101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
HB4773

 

Introduced 2/18/2020, by Rep. Curtis J. Tarver, II

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 25/10
35 ILCS 25/25
35 ILCS 25/30
35 ILCS 25/35
35 ILCS 25/45

    Amends the Small Business Job Creation Tax Credit Act. Amends the Small Business Job Creation Tax Credit Act. Creates a second set of incentive periods beginning on July 1, 2020 and ending on June 30, 2026. Provides that the basic wage for the second set of incentive periods is $15 per hour. Provides that the credit may not exceed $2,500 per new employee hired, except that, if the new employee is a returning citizen, then the credit for that employee may not exceed $3,500. Provides that the term "returning citizen" means an individual who (i) is a resident of Illinois, (ii) was formerly incarcerated in a federal, State, or local correctional institution, and (iii) is a new employee. Provides that the aggregate amount of credits that may be awarded under the Act is (i) $50,000,000 for new employees other than returning citizens and (ii) $5,000,000 for returning citizens. Adds provisions concerning recapture of the credit if the employee is terminated by the taxpayer within one year after the credit is awarded. Effective immediately.


LRB101 18400 HLH 67848 b

FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB4773LRB101 18400 HLH 67848 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 Small Business Job Creation Tax Credit Act
5is amended by changing Sections 10, 25, 30, 35, and 45 as
6follows:
 
7    (35 ILCS 25/10)
8    Sec. 10. Definitions. In this Act:
9    "Applicant" means a person that is operating a business
10located within the State of Illinois that is engaged in
11interstate or intrastate commerce and either:
12        (1) has no more than 50 full-time employees, without
13    regard to the location of employment of such employees at
14    the beginning of the incentive period; or
15        (2) for incentive periods ending on or before June 30,
16    2016, hired within the incentive period an employee who had
17    participated as worker-trainee in the Put Illinois to Work
18    Program during 2010.
19    In the case of any person that is a member of a unitary
20business group within the meaning of subdivision (a)(27) of
21Section 1501 of the Illinois Income Tax Act, "applicant" refers
22to the unitary business group.
23    "Certificate" means the tax credit certificate issued by

 

 

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1the Department under Section 35 of this Act.
2    "Certificate of eligibility" means the certificate issued
3by the Department under Section 20 of this Act.
4    "Credit" means the amount awarded by the Department to an
5applicant by issuance of a certificate under Section 35 of this
6Act for each new full-time equivalent employee hired or job
7created.
8    "Department" means the Department of Commerce and Economic
9Opportunity.
10    "Director" means the Director of the Department.
11    "Full-time employee" means an individual who is employed
12for a basic wage for at least 35 hours each week or who renders
13any other standard of service generally accepted by industry
14custom or practice as full-time employment. An individual for
15whom a W-2 is issued by a Professional Employer Organization is
16a full-time employee if he or she is employed in the service of
17the applicant for a basic wage for at least 35 hours each week
18or renders any other standard of service generally accepted by
19industry custom or practice as full-time employment. For the
20purposes of this Act, such an individual shall be considered a
21full-time employee of the applicant.
22    "Professional Employer Organization" (PEO) shall have the
23same meaning as defined in Section 5-5 of the Economic
24Development for a Growing Economy Tax Credit Act. As used in
25this Section, "Professional Employer Organization" does not
26include a day and temporary labor service agency regulated

 

 

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1under the Day and Temporary Labor Services Act.
2    "Incentive period" means the period beginning on July 1 and
3ending on June 30 of the following year. The first series of
4incentive periods period shall begin on July 1, 2010 and the
5last incentive period shall end on June 30, 2016. The second
6series of incentive periods shall begin on July 1, 2020 and end
7on June 30, 2026.
8    "Basic wage" means compensation for employment that is no
9less than (i) $10 per hour for the first set of incentive
10periods or (ii) $15 per hour for the second set of incentive
11periods, or the equivalent salary for a new employee.
12    "New employee" means a full-time employee who first became
13employed by an applicant with less than 50 full-time employees
14within the incentive period whose hire results in a net
15increase in the applicant's full-time Illinois employees and
16who is receiving a basic wage as compensation. :
17        (1) who first became employed by an applicant with less
18    than 50 full-time employees within the incentive period
19    whose hire results in a net increase in the applicant's
20    full-time Illinois employees and who is receiving a basic
21    wage as compensation; or
22        (2) who participated as a worker-trainee in the Put
23    Illinois to Work Program during 2010 and who is
24    subsequently hired during the incentive period by an
25    applicant and who is receiving a basic wage as
26    compensation.

