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1 | AN ACT concerning revenue.
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2 | Be it enacted by the People of the State of Illinois,
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3 | represented in the General Assembly:
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4 | Section 1. Short title. This Act may be cited as the | |||||||||||||||||||||
5 | Revitalizing Downtowns Tax Credit Act. | |||||||||||||||||||||
6 | Section 5. Definitions. As used in this Act, unless the | |||||||||||||||||||||
7 | context clearly indicates otherwise: | |||||||||||||||||||||
8 | "Board" means the Capital Development Board. | |||||||||||||||||||||
9 | "Qualified office building" means commercial property, and | |||||||||||||||||||||
10 | its structural components, that is leased or available for | |||||||||||||||||||||
11 | lease to office tenants or is used primarily for office use. | |||||||||||||||||||||
12 | "Qualified expenditures" means any amount properly | |||||||||||||||||||||
13 | chargeable to a capital account. Qualified expenditures does | |||||||||||||||||||||
14 | not include the cost of acquisition to the building or | |||||||||||||||||||||
15 | property to be converted, the cost to enlarge the building, | |||||||||||||||||||||
16 | any expenditure which is allocable to the portion of such | |||||||||||||||||||||
17 | property which is tax-exempt use property, or any expenditure | |||||||||||||||||||||
18 | of a lessee of a building on or after the day the conversion is | |||||||||||||||||||||
19 | complete. | |||||||||||||||||||||
20 | "Qualified conversion plan" means a plan to substantially | |||||||||||||||||||||
21 | convert a qualified office building from office use to | |||||||||||||||||||||
22 | residential, retail, or other commercial use. In the case of | |||||||||||||||||||||
23 | conversion to a residential use, such converted qualified |
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1 | office building must meet the following requirements: (i) 20% | ||||||
2 | or more of the residential housing units must be both | ||||||
3 | rent-restricted and occupied by individuals whose income is | ||||||
4 | 80% or less of the municipality's median gross income; and | ||||||
5 | (ii) the property is subject to a written binding State or | ||||||
6 | local agreement with respect to the provision of financing of | ||||||
7 | affordable housing and such agreement is documented. | ||||||
8 | "Qualified taxpayer" means the owner of the qualified | ||||||
9 | office building. | ||||||
10 | "Substantial rehabilitation" means that the qualified | ||||||
11 | expenditures during the 24-month period selected by the | ||||||
12 | taxpayer at the time and in the manner prescribed by rule and | ||||||
13 | ending with or within the taxable year exceed the greater of: | ||||||
14 | (i) the adjusted basis of the building and its structural | ||||||
15 | components or (ii) $15,000. The adjusted basis of the building | ||||||
16 | and its structural components shall be determined as of the | ||||||
17 | beginning of the first day of that 24-month period or the | ||||||
18 | beginning of the first day of the holding period of the | ||||||
19 | building, whichever is later. For purposes of determining the | ||||||
20 | adjusted basis, the determination of the beginning of the | ||||||
21 | holding period shall be made without regard to any | ||||||
22 | reconstruction by the qualified taxpayer. | ||||||
23 | Section 10. Allowable credit. | ||||||
24 | (a) To the extent authorized by this Act, for taxable | ||||||
25 | years beginning on or after January 1, 2023 and ending on or |
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1 | before December 31, 2025, there shall be allowed a tax credit | ||||||
2 | against the tax imposed by subsections (a) and (b) of Section | ||||||
3 | 201 of the Illinois Income Tax Act in an aggregate amount equal | ||||||
4 | to 25% of qualified expenditures incurred by a qualified | ||||||
5 | taxpayer undertaking a qualified conversion plan of a | ||||||
6 | qualified office building, provided that the total amount of | ||||||
7 | such expenditures must equal $15,000 or more. If the qualified | ||||||
8 | conversion plan spans multiple years, the aggregate credit for | ||||||
9 | the entire project shall be allowed in the last taxable year. | ||||||
10 | (b) To obtain a tax credit pursuant to this Section, the | ||||||
11 | taxpayer must apply with the Capital Development Board. The | ||||||
12 | Capital Development Board shall determine the amount of | ||||||
13 | eligible conversion expenditures within 45 days after receipt | ||||||
14 | of a complete application. The taxpayer must provide to the | ||||||
15 | Board a third-party cost certification conducted by a | ||||||
16 | certified public accountant verifying (i) the qualified and | ||||||
17 | non-qualified conversion expenses and (ii) that the qualified | ||||||
18 | expenditures exceed the adjusted basis of the qualified office | ||||||
19 | building on the first day the qualified conversion plan | ||||||
20 | commenced. The accountant shall provide appropriate review and | ||||||
21 | testing of invoices. The Board is authorized, but not | ||||||
22 | required, to accept this third-party cost certification to | ||||||
