State of Illinois
91st General Assembly
Legislation

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[ Engrossed ][ Senate Amendment 001 ][ Senate Amendment 003 ]

91_SB1439

 
                                               LRB9111819SMdv

 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-                LRB9111819SMdv
 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-                LRB9111819SMdv
 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  assumed  are  50%  or  more  of its total insurance
15    premiums as determined under paragraph (2) of subsection  (b)
16    of   Section   304,   except   that   for  purposes  of  this
17    determination reinsurance premiums  do  not  include  assumed
18    premiums    from   inter-affiliate   pooling   arrangements),
19    beginning with taxable years ending on or after December  31,
20    1999  and  ending  with  taxable  years  ending  on or before
21    December 31, 2000, the sum of the rates  of  tax  imposed  by
22    subsections  (b) and (d) shall be reduced (but not increased)
23    to the rate at which the total amount of  tax  imposed  under
24    this  Act,  net  of all credits allowed under this Act, shall
25    equal (i) the total amount of tax that would  be  imposed  on
26    the  foreign  insurer's  net income allocable to Illinois for
27    the taxable year by such foreign insurer's state  or  country
28    of  domicile  if  that  net income were subject to all income
29    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-                LRB9111819SMdv
 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        (e)  Investment credit.  A taxpayer shall  be  allowed  a
32    credit  against  the Personal Property Tax Replacement Income
33    Tax for investment in qualified property.
34             (1)  A taxpayer shall be allowed a credit  equal  to
 
                            -5-                LRB9111819SMdv
 1        .5%  of the basis of qualified property placed in service
 2        during the taxable year, provided such property is placed
 3        in service on or after July  1,  1984.   There  shall  be
 4        allowed an additional credit equal to .5% of the basis of
 5        qualified  property  placed in service during the taxable
 6        year, provided such property is placed in service  on  or
 7        after  July  1,  1986, and the taxpayer's base employment
 8        within Illinois has increased by  1%  or  more  over  the
 9        preceding year as determined by the taxpayer's employment
10        records  filed with the Illinois Department of Employment
11        Security.  Taxpayers who are new  to  Illinois  shall  be
12        deemed  to  have met the 1% growth in base employment for
13        the first year in which they file employment records with
14        the Illinois  Department  of  Employment  Security.   The
15        provisions  added  to  this Section by Public Act 85-1200
16        (and restored by Public Act 87-895) shall be construed as
17        declaratory of existing law and not as a  new  enactment.
18        If,  in  any year, the increase in base employment within
19        Illinois over the preceding year is  less  than  1%,  the
20        additional  credit  shall  be  limited to that percentage
21        times a fraction, the numerator of which is .5%  and  the
22        denominator  of  which  is  1%, but shall not exceed .5%.
23        The investment credit shall not be allowed to the  extent
24        that  it  would  reduce a taxpayer's liability in any tax
25        year  below  zero,  nor  may  any  credit  for  qualified
26        property be allowed for any year other than the  year  in
27        which the property was placed in service in Illinois. For
28        tax years ending on or after December 31, 1987, and on or
29        before December 31, 1988, the credit shall be allowed for
30        the  tax year in which the property is placed in service,
31        or, if the amount of the credit exceeds the tax liability
32        for that year, whether it exceeds the original  liability
33        or  the  liability  as  later amended, such excess may be
34        carried forward and applied to the tax liability of the 5
 
                            -6-                LRB9111819SMdv
 1        taxable years following the excess credit  years  if  the
 2        taxpayer  (i)  makes investments which cause the creation
 3        of a  minimum  of  2,000  full-time  equivalent  jobs  in
 4        Illinois,   (ii)   is   located  in  an  enterprise  zone
 5        established pursuant to the Illinois Enterprise Zone  Act
 6        and  (iii) is certified by the Department of Commerce and
 7        Community Affairs  as  complying  with  the  requirements
 8        specified  in  clause  (i) and (ii) by July 1, 1986.  The
 9        Department of Commerce and Community Affairs shall notify
10        the Department of  Revenue  of  all  such  certifications
11        immediately.  For  tax  years  ending  after December 31,
12        1988, the credit shall be allowed for  the  tax  year  in
13        which  the  property  is  placed  in  service, or, if the
14        amount of the credit exceeds the tax liability  for  that
15        year,  whether  it  exceeds the original liability or the
16        liability as later amended, such excess  may  be  carried
17        forward and applied to the tax liability of the 5 taxable
18        years following the excess credit years. The credit shall
19        be  applied  to  the  earliest  year for which there is a
20        liability. If there is credit from more than one tax year
21        that is available to offset a liability,  earlier  credit
22        shall be applied first.
23             (2)  The  term  "qualified  property" means property
24        which:
25                  (A)  is  tangible,   whether   new   or   used,
26             including  buildings  and  structural  components of
27             buildings and signs that are real property, but  not
28             including land or improvements to real property that
29             are not a structural component of a building such as
30             landscaping,   sewer   lines,  local  access  roads,
31             fencing, parking lots, and other appurtenances;
32                  (B)  is depreciable pursuant to Section 167  of
33             the  Internal  Revenue  Code,  except  that  "3-year
34             property" as defined in Section 168(c)(2)(A) of that
 
