State of Illinois
92nd General Assembly
Legislation

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[ Engrossed ][ House Amendment 001 ]


92_HB5384

 
                                               LRB9213134SMdv

 1        AN ACT concerning taxes.

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

 4        Section  5.   The  Illinois  Income Tax Act is amended by
 5    changing Section 201 as follows:

 6        (35 ILCS 5/201) (from Ch. 120, par. 2-201)
 7        Sec. 201.  Tax Imposed.
 8        (a)  In general.  A tax measured by net income is  hereby
 9    imposed  on  every  individual, corporation, trust and estate
10    for each taxable year ending  after  July  31,  1969  on  the
11    privilege  of earning or receiving income in or as a resident
12    of this State. Such tax shall be in  addition  to  all  other
13    occupation or privilege taxes imposed by this State or by any
14    municipal corporation or political subdivision thereof.
15        (b)  Rates.   The  tax  imposed by subsection (a) of this
16    Section shall be determined as follows, except as adjusted by
17    subsection (d-1):
18             (1)  In the case of an individual, trust or  estate,
19        for taxable years ending prior to July 1, 1989, an amount
20        equal  to  2  1/2%  of  the taxpayer's net income for the
21        taxable year.
22             (2)  In the case of an individual, trust or  estate,
23        for  taxable  years  beginning  prior to July 1, 1989 and
24        ending after June 30, 1989, an amount equal to the sum of
25        (i) 2 1/2% of the taxpayer's net income  for  the  period
26        prior to July 1, 1989, as calculated under Section 202.3,
27        and  (ii)  3% of the taxpayer's net income for the period
28        after June 30, 1989, as calculated under Section 202.3.
29             (3)  In the case of an individual, trust or  estate,
30        for  taxable  years  beginning  after  June  30, 1989, an
31        amount equal to 3% of the taxpayer's net income  for  the
 
                            -2-                LRB9213134SMdv
 1        taxable year.
 2             (4)  (Blank).
 3             (5)  (Blank).
 4             (6)  In the case of a corporation, for taxable years
 5        ending  prior  to  July 1, 1989, an amount equal to 4% of
 6        the taxpayer's net income for the taxable year.
 7             (7)  In the case of a corporation, for taxable years
 8        beginning prior to July 1, 1989 and ending after June 30,
 9        1989, an amount equal  to  the  sum  of  (i)  4%  of  the
10        taxpayer's  net  income  for  the period prior to July 1,
11        1989, as calculated under Section 202.3, and (ii) 4.8% of
12        the taxpayer's net income for the period after  June  30,
13        1989, as calculated under Section 202.3.
14             (8)  In the case of a corporation, for taxable years
15        beginning after June 30, 1989, an amount equal to 4.8% of
16        the taxpayer's net income for the taxable year.
17        (c)  Personal   Property   Tax  Replacement  Income  Tax.
18    Beginning on July 1, 1979 and thereafter, in addition to such
19    income  tax,  there  is  also  hereby  imposed  the  Personal
20    Property Tax Replacement Income Tax measured by net income on
21    every  corporation  (including  Subchapter  S  corporations),
22    partnership and trust, for each  taxable  year  ending  after
23    June  30,  1979.   Such taxes are imposed on the privilege of
24    earning or receiving income in  or  as  a  resident  of  this
25    State.   The  Personal  Property  Tax  Replacement Income Tax
26    shall be in addition to the income tax imposed by subsections
27    (a) and (b) of this Section and  in  addition  to  all  other
28    occupation or privilege taxes imposed by this State or by any
29    municipal corporation or political subdivision thereof.
30        (d)  Additional  Personal Property Tax Replacement Income
31    Tax Rates.  The personal property tax replacement income  tax
32    imposed by this subsection and subsection (c) of this Section
33    in  the  case  of  a  corporation,  other than a Subchapter S
34    corporation and except as adjusted by subsection (d-1), shall
 
                            -3-                LRB9213134SMdv
 1    be an additional amount equal to 2.85% of such taxpayer's net
 2    income for the taxable year, except that beginning on January
 3    1, 1981, and thereafter, the rate of 2.85% specified in  this
 4    subsection  shall  be  reduced  to 2.5%, and in the case of a
 5    partnership, trust or a Subchapter S corporation shall be  an
 6    additional amount equal to 1.5% of such taxpayer's net income
 7    for the taxable year.
 8        (d-1)  Rate  reduction  for certain foreign insurers.  In
 9    the case of a foreign insurer, as defined by Section 35A-5 of
10    the Illinois  Insurance  Code,  whose  state  or  country  of
11    domicile   imposes   on  insurers  domiciled  in  Illinois  a
12    retaliatory tax (excluding any insurer  whose  premiums  from
13    reinsurance  assumed  are  50% or more of its total insurance
14    premiums as determined under paragraph (2) of subsection  (b)
15    of   Section   304,   except   that   for  purposes  of  this
16    determination  premiums  from  reinsurance  do  not   include
17    premiums   from  inter-affiliate  reinsurance  arrangements),
18    beginning with taxable years ending on or after December  31,
19    1999,  the sum of the rates of tax imposed by subsections (b)
20    and (d) shall be reduced (but not increased) to the  rate  at
21    which  the total amount of tax imposed under this Act, net of
22    all credits allowed under this Act, shall equal (i) the total
23    amount of tax that would be imposed on the foreign  insurer's
24    net income allocable to Illinois for the taxable year by such
25    foreign  insurer's  state  or country of domicile if that net
26    income were subject to all income taxes and taxes measured by
27    net income imposed by such foreign insurer's state or country
28    of domicile, net of all credits allowed or  (ii)  a  rate  of
29    zero  if no such tax is imposed on such income by the foreign
30    insurer's  state  of  domicile.  For  the  purposes  of  this
31    subsection  (d-1),  an  inter-affiliate  includes  a   mutual
32    insurer under common management.
33             (1)  For  the  purposes  of  subsection (d-1), in no
34        event shall the sum  of  the  rates  of  tax  imposed  by
 
