101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
HB3025

 

Introduced , by Rep. Jehan Gordon-Booth

 

SYNOPSIS AS INTRODUCED:
 
New Act
35 ILCS 5/229 new

    Creates the School Building Rehabilitation Tax Credit Act. Creates an income tax credit equal to 25% of the qualified expenditures incurred by a qualified taxpayer undertaking a qualified rehabilitation plan of a vacant school building. Provides that, to be eligible for the credit, the taxpayer must apply with the Department of Revenue. Provides that the credit is subject to certain limitations. Amends the Illinois Income Tax Act to make conforming changes. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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1    AN ACT concerning revenue.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 1. Short title. This Act may be cited as the School
5Building Rehabilitation Tax Credit Act.
 
6    Section 5. Definitions. As used in this Act, unless the
7context clearly indicates otherwise:
8    "Department" means the Department of Revenue.
9    "Phased rehabilitation" means a project that is completed
10in phases.
11    "Placed in service" means the date when the property is
12placed in a condition or state of readiness and availability
13for a specifically assigned function.
14    "Qualified expenditures" means all the costs and expenses
15for construction materials used to repurpose a qualified school
16building.
17    "Qualified school building" means a vacant school building
18located in Illinois.
19    "Qualified rehabilitation plan" means a project involving
20a qualified school building that is approved by the Department.
21    "Qualified taxpayer" means the owner of the qualified
22school building.
23    "Recapture event" means any of the following events

 

 

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1occurring during the recapture period:
2        (1) failure to place in service the rehabilitated
3    portions of the qualified school building, or failure to
4    maintain the rehabilitated portions of the qualified
5    school building in service after they are placed in
6    service; provided that a recapture event under this
7    paragraph (1) shall not include a removal from service for
8    a reasonable period of time to conduct maintenance and
9    repairs that are reasonably necessary to protect the health
10    and safety of the public or to protect the structural
11    integrity of the qualified school building or a neighboring
12    structure;
13        (2) demolition or other alteration of the qualified
14    school building in a manner that is inconsistent with the
15    qualified rehabilitation plan;
16        (3) disposition of the rehabilitated qualified school
17    building in whole or a proportional disposition of a
18    partnership interest therein, except as otherwise
19    permitted by this Section; or
20        (4) use of the qualified school building in a manner
21    that is inconsistent with the qualified rehabilitation
22    plan or that is otherwise inconsistent with the provisions
23    and intent of this Section.
24    A recapture event occurring in one taxable year shall be
25deemed continuing to subsequent taxable years unless and until
26corrected.

 

 

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1    The following dispositions of a qualified school building
2shall not be deemed to be a recapture event for purposes of
3this Section:
4        (1) a transfer by reason of death;
5        (2) a transfer between spouses incident to divorce;
6        (3) a sale by and leaseback to an entity that, when the
7    rehabilitated portions of the qualified school building
8    are placed in service, will be a lessee of the qualified
9    school building, but only for so long as the entity
10    continues to be a lessee; and
11        (4) a mere change in the form of conducting the trade
12    or business by the owner (or, if applicable, the lessee) of
13    the qualified school building, so long as the property
14    interest in such qualified school building is retained in
15    such trade or business and the owner or lessee retains a
16    substantial interest in such trade or business.
17    "Recapture period" means the 5-year period beginning on the
18date that the qualified school building or rehabilitated
19portions of the qualified school building are placed in
20service.
21    "Substantial rehabilitation" means that the qualified
22expenditures during the 24-month period selected by the
23taxpayer at the time and in the manner prescribed by rule and
24ending with or within the taxable year exceed the greater of
25(i) the adjusted basis of the building and its structural
26components or (ii) $5,000. The adjusted basis of the building

 

 

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1and its structural components shall be determined as of the
2beginning of the first day of such 24-month period or as of the
3beginning of the first day of the holding period of the
4building, whichever is later. For purposes of determining the
5adjusted basis, the determination of the beginning of the
6holding period shall be made without regard to any
7reconstruction by the taxpayer in connection with the
8rehabilitation. In the case of any phased rehabilitation, with
9phases set forth in architectural plans and specifications
10completed before the rehabilitation begins, this definition
11shall be applied by substituting "60-month period" for
12"24-month period" wherever that term occurs in the definition.
 
