101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
HB3026

 

Introduced 2/15/2019, by Rep. Jehan Gordon-Booth

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 5/228
35 ILCS 31/5
35 ILCS 31/10
35 ILCS 31/20

    Amends the Historic Preservation Tax Credit Act. Provides that the aggregate amount of credits awarded under the Act to a particular taxpayer may not exceed $3,000,000. Provides that the total amount of expenditures must equal at least $5,000 and (currently, "or") exceed the adjusted basis of the structure. Provides that the taxpayer may not receive a credit under the Act and a River Edge redevelopment credit for the same qualified expenditures or rehabilitation plan. Makes changes concerning the allocation of credits. Makes various technical changes. Amends the Illinois Income Tax Act. Makes changes to the historic preservation credit to include limited liability companies. Effective immediately.


LRB101 10296 HLH 55401 b

FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB3026LRB101 10296 HLH 55401 b

1    AN ACT concerning revenue.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Income Tax Act is amended by
5renumbering and changing Section 228, as added by Public Act
6100-629, as follows:
 
7    (35 ILCS 5/228)
8    Sec. 228 227. Historic preservation credit. For tax years
9beginning on or after January 1, 2019 and ending on or before
10December 31, 2023, a taxpayer who qualifies for a credit under
11the Historic Preservation Tax Credit Act is entitled to a
12credit against the taxes imposed under subsections (a) and (b)
13of Section 201 of this Act as provided in that Act. If the
14taxpayer is a partnership, or Subchapter S corporation, or a
15limited liability company, the credit shall be allowed to the
16partners or shareholders in accordance with the determination
17of income and distributive share of income under Sections 702
18and 704 and Subchapter S of the Internal Revenue Code, provided
19that credits granted to a partnership, a limited liability
20company taxed as a partnership, or other multiple owners of
21property shall be passed through to the partners, members, or
22owners respectively on a pro rata basis or pursuant to an
23executed agreement among the partners, members, or owners

 

 

HB3026- 2 -LRB101 10296 HLH 55401 b

1documenting any alternate distribution method. If the amount of
2any tax credit awarded under this Section exceeds the qualified
3taxpayer's income tax liability for the year in which the
4qualified rehabilitation plan was placed in service, the excess
5amount may be carried forward as provided in the Historic
6Preservation Tax Credit Act.
7(Source: P.A. 100-629, eff. 1-1-19; revised 10-9-18.)
 
8    Section 10. The Historic Preservation Tax Credit Act is
9amended by changing Sections 5, 10, and 20 as follows:
 
10    (35 ILCS 31/5)
11    Sec. 5. Definitions. As used in this Act, unless the
12context clearly indicates otherwise:
13    "Director" means the Director of Natural Resources or his
14or her designee.
15    "Division" means the State Historic Preservation Office
16within the Department of Natural Resources.
17    "Phased rehabilitation" means a project that is completed
18in phases, as defined under Section 47 of the federal Internal
19Revenue Code and pursuant to National Park Service regulations
20at 36 C.F.R. 67.
21    "Placed in service" means the date when the property is
22placed in a condition or state of readiness and availability
23for a specifically assigned function as defined under Section
2447 of the federal Internal Revenue Code and federal Treasury

 

 

HB3026- 3 -LRB101 10296 HLH 55401 b

1Regulation Sections 1.46 and 1.48.
2    "Qualified expenditures" means all the costs and expenses
3defined as qualified rehabilitation expenditures under Section
447 of the federal Internal Revenue Code that were incurred in
5connection with a qualified rehabilitation plan historic
6structure.
7    "Qualified historic structure" means any structure that is
8located in Illinois and is defined as a certified historic
9structure under Section 47(c)(3) of the federal Internal
10Revenue Code.
11    "Qualified rehabilitation plan" means a project that is
12approved by the Department of Natural Resources and the
13National Park Service as being consistent with the United
14States Secretary of the Interior's Standards for
15Rehabilitation.
16    "Qualified taxpayer" means the owner of the qualified
17historic structure or any other person or entity who may
18qualify for the federal rehabilitation credit allowed by
19Section 47 of the federal Internal Revenue Code.
20    "Recapture event" means any of the following events
21occurring during the recapture period:
22        (1) failure to place in service the rehabilitated
23    portions of the qualified historic structure, or failure to
24    maintain the rehabilitated portions of the qualified
25    historic structure in service after they are placed in
26    service; provided that a recapture event under this

 

 

