HB3753 100TH GENERAL ASSEMBLY

LRB100 11428 HLH 21851 b

100TH GENERAL ASSEMBLY
State of Illinois
2017 and 2018
HB3753

Introduced , by Rep. Jerry Costello, II

SYNOPSIS AS INTRODUCED:

35 ILCS 105/3-61
35 ILCS 110/3-51
35 ILCS 115/2d
35 ILCS 120/2-51

Amends the Use Tax Act, the Service Use Tax Act, the Service Occupation Tax Act, and the Retailers' Occupation Tax Act. Provides that the term "use as rolling stock moving in interstate commerce" means that a person claiming the exemption must: (1) use the vehicles or trailers to transport persons or property for hire; (2) hold, at the time of purchase, an appropriate credential that authorizes a motor carrier to engage in interstate commerce for-hire; and (3) if the person claiming the exemption is a subsidiary of another company, maintain separate books and records, including separate charts of accounts, and assure that all transactions between the transportation company and the parent are commercially reasonable arms-length transactions. Retains the current definition for aircraft and watercraft. Effective immediately.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning revenue.

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

Section 5. The Use Tax Act is amended by changing Section 3-61 as follows:

(35 ILCS 105/3-61)

Sec. 3-61. Motor vehicles; trailers; use as rolling stock definition.

(a) Through June 30, 2003, "use as rolling stock moving in interstate commerce" in subsections (b) and (c) of Section 3-55 means for motor vehicles, as defined in Section 1-146 of the Illinois Vehicle Code, and trailers, as defined in Section 1-209 of the Illinois Vehicle Code, when on 15 or more occasions in a 12-month period the motor vehicle and trailer has carried persons or property for hire in interstate commerce, even just between points in Illinois, if the motor vehicle and trailer transports persons whose journeys or property whose shipments originate or terminate outside Illinois. This definition applies to all property purchased for the purpose of being attached to those motor vehicles or trailers as a part thereof.

(b) On and after July 1, 2003 and through June 30, 2004, "use as rolling stock moving in interstate commerce" in paragraphs (b) and (c) of Section 3-55 occurs for motor vehicles, as defined in Section 1-146 of the Illinois Vehicle Code, when during a 12-month period the rolling stock has carried persons or property for hire in interstate commerce for 51% of its total trips and transports persons whose journeys or property whose shipments originate or terminate outside Illinois. Trips that are only between points in Illinois shall not be counted as interstate trips when calculating whether the tangible personal property qualifies for the exemption but such trips shall be included in total trips taken.

(c) Beginning July 1, 2004 and through June 30, 2017, "use as rolling stock moving in interstate commerce" in paragraphs (b) and (c) of Section 3-55 occurs for motor vehicles, as defined in Section 1-146 of the Illinois Vehicle Code, when during a 12-month period the rolling stock has carried persons or property for hire in interstate commerce for greater than 50% of its total trips for that period or for greater than 50% of its total miles for that period. The person claiming the exemption shall make an election at the time of purchase to use either the trips or mileage method. Persons who purchased motor vehicles prior to July 1, 2004 shall make an election to use either the trips or mileage method and document that election in their books and records. If no election is made under this subsection to use the trips or mileage method, the person shall be deemed to have chosen the mileage method.

For purposes of determining qualifying trips or miles, motor vehicles that carry persons or property for hire, even just between points in Illinois, will be considered used for hire in interstate commerce if the motor vehicle transports persons whose journeys or property whose shipments originate or terminate outside Illinois. The exemption for motor vehicles used as rolling stock moving in interstate commerce may be claimed only for the following vehicles: (i) motor vehicles whose gross vehicle weight rating exceeds 16,000 pounds; and (ii) limousines, as defined in Section 1-139.1 of the Illinois Vehicle Code. This definition applies to all property purchased for the purpose of being attached to those motor vehicles as a part thereof.

(d) Beginning July 1, 2004 and through June 30, 2017, "use as rolling stock moving in interstate commerce" in paragraphs (b) and (c) of Section 3-55 occurs for trailers, as defined in Section 1-209 of the Illinois Vehicle Code, semitrailers as defined in Section 1-187 of the Illinois Vehicle Code, and pole trailers as defined in Section 1-161 of the Illinois Vehicle Code, when during a 12-month period the rolling stock has carried persons or property for hire in interstate commerce for greater than 50% of its total trips for that period or for greater than 50% of its total miles for that period. The person claiming the exemption for a trailer or trailers that will not be dedicated to a motor vehicle or group of motor vehicles shall make an election at the time of purchase to use either the trips or mileage method. Persons who purchased trailers prior to July 1, 2004 that are not dedicated to a motor vehicle or group of motor vehicles shall make an election to use either the trips or mileage method and document that election in their books and records. If no election is made under this subsection to use the trips or mileage method, the person shall be deemed to have chosen the mileage method.

