96TH GENERAL ASSEMBLY
State of Illinois
2009 and 2010
HB3763

 

Introduced 2/25/2009, by Rep. Mark L. Walker

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 105/3-50   from Ch. 120, par. 439.3-50
35 ILCS 120/2-45   from Ch. 120, par. 441-45

    Amends the Use Tax Act and the Retailers' Occupation Tax Act. Provides that the manufacturing and assembling machinery and equipment exemption also includes production related tangible personal property purchased on or after July 1, 2007 (instead of on or after July 1, 2007 and on or before June 30, 2008). Effective immediately.


LRB096 09548 RCE 19708 b

FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB3763 LRB096 09548 RCE 19708 b

1     AN ACT concerning revenue.
 
2     Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
 
4     Section 5. The Use Tax Act is amended by changing Section
5 3-50 as follows:
 
6     (35 ILCS 105/3-50)  (from Ch. 120, par. 439.3-50)
7     Sec. 3-50. Manufacturing and assembly exemption. The
8 manufacturing and assembling machinery and equipment exemption
9 includes machinery and equipment that replaces machinery and
10 equipment in an existing manufacturing facility as well as
11 machinery and equipment that are for use in an expanded or new
12 manufacturing facility. The machinery and equipment exemption
13 also includes machinery and equipment used in the general
14 maintenance or repair of exempt machinery and equipment or for
15 in-house manufacture of exempt machinery and equipment. For the
16 purposes of this exemption, terms have the following meanings:
17         (1) "Manufacturing process" means the production of an
18     article of tangible personal property, whether the article
19     is a finished product or an article for use in the process
20     of manufacturing or assembling a different article of
21     tangible personal property, by a procedure commonly
22     regarded as manufacturing, processing, fabricating, or
23     refining that changes some existing material into a

 

 

HB3763 - 2 - LRB096 09548 RCE 19708 b

1     material with a different form, use, or name. In relation
2     to a recognized integrated business composed of a series of
3     operations that collectively constitute manufacturing, or
4     individually constitute manufacturing operations, the
5     manufacturing process commences with the first operation
6     or stage of production in the series and does not end until
7     the completion of the final product in the last operation
8     or stage of production in the series. For purposes of this
9     exemption, photoprocessing is a manufacturing process of
10     tangible personal property for wholesale or retail sale.
11         (2) "Assembling process" means the production of an
12     article of tangible personal property, whether the article
13     is a finished product or an article for use in the process
14     of manufacturing or assembling a different article of
15     tangible personal property, by the combination of existing
16     materials in a manner commonly regarded as assembling that
17     results in an article or material of a different form, use,
18     or name.
19         (3) "Machinery" means major mechanical machines or
20     major components of those machines contributing to a
21     manufacturing or assembling process.
22         (4) "Equipment" includes an independent device or tool
23     separate from machinery but essential to an integrated
24     manufacturing or assembly process; including computers
25     used primarily in a manufacturer's computer assisted
26     design, computer assisted manufacturing (CAD/CAM) system;

 

 

HB3763 - 3 - LRB096 09548 RCE 19708 b

1     any subunit or assembly comprising a component of any
2     machinery or auxiliary, adjunct, or attachment parts of
3     machinery, such as tools, dies, jigs, fixtures, patterns,
4     and molds; and any parts that require periodic replacement
5     in the course of normal operation; but does not include
6     hand tools. Equipment includes chemicals or chemicals
7     acting as catalysts but only if the chemicals or chemicals
8     acting as catalysts effect a direct and immediate change
9     upon a product being manufactured or assembled for
10     wholesale or retail sale or lease.
11         (5) "Production related tangible personal property"
12     means all tangible personal property that is used or
13     consumed by the purchaser in a manufacturing facility in
14     which a manufacturing process takes place and includes,
15     without limitation, tangible personal property that is
16     purchased for incorporation into real estate within a
17     manufacturing facility and tangible personal property that
18     is used or consumed in activities such as research and
19     development, preproduction material handling, receiving,
20     quality control, inventory control, storage, staging, and
21     packaging for shipping and transportation purposes.
22     "Production related tangible personal property" does not
23     include (i) tangible personal property that is used, within
24     or without a manufacturing facility, in sales, purchasing,
25     accounting, fiscal management, marketing, personnel
26     recruitment or selection, or landscaping or (ii) tangible

 

 