13    Section 10. Allowable credit.
14    (a) To the extent authorized by this Act, for taxable years
15beginning on or after January 1, 2020 and ending on or before
16December 31, 2024, there shall be allowed a tax credit against
17the tax imposed by subsections (a) and (b) of Section 201 of
18the Illinois Income Tax Act in an aggregate amount equal to 25%
19of qualified expenditures incurred by a qualified taxpayer
20undertaking a qualified rehabilitation plan of a qualified
21school building, provided that the total amount of such
22expenditures must (i) equal $5,000 or more or (ii) exceed the
23adjusted basis of the qualified school building on the first
24day the qualified rehabilitation plan commenced. If the
25qualified rehabilitation plan spans multiple years, the

 

 

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1aggregate credit for the entire project shall be allowed in the
2last taxable year.
3    (b) To obtain a tax credit pursuant to this Section, the
4taxpayer must apply with the Department. The Department shall
5determine the amount of eligible rehabilitation expenditures
6within 45 days after receipt of a complete application. The
7taxpayer must provide to the Department a third-party cost
8certification conducted by a certified public accountant
9verifying (i) the qualified and non-qualified rehabilitation
10expenses and (ii) that the qualified expenditures exceed the
11adjusted basis of the qualified school building on the first
12day the qualified rehabilitation plan commenced. The
13accountant shall provide appropriate review and testing of
14invoices. The Department is authorized, but not required, to
15accept this third-party cost certification to determine the
16amount of qualified expenditures.
17    (c) If the amount of any tax credit awarded under this Act
18exceeds the qualified taxpayer's income tax liability for the
19year in which the qualified rehabilitation plan was placed in
20service, the excess amount may be carried forward for a credit
21against the taxpayer's income tax liability in the next
22succeeding year or years until the total amount of the credit
23has been used, except that a credit may not be carried forward
24for deduction after the tenth taxable year after the taxable
25year in which the qualified rehabilitation plan was placed in
26service. Upon completion and review of the project, the

 

 

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1Department shall issue a single certificate in the amount of
2the eligible credits equal to 25% of the qualified expenditures
3incurred during the eligible taxable years. At the time the
4certificate is issued, an issuance fee up to the maximum amount
5of 2% of the amount of the credits issued by the certificate
6may be collected from the applicant to administer the Act. If
7collected, this issuance fee shall be directed to the Tax
8Compliance and Administration Fund for use of the Department in
9the administration of this program. The taxpayer must attach
10the certificate or legal documentation of her or his
11proportional share of the certificate to the tax return on
12which the credits are to be claimed. The tax credit under this
13Section may not reduce the taxpayer's liability to less than
14zero. If the amount of the credit exceeds the tax liability for
15the year, the excess credit may be carried forward and applied
16to the tax liability of the 10 taxable years following the
17excess credit year.
18    (d) If the taxpayer is (i) a corporation having an election
19in effect under Subchapter S of the federal Internal Revenue
20Code, (ii) a partnership, or (iii) a limited liability company,
21the credit provided under this Act may be claimed by the
22shareholders of the corporation, the partners of the
23partnership, or the members of the limited liability company in
24the same manner as those shareholders, partners, or members
25account for their proportionate shares of the income or losses
26of the corporation, partnership, or limited liability company,

 

 

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1or as provided in the by-laws or other executed agreement of
2the corporation, partnership, or limited liability company.
3Credits granted to a partnership, a limited liability company
4taxed as a partnership, or other multiple owners of property
5shall be passed through to the partners, members, or owners
6respectively on a pro rata basis or pursuant to an executed
7agreement among the partners, members, or owners documenting
8any alternate distribution method.
9    (e) If a recapture event occurs during the recapture period
10with respect to a qualified school building, then, for any
11taxable year in which the credits are allowed as specified in
12this Act, the tax under the applicable Section of this Act
13shall be increased by applying the recapture percentage set
14forth below to the tax decrease resulting from the application
15of credits allowed under this Act to the taxable year in
16question.
17    For the purposes of this subsection, the recapture
18percentage shall be determined as follows:
19        (1) if the recapture event occurs within the first year
20    after commencement of the recapture period, then the
21    recapture percentage is 100%;
22        (2) if the recapture event occurs within the second
23    year after commencement of the recapture period, then the
24    recapture percentage is 80%;
25        (3) if the recapture event occurs within the third year
26    after commencement of the recapture period, then the

