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92_HB5566 LRB9214073SMpc 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- LRB9214073SMpc 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) Personal Property Tax Replacement Income Tax. 18 Beginning on July 1, 1979 and thereafter, in addition to such 19 income tax, there is also hereby imposed the Personal 20 Property Tax Replacement Income Tax measured by net income on 21 every corporation (including Subchapter S corporations), 22 partnership and trust, for each taxable year ending after 23 June 30, 1979. Such taxes are imposed on the privilege of 24 earning or receiving income in or as a resident of this 25 State. The Personal Property Tax Replacement Income Tax 26 shall be in addition to the income tax imposed by subsections 27 (a) and (b) of this Section and in addition to all other 28 occupation or privilege taxes imposed by this State or by any 29 municipal corporation or political subdivision 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- LRB9214073SMpc 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- LRB9214073SMpc 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- LRB9214073SMpc 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- LRB9214073SMpc 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- LRB9214073SMpc 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- LRB9214073SMpc 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- LRB9214073SMpc 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 30 the basis for such property. The credit shall be 31 available only in the taxable year in which the property 32 is placed in service in the Enterprise Zone and shall not 33 be allowed to the extent that it would reduce a 34 taxpayer's liability for the tax imposed by subsections -10- LRB9214073SMpc 1 (a) and (b) of this Section to below zero. For tax years 2 ending on or after December 31, 1985, the credit shall be 3 allowed for the tax year in which the property is placed 4 in service, or, if the amount of the credit exceeds the 5 tax liability for that year, whether it exceeds the 6 original liability or the liability as later amended, 7 such excess may be carried forward and applied to the tax 8 liability of the 5 taxable years following the excess 9 credit year. The credit shall be applied to the earliest 10 year for which there is a liability. If there is credit 11 from more than one tax year that is available to offset a 12 liability, the credit accruing first in time shall be 13 applied first. 14 (2) The term qualified property means property 15 which: 16 (A) is tangible, whether new or used, 17 including buildings and structural components of 18 buildings; 19 (B) is depreciable pursuant to Section 167 of 20 the Internal Revenue Code, except that "3-year 21 property" as defined in Section 168(c)(2)(A) of that 22 Code is not eligible for the credit provided by this 23 subsection (f); 24 (C) is acquired by purchase as defined in 25 Section 179(d) of the Internal Revenue Code; 26 (D) is used in the Enterprise Zone by the 27 taxpayer; and 28 (E) has not been previously used in Illinois 29 in such a manner and by such a person as would 30 qualify for the credit provided by this subsection 31 (f) or subsection (e). 32 (3) The basis of qualified property shall be the 33 basis used to compute the depreciation deduction for 34 federal income tax purposes. -11- LRB9214073SMpc 1 (4) If the basis of the property for federal income 2 tax depreciation purposes is increased after it has been 3 placed in service in the Enterprise Zone by the taxpayer, 4 the amount of such increase shall be deemed property 5 placed in service on the date of such increase in basis. 6 (5) The term "placed in service" shall have the 7 same meaning as under Section 46 of the Internal Revenue 8 Code. 9 (6) If during any taxable year, any property ceases 10 to be qualified property in the hands of the taxpayer 11 within 48 months after being placed in service, or the 12 situs of any qualified property is moved outside the 13 Enterprise Zone within 48 months after being placed in 14 service, the tax imposed under subsections (a) and (b) of 15 this Section for such taxable year shall be increased. 