102ND GENERAL ASSEMBLY
State of Illinois
2021 and 2022
HB3186

 

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

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 5/228
35 ILCS 31/5
35 ILCS 31/10
35 ILCS 31/20

    Amends the Historic Preservation Tax Credit Act. Provides that the aggregate amount of credits awarded under the Act to a particular taxpayer may not exceed $3,000,000. Provides that the total amount of expenditures must equal at least $5,000 and (currently, "or") exceed the adjusted basis of the structure. Provides that the taxpayer may not receive a credit under the Act and a River Edge redevelopment credit for the same qualified expenditures or rehabilitation plan. Makes changes concerning the allocation of credits. Makes various technical changes. Amends the Illinois Income Tax Act. Makes changes to the historic preservation credit to include limited liability companies. Effective immediately.


LRB102 13314 HLH 18658 b

FISCAL NOTE ACT MAY APPLY
HOUSING AFFORDABILITY IMPACT NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB3186LRB102 13314 HLH 18658 b

1    AN ACT concerning revenue.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Income Tax Act is amended by
5changing Section 228 as follows:
 
6    (35 ILCS 5/228)
7    Sec. 228. Historic preservation credit. For tax years
8beginning on or after January 1, 2019 and ending on or before
9December 31, 2023, a taxpayer who qualifies for a credit under
10the Historic Preservation Tax Credit Act is entitled to a
11credit against the taxes imposed under subsections (a) and (b)
12of Section 201 of this Act as provided in that Act. If the
13taxpayer is a partnership, or Subchapter S corporation, or a
14limited liability company, the credit shall be allowed to the
15partners or shareholders in accordance with the determination
16of income and distributive share of income under Sections 702
17and 704 and Subchapter S of the Internal Revenue Code,
18provided that credits granted to a partnership, a limited
19liability company taxed as a partnership, or other multiple
20owners of property shall be passed through to the partners,
21members, or owners respectively on a pro rata basis or
22pursuant to an executed agreement among the partners, members,
23or owners documenting any alternate distribution method. If

 

 

HB3186- 2 -LRB102 13314 HLH 18658 b

1the amount of any tax credit awarded under this Section
2exceeds the qualified taxpayer's income tax liability for the
3year in which the qualified rehabilitation plan was placed in
4service, the excess amount may be carried forward as provided
5in the Historic Preservation Tax Credit Act.
6(Source: P.A. 100-629, eff. 1-1-19; 101-81, eff. 7-12-19.)
 
7    Section 10. The Historic Preservation Tax Credit Act is
8amended by changing Sections 5, 10, and 20 as follows:
 
9    (35 ILCS 31/5)
10    Sec. 5. Definitions. As used in this Act, unless the
11context clearly indicates otherwise:
12    "Director" means the Director of Natural Resources or his
13or her designee.
14    "Division" means the State Historic Preservation Office
15within the Department of Natural Resources.
16    "Phased rehabilitation" means a project that is completed
17in phases, as defined under Section 47 of the federal Internal
18Revenue Code and pursuant to National Park Service regulations
19at 36 C.F.R. 67.
20    "Placed in service" means the date when the property is
21placed in a condition or state of readiness and availability
22for a specifically assigned function as defined under Section
2347 of the federal Internal Revenue Code and federal Treasury
24Regulation Sections 1.46 and 1.48.

 

 