For purposes of determining qualifying trips or miles, trailers, semitrailers, or pole trailers that carry property for hire, even just between points in Illinois, will be considered used for hire in interstate commerce if the trailers, semitrailers, or pole trailers transport property whose shipments originate or terminate outside Illinois. This definition applies to all property purchased for the purpose of being attached to those trailers, semitrailers, or pole trailers as a part thereof. In lieu of a person providing documentation regarding the qualifying use of each individual trailer, semitrailer, or pole trailer, that person may document such qualifying use by providing documentation of the following:

(1) If a trailer, semitrailer, or pole trailer is dedicated to a motor vehicle that qualifies as rolling stock moving in interstate commerce under subsection (c) of this Section, then that trailer, semitrailer, or pole trailer qualifies as rolling stock moving in interstate commerce under this subsection.

(2) If a trailer, semitrailer, or pole trailer is dedicated to a group of motor vehicles that all qualify as rolling stock moving in interstate commerce under subsection (c) of this Section, then that trailer, semitrailer, or pole trailer qualifies as rolling stock moving in interstate commerce under this subsection.

(3) If one or more trailers, semitrailers, or pole trailers are dedicated to a group of motor vehicles and not all of those motor vehicles in that group qualify as rolling stock moving in interstate commerce under subsection (c) of this Section, then the percentage of those trailers, semitrailers, or pole trailers that qualifies as rolling stock moving in interstate commerce under this subsection is equal to the percentage of those motor vehicles in that group that qualify as rolling stock moving in interstate commerce under subsection (c) of this Section to which those trailers, semitrailers, or pole trailers are dedicated. However, to determine the qualification for the exemption provided under this item (3), the mathematical application of the qualifying percentage to one or more trailers, semitrailers, or pole trailers under this subpart shall not be allowed as to any fraction of a trailer, semitrailer, or pole trailer.

(e) For aircraft and watercraft purchased on or after January 1, 2014, "use as rolling stock moving in interstate commerce" in paragraphs (b) and (c) of Section 3-55 occurs when, during a 12-month period, the rolling stock has carried persons or property for hire in interstate commerce for greater than 50% of its total trips for that period or for greater than 50% of its total miles for that period. The person claiming the exemption shall make an election at the time of purchase to use either the trips or mileage method and document that election in their books and records. If no election is made under this subsection to use the trips or mileage method, the person shall be deemed to have chosen the mileage method. For aircraft, flight hours may be used in lieu of recording miles in determining whether the aircraft meets the mileage test in this subsection. For watercraft, nautical miles or trip hours may be used in lieu of recording miles in determining whether the watercraft meets the mileage test in this subsection.

Notwithstanding any other provision of law to the contrary, property purchased on or after January 1, 2014 for the purpose of being attached to aircraft or watercraft as a part thereof qualifies as rolling stock moving in interstate commerce only if the aircraft or watercraft to which it will be attached qualifies as rolling stock moving in interstate commerce under the test set forth in this subsection (e), regardless of when the aircraft or watercraft was purchased. Persons who purchased aircraft or watercraft prior to January 1, 2014 shall make an election to use either the trips or mileage method and document that election in their books and records for the purpose of determining whether property purchased on or after January 1, 2014 for the purpose of being attached to aircraft or watercraft as a part thereof qualifies as rolling stock moving in interstate commerce under this subsection (e).

(f) The election to use either the trips or mileage method made under the provisions of subsections (c), (d), or (e) of this Section will remain in effect for the duration of the purchaser's ownership of that item or, with respect to subsections (c) and (d) of this Section, until July 1, 2017, whichever occurs sooner.

(g) The General Assembly finds:

(1) The rolling stock exemption has been repeatedly amended and, between January 1, 1999 and the effective date of this amendatory Act of the 100th General Assembly, has taken 4 forms.

(2) The exemption continues to be a subject of dispute, audits, and lack of clarity and is problematic for Illinois businesses.

(3) It is essential to provide simplicity and clarity to the issue of when a purchaser such as a trucking company in Illinois qualifies for the rolling stock sales tax exemption.

(4) Working with the trucking and hauling community and other interested parties, this amendatory Act of the 100th General Assembly draws a simple bright line that purchasers must meet to qualify for the exemption which is modeled on surrounding states that do not require a test involving trips, or mileage, or both for shipments between points which originate or terminate outside the relevant state. Such a simplified requirement, without a trips or miles qualification, will provide certainty for purchasers such as Illinois trucking businesses and also provide a more easily enforced requirement and audit practice for the Department of Revenue.

(5) It is the intent of the General Assembly to establish on and after the effective date of this amendatory Act of the 100th General Assembly an exemption based upon the purchaser's status as a motor carrier which has credentials to engage in interstate commerce for hire.

