Public Act 093-0029
Public Act 93-0029 of the 93rd General Assembly
Public Act 93-0029
SB1634 Enrolled LRB093 02897 SJM 02913 b
AN ACT concerning taxes.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Illinois Income Tax Act is amended by
changing Sections 201, 204, and 207 as follows:
(35 ILCS 5/201) (from Ch. 120, par. 2-201)
Sec. 201. Tax Imposed.
(a) In general. A tax measured by net income is hereby
imposed on every individual, corporation, trust and estate
for each taxable year ending after July 31, 1969 on the
privilege of earning or receiving income in or as a resident
of this State. Such tax shall be in addition to all other
occupation or privilege taxes imposed by this State or by any
municipal corporation or political subdivision thereof.
(b) Rates. The tax imposed by subsection (a) of this
Section shall be determined as follows, except as adjusted by
subsection (d-1):
(1) In the case of an individual, trust or estate,
for taxable years ending prior to July 1, 1989, an amount
equal to 2 1/2% of the taxpayer's net income for the
taxable year.
(2) In the case of an individual, trust or estate,
for taxable years beginning prior to July 1, 1989 and
ending after June 30, 1989, an amount equal to the sum of
(i) 2 1/2% of the taxpayer's net income for the period
prior to July 1, 1989, as calculated under Section 202.3,
and (ii) 3% of the taxpayer's net income for the period
after June 30, 1989, as calculated under Section 202.3.
(3) In the case of an individual, trust or estate,
for taxable years beginning after June 30, 1989, an
amount equal to 3% of the taxpayer's net income for the
taxable year.
(4) (Blank).
(5) (Blank).
(6) In the case of a corporation, for taxable years
ending prior to July 1, 1989, an amount equal to 4% of
the taxpayer's net income for the taxable year.
(7) In the case of a corporation, for taxable years
beginning prior to July 1, 1989 and ending after June 30,
1989, an amount equal to the sum of (i) 4% of the
taxpayer's net income for the period prior to July 1,
1989, as calculated under Section 202.3, and (ii) 4.8% of
the taxpayer's net income for the period after June 30,
1989, as calculated under Section 202.3.
(8) In the case of a corporation, for taxable years
beginning after June 30, 1989, an amount equal to 4.8% of
the taxpayer's net income for the taxable year.
(c) Personal Property Tax Replacement Income Tax.
Beginning on July 1, 1979 and thereafter, in addition to such
income tax, there is also hereby imposed the Personal
Property Tax Replacement Income Tax measured by net income on
every corporation (including Subchapter S corporations),
partnership and trust, for each taxable year ending after
June 30, 1979. Such taxes are imposed on the privilege of
earning or receiving income in or as a resident of this
State. The Personal Property Tax Replacement Income Tax
shall be in addition to the income tax imposed by subsections
(a) and (b) of this Section and in addition to all other
occupation or privilege taxes imposed by this State or by any
municipal corporation or political subdivision thereof.
(d) Additional Personal Property Tax Replacement Income
Tax Rates. The personal property tax replacement income tax
imposed by this subsection and subsection (c) of this Section
in the case of a corporation, other than a Subchapter S
corporation and except as adjusted by subsection (d-1), shall
be an additional amount equal to 2.85% of such taxpayer's net
income for the taxable year, except that beginning on January
1, 1981, and thereafter, the rate of 2.85% specified in this
subsection shall be reduced to 2.5%, and in the case of a
partnership, trust or a Subchapter S corporation shall be an
additional amount equal to 1.5% of such taxpayer's net income
for the taxable year.
(d-1) Rate reduction for certain foreign insurers. In
the case of a foreign insurer, as defined by Section 35A-5 of
the Illinois Insurance Code, whose state or country of
domicile imposes on insurers domiciled in Illinois a
retaliatory tax (excluding any insurer whose premiums from
reinsurance assumed are 50% or more of its total insurance
premiums as determined under paragraph (2) of subsection (b)
of Section 304, except that for purposes of this
determination premiums from reinsurance do not include
premiums from inter-affiliate reinsurance arrangements),
beginning with taxable years ending on or after December 31,
1999, the sum of the rates of tax imposed by subsections (b)
and (d) shall be reduced (but not increased) to the rate at
which the total amount of tax imposed under this Act, net of
all credits allowed under this Act, shall equal (i) the total
amount of tax that would be imposed on the foreign insurer's
net income allocable to Illinois for the taxable year by such
foreign insurer's state or country of domicile if that net
income were subject to all income taxes and taxes measured by
net income imposed by such foreign insurer's state or country
of domicile, net of all credits allowed or (ii) a rate of
zero if no such tax is imposed on such income by the foreign
insurer's state of domicile. For the purposes of this
subsection (d-1), an inter-affiliate includes a mutual
insurer under common management.
