State of Illinois
90th General Assembly
Legislation

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[ Introduced ][ Senate Amendment 001 ][ Senate Amendment 002 ]

90_SB0020eng

      35 ILCS 5/201             from Ch. 120, par. 2-201
          Amends  the  Illinois  Income  Tax  Act.   Provides  that
      partners and shareholders of Subchapter S corporations  shall
      be  allowed  the  jobs  tax credit.  Provides that the credit
      shall be determined in accordance with the  determination  of
      income  and  distributive  share of income under Sections 702
      and 704 and Subchapter S of the Internal Revenue Code.
                                                     LRB9000090KRpk
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 1        AN ACT to amend the Illinois Income Tax Act  by  changing
 2    Section 201.
 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 Section 201 as follows:
 7        (35 ILCS 5/201) (from Ch. 120, par. 2-201)
 8        Sec. 201.  Tax Imposed.
 9        (a)  In  general.  A tax measured by net income is hereby
10    imposed on every individual, corporation,  trust  and  estate
11    for  each  taxable  year  ending  after  July 31, 1969 on the
12    privilege of earning or receiving income in or as a  resident
13    of  this  State.  Such  tax shall be in addition to all other
14    occupation or privilege taxes imposed by this State or by any
15    municipal corporation or political subdivision thereof.
16        (b)  Rates. The tax imposed by  subsection  (a)  of  this
17    Section shall be determined as follows:
18             (1)  In  the case of an individual, trust or estate,
19        for taxable years ending prior to July 1, 1989, an amount
20        equal to 2 1/2% of the  taxpayer's  net  income  for  the
21        taxable year.
22             (2)  In  the case of an individual, trust or estate,
23        for taxable years beginning prior to  July  1,  1989  and
24        ending after June 30, 1989, an amount equal to the sum of
25        (i)  2  1/2%  of the taxpayer's net income for the period
26        prior to July 1, 1989, as calculated under Section 202.3,
27        and (ii) 3% of the taxpayer's net income for  the  period
28        after June 30, 1989, as calculated under Section 202.3.
29             (3)  In  the case of an individual, trust or estate,
30        for taxable years  beginning  after  June  30,  1989,  an
31        amount  equal  to 3% of the taxpayer's net income for the
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 1        taxable year.
 2             (4)  (Blank).
 3             (5)  (Blank).
 4             (6)  In the case of a corporation, for taxable years
 5        ending prior to July 1, 1989, an amount equal  to  4%  of
 6        the taxpayer's net income for the taxable year.
 7             (7)  In the case of a corporation, for taxable years
 8        beginning prior to July 1, 1989 and ending after June 30,
 9        1989,  an  amount  equal  to  the  sum  of  (i) 4% of the
10        taxpayer's net income for the period  prior  to  July  1,
11        1989, as calculated under Section 202.3, and (ii) 4.8% of
12        the  taxpayer's  net income for the period after June 30,
13        1989, as calculated under Section 202.3.
14             (8)  In the case of a corporation, for taxable years
15        beginning after June 30, 1989, an amount equal to 4.8% of
16        the taxpayer's net income for the taxable year.
17        (c)  Beginning  on  July  1,  1979  and  thereafter,   in
18    addition to such income tax, there is also hereby imposed the
19    Personal  Property Tax Replacement Income Tax measured by net
20    income  on  every   corporation   (including   Subchapter   S
21    corporations),  partnership  and trust, for each taxable year
22    ending after June 30, 1979.  Such taxes are  imposed  on  the
23    privilege  of earning or receiving income in or as a resident
24    of this State.  The Personal Property Tax Replacement  Income
25    Tax  shall  be  in  addition  to  the  income  tax imposed by
26    subsections (a) and (b) of this Section and  in  addition  to
27    all other occupation or privilege taxes imposed by this State
28    or  by  any  municipal  corporation  or political subdivision
29    thereof.
30        (d)  Additional Personal Property Tax Replacement  Income
31    Tax  Rates.  The personal property tax replacement income tax
32    imposed by this subsection and subsection (c) of this Section
33    in the case of a  corporation,  other  than  a  Subchapter  S
34    corporation,  shall be an additional amount equal to 2.85% of
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 1    such taxpayer's net income for the taxable year, except  that
 2    beginning  on  January  1,  1981, and thereafter, the rate of
 3    2.85% specified in this subsection shall be reduced to  2.5%,
 4    and  in  the  case  of a partnership, trust or a Subchapter S
 5    corporation shall be an additional amount equal  to  1.5%  of
 6    such taxpayer's net income for the taxable year.