                            -7-                LRB9111819SMdv
 1             Code is not eligible for the credit provided by this
 2             subsection (e);
 3                  (C)  is  acquired  by  purchase  as  defined in
 4             Section 179(d) of the Internal Revenue Code;
 5                  (D)  is used in Illinois by a taxpayer  who  is
 6             primarily  engaged  in  manufacturing,  or in mining
 7             coal or fluorite, or in retailing; and
 8                  (E)  has not previously been used  in  Illinois
 9             in  such  a  manner  and  by  such a person as would
10             qualify for the credit provided by  this  subsection
11             (e) or subsection (f).
12             (3)  For    purposes   of   this   subsection   (e),
13        "manufacturing" means the material staging and production
14        of tangible  personal  property  by  procedures  commonly
15        regarded  as  manufacturing,  processing, fabrication, or
16        assembling which changes some existing material into  new
17        shapes, new qualities, or new combinations.  For purposes
18        of  this  subsection (e) the term "mining" shall have the
19        same meaning as the term "mining" in  Section  613(c)  of
20        the   Internal   Revenue  Code.   For  purposes  of  this
21        subsection (e), the term "retailing" means  the  sale  of
22        tangible   personal  property  or  services  rendered  in
23        conjunction with the sale of tangible consumer  goods  or
24        commodities.
25             (4)  The  basis  of  qualified property shall be the
26        basis used to  compute  the  depreciation  deduction  for
27        federal income tax purposes.
28             (5)  If the basis of the property for federal income
29        tax  depreciation purposes is increased after it has been
30        placed in service in Illinois by the taxpayer, the amount
31        of such increase  shall  be  deemed  property  placed  in
32        service on the date of such increase in basis.
33             (6)  The  term  "placed  in  service" shall have the
34        same meaning as under Section 46 of the Internal  Revenue
 
                            -8-                LRB9111819SMdv
 1        Code.
 2             (7)  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 Illinois
 6        within  48  months  after  being  placed  in service, the
 7        Personal Property Tax Replacement  Income  Tax  for  such
 8        taxable  year shall be increased.  Such increase shall be
 9        determined by (i) recomputing the investment credit which
10        would have been allowed for the year in which credit  for
11        such  property was originally allowed by eliminating such
12        property from such computation and, (ii) subtracting such
13        recomputed credit from the amount  of  credit  previously
14        allowed.  For  the  purposes  of  this  paragraph  (7), a
15        reduction of the basis of  qualified  property  resulting
16        from  a  redetermination  of  the purchase price shall be
17        deemed a disposition of qualified property to the  extent
18        of such reduction.
19             (8)  Unless  the  investment  credit  is extended by
20        law, the basis of qualified property  shall  not  include
21        costs  incurred after December 31, 2003, except for costs
22        incurred pursuant to a binding contract entered  into  on
23        or before December 31, 2003.
24             (9)  Each  taxable  year, a partnership may elect to
25        pass through to its partners the  credits  to  which  the
26        partnership is entitled under this subsection (e) for the
27        taxable  year.  A partner may use the credit allocated to
28        him or her under this  paragraph  only  against  the  tax
29        imposed  in  subsections (c) and (d) of this Section.  If
30        the partnership makes that election, those credits  shall
31        be  allocated  among  the  partners in the partnership in
32        accordance with the rules set forth in Section 704(b)  of
33        the  Internal  Revenue  Code,  and  the rules promulgated
34        under that Section,  and  the  allocated  amount  of  the
 
