101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
SB3745

 

Introduced 2/14/2020, by Sen. Cristina Castro

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 31/5
35 ILCS 31/10
35 ILCS 31/20
35 ILCS 31/25
35 ILCS 5/228

    Amends the Historic Preservation Tax Credit Act. Provides that the aggregate amount of the credit may not exceed $3,000,000. Provides that credits may be awarded upon completion of the project and approval of a complete application (currently, review of the project). Provides that the taxpayer is not eligible to receive credits under that Act and as qualified River Edge Redevelopment Zone property for the same qualified expenditures or qualified rehabilitation plan. Makes various technical corrections concerning allocation of credits. Amends the Illinois Income Tax Act with respect to the Historic Preservation Tax Credit to include provisions concerning limited liability companies. Effective immediately.


LRB101 17818 HLH 67249 b

FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

SB3745LRB101 17818 HLH 67249 b

1    AN ACT concerning revenue.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Historic Preservation Tax Credit Act is
5amended by changing Sections 5, 10, 20, and 25 as follows:
 
6    (35 ILCS 31/5)
7    Sec. 5. Definitions. As used in this Act, unless the
8context clearly indicates otherwise:
9    "Director" means the Director of Natural Resources or his
10or her designee.
11    "Division" means the State Historic Preservation Office
12within the Department of Natural Resources.
13    "Phased rehabilitation" means a project that is completed
14in phases, as defined under Section 47 of the federal Internal
15Revenue Code and pursuant to National Park Service regulations
16at 36 C.F.R. 67.
17    "Placed in service" means the date when the property is
18placed in a condition or state of readiness and availability
19for a specifically assigned function as defined under Section
2047 of the federal Internal Revenue Code and federal Treasury
21Regulation Sections 1.46 and 1.48.
22    "Qualified expenditures" means all the costs and expenses
23defined as qualified rehabilitation expenditures under Section

 

 

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147 of the federal Internal Revenue Code that were incurred in
2connection with a qualified rehabilitation plan historic
3structure.
4    "Qualified historic structure" means any structure that is
5located in Illinois and is defined as a certified historic
6structure under Section 47(c)(3) of the federal Internal
7Revenue Code.
8    "Qualified rehabilitation plan" means a project that is
9approved by the Department of Natural Resources and the
10National Park Service as being consistent with the United
11States Secretary of the Interior's Standards for
12Rehabilitation.
13    "Qualified taxpayer" means the owner of the qualified
14historic structure or any other person or entity who may
15qualify for the federal rehabilitation credit allowed by
16Section 47 of the federal Internal Revenue Code.
17    "Recapture event" means any of the following events
18occurring during the recapture period:
19        (1) failure to place in service the rehabilitated
20    portions of the qualified historic structure, or failure to
21    maintain the rehabilitated portions of the qualified
22    historic structure in service after they are placed in
23    service; provided that a recapture event under this
24    paragraph (1) shall not include a removal from service for
25    a reasonable period of time to conduct maintenance and
26    repairs that are reasonably necessary to protect the health

 

 

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1    and safety of the public or to protect the structural
2    integrity of the qualified historic structure or a
3    neighboring structure;
4        (2) demolition or other alteration of the qualified
5    historic structure in a manner that is inconsistent with
6    the qualified rehabilitation plan or the Secretary of the
7    Interior's Standards for Rehabilitation;
8        (3) disposition of the rehabilitated qualified
9    historic structure in whole or a proportional disposition
10    of a partnership interest therein, except as otherwise
11    permitted by this Section; or
12        (4) use of the qualified historic structure in a manner
13    that is inconsistent with the qualified rehabilitation
14    plan or that is otherwise inconsistent with the provisions
15    and intent of this Section.
16    A recapture event occurring in one taxable year shall be
17deemed continuing to subsequent taxable years unless and until
18corrected.
19    The following dispositions of a qualified historic
20structure shall not be deemed to be a recapture event for
21purposes of this Section:
22        (1) a transfer by reason of death;
23        (2) a transfer between spouses incident to divorce;
24        (3) a sale by and leaseback to an entity that, when the
25    rehabilitated portions of the qualified historic structure
26    are placed in service, will be a lessee of the qualified

 

 