HB3763 - 4 - LRB096 09548 RCE 19708 b

1     personal property that is required to be titled or
2     registered with a department, agency, or unit of federal,
3     State, or local government.
4     The manufacturing and assembling machinery and equipment
5 exemption includes production related tangible personal
6 property that is purchased on or after July 1, 2007 and on or
7 before June 30, 2008. The exemption for production related
8 tangible personal property is subject to both of the following
9 limitations:
10         (1) The maximum amount of the exemption for any one
11     taxpayer may not exceed 5% of the purchase price of
12     production related tangible personal property that is
13     purchased on or after July 1, 2007 and on or before June
14     30, 2008. A credit under Section 3-85 of this Act may not
15     be earned by the purchase of production related tangible
16     personal property for which an exemption is received under
17     this Section.
18         (2) The maximum aggregate amount of the exemptions for
19     production related tangible personal property awarded
20     under this Act and the Retailers' Occupation Tax Act to all
21     taxpayers may not exceed $10,000,000. If the claims for the
22     exemption exceed $10,000,000, then the Department shall
23     reduce the amount of the exemption to each taxpayer on a
24     pro rata basis.
25 The Department may adopt rules to implement and administer the
26 exemption for production related tangible personal property.

 

 

HB3763 - 5 - LRB096 09548 RCE 19708 b

1     The manufacturing and assembling machinery and equipment
2 exemption includes the sale of materials to a purchaser who
3 produces exempted types of machinery, equipment, or tools and
4 who rents or leases that machinery, equipment, or tools to a
5 manufacturer of tangible personal property. This exemption
6 also includes the sale of materials to a purchaser who
7 manufactures those materials into an exempted type of
8 machinery, equipment, or tools that the purchaser uses himself
9 or herself in the manufacturing of tangible personal property.
10 This exemption includes the sale of exempted types of machinery
11 or equipment to a purchaser who is not the manufacturer, but
12 who rents or leases the use of the property to a manufacturer.
13 The purchaser of the machinery and equipment who has an active
14 resale registration number shall furnish that number to the
15 seller at the time of purchase. A user of the machinery,
16 equipment, or tools without an active resale registration
17 number shall prepare a certificate of exemption for each
18 transaction stating facts establishing the exemption for that
19 transaction, and that certificate shall be available to the
20 Department for inspection or audit. The Department shall
21 prescribe the form of the certificate. Informal rulings,
22 opinions, or letters issued by the Department in response to an
23 inquiry or request for an opinion from any person regarding the
24 coverage and applicability of this exemption to specific
25 devices shall be published, maintained as a public record, and
26 made available for public inspection and copying. If the

 

 

HB3763 - 6 - LRB096 09548 RCE 19708 b

1 informal ruling, opinion, or letter contains trade secrets or
2 other confidential information, where possible, the Department
3 shall delete that information before publication. Whenever
4 informal rulings, opinions, or letters contain a policy of
5 general applicability, the Department shall formulate and
6 adopt that policy as a rule in accordance with the Illinois
7 Administrative Procedure Act.
8 (Source: P.A. 95-707, eff. 1-11-08.)
 
9     Section 10. The Retailers' Occupation Tax Act is amended by
10 changing Section 2-45 as follows:
 
11     (35 ILCS 120/2-45)  (from Ch. 120, par. 441-45)
12     Sec. 2-45. Manufacturing and assembly exemption. The
13 manufacturing and assembly machinery and equipment exemption
14 includes machinery and equipment that replaces machinery and
15 equipment in an existing manufacturing facility as well as
16 machinery and equipment that are for use in an expanded or new
17 manufacturing facility.
18     The machinery and equipment exemption also includes
19 machinery and equipment used in the general maintenance or
20 repair of exempt machinery and equipment or for in-house
21 manufacture of exempt machinery and equipment. For the purposes
22 of this exemption, terms have the following meanings:
23         (1) "Manufacturing process" means the production of an
24     article of tangible personal property, whether the article

 

 

HB3763 - 7 - LRB096 09548 RCE 19708 b

1     is a finished product or an article for use in the process
2     of manufacturing or assembling a different article of
3     tangible personal property, by a procedure commonly
4     regarded as manufacturing, processing, fabricating, or
5     refining that changes some existing material or materials
6     into a material with a different form, use, or name. In
7     relation to a recognized integrated business composed of a
8     series of operations that collectively constitute
9     manufacturing, or individually constitute manufacturing
10     operations, the manufacturing process commences with the
11     first operation or stage of production in the series and
12     does not end until the completion of the final product in
13     the last operation or stage of production in the series.
14     For purposes of this exemption, photoprocessing is a
15     manufacturing process of tangible personal property for
16     wholesale or retail sale.
17         (2) "Assembling process" means the production of an
18     article of tangible personal property, whether the article
19     is a finished product or an article for use in the process
20     of manufacturing or assembling a different article of
21     tangible personal property, by the combination of existing
22     materials in a manner commonly regarded as assembling that
23     results in a material of a different form, use, or name.
24         (3) "Machinery" means major mechanical machines or
25     major components of those machines contributing to a
26     manufacturing or assembling process.