Beginning on July 1, 2017 "use as rolling stock moving in interstate commerce" means that a person claiming the exemption must:

(1) use the vehicles or trailers to transport persons or property for hire;

(2) hold, at the time of purchase, an appropriate credential that authorizes a motor carrier to engage in interstate commerce for-hire; and

(3) if the person claiming the exemption is a subsidiary of another company, maintain separate books and records, including separate charts of accounts, and assure that all transactions between the transportation company and the parent are commercially reasonable arms-length transactions.

Subsection (e) of this Section shall continue to apply to aircraft and watercraft on and after July 1, 2017.

Property purchased for the purpose of being attached to a motor vehicle or trailer as a part thereof qualifies as rolling stock moving in interstate commerce only if the motor vehicle or trailer to which it will be attached qualifies as rolling stock moving in interstate commerce under the test set forth in this subsection (g).

(Source: P.A. 98-584, eff. 8-27-13.)

Section 10. The Service Use Tax Act is amended by changing Section 3-51 as follows:

(35 ILCS 110/3-51)

Sec. 3-51. Motor vehicles; trailers; use as rolling stock definition.

(a) Through June 30, 2003, "use as rolling stock moving in interstate commerce" in subsection (b) of Section 3-45 means for motor vehicles, as defined in Section 1-46 of the Illinois Vehicle Code, and trailers, as defined in Section 1-209 of the Illinois Vehicle Code, when on 15 or more occasions in a 12-month period the motor vehicle and trailer has carried persons or property for hire in interstate commerce, even just between points in Illinois, if the motor vehicle and trailer transports persons whose journeys or property whose shipments originate or terminate outside Illinois. This definition applies to all property purchased for the purpose of being attached to those motor vehicles or trailers as a part thereof.

(b) On and after July 1, 2003 and through June 30, 2004, "use as rolling stock moving in interstate commerce" in paragraphs (4) and (4a) of the definition of "sale of service" in Section 2 and subsection (b) of Section 3-45 occurs for motor vehicles, as defined in Section 1-146 of the Illinois Vehicle Code, when during a 12-month period the rolling stock has carried persons or property for hire in interstate commerce for 51% of its total trips and transports persons whose journeys or property whose shipments originate or terminate outside Illinois. Trips that are only between points in Illinois shall not be counted as interstate trips when calculating whether the tangible personal property qualifies for the exemption but such trips shall be included in total trips taken.

(c) Beginning July 1, 2004 and through June 30, 2017, "use as rolling stock moving in interstate commerce" in paragraphs (4) and (4a) of the definition of "sale of service" in Section 2 and subsection (b) of Section 3-45 occurs for motor vehicles, as defined in Section 1-146 of the Illinois Vehicle Code, when during a 12-month period the rolling stock has carried persons or property for hire in interstate commerce for greater than 50% of its total trips for that period or for greater than 50% of its total miles for that period. The person claiming the exemption shall make an election at the time of purchase to use either the trips or mileage method. Persons who purchased motor vehicles prior to July 1, 2004 shall make an election to use either the trips or mileage method and document that election in their books and records. If no election is made under this subsection to use the trips or mileage method, the person shall be deemed to have chosen the mileage method.

For purposes of determining qualifying trips or miles, motor vehicles that carry persons or property for hire, even just between points in Illinois, will be considered used for hire in interstate commerce if the motor vehicle transports persons whose journeys or property whose shipments originate or terminate outside Illinois. The exemption for motor vehicles used as rolling stock moving in interstate commerce may be claimed only for the following vehicles: (i) motor vehicles whose gross vehicle weight rating exceeds 16,000 pounds; and (ii) limousines, as defined in Section 1-139.1 of the Illinois Vehicle Code. This definition applies to all property purchased for the purpose of being attached to those motor vehicles as a part thereof.

(d) Beginning July 1, 2004 and through June 30, 2017, "use as rolling stock moving in interstate commerce" in paragraphs (4) and (4a) of the definition of "sale of service" in Section 2 and subsection (b) of Section 3-45 occurs for trailers, as defined in Section 1-209 of the Illinois Vehicle Code, semitrailers as defined in Section 1-187 of the Illinois Vehicle Code, and pole trailers as defined in Section 1-161 of the Illinois Vehicle Code, when during a 12-month period the rolling stock has carried persons or property for hire in interstate commerce for greater than 50% of its total trips for that period or for greater than 50% of its total miles for that period. The person claiming the exemption for a trailer or trailers that will not be dedicated to a motor vehicle or group of motor vehicles shall make an election at the time of purchase to use either the trips or mileage method. Persons who purchased trailers prior to July 1, 2004 that are not dedicated to a motor vehicle or group of motor vehicles shall make an election to use either the trips or mileage method and document that election in their books and records. If no election is made under this subsection to use the trips or mileage method, the person shall be deemed to have chosen the mileage method.