 

 

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1    recapture percentage is 60%;
2        (4) if the recapture event occurs within the fourth
3    year after commencement of the recapture period, then the
4    recapture percentage is 40%; and
5        (5) if the recapture event occurs within the fifth year
6    after commencement of the recapture period, then the
7    recapture percentage is 20%.
8    In the case of any recapture event, the carryforwards under
9this Act shall be adjusted by reason of such event.
10    (d) The Department may adopt rules to implement this
11Section in addition to the rules expressly authorized herein.
 
12    Section 20. Limitations, reporting, and monitoring.
13    (a) The Department shall award not more than an aggregate
14of $15,000,000 in total annual tax credits pursuant to
15qualified rehabilitation plans for qualified school building.
16The Department shall award not more than $3,000,000 in tax
17credits with regard to a single qualified rehabilitation plan.
18In awarding tax credits under this Act, the Department must
19prioritize projects that meet one or more of the following:
20        (1) the qualified school building was previously owned
21    by a federal, State, or local governmental entity;
22        (2) the qualified school building is located in a
23    census tract that has a median family income at or below
24    the State median family income; data from the most recent
25    5-year estimate from the American Community Survey (ACS),

 

 

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1    published by the U.S. Census Bureau, shall be used to
2    determine eligibility;
3        (3) the qualified rehabilitation plan includes in the
4    development partnership a Community Development Entity or
5    a low-profit (B Corporation) or not-for-profit
6    organization, as defined by Section 501(c)(3) of the
7    Internal Revenue Code; or
8        (4) the qualified school building is located in an area
9    declared under an Emergency Declaration or Major Disaster
10    Declaration under the federal Robert T. Stafford Disaster
11    Relief and Emergency Assistance Act.
12     (b) The annual aggregate program allocation of $15,000,000
13set forth in subsection (a) shall be allocated by the
14Department, in such proportion as determined by the Department,
15on a per calendar basis twice in each year that the program is
16in effect, provided that: (i) the amount initially allocated by
17the Department for any one calendar application period shall
18not exceed 65% of the total allowable amount and (ii) any
19portion of the allocated allowable amount remaining unused as
20of the end of any of the second calendar application period of
21a given calendar year shall be rolled into and added to the
22total allocated amount for the next available calendar year.
23The qualified rehabilitation plan must meet a readiness test,
24as defined in the rules created by the Department, in order for
25the Applicant to qualify. Applicants that qualify under this
26Act will be placed in a queue based on the date and time the

 

 

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1application is received until the application period total
2allowable amount is reached. Applicants must reapply for each
3application period.
4    (c) On or before December 31, 2020, and on or before
5December 31 of each even-numbered year thereafter through 2024,
6subject to appropriation and prior to equal disbursement to the
7Department, moneys in the Tax Compliance and Administration
8Fund attributable to fees under this Act shall be used,
9beginning at the end of the first fiscal year after the
10effective date of this Act, to hire a qualified third party to
11prepare a biennial report to assess the overall effectiveness
12of this Act from the qualified rehabilitation projects under
13this Act completed in that year and in previous years. Baseline
14data of the metrics in the report shall be collected at the
15initiation of a qualified rehabilitation project. The overall
16economic impact shall include at least:
17        (1) the number of applications, project locations, and
18    proposed use of qualified historic structures;
19        (2) the amount of credits awarded and the number and
20    location of projects receiving credit allocations;
21        (3) the status of ongoing projects and projected
22    qualifying expenditures for ongoing projects;
23        (4) for completed projects, the total amount of
24    qualifying rehabilitation expenditures and non-qualifying
25    expenditures, the number of housing units created and the
26    number of housing units that qualify as affordable, and the