                            -9-                LRB9111819SMdv
 1        credits shall be allowed to the partners for that taxable
 2        year.   The  partnership  shall make this election on its
 3        Personal Property Tax Replacement Income Tax  return  for
 4        that  taxable  year.  The  election  to  pass through the
 5        credits shall be irrevocable.
 6          (f)  Investment credit; Enterprise Zone.
 7             (1)  A taxpayer shall be allowed  a  credit  against
 8        the  tax  imposed  by  subsections  (a)  and  (b) of this
 9        Section for investment in  qualified  property  which  is
10        placed  in service in an Enterprise Zone created pursuant
11        to  the  Illinois  Enterprise  Zone  Act.  For  partners,
12        shareholders of Subchapter S corporations, and owners  of
13        limited  liability companies, if the liability company is
14        treated as a partnership  for  purposes  of  federal  and
15        State  income  taxation,  there shall be allowed a credit
16        under this subsection (f) to be determined in  accordance
17        with  the  determination of income and distributive share
18        of income under Sections 702 and 704 and Subchapter S  of
19        the Internal Revenue Code. The credit shall be .5% of the
20        basis  for  such property.  The credit shall be available
21        only in the taxable year in which the property is  placed
22        in  service  in  the  Enterprise  Zone  and  shall not be
23        allowed to the extent that it would reduce  a  taxpayer's
24        liability  for the tax imposed by subsections (a) and (b)
25        of this Section to below zero. For tax years ending on or
26        after December 31, 1985, the credit shall be allowed  for
27        the  tax year in which the property is placed in service,
28        or, if the amount of the credit exceeds the tax liability
29        for that year, whether it exceeds the original  liability
30        or  the  liability  as  later amended, such excess may be
31        carried forward and applied to the tax liability of the 5
32        taxable years  following  the  excess  credit  year.  The
33        credit  shall  be  applied to the earliest year for which
34        there is a liability. If there is credit from  more  than
 
                            -10-               LRB9111819SMdv
 1        one tax year that is available to offset a liability, the
 2        credit accruing first in time shall be applied first.
 3             (2)  The  term  qualified  property  means  property
 4        which:
 5                  (A)  is   tangible,   whether   new   or  used,
 6             including buildings  and  structural  components  of
 7             buildings;
 8                  (B)  is  depreciable pursuant to Section 167 of
 9             the  Internal  Revenue  Code,  except  that  "3-year
10             property" as defined in Section 168(c)(2)(A) of that
11             Code is not eligible for the credit provided by this
12             subsection (f);
13                  (C)  is acquired  by  purchase  as  defined  in
14             Section 179(d) of the Internal Revenue Code;
15                  (D)  is  used  in  the  Enterprise  Zone by the
16             taxpayer; and
17                  (E)  has not been previously used  in  Illinois
18             in  such  a  manner  and  by  such a person as would
19             qualify for the credit provided by  this  subsection
20             (f) or subsection (e).
21             (3)  The  basis  of  qualified property shall be the
22        basis used to  compute  the  depreciation  deduction  for
23        federal income tax purposes.
24             (4)  If the basis of the property for federal income
25        tax  depreciation purposes is increased after it has been
26        placed in service in the Enterprise Zone by the taxpayer,
27        the amount of such  increase  shall  be  deemed  property
28        placed in service on the date of such increase in basis.
29             (5)  The  term  "placed  in  service" shall have the
30        same meaning as under Section 46 of the Internal  Revenue
31        Code.
32             (6)  If during any taxable year, any property ceases
33        to  be  qualified  property  in the hands of the taxpayer
34        within 48 months after being placed in  service,  or  the
 
                            -11-               LRB9111819SMdv
 1        situs  of  any  qualified  property  is moved outside the
 2        Enterprise Zone within 48 months after  being  placed  in
 3        service, the tax imposed under subsections (a) and (b) of
 4        this  Section  for  such taxable year shall be increased.
 5        Such increase shall be determined by (i) recomputing  the
 6        investment  credit  which would have been allowed for the
 7        year in which credit for  such  property  was  originally
 8        allowed   by   eliminating   such   property   from  such
 9        computation, and (ii) subtracting such recomputed  credit
10        from  the  amount  of credit previously allowed.  For the
11        purposes of this paragraph (6), a reduction of the  basis
12        of qualified property resulting from a redetermination of
13        the  purchase  price  shall  be  deemed  a disposition of
14        qualified property to the extent of such reduction.
15          (g)  Jobs Tax Credit; Enterprise Zone and Foreign Trade
16    Zone or Sub-Zone.
17             (1)  A taxpayer conducting a trade or business in an
18        enterprise zone or a High Impact Business  designated  by
19        the   Department   of   Commerce  and  Community  Affairs
20        conducting a trade or business in a federally  designated
21        Foreign  Trade Zone or Sub-Zone shall be allowed a credit
22        against the tax imposed by subsections  (a)  and  (b)  of
23        this  Section in the amount of $500 per eligible employee
24        hired to work in the zone during the taxable year.
25             (2)  To qualify for the credit:
26                  (A)  the taxpayer must hire 5 or more  eligible
27             employees to work in an enterprise zone or federally
28             designated Foreign Trade Zone or Sub-Zone during the
29             taxable year;
30                  (B)  the taxpayer's total employment within the
31             enterprise  zone  or  federally  designated  Foreign
32             Trade  Zone  or  Sub-Zone must increase by 5 or more
33             full-time employees beyond  the  total  employed  in
34             that  zone  at  the end of the previous tax year for
 
