State of Illinois
2023 and 2024


Introduced 2/9/2023, by Sen. Steve Stadelman


New Act
35 ILCS 5/234 new

    Creates the Revitalizing Downtowns Tax Credit Act. Creates an income tax credit in an aggregate amount equal to 25% of the qualified expenditures incurred by a qualified taxpayer undertaking a plan to substantially convert an office building from office use to residential, retail, or other commercial use. Provides that the total amount of such expenditures must equal $15,000 or more. Provides that, if the conversion is to residential use, then 20% or more of the residential housing units must be both rent-restricted and occupied by individuals whose income is 80% or less of the municipality's median gross income and the property must be subject to a written binding State or local agreement with respect to the provision of financing of affordable housing. Provides that the credit applies for tax years beginning on or after January 1, 2024 and ending on or before December 31, 2026. Amends the Illinois Income Tax to make conforming changes. Effective immediately.

LRB103 28104 HLH 54483 b





SB1743LRB103 28104 HLH 54483 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. Short title. This Act may be cited as the
5Revitalizing Downtowns Tax Credit Act.
6    Section 5. Definitions. As used in this Act, unless the
7context clearly indicates otherwise:
8    "Board" means the Capital Development Board.
9    "Qualified conversion plan" means a plan to substantially
10convert a qualified office building from office use to
11residential, retail, or other commercial use. In the case of
12conversion to a residential use, such converted qualified
13office building must meet the following requirements: (i) 20%
14or more of the residential housing units must be both
15rent-restricted and occupied by individuals whose income is
1680% or less of the municipality's median gross income and (ii)
17the property must be subject to a written binding State or
18local agreement with respect to the provision of financing of
19affordable housing and such agreement is documented.
20    "Qualified expenditures" means any amount properly
21chargeable to a capital account. "Qualified expenditures" does
22not include the cost of acquisition to the building or
23property to be converted, the cost to enlarge the building,



SB1743- 2 -LRB103 28104 HLH 54483 b

1any expenditure that is allocable to the portion of such
2property which is tax-exempt use property, or any expenditure
3of a lessee of a building on or after the day the conversion is
5    "Qualified office building" means commercial property that
6is leased or available for lease to office tenants or is used
7primarily for office use, as well as the structural components
8of that property.
9    "Qualified taxpayer" means the owner of the qualified
10office building.
11    "Substantial rehabilitation" means that the qualified
12expenditures during the 24-month period selected by the
13taxpayer at the time and in the manner prescribed by rule and
14ending with or within the taxable year exceed the greater of
15(i) the adjusted basis of the building and its structural
16components or (ii) $15,000. The adjusted basis of the building
17and its structural components shall be determined as of the
18beginning of the first day of that 24-month period or the
19beginning of the first day of the holding period of the
20building, whichever is later. For purposes of determining the
21adjusted basis, the determination of the beginning of the
22holding period shall be made without regard to any
23reconstruction by the qualified taxpayer.
24    Section 10. Allowable credit.
25    (a) To the extent authorized by this Act, for taxable



SB1743- 3 -LRB103 28104 HLH 54483 b

1years beginning on or after January 1, 2024 and ending on or
2before December 31, 2026, there shall be allowed a tax credit
3against the tax imposed by subsections (a) and (b) of Section
4201 of the Illinois Income Tax Act in an aggregate amount equal
5to 25% of qualified expenditures incurred by a qualified
6taxpayer undertaking a qualified conversion plan of a
7qualified office building, provided that the total amount of
8such expenditures must equal $15,000 or more. If the qualified
9conversion plan spans multiple years, the aggregate credit for
10the entire project shall be allowed in the last taxable year.
11    (b) To obtain a tax credit pursuant to this Section, the
12taxpayer must apply with the Capital Development Board. The
13Capital Development Board shall determine the amount of
14eligible conversion expenditures within 45 days after receipt
15of a complete application. The taxpayer must provide to the
16Board a third-party cost certification conducted by a
17certified public accountant verifying (i) the qualified and
18non-qualified conversion expenses and (ii) that the qualified
19expenditures exceed the adjusted basis of the qualified office
20building on the first day the qualified conversion plan
21commenced. The accountant shall provide appropriate review and
22testing of invoices. The Board is authorized, but not
23required, to accept this third-party cost certification to
24determine the amount of qualified expenditures.
25    (c) If the amount of any tax credit awarded under this Act
26exceeds the qualified taxpayer's income tax liability for the



SB1743- 4 -LRB103 28104 HLH 54483 b

1year in which the qualified conversion plan was placed in
2service, the excess amount may be carried forward for
3deduction from the taxpayer's income tax liability in the next
4succeeding year or years until the total amount of the credit
5has been used, except that a credit may not be carried forward
6for deduction after the tenth taxable year after the taxable
7year in which the qualified conversion plan was placed in
8service. Upon completion and review of the project, the Board
9shall issue a single certificate in the amount of the eligible
10credits equal to 25% of the qualified expenditures incurred
11during the eligible taxable years. At the time the certificate
12is issued, an issuance fee up to the maximum amount of 2% of
13the amount of the credits issued by the certificate may be
14collected from the applicant to administer the Act. If
15collected, this issuance fee shall be directed to the Capital
16Development Fund or other such fund as appropriate for use by
17the Board in the administration of the program under this Act.
18The taxpayer must attach the certificate or legal
19documentation of her or his proportional share of the
20certificate to the tax return on which the credits are to be
21claimed. The tax credit under this Section may not reduce the
22taxpayer's liability to less than zero. If the amount of the
23credit exceeds the tax liability for the year, the excess
24credit may be carried forward and applied to the tax liability
25of the 10 taxable years following the excess credit year.
26    (d) If the taxpayer is a corporation having an election in