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1    historic structure, but only for so long as the entity
2    continues to be a lessee; and
3        (4) a mere change in the form of conducting the trade
4    or business by the owner (or, if applicable, the lessee) of
5    the qualified historic structure, so long as the property
6    interest in such qualified historic structure is retained
7    in such trade or business and the owner or lessee retains a
8    substantial interest in such trade or business.
9    "Recapture period" means the 5-year period beginning on the
10date that the qualified historic structure or rehabilitated
11portions of the qualified historic structure are placed in
12service.
13    "Substantial rehabilitation" means that the qualified
14rehabilitation expenditures during the 24-month period
15selected by the taxpayer at the time and in the manner
16prescribed by rule and ending with or within the taxable year
17exceed the greater of (i) the adjusted basis of the building
18and its structural components or (ii) $5,000. The adjusted
19basis of the building and its structural components shall be
20determined as of the beginning of the first day of such
2124-month period or as of the beginning of the first day of the
22holding period of the building, whichever is later. For
23purposes of determining the adjusted basis, the determination
24of the beginning of the holding period shall be made without
25regard to any reconstruction by the taxpayer in connection with
26the rehabilitation. In the case of any phased rehabilitation,

 

 

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1with phases set forth in architectural plans and specifications
2completed before the rehabilitation begins, this definition
3shall be applied by substituting "60-month period" for
4"24-month period" wherever that term occurs in the definition.
5(Source: P.A. 100-629, eff. 1-1-19.)
 
6    (35 ILCS 31/10)
7    Sec. 10. Allowable credit.
8    (a) To the extent authorized by this Act, for taxable years
9beginning on or after January 1, 2019 and ending on or before
10December 31, 2023, there shall be allowed a tax credit to the
11qualified taxpayer against the tax imposed by subsections (a)
12and (b) of Section 201 of the Illinois Income Tax Act in an
13aggregate amount equal to 25% of qualified expenditures, but
14not to exceed $3,000,000, incurred by a qualified taxpayer
15undertaking a qualified rehabilitation plan of a qualified
16historic structure, provided that the total amount of such
17expenditures must (i) equal $5,000 or more or (ii) exceed the
18adjusted basis of the qualified historic structure on the first
19day the qualified rehabilitation plan commenced. If the
20qualified rehabilitation plan spans multiple years, the
21aggregate credit for the entire project shall be allowed in the
22last taxable year.
23    (b) To obtain a tax credit certificate pursuant to this
24Section, the qualified taxpayer must apply with the Division.
25The Division shall determine the amount of eligible

 

 

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1rehabilitation expenditures within 45 days after receipt of a
2complete application. The taxpayer must provide to the Division
3a third-party cost certification conducted by a certified
4public accountant verifying (i) the qualified and
5non-qualified rehabilitation expenses and (ii) that the
6qualified expenditures exceed the adjusted basis of the
7qualified historic structure on the first day the qualified
8rehabilitation plan commenced. The accountant shall provide
9appropriate review and testing of invoices. The Division is
10authorized, but not required, to accept this third-party cost
11certification to determine the amount of qualified
12expenditures. The Division and the National Park Service shall
13determine whether the rehabilitation is consistent with the
14Standards of the Secretary of the United States Department of
15the Interior.
16    (c) If the amount of any tax credit awarded under this Act
17exceeds the qualified taxpayer's income tax liability for the
18year in which the qualified rehabilitation plan was placed in
19service, the excess amount may be carried forward for deduction
20from the taxpayer's income tax liability in the next succeeding
21year or years until the total amount of the credit has been
22used, except that a credit may not be carried forward for
23deduction after the tenth taxable year after the taxable year
24in which the qualified rehabilitation plan was placed in
25service. Upon completion of the project and approval of the
26complete application review of the project, the Division shall

 

 

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1issue a single certificate in the amount of the eligible
2credits equal to 25% of the qualified expenditures incurred
3during the eligible taxable years, not to exceed the lesser of
4the allocated amount or $3,000,000 per single qualified
5rehabilitation plan. Prior to the issuance of the tax credit
6certificate, the qualified taxpayer must provide to the
7Division verification that the rehabilitated structure is a
8qualified historic structure.. At the time the certificate is
9issued, an issuance fee up to the maximum amount of 2% of the
10amount of the credits issued by the certificate may be
11collected from the qualified taxpayer applicant to administer
12the Act. If collected, this issuance fee shall be directed to
13the Division Historic Property Administrative Fund or other
14such fund as appropriate for use of the Division in the
15administration of the Historic Preservation Tax Credit
16Program. The taxpayer must attach the certificate or legal
17documentation of her or his proportional share of the
18certificate to the tax return on which the credits are to be
19claimed. The tax credit under this Section may not reduce the
20taxpayer's liability to less than zero. If the amount of the
21credit exceeds the tax liability for the year, the excess
22credit may be carried forward and applied to the tax liability
23of the 10 taxable years following the first excess credit year.
24The taxpayer is not eligible to receive credits under this
25Section and under Section 221 of the Illinois Income Tax Act
26for the same qualified expenditures or qualified