 7        (e)  Investment  credit.   A  taxpayer shall be allowed a
 8    credit against the Personal Property Tax  Replacement  Income
 9    Tax for investment in qualified property.
10             (1)  A  taxpayer  shall be allowed a credit equal to
11        .5% of the basis of qualified property placed in  service
12        during the taxable year, provided such property is placed
13        in  service  on  or  after  July 1, 1984.  There shall be
14        allowed an additional credit equal to .5% of the basis of
15        qualified property placed in service during  the  taxable
16        year,  provided  such property is placed in service on or
17        after July 1, 1986, and the  taxpayer's  base  employment
18        within  Illinois  has  increased  by  1% or more over the
19        preceding year as determined by the taxpayer's employment
20        records filed with the Illinois Department of  Employment
21        Security.   Taxpayers  who  are  new to Illinois shall be
22        deemed to have met the 1% growth in base  employment  for
23        the first year in which they file employment records with
24        the  Illinois  Department  of  Employment  Security.  The
25        provisions added to this Section by  Public  Act  85-1200
26        (and restored by Public Act 87-895) shall be construed as
27        declaratory  of  existing law and not as a new enactment.
28        If, in any year, the increase in base  employment  within
29        Illinois  over  the  preceding  year is less than 1%, the
30        additional credit shall be  limited  to  that  percentage
31        times  a  fraction, the numerator of which is .5% and the
32        denominator of which is 1%, but  shall  not  exceed  .5%.
33        The  investment credit shall not be allowed to the extent
34        that it would reduce a taxpayer's liability  in  any  tax
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 1        year  below  zero,  nor  may  any  credit  for  qualified
 2        property  be  allowed for any year other than the year in
 3        which the property was placed in service in Illinois. For
 4        tax years ending on or after December 31, 1987, and on or
 5        before December 31, 1988, the credit shall be allowed for
 6        the tax year in which the property is placed in  service,
 7        or, if the amount of the credit exceeds the tax liability
 8        for  that year, whether it exceeds the original liability
 9        or the liability as later amended,  such  excess  may  be
10        carried forward and applied to the tax liability of the 5
11        taxable  years  following  the excess credit years if the
12        taxpayer (i) makes investments which cause  the  creation
13        of  a  minimum  of  2,000  full-time  equivalent  jobs in
14        Illinois,  (ii)  is  located  in   an   enterprise   zone
15        established  pursuant to the Illinois Enterprise Zone Act
16        and (iii) is certified by the Department of Commerce  and
17        Community  Affairs  as  complying  with  the requirements
18        specified in clause (i) and (ii) by July  1,  1986.   The
19        Department of Commerce and Community Affairs shall notify
20        the  Department  of  Revenue  of  all such certifications
21        immediately. For tax  years  ending  after  December  31,
22        1988,  the  credit  shall  be allowed for the tax year in
23        which the property is  placed  in  service,  or,  if  the
24        amount  of  the credit exceeds the tax liability for that
25        year, whether it exceeds the original  liability  or  the
26        liability  as  later  amended, such excess may be carried
27        forward and applied to the tax liability of the 5 taxable
28        years following the excess credit years. The credit shall
29        be applied to the earliest year  for  which  there  is  a
30        liability. If there is credit from more than one tax year
31        that  is  available to offset a liability, earlier credit
32        shall be applied first.
33             (2)  The term "qualified  property"  means  property
34        which:
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 1                  (A)  is   tangible,   whether   new   or  used,
 2             including buildings  and  structural  components  of
 3             buildings  and signs that are real property, but not
 4             including land or improvements to real property that
 5             are not a structural component of a building such as
 6             landscaping,  sewer  lines,  local   access   roads,
 7             fencing, parking lots, and other appurtenances;
 8                  (B)  is  depreciable pursuant to Section 167 of
 9             the  Internal  Revenue  Code,  except  that  "3-year
10             property" as defined in Section 168(c)(2)(A) of that
11             Code is not eligible for the credit provided by this
12             subsection (e);
13                  (C)  is acquired  by  purchase  as  defined  in
14             Section 179(d) of the Internal Revenue Code;
15                  (D)  is  used  in Illinois by a taxpayer who is
16             primarily engaged in  manufacturing,  or  in  mining
17             coal or fluorite, or in retailing; and
18                  (E)  has  not  previously been used in Illinois
19             in such a manner and  by  such  a  person  as  would
20             qualify  for  the credit provided by this subsection
21             (e) or subsection (f).