SB1743- 5 -LRB103 28104 HLH 54483 b

1effect under Subchapter S of the federal Internal Revenue
2Code, a partnership, or a limited liability company, the
3credit provided under this Act may be claimed by the
4shareholders of the corporation, the partners of the
5partnership, or the members of the limited liability company
6in the same manner as those shareholders, partners, or members
7account for their proportionate shares of the income or losses
8of the corporation, partnership, or limited liability company,
9or as provided in the bylaws or other executed agreement of the
10corporation, partnership, or limited liability company.
11Credits granted to a partnership, a limited liability company
12taxed as a partnership, or other multiple owners of property
13shall be passed through to the partners, members, or owners
14respectively on a pro rata basis or pursuant to an executed
15agreement among the partners, members, or owners documenting
16any alternate distribution method.
17    Section 15. Limitations, reporting, and monitoring.
18    (a) The Board shall award not more than an aggregate of
19$15,000,000 in total annual tax credits pursuant to qualified
20conversion plans for qualified office buildings. The Board
21shall award not more than $3,000,000 in tax credits with
22regard to a single qualified conversion plan. In awarding tax
23credits under this Act, the Board must prioritize projects
24that meet one or more of the following:
25        (1) the qualified office building is located in a



SB1743- 6 -LRB103 28104 HLH 54483 b

1    county that borders a State with a similar conversion tax
2    credit;
3        (2) the qualified office building was previously owned
4    by a federal, State, or local governmental entity;
5        (3) the qualified office building is located in a
6    census tract that has a median family income at or below
7    the State median family income; data from the most recent
8    5-year estimate from the American Community Survey (ACS),
9    published by the U.S. Census Bureau, shall be used to
10    determine eligibility;
11        (4) the qualified conversion plan includes in the
12    development partnership a Community Development Entity or
13    a low-profit (B Corporation) or not-for-profit
14    organization, as defined by Section 501(c)(3) of the
15    Internal Revenue Code; or
16        (5) the qualified office building is located in an
17    area declared under an Emergency Declaration or Major
18    Disaster Declaration under the federal Robert T. Stafford
19    Disaster Relief and Emergency Assistance Act.
20    (b) The annual aggregate program allocation of $15,000,000
21set forth in subsection (a) shall be allocated by the Board, in
22such proportion as determined by the Board, on a per calendar
23basis twice in each year that the program is in effect,
24provided that: (i) the amount initially allocated by the Board
25for any one calendar application period shall not exceed 65%
26of the total allowable amount and (ii) any portion of the



SB1743- 7 -LRB103 28104 HLH 54483 b

1allocated allowable amount remaining unused as of the end of
2any of the second calendar application period of a given
3calendar year shall be rolled into and added to the total
4allocated amount for the next available calendar year.
5Applicants that qualify under this Act will be placed in a
6queue based on the date and time the application is received
7until the application period total allowable amount is
8reached. Applicants must reapply for each application period.
9    (c) On or before December 31, 2023 and on or before
10December 31 of each even-numbered year thereafter through
112026, subject to appropriation and prior to equal disbursement
12to the Board, moneys in the Capital Development Fund shall be
13used, beginning at the end of the first fiscal year after the
14effective date of this Act, to hire a qualified third party to
15prepare a biennial report to assess the overall effectiveness
16of this Act from the qualified conversion projects under this
17Act completed in that year and in previous years. Baseline
18data of the metrics in the report shall be collected at the
19initiation of a qualified conversion project. The overall
20economic impact shall include at least:
21        (1) the number of applications, project locations, and
22    proposed use of to be converted qualified office
23    buildings;
24        (2) the amount of credits awarded and the number and
25    location of projects receiving credit allocations;
26        (3) the status of ongoing projects and projected



SB1743- 8 -LRB103 28104 HLH 54483 b

1    qualifying expenditures for ongoing projects;
2        (4) for completed projects, the total amount of
3    qualifying conversion expenditures and non-qualifying
4    expenditures, the number of new businesses created, the
5    number of new jobs created, a number of new housing units
6    created, and the total square footage converted and
7    developed;
8        (5) direct, indirect, and induced economic impacts;
9        (6) temporary and permanent construction jobs created;
10    and
11        (7) sales, income, and property tax generation before
12    construction, during construction, and after completion.
13    The report to the General Assembly shall be filed with the
14Clerk of the House of Representatives and the Secretary of the
15Senate as provided in Section 3.1 of the General Assembly
16Organization Act.
17    (d) Any time prior to issuance of a tax credit
18certificate, the Director of the Board or staff of the Board
19may, upon reasonable notice to the project owner of not less
20than 3 business days, conduct a site visit to the project to
21inspect and evaluate the project.
22    (e) Any time prior to the issuance of a tax credit
23certificate and for a period of 4 years following the
24effective date of a project tax credit certificate, the
25Director may, upon reasonable notice of not less than 30
26calendar days, request a status report from the applicant



