102ND GENERAL ASSEMBLY
State of Illinois
2021 and 2022
HB3184

 

Introduced 2/19/2021, by Rep. Jehan Gordon-Booth

 

SYNOPSIS AS INTRODUCED:
 
New Act
35 ILCS 5/232 new
30 ILCS 105/5.935 new

    Creates the School Building Rehabilitation Tax Credit Act. Creates an income tax credit equal to 25% of the qualified expenditures incurred by a qualified taxpayer undertaking a qualified rehabilitation plan of a vacant school building. Provides that, to be eligible for the credit, the taxpayer must apply with the Department of Commerce and Economic Opportunity. Provides that the credit is subject to certain limitations. Amends the Illinois Income Tax Act to make conforming changes. Effective immediately.


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FISCAL NOTE ACT MAY APPLY
HOUSING AFFORDABILITY IMPACT 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 School
5Building Rehabilitation Tax Credit Act.
 
6    Section 5. Definitions. As used in this Act, unless the
7context clearly indicates otherwise:
8    "Department" means the Department of Commerce and Economic
9Opportunity.
10    "Phased rehabilitation" means a project that is completed
11in phases.
12    "Placed in service" means the date when the property is
13placed in a condition or state of readiness and availability
14for a specifically assigned function.
15    "Qualified expenditures" means all the costs and expenses
16for construction materials used to repurpose a qualified
17school building.
18    "Qualified school building" means a vacant school building
19located in Illinois.
20    "Qualified rehabilitation plan" means a project involving
21a qualified school building that is approved by the
22Department.
23    "Qualified taxpayer" means the owner of the qualified

 

 

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1school building.
2    "Recapture event" means any of the following events
3occurring during the recapture period:
4        (1) failure to place in service the rehabilitated
5    portions of the qualified school building, or failure to
6    maintain the rehabilitated portions of the qualified
7    school building in service after they are placed in
8    service; provided that a recapture event under this
9    paragraph (1) shall not include a removal from service for
10    a reasonable period of time to conduct maintenance and
11    repairs that are reasonably necessary to protect the
12    health and safety of the public or to protect the
13    structural integrity of the qualified school building or a
14    neighboring structure;
15        (2) demolition or other alteration of the qualified
16    school building in a manner that is inconsistent with the
17    qualified rehabilitation plan;
18        (3) disposition of the rehabilitated qualified school
19    building in whole or a proportional disposition of a
20    partnership interest therein, except as otherwise
21    permitted by this Section; or
22        (4) use of the qualified school building in a manner
23    that is inconsistent with the qualified rehabilitation
24    plan or that is otherwise inconsistent with the provisions
25    and intent of this Section.
26    A recapture event occurring in one taxable year shall be

 

 

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1deemed continuing to subsequent taxable years unless and until
2corrected.
3    The following dispositions of a qualified school building
4shall not be deemed to be a recapture event for purposes of
5this Section:
6        (1) a transfer by reason of death;
7        (2) a transfer between spouses incident to divorce;
8        (3) a sale by and leaseback to an entity that, when the
9    rehabilitated portions of the qualified school building
10    are placed in service, will be a lessee of the qualified
11    school building, but only for so long as the entity
12    continues to be a lessee; and
13        (4) a mere change in the form of conducting the trade
14    or business by the owner (or, if applicable, the lessee)
15    of the qualified school building, so long as the property
16    interest in such qualified school building is retained in
17    such trade or business and the owner or lessee retains a
18    substantial interest in such trade or business.
19    "Recapture period" means the 5-year period beginning on
20the date that the qualified school building or rehabilitated
21portions of the qualified school building are placed in
22service.
23    "Substantial rehabilitation" means that the qualified
24expenditures during the 24-month period selected by the
25taxpayer at the time and in the manner prescribed by rule and
26ending with or within the taxable year exceed the greater of

 

 

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1(i) the adjusted basis of the building and its structural
2components or (ii) $5,000. The adjusted basis of the building
3and its structural components shall be determined as of the
4beginning of the first day of such 24-month period or as of the
5beginning of the first day of the holding period of the
6building, whichever is later. For purposes of determining the
7adjusted basis, the determination of the beginning of the
8holding period shall be made without regard to any
9reconstruction by the taxpayer in connection with the
10rehabilitation. In the case of any phased rehabilitation, with
11phases set forth in architectural plans and specifications
12completed before the rehabilitation begins, this definition
13shall be applied by substituting "60-month period" for
14"24-month period" wherever that term occurs in the definition.
 