22             (3)  For   purposes   of   this   subsection    (e),
23        "manufacturing" means the material staging and production
24        of  tangible  personal  property  by  procedures commonly
25        regarded as manufacturing,  processing,  fabrication,  or
26        assembling  which changes some existing material into new
27        shapes, new qualities, or new combinations.  For purposes
28        of this subsection (e) the term "mining" shall  have  the
29        same  meaning  as  the term "mining" in Section 613(c) of
30        the  Internal  Revenue  Code.   For  purposes   of   this
31        subsection  (e),  the  term "retailing" means the sale of
32        tangible  personal  property  or  services  rendered   in
33        conjunction  with  the sale of tangible consumer goods or
34        commodities.
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 1             (4)  The basis of qualified property  shall  be  the
 2        basis  used  to  compute  the  depreciation deduction for
 3        federal income tax purposes.
 4             (5)  If the basis of the property for federal income
 5        tax depreciation purposes is increased after it has  been
 6        placed in service in Illinois by the taxpayer, the amount
 7        of  such  increase  shall  be  deemed  property placed in
 8        service on the date of such increase in basis.
 9             (6)  The term "placed in  service"  shall  have  the
10        same  meaning as under Section 46 of the Internal Revenue
11        Code.
12             (7)  If during any taxable year, any property ceases
13        to be qualified property in the  hands  of  the  taxpayer
14        within  48  months  after being placed in service, or the
15        situs of any qualified property is moved outside Illinois
16        within 48 months  after  being  placed  in  service,  the
17        Personal  Property  Tax  Replacement  Income Tax for such
18        taxable year shall be increased.  Such increase shall  be
19        determined by (i) recomputing the investment credit which
20        would  have been allowed for the year in which credit for
21        such property was originally allowed by eliminating  such
22        property from such computation and, (ii) subtracting such
23        recomputed  credit  from  the amount of credit previously
24        allowed. For  the  purposes  of  this  paragraph  (7),  a
25        reduction  of  the  basis of qualified property resulting
26        from a redetermination of the  purchase  price  shall  be
27        deemed  a disposition of qualified property to the extent
28        of such reduction.
29             (8)  Unless the investment  credit  is  extended  by
30        law,  the  basis  of qualified property shall not include
31        costs incurred after December 31, 2003, except for  costs
32        incurred  pursuant  to a binding contract entered into on
33        or before December 31, 2003.
34        (f)  Investment credit; Enterprise Zone.
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 1             (1)  A taxpayer shall be allowed  a  credit  against
 2        the  tax  imposed  by  subsections  (a)  and  (b) of this
 3        Section for investment in  qualified  property  which  is
 4        placed  in service in an Enterprise Zone created pursuant
 5        to the Illinois Enterprise Zone Act.  For  partners,  and
 6        for  shareholders  of  Subchapter  S  corporations,   and
 7        owners of limited liability companies, if  the  liability
 8        company  is  treated  as  a  partnership  for purposes of
 9        federal and State income taxation, there shall be allowed
10        a credit under this subsection (f) to  be  determined  in
11        accordance   with   the   determination   of  income  and
12        distributive share of income under Sections 702  and  704
13        and Subchapter S of the Internal Revenue Code. The credit
14        shall  be .5% of the basis for such property.  The credit
15        shall be available only in the taxable year in which  the
16        property  is placed in service in the Enterprise Zone and
17        shall not be allowed to the extent that it would reduce a
18        taxpayer's liability for the tax imposed  by  subsections
19        (a)  and (b) of this Section to below zero. For tax years
20        ending on or after December 31, 1985, the credit shall be
21        allowed for the tax year in which the property is  placed
22        in  service,  or, if the amount of the credit exceeds the
23        tax liability for  that  year,  whether  it  exceeds  the
24        original  liability  or  the  liability as later amended,
25        such excess may be carried forward and applied to the tax
26        liability of the 5 taxable  years  following  the  excess
27        credit  year. The credit shall be applied to the earliest
28        year for which there is a liability. If there  is  credit
29        from more than one tax year that is available to offset a
30        liability,  the  credit  accruing  first in time shall be
31        applied first.
