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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 SB20 Engrossed LRB9000090KRpk 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 SB20 Engrossed -2- LRB9000090KRpk 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 SB20 Engrossed -3- LRB9000090KRpk 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 SB20 Engrossed -4- LRB9000090KRpk 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: SB20 Engrossed -5- LRB9000090KRpk 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. SB20 Engrossed -6- LRB9000090KRpk 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. SB20 Engrossed -7- LRB9000090KRpk 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,and6forshareholders 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, SB20 Engrossed -8- LRB9000090KRpk 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 SB20 Engrossed -9- LRB9000090KRpk 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; SB20 Engrossed -10- LRB9000090KRpk 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 SB20 Engrossed -11- LRB9000090KRpk 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 SB20 Engrossed -12- LRB9000090KRpk 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 SB20 Engrossed -13- LRB9000090KRpk 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 SB20 Engrossed -14- LRB9000090KRpk 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 forshareholders 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.)