97TH GENERAL ASSEMBLY
State of Illinois
2011 and 2012
HB5111

 

Introduced 2/8/2012, by Rep. Frank J. Mautino

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 25/10
35 ILCS 25/25

    Amends the Small Business Job Creation Tax Credit Act. Provides that an employee who is employed in the service of the applicant for a basic wage for at least 35 hours each week or who renders a standard of service to the applicant that is generally accepted as full-time employment is considered a full-time employee of the applicant regardless of whether a W-2 is issued for the employee by a professional employer organization. Requires the Department of Commerce and Economic Opportunity to make rules concerning applicants for which a professional employer organization has been contracted to issue W-2s and make payment of withholding taxes.


LRB097 16508 HLH 61676 b

FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB5111LRB097 16508 HLH 61676 b

1    AN ACT concerning revenue.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Small Business Job Creation Tax Credit Act
5is amended by changing Sections 10 and 25 as follows:
 
6    (35 ILCS 25/10)
7    (Text of Section before amendment by P.A. 97-636)
8    Sec. 10. Definitions. In this Act:
9    "Applicant" means a person that is operating a business
10located within the State of Illinois that is engaged in
11interstate or intrastate commerce and either:
12        (1) has no more than 50 full-time employees, without
13    regard to the location of employment of such employees at
14    the beginning of the incentive period; or
15        (2) hired within the incentive period an employee who
16    had participated as worker-trainee in the Put Illinois to
17    Work Program during 2010.
18    In the case of any person that is a member of a unitary
19business group within the meaning of subdivision (a)(27) of
20Section 1501 of the Illinois Income Tax Act, "applicant" refers
21to the unitary business group.
22    "Certificate" means the tax credit certificate issued by
23the Department under Section 35 of this Act.

 

 

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1    "Certificate of eligibility" means the certificate issued
2by the Department under Section 20 of this Act.
3    "Credit" means the amount awarded by the Department to an
4applicant by issuance of a certificate under Section 35 of this
5Act for each new full-time equivalent employee hired or job
6created.
7    "Department" means the Department of Commerce and Economic
8Opportunity.
9    "Director" means the Director of the Department.
10    "Full-time employee" means an individual who is employed
11for a basic wage for at least 35 hours each week or who renders
12any other standard of service generally accepted by industry
13custom or practice as full-time employment. An individual for
14whom a W-2 is issued by a Professional Employer Organization is
15a full-time employee if he or she is employed in the service of
16the applicant for a basic wage for at least 35 hours each week
17or renders any other standard of service generally accepted by
18industry custom or practice as full-time employment. For the
19purposes of this Act, such an individual shall be considered a
20full-time employee of the applicant.
21    "Professional Employer Organization" (PEO) shall have the
22same meaning as defined in Section 5-5 of the Economic
23Development for a Growing Economy Tax Credit Act.
24    "Incentive period" means the period beginning July 1, 2010
25and ending on June 30, 2011.
26    "Basic wage" means compensation for employment that is no

 

 

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1less than $10 per hour or the equivalent salary for a new
2employee.
3    "New employee" means a full-time employee:
4        (1) who first became employed by an applicant with less
5    than 50 full-time employees within the incentive period
6    whose hire results in a net increase in the applicant's
7    full-time Illinois employees and who is receiving a basic
8    wage as compensation; or
9        (2) who participated as a worker-trainee in the Put
10    Illinois to Work Program during 2010 and who is
11    subsequently hired during the incentive period by an
12    applicant and who is receiving a basic wage as
13    compensation.
14    The term "new employee" does not include:
15        (1) a person who was previously employed in Illinois by
16    the applicant or a related member prior to the onset of the
17    incentive period; or
18        (2) any individual who has a direct or indirect
19    ownership interest of at least 5% in the profits, capital,
20    or value of the applicant or a related member.
21    "Noncompliance date" means, in the case of an applicant
22that is not complying with the requirements of the provisions
23of this Act, the day following the last date upon which the
24taxpayer was in compliance with the requirements of the
25provisions of this Act, as determined by the Director, pursuant
26to Section 45 of this Act.