32             (2)  The  term  qualified  property  means  property
33        which:
34                  (A)  is  tangible,   whether   new   or   used,
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 1             including  buildings  and  structural  components of
 2             buildings;
 3                  (B)  is depreciable pursuant to Section 167  of
 4             the  Internal  Revenue  Code,  except  that  "3-year
 5             property" as defined in Section 168(c)(2)(A) of that
 6             Code is not eligible for the credit provided by this
 7             subsection (f);
 8                  (C)  is  acquired  by  purchase  as  defined in
 9             Section 179(d) of the Internal Revenue Code;
10                  (D)  is used in  the  Enterprise  Zone  by  the
11             taxpayer; and
12                  (E)  has  not  been previously used in Illinois
13             in such a manner and  by  such  a  person  as  would
14             qualify  for  the credit provided by this subsection
15             (f) or subsection (e).
16             (3)  The basis of qualified property  shall  be  the
17        basis  used  to  compute  the  depreciation deduction for
18        federal income tax purposes.
19             (4)  If the basis of the property for federal income
20        tax depreciation purposes is increased after it has  been
21        placed in service in the Enterprise Zone by the taxpayer,
22        the  amount  of  such  increase  shall be deemed property
23        placed in service on the date of such increase in basis.
24             (5)  The term "placed in  service"  shall  have  the
25        same  meaning as under Section 46 of the Internal Revenue
26        Code.
27             (6)  If during any taxable year, any property ceases
28        to be qualified property in the  hands  of  the  taxpayer
29        within  48  months  after being placed in service, or the
30        situs of any qualified  property  is  moved  outside  the
31        Enterprise  Zone  within  48 months after being placed in
32        service, the tax imposed under subsections (a) and (b) of
33        this Section for such taxable year  shall  be  increased.
34        Such  increase shall be determined by (i) recomputing the
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 1        investment credit which would have been allowed  for  the
 2        year  in  which  credit  for such property was originally
 3        allowed  by   eliminating   such   property   from   such
 4        computation,  and (ii) subtracting such recomputed credit
 5        from the amount of credit previously  allowed.   For  the
 6        purposes  of this paragraph (6), a reduction of the basis
 7        of qualified property resulting from a redetermination of
 8        the purchase price  shall  be  deemed  a  disposition  of
 9        qualified property to the extent of such reduction.
10             (g)  Jobs  Tax  Credit;  Enterprise Zone and Foreign
11    Trade Zone or Sub-Zone.
12             (1)  A taxpayer conducting a trade or business in an
13        enterprise zone or a High Impact Business  designated  by
14        the   Department   of   Commerce  and  Community  Affairs
15        conducting a trade or business in a federally  designated
16        Foreign  Trade Zone or Sub-Zone shall be allowed a credit
17        against the tax imposed by subsections  (a)  and  (b)  of
18        this  Section in the amount of $500 per eligible employee
19        hired to work in the zone  during  the  taxable  year.  A
20        partnership or Subchapter S corporation that is otherwise
21        eligible  for  the  credit provided in this paragraph may
22        pass  the  credit  through  to  the   partners   of   the
23        partnership or the shareholders of the corporation in the
24        same  manner  as  partnership or Subchapter S corporation
25        income is distributed to partners and shareholders  under
26        the  Internal  Revenue  Code.   The  credit  may  then be
27        applied against the  tax  liability  of  the  partner  or
28        shareholder   under  subsections  (a)  and  (b)  of  this
29        Section.
30             (2)  To qualify for the credit:
31                  (A)  the taxpayer must hire 5 or more  eligible
32             employees to work in an enterprise zone or federally
33             designated Foreign Trade Zone or Sub-Zone during the
34             taxable year;
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 1                  (B)  the taxpayer's total employment within the
 2             enterprise  zone  or  federally  designated  Foreign
 3             Trade  Zone  or  Sub-Zone must increase by 5 or more
 4             full-time employees beyond  the  total  employed  in
 5             that  zone  at  the end of the previous tax year for
 6             which a jobs  tax  credit  under  this  Section  was
 7             taken,  or beyond the total employed by the taxpayer
 8             as of December 31, 1985, whichever is later; and
 9                  (C)  the eligible employees  must  be  employed
10             180 consecutive days in order to be deemed hired for
11             purposes of this subsection.
