State of Illinois
90th General Assembly
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90_HB2403

      35 ILCS 5/201             from Ch. 120, par. 2-201
      35 ILCS 5/202.5 new
      35 ILCS 5/901             from Ch. 120, par. 9-901
          Amends the  Illinois  Income  Tax  Act  to  decrease  the
      individual  rate  from  3%  to  2.75%  and  to  decrease  the
      corporate  rate  from 4.8% to 4.4% beginning January 1, 1998.
      Effective January 1, 1998.
                                                     LRB9007722KDks
                                               LRB9007722KDks
 1        AN ACT to amend the Illinois Income Tax Act  by  changing
 2    Sections 201 and 901 and adding Section 202.5.
 3        Be  it  enacted  by  the People of the State of Illinois,
 4    represented in the General Assembly:
 5        Section 5.  The Illinois Income Tax  Act  is  amended  by
 6    changing  Sections  201  and 901 and adding Sections 202.5 as
 7    follows:
 8        (35 ILCS 5/201) (from Ch. 120, par. 2-201)
 9        Sec. 201.  Tax Imposed.
10        (a)  In general. A tax measured by net income  is  hereby
11    imposed  on  every  individual, corporation, trust and estate
12    for each taxable year ending  after  July  31,  1969  on  the
13    privilege  of earning or receiving income in or as a resident
14    of this State. Such tax shall be in  addition  to  all  other
15    occupation or privilege taxes imposed by this State or by any
16    municipal corporation or political subdivision thereof.
17        (b)  Rates.  The  tax  imposed  by subsection (a) of this
18    Section shall be determined as follows:
19             (1)  In the case of an individual, trust or  estate,
20        for taxable years ending prior to July 1, 1989, an amount
21        equal  to  2  1/2%  of  the taxpayer's net income for the
22        taxable year.
23             (2)  In the case of an individual, trust or  estate,
24        for  taxable  years  beginning  prior to July 1, 1989 and
25        ending after June 30, 1989, an amount equal to the sum of
26        (i) 2 1/2% of the taxpayer's net income  for  the  period
27        prior to July 1, 1989, as calculated under Section 202.3,
28        and  (ii)  3% of the taxpayer's net income for the period
29        after June 30, 1989, as calculated under Section 202.3.
30             (3)  In the case of an individual, trust or  estate,
31        for  taxable  years  beginning  after  June 30, 1989, and
                            -2-                LRB9007722KDks
 1        ending prior to January 1, 1998, an amount equal to 3% of
 2        the taxpayer's net income for the taxable year.
 3             (4)  In the case of an individual, trust or  estate,
 4        for taxable years beginning prior to January 1, 1998, and
 5        ending  after  December  31, 1997, an amount equal to the
 6        sum of (i) 3% of the taxpayer's net income for the period
 7        prior to January 1, 1998,  as  calculated  under  Section
 8        202.5,  and  (ii)  2.75% of the taxpayer's net income for
 9        the period after December 31, 1997, as  calculated  under
10        Section 202.5 (Blank).
11             (5)  In  the case of an individual, trust or estate,
12        for taxable years beginning after December 31,  1997,  an
13        amount  equal  to  2.75% of the taxpayer's net income for
14        the taxable year (Blank).
15             (6)  In the case of a corporation, for taxable years
16        ending prior to July 1, 1989, an amount equal  to  4%  of
17        the taxpayer's net income for the taxable year.
18             (7)  In the case of a corporation, for taxable years
19        beginning prior to July 1, 1989 and ending after June 30,
20        1989,  an  amount  equal  to  the  sum  of  (i) 4% of the
21        taxpayer's net income for the period  prior  to  July  1,
22        1989, as calculated under Section 202.3, and (ii) 4.8% of
23        the  taxpayer's  net income for the period after June 30,
24        1989, as calculated under Section 202.3.
25             (8)  In the case of a corporation, for taxable years
26        beginning after  June  30,  1989,  and  ending  prior  to
27        January   1,  1998,  an  amount  equal  to  4.8%  of  the
28        taxpayer's net income for the taxable year.
29             (9)  In the case of a corporation, for taxable years
30        beginning prior to January  1,  1998,  and  ending  after
31        December 31, 1997, an amount equal to the sum of (i) 4.8%
32        of  the  taxpayer's  net  income  for the period prior to
33        January 1, 1998, as calculated under Section  202.5,  and
34        (ii)  4.4%  of  the  taxpayer's net income for the period
                            -3-                LRB9007722KDks
 1        after December 31,  1997,  as  calculated  under  Section
 2        202.5.
 3             (10)  In  case  of  a corporation, for taxable years
 4        beginning after December 31, 1997,  an  amount  equal  to
 5        4.4% of the taxpayer's net income for the taxable year.
 6        (c)  Beginning   on  July  1,  1979  and  thereafter,  in
 7    addition to such income tax, there is also hereby imposed the
 8    Personal Property Tax Replacement Income Tax measured by  net
 9    income   on   every   corporation   (including  Subchapter  S
10    corporations), partnership and trust, for each  taxable  year
11    ending  after  June  30, 1979.  Such taxes are imposed on the
12    privilege of earning or receiving income in or as a  resident
13    of  this State.  The Personal Property Tax Replacement Income
14    Tax shall be  in  addition  to  the  income  tax  imposed  by
15    subsections  (a)  and  (b) of this Section and in addition to
16    all other occupation or privilege taxes imposed by this State
17    or by any  municipal  corporation  or  political  subdivision
18    thereof.
19        (d)  Additional  Personal Property Tax Replacement Income
20    Tax Rates.  The personal property tax replacement income  tax
21    imposed by this subsection and subsection (c) of this Section
22    in  the  case  of  a  corporation,  other than a Subchapter S
23    corporation, shall be an additional amount equal to 2.85%  of
24    such  taxpayer's net income for the taxable year, except that
25    beginning on January 1, 1981, and  thereafter,  the  rate  of
26    2.85%  specified in this subsection shall be reduced to 2.5%,
27    and in the case of a partnership, trust  or  a  Subchapter  S
28    corporation  shall  be  an additional amount equal to 1.5% of
29    such taxpayer's net income for the taxable year.