                            -12-               LRB9111819SMdv
 1             which a jobs  tax  credit  under  this  Section  was
 2             taken,  or beyond the total employed by the taxpayer
 3             as of December 31, 1985, whichever is later; and
 4                  (C)  the eligible employees  must  be  employed
 5             180 consecutive days in order to be deemed hired for
 6             purposes of this subsection.
 7             (3)  An  "eligible  employee"  means an employee who
 8        is:
 9                  (A)  Certified by the  Department  of  Commerce
10             and  Community  Affairs  as  "eligible for services"
11             pursuant to regulations  promulgated  in  accordance
12             with  Title  II of the Job Training Partnership Act,
13             Training Services for the Disadvantaged or Title III
14             of the Job Training Partnership Act, Employment  and
15             Training Assistance for Dislocated Workers Program.
16                  (B)  Hired   after   the   enterprise  zone  or
17             federally designated Foreign Trade Zone or  Sub-Zone
18             was  designated or the trade or business was located
19             in that zone, whichever is later.
20                  (C)  Employed in the enterprise zone or Foreign
21             Trade Zone or Sub-Zone. An employee is  employed  in
22             an  enterprise  zone or federally designated Foreign
23             Trade Zone or Sub-Zone if his services are  rendered
24             there  or  it  is  the  base  of  operations for the
25             services performed.
26                  (D)  A full-time employee working  30  or  more
27             hours per week.
28             (4)  For  tax  years ending on or after December 31,
29        1985 and prior to December 31, 1988, the credit shall  be
30        allowed  for the tax year in which the eligible employees
31        are hired.  For tax years ending on or after December 31,
32        1988, the credit  shall  be  allowed  for  the  tax  year
33        immediately  following the tax year in which the eligible
34        employees are hired.  If the amount of the credit exceeds
 
                            -13-               LRB9111819SMdv
 1        the tax liability for that year, whether it  exceeds  the
 2        original  liability  or  the  liability as later amended,
 3        such excess may be carried forward and applied to the tax
 4        liability of the 5 taxable  years  following  the  excess
 5        credit year.  The credit shall be applied to the earliest
 6        year  for  which there is a liability. If there is credit
 7        from more than one tax year that is available to offset a
 8        liability, earlier credit shall be applied first.
 9             (5)  The Department of Revenue shall promulgate such
10        rules and regulations as may be deemed necessary to carry
11        out the purposes of this subsection (g).
12             (6)  The credit  shall  be  available  for  eligible
13        employees hired on or after January 1, 1986.
14             (h)  Investment credit; High Impact Business.
15             (1)  Subject to subsection (b) of Section 5.5 of the
16        Illinois Enterprise Zone Act, a taxpayer shall be allowed
17        a  credit  against the tax imposed by subsections (a) and
18        (b) of this Section for investment in qualified  property
19        which  is  placed  in service by a Department of Commerce
20        and Community Affairs designated  High  Impact  Business.
21        The  credit  shall be .5% of the basis for such property.
22        The credit shall  not  be  available  until  the  minimum
23        investments  in  qualified  property set forth in Section
24        5.5  of  the  Illinois  Enterprise  Zone  Act  have  been
25        satisfied and shall not be allowed to the extent that  it
26        would  reduce  a taxpayer's liability for the tax imposed
27        by subsections (a) and (b) of this Section to below zero.
28        The credit applicable to such minimum  investments  shall
29        be  taken  in  the  taxable  year  in  which such minimum
30        investments  have  been  completed.    The   credit   for
31        additional investments beyond the minimum investment by a
32        designated  high  impact business shall be available only
33        in the taxable year in which the property  is  placed  in
34        service  and  shall  not be allowed to the extent that it
 
