        Section  shall be increased for the taxable year in which
 7        the taxpayer relocated its facility by an amount equal to
 8        the amount of credit received by the taxpayer under  this
 9        subsection (h).
10        (i)  A credit shall be allowed against the tax imposed by
11    subsections  (a)  and (b) of this Section for the tax imposed
12    by subsections (c) and (d)  of  this  Section.   This  credit
13    shall   be   computed  by  multiplying  the  tax  imposed  by
14    subsections (c) and (d) of this Section by  a  fraction,  the
15    numerator  of  which is base income allocable to Illinois and
16    the denominator of which is Illinois base income, and further
17    multiplying  the  product  by  the  tax   rate   imposed   by
18    subsections (a) and (b) of this Section.
19        Any  credit  earned  on  or after December 31, 1986 under
20    this subsection which is unused in the  year  the  credit  is
21    computed  because  it  exceeds  the  tax liability imposed by
22    subsections (a) and (b) for that year (whether it exceeds the
23    original liability or the liability as later amended) may  be
24    carried  forward  and applied to the tax liability imposed by
25    subsections (a) and (b) of the 5 taxable years following  the
26    excess  credit  year.   This credit shall be applied first to
27    the earliest year for which there is a liability.   If  there
28    is a credit under this subsection from more than one tax year
29    that  is  available to offset a liability the earliest credit
30    arising under this subsection shall be applied first.
31        If, during any taxable year ending on or  after  December
32    31,  1986, the tax imposed by subsections (c) and (d) of this
33    Section for which a taxpayer has claimed a credit under  this
34    subsection  (i) is reduced, the amount of credit for such tax
 
SB1326 Engrossed            -17-               LRB9110268SMdv
 1    shall also be reduced.  Such reduction shall be determined by
 2    recomputing the credit to take into account the  reduced  tax
 3    imposed  by  subsection  (c)  and (d).  If any portion of the
 4    reduced amount of credit has  been  carried  to  a  different
 5    taxable  year,  an  amended  return  shall  be filed for such
 6    taxable year to reduce the amount of credit claimed.
 7        (j)  Training expense credit.  Beginning with  tax  years
 8    ending  on  or  after  December 31, 1986, a taxpayer shall be
 9    allowed a credit against the tax imposed  by  subsection  (a)
10    and  (b)  under this Section for all amounts paid or accrued,
11    on behalf of all persons employed by the taxpayer in Illinois
12    or Illinois residents  employed  outside  of  Illinois  by  a
13    taxpayer,   for   educational   or   vocational  training  in
14    semi-technical or technical fields or semi-skilled or skilled
15    fields,  which  were  deducted  from  gross  income  in   the
16    computation  of  taxable  income.  The credit against the tax
17    imposed by subsections (a) and (b)  shall  be  1.6%  of  such
18    training  expenses.  For partners, shareholders of subchapter
19    S corporations, and owners of limited liability companies, if
20    the  liability  company  is  treated  as  a  partnership  for
21    purposes of federal and State income taxation, there shall be
22    allowed a credit under this subsection (j) to  be  determined
23    in   accordance   with   the   determination  of  income  and
24    distributive share of income under Sections 702 and  704  and
25    subchapter S of the Internal Revenue Code.
26        Any  credit allowed under this subsection which is unused
27    in the year the credit is earned may be  carried  forward  to
28    each  of the 5 taxable years following the year for which the
29    credit is first computed until it is used.  This credit shall
30    be applied first to the earliest year for which  there  is  a
31    liability.   If  there is a credit under this subsection from
32    more than  one  tax  year  that  is  available  to  offset  a
33    liability  the  earliest credit arising under this subsection
34    shall be applied first.
 
SB1326 Engrossed            -18-               LRB9110268SMdv
 1        (k)  Research and development credit.
 2        Beginning with tax years ending after  July  1,  1990,  a
 3    taxpayer shall be allowed a credit against the tax imposed by
 4    subsections  (a)  and  (b)  of  this  Section  for increasing
 5    research  activities  in  this  State.   The  credit  allowed
 6    against the tax imposed by subsections (a) and (b)  shall  be
 7    equal to 6 1/2% of the qualifying expenditures for increasing
 8    research activities in this State. For partners, shareholders
 9    of subchapter S corporations, and owners of limited liability
10    companies,   if   the  liability  company  is  treated  as  a
11    partnership  for  purposes  of  federal  and   State   income
12    taxation,   there  shall  be  allowed  a  credit  under  this
13    subsection  to  be  determined   in   accordance   with   the
14    determination  of  income  and  distributive  share of income
15    under Sections 702 and 704 and subchapter S of  the  Internal
16    Revenue Code.
17        For    purposes    of    this   subsection,   "qualifying
18    expenditures" means the qualifying  expenditures  as  defined
19    for  the  federal  credit  for increasing research activities
20    which would be allowable under Section  41  of  the  Internal
21    Revenue   Code   and  which  are  conducted  in  this  State,
22    "qualifying expenditures for increasing  research  activities
23    in  this  State"  means the excess of qualifying expenditures
24    for the  taxable  year  in  which  incurred  over  qualifying
25    expenditures  for  the  base period, "qualifying expenditures
26    for the base period" means  the  average  of  the  qualifying
27    expenditures  for  each  year  in  the base period, and "base
28    period" means the 3 taxable years immediately  preceding  the
29    taxable year for which the determination is being made.
30        Any credit in excess of the tax liability for the taxable
31    year may be carried forward. A taxpayer may elect to have the
32    unused  credit  shown  on  its final completed return carried
33    over as a credit against the tax liability for the  following
34    5  taxable  years  or until it has been fully used, whichever
 