For purposes of determining qualifying trips or miles, trailers, semitrailers, or pole trailers that carry property for hire, even just between points in Illinois, will be considered used for hire in interstate commerce if the trailers, semitrailers, or pole trailers transport property whose shipments originate or terminate outside Illinois. This definition applies to all property purchased for the purpose of being attached to those trailers, semitrailers, or pole trailers as a part thereof. In lieu of a person providing documentation regarding the qualifying use of each individual trailer, semitrailer, or pole trailer, that person may document such qualifying use by providing documentation of the following:

(1) If a trailer, semitrailer, or pole trailer is dedicated to a motor vehicle that qualifies as rolling stock moving in interstate commerce under subsection (c) of this Section, then that trailer, semitrailer, or pole trailer qualifies as rolling stock moving in interstate commerce under this subsection.

(2) If a trailer, semitrailer, or pole trailer is dedicated to a group of motor vehicles that all qualify as rolling stock moving in interstate commerce under subsection (c) of this Section, then that trailer, semitrailer, or pole trailer qualifies as rolling stock moving in interstate commerce under this subsection.

(3) If one or more trailers, semitrailers, or pole trailers are dedicated to a group of motor vehicles and not all of those motor vehicles in that group qualify as rolling stock moving in interstate commerce under subsection (c) of this Section, then the percentage of those trailers, semitrailers, or pole trailers that qualifies as rolling stock moving in interstate commerce under this subsection is equal to the percentage of those motor vehicles in that group that qualify as rolling stock moving in interstate commerce under subsection (c) of this Section to which those trailers, semitrailers, or pole trailers are dedicated. However, to determine the qualification for the exemption provided under this item (3), the mathematical application of the qualifying percentage to one or more trailers, semitrailers, or pole trailers under this subpart shall not be allowed as to any fraction of a trailer, semitrailer, or pole trailer.

(e) For aircraft and watercraft purchased on or after January 1, 2014, "use as rolling stock moving in interstate commerce" in (i) paragraphs (4) and (4a) of the definition of "sale of service" in Section 2 and (ii) subsection (b) of Section 3-45 occurs when, during a 12-month period, the rolling stock has carried persons or property for hire in interstate commerce for greater than 50% of its total trips for that period or for greater than 50% of its total miles for that period. The person claiming the exemption shall make an election at the time of purchase to use either the trips or mileage method and document that election in their books and records. If no election is made under this subsection to use the trips or mileage method, the person shall be deemed to have chosen the mileage method. For aircraft, flight hours may be used in lieu of recording miles in determining whether the aircraft meets the mileage test in this subsection. For watercraft, nautical miles or trip hours may be used in lieu of recording miles in determining whether the watercraft meets the mileage test in this subsection.

Notwithstanding any other provision of law to the contrary, property purchased on or after January 1, 2014 for the purpose of being attached to aircraft or watercraft as a part thereof qualifies as rolling stock moving in interstate commerce only if the aircraft or watercraft to which it will be attached qualifies as rolling stock moving in interstate commerce under the test set forth in this subsection (e), regardless of when the aircraft or watercraft was purchased. Persons who purchased aircraft or watercraft prior to January 1, 2014 shall make an election to use either the trips or mileage method and document that election in their books and records for the purpose of determining whether property purchased on or after January 1, 2014 for the purpose of being attached to aircraft or watercraft as a part thereof qualifies as rolling stock moving in interstate commerce under this subsection (e).

(f) The election to use either the trips or mileage method made under the provisions of subsections (c), (d), or (e) of this Section will remain in effect for the duration of the purchaser's ownership of that item or, with respect to subsections (c) and (d) of this Section, until July 1, 2017, whichever occurs sooner.

(g) The General Assembly finds:

(1) The rolling stock exemption has been repeatedly amended and, between January 1, 1999 and the effective date of this amendatory Act of the 100th General Assembly, has taken 4 forms.

(2) The exemption continues to be a subject of dispute, audits, and lack of clarity and is problematic for Illinois businesses.

(3) It is essential to provide simplicity and clarity to the issue of when a purchaser such as a trucking company in Illinois qualifies for the rolling stock sales tax exemption.

(4) Working with the trucking and hauling community and other interested parties, this amendatory Act of the 100th General Assembly draws a simple bright line that purchasers must meet to qualify for the exemption which is modeled on surrounding states that do not require a test involving trips, or mileage, or both for shipments between points which originate or terminate outside the relevant state. Such a simplified requirement, without a trips or miles qualification, will provide certainty for purchasers such as Illinois trucking businesses and also provide a more easily enforced requirement and audit practice for the Department of Revenue.

(5) It is the intent of the General Assembly to establish on and after the effective date of this amendatory Act of the 100th General Assembly an exemption based upon the purchaser's status as a motor carrier which has credentials to engage in interstate commerce for hire.

Beginning on July 1, 2017 "use as rolling stock moving in interstate commerce" means that a person claiming the exemption must:

(1) use the vehicles or trailers to transport persons or property for hire;

(2) hold, at the time of purchase, an appropriate credential that authorizes a motor carrier to engage in interstate commerce for-hire; and

(3) if the person claiming the exemption is a subsidiary of another company, maintain separate books and records, including separate charts of accounts, and assure that all transactions between the transportation company and the parent are commercially reasonable arms-length transactions.

