State of Illinois
91st General Assembly

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 1        AN ACT concerning economic development.

 2        Be it enacted by the People of  the  State  of  Illinois,
 3    represented in the General Assembly:

 4        Section  1.  Short  title.   This Act may be cited as the
 5    Economic Development for a Growing Economy Tax Credit Act.

 6        Section 5. Definitions.  As used in this Act:
 7        "Applicant" means a taxpayer that is a  business  located
 8    or which plans to locate within the State of Illinois that is
 9    engaged  in interstate or intrastate commerce for the purpose
10    of  manufacturing,  processing,   or   assembling   products,
11    conducting   research   and  development,  providing  tourism
12    services,  or  providing  services  in  interstate  commerce,
13    office industries, or agricultural processing, but  excluding
14    retail,   retail  food,  health,  or  professional  services.
15    "Applicant" does  not  include  a  business  that  closes  or
16    substantially  reduces  its  operation at one location in the
17    State and  relocates  substantially  the  same  operation  to
18    another  location  in  the  State.  This  does not prohibit a
19    business from expanding its operations at another location in
20    the State provided that  existing  operations  of  a  similar
21    nature   located   within   the   State  are  not  closed  or
22    substantially reduced. This also does not prohibit a business
23    from moving its operations from one location in the State  to
24    another  location  in  the State for the purpose of expanding
25    the operation provided that the  Department  determines  that
26    expansion   cannot  reasonably  be  accommodated  within  the
27    municipality in which the business is located, or in the case
28    of a business located in an incorporated area of the  county,
29    within  the  county  in  which the business is located, after
30    conferring  with  the   chief   elected   official   of   the
31    municipality  or  county  and  taking  into consideration any
                            -2-                LRB9100606PTpk
 1    evidence offered by the municipality or county regarding  the
 2    ability  to  accommodate expansion within the municipality or
 3    county.
 4        "Department"  means  the  Department  of   Commerce   and
 5    Community Affairs.
 6        "Credit  amount"  means  the amount agreed to between the
 7    Department and applicant under this Act, but  not  to  exceed
 8    the  new  employees'  income tax withholdings attributable to
 9    the applicant's project.
10        "Director" means the Director of Commerce  and  Community
11    Affairs.
12        "Full-time  employee" means an individual who is employed
13    for consideration for at least 35  hours  each  week  or  who
14    renders  any  other standard of service generally accepted by
15    custom or specified by contract as full-time employment.
16        "New employees' income tax withholdings" means the  total
17    amount  withheld under Section 701 of the Illinois Income Tax
18    Act  by  the  taxpayer  during  the  taxable  year  from  the
19    compensation of new employees.
20        "New employee" means:
21             (a)  A  full-time  employee  first  employed  by   a
22        taxpayer  in  the  project  that  is the subject of a tax
23        credit agreement and who is employed after  the  taxpayer
24        enters into the tax credit agreement.
25             (b)  The term "new employee" does not include:
26                  (1)  an employee of the taxpayer who performs a
27             job   that   was  previously  performed  by  another
28             employee, if that job existed for at least 6  months
29             before hiring the new employee;
30                  (2)  an   employee  of  the  taxpayer  who  was
31             previously employed in Illinois by a related  member
32             of  the taxpayer and whose employment was shifted to
33             the taxpayer after the taxpayer entered into the tax
34             credit agreement; or
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 1                  (3)  a child, grandchild,  parent,  or  spouse,
 2             other  than  a  spouse who is legally separated from
 3             the individual, of any individual who is an employee