30        (e)  Investment credit.  A taxpayer shall  be  allowed  a
31    credit  against  the Personal Property Tax Replacement Income
32    Tax for investment in qualified property.
33             (1)  A taxpayer shall be allowed a credit  equal  to
34        .5%  of the basis of qualified property placed in service
                            -4-                LRB9007722KDks
 1        during the taxable year, provided such property is placed
 2        in service on or after July  1,  1984.   There  shall  be
 3        allowed an additional credit equal to .5% of the basis of
 4        qualified  property  placed in service during the taxable
 5        year, provided such property is placed in service  on  or
 6        after  July  1,  1986, and the taxpayer's base employment
 7        within Illinois has increased by  1%  or  more  over  the
 8        preceding year as determined by the taxpayer's employment
 9        records  filed with the Illinois Department of Employment
10        Security.  Taxpayers who are new  to  Illinois  shall  be
11        deemed  to  have met the 1% growth in base employment for
12        the first year in which they file employment records with
13        the Illinois  Department  of  Employment  Security.   The
14        provisions  added  to  this Section by Public Act 85-1200
15        (and restored by Public Act 87-895) shall be construed as
16        declaratory of existing law and not as a  new  enactment.
17        If,  in  any year, the increase in base employment within
18        Illinois over the preceding year is  less  than  1%,  the
19        additional  credit  shall  be  limited to that percentage
20        times a fraction, the numerator of which is .5%  and  the
21        denominator  of  which  is  1%, but shall not exceed .5%.
22        The investment credit shall not be allowed to the  extent
23        that  it  would  reduce a taxpayer's liability in any tax
24        year  below  zero,  nor  may  any  credit  for  qualified
25        property be allowed for any year other than the  year  in
26        which the property was placed in service in Illinois. For
27        tax years ending on or after December 31, 1987, and on or
28        before December 31, 1988, the credit shall be allowed for
29        the  tax year in which the property is placed in service,
30        or, if the amount of the credit exceeds the tax liability
31        for that year, whether it exceeds the original  liability
32        or  the  liability  as  later amended, such excess may be
33        carried forward and applied to the tax liability of the 5
34        taxable years following the excess credit  years  if  the
                            -5-                LRB9007722KDks
 1        taxpayer  (i)  makes investments which cause the creation
 2        of a  minimum  of  2,000  full-time  equivalent  jobs  in
 3        Illinois,   (ii)   is   located  in  an  enterprise  zone
 4        established pursuant to the Illinois Enterprise Zone  Act
 5        and  (iii) is certified by the Department of Commerce and
 6        Community Affairs  as  complying  with  the  requirements
 7        specified  in  clause  (i) and (ii) by July 1, 1986.  The
 8        Department of Commerce and Community Affairs shall notify
 9        the Department of  Revenue  of  all  such  certifications
10        immediately.  For  tax  years  ending  after December 31,
11        1988, the credit shall be allowed for  the  tax  year  in
12        which  the  property  is  placed  in  service, or, if the
13        amount of the credit exceeds the tax liability  for  that
14        year,  whether  it  exceeds the original liability or the
15        liability as later amended, such excess  may  be  carried
16        forward and applied to the tax liability of the 5 taxable
17        years following the excess credit years. The credit shall
18        be  applied  to  the  earliest  year for which there is a
19        liability. If there is credit from more than one tax year
20        that is available to offset a liability,  earlier  credit
21        shall be applied first.
22             (2)  The  term  "qualified  property" means property
23        which:
24                  (A)  is  tangible,   whether   new   or   used,
25             including  buildings  and  structural  components of
26             buildings and signs that are real property, but  not
27             including land or improvements to real property that
28             are not a structural component of a building such as
29             landscaping,   sewer   lines,  local  access  roads,
30             fencing, parking lots, and other appurtenances;
31                  (B)  is depreciable pursuant to Section 167  of
32             the  Internal  Revenue  Code,  except  that  "3-year
33             property" as defined in Section 168(c)(2)(A) of that
34             Code is not eligible for the credit provided by this
                            -6-                LRB9007722KDks
 1             subsection (e);
 2                  (C)  is  acquired  by  purchase  as  defined in
 3             Section 179(d) of the Internal Revenue Code;
 4                  (D)  is used in Illinois by a taxpayer  who  is
 5             primarily  engaged  in  manufacturing,  or in mining
 6             coal or fluorite, or in retailing; and
 7                  (E)  has not previously been used  in  Illinois
 8             in  such  a  manner  and  by  such a person as would
 9             qualify for the credit provided by  this  subsection
10             (e) or subsection (f).
11             (3)  For    purposes   of   this   subsection   (e),
12        "manufacturing" means the material staging and production
13        of tangible  personal  property  by  procedures  commonly
14        regarded  as  manufacturing,  processing, fabrication, or
15        assembling which changes some existing material into  new
16        shapes, new qualities, or new combinations.  For purposes
17        of  this  subsection (e) the term "mining" shall have the
18        same meaning as the term "mining" in  Section  613(c)  of
19        the   Internal   Revenue  Code.   For  purposes  of  this
20        subsection (e), the term "retailing" means  the  sale  of
21        tangible   personal  property  or  services  rendered  in
22        conjunction with the sale of tangible consumer  goods  or
23        commodities.
24             (4)  The  basis  of  qualified property shall be the
25        basis used to  compute  the  depreciation  deduction  for
26        federal income tax purposes.
27             (5)  If the basis of the property for federal income
28        tax  depreciation purposes is increased after it has been
29        placed in service in Illinois by the taxpayer, the amount
30        of such increase  shall  be  deemed  property  placed  in
31        service on the date of such increase in basis.
32             (6)  The  term  "placed  in  service" shall have the
33        same meaning as under Section 46 of the Internal  Revenue
34        Code.
                            -7-                LRB9007722KDks
 1             (7)  If during any taxable year, any property ceases
 2        to  be  qualified  property  in the hands of the taxpayer
 3        within 48 months after being placed in  service,  or  the
 4        situs of any qualified property is moved outside Illinois
 5        within  48  months  after  being  placed  in service, the
 6        Personal Property Tax Replacement  Income  Tax  for  such
 7        taxable  year shall be increased.  Such increase shall be
 8        determined by (i) recomputing the investment credit which
 9        would have been allowed for the year in which credit  for
10        such  property was originally allowed by eliminating such
11        property from such computation and, (ii) subtracting such
12        recomputed credit from the amount  of  credit  previously
13        allowed.  For  the  purposes  of  this  paragraph  (7), a
14        reduction of the basis of  qualified  property  resulting
15        from  a  redetermination  of  the purchase price shall be
16        deemed a disposition of qualified property to the  extent
17        of such reduction.
