SB3233 103RD GENERAL ASSEMBLY

LRB103 38198 HLH 68331 b

103RD GENERAL ASSEMBLY
State of Illinois
2023 and 2024
SB3233

Introduced 2/6/2024, by Sen. Robert Peters

SYNOPSIS AS INTRODUCED:

New Act
35 ILCS 5/241 new
215 ILCS 5/409	from Ch. 73, par. 1021
215 ILCS 5/444	from Ch. 73, par. 1056

Creates the Build Illinois Homes Tax Credit Act. Provides that owners of qualified low-income housing developments are eligible for credits against the taxes imposed by the Illinois Income Tax Act or taxes, penalties, fees, charges, and payments imposed by the Illinois Insurance Code. Amends the Illinois Income Tax Act and the Illinois Insurance Code to make conforming changes. Effective immediately.

A BILL FOR

AN ACT concerning revenue.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 1. Short title. This Act may be cited as the Build Illinois Homes Tax Credit Act.

Section 5. Definitions. As used in this Act, unless the context clearly requires otherwise:

"Allocation schedule certification" means a certification issued by the owner of a qualified development, or by the owner's designee, under subsection (d) of Section 15 of this Act. The certification shall include the following:

(1) the building identification number for each building included in the qualified development;

(2) the calendar year in which the last building of the qualified development was placed in service;

(3) the amount of the credit allowed for each year of the credit period;

(4) the amount of credit allocated to each qualified taxpayer for the qualified development for the applicable tax year; and

(5) confirmation of whether each qualified taxpayer elects to apply the credit to income tax or insurance premium tax.

"Authority" means:

(1) the Illinois Housing Development Authority; or

(2) the City of Chicago Department of Housing.

"Building identification number" means the number assigned to a building within the qualified development by an Authority when allocating the federal tax credit.

"Credit" means the credit allowed under this Act.

"Credit period" means a period of 6 taxable years beginning with the taxable year in which a qualified development is placed in service. No credit period may include a taxable year beginning prior to January 1, 2025. If a qualified development consists of more than one building, then the qualified development is deemed to be placed in service in the taxable year in which the last building of the qualified development is placed in service.

"Department" means the Department of Revenue.

"Federal tax credit" means the federal low-income housing tax credit provided by Section 42 of the federal Internal Revenue Code, including federal low-income housing tax credits issued under 26 U.S.C. 42(h)(3) and 26 U.S.C. 42(h)(4).

"Qualified basis" means the qualified basis of the qualified development as determined under Section 42 of the federal Internal Revenue Code of 1986.

"Qualified development" means a qualified low-income housing project, as that term is defined in Section 42 of the federal Internal Revenue Code of 1986, that is located in the State and is determined to be eligible for the federal tax credit set forth in Section 42 of the Internal Revenue Code.

"Qualified taxpayer" means an individual, person, firm, corporation, or other entity that owns a direct or indirect interest in a qualified development and that is subject to the taxes imposed by subsections (a) and (b) of Section 201 of the Illinois Income Tax Act or any privilege tax or retaliatory tax, penalty, fee, charge, or payment imposed by the Illinois Insurance Code.

"Reservation letter" means a reservation letter issued by the Illinois Housing Development Authority or a reservation agreement issued by the City of Chicago Department of Housing.

"State credit eligibility statement" means a statement issued by an Authority under Section 10 or documents submitted in satisfaction of a statement as allowed under Section 10.

"State tax return" means the income tax return filed with the Department or the privilege and retaliatory tax return filed with the Department of Insurance, as applicable.

Section 10. State credit eligibility statements. Following construction or rehabilitation of the qualified development, the applicable Authority shall issue a State credit eligibility statement with respect to each building located in the qualified development certifying that the building qualifies for the credit under this Act and specifying:

(1) the calendar year in which the last building of the qualified development was placed in service;

(2) the amount of the credit allowed for each year of the credit period;

(3) the maximum qualified basis of the qualified development taken into account in determining such annual credit amount;

(4) a building identification number; and

(5) that the qualified development is eligible for and has applied to receive a federal tax credit.

