102ND GENERAL ASSEMBLY
State of Illinois
2021 and 2022
SB2258

 

Introduced 2/26/2021, by Sen. Chapin Rose

 

SYNOPSIS AS INTRODUCED:
 
New Act
35 ILCS 5/704A

    Creates the Job Creation Zone Pilot Program Act. Sets forth the boundaries of the Job Creation Zone. Provides that applicants that pledge to hire at least 5 new employees at a designated location within the job creation zone are eligible for credits against their obligation to pay over withholding taxes under the Illinois Income Tax Act. Sets forth the amount of the credit, which is based on the incremental income tax attributable to new employees hired by the taxpayer during the calendar year. Amends the Illinois Income Tax Act to make conforming changes. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

SB2258LRB102 16277 HLH 21659 b

1    AN ACT concerning State government.
 
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 Job
5Creation Zone Pilot Program Act.
 
6    Section 5. Definitions. As used in this Act:
7    "Agreement" means an agreement between the taxpayer and
8the Department for credit awards under this Act.
9    "Department" means the Department of Commerce and Economic
10Opportunity.
11    "Incremental income tax" means the total amount withheld
12during the reporting period from the compensation of new
13employees under Article 7 of the Illinois Income Tax Act
14arising from employment at a project that is the subject of an
15agreement.
16    "New employee" means a full-time employee who (i) is first
17employed by a taxpayer in the project that is the subject of an
18agreement under this Act, (ii) is hired after the taxpayer
19enters into the tax credit agreement, (iii) receives
20compensation from the taxpayer that is at least 125% of the
21State minimum wage during the entire time he or she is
22considered a new employee, and (iv) is eligible for
23employer-sponsored group health insurance benefits and

 

 

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1retirement benefits as a condition of his or her employment
2with the taxpayer. The term "new employee" does not include:
3        (1) an employee of the taxpayer who performs a job
4    that was previously performed by another employee, if that
5    job existed for at least 6 months before hiring the
6    employee; notwithstanding this paragraph, an employee may
7    be considered a new employee if the employee performs a
8    job that was previously performed by an employee who was:
9            (A) treated under the agreement as a new employee;
10        and
11            (B) promoted by the taxpayer to another job;
12        (2) an employee of the taxpayer who was previously
13    employed in Illinois by a related member of the taxpayer
14    and whose employment was shifted to the taxpayer after the
15    taxpayer entered into the agreement under this Act; or
16        (3) a child, grandchild, parent, or spouse, other than
17    a spouse who is legally separated from the individual, of
18    any individual who has a direct or an indirect ownership
19    interest of at least 5% in the profits, capital, or value
20    of the taxpayer.
21    "Project" means employment in one or more of the following
22fields: manufacturing, technology, research, science,
23mathematics, engineering, construction, energy,
24bioprocessing, or agriculture.
25    "Related Member" means a person that, with respect to the
26taxpayer during any portion of the taxable year, is any one of

 

 

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1the following:
2        (1) An individual stockholder, if the stockholder and
3    the members of the stockholder's family (as defined in
4    Section 318 of the Internal Revenue Code) own directly,
5    indirectly, beneficially, or constructively, in the
6    aggregate, at least 50% of the value of the taxpayer's
7    outstanding stock.
8        (2) A partnership, estate, or trust and any partner or
9    beneficiary, if the partnership, estate, or trust, and its
10    partners or beneficiaries own directly, indirectly,
11    beneficially, or constructively, in the aggregate, at
12    least 50% of the profits, capital, stock, or value of the
13    taxpayer.
14        (3) A corporation, and any party related to the
15    corporation in a manner that would require an attribution
16    of stock from the corporation to the party or from the
17    party to the corporation under the attribution rules of
18    Section 318 of the Internal Revenue Code, if the taxpayer
19    owns directly, indirectly, beneficially, or constructively
20    at least 50% of the value of the corporation's outstanding
21    stock.
22        (4) A corporation and any party related to that
23    corporation in a manner that would require an attribution
24    of stock from the corporation to the party or from the
25    party to the corporation under the attribution rules of
26    Section 318 of the Internal Revenue Code, if the