18             (8)  Unless  the  investment  credit  is extended by
19        law, the basis of qualified property  shall  not  include
20        costs  incurred after December 31, 2003, except for costs
21        incurred pursuant to a binding contract entered  into  on
22        or before December 31, 2003.
23             (9)  Each  taxable  year, a partnership may elect to
24        pass through to its partners the  credits  to  which  the
25        partnership is entitled under this subsection (e) for the
26        taxable  year.  A partner may use the credit allocated to
27        him or her under this  paragraph  only  against  the  tax
28        imposed  in  subsections (c) and (d) of this Section.  If
29        the partnership makes that election, those credits  shall
30        be  allocated  among  the  partners in the partnership in
31        accordance with the rules set forth in Section 704(b)  of
32        the  Internal  Revenue  Code,  and  the rules promulgated
33        under that Section,  and  the  allocated  amount  of  the
34        credits shall be allowed to the partners for that taxable
                            -8-                LRB9007722KDks
 1        year.   The  partnership  shall make this election on its
 2        Personal Property Tax Replacement Income Tax  return  for
 3        that  taxable  year.  The  election  to  pass through the
 4        credits shall be irrevocable.
 5        (f)  Investment credit; Enterprise Zone.
 6             (1)  A taxpayer shall be allowed  a  credit  against
 7        the  tax  imposed  by  subsections  (a)  and  (b) of this
 8        Section for investment in  qualified  property  which  is
 9        placed  in service in an Enterprise Zone created pursuant
10        to the Illinois Enterprise Zone Act. For partners and for
11        shareholders of Subchapter S corporations, there shall be
12        allowed  a  credit  under  this  subsection  (f)  to   be
13        determined in accordance with the determination of income
14        and  distributive  share of income under Sections 702 and
15        704 and Subchapter S of the Internal  Revenue  Code.  The
16        credit  shall be .5% of the basis for such property.  The
17        credit shall be available only in  the  taxable  year  in
18        which the property is placed in service in the Enterprise
19        Zone and shall not be allowed to the extent that it would
20        reduce  a  taxpayer's  liability  for  the tax imposed by
21        subsections (a) and (b) of this Section  to  below  zero.
22        For  tax  years ending on or after December 31, 1985, the
23        credit shall be allowed for the tax  year  in  which  the
24        property  is  placed in service, or, if the amount of the
25        credit exceeds the tax liability for that  year,  whether
26        it  exceeds  the  original  liability or the liability as
27        later amended, such excess may  be  carried  forward  and
28        applied  to  the  tax  liability  of  the 5 taxable years
29        following the excess credit year.  The  credit  shall  be
30        applied  to  the  earliest  year  for  which  there  is a
31        liability. If there is credit from more than one tax year
32        that is available  to  offset  a  liability,  the  credit
33        accruing first in time shall be applied first.
34             (2)  The  term  qualified  property  means  property
                            -9-                LRB9007722KDks
 1        which:
 2                  (A)  is   tangible,   whether   new   or  used,
 3             including buildings  and  structural  components  of
 4             buildings;
 5                  (B)  is  depreciable pursuant to Section 167 of
 6             the  Internal  Revenue  Code,  except  that  "3-year
 7             property" as defined in Section 168(c)(2)(A) of that
 8             Code is not eligible for the credit provided by this
 9             subsection (f);
10                  (C)  is acquired  by  purchase  as  defined  in
11             Section 179(d) of the Internal Revenue Code;
12                  (D)  is  used  in  the  Enterprise  Zone by the
13             taxpayer; and
14                  (E)  has not been previously used  in  Illinois
15             in  such  a  manner  and  by  such a person as would
16             qualify for the credit provided by  this  subsection
17             (f) or subsection (e).
18             (3)  The  basis  of  qualified property shall be the
19        basis used to  compute  the  depreciation  deduction  for
20        federal income tax purposes.
21             (4)  If the basis of the property for federal income
22        tax  depreciation purposes is increased after it has been
23        placed in service in the Enterprise Zone by the taxpayer,
24        the amount of such  increase  shall  be  deemed  property
25        placed in service on the date of such increase in basis.
26             (5)  The  term  "placed  in  service" shall have the
27        same meaning as under Section 46 of the Internal  Revenue
28        Code.
29             (6)  If during any taxable year, any property ceases
30        to  be  qualified  property  in the hands of the taxpayer
31        within 48 months after being placed in  service,  or  the
32        situs  of  any  qualified  property  is moved outside the
33        Enterprise Zone within 48 months after  being  placed  in
34        service, the tax imposed under subsections (a) and (b) of
                            -10-               LRB9007722KDks
 1        this  Section  for  such taxable year shall be increased.
 2        Such increase shall be determined by (i) recomputing  the
 3        investment  credit  which would have been allowed for the
 4        year in which credit for  such  property  was  originally
 5        allowed   by   eliminating   such   property   from  such
 6        computation, and (ii) subtracting such recomputed  credit
 7        from  the  amount  of credit previously allowed.  For the
 8        purposes of this paragraph (6), a reduction of the  basis
 9        of qualified property resulting from a redetermination of
10        the  purchase  price  shall  be  deemed  a disposition of
11        qualified property to the extent of such reduction.
12             (g)  Jobs Tax Credit; Enterprise  Zone  and  Foreign
13    Trade Zone or Sub-Zone.
14             (1)  A taxpayer conducting a trade or business in an
15        enterprise  zone  or a High Impact Business designated by
16        the  Department  of  Commerce   and   Community   Affairs
17        conducting  a trade or business in a federally designated
18        Foreign Trade Zone or Sub-Zone shall be allowed a  credit
19        against  the  tax  imposed  by subsections (a) and (b) of
20        this Section in the amount of $500 per eligible  employee
21        hired to work in the zone during the taxable year.
