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91_SB1439eng SB1439 Engrossed 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 SB1439 Engrossed -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 SB1439 Engrossed -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 SB1439 Engrossed -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 SB1439 Engrossed -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 SB1439 Engrossed -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 SB1439 Engrossed -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 SB1439 Engrossed -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 SB1439 Engrossed -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 SB1439 Engrossed -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 SB1439 Engrossed -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 SB1439 Engrossed -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 SB1439 Engrossed -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 SB1439 Engrossed -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 SB1439 Engrossed -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, SB1439 Engrossed -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 SB1439 Engrossed -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 SB1439 Engrossed -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 qualifying expenditures as defined 15 for the federal credit for increasing research activities 16 which would be allowable under Section 41 of the Internal 17 Revenue Code and which are conducted in this State, 18 "qualifying expenditures for increasing research activities 19 in this State" means the excess of qualifying expenditures 20 for the taxable year in which incurred over qualifying 21 expenditures for the base period, "qualifying expenditures 22 for the base period" means the average of the qualifying 23 expenditures for each year in the base period, and "base 24 period" means the 3 taxable years immediately preceding the 25 taxable year for which the determination is being made. 26 Any credit in excess of the tax liability for the taxable 27 year may be carried forward. A taxpayer may elect to have the 28 unused credit shown on its final completed return carried 29 over as a credit against the tax liability for the following 30 5 taxable years or until it has been fully used, whichever 31 occurs first. 32 If an unused credit is carried forward to a given year 33 from 2 or more earlier years, that credit arising in the 34 earliest year will be applied first against the tax liability SB1439 Engrossed -19- LRB9111819SMdv 1 for the given year. If a tax liability for the given year 2 still remains, the credit from the next earliest year will 3 then be applied, and so on, until all credits have been used 4 or no tax liability for the given year remains. Any 5 remaining unused credit or credits then will be carried 6 forward to the next following year in which a tax liability 7 is incurred, except that no credit can be carried forward to 8 a year which is more than 5 years after the year in which the 9 expense for which the credit is given was incurred. 10 Unless extended by law, the credit shall not include 11 costs incurred after December 31, 20102004, except for costs 12 incurred pursuant to a binding contract entered into on or 13 before December 31, 20102004. 14 No inference shall be drawn from this amendatory Act of 15 the 91st General Assembly in construing this Section for 16 taxable years beginning before January 1, 1999. 17 (l) Environmental Remediation Tax Credit. 18 (i) For tax years ending after December 31, 1997 19 and on or before December 31, 2001, a taxpayer shall be 20 allowed a credit against the tax imposed by subsections 21 (a) and (b) of this Section for certain amounts paid for 22 unreimbursed eligible remediation costs, as specified in 23 this subsection. For purposes of this Section, 24 "unreimbursed eligible remediation costs" means costs 25 approved by the Illinois Environmental Protection Agency 26 ("Agency") under Section 58.14 of the Environmental 27 Protection Act that were paid in performing environmental 28 remediation at a site for which a No Further Remediation 29 Letter was issued by the Agency and recorded under 30 Section 58.10 of the Environmental Protection Act. The 31 credit must be claimed for the taxable year in which 32 Agency approval of the eligible remediation costs is 33 granted. The credit is not available to any taxpayer if 34 the taxpayer or any related party caused or contributed SB1439 Engrossed -20- LRB9111819SMdv 1 to, in any material respect, a release of regulated 2 substances on, in, or under the site that was identified 3 and addressed by the remedial action pursuant to the Site 4 Remediation Program of the Environmental Protection Act. 5 After the Pollution Control Board rules are adopted 6 pursuant to the Illinois Administrative Procedure Act for 7 the administration and enforcement of Section 58.9 of the 8 Environmental Protection Act, determinations as to credit 9 availability for purposes of this Section shall be made 10 consistent with those rules. For purposes of this 11 