HB4849 104TH GENERAL ASSEMBLY

LRB104 17527 HLH 30954 b

104TH GENERAL ASSEMBLY
State of Illinois
2025 and 2026
HB4849

Introduced , by Rep. Will Guzzardi

SYNOPSIS AS INTRODUCED:

New Act
35 ILCS 5/253 new

Creates the Farmer Tax Benefit Act. Provides that taxpayers may apply to the Department of Natural Resources for an income tax credit in an amount equal to either (i) 100% of the fair market value of a qualified donation to a conservation agency of a land protection agreement or (ii) 50% of the fair market value of the qualified donation to a conservation agency of a fee simple interest or a remainder interest in qualified real property. Amends the Illinois Income Tax Act to make conforming changes.

A BILL FOR

AN ACT concerning revenue.

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

Section 1. Short title. This Act may be cited as the Farmer Tax Benefit Act.

Section 5. Purpose and findings. The General Assembly finds that:

(1) The State of Illinois' unique natural resources, wildlife habitats, open spaces, agricultural and forested resources, wetlands, and historical, cultural, and archaeological resources are of significant economic, environmental, and social benefit to the State and the public.

(2) The Illinois economy is vulnerable to other states that have financial incentive programs targeted to support the protection of unique natural and agricultural resources. Illinois should advance new tools to ensure that Illinois offers a competitive quality of life and is desirable in site location decision-making for businesses.

(3) Natural carbon storage and increasing carbon sequestration from natural and working lands is a critical component of State and national deep decarbonization strategies because the maintenance of existing sequestered carbon in intact natural and working lands systems can be among the most cost-effective ways to support climate goals.

(4) The protection of natural and working lands is an important climate adaptation strategy, with land conservation serving to build community resilience against extreme weather events, such as by absorbing excess rainwater to reduce flooding, filtering pollutants, offering cooling from extreme heat, preserving biodiversity, ensuring species' corridor migration, and protecting productive farmland that provides food security.

(5) Much of the State's unique natural, historical, agricultural and open space resources and habitats are found on lands that are privately owned. The General Assembly intends to provide private landowners with incentives to encourage voluntary protection of private lands for open space, natural resources, biodiversity conservation, water supply, outdoor recreation, farmland and forestland preservation, historic preservation, and land conservation purposes.

Section 10. Definitions. As used in this Act:

"Conservation agency" means the following:

(1) the State of Illinois;

(2) a federal agency;

(3) a unit of local government;

(4) a federally-recognized Indian tribe; or

(5) a 501(c)(3) nonprofit organization that has experience acquiring conservation real estate, whether through purchase, donation, or transfer, and that meets the requirements of Section 170(h)(3) of the Internal Revenue Code and the regulations adopted under that Section.

A conservation agency must also:

(1) be authorized to acquire, hold, and maintain title to real estate or interests in real estate in Illinois;

(2) be organized and operated for purposes expressly including natural resource protection, land conservation, or historic preservation; and

(3) meet other criteria or certifications required by the Department by rule.

Any non-profit corporation that is accredited through the Land Trust Accreditation Commission shall automatically be deemed a conservation agency with no further burden of proof.

"Credit" means the Illinois Land Protection Credit created and administered as outlined in this Act.

"Department" means the Department of Natural Resources.

"Federally recognized Indian tribe" means any Indian tribe that is included on the list of federally recognized Indian tribes that is published from time to time by the United States Department of the Interior under the Federally Recognized Indian Tribe List Act of 1994.

"Landowner" means the owner of fee simple title to land, as evidenced by the county real property records in the county where the real property interest is located, including, without limitation, individuals, trusts and estates, and entities such as limited liability companies, partnerships, and corporations, whether for profit or not-for-profit.

"Land protection agreement" means a restriction, granted in perpetuity and created pursuant to Illinois real property law, on the use that may be made of real property, and that complies with Section 170(h)(2)(C) of the Internal Revenue Code.

"Qualified appraisal" has the same meaning as that term is defined in 26 CFR 1.170A-17.

