Illinois General Assembly - Full Text of SB2440
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Full Text of SB2440  102nd General Assembly

SB2440 102ND GENERAL ASSEMBLY

  
  

 


 
102ND GENERAL ASSEMBLY
State of Illinois
2021 and 2022
SB2440

 

Introduced 2/26/2021, by Sen. Mattie Hunter

 

SYNOPSIS AS INTRODUCED:
 
New Act
35 ILCS 5/232 new

    Creates the Build Illinois Homes Tax Credit Act. Provides that the Illinois Housing Development Authority and the City of Chicago Department of Housing may allocate tax credits to the owners of qualified developments. Provides that the term "qualified development" means a qualified low-income housing project. Amends the Illinois Income Tax Act to make conforming changes. Effective immediately.


LRB102 16481 HLH 21873 b

FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

SB2440LRB102 16481 HLH 21873 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 1-1. Short title. This Act may be cited as the
5Build Illinois Homes Tax Credit Act.
 
6    Section 1-5. Definitions. As used in this Act, unless the
7context clearly requires otherwise:
8    "Allocation" means an award of tax credits to the owner of
9a qualified development in any allocation round, to be claimed
10ratably annually over the credit period.
11    "Allocation round" means all allocations by the Authority
12of credits under this Act to qualified developments in any
13calendar year.
14    "Allocation schedule certification" means the
15certification issued by the owner of a qualified development
16or its designee pursuant to subsection (d) of Section 1-10 of
17this Act.
18    "Authority" means:
19        (1) the Illinois Housing Development Authority; or
20        (2) the City of Chicago Department of Housing.
21    "Community revitalization strategy" means an implemented
22strategy that is designed to lead to measurable increases in
23access to employment, access to healthcare services, access to

 

 

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1transportation, access to community amenities, improvement to
2the quality of housing stock, or affordable housing
3opportunities.
4    "Credit" means the credit allowed pursuant to this Act.
5    "Credit period" means the period of 10 taxable years
6beginning with the taxable year in which a qualified
7development is placed in service. If a qualified development
8consists of more than one building, the qualified development
9is deemed to be placed in service in the taxable year during
10which the last building of the qualified development is placed
11in service.
12    "Department" means the Department of Revenue.
13    "Federal tax credit" means the federal low-income housing
14tax credit provided by Section 42 of the federal Internal
15Revenue Code, including federal low-income housing tax credits
16issued pursuant to 26 U.S.C. 42(h)(3) and 26 U.S.C. 42(h)(4).
17    "Opportunity area" means an area of low poverty and high
18income with exact determination methodology determined yearly
19by each individual Authority.
20    "Qualified allocation plan" means the qualified allocation
21plan adopted by the Authority pursuant to Section 42(m) of the
22federal Internal Revenue Code of 1986.
23    "Qualified basis" means the qualified basis of the
24qualified development as determined pursuant to Section 42 of
25the federal Internal Revenue Code of 1986.
26    "Qualified development" means a qualified low-income

 

 

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1housing project, as that term is defined in Section 42 of the
2federal Internal Revenue Code of 1986, that is located in the
3State and is determined to be eligible for the federal tax
4credit set forth in Section 42 of the Internal Revenue Code,
5whether or not a federal tax credit is allocated with respect
6to that qualified development.
7    "Qualified taxpayer" means an individual, person, firm,
8corporation, or other entity that owns an interest, direct or
9indirect, in a qualified development and is subject to any or
10all of the following: (i) the taxes imposed by the Illinois
11Income Tax Act; or (ii) any privilege tax or retaliatory tax,
12penalty, fee, charge or payment imposed by the Illinois
13Insurance Code.
14    "State credit eligibility statement" means a statement
15issued by the Authority under Section 1-7.
16    "State tax return" means the income tax return filed with
17the Department or the privilege and retaliatory tax return
18filed with the Department of Insurance, as applicable.
 