 4             of the taxpayer and who has a direct or an  indirect
 5             ownership  interest  of  at least 5% in the profits,
 6             capital, or value  of  the  taxpayer  (an  ownership
 7             interest  shall  be  determined  in  accordance with
 8             Section  1563  of  the  Internal  Revenue  Code  and
 9             regulations prescribed under that Section).
10             (c)  Notwithstanding  paragraph  (1)  of  subsection
11        (b), if a new employee performs a job that was previously
12        performed by an employee who was:
13                  (1)  treated  under  the  agreement  as  a  new
14             employee, and
15                  (2)  promoted by the taxpayer to  another  job,
16             the  employee may be considered a new employee under
17             the agreement.
18             (d)  Notwithstanding subsection (a), the  Department
19        may credit awards to an applicant that met the conditions
20        of  this  Act  at the time of the applicant's location or
21        expansion decision, if:
22                  (1)  the applicant is in receipt  of  a  letter
23             from  the Department stating an intent to enter into
24             a credit agreement; and
25                  (2)  the letter described in paragraph  (1)  is
26             issued  by  the  Department  not  later than 15 days
27             after the effective date of this Act.
28        "Pass through entity" means an entity that is exempt from
29    the tax under subsection (b) or (c) of  Section  205  of  the
30    Illinois Income Tax Act.
31        "Related member" means a person that, with respect to the
32    taxpayer  during  all  or any portion of the taxable year, is
33    any one  of the following:
34             (1)  An individual stockholder, or a member  of  the
                            -4-                LRB9100606PTpk
 1        stockholder's  family  enumerated  in  Section 318 of the
 2        Internal Revenue Code, if the stockholder and the  member
 3        of  the  stockholder's  family  own directly, indirectly,
 4        beneficially, or constructively,  in  the  aggregate,  at
 5        least  50%  of  the  value  of the taxpayer's outstanding
 6        stock.
 7             (2)  A stockholder, or a stockholder's  partnership,
 8        estate, trust, or corporation, if the stockholder and the
 9        stockholder's  partnership, estate, trust, or corporation
10        owns    directly,    indirectly,     beneficially,     or
11        constructively,  in  the  aggregate,  at least 50% of the
12        value of the taxpayer's outstanding stock.
13             (3)  A  corporation,  or  a  party  related  to  the
14        corporation in a manner that would require an attribution
15        of stock from the corporation to the party  or  from  the
16        party  to  the corporation under the attribution rules of
17        Section 318 of the Internal Revenue Code, if the taxpayer
18        owns    directly,    indirectly,     beneficially,     or
19        constructively   at   least  50%  of  the  value  of  the
20        corporation's outstanding stock.
21             (4)  A  component  member  (as  defined  in  Section
22        1563(b)  of the Internal Revenue Code).
23             (5)  A person to or from whom there  is  attribution
24        of stock ownership in accordance with Section 1563(e)  of
25        the   Internal  Revenue  Code  except,  for  purposes  of
26        determining whether a person is a  related  member  under
27        this  paragraph, 20% shall be substituted for 5% wherever
28        5% appears in Section 1563(e)  of  the  Internal  Revenue
29        Code.
30        "State  tax  liability"  means  a  taxpayer's  total  tax
31    liability that is incurred under the Illinois Income Tax Act.
32        "Taxpayer"  means  a person, corporation, partnership, or
33    other entity that has any State tax liability.
                            -5-                LRB9100606PTpk
 1        Section 10. Tax credit.  Subject to  the  conditions  set
 2    forth in this Act, a taxpayer is entitled to a credit against
 3    any  State  tax liability that may be imposed on the taxpayer
 4    for a taxable year after December 31, 1998, if  the  taxpayer
 5    is awarded a credit by the Department under this Act for that
 6    taxable year.