(1) For the purposes of subsection (d-1), in no
event shall the sum of the rates of tax imposed by
subsections (b) and (d) be reduced below the rate at
which the sum of:
(A) the total amount of tax imposed on such
foreign insurer under this Act for a taxable year,
net of all credits allowed under this Act, plus
(B) the privilege tax imposed by Section 409
of the Illinois Insurance Code, the fire insurance
company tax imposed by Section 12 of the Fire
Investigation Act, and the fire department taxes
imposed under Section 11-10-1 of the Illinois
Municipal Code,
equals 1.25% for taxable years ending prior to December
31, 2003, or 1.75% for taxable years ending on or after
December 31, 2003, of the net taxable premiums written
for the taxable year, as described by subsection (1) of
Section 409 of the Illinois Insurance Code. This
paragraph will in no event increase the rates imposed
under subsections (b) and (d).
(2) Any reduction in the rates of tax imposed by
this subsection shall be applied first against the rates
imposed by subsection (b) and only after the tax imposed
by subsection (a) net of all credits allowed under this
Section other than the credit allowed under subsection
(i) has been reduced to zero, against the rates imposed
by subsection (d).
This subsection (d-1) is exempt from the provisions of
Section 250.
(e) Investment credit. A taxpayer shall be allowed a
credit against the Personal Property Tax Replacement Income
Tax for investment in qualified property.
(1) A taxpayer shall be allowed a credit equal to
.5% of the basis of qualified property placed in service
during the taxable year, provided such property is placed
in service on or after July 1, 1984. There shall be
allowed an additional credit equal to .5% of the basis of
qualified property placed in service during the taxable
year, provided such property is placed in service on or
after July 1, 1986, and the taxpayer's base employment
within Illinois has increased by 1% or more over the
preceding year as determined by the taxpayer's employment
records filed with the Illinois Department of Employment
Security. Taxpayers who are new to Illinois shall be
deemed to have met the 1% growth in base employment for
the first year in which they file employment records with
the Illinois Department of Employment Security. The
provisions added to this Section by Public Act 85-1200
(and restored by Public Act 87-895) shall be construed as
declaratory of existing law and not as a new enactment.
If, in any year, the increase in base employment within
Illinois over the preceding year is less than 1%, the
additional credit shall be limited to that percentage
times a fraction, the numerator of which is .5% and the
denominator of which is 1%, but shall not exceed .5%.
The investment credit shall not be allowed to the extent
that it would reduce a taxpayer's liability in any tax
year below zero, nor may any credit for qualified
property be allowed for any year other than the year in
which the property was placed in service in Illinois. For
tax years ending on or after December 31, 1987, and on or
before December 31, 1988, the credit shall be allowed for
the tax year in which the property is placed in service,
or, if the amount of the credit exceeds the tax liability
for that year, whether it exceeds the original liability
or the liability as later amended, such excess may be
carried forward and applied to the tax liability of the 5
taxable years following the excess credit years if the
taxpayer (i) makes investments which cause the creation
of a minimum of 2,000 full-time equivalent jobs in
Illinois, (ii) is located in an enterprise zone
established pursuant to the Illinois Enterprise Zone Act
and (iii) is certified by the Department of Commerce and
Community Affairs as complying with the requirements
specified in clause (i) and (ii) by July 1, 1986. The
Department of Commerce and Community Affairs shall notify
the Department of Revenue of all such certifications
immediately. For tax years ending after December 31,
1988, the credit shall be allowed for the tax year in
which the property is placed in service, or, if the
amount of the credit exceeds the tax liability for that
year, whether it exceeds the original liability or the
liability as later amended, such excess may be carried
forward and applied to the tax liability of the 5 taxable
years following the excess credit years. The credit shall
be applied to the earliest year for which there is a
liability. If there is credit from more than one tax year
that is available to offset a liability, earlier credit
shall be applied first.
