97TH GENERAL ASSEMBLY
State of Illinois
2011 and 2012
SB0097

 

Introduced 1/27/2011, by Sen. John G. Mulroe

 

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

    Amends the Small Business Job Creation Tax Credit Act. Provides that a person who operates an Illinois business having 75 or fewer full-time employees (instead of 50 or fewer full-time employees) may apply for the Small Business Job Creation Tax Credit. Extends the incentive period from June 30, 2011 to June 30, 2012, if the seasonally adjusted unemployment rate of the State of Illinois for the month of May 2011 is 7.0% or higher, as reported by the Illinois Department of Employment Security. Raises the cap on the credit from $2,500 to $3,500 for each new employee hired. Changes the manner in which the net increase in full-time Illinois employees is calculated in the event that the incentive period is extended. Contains provisions concerning the applicability of the credit to employers that contract with a Professional Employer Organization. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

SB0097LRB097 05510 HLH 45570 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    Sec. 10. Definitions. In this Act:
8    "Applicant" means a person that is operating a business
9located within the State of Illinois that is engaged in
10interstate or intrastate commerce and has no more than 75 50
11full-time employees, without regard to the location of
12employment of such employees at the beginning of the incentive
13period. In the case of any person that is a member of a unitary
14business group within the meaning of subdivision (a)(27) of
15Section 1501 of the Illinois Income Tax Act, "applicant" refers
16to the unitary business group.
17    "Certificate" means the tax credit certificate issued by
18the Department under Section 35 of this Act.
19    "Certificate of eligibility" means the certificate issued
20by the Department under Section 20 of this Act.
21    "Credit" means the amount awarded by the Department to an
22applicant by issuance of a certificate under Section 35 of this
23Act for each new full-time equivalent employee hired or job

 

 

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1created.
2    "Department" means the Department of Commerce and Economic
3Opportunity.
4    "Director" means the Director of the Department.
5    "Full-time employee" means an individual who is employed
6for a basic wage for at least 35 hours each week or who renders
7any other standard of service generally accepted by industry
8custom or practice as full-time employment. An individual for
9whom a W-2 is issued by a Professional Employer Organization is
10a full-time employee if he or she is employed in the service of
11the applicant for a basic wage for at least 35 hours each week
12or renders any other standard of service generally accepted by
13industry custom or practice as full-time employment. For the
14purposes of this Act, such an individual shall be considered a
15full-time employee of the applicant.
16    "Professional Employer Organization" (PEO) shall have the
17same meaning as defined in Section 5-5 of the Economic
18Development for a Growing Economy Tax Credit Act.
19    "Incentive period" means the period beginning July 1, 2010
20and ending on June 30, 2011. However, if the seasonally
21adjusted unemployment rate for the State of Illinois for the
22month of May 2011 is 7.0% or higher, as reported by the
23Illinois Department of Employment Security, then the incentive
24period shall be extended until June 30, 2012.
25    "Basic wage" means compensation for employment that is no
26less than $13.75 per hour or the equivalent salary for a new

 

 

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1employee.
2    "New employee" means a full-time employee first employed by
3an applicant within the incentive period whose hire results in
4a net increase in the applicant's full-time Illinois employees
5and who is receiving a basic wage as compensation. The term
6"new employee" does not include:
7        (1) a person who was previously employed in Illinois by
8    the applicant or a related member prior to the onset of the
9    incentive period; or
10        (2) any individual who has a direct or indirect
11    ownership interest of at least 5% in the profits, capital,
12    or value of the applicant or a related member.
13    "Noncompliance date" means, in the case of an applicant
14that is not complying with the requirements of the provisions
15of this Act, the day following the last date upon which the
16taxpayer was in compliance with the requirements of the
17provisions of this Act, as determined by the Director, pursuant
18to Section 45 of this Act.
19    "Related member" means a person that, with respect to the
20applicant during any portion of the incentive period, is any
21one of the following,
22        (1) An individual, if the individual and the members of
23    the individual's family (as defined in Section 318 of the
24    Internal Revenue Code) own directly, indirectly,
25    beneficially, or constructively, in the aggregate, at
26    least 50% of the value of the outstanding profits, capital,

 