 

 

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1    "Put Illinois to Work Program" means a worker training and
2employment program that was established by the State of
3Illinois with funding from the United States Department of
4Health and Human Services of Emergency Temporary Assistance to
5Needy Families funds authorized by the American Recovery and
6Reinvestment Act of 2009 (ARRA TANF Funds). These ARRA TANF
7funds were in turn used by the State of Illinois to fund the
8Put Illinois to Work Program.
9    "Related member" means a person that, with respect to the
10applicant during any portion of the incentive period, is any
11one of the following,
12        (1) An individual, if the individual and the members of
13    the individual's family (as defined in Section 318 of the
14    Internal Revenue Code) own directly, indirectly,
15    beneficially, or constructively, in the aggregate, at
16    least 50% of the value of the outstanding profits, capital,
17    stock, or other ownership interest in the applicant.
18        (2) A partnership, estate, or trust and any partner or
19    beneficiary, if the partnership, estate, or trust and its
20    partners or beneficiaries own directly, indirectly,
21    beneficially, or constructively, in the aggregate, at
22    least 50% of the profits, capital, stock, or other
23    ownership interest in the applicant.
24        (3) A corporation, and any party related to the
25    corporation in a manner that would require an attribution
26    of stock from the corporation under the attribution rules

 

 

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1    of Section 318 of the Internal Revenue Code, if the
2    applicant and any other related member own, in the
3    aggregate, directly, indirectly, beneficially, or
4    constructively, at least 50% of the value of the
5    corporation's outstanding stock.
6        (4) A corporation and any party related to that
7    corporation in a manner that would require an attribution
8    of stock from the corporation to the party or from the
9    party to the corporation under the attribution rules of
10    Section 318 of the Internal Revenue Code, if the
11    corporation and all such related parties own, in the
12    aggregate, at least 50% of the profits, capital, stock, or
13    other ownership interest in the applicant.
14        (5) A person to or from whom there is attribution of
15    stock ownership in accordance with Section 1563(e) of the
16    Internal Revenue Code, except that for purposes of
17    determining whether a person is a related member under this
18    paragraph, "20%" shall be substituted for "5%" whenever
19    "5%" appears in Section 1563(e) of the Internal Revenue
20    Code.
21(Source: P.A. 96-888, eff. 4-13-10; 96-1498, eff. 1-18-11.)
 
22    (Text of Section after amendment by P.A. 97-636)
23    Sec. 10. Definitions. In this Act:
24    "Applicant" means a person that is operating a business
25located within the State of Illinois that is engaged in

 

 

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1interstate or intrastate commerce and either:
2        (1) has no more than 50 full-time employees, without
3    regard to the location of employment of such employees at
4    the beginning of the incentive period; or
5        (2) hired within the incentive period an employee who
6    had participated as worker-trainee in the Put Illinois to
7    Work Program during 2010.
8    In the case of any person that is a member of a unitary
9business group within the meaning of subdivision (a)(27) of
10Section 1501 of the Illinois Income Tax Act, "applicant" refers
11to the unitary business group.
12    "Certificate" means the tax credit certificate issued by
13the Department under Section 35 of this Act.
14    "Certificate of eligibility" means the certificate issued
15by the Department under Section 20 of this Act.
16    "Credit" means the amount awarded by the Department to an
17applicant by issuance of a certificate under Section 35 of this
18Act for each new full-time equivalent employee hired or job
19created.
20    "Department" means the Department of Commerce and Economic
21Opportunity.
22    "Director" means the Director of the Department.
23    "Full-time employee" means an individual who is employed
24for a basic wage for at least 35 hours each week or who renders
25any other standard of service generally accepted by industry
26custom or practice as full-time employment. An individual for

 

 

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1whom a W-2 is issued by a Professional Employer Organization is
2a full-time employee if he or she is employed in the service of
3the applicant for a basic wage for at least 35 hours each week
4or renders any other standard of service generally accepted by
5industry custom or practice as full-time employment. For the
6purposes of this Act, such an individual shall be considered a
7full-time employee of the applicant.
8    "Professional Employer Organization" (PEO) shall have the
9same meaning as defined in Section 5-5 of the Economic
10Development for a Growing Economy Tax Credit Act.
11    "Incentive period" means the period beginning on July 1 and
12ending on June 30 of the following year. The first incentive
13period shall begin on July 1, 2010 and the last incentive
14period shall end on June 30, 2016.
15    "Basic wage" means compensation for employment that is no
16less than $10 per hour or the equivalent salary for a new
17employee.
18    "New employee" means a full-time employee:
19        (1) who first became employed by an applicant with less
20    than 50 full-time employees within the incentive period
21    whose hire results in a net increase in the applicant's
22    full-time Illinois employees and who is receiving a basic
23    wage as compensation; or
24        (2) who participated as a worker-trainee in the Put
25    Illinois to Work Program during 2010 and who is
26    subsequently hired during the incentive period by an