16 Such increase shall be determined by (i) recomputing the 17 investment credit which would have been allowed for the 18 year in which credit for such property was originally 19 allowed by eliminating such property from such 20 computation, and (ii) subtracting such recomputed credit 21 from the amount of credit previously allowed. For the 22 purposes of this paragraph (6), a reduction of the basis 23 of qualified property resulting from a redetermination of 24 the purchase price shall be deemed a disposition of 25 qualified property to the extent of such reduction. 26 (g) Jobs Tax Credit; Enterprise Zone and Foreign Trade 27 Zone or Sub-Zone. 28 (1) A taxpayer conducting a trade or business in an 29 enterprise zone or a High Impact Business designated by 30 the Department of Commerce and Community Affairs 31 conducting a trade or business in a federally designated 32 Foreign Trade Zone or Sub-Zone shall be allowed a credit 33 against the tax imposed by subsections (a) and (b) of 34 this Section in the amount of $500 per eligible employee -12- LRB9214073SMpc 1 hired to work in the zone during the taxable year. 2 (2) To qualify for the credit: 3 (A) the taxpayer must hire 5 or more eligible 4 employees to work in an enterprise zone or federally 5 designated Foreign Trade Zone or Sub-Zone during the 6 taxable year; 7 (B) the taxpayer's total employment within the 8 enterprise zone or federally designated Foreign 9 Trade Zone or Sub-Zone must increase by 5 or more 10 full-time employees beyond the total employed in 11 that zone at the end of the previous tax year for 12 which a jobs tax credit under this Section was 13 taken, or beyond the total employed by the taxpayer 14 as of December 31, 1985, whichever is later; and 15 (C) the eligible employees must be employed 16 180 consecutive days in order to be deemed hired for 17 purposes of this subsection. 18 (3) An "eligible employee" means an employee who 19 is: 20 (A) Certified by the Department of Commerce 21 and Community Affairs as "eligible for services" 22 pursuant to regulations promulgated in accordance 23 with Title II of the Job Training Partnership Act, 24 Training Services for the Disadvantaged or Title III 25 of the Job Training Partnership Act, Employment and 26 Training Assistance for Dislocated Workers Program. 27 (B) Hired after the enterprise zone or 28 federally designated Foreign Trade Zone or Sub-Zone 29 was designated or the trade or business was located 30 in that zone, whichever is later. 31 (C) Employed in the enterprise zone or Foreign 32 Trade Zone or Sub-Zone. An employee is employed in 33 an enterprise zone or federally designated Foreign 34 Trade Zone or Sub-Zone if his services are rendered -13- LRB9214073SMpc 1 there or it is the base of operations for the 2 services performed. 3 (D) A full-time employee working 30 or more 4 hours per week. 5 (4) For tax years ending on or after December 31, 6 1985 and prior to December 31, 1988, the credit shall be 7 allowed for the tax year in which the eligible employees 8 are hired. For tax years ending on or after December 31, 9 1988, the credit shall be allowed for the tax year 10 immediately following the tax year in which the eligible 11 employees are hired. If the amount of the credit exceeds 12 the tax liability for that year, whether it exceeds the 13 original liability or the liability as later amended, 14 such excess may be carried forward and applied to the tax 15 liability of the 5 taxable years following the excess 16 credit year. The credit shall be applied to the earliest 17 year for which there is a liability. If there is credit 18 from more than one tax year that is available to offset a 19 liability, earlier credit shall be applied first. 20 (5) The Department of Revenue shall promulgate such 21 rules and regulations as may be deemed necessary to carry 22 out the purposes of this subsection (g). 23 (6) The credit shall be available for eligible 24 employees hired on or after January 1, 1986. 25 (h) Investment credit; High Impact Business. 26 (1) Subject to subsections (b) and (b-5) of Section 27 5.5 of the Illinois Enterprise Zone Act, a taxpayer shall 28 be allowed a credit against the tax imposed by 29 subsections (a) and (b) of this Section for investment in 30 qualified property which is placed in service by a 31 Department of Commerce and Community Affairs designated 32 High Impact Business. The credit shall be .5% of the 33 basis for such property. The credit shall not be 34 available (i) until the minimum investments in qualified -14- LRB9214073SMpc 1 property set forth in subdivision (a)(3)(A) of Section 2 5.5 of the Illinois Enterprise Zone Act have been 3 satisfied or (ii) until the time authorized in subsection 4 (b-5) of the Illinois Enterprise