The State credit eligibility statement shall be issued by an Authority simultaneously with IRS Form 8609. An Authority may issue, and the Department and Department of Insurance may accept, an IRS Form 8609, including any additional statements attached to the IRS Form 8609, and the reservation letter issued by the Authority for the qualified development in satisfaction of both federal requirements and the requirements set forth in this Section.

The State credit eligibility statement shall include a section to be completed by the owner of the qualified development annually for each year of the credit period certifying that the qualified development conforms with all compliance requirements, including all federal compliance requirements for the federal tax credit. The State credit eligibility statement shall be filed with the project owner's State tax return annually for each year of the credit period.

Section 15. Credit for low-income housing developments.

(a) For taxable years beginning on or after January 1, 2025, an Authority may award a credit to the owner of a qualified development simultaneously with the federal tax credit in an amount determined by the Authority, subject to the following guidelines:

(1) the Authority must find that the credit is necessary for the financial feasibility of the qualified development;

(2) the aggregate amount of credits awarded to qualified developments for each calendar year shall not exceed $20,000,000, plus the amount of unallocated credits, if any, from the preceding calendar year, plus the amount of any credit recaptured or otherwise returned to an Authority since the preceding calendar year;

(3) of the $20,000,000 annual allocation:

(A) 75.5% of the available credits for each calendar year shall be awarded by the Illinois Housing Development Authority, plus any credits the Illinois Housing Development Authority did not award from prior calendar years, plus the amount of any credits recaptured or otherwise returned to the Illinois Housing Development Authority from prior calendar years; and

(B) 24.5% of the available credits in each calendar year shall be awarded by the City of Chicago Department of Housing, plus any credits the City of Chicago Department of Housing did not award from prior calendar years, plus the amount of any credits recaptured or otherwise returned to the City of Chicago Department of Housing since the prior calendar year; and

(4) unless otherwise provided in this Act, or unless the context clearly requires otherwise, an Authority must determine eligibility for credits and award credits in accordance with the standards and requirements set forth in Section 42 of the federal Internal Revenue Code of 1986 and, to the extent possible, use the same forms that are used in administering the credit under Section 42 of the federal Internal Revenue Code of 1986.

(b) For tax years during the credit period, any qualified taxpayer is allowed a credit, as provided in this Act, against either of the following: (i) the taxes imposed by subsections (a) and (b) of Section 201 of the Illinois Income Tax Act; or (ii) any privilege tax or retaliatory tax, penalty, fee, charge, or payment imposed under the Illinois Insurance Code.

(c) A qualified taxpayer may claim a credit under this Act so long as the taxpayer's direct or indirect interest in the qualified development is acquired prior to the filing of its tax return claiming the credit. On or before March 31 following each year of the credit period, the owner must submit to the Department, the Department of Insurance, and the applicable Authority an allocation schedule certification, in an electronic format prescribed by the Department, the Department of Insurance, and the Authority, respectively, detailing the amount of the credit allocated to the qualified taxpayer for the applicable year and stating whether the qualified taxpayer has elected to claim the credit against the taxpayer's State income tax or insurance privilege tax or retaliatory tax liability. The taxpayer may assign to a designee the duty of preparing and submitting the allocation schedule certification. In that case, the designee must provide the allocation schedule certification to the Department, the Department of Insurance, and the applicable Authority on or before the deadline for submission. The qualified taxpayer must notify the Department, the Department of Insurance, and the applicable Authority if it assigns that duty to its designee.

The allocation schedule certification submitted under this Section may be amended if the State credit eligibility statement for a project is received after the deadline for filing the allocation schedule certification. Any amendment to an allocation schedule certification shall be filed before the taxpayer attempts to claim tax credits associated with the applicable State credit eligibility statement. Each qualified taxpayer is allowed to claim its awarded amount of credit subject to any restrictions set forth in this Section. If the credit is to be taken against the income tax and the qualified taxpayer is a pass-through entity, then the provisions of Section 251 of the Illinois Income Tax Act apply.

(d) No credit may be awarded under this Act unless the qualified development is the subject of a recorded restrictive covenant requiring the development to be maintained and operated as a qualified development; this requirement for a recorded restrictive covenant may be satisfied by the agreement for an extended low-income housing commitment required for the federal tax credits as defined in Section 42(h)(6)(B) of the federal Internal Revenue Code of 1986.