 

 

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1    applicant and who is receiving a basic wage as
2    compensation.
3    The term "new employee" does not include:
4        (1) a person who was previously employed in Illinois by
5    the applicant or a related member prior to the onset of the
6    incentive period; or
7        (2) any individual who has a direct or indirect
8    ownership interest of at least 5% in the profits, capital,
9    or value of the applicant or a related member.
10    "Noncompliance date" means, in the case of an applicant
11that is not complying with the requirements of the provisions
12of this Act, the day following the last date upon which the
13taxpayer was in compliance with the requirements of the
14provisions of this Act, as determined by the Director, pursuant
15to Section 45 of this Act.
16    "Put Illinois to Work Program" means a worker training and
17employment program that was established by the State of
18Illinois with funding from the United States Department of
19Health and Human Services of Emergency Temporary Assistance to
20Needy Families funds authorized by the American Recovery and
21Reinvestment Act of 2009 (ARRA TANF Funds). These ARRA TANF
22funds were in turn used by the State of Illinois to fund the
23Put Illinois to Work Program.
24    "Related member" means a person that, with respect to the
25applicant during any portion of the incentive period, is any
26one of the following,

 

 

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

 

 

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1    aggregate, at least 50% of the profits, capital, stock, or
2    other ownership interest in the applicant.
3        (5) A person to or from whom there is attribution of
4    stock ownership in accordance with Section 1563(e) of the
5    Internal Revenue Code, except that for purposes of
6    determining whether a person is a related member under this
7    paragraph, "20%" shall be substituted for "5%" whenever
8    "5%" appears in Section 1563(e) of the Internal Revenue
9    Code.
10(Source: P.A. 96-888, eff. 4-13-10; 96-1498, eff. 1-18-11;
1197-636, eff. 6-1-12.)
 
12    (35 ILCS 25/25)
13    (Text of Section before amendment by P.A. 97-636)
14    Sec. 25. Tax credit.
15    (a) Subject to the conditions set forth in this Act, an
16applicant is entitled to a credit against payment of taxes
17withheld under Section 704A of the Illinois Income Tax Act:
18        (1) for new employees who participated as
19    worker-trainees in the Put Illinois to Work Program during
20    2010:
21            (A) in the first calendar year ending on or after
22        the date that is 6 months after December 31, 2010, or
23        the date of hire, whichever is later. Under this
24        subparagraph, the applicant is entitled to one-half of
25        the credit allowable for each new employee who is

 

 

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1        employed for at least 6 months after the date of hire;
2        and
3            (B) in the first calendar year ending on or after
4        the date that is 12 months after December 31, 2010, or
5        the date of hire, whichever is later. Under this
6        subparagraph, the applicant is entitled to one-half of
7        the credit allowable for each new employee who is
8        employed for at least 12 months after the date of hire;
9         (2) for all other new employees, in the first calendar
10    year ending on or after the date that is 12 months after
11    the date of hire of a new employee. The credit shall be
12    allowed as a credit to an applicant for each full-time
13    employee hired during the incentive period that results in
14    a net increase in full-time Illinois employees, where the
15    net increase in the employer's full-time Illinois
16    employees is maintained for at least 12 months.
17    (b) The Department shall make credit awards under this Act
18to further job creation.
19    (c) The credit shall be claimed for the first calendar year
20ending on or after the date on which the certificate is issued
21by the Department.
22    (d) The credit shall not exceed $2,500 per new employee
23hired.
24    (e) The net increase in full-time Illinois employees,
25measured on an annual full-time equivalent basis, shall be the
26total number of full-time Illinois employees of the applicant

 

 

