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Full Text of HB0240  99th General Assembly

HB0240 99TH GENERAL ASSEMBLY


 


 
99TH GENERAL ASSEMBLY
State of Illinois
2015 and 2016
HB0240

 

Introduced , by Rep. Greg Harris

 

SYNOPSIS AS INTRODUCED:
 
New Act
35 ILCS 5/224 new
215 ILCS 5/409.1 new

    Creates the Illinois Rehabilitation and Revitalization Tax Credit Act. Creates a credit against taxes imposed under the Illinois Income Tax Act and the Illinois Insurance Code in an aggregate amount equal to 20% of qualified expenditures incurred by a qualified taxpayer pursuant to a qualified rehabilitation plan on a qualified structure, provided that the total amount of such qualified expenditures exceeds the greater of $5,000 or the adjusted basis of the property. Provides that credits may be carried forward for a period of 5 years, or carried back for a period of one year. Provides that credits awarded for each qualified rehabilitation project shall be limited to a maximum of $3,000,000. Provides that credits may be assigned or transferred. Effective January 1, 2016.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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1    AN ACT concerning revenue.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 1. Short title. This Act may be cited as the
5Illinois Rehabilitation and Revitalization Tax Credit Act.
 
6    Section 5. Definitions. As used in this Section, unless the
7context clearly indicates otherwise:
8    (a) "Agency" means the Historic Preservation Agency.
9    (b) "Department" means the Department of Commerce and
10Economic Opportunity.
11    (c) "Qualified expenditures" means all the costs and
12expenses defined as qualified rehabilitation expenditures
13under Section 47 of the federal Internal Revenue Code.
14Applicants may incur qualified expenditures, at their own risk,
15from the earlier of (i) the commencement of construction or
16(ii) one year prior to receipt of preliminary approval of an
17application pursuant to Section 40.
18    (d) "Qualified structure" means any building located in
19Illinois that is defined as a certified historic structure
20under Section 47(c)(3) of the federal Internal Revenue Code.
21    (e) "Qualified rehabilitation plan" means a proposed
22rehabilitation design that is approved by the Agency and
23certified by the National Park Service as being consistent with

 

 

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1the Secretary of the Interior's Standards for Rehabilitation,
2as adopted by the United States Secretary of the Interior.
3    (f) "Qualified rehabilitation project" means a completed
4rehabilitation project that is approved by the Agency and
5certified by the National Park Service as being consistent with
6the Secretary of the Interior's Standards for Rehabilitation,
7as adopted by the United States Secretary of the Interior.
8    (g) "Qualified taxpayer" means any owner of the qualified
9structure or any other person who may qualify for the federal
10rehabilitation credit allowed by Section 47 of the federal
11Internal Revenue Code. If the taxpayer is (i) a corporation
12having an election in effect under Subchapter S of the federal
13Internal Revenue Code, (ii) a partnership, or (iii) a limited
14liability company, the credit provided by this subsection may
15be claimed by the shareholders of the corporation, the partners
16of the partnership, or the members of the limited liability
17company in the same manner as those shareholders, partners, or
18members account for their proportionate shares of the income or
19losses of the corporation, partnership, or limited liability
20company, or as provided in the bylaws or other executed
21agreement of the corporation, partnership, or limited
22liability company. Credits granted to a partnership, a limited
23liability company taxed as a partnership, or other multiple
24owners of property shall be passed through to the partners,
25members, or owners respectively on a pro rata basis or pursuant
26to an executed agreement among the partners, members, or owners

 

 

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1documenting any alternate distribution method. Nothing in this
2Act is intended to prohibit a non-profit entity with a Section
3501(c)(3) designation under the federal Internal Revenue Code
4from serving as a shareholder, partner, member or other owner
5of a qualified taxpayer.
 
6    Section 10. Functional obsolescence test. When the credits
7requested with respect to a qualified rehabilitation plan are
8$1,000,000 or more, the Department must confirm that the
9property satisfies at least 2 of the following factors:
10        (1) Dilapidation. Dilapidation means that the primary
11    structural components of buildings or improvements on the
12    property are in an advanced state of disrepair or neglect
13    of necessary repairs such that a documented building
14    condition analysis determines that major repair is
15    required or the defects are so serious and so extensive
16    that the buildings must be removed.
17        (2) Obsolescence. Obsolescence means that the property
18    has fallen or is in the process of falling into disuse,
19    that structures on the property have become ill suited for
20    the original use, or both.
21        (3) Deterioration. Deterioration means: that buildings
22    located on the property contain defects including, but not
23    limited to, major defects in the secondary building
24    components such as doors, windows, porches, gutters and
25    downspouts, and fascia; that surface improvements,