 

 

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1    The term "new employee" does not include:
2        (1) a person who was previously employed in Illinois by
3    the applicant or a related member prior to the onset of the
4    incentive period; or
5        (2) any individual who has a direct or indirect
6    ownership interest of at least 5% in the profits, capital,
7    or value of the applicant or a related member.
8    "Noncompliance date" means, in the case of an applicant
9that is not complying with the requirements of the provisions
10of this Act, the day following the last date upon which the
11taxpayer was in compliance with the requirements of the
12provisions of this Act, as determined by the Director, pursuant
13to Section 45 of this Act.
14    "Put Illinois to Work Program" means a worker training and
15employment program that was established by the State of
16Illinois with funding from the United States Department of
17Health and Human Services of Emergency Temporary Assistance for
18Needy Families funds authorized by the American Recovery and
19Reinvestment Act of 2009 (ARRA TANF Funds). These ARRA TANF
20funds were in turn used by the State of Illinois to fund the
21Put Illinois to Work Program.
22    "Related member" means a person that, with respect to the
23applicant during any portion of the incentive period, is any
24one of the following,
25        (1) An individual, if the individual and the members of
26    the individual's family (as defined in Section 318 of the

 

 

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1    Internal Revenue Code) own directly, indirectly,
2    beneficially, or constructively, in the aggregate, at
3    least 50% of the value of the outstanding profits, capital,
4    stock, or other ownership interest in the applicant.
5        (2) A partnership, estate, or trust and any partner or
6    beneficiary, if the partnership, estate, or trust and its
7    partners or beneficiaries own directly, indirectly,
8    beneficially, or constructively, in the aggregate, at
9    least 50% of the profits, capital, stock, or other
10    ownership interest in the applicant.
11        (3) A corporation, and any party related to the
12    corporation in a manner that would require an attribution
13    of stock from the corporation under the attribution rules
14    of Section 318 of the Internal Revenue Code, if the
15    applicant and any other related member own, in the
16    aggregate, directly, indirectly, beneficially, or
17    constructively, at least 50% of the value of the
18    corporation's outstanding stock.
19        (4) A corporation and any party related to that
20    corporation in a manner that would require an attribution
21    of stock from the corporation to the party or from the
22    party to the corporation under the attribution rules of
23    Section 318 of the Internal Revenue Code, if the
24    corporation and all such related parties own, in the
25    aggregate, at least 50% of the profits, capital, stock, or
26    other ownership interest in the applicant.

 

 

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1        (5) A person to or from whom there is attribution of
2    stock ownership in accordance with Section 1563(e) of the
3    Internal Revenue Code, except that for purposes of
4    determining whether a person is a related member under this
5    paragraph, "20%" shall be substituted for "5%" whenever
6    "5%" appears in Section 1563(e) of the Internal Revenue
7    Code.
8    "Returning citizen" means an individual who (i) is a
9resident of Illinois, (ii) was formerly incarcerated in a
10federal, State, or local correctional institution, and (iii) is
11a new employee.
12(Source: P.A. 100-863, eff. 8-14-18.)
 
13    (35 ILCS 25/25)
14    Sec. 25. Tax credit.
15    (a) Subject to the conditions set forth in this Act, an
16applicant is entitled to a credit against payment of taxes
17withheld under Section 704A of the Illinois Income Tax Act:
18        (1) for new employees who participated as
19    worker-trainees in the Put Illinois to Work Program during
20    2010, for incentive periods ending on or before June 30,
21    2016:
22            (A) in the first calendar year ending on or after
23        the date that is 6 months after December 31, 2010, or
24        the date of hire, whichever is later. Under this
25        subparagraph, the applicant is entitled to one-half of

 

 

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1        the credit allowable for each new employee who is
2        employed for at least 6 months after the date of hire;
3        and
4            (B) in the first calendar year ending on or after
5        the date that is 12 months after December 31, 2010, or
6        the date of hire, whichever is later. Under this
7        subparagraph, the applicant is entitled to one-half of
8        the credit allowable for each new employee who is
9        employed for at least 12 months after the date of hire;
10         (2) for all other new employees, in the first calendar
11    year ending on or after the date that is 12 months after
12    the date of hire of a new employee. The credit shall be
13    allowed as a credit to an applicant for each full-time
14    employee hired during the incentive period that results in
15    a net increase in full-time Illinois employees, where the
16    net increase in the employer's full-time Illinois
17    employees is maintained for at least 12 months.
18    (b) The Department shall make credit awards under this Act
19to further job creation.
20    (c) The credit shall be claimed for the first calendar year
21ending on or after the date on which the certificate is issued
22by the Department.
23    (d) The credit shall not exceed $2,500 per new employee
24hired, except that, for the second set of incentive periods, if
25the new employee is a returning citizen, then the credit for
26that employee may not exceed $3,500.

 

 

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1    (e) The net increase in full-time Illinois employees,
2measured on an annual full-time equivalent basis, shall be the
3total number of full-time Illinois employees of the applicant
4on the final day of the incentive period, minus the number of
5full-time Illinois employees employed by the employer on the
6first day of that same incentive period. For purposes of the
7calculation, an employer that begins doing business in this
8State during the incentive period, as determined by the
9Director, shall be treated as having zero Illinois employees on
10the first day of the incentive period.
11    (f) The net increase in the number of full-time Illinois
12employees of the applicant under subsection (e) must be
13sustained continuously for at least 12 months, starting with
14the date of hire of a new employee during the incentive period.
15Eligibility for the credit does not depend on the continuous
16employment of any particular individual. For purposes of this
17subsection (f), if a new employee ceases to be employed before
18the completion of the 12-month period for any reason, the net
19increase in the number of full-time Illinois employees shall be
20treated as continuous if a different new employee is hired as a
21replacement within a reasonable time for the same position
22within 8 weeks after the position becomes vacant.
23    (g) The Department shall promulgate rules to enable an
24applicant for which a PEO has been contracted to issue W-2s and
25make payment of taxes withheld under Section 704A of the
26Illinois Income Tax Act for new employees to retain the benefit