HB3186- 3 -LRB102 13314 HLH 18658 b

1    "Qualified expenditures" means all the costs and expenses
2defined as qualified rehabilitation expenditures under Section
347 of the federal Internal Revenue Code that were incurred in
4connection with a qualified rehabilitation plan historic
5structure.
6    "Qualified historic structure" means any structure that is
7located in Illinois and is defined as a certified historic
8structure under Section 47(c)(3) of the federal Internal
9Revenue Code.
10    "Qualified rehabilitation plan" means a project that is
11approved by the Department of Natural Resources and the
12National Park Service as being consistent with the United
13States Secretary of the Interior's Standards for
14Rehabilitation.
15    "Qualified taxpayer" means the owner of the qualified
16historic structure or any other person or entity who may
17qualify for the federal rehabilitation credit allowed by
18Section 47 of the federal Internal Revenue Code.
19    "Recapture event" means any of the following events
20occurring during the recapture period:
21        (1) failure to place in service the rehabilitated
22    portions of the qualified historic structure, or failure
23    to maintain the rehabilitated portions of the qualified
24    historic structure in service after they are placed in
25    service; provided that a recapture event under this
26    paragraph (1) shall not include a removal from service for

 

 

HB3186- 4 -LRB102 13314 HLH 18658 b

1    a reasonable period of time to conduct maintenance and
2    repairs that are reasonably necessary to protect the
3    health and safety of the public or to protect the
4    structural integrity of the qualified historic structure
5    or a neighboring structure;
6        (2) demolition or other alteration of the qualified
7    historic structure in a manner that is inconsistent with
8    the qualified rehabilitation plan or the Secretary of the
9    Interior's Standards for Rehabilitation;
10        (3) disposition of the rehabilitated qualified
11    historic structure in whole or a proportional disposition
12    of a partnership interest therein, except as otherwise
13    permitted by this Section; or
14        (4) use of the qualified historic structure in a
15    manner that is inconsistent with the qualified
16    rehabilitation plan or that is otherwise inconsistent with
17    the provisions and intent of this Section.
18    A recapture event occurring in one taxable year shall be
19deemed continuing to subsequent taxable years unless and until
20corrected.
21    The following dispositions of a qualified historic
22structure shall not be deemed to be a recapture event for
23purposes of this Section:
24        (1) a transfer by reason of death;
25        (2) a transfer between spouses incident to divorce;
26        (3) a sale by and leaseback to an entity that, when the

 

 

HB3186- 5 -LRB102 13314 HLH 18658 b

1    rehabilitated portions of the qualified historic structure
2    are placed in service, will be a lessee of the qualified
3    historic structure, but only for so long as the entity
4    continues to be a lessee; and
5        (4) a mere change in the form of conducting the trade
6    or business by the owner (or, if applicable, the lessee)
7    of the qualified historic structure, so long as the
8    property interest in such qualified historic structure is
9    retained in such trade or business and the owner or lessee
10    retains a substantial interest in such trade or business.
11    "Recapture period" means the 5-year period beginning on
12the date that the qualified historic structure or
13rehabilitated portions of the qualified historic structure are
14placed in service.
15    "Substantial rehabilitation" means that the qualified
16rehabilitation expenditures during the 24-month period
17selected by the taxpayer at the time and in the manner
18prescribed by rule and ending with or within the taxable year
19exceed the greater of (i) the adjusted basis of the building
20and its structural components or (ii) $5,000. The adjusted
21basis of the building and its structural components shall be
22determined as of the beginning of the first day of such
2324-month period or as of the beginning of the first day of the
24holding period of the building, whichever is later. For
25purposes of determining the adjusted basis, the determination
26of the beginning of the holding period shall be made without

 

 

HB3186- 6 -LRB102 13314 HLH 18658 b

1regard to any reconstruction by the taxpayer in connection
2with the rehabilitation. In the case of any phased
3rehabilitation, with phases set forth in architectural plans
4and specifications completed before the rehabilitation begins,
5this definition shall be applied by substituting "60-month
6period" for "24-month period" wherever that term occurs in the
7definition.
8(Source: P.A. 100-629, eff. 1-1-19.)
 