SB1326 Engrossed            -19-               LRB9110268SMdv
 1    occurs first.
 2        If an unused credit is carried forward to  a  given  year
 3    from  2  or  more  earlier  years, that credit arising in the
 4    earliest year will be applied first against the tax liability
 5    for the given year.  If a tax liability for  the  given  year
 6    still  remains,  the  credit from the next earliest year will
 7    then be applied, and so on, until all credits have been  used
 8    or  no  tax  liability  for  the  given  year  remains.   Any
 9    remaining  unused  credit  or  credits  then  will be carried
10    forward to the next following year in which a  tax  liability
11    is  incurred, except that no credit can be carried forward to
12    a year which is more than 5 years after the year in which the
13    expense for which the credit is given was incurred.
14        Unless extended by law,  the  credit  shall  not  include
15    costs  incurred  after  December  31,  2004, except for costs
16    incurred pursuant to a binding contract entered  into  on  or
17    before December 31, 2004.
18        No  inference  shall be drawn from this amendatory Act of
19    the 91st General Assembly  in  construing  this  Section  for
20    taxable years beginning before January 1, 1999.
21        (l)  Environmental Remediation Tax Credit.
22             (i)  For  tax   years ending after December 31, 1997
23        and on or before December 31, 2001, a taxpayer  shall  be
24        allowed  a  credit against the tax imposed by subsections
25        (a) and (b) of this Section for certain amounts paid  for
26        unreimbursed  eligible remediation costs, as specified in
27        this  subsection.   For   purposes   of   this   Section,
28        "unreimbursed  eligible  remediation  costs"  means costs
29        approved by the Illinois Environmental Protection  Agency
30        ("Agency")  under  Section  58.14  of  the  Environmental
31        Protection Act that were paid in performing environmental
32        remediation  at a site for which a No Further Remediation
33        Letter was  issued  by  the  Agency  and  recorded  under
34        Section  58.10  of the Environmental Protection Act.  The
 
SB1326 Engrossed            -20-               LRB9110268SMdv
 1        credit must be claimed for  the  taxable  year  in  which
 2        Agency  approval  of  the  eligible  remediation costs is
 3        granted.  The credit is not available to any taxpayer  if
 4        the  taxpayer  or any related party caused or contributed
 5        to, in any  material  respect,  a  release  of  regulated
 6        substances  on, in, or under the site that was identified
 7        and addressed by the remedial action pursuant to the Site
 8        Remediation Program of the Environmental Protection  Act.
 9        After  the  Pollution  Control  Board  rules  are adopted
10        pursuant to the Illinois Administrative Procedure Act for
11        the administration and enforcement of Section 58.9 of the
12        Environmental Protection Act, determinations as to credit
13        availability for purposes of this Section shall  be  made
14        consistent  with  those  rules.   For  purposes  of  this
15        Section,   "taxpayer"   includes   a   person  whose  tax
16        attributes the taxpayer has succeeded  to  under  Section
17        381  of  the  Internal  Revenue  Code and "related party"
18        includes the persons disallowed a deduction for losses by
19        paragraphs (b), (c), and (f)(1) of  Section  267  of  the
20        Internal  Revenue  Code  by  virtue  of  being  a related
21        taxpayer, as well as any of  its  partners.   The  credit
22        allowed  against  the  tax imposed by subsections (a) and
23        (b) shall be equal to 25% of  the  unreimbursed  eligible
24        remediation  costs in excess of $100,000 per site, except
25        that the $100,000 threshold shall not apply to  any  site
26        contained  in  an  enterprise  zone  as determined by the
27        Department of Commerce and Community Affairs.  The  total
28        credit  allowed  shall not exceed $40,000 per year with a
29        maximum total of $150,000 per  site.   For  partners  and
30        shareholders of subchapter S corporations, there shall be
31        allowed  a  credit under this subsection to be determined
32        in  accordance  with  the  determination  of  income  and
33        distributive share of income under Sections 702  and  704
34        of subchapter S of the Internal Revenue Code.
 