 7        Section 15.  Credit awards.
 8        (a)  The Department may make credit awards under this Act
 9    to foster job creation in Illinois.
10        (b)  The  credit  shall  be claimed for the taxable years
11    specified in the taxpayer's tax credit agreement.

12        Section 20.  Proposal of  project  to  create  new  jobs;
13    application.   A person that proposes a project to create new
14    jobs in Illinois may apply to the Department to enter into an
15    agreement for a tax credit under this Act. The Director shall
16    prescribe the form of the application.

17        Section 25.  Agreement with applicant for credit.   After
18    receipt  of  an application, the Department may enter into an
19    agreement with the applicant for a credit under this  Act  if
20    the   Department   determines   that  all  of  the  following
21    conditions exist:
22             (1)  The applicant's project will create  a  minimum
23        of  100  jobs  for full-time employees that were not jobs
24        previously performed by employees  of  the  applicant  in
25        Illinois.
26             (2)  The  applicant's  project is economically sound
27        and will benefit the people  of  Illinois  by  increasing
28        opportunities   for   employment  and  strengthening  the
29        economy of Illinois.
30             (3)  There is at least one   other  state  that  the
31        applicant verifies is being considered for the project.
                            -6-                LRB9100606PTpk
 1             (4)  A  significant  disparity  is identified, using
 2        best available data,  in  the  projected  costs  for  the
 3        applicant's   project   compared  to  the  costs  in  the
 4        competing state, including the impact  of  the  competing
 5        state's   incentive   programs.   The  competing  state's
 6        incentive programs shall include state,  local,  private,
 7        and federal funds available.
 8             (5)  The  political  subdivisions  affected  by  the
 9        project  have  committed local incentives with respect to
10        the project.
11             (6)  Receiving the tax credit is a major  factor  in
12        the  applicant's  decision to go forward with the project
13        and not receiving the  tax  credit  will  result  in  the
14        applicant not creating new jobs in Illinois.
15             (7)  Awarding  the  tax  credit  will  result  in an
16        overall positive fiscal impact to the State, as certified
17        by the Bureau of the Budget   using  the  best  available
18        data.
19             (8)  The  credit  is not prohibited by Section 35 of
20        this Act.

21        Section 30.  Use of the credits.  An applicant  must  use
22    the  credit awards provided under this Act for one or more of
23    the following purposes:
24             (1)  capital investment, including, but not  limited
25        to, equipment, buildings, or land;
26             (2)  infrastructure development;
27             (3)  debt service;
28             (4)  research and development;
29             (5)  job training and education;
30             (6)  lease costs; or
31             (7)  relocation costs.

32        Section 35.  Relocation of jobs in Illinois.  A person is
                            -7-                LRB9100606PTpk
 1    not entitled to claim the credit provided by this Act for any
 2    jobs  that the person relocates from one  site in Illinois to
 3    another site in Illinois. Determinations under  this  Section
 4    shall be made by the Department.

 5        Section   40.    Determination   of  credit  amount.   In
 6    determining the credit amount that  should  be  awarded,  the
 7    Department   shall  take  into  consideration  the  following
 8    factors:
 9             (1)  The economy of the county where  the  projected
10        investment is to occur.
11             (2)  The   potential   impact   on  the  economy  of
12        Illinois.
13             (3)  The magnitude of the cost differential  between
14        Illinois and the competing state.
15             (4)  The  incremental  payroll  attributable  to the
16        project.
17             (5)  The  capital  investment  attributable  to  the
18        project.
19             (6)  The amount of the  average  wage  paid  by  the
20        applicant.
21             (7)  The   costs   to   Illinois  and  the  affected
22        political subdivisions with respect to the project.
23             (8)  The  financial  assistance  that  is  otherwise
24        provided  by  Illinois   and   the   affected   political
25        subdivisions.

26        Section  45.   Amount  and  duration of tax credit.   The
27    Department shall determine the amount and duration of  a  tax
28    credit awarded under this Act. The duration of the credit may
29    not  exceed  15  taxable years. The credit may be stated as a
30    percentage of the  new  employees'  income  tax  withholdings
31    attributable  to  the  applicant's  project and may include a
32    fixed dollar limitation. The credit amount may not exceed the
                            -8-                LRB9100606PTpk
 1    new employees' income tax withholdings. However,  the  credit
 2    amount  claimed  for a taxable year may exceed the taxpayer's
 3    State tax liability for the taxable year, in which  case  the
 4    excess shall be refunded to the taxpayer.

