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91_SB0040
LRB9101877PTmb
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
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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
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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.
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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.
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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
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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
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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
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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
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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.
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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.
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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