                            -14-               LRB9111819SMdv
 1        would reduce a taxpayer's liability for the  tax  imposed
 2        by subsections (a) and (b) of this Section to below zero.
 3        For  tax  years ending on or after December 31, 1987, the
 4        credit shall be allowed for the tax  year  in  which  the
 5        property  is  placed in service, or, if the amount of the
 6        credit exceeds the tax liability for that  year,  whether
 7        it  exceeds  the  original  liability or the liability as
 8        later amended, such excess may  be  carried  forward  and
 9        applied  to  the  tax  liability  of  the 5 taxable years
10        following the excess credit year.  The  credit  shall  be
11        applied  to  the  earliest  year  for  which  there  is a
12        liability.  If there is credit from  more  than  one  tax
13        year  that is available to offset a liability, the credit
14        accruing first in time shall be applied first.
15             Changes made in this subdivision  (h)(1)  by  Public
16        Act 88-670 restore changes made by Public Act 85-1182 and
17        reflect existing law.
18             (2)  The  term  qualified  property  means  property
19        which:
20                  (A)  is   tangible,   whether   new   or  used,
21             including buildings  and  structural  components  of
22             buildings;
23                  (B)  is  depreciable pursuant to Section 167 of
24             the  Internal  Revenue  Code,  except  that  "3-year
25             property" as defined in Section 168(c)(2)(A) of that
26             Code is not eligible for the credit provided by this
27             subsection (h);
28                  (C)  is acquired  by  purchase  as  defined  in
29             Section 179(d) of the Internal Revenue Code; and
30                  (D)  is  not  eligible  for the Enterprise Zone
31             Investment Credit provided by subsection (f) of this
32             Section.
33             (3)  The basis of qualified property  shall  be  the
34        basis  used  to  compute  the  depreciation deduction for
 
                            -15-               LRB9111819SMdv
 1        federal income tax purposes.
 2             (4)  If the basis of the property for federal income
 3        tax depreciation purposes is increased after it has  been
 4        placed in service in a federally designated Foreign Trade
 5        Zone or Sub-Zone located in Illinois by the taxpayer, the
 6        amount  of  such increase shall be deemed property placed
 7        in service on the date of such increase in basis.
 8             (5)  The term "placed in  service"  shall  have  the
 9        same  meaning as under Section 46 of the Internal Revenue
10        Code.
11             (6)  If during any taxable year ending on or  before
12        December  31,  1996,  any property ceases to be qualified
13        property in the hands of the taxpayer  within  48  months
14        after  being  placed  in  service,  or  the  situs of any
15        qualified property is moved outside  Illinois  within  48
16        months  after  being  placed  in service, the tax imposed
17        under subsections (a) and (b) of this  Section  for  such
18        taxable  year shall be increased.  Such increase shall be
19        determined by (i) recomputing the investment credit which
20        would have been allowed for the year in which credit  for
21        such  property was originally allowed by eliminating such
22        property from such computation, and (ii) subtracting such
23        recomputed credit from the amount  of  credit  previously
24        allowed.   For  the  purposes  of  this  paragraph (6), a
25        reduction of the basis of  qualified  property  resulting
26        from  a  redetermination  of  the purchase price shall be
27        deemed a disposition of qualified property to the  extent
28        of such reduction.
29             (7)  Beginning  with tax years ending after December
30        31, 1996, if a taxpayer qualifies for  the  credit  under
31        this   subsection  (h)  and  thereby  is  granted  a  tax
32        abatement and the taxpayer relocates its entire  facility
33        in  violation  of  the  explicit  terms and length of the
34        contract under Section 18-183 of the Property  Tax  Code,
 
