101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
SB3498

 

Introduced 2/14/2020, by Sen. Ram Villivalam

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 25/5
35 ILCS 25/10
35 ILCS 25/25
35 ILCS 25/30
35 ILCS 25/35

    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 credit shall not exceed $5,000 per employee hired. Provides that the maximum amount of credits allowed is $75,000,000. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

SB3498LRB101 20658 HLH 70317 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 5, 10, 25, 30, and 35 as
6follows:
 
7    (35 ILCS 25/5)
8    Sec. 5. Findings and purpose. Small businesses provide for
9roughly half of the private workforce in Illinois. In the wake
10of one of the worst economic crises in Illinois history, it is
11necessary to assist and encourage small businesses in the
12hiring of new employees. The General Assembly finds that the
13Illinois economy is mired in one of the worst economic
14recessions it has ever suffered. Small businesses in particular
15have been hit hard by the economy, resulting in levels of high
16unemployment throughout the State. In order to reverse the
17trend of high unemployment and to help spur the economy to
18recovery, it is necessary to assist and encourage small
19businesses in the hiring of new employees.
20(Source: P.A. 96-888, eff. 4-13-10.)
 
21    (35 ILCS 25/10)
22    Sec. 10. Definitions. In this Act:

 

 

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1    "Applicant" means a person that is operating a business
2located within the State of Illinois that is engaged in
3interstate or intrastate commerce and either:
4        (1) has no more than 50 full-time employees, without
5    regard to the location of employment of such employees at
6    the beginning of the incentive period; or
7        (2) for the first set of incentive periods, hired
8    within the incentive period an employee who had
9    participated as worker-trainee in the Put Illinois to Work
10    Program during 2010.
11    In the case of any person that is a member of a unitary
12business group within the meaning of subdivision (a)(27) of
13Section 1501 of the Illinois Income Tax Act, "applicant" refers
14to the unitary business group.
15    "Certificate" means the tax credit certificate issued by
16the Department under Section 35 of this Act.
17    "Certificate of eligibility" means the certificate issued
18by the Department under Section 20 of this Act.
19    "Credit" means the amount awarded by the Department to an
20applicant by issuance of a certificate under Section 35 of this
21Act for each new full-time equivalent employee hired or job
22created.
23    "Department" means the Department of Commerce and Economic
24Opportunity.
25    "Director" means the Director of the Department.
26    "Full-time employee" means an individual who is employed

 

 

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1for a basic wage for at least 35 hours each week or who renders
2any other standard of service generally accepted by industry
3custom or practice as full-time employment. An individual for
4whom a W-2 is issued by a Professional Employer Organization is
5a full-time employee if he or she is employed in the service of
6the applicant for a basic wage for at least 35 hours each week
7or renders any other standard of service generally accepted by
8industry custom or practice as full-time employment. For the
9purposes of this Act, such an individual shall be considered a
10full-time employee of the applicant.
11    "Professional Employer Organization" (PEO) shall have the
12same meaning as defined in Section 5-5 of the Economic
13Development for a Growing Economy Tax Credit Act. As used in
14this Section, "Professional Employer Organization" does not
15include a day and temporary labor service agency regulated
16under the Day and Temporary Labor Services Act.
17    "Incentive period" means the period beginning on July 1 and
18ending on June 30 of the following year. The first set of
19incentive periods period shall begin on July 1, 2010 and the
20last incentive period shall end on June 30, 2016. The second
21set of incentive periods shall begin on July 1, 2020 and end on
22June 30, 2026.
23    "Basic wage" means compensation for employment that is no
24less than $10 per hour or the equivalent salary for a new
25employee.
26    "New employee" means a full-time employee:

 

 

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1        (1) who first became employed by an applicant with less
2    than 50 full-time employees within the incentive period
3    whose hire results in a net increase in the applicant's
4    full-time Illinois employees and who is receiving a basic
5    wage as compensation; or
6        (2) for the first set of incentive periods, who
7    participated as a worker-trainee in the Put Illinois to
8    Work Program during 2010 and who is subsequently hired
9    during the incentive period by an applicant and who is
10    receiving a basic wage as compensation.
11    The term "new employee" does not include:
12        (1) a person who was previously employed in Illinois by
13    the applicant or a related member prior to the onset of the
14    incentive period; or
15        (2) any individual who has a direct or indirect
16    ownership interest of at least 5% in the profits, capital,
17    or value of the applicant or a related member.
18    "Noncompliance date" means, in the case of an applicant
19that is not complying with the requirements of the provisions
20of this Act, the day following the last date upon which the
21taxpayer was in compliance with the requirements of the
22provisions of this Act, as determined by the Director, pursuant
23to Section 45 of this Act.
24    "Put Illinois to Work Program" means a worker training and
25employment program that was established by the State of
26Illinois with funding from the United States Department of