(2) The term "qualified property" means property
which:
(A) is tangible, whether new or used,
including buildings and structural components of
buildings and signs that are real property, but not
including land or improvements to real property that
are not a structural component of a building such as
landscaping, sewer lines, local access roads,
fencing, parking lots, and other appurtenances;
(B) is depreciable pursuant to Section 167 of
the Internal Revenue Code, except that "3-year
property" as defined in Section 168(c)(2)(A) of that
Code is not eligible for the credit provided by this
subsection (e);
(C) is acquired by purchase as defined in
Section 179(d) of the Internal Revenue Code;
(D) is used in Illinois by a taxpayer who is
primarily engaged in manufacturing, or in mining
coal or fluorite, or in retailing; and
(E) has not previously been used in Illinois
in such a manner and by such a person as would
qualify for the credit provided by this subsection
(e) or subsection (f).
(3) For purposes of this subsection (e),
"manufacturing" means the material staging and production
of tangible personal property by procedures commonly
regarded as manufacturing, processing, fabrication, or
assembling which changes some existing material into new
shapes, new qualities, or new combinations. For purposes
of this subsection (e) the term "mining" shall have the
same meaning as the term "mining" in Section 613(c) of
the Internal Revenue Code. For purposes of this
subsection (e), the term "retailing" means the sale of
tangible personal property or services rendered in
conjunction with the sale of tangible consumer goods or
commodities.
(4) The basis of qualified property shall be the
basis used to compute the depreciation deduction for
federal income tax purposes.
(5) If the basis of the property for federal income
tax depreciation purposes is increased after it has been
placed in service in Illinois by the taxpayer, the amount
of such increase shall be deemed property placed in
service on the date of such increase in basis.
(6) The term "placed in service" shall have the
same meaning as under Section 46 of the Internal Revenue
Code.
(7) If during any taxable year, any property ceases
to be qualified property in the hands of the taxpayer
within 48 months after being placed in service, or the
situs of any qualified property is moved outside Illinois
within 48 months after being placed in service, the
Personal Property Tax Replacement Income Tax for such
taxable year shall be increased. Such increase shall be
determined by (i) recomputing the investment credit which
would have been allowed for the year in which credit for
such property was originally allowed by eliminating such
property from such computation and, (ii) subtracting such
recomputed credit from the amount of credit previously
allowed. For the purposes of this paragraph (7), a
reduction of the basis of qualified property resulting
from a redetermination of the purchase price shall be
deemed a disposition of qualified property to the extent
of such reduction.
(8) Unless the investment credit is extended by
law, the basis of qualified property shall not include
costs incurred after December 31, 2003, except for costs
incurred pursuant to a binding contract entered into on
or before December 31, 2003.
(9) Each taxable year ending before December 31,
2000, a partnership may elect to pass through to its
partners the credits to which the partnership is entitled
under this subsection (e) for the taxable year. A
partner may use the credit allocated to him or her under
this paragraph only against the tax imposed in
subsections (c) and (d) of this Section. If the
partnership makes that election, those credits shall be
allocated among the partners in the partnership in
accordance with the rules set forth in Section 704(b) of
the Internal Revenue Code, and the rules promulgated
under that Section, and the allocated amount of the
credits shall be allowed to the partners for that taxable
year. The partnership shall make this election on its
Personal Property Tax Replacement Income Tax return for
that taxable year. The election to pass through the
credits shall be irrevocable.
For taxable years ending on or after December 31,
2000, a partner that qualifies its partnership for a
subtraction under subparagraph (I) of paragraph (2) of
subsection (d) of Section 203 or a shareholder that
qualifies a Subchapter S corporation for a subtraction
under subparagraph (S) of paragraph (2) of subsection (b)
of Section 203 shall be allowed a credit under this
subsection (e) equal to its share of the credit earned
under this subsection (e) during the taxable year by the
partnership or Subchapter S corporation, determined in
accordance with the determination of income and
distributive share of income under Sections 702 and 704
and Subchapter S of the Internal Revenue Code. This
paragraph is exempt from the provisions of Section 250.
(f) Investment credit; Enterprise Zone.
