State of Illinois
92nd General Assembly
Legislation

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92_HB2205

 
                                               LRB9205004SMtm

 1        AN ACT concerning taxes.

 2        Be  it  enacted  by  the People of the State of Illinois,
 3    represented in the General Assembly:

 4        Section 5.  The Illinois Income Tax  Act  is  amended  by
 5    changing Section 201 as follows:

 6        (35 ILCS 5/201) (from Ch. 120, par. 2-201)
 7        Sec. 201.  Tax Imposed.
 8        (a)  In  general.  A tax measured by net income is hereby
 9    imposed on every individual, corporation,  trust  and  estate
10    for  each  taxable  year  ending  after  July 31, 1969 on the
11    privilege of earning or receiving income in or as a  resident
12    of  this  State.  Such  tax shall be in addition to all other
13    occupation or privilege taxes imposed by this State or by any
14    municipal corporation or political subdivision thereof.
15        (b)  Rates. The tax imposed by  subsection  (a)  of  this
16    Section shall be determined as follows, except as adjusted by
17    subsection (d-1):
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
 
                            -2-                LRB9205004SMtm
 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 and except as adjusted by subsection (d-1), shall
 
                            -3-                LRB9205004SMtm
 1    be an additional amount equal to 2.85% of such taxpayer's net
 2    income for the taxable year, except that beginning on January
 3    1,  1981, and thereafter, the rate of 2.85% specified in this
 4    subsection shall be reduced to 2.5%, and in  the  case  of  a
 5    partnership,  trust or a Subchapter S corporation shall be an
 6    additional amount equal to 1.5% of such taxpayer's net income
 7    for the taxable year.
 8        (d-1)  Rate reduction for certain foreign  insurers.   In
 9    the case of a foreign insurer, as defined by Section 35A-5 of
10    the  Illinois  Insurance  Code,  whose  state  or  country of
11    domicile  imposes  on  insurers  domiciled  in   Illinois   a
12    retaliatory  tax  (excluding  any insurer whose premiums from
13    reinsurance assumed are 50% or more of  its  total  insurance
14    premiums  as determined under paragraph (2) of subsection (b)
15    of  Section  304,  except   that   for   purposes   of   this
16    determination   premiums  from  reinsurance  do  not  include
17    premiums  from  inter-affiliate  reinsurance   arrangements),
18    beginning  with taxable years ending on or after December 31,
19    1999, the sum of the rates of tax imposed by subsections  (b)
20    and  (d)  shall be reduced (but not increased) to the rate at
21    which the total amount of tax imposed under this Act, net  of
22    all credits allowed under this Act, shall equal (i) the total
23    amount  of tax that would be imposed on the foreign insurer's
24    net income allocable to Illinois for the taxable year by such
25    foreign insurer's state or country of domicile  if  that  net
26    income were subject to all income taxes and taxes measured by
27    net income imposed by such foreign insurer's state or country
28    of  domicile,  net  of  all credits allowed or (ii) a rate of
29    zero if no such tax is imposed on such income by the  foreign
30    insurer's  state  of  domicile.  For  the  purposes  of  this
31    subsection   (d-1),  an  inter-affiliate  includes  a  mutual
32    insurer under common management.
33             (1)  For the purposes of  subsection  (d-1),  in  no
34        event  shall  the  sum  of  the  rates  of tax imposed by
 
                            -4-                LRB9205004SMtm
 1        subsections (b) and (d) be  reduced  below  the  rate  at
 2        which the sum of:
 3                  (A)  the  total  amount  of tax imposed on such
 4             foreign insurer under this Act for a  taxable  year,
 5             net of all credits allowed under this Act, plus
 6                  (B)  the  privilege  tax imposed by Section 409
 7             of the Illinois Insurance Code, the  fire  insurance
 8             company  tax  imposed  by  Section  12  of  the Fire
 9             Investigation Act, and  the  fire  department  taxes
10             imposed   under  Section  11-10-1  of  the  Illinois
11             Municipal Code,
12        equals 1.25% of the net taxable premiums written for  the
13        taxable  year,  as described by subsection (1) of Section
14        409 of the Illinois Insurance Code.  This paragraph  will
15        in  no event increase the rates imposed under subsections
16        (b) and (d).
17             (2)  Any reduction in the rates of  tax  imposed  by
18        this  subsection shall be applied first against the rates
19        imposed by subsection (b) and only after the tax  imposed
20        by  subsection  (a) net of all credits allowed under this
21        Section other than the credit  allowed  under  subsection
22        (i)  has  been reduced to zero, against the rates imposed
23        by subsection (d).
24        This subsection (d-1) is exempt from  the  provisions  of
25    Section 250.
26        (e)  Investment  credit.   A  taxpayer shall be allowed a
27    credit against the Personal Property Tax  Replacement  Income
28    Tax for investment in qualified property.
29             (1)  A  taxpayer  shall be allowed a credit equal to
30        .5% of the basis of qualified property placed in  service
31        during the taxable year, provided such property is placed
32        in  service  on  or  after  July 1, 1984.  There shall be
33        allowed an additional credit equal to .5% of the basis of
34        qualified property placed in service during  the  taxable
 