12             (3)  An  "eligible  employee"  means an employee who
13        is:
14                  (A)  Certified by the  Department  of  Commerce
15             and  Community  Affairs  as  "eligible for services"
16             pursuant to regulations  promulgated  in  accordance
17             with  Title  II of the Job Training Partnership Act,
18             Training Services for the Disadvantaged or Title III
19             of the Job Training Partnership Act, Employment  and
20             Training Assistance for Dislocated Workers Program.
21                  (B)  Hired   after   the   enterprise  zone  or
22             federally designated Foreign Trade Zone or  Sub-Zone
23             was  designated or the trade or business was located
24             in that zone, whichever is later.
25                  (C)  Employed in the enterprise zone or Foreign
26             Trade Zone or Sub-Zone. An employee is  employed  in
27             an  enterprise  zone or federally designated Foreign
28             Trade Zone or Sub-Zone if his services are  rendered
29             there  or  it  is  the  base  of  operations for the
30             services performed.
31                  (D)  A full-time employee working  30  or  more
32             hours per week.
33             (4)  For  tax  years ending on or after December 31,
34        1985 and prior to December 31, 1988, the credit shall  be
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 1        allowed  for the tax year in which the eligible employees
 2        are hired.  For tax years ending on or after December 31,
 3        1988, the credit  shall  be  allowed  for  the  tax  year
 4        immediately  following the tax year in which the eligible
 5        employees are hired.  If the amount of the credit exceeds
 6        the tax liability for that year, whether it  exceeds  the
 7        original  liability  or  the  liability as later amended,
 8        such excess may be carried forward and applied to the tax
 9        liability of the 5 taxable  years  following  the  excess
10        credit year.  The credit shall be applied to the earliest
11        year  for  which there is a liability. If there is credit
12        from more than one tax year that is available to offset a
13        liability, earlier credit shall be applied first.
14             (5)  The Department of Revenue shall promulgate such
15        rules and regulations as may be deemed necessary to carry
16        out the purposes of this subsection (g).
17             (6)  The credit  shall  be  available  for  eligible
18        employees hired on or after January 1, 1986.
19             (h)  Investment credit; High Impact Business.
20             (1)  Subject to subsection (b) of Section 5.5 of the
21        Illinois Enterprise Zone Act, a taxpayer shall be allowed
22        a  credit  against the tax imposed by subsections (a) and
23        (b) of this Section for investment in qualified  property
24        which  is  placed  in service by a Department of Commerce
25        and Community Affairs designated  High  Impact  Business.
26        The  credit  shall be .5% of the basis for such property.
27        The credit shall  not  be  available  until  the  minimum
28        investments  in  qualified  property set forth in Section
29        5.5  of  the  Illinois  Enterprise  Zone  Act  have  been
30        satisfied and shall not be allowed to the extent that  it
31        would  reduce  a taxpayer's liability for the tax imposed
32        by subsections (a) and (b) of this Section to below zero.
33        The credit applicable to such minimum  investments  shall
34        be  taken  in  the  taxable  year  in  which such minimum
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 1        investments  have  been  completed.    The   credit   for
 2        additional investments beyond the minimum investment by a
 3        designated  high  impact business shall be available only
 4        in the taxable year in which the property  is  placed  in
 5        service  and  shall  not be allowed to the extent that it
 6        would reduce a taxpayer's liability for the  tax  imposed
 7        by subsections (a) and (b) of this Section to below zero.
 8        For  tax  years ending on or after December 31, 1987, the
 9        credit shall be allowed for the tax  year  in  which  the
10        property  is  placed in service, or, if the amount of the
11        credit exceeds the tax liability for that  year,  whether
12        it  exceeds  the  original  liability or the liability as
13        later amended, such excess may  be  carried  forward  and
14        applied  to  the  tax  liability  of  the 5 taxable years
15        following the excess credit year.  The  credit  shall  be
16        applied  to  the  earliest  year  for  which  there  is a
17        liability.  If there is credit from  more  than  one  tax
18        year  that is available to offset a liability, the credit
19        accruing first in time shall be applied first.
20             Changes made in this subdivision  (h)(1)  by  Public
21        Act 88-670 restore changes made by Public Act 85-1182 and
22        reflect existing law.