 

 

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1rehabilitation plan.
2    (d) If the taxpayer is (i) a corporation having an election
3in effect under Subchapter S of the federal Internal Revenue
4Code, (ii) a partnership, or (iii) a limited liability company,
5the credit provided under this Act may be claimed by the
6shareholders of the corporation, the partners of the
7partnership, or the members of the limited liability company in
8the same manner as those shareholders, partners, or members
9account for their proportionate shares of the income or losses
10of the corporation, partnership, or limited liability company,
11or as provided in the bylaws or other executed agreement of the
12corporation, partnership, or limited liability company.
13Credits granted to a partnership, a limited liability company
14taxed as a partnership, or other multiple owners of property
15shall be passed through to the partners, members, or owners
16respectively on a pro rata basis or pursuant to an executed
17agreement among the partners, members, or owners documenting
18any alternate distribution method.
19    (e) If a recapture event occurs during the recapture period
20with respect to a qualified historic structure, then for any
21taxable year in which the credits are allowed as specified in
22this Act, the tax under the applicable Section of this Act
23shall be increased by applying the recapture percentage set
24forth below to the tax decrease resulting from the application
25of credits allowed under this Act to the taxable year in
26question.

 

 

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1    For the purposes of this subsection, the recapture
2percentage shall be determined as follows:
3        (1) if the recapture event occurs within the first year
4    after commencement of the recapture period, then the
5    recapture percentage is 100%;
6        (2) if the recapture event occurs within the second
7    year after commencement of the recapture period, then the
8    recapture percentage is 80%;
9        (3) if the recapture event occurs within the third year
10    after commencement of the recapture period, then the
11    recapture percentage is 60%;
12        (4) if the recapture event occurs within the fourth
13    year after commencement of the recapture period, then the
14    recapture percentage is 40%; and
15        (5) if the recapture event occurs within the fifth year
16    after commencement of the recapture period, then the
17    recapture percentage is 20%.
18    In the case of any recapture event, the carryforwards under
19this Act shall be adjusted by reason of such event.
20    (f) The Division may adopt rules to implement this Section
21in addition to the rules expressly authorized herein.
22(Source: P.A. 100-629, eff. 1-1-19; 101-81, eff. 7-12-19.)
 
23    (35 ILCS 31/20)
24    Sec. 20. Limitations, reporting, and monitoring.
25    (a) In every calendar year that this program is in effect,

 

 

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1the Division is authorized to allocate $15,000,000 in tax
2credits in addition to any unallocated, returned, or rescinded
3allocations from previous years, pursuant to qualified
4rehabilitation plans. The Division shall award not more than an
5aggregate of $15,000,000 in total annual tax credits pursuant
6to qualified rehabilitation plans for qualified historic
7structures. The Division shall not allocate or award award not
8more than $3,000,000 in tax credits with regard to a single
9qualified rehabilitation plan. In allocating awarding tax
10credits under this Act, the Division must prioritize
11applications projects that meet one or more of the following:
12        (1) the qualified historic structure is located in a
13    county that borders a State with a historic
14    income-producing property rehabilitation credit;
15        (2) the qualified historic structure was previously
16    owned by a federal, state, or local governmental entity for
17    no less than 6 months;
18        (3) the qualified historic structure is located in a
19    census tract that has a median family income at or below
20    the State median family income; data from the most recent
21    5-year estimate from the American Community Survey (ACS),
22    published by the U.S. Census Bureau, shall be used to
23    determine eligibility;
24        (4) the qualified rehabilitation plan includes in the
25    development partnership a Community Development Entity or
26    a low-profit (B Corporation) or not-for-profit

 

 