                            -5-                LRB9205004SMtm
 1        year,  provided  such property is placed in service on or
 2        after July 1, 1986, and the  taxpayer's  base  employment
 3        within  Illinois  has  increased  by  1% or more over the
 4        preceding year as determined by the taxpayer's employment
 5        records filed with the Illinois Department of  Employment
 6        Security.   Taxpayers  who  are  new to Illinois shall be
 7        deemed to have met the 1% growth in base  employment  for
 8        the first year in which they file employment records with
 9        the  Illinois  Department  of  Employment  Security.  The
10        provisions added to this Section by  Public  Act  85-1200
11        (and restored by Public Act 87-895) shall be construed as
12        declaratory  of  existing law and not as a new enactment.
13        If, in any year, the increase in base  employment  within
14        Illinois  over  the  preceding  year is less than 1%, the
15        additional credit shall be  limited  to  that  percentage
16        times  a  fraction, the numerator of which is .5% and the
17        denominator of which is 1%, but  shall  not  exceed  .5%.
18        The  investment credit shall not be allowed to the extent
19        that it would reduce a taxpayer's liability  in  any  tax
20        year  below  zero,  nor  may  any  credit  for  qualified
21        property  be  allowed for any year other than the year in
22        which the property was placed in service in Illinois. For
23        tax years ending on or after December 31, 1987, and on or
24        before December 31, 1988, the credit shall be allowed for
25        the tax year in which the property is placed in  service,
26        or, if the amount of the credit exceeds the tax liability
27        for  that year, whether it exceeds the original liability
28        or the liability as later amended,  such  excess  may  be
29        carried forward and applied to the tax liability of the 5
30        taxable  years  following  the excess credit years if the
31        taxpayer (i) makes investments which cause  the  creation
32        of  a  minimum  of  2,000  full-time  equivalent  jobs in
33        Illinois,  (ii)  is  located  in   an   enterprise   zone
34        established  pursuant to the Illinois Enterprise Zone Act
 
                            -6-                LRB9205004SMtm
 1        and (iii) is certified by the Department of Commerce  and
 2        Community  Affairs  as  complying  with  the requirements
 3        specified in clause (i) and (ii) by July  1,  1986.   The
 4        Department of Commerce and Community Affairs shall notify
 5        the  Department  of  Revenue  of  all such certifications
 6        immediately. For tax  years  ending  after  December  31,
 7        1988,  the  credit  shall  be allowed for the tax year in
 8        which the property is  placed  in  service,  or,  if  the
 9        amount  of  the credit exceeds the tax liability for that
10        year, whether it exceeds the original  liability  or  the
11        liability  as  later  amended, such excess may be carried
12        forward and applied to the tax liability of the 5 taxable
13        years following the excess credit years. The credit shall
14        be applied to the earliest year  for  which  there  is  a
15        liability. If there is credit from more than one tax year
16        that  is  available to offset a liability, earlier credit
17        shall be applied first.
18             (2)  The term "qualified  property"  means  property
19        which:
20                  (A)  is   tangible,   whether   new   or  used,
21             including buildings  and  structural  components  of
22             buildings  and signs that are real property, but not
23             including land or improvements to real property that
24             are not a structural component of a building such as
25             landscaping,  sewer  lines,  local   access   roads,
26             fencing, parking lots, and other appurtenances;
27                  (B)  is  depreciable pursuant to Section 167 of
28             the  Internal  Revenue  Code,  except  that  "3-year
29             property" as defined in Section 168(c)(2)(A) of that
30             Code is not eligible for the credit provided by this
31             subsection (e);
32                  (C)  is acquired  by  purchase  as  defined  in
33             Section 179(d) of the Internal Revenue Code;
34                  (D)  is  used  in Illinois by a taxpayer who is
 
                            -7-                LRB9205004SMtm
 1             primarily engaged in  manufacturing,  or  in  mining
 2             coal or fluorite, or in retailing; and
 3                  (E)  has  not  previously been used in Illinois
 4             in such a manner and  by  such  a  person  as  would
 5             qualify  for  the credit provided by this subsection
 6             (e) or subsection (f).
 7             (3)  For   purposes   of   this   subsection    (e),
 8        "manufacturing" means the material staging and production
 9        of  tangible  personal  property  by  procedures commonly
10        regarded as manufacturing,  processing,  fabrication,  or
11        assembling  which changes some existing material into new
12        shapes, new qualities, or new combinations.  For purposes
13        of this subsection (e) the term "mining" shall  have  the
14        same  meaning  as  the term "mining" in Section 613(c) of
15        the  Internal  Revenue  Code.   For  purposes   of   this
16        subsection  (e),  the  term "retailing" means the sale of
17        tangible  personal  property  or  services  rendered   in
18        conjunction  with  the sale of tangible consumer goods or
19        commodities.
20             (4)  The basis of qualified property  shall  be  the
21        basis  used  to  compute  the  depreciation deduction for
22        federal income tax purposes.
23             (5)  If the basis of the property for federal income
24        tax depreciation purposes is increased after it has  been
25        placed in service in Illinois by the taxpayer, the amount
26        of  such  increase  shall  be  deemed  property placed in
27        service on the date of such increase in basis.
28             (6)  The term "placed in  service"  shall  have  the
29        same  meaning as under Section 46 of the Internal Revenue
30        Code.
31             (7)  If during any taxable year, any property ceases
32        to be qualified property in the  hands  of  the  taxpayer
33        within  48  months  after being placed in service, or the
34        situs of any qualified property is moved outside Illinois
 