 

 

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1Health and Human Services of Emergency Temporary Assistance for
2Needy Families funds authorized by the American Recovery and
3Reinvestment Act of 2009 (ARRA TANF Funds). These ARRA TANF
4funds were in turn used by the State of Illinois to fund the
5Put Illinois to Work Program.
6    "Related member" means a person that, with respect to the
7applicant during any portion of the incentive period, is any
8one of the following,
9        (1) An individual, if the individual and the members of
10    the individual's family (as defined in Section 318 of the
11    Internal Revenue Code) own directly, indirectly,
12    beneficially, or constructively, in the aggregate, at
13    least 50% of the value of the outstanding profits, capital,
14    stock, or other ownership interest in the applicant.
15        (2) A partnership, estate, or trust and any partner or
16    beneficiary, if the partnership, estate, or trust and its
17    partners or beneficiaries own directly, indirectly,
18    beneficially, or constructively, in the aggregate, at
19    least 50% of the profits, capital, stock, or other
20    ownership interest in the applicant.
21        (3) A corporation, and any party related to the
22    corporation in a manner that would require an attribution
23    of stock from the corporation under the attribution rules
24    of Section 318 of the Internal Revenue Code, if the
25    applicant and any other related member own, in the
26    aggregate, directly, indirectly, beneficially, or

 

 

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1    constructively, at least 50% of the value of the
2    corporation's outstanding stock.
3        (4) A corporation and any party related to that
4    corporation in a manner that would require an attribution
5    of stock from the corporation to the party or from the
6    party to the corporation under the attribution rules of
7    Section 318 of the Internal Revenue Code, if the
8    corporation and all such related parties own, in the
9    aggregate, at least 50% of the profits, capital, stock, or
10    other ownership interest in the applicant.
11        (5) A person to or from whom there is attribution of
12    stock ownership in accordance with Section 1563(e) of the
13    Internal Revenue Code, except that for purposes of
14    determining whether a person is a related member under this
15    paragraph, "20%" shall be substituted for "5%" whenever
16    "5%" appears in Section 1563(e) of the Internal Revenue
17    Code.
18(Source: P.A. 100-863, eff. 8-14-18.)
 
19    (35 ILCS 25/25)
20    Sec. 25. Tax credit.
21    (a) Subject to the conditions set forth in this Act, for
22the first set of incentive periods, an applicant is entitled to
23a credit against payment of taxes withheld under Section 704A
24of the Illinois Income Tax Act:
25        (1) for new employees who participated as

 

 

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1    worker-trainees in the Put Illinois to Work Program during
2    2010:
3            (A) in the first calendar year ending on or after
4        the date that is 6 months after December 31, 2010, or
5        the date of hire, whichever is later. Under this
6        subparagraph, the applicant is entitled to one-half of
7        the credit allowable for each new employee who is
8        employed for at least 6 months after the date of hire;
9        and
10            (B) in the first calendar year ending on or after
11        the date that is 12 months after December 31, 2010, or
12        the date of hire, whichever is later. Under this
13        subparagraph, the applicant is entitled to one-half of
14        the credit allowable for each new employee who is
15        employed for at least 12 months after the date of hire;
16         (2) for all other new employees, in the first calendar
17    year ending on or after the date that is 12 months after
18    the date of hire of a new employee. The credit shall be
19    allowed as a credit to an applicant for each full-time
20    employee hired during the incentive period that results in
21    a net increase in full-time Illinois employees, where the
22    net increase in the employer's full-time Illinois
23    employees is maintained for at least 12 months.
24    (a-5) Subject to the conditions set forth in this Act, for
25the second set of incentive periods, an applicant is entitled
26to a credit against payment of taxes withheld under Section

 

 

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1704A of the Illinois Income Tax Act in the first calendar year
2ending on or after the date that is 12 months after the date of
3hire of a new employee. The credit shall be allowed as a credit
4to an applicant for each full-time employee hired during the
5incentive period that results in a net increase in full-time
6Illinois employees, where the net increase in the employer's
7full-time Illinois employees is maintained for at least 12
8months.
9    (b) The Department shall make credit awards under this Act
10to further job creation.
11    (c) The credit shall be claimed for the first calendar year
12ending on or after the date on which the certificate is issued
13by the Department.
14    (d) The credit shall not exceed $5,000 $2,500 per new
15employee hired.
16    (e) The net increase in full-time Illinois employees,
17measured on an annual full-time equivalent basis, shall be the
18total number of full-time Illinois employees of the applicant
19on the final day of the incentive period, minus the number of
20full-time Illinois employees employed by the employer on the
21first day of that same incentive period. For purposes of the
22calculation, an employer that begins doing business in this
23State during the incentive period, as determined by the
24Director, shall be treated as having zero Illinois employees on
25the first day of the incentive period.
26    (f) The net increase in the number of full-time Illinois