 

 

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1    corporation and all such related parties own in the
2    aggregate at least 50% of the profits, capital, stock, or
3    value of the taxpayer.
4        (5) A person to or from whom there is attribution of
5    stock ownership in accordance with Section 1563(e) of the
6    Internal Revenue Code, except, for purposes of determining
7    whether a person is a Related Member under this paragraph,
8    20% shall be substituted for 5% wherever 5% appears in
9    Section 1563(e) of the Internal Revenue Code.
 
10    Section 10. Zone created. A job creation zone pilot
11program is hereby created. The job creation zone shall have
12the following boundaries:
13        Beginning at the intersection of US-51 and State Route
14    9; then East to the Indiana State Line; then South along
15    the border between Illinois and Indiana; then Southwest
16    along Interstate 70 to US-51; then North along US-51 to
17    the Point of Beginning; the job creation zone also
18    includes all of the territory within 15 miles of the
19    North, South, and West borders set forth in this Section.
 
20    Section 15. Tax credit awards; application.
21    (a) The Department shall make credit awards under this Act
22to foster job creation within the job creation zone. To be
23eligible for credits under this Act, the applicant must pledge
24to hire at least 5 new employees at a designated location

 

 

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1within the job creation zone.
2    (b) An applicant may request a credit award by formal
3written letter of request or by formal application to the
4Department, in which the applicant states its intent to hire
5at least 5 new employees at a designated location within the
6job creation zone. As circumstances require, the Department
7may require a formal application from an applicant and a
8formal letter of request for assistance.
9    (c) The Department may not make a credit award for a
10project at a location that was used by a different employer
11during the previous year if the applicant will employ the same
12number of employees or fewer employees (including new
13employees) at that project location.
14    (d) The Department may make credit awards for withholding
15reporting periods beginning on or after July 1, 2020.
 
16    Section 25. Tax credit awards; amount. Any taxpayer that
17has been issued a certificate of exemption by the Department
18under this Act may claim a credit against its obligation to pay
19over withholding under Section 704A of the Illinois Income Tax
20Act. The amount of the credit may not exceed (i) 50% of the
21incremental income tax attributable to each new employee
22during calendar year in which the new employee is hired and for
23the first 2 calendar years after the new employee is hired and
24(ii) 25% of the incremental income tax attributable to each
25new employee during the third and fourth calendar years after

 

 

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1the new employee is hired.
 
2    Section 30. Rulemaking. The Department may adopt rules to
3implement and enforce the provisions of this Act.
 
4    Section 900. The Illinois Income Tax Act is amended by
5changing Section 704A as follows:
 
6    (35 ILCS 5/704A)
7    Sec. 704A. Employer's return and payment of tax withheld.
8    (a) In general, every employer who deducts and withholds
9or is required to deduct and withhold tax under this Act on or
10after January 1, 2008 shall make those payments and returns as
11provided in this Section.
12    (b) Returns. Every employer shall, in the form and manner
13required by the Department, make returns with respect to taxes
14withheld or required to be withheld under this Article 7 for
15each quarter beginning on or after January 1, 2008, on or
16before the last day of the first month following the close of
17that quarter.
18    (c) Payments. With respect to amounts withheld or required
19to be withheld on or after January 1, 2008:
20        (1) Semi-weekly payments. For each calendar year, each
21    employer who withheld or was required to withhold more
22    than $12,000 during the one-year period ending on June 30
23    of the immediately preceding calendar year, payment must

 

 