 5        Section  50.   Contents of agreement with applicant.  The
 6    Department shall enter into an agreement  with  an  applicant
 7    that  is  awarded a credit under this Act. The agreement must
 8    include all of the following:
 9             (1)  A detailed description of the project  that  is
10        the subject of the agreement.
11             (2)  The  duration  of  the tax credit and the first
12        taxable year for which the credit may be claimed.
13             (3)  The credit amount that will be allowed for each
14        taxable year.
15             (4)  A requirement that the taxpayer shall  maintain
16        operations  at  the  project  location  for  at least the
17        number of years of the term of the tax credit.
18             (5)  A specific method for determining the number of
19        new employees employed during  a  taxable  year  who  are
20        performing jobs not previously performed by an employee.
21             (6)  A  requirement that the taxpayer shall annually
22        report to the Department the number of new employees  who
23        are  performing  jobs  not  previously  performed  by  an
24        employee,   the   new  income  tax  revenue  withheld  in
25        connection  with  the  new  employees,  and   any   other
26        information  the Director needs to perform the Director's
27        duties under this Act.
28             (7)  A requirement that the Director  is  authorized
29        to verify with the appropriate State agencies the amounts
30        reported  under  paragraph  (6), and after doing so shall
31        issue a certificate to  the  taxpayer  stating  that  the
32        amounts have been verified.
33             (8)  A  requirement  that the taxpayer shall provide
                            -9-                LRB9100606PTpk
 1        written notification to the Director  not  more  than  30
 2        days after the taxpayer makes or receives a proposal that
 3        would   transfer   the  taxpayer's  State  tax  liability
 4        obligations to a successor taxpayer.
 5             (9)  Any  other  performance  conditions  that   the
 6        Director determines are appropriate.

 7        Section  55.   Certificate of verification; submission to
 8    the Department of Revenue.   A  taxpayer  claiming  a  credit
 9    under  this  Act  shall submit to the Department of Revenue a
10    copy of the Director's certificate of verification under this
11    Act for the taxable year. However, failure to submit  a  copy
12    of the certificate does not invalidate a claim for a credit.

13        Section  60.  Pass  through  entity  with  no  State  tax
14    liability.
15        (a)  If  a pass through entity does not have State income
16    tax liability against which the tax credit may be applied,  a
17    shareholder or partner of the pass through entity is entitled
18    to a tax credit equal to:
19             (1)  the  tax credit determined for the pass through
20        entity for the taxable year; multiplied by
21             (2)  the percentage of  the  pass  through  entity's
22        distributive  income  to which the shareholder or partner
23        is entitled.
24        (b)  The credit  provided  under  subsection  (a)  is  in
25    addition to a tax credit to which a shareholder or partner of
26    a  pass through entity is otherwise entitled under a separate
27    agreement under  this  Act.  A  pass  through  entity  and  a
28    shareholder  or  partner  of  the pass through entity may not
29    claim more than one  credit under the same agreement.

30        Section 65. Noncompliance; notice;  assessment.   If  the
31    Director determines that a taxpayer who has received a credit
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 1    under  this Act is not complying with the requirements of the
 2    tax credit agreement or all of the provisions  of  this  Act,
 3    the  director  shall  provide  notice  to the taxpayer of the
 4    alleged noncompliance, and allow the  taxpayer  a  reasonable
 5    opportunity  to  provide an explanation.  If, after affording
 6    the taxpayer an opportunity to provide  an  explanation,  the
 7    Director  still  determines  that a noncompliance exists, the
 8    Director shall instruct the Department of Revenue to issue  a
 9    notice of deficiency under Section 904 of the Illinois Income
10    Tax  Act  to the taxpayer for an amount not greater than that
11    stated  in  the  Director's  notice.   The  amount   of   the
12    assessment  may  not  exceed  the  amount  of  any previously
13    allowed credits under this Act.