22             (2)  To qualify for the credit:
23                  (A)  the  taxpayer must hire 5 or more eligible
24             employees to work in an enterprise zone or federally
25             designated Foreign Trade Zone or Sub-Zone during the
26             taxable year;
27                  (B)  the taxpayer's total employment within the
28             enterprise  zone  or  federally  designated  Foreign
29             Trade Zone or Sub-Zone must increase by  5  or  more
30             full-time  employees  beyond  the  total employed in
31             that zone at the end of the previous  tax  year  for
32             which  a  jobs  tax  credit  under  this Section was
33             taken, or beyond the total employed by the  taxpayer
34             as of December 31, 1985, whichever is later; and
                            -11-               LRB9007722KDks
 1                  (C)  the  eligible  employees  must be employed
 2             180 consecutive days in order to be deemed hired for
 3             purposes of this subsection.
 4             (3)  An "eligible employee" means  an  employee  who
 5        is:
 6                  (A)  Certified  by  the  Department of Commerce
 7             and Community Affairs  as  "eligible  for  services"
 8             pursuant  to  regulations  promulgated in accordance
 9             with Title II of the Job Training  Partnership  Act,
10             Training Services for the Disadvantaged or Title III
11             of  the Job Training Partnership Act, Employment and
12             Training Assistance for Dislocated Workers Program.
13                  (B)  Hired  after  the   enterprise   zone   or
14             federally  designated Foreign Trade Zone or Sub-Zone
15             was designated or the trade or business was  located
16             in that zone, whichever is later.
17                  (C)  Employed in the enterprise zone or Foreign
18             Trade  Zone  or Sub-Zone. An employee is employed in
19             an enterprise zone or federally  designated  Foreign
20             Trade  Zone or Sub-Zone if his services are rendered
21             there or it  is  the  base  of  operations  for  the
22             services performed.
23                  (D)  A  full-time  employee  working 30 or more
24             hours per week.
25             (4)  For tax years ending on or after  December  31,
26        1985  and prior to December 31, 1988, the credit shall be
27        allowed for the tax year in which the eligible  employees
28        are hired.  For tax years ending on or after December 31,
29        1988,  the  credit  shall  be  allowed  for  the tax year
30        immediately following the tax year in which the  eligible
31        employees are hired.  If the amount of the credit exceeds
32        the  tax  liability for that year, whether it exceeds the
33        original liability or the  liability  as  later  amended,
34        such excess may be carried forward and applied to the tax
                            -12-               LRB9007722KDks
 1        liability  of  the  5  taxable years following the excess
 2        credit year.  The credit shall be applied to the earliest
 3        year for which there is a liability. If there  is  credit
 4        from more than one tax year that is available to offset a
 5        liability, earlier credit shall be applied first.
 6             (5)  The Department of Revenue shall promulgate such
 7        rules and regulations as may be deemed necessary to carry
 8        out the purposes of this subsection (g).
 9             (6)  The  credit  shall  be  available  for eligible
10        employees hired on or after January 1, 1986.
11             (h)  Investment credit; High Impact Business.
12             (1)  Subject to subsection (b) of Section 5.5 of the
13        Illinois Enterprise Zone Act, a taxpayer shall be allowed
14        a credit against the tax imposed by subsections  (a)  and
15        (b)  of this Section for investment in qualified property
16        which is placed in service by a  Department  of  Commerce
17        and  Community  Affairs  designated High Impact Business.
18        The credit shall be .5% of the basis for  such  property.
19        The  credit  shall  not  be  available  until the minimum
20        investments in qualified property set  forth  in  Section
21        5.5  of  the  Illinois  Enterprise  Zone  Act  have  been
22        satisfied  and shall not be allowed to the extent that it
23        would reduce a taxpayer's liability for the  tax  imposed
24        by subsections (a) and (b) of this Section to below zero.
25        The  credit  applicable to such minimum investments shall
26        be taken in  the  taxable  year  in  which  such  minimum
27        investments   have   been   completed.   The  credit  for
28        additional investments beyond the minimum investment by a
29        designated high impact business shall be  available  only
30        in  the  taxable  year in which the property is placed in
31        service and shall not be allowed to the  extent  that  it
32        would  reduce  a taxpayer's liability for the tax imposed
33        by subsections (a) and (b) of this Section to below zero.
34        For tax years ending on or after December 31,  1987,  the
                            -13-               LRB9007722KDks
 1        credit  shall  be  allowed  for the tax year in which the
 2        property is placed in service, or, if the amount  of  the
 3        credit  exceeds  the tax liability for that year, whether
 4        it exceeds the original liability  or  the  liability  as
 5        later  amended,  such  excess  may be carried forward and
 6        applied to the tax  liability  of  the  5  taxable  years
 7        following  the  excess  credit year.  The credit shall be
 8        applied to  the  earliest  year  for  which  there  is  a
 9        liability.   If  there  is  credit from more than one tax
10        year that is available to offset a liability, the  credit
11        accruing first in time shall be applied first.
12             Changes  made  in  this subdivision (h)(1) by Public
13        Act 88-670 restore changes made by Public Act 85-1182 and
14        reflect existing law.
15             (2)  The  term  qualified  property  means  property
16        which:
17                  (A)  is  tangible,   whether   new   or   used,
18             including  buildings  and  structural  components of
19             buildings;
20                  (B)  is depreciable pursuant to Section 167  of
21             the  Internal  Revenue  Code,  except  that  "3-year
22             property" as defined in Section 168(c)(2)(A) of that
23             Code is not eligible for the credit provided by this
24             subsection (h);
25                  (C)  is  acquired  by  purchase  as  defined in
26             Section 179(d) of the Internal Revenue Code; and
27                  (D)  is not eligible for  the  Enterprise  Zone
28             Investment Credit provided by subsection (f) of this
29             Section.
30             (3)  The  basis  of  qualified property shall be the
31        basis used to  compute  the  depreciation  deduction  for
32        federal income tax purposes.
33             (4)  If the basis of the property for federal income
34        tax  depreciation purposes is increased after it has been
                            -14-               LRB9007722KDks
 1        placed in service in a federally designated Foreign Trade
 2        Zone or Sub-Zone located in Illinois by the taxpayer, the
 3        amount of such increase shall be deemed  property  placed
 4        in service on the date of such increase in basis.