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1    organization, as defined by Section 501(c)(3) of the
2    Internal Revenue Code; or
3        (5) the qualified historic structure is located in an
4    area declared under an Emergency Declaration or Major
5    Disaster Declaration under the federal Robert T. Stafford
6    Disaster Relief and Emergency Assistance Act. The
7    declaration must be no older than 3 years at the time of
8    application.
9    (b) The annual aggregate authorization program allocation
10of $15,000,000 set forth in subsection (a) shall be allocated
11by the Division, in such proportion as determined by the
12Director Department, on a per calendar basis twice in each
13calendar year that the program is in effect, provided that: (i)
14the amount initially allocated by the Division for the first
15any one calendar application period shall not exceed 65% of the
16total allowable amount available for allocation. Any
17unallocated and (ii) any portion of the allocated allowable
18amount remaining unused as of the end of any of the second
19calendar application period of a given calendar year shall be
20rolled over into and added to the total authorized allocated
21amount for the next available calendar year. The qualified
22rehabilitation plan must meet a readiness test, as defined in
23the rules created by the Division, in order for the application
24Applicant to qualify. In any given application period,
25applications Applicants that qualify under this Act will be
26prioritized as set forth in subsection (a) and placed in a

 

 

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1queue based on the date and time the application is received.
2Applicants whose applications qualify but do not receive an
3allocation until such time as the application period total
4allowable amount is reached. Applicants must reapply to be
5considered in subsequent for each application periods period.
6    (c) Subject On or before December 31, 2019, and on or
7before December 31 of each odd-numbered year thereafter through
82023, subject to appropriation and prior to equal disbursement
9to the Division, moneys in the Historic Property Administrative
10Fund shall be used, on a biennial basis, beginning at the end
11of the second first fiscal year after the effective date of
12this amendatory Act of the 101st General Assembly, to hire a
13qualified third party to prepare a biennial report to assess
14the overall impact effectiveness of this Act from the qualified
15rehabilitation plans projects under this Act completed in that
16year and in previous years. Baseline data of the metrics in the
17report shall be collected at the initiation of a qualified
18rehabilitation plan project. The overall economic impact shall
19include at least:
20        (1) the number of applications, project locations, and
21    proposed use of qualified historic structures;
22        (2) the amount of credits awarded and the number and
23    location of projects receiving credit allocations;
24        (3) the status of ongoing projects and projected
25    qualifying expenditures for ongoing projects;
26        (4) for completed projects, the total amount of

 

 

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1    qualifying rehabilitation expenditures and non-qualifying
2    expenditures, the number of housing units created and the
3    number of housing units that qualify as affordable, and the
4    total square footage rehabilitated and developed;
5        (5) direct, indirect, and induced economic impacts;
6        (6) temporary, permanent, and construction jobs
7    created; and
8        (7) sales, income, and property tax generation before
9    construction, during construction, and after completion.
10    The report to the General Assembly shall be filed with the
11Clerk of the House of Representatives and the Secretary of the
12Senate in electronic form only, in the manner that the Clerk
13and the Secretary shall direct.
14    (d) Any time prior to issuance of a tax credit certificate,
15the Director of the Division, the State Historic Preservation
16Officer, or staff of the Division may, upon reasonable notice
17to the project owner of not less than 3 business days, conduct
18a site visit to the project to inspect and evaluate the
19project.
20    (e) Any time prior to the issuance of a tax credit
21certificate and for a period of 4 years following the effective
22date of a project tax credit certificate, the Director may,
23upon reasonable notice of not less than 30 calendar days,
24request a status report from the Applicant consisting of
25information and updates relevant to the status of the project.
26Status reports shall not be requested more than twice yearly.

 

 

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1    (f) In order to demonstrate sufficient evidence of
2reviewable progress within 12 months after the date the
3Applicant received notification of allocation approval from
4the Division, the Director may require the Applicant to shall
5provide all of the following:
6        (1) a viable financial plan which demonstrates by way
7    of an executed agreement that all financing has been
8    secured for the project; such financing shall include, but
9    not be limited to, equity investment as demonstrated by
10    letters of commitment from the owner of the property,
11    investment partners, and equity investors;
12        (2) (blank); final construction drawings or approved
13    building permits that demonstrate the complete
14    rehabilitation of the full scope of the application; and
15        (3) all historic approvals, including all federal and
16    State rehabilitation documents required by the Division.
17    The Director shall review the submitted evidence and may
18request additional documentation from the Applicant if
19necessary. The Applicant will have 30 calendar days to provide
20the information requested, otherwise the allocation approval
21may be rescinded at the discretion of the Director.
22    (g) In order to demonstrate sufficient evidence of
23reviewable progress within 24 18 months after the date the
24application received notification of approval from the
25Division, the Director may require the Applicant is required to
26provide detailed evidence that the Applicant has secured and