14        Section 70. Annual report. On or  before  March  31  each
15    year, the Director shall submit a report to the Department on
16    the tax credit program under this Act to the Governor and the
17    General Assembly. The report shall include information on the
18    number  of  agreements  that were entered into under this Act
19    during the preceding calendar  year,  a  description  of  the
20    project  that  is the subject of each agreement, an update on
21    the status of projects under agreements entered  into  before
22    the  preceding  calendar  year,  and  the  sum of the credits
23    awarded under this  Act.  A  copy  of  the  report  shall  be
24    delivered  to  the Governor and to each member of the General
25    Assembly.

26        Section 75. Evaluation of  tax  credit  program.    On  a
27    biennial  basis, the Department shall evaluate the tax credit
28    program.  The evaluation shall include an assessment  of  the
29    effectiveness of the program in creating new jobs in Illinois
30    and  of  the revenue impact of the program, and may include a
31    review of the practices and experiences of other states  with
32    similar  programs.  The Director shall submit a report on the
                            -11-               LRB9100606PTpk
 1    evaluation to the Governor and  the  General  Assembly  after
 2    June 30 and before November 1 in each odd-numbered year.

 3        Section  80.   Adoption  of  rules.   The Department  may
 4    adopt rules necessary to implement this Act.  The  rules  may
 5    provide  for  recipients  of tax credits under this Act to be
 6    charged fees to cover administrative costs of the tax  credit
 7    program.  Fees collected shall be deposited into the Economic
 8    Development for a Growing Economy Fund.

 9        Section 85.   The  Economic  Development  for  a  Growing
10    Economy Fund.
11        (a)  The  Economic Development for a Growing Economy Fund
12    is established to be used exclusively  for  the  purposes  of
13    this  Act,  including  paying  for the costs of administering
14    this Act. The Fund shall be administered by the Department.
15        (b)  The Fund consists of collected fees,  appropriations
16    from the General Assembly, and gifts and grants to the Fund.
17        (c)  The  State  Treasurer  shall invest the money in the
18    Fund not currently needed to meet the obligations of the Fund
19    in the same manner as other public  funds  may  be  invested.
20    Interest   that  accrues  from  these  investments  shall  be
21    deposited into the Fund.
22        (d)  The money in the Fund at the end of a  State  fiscal
23    year  remains  in  the  Fund  to  be used exclusively for the
24    purposes of this Act. Expenditures from the Fund are  subject
25    to appropriation by the General Assembly.

26        Section  100.  The State Finance Act is amended by adding
27    Section 5.490 as follows:

28        (30 ILCS 105/5.490 new)
29        Sec. 5.490.   The  Economic  Development  for  a  Growing
30    Economy Fund.
                            -12-               LRB9100606PTpk
 1        Section  105.  The  Illinois Income Tax Act is amended by
 2    adding Section 211 as follows:

 3        (35 ILCS 5/211 new)
 4        Sec. 211.  Economic Development for a Growing Economy Tax
 5    Credit.  For tax years beginning on or after January 1, 1999,
 6    a taxpayer participating in an economic  development  project
 7    under  the  Economic  Development  for  a Growing Economy Tax
 8    Credit Act is entitled to a  tax  credit  against  the  taxes
 9    imposed  under  this Act in an amount to be determined in the
10    agreement required under the Economic Development for Growing
11    Economy Tax Credit Act. The Department, in  cooperation  with
12    the  Department  of  Commerce  and  Community  Affairs, shall
13    prescribe rules to enforce and administer the  provisions  of
14    this  Section.  This Section is exempt from the provisions of
15    Section 250 of this Act.
                            -13-               LRB9100606PTpk
 1                                INDEX
 2               Statutes amended in order of appearance
 3                               New Act
 4    30 ILCS 105/5.490 new
 5    35 ILCS 5/211 new

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