Subsection (e) of this Section shall continue to apply to aircraft and watercraft on and after July 1, 2017.

Property purchased for the purpose of being attached to a motor vehicle or trailer as a part thereof qualifies as rolling stock moving in interstate commerce only if the motor vehicle or trailer to which it will be attached qualifies as rolling stock moving in interstate commerce under the test set forth in this subsection (g).

(Source: P.A. 98-584, eff. 8-27-13.)

Section 15. The Service Occupation Tax Act is amended by changing Section 2d as follows:

(35 ILCS 115/2d)

Sec. 2d. Motor vehicles; trailers; use as rolling stock definition.

(a) Through June 30, 2003, "use as rolling stock moving in interstate commerce" in subsections (d) and (d-1) of the definition of "sale of service" in Section 2 means for motor vehicles, as defined in Section 1-146 of the Illinois Vehicle Code, and trailers, as defined in Section 1-209 of the Illinois Vehicle Code, when on 15 or more occasions in a 12-month period the motor vehicle and trailer has carried persons or property for hire in interstate commerce, even just between points in Illinois, if the motor vehicle and trailer transports persons whose journeys or property whose shipments originate or terminate outside Illinois. This definition applies to all property purchased for the purpose of being attached to those motor vehicles or trailers as a part thereof.

(b) On and after July 1, 2003 and through June 30, 2004, "use as rolling stock moving in interstate commerce" in paragraphs (d) and (d-1) of the definition of "sale of service" in Section 2 occurs for motor vehicles, as defined in Section 1-146 of the Illinois Vehicle Code, when during a 12-month period the rolling stock has carried persons or property for hire in interstate commerce for 51% of its total trips and transports persons whose journeys or property whose shipments originate or terminate outside Illinois. Trips that are only between points in Illinois will not be counted as interstate trips when calculating whether the tangible personal property qualifies for the exemption but such trips will be included in total trips taken.

(c) Beginning July 1, 2004 and through June 30, 2017, "use as rolling stock moving in interstate commerce" in paragraphs (d) and (d-1) of the definition of "sale of service" in Section 2 occurs for motor vehicles, as defined in Section 1-146 of the Illinois Vehicle Code, when during a 12-month period the rolling stock has carried persons or property for hire in interstate commerce for greater than 50% of its total trips for that period or for greater than 50% of its total miles for that period. The person claiming the exemption shall make an election at the time of purchase to use either the trips or mileage method. Persons who purchased motor vehicles prior to July 1, 2004 shall make an election to use either the trips or mileage method and document that election in their books and records. If no election is made under this subsection to use the trips or mileage method, the person shall be deemed to have chosen the mileage method.

For purposes of determining qualifying trips or miles, motor vehicles that carry persons or property for hire, even just between points in Illinois, will be considered used for hire in interstate commerce if the motor vehicle transports persons whose journeys or property whose shipments originate or terminate outside Illinois. The exemption for motor vehicles used as rolling stock moving in interstate commerce may be claimed only for the following vehicles: (i) motor vehicles whose gross vehicle weight rating exceeds 16,000 pounds; and (ii) limousines, as defined in Section 1-139.1 of the Illinois Vehicle Code. This definition applies to all property purchased for the purpose of being attached to those motor vehicles as a part thereof.

(d) Beginning July 1, 2004 and through June 30, 2017, "use as rolling stock moving in interstate commerce" in paragraphs (d) and (d-1) of the definition of "sale of service" in Section 2 occurs for trailers, as defined in Section 1-209 of the Illinois Vehicle Code, semitrailers as defined in Section 1-187 of the Illinois Vehicle Code, and pole trailers as defined in Section 1-161 of the Illinois Vehicle Code, when during a 12-month period the rolling stock has carried persons or property for hire in interstate commerce for greater than 50% of its total trips for that period or for greater than 50% of its total miles for that period. The person claiming the exemption for a trailer or trailers that will not be dedicated to a motor vehicle or group of motor vehicles shall make an election at the time of purchase to use either the trips or mileage method. Persons who purchased trailers prior to July 1, 2004 that are not dedicated to a motor vehicle or group of motor vehicles shall make an election to use either the trips or mileage method and document that election in their books and records. If no election is made under this subsection to use the trips or mileage method, the person shall be deemed to have chosen the mileage method.

For purposes of determining qualifying trips or miles, trailers, semitrailers, or pole trailers that carry property for hire, even just between points in Illinois, will be considered used for hire in interstate commerce if the trailers, semitrailers, or pole trailers transport property whose shipments originate or terminate outside Illinois. This definition applies to all property purchased for the purpose of being attached to those trailers, semitrailers, or pole trailers as a part thereof. In lieu of a person providing documentation regarding the qualifying use of each individual trailer, semitrailer, or pole trailer, that person may document such qualifying use by providing documentation of the following:

(1) If a trailer, semitrailer, or pole trailer is dedicated to a motor vehicle that qualifies as rolling stock moving in interstate commerce under subsection (c) of this Section, then that trailer, semitrailer, or pole trailer qualifies as rolling stock moving in interstate commerce under this subsection.