(1) A taxpayer shall be allowed a credit against
the tax imposed by subsections (a) and (b) of this
Section for investment in qualified property which is
placed in service in an Enterprise Zone created pursuant
to the Illinois Enterprise Zone Act. For partners,
shareholders of Subchapter S corporations, and owners of
limited liability companies, if the liability company is
treated as a partnership for purposes of federal and
State income taxation, there shall be allowed a credit
under this subsection (f) to be determined in accordance
with the determination of income and distributive share
of income under Sections 702 and 704 and Subchapter S of
the Internal Revenue Code. The credit shall be .5% of
the basis for such property. The credit shall be
available only in the taxable year in which the property
is placed in service in the Enterprise Zone and shall not
be allowed to the extent that it would reduce a
taxpayer's liability for the tax imposed by subsections
(a) and (b) of this Section to below zero. For tax years
ending on or after December 31, 1985, the credit shall be
allowed for the tax year in which the property is placed
in service, or, if the amount of the credit exceeds the
tax liability for that year, whether it exceeds the
original liability or the liability as later amended,
such excess may be carried forward and applied to the tax
liability of the 5 taxable years following the excess
credit year. The credit shall be applied to the earliest
year for which there is a liability. If there is credit
from more than one tax year that is available to offset a
liability, the credit accruing first in time shall be
applied first.
(2) The term qualified property means property
which:
(A) is tangible, whether new or used,
including buildings and structural components of
buildings;
(B) is depreciable pursuant to Section 167 of
the Internal Revenue Code, except that "3-year
property" as defined in Section 168(c)(2)(A) of that
Code is not eligible for the credit provided by this
subsection (f);
(C) is acquired by purchase as defined in
Section 179(d) of the Internal Revenue Code;
(D) is used in the Enterprise Zone by the
taxpayer; and
(E) has not been previously used in Illinois
in such a manner and by such a person as would
qualify for the credit provided by this subsection
(f) or subsection (e).
(3) The basis of qualified property shall be the
basis used to compute the depreciation deduction for
federal income tax purposes.
(4) If the basis of the property for federal income
tax depreciation purposes is increased after it has been
placed in service in the Enterprise Zone by the taxpayer,
the amount of such increase shall be deemed property
placed in service on the date of such increase in basis.
(5) The term "placed in service" shall have the
same meaning as under Section 46 of the Internal Revenue
Code.
(6) If during any taxable year, any property ceases
to be qualified property in the hands of the taxpayer
within 48 months after being placed in service, or the
situs of any qualified property is moved outside the
Enterprise Zone within 48 months after being placed in
service, the tax imposed under subsections (a) and (b) of
this Section for such taxable year shall be increased.
Such increase shall be determined by (i) recomputing the
investment credit which would have been allowed for the
year in which credit for such property was originally
allowed by eliminating such property from such
computation, and (ii) subtracting such recomputed credit
from the amount of credit previously allowed. For the
purposes of this paragraph (6), a reduction of the basis
of qualified property resulting from a redetermination of
the purchase price shall be deemed a disposition of
qualified property to the extent of such reduction.
(g) Jobs Tax Credit; Enterprise Zone and Foreign Trade
Zone or Sub-Zone.
(1) A taxpayer conducting a trade or business in an
enterprise zone or a High Impact Business designated by
the Department of Commerce and Community Affairs
conducting a trade or business in a federally designated
Foreign Trade Zone or Sub-Zone shall be allowed a credit
against the tax imposed by subsections (a) and (b) of
this Section in the amount of $500 per eligible employee
hired to work in the zone during the taxable year.
(2) To qualify for the credit:
(A) the taxpayer must hire 5 or more eligible
employees to work in an enterprise zone or federally
designated Foreign Trade Zone or Sub-Zone during the
taxable year;
(B) the taxpayer's total employment within the
enterprise zone or federally designated Foreign
Trade Zone or Sub-Zone must increase by 5 or more
full-time employees beyond the total employed in
that zone at the end of the previous tax year for
which a jobs tax credit under this Section was
taken, or beyond the total employed by the taxpayer
as of December 31, 1985, whichever is later; and
(C) the eligible employees must be employed
180 consecutive days in order to be deemed hired for
purposes of this subsection.