Section, "taxpayer" includes a person whose tax 12 attributes the taxpayer has succeeded to under Section 13 381 of the Internal Revenue Code and "related party" 14 includes the persons disallowed a deduction for losses by 15 paragraphs (b), (c), and (f)(1) of Section 267 of the 16 Internal Revenue Code by virtue of being a related 17 taxpayer, as well as any of its partners. The credit 18 allowed against the tax imposed by subsections (a) and 19 (b) shall be equal to 25% of the unreimbursed eligible 20 remediation costs in excess of $100,000 per site, except 21 that the $100,000 threshold shall not apply to any site 22 contained in an enterprise zone as determined by the 23 Department of Commerce and Community Affairs. The total 24 credit allowed shall not exceed $40,000 per year with a 25 maximum total of $150,000 per site. For partners and 26 shareholders of subchapter S corporations, there shall be 27 allowed a credit under this subsection to be determined 28 in accordance with the determination of income and 29 distributive share of income under Sections 702 and 704 30 of subchapter S of the Internal Revenue Code. 31 (ii) A credit allowed under this subsection that is 32 unused in the year the credit is earned may be carried 33 forward to each of the 5 taxable years following the year 34 for which the credit is first earned until it is used. SB1439 Engrossed -21- LRB9111819SMdv 1 The term "unused credit" does not include any amounts of 2 unreimbursed eligible remediation costs in excess of the 3 maximum credit per site authorized under paragraph (i). 4 This credit shall be applied first to the earliest year 5 for which there is a liability. If there is a credit 6 under this subsection from more than one tax year that is 7 available to offset a liability, the earliest credit 8 arising under this subsection shall be applied first. A 9 credit allowed under this subsection may be sold to a 10 buyer as part of a sale of all or part of the remediation 11 site for which the credit was granted. The purchaser of 12 a remediation site and the tax credit shall succeed to 13 the unused credit and remaining carry-forward period of 14 the seller. To perfect the transfer, the assignor shall 15 record the transfer in the chain of title for the site 16 and provide written notice to the Director of the 17 Illinois Department of Revenue of the assignor's intent 18 to sell the remediation site and the amount of the tax 19 credit to be transferred as a portion of the sale. In no 20 event may a credit be transferred to any taxpayer if the 21 taxpayer or a related party would not be eligible under 22 the provisions of subsection (i). 23 (iii) For purposes of this Section, the term "site" 24 shall have the same meaning as under Section 58.2 of the 25 Environmental Protection Act. 26 (m) Education expense credit. 27 Beginning with tax years ending after December 31, 1999, 28 a taxpayer who is the custodian of one or more qualifying 29 pupils shall be allowed a credit against the tax imposed by 30 subsections (a) and (b) of this Section for qualified 31 education expenses incurred on behalf of the qualifying 32 pupils. The credit shall be equal to 25% of qualified 33 education expenses, but in no event may the total credit 34 under this Section claimed by a family that is the custodian SB1439 Engrossed -22- LRB9111819SMdv 1 of qualifying pupils exceed $500. In no event shall a credit 2 under this subsection reduce the taxpayer's liability under 3 this Act to less than zero. This subsection is exempt from 4 the provisions of Section 250 of this Act. 5 For purposes of this subsection; 6 "Qualifying pupils" means individuals who (i) are 7 residents of the State of Illinois, (ii) are under the age of 8 21 at the close of the school year for which a credit is 9 sought, and (iii) during the school year for which a credit 10 is sought were full-time pupils enrolled in a kindergarten 11 through twelfth grade education program at any school, as 12 defined in this subsection. 13 "Qualified education expense" means the amount incurred 14 on behalf of a qualifying pupil in excess of $250 for 15 tuition, book fees, and lab fees at the school in which the 16 pupil is enrolled during the regular school year. 17 "School" means any public or nonpublic elementary or 18 secondary school in Illinois that is in compliance with Title 19 VI of the Civil Rights Act of 1964 and attendance at which 20 satisfies the requirements of Section 26-1 of the School 21 Code, except that nothing shall be construed to require a 22 child to attend any particular public or nonpublic school to 23 qualify for the credit under this Section. 24 "Custodian" means, with respect to qualifying pupils, an 25 Illinois resident who is a parent, the parents, a legal 26 guardian, or the legal guardians of the qualifying pupils. 27 (Source: P.A. 90-123, eff. 7-21-97; 90-458, eff. 8-17-97; 28 90-605, eff. 6-30-98; 90-655, eff. 7-30-98; 90-717, eff. 29 8-7-98; 90-792, eff. 1-1-99; 91-9, eff. 1-1-00; 91-357, eff. 30 7-29-99; 91-643, eff. 8-20-99; 91-644, eff. 8-20-99; revised 31 8-27-99.) 32 Section 99. Effective date. This Act takes effect on 33 January 1, 2001.