(e) If, during a taxable year, there is a determination that no recorded restrictive covenant meeting the requirements of subsection (d) was in effect as of the beginning of that year, the determination shall not apply to any period before that year and subsection (e) shall be applied without regard to that determination if the failure is corrected within one year after the date of the determination.

(f) The tax credit under this Act may not reduce the taxpayer's liability to less than zero. If the amount of the tax credit exceeds the tax liability for the year, the excess may be carried forward and applied to the tax liability of the 5 taxable years following the excess credit year. The credit must be applied to the earliest year for which there is a tax liability. If there are credits from more than one tax year that are available to offset a liability, then the earlier credit must be applied first. Credits that are initially claimed against taxes imposed by the Illinois Income Tax Act may be carried forward only against the taxpayer's future Illinois Income Tax liability. Credits that are initially claimed against taxes, penalties, fees, charges, and payments imposed by the Illinois Insurance Code may be carried forward only against taxes, penalties, fees, charges, and payments imposed by the Illinois Insurance Code. Credits that are not claimed or carried forward may not be refunded to the taxpayer. The qualified taxpayer is solely responsible for correctly filing tax returns, and an Authority is not responsible for monitoring the calculation of taxes under this Section.

(g) By March 31, 2025 and by March 31 of each year thereafter, each Authority shall provide to the Department and the Department of Insurance an electronic file containing all data related to all State credit eligibility statements issued during the preceding year in the manner and form as provided by each respective Department.

(h) Each Authority is entitled to a reservation fee of 1% of the credit awarded under this Section for each year of the award to support the cost of compliance monitoring. An Authority may exercise the option to impose a compliance fee or a penalty in the exercise of its compliance monitoring function under this Act.

Section 20. Recapture. If, under Section 42 of the Internal Revenue Code, a portion of any federal tax credit claimed with respect to a qualified development for which a credit has been awarded under this Act is required by the Internal Revenue Service to be recaptured during the first 6 years after a project is placed in service, then, within 60 days after becoming aware of the federal tax credit recapture, the project owner shall provide the Department, the Department of Insurance, and the applicable Authority with notice of the federal tax credit recapture. Notice shall be provided in the manner and form as provided by the Department, the Department of Insurance, and the Authority, respectively. If an Authority issues a federal Form 8823 to the owner of a qualified development that has been awarded a credit under this Act, and an Authority has not been notified within 6 months of filing the Form 8823 that the noncompliance has been remedied, an Authority shall submit the Form 8823 to the Department or Department of Insurance, as applicable. The amount of credit subject to recapture shall be proportionately equal to the amount of the qualified development's federal tax credits that are subject to recapture. If the project owner (or one of the project owner's direct or indirect members) fails to notify the Department or the Department of Insurance, as applicable, of any recapture of the federal tax credit, then the entire amount of the State tax credit awarded for the qualified development is subject to recapture. The qualified taxpayer subject to recapture shall increase the qualified taxpayer's tax by the amount of any credit subject to recapture in the tax year the qualified taxpayer is notified of the recapture. If multiple taxpayers claimed credit with respect to the building for which credit is to be recaptured, each of those taxpayers shall be liable for a portion of the recapture equal to the percentages of credit with respect to the building originally claimed by the taxpayer.

Section 25. Filing requirements. An owner of a qualified development that has been awarded a credit and each qualified taxpayer claiming any portion of the credit must file with their State tax returns a copy of the State credit eligibility statement issued by an Authority for that qualified development. In addition, the owner of a qualified development or its designee shall file a copy of the allocation schedule certification prior to any tax return being filed claiming a State credit for such qualified development. A qualified taxpayer receiving any allocated portion of a credit through a pass-through entity shall attach to its State tax return a copy of the Schedule K-1-P for that taxable year.

Section 30. Compliance monitoring. An Authority, in consultation with the Department and Department of Insurance, shall monitor and oversee compliance with the provisions of this Act and shall report specific occurrences of noncompliance to the Department and the Department of Insurance in the manner and form as provided by the Department and the Department of Insurance. An Authority shall make every effort to monitor and report noncompliance using the same procedures used for compliance monitoring of the federal tax credits.