 

 

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1    total square footage rehabilitated and developed;
2        (5) direct, indirect, and induced economic impacts;
3        (6) temporary, permanent, and construction jobs
4    created; and
5        (7) sales, income, and property tax generation before
6    construction, during construction, and after completion.
7    The report to the General Assembly shall be filed with the
8Clerk of the House of Representatives and the Secretary of the
9Senate in electronic form only, in the manner that the Clerk
10and the Secretary shall direct.
11    (d) Any time prior to issuance of a tax credit certificate,
12the Director of the Department, the State Historic Preservation
13Officer, or staff of the Department may, upon reasonable notice
14to the project owner of not less than 3 business days, conduct
15a site visit to the project to inspect and evaluate the
16project.
17    (e) Any time prior to the issuance of a tax credit
18certificate and for a period of 4 years following the effective
19date of a project tax credit certificate, the Director may,
20upon reasonable notice of not less than 30 calendar days,
21request a status report from the Applicant consisting of
22information and updates relevant to the status of the project.
23Status reports shall not be requested more than twice yearly.
24    (f) In order to demonstrate sufficient evidence of
25reviewable progress within 12 months after the date the
26Applicant received notification of approval from the

 

 

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1Department, the Applicant shall provide all of the following:
2        (1) a viable financial plan which demonstrates by way
3    of an executed agreement that all financing has been
4    secured for the project; such financing shall include, but
5    not be limited to, equity investment as demonstrated by
6    letters of commitment from the owner of the property,
7    investment partners, and equity investors; and
8        (2) final construction drawings or approved building
9    permits that demonstrate the complete rehabilitation of
10    the full scope of the application.
11    The Director shall review the submitted evidence and may
12request additional documentation from the Applicant if
13necessary. The Applicant will have 30 calendar days to provide
14the information requested, otherwise the approval may be
15rescinded at the discretion of the Director.
16    (g) In order to demonstrate sufficient evidence of
17reviewable progress within 18 months after the date the
18application received notification of approval from the
19Department, the Applicant is required to provide detailed
20evidence that the Applicant has secured and closed on financing
21for the complete scope of rehabilitation for the project. To
22demonstrate evidence that the Applicant has secured and closed
23on financing, the Applicant will need to provide signed and
24processed loan agreements, bank financing documents or other
25legal and contractual evidence to demonstrate that adequate
26financing is available to complete the project. The Director

 

 

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1shall review the submitted evidence and may request additional
2documentation from the Applicant if necessary. The Applicant
3will have 30 calendar days to provide the information
4requested, otherwise the approval may be rescinded at the
5discretion of the Director.
6    If the Applicant fails to document reviewable progress
7within 18 months of approval, the Director may notify the
8Applicant that the application is rescinded. However, should
9financing and construction be imminent, the Director may elect
10to grant the Applicant no more than 5 months to close on
11financing and commence construction. If the Applicant fails to
12meet these conditions in the required timeframe, the Director
13shall notify the Applicant that the application is rescinded.
14Any such rescinded allocation shall be added to the aggregate
15amount of credits available for allocation for the year in
16which the forfeiture occurred.
17    The amount of the qualified expenditures identified in the
18Applicant's certification of completion and reflected on the
19certificate issued by the Department is subject to inspection,
20examination, and audit.
21    The Applicant shall establish and maintain for a period of
224 years following the effective date on a project tax credit
23certificate such records as required by the Department.
 
24    Section 25. Powers. The Department shall adopt rules for
25the administration of this Act.
 

 

 

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1    Section 60. The Illinois Income Tax Act is amended by
2adding Section 229 as follows:
 
3    (35 ILCS 5/229 new)
4    Sec. 229. School Building Rehabilitation Tax Credit. For
5taxable years beginning on or after January 1, 2020 and ending
6on or before December 31, 2024, each taxpayer that is awarded a
7credit under the School Building Rehabilitation Tax Credit Act
8is entitled to a credit as provided in that Act.
 
9    Section 99. Effective date. This Act takes effect upon
10becoming law.