                            -8-                LRB9205004SMtm
 1        within 48 months  after  being  placed  in  service,  the
 2        Personal  Property  Tax  Replacement  Income Tax for such
 3        taxable year shall be increased.  Such increase shall  be
 4        determined by (i) recomputing the investment credit which
 5        would  have been allowed for the year in which credit for
 6        such property was originally allowed by eliminating  such
 7        property from such computation and, (ii) subtracting such
 8        recomputed  credit  from  the amount of credit previously
 9        allowed. For  the  purposes  of  this  paragraph  (7),  a
10        reduction  of  the  basis of qualified property resulting
11        from a redetermination of the  purchase  price  shall  be
12        deemed  a disposition of qualified property to the extent
13        of such reduction.
14             (8)  Unless the investment  credit  is  extended  by
15        law,  the  basis  of qualified property shall not include
16        costs incurred after December 31, 2003, except for  costs
17        incurred  pursuant  to a binding contract entered into on
18        or before December 31, 2003.
19             (9)  Each taxable year ending  before  December  31,
20        2000,  a  partnership  may  elect  to pass through to its
21        partners the credits to which the partnership is entitled
22        under this  subsection  (e)  for  the  taxable  year.   A
23        partner  may use the credit allocated to him or her under
24        this  paragraph  only  against   the   tax   imposed   in
25        subsections   (c)  and  (d)  of  this  Section.   If  the
26        partnership makes that election, those credits  shall  be
27        allocated  among  the  partners  in  the  partnership  in
28        accordance  with the rules set forth in Section 704(b) of
29        the Internal Revenue  Code,  and  the  rules  promulgated
30        under  that  Section,  and  the  allocated  amount of the
31        credits shall be allowed to the partners for that taxable
32        year.  The partnership shall make this  election  on  its
33        Personal  Property  Tax Replacement Income Tax return for
34        that taxable year.  The  election  to  pass  through  the
 
                            -9-                LRB9205004SMtm
 1        credits shall be irrevocable.
 2             For  taxable  years  ending on or after December 31,
 3        2000, a partner that  qualifies  its  partnership  for  a
 4        subtraction  under  subparagraph  (I) of paragraph (2) of
 5        subsection (d) of  Section  203  or  a  shareholder  that
 6        qualifies  a  Subchapter  S corporation for a subtraction
 7        under subparagraph (S) of paragraph (2) of subsection (b)
 8        of Section 203 shall  be  allowed  a  credit  under  this
 9        subsection  (e)  equal  to its share of the credit earned
10        under this subsection (e) during the taxable year by  the
11        partnership  or  Subchapter  S corporation, determined in
12        accordance  with  the   determination   of   income   and
13        distributive  share  of income under Sections 702 and 704
14        and Subchapter S of  the  Internal  Revenue  Code.   This
15        paragraph is exempt from the provisions of Section 250.
16          (f)  Investment credit; Enterprise Zone.
17             (1)  A  taxpayer  shall  be allowed a credit against
18        the tax imposed  by  subsections  (a)  and  (b)  of  this
19        Section  for  investment  in  qualified property which is
20        placed in service in an Enterprise Zone created  pursuant
21        to  the  Illinois  Enterprise  Zone  Act.  For  partners,
22        shareholders  of Subchapter S corporations, and owners of
23        limited liability companies, if the liability company  is
24        treated  as  a  partnership  for  purposes of federal and
25        State income taxation, there shall be  allowed  a  credit
26        under  this subsection (f) to be determined in accordance
27        with the determination of income and  distributive  share
28        of  income under Sections 702 and 704 and Subchapter S of
29        the Internal Revenue Code. The credit shall be .5% of the
30        basis for such property.  The credit shall  be  available
31        only  in the taxable year in which the property is placed
32        in service in  the  Enterprise  Zone  and  shall  not  be
33        allowed  to  the extent that it would reduce a taxpayer's
34        liability for the tax imposed by subsections (a) and  (b)
 