                            -4-                LRB9213134SMdv
 1        subsections  (b)  and  (d)  be  reduced below the rate at
 2        which the sum of:
 3                  (A)  the total amount of tax  imposed  on  such
 4             foreign  insurer  under this Act for a taxable year,
 5             net of all credits allowed under this Act, plus
 6                  (B)  the privilege tax imposed by  Section  409
 7             of  the  Illinois Insurance Code, the fire insurance
 8             company tax  imposed  by  Section  12  of  the  Fire
 9             Investigation  Act,  and  the  fire department taxes
10             imposed  under  Section  11-10-1  of  the   Illinois
11             Municipal Code,
12        equals  1.25% of the net taxable premiums written for the
13        taxable year, as described by subsection (1)  of  Section
14        409  of  the Illinois Insurance Code. This paragraph will
15        in no event increase the rates imposed under  subsections
16        (b) and (d).
17             (2)  Any  reduction  in  the rates of tax imposed by
18        this subsection shall be applied first against the  rates
19        imposed  by subsection (b) and only after the tax imposed
20        by subsection (a) net of all credits allowed  under  this
21        Section  other  than  the credit allowed under subsection
22        (i) has been reduced to zero, against the  rates  imposed
23        by subsection (d).
24        This  subsection  (d-1)  is exempt from the provisions of
25    Section 250.
26        (e)  Investment credit.  A taxpayer shall  be  allowed  a
27    credit  against  the Personal Property Tax Replacement Income
28    Tax for investment in qualified property.
29             (1)  A taxpayer shall be allowed a credit  equal  to
30        .5%  of the basis of qualified property placed in service
31        during the taxable year, provided such property is placed
32        in service on or after July  1,  1984.   There  shall  be
33        allowed an additional credit equal to .5% of the basis of
34        qualified  property  placed in service during the taxable
 
                            -5-                LRB9213134SMdv
 1        year, provided such property is placed in service  on  or
 2        after  July  1,  1986, and the taxpayer's base employment
 3        within Illinois has increased by  1%  or  more  over  the
 4        preceding year as determined by the taxpayer's employment
 5        records  filed with the Illinois Department of Employment
 6        Security.  Taxpayers who are new  to  Illinois  shall  be
 7        deemed  to  have met the 1% growth in base employment for
 8        the first year in which they file employment records with
 9        the Illinois  Department  of  Employment  Security.   The
10        provisions  added  to  this Section by Public Act 85-1200
11        (and restored by Public Act 87-895) shall be construed as
12        declaratory of existing law and not as a  new  enactment.
13        If,  in  any year, the increase in base employment within
14        Illinois over the preceding year is  less  than  1%,  the
15        additional  credit  shall  be  limited to that percentage
16        times a fraction, the numerator of which is .5%  and  the
17        denominator  of  which  is  1%, but shall not exceed .5%.
18        The investment credit shall not be allowed to the  extent
19        that  it  would  reduce a taxpayer's liability in any tax
20        year  below  zero,  nor  may  any  credit  for  qualified
21        property be allowed for any year other than the  year  in
22        which the property was placed in service in Illinois. For
23        tax years ending on or after December 31, 1987, and on or
24        before December 31, 1988, the credit shall be allowed for
25        the  tax year in which the property is placed in service,
26        or, if the amount of the credit exceeds the tax liability
27        for that year, whether it exceeds the original  liability
28        or  the  liability  as  later amended, such excess may be
29        carried forward and applied to the tax liability of the 5
30        taxable years following the excess credit  years  if  the
31        taxpayer  (i)  makes investments which cause the creation
32        of a  minimum  of  2,000  full-time  equivalent  jobs  in
33        Illinois,   (ii)   is   located  in  an  enterprise  zone
34        established pursuant to the Illinois Enterprise Zone  Act
 
                            -6-                LRB9213134SMdv
 1        and  (iii) is certified by the Department of Commerce and
 2        Community Affairs  as  complying  with  the  requirements
 3        specified  in  clause  (i) and (ii) by July 1, 1986.  The
 4        Department of Commerce and Community Affairs shall notify
 5        the Department of  Revenue  of  all  such  certifications
 6        immediately.  For  tax  years  ending  after December 31,
 7        1988, the credit shall be allowed for  the  tax  year  in
 8        which  the  property  is  placed  in  service, or, if the
 9        amount of the credit exceeds the tax liability  for  that
10        year,  whether  it  exceeds the original liability or the
11        liability as later amended, such excess  may  be  carried
12        forward and applied to the tax liability of the 5 taxable
13        years following the excess credit years. The credit shall
14        be  applied  to  the  earliest  year for which there is a
15        liability. If there is credit from more than one tax year
16        that is available to offset a liability,  earlier  credit
17        shall be applied first.
18             (2)  The  term  "qualified  property" means property
19        which:
20                  (A)  is  tangible,   whether   new   or   used,
21             including  buildings  and  structural  components of
22             buildings and signs that are real property, but  not
23             including land or improvements to real property that
24             are not a structural component of a building such as
25             landscaping,   sewer   lines,  local  access  roads,
26             fencing, parking lots, and other appurtenances;
27                  (B)  is depreciable pursuant to Section 167  of
28             the  Internal  Revenue  Code,  except  that  "3-year
29             property" as defined in Section 168(c)(2)(A) of that
30             Code is not eligible for the credit provided by this
31             subsection (e);
32                  (C)  is  acquired  by  purchase  as  defined in
33             Section 179(d) of the Internal Revenue Code;
34                  (D)  is used in Illinois by a taxpayer  who  is
 