 

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1    stock, or other ownership interest in the applicant.
2        (2) A partnership, estate, or trust and any partner or
3    beneficiary, if the partnership, estate, or trust and its
4    partners or beneficiaries own directly, indirectly,
5    beneficially, or constructively, in the aggregate, at
6    least 50% of the profits, capital, stock, or other
7    ownership interest in the applicant.
8        (3) A corporation, and any party related to the
9    corporation in a manner that would require an attribution
10    of stock from the corporation under the attribution rules
11    of Section 318 of the Internal Revenue Code, if the
12    applicant and any other related member own, in the
13    aggregate, directly, indirectly, beneficially, or
14    constructively, at least 50% of the value of the
15    corporation's outstanding stock.
16        (4) A corporation and any party related to that
17    corporation in a manner that would require an attribution
18    of stock from the corporation to the party or from the
19    party to the corporation under the attribution rules of
20    Section 318 of the Internal Revenue Code, if the
21    corporation and all such related parties own, in the
22    aggregate, at least 50% of the profits, capital, stock, or
23    other ownership interest in the applicant.
24        (5) A person to or from whom there is attribution of
25    stock ownership in accordance with Section 1563(e) of the
26    Internal Revenue Code, except that for purposes of

 

 

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1    determining whether a person is a related member under this
2    paragraph, "20%" shall be substituted for "5%" whenever
3    "5%" appears in Section 1563(e) of the Internal Revenue
4    Code.
5(Source: P.A. 96-888, eff. 4-13-10.)
 
6    (35 ILCS 25/25)
7    Sec. 25. Tax credit.
8    (a) Subject to the conditions set forth in this Act, an
9applicant is entitled to a credit against payment of taxes
10withheld under Section 704A of the Illinois Income Tax Act for
11calendar years ending on or after the date that is 12 months
12after the date of hire of a new employee. The credit shall be
13allowed as a credit to an applicant for each full-time employee
14hired during the incentive period that results in a net
15increase in full-time Illinois employees, where the net
16increase in the employer's full-time Illinois employees is
17maintained for at least 12 months.
18    (b) The Department shall make credit awards under this Act
19to further job creation.
20    (c) The credit shall be claimed for the first calendar year
21ending on or after the date on which the certificate is issued
22by the Department.
23    (d) The credit shall not exceed $3,500 $2,500 per new
24employee hired.
25    (e) The net increase in full-time Illinois employees,

 

 

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1measured on an annual full-time equivalent basis, shall be the
2total number of full-time Illinois employees of the applicant
3on June 30, 2011, minus the number of full-time Illinois
4employees employed by the employer on July 1, 2010. However, if
5the incentive period is extended until June 30, 2012, then the
6net increase in full-time Illinois employees, measured on an
7annual full-time equivalent basis, shall be the maximum total
8number of full-time Illinois employees employed by the
9applicant for at least 12 consecutive months during any portion
10of the period running from July 1, 2010 to July 1, 2012, minus
11the number of full-time Illinois employees employed by the
12employer on July 1, 2010. For purposes of these calculations
13the calculation, an employer that begins doing business in this
14State during the incentive period, as determined by the
15Director, shall be treated as having zero Illinois employees on
16July 1, 2010.
17    (f) The net increase in the number of full-time Illinois
18employees of the applicant must be sustained continuously for
19at least 12 months, starting with the date of hire of a new
20employee during the incentive period. Eligibility for the
21credit does not depend on the continuous employment of any
22particular individual. For purposes of this subsection (f), if
23a new employee ceases to be employed before the completion of
24the 12-month period for any reason, the net increase in the
25number of full-time Illinois employees shall be treated as
26continuous if a different new employee is hired as a

 

 

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1replacement within a reasonable time for the same position.
2    (g) The Department shall promulgate rules to enable an
3applicant for which a PEO has been contracted to issue W-2s and
4make payment of taxes withheld under Section 704A of the
5Illinois Income Tax Act for new employees to retain the benefit
6of tax credits to which the applicant is otherwise entitled
7under this Act.
8(Source: P.A. 96-888, eff. 4-13-10.)
 
9    Section 99. Effective date. This Act takes effect upon
10becoming law.