 

 

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1employees of the applicant under subsection (e) must be
2sustained continuously for at least 12 months, starting with
3the date of hire of a new employee during the incentive period.
4Eligibility for the credit does not depend on the continuous
5employment of any particular individual. For purposes of this
6subsection (f), if a new employee ceases to be employed before
7the completion of the 12-month period for any reason, the net
8increase in the number of full-time Illinois employees shall be
9treated as continuous if a different new employee is hired as a
10replacement within a reasonable time for the same position.
11    (g) The Department shall promulgate rules to enable an
12applicant for which a PEO has been contracted to issue W-2s and
13make payment of taxes withheld under Section 704A of the
14Illinois Income Tax Act for new employees to retain the benefit
15of tax credits to which the applicant is otherwise entitled
16under this Act.
17(Source: P.A. 96-888, eff. 4-13-10; 96-1498, eff. 1-18-11;
1897-636, eff. 6-1-12; 97-1052, eff. 8-23-12.)
 
19    (35 ILCS 25/30)
20    Sec. 30. Maximum amount of credits allowed. The Department
21shall limit the monetary amount of credits awarded under this
22Act to no more than $75,000,000 $50,000,000. If applications
23for a greater amount are received, credits shall be allowed on
24a first-come-first-served basis, based on the date on which
25each properly completed application for a certificate of

 

 

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1eligibility is received by the Department. If more than one
2certificate of eligibility is received on the same day, the
3credits will be awarded based on the time of submission for
4that particular day.
5(Source: P.A. 96-888, eff. 4-13-10.)
 
6    (35 ILCS 25/35)
7    Sec. 35. Application for award of tax credit; tax credit
8certificate.
9    (a) On or after the conclusion of the 12-month period (or
106-month period, for purposes of subparagraph (A) of item (1) of
11subsection (a) of Section 25) after a new employee has been
12hired, an applicant shall file with the Department an
13application for award of a credit. The application shall
14include the following:
15        (1) The names, Social Security numbers, job
16    descriptions, salary or wage rates, and dates of hire of
17    the new employees with respect to whom the credit is being
18    requested, and an indication of whether each new employee
19    listed participated as a worker-trainee in the Put Illinois
20    to Work Program.
21        (2) A certification that each new employee listed has
22    been retained on the job for one year (or 6 months, for
23    purposes of subparagraph (A) of item (1) of subsection (a)
24    of Section 25) from the date of hire.
25        (3) The number of new employees hired by the applicant

 

 

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1    during the incentive period.
2        (4) The net increase in the number of full-time
3    Illinois employees of the applicant (including the new
4    employees listed in the request) between the beginning of
5    the incentive period and the dates on which the new
6    employees listed in the request were hired. This
7    requirement does not apply for tax credits the applicant is
8    seeking because the new employee had participated as a
9    worker-trainee in the Put Illinois to Work Program.
10        (5) An agreement that the Director is authorized to
11    verify with the appropriate State agencies the information
12    contained in the request before issuing a certificate to
13    the applicant.
14        (6) Any other information the Department determines to
15    be appropriate.
16    (b) Although an application may be filed at any time after
17the conclusion of the 12-month period (or 6-month period, for
18purposes of subparagraph (A) of item (1) of subsection (a) of
19Section 25) after a new employee was hired, an application
20filed more than 90 days after the earliest date on which it
21could have been filed shall not be awarded any credit if, prior
22to the date it is filed, the Department has received
23applications under this Section for credits totaling more than
24$75,000,000 $50,000,000.
25    (c) The Department shall issue a certificate to each
26applicant awarded a credit under this Act. The certificate

 

 

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1shall include the following:
2        (1) The name and taxpayer identification number of the
3    applicant.
4        (2) The date on which the certificate is issued.
5        (3) The credit amount that will be allowed.
6        (4) Any other information the Department determines to
7    be appropriate.
8(Source: P.A. 96-888, eff. 4-13-10; 96-1498, eff. 1-18-11.)
 
9    Section 99. Effective date. This Act takes effect upon
10becoming law.