HB3026- 4 -LRB101 10296 HLH 55401 b

1    paragraph (1) shall not include a removal from service for
2    a reasonable period of time to conduct maintenance and
3    repairs that are reasonably necessary to protect the health
4    and safety of the public or to protect the structural
5    integrity of the qualified historic structure or a
6    neighboring structure;
7        (2) demolition or other alteration of the qualified
8    historic structure in a manner that is inconsistent with
9    the qualified rehabilitation plan or the Secretary of the
10    Interior's Standards for Rehabilitation;
11        (3) disposition of the rehabilitated qualified
12    historic structure in whole or a proportional disposition
13    of a partnership interest therein, except as otherwise
14    permitted by this Section; or
15        (4) use of the qualified historic structure in a manner
16    that is inconsistent with the qualified rehabilitation
17    plan or that is otherwise inconsistent with the provisions
18    and intent of this Section.
19    A recapture event occurring in one taxable year shall be
20deemed continuing to subsequent taxable years unless and until
21corrected.
22    The following dispositions of a qualified historic
23structure shall not be deemed to be a recapture event for
24purposes of this Section:
25        (1) a transfer by reason of death;
26        (2) a transfer between spouses incident to divorce;

 

 

HB3026- 5 -LRB101 10296 HLH 55401 b

1        (3) a sale by and leaseback to an entity that, when the
2    rehabilitated portions of the qualified historic structure
3    are placed in service, will be a lessee of the qualified
4    historic structure, but only for so long as the entity
5    continues to be a lessee; and
6        (4) a mere change in the form of conducting the trade
7    or business by the owner (or, if applicable, the lessee) of
8    the qualified historic structure, so long as the property
9    interest in such qualified historic structure is retained
10    in such trade or business and the owner or lessee retains a
11    substantial interest in such trade or business.
12    "Recapture period" means the 5-year period beginning on the
13date that the qualified historic structure or rehabilitated
14portions of the qualified historic structure are placed in
15service.
16    "Substantial rehabilitation" means that the qualified
17rehabilitation expenditures during the 24-month period
18selected by the taxpayer at the time and in the manner
19prescribed by rule and ending with or within the taxable year
20exceed the greater of (i) the adjusted basis of the building
21and its structural components or (ii) $5,000. The adjusted
22basis of the building and its structural components shall be
23determined as of the beginning of the first day of such
2424-month period or as of the beginning of the first day of the
25holding period of the building, whichever is later. For
26purposes of determining the adjusted basis, the determination

 

 

HB3026- 6 -LRB101 10296 HLH 55401 b

1of the beginning of the holding period shall be made without
2regard to any reconstruction by the taxpayer in connection with
3the rehabilitation. In the case of any phased rehabilitation,
4with phases set forth in architectural plans and specifications
5completed before the rehabilitation begins, this definition
6shall be applied by substituting "60-month period" for
7"24-month period" wherever that term occurs in the definition.
8(Source: P.A. 100-629, eff. 1-1-19.)
 
9    (35 ILCS 31/10)
10    Sec. 10. Allowable credit.
11    (a) To the extent authorized by this Act, for taxable years
12beginning on or after January 1, 2019 and ending on or before
13December 31, 2023, there shall be allowed a tax credit to the
14qualified taxpayer against the tax imposed by subsections (a)
15and (b) of Section 201 of the Illinois Income Tax Act in an
16aggregate amount equal to the lesser of (i) 25% of qualified
17expenditures incurred in by a qualified taxpayer undertaking a
18qualified rehabilitation plan or (ii) $3,000,000 of a qualified
19historic structure, provided that the total amount of such
20expenditures must (i) equal $5,000 or more and or (ii) exceed
21the adjusted basis of the qualified historic structure on the
22first day the qualified rehabilitation plan commenced. If the
23qualified rehabilitation plan spans multiple years, the
24aggregate credit for the entire project shall be allowed in the
25last taxable year.

 

 

HB3026- 7 -LRB101 10296 HLH 55401 b

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

 

 

HB3026- 8 -LRB101 10296 HLH 55401 b

1in which the qualified rehabilitation plan was placed in
2service. Upon completion and review of the project and approval
3of the complete application, the Division shall issue a single
4certificate in the amount of the eligible credits equal to 25%
5of the qualified expenditures incurred during the eligible
6taxable years, not to exceed the lesser of the allocated amount
7or $3,000,000 per single qualified rehabilitation plan. Prior
8to the issuance of the tax credit certificate, the qualified
9taxpayer must provide to the Division verification that the
10rehabilitated structure is a qualified historic structure. At
11the time the certificate is issued, an issuance fee up to the
12maximum amount of 2% of the amount of the credits issued by the
13certificate may be collected from the qualified taxpayer
14applicant to administer the Act. If collected, this issuance
15fee shall be directed to the Division Historic Property
16Administrative Fund or other such fund as appropriate for use
17of the Division in the administration of the Historic
18Preservation Tax Credit Program. The taxpayer must attach the
19certificate or legal documentation of her or his proportional
20share of the certificate to the tax return on which the credits
21are to be claimed. The tax credit under this Section may not
22reduce the taxpayer's liability to less than zero. If the
23amount of the credit exceeds the tax liability for the year,
24the excess credit may be carried forward and applied to the tax
25liability of the 10 taxable years following the first excess
26credit year. The taxpayer may not receive credits under this