 

 

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1    roadways, alleys, curbs, gutters, sidewalks, off-street
2    parking, and surface storage areas evidence deterioration,
3    including, but not limited to, surface cracking,
4    crumbling, potholes, depressions, loose paving material,
5    or weeds protruding through paved surfaces; or that any
6    combination of these problems exists.
7        (4) Presence of structures below minimum code
8    standards. The property contains structures that do not
9    meet the standards of zoning, subdivision, building, fire,
10    and other governmental codes applicable to property, but
11    not including housing and property maintenance codes.
12        (5) Illegal use of individual structures. The use of
13    structures in violation of applicable federal, State, or
14    local laws, exclusive of those applicable to the presence
15    of structures below minimum code standards.
16        (6) Excessive vacancies. Buildings on the property are
17    unoccupied or underused and represent an adverse influence
18    on the area because of the frequency, extent, or duration
19    of the vacancies.
20        (7) Inadequate ventilation, natural light, or sanitary
21    facilities. Inadequate ventilation means the absence of
22    ventilation for air circulation in spaces or rooms that
23    lack windows or require the removal of dust, odor, gas,
24    smoke, or other noxious airborne materials. Inadequate
25    natural light means the absence of skylights or windows for
26    interior spaces or rooms or improper window sizes or

 

 

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1    amounts as determined by room area to window area ratios.
2    Inadequate sanitary facilities refers to the absence or
3    inadequacy of garbage storage and enclosure, bathroom
4    facilities, hot water and kitchens, or structural
5    inadequacies preventing ingress and egress to and from all
6    rooms and units within a building.
7        (8) Inadequate utilities. Inadequate utilities are
8    underground and overhead utilities such as storm sewers and
9    storm drainage, sanitary sewers, water lines, and gas,
10    telephone, and electrical services that are: (1) of
11    insufficient capacity to serve the uses in the
12    redevelopment project area; (2) deteriorated, antiquated,
13    obsolete, or in disrepair; or (3) lacking within the
14    redevelopment project area.
 
15    Section 15. Allowable credit. There shall be allowed a tax
16credit against (i) the tax imposed by subsections (a) and (b)
17of Section 201 of the Illinois Income Tax Act and (ii) the
18taxes imposed under Sections 409, 413, 444, and 444.1 of the
19Illinois Insurance Code in an aggregate amount equal to 20% of
20qualified expenditures incurred by a qualified taxpayer
21pursuant to a qualified rehabilitation plan on a qualified
22structure, provided that the total amount of such qualified
23expenditures exceeds the greater of $5,000 or the adjusted
24basis of the property. A tax credit may be earned under this
25Act during the period beginning January 1, 2016 and ending

 

 

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1December 31, 2020. While a tax credit may be earned before July
21, 2016, no tax credit shall be actually issued by the
3Department before July 1, 2016. While a tax credit must be
4earned on or before December 31, 2020, a credit shall be
5allowed after December 31, 2020 in accordance with the terms of
6this Act. If the amount of any tax credit awarded under this
7Act exceeds the taxpayer's tax liability for the year in which
8the qualified rehabilitation project was placed in service, the
9excess amount may be carried forward for deduction from the
10taxpayer's tax liability in the next succeeding year or years
11or may be carried back for deduction from the taxpayer's tax
12liability for the immediately preceding year until the total
13amount of the credit has been used, except that a credit may
14not be carried forward for deduction after the fifth taxable
15year after the taxable year in which the qualified
16rehabilitation project was placed in service or carried back
17for deduction more than one year before the taxable year in
18which the qualified rehabilitation project was placed in
19service.
 
20    Section 20. Economic needs test. When the credits requested
21with respect to a qualified rehabilitation plan will be
22$1,000,000 or more, the Department shall evaluate whether,
23without public intervention, the economic development project
24would not otherwise benefit from private sector investment. The
25Department shall have the power to adopt rules for such

 

 

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1evaluation purpose.
 