15    Section 10. Allowable credit.
16    (a) To the extent authorized by this Act, for taxable
17years beginning on or after January 1, 2021 and ending on or
18before December 31, 2025, there shall be allowed a tax credit
19against the tax imposed by subsections (a) and (b) of Section
20201 of the Illinois Income Tax Act in an aggregate amount equal
21to 25% of qualified expenditures incurred by a qualified
22taxpayer undertaking a qualified rehabilitation plan of a
23qualified school building, provided that the total amount of
24such expenditures must (i) equal $5,000 or more or (ii) exceed
25the adjusted basis of the qualified school building on the

 

 

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1first day the qualified rehabilitation plan commenced. If the
2qualified rehabilitation plan spans multiple years, the
3aggregate credit for the entire project shall be allowed in
4the last taxable year.
5    (b) To obtain a tax credit pursuant to this Section, the
6taxpayer must apply with the Department. The Department shall
7determine the amount of eligible rehabilitation expenditures
8within 45 days after receipt of a complete application. The
9taxpayer must provide to the Department a third-party cost
10certification conducted by a certified public accountant
11verifying (i) the qualified and non-qualified rehabilitation
12expenses and (ii) that the qualified expenditures exceed the
13adjusted basis of the qualified school building on the first
14day the qualified rehabilitation plan commenced. The
15accountant shall provide appropriate review and testing of
16invoices. The Department is authorized, but not required, to
17accept this third-party cost certification to determine the
18amount of qualified expenditures.
19    (c) If the amount of any tax credit awarded under this Act
20exceeds the qualified taxpayer's income tax liability for the
21year in which the qualified rehabilitation plan was placed in
22service, the excess amount may be carried forward for a credit
23against the taxpayer's income tax liability in the next
24succeeding year or years until the total amount of the credit
25has been used, except that a credit may not be carried forward
26for deduction after the tenth taxable year after the taxable

 

 

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1year in which the qualified rehabilitation plan was placed in
2service. Upon completion and review of the project, the
3Department shall issue a single certificate in the amount of
4the eligible credits equal to 25% of the qualified
5expenditures incurred during the eligible taxable years. At
6the time the certificate is issued, an issuance fee up to the
7maximum amount of 2% of the amount of the credits issued by the
8certificate may be collected from the applicant to administer
9the Act. If collected, this issuance fee shall be paid into the
10School Building Rehabilitation Tax Credit Fund for use of the
11Department in the administration of this program. The taxpayer
12must attach the certificate or legal documentation of her or
13his proportional share of the certificate to the tax return on
14which the credits are to be claimed. The tax credit under this
15Section may not reduce the taxpayer's liability to less than
16zero. If the amount of the credit exceeds the tax liability for
17the year, the excess credit may be carried forward and applied
18to the tax liability of the 10 taxable years following the
19excess credit year.
20    (d) If the taxpayer is (i) a corporation having an
21election in effect under Subchapter S of the federal Internal
22Revenue Code, (ii) a partnership, or (iii) a limited liability
23company, the credit provided under this Act may be claimed by
24the shareholders of the corporation, the partners of the
25partnership, or the members of the limited liability company
26in the same manner as those shareholders, partners, or members

 

 

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1account for their proportionate shares of the income or losses
2of the corporation, partnership, or limited liability company,
3or as provided in the by-laws or other executed agreement of
4the corporation, partnership, or limited liability company.
5Credits granted to a partnership, a limited liability company
6taxed as a partnership, or other multiple owners of property
7shall be passed through to the partners, members, or owners
8respectively on a pro rata basis or pursuant to an executed
9agreement among the partners, members, or owners documenting
10any alternate distribution method.
11    (e) If a recapture event occurs during the recapture
12period with respect to a qualified school building, then, for
13any taxable year in which the credits are allowed as specified
14in this Act, the tax under the applicable Section of this Act
15shall be increased by applying the recapture percentage set
16forth below to the tax decrease resulting from the application
17of credits allowed under this Act to the taxable year in
18question.
19    For the purposes of this subsection, the recapture
20percentage shall be determined as follows:
21        (1) if the recapture event occurs within the first
22    year after commencement of the recapture period, then the
23    recapture percentage is 100%;
24        (2) if the recapture event occurs within the second
25    year after commencement of the recapture period, then the
26    recapture percentage is 80%;

 

 

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1        (3) if the recapture event occurs within the third
2    year after commencement of the recapture period, then the
3    recapture percentage is 60%;
4        (4) if the recapture event occurs within the fourth
5    year after commencement of the recapture period, then the
6    recapture percentage is 40%; and
7        (5) if the recapture event occurs within the fifth
8    year after commencement of the recapture period, then the
9    recapture percentage is 20%.
10    In the case of any recapture event, the carryforwards
11under this Act shall be adjusted by reason of such event.
12    (d) The Department may adopt rules to implement this
13Section in addition to the rules expressly authorized herein.
 