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1    be made:
2            (A) on or before each Friday of the calendar year,
3        for taxes withheld or required to be withheld on the
4        immediately preceding Saturday, Sunday, Monday, or
5        Tuesday;
6            (B) on or before each Wednesday of the calendar
7        year, for taxes withheld or required to be withheld on
8        the immediately preceding Wednesday, Thursday, or
9        Friday.
10        Beginning with calendar year 2011, payments made under
11    this paragraph (1) of subsection (c) must be made by
12    electronic funds transfer.
13        (2) Semi-weekly payments. Any employer who withholds
14    or is required to withhold more than $12,000 in any
15    quarter of a calendar year is required to make payments on
16    the dates set forth under item (1) of this subsection (c)
17    for each remaining quarter of that calendar year and for
18    the subsequent calendar year.
19        (3) Monthly payments. Each employer, other than an
20    employer described in items (1) or (2) of this subsection,
21    shall pay to the Department, on or before the 15th day of
22    each month the taxes withheld or required to be withheld
23    during the immediately preceding month.
24        (4) Payments with returns. Each employer shall pay to
25    the Department, on or before the due date for each return
26    required to be filed under this Section, any tax withheld

 

 

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1    or required to be withheld during the period for which the
2    return is due and not previously paid to the Department.
3    (d) Regulatory authority. The Department may, by rule:
4        (1) Permit employers, in lieu of the requirements of
5    subsections (b) and (c), to file annual returns due on or
6    before January 31 of the year for taxes withheld or
7    required to be withheld during the previous calendar year
8    and, if the aggregate amounts required to be withheld by
9    the employer under this Article 7 (other than amounts
10    required to be withheld under Section 709.5) do not exceed
11    $1,000 for the previous calendar year, to pay the taxes
12    required to be shown on each such return no later than the
13    due date for such return.
14        (2) Provide that any payment required to be made under
15    subsection (c)(1) or (c)(2) is deemed to be timely to the
16    extent paid by electronic funds transfer on or before the
17    due date for deposit of federal income taxes withheld
18    from, or federal employment taxes due with respect to, the
19    wages from which the Illinois taxes were withheld.
20        (3) Designate one or more depositories to which
21    payment of taxes required to be withheld under this
22    Article 7 must be paid by some or all employers.
23        (4) Increase the threshold dollar amounts at which
24    employers are required to make semi-weekly payments under
25    subsection (c)(1) or (c)(2).
26    (e) Annual return and payment. Every employer who deducts

 

 

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1and withholds or is required to deduct and withhold tax from a
2person engaged in domestic service employment, as that term is
3defined in Section 3510 of the Internal Revenue Code, may
4comply with the requirements of this Section with respect to
5such employees by filing an annual return and paying the taxes
6required to be deducted and withheld on or before the 15th day
7of the fourth month following the close of the employer's
8taxable year. The Department may allow the employer's return
9to be submitted with the employer's individual income tax
10return or to be submitted with a return due from the employer
11under Section 1400.2 of the Unemployment Insurance Act.
12    (f) Magnetic media and electronic filing. With respect to
13taxes withheld in calendar years prior to 2017, any W-2 Form
14that, under the Internal Revenue Code and regulations
15promulgated thereunder, is required to be submitted to the
16Internal Revenue Service on magnetic media or electronically
17must also be submitted to the Department on magnetic media or
18electronically for Illinois purposes, if required by the
19Department.
20    With respect to taxes withheld in 2017 and subsequent
21calendar years, the Department may, by rule, require that any
22return (including any amended return) under this Section and
23any W-2 Form that is required to be submitted to the Department
24must be submitted on magnetic media or electronically.
25    The due date for submitting W-2 Forms shall be as
26prescribed by the Department by rule.