                            -16-               LRB9111819SMdv
 1        the  tax  imposed  under  subsections (a) and (b) of this
 2        Section shall be increased for the taxable year in  which
 3        the taxpayer relocated its facility by an amount equal to
 4        the  amount of credit received by the taxpayer under this
 5        subsection (h).
 6        (i)  A credit shall be allowed against the tax imposed by
 7    subsections (a) and (b) of this Section for the  tax  imposed
 8    by  subsections  (c)  and  (d)  of this Section.  This credit
 9    shall  be  computed  by  multiplying  the  tax   imposed   by
10    subsections  (c)  and  (d) of this Section by a fraction, the
11    numerator of which is base income allocable to  Illinois  and
12    the denominator of which is Illinois base income, and further
13    multiplying   the   product   by  the  tax  rate  imposed  by
14    subsections (a) and (b) of this Section.
15        Any credit earned on or after  December  31,  1986  under
16    this  subsection  which  is  unused in the year the credit is
17    computed because it exceeds  the  tax  liability  imposed  by
18    subsections (a) and (b) for that year (whether it exceeds the
19    original  liability or the liability as later amended) may be
20    carried forward and applied to the tax liability  imposed  by
21    subsections  (a) and (b) of the 5 taxable years following the
22    excess credit year.  This credit shall be  applied  first  to
23    the  earliest  year for which there is a liability.  If there
24    is a credit under this subsection from more than one tax year
25    that is available to offset a liability the  earliest  credit
26    arising under this subsection shall be applied first.
27        If,  during  any taxable year ending on or after December
28    31, 1986, the tax imposed by subsections (c) and (d) of  this
29    Section  for which a taxpayer has claimed a credit under this
30    subsection (i) is reduced, the amount of credit for such  tax
31    shall also be reduced.  Such reduction shall be determined by
32    recomputing  the  credit to take into account the reduced tax
33    imposed by subsection (c) and (d).  If  any  portion  of  the
34    reduced  amount  of  credit  has  been carried to a different
 
                            -17-               LRB9111819SMdv
 1    taxable year, an amended  return  shall  be  filed  for  such
 2    taxable year to reduce the amount of credit claimed.
 3        (j)  Training  expense  credit.  Beginning with tax years
 4    ending on or after December 31, 1986,  a  taxpayer  shall  be
 5    allowed  a  credit  against the tax imposed by subsection (a)
 6    and (b) under this Section for all amounts paid  or  accrued,
 7    on behalf of all persons employed by the taxpayer in Illinois
 8    or  Illinois  residents  employed  outside  of  Illinois by a
 9    taxpayer,  for  educational   or   vocational   training   in
10    semi-technical or technical fields or semi-skilled or skilled
11    fields,   which  were  deducted  from  gross  income  in  the
12    computation of taxable income.  The credit  against  the  tax
13    imposed  by  subsections  (a)  and  (b) shall be 1.6% of such
14    training expenses.  For partners, shareholders of  subchapter
15    S corporations, and owners of limited liability companies, if
16    the  liability  company  is  treated  as  a  partnership  for
17    purposes of federal and State income taxation, there shall be
18    allowed  a  credit under this subsection (j) to be determined
19    in  accordance  with  the   determination   of   income   and
20    distributive  share  of income under Sections 702 and 704 and
21    subchapter S of the Internal Revenue Code.
22        Any credit allowed under this subsection which is  unused
23    in  the  year  the credit is earned may be carried forward to
24    each of the 5 taxable years following the year for which  the
25    credit is first computed until it is used.  This credit shall
26    be  applied  first  to the earliest year for which there is a
27    liability.  If there is a credit under this  subsection  from
28    more  than  one  tax  year  that  is  available  to  offset a
29    liability the earliest credit arising under  this  subsection
30    shall be applied first.
31        (k)  Research and development credit.
32        Beginning  with  tax  years  ending after July 1, 1990, a
33    taxpayer shall be allowed a credit against the tax imposed by
34    subsections (a)  and  (b)  of  this  Section  for  increasing
 
                            -18-               LRB9111819SMdv
 1    research  activities  in  this  State.   The  credit  allowed
 2    against  the  tax imposed by subsections (a) and (b) shall be
 3    equal to 6 1/2% of the qualifying expenditures for increasing
 4    research activities in this State. For partners, shareholders
 5    of subchapter S corporations, and owners of limited liability
 6    companies,  if  the  liability  company  is  treated   as   a
 7    partnership   for   purposes  of  federal  and  State  income
 8    taxation,  there  shall  be  allowed  a  credit  under   this
 9    subsection   to   be   determined   in  accordance  with  the
10    determination of income  and  distributive  share  of  income
11    under  Sections  702 and 704 and subchapter S of the Internal
12    Revenue Code.
13        For   purposes   of    this    subsection,    "qualifying
14    expenditures"   means   the   qualified   research  expenses,
15    qualifying expenditures as defined in for the federal  credit
16    for  increasing  research activities which would be allowable
17    under Section 41(b) 41 of the Internal Revenue  Code  on  the
18    effective  date  of  this  amendatory Act of the 91st General
19    Assembly, if the research activities and which are  conducted
20    by  an  entity that has its primary office in this State. For
21    purposes  of  this  subsection,   "qualifying   expenditures"
22    include  intellectual  property  development  and  protection
23    expenditures  in  the  United  States  and  foreign countries
24    incurred  for  the  purpose  of  protecting  the  results  of
25    research activities., "qualifying expenditures for increasing
26    research activities  in  this  State"  means  the  excess  of
27    qualifying   expenditures  for  the  taxable  year  in  which
28    incurred over qualifying expenditures for  the  base  period,
29    "qualifying  expenditures  for  the  base  period"  means the
30    average of the qualifying expenditures for each year  in  the
31    base  period,  and  "base  period"  means the 3 taxable years
32    immediately  preceding  the  taxable  year  for   which   the
33    determination is being made.
34        Any credit in excess of the tax liability for the taxable
 
