Illinois General Assembly - Full Text of HB2744
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Full Text of HB2744  100th General Assembly




State of Illinois
2017 and 2018


Introduced , by Rep. Michael J. Zalewski


New Act
35 ILCS 5/224 new

    Creates the Business and Employment Development Tax Credit Act. Provides that the Department of Commerce and Economic Opportunity may certify a business as eligible for an income tax credit under the Act and may award credits to certified businesses. Sets forth the amount of the credit, which is calculated as a percentage of the wages paid to new or retained full-time and part-time employees. Provides that the duration of the credit is 5 taxable years, except that the credit may be carried forward for 5 years. Contains provisions concerning recapture of the credit. Amends the Illinois Income Tax Act to make conforming changes. Provides that the Business and Employment Development Tax Credit is exempt from the Act's automatic sunset provision. Effective immediately.

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HB2744LRB100 05627 HLH 15641 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 1. Short title. This Act may be cited as the
5Business and Employment Development Tax Credit Act.
6    Section 5. Purpose. The General Assembly finds that, in an
7increasingly global economy, the State's economy would benefit
8from efficient use of State resources in support of business
9development and increased employment. Tax credits shall be
10granted under this Act only for genuine business development
11and employment growth within the State.
12    Section 10. Definitions. As used in this Act:
13    "Applicant" means a taxpayer seeking certified business
14status from the Department.
15    "Average number of employees" means, in the case of a
16calendar year taxpayer, the sum of the total number of
17full-time equivalent employees of the business in the State on
18March 31, June 30, September 30, and December 31, divided by 4.
19In the case of a fiscal year taxpayer, the sum of the total
20number of full-time equivalent employees of the business in the
21State at the end of each quarter of the taxable year of the
22taxpayer divided by 4.



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1    "Certified business" means a taxpayer that is operating a
2business located, or that the taxpayer plans to locate, within
3the State that is certified as eligible for the credits awarded
4under this Act.
5    "Credit" means the credits awarded pursuant to Section 20
6of this Act.
7    "Department" means the Department of Commerce and Economic
8Opportunity or its successor.
9    "Director" means the Director of Commerce and Economic
11    "Eligible new employee" means a full-time or part-time
12employee of a certified business. The term "eligible new
13employee" does not include a person classified as an
14independent contractor under laws and rules administered by the
15Department of Employment Security.
16    Full-time employee" means an individual who is employed for
17consideration for at least 35 hours each week or who renders
18any other standard of service generally accepted by industry
19custom or practice as full-time employment. An individual for
20whom a W-2 is issued by a Professional Employer Organization
21(PEO) is a full-time employee if employed in the service of the
22Applicant for consideration for at least 35 hours each week or
23who renders any other standard of service generally accepted by
24industry custom or practice as full-time employment.
25    "New employee" means each Illinois-domiciled resident
26hired as an eligible new employee employed in a net new job.



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1    "New job" means a job that did not exist in the business of
2the taxpayer in this State prior to the taxable year in which
3the new job was created. New jobs must be filled by new
5    "Net new employment" means the average number of new jobs
6of a certified business in the State during the taxable year
7that equals or exceeds the average number of employees of the
8business in the State during the immediately preceding taxable
10    "Net new job" means a job that: (1) is new to this State;
11(2) has not been transferred from another business located in
12this State through an acquisition, merger, consolidation, or
13other reorganization of the business, or through the
14acquisition of the assets of another business, or transferred
15from the existing employees of a related person, as defined in
16Section 465(b)(3)(C) of the Internal Revenue Code, located in
17the State, to similar employment with the taxpayer unless the
18business has received approval from the Department; and (3) is
19not filled by an individual employed within the State within
20the preceding 60 months by a related person.
21    "Pass-through entity" means an entity that is exempt from
22the tax under subsection (b) or (c) of Section 205 of the
23Illinois Income Tax Act.
24    "Professional Employer Organization" (PEO) means an
25employee leasing company, as defined in Section 206.1 of the
26Unemployment Insurance Act.



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1    "Related member" means a person who, with respect to the
2taxpayer during any portion of the taxable year, is any one of
3the following:
4        (1) An individual stockholder, if the stockholder and
5    the members of the stockholder's family (as defined in
6    Section 318 of the Internal Revenue Code) own directly,
7    indirectly, beneficially, or constructively, in the
8    aggregate, at least 50% of the value of the taxpayer's
9    outstanding stock.
10        (2) A partnership, estate, or trust, and any partner or
11    beneficiary, if the partnership, estate, or trust, and its
12    partners or beneficiaries own directly, indirectly,
13    beneficially, or constructively, in the aggregate, at
14    least 50% of the profits, capital, stock, or value of the
15    taxpayer.
16        (3) A corporation, and any party related to the
17    corporation in a manner that would require an attribution
18    of stock from the corporation to the party or from the
19    party to the corporation under the attribution rules of
20    Section 318 of the Internal Revenue Code, if the taxpayer
21    owns directly, indirectly, beneficially, or
22    constructively, at least 50% of the value of the
23    corporation's outstanding stock.
24        (4) A corporation and any party related to that
25    corporation in a manner that would require an attribution
26    of stock from the corporation to the party or from the