 5             (5)  The  term  "placed  in  service" shall have the
 6        same meaning as under Section 46 of the Internal  Revenue
 7        Code.
 8             (6)  If  during any taxable year ending on or before
 9        December 31, 1996, any property ceases  to  be  qualified
10        property  in  the  hands of the taxpayer within 48 months
11        after being placed  in  service,  or  the  situs  of  any
12        qualified  property  is  moved outside Illinois within 48
13        months after being placed in  service,  the  tax  imposed
14        under  subsections  (a)  and (b) of this Section for such
15        taxable year shall be increased.  Such increase shall  be
16        determined by (i) recomputing the investment credit which
17        would  have been allowed for the year in which credit for
18        such property was originally allowed by eliminating  such
19        property from such computation, and (ii) subtracting such
20        recomputed  credit  from  the amount of credit previously
21        allowed.  For the  purposes  of  this  paragraph  (6),  a
22        reduction  of  the  basis of qualified property resulting
23        from a redetermination of the  purchase  price  shall  be
24        deemed  a disposition of qualified property to the extent
25        of such reduction.
26             (7)  Beginning with tax years ending after  December
27        31,  1996,  if  a taxpayer qualifies for the credit under
28        this  subsection  (h)  and  thereby  is  granted  a   tax
29        abatement  and the taxpayer relocates its entire facility
30        in violation of the explicit  terms  and  length  of  the
31        contract  under  Section 18-183 of the Property Tax Code,
32        the tax imposed under subsections (a)  and  (b)  of  this
33        Section  shall be increased for the taxable year in which
34        the taxpayer relocated its facility by an amount equal to
                            -15-               LRB9007722KDks
 1        the amount of credit received by the taxpayer under  this
 2        subsection (h).
 3        (i)  A credit shall be allowed against the tax imposed by
 4    subsections  (a)  and (b) of this Section for the tax imposed
 5    by subsections (c) and (d)  of  this  Section.   This  credit
 6    shall   be   computed  by  multiplying  the  tax  imposed  by
 7    subsections (c) and (d) of this Section by  a  fraction,  the
 8    numerator  of  which is base income allocable to Illinois and
 9    the denominator of which is Illinois base income, and further
10    multiplying  the  product  by  the  tax   rate   imposed   by
11    subsections (a) and (b) of this Section.
12        Any  credit  earned  on  or after December 31, 1986 under
13    this subsection which is unused in the  year  the  credit  is
14    computed  because  it  exceeds  the  tax liability imposed by
15    subsections (a) and (b) for that year (whether it exceeds the
16    original liability or the liability as later amended) may  be
17    carried  forward  and applied to the tax liability imposed by
18    subsections (a) and (b) of the 5 taxable years following  the
19    excess  credit  year.   This credit shall be applied first to
20    the earliest year for which there is a liability.   If  there
21    is a credit under this subsection from more than one tax year
22    that  is  available to offset a liability the earliest credit
23    arising under this subsection shall be applied first.
24        If, during any taxable year ending on or  after  December
25    31,  1986, the tax imposed by subsections (c) and (d) of this
26    Section for which a taxpayer has claimed a credit under  this
27    subsection  (i) is reduced, the amount of credit for such tax
28    shall also be reduced.  Such reduction shall be determined by
29    recomputing the credit to take into account the  reduced  tax
30    imposed  by  subsection  (c)  and (d).  If any portion of the
31    reduced amount of credit has  been  carried  to  a  different
32    taxable  year,  an  amended  return  shall  be filed for such
33    taxable year to reduce the amount of credit claimed.
34        (j)  Training expense credit.  Beginning with  tax  years
                            -16-               LRB9007722KDks
 1    ending  on  or  after  December 31, 1986, a taxpayer shall be
 2    allowed a credit against the tax imposed  by  subsection  (a)
 3    and  (b)  under this Section for all amounts paid or accrued,
 4    on behalf of all persons employed by the taxpayer in Illinois
 5    or Illinois residents  employed  outside  of  Illinois  by  a
 6    taxpayer,   for   educational   or   vocational  training  in
 7    semi-technical or technical fields or semi-skilled or skilled
 8    fields,  which  were  deducted  from  gross  income  in   the
 9    computation  of  taxable  income.  The credit against the tax
10    imposed by subsections (a) and (b)  shall  be  1.6%  of  such
11    training  expenses.   For  partners  and  for shareholders of
12    subchapter S corporations, there shall be  allowed  a  credit
13    under this subsection (j) to be determined in accordance with
14    the  determination of income and distributive share of income
15    under Sections 702 and 704 and subchapter S of  the  Internal
16    Revenue Code.
17        Any  credit allowed under this subsection which is unused
18    in the year the credit is earned may be  carried  forward  to
19    each  of the 5 taxable years following the year for which the
20    credit is first computed until it is used.  This credit shall
21    be applied first to the earliest year for which  there  is  a
22    liability.   If  there is a credit under this subsection from
23    more than  one  tax  year  that  is  available  to  offset  a
24    liability  the  earliest credit arising under this subsection
25    shall be applied first.
26        (k)  Research and development credit.
27        Beginning with tax years ending after  July  1,  1990,  a
28    taxpayer shall be allowed a credit against the tax imposed by
29    subsections  (a)  and  (b)  of  this  Section  for increasing
30    research  activities  in  this  State.   The  credit  allowed
31    against the tax imposed by subsections (a) and (b)  shall  be
32    equal to 6 1/2% of the qualifying expenditures for increasing
33    research activities in this State.
34        For    purposes    of    this   subsection,   "qualifying
                            -17-               LRB9007722KDks
 1    expenditures" means the qualifying  expenditures  as  defined
 2    for  the  federal  credit  for increasing research activities
 3    which would be allowable under Section  41  of  the  Internal
 4    Revenue   Code   and  which  are  conducted  in  this  State,
 5    "qualifying expenditures for increasing  research  activities
 6    in  this  State"  means the excess of qualifying expenditures
 7    for the  taxable  year  in  which  incurred  over  qualifying
 8    expenditures  for  the  base period, "qualifying expenditures
 9    for the base period" means  the  average  of  the  qualifying
10    expenditures  for  each  year  in  the base period, and "base
11    period" means the 3 taxable years immediately  preceding  the
12    taxable year for which the determination is being made.
13        Any credit in excess of the tax liability for the taxable
14    year may be carried forward. A taxpayer may elect to have the
15    unused  credit  shown  on  its final completed return carried
16    over as a credit against the tax liability for the  following
17    5  taxable  years  or until it has been fully used, whichever
18    occurs first.