Section 35. Report to the General Assembly.

(a) Each Authority must, by March 31, 2026 and by March 31 of each year thereafter, provide a written report to the General Assembly and must publish that report on its website.

(b) The report shall:

(1) set forth the number of qualified developments that have been awarded tax credits under this Act during the calendar year and the total number of units supported by each qualified development;

(2) describe each qualified development that has been awarded tax credits under this Act, including, without limitation, the geographic location of the qualified development, the household type, the income levels intended to be served by the qualified development, and the rents or set-asides authorized for each qualified development;

(3) provide housing market information that demonstrates how the qualified developments supported by the tax credits are addressing the need for affordable housing within the communities they are intended to serve as well as information about any remaining disparities in the affordability of housing within those communities; and

(4) provide information about the percentage of qualified developments that were awarded credits and that received incentive scoring points as a result of the general contractor, property manager, architect, or sponsor being certified under the Business Enterprise Program for Minorities, Females, and Persons with a Disability.

Section 40. Exempt from automatic sunset. The credit under this Act is exempt from the provisions of Section 250 of the Illinois Income Tax Act.

Section 900. The Illinois Income Tax Act is amended by adding Section 241 as follows:

(35 ILCS 5/241 new)

Sec. 241. Build Illinois Homes Tax Credit Act.

(a) For taxable years beginning on or after January 1, 2025, any eligible taxpayer with respect to a credit awarded in accordance with the Build Illinois Homes Tax Credit Act that is named on an allocation schedule certification for a particular tax year is entitled to a credit against the taxes imposed by subsections (a) and (b) of Section 201 as provided in the Build Illinois Homes Tax Credit Act.

(b) The taxpayer shall attach a copy of the allocation schedule certification and the State credit eligibility certificate issued under the Build Illinois Homes Tax Credit Act to the tax return on which the credits are to be claimed.

(c) If, during any taxable year, a taxpayer is notified of a recapture of a credit previously claimed on a State income tax return in accordance with 42 U.S.C. 42, the tax imposed under subsections (a) and (b) of Section 201 for that taxpayer for that taxable year shall be increased. The amount of the increase shall be determined by (i) recomputing the Build Illinois Homes Tax Credit that would have been allowed for the year in which the credit was originally allowed by eliminating the recaptured amount from such computation, and (ii) subtracting that recomputed credit from the amount of credit previously allowed. No Build Illinois Homes Tax Credit shall be allowed with respect to any credit subject to a recapture notice for any taxable year ending after the issuance of a recapture notice.

(d) This Section is exempt from the provisions of Section 250.

Section 905. The Illinois Insurance Code is amended by changing Sections 409 and 444 as follows:

(215 ILCS 5/409) (from Ch. 73, par. 1021)

Sec. 409. Annual privilege tax payable by companies.

(1) As of January 1, 1999 for all health maintenance organization premiums written; as of July 1, 1998 for all premiums written as accident and health business, voluntary health service plan business, dental service plan business, or limited health service organization business; and as of January 1, 1998 for all other types of insurance premiums written, every company doing any form of insurance business in this State, including, but not limited to, every risk retention group, and excluding all fraternal benefit societies, all farm mutual companies, all religious charitable risk pooling trusts, and excluding all statutory residual market and special purpose entities in which companies are statutorily required to participate, whether incorporated or otherwise, shall pay, for the privilege of doing business in this State, to the Director for the State treasury a State tax equal to 0.5% of the net taxable premium written, together with any amounts due under Section 444 of this Code, except that the tax to be paid on any premium derived from any accident and health insurance or on any insurance business written by any company operating as a health maintenance organization, voluntary health service plan, dental service plan, or limited health service organization shall be equal to 0.4% of such net taxable premium written, together with any amounts due under Section 444. Upon the failure of any company to pay any such tax due, the Director may, by order, revoke or suspend the company's certificate of authority after giving 20 days written notice to the company, or commence proceedings for the suspension of business in this State under the procedures set forth by Section 401.1 of this Code. The gross taxable premium written shall be the gross amount of premiums received on direct business during the calendar year on contracts covering risks in this State, except premiums on annuities, premiums on which State premium taxes are prohibited by federal law, premiums paid by the State for health care coverage for Medicaid eligible insureds as described in Section 5-2 of the Illinois Public Aid Code, premiums paid for health care services included as an element of tuition charges at any university or college owned and operated by the State of Illinois, premiums on group insurance contracts under the State Employees Group Insurance Act of 1971, and except premiums for deferred compensation plans for employees of the State, units of local government, or school districts. The net taxable premium shall be the gross taxable premium written reduced only by the following:

(a) the amount of premiums returned thereon which shall be limited to premiums returned during the same preceding calendar year and shall not include the return of cash surrender values or death benefits on life policies including annuities;

(b) dividends on such direct business that have been paid in cash, applied in reduction of premiums or left to accumulate to the credit of policyholders or annuitants. In the case of life insurance, no deduction shall be made for the payment of deferred dividends paid in cash to policyholders on maturing policies; dividends left to accumulate to the credit of policyholders or annuitants shall be included as gross taxable premium written when such dividend accumulations are applied to purchase paid-up insurance or to shorten the endowment or premium paying period.

(2) The annual privilege tax payment due from a company under subsection (4) of this Section may be reduced by: (a) the excess amount, if any, by which the aggregate income taxes paid by the company, on a cash basis, for the preceding calendar year under Sections 601 and 803 of the Illinois Income Tax Act exceed 1.5% of the company's net taxable premium written for that prior calendar year, as determined under subsection (1) of this Section; and (b) the amount of any fire department taxes paid by the company during the preceding calendar year under Section 11-10-1 of the Illinois Municipal Code. Any deductible amount or offset allowed under items (a) and (b) of this subsection for any calendar year will not be allowed as a deduction or offset against the company's privilege tax liability for any other taxing period or calendar year.

(3) If a company survives or was formed by a merger, consolidation, reorganization, or reincorporation, the premiums received and amounts returned or paid by all companies party to the merger, consolidation, reorganization, or reincorporation shall, for purposes of determining the amount of the tax imposed by this Section, be regarded as received, returned, or paid by the surviving or new company.

(4)(a) All companies subject to the provisions of this Section shall make an annual return for the preceding calendar year on or before March 15 setting forth such information on such forms as the Director may reasonably require. Payments of quarterly installments of the taxpayer's total estimated tax for the current calendar year shall be due on or before April 15, June 15, September 15, and December 15 of such year, except that all companies transacting insurance in this State whose annual tax for the immediately preceding calendar year was less than $5,000 shall make only an annual return. Failure of a company to make the annual payment, or to make the quarterly payments, if required, of at least 25% of either (i) the total tax paid during the previous calendar year or (ii) 80% of the actual tax for the current calendar year shall subject it to the penalty provisions set forth in Section 412 of this Code.

(b) Notwithstanding the foregoing provisions, no annual return shall be required or made on March 15, 1998, under this subsection. For the calendar year 1998:

(i) each health maintenance organization shall have no estimated tax installments;

(ii) all companies subject to the tax as of July 1, 1998 as set forth in subsection (1) shall have estimated tax installments due on September 15 and December 15 of 1998 which installments shall each amount to no less than one-half of 80% of the actual tax on its net taxable premium written during the period July 1, 1998, through December 31, 1998; and

(iii) all other companies shall have estimated tax installments due on June 15, September 15, and December 15 of 1998 which installments shall each amount to no less than one-third of 80% of the actual tax on its net taxable premium written during the calendar year 1998.

In the year 1999 and thereafter all companies shall make annual and quarterly installments of their estimated tax as provided by paragraph (a) of this subsection.

(5) In addition to the authority specifically granted under Article XXV of this Code, the Director shall have such authority to adopt rules and establish forms as may be reasonably necessary for purposes of determining the allocation of Illinois corporate income taxes paid under subsections (a) through (d) of Section 201 of the Illinois Income Tax Act amongst members of a business group that files an Illinois corporate income tax return on a unitary basis, for purposes of regulating the amendment of tax returns, for purposes of defining terms, and for purposes of enforcing the provisions of Article XXV of this Code. The Director shall also have authority to defer, waive, or abate the tax imposed by this Section if in his opinion the company's solvency and ability to meet its insured obligations would be immediately threatened by payment of the tax due.