                            -7-                LRB9213134SMdv
 1             primarily  engaged  in  manufacturing,  or in mining
 2             coal or fluorite, or in retailing; and
 3                  (E)  has not previously been used  in  Illinois
 4             in  such  a  manner  and  by  such a person as would
 5             qualify for the credit provided by  this  subsection
 6             (e) or subsection (f).
 7             (3)  For    purposes   of   this   subsection   (e),
 8        "manufacturing" means the material staging and production
 9        of tangible  personal  property  by  procedures  commonly
10        regarded  as  manufacturing,  processing, fabrication, or
11        assembling which changes some existing material into  new
12        shapes, new qualities, or new combinations.  For purposes
13        of  this  subsection (e) the term "mining" shall have the
14        same meaning as the term "mining" in  Section  613(c)  of
15        the   Internal   Revenue  Code.   For  purposes  of  this
16        subsection (e), the term "retailing" means  the  sale  of
17        tangible   personal  property  or  services  rendered  in
18        conjunction with the sale of tangible consumer  goods  or
19        commodities.
20             (4)  The  basis  of  qualified property shall be the
21        basis used to  compute  the  depreciation  deduction  for
22        federal income tax purposes.
23             (5)  If the basis of the property for federal income
24        tax  depreciation purposes is increased after it has been
25        placed in service in Illinois by the taxpayer, the amount
26        of such increase  shall  be  deemed  property  placed  in
27        service on the date of such increase in basis.
28             (6)  The  term  "placed  in  service" shall have the
29        same meaning as under Section 46 of the Internal  Revenue
30        Code.
31             (7)  If during any taxable year, any property ceases
32        to  be  qualified  property  in the hands of the taxpayer
33        within 48 months after being placed in  service,  or  the
34        situs of any qualified property is moved outside Illinois
 
                            -8-                LRB9213134SMdv
 1        within  48  months  after  being  placed  in service, the
 2        Personal Property Tax Replacement  Income  Tax  for  such
 3        taxable  year shall be increased.  Such increase shall be
 4        determined by (i) recomputing the investment credit which
 5        would have been allowed for the year in which credit  for
 6        such  property was originally allowed by eliminating such
 7        property from such computation and, (ii) subtracting such
 8        recomputed credit from the amount  of  credit  previously
 9        allowed.  For  the  purposes  of  this  paragraph  (7), a
10        reduction of the basis of  qualified  property  resulting
11        from  a  redetermination  of  the purchase price shall be
12        deemed a disposition of qualified property to the  extent
13        of such reduction.
14             (8)  Unless  the  investment  credit  is extended by
15        law, the basis of qualified property  shall  not  include
16        costs  incurred after December 31, 2003, except for costs
17        incurred pursuant to a binding contract entered  into  on
18        or before December 31, 2003.
19             (9)  Each  taxable  year  ending before December 31,
20        2000, a partnership may elect  to  pass  through  to  its
21        partners the credits to which the partnership is entitled
22        under  this  subsection  (e)  for  the  taxable  year.  A
23        partner may use the credit allocated to him or her  under
24        this   paragraph   only   against   the  tax  imposed  in
25        subsections  (c)  and  (d)  of  this  Section.   If   the
26        partnership  makes  that election, those credits shall be
27        allocated  among  the  partners  in  the  partnership  in
28        accordance with the rules set forth in Section 704(b)  of
29        the  Internal  Revenue  Code,  and  the rules promulgated
30        under that Section,  and  the  allocated  amount  of  the
31        credits shall be allowed to the partners for that taxable
32        year.   The  partnership  shall make this election on its
33        Personal Property Tax Replacement Income Tax  return  for
34        that  taxable  year.  The  election  to  pass through the
 