 

 

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1    (g) For amounts deducted or withheld after December 31,
22009, a taxpayer who makes an election under subsection (f) of
3Section 5-15 of the Economic Development for a Growing Economy
4Tax Credit Act for a taxable year shall be allowed a credit
5against payments due under this Section for amounts withheld
6during the first calendar year beginning after the end of that
7taxable year equal to the amount of the credit for the
8incremental income tax attributable to full-time employees of
9the taxpayer awarded to the taxpayer by the Department of
10Commerce and Economic Opportunity under the Economic
11Development for a Growing Economy Tax Credit Act for the
12taxable year and credits not previously claimed and allowed to
13be carried forward under Section 211(4) of this Act as
14provided in subsection (f) of Section 5-15 of the Economic
15Development for a Growing Economy Tax Credit Act. The credit
16or credits may not reduce the taxpayer's obligation for any
17payment due under this Section to less than zero. If the amount
18of the credit or credits exceeds the total payments due under
19this Section with respect to amounts withheld during the
20calendar year, the excess may be carried forward and applied
21against the taxpayer's liability under this Section in the
22succeeding calendar years as allowed to be carried forward
23under paragraph (4) of Section 211 of this Act. The credit or
24credits shall be applied to the earliest year for which there
25is a tax liability. If there are credits from more than one
26taxable year that are available to offset a liability, the

 

 

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1earlier credit shall be applied first. Each employer who
2deducts and withholds or is required to deduct and withhold
3tax under this Act and who retains income tax withholdings
4under subsection (f) of Section 5-15 of the Economic
5Development for a Growing Economy Tax Credit Act must make a
6return with respect to such taxes and retained amounts in the
7form and manner that the Department, by rule, requires and pay
8to the Department or to a depositary designated by the
9Department those withheld taxes not retained by the taxpayer.
10For purposes of this subsection (g), the term taxpayer shall
11include taxpayer and members of the taxpayer's unitary
12business group as defined under paragraph (27) of subsection
13(a) of Section 1501 of this Act. This Section is exempt from
14the provisions of Section 250 of this Act. No credit awarded
15under the Economic Development for a Growing Economy Tax
16Credit Act for agreements entered into on or after January 1,
172015 may be credited against payments due under this Section.
18    (h) An employer may claim a credit against payments due
19under this Section for amounts withheld during the first
20calendar year ending after the date on which a tax credit
21certificate was issued under Section 35 of the Small Business
22Job Creation Tax Credit Act. The credit shall be equal to the
23amount shown on the certificate, but may not reduce the
24taxpayer's obligation for any payment due under this Section
25to less than zero. If the amount of the credit exceeds the
26total payments due under this Section with respect to amounts

 

 

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1withheld during the calendar year, the excess may be carried
2forward and applied against the taxpayer's liability under
3this Section in the 5 succeeding calendar years. The credit
4shall be applied to the earliest year for which there is a tax
5liability. If there are credits from more than one calendar
6year that are available to offset a liability, the earlier
7credit shall be applied first. This Section is exempt from the
8provisions of Section 250 of this Act.
9    (i) Each employer with 50 or fewer full-time equivalent
10employees during the reporting period may claim a credit
11against the payments due under this Section for each qualified
12employee in an amount equal to the maximum credit allowable.
13The credit may be taken against payments due for reporting
14periods that begin on or after January 1, 2020, and end on or
15before December 31, 2027. An employer may not claim a credit
16for an employee who has worked fewer than 90 consecutive days
17immediately preceding the reporting period; however, such
18credits may accrue during that 90-day period and be claimed
19against payments under this Section for future reporting
20periods after the employee has worked for the employer at
21least 90 consecutive days. In no event may the credit exceed
22the employer's liability for the reporting period. Each
23employer who deducts and withholds or is required to deduct
24and withhold tax under this Act and who retains income tax
25withholdings under this subsection must make a return with
26respect to such taxes and retained amounts in the form and

 

 