(6) This Section is subject to the provisions of Section 10 of the New Markets Development Program Act.

(7) This Section is subject to the provisions of the Build Illinois Homes Tax Credit Act.

(Source: P.A. 97-813, eff. 7-13-12; 98-1169, eff. 1-9-15.)

(215 ILCS 5/444) (from Ch. 73, par. 1056)

Sec. 444. Retaliation.

(1) Whenever the existing or future laws of any other state or country shall require of companies incorporated or organized under the laws of this State as a condition precedent to their doing business in such other state or country, compliance with laws, rules, regulations, and prohibitions more onerous or burdensome than the rules and regulations imposed by this State on foreign or alien companies, or shall require any deposit of securities or other obligations in such state or country, for the protection of policyholders or otherwise or require of such companies or agents thereof or brokers the payment of penalties, fees, charges, or taxes greater than the penalties, fees, charges, or taxes required in the aggregate for like purposes by this Code or any other law of this State, of foreign or alien companies, agents thereof or brokers, then such laws, rules, regulations, and prohibitions of said other state or country shall apply to companies incorporated or organized under the laws of such state or country doing business in this State, and all such companies, agents thereof, or brokers doing business in this State, shall be required to make deposits, pay penalties, fees, charges, and taxes, in amounts equal to those required in the aggregate for like purposes of Illinois companies doing business in such state or country, agents thereof or brokers. Whenever any other state or country shall refuse to permit any insurance company incorporated or organized under the laws of this State to transact business according to its usual plan in such other state or country, the director may, if satisfied that such company of this State is solvent, properly managed, and can operate legally under the laws of such other state or country, forthwith suspend or cancel the license of every insurance company doing business in this State which is incorporated or organized under the laws of such other state or country to the extent that it insures in this State against any of the risks or hazards which are sought to be insured against by the company of this State in such other state or country.

(2) The provisions of this Section shall not apply to residual market or special purpose assessments or guaranty fund or guaranty association assessments, both under the laws of this State and under the laws of any other state or country, and any tax offset or credit for any such assessment shall, for purposes of this Section, be treated as a tax paid both under the laws of this State and under the laws of any other state or country.

(3) The terms "penalties", "fees", "charges", and "taxes" in subsection (1) of this Section shall include: the penalties, fees, charges, and taxes collected on a cash basis under State law and referenced within Article XXV exclusive of any items referenced by subsection (2) of this Section, but including any tax offset allowed under Section 531.13 of this Code; the aggregate Illinois corporate income taxes paid under Sections 601 and 803 of the Illinois Income Tax Act during the calendar year for which the retaliatory tax calculation is being made, less the recapture of any Illinois corporate income tax cash refunds to the extent that the amount of tax refunded was reported as part of the Illinois basis in the calculation of the retaliatory tax for a prior tax year, provided that such recaptured refund shall not exceed the amount necessary for equivalence of the Illinois basis with the state of incorporation basis in such tax year, and after any tax offset allowed under Section 531.13 of this Code; income or personal property taxes imposed by other states or countries; penalties, fees, charges, and taxes of other states or countries imposed for purposes like those of the penalties, fees, charges, and taxes specified in Article XXV of this Code exclusive of any item referenced in subsection (2) of this Section; and any penalties, fees, charges, and taxes required as a franchise, privilege, or licensing tax for conducting the business of insurance whether calculated as a percentage of income, gross receipts, premium, or otherwise.

(4) Nothing contained in this Section or Section 409 or Section 444.1 is intended to authorize or expand any power of local governmental units or municipalities to impose taxes, fees, or charges.

(5) This Section is subject to the provisions of Section 10 of the New Markets Development Program Act.

(6) This Section is subject to the provisions of the Build Illinois Homes Tax Credit Act.

(Source: P.A. 98-1169, eff. 1-9-15.)

Section 999. Effective date. This Act takes effect upon becoming law.