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1    party to the corporation under the attribution rules of
2    Section 318 of the Internal Revenue Code, if the
3    corporation and all such related parties own in the
4    aggregate at least 50% of the profits, capital, stock, or
5    value of the taxpayer.
6        (5) A person to or from whom there is attribution of
7    stock ownership in accordance with Section 1563(e) of the
8    Internal Revenue Code, except that, for purposes of
9    determining whether a person is a related member under this
10    paragraph, 20% shall be substituted for 5% wherever 5%
11    appears in Section 1563(e) of the Internal Revenue Code.
12    "Retained job" means a full-time or part-time position of
13employment by a taxpayer that would either be eliminated or
14transferred outside of this State absent an award of the
15credits in Section 20 of this Act.
16    "Taxpayer" means an individual, corporation, partnership,
17or other entity that is subject to the Illinois Income Tax Act,
18and means each individual member of a unitary business group,
19as that term is defined in Section 1501 of the Illinois Income
20Tax Act, and does not mean a unitary business group as a whole.
21    "Training costs" means 50% of employee wage costs for a new
22employee during the first 6 months of employment of that new
24    Section 15. Powers of the Department. The Department, in
25addition to those powers granted under the Civil Administrative



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1Code of Illinois, is granted and shall have all the powers
2necessary or convenient to carry out and effectuate the
3purposes and provisions of this Act, including, but not limited
4to, power and authority to:
5        (1) adopt rules deemed necessary and appropriate for
6    the administration of the this Act;
7        (2) establish forms for applications, notifications,
8        contracts, or any other agreements, and accept
9        applications for credits under this Act at any time
10        during the year;
11        (3) provide and assist taxpayers pursuant to the
12    provisions of this Act and cooperate with taxpayers that
13    are certified businesses to promote, foster, and support
14    economic development, capital investment, and job creation
15    or retention within the State;
16        (4) enter into agreements and memoranda of
17    understanding for participation of and engage in
18    cooperation with agencies of the federal government, units
19    of local government, universities, research foundations or
20    institutions, regional economic development corporations,
21    or other organizations for the purposes of this Act;
22        (5) establish, negotiate, and effectuate any term,
23    agreement, or other document with any person, necessary or
24    appropriate to accomplish the purposes of this Act;
25        (6) provide for sufficient personnel to permit the
26    administration, staffing, operation, and related support



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1    required to adequately discharge the Department's duties
2    and responsibilities described in this Act from funds as
3    may be appropriated by the General Assembly for the
4    administration of this Act;
5        (7) require applicants, upon written request, to issue
6    any necessary authorization to the appropriate federal,
7    State, or local authority for the release of information
8    concerning a project being considered under the provisions
9    of this Act, with the information requested to include, but
10    not be limited to, financial reports, returns, or records
11    relating to the taxpayer or the project; and
12        (8) require that a certified business shall at all
13    times keep proper books of record and account in accordance
14    with generally accepted accounting principles consistently
15    applied, with the books, records, or papers related in the
16    custody or control of the certified business open for
17    reasonable Department inspection and audits, and
18    including, without limitation, the making of copies of the
19    books, records, or papers, and the inspection or appraisal
20    of any assets of the certified business or project.
21    Section 20. Tax credit awards.
22    (a) For taxable years beginning after December 31, 2017,
23the Department shall award credits against the tax imposed
24under subsections (a) and (b) of Section 201 of the Illinois
25Income Tax Act to certified businesses for jobs created or



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1retained in an amount equal to:
2        (1) 10% of the wages paid to each eligible new
3    full-time employee during the taxable year in which he or
4    she is hired and each of the subsequent 4 taxable years;
5    10% of the wages paid to each eligible retained full-time
6    employee in the first year in which the taxpayer is a
7    certified business and each of the subsequent 4 taxable
8    years; and an additional 5% of the wages paid to an
9    eligible new or retained full-time employee during those
10    taxable years if the wages paid to that eligible new or
11    retained full-time employee are more than 150% of the
12    Illinois minimum wage when calculated on an hourly basis;
13    and
14        (2) 5% of the wages paid to each eligible new part-time
15    employee during the taxable year in which he or she is
16    hired and the subsequent 4 taxable years; 5% of the wages
17    paid to each eligible retained part-time employee in the
18    first year in which the taxpayer is a certified business
19    and each of the subsequent 4 taxable years; and
20        (3) an additional amount of 10% of the wages of an
21    eligible new or retained full-time or part-time employee
22    employed by the certified business in a labor market area
23    that meets any one of the following criteria:
24            (A) the labor market area has a poverty rate of at
25        least 20%, according to the latest federal decennial
26        census;