 

 

HB3026- 9 -LRB101 10296 HLH 55401 b

1Section and Section 221 of the Illinois Income Tax Act for the
2same qualified expenditures or qualified rehabilitation plan.
3    (d) If the taxpayer is (i) a corporation having an election
4in effect under Subchapter S of the federal Internal Revenue
5Code, (ii) a partnership, or (iii) a limited liability company,
6the credit provided under this Act may be claimed by the
7shareholders of the corporation, the partners of the
8partnership, or the members of the limited liability company in
9the same manner as those shareholders, partners, or members
10account for their proportionate shares of the income or losses
11of the corporation, partnership, or limited liability company,
12or as provided in the bylaws or other executed agreement of the
13corporation, partnership, or limited liability company.
14Credits granted to a partnership, a limited liability company
15taxed as a partnership, or other multiple owners of property
16shall be passed through to the partners, members, or owners
17respectively on a pro rata basis or pursuant to an executed
18agreement among the partners, members, or owners documenting
19any alternate distribution method.
20    (e) If a recapture event occurs during the recapture period
21with respect to a qualified historic structure, then for any
22taxable year in which the credits are allowed as specified in
23this Act, the tax under the applicable Section of this Act
24shall be increased by applying the recapture percentage set
25forth below to the tax decrease resulting from the allocation
26application of credits allowed under this Act to the taxable

 

 

HB3026- 10 -LRB101 10296 HLH 55401 b

1year in question.
2    For the purposes of this subsection, the recapture
3percentage shall be determined as follows:
4        (1) if the recapture event occurs within the first year
5    after commencement of the recapture period, then the
6    recapture percentage is 100%;
7        (2) if the recapture event occurs within the second
8    year after commencement of the recapture period, then the
9    recapture percentage is 80%;
10        (3) if the recapture event occurs within the third year
11    after commencement of the recapture period, then the
12    recapture percentage is 60%;
13        (4) if the recapture event occurs within the fourth
14    year after commencement of the recapture period, then the
15    recapture percentage is 40%; and
16        (5) if the recapture event occurs within the fifth year
17    after commencement of the recapture period, then the
18    recapture percentage is 20%.
19    In the case of any recapture event, the carryforwards under
20this Act shall be adjusted by reason of such event.
21    (f) (d) The Division may adopt rules to implement this
22Section in addition to the rules expressly authorized herein.
23(Source: P.A. 100-629, eff. 1-1-19; revised 10-1-18.)
 
24    (35 ILCS 31/20)
25    Sec. 20. Limitations, reporting, and monitoring.

 

 

HB3026- 11 -LRB101 10296 HLH 55401 b

1    (a) In every calendar year that this program is in effect,
2the Division is authorized to allocate $15,000,000 worth of tax
3credits in addition to any unallocated, returned, or rescinded
4allocations from previous years, pursuant to qualified
5rehabilitation plans. The Division shall award not more than an
6aggregate of $15,000,000 in total annual tax credits pursuant
7to qualified rehabilitation plans for qualified historic
8structures. The Division shall allocate and award not more than
9$3,000,000 in tax credits with regard to a single qualified
10rehabilitation plan. In allocating awarding tax credits under
11this Act, the Division must prioritize applications projects
12that meet one or more of the following:
13        (1) the qualified historic structure is located in a
14    county that borders a State with a historic
15    income-producing property rehabilitation credit;
16        (2) the qualified historic structure was previously
17    owned by a federal, state, or local governmental entity for
18    no less than 6 months;
19        (3) the qualified historic structure is located in a
20    census tract that has a median family income at or below
21    the State median family income; data from the most recent
22    5-year estimate from the American Community Survey (ACS),
23    published by the U.S. Census Bureau, shall be used to
24    determine eligibility;
25        (4) the qualified rehabilitation plan includes in the
26    development partnership a Community Development Entity or

 

 