9    (35 ILCS 31/10)
10    Sec. 10. Allowable credit.
11    (a) To the extent authorized by this Act, for taxable
12years beginning on or after January 1, 2019 and ending on or
13before December 31, 2023, there shall be allowed a tax credit
14to the qualified taxpayer against the tax imposed by
15subsections (a) and (b) of Section 201 of the Illinois Income
16Tax Act in an aggregate amount equal to the lesser of (i) 25%
17of qualified expenditures incurred in by a qualified taxpayer
18undertaking a qualified rehabilitation plan or (ii) $3,000,000
19of a qualified historic structure, provided that the total
20amount of such expenditures must (i) equal $5,000 or more and
21or (ii) exceed the adjusted basis of the qualified historic
22structure on the first day the qualified rehabilitation plan
23commenced. If the qualified rehabilitation plan spans multiple
24years, the aggregate credit for the entire project shall be
25allowed in the last taxable year.

 

 

HB3186- 7 -LRB102 13314 HLH 18658 b

1    (b) To obtain a tax credit certificate pursuant to this
2Section, the qualified taxpayer must apply with the Division.
3The Division shall determine the amount of eligible
4rehabilitation expenditures within 45 days after receipt of a
5complete application. The taxpayer must provide to the
6Division a third-party cost certification conducted by a
7certified public accountant verifying (i) the qualified and
8non-qualified rehabilitation expenses and (ii) that the
9qualified expenditures exceed the adjusted basis of the
10qualified historic structure on the first day the qualified
11rehabilitation plan commenced. The accountant shall provide
12appropriate review and testing of invoices. The Division is
13authorized, but not required, to accept this third-party cost
14certification to determine the amount of qualified
15expenditures. The Division and the National Park Service shall
16determine whether the rehabilitation is consistent with the
17Standards of the Secretary of the United States Department of
18the Interior.
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
23deduction from 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

 

 

HB3186- 8 -LRB102 13314 HLH 18658 b

1year in which the qualified rehabilitation plan was placed in
2service. Upon completion and review of the project and
3approval of the complete application, the Division shall issue
4a single certificate in the amount of the eligible credits
5equal to 25% of the qualified expenditures incurred during the
6eligible taxable years, not to exceed the lesser of the
7allocated amount or $3,000,000 per single qualified
8rehabilitation plan. Prior to the issuance of the tax credit
9certificate, the qualified taxpayer must provide to the
10Division verification that the rehabilitated structure is a
11qualified historic structure. At the time the certificate is
12issued, an issuance fee up to the maximum amount of 2% of the
13amount of the credits issued by the certificate may be
14collected from the qualified taxpayer applicant to administer
15the Act. If collected, this issuance fee shall be directed to
16the Division Historic Property Administrative Fund or other
17such fund as appropriate for use of the Division in the
18administration of the Historic Preservation Tax Credit
19Program. The taxpayer must attach the certificate or legal
20documentation of her or his proportional share of the
21certificate to the tax return on which the credits are to be
22claimed. The tax credit under this Section may not reduce the
23taxpayer's liability to less than zero. If the amount of the
24credit exceeds the tax liability for the year, the excess
25credit may be carried forward and applied to the tax liability
26of the 10 taxable years following the first excess credit

 

 

HB3186- 9 -LRB102 13314 HLH 18658 b

1year. The taxpayer may not receive credits under this Section
2and Section 221 of the Illinois Income Tax Act for the same
3qualified expenditures or qualified rehabilitation plan.
4    (d) If the taxpayer is (i) a corporation having an
5election in effect under Subchapter S of the federal Internal
6Revenue Code, (ii) a partnership, or (iii) a limited liability
7company, the credit provided under this Act may be claimed by
8the shareholders of the corporation, the partners of the
9partnership, or the members of the limited liability company
10in the same manner as those shareholders, partners, or members
11account for their proportionate shares of the income or losses
12of the corporation, partnership, or limited liability company,
13or as provided in the bylaws or other executed agreement of the
14corporation, partnership, or limited liability company.
15Credits granted to a partnership, a limited liability company
16taxed as a partnership, or other multiple owners of property
17shall be passed through to the partners, members, or owners
18respectively on a pro rata basis or pursuant to an executed
19agreement among the partners, members, or owners documenting
20any alternate distribution method.
21    (e) If a recapture event occurs during the recapture
22period with respect to a qualified historic structure, then
23for any taxable year in which the credits are allowed as
24specified in this Act, the tax under the applicable Section of
25this Act shall be increased by applying the recapture
26percentage set forth below to the tax decrease resulting from