(2) If a trailer, semitrailer, or pole trailer is dedicated to a group of motor vehicles that all qualify as rolling stock moving in interstate commerce under subsection (c) of this Section, then that trailer, semitrailer, or pole trailer qualifies as rolling stock moving in interstate commerce under this subsection.

(3) If one or more trailers, semitrailers, or pole trailers are dedicated to a group of motor vehicles and not all of those motor vehicles in that group qualify as rolling stock moving in interstate commerce under subsection (c) of this Section, then the percentage of those trailers, semitrailers, or pole trailers that qualifies as rolling stock moving in interstate commerce under this subsection is equal to the percentage of those motor vehicles in that group that qualify as rolling stock moving in interstate commerce under subsection (c) of this Section to which those trailers, semitrailers, or pole trailers are dedicated. However, to determine the qualification for the exemption provided under this item (3), the mathematical application of the qualifying percentage to one or more trailers, semitrailers, or pole trailers under this subpart shall not be allowed as to any fraction of a trailer, semitrailer, or pole trailer.

(e) For aircraft and watercraft purchased on or after January 1 2014, "use as rolling stock moving in interstate commerce" in paragraphs (d) and (d-1) of the definition of "sale of service" in Section 2 occurs when, during a 12-month period, the rolling stock has carried persons or property for hire in interstate commerce for greater than 50% of its total trips for that period or for greater than 50% of its total miles for that period. The person claiming the exemption shall make an election at the time of purchase to use either the trips or mileage method and document that election in their books and records. If no election is made under this subsection to use the trips or mileage method, the person shall be deemed to have chosen the mileage method. For aircraft, flight hours may be used in lieu of recording miles in determining whether the aircraft meets the mileage test in this subsection. For watercraft, nautical miles or trip hours may be used in lieu of recording miles in determining whether the watercraft meets the mileage test in this subsection.

Notwithstanding any other provision of law to the contrary, property purchased on or after January 1, 2014 for the purpose of being attached to aircraft or watercraft as a part thereof qualifies as rolling stock moving in interstate commerce only if the aircraft or watercraft to which it will be attached qualifies as rolling stock moving in interstate commerce under the test set forth in this subsection (e), regardless of when the aircraft or watercraft was purchased. Persons who purchased aircraft or watercraft prior to January 1, 2014 shall make an election to use either the trips or mileage method and document that election in their books and records for the purpose of determining whether property purchased on or after January 1, 2014 for the purpose of being attached to aircraft or watercraft as a part thereof qualifies as rolling stock moving in interstate commerce under this subsection (e).

(f) The election to use either the trips or mileage method made under the provisions of subsections (c), (d), or (e) of this Section will remain in effect for the duration of the purchaser's ownership of that item or, with respect to subsections (c) and (d) of this Section, until July 1, 2017, whichever occurs sooner.

(g) The General Assembly finds:

(1) The rolling stock exemption has been repeatedly amended and, between January 1, 1999 and the effective date of this amendatory Act of the 100th General Assembly, has taken 4 forms.

(2) The exemption continues to be a subject of dispute, audits, and lack of clarity and is problematic for Illinois businesses.

(3) It is essential to provide simplicity and clarity to the issue of when a purchaser such as a trucking company in Illinois qualifies for the rolling stock sales tax exemption.

(4) Working with the trucking and hauling community and other interested parties, this amendatory Act of the 100th General Assembly draws a simple bright line that purchasers must meet to qualify for the exemption which is modeled on surrounding states that do not require a test involving trips, or mileage, or both for shipments between points which originate or terminate outside the relevant state. Such a simplified requirement, without a trips or miles qualification, will provide certainty for purchasers such as Illinois trucking businesses and also provide a more easily enforced requirement and audit practice for the Department of Revenue.

(5) It is the intent of the General Assembly to establish on and after the effective date of this amendatory Act of the 100th General Assembly an exemption based upon the purchaser's status as a motor carrier which has credentials to engage in interstate commerce for hire.

Beginning on July 1, 2017 "use as rolling stock moving in interstate commerce" means that a person claiming the exemption must:

(1) use the vehicles or trailers to transport persons or property for hire;

(2) hold, at the time of purchase, an appropriate credential that authorizes a motor carrier to engage in interstate commerce for-hire; and

(3) if the person claiming the exemption is a subsidiary of another company, maintain separate books and records, including separate charts of accounts, and assure that all transactions between the transportation company and the parent are commercially reasonable arms-length transactions.

Subsection (e) of this Section shall continue to apply to aircraft and watercraft on and after July 1, 2017.