                            -9-                LRB9213134SMdv
 1        credits shall be irrevocable.
 2             For taxable years ending on or  after  December  31,
 3        2000,  a  partner  that  qualifies  its partnership for a
 4        subtraction under subparagraph (I) of  paragraph  (2)  of
 5        subsection  (d)  of  Section  203  or  a shareholder that
 6        qualifies a Subchapter S corporation  for  a  subtraction
 7        under subparagraph (S) of paragraph (2) of subsection (b)
 8        of  Section  203  shall  be  allowed  a credit under this
 9        subsection (e) equal to its share of  the  credit  earned
10        under  this subsection (e) during the taxable year by the
11        partnership or Subchapter S  corporation,  determined  in
12        accordance   with   the   determination   of  income  and
13        distributive share of income under Sections 702  and  704
14        and  Subchapter  S  of  the  Internal Revenue Code.  This
15        paragraph is exempt from the provisions of Section 250.
16          (f)  Investment credit; Enterprise Zone.
17             (1)  A taxpayer shall be allowed  a  credit  against
18        the  tax  imposed  by  subsections  (a)  and  (b) of this
19        Section for investment in  qualified  property  which  is
20        placed  in service in an Enterprise Zone created pursuant
21        to the  Illinois  Enterprise  Zone  Act.   For  partners,
22        shareholders  of Subchapter S corporations, and owners of
23        limited liability companies, if the liability company  is
24        treated  as  a  partnership  for  purposes of federal and
25        State income taxation, there shall be  allowed  a  credit
26        under  this subsection (f) to be determined in accordance
27        with the determination of income and  distributive  share
28        of  income under Sections 702 and 704 and Subchapter S of
29        the Internal Revenue Code.  The credit shall  be  .5%  of
30        the  basis  for  such  property.   The  credit  shall  be
31        available  only in the taxable year in which the property
32        is placed in service in the Enterprise Zone and shall not
33        be  allowed  to  the  extent  that  it  would  reduce   a
34        taxpayer's  liability  for the tax imposed by subsections
 
                            -10-               LRB9213134SMdv
 1        (a) and (b) of this Section to below zero.  For tax years
 2        ending on or after December 31, 1985, the credit shall be
 3        allowed for the tax year in which the property is  placed
 4        in  service,  or, if the amount of the credit exceeds the
 5        tax liability for  that  year,  whether  it  exceeds  the
 6        original  liability  or  the  liability as later amended,
 7        such excess may be carried forward and applied to the tax
 8        liability of the 5 taxable  years  following  the  excess
 9        credit year.  The credit shall be applied to the earliest
10        year  for which there is a liability.  If there is credit
11        from more than one tax year that is available to offset a
12        liability, the credit accruing first  in  time  shall  be
13        applied first.
14             (2)  The  term  qualified  property  means  property
15        which:
16                  (A)  is   tangible,   whether   new   or  used,
17             including buildings  and  structural  components  of
18             buildings;
19                  (B)  is  depreciable pursuant to Section 167 of
20             the  Internal  Revenue  Code,  except  that  "3-year
21             property" as defined in Section 168(c)(2)(A) of that
22             Code is not eligible for the credit provided by this
23             subsection (f);
24                  (C)  is acquired  by  purchase  as  defined  in
25             Section 179(d) of the Internal Revenue Code;
26                  (D)  is  used  in  the  Enterprise  Zone by the
27             taxpayer; and
28                  (E)  has not been previously used  in  Illinois
29             in  such  a  manner  and  by  such a person as would
30             qualify for the credit provided by  this  subsection
31             (f) or subsection (e).
32             (3)  The  basis  of  qualified property shall be the
33        basis used to  compute  the  depreciation  deduction  for
34        federal income tax purposes.
 
                            -11-               LRB9213134SMdv
 1             (4)  If the basis of the property for federal income
 2        tax  depreciation purposes is increased after it has been
 3        placed in service in the Enterprise Zone by the taxpayer,
 4        the amount of such  increase  shall  be  deemed  property
 5        placed in service on the date of such increase in basis.
 6             (5)  The  term  "placed  in  service" shall have the
 7        same meaning as under Section 46 of the Internal  Revenue
 8        Code.
 9             (6)  If during any taxable year, any property ceases
10        to  be  qualified  property  in the hands of the taxpayer
11        within 48 months after being placed in  service,  or  the
12        situs  of  any  qualified  property  is moved outside the
13        Enterprise Zone within 48 months after  being  placed  in
14        service, the tax imposed under subsections (a) and (b) of
15        this  Section  for  such taxable year shall be increased.
16        Such increase shall be determined by (i) recomputing  the
17        investment  credit  which would have been allowed for the
18        year in which credit for  such  property  was  originally
19        allowed   by   eliminating   such   property   from  such
20        computation, and (ii) subtracting such recomputed  credit
21        from  the  amount  of credit previously allowed.  For the
22        purposes of this paragraph (6), a reduction of the  basis
23        of qualified property resulting from a redetermination of
24        the  purchase  price  shall  be  deemed  a disposition of
25        qualified property to the extent of such reduction.
26          (g)  Jobs Tax Credit; Enterprise Zone and Foreign Trade
27    Zone or Sub-Zone.
28             (1)  A taxpayer conducting a trade or business in an
29        enterprise zone or a High Impact Business  designated  by
30        the   Department   of   Commerce  and  Community  Affairs
31        conducting a trade or business in a federally  designated
32        Foreign  Trade Zone or Sub-Zone shall be allowed a credit
33        against the tax imposed by subsections  (a)  and  (b)  of
34        this  Section in the amount of $500 per eligible employee
 