19        If an unused credit is carried forward to  a  given  year
20    from  2  or  more  earlier  years, that credit arising in the
21    earliest year will be applied first against the tax liability
22    for the given year.  If a tax liability for  the  given  year
23    still  remains,  the  credit from the next earliest year will
24    then be applied, and so on, until all credits have been  used
25    or  no  tax  liability  for  the  given  year  remains.   Any
26    remaining  unused  credit  or  credits  then  will be carried
27    forward to the next following year in which a  tax  liability
28    is  incurred, except that no credit can be carried forward to
29    a year which is more than 5 years after the year in which the
30    expense for which the credit is given was incurred.
31        Unless extended by law,  the  credit  shall  not  include
32    costs  incurred  after  December  31,  1999, except for costs
33    incurred pursuant to a binding contract entered  into  on  or
34    before December 31, 1999.
                            -18-               LRB9007722KDks
 1        (l)  Environmental Remediation Tax Credit.
 2             (i)  For  tax   years ending after December 31, 1997
 3        and on or before December 31, 2001, a taxpayer  shall  be
 4        allowed  a  credit against the tax imposed by subsections
 5        (a) and (b) of this Section for certain amounts paid  for
 6        unreimbursed  eligible remediation costs, as specified in
 7        this  subsection.   For   purposes   of   this   Section,
 8        "unreimbursed  eligible  remediation  costs"  means costs
 9        approved by the Illinois Environmental Protection  Agency
10        ("Agency")  under  Section  58.14  of  the  Environmental
11        Protection Act that were paid in performing environmental
12        remediation  at a site for which a No Further Remediation
13        Letter was  issued  by  the  Agency  and  recorded  under
14        Section  58.10  of  the Environmental Protection Act, and
15        does not mean approved eligible  remediation  costs  that
16        are  at  any  time  deducted  under the provisions of the
17        Internal Revenue Code.  The credit must  be  claimed  for
18        the taxable year in which Agency approval of the eligible
19        remediation   costs   is  granted.   In  no  event  shall
20        unreimbursed eligible remediation costs include any costs
21        taken  into  account  in  calculating  an   environmental
22        remediation  credit  granted  against a tax imposed under
23        the provisions of the Internal Revenue Code.  The  credit
24        is  not  available to any taxpayer if the taxpayer or any
25        related party caused or contributed to, in  any  material
26        respect,  a  release  of  regulated substances on, in, or
27        under the site that was identified and addressed  by  the
28        remedial  action pursuant to the Site Remediation Program
29        of the Environmental Protection Act.  After the Pollution
30        Control Board rules are adopted pursuant to the  Illinois
31        Administrative  Procedure  Act for the administration and
32        enforcement  of  Section  58.9   of   the   Environmental
33        Protection  Act, determinations as to credit availability
34        for purposes of this Section  shall  be  made  consistent
                            -19-               LRB9007722KDks
 1        with   those   rules.   For  purposes  of  this  Section,
 2        "taxpayer" includes a person  whose  tax  attributes  the
 3        taxpayer  has  succeeded  to  under  Section  381  of the
 4        Internal Revenue Code and "related  party"  includes  the
 5        persons  disallowed  a deduction for losses by paragraphs
 6        (b), (c), and (f)(1)  of  Section  267  of  the  Internal
 7        Revenue  Code  by  virtue of being a related taxpayer, as
 8        well as any of its partners.  The credit allowed  against
 9        the tax imposed by subsections (a) and (b) shall be equal
10        to  25% of the unreimbursed eligible remediation costs in
11        excess of $100,000 per site,  except  that  the  $100,000
12        threshold  shall  not  apply  to any site contained in an
13        enterprise zone and located in a  census  tract  that  is
14        located  in  a  minor  civil division and place or county
15        that has been determined by the  Department  of  Commerce
16        and Community Affairs to contain a majority of households
17        consisting of low and moderate income persons.  The total
18        credit  allowed  shall not exceed $40,000 per year with a
19        maximum total of $150,000 per  site.   For  partners  and
20        shareholders of subchapter S corporations, there shall be
21        allowed  a  credit under this subsection to be determined
22        in  accordance  with  the  determination  of  income  and
23        distributive share of income under Sections 702  and  704
24        of subchapter S of the Internal Revenue Code.
25             (ii)  A credit allowed under this subsection that is
26        unused  in  the  year the credit is earned may be carried
27        forward to each of the 5 taxable years following the year
28        for which the credit is first earned until  it  is  used.
29        The  term "unused credit" does not include any amounts of
30        unreimbursed eligible remediation costs in excess of  the
31        maximum  credit  per site authorized under paragraph (i).
32        This credit shall be applied first to the  earliest  year
33        for  which  there  is  a liability.  If there is a credit
34        under this subsection from more than one tax year that is
                            -20-               LRB9007722KDks
 1        available to offset  a  liability,  the  earliest  credit
 2        arising  under this subsection shall be applied first.  A
 3        credit allowed under this subsection may  be  sold  to  a
 4        buyer as part of a sale of all or part of the remediation
 5        site  for which the credit was granted.  The purchaser of
 6        a remediation site and the tax credit  shall  succeed  to
 7        the  unused  credit and remaining carry-forward period of
 8        the seller.  To perfect the transfer, the assignor  shall
 9        record  the  transfer  in the chain of title for the site
10        and  provide  written  notice  to  the  Director  of  the
11        Illinois Department of Revenue of the  assignor's  intent
12        to  sell  the  remediation site and the amount of the tax
13        credit to be transferred as a portion of the sale.  In no
14        event may a credit be transferred to any taxpayer if  the
15        taxpayer  or  a related party would not be eligible under
16        the provisions of subsection (i).
17             (iii)  For purposes of this Section, the term "site"
18        shall have the same meaning as under Section 58.2 of  the
19        Environmental Protection Act.
20    (Source:  P.A.  89-235,  eff.  8-4-95;  89-519, eff. 7-18-96;
21    89-591, eff.  8-1-96;  90-123,  eff.  7-21-97;  90-458,  eff.
22    8-17-97; revised 10-16-97.)
23        (35 ILCS 5/202.5 new)
24        Sec.  202.5.  Net income attributable to the period prior
25    to January 1, 1998, and net income attributable to the period
26    after December 31, 1997.