HB3026- 12 -LRB101 10296 HLH 55401 b

1    a low-profit (B Corporation) or not-for-profit
2    organization, as defined by Section 501(c)(3) of the
3    Internal Revenue Code; or
4        (5) the qualified historic structure is located in an
5    area declared under an Emergency Declaration or Major
6    Disaster Declaration under the federal Robert T. Stafford
7    Disaster Relief and Emergency Assistance Act. The
8    declaration must be no older than 3 years old at the time
9    of application.
10    (b) The annual aggregate authorization program allocation
11of $15,000,000 set forth in subsection (a) shall be allocated
12by the Division, in such proportion as determined by the
13Director Department, on a per calendar basis twice in each year
14that the program is in effect, provided that: (i) the amount
15initially allocated by the Division for the first any one
16calendar year application period shall not exceed 65% of the
17total allowable amount available for allocation. Any
18unallocated and (ii) any portion of the allocated allowable
19amount remaining unused as of the end of any of the second
20calendar application period of a given calendar year shall be
21rolled over into and added to the total authorized allocated
22amount for the next available calendar year. The qualified
23rehabilitation plan must meet a readiness test, as defined in
24the rules created by the Division, in order for the application
25Applicant to qualify. In any given application period,
26applications Applicants that qualify under this Act and are

 

 

HB3026- 13 -LRB101 10296 HLH 55401 b

1prioritized as set forth in subsection (a) will be placed in a
2queue based on the date and time the application is received
3until such time as the application period total allowable
4amount is reached. Applications that qualify but do not receive
5an allocation Applicants must reapply to be considered in
6subsequent for each application periods period.
7    (c) Subject On or before December 31, 2019, and on or
8before December 31 of each odd-numbered year thereafter through
92023, subject to appropriation and prior to equal disbursement
10to the Division, moneys in the Historic Property Administrative
11Fund shall be used, on a biennial basis beginning at the end of
12the second first fiscal year after the effective date of this
13Act, to hire a qualified third party to prepare a biennial
14report to assess the overall impact effectiveness of this Act
15from the qualified rehabilitation plans projects under this Act
16completed in that year and in previous years. Baseline data of
17the metrics in the report shall be collected at the initiation
18of a qualified rehabilitation plan project. The overall
19economic impact shall include at least:
20        (1) the number of applications, project locations, and
21    proposed use of qualified historic structures;
22        (2) the amount of credits awarded and the number and
23    location of projects receiving credit allocations;
24        (3) the status of ongoing projects and projected
25    qualifying expenditures for ongoing projects;
26        (4) for completed projects, the total amount of

 

 

HB3026- 14 -LRB101 10296 HLH 55401 b

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

 

 

HB3026- 15 -LRB101 10296 HLH 55401 b

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

 

 

HB3026- 16 -LRB101 10296 HLH 55401 b

1closed on financing for the complete scope of rehabilitation
2for the project. To demonstrate evidence that the Applicant has
3secured and closed on financing, the Applicant will need to
4provide signed and processed loan agreements, bank financing
5documents or other legal and contractual evidence to
6demonstrate that adequate financing is available to complete
7the project. The Director shall review the submitted evidence
8and may request additional documentation from the Applicant if
9necessary. The Applicant will have 30 calendar days to provide
10the information requested, otherwise the allocation approval
11may be rescinded at the discretion of the Director.
12    If the Applicant fails to document reviewable progress
13within 24 18 months of approval, the Director may notify the
14Applicant that the allocation application is rescinded.
15However, should financing and construction be imminent, the
16Director may elect to grant the Applicant no more than 5 months
17to close on financing and commence construction. If the
18Applicant fails to meet these conditions in the required
19timeframe, the Director shall notify the Applicant that the
20allocation application is rescinded. Any such rescinded
21allocation shall be added to the aggregate amount of credits
22available for allocation for the year in which the forfeiture
23occurred.
24    The amount of the qualified expenditures identified in the
25qualified taxpayer's Applicant's certification of completion
26and reflected on the Historic Preservation Tax Credit

 

 

HB3026- 17 -LRB101 10296 HLH 55401 b

1certificate issued by the Director is subject to inspection,
2examination, and audit by the Department of Revenue.
3    The qualified taxpayer Applicant shall establish and
4maintain for a period of 4 years following the effective date
5on a project tax credit certificate such records as required by
6the Director. Such records include, but are not limited to,
7records documenting project expenditures and compliance with
8the U.S. Secretary of the Interior's Standards. The qualified
9taxpayer Applicant shall make such records available for review
10and verification by the Director, the State Historic
11Preservation Officer, the Department of Revenue, or
12appropriate staff, as well as other appropriate State agencies.
13In the event the Director determines an Applicant has submitted
14a status an annual report containing erroneous information or
15data not supported by records established and maintained under
16this Act, the Director may, after providing notice, require the
17Applicant to resubmit corrected reports.
18(Source: P.A. 100-629, eff. 1-1-19.)
 
19    Section 99. Effective date. This Act takes effect upon
20becoming law.