19    Section 1-7. State credit eligibility statements. A State
20credit eligibility statement shall be issued by the Authority
21with respect to each building within the qualified development
22following construction or rehabilitation of the qualified
23development certifying that each such building within that
24qualified development qualifies for the credit and specifying:
25        (1) the calendar year in which the last building of

 

 

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1    the qualified development was placed in service;
2        (2) the amount of the credit allowed for each year of
3    the credit period;
4        (3) the maximum qualified basis of the qualified
5    development taken into account in determining such annual
6    credit amount; and
7        (4) a unique identification number for each State
8    credit eligibility statement issued.
9    The State credit eligibility statement shall be issued by
10the Authority simultaneously with IRS Form 8609 if the
11qualified development was also allocated federal tax credits.
12    The State credit eligibility statement shall include a
13Section to be completed by the owner of the qualified
14development annually for each year of the credit period
15certifying that the qualified development was in conformance
16with all compliance requirements. That certification shall be
17filed with the project owner's State tax return annually of
18each year of the credit period.
 
19    Section 1-10. Credit for low-income housing developments.
20    (a) The Authority shall include the credit in its annual
21qualified allocation plan each year until expiration of this
22Act. Each allocation round shall be simultaneous with
23allocations of federal tax credits.
24    (b) For taxable years beginning on or after January 1,
252022, the Authority may allocate a credit to the owner of a

 

 

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1qualified development in any allocation round in an amount
2determined by the Authority, subject to the following
3guidelines:
4        (1) the Authority must find that the credit is
5    necessary for the financial feasibility of the qualified
6    development;
7        (2) the aggregate sum of credits allocated to
8    qualified developments in any allocation round shall not
9    exceed $35,000,000, plus the amount of unallocated
10    credits, if any, from the preceding allocation round, plus
11    the amount of any credit recaptured or otherwise returned
12    to the Authority since the previous allocation round;
13        (3) of the $35,000,000 annual allocation: (i) 75.5% of
14    the available credits in each allocation round shall be
15    allocated by the Illinois Housing Development Authority,
16    plus any credits the Illinois Housing Development
17    Authority did not allocate from the previous allocation
18    round, plus the amount of any credits recaptured or
19    otherwise returned to the Illinois Housing Development
20    Authority since the previous allocation round; and (ii)
21    24.5% of the available credits in each allocation round
22    shall be allocated by the City of Chicago Department of
23    Housing, plus any credits the City of Chicago Department
24    of Housing did not allocate from the previous allocation
25    round, plus the amount of any credits recaptured or
26    otherwise returned to the City of Chicago Department of

 

 

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1    Housing since the previous allocation round;
2        (4) the scoring process used by the Illinois Housing
3    Development Authority to award credits, detailed in the
4    yearly Qualified Allocation Plan, must have 25% of
5    available points given to projects built in opportunity
6    areas, projects that use a community revitalization
7    strategy, or some combination of those factors;
8        (5) units of local government and home rule
9    communities that submit qualified allocation plans for
10    affordable housing may use their own metrics for awarding
11    credits so long as these metrics are no less restrictive
12    than paragraph (4); and
13        (6) unless otherwise provided in this Act, or unless
14    the context clearly requires otherwise, the Authority must
15    determine eligibility for credits and allocate credits in
16    accordance with the standards and requirements set forth
17    in Section 42 of the federal Internal Revenue Code of
18    1986.
19    (c) For tax years during the credit period, any qualified
20taxpayer is allowed a credit as provided in this Act against
21any or all of the following: (i) the taxes imposed by
22subsections (a) and (b) of Section 201 of the Illinois Income
23Tax Act; or (ii) any privilege tax or retaliatory tax,
24penalty, fee, charge, or payment imposed under the Illinois
25Insurance Code.
26    (d) If a taxpayer receiving an allocation of a credit is

 

 

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1(i) a corporation that has an election in effect under
2Subchapter S of the federal Internal Revenue Code, (ii) a
3partnership, or (iii) a limited liability company, that is
4required to file a tax return, the credit provided under this
5Act may be claimed by the shareholders of the corporation, the
6partners of the partnership, or the members of the limited
7liability company in the same manner as those shareholders,
8partners, or members account for their proportionate shares of
9the income or losses of the corporation, partnership, or
10limited liability company, or as provided in the bylaws or
11other executed agreement of the corporation, partnership, or
12limited liability company. Credits granted to a partnership, a
13limited liability company taxed as a partnership, or other
14multiple owners of property shall be passed through to the
15partners, members, or owners respectively on a pro rata basis
16or pursuant to an executed agreement among the partners,
17members, or owners documenting any alternative distribution
18method, regardless of whether any such person is deemed a
19partner for federal income tax purposes, as long as the
20partner, shareholder or member would be considered a partner,
21shareholder, or member for State law purposes in accordance
22with Chapter 805 of the Illinois Compiled Statutes, and
23whether or not those persons are allocated or allowed any
24portion of the federal tax credit with respect to the
25qualified development, or whether the allocation of the credit
26under the terms of the agreement has substantial economic