23 | determine the amount of qualified expenditures. | ||||||
24 | (c) If the amount of any tax credit awarded under this Act | ||||||
25 | exceeds the qualified taxpayer's income tax liability for the | ||||||
26 | year in which the qualified conversion plan was placed in |
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1 | service, the excess amount may be carried forward for | ||||||
2 | deduction from the taxpayer's income tax liability in the next | ||||||
3 | succeeding year or years until the total amount of the credit | ||||||
4 | has been used, except that a credit may not be carried forward | ||||||
5 | for deduction after the tenth taxable year after the taxable | ||||||
6 | year in which the qualified conversion plan was placed in | ||||||
7 | service. Upon completion and review of the project, the Board | ||||||
8 | shall issue a single certificate in the amount of the eligible | ||||||
9 | credits equal to 25% of the qualified expenditures incurred | ||||||
10 | during the eligible taxable years. At the time the certificate | ||||||
11 | is issued, an issuance fee up to the maximum amount of 2% of | ||||||
12 | the amount of the credits issued by the certificate may be | ||||||
13 | collected from the applicant to administer the Act. If | ||||||
14 | collected, this issuance fee shall be directed to the Capital | ||||||
15 | Development Fund or other such fund as appropriate for use by | ||||||
16 | the Board in the administration of the program under this Act. | ||||||
17 | The taxpayer must attach the certificate or legal | ||||||
18 | documentation of her or his proportional share of the | ||||||
19 | certificate to the tax return on which the credits are to be | ||||||
20 | claimed. The tax credit under this Section may not reduce the | ||||||
21 | taxpayer's liability to less than zero. If the amount of the | ||||||
22 | credit exceeds the tax liability for the year, the excess | ||||||
23 | credit may be carried forward and applied to the tax liability | ||||||
24 | of the 10 taxable years following the excess credit year. | ||||||
25 | (d) If the taxpayer is (i) a corporation having an | ||||||
26 | election in effect under Subchapter S of the federal Internal |
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1 | Revenue Code, (ii) a partnership, or (iii) a limited liability | ||||||
2 | company, the credit provided under this Act may be claimed by | ||||||
3 | the shareholders of the corporation, the partners of the | ||||||
4 | partnership, or the members of the limited liability company | ||||||
5 | in the same manner as those shareholders, partners, or members | ||||||
6 | account for their proportionate shares of the income or losses | ||||||
7 | of the corporation, partnership, or limited liability company, | ||||||
8 | or as provided in the bylaws or other executed agreement of the | ||||||
9 | corporation, partnership, or limited liability company. | ||||||
10 | Credits granted to a partnership, a limited liability company | ||||||
11 | taxed as a partnership, or other multiple owners of property | ||||||
12 | shall be passed through to the partners, members, or owners | ||||||
13 | respectively on a pro rata basis or pursuant to an executed | ||||||
14 | agreement among the partners, members, or owners documenting | ||||||
15 | any alternate distribution method. | ||||||
16 | Section 15. Limitations, reporting, and monitoring. | ||||||
17 | (a) The Division shall award not more than an aggregate of | ||||||
18 | $15,000,000 in total annual tax credits pursuant to qualified | ||||||
19 | conversion plans for qualified office buildings. The Board | ||||||
20 | shall award not more than $3,000,000 in tax credits with | ||||||
21 | regard to a single qualified conversion plan. In awarding tax | ||||||
22 | credits under this Act, the Board must prioritize projects | ||||||
23 | that meet one or more of the following: | ||||||
24 | (1) the qualified office building is located in a | ||||||
25 | county that borders a State with a similar conversion tax |
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1 | credit; | ||||||
2 | (2) the qualified office building was previously owned | ||||||
3 | by a federal, State, or local governmental entity; | ||||||
4 | (3) the qualified office building is located in a | ||||||
5 | census tract that has a median family income at or below | ||||||
6 | the State median family income; data from the most recent | ||||||
7 | 5-year estimate from the American Community Survey (ACS), | ||||||
8 | published by the U.S. Census Bureau, shall be used to | ||||||
9 | determine eligibility; | ||||||
10 | (4) the qualified conversion plan includes in the | ||||||
11 | development partnership a Community Development Entity or | ||||||
12 | a low-profit (B Corporation) or not-for-profit | ||||||
13 | organization, as defined by Section 501(c)(3) of the | ||||||
14 | Internal Revenue Code; or | ||||||
15 | (5) the qualified office building is located in an | ||||||
16 | area declared under an Emergency Declaration or Major | ||||||
17 | Disaster Declaration under the federal Robert T. Stafford | ||||||
18 | Disaster Relief and Emergency Assistance Act. | ||||||
19 | (b) The annual aggregate program allocation of $15,000,000 | ||||||
20 | set forth in subsection (a) shall be allocated by the Board, in | ||||||
21 | such proportion as determined by the Board, on a per calendar | ||||||