27        (a)  In general.  With respect to the taxable year  of  a
28    taxpayer beginning prior to January 1, 1998, and ending after
29    December  31,  1997, net income for the period after December
30    31, 1997, shall be that amount which bears the same ratio  to
31    the  taxpayer's net income for the entire taxable year as the
32    number of days in such year after December 31, 1997, bears to
33    the total number of days in such year, and the net income for
                            -21-               LRB9007722KDks
 1    the period prior to January 1, 1998,  shall  be  that  amount
 2    which  bears  the same ratio to the taxpayer's net income for
 3    the entire taxable year as the number of days  in  such  year
 4    prior  to  January 1, 1998, bears to the total number of days
 5    in such year.
 6        (b)  Election to attribute  income  and  deduction  items
 7    specifically  to  the  respective  portions of a taxable year
 8    prior to January 1, 1998, and after December 31, 1997. In the
 9    case of a taxpayer with a taxable  year  beginning  prior  to
10    January  1,  1998,  and  ending  after December 31, 1997, the
11    taxpayer may elect, in lieu of the procedure  established  in
12    subsection  (a) of this Section, to determine net income on a
13    specific accounting basis for the 2 portions of  his  taxable
14    year:
15             (i)  from  the beginning of the taxable year through
16        December 31, 1997, and
17             (ii)  from January 1, 1998, through the end  of  the
18        taxable year.
19        If  the  taxpayer  elects  specific accounting under this
20    subsection, there shall be taken into  account  in  computing
21    base  income  for  each of the 2 portions of the taxable year
22    only those items earned, received, paid, incurred or  accrued
23    in  each  such  period.   The  standard exemption provided by
24    Section 204 shall be divided between the  respective  periods
25    in  amounts  which bear the same ratio to the total exemption
26    allowable under Section 204  (determined  without  regard  to
27    this Section) as the total number of days in each such period
28    bears  to  the total number of days in the taxable year.  The
29    election provided by this subsection shall be  made  in  such
30    manner  and  at  such  time as the Department may by forms or
31    regulations prescribe, but shall be made not later  than  the
32    due date (including any extensions thereof) for the filing of
33    the return for the taxable year, and shall be irrevocable.
                            -22-               LRB9007722KDks
 1        (35 ILCS 5/901) (from Ch. 120, par. 9-901)
 2        Sec. 901.  Collection Authority.
 3        (a)  In general.
 4        The  Department  shall  collect the taxes imposed by this
 5    Act.  The Department shall collect certified past  due  child
 6    support   amounts   under   Section   39b52   of   the  Civil
 7    Administrative Code  of  Illinois.   Except  as  provided  in
 8    subsections  (c)  and  (e)  of  this Section, money collected
 9    pursuant to subsections (a) and (b) of Section  201  of  this
10    Act  shall be paid into the General Revenue Fund in the State
11    treasury; money collected pursuant to subsections (c) and (d)
12    of Section 201 of this Act shall be paid  into  the  Personal
13    Property  Tax  Replacement  Fund, a special fund in the State
14    Treasury; and money collected  under  Section  39b52  of  the
15    Civil  Administrative Code of Illinois shall be paid into the
16    Child Support Enforcement Trust Fund, a special fund  outside
17    the State Treasury.
18        (b)  Local Governmental Distributive Fund.
19        Beginning August 1, 1969, and continuing through June 30,
20    1994,  the  Treasurer  shall  transfer  each  month  from the
21    General Revenue Fund to a special fund in the State treasury,
22    to be known as the "Local Government Distributive  Fund",  an
23    amount equal to 1/12 of the net revenue realized from the tax
24    imposed by subsections (a) and (b) of Section 201 of this Act
25    during  the  preceding  month.  Beginning  July  1, 1994, and
26    continuing  through  June  30,  1995,  the  Treasurer   shall
27    transfer  each  month  from  the  General Revenue Fund to the
28    Local Government Distributive Fund an amount equal to 1/11 of
29    the net revenue realized from the tax imposed by  subsections
30    (a)  and  (b) of Section 201 of this Act during the preceding
31    month.  Beginning July 1, 1995, the Treasurer shall  transfer
32    each  month  from  the  General  Revenue  Fund  to  the Local
33    Government Distributive Fund an amount equal to 1/10  of  the
34    net  revenue realized from the tax imposed by subsections (a)
                            -23-               LRB9007722KDks
 1    and (b) of Section 201 of the Illinois Income Tax Act  during
 2    the  preceding  month. Net revenue realized for a month shall
 3    be defined as the revenue from the tax imposed by subsections
 4    (a) and (b) of Section 201 of this Act which is deposited  in
 5    the General Revenue Fund, the Educational Assistance Fund and
 6    the  Income  Tax Surcharge Local Government Distributive Fund
 7    during the month minus the amount paid  out  of  the  General
 8    Revenue  Fund  in  State  warrants  during that same month as
 9    refunds to taxpayers for overpayment of liability  under  the
10    tax imposed by subsections (a) and (b) of Section 201 of this
11    Act.
12        (c)  Deposits Into Income Tax Refund Fund.
13             (1)  Beginning  on  January  1, 1989 and thereafter,
14        the Department shall deposit a percentage of the  amounts
15        collected  pursuant  to  subsections (a) and (b)(1), (2),
16        and (3), (4), and (5) of Section 201 of this Act  into  a
17        fund in the State treasury known as the Income Tax Refund
18        Fund.   The  Department  shall deposit 6% of such amounts
19        during the period beginning January 1, 1989 and ending on
20        June 30, 1989.  Beginning with State fiscal year 1990 and
21        for each fiscal year thereafter, the percentage deposited
22        into the Income Tax Refund  Fund  during  a  fiscal  year
23        shall  be  the  Annual Percentage.  The Annual Percentage
24        shall be calculated as a fraction, the numerator of which
25        shall be the amount of refunds approved  for  payment  by
26        the  Department  during  the  preceding  fiscal year as a
27        result of overpayment of tax liability under  subsections
28        (a) and (b)(1), (2), and (3), (4), and (5) of Section 201
29        of  this  Act  plus  the amount of such refunds remaining
30        approved but unpaid at the end of  the  preceding  fiscal
31        year  minus  any  surplus which remains on deposit in the
32        Income Tax Refund Fund at the end of the preceding  year,
33        the  denominator of which shall be the amounts which will
34        be collected pursuant to subsections (a) and (b)(1), (2),
                            -24-               LRB9007722KDks
 1        and (3), (4), and (5) of Section 201 of this  Act  during
 2        the preceding fiscal year.  The Director of Revenue shall
 3        certify  the  Annual Percentage to the Comptroller on the
 4        last  business  day  of  the  fiscal   year   immediately
 5        preceding   the  fiscal  year  for  which  is  it  to  be
 6        effective.