                            -10-               LRB9205004SMtm
 1        of this Section to below zero. For tax years ending on or
 2        after  December 31, 1985, the credit shall be allowed for
 3        the tax year in which the property is placed in  service,
 4        or, if the amount of the credit exceeds the tax liability
 5        for  that year, whether it exceeds the original liability
 6        or the liability as later amended,  such  excess  may  be
 7        carried forward and applied to the tax liability of the 5
 8        taxable  years  following  the  excess  credit  year. The
 9        credit shall be applied to the earliest  year  for  which
10        there  is  a liability. If there is credit from more than
11        one tax year that is available to offset a liability, the
12        credit accruing first in time shall be applied first.
13             (2)  The  term  qualified  property  means  property
14        which:
15                  (A)  is  tangible,   whether   new   or   used,
16             including  buildings  and  structural  components of
17             buildings;
18                  (B)  is depreciable pursuant to Section 167  of
19             the  Internal  Revenue  Code,  except  that  "3-year
20             property" as defined in Section 168(c)(2)(A) of that
21             Code is not eligible for the credit provided by this
22             subsection (f);
23                  (C)  is  acquired  by  purchase  as  defined in
24             Section 179(d) of the Internal Revenue Code;
25                  (D)  is used in  the  Enterprise  Zone  by  the
26             taxpayer; and
27                  (E)  has  not  been previously used in Illinois
28             in such a manner and  by  such  a  person  as  would
29             qualify  for  the credit provided by this subsection
30             (f) or subsection (e).
31             (3)  The basis of qualified property  shall  be  the
32        basis  used  to  compute  the  depreciation deduction for
33        federal income tax purposes.
34             (4)  If the basis of the property for federal income
 
                            -11-               LRB9205004SMtm
 1        tax depreciation purposes is increased after it has  been
 2        placed in service in the Enterprise Zone by the taxpayer,
 3        the  amount  of  such  increase  shall be deemed property
 4        placed 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, any property ceases
 9        to be qualified property in the  hands  of  the  taxpayer
10        within  48  months  after being placed in service, or the
11        situs of any qualified  property  is  moved  outside  the
12        Enterprise  Zone  within  48 months after being placed in
13        service, the tax imposed under subsections (a) and (b) of
14        this Section for such taxable year  shall  be  increased.
15        Such  increase shall be determined by (i) recomputing the
16        investment credit which would have been allowed  for  the
17        year  in  which  credit  for such property was originally
18        allowed  by   eliminating   such   property   from   such
19        computation,  and (ii) subtracting such recomputed credit
20        from the amount of credit previously  allowed.   For  the
21        purposes  of this paragraph (6), a reduction of the basis
22        of qualified property resulting from a redetermination of
23        the purchase price  shall  be  deemed  a  disposition  of
24        qualified property to the extent of such reduction.
25          (g)  Jobs Tax Credit; Enterprise Zone and Foreign Trade
26    Zone or Sub-Zone.
27             (1)  A taxpayer conducting a trade or business in an
28        enterprise  zone  or a High Impact Business designated by
29        the  Department  of  Commerce   and   Community   Affairs
30        conducting  a trade or business in a federally designated
31        Foreign Trade Zone or Sub-Zone shall be allowed a  credit
32        against  the  tax  imposed  by subsections (a) and (b) of
33        this Section in the amount of $500 per eligible  employee
34        hired to work in the zone during the taxable year.
 
                            -12-               LRB9205004SMtm
 1             (2)  To qualify for the credit:
 2                  (A)  the  taxpayer must hire 5 or more eligible
 3             employees to work in an enterprise zone or federally
 4             designated Foreign Trade Zone or Sub-Zone during the
 5             taxable year;
 6                  (B)  the taxpayer's total employment within the
 7             enterprise  zone  or  federally  designated  Foreign
 8             Trade Zone or Sub-Zone must increase by  5  or  more
 9             full-time  employees  beyond  the  total employed in
10             that zone at the end of the previous  tax  year  for
11             which  a  jobs  tax  credit  under  this Section was
12             taken, or beyond the total employed by the  taxpayer
13             as of December 31, 1985, whichever is later; and
14                  (C)  the  eligible  employees  must be employed
15             180 consecutive days in order to be deemed hired for
16             purposes of this subsection.
17             (3)  An "eligible employee" means  an  employee  who
18        is:
19                  (A)  Certified  by  the  Department of Commerce
20             and Community Affairs  as  "eligible  for  services"
21             pursuant  to  regulations  promulgated in accordance
22             with Title II of the Job Training  Partnership  Act,
23             Training Services for the Disadvantaged or Title III
24             of  the Job Training Partnership Act, Employment and
25             Training Assistance for Dislocated Workers Program.
26                  (B)  Hired  after  the   enterprise   zone   or
27             federally  designated Foreign Trade Zone or Sub-Zone
28             was designated or the trade or business was  located
29             in that zone, whichever is later.
30                  (C)  Employed in the enterprise zone or Foreign
31             Trade  Zone  or Sub-Zone. An employee is employed in
32             an enterprise zone or federally  designated  Foreign
33             Trade  Zone or Sub-Zone if his services are rendered
34             there or it  is  the  base  of  operations  for  the
 