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1            (B) 50% or more of the children in the local labor
2        market participate in the federal free lunch program,
3        according to reported statistics from the State Board
4        of Education, or
5            (C) 20% or more of the households in the local
6        labor market area receive food stamps, according to the
7        latest federal decennial census.
8        (4) In lieu of the credits provided under paragraphs
9    (1), (2), and (3) of this subsection (a), an amount equal
10    to 50% of the training costs, as defined in Section 10,
11    associated with each new employee.
12    (b) The Department shall award credits for investment in an
13amount equal to:
14        (1) 50% of the amount claimed by the certified business
15    for the taxable year pursuant to subsection (e) of Section
16    201 of the Illinois Income Tax Act; or
17        (2) 50% of the amount claimed by the Certified Business
18    for the taxable year pursuant to subsection (h) or (f) of
19    Section 201 of the Illinois Income Tax.
20    (c) The maximum amount of all new credits awarded by the
21Department during any calendar year may not exceed $50,000,000.
22Any taxpayer who is otherwise qualified for a credit but is not
23awarded a credit in a taxable year solely because the
24$50,000,000 cap has been reached is eligible for the credit in
25the following taxable year.
26    (d) Any tax credits awarded under this Act and not



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1previously claimed by a taxpayer against its income tax
2liability under Section 201 of the Illinois Income Tax Act may
3be sold, assigned, or transferred, in whole or in part, to
4another Illinois taxpayer subject to all of the following
6        (1) A taxpayer awarded an income tax credit under this
7    Act may make only a single sale, assignment, or transfer of
8    the tax credit earned in a taxable year; however, the
9    credit may be sold, assigned, or transferred to one or more
10    transferees.
11        (2) The tax credit earned by the transferor may be
12    transferred before the due date, including extensions, of
13    the Illinois income tax return of the transferor. The
14    amount of the credit transferred to the transferee or
15    transferees may not exceed the amount of the credit earned
16    by the transferor in the transferor's taxable year.
17        (3) Written notification of the transfer or sale of
18    credits awarded under this Act shall be submitted to the
19    Department and the Department of Revenue within 30 days
20    after the sale, assignment, or transfer. The Department of
21    Revenue shall provide by rule the information required to
22    be provided in such written notification.
23        (4) The transfer or sale of tax credits under this
24    subsection does not extend the time during which those tax
25    credits may be used. The carry-forward period for a tax
26    credit that is transferred or sold shall begin on the date



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1    on which the tax credit was originally earned.
2        (5) A transferee shall have only those rights to claim
3    and use the tax credit that were available to the taxpayer
4    that earned the credit, except that credits sold or
5    transferred may not be used against a transferee's
6    withholding tax liability.
7        (6) If the taxpayer earning the credit is later
8    determined to not be in entitled to the credit, the
9    Department of Revenue shall hold the transferor liable for
10    any tax, penalty, or interest due as a result of such
11    determination.
12    Section 25. Application to be a certified business.
13    (a) Any taxpayer proposing to increase investment and
14employment in Illinois may request designation as a certified
15business by application to the Department in which the taxpayer
16states its intent to hire or retain a specified number of
17full-time or full-time equivalent employees at designated
18locations in Illinois.
19    (b) In order to qualify for credits under this Act, the
20applicant must create net new jobs or retain existing jobs that
21would be eliminated or transferred to locations outside of
22Illinois but for the credits to be received by the taxpayer.
23    (c) After review of the application, the Department may
24certify the applicant as a certified business.



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1    Section 30. Relocation of jobs in Illinois. A taxpayer may
2not claim the credits provided by this Act with respect to any
3jobs that the taxpayer relocates from one site in Illinois to
4another site in Illinois, except for those jobs certified as
5retained jobs. Determinations under this Section shall be made
6by the Department.
7    Section 35. Duration of the credit. The duration of the
8credit is 5 taxable years, except as the credit may be applied
9in a carryover year pursuant to Section 224 of the Illinois
10Income Tax Act.
11    Section 40. Recapture of the credit. If a taxpayer fails to
12maintain any retained job or net new job for the year in which
13the job was created or retained, then no credit shall be
14granted for that net new job. If a taxpayer fails to maintain
15any retained job or net new job for the subsequent 4 taxable
16years after the year of creation or retention, the credits
17granted under this Act for those jobs shall be recaptured. Any
18amounts recaptured pursuant to this Section shall be reported
19and paid to the Department of Revenue on the income tax return
20for the taxable year in which the recapture is triggered. Any
21such amounts repaid by the original due date of the income tax
22return on which the recapture is reported shall be subject to
23only to interest, but not penalties under the Uniform Penalty
24and Interest Act.