Zone Act for entities 5 designated as High Impact Businesses under subdivisions 6 (a)(3)(B), (a)(3)(C), and (a)(3)(D) of Section 5.5 of the 7 Illinois Enterprise Zone Act, and shall not be allowed to 8 the extent that it would reduce a taxpayer's liability 9 for the tax imposed by subsections (a) and (b) of this 10 Section to below zero. The credit applicable to such 11 investments shall be taken in the taxable year in which 12 such investments have been completed. The credit for 13 additional investments beyond the minimum investment by a 14 designated high impact business authorized under 15 subdivision (a)(3)(A) of Section 5.5 of the Illinois 16 Enterprise Zone Act shall be available only in the 17 taxable year in which the property is placed in service 18 and shall not be allowed to the extent that it would 19 reduce a taxpayer's liability for the tax imposed by 20 subsections (a) and (b) of this Section to below zero. 21 For tax years ending on or after December 31, 1987, the 22 credit shall be allowed for the tax year in which the 23 property is placed in service, or, if the amount of the 24 credit exceeds the tax liability for that year, whether 25 it exceeds the original liability or the liability as 26 later amended, such excess may be carried forward and 27 applied to the tax liability of the 5 taxable years 28 following the excess credit year. The credit shall be 29 applied to the earliest year for which there is a 30 liability. If there is credit from more than one tax 31 year that is available to offset a liability, the credit 32 accruing first in time shall be applied first. 33 Changes made in this subdivision (h)(1) by Public 34 Act 88-670 restore changes made by Public Act 85-1182 and -15- LRB9214073SMpc 1 reflect existing law. 2 (2) The term qualified property means property 3 which: 4 (A) is tangible, whether new or used, 5 including buildings and structural components of 6 buildings; 7 (B) is depreciable pursuant to Section 167 of 8 the Internal Revenue Code, except that "3-year 9 property" as defined in Section 168(c)(2)(A) of that 10 Code is not eligible for the credit provided by this 11 subsection (h); 12 (C) is acquired by purchase as defined in 13 Section 179(d) of the Internal Revenue Code; and 14 (D) is not eligible for the Enterprise Zone 15 Investment Credit provided by subsection (f) of this 16 Section. 17 (3) The basis of qualified property shall be the 18 basis used to compute the depreciation deduction for 19 federal income tax purposes. 20 (4) If the basis of the property for federal income 21 tax depreciation purposes is increased after it has been 22 placed in service in a federally designated Foreign Trade 23 Zone or Sub-Zone located in Illinois by the taxpayer, the 24 amount of such increase shall be deemed property placed 25 in service on the date of such increase in basis. 26 (5) The term "placed in service" shall have the 27 same meaning as under Section 46 of the Internal Revenue 28 Code. 29 (6) If during any taxable year ending on or before 30 December 31, 1996, any property ceases to be qualified 31 property in the hands of the taxpayer within 48 months 32 after being placed in service, or the situs of any 33 qualified property is moved outside Illinois within 48 34 months after being placed in service, the tax imposed -16- LRB9214073SMpc 1 under subsections (a) and (b) of this Section for such 2 taxable year shall be increased. Such increase shall be 3 determined by (i) recomputing the investment credit which 4 would have been allowed for the year in which credit for 5 such property was originally allowed by eliminating such 6 property from such computation, and (ii) subtracting such 7 recomputed credit from the amount of credit previously 8 allowed. For the purposes of this paragraph (6), a 9 reduction of the basis of qualified property resulting 10 from a redetermination of the purchase price shall be 11 deemed a disposition of qualified property to the extent 12 of such reduction. 13 (7) Beginning with tax years ending after December 14 31, 1996, if a taxpayer qualifies for the credit under 15 this subsection (h) and thereby is granted a tax 16 abatement and the taxpayer relocates its entire facility 17 in violation of the explicit terms and length of the 18 contract under Section 18-183 of the Property Tax Code, 19 the tax imposed under subsections (a) and (b) of this 20 Section shall be increased for the taxable year in which 21 the taxpayer relocated its facility by an amount equal to 22 the amount of credit received by the taxpayer under this 23 subsection (h). 