                            -12-               LRB9213134SMdv
 1        hired to work in the zone during the taxable year.
 2             (2)  To qualify for the credit:
 3                  (A)  the taxpayer must hire 5 or more  eligible
 4             employees to work in an enterprise zone or federally
 5             designated Foreign Trade Zone or Sub-Zone during the
 6             taxable year;
 7                  (B)  the taxpayer's total employment within the
 8             enterprise  zone  or  federally  designated  Foreign
 9             Trade  Zone  or  Sub-Zone must increase by 5 or more
10             full-time employees beyond  the  total  employed  in
11             that  zone  at  the end of the previous tax year for
12             which a jobs  tax  credit  under  this  Section  was
13             taken,  or beyond the total employed by the taxpayer
14             as of December 31, 1985, whichever is later; and
15                  (C)  the eligible employees  must  be  employed
16             180 consecutive days in order to be deemed hired for
17             purposes of this subsection.
18             (3)  An  "eligible  employee"  means an employee who
19        is:
20                  (A)  Certified by the  Department  of  Commerce
21             and  Community  Affairs  as  "eligible for services"
22             pursuant to regulations  promulgated  in  accordance
23             with  Title  II of the Job Training Partnership Act,
24             Training Services for the Disadvantaged or Title III
25             of the Job Training Partnership Act, Employment  and
26             Training Assistance for Dislocated Workers Program.
27                  (B)  Hired   after   the   enterprise  zone  or
28             federally designated Foreign Trade Zone or  Sub-Zone
29             was  designated or the trade or business was located
30             in that zone, whichever is later.
31                  (C)  Employed in the enterprise zone or Foreign
32             Trade Zone or Sub-Zone. An employee is  employed  in
33             an  enterprise  zone or federally designated Foreign
34             Trade Zone or Sub-Zone if his services are  rendered
 
                            -13-               LRB9213134SMdv
 1             there  or  it  is  the  base  of  operations for the
 2             services performed.
 3                  (D)  A full-time employee working  30  or  more
 4             hours per week.
 5             (4)  For  tax  years ending on or after December 31,
 6        1985 and prior to December 31, 1988, the credit shall  be
 7        allowed  for the tax year in which the eligible employees
 8        are hired.  For tax years ending on or after December 31,
 9        1988, the credit  shall  be  allowed  for  the  tax  year
10        immediately  following the tax year in which the eligible
11        employees are hired.  If the amount of the credit exceeds
12        the tax liability for that year, whether it  exceeds  the
13        original  liability  or  the  liability as later amended,
14        such excess may be carried forward and applied to the tax
15        liability of the 5 taxable  years  following  the  excess
16        credit year.  The credit shall be applied to the earliest
17        year  for  which there is a liability. If there is credit
18        from more than one tax year that is available to offset a
19        liability, earlier credit shall be applied first.
20             (5)  The Department of Revenue shall promulgate such
21        rules and regulations as may be deemed necessary to carry
22        out the purposes of this subsection (g).
23             (6)  The credit  shall  be  available  for  eligible
24        employees hired on or after January 1, 1986.
25             (h)  Investment credit; High Impact Business.
26             (1)  Subject to subsections (b) and (b-5) of Section
27        5.5 of the Illinois Enterprise Zone Act, a taxpayer shall
28        be   allowed   a   credit  against  the  tax  imposed  by
29        subsections (a) and (b) of this Section for investment in
30        qualified property  which  is  placed  in  service  by  a
31        Department  of  Commerce and Community Affairs designated
32        High Impact Business.  The credit shall  be  .5%  of  the
33        basis  for  such  property.   The  credit  shall  not  be
34        available  (i) until the minimum investments in qualified
 
                            -14-               LRB9213134SMdv
 1        property set forth in subdivision  (a)(3)(A)  of  Section
 2        5.5  of  the  Illinois  Enterprise  Zone  Act  have  been
 3        satisfied or (ii) until the time authorized in subsection
 4        (b-5)  of  the  Illinois Enterprise Zone Act for entities
 5        designated as High Impact Businesses  under  subdivisions
 6        (a)(3)(B), (a)(3)(C), and (a)(3)(D) of Section 5.5 of the
 7        Illinois Enterprise Zone Act, and shall not be allowed to
 8        the  extent  that  it would reduce a taxpayer's liability
 9        for the tax imposed by subsections (a) and  (b)  of  this
10        Section  to  below  zero.   The credit applicable to such
11        investments shall be taken in the taxable year  in  which
12        such  investments  have  been  completed.  The credit for
13        additional investments beyond the minimum investment by a
14        designated  high   impact   business   authorized   under
15        subdivision  (a)(3)(A)  of  Section  5.5  of the Illinois
16        Enterprise Zone  Act  shall  be  available  only  in  the
17        taxable  year  in which the property is placed in service
18        and shall not be allowed to  the  extent  that  it  would
19        reduce  a  taxpayer's  liability  for  the tax imposed by
20        subsections (a) and (b) of this Section  to  below  zero.
21        For  tax  years ending on or after December 31, 1987, the
22        credit shall be allowed for the tax  year  in  which  the
23        property  is  placed in service, or, if the amount of the
24        credit exceeds the tax liability for that  year,  whether
25        it  exceeds  the  original  liability or the liability as
26        later amended, such excess may  be  carried  forward  and
27        applied  to  the  tax  liability  of  the 5 taxable years
28        following the excess credit year.  The  credit  shall  be
29        applied  to  the  earliest  year  for  which  there  is a
30        liability.  If there is credit from  more  than  one  tax
31        year  that is available to offset a liability, the credit
32        accruing first in time shall be applied first.
33             Changes made in this subdivision  (h)(1)  by  Public
34        Act 88-670 restore changes made by Public Act 85-1182 and
 