                            -19-               LRB9111819SMdv
 1    year may be carried forward. A taxpayer may elect to have the
 2    unused  credit  shown  on  its final completed return carried
 3    over as a credit against the tax liability for the  following
 4    5  taxable  years  or until it has been fully used, whichever
 5    occurs first.
 6        If an unused credit is carried forward to  a  given  year
 7    from  2  or  more  earlier  years, that credit arising in the
 8    earliest year will be applied first against the tax liability
 9    for the given year.  If a tax liability for  the  given  year
10    still  remains,  the  credit from the next earliest year will
11    then be applied, and so on, until all credits have been  used
12    or  no  tax  liability  for  the  given  year  remains.   Any
13    remaining  unused  credit  or  credits  then  will be carried
14    forward to the next following year in which a  tax  liability
15    is  incurred, except that no credit can be carried forward to
16    a year which is more than 5 years after the year in which the
17    expense for which the credit is given was incurred.
18        Unless extended by law,  the  credit  shall  not  include
19    costs incurred after December 31, 2014 2004, except for costs
20    incurred  pursuant  to  a binding contract entered into on or
21    before December 31, 2014 2004.
22        No inference shall be drawn from this amendatory  Act  of
23    the  91st  General  Assembly  in  construing this Section for
24    taxable years beginning before January 1, 1999.
25        (l)  Environmental Remediation Tax Credit.
26             (i)  For tax  years ending after December  31,  1997
27        and  on  or before December 31, 2001, a taxpayer shall be
28        allowed a credit against the tax imposed  by  subsections
29        (a)  and (b) of this Section for certain amounts paid for
30        unreimbursed eligible remediation costs, as specified  in
31        this   subsection.    For   purposes   of  this  Section,
32        "unreimbursed eligible  remediation  costs"  means  costs
33        approved  by the Illinois Environmental Protection Agency
34        ("Agency")  under  Section  58.14  of  the  Environmental
 
                            -20-               LRB9111819SMdv
 1        Protection Act that were paid in performing environmental
 2        remediation at a site for which a No Further  Remediation
 3        Letter  was  issued  by  the  Agency  and  recorded under
 4        Section 58.10 of the Environmental Protection Act.    The
 5        credit  must  be  claimed  for  the taxable year in which
 6        Agency approval of  the  eligible  remediation  costs  is
 7        granted.   The credit is not available to any taxpayer if
 8        the taxpayer or any related party caused  or  contributed
 9        to,  in  any  material  respect,  a  release of regulated
10        substances on, in, or under the site that was  identified
11        and addressed by the remedial action pursuant to the Site
12        Remediation  Program of the Environmental Protection Act.
13        After the  Pollution  Control  Board  rules  are  adopted
14        pursuant to the Illinois Administrative Procedure Act for
15        the administration and enforcement of Section 58.9 of the
16        Environmental Protection Act, determinations as to credit
17        availability  for  purposes of this Section shall be made
18        consistent  with  those  rules.   For  purposes  of  this
19        Section,  "taxpayer"  includes   a   person   whose   tax
20        attributes  the  taxpayer  has succeeded to under Section
21        381 of the Internal  Revenue  Code  and  "related  party"
22        includes the persons disallowed a deduction for losses by
23        paragraphs  (b),  (c),  and  (f)(1) of Section 267 of the
24        Internal Revenue  Code  by  virtue  of  being  a  related
25        taxpayer,  as  well  as  any of its partners.  The credit
26        allowed against the tax imposed by  subsections  (a)  and
27        (b)  shall  be  equal to 25% of the unreimbursed eligible
28        remediation costs in excess of $100,000 per site,  except
29        that  the  $100,000 threshold shall not apply to any site
30        contained in an enterprise  zone  as  determined  by  the
31        Department  of Commerce and Community Affairs.  The total
32        credit allowed shall not exceed $40,000 per year  with  a
33        maximum  total  of  $150,000  per site.  For partners and
34        shareholders of subchapter S corporations, there shall be
 