                            -13-               LRB9205004SMtm
 1             services performed.
 2                  (D)  A  full-time  employee  working 30 or more
 3             hours per week.
 4             (4)  For tax years ending on or after  December  31,
 5        1985  and prior to December 31, 1988, the credit shall be
 6        allowed for the tax year in which the eligible  employees
 7        are hired.  For tax years ending on or after December 31,
 8        1988,  the  credit  shall  be  allowed  for  the tax year
 9        immediately following the tax year in which the  eligible
10        employees are hired.  If the amount of the credit exceeds
11        the  tax  liability for that year, whether it exceeds the
12        original liability or the  liability  as  later  amended,
13        such excess may be carried forward and applied to the tax
14        liability  of  the  5  taxable years following the excess
15        credit year.  The credit shall be applied to the earliest
16        year for which there is a liability. If there  is  credit
17        from more than one tax year that is available to offset a
18        liability, earlier credit shall be applied first.
19             (5)  The Department of Revenue shall promulgate such
20        rules and regulations as may be deemed necessary to carry
21        out the purposes of this subsection (g).
22             (6)  The  credit  shall  be  available  for eligible
23        employees hired on or after January 1, 1986.
24             (h)  Investment credit; High Impact Business.
25             (1)  Subject to subsection (b) of Section 5.5 of the
26        Illinois Enterprise Zone Act, a taxpayer shall be allowed
27        a credit against the tax imposed by subsections  (a)  and
28        (b)  of this Section for investment in qualified property
29        which is placed in service by a  Department  of  Commerce
30        and  Community  Affairs  designated High Impact Business.
31        The credit shall be .5% of the basis for  such  property.
32        The  credit  shall  not  be  available  until the minimum
33        investments in qualified property set  forth  in  Section
34        5.5  of  the  Illinois  Enterprise  Zone  Act  have  been
 
                            -14-               LRB9205004SMtm
 1        satisfied  and shall not be allowed to the extent that it
 2        would reduce a taxpayer's liability for the  tax  imposed
 3        by subsections (a) and (b) of this Section to below zero.
 4        The  credit  applicable to such minimum investments shall
 5        be taken in  the  taxable  year  in  which  such  minimum
 6        investments   have   been   completed.   The  credit  for
 7        additional investments beyond the minimum investment by a
 8        designated high impact business shall be  available  only
 9        in  the  taxable  year in which the property is placed in
10        service and shall not be allowed to the  extent  that  it
11        would  reduce  a taxpayer's liability for the tax imposed
12        by subsections (a) and (b) of this Section to below zero.
13        For tax years ending on or after December 31,  1987,  the
14        credit  shall  be  allowed  for the tax year in which the
15        property is placed in service, or, if the amount  of  the
16        credit  exceeds  the tax liability for that year, whether
17        it exceeds the original liability  or  the  liability  as
18        later  amended,  such  excess  may be carried forward and
19        applied to the tax  liability  of  the  5  taxable  years
20        following  the  excess  credit year.  The credit shall be
21        applied to  the  earliest  year  for  which  there  is  a
22        liability.   If  there  is  credit from more than one tax
23        year that is available to offset a liability, the  credit
24        accruing first in time shall be applied first.
25             Changes  made  in  this subdivision (h)(1) by Public
26        Act 88-670 restore changes made by Public Act 85-1182 and
27        reflect existing law.
28             (2)  The  term  qualified  property  means  property
29        which:
30                  (A)  is  tangible,   whether   new   or   used,
31             including  buildings  and  structural  components of
32             buildings;
33                  (B)  is depreciable pursuant to Section 167  of
34             the  Internal  Revenue  Code,  except  that  "3-year
 
                            -15-               LRB9205004SMtm
 1             property" as defined in Section 168(c)(2)(A) of that
 2             Code is not eligible for the credit provided by this
 3             subsection (h);
 4                  (C)  is  acquired  by  purchase  as  defined in
 5             Section 179(d) of the Internal Revenue Code; and
 6                  (D)  is not eligible for  the  Enterprise  Zone
 7             Investment Credit provided by subsection (f) of this
 8             Section.
 9             (3)  The  basis  of  qualified property shall be the
10        basis used to  compute  the  depreciation  deduction  for
11        federal income tax purposes.
12             (4)  If the basis of the property for federal income
13        tax  depreciation purposes is increased after it has been
14        placed in service in a federally designated Foreign Trade
15        Zone or Sub-Zone located in Illinois by the taxpayer, the
16        amount of such increase shall be deemed  property  placed
17        in service on the date of such increase in basis.
18             (5)  The  term  "placed  in  service" shall have the
19        same meaning as under Section 46 of the Internal  Revenue
20        Code.
21             (6)  If  during any taxable year ending on or before
22        December 31, 1996, any property ceases  to  be  qualified
23        property  in  the  hands of the taxpayer within 48 months
24        after being placed  in  service,  or  the  situs  of  any
25        qualified  property  is  moved outside Illinois within 48
26        months after being placed in  service,  the  tax  imposed
27        under  subsections  (a)  and (b) of this Section for such
28        taxable year shall be increased.  Such increase shall  be
29        determined by (i) recomputing the investment credit which
30        would  have been allowed for the year in which credit for
31        such property was originally allowed by eliminating  such
32        property from such computation, and (ii) subtracting such
33        recomputed  credit  from  the amount of credit previously
34        allowed.  For the  purposes  of  this  paragraph  (6),  a
 