                            -15-               LRB9213134SMdv
 1        reflect existing law.
 2             (2)  The  term  qualified  property  means  property
 3        which:
 4                  (A)  is   tangible,   whether   new   or  used,
 5             including buildings  and  structural  components  of
 6             buildings;
 7                  (B)  is  depreciable pursuant to Section 167 of
 8             the  Internal  Revenue  Code,  except  that  "3-year
 9             property" as defined in Section 168(c)(2)(A) of that
10             Code is not eligible for the credit provided by this
11             subsection (h);
12                  (C)  is acquired  by  purchase  as  defined  in
13             Section 179(d) of the Internal Revenue Code; and
14                  (D)  is  not  eligible  for the Enterprise Zone
15             Investment Credit provided by subsection (f) of this
16             Section.
17             (3)  The basis of qualified property  shall  be  the
18        basis  used  to  compute  the  depreciation deduction for
19        federal income tax purposes.
20             (4)  If the basis of the property for federal income
21        tax depreciation purposes is increased after it has  been
22        placed in service in a federally designated Foreign Trade
23        Zone or Sub-Zone located in Illinois by the taxpayer, the
24        amount  of  such increase shall be deemed property placed
25        in service on the date of such increase in basis.
26             (5)  The term "placed in  service"  shall  have  the
27        same  meaning as under Section 46 of the Internal Revenue
28        Code.
29             (6)  If during any taxable year ending on or  before
30        December  31,  1996,  any property ceases to be qualified
31        property in the hands of the taxpayer  within  48  months
32        after  being  placed  in  service,  or  the  situs of any
33        qualified property is moved outside  Illinois  within  48
34        months  after  being  placed  in service, the tax imposed
 
                            -16-               LRB9213134SMdv
 1        under subsections (a) and (b) of this  Section  for  such
 2        taxable  year shall be increased.  Such increase shall be
 3        determined by (i) recomputing the investment credit which
 4        would have been allowed for the year in which credit  for
 5        such  property was originally allowed by eliminating such
 6        property from such computation, and (ii) subtracting such
 7        recomputed credit from the amount  of  credit  previously
 8        allowed.   For  the  purposes  of  this  paragraph (6), a
 9        reduction of the basis of  qualified  property  resulting
10        from  a  redetermination  of  the purchase price shall be
11        deemed a disposition of qualified property to the  extent
12        of such reduction.
13             (7)  Beginning  with tax years ending after December
14        31, 1996, if a taxpayer qualifies for  the  credit  under
15        this   subsection  (h)  and  thereby  is  granted  a  tax
16        abatement and the taxpayer relocates its entire  facility
17        in  violation  of  the  explicit  terms and length of the
18        contract under Section 18-183 of the Property  Tax  Code,
19        the  tax  imposed  under  subsections (a) and (b) of this
20        Section shall be increased for the taxable year in  which
21        the taxpayer relocated its facility by an amount equal to
22        the  amount of credit received by the taxpayer under this
23        subsection (h).
24        (i)  Credit for Personal Property Tax Replacement  Income
25    Tax.    A  credit shall be allowed against the tax imposed by
26    subsections (a) and (b) of this Section for the  tax  imposed
27    by  subsections  (c)  and  (d)  of this Section.  This credit
28    shall  be  computed  by  multiplying  the  tax   imposed   by
29    subsections  (c)  and  (d) of this Section by a fraction, the
30    numerator of which is base income allocable to  Illinois  and
31    the denominator of which is Illinois base income, and further
32    multiplying   the   product   by  the  tax  rate  imposed  by
33    subsections (a) and (b) of this Section.
34        Any credit earned on or after  December  31,  1986  under
 
                            -17-               LRB9213134SMdv
 1    this  subsection  which  is  unused in the year the credit is
 2    computed because it exceeds  the  tax  liability  imposed  by
 3    subsections (a) and (b) for that year (whether it exceeds the
 4    original  liability or the liability as later amended) may be
 5    carried forward and applied to the tax liability  imposed  by
 6    subsections  (a) and (b) of the 5 taxable years following the
 7    excess credit year.  This credit shall be  applied  first  to
 8    the  earliest  year for which there is a liability.  If there
 9    is a credit under this subsection from more than one tax year
10    that is available to offset a liability the  earliest  credit
11    arising under this subsection shall be applied first.
12        If,  during  any taxable year ending on or after December
13    31, 1986, the tax imposed by subsections (c) and (d) of  this
14    Section  for which a taxpayer has claimed a credit under this
15    subsection (i) is reduced, the amount of credit for such  tax
16    shall also be reduced.  Such reduction shall be determined by
17    recomputing  the  credit to take into account the reduced tax
18    imposed by  subsections  subsection  (c)  and  (d).   If  any
19    portion of the reduced amount of credit has been carried to a
20    different  taxable year, an amended return shall be filed for
21    such taxable year to reduce the amount of credit claimed.
22        (j)  Training expense credit.  Beginning with  tax  years
23    ending  on  or  after  December 31, 1986, a taxpayer shall be
24    allowed a credit  against  the  tax  imposed  by  subsections
25    subsection  (a)  and  (b)  under this Section for all amounts
26    paid or accrued, on behalf of all  persons  employed  by  the
27    taxpayer  in  Illinois or Illinois residents employed outside
28    of Illinois by a  taxpayer,  for  educational  or  vocational
29    training   in   semi-technical   or   technical   fields   or
30    semi-skilled  or  skilled  fields,  which  were deducted from
31    gross income in  the  computation  of  taxable  income.   The
32    credit  against  the  tax  imposed by subsections (a) and (b)
33    shall be 1.6%  of  such  training  expenses.   For  partners,
34    shareholders  of  subchapter  S  corporations,  and owners of
 