SB1743- 9 -LRB103 28104 HLH 54483 b

1consisting of information and updates relevant to the status
2of the project. Status reports shall not be requested more
3than twice yearly.
4    (f) In order to demonstrate sufficient evidence of
5reviewable progress within 12 months after the date the
6applicant received notification of approval from the Board,
7the applicant shall provide all of the following:
8        (1) a viable financial plan which demonstrates by way
9    of an executed agreement that all financing has been
10    secured for the project; such financing shall include, but
11    not be limited to, equity investment as demonstrated by
12    letters of commitment from the owner of the property,
13    investment partners, and equity investors;
14        (2) final construction drawings or approved building
15    permits that demonstrate the complete conversion of the
16    full scope of the application; and
17        (3) all historic approvals, including all federal and
18    State documents required by the Board.
19    The Director shall review the submitted evidence and may
20request additional documentation from the applicant if
21necessary. The applicant will have 30 calendar days to provide
22the information requested, otherwise the approval may be
23rescinded at the discretion of the Director.
24    (g) In order to demonstrate sufficient evidence of
25reviewable progress within 18 months after the date the
26application received notification of approval from the Board,



SB1743- 10 -LRB103 28104 HLH 54483 b

1the applicant is required to provide detailed evidence that
2the applicant has secured and closed on financing for the
3complete scope of conversion for the project. To demonstrate
4evidence that the applicant has secured and closed on
5financing, the applicant will need to provide signed and
6processed loan agreements, bank financing documents or other
7legal and contractual evidence to demonstrate that adequate
8financing is available to complete the project. The Director
9shall review the submitted evidence and may request additional
10documentation from the applicant if necessary. The applicant
11will have 30 calendar days to provide the information
12requested, otherwise the approval may be rescinded at the
13discretion of the Director.
14    If the applicant fails to document reviewable progress
15within 18 months of approval, the Director may notify the
16applicant that the application is rescinded. However, should
17financing and construction be imminent, the Director may elect
18to grant the applicant no more than 5 months to close on
19financing and commence construction. If the applicant fails to
20meet these conditions in the required timeframe, the Director
21shall notify the applicant that the application is rescinded.
22Any such rescinded allocation shall be added to the aggregate
23amount of credits available for allocation for the year in
24which the forfeiture occurred.
25    The amount of the qualified expenditures identified in the
26applicant's certification of completion and reflected on the



SB1743- 11 -LRB103 28104 HLH 54483 b

1Revitalizing Downtowns Tax Credit certificate issued by the
2Director is subject to inspection, examination, and audit by
3the Department of Revenue.
4    The applicant shall establish and maintain for a period of
54 years following the effective date on a project tax credit
6certificate such records as required by the Director. Such
7records include, but are not limited to, records documenting
8project expenditures and compliance with the U.S. Secretary of
9the Interior's Standards. The applicant shall make such
10records available for review and verification by the Director,
11the Department of Revenue, or appropriate staff, as well as
12other appropriate State agencies. In the event the Director
13determines an applicant has submitted an annual report
14containing erroneous information or data not supported by
15records established and maintained under this Act, the
16Director may, after providing notice, require the applicant to
17resubmit corrected reports.
18    Section 20. Powers. The Board shall adopt rules for the
19administration of this Act. The Board may enter into an
20intergovernmental agreement with the Department of Commerce
21and Economic Opportunity, the Department of Revenue, or both,
22for the administration of this Act. Such intergovernmental
23agreement may allow for the distribution of all or a portion of
24the issuance fee to the Department of Commerce and Economic
25Opportunity or the Department of Revenue, as applicable.



SB1743- 12 -LRB103 28104 HLH 54483 b

1    Section 50. The Illinois Income Tax Act is amended by
2adding Section 234 as follows:
3    (35 ILCS 5/234 new)
4    Sec. 234. Revitalizing Downtowns Tax Credit. For tax years
5beginning on or after January 1, 2024 and ending on or before
6December 31, 2026, a taxpayer who qualifies for a credit under
7the Revitalizing Downtowns Credit Act is entitled to a credit
8against the taxes imposed under subsections (a) and (b) of
9Section 201 of this Act as provided in that Act. If the
10taxpayer is a partnership or Subchapter S corporation, the
11credit shall be allowed to the partners or shareholders in
12accordance with the determination of income and distributive
13share of income under Sections 702 and 704 and Subchapter S of
14the Internal Revenue Code. If the amount of any tax credit
15awarded under this Section exceeds the qualified taxpayer's
16income tax liability for the year in which the qualified
17rehabilitation plan was placed in service, the excess amount
18may be carried forward as provided in the Revitalizing
19Downtowns Tax Credit Act.
20    Section 99. Effective date. This Act takes effect upon
21becoming law.