(3) An "eligible employee" means an employee who
is:
(A) Certified by the Department of Commerce
and Community Affairs as "eligible for services"
pursuant to regulations promulgated in accordance
with Title II of the Job Training Partnership Act,
Training Services for the Disadvantaged or Title III
of the Job Training Partnership Act, Employment and
Training Assistance for Dislocated Workers Program.
(B) Hired after the enterprise zone or
federally designated Foreign Trade Zone or Sub-Zone
was designated or the trade or business was located
in that zone, whichever is later.
(C) Employed in the enterprise zone or Foreign
Trade Zone or Sub-Zone. An employee is employed in
an enterprise zone or federally designated Foreign
Trade Zone or Sub-Zone if his services are rendered
there or it is the base of operations for the
services performed.
(D) A full-time employee working 30 or more
hours per week.
(4) For tax years ending on or after December 31,
1985 and prior to December 31, 1988, the credit shall be
allowed for the tax year in which the eligible employees
are hired. For tax years ending on or after December 31,
1988, the credit shall be allowed for the tax year
immediately following the tax year in which the eligible
employees are hired. If the amount of the credit exceeds
the tax liability for that year, whether it exceeds the
original liability or the liability as later amended,
such excess may be carried forward and applied to the tax
liability of the 5 taxable years following the excess
credit year. The credit shall be applied to the earliest
year for which there is a liability. If there is credit
from more than one tax year that is available to offset a
liability, earlier credit shall be applied first.
(5) The Department of Revenue shall promulgate such
rules and regulations as may be deemed necessary to carry
out the purposes of this subsection (g).
(6) The credit shall be available for eligible
employees hired on or after January 1, 1986.
(h) Investment credit; High Impact Business.
(1) Subject to subsections (b) and (b-5) of Section
5.5 of the Illinois Enterprise Zone Act, a taxpayer shall
be allowed a credit against the tax imposed by
subsections (a) and (b) of this Section for investment in
qualified property which is placed in service by a
Department of Commerce and Community Affairs designated
High Impact Business. The credit shall be .5% of the
basis for such property. The credit shall not be
available (i) until the minimum investments in qualified
property set forth in subdivision (a)(3)(A) of Section
5.5 of the Illinois Enterprise Zone Act have been
satisfied or (ii) until the time authorized in subsection
(b-5) of the Illinois Enterprise Zone Act for entities
designated as High Impact Businesses under subdivisions
(a)(3)(B), (a)(3)(C), and (a)(3)(D) of Section 5.5 of the
Illinois Enterprise Zone Act, and shall not be allowed to
the extent that it would reduce a taxpayer's liability
for the tax imposed by subsections (a) and (b) of this
Section to below zero. The credit applicable to such
investments shall be taken in the taxable year in which
such investments have been completed. The credit for
additional investments beyond the minimum investment by a
designated high impact business authorized under
subdivision (a)(3)(A) of Section 5.5 of the Illinois
Enterprise Zone Act shall be available only in the
taxable year in which the property is placed in service
and shall not be allowed to the extent that it would
reduce a taxpayer's liability for the tax imposed by
subsections (a) and (b) of this Section to below zero.
For tax years ending on or after December 31, 1987, the
credit shall be allowed for the tax year in which the
property is placed in service, or, if the amount of the
credit exceeds the tax liability for that year, whether
it exceeds the original liability or the liability as
later amended, such excess may be carried forward and
applied to the tax liability of the 5 taxable years
following the excess credit year. The credit shall be
applied to the earliest year for which there is a
liability. If there is credit from more than one tax
year that is available to offset a liability, the credit
accruing first in time shall be applied first.
Changes made in this subdivision (h)(1) by Public
Act 88-670 restore changes made by Public Act 85-1182 and
reflect existing law.
(2) The term qualified property means property
which:
(A) is tangible, whether new or used,
including buildings and structural components of
buildings;
(B) is depreciable pursuant to Section 167 of
the Internal Revenue Code, except that "3-year
property" as defined in Section 168(c)(2)(A) of that
Code is not eligible for the credit provided by this
subsection (h);
(C) is acquired by purchase as defined in
Section 179(d) of the Internal Revenue Code; and
(D) is not eligible for the Enterprise Zone
Investment Credit provided by subsection (f) of this
Section.
(3) The basis of qualified property shall be the
basis used to compute the depreciation deduction for
federal income tax purposes.