 

 

HB3763 - 8 - LRB096 09548 RCE 19708 b

1         (4) "Equipment" includes an independent device or tool
2     separate from machinery but essential to an integrated
3     manufacturing or assembly process; including computers
4     used primarily in a manufacturer's computer assisted
5     design, computer assisted manufacturing (CAD/CAM) system;
6     any subunit or assembly comprising a component of any
7     machinery or auxiliary, adjunct, or attachment parts of
8     machinery, such as tools, dies, jigs, fixtures, patterns,
9     and molds; and any parts that require periodic replacement
10     in the course of normal operation; but does not include
11     hand tools. Equipment includes chemicals or chemicals
12     acting as catalysts but only if the chemicals or chemicals
13     acting as catalysts effect a direct and immediate change
14     upon a product being manufactured or assembled for
15     wholesale or retail sale or lease.
16         (5) "Production related tangible personal property"
17     means all tangible personal property that is used or
18     consumed by the purchaser in a manufacturing facility in
19     which a manufacturing process takes place and includes,
20     without limitation, tangible personal property that is
21     purchased for incorporation into real estate within a
22     manufacturing facility and tangible personal property that
23     is used or consumed in activities such as research and
24     development, preproduction material handling, receiving,
25     quality control, inventory control, storage, staging, and
26     packaging for shipping and transportation purposes.

 

 

HB3763 - 9 - LRB096 09548 RCE 19708 b

1     "Production related tangible personal property" does not
2     include (i) tangible personal property that is used, within
3     or without a manufacturing facility, in sales, purchasing,
4     accounting, fiscal management, marketing, personnel
5     recruitment or selection, or landscaping or (ii) tangible
6     personal property that is required to be titled or
7     registered with a department, agency, or unit of federal,
8     State, or local government.
9     The manufacturing and assembling machinery and equipment
10 exemption includes production related tangible personal
11 property that is purchased on or after July 1, 2007 and on or
12 before June 30, 2008. The exemption for production related
13 tangible personal property is subject to both of the following
14 limitations:
15         (1) The maximum amount of the exemption for any one
16     taxpayer may not exceed 5% of the purchase price of
17     production related tangible personal property that is
18     purchased on or after July 1, 2007 and on or before June
19     30, 2008. A credit under Section 3-85 of this Act may not
20     be earned by the purchase of production related tangible
21     personal property for which an exemption is received under
22     this Section.
23         (2) The maximum aggregate amount of the exemptions for
24     production related tangible personal property awarded
25     under this Act and the Use Retailers' Occupation Tax Act to
26     all taxpayers may not exceed $10,000,000. If the claims for

 

 

HB3763 - 10 - LRB096 09548 RCE 19708 b

1     the exemption exceed $10,000,000, then the Department
2     shall reduce the amount of the exemption to each taxpayer
3     on a pro rata basis.
4 The Department may adopt rules to implement and administer the
5 exemption for production related tangible personal property.
6     The manufacturing and assembling machinery and equipment
7 exemption includes the sale of materials to a purchaser who
8 produces exempted types of machinery, equipment, or tools and
9 who rents or leases that machinery, equipment, or tools to a
10 manufacturer of tangible personal property. This exemption
11 also includes the sale of materials to a purchaser who
12 manufactures those materials into an exempted type of
13 machinery, equipment, or tools that the purchaser uses himself
14 or herself in the manufacturing of tangible personal property.
15 The purchaser of the machinery and equipment who has an active
16 resale registration number shall furnish that number to the
17 seller at the time of purchase. A purchaser of the machinery,
18 equipment, and tools without an active resale registration
19 number shall furnish to the seller a certificate of exemption
20 for each transaction stating facts establishing the exemption
21 for that transaction, and that certificate shall be available
22 to the Department for inspection or audit. Informal rulings,
23 opinions, or letters issued by the Department in response to an
24 inquiry or request for an opinion from any person regarding the
25 coverage and applicability of this exemption to specific
26 devices shall be published, maintained as a public record, and

 

 

HB3763 - 11 - LRB096 09548 RCE 19708 b

1 made available for public inspection and copying. If the
2 informal ruling, opinion, or letter contains trade secrets or
3 other confidential information, where possible, the Department
4 shall delete that information before publication. Whenever
5 informal rulings, opinions, or letters contain a policy of
6 general applicability, the Department shall formulate and
7 adopt that policy as a rule in accordance with the Illinois
8 Administrative Procedure Act.
9 (Source: P.A. 95-707, eff. 1-11-08; revised 10-23-08.)
 
10     Section 99. Effective date. This Act takes effect upon
11 becoming law.