"Qualified donation" means the transfer and conveyance by gift, without consideration, of all or a portion, including bargain sales, of a qualified real property interest to a conservation agency if those purposes are secured in perpetuity through recording of a deed in the real property records in the county where the qualified real property interest is located.

"Qualified real property interest" means any of the following interests in real property located in the State of Illinois:

(1) fee simple interest;

(2) a remainder interest; or

(3) a land protection agreement.

A fee simple interest or remainder interest shall not be deemed a qualified real property interest unless the conservation and preservation purposes are assured in perpetuity. In these cases, the credit shall not be allowed until the conservation agency agrees in recorded documentation that any subsequent conveyances of the fee simple or remainder interest in the property will be subject to a prior conveyance in perpetuity of a land protection agreement or will be conveyed to another conservation agency.

Section 15. Credit availability.

(a) For taxable years beginning on or after January 1, 2027, taxpayers may apply to the Department for a credit against the tax imposed by subsections (a) and (b) of Section 201 of the Illinois Income Tax Act in an amount equal to either (i) 100% of the fair market value of a qualified donation of a land protection agreement or (ii) 50% of the fair market value of the qualified donation of a fee simple interest or a remainder interest in qualified real property. The fair market value of any donation made under this Section shall be substantiated by a qualified appraisal prepared by a qualified appraiser.

(b) The total aggregate amount of tax credits issued under this Act in any State fiscal year shall not exceed $7,500,000. Certificates of tax credit shall be allocated on a first-come, first-served basis. The Department shall log applications as they are received. If the $7,500,000 total aggregate cap is exceeded in any one year, the Department shall issue a certificate of tax credit to be available to the landowner in the subsequent tax year with an effective date of the subsequent year.

(c) The amount of the credit that may be claimed by a landowner for any single qualified donation shall not exceed $500,000.

(d) The credit under this Act is exempt from the provisions of Section 250.

Section 20. Credit allocation by the Department.

(a) A landowner seeking to claim a tax credit under Section 15 above shall, in either the year of the donation or the year following the year of donation, submit to the Department an application for a land protection tax credit on a form to be created by the Department. The application shall be accompanied by the qualified appraisal substantiating the value of the qualified donation and the deed transferring the qualified real property interest. If the landowner is a pass-through entity, the application shall also include documentation that the landowner has owned the property for more than 3 years at the time of the donation or otherwise meets the family exception set forth in Section 40.

(b) On receipt of the application and all supporting documentation, the Department shall either (i) record the transaction and provide the landowner with a certificate acknowledging the credit, together with a tracking number, on a form to be created by the Department, (ii) request more information, or (iii) decline to issue the certificate by providing a written statement of the deficiencies in the application. The landowner shall have an opportunity to cure any deficiencies. The Department shall make its determination within 60 days of receipt of the application. If no determination is made within 60 days after receipt, the credit shall be deemed automatically granted.

If the landowner is receiving compensation for any non-donated portion of a qualified real property interest and that compensation derives from a federal, State, or local public conservation funding source, then the landowner shall include, with the application, documentation confirming the award of public funding towards the qualified real property interest. In that case, the public funding award shall be determinative of the conservation benefit and value, no additional review by the Department shall be necessary, and the credit shall be automatically granted and the certificate automatically issued.

Section 25. Allowable credit use.

(a) If the amount of the credit exceeds the tax liability for the year, the excess may be carried forward and applied to the tax liability of the 5 taxable years following the excess credit year. In no event shall a credit under this Section reduce the taxpayer's liability to less than zero. The landowner shall submit a copy of the certificate of tax credit with its tax returns for the year of the claimed credit.

(b) A sale, assignment, or transfer of the tax credit may be made by the taxpayer earning the credit at any time during the 5-year carry forward period. Upon notice of transfer, the Department shall issue transfer certificates to the transferor and transferee that identify the amount of the credit transferred. Upon issuance of the transfer certificates, the transferor relinquishes all rights to the portion of the credit that was transferred. The transferred credit may be applied by the transferee against its tax imposed by the Illinois Income Tax Act, and any credit not used by the transferee may be carried forward for the remainder of the original 5-year carry forward period. A landowner seeking to transfer a credit shall submit to the Department a Notice of Tax Credit Transfer on a form to be created by the Department. Upon any transfer of a credit, a fee equal to 2.5% of the amount of the credit so transferred shall be paid to the Department by the landowner to cover the administrative costs of this process.