Property purchased for the purpose of being attached to a motor vehicle or trailer as a part thereof qualifies as rolling stock moving in interstate commerce only if the motor vehicle or trailer to which it will be attached qualifies as rolling stock moving in interstate commerce under the test set forth in this subsection (g).

(Source: P.A. 98-584, eff. 8-27-13.)

Section 20. The Retailers' Occupation Tax Act is amended by changing Section 2-51 as follows:

(35 ILCS 120/2-51)

Sec. 2-51. Motor vehicles; trailers; use as rolling stock definition.

(a) Through June 30, 2003, "use as rolling stock moving in interstate commerce" in paragraphs (12) and (13) of Section 2-5 means for motor vehicles, as defined in Section 1-146 of the Illinois Vehicle Code, and trailers, as defined in Section 1-209 of the Illinois Vehicle Code, when on 15 or more occasions in a 12-month period the motor vehicle and trailer has carried persons or property for hire in interstate commerce, even just between points in Illinois, if the motor vehicle and trailer transports persons whose journeys or property whose shipments originate or terminate outside Illinois. This definition applies to all property purchased for the purpose of being attached to those motor vehicles or trailers as a part thereof.

(b) On and after July 1, 2003 and through June 30, 2004, "use as rolling stock moving in interstate commerce" in paragraphs (12) and (13) of Section 2-5 occurs for motor vehicles, as defined in Section 1-146 of the Illinois Vehicle Code, when during a 12-month period the rolling stock has carried persons or property for hire in interstate commerce for 51% of its total trips and transports persons whose journeys or property whose shipments originate or terminate outside Illinois. Trips that are only between points in Illinois shall not be counted as interstate trips when calculating whether the tangible personal property qualifies for the exemption but such trips shall be included in total trips taken.

(c) Beginning July 1, 2004 and through June 30, 2017, "use as rolling stock moving in interstate commerce" in paragraphs (12) and (13) of Section 2-5 occurs for motor vehicles, as defined in Section 1-146 of the Illinois Vehicle Code, when during a 12-month period the rolling stock has carried persons or property for hire in interstate commerce for greater than 50% of its total trips for that period or for greater than 50% of its total miles for that period. The person claiming the exemption shall make an election at the time of purchase to use either the trips or mileage method. Persons who purchased motor vehicles prior to July 1, 2004 shall make an election to use either the trips or mileage method and document that election in their books and records. If no election is made under this subsection to use the trips or mileage method, the person shall be deemed to have chosen the mileage method.

For purposes of determining qualifying trips or miles, motor vehicles that carry persons or property for hire, even just between points in Illinois, will be considered used for hire in interstate commerce if the motor vehicle transports persons whose journeys or property whose shipments originate or terminate outside Illinois. The exemption for motor vehicles used as rolling stock moving in interstate commerce may be claimed only for the following vehicles: (i) motor vehicles whose gross vehicle weight rating exceeds 16,000 pounds; and (ii) limousines, as defined in Section 1-139.1 of the Illinois Vehicle Code. This definition applies to all property purchased for the purpose of being attached to those motor vehicles as a part thereof.

(d) Beginning July 1, 2004 and through June 30, 2017, "use as rolling stock moving in interstate commerce" in paragraphs (12) and (13) of Section 2-5 occurs for trailers, as defined in Section 1-209 of the Illinois Vehicle Code, semitrailers as defined in Section 1-187 of the Illinois Vehicle Code, and pole trailers as defined in Section 1-161 of the Illinois Vehicle Code, when during a 12-month period the rolling stock has carried persons or property for hire in interstate commerce for greater than 50% of its total trips for that period or for greater than 50% of its total miles for that period. The person claiming the exemption for a trailer or trailers that will not be dedicated to a motor vehicle or group of motor vehicles shall make an election at the time of purchase to use either the trips or mileage method. Persons who purchased trailers prior to July 1, 2004 that are not dedicated to a motor vehicle or group of motor vehicles shall make an election to use either the trips or mileage method and document that election in their books and records. If no election is made under this subsection to use the trips or mileage method, the person shall be deemed to have chosen the mileage method.

For purposes of determining qualifying trips or miles, trailers, semitrailers, or pole trailers that carry property for hire, even just between points in Illinois, will be considered used for hire in interstate commerce if the trailers, semitrailers, or pole trailers transport property whose shipments originate or terminate outside Illinois. This definition applies to all property purchased for the purpose of being attached to those trailers, semitrailers, or pole trailers as a part thereof. In lieu of a person providing documentation regarding the qualifying use of each individual trailer, semitrailer, or pole trailer, that person may document such qualifying use by providing documentation of the following:

(1) If a trailer, semitrailer, or pole trailer is dedicated to a motor vehicle that qualifies as rolling stock moving in interstate commerce under subsection (c) of this Section, then that trailer, semitrailer, or pole trailer qualifies as rolling stock moving in interstate commerce under this subsection.