                            -16-               LRB9205004SMtm
 1        reduction  of  the  basis of qualified property resulting
 2        from a redetermination of the  purchase  price  shall  be
 3        deemed  a disposition of qualified property to the extent
 4        of such reduction.
 5             (7)  Beginning with tax years ending after  December
 6        31,  1996,  if  a taxpayer qualifies for the credit under
 7        this  subsection  (h)  and  thereby  is  granted  a   tax
 8        abatement  and the taxpayer relocates its entire facility
 9        in violation of the explicit  terms  and  length  of  the
10        contract  under  Section 18-183 of the Property Tax Code,
11        the tax imposed under subsections (a)  and  (b)  of  this
12        Section  shall be increased for the taxable year in which
13        the taxpayer relocated its facility by an amount equal to
14        the amount of credit received by the taxpayer under  this
15        subsection (h).
16        (i)  A credit shall be allowed against the tax imposed by
17    subsections  (a)  and (b) of this Section for the tax imposed
18    by subsections (c) and (d)  of  this  Section.   This  credit
19    shall   be   computed  by  multiplying  the  tax  imposed  by
20    subsections (c) and (d) of this Section by  a  fraction,  the
21    numerator  of  which is base income allocable to Illinois and
22    the denominator of which is Illinois base income, and further
23    multiplying  the  product  by  the  tax   rate   imposed   by
24    subsections (a) and (b) of this Section.
25        Any  credit  earned  on  or after December 31, 1986 under
26    this subsection which is unused in the  year  the  credit  is
27    computed  because  it  exceeds  the  tax liability imposed by
28    subsections (a) and (b) for that year (whether it exceeds the
29    original liability or the liability as later amended) may  be
30    carried  forward  and applied to the tax liability imposed by
31    subsections (a) and (b) of the 5 taxable years following  the
32    excess  credit  year.   This credit shall be applied first to
33    the earliest year for which there is a liability.   If  there
34    is a credit under this subsection from more than one tax year
 
                            -17-               LRB9205004SMtm
 1    that  is  available to offset a liability the earliest credit
 2    arising under this subsection shall be applied first.
 3        If, during any taxable year ending on or  after  December
 4    31,  1986, the tax imposed by subsections (c) and (d) of this
 5    Section for which a taxpayer has claimed a credit under  this
 6    subsection  (i) is reduced, the amount of credit for such tax
 7    shall also be reduced.  Such reduction shall be determined by
 8    recomputing the credit to take into account the  reduced  tax
 9    imposed  by  subsection  (c)  and (d).  If any portion of the
10    reduced amount of credit has  been  carried  to  a  different
11    taxable  year,  an  amended  return  shall  be filed for such
12    taxable year to reduce the amount of credit claimed.
13        (j)  Training expense credit.  Beginning with  tax  years
14    ending  on  or  after  December 31, 1986, a taxpayer shall be
15    allowed a credit against the tax imposed  by  subsection  (a)
16    and  (b)  under this Section for all amounts paid or accrued,
17    on behalf of all persons employed by the taxpayer in Illinois
18    or Illinois residents  employed  outside  of  Illinois  by  a
19    taxpayer,   for   educational   or   vocational  training  in
20    semi-technical or technical fields or semi-skilled or skilled
21    fields,  which  were  deducted  from  gross  income  in   the
22    computation  of  taxable  income.  The credit against the tax
23    imposed by subsections (a) and (b)  shall  be  1.6%  of  such
24    training  expenses.  For partners, shareholders of subchapter
25    S corporations, and owners of limited liability companies, if
26    the  liability  company  is  treated  as  a  partnership  for
27    purposes of federal and State income taxation, there shall be
28    allowed a credit under this subsection (j) to  be  determined
29    in   accordance   with   the   determination  of  income  and
30    distributive share of income under Sections 702 and  704  and
31    subchapter S of the Internal Revenue Code.
32        Any  credit allowed under this subsection which is unused
33    in the year the credit is earned may be  carried  forward  to
34    each  of the 5 taxable years following the year for which the
 
                            -18-               LRB9205004SMtm
 1    credit is first computed until it is used.  This credit shall
 2    be applied first to the earliest year for which  there  is  a
 3    liability.   If  there is a credit under this subsection from
 4    more than  one  tax  year  that  is  available  to  offset  a
 5    liability  the  earliest credit arising under this subsection
 6    shall be applied first.
 7        (k)  Research and development credit.
 8        Beginning with tax years ending after  July  1,  1990,  a
 9    taxpayer shall be allowed a credit against the tax imposed by
10    subsections  (a)  and  (b)  of  this  Section  for increasing
11    research  activities  in  this  State.   The  credit  allowed
12    against the tax imposed by subsections (a) and (b)  shall  be
13    equal to 6 1/2% of the qualifying expenditures for increasing
14    research activities in this State. For partners, shareholders
15    of subchapter S corporations, and owners of limited liability
16    companies,   if   the  liability  company  is  treated  as  a
17    partnership  for  purposes  of  federal  and   State   income
18    taxation,   there  shall  be  allowed  a  credit  under  this
19    subsection  to  be  determined   in   accordance   with   the
20    determination  of  income  and  distributive  share of income
21    under Sections 702 and 704 and subchapter S of  the  Internal
22    Revenue Code.
23        For purposes of this subsection:,
24        "Qualifying    expenditures"    means    the   qualifying
25    expenditures as defined for the federal credit for increasing
26    research activities which would be allowable under Section 41
27    of the Internal Revenue Code and which are conducted in  this
28    State.,
29        "Qualifying    expenditures   for   increasing   research
30    activities in this State"  means,  at  the  election  of  the
31    taxpayer,  either  (1)  the excess of qualifying expenditures
32    for the  taxable  year  in  which  incurred  over  qualifying
33    expenditures  for  the  base  period  or  (2) as an alternate
34    credit, for taxable years ending on  or  after  December  31,
 