24 (i) Credit for Personal Property Tax Replacement Income 25 Tax. A credit shall be allowed against the tax imposed by 26 subsections (a) and (b) of this Section for the tax imposed 27 by subsections (c) and (d) of this Section. This credit 28 shall be computed by multiplying the tax imposed by 29 subsections (c) and (d) of this Section by a fraction, the 30 numerator of which is base income allocable to Illinois and 31 the denominator of which is Illinois base income, and further 32 multiplying the product by the tax rate imposed by 33 subsections (a) and (b) of this Section. 34 Any credit earned on or after December 31, 1986 under -17- LRB9214073SMpc 1 this subsection which is unused in the year the credit is 2 computed because it exceeds the tax liability imposed by 3 subsections (a) and (b) for that year (whether it exceeds the 4 original liability or the liability as later amended) may be 5 carried forward and applied to the tax liability imposed by 6 subsections (a) and (b) of the 5 taxable years following the 7 excess credit year. This credit shall be applied first to 8 the earliest year for which there is a liability. If there 9 is a credit under this subsection from more than one tax year 10 that is available to offset a liability the earliest credit 11 arising under this subsection shall be applied first. 12 If, during any taxable year ending on or after December 13 31, 1986, the tax imposed by subsections (c) and (d) of this 14 Section for which a taxpayer has claimed a credit under this 15 subsection (i) is reduced, the amount of credit for such tax 16 shall also be reduced. Such reduction shall be determined by 17 recomputing the credit to take into account the reduced tax 18 imposed by subsectionssubsection(c) and (d). If any 19 portion of the reduced amount of credit has been carried to a 20 different taxable year, an amended return shall be filed for 21 such taxable year to reduce the amount of credit claimed. 22 (j) Training expense credit. Beginning with tax years 23 ending on or after December 31, 1986, a taxpayer shall be 24 allowed a credit against the tax imposed by subsections 25subsection(a) and (b) under this Section for all amounts 26 paid or accrued, on behalf of all persons employed by the 27 taxpayer in Illinois or Illinois residents employed outside 28 of Illinois by a taxpayer, for educational or vocational 29 training in semi-technical or technical fields or 30 semi-skilled or skilled fields, which were deducted from 31 gross income in the computation of taxable income. The 32 credit against the tax imposed by subsections (a) and (b) 33 shall be 1.6% of such training expenses. For partners, 34 shareholders of subchapter S corporations, and owners of -18- LRB9214073SMpc 1 limited liability companies, if the liability company is 2 treated as a partnership for purposes of federal and State 3 income taxation, there shall be allowed a credit under this 4 subsection (j) to be determined in accordance with the 5 determination of income and distributive share of income 6 under Sections 702 and 704 and subchapter S of the Internal 7 Revenue Code. 8 Any credit allowed under this subsection which is unused 9 in the year the credit is earned may be carried forward to 10 each of the 5 taxable years following the year for which the 11 credit is first computed until it is used. This credit shall 12 be applied first to the earliest year for which there is a 13 liability. If there is a credit under this subsection from 14 more than one tax year that is available to offset a 15 liability the earliest credit arising under this subsection 16 shall be applied first. 17 (k) Research and development credit. 18 Beginning with tax years ending after July 1, 1990, a 19 taxpayer shall be allowed a credit against the tax imposed by 20 subsections (a) and (b) of this Section for increasing 21 research activities in this State. The credit allowed 22 against the tax imposed by subsections (a) and (b) shall be 23 equal to 6 1/2% of the qualifying expenditures for increasing 24 research activities in this State. For partners, 25 shareholders of subchapter S corporations, and owners of 26 limited liability companies, if the liability company is 27 treated as a partnership for purposes of federal and State 28 income taxation, there shall be allowed a credit under this 29 subsection to be determined in accordance with the 30 