 

 

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1of tax credits to which the applicant is otherwise entitled
2under this Act.
3(Source: P.A. 96-888, eff. 4-13-10; 96-1498, eff. 1-18-11;
497-636, eff. 6-1-12; 97-1052, eff. 8-23-12.)
 
5    (35 ILCS 25/30)
6    Sec. 30. Maximum amount of credits allowed. The Department
7shall limit the monetary amount of credits awarded under this
8Act to no more than (i) $50,000,000 for new employees other
9than returning citizens and (ii) $5,000,000 for returning
10citizens. If a new employee is a returning citizen, but the
11$5,000,000 limit under this Section has been reached, then the
12applicant may request a credit for that employee under the
13$50,000,000 limit; however, the credit awarded for that new
14employee may not exceed $2,500. If applications for a greater
15amount are received, credits shall be allowed on a
16first-come-first-served basis, based on the date on which each
17properly completed application for a certificate of
18eligibility is received by the Department. If more than one
19certificate of eligibility is received on the same day, the
20credits will be awarded based on the time of submission for
21that particular day.
22(Source: P.A. 96-888, eff. 4-13-10.)
 
23    (35 ILCS 25/35)
24    Sec. 35. Application for award of tax credit; tax credit

 

 

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1certificate.
2    (a) On or after the conclusion of the 12-month period (or
36-month period, for purposes of subparagraph (A) of item (1) of
4subsection (a) of Section 25) after a new employee has been
5hired, an applicant shall file with the Department an
6application for award of a credit. The application shall
7include the following:
8        (1) The names, Social Security numbers, job
9    descriptions, salary or wage rates, and dates of hire of
10    the new employees with respect to whom the credit is being
11    requested, and an indication of whether each new employee
12    listed participated as a worker-trainee in the Put Illinois
13    to Work Program.
14        (2) A certification that each new employee listed has
15    been retained on the job for one year (or 6 months, for
16    purposes of subparagraph (A) of item (1) of subsection (a)
17    of Section 25) from the date of hire.
18        (3) The number of new employees hired by the applicant
19    during the incentive period.
20        (4) The net increase in the number of full-time
21    Illinois employees of the applicant (including the new
22    employees listed in the request) between the beginning of
23    the incentive period and the dates on which the new
24    employees listed in the request were hired. This
25    requirement does not apply for tax credits the applicant is
26    seeking because the new employee had participated as a

 

 

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1    worker-trainee in the Put Illinois to Work Program.
2        (5) An agreement that the Director is authorized to
3    verify with the appropriate State agencies the information
4    contained in the request before issuing a certificate to
5    the applicant.
6        (6) Any other information the Department determines to
7    be appropriate.
8    (b) Although an application may be filed at any time after
9the conclusion of the 12-month period (or 6-month period, for
10purposes of subparagraph (A) of item (1) of subsection (a) of
11Section 25) after a new employee was hired, an application
12filed more than 90 days after the earliest date on which it
13could have been filed shall not be awarded any credit if, prior
14to the date it is filed, the Department has received
15applications under this Section for credits totaling more than
16$50,000,000.
17    (c) The Department shall issue a certificate to each
18applicant awarded a credit under this Act. The certificate
19shall include the following:
20        (1) The name and taxpayer identification number of the
21    applicant.
22        (2) The date on which the certificate is issued.
23        (3) The credit amount that will be allowed.
24        (4) Any other information the Department determines to
25    be appropriate.
26(Source: P.A. 96-888, eff. 4-13-10; 96-1498, eff. 1-18-11.)
 

 

 

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1    (35 ILCS 25/45)
2    Sec. 45. Noncompliance with Act; recapture.
3    (a) If the Director determines that an applicant who has
4received a credit under this Act is not complying with the
5requirements of the provisions of this Act, the Director shall
6provide notice to the applicant of the alleged noncompliance,
7and allow the taxpayer a hearing under the provisions of the
8Illinois Administrative Procedure Act. If, after such notice
9and any hearing, the Director determines that a noncompliance
10exists, the Director shall issue to the Department of Revenue
11notice to that effect, stating the noncompliance date.
12    (b) For tax credits awarded during the second set of
13incentive periods, if an employee for whom a tax credit was
14awarded under this Act is terminated by the taxpayer within one
15year after the credit is awarded, then the Department shall
16recapture the amount of the credit awarded for that employee.
17This subsection (b) does not apply if the person is terminated
18for cause or if the person voluntarily resigns.
19(Source: P.A. 96-888, eff. 4-13-10.)
 
20    Section 99. Effective date. This Act takes effect upon
21becoming law.