14    Section 20. Limitations, reporting, and monitoring.
15    (a) The Department shall award not more than an aggregate
16of $15,000,000 in total annual tax credits pursuant to
17qualified rehabilitation plans for qualified school building.
18The Department shall award not more than $3,000,000 in tax
19credits with regard to a single qualified rehabilitation plan.
20In awarding tax credits under this Act, the Department must
21prioritize projects that meet one or more of the following:
22        (1) the qualified school building was previously owned
23    by a federal, State, or local governmental entity;
24        (2) the qualified school building is located in a
25    census tract that has a median family income at or below

 

 

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1    the State median family income; data from the most recent
2    5-year estimate from the American Community Survey (ACS),
3    published by the U.S. Census Bureau, shall be used to
4    determine eligibility;
5        (3) the qualified rehabilitation plan includes in the
6    development partnership a Community Development Entity or
7    a low-profit (B Corporation) or not-for-profit
8    organization, as defined by Section 501(c)(3) of the
9    Internal Revenue Code; or
10        (4) the qualified school building is located in an
11    area declared under an Emergency Declaration or Major
12    Disaster Declaration under the federal Robert T. Stafford
13    Disaster Relief and Emergency Assistance Act.
14     (b) The annual aggregate program allocation of
15$15,000,000 set forth in subsection (a) shall be allocated by
16the Department, in such proportion as determined by the
17Department, on a per calendar basis twice in each year that the
18program is in effect, provided that: (i) the amount initially
19allocated by the Department for any one calendar application
20period shall not exceed 65% of the total allowable amount and
21(ii) any portion of the allocated allowable amount remaining
22unused as of the end of any of the second calendar application
23period of a given calendar year shall be rolled into and added
24to the total allocated amount for the next available calendar
25year. The qualified rehabilitation plan must meet a readiness
26test, as defined in the rules created by the Department, in

 

 

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1order for the Applicant to qualify. Applicants that qualify
2under this Act will be placed in a queue based on the date and
3time the application is received until the application period
4total allowable amount is reached. Applicants must reapply for
5each application period.
6    (c) On or before December 31, 2021, and on or before
7December 31 of each even-numbered year thereafter through
82024, subject to appropriation and prior to equal disbursement
9to the Department, moneys in the School Building
10Rehabilitation Tax Credit Fund attributable to fees under this
11Act shall be used, beginning at the end of the first fiscal
12year after the effective date of this Act, to hire a qualified
13third party to prepare a biennial report to assess the overall
14effectiveness of this Act from the qualified rehabilitation
15projects under this Act completed in that year and in previous
16years. Baseline data of the metrics in the report shall be
17collected at the initiation of a qualified rehabilitation
18project. The overall economic impact shall include at least:
19        (1) the number of applications, project locations, and
20    proposed use of qualified school building;
21        (2) the amount of credits awarded and the number and
22    location of projects receiving credit allocations;
23        (3) the status of ongoing projects and projected
24    qualifying expenditures for ongoing projects;
25        (4) for completed projects, the total amount of
26    qualifying rehabilitation expenditures and non-qualifying

 

 

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

 

 

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

 

 

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

 

 

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1    Section 25. Powers. The Department shall adopt rules for
2the administration of this Act.
 
3    Section 900. The Illinois Income Tax Act is amended by
4adding Section 232 as follows:
 
5    (35 ILCS 5/232 new)
6    Sec. 232. School Building Rehabilitation Tax Credit. For
7taxable years beginning on or after January 1, 2021 and ending
8on or before December 31, 2025, each taxpayer that is awarded a
9credit under the School Building Rehabilitation Tax Credit Act
10is entitled to a credit as provided in that Act.
 
11    Section 905. The State Finance Act is amended by adding
12Section 5.935 as follows:
 
13    (30 ILCS 105/5.935 new)
14    Sec. 5.935. The School Building Rehabilitation Tax Credit
15Fund.
 
16    Section 999. Effective date. This Act takes effect upon
17becoming law.