determination of income and distributive share of income 31 under Sections 702 and 704 and subchapter S of the Internal 32 Revenue Code. 33 For purposes of this subsection, "qualifying 34 expenditures" means the qualifying expenditures as defined -19- LRB9214073SMpc 1 for the federal credit for increasing research activities 2 which would be allowable under Section 41 of the Internal 3 Revenue Code and which are conducted in this State, 4 "qualifying expenditures for increasing research activities 5 in this State" means the excess of qualifying expenditures 6 for the taxable year in which incurred over qualifying 7 expenditures for the base period, "qualifying expenditures 8 for the base period" means the average of the qualifying 9 expenditures for each year in the base period, and "base 10 period" means the 3 taxable years immediately preceding the 11 taxable year for which the determination is being made. 12 Any credit in excess of the tax liability for the taxable 13 year may be carried forward. A taxpayer may elect to have the 14 unused credit shown on its final completed return carried 15 over as a credit against the tax liability for the following 16 5 taxable years or until it has been fully used, whichever 17 occurs first. 18 If an unused credit is carried forward to a given year 19 from 2 or more earlier years, that credit arising in the 20 earliest year will be applied first against the tax liability 21 for the given year. If a tax liability for the given year 22 still remains, the credit from the next earliest year will 23 then be applied, and so on, until all credits have been used 24 or no tax liability for the given year remains. Any 25 remaining unused credit or credits then will be carried 26 forward to the next following year in which a tax liability 27 is incurred, except that no credit can be carried forward to 28 a year which is more than 5 years after the year in which the 29 expense for which the credit is given was incurred. 30 Unless extended by law, the credit shall not include 31 costs incurred after December 31, 2004, except for costs 32 incurred pursuant to a binding contract entered into on or 33 before December 31, 2004. 34 No inference shall be drawn from this amendatory Act of -20- LRB9214073SMpc 1 the 91st General Assembly in construing this Section for 2 taxable years beginning before January 1, 1999. 3 (l) Environmental Remediation Tax Credit. 4 (i) For tax years ending after December 31, 1997 5 and on or before December 31, 2001, a taxpayer shall be 6 allowed a credit against the tax imposed by subsections 7 (a) and (b) of this Section for certain amounts paid for 8 unreimbursed eligible remediation costs, as specified in 9 this subsection. For purposes of this Section, 10 "unreimbursed eligible remediation costs" means costs 11 approved by the Illinois Environmental Protection Agency 12 ("Agency") under Section 58.14 of the Environmental 13 Protection Act that were paid in performing environmental 14 remediation at a site for which a No Further Remediation 15 Letter was issued by the Agency and recorded under 16 Section 58.10 of the Environmental Protection Act. The 17 credit must be claimed for the taxable year in which 18 Agency approval of the eligible remediation costs is 19 granted. The credit is not available to any taxpayer if 20 the taxpayer or any related party caused or contributed 21 to, in any material respect, a release of regulated 22 substances on, in, or under the site that was identified 23 and addressed by the remedial action pursuant to the Site 24 Remediation Program of the Environmental Protection Act. 25 After the Pollution Control Board rules are adopted 26 pursuant to the Illinois Administrative Procedure Act for 27 the administration and enforcement of Section 58.9 of the 28 Environmental Protection Act, determinations as to credit 29 availability for purposes of this Section shall be made 30 consistent with those rules. For purposes of this 31 Section, "taxpayer" includes a person whose tax 32 attributes the taxpayer has succeeded to under Section 33 381 of the Internal Revenue Code and "related party" 34 includes the persons disallowed a deduction for losses by -21- LRB9214073SMpc 1 paragraphs (b), (c), and (f)(1) of Section 267 of the 2 Internal Revenue Code by virtue of being a related 3 taxpayer, as well as any of its partners. The credit 4 allowed against the tax imposed by subsections (a) and 5 (b) shall be equal to 25% of the unreimbursed eligible 6 remediation