                            -21-               LRB9111819SMdv
 1        allowed a credit under this subsection to  be  determined
 2        in  accordance  with  the  determination  of  income  and
 3        distributive  share  of income under Sections 702 and 704
 4        of subchapter S of the Internal Revenue Code.
 5             (ii)  A credit allowed under this subsection that is
 6        unused in the year the credit is earned  may  be  carried
 7        forward to each of the 5 taxable years following the year
 8        for  which  the  credit is first earned until it is used.
 9        The term "unused credit" does not include any amounts  of
10        unreimbursed  eligible remediation costs in excess of the
11        maximum credit per site authorized under  paragraph  (i).
12        This  credit  shall be applied first to the earliest year
13        for which there is a liability.  If  there  is  a  credit
14        under this subsection from more than one tax year that is
15        available  to  offset  a  liability,  the earliest credit
16        arising under this subsection shall be applied first.   A
17        credit  allowed  under  this  subsection may be sold to a
18        buyer as part of a sale of all or part of the remediation
19        site for which the credit was granted.  The purchaser  of
20        a  remediation  site  and the tax credit shall succeed to
21        the unused credit and remaining carry-forward  period  of
22        the  seller.  To perfect the transfer, the assignor shall
23        record the transfer in the chain of title  for  the  site
24        and  provide  written  notice  to  the  Director  of  the
25        Illinois  Department  of Revenue of the assignor's intent
26        to sell the remediation site and the amount  of  the  tax
27        credit to be transferred as a portion of the sale.  In no
28        event  may a credit be transferred to any taxpayer if the
29        taxpayer or a related party would not be  eligible  under
30        the provisions of subsection (i).
31             (iii)  For purposes of this Section, the term "site"
32        shall  have the same meaning as under Section 58.2 of the
33        Environmental Protection Act.
34        (m)  Education expense credit.
 
                            -22-               LRB9111819SMdv
 1        Beginning with tax years ending after December 31,  1999,
 2    a  taxpayer  who  is  the custodian of one or more qualifying
 3    pupils shall be allowed a credit against the tax  imposed  by
 4    subsections  (a)  and  (b)  of  this  Section  for  qualified
 5    education  expenses  incurred  on  behalf  of  the qualifying
 6    pupils.  The credit  shall  be  equal  to  25%  of  qualified
 7    education  expenses,  but  in  no  event may the total credit
 8    under this Section claimed by a family that is the  custodian
 9    of  qualifying pupils exceed $500. In no event shall a credit
10    under this subsection reduce the taxpayer's  liability  under
11    this  Act  to  less than zero. This subsection is exempt from
12    the provisions of Section 250 of this Act.
13        For purposes of this subsection;
14        "Qualifying  pupils"  means  individuals  who   (i)   are
15    residents of the State of Illinois, (ii) are under the age of
16    21  at  the  close  of  the school year for which a credit is
17    sought, and (iii) during the school year for which  a  credit
18    is  sought  were  full-time pupils enrolled in a kindergarten
19    through twelfth grade education program  at  any  school,  as
20    defined in this subsection.
21        "Qualified  education  expense" means the amount incurred
22    on behalf of  a  qualifying  pupil  in  excess  of  $250  for
23    tuition,  book  fees, and lab fees at the school in which the
24    pupil is enrolled during the regular school year.
25        "School" means any  public  or  nonpublic  elementary  or
26    secondary school in Illinois that is in compliance with Title
27    VI  of  the  Civil Rights Act of 1964 and attendance at which
28    satisfies the requirements of  Section  26-1  of  the  School
29    Code,  except  that  nothing  shall be construed to require a
30    child to attend any particular public or nonpublic school  to
31    qualify for the credit under this Section.
32        "Custodian"  means, with respect to qualifying pupils, an
33    Illinois resident who is  a  parent,  the  parents,  a  legal
34    guardian, or the legal guardians of the qualifying pupils.
 
                            -23-               LRB9111819SMdv
 1    (Source:  P.A.  90-123,  eff.  7-21-97; 90-458, eff. 8-17-97;
 2    90-605, eff. 6-30-98;  90-655,  eff.  7-30-98;  90-717,  eff.
 3    8-7-98;  90-792, eff. 1-1-99; 91-9, eff. 1-1-00; 91-357, eff.
 4    7-29-99; 91-643, eff. 8-20-99; 91-644, eff. 8-20-99;  revised
 5    8-27-99.)

 6        Section  99.   Effective  date.  This Act takes effect on
 7    January 1, 2001.

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