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1manner that the Department, by rule, requires and pay to the
2Department or to a depositary designated by the Department
3those withheld taxes not retained by the employer.
4    For each reporting period, the employer may not claim a
5credit or credits for more employees than the number of
6employees making less than the minimum or reduced wage for the
7current calendar year during the last reporting period of the
8preceding calendar year. Notwithstanding any other provision
9of this subsection, an employer shall not be eligible for
10credits for a reporting period unless the average wage paid by
11the employer per employee for all employees making less than
12$55,000 during the reporting period is greater than the
13average wage paid by the employer per employee for all
14employees making less than $55,000 during the same reporting
15period of the prior calendar year.
16    For purposes of this subsection (i):
17    "Compensation paid in Illinois" has the meaning ascribed
18to that term under Section 304(a)(2)(B) of this Act.
19    "Employer" and "employee" have the meaning ascribed to
20those terms in the Minimum Wage Law, except that "employee"
21also includes employees who work for an employer with fewer
22than 4 employees. Employers that operate more than one
23establishment pursuant to a franchise agreement or that
24constitute members of a unitary business group shall aggregate
25their employees for purposes of determining eligibility for
26the credit.

 

 

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1    "Full-time equivalent employees" means the ratio of the
2number of paid hours during the reporting period and the
3number of working hours in that period.
4    "Maximum credit" means the percentage listed below of the
5difference between the amount of compensation paid in Illinois
6to employees who are paid not more than the required minimum
7wage reduced by the amount of compensation paid in Illinois to
8employees who were paid less than the current required minimum
9wage during the reporting period prior to each increase in the
10required minimum wage on January 1. If an employer pays an
11employee more than the required minimum wage and that employee
12previously earned less than the required minimum wage, the
13employer may include the portion that does not exceed the
14required minimum wage as compensation paid in Illinois to
15employees who are paid not more than the required minimum
16wage.
17        (1) 25% for reporting periods beginning on or after
18    January 1, 2020 and ending on or before December 31, 2020;
19        (2) 21% for reporting periods beginning on or after
20    January 1, 2021 and ending on or before December 31, 2021;
21        (3) 17% for reporting periods beginning on or after
22    January 1, 2022 and ending on or before December 31, 2022;
23        (4) 13% for reporting periods beginning on or after
24    January 1, 2023 and ending on or before December 31, 2023;
25        (5) 9% for reporting periods beginning on or after
26    January 1, 2024 and ending on or before December 31, 2024;

 

 

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1        (6) 5% for reporting periods beginning on or after
2    January 1, 2025 and ending on or before December 31, 2025.
3    The amount computed under this subsection may continue to
4be claimed for reporting periods beginning on or after January
51, 2026 and:
6        (A) ending on or before December 31, 2026 for
7    employers with more than 5 employees; or
8        (B) ending on or before December 31, 2027 for
9    employers with no more than 5 employees.
10    "Qualified employee" means an employee who is paid not
11more than the required minimum wage and has an average wage
12paid per hour by the employer during the reporting period
13equal to or greater than his or her average wage paid per hour
14by the employer during each reporting period for the
15immediately preceding 12 months. A new qualified employee is
16deemed to have earned the required minimum wage in the
17preceding reporting period.
18    "Reporting period" means the quarter for which a return is
19required to be filed under subsection (b) of this Section.
20    (j) An employer may claim a credit against payments due
21under this Section for amounts withheld during the first
22calendar year ending after the date on which a certificate of
23exemption was issued under the Job Creation Zone Pilot Program
24Act. The credit shall be equal to the amount shown on the
25certificate, but may not reduce the taxpayer's obligation for
26any payment due under this Section to less than zero. If the

 

 

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1amount of the credit exceeds the total payments due under this
2Section with respect to amounts withheld during the calendar
3year, the excess may be carried forward and applied against
4the taxpayer's liability under this Section in the 5
5succeeding calendar years. The credit shall be applied to the
6earliest year for which there is a tax liability. If there are
7credits from more than one calendar year that are available to
8offset a liability, the earlier credit shall be applied first.
9This subsection (j) is exempt from the provisions of Section
10250 of this Act.
11(Source: P.A. 100-303, eff. 8-24-17; 100-511, eff. 9-18-17;
12100-863, eff. 8-14-18; 101-1, eff. 2-19-19.)
 
13    Section 999. Effective date. This Act takes effect upon
14becoming law.