2    Section 25. Transfer of credits. Any qualified taxpayer,
3referred to in this Section as the assignor, may allocate,
4sell, assign, convey, or otherwise transfer tax credits allowed
5and earned under this Act, to any individual or entity,
6including without limitation, a non-profit entity with a
7Section 501(c)(3) designation under the federal Internal
8Revenue Code. The individual or entity acquiring the credits,
9referred to in this Section as the assignee, may use the amount
10of the acquired credits to offset up to 100% of its tax
11liability, if any, for either the taxable year in which the
12qualified rehabilitation project was first placed into service
13or the taxable year in which the credits were acquired, or any
14years in between. Unused credit amounts may be carried forward
15for up to 5 years and carried back for up to one year, except
16that all credits must be claimed within 5 years after the tax
17year in which the qualified rehabilitation project was first
18placed into service. The assignor shall enter into a written
19agreement with the assignee establishing the terms and
20conditions of the agreement and shall perfect the transfer by
21notifying the Department in writing within 30 calendar days
22after the effective date of the transfer and shall provide any
23information as may be required by the Department to administer
24and carry out the provisions of this Section. The Department
25shall develop a system to track the transfer of credits and to

 

 

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1certify the ownership of credits, and the Department may adopt
2rules to permit verification of the ownership of credits but
3shall not adopt any rules which unduly restrict or hinder the
4transfer of credits. The assignee also may sell, assign,
5convey, or otherwise transfer the credits, and the credits may
6be transferred more than once. The credits may be bifurcated to
7be transferred to more than one assignee. If credits that have
8been transferred are subsequently reduced, adjusted, or
9cancelled, in whole or in part, by the Department, the
10Department of Revenue, or any other applicable government
11agency, only the original qualified taxpayer that was awarded
12the credits, and not any subsequent assignee of the credits,
13shall be held liable to repay any amount of such reduction,
14adjustment, or cancellation of the credits. The credits are not
15subject to recapture.
 
16    Section 30. Maximum limits. The credits awarded for each
17qualified rehabilitation project shall be limited to a maximum
18of $3,000,000. A qualified rehabilitation project shall not
19receive credits pursuant to this Act if the qualified
20rehabilitation project has received credits pursuant to the
21River Edge Redevelopment Zone Act.
 
22    Section 35. Maximum annual cap. The total amount of credits
23approved by the Department under this Act may not exceed: (1)
24$10,000,000 in Fiscal Year 2016; (2) $20,000,000 in Fiscal Year

 

 

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12017; (3) $30,000,000 in Fiscal Year 2018; (4) $40,000,000 for
2Fiscal Year 2019; and (5) $50,000,000 for Fiscal Year 2020. If
3the total amount of credits awarded in any of those fiscal
4years is less than the maximum amount available for that fiscal
5year, then the maximum amount available for the next fiscal
6year shall be increased by the difference between the maximum
7amount and the total amount awarded.
 
8    Section 40. Application Process.
9    (a) To obtain the credits allowed under this Act, the
10applicant shall submit an application for tax credits to the
11Department. The Department shall prioritize each application
12for review and approval in the order of the date on which the
13application was postmarked, with the oldest postmarked date
14receiving priority. Applications postmarked on the same day
15shall go through a lottery process to determine the order in
16which applications shall be received for approval. The
17application shall be in such form as the Department and the
18Agency shall reasonably require, and the application shall
19include sufficient information to permit the Agency to approve,
20approve with conditions, or reject the structure,
21rehabilitation plan, or rehabilitation project. The Department
22may charge an application fee of up to $1,000 per application
23per project. All application fees will be deposited into the
24Department's Administrative Fund, with the fee to be equally
25divided between the Department and the Agency.

 

 

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1    (b) To ensure that an applicant has sufficient ownership of
2the qualified structure, each application shall include all of
3the following:
4        (1) Proof of ownership or site control. Proof of
5    ownership shall include evidence that the applicant is the
6    fee simple owner of the qualified structure, such as a
7    warranty deed or a closing statement. Proof of site control
8    may be evidenced by a leasehold interest or an option to
9    acquire such an interest. If the applicant is in the
10    process of acquiring fee simple ownership, proof of site
11    control shall include an executed sales contract or an
12    executed option to purchase the qualified structure.
13        (2) The estimated qualified expenditures, the
14    anticipated total costs of the project, the adjusted basis
15    of the property, as shown by proof of actual acquisition
16    costs, the anticipated total labor costs, the estimated
17    project start date, and the estimated project completion
18    date.
19        (3) Proof that the property is a qualified structure as
20    defined in this Act or evidence that the necessary
21    documentation has been prepared for the property to become
22    a qualified structure, but a final determination of such
23    qualification shall not be a prerequisite for approval of
24    the preliminary application or the incurrence of qualified
25    expenditures.
26        (4) Any other information which the Department and the

 

 