22 | basis twice in each year that the program is in effect, | ||||||
23 | provided that: (i) the amount initially allocated by the Board | ||||||
24 | for any one calendar application period shall not exceed 65% | ||||||
25 | of the total allowable amount and (ii) any portion of the | ||||||
26 | allocated allowable amount remaining unused as of the end of |
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1 | any of the second calendar application period of a given | ||||||
2 | calendar year shall be rolled into and added to the total | ||||||
3 | allocated amount for the next available calendar year. | ||||||
4 | Applicants that qualify under this Act will be placed in a | ||||||
5 | queue based on the date and time the application is received | ||||||
6 | until the application period total allowable amount is | ||||||
7 | reached. Applicants must reapply for each application period. | ||||||
8 | (c) On or before December 31, 2022 and on or before | ||||||
9 | December 31 of each odd-numbered year thereafter through 2025, | ||||||
10 | subject to appropriation and prior to equal disbursement to | ||||||
11 | the Board, moneys in the Capital Development Fund shall be | ||||||
12 | used, beginning at the end of the first fiscal year after the | ||||||
13 | effective date of this Act, to hire a qualified third party to | ||||||
14 | prepare a biennial report to assess the overall effectiveness | ||||||
15 | of this Act from the qualified conversion projects under this | ||||||
16 | Act completed in that year and in previous years. Baseline | ||||||
17 | data of the metrics in the report shall be collected at the | ||||||
18 | initiation of a qualified conversion project. The overall | ||||||
19 | economic impact shall include at least: | ||||||
20 | (1) the number of applications, project locations, and | ||||||
21 | proposed use of to be converted qualified office | ||||||
22 | buildings; | ||||||
23 | (2) the amount of credits awarded and the number and | ||||||
24 | location of projects receiving credit allocations; | ||||||
25 | (3) the status of ongoing projects and projected | ||||||
26 | qualifying expenditures for ongoing projects; |
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1 | (4) for completed projects, the total amount of | ||||||
2 | qualifying conversion expenditures and non-qualifying | ||||||
3 | expenditures, the number of new businesses created, the | ||||||
4 | number of new jobs created, a number of new housing units | ||||||
5 | created, and the total square footage converted and | ||||||
6 | developed; | ||||||
7 | (5) direct, indirect, and induced economic impacts; | ||||||
8 | (6) temporary and permanent construction jobs created; | ||||||
9 | and | ||||||
10 | (7) sales, income, and property tax generation before | ||||||
11 | construction, during construction, and after completion. | ||||||
12 | The report to the General Assembly shall be filed with the | ||||||
13 | Clerk of the House of Representatives and the Secretary of the | ||||||
14 | Senate as provided in Section 3.1 of the General Assembly | ||||||
15 | Organization Act. | ||||||
16 | (d) Any time prior to issuance of a tax credit | ||||||
17 | certificate, the Director of the Board or staff of the Board | ||||||
18 | may, upon reasonable notice to the project owner of not less | ||||||
19 | than 3 business days, conduct a site visit to the project to | ||||||
20 | inspect and evaluate the project. | ||||||
21 | (e) Any time prior to the issuance of a tax credit | ||||||
22 | certificate and for a period of 4 years following the | ||||||
23 | effective date of a project tax credit certificate, the | ||||||
24 | Director may, upon reasonable notice of not less than 30 | ||||||
25 | calendar days, request a status report from the applicant | ||||||
26 | consisting of information and updates relevant to the status |
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1 | of the project. Status reports shall not be requested more | ||||||
2 | than twice yearly. | ||||||
3 | (f) In order to demonstrate sufficient evidence of | ||||||
4 | reviewable progress within 12 months after the date the | ||||||
5 | applicant received notification of approval from the Board, | ||||||
6 | the applicant shall provide all of the following: | ||||||
7 | (1) a viable financial plan which demonstrates by way | ||||||
8 | of an executed agreement that all financing has been | ||||||
9 | secured for the project; such financing shall include, but | ||||||
10 | not be limited to, equity investment as demonstrated by | ||||||
11 | letters of commitment from the owner of the property, | ||||||
12 | investment partners, and equity investors; | ||||||
13 | (2) final construction drawings or approved building | ||||||
14 | permits that demonstrate the complete conversion of the | ||||||
15 | full scope of the application; and | ||||||
16 | (3) all historic approvals, including all federal and | ||||||
17 | State documents required by the Board. | ||||||
18 | The Director shall review the submitted evidence and may | ||||||
19 | request additional documentation from the applicant if | ||||||
20 | necessary. The applicant will have 30 calendar days to provide | ||||||
21 | the information requested, otherwise the approval may be | ||||||
22 | rescinded at the discretion of the Director. | ||||||