                            -19-               LRB9205004SMtm
 1    2001,  the  qualifying  expenditures  for  the  taxable  year
 2    incurred  in  this State computed in a manner consistent with
 3    the  alternative  incremental  credit  described  in  section
 4    41(c)(4) of the Internal Revenue Code.  The taxpayer may make
 5    this  election  regardless  of  the  method  used   for   the
 6    taxpayer's  federal  income  tax.  An election is for the tax
 7    year, and the taxpayer may use another or the same method for
 8    any subsequent year.  For purposes of  the  alternate  credit
 9    computation,  the  credit percentages applicable to qualified
10    research expenses described in clauses (i), (ii),  and  (iii)
11    of  section  41(c)(4)(A)  of  the  Internal  Revenue Code are
12    1.65%, 2.20%, and 2.75%, respectively.,
13        "Qualifying expenditures for the base period"  means  the
14    average  of  the qualifying expenditures for each year in the
15    base period, and "base period"  means  the  3  taxable  years
16    immediately   preceding   the  taxable  year  for  which  the
17    determination is being made.
18        Any credit in excess of the tax liability for the taxable
19    year may be carried forward. A taxpayer may elect to have the
20    unused credit shown on its  final  completed  return  carried
21    over  as a credit against the tax liability for the following
22    5 taxable years or until it has been  fully  used,  whichever
23    occurs first.
24        If  an  unused  credit is carried forward to a given year
25    from 2 or more earlier years,  that  credit  arising  in  the
26    earliest year will be applied first against the tax liability
27    for  the  given  year.  If a tax liability for the given year
28    still remains, the credit from the next  earliest  year  will
29    then  be applied, and so on, until all credits have been used
30    or  no  tax  liability  for  the  given  year  remains.   Any
31    remaining unused credit  or  credits  then  will  be  carried
32    forward  to  the next following year in which a tax liability
33    is incurred, except that no credit can be carried forward  to
34    a year which is more than 5 years after the year in which the
 
                            -20-               LRB9205004SMtm
 1    expense for which the credit is given was incurred.
 2        Unless  extended  by  law,  the  credit shall not include
 3    costs incurred after December 31, 2009 2004, except for costs
 4    incurred pursuant to a binding contract entered  into  on  or
 5    before December 31, 2009 2004.
 6        No  inference  shall be drawn from this amendatory Act of
 7    the 91st General Assembly  in  construing  this  Section  for
 8    taxable years beginning before January 1, 1999.
 9        (l)  Environmental Remediation Tax Credit.
10             (i)  For  tax   years ending after December 31, 1997
11        and on or before December 31, 2001, a taxpayer  shall  be
12        allowed  a  credit against the tax imposed by subsections
13        (a) and (b) of this Section for certain amounts paid  for
14        unreimbursed  eligible remediation costs, as specified in
15        this  subsection.   For   purposes   of   this   Section,
16        "unreimbursed  eligible  remediation  costs"  means costs
17        approved by the Illinois Environmental Protection  Agency
18        ("Agency")  under  Section  58.14  of  the  Environmental
19        Protection Act that were paid in performing environmental
20        remediation  at a site for which a No Further Remediation
21        Letter was  issued  by  the  Agency  and  recorded  under
22        Section  58.10  of the Environmental Protection Act.  The
23        credit must be claimed for  the  taxable  year  in  which
24        Agency  approval  of  the  eligible  remediation costs is
25        granted.  The credit is not available to any taxpayer  if
26        the  taxpayer  or any related party caused or contributed
27        to, in any  material  respect,  a  release  of  regulated
28        substances  on, in, or under the site that was identified
29        and addressed by the remedial action pursuant to the Site
30        Remediation Program of the Environmental Protection  Act.
31        After  the  Pollution  Control  Board  rules  are adopted
32        pursuant to the Illinois Administrative Procedure Act for
33        the administration and enforcement of Section 58.9 of the
34        Environmental Protection Act, determinations as to credit
 