 

 

HB3186- 10 -LRB102 13314 HLH 18658 b

1the allocation application of credits allowed under this Act
2to the taxable year in question.
3    For the purposes of this subsection, the recapture
4percentage shall be determined as follows:
5        (1) if the recapture event occurs within the first
6    year after commencement of the recapture period, then the
7    recapture percentage is 100%;
8        (2) if the recapture event occurs within the second
9    year after commencement of the recapture period, then the
10    recapture percentage is 80%;
11        (3) if the recapture event occurs within the third
12    year after commencement of the recapture period, then the
13    recapture percentage is 60%;
14        (4) if the recapture event occurs within the fourth
15    year after commencement of the recapture period, then the
16    recapture percentage is 40%; and
17        (5) if the recapture event occurs within the fifth
18    year after commencement of the recapture period, then the
19    recapture percentage is 20%.
20    In the case of any recapture event, the carryforwards
21under this Act shall be adjusted by reason of such event.
22    (f) (d) The Division may adopt rules to implement this
23Section in addition to the rules expressly authorized herein.
24(Source: P.A. 100-629, eff. 1-1-19; revised 10-1-18.)
 
25    (35 ILCS 31/20)

 

 

HB3186- 11 -LRB102 13314 HLH 18658 b

1    Sec. 20. Limitations, reporting, and monitoring.
2    (a) In every calendar year that this program is in effect,
3the Division is authorized to allocate $15,000,000 worth of
4tax credits in addition to any unallocated, returned, or
5rescinded allocations from previous years, pursuant to
6qualified rehabilitation plans. The Division shall award not
7more than an aggregate of $15,000,000 in total annual tax
8credits pursuant to qualified rehabilitation plans for
9qualified historic structures. The Division shall allocate and
10award not more than $3,000,000 in tax credits with regard to a
11single qualified rehabilitation plan. In allocating awarding
12tax credits under this Act, the Division must prioritize
13applications projects that meet one or more of the following:
14        (1) the qualified historic structure is located in a
15    county that borders a State with a historic
16    income-producing property rehabilitation credit;
17        (2) the qualified historic structure was previously
18    owned by a federal, state, or local governmental entity
19    for no less than 6 months;
20        (3) the qualified historic structure is located in a
21    census tract that has a median family income at or below
22    the State median family income; data from the most recent
23    5-year estimate from the American Community Survey (ACS),
24    published by the U.S. Census Bureau, shall be used to
25    determine eligibility;
26        (4) the qualified rehabilitation plan includes in the

 

 

HB3186- 12 -LRB102 13314 HLH 18658 b

1    development partnership a Community Development Entity or
2    a low-profit (B Corporation) or not-for-profit
3    organization, as defined by Section 501(c)(3) of the
4    Internal Revenue Code; or
5        (5) the qualified historic structure is located in an
6    area declared under an Emergency Declaration or Major
7    Disaster Declaration under the federal Robert T. Stafford
8    Disaster Relief and Emergency Assistance Act. The
9    declaration must be no older than 3 years old at the time
10    of application.
11    (b) The annual aggregate authorization program allocation
12of $15,000,000 set forth in subsection (a) shall be allocated
13by the Division, in such proportion as determined by the
14Director Department, on a per calendar basis twice in each
15calendar year that the program is in effect, provided that:
16(i) the amount initially allocated by the Division for the
17first any one calendar year application period shall not
18exceed 65% of the total allowable amount available for
19allocation. Any unallocated and (ii) any portion of the
20allocated allowable amount remaining unused as of the end of
21any of the second calendar application period of a given
22calendar year shall be rolled over into and added to the total
23authorized allocated amount for the next available calendar
24year. The qualified rehabilitation plan must meet a readiness
25test, as defined in the rules created by the Division, in order
26for the application Applicant to qualify. In any given