SB1326 Engrossed            -21-               LRB9110268SMdv
 1             (ii)  A credit allowed under this subsection that is
 2        unused  in  the  year the credit is earned may be carried
 3        forward to each of the 5 taxable years following the year
 4        for which the credit is first earned until  it  is  used.
 5        The  term "unused credit" does not include any amounts of
 6        unreimbursed eligible remediation costs in excess of  the
 7        maximum  credit  per site authorized under paragraph (i).
 8        This credit shall be applied first to the  earliest  year
 9        for  which  there  is  a liability.  If there is a credit
10        under this subsection from more than one tax year that is
11        available to offset  a  liability,  the  earliest  credit
12        arising  under this subsection shall be applied first.  A
13        credit allowed under this subsection may  be  sold  to  a
14        buyer as part of a sale of all or part of the remediation
15        site  for which the credit was granted.  The purchaser of
16        a remediation site and the tax credit  shall  succeed  to
17        the  unused  credit and remaining carry-forward period of
18        the seller.  To perfect the transfer, the assignor  shall
19        record  the  transfer  in the chain of title for the site
20        and  provide  written  notice  to  the  Director  of  the
21        Illinois Department of Revenue of the  assignor's  intent
22        to  sell  the  remediation site and the amount of the tax
23        credit to be transferred as a portion of the sale.  In no
24        event may a credit be transferred to any taxpayer if  the
25        taxpayer  or  a related party would not be eligible under
26        the provisions of subsection (i).
27             (iii)  For purposes of this Section, the term "site"
28        shall have the same meaning as under Section 58.2 of  the
29        Environmental Protection Act.
30        (m)  Education expense credit.
31        Beginning  with tax years ending after December 31, 1999,
32    a taxpayer who is the custodian of  one  or  more  qualifying
33    pupils  shall  be allowed a credit against the tax imposed by
34    subsections  (a)  and  (b)  of  this  Section  for  qualified
 
SB1326 Engrossed            -22-               LRB9110268SMdv
 1    education expenses  incurred  on  behalf  of  the  qualifying
 2    pupils.   The  credit  shall  be  equal  to  25% of qualified
 3    education expenses, but in no  event  may  the  total  credit
 4    under  this Section claimed by a family that is the custodian
 5    of qualifying pupils exceed $500. In no event shall a  credit
 6    under  this  subsection reduce the taxpayer's liability under
 7    this Act to less than zero. This subsection  is  exempt  from
 8    the provisions of Section 250 of this Act.
 9        For purposes of this subsection;
10        "Qualifying   pupils"   means  individuals  who  (i)  are
11    residents of the State of Illinois, (ii) are under the age of
12    21 at the close of the school year  for  which  a  credit  is
13    sought,  and  (iii) during the school year for which a credit
14    is sought were full-time pupils enrolled  in  a  kindergarten
15    through  twelfth  grade  education  program at any school, as
16    defined in this subsection.
17        "Qualified education expense" means the  amount  incurred
18    on  behalf  of  a  qualifying  pupil  in  excess  of $250 for
19    tuition, book fees, and lab fees at the school in  which  the
20    pupil is enrolled during the regular school year.
21        "School"  means  any  public  or  nonpublic elementary or
22    secondary school in Illinois that is in compliance with Title
23    VI of the Civil Rights Act of 1964 and  attendance  at  which
24    satisfies  the  requirements  of  Section  26-1 of the School
25    Code, except that nothing shall be  construed  to  require  a
26    child  to attend any particular public or nonpublic school to
27    qualify for the credit under this Section.
28        "Custodian" means, with respect to qualifying pupils,  an
29    Illinois  resident  who  is  a  parent,  the parents, a legal
30    guardian, or the legal guardians of the qualifying pupils.
31    (Source: P.A. 90-123, eff.  7-21-97;  90-458,  eff.  8-17-97;
32    90-605,  eff.  6-30-98;  90-655,  eff.  7-30-98; 90-717, eff.
33    8-7-98; 90-792, eff. 1-1-99; 91-9, eff. 1-1-00; 91-357,  eff.
34    7-29-99;  91-643, eff. 8-20-99; 91-644, eff. 8-20-99; revised
 
SB1326 Engrossed            -23-               LRB9110268SMdv
 1    8-27-99.)

 2        Section 99.  Effective date.  This Act takes effect  upon
 3    becoming law.

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