 

 

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1effect, within the meaning of Section 704(b) of the Internal
2Revenue Code, relating to determination of distributive share.
3In the case of multiple tiers of pass-through entities, the
4credit may be so allocated through any number of pass-through
5entities on a pro rata basis or pursuant to an executed
6agreement among the partners, members, or owners documenting
7any alternative distribution method. Notwithstanding the
8foregoing, no credit shall be passed through an entity that is
9considered a disregarded entity for tax purposes. A qualified
10taxpayer may claim a credit so long as its direct or indirect
11interest in the qualified development is acquired prior to the
12filing of its tax return claiming the credit. On or before
13February 28th following each year of the credit period, the
14owner must submit an allocation schedule certification to the
15Department and the Department of Insurance detailing the
16amount of credit allocated to each qualified taxpayer for the
17applicable year and whether each qualified taxpayer intends to
18apply the credit to income tax or insurance premium tax, or the
19owner must notify the Department and the Department of
20Insurance that it has assigned the duty of the allocation
21schedule certification to its designee who must provide such
22allocation schedule certification to the Department by the
23deadline. Such allocation schedule certification may be
24amended in the event the State credit eligibility statement
25for a project is received after the deadline for filing the
26allocation schedule certification. Any such amendment shall be

 

 

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1filed prior to any taxpayer attempting to claim tax credits
2associated with the applicable State credit eligibility
3statement. Each qualified taxpayer is allowed to claim its
4allocated amount of credit subject to any restrictions set
5forth in this Section.
6    (e) No credit may be allocated pursuant to this Act unless
7the qualified development is the subject of a recorded
8restrictive covenant requiring the development to be
9maintained and operated as a qualified development; this
10requirement for a recorded restrictive covenant may be
11satisfied by the agreement for an extended low-income housing
12commitment required for the federal tax credits as defined in
13Section 42(h)(6)(B) of the federal Internal Revenue Code of
141986.
15    (f) If, during a taxable year, there is a determination
16that no recorded restrictive covenant meeting the requirements
17of subsection (e) was in effect as of the beginning of that
18year, such determination shall not apply to any period before
19that year and subsection (e) shall be applied without regard
20to that determination if the failure is corrected within one
21year from the date of the determination.
22    (g) The credit amount may be taken against the taxes
23imposed by the Illinois Income Tax Act for each taxable year of
24the credit period. The credit amount may be taken against the
25taxes, penalties, fees, charges, and payments imposed by the
26Illinois Insurance Code for each reporting period in the

 

 

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1credit period. Any credit amount that exceeds the tax due for a
2taxable year may be carried forward as a tax credit against
3payments due for up to 5 taxable years following the tax year
4to which the credit relates and must be applied first to the
5earliest reporting periods possible. Credits that are not
6claimed may not be refunded to the qualified taxpayer.
7    (h) By January 15, 2022 and by January 15 of each year
8thereafter, the Authority shall provide to the Department an
9electronic file containing all data related to all State
10credit eligibility statements issued during the preceding year
11in the manner and form as provided by the Department.
 
12    Section 1-15. Recapture. If, under Section 42 of the
13Internal Revenue Code of 1986, a portion of any federal tax
14credit claimed with respect to a qualified development is
15required to be recaptured during the first 10 years after a
16project is placed in service, then the Authority shall provide
17written notice, upon a form created by the Authority, to the
18Department of the amount to be recaptured. The amount of
19credit subject to recapture shall be proportionately equal to
20the amount of the qualified development's federal tax credits
21which are subject to recapture. The Department shall notify
22the qualified taxpayer that claimed the credit of the amount
23recaptured, and the qualified taxpayer subject to recapture
24shall increase the qualified taxpayer's tax by the amount of
25any credit wrongfully claimed in the tax year the qualified

 

 

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1taxpayer is notified of the recapture. Those adjustments shall
2be made in the year the reduction in qualified basis is
3identified.
 
