SB3303 100TH GENERAL ASSEMBLY

LRB100 20759 HLH 36242 b

100TH GENERAL ASSEMBLY
State of Illinois
2017 and 2018
SB3303

Introduced 2/16/2018, by Sen. Karen McConnaughay

SYNOPSIS AS INTRODUCED:

New Act
35 ILCS 5/227 new

Creates the Manufacturing Job Destination Tax Credit Act and amends the Illinois Income Tax Act. Provides for a credit of 25% of the Illinois labor expenditures made by a manufacturing company in order to foster job creation and retention in Illinois. Authorizes the Department of Revenue to award a tax credit to taxpayer-employers who apply for the credit and meet the certain Illinois labor, job training, and apprenticeship requirements. Sets minimum requirements and procedures for certifying a taxpayer as an "accredited manufacturer" and for awarding the credit. Effective January 1, 2019.

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. Short title. This Act may be cited as the Manufacturing Job Destination Tax Credit Act.

Section 10. Purpose. The General Assembly finds that the manufacturing sector is a crucial underpinning of the economy of the State of Illinois. Manufacturing employs approximately 570,000 workers directly in jobs that pay an average of more than $84,000 per year in wages and benefits. Total manufacturing output exceeded $103,000,000,000, contributing the single largest share of the Illinois Gross State Product. Ninety-three percent of Illinois exports are manufactured goods and services, totaling approximately $54,800,000,000. However, Illinois has lost more than 300,000 manufacturing jobs since 2000. Since the end of the recession in 2009, Illinois has gained only 8,300 manufacturing jobs while neighboring states have increased manufacturing employment by an average of 68,800 jobs. Illinois manufacturers are experiencing a skills gap with the need to find qualified workers to fill the pipeline before half of the workforce retires in the next 15 years. Therefore, it is in the best interest of the State to make Illinois the preferred destination for manufacturing and to strengthen the existing industrial base in Illinois, thereby promoting job growth, increased capital investment, expanded exports, and long-term revenue growth for the State.

Section 15. Definitions. As used in this Act:

"Accredited manufacturer" means a manufacturer that has been certified by the Department.

"Apprenticeship expense" means the amount incurred on behalf of a qualifying apprentice for tuition, book fees, and lab fees at the school or community college in which the apprentice is enrolled during the regular school year.

"Credit" means an amount equal to 25% of the sum of the qualifying Illinois labor expenditures approved by the Department, the job training expenditures approved by the Department, and the apprenticeship expenses approved by the Department. The accredited manufacturer is deemed to have paid, on its balance due day for the year, an amount equal to 25% of its qualified Illinois labor expenditure for the tax year.

"Department" means the Department of Revenue.

"Director" means the Director of Revenue.

"Illinois labor expenditure" means salary or wages paid to employees of an accredited manufacturer for services in Illinois after the effective date of this Act.

To qualify as an Illinois labor expenditure, the expenditure must be:

(1) Reasonable under the circumstances.

(2) Included in the federal income tax basis of the property.

(3) Incurred by the accredited manufacturer for services on or after January 1, 2018.

(4) Incurred for the production stages of the manufacturing process.

(5) Limited to the first $25,000 of wages paid or incurred to each employee of the manufacturing company.

(6) Exclusive of the salary or wages paid to or incurred for the 2 highest paid employees of the manufacturing company.

(7) Directly attributable to the accredited manufacturer.

(8) Paid in the tax year for which the applicant is claiming the credit or no later than 60 days after the end of the tax year.

(9) Paid for services rendered in Illinois.

"Job training expenditure" means all amounts paid or accrued on behalf of all persons employed by the taxpayer in the State for education or vocational training in semi-technical, semi-skilled, or skilled fields.

"Qualifying apprentice" means an individual who (i) is a resident of the State of Illinois, (ii) is between the ages of 16 and 30 years old at the close of the school year for which a credit is sought, and (iii) during the school year for which a credit is sought was a full-time apprentice enrolled in an apprenticeship program which is registered with the US Department of Labor, Office of Apprenticeship.

"School" means any public or nonpublic secondary school in Illinois, or any community college that is in compliance with Title VI of the Civil Rights Act of 1964, except that nothing shall be construed to allow a student to attend a community college not a part of an approved apprenticeship program to qualify for the credit under this Section.