 

 

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1closed on financing for the complete scope of rehabilitation
2for the project. To demonstrate evidence that the Applicant has
3secured and closed on financing, the Applicant will need to
4provide signed and processed loan agreements, bank financing
5documents or other legal and contractual evidence to
6demonstrate that adequate financing is available to complete
7the project. The Director shall review the submitted evidence
8and may request additional documentation from the Applicant if
9necessary. The Applicant will have 30 calendar days to provide
10the information requested, otherwise the allocation approval
11may be rescinded at the discretion of the Director.
12    If the Applicant fails to document reviewable progress
13within 24 18 months of approval, the Director may notify the
14Applicant that the allocation application is rescinded.
15However, should financing and construction be imminent, the
16Director may elect to grant the Applicant no more than 5 months
17to close on financing and commence construction. If the
18Applicant fails to meet these conditions in the required
19timeframe, the Director shall notify the Applicant that the
20application is rescinded. Any such rescinded allocation shall
21be added to the aggregate amount of credits available for
22allocation for the year in which the forfeiture occurred.
23    The amount of the qualified expenditures identified in the
24qualified taxpayer's Applicant's certification of completion
25and reflected on the Historic Preservation Tax Credit
26certificate issued by the Director is subject to inspection,

 

 

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1examination, and audit by the Department of Revenue.
2    The qualified taxpayer Applicant shall establish and
3maintain for a period of 4 years following the effective date
4on a project tax credit certificate such records as required by
5the Director. Such records include, but are not limited to,
6records documenting project expenditures and compliance with
7the U.S. Secretary of the Interior's Standards. The Applicant
8shall make such records available for review and verification
9by the Director, the State Historic Preservation Officer, the
10Department of Revenue, or appropriate staff, as well as other
11appropriate State agencies. In the event the Director
12determines an Applicant has submitted a status an annual report
13containing erroneous information or data not supported by
14records established and maintained under this Act, the Director
15may, after providing notice, require the Applicant to resubmit
16corrected reports.
17(Source: P.A. 100-629, eff. 1-1-19.)
 
18    (35 ILCS 31/25)
19    Sec. 25. Powers. The Division may shall adopt rules for the
20administration of this Act. The Division may enter into an
21intergovernmental agreement with the Department of Commerce
22and Economic Opportunity, the Department of Revenue, or both,
23for the administration of this Act. Such intergovernmental
24agreement may allow for the distribution of all or a portion of
25the issuance fee imposed under Section 10 to the Department of

 

 

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1Commerce and Economic Opportunity or the Department of Revenue,
2as applicable.
3(Source: P.A. 100-629, eff. 1-1-19.)
 
4    Section 10. The Illinois Income Tax Act is amended by
5changing Section 228 as follows:
 
6    (35 ILCS 5/228)
7    Sec. 228. Historic preservation credit. For tax years
8beginning on or after January 1, 2019 and ending on or before
9December 31, 2023, a taxpayer who qualifies for a credit under
10the Historic Preservation Tax Credit Act is entitled to a
11credit against the taxes imposed under subsections (a) and (b)
12of Section 201 of this Act as provided in that Act. If the
13taxpayer is a partnership, or Subchapter S corporation, or a
14limited liability company the credit shall be allowed to the
15partners, or shareholders, or members in accordance with the
16determination of income and distributive share of income under
17Sections 702 and 704 and Subchapter S of the Internal Revenue
18Code provided that credits granted to a partnership, a limited
19liability company taxed as a partnership, or other multiple
20owners of property shall be passed through to the partners,
21members, or owners respectively on a pro rata basis or pursuant
22to an executed agreement among the partners, members, or owners
23documenting any alternate distribution method. If the amount of
24any tax credit awarded under this Section exceeds the qualified

 

 

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1taxpayer's income tax liability for the year in which the
2qualified rehabilitation plan was placed in service, the excess
3amount may be carried forward as provided in the Historic
4Preservation Tax Credit Act.
5(Source: P.A. 100-629, eff. 1-1-19; 101-81, eff. 7-12-19.)
 
6    Section 99. Effective date. This Act takes effect upon
7becoming law.