(4) If the basis of the property for federal income
tax depreciation purposes is increased after it has been
placed in service in a federally designated Foreign Trade
Zone or Sub-Zone located in Illinois by the taxpayer, the
amount of such increase shall be deemed property placed
in service on the date of such increase in basis.
(5) The term "placed in service" shall have the
same meaning as under Section 46 of the Internal Revenue
Code.
(6) If during any taxable year ending on or before
December 31, 1996, any property ceases to be qualified
property in the hands of the taxpayer within 48 months
after being placed in service, or the situs of any
qualified property is moved outside Illinois within 48
months after being placed in service, the tax imposed
under subsections (a) and (b) of this Section for such
taxable year shall be increased. Such increase shall be
determined by (i) recomputing the investment credit which
would have been allowed for the year in which credit for
such property was originally allowed by eliminating such
property from such computation, and (ii) subtracting such
recomputed credit from the amount of credit previously
allowed. For the purposes of this paragraph (6), a
reduction of the basis of qualified property resulting
from a redetermination of the purchase price shall be
deemed a disposition of qualified property to the extent
of such reduction.
(7) Beginning with tax years ending after December
31, 1996, if a taxpayer qualifies for the credit under
this subsection (h) and thereby is granted a tax
abatement and the taxpayer relocates its entire facility
in violation of the explicit terms and length of the
contract under Section 18-183 of the Property Tax Code,
the tax imposed under subsections (a) and (b) of this
Section shall be increased for the taxable year in which
the taxpayer relocated its facility by an amount equal to
the amount of credit received by the taxpayer under this
subsection (h).
(i) Credit for Personal Property Tax Replacement Income
Tax. For tax years ending prior to December 31, 2003, a
credit shall be allowed against the tax imposed by
subsections (a) and (b) of this Section for the tax imposed
by subsections (c) and (d) of this Section. This credit
shall be computed by multiplying the tax imposed by
subsections (c) and (d) of this Section by a fraction, the
numerator of which is base income allocable to Illinois and
the denominator of which is Illinois base income, and further
multiplying the product by the tax rate imposed by
subsections (a) and (b) of this Section.
Any credit earned on or after December 31, 1986 under
this subsection which is unused in the year the credit is
computed because it exceeds the tax liability imposed by
subsections (a) and (b) for that year (whether it exceeds the
original liability or the liability as later amended) may be
carried forward and applied to the tax liability imposed by
subsections (a) and (b) of the 5 taxable years following the
excess credit year, provided that no credit may be carried
forward to any year ending on or after December 31, 2003.
This credit shall be applied first to the earliest year for
which there is a liability. If there is a credit under this
subsection from more than one tax year that is available to
offset a liability the earliest credit arising under this
subsection shall be applied first.
If, during any taxable year ending on or after December
31, 1986, the tax imposed by subsections (c) and (d) of this
Section for which a taxpayer has claimed a credit under this
subsection (i) is reduced, the amount of credit for such tax
shall also be reduced. Such reduction shall be determined by
recomputing the credit to take into account the reduced tax
imposed by subsections (c) and (d). If any portion of the
reduced amount of credit has been carried to a different
taxable year, an amended return shall be filed for such
taxable year to reduce the amount of credit claimed.
(j) Training expense credit. Beginning with tax years
ending on or after December 31, 1986 and prior to December
31, 2003, a taxpayer shall be allowed a credit against the
tax imposed by subsections (a) and (b) under this Section for
all amounts paid or accrued, on behalf of all persons
employed by the taxpayer in Illinois or Illinois residents
employed outside of Illinois by a taxpayer, for educational
or vocational training in semi-technical or technical fields
or semi-skilled or skilled fields, which were deducted from
gross income in the computation of taxable income. The
credit against the tax imposed by subsections (a) and (b)
shall be 1.6% of such training expenses. For partners,
shareholders of subchapter S corporations, and owners of
limited liability companies, if the liability company is
treated as a partnership for purposes of federal and State
income taxation, there shall be allowed a credit under this
subsection (j) to be determined in accordance with the
determination of income and distributive share of income
under Sections 702 and 704 and subchapter S of the Internal
Revenue Code.
Any credit allowed under this subsection which is unused
in the year the credit is earned may be carried forward to
each of the 5 taxable years following the year for which the
credit is first computed until it is used. This credit shall
be applied first to the earliest year for which there is a
liability. If there is a credit under this subsection from
more than one tax year that is available to offset a
liability the earliest credit arising under this subsection
shall be applied first. No carryforward credit may be
claimed in any tax year ending on or after December 31, 2003.