23             (2)  The  term  qualified  property  means  property
24        which:
25                  (A)  is   tangible,   whether   new   or  used,
26             including buildings  and  structural  components  of
27             buildings;
28                  (B)  is  depreciable pursuant to Section 167 of
29             the  Internal  Revenue  Code,  except  that  "3-year
30             property" as defined in Section 168(c)(2)(A) of that
31             Code is not eligible for the credit provided by this
32             subsection (h);
33                  (C)  is acquired  by  purchase  as  defined  in
34             Section 179(d) of the Internal Revenue Code; and
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 1                  (D)  is  not  eligible  for the Enterprise Zone
 2             Investment Credit provided by subsection (f) of this
 3             Section.
 4             (3)  The basis of qualified property  shall  be  the
 5        basis  used  to  compute  the  depreciation deduction for
 6        federal income tax purposes.
 7             (4)  If the basis of the property for federal income
 8        tax depreciation purposes is increased after it has  been
 9        placed in service in a federally designated Foreign Trade
10        Zone or Sub-Zone located in Illinois by the taxpayer, the
11        amount  of  such increase shall be deemed property placed
12        in service on the date of such increase in basis.
13             (5)  The term "placed in  service"  shall  have  the
14        same  meaning as under Section 46 of the Internal Revenue
15        Code.
16             (6)  If during any taxable year ending on or  before
17        December  31,  1996,  any property ceases to be qualified
18        property in the hands of the taxpayer  within  48  months
19        after  being  placed  in  service,  or  the  situs of any
20        qualified property is moved outside  Illinois  within  48
21        months  after  being  placed  in service, the tax imposed
22        under subsections (a) and (b) of this  Section  for  such
23        taxable  year shall be increased.  Such increase shall be
24        determined by (i) recomputing the investment credit which
25        would have been allowed for the year in which credit  for
26        such  property was originally allowed by eliminating such
27        property from such computation, and (ii) subtracting such
28        recomputed credit from the amount  of  credit  previously
29        allowed.   For  the  purposes  of  this  paragraph (6), a
30        reduction of the basis of  qualified  property  resulting
31        from  a  redetermination  of  the purchase price shall be
32        deemed a disposition of qualified property to the  extent
33        of such reduction.
34             (7)  Beginning  with tax years ending after December
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 1        31, 1996, if a taxpayer qualifies for  the  credit  under
 2        this   subsection  (h)  and  thereby  is  granted  a  tax
 3        abatement and the taxpayer relocates its entire  facility
 4        in  violation  of  the  explicit  terms and length of the
 5        contract under Section 18-183 of the Property  Tax  Code,
 6        the  tax  imposed  under  subsections (a) and (b) of this
 7        Section shall be increased for the taxable year in  which
 8        the taxpayer relocated its facility by an amount equal to
 9        the  amount of credit received by the taxpayer under this
10        subsection (h).
11        (i)  A credit shall be allowed against the tax imposed by
12    subsections (a) and (b) of this Section for the  tax  imposed
13    by  subsections  (c)  and  (d)  of this Section.  This credit
14    shall  be  computed  by  multiplying  the  tax   imposed   by
15    subsections  (c)  and  (d) of this Section by a fraction, the
16    numerator of which is base income allocable to  Illinois  and
17    the denominator of which is Illinois base income, and further
18    multiplying   the   product   by  the  tax  rate  imposed  by
19    subsections (a) and (b) of this Section.
20        Any credit earned on or after  December  31,  1986  under
21    this  subsection  which  is  unused in the year the credit is
22    computed because it exceeds  the  tax  liability  imposed  by
23    subsections (a) and (b) for that year (whether it exceeds the
24    original  liability or the liability as later amended) may be
25    carried forward and applied to the tax liability  imposed  by
26    subsections  (a) and (b) of the 5 taxable years following the
27    excess credit year.  This credit shall be  applied  first  to
28    the  earliest  year for which there is a liability.  If there
29    is a credit under this subsection from more than one tax year
30    that is available to offset a liability the  earliest  credit
31    arising under this subsection shall be applied first.
32        If,  during  any taxable year ending on or after December
33    31, 1986, the tax imposed by subsections (c) and (d) of  this
34    Section  for which a taxpayer has claimed a credit under this
SB20 Engrossed              -15-               LRB9000090KRpk
 1    subsection (i) is reduced, the amount of credit for such  tax
 2    shall also be reduced.  Such reduction shall be determined by
 3    recomputing  the  credit to take into account the reduced tax
 4    imposed by subsection (c) and (d).  If  any  portion  of  the
 5    reduced  amount  of  credit  has  been carried to a different
 6    taxable year, an amended  return  shall  be  filed  for  such
 7    taxable year to reduce the amount of credit claimed.