                            -18-               LRB9213134SMdv
 1    limited liability companies,  if  the  liability  company  is
 2    treated  as  a  partnership for purposes of federal and State
 3    income taxation, there shall be allowed a credit  under  this
 4    subsection  (j)  to  be  determined  in  accordance  with the
 5    determination of income  and  distributive  share  of  income
 6    under  Sections  702 and 704 and subchapter S of the Internal
 7    Revenue Code.
 8        Any credit allowed under this subsection which is  unused
 9    in  the  year  the credit is earned may be carried forward to
10    each of the 5 taxable years following the year for which  the
11    credit is first computed until it is used.  This credit shall
12    be  applied  first  to the earliest year for which there is a
13    liability.  If there is a credit under this  subsection  from
14    more  than  one  tax  year  that  is  available  to  offset a
15    liability the earliest credit arising under  this  subsection
16    shall be applied first.
17        (k)  Research and development credit.
18        Beginning  with  tax  years  ending after July 1, 1990, a
19    taxpayer shall be allowed a credit against the tax imposed by
20    subsections (a)  and  (b)  of  this  Section  for  increasing
21    research  activities  in  this  State.   The  credit  allowed
22    against  the  tax imposed by subsections (a) and (b) shall be
23    equal to 6 1/2% of the qualifying expenditures for increasing
24    research   activities   in   this   State.    For   partners,
25    shareholders of subchapter  S  corporations,  and  owners  of
26    limited  liability  companies,  if  the  liability company is
27    treated as a partnership for purposes of  federal  and  State
28    income  taxation,  there shall be allowed a credit under this
29    subsection  to  be  determined   in   accordance   with   the
30    determination  of  income  and  distributive  share of income
31    under Sections 702 and 704 and subchapter S of  the  Internal
32    Revenue Code.
33        For    purposes    of    this   subsection,   "qualifying
34    expenditures" means the qualifying  expenditures  as  defined
 
                            -19-               LRB9213134SMdv
 1    for  the  federal  credit  for increasing research activities
 2    which would be allowable under Section  41  of  the  Internal
 3    Revenue   Code   and  which  are  conducted  in  this  State,
 4    "qualifying expenditures for increasing  research  activities
 5    in  this  State"  means the excess of qualifying expenditures
 6    for the  taxable  year  in  which  incurred  over  qualifying
 7    expenditures  for  the  base period, "qualifying expenditures
 8    for the base period" means  the  average  of  the  qualifying
 9    expenditures  for  each  year  in  the base period, and "base
10    period" means the 3 taxable years immediately  preceding  the
11    taxable year for which the determination is being made.
12        Any credit in excess of the tax liability for the taxable
13    year may be carried forward. A taxpayer may elect to have the
14    unused  credit  shown  on  its final completed return carried
15    over as a credit against the tax liability for the  following
16    5  taxable  years  or until it has been fully used, whichever
17    occurs first.
18        If an unused credit is carried forward to  a  given  year
19    from  2  or  more  earlier  years, that credit arising in the
20    earliest year will be applied first against the tax liability
21    for the given year.  If a tax liability for  the  given  year
22    still  remains,  the  credit from the next earliest year will
23    then be applied, and so on, until all credits have been  used
24    or  no  tax  liability  for  the  given  year  remains.   Any
25    remaining  unused  credit  or  credits  then  will be carried
26    forward to the next following year in which a  tax  liability
27    is  incurred, except that no credit can be carried forward to
28    a year which is more than 5 years after the year in which the
29    expense for which the credit is given was incurred.
30        Unless extended by law,  the  credit  shall  not  include
31    costs  incurred  after  December  31,  2004, except for costs
32    incurred pursuant to a binding contract entered  into  on  or
33    before December 31, 2004.
34        No  inference  shall be drawn from this amendatory Act of
 
                            -20-               LRB9213134SMdv
 1    the 91st General Assembly  in  construing  this  Section  for
 2    taxable years beginning before January 1, 1999.
 3        (l)  Environmental Remediation Tax Credit.
 4             (i)  For  tax   years ending after December 31, 1997
 5        and on or before December 31, 2001, a taxpayer  shall  be
 6        allowed  a  credit against the tax imposed by subsections
 7        (a) and (b) of this Section for certain amounts paid  for
 8        unreimbursed  eligible remediation costs, as specified in
 9        this  subsection.    For  purposes   of   this   Section,
10        "unreimbursed  eligible  remediation  costs"  means costs
11        approved by the Illinois Environmental Protection  Agency
12        ("Agency")  under  Section  58.14  of  the  Environmental
13        Protection Act that were paid in performing environmental
14        remediation  at a site for which a No Further Remediation
15        Letter was  issued  by  the  Agency  and  recorded  under
16        Section  58.10  of the Environmental Protection Act.  The
17        credit must be claimed for  the  taxable  year  in  which
18        Agency  approval  of  the  eligible  remediation costs is
19        granted.  The credit is not available to any taxpayer  if
20        the  taxpayer  or any related party caused or contributed
21        to, in any  material  respect,  a  release  of  regulated
22        substances  on, in, or under the site that was identified
23        and addressed by the remedial action pursuant to the Site
24        Remediation Program of the Environmental Protection  Act.
25        After  the  Pollution  Control  Board  rules  are adopted
26        pursuant to the Illinois Administrative Procedure Act for
27        the administration and enforcement of Section 58.9 of the
28        Environmental Protection Act, determinations as to credit
29        availability for purposes of this Section shall  be  made
30        consistent  with  those  rules.   For  purposes  of  this
31        Section,   "taxpayer"   includes   a   person  whose  tax
32        attributes the taxpayer has succeeded  to  under  Section
33        381  of  the  Internal  Revenue  Code and "related party"
34        includes the persons disallowed a deduction for losses by
 