Section 20. Tax credit awards. Subject to the conditions set forth in this Act, an accredited manufacturer is entitled to a credit of 25% of all qualifying Illinois labor expenditures approved by the Department.

Section 25. Accredited manufacturing company certification. Any taxpayer may request certification as an accredited manufacturing company by formal application to the Department. In determining whether to issue an accredited manufacturing company certificate, the Department must determine that the following conditions exist:

(1) The taxpayer is engaged primarily in the business of manufacturing goods.

(2) The taxpayer intends to employ workers in the State of Illinois.

(3) The taxpayer provides health insurance to its employees.

(4) The taxpayer provides to its employees either a pension plan or a 401k plan.

(5) The taxpayer offers to its employees paid time-off benefits.

(6) The taxpayer intends to expend a portion of its research and development budgets in the State of Illinois.

Section 30. Issuance of manufacturing job destination tax credit certification.

(a) In order to qualify for a tax credit under this Act, an accredited manufacturer must file, on forms prescribed by the Department, all information necessary to calculate the tax credit.

(b) Upon satisfactory review of the application, the Department shall issue a manufacturing job destination tax credit certificate stating the amount of the tax credit.

Section 35. Amount and duration of the credit. The amount of the credit awarded under this Act is based on the amount of qualifying Illinois labor expenditures approved by the Department in any tax year beginning January 1, 2018 or thereafter for the applicant.

Section 40. Evaluation of tax credit program. The Department shall evaluate the tax credit program annually. The evaluation must include an assessment of the effectiveness of the program in creating and retaining jobs in Illinois, improving the skill level of workers, and of the revenue impact of the program and may include a review of the practices and experiences of other states or nations with similar programs. Upon completion of this evaluation, the Department shall determine the overall success of the program.

Section 45. Program terms and conditions. Any documentary materials or data made available to or received by any agent or employee of the Department are confidential and are not public records to the extent that the materials or data consist of commercial or financial information regarding the manufacturing operation of the applicant for or recipient of any tax credit under this Act.

Section 50. Appeals. If the Department denies a taxpayer certification under Section 25 of this Act, the denial must be in writing stating the reasons for the denial. The taxpayer shall have 60 days to correct any deficiency that was the reason for the initial denial of certification.

If the Department again denies the certification, the taxpayer may appeal the denial within 60 days after the denial and request a hearing. At the hearing, if the taxpayer shows, by preponderance of evidence, that he or she has complied with the requirements of this Section, then the taxpayer shall be certified as an accredited manufacturer.

If the taxpayer disagrees with the Department about the amount of the tax credit available for any tax year, the taxpayer may appeal the certification and request a hearing. If the taxpayer shows, by a preponderance of evidence, that he or she is entitled to a larger amount, the Department shall approve the larger amount. However, in no instance may the Department determine a lesser amount.

The provisions of the Administrative Review Law, and the rules adopted pursuant thereto, apply to and govern all proceedings for the judicial review of this Act.

Section 90. The Illinois Income Tax Act is amended by adding Section 227 as follows:

(35 ILCS 5/227 new)

Sec. 227. Manufacturing job destination tax credit. For tax years beginning on or after January 1, 2018, a taxpayer who has been awarded a tax credit under the Manufacturing Job Destination Tax Credit Act is entitled to a credit against the taxes imposed under subsections (a) and (b) of Section 201 of this Act in an amount determined by the Department under the Manufacturing Job Destination Tax Credit Act. If the taxpayer is a partnership or Subchapter S corporation, the credit is allowed to the partners or shareholders in accordance with the determination of income and distributive share of income under Sections 702 and 704 and Subchapter S of the Internal Revenue Code. The Department must prescribe rules to enforce and administer the provisions of this Section. This Section is exempt from the provisions of Section 250 of this Act.

The credit is non-refundable, but may be sold, transferred, or conveyed to other taxpayers who are primarily engaged in manufacturing.

The credit may not be carried forward or back. In no event shall a credit under this Section reduce the taxpayer's liability to less than zero.

Section 99. Effective date. This Act takes effect January 1, 2019.