23 | (g) In order to demonstrate sufficient evidence of | ||||||
24 | reviewable progress within 18 months after the date the | ||||||
25 | application received notification of approval from the Board, | ||||||
26 | the applicant is required to provide detailed evidence that |
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1 | the applicant has secured and closed on financing for the | ||||||
2 | complete scope of conversion for the project. To demonstrate | ||||||
3 | evidence that the applicant has secured and closed on | ||||||
4 | financing, the applicant will need to provide signed and | ||||||
5 | processed loan agreements, bank financing documents or other | ||||||
6 | legal and contractual evidence to demonstrate that adequate | ||||||
7 | financing is available to complete the project. The Director | ||||||
8 | shall review the submitted evidence and may request additional | ||||||
9 | documentation from the applicant if necessary. The applicant | ||||||
10 | will have 30 calendar days to provide the information | ||||||
11 | requested, otherwise the approval may be rescinded at the | ||||||
12 | discretion of the Director. | ||||||
13 | If the applicant fails to document reviewable progress | ||||||
14 | within 18 months of approval, the Director may notify the | ||||||
15 | applicant that the application is rescinded. However, should | ||||||
16 | financing and construction be imminent, the Director may elect | ||||||
17 | to grant the applicant no more than 5 months to close on | ||||||
18 | financing and commence construction. If the applicant fails to | ||||||
19 | meet these conditions in the required timeframe, the Director | ||||||
20 | shall notify the applicant that the application is rescinded. | ||||||
21 | Any such rescinded allocation shall be added to the aggregate | ||||||
22 | amount of credits available for allocation for the year in | ||||||
23 | which the forfeiture occurred. | ||||||
24 | The amount of the qualified expenditures identified in the | ||||||
25 | applicant's certification of completion and reflected on the | ||||||
26 | Revitalizing Downtowns Tax Credit certificate issued by the |
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1 | Director is subject to inspection, examination, and audit by | ||||||
2 | the Department of Revenue. | ||||||
3 | The applicant shall establish and maintain for a period of | ||||||
4 | 4 years following the effective date on a project tax credit | ||||||
5 | certificate such records as required by the Director. Such | ||||||
6 | records include, but are not limited to, records documenting | ||||||
7 | project expenditures and compliance with the U.S. Secretary of | ||||||
8 | the Interior's Standards. The applicant shall make such | ||||||
9 | records available for review and verification by the Director, | ||||||
10 | the Department of Revenue, or appropriate staff, as well as | ||||||
11 | other appropriate State agencies. In the event the Director | ||||||
12 | determines an applicant has submitted an annual report | ||||||
13 | containing erroneous information or data not supported by | ||||||
14 | records established and maintained under this Act, the | ||||||
15 | Director may, after providing notice, require the applicant to | ||||||
16 | resubmit corrected reports. | ||||||
17 | Section 20. Powers. The Board shall adopt rules for the | ||||||
18 | administration of this Act. The Board may enter into an | ||||||
19 | intergovernmental agreement with the Department of Commerce | ||||||
20 | and Economic Opportunity, the Department of Revenue, or both, | ||||||
21 | for the administration of this Act. Such intergovernmental | ||||||
22 | agreement may allow for the distribution of all or a portion of | ||||||
23 | the issuance fee to the Department of Commerce and Economic | ||||||
24 | Opportunity or the Department of Revenue, as applicable. |
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1 | Section 50. The Illinois Income Tax Act is amended by | ||||||
2 | adding Section 232 as follows: | ||||||
3 | (35 ILCS 5/232 new) | ||||||
4 | Sec. 232. Revitalizing Downtowns Tax Credit. For tax years | ||||||
5 | beginning on or after January 1, 2023 and ending on or before | ||||||
6 | December 31, 2025, a taxpayer who qualifies for a credit under | ||||||
7 | the Revitalizing Downtowns Credit Act is entitled to a credit | ||||||
8 | against the taxes imposed under subsections (a) and (b) of | ||||||
9 | Section 201 of this Act as provided in that Act. If the | ||||||
10 | taxpayer is a partnership or Subchapter S corporation, the | ||||||
11 | credit shall be allowed to the partners or shareholders in | ||||||
12 | accordance with the determination of income and distributive | ||||||
13 | share of income under Sections 702 and 704 and Subchapter S of | ||||||
14 | the Internal Revenue Code. If the amount of any tax credit | ||||||
15 | awarded under this Section exceeds the qualified taxpayer's | ||||||
16 | income tax liability for the year in which the qualified | ||||||
17 | rehabilitation plan was placed in service, the excess amount | ||||||
18 | may be carried forward as provided in the Revitalizing | ||||||
19 | Downtowns Tax Credit Act.
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20 | Section 99. Effective date. This Act takes effect upon | ||||||
21 | becoming law.
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