4    Section 1-20. Filing requirements. An owner of a qualified
5development that has received an allocation and each qualified
6taxpayer claiming any portion of the credit must file with
7their State tax returns a copy of the State credit eligibility
8statement issued by the Authority for that qualified
9development. A qualified taxpayer receiving an allocation of
10credit through a pass-through entity shall attach to its State
11tax return a copy of the Schedule K-1-P or other written
12statement from the pass-through entity stating the portion of
13the annual credit shown on the State credit eligibility
14statement that is allocated to that partner, member or
15shareholder for that taxable year. In addition, the owner of a
16qualified development or its designee shall file a copy of the
17allocation schedule certification prior to any tax return
18being filed claiming a State credit for such qualified
19development.
 
20    Section 1-25. Rules. The Illinois Housing Development
21Authority and the Department, in consultation with each other,
22shall adopt such rules as are necessary to carry out their
23respective responsibilities under this Act.
 

 

 

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1    Section 1-30. Compliance monitoring. The Authority, in
2consultation with the Department, shall monitor and oversee
3compliance with the provisions of this Act and shall report
4specific occurrences of noncompliance to the Department.
 
5    Section 1-35. Report to the General Assembly.
6    (a) The Illinois Housing Development Authority must, by
7December 31 of each allocation year, provide a written report
8to the General Assembly and must publish that report on its
9website.
10    (b) The report shall:
11        (1) set forth the number of qualified developments
12    that have been allocated tax credits under this Act during
13    the allocation year and the total number of units
14    supported by each qualified development;
15        (2) describe each qualified development that has been
16    allocated tax credits under this Act including, without
17    limitation, the geographic location of the qualified
18    development, the household type and any specific
19    demographic information available about residents intended
20    to be served by the qualified development, the income
21    levels intended to be served by the qualified development,
22    and the rents or set-asides authorized for each qualified
23    development;
24        (3) provide housing market and demographic information
25    that demonstrates how the qualified developments supported

 

 

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1    by the tax credits are addressing the need for affordable
2    housing within the communities they are intended to serve
3    as well as information about any remaining disparities in
4    the affordability of housing within those communities; and
5        (4) provide information on the percentage of qualified
6    developments allocated credits that received incentive
7    scoring points in the qualified allocation plan as a
8    result of the general contractor, property manager,
9    architect, or sponsor being certified under the Business
10    Enterprise Program for Minorities, Females, and Persons
11    with a Disability.
 
12    Section 1-40. Exempt from automatic sunset. The credit
13under this Act is exempt from the provisions of Section 250 of
14the Illinois Income Tax Act.
 
15    Section 1-90. The Illinois Income Tax Act is amended by
16adding Section 232 as follows:
 
17    (35 ILCS 5/232 new)
18    Sec. 232. Build Illinois Homes Tax Credit Act.
19    (a) For taxable years beginning on or after January 1,
202022, any eligible taxpayer with respect to a credit awarded
21in accordance with the Build Illinois Homes Tax Credit Act
22that is named on the allocation schedule certification for a
23particular tax year is entitled to a credit against the taxes

 

 

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1imposed by subsections (a) and (b) of Section 201 as provided
2in the Build Illinois Homes Tax Credit Act.
3    (b) The taxpayer shall attach a copy of the allocation
4schedule certification and the State credit eligibility
5certificate issued under the Build Illinois Homes Tax Credit
6Act to the tax return on which the credits are to be claimed.
7    (c) If, during any taxable year, a taxpayer is notified of
8a recapture of a credit previously claimed on a State income
9tax return in accordance with the Build Illinois Homes Tax
10Credit Act, the tax imposed under subsections (a) and (b) of
11Section 201 for that taxpayer for that taxable year shall be
12increased. The amount of the increase shall be determined by
13(i) recomputing the Build Illinois Homes Tax Credit that would
14have been allowed for the year in which the credit was
15originally allowed by eliminating the recaptured amount from
16such computation, and (ii) subtracting that recomputed credit
17from the amount of credit previously allowed. No Build
18Illinois Homes tax Credit shall be allowed with respect to any
19credit subject to a recapture notice for any taxable year
20ending after the issuance of a recapture notice.
21    (d) This Section is exempt from the provisions of Section
22250.
 
23    Section 99. Effective date. This Act takes effect upon
24becoming law.