 7             (2)  Beginning on January 1,  1989  and  thereafter,
 8        the  Department shall deposit a percentage of the amounts
 9        collected pursuant to subsections (a)  and  (b)(6),  (7),
10        and  (8), (9), and 10, (c) and (d) of Section 201 of this
11        Act into a fund in the State treasury known as the Income
12        Tax Refund Fund.  The Department  shall  deposit  18%  of
13        such  amounts during the period beginning January 1, 1989
14        and ending on June 30, 1989.  Beginning with State fiscal
15        year 1990  and  for  each  fiscal  year  thereafter,  the
16        percentage  deposited  into  the  Income  Tax Refund Fund
17        during a fiscal year shall be the Annual Percentage.  The
18        Annual Percentage shall be calculated as a fraction,  the
19        numerator  of  which  shall  be  the  amount  of  refunds
20        approved   for  payment  by  the  Department  during  the
21        preceding fiscal year as a result of overpayment  of  tax
22        liability under subsections (a) and (b)(6), (7), and (8),
23        (9),  and 10, (c) and (d) of Section 201 of this Act plus
24        the amount of such refunds remaining approved but  unpaid
25        at  the end of the preceding fiscal year, the denominator
26        of which shall be the amounts  which  will  be  collected
27        pursuant  to  subsections  (a)  and (b)(6), (7), and (8),
28        (9), and (10), (c) and (d) of Section  201  of  this  Act
29        during  the  preceding  fiscal  year.   The  Director  of
30        Revenue  shall  certify  the  Annual  Percentage  to  the
31        Comptroller  on  the last business day of the fiscal year
32        immediately preceding the fiscal year for which it is  to
33        be effective.
34        (d)  Expenditures from Income Tax Refund Fund.
                            -25-               LRB9007722KDks
 1             (1)  Beginning  January 1, 1989, money in the Income
 2        Tax Refund Fund shall be  expended  exclusively  for  the
 3        purpose  of  paying refunds resulting from overpayment of
 4        tax liability under Section  201  of  this  Act  and  for
 5        making transfers pursuant to this subsection (d).
 6             (2)  The  Director  shall  order  payment of refunds
 7        resulting from overpayment of tax liability under Section
 8        201 of this Act from the Income Tax Refund Fund  only  to
 9        the extent that amounts collected pursuant to Section 201
10        of this Act and transfers pursuant to this subsection (d)
11        have been deposited and retained in the Fund.
12             (3)  On  the  last business day of each fiscal year,
13        the  Director  shall  order  transferred  and  the  State
14        Treasurer and State Comptroller shall transfer  from  the
15        Income  Tax  Refund  Fund  to  the  Personal Property Tax
16        Replacement Fund an amount, certified by the Director  to
17        the  Comptroller,  equal  to  the  excess  of  the amount
18        collected pursuant to subsections (c) and (d) of  Section
19        201 of this Act deposited into the Income Tax Refund Fund
20        during  the  fiscal  year  over  the  amount  of  refunds
21        resulting   from   overpayment  of  tax  liability  under
22        subsections (c) and (d) of Section 201 of this  Act  paid
23        from the Income Tax Refund Fund during the fiscal year.
24             (4)  On  the  last business day of each fiscal year,
25        the  Director  shall  order  transferred  and  the  State
26        Treasurer and State Comptroller shall transfer  from  the
27        Personal  Property Tax Replacement Fund to the Income Tax
28        Refund Fund an amount, certified by the Director  to  the
29        Comptroller, equal to the excess of the amount of refunds
30        resulting   from   overpayment  of  tax  liability  under
31        subsections (c) and (d) of Section 201 of this  Act  paid
32        from  the  Income  Tax Refund Fund during the fiscal year
33        over the amount collected pursuant to subsections (c) and
34        (d) of Section 201 of this Act deposited into the  Income
                            -26-               LRB9007722KDks
 1        Tax Refund Fund during the fiscal year.
 2             (5)  This  Act  shall  constitute an irrevocable and
 3        continuing appropriation from the Income Tax Refund  Fund
 4        for  the  purpose of paying refunds upon the order of the
 5        Director  in  accordance  with  the  provisions  of  this
 6        Section.
 7        (e)  Deposits into the Education Assistance Fund and  the
 8    Income Tax Surcharge Local Government Distributive Fund.
 9        On July 1, 1991, and thereafter, of the amounts collected
10    pursuant  to  subsections  (a) and (b) of Section 201 of this
11    Act minus deposits into  the  Income  Tax  Refund  Fund,  the
12    Department  shall  deposit 7.3% into the Education Assistance
13    Fund in the State Treasury.   Beginning  July  1,  1991,  and
14    continuing through January 31, 1993, of the amounts collected
15    pursuant  to  subsections  (a)  and (b) of Section 201 of the
16    Illinois Income Tax Act, minus deposits into the  Income  Tax
17    Refund  Fund,  the  Department  shall  deposit  3.0% into the
18    Income Tax Surcharge Local Government  Distributive  Fund  in
19    the   State   Treasury.    Beginning  February  1,  1993  and
20    continuing through June 30, 1993, of  the  amounts  collected
21    pursuant  to  subsections  (a)  and (b) of Section 201 of the
22    Illinois Income Tax Act, minus deposits into the  Income  Tax
23    Refund  Fund,  the  Department  shall  deposit  4.4% into the
24    Income Tax Surcharge Local Government  Distributive  Fund  in
25    the  State  Treasury.  Beginning July 1, 1993, and continuing
26    through  June  30,  1994,  of  the  amounts  collected  under
27    subsections (a) and (b) of Section 201  of  this  Act,  minus
28    deposits  into  the  Income  Tax  Refund Fund, the Department
29    shall deposit 1.475% into  the  Income  Tax  Surcharge  Local
30    Government Distributive Fund in the State Treasury.
31    (Source: P.A. 88-89; 89-6, eff. 12-31-95.)
32        Section  99.   Effective  date.   This  Act  takes effect
33    January 1, 1998.

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