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1    Agency may reasonably require.
2    (c) If the Agency approves the applicant's rehabilitation
3plan for a qualified structure as meeting the Secretary of
4Interior's Standards for Rehabilitation and if the application
5is otherwise complete, the plan shall be forwarded to the
6National Park Service for review. If the National Park Service
7certifies the rehabilitation plan, the plan shall be considered
8qualified for this Act. The Department shall notify the
9applicant in writing of the preliminary approval for an amount
10of credits equal to the amount provided under this Section as
11may be limited elsewhere in this Act. Such preliminary approval
12requires full compliance thereafter with all other
13requirements of law as a condition to any claim for such
14credits. If the Agency or the National Park Service deems the
15applicant's rehabilitation plan to not be qualified, or if the
16application is not complete, the applicant shall be notified in
17writing of the rejection of the application. Any rejected
18application shall be removed from the review process. Rejected
19applications shall lose priority in the review process. A
20rejected application may be resubmitted, but shall be deemed to
21be a new application for purposes of the priority procedures
22described in this Section.
23    (d) Following approval of an application, the identity of
24the applicant contained in such application shall not be
25modified, except that:
26        (1) the applicant may add partners, members, or

 

 

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1    shareholders as part of the ownership structure, so long as
2    the primary owner remains the same; however, prior to the
3    commencement of renovation and the expenditure of at least
4    10% of the proposed rehabilitation budget, removal of the
5    principal for failure to perform duties and the appointment
6    of a new principal thereafter shall not constitute a change
7    of the principal; and
8        (2) the identity of the applicant may be changed if the
9    ownership of the project is changed due to a foreclosure,
10    deed in lieu of a foreclosure, or voluntary conveyance, or
11    a transfer in bankruptcy.
12    (e) In the event that the Department grants approval for
13credits in any fiscal year equal to the maximum amount
14available under this Act, all applicants with applications then
15awaiting approval or thereafter submitted for approval shall be
16notified by the Department that no additional credits shall be
17approved during such fiscal year and shall be notified of the
18priority given to such applicant's application then awaiting
19approval. Those applications shall be kept on file by the
20Department and shall be considered for approval for credits in
21the order established in this Act in the event that additional
22credits become available due to the rescission of preliminary
23approvals or when a new fiscal year's allocation of credits
24becomes available for approval.
25    (f) All applicants with applications receiving preliminary
26approval on or after the effective date of this Act shall

 

 

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1commence rehabilitation within 2 years of the date of issue of
2the letter from the Department granting preliminary approval
3for credits. Commencement of rehabilitation means that, as of
4the date in which actual physical work has begun, the applicant
5has incurred no less than 10% of the estimated costs of
6rehabilitation provided in the application. The applicant may
7commence and incur qualified expenditures, at its own risk,
8before the property becomes a qualified structure. If the
9rehabilitation receives final approval under this Section,
10including the necessary verification of the total costs and
11expenses of rehabilitation, the applicant shall receive tax
12credits for all qualified expenditures incurred within the time
13periods allowed in this Act. If the Department determines that
14an applicant has failed to comply with the requirements
15provided under this Section, the preliminary approval for the
16amount of credits for such applicant shall be rescinded and
17such amount of credits shall then be included in the total
18amount of credits from which preliminary approvals for other
19projects may be granted. Any applicant whose preliminary
20approval shall be rescinded shall be notified of such from the
21Department and, upon receipt of such notice, may submit a new
22application for the project but such application shall be
23deemed to be a new application for purposes of the priority
24procedures described in this Section.
25    (g) If the Agency approves the completed rehabilitation
26project as meeting the Secretary of Interior's Standards for

 

 

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1Rehabilitation, the completed rehabilitation project shall be
2forwarded to the National Park Service for review. If the
3National Park Service certifies the completed rehabilitation
4project, the project shall be considered qualified for this
5Act. For qualified rehabilitation projects, the applicant
6shall submit a cost certification, and when the credits
7requested with respect to a qualified rehabilitation project
8are $250,000 or more, the Department shall require an outside
9audit of the cost certification. The Department shall determine
10the amount of qualified expenditures and the amount of credits
11to be issued to the applicant. The issuance of certificates of
12credits to applicants shall be performed by the Department. The
13Department shall coordinate with the Illinois Department of
14Revenue to determine if the applicant has any outstanding
15Illinois tax obligations that can be satisfied by the credits
16to be issued. The Department shall inform the applicant of
17final approval and of final credit amount by letter. An
18issuance fee of up to 2% of the amount of the credits issued by
19the tax credit certificate may be collected from the applicant
20and remitted to the Department, to be deposited into the
21Historic Property Administrative Fund, with the fee to be
22divided equally between the Department and the Agency, for the
23purpose of administering the Act. When the Department has
24received the issuance fee from the applicant and deposited it
25into the Historic Property Administrative Fund, the Department
26shall issue the tax credit certificates to the applicant. The