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1on June 30, 2011, minus the number of full-time Illinois
2employees employed by the employer on July 1, 2010. For
3purposes of the calculation, an employer that begins doing
4business in this State during the incentive period, as
5determined by the Director, shall be treated as having zero
6Illinois employees on July 1, 2010.
7    (f) The net increase in the number of full-time Illinois
8employees of the applicant under subsection (e) must be
9sustained continuously for at least 12 months, starting with
10the date of hire of a new employee during the incentive period.
11Eligibility for the credit does not depend on the continuous
12employment of any particular individual. For purposes of this
13subsection (f), if a new employee ceases to be employed before
14the completion of the 12-month period for any reason, the net
15increase in the number of full-time Illinois employees shall be
16treated as continuous if a different new employee is hired as a
17replacement within a reasonable time for the same position.
18    (g) The Department shall promulgate rules to enable an
19applicant for which a PEO has been contracted to issue W-2s and
20make payment of taxes withheld under Section 704A of the
21Illinois Income Tax Act for new employees to retain the benefit
22of tax credits to which the applicant is otherwise entitled
23under this Act.
24(Source: P.A. 96-888, eff. 4-13-10; 96-1498, eff. 1-18-11.)
 
25    (Text of Section after amendment by P.A. 97-636)

 

 

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1    Sec. 25. Tax credit.
2    (a) Subject to the conditions set forth in this Act, an
3applicant is entitled to a credit against payment of taxes
4withheld under Section 704A of the Illinois Income Tax Act:
5        (1) for new employees who participated as
6    worker-trainees in the Put Illinois to Work Program during
7    2010:
8            (A) in the first calendar year ending on or after
9        the date that is 6 months after December 31, 2010, or
10        the date of hire, whichever is later. Under this
11        subparagraph, the applicant is entitled to one-half of
12        the credit allowable for each new employee who is
13        employed for at least 6 months after the date of hire;
14        and
15            (B) in the first calendar year ending on or after
16        the date that is 12 months after December 31, 2010, or
17        the date of hire, whichever is later. Under this
18        subparagraph, the applicant is entitled to one-half of
19        the credit allowable for each new employee who is
20        employed for at least 12 months after the date of hire;
21         (2) for all other new employees, in the first calendar
22    year ending on or after the date that is 12 months after
23    the date of hire of a new employee. The credit shall be
24    allowed as a credit to an applicant for each full-time
25    employee hired during the incentive period that results in
26    a net increase in full-time Illinois employees, where the

 

 

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1    net increase in the employer's full-time Illinois
2    employees is maintained for at least 12 months.
3    (b) The Department shall make credit awards under this Act
4to further job creation.
5    (c) The credit shall be claimed for the first calendar year
6ending on or after the date on which the certificate is issued
7by the Department.
8    (d) The credit shall not exceed $2,500 per new employee
9hired.
10    (e) The net increase in full-time Illinois employees,
11measured on an annual full-time equivalent basis, shall be the
12total number of full-time Illinois employees of the applicant
13on the final day of the incentive period, minus the number of
14full-time Illinois employees employed by the employer on the
15first day of that same incentive period. For purposes of the
16calculation, an employer that begins doing business in this
17State during the incentive period, as determined by the
18Director, shall be treated as having zero Illinois employees on
19the first day of the incentive period.
20    (f) The net increase in the number of full-time Illinois
21employees of the applicant under subsection (e) must be
22sustained continuously for at least 12 months, starting with
23the date of hire of a new employee during the incentive period.
24Eligibility for the credit does not depend on the continuous
25employment of any particular individual. For purposes of this
26subsection (f), if a new employee ceases to be employed before

 

 

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1the completion of the 12-month period for any reason, the net
2increase in the number of full-time Illinois employees shall be
3treated as continuous if a different new employee is hired as a
4replacement within a reasonable time for the same position.
5    (g) The Department shall promulgate rules to enable an
6applicant for which a PEO has been contracted to issue W-2s and
7make payment of taxes withheld under Section 704A of the
8Illinois Income Tax Act for new employees to retain the benefit
9of tax credits to which the applicant is otherwise entitled
10under this Act.
11(Source: P.A. 96-888, eff. 4-13-10; 96-1498, eff. 1-18-11;
1297-636, eff. 6-1-12.)
 
13    Section 95. No acceleration or delay. Where this Act makes
14changes in a statute that is represented in this Act by text
15that is not yet or no longer in effect (for example, a Section
16represented by multiple versions), the use of that text does
17not accelerate or delay the taking effect of (i) the changes
18made by this Act or (ii) provisions derived from any other
19Public Act.