 

 

HB3186- 13 -LRB102 13314 HLH 18658 b

1application period, applications Applicants that qualify under
2this Act and are prioritized as set forth in subsection (a)
3will be placed in a queue based on the date and time the
4application is received until such time as the application
5period total allowable amount is reached. Applications that
6qualify but do not receive an allocation Applicants must
7reapply to be considered in subsequent for each application
8periods period.
9    (c) Subject On or before December 31, 2019, and on or
10before December 31 of each odd-numbered year thereafter
11through 2023, subject to appropriation and prior to equal
12disbursement to the Division, moneys in the Historic Property
13Administrative Fund shall be used, on a biennial basis
14beginning at the end of the second first fiscal year after the
15effective date of this Act, to hire a qualified third party to
16prepare a biennial report to assess the overall impact
17effectiveness of this Act from the qualified rehabilitation
18plans projects under this Act completed in that year and in
19previous years. Baseline data of the metrics in the report
20shall be collected at the initiation of a qualified
21rehabilitation plan project. The overall economic impact shall
22include at least:
23        (1) the number of applications, project locations, and
24    proposed use of qualified historic structures;
25        (2) the amount of credits awarded and the number and
26    location of projects receiving credit allocations;

 

 

HB3186- 14 -LRB102 13314 HLH 18658 b

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

 

 

HB3186- 15 -LRB102 13314 HLH 18658 b

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

 

 

HB3186- 16 -LRB102 13314 HLH 18658 b

1reviewable progress within 24 18 months after the date the
2application received notification of approval from the
3Division, the Director may require the Applicant is required
4to provide detailed evidence that the Applicant has secured
5and closed on financing for the complete scope of
6rehabilitation for the project. To demonstrate evidence that
7the Applicant has secured and closed on financing, the
8Applicant will need to provide signed and processed loan
9agreements, bank financing documents or other legal and
10contractual evidence to demonstrate that adequate financing is
11available to complete the project. The Director shall review
12the submitted evidence and may request additional
13documentation from the Applicant if necessary. The Applicant
14will have 30 calendar days to provide the information
15requested, otherwise the allocation approval may be rescinded
16at the discretion of the Director.
17    If the Applicant fails to document reviewable progress
18within 24 18 months of approval, the Director may notify the
19Applicant that the allocation application is rescinded.
20However, should financing and construction be imminent, the
21Director may elect to grant the Applicant no more than 5 months
22to close on financing and commence construction. If the
23Applicant fails to meet these conditions in the required
24timeframe, the Director shall notify the Applicant that the
25allocation application is rescinded. Any such rescinded
26allocation shall be added to the aggregate amount of credits

 

 

HB3186- 17 -LRB102 13314 HLH 18658 b

1available for allocation for the year in which the forfeiture
2occurred.
3    The amount of the qualified expenditures identified in the
4qualified taxpayer's Applicant's certification of completion
5and reflected on the Historic Preservation Tax Credit
6certificate issued by the Director is subject to inspection,
7examination, and audit by the Department of Revenue.
8    The qualified taxpayer Applicant shall establish and
9maintain for a period of 4 years following the effective date
10on a project tax credit certificate such records as required
11by the Director. Such records include, but are not limited to,
12records documenting project expenditures and compliance with
13the U.S. Secretary of the Interior's Standards. The qualified
14taxpayer Applicant shall make such records available for
15review and verification by the Director, the State Historic
16Preservation Officer, the Department of Revenue, or
17appropriate staff, as well as other appropriate State
18agencies. In the event the Director determines an Applicant
19has submitted a status an annual report containing erroneous
20information or data not supported by records established and
21maintained under this Act, the Director may, after providing
22notice, require the Applicant to resubmit corrected reports.
23(Source: P.A. 100-629, eff. 1-1-19.)
 
24    Section 99. Effective date. This Act takes effect upon
25becoming law.