(2) If a trailer, semitrailer, or pole trailer is dedicated to a group of motor vehicles that all qualify as rolling stock moving in interstate commerce under subsection (c) of this Section, then that trailer, semitrailer, or pole trailer qualifies as rolling stock moving in interstate commerce under this subsection.

(3) If one or more trailers, semitrailers, or pole trailers are dedicated to a group of motor vehicles and not all of those motor vehicles in that group qualify as rolling stock moving in interstate commerce under subsection (c) of this Section, then the percentage of those trailers, semitrailers, or pole trailers that qualifies as rolling stock moving in interstate commerce under this subsection is equal to the percentage of those motor vehicles in that group that qualify as rolling stock moving in interstate commerce under subsection (c) of this Section to which those trailers, semitrailers, or pole trailers are dedicated. However, to determine the qualification for the exemption provided under this item (3), the mathematical application of the qualifying percentage to one or more trailers, semitrailers, or pole trailers under this subpart shall not be allowed as to any fraction of a trailer, semitrailer, or pole trailer.

(e) For aircraft and watercraft purchased on or after January 1, 2014, "use as rolling stock moving in interstate commerce" in paragraphs (12) and (13) of Section 2-5 occurs when, during a 12-month period, the rolling stock has carried persons or property for hire in interstate commerce for greater than 50% of its total trips for that period or for greater than 50% of its total miles for that period. The person claiming the exemption shall make an election at the time of purchase to use either the trips or mileage method and document that election in their books and records. If no election is made under this subsection to use the trips or mileage method, the person shall be deemed to have chosen the mileage method. For aircraft, flight hours may be used in lieu of recording miles in determining whether the aircraft meets the mileage test in this subsection. For watercraft, nautical miles or trip hours may be used in lieu of recording miles in determining whether the watercraft meets the mileage test in this subsection.

Notwithstanding any other provision of law to the contrary, property purchased on or after January 1, 2014 for the purpose of being attached to aircraft or watercraft as a part thereof qualifies as rolling stock moving in interstate commerce only if the aircraft or watercraft to which it will be attached qualifies as rolling stock moving in interstate commerce under the test set forth in this subsection (e), regardless of when the aircraft or watercraft was purchased. Persons who purchased aircraft or watercraft prior to January 1, 2014 shall make an election to use either the trips or mileage method and document that election in their books and records for the purpose of determining whether property purchased on or after January 1, 2014 for the purpose of being attached to aircraft or watercraft as a part thereof qualifies as rolling stock moving in interstate commerce under this subsection (e).

(f) The election to use either the trips or mileage method made under the provisions of subsections (c), (d), or (e) of this Section will remain in effect for the duration of the purchaser's ownership of that item or, with respect to subsections (c) and (d) of this Section, until July 1, 2017, whichever occurs sooner.

(g) The General Assembly finds:

(1) The rolling stock exemption has been repeatedly amended and, between January 1, 1999 and the effective date of this amendatory Act of the 100th General Assembly, has taken 4 forms.

(2) The exemption continues to be a subject of dispute, audits, and lack of clarity and is problematic for Illinois businesses.

(3) It is essential to provide simplicity and clarity to the issue of when a purchaser such as a trucking company in Illinois qualifies for the rolling stock sales tax exemption.

(4) Working with the trucking and hauling community and other interested parties, this amendatory Act of the 100th General Assembly draws a simple bright line that purchasers must meet to qualify for the exemption which is modeled on surrounding states that do not require a test involving trips, or mileage, or both for shipments between points which originate or terminate outside the relevant state. Such a simplified requirement, without a trips or miles qualification, will provide certainty for purchasers such as Illinois trucking businesses and also provide a more easily enforced requirement and audit practice for the Department of Revenue.

(5) It is the intent of the General Assembly to establish on and after the effective date of this amendatory Act of the 100th General Assembly an exemption based upon the purchaser's status as a motor carrier which has credentials to engage in interstate commerce for hire.

Beginning on July 1, 2017 "use as rolling stock moving in interstate commerce" means that a person claiming the exemption must:

(1) use the vehicles or trailers to transport persons or property for hire;

(2) hold, at the time of purchase, an appropriate credential that authorizes a motor carrier to engage in interstate commerce for-hire; and

(3) if the person claiming the exemption is a subsidiary of another company, maintain separate books and records, including separate charts of accounts, and assure that all transactions between the transportation company and the parent are commercially reasonable arms-length transactions.

Subsection (e) of this Section shall apply to aircraft and watercraft on and after July 1, 2017.

Property purchased for the purpose of being attached to a motor vehicle or a trailer as a part thereof qualifies as rolling stock moving in interstate commerce only if the motor vehicle or trailer to which it will be attached qualifies as rolling stock moving in interstate commerce under the test set forth in this subsection (g).

(Source: P.A. 98-584, eff. 8-27-13.)

Section 99. Effective date. This Act takes effect upon becoming law.