costs in excess of $100,000 per site, except 7 that the $100,000 threshold shall not apply to any site 8 contained in an enterprise zone as determined by the 9 Department of Commerce and Community Affairs. The total 10 credit allowed shall not exceed $40,000 per year with a 11 maximum total of $150,000 per site. For partners and 12 shareholders of subchapter S corporations, there shall be 13 allowed a credit under this subsection to be determined 14 in accordance with the determination of income and 15 distributive share of income under Sections 702 and 704 16 and subchapter S of the Internal Revenue Code. 17 (ii) A credit allowed under this subsection that is 18 unused in the year the credit is earned may be carried 19 forward to each of the 5 taxable years following the year 20 for which the credit is first earned until it is used. 21 The term "unused credit" does not include any amounts of 22 unreimbursed eligible remediation costs in excess of the 23 maximum credit per site authorized under paragraph (i). 24 This credit shall be applied first to the earliest year 25 for which there is a liability. If there is a credit 26 under this subsection from more than one tax year that is 27 available to offset a liability, the earliest credit 28 arising under this subsection shall be applied first. A 29 credit allowed under this subsection may be sold to a 30 buyer as part of a sale of all or part of the remediation 31 site for which the credit was granted. The purchaser of 32 a remediation site and the tax credit shall succeed to 33 the unused credit and remaining carry-forward period of 34 the seller. To perfect the transfer, the assignor shall -22- LRB9214073SMpc 1 record the transfer in the chain of title for the site 2 and provide written notice to the Director of the 3 Illinois Department of Revenue of the assignor's intent 4 to sell the remediation site and the amount of the tax 5 credit to be transferred as a portion of the sale. In no 6 event may a credit be transferred to any taxpayer if the 7 taxpayer or a related party would not be eligible under 8 the provisions of subsection (i). 9 (iii) For purposes of this Section, the term "site" 10 shall have the same meaning as under Section 58.2 of the 11 Environmental Protection Act. 12 (m) Education expense credit. 13 Beginning with tax years ending after December 31, 1999, 14 a taxpayer who is the custodian of one or more qualifying 15 pupils isshall beallowed a credit against the tax imposed 16 by subsections (a) and (b) of this Section for qualified 17 education expenses incurred on behalf of the qualifying 18 pupils. The credit shall be equal to 25% of qualified 19 education expenses, but in no event may the total credit 20 under this Section claimed by a family that is the custodian 21 of qualifying pupils exceed $500. In no event shall a credit 22 under this subsection reduce the taxpayer's liability under 23 this Act to less than zero. This subsection is exempt from 24 the provisions of Section 250 of this Act. 25 For purposes of this subsection:;26 "Qualifying pupils" means individuals who (i) are 27 residents of the State of Illinois, (ii) are under the age of 28 21 at the close of the school year for which a credit is 29 sought, and (iii) during the school year for which a credit 30 is sought were full-time pupils enrolled in a kindergarten 31 through twelfth grade education program at any school, as 32 defined in this subsection. 33 "Qualified education expense" means the amount incurred 34 on behalf of a qualifying pupil in excess of $250 for -23- LRB9214073SMpc 1 tuition, book fees, and lab fees at the school in which the 2 pupil is enrolled during the regular school year. 3 "School" means any public or nonpublic elementary or 4 secondary school in Illinois that is in compliance with Title 5 VI of the Civil Rights Act of 1964 and attendance at which 6 satisfies the requirements of Section 26-1 of the School 7 Code, except that nothing shall be construed to require a 8 child to attend any particular public or nonpublic school to 9 qualify for the credit under this Section. 10 "Custodian" means, with respect to qualifying pupils, an 11 Illinois resident who is a parent, the parents, a legal 12 guardian, or the legal guardians of the qualifying pupils. 13 (Source: P.A. 91-9, eff. 1-1-00; 91-357, eff. 7-29-99; 14 91-643, eff. 8-20-99; 91-644, eff. 8-20-99; 91-860, eff. 15 6-22-00; 91-913, eff. 1-1-01; 92-12, eff. 7-1-01; 92-16, eff. 16 6-28-01; revised 12-3-01.)