                            -21-               LRB9213134SMdv
 1        paragraphs (b), (c), and (f)(1) of  Section  267  of  the
 2        Internal  Revenue  Code  by  virtue  of  being  a related
 3        taxpayer, as well as any of  its  partners.   The  credit
 4        allowed  against  the  tax imposed by subsections (a) and
 5        (b) shall be equal to 25% of  the  unreimbursed  eligible
 6        remediation  costs in excess of $100,000 per site, except
 7        that the $100,000 threshold shall not apply to  any  site
 8        contained  in  an  enterprise  zone  as determined by the
 9        Department of Commerce and Community Affairs.  The  total
10        credit  allowed  shall not exceed $40,000 per year with a
11        maximum total of $150,000 per  site.   For  partners  and
12        shareholders of subchapter S corporations, there shall be
13        allowed  a  credit under this subsection to be determined
14        in  accordance  with  the  determination  of  income  and
15        distributive share of income under Sections 702  and  704
16        and subchapter S of the Internal Revenue Code.
17             (ii)  A credit allowed under this subsection that is
18        unused  in  the  year the credit is earned may be carried
19        forward to each of the 5 taxable years following the year
20        for which the credit is first earned until  it  is  used.
21        The  term "unused credit" does not include any amounts of
22        unreimbursed eligible remediation costs in excess of  the
23        maximum  credit  per site authorized under paragraph (i).
24        This credit shall be applied first to the  earliest  year
25        for  which  there  is  a liability.  If there is a credit
26        under this subsection from more than one tax year that is
27        available to offset  a  liability,  the  earliest  credit
28        arising  under this subsection shall be applied first.  A
29        credit allowed under this subsection may  be  sold  to  a
30        buyer as part of a sale of all or part of the remediation
31        site  for which the credit was granted.  The purchaser of
32        a remediation site and the tax credit  shall  succeed  to
33        the  unused  credit and remaining carry-forward period of
34        the seller.  To perfect the transfer, the assignor  shall
 
                            -22-               LRB9213134SMdv
 1        record  the  transfer  in the chain of title for the site
 2        and  provide  written  notice  to  the  Director  of  the
 3        Illinois Department of Revenue of the  assignor's  intent
 4        to  sell  the  remediation site and the amount of the tax
 5        credit to be transferred as a portion of the sale.  In no
 6        event may a credit be transferred to any taxpayer if  the
 7        taxpayer  or  a related party would not be eligible under
 8        the provisions of subsection (i).
 9             (iii)  For purposes of this Section, the term "site"
10        shall have the same meaning as under Section 58.2 of  the
11        Environmental Protection Act.
12        (m)  Education expense credit.
13        Beginning  with tax years ending after December 31, 1999,
14    a taxpayer who is the custodian of  one  or  more  qualifying
15    pupils  is  shall be allowed a credit against the tax imposed
16    by subsections (a) and (b)  of  this  Section  for  qualified
17    education  expenses  incurred  on  behalf  of  the qualifying
18    pupils.  The credit  shall  be  equal  to  25%  of  qualified
19    education  expenses,  but  in  no  event may the total credit
20    under this Section claimed by a family that is the  custodian
21    of qualifying pupils exceed $500.  In no event shall a credit
22    under  this  subsection reduce the taxpayer's liability under
23    this Act to less than zero.  This subsection is  exempt  from
24    the provisions of Section 250 of this Act.
25        For purposes of this subsection:;
26        "Qualifying   pupils"   means  individuals  who  (i)  are
27    residents of the State of Illinois, (ii) are under the age of
28    21 at the close of the school year  for  which  a  credit  is
29    sought,  and  (iii) during the school year for which a credit
30    is sought were full-time pupils enrolled  in  a  kindergarten
31    through  twelfth  grade  education  program at any school, as
32    defined in this subsection.
33        "Qualified education expense" means the  amount  incurred
34    on  behalf  of  a  qualifying  pupil  in  excess  of $250 for
 
                            -23-               LRB9213134SMdv
 1    tuition, book fees, and lab fees at the school in  which  the
 2    pupil is enrolled during the regular school year.
 3        "School"  means  any  public  or  nonpublic elementary or
 4    secondary school in Illinois that is in compliance with Title
 5    VI of the Civil Rights Act of 1964 and  attendance  at  which
 6    satisfies  the  requirements  of  Section  26-1 of the School
 7    Code, except that nothing shall be  construed  to  require  a
 8    child  to attend any particular public or nonpublic school to
 9    qualify for the credit under this Section.
10        "Custodian" means, with respect to qualifying pupils,  an
11    Illinois  resident  who  is  a  parent,  the parents, a legal
12    guardian, or the legal guardians of the qualifying pupils.
13    (Source:  P.A.  91-9,  eff.  1-1-00;  91-357,  eff.  7-29-99;
14    91-643, eff. 8-20-99;  91-644,  eff.  8-20-99;  91-860,  eff.
15    6-22-00; 91-913, eff. 1-1-01; 92-12, eff. 7-1-01; 92-16, eff.
16    6-28-01; revised 12-3-01.)

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