(k) Research and development credit.
For Beginning with tax years ending after July 1, 1990
and prior to December 31, 2003, a taxpayer shall be allowed a
credit against the tax imposed by subsections (a) and (b) of
this Section for increasing research activities in this
State. The credit allowed against the tax imposed by
subsections (a) and (b) shall be equal to 6 1/2% of the
qualifying expenditures for increasing research activities in
this State. For partners, shareholders of subchapter S
corporations, and owners of limited liability companies, if
the liability company is treated as a partnership for
purposes of federal and State income taxation, there shall be
allowed a credit under this subsection to be determined in
accordance with the determination of income and distributive
share of income under Sections 702 and 704 and subchapter S
of the Internal Revenue Code.
For purposes of this subsection, "qualifying
expenditures" means the qualifying expenditures as defined
for the federal credit for increasing research activities
which would be allowable under Section 41 of the Internal
Revenue Code and which are conducted in this State,
"qualifying expenditures for increasing research activities
in this State" means the excess of qualifying expenditures
for the taxable year in which incurred over qualifying
expenditures for the base period, "qualifying expenditures
for the base period" means the average of the qualifying
expenditures for each year in the base period, and "base
period" means the 3 taxable years immediately preceding the
taxable year for which the determination is being made.
Any credit in excess of the tax liability for the taxable
year may be carried forward. A taxpayer may elect to have the
unused credit shown on its final completed return carried
over as a credit against the tax liability for the following
5 taxable years or until it has been fully used, whichever
occurs first; provided that no credit may be carried forward
to any year ending on or after December 31, 2003.
If an unused credit is carried forward to a given year
from 2 or more earlier years, that credit arising in the
earliest year will be applied first against the tax liability
for the given year. If a tax liability for the given year
still remains, the credit from the next earliest year will
then be applied, and so on, until all credits have been used
or no tax liability for the given year remains. Any
remaining unused credit or credits then will be carried
forward to the next following year in which a tax liability
is incurred, except that no credit can be carried forward to
a year which is more than 5 years after the year in which the
expense for which the credit is given was incurred.
Unless extended by law, the credit shall not include
costs incurred after December 31, 2004, except for costs
incurred pursuant to a binding contract entered into on or
before December 31, 2004.
No inference shall be drawn from this amendatory Act of
the 91st General Assembly in construing this Section for
taxable years beginning before January 1, 1999.
(l) Environmental Remediation Tax Credit.
(i) For tax years ending after December 31, 1997
and on or before December 31, 2001, a taxpayer shall be
allowed a credit against the tax imposed by subsections
(a) and (b) of this Section for certain amounts paid for
unreimbursed eligible remediation costs, as specified in
this subsection. For purposes of this Section,
"unreimbursed eligible remediation costs" means costs
approved by the Illinois Environmental Protection Agency
("Agency") under Section 58.14 of the Environmental
Protection Act that were paid in performing environmental
remediation at a site for which a No Further Remediation
Letter was issued by the Agency and recorded under
Section 58.10 of the Environmental Protection Act. The
credit must be claimed for the taxable year in which
Agency approval of the eligible remediation costs is
granted. The credit is not available to any taxpayer if
the taxpayer or any related party caused or contributed
to, in any material respect, a release of regulated
substances on, in, or under the site that was identified
and addressed by the remedial action pursuant to the Site
Remediation Program of the Environmental Protection Act.
After the Pollution Control Board rules are adopted
pursuant to the Illinois Administrative Procedure Act for
the administration and enforcement of Section 58.9 of the
Environmental Protection Act, determinations as to credit
availability for purposes of this Section shall be made
consistent with those rules. For purposes of this
Section, "taxpayer" includes a person whose tax
attributes the taxpayer has succeeded to under Section
381 of the Internal Revenue Code and "related party"
includes the persons disallowed a deduction for losses by
paragraphs (b), (c), and (f)(1) of Section 267 of the
Internal Revenue Code by virtue of being a related
taxpayer, as well as any of its partners. The credit
allowed against the tax imposed by subsections (a) and
(b) shall be equal to 25% of the unreimbursed eligible
remediation costs in excess of $100,000 per site, except
that the $100,000 threshold shall not apply to any site
contained in an enterprise zone as determined by the
Department of Commerce and Community Affairs. The total
credit allowed shall not exceed $40,000 per year with a
maximum total of $150,000 per site. For partners and
shareholders of subchapter S corporations, there shall be
allowed a credit under this subsection to be determined
in accordance with the determination of income and
distributive share of income under Sections 702 and 704
and subchapter S of the Internal Revenue Code.