 8        (j)  Training  expense  credit.  Beginning with tax years
 9    ending on or after December 31, 1986,  a  taxpayer  shall  be
10    allowed  a  credit  against the tax imposed by subsection (a)
11    and (b) under this Section for all amounts paid  or  accrued,
12    on behalf of all persons employed by the taxpayer in Illinois
13    or  Illinois  residents  employed  outside  of  Illinois by a
14    taxpayer,  for  educational   or   vocational   training   in
15    semi-technical or technical fields or semi-skilled or skilled
16    fields,   which  were  deducted  from  gross  income  in  the
17    computation of taxable income.  The credit  against  the  tax
18    imposed  by  subsections  (a)  and  (b) shall be 1.6% of such
19    training expenses.  For partners,  and  for  shareholders  of
20    subchapter  S  corporations,  and owners of limited liability
21    companies,  if  the  liability  company  is  treated   as   a
22    partnership   for   purposes  of  federal  and  State  income
23    taxation,  there  shall  be  allowed  a  credit  under   this
24    subsection  (j)  to  be  determined  in  accordance  with the
25    determination of income  and  distributive  share  of  income
26    under  Sections  702 and 704 and subchapter S of the Internal
27    Revenue Code.
28        Any credit allowed under this subsection which is  unused
29    in  the  year  the credit is earned may be carried forward to
30    each of the 5 taxable years following the year for which  the
31    credit is first computed until it is used.  This credit shall
32    be  applied  first  to the earliest year for which there is a
33    liability.  If there is a credit under this  subsection  from
34    more  than  one  tax  year  that  is  available  to  offset a
SB20 Engrossed              -16-               LRB9000090KRpk
 1    liability the earliest credit arising under  this  subsection
 2    shall be applied first.
 3        (k)  Research and development credit.
 4        Beginning  with  tax  years  ending after July 1, 1990, a
 5    taxpayer shall be allowed a credit against the tax imposed by
 6    subsections (a)  and  (b)  of  this  Section  for  increasing
 7    research  activities  in  this  State.   The  credit  allowed
 8    against  the  tax imposed by subsections (a) and (b) shall be
 9    equal to 6 1/2% of the qualifying expenditures for increasing
10    research activities in this State.
11        For   purposes   of    this    subsection,    "qualifying
12    expenditures"  means  the  qualifying expenditures as defined
13    for the federal credit  for  increasing  research  activities
14    which  would  be  allowable  under Section 41 of the Internal
15    Revenue  Code  and  which  are  conducted  in   this   State,
16    "qualifying  expenditures  for increasing research activities
17    in this State" means the excess  of  qualifying  expenditures
18    for  the  taxable  year  in  which  incurred  over qualifying
19    expenditures for the base  period,  "qualifying  expenditures
20    for  the  base  period"  means  the average of the qualifying
21    expenditures for each year in  the  base  period,  and  "base
22    period"  means  the 3 taxable years immediately preceding the
23    taxable year for which the determination is being made.
24        Any credit in excess of the tax liability for the taxable
25    year may be carried forward. A taxpayer may elect to have the
26    unused credit shown on its  final  completed  return  carried
27    over  as a credit against the tax liability for the following
28    5 taxable years or until it has been  fully  used,  whichever
29    occurs first.
30        If  an  unused  credit is carried forward to a given year
31    from 2 or more earlier years,  that  credit  arising  in  the
32    earliest year will be applied first against the tax liability
33    for  the  given  year.  If a tax liability for the given year
34    still remains, the credit from the next  earliest  year  will
SB20 Engrossed              -17-               LRB9000090KRpk
 1    then  be applied, and so on, until all credits have been used
 2    or  no  tax  liability  for  the  given  year  remains.   Any
 3    remaining unused credit  or  credits  then  will  be  carried
 4    forward  to  the next following year in which a tax liability
 5    is incurred, except that no credit can be carried forward  to
 6    a year which is more than 5 years after the year in which the
 7    expense for which the credit is given was incurred.
 8        Unless  extended  by  law,  the  credit shall not include
 9    costs incurred after December  31,  1999,  except  for  costs
10    incurred  pursuant  to  a binding contract entered into on or
11    before December 31, 1999.
12    (Source: P.A. 88-45; 88-89;  88-141;  88-547,  eff.  6-30-94;
13    88-670,  eff.  12-2-94;  89-235,  eff.  8-4-95;  89-519, eff.
14    7-18-96; 89-591, eff. 8-1-96.)

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