State of Illinois
92nd General Assembly
Legislation

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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
 
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 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  subsections  subsection  (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
25    subsection (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 is shall be allowed 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.)

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