 

 

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1taxpayer must attach the tax credit certificate to the tax
2return on which the credits are to be claimed.
3    (h) In the event the amount of qualified expenditures
4actually incurred by an applicant are more than those estimated
5in its application, the applicant can submit a new application
6for such excess amount of qualified expenditures on a form
7prescribed by the Department, but that application shall be
8deemed to be a new application for purposes of the priority
9procedures described in this Act with respect to such excess
10amount of qualified expenditures. Such applications shall be
11automatically approved, subject only to availability of tax
12credits and all provisions regarding priority provided in this
13Act.
 
14    Section 45. Biennial report; powers of the Department and
15Agency. The Department shall determine, on a biennial basis
16beginning at the end of the second fiscal year after the date
17this Act takes effect, the overall economic impact to the State
18from the qualified rehabilitation projects. The overall
19economic impact shall include the number of jobs created. The
20Department and the Agency are granted and have all the powers
21necessary or convenient to carry out the provisions of this
22Act, including, but not limited to, the power to promulgate
23rules for the administration of this Act and the power to
24establish application forms and other agreements.
 

 

 

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1    Section 50. Appeals process. Decisions of the National Park
2Service on whether a structure, rehabilitation plan or
3rehabilitation project meets the Secretary of the Interior's
4Standards for Rehabilitation shall be considered final and
5shall determine whether a structure, rehabilitation plan or
6rehabilitation project is considered qualified for the
7purposes of this Act. The applicant may appeal the decision of
8the National Park Service in the manner described in 36 C.F.R.
967 - Historic Preservation Certifications Pursuant to Sec.
1048(g) and Sec. 170(h) of the Internal Revenue Code of 1986, as
11amended. The applicant may appeal any official decision other
12than the qualification of the structure, rehabilitation plan,
13or rehabilitation project to the Department with regard to an
14application submitted under this Act to an independent,
15third-party appeals officer to be identified by the Department
16and the Agency.
17    Appeals must be submitted to the designated appeals officer
18in writing within 30 days of receipt by the applicant of the
19decision which is the subject of the appeal, and shall include
20all information the applicant wishes the appeals officer to
21consider in deciding the appeal.
22    Upon receipt of an appeal, the appeals officer shall notify
23the Department and the Agency that an appeal is pending,
24identify the decision being appealed and forward a copy of the
25information submitted by the applicant. The Department or the
26Agency, or both, may submit a written response to the appeal.

 

 

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1    The applicant shall be entitled to one meeting with the
2appeals officer to discuss the appeal, but the appeals officer
3may schedule additional meetings at their discretion. The
4Department and the Agency shall be permitted to appear at all
5meetings.
6    The appeals officer shall consider the record of the
7decision in question, any further written submissions by the
8applicant, the Department, or the Agency, and other available
9information and shall deliver a written decision to all parties
10as promptly as circumstances permit.
11    Appeals under this Section constitute an administrative
12review of the decision appealed from and are not conducted as
13an adjudicative proceeding.
 
14    Section 80. The Illinois Income Tax Act is amended by
15adding Section 224 as follows:
 
16    (35 ILCS 5/224 new)
17    Sec. 224. Rehabilitation and revitalization credit. For
18tax years commencing on or after January 1, 2016, a taxpayer
19who qualifies for a credit under the Illinois Rehabilitation
20and Revitalization Tax Credit Act is entitled to a credit
21against the taxes imposed under subsections (a) and (b) of
22Section 201 of this Act. If the taxpayer is a partnership or
23Subchapter S corporation, the credit shall be allowed to the
24partners or shareholders in accordance with the determination

 

 

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1of income and distributive share of income under Sections 702
2and 704 and Subchapter S of the Internal Revenue Code or the
3credit shall be allowed to the partners or shareholders
4pursuant to an executed agreement among the partners or
5shareholders documenting any alternate distribution method.
6This Section is exempt from the provisions of Section 250 of
7this Act.
 
8    Section 85. The Illinois Insurance Code is amended by
9adding Section 409.1 as follows:
 
10    (215 ILCS 5/409.1 new)
11    Sec. 409.1. Rehabilitation and revitalization credit. For
12taxes payable after January 1, 2016, credits may be granted
13against the taxes imposed under Section 409, 413, 444, and
14444.1 of this Act as provided in the Illinois Rehabilitation
15and Revitalization Tax Credit Act.
 
16    Section 99. Effective date. This Act takes effect January
171, 2016.