                            -21-               LRB9205004SMtm
 1        availability for purposes of this Section shall  be  made
 2        consistent  with  those  rules.   For  purposes  of  this
 3        Section,   "taxpayer"   includes   a   person  whose  tax
 4        attributes the taxpayer has succeeded  to  under  Section
 5        381  of  the  Internal  Revenue  Code and "related party"
 6        includes the persons disallowed a deduction for losses by
 7        paragraphs (b), (c), and (f)(1) of  Section  267  of  the
 8        Internal  Revenue  Code  by  virtue  of  being  a related
 9        taxpayer, as well as any of  its  partners.   The  credit
10        allowed  against  the  tax imposed by subsections (a) and
11        (b) shall be equal to 25% of  the  unreimbursed  eligible
12        remediation  costs in excess of $100,000 per site, except
13        that the $100,000 threshold shall not apply to  any  site
14        contained  in  an  enterprise  zone  as determined by the
15        Department of Commerce and Community Affairs.  The  total
16        credit  allowed  shall not exceed $40,000 per year with a
17        maximum total of $150,000 per  site.   For  partners  and
18        shareholders of subchapter S corporations, there shall be
19        allowed  a  credit under this subsection to be determined
20        in  accordance  with  the  determination  of  income  and
21        distributive share of income under Sections 702  and  704
22        and of subchapter S of the Internal Revenue Code.
23             (ii)  A credit allowed under this subsection that is
24        unused  in  the  year the credit is earned may be carried
25        forward to each of the 5 taxable years following the year
26        for which the credit is first earned until  it  is  used.
27        The  term "unused credit" does not include any amounts of
28        unreimbursed eligible remediation costs in excess of  the
29        maximum  credit  per site authorized under paragraph (i).
30        This credit shall be applied first to the  earliest  year
31        for  which  there  is  a liability.  If there is a credit
32        under this subsection from more than one tax year that is
33        available to offset  a  liability,  the  earliest  credit
34        arising  under this subsection shall be applied first.  A
 
                            -22-               LRB9205004SMtm
 1        credit allowed under this subsection may  be  sold  to  a
 2        buyer as part of a sale of all or part of the remediation
 3        site  for which the credit was granted.  The purchaser of
 4        a remediation site and the tax credit  shall  succeed  to
 5        the  unused  credit and remaining carry-forward period of
 6        the seller.  To perfect the transfer, the assignor  shall
 7        record  the  transfer  in the chain of title for the site
 8        and  provide  written  notice  to  the  Director  of  the
 9        Illinois Department of Revenue of the  assignor's  intent
10        to  sell  the  remediation site and the amount of the tax
11        credit to be transferred as a portion of the sale.  In no
12        event may a credit be transferred to any taxpayer if  the
13        taxpayer  or  a related party would not be eligible under
14        the provisions of subsection (i).
15             (iii)  For purposes of this Section, the term "site"
16        shall have the same meaning as under Section 58.2 of  the
17        Environmental Protection Act.
18        (m)  Education expense credit.
19        Beginning  with tax years ending after December 31, 1999,
20    a taxpayer who is the custodian of  one  or  more  qualifying
21    pupils  shall  be allowed a credit against the tax imposed by
22    subsections  (a)  and  (b)  of  this  Section  for  qualified
23    education expenses  incurred  on  behalf  of  the  qualifying
24    pupils.   The  credit  shall  be  equal  to  25% of qualified
25    education expenses, but in no  event  may  the  total  credit
26    under  this Section claimed by a family that is the custodian
27    of qualifying pupils exceed $500. In no event shall a  credit
28    under  this  subsection reduce the taxpayer's liability under
29    this Act to less than zero. This subsection  is  exempt  from
30    the provisions of Section 250 of this Act.
31        For purposes of this subsection;
32        "Qualifying   pupils"   means  individuals  who  (i)  are
33    residents of the State of Illinois, (ii) are under the age of
34    21 at the close of the school year  for  which  a  credit  is
 
                            -23-               LRB9205004SMtm
 1    sought,  and  (iii) during the school year for which a credit
 2    is sought were full-time pupils enrolled  in  a  kindergarten
 3    through  twelfth  grade  education  program at any school, as
 4    defined in this subsection.
 5        "Qualified education expense" means the  amount  incurred
 6    on  behalf  of  a  qualifying  pupil  in  excess  of $250 for
 7    tuition, book fees, and lab fees at the school in  which  the
 8    pupil is enrolled during the regular school year.
 9        "School"  means  any  public  or  nonpublic elementary or
10    secondary school in Illinois that is in compliance with Title
11    VI of the Civil Rights Act of 1964 and  attendance  at  which
12    satisfies  the  requirements  of  Section  26-1 of the School
13    Code, except that nothing shall be  construed  to  require  a
14    child  to attend any particular public or nonpublic school to
15    qualify for the credit under this Section.
16        "Custodian" means, with respect to qualifying pupils,  an
17    Illinois  resident  who  is  a  parent,  the parents, a legal
18    guardian, or the legal guardians of the qualifying pupils.
19    (Source: P.A. 90-123, eff.  7-21-97;  90-458,  eff.  8-17-97;
20    90-605,  eff.  6-30-98;  90-655,  eff.  7-30-98; 90-717, eff.
21    8-7-98; 90-792, eff. 1-1-99; 91-9, eff. 1-1-00; 91-357,  eff.
22    7-29-99;  91-643, eff. 8-20-99; 91-644, eff. 8-20-99; 91-860,
23    eff. 6-22-00; 91-913, eff. 1-1-01; revised 10-24-00.)

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