Section 30. Powers of the Department.

(a) The Department, in addition to those powers granted under the Civil Administrative Code of Illinois, is granted and has all the powers necessary or convenient to carry out and effectuate the purposes and provisions of this Act, including, but not limited to, power and authority to:

(1) Adopt rules deemed necessary and appropriate for the administration of the tax credit program.

(2) Establish forms for applications, notifications, contracts, or any other agreements and accept applications at any time during the year.

(3) Assist applicants pursuant to the provisions of this Act to promote, foster, and support land conservation and its related benefits within the State.

(4) Gather information and conduct inquiries in the manner and by the methods as it deems desirable.

(5) Provide for sufficient personnel to permit administration, staffing, operation, and related support required to adequately discharge its duties and responsibilities described in this Act from funds as may be appropriated by the General Assembly for the administration of this Act.

(6) Require applicants, upon written request, to issue any necessary authorization to the appropriate federal, State, or local authority for the release of information concerning a project being considered under the provisions of this Act, with the information requested to include, but not be limited to, financial reports, returns, or records.

(b) The Department shall adopt rules within 6 months after the effective date of this Act.

Section 35. Analysis of the Illinois Land Protection Tax Credit.

(a) By December 31, 2032, the Department, in consultation with other State agencies as needed, shall prepare a report detailing the amount of land and the fair market value of land protected during the reporting period pursuant to this Act. The Department may consider application and attestation information provided by eligible taxpayers pursuant to this Act and any other data it deems relevant.

(b) The final report shall be made publicly available, and copies of the final report shall be filed with the General Assembly and the Governor.

Section 40. Applicability and limitations.

(a) Any tax credits arising under this Act from a qualified donation made by a pass-through tax entity, such as a trust, estate, limited liability corporation, or partnership, limited partnership, subchapter S corporation, or other fiduciary, shall be used either by that entity, if it is the taxpayer on behalf of such entity, or by the member, manager, partner, shareholder, or beneficiary, as the case may be, in proportion to the person's interest in the entity, if that income tax liability passes through such entity to such member, manager, partner, shareholder, beneficiary. Tax credits may not be claimed by both the entity and the member, manager, partner, shareholder, or beneficiary for the same qualified donation. In the case of a pass-through entity described above, no qualified donation shall be eligible for a tax credit under this Act unless the entity acquired the land or qualified real property interest 3 or more years before the donation for which the qualified donation is being sought.

(b) Subsection (a) shall not apply with respect to any qualified donation by any partnership or pass-through entity for which a tax credit is being sought under this Act if substantially all of the partnership interests or pass-through entity interests in the partnership or pass-through entity are held, directly or indirectly, by an individual or members of the individual's family.

As used in this subsection, "member of the family" means the individual's spouse or any person who bears a relationship to the individual that is described in Internal Revenue Code Section 152(d)(2) subparagraphs (A) through (G).

(c) If a conservation agency becomes unqualified after the effective date of a qualified donation, it shall not require any taxpayer to repay tax credits claimed under this Act, nor shall such event be cause for any other penalty to be imposed on a taxpayer.

Section 45. Construction.

(a) Nothing in this Act shall be interpreted to in any way alter or amend any permit requirements, reporting requirements, allocation procedures, or other requirements set forth in any other provision of State law.

(b) Notwithstanding any provision of law to the contrary, a land protection agreement held pursuant to this Section shall be construed in favor of achieving the conservation purposes for which it was created.

Section 900. The Illinois Income Tax Act is amended by adding Section 253 as follows:

(35 ILCS 5/253 new)

Sec. 253. Farmer Tax Benefit Act. A taxpayer who has been awarded a credit under the Farmer Tax Benefit Act is entitled to a credit as provided in that Act.