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1    Section 45. Certificate of verification.
2    (a) A certified business claiming credits under this Act
3shall submit to the Department of Revenue a copy of the
4Department's certificate of verification under this Act for the
5taxable year. However, a failure to submit a copy of the
6certificate with the tax return of the certified business shall
7not invalidate a claim for a credit.
8    (b) For a certified business to be eligible for a
9certificate of verification, the certified business shall
10provide proof as required by the Department prior to the end of
11each calendar year, including, but not limited to, attestation
12by the certified business of the retained jobs and net new
13employment in the State during the taxable year.
14    Section 50. Pass-through entity. The shareholders or
15partners of a certified business that is a pass-through entity
16shall be entitled to the credits awarded under this Act.
17    Section 55. Rulemaking. The Department and the Department
18of Revenue shall adopt rules necessary to implement this Act.
19    Section 60. Noncompliance; notice; assessment. If the
20Department determines that a taxpayer who has received a credit
21under this Act is not complying with the requirements of this
22Act, the Department shall provide written notice to the



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1taxpayer of the alleged noncompliance. The notice shall provide
2the basis for the Department's determination and shall allow
3the taxpayer to request a hearing before the Department of
4Revenue, provided such request is made within 60 days after the
5notice is provided to the taxpayer. Any hearing authorized
6pursuant to this Section shall be subject to the rules of the
7Department of Revenue and shall be open to the public in the
8same manner as any other matter before the Department of
9Revenue. If, after such notice and any hearing, the Department
10of Revenue determines that a noncompliance exists, the
11Department of Revenue shall issue to the Department of Commerce
12and Economic Opportunity a notice to that effect, stating the
13revocation date.
14    Section 65. Annual report. On or before July 1 each year,
15the Department shall submit a report on the tax credit program
16under this Act to the Governor and the General Assembly. The
17report shall include information on the number of
18certifications made under this Act during the preceding
19calendar year, a description of the subject of each
20certification, an update of the status of certifications
21entered into in preceding calendar years, and the sum of
22credits awarded under this Act.
23    Section 100. The Illinois Income Tax Act is amended by
24adding Section 224 as follows:



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1    (35 ILCS 5/224 new)
2    Sec. 224. Business and employment development tax credit.
3    (a) For tax years beginning on or after January 1, 2018, a
4taxpayer who has been certified by the Department of Commerce
5and Economic Opportunity as a certified business under the
6Business and Employment Development Tax Credit Act is entitled
7to a credit against the taxes imposed under subsections (a) and
8(b) of Section 201 of this Act as provided in this Act. If the
9taxpayer is a partnership or Subchapter S corporation, the
10credit shall be allowed to the partners or shareholders in
11accordance with the determination of income and distributive
12share of income under Sections 702 and 704 and subchapter S of
13the Internal Revenue Code. The Department, in cooperation with
14the Department of Commerce and Economic Opportunity, shall
15adopt rules to enforce and administer the provisions of this
16Section. This Section is exempt from the provisions of Section
17250 of this Act.
18    (b) The amount of the credit shall be determined on an
19annual basis. Except as applied in a carryover year, the credit
20may not be applied against any State income tax liability in
21more than 10 taxable years.
22    (c) In no event shall a credit under this Section reduce
23the taxpayer's liability to less than zero. If the amount of
24the credit exceeds the tax liability for the year, the excess
25may be carried forward and applied to the tax liability of the



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15 taxable years following the excess credit year. The tax
2credit shall be applied to the earliest year for which there is
3a tax liability. If there are credits for more than one year
4that are available to offset a liability, the earlier credit
5shall be applied first.
6    (d) No credit shall be allowed with respect to any
7certification for any taxable year ending after the revocation
8of the certification by the Department of Commerce and Economic
9Opportunity. Upon receiving notification by the Department of
10Commerce and Economic Opportunity of the revocation of
11certification, the Department shall notify the taxpayer that no
12credit is allowed for any taxable year ending after the
13revocation date, as stated in such notification. If any credit
14has been allowed with respect to a certification for a taxable
15year ending after the revocation date, any refund paid to the
16taxpayer for that taxable year shall, to the extent of that
17credit allowed, be an erroneous refund within the meaning of
18Section 912 of this Act.
19    (e) A sale, assignment, or transfer of the tax credit award
20may be made by the taxpayer in accordance with rules adopted by
21the Department of Commerce and Economic Opportunity.
22    (f) The terms used in this Section have the meanings given
23to those terms in the Business and Employment Development Tax
24Credit Act.
25    Section 999. Effective date. This Act takes effect upon
26becoming law.