(ii) A credit allowed under this subsection that is
unused in the year the credit is earned may be carried
forward to each of the 5 taxable years following the year
for which the credit is first earned until it is used.
The term "unused credit" does not include any amounts of
unreimbursed eligible remediation costs in excess of the
maximum credit per site authorized under paragraph (i).
This credit shall be applied first to the earliest year
for which there is a liability. If there is a credit
under this subsection from more than one tax year that is
available to offset a liability, the earliest credit
arising under this subsection shall be applied first. A
credit allowed under this subsection may be sold to a
buyer as part of a sale of all or part of the remediation
site for which the credit was granted. The purchaser of
a remediation site and the tax credit shall succeed to
the unused credit and remaining carry-forward period of
the seller. To perfect the transfer, the assignor shall
record the transfer in the chain of title for the site
and provide written notice to the Director of the
Illinois Department of Revenue of the assignor's intent
to sell the remediation site and the amount of the tax
credit to be transferred as a portion of the sale. In no
event may a credit be transferred to any taxpayer if the
taxpayer or a related party would not be eligible under
the provisions of subsection (i).
(iii) For purposes of this Section, the term "site"
shall have the same meaning as under Section 58.2 of the
Environmental Protection Act.
(m) Education expense credit. Beginning with tax years
ending after December 31, 1999, a taxpayer who is the
custodian of one or more qualifying pupils shall be allowed a
credit against the tax imposed by subsections (a) and (b) of
this Section for qualified education expenses incurred on
behalf of the qualifying pupils. The credit shall be equal
to 25% of qualified education expenses, but in no event may
the total credit under this subsection claimed by a family
that is the custodian of qualifying pupils exceed $500. In
no event shall a credit under this subsection reduce the
taxpayer's liability under this Act to less than zero. This
subsection is exempt from the provisions of Section 250 of
this Act.
For purposes of this subsection:
"Qualifying pupils" means individuals who (i) are
residents of the State of Illinois, (ii) are under the age of
21 at the close of the school year for which a credit is
sought, and (iii) during the school year for which a credit
is sought were full-time pupils enrolled in a kindergarten
through twelfth grade education program at any school, as
defined in this subsection.
"Qualified education expense" means the amount incurred
on behalf of a qualifying pupil in excess of $250 for
tuition, book fees, and lab fees at the school in which the
pupil is enrolled during the regular school year.
"School" means any public or nonpublic elementary or
secondary school in Illinois that is in compliance with Title
VI of the Civil Rights Act of 1964 and attendance at which
satisfies the requirements of Section 26-1 of the School
Code, except that nothing shall be construed to require a
child to attend any particular public or nonpublic school to
qualify for the credit under this Section.
"Custodian" means, with respect to qualifying pupils, an
Illinois resident who is a parent, the parents, a legal
guardian, or the legal guardians of the qualifying pupils.
(Source: P.A. 91-9, eff. 1-1-00; 91-357, eff. 7-29-99;
91-643, eff. 8-20-99; 91-644, eff. 8-20-99; 91-860, eff.
6-22-00; 91-913, eff. 1-1-01; 92-12, eff. 7-1-01; 92-16, eff.
6-28-01; 92-651, eff. 7-11-02; 92-846, eff. 8-23-02.)
(35 ILCS 5/204) (from Ch. 120, par. 2-204)
Sec. 204. Standard Exemption.
(a) Allowance of exemption. In computing net income
under this Act, there shall be allowed as an exemption the
sum of the amounts determined under subsections (b), (c) and
(d), multiplied by a fraction the numerator of which is the
amount of the taxpayer's base income allocable to this State
for the taxable year and the denominator of which is the
taxpayer's total base income for the taxable year.
(b) Basic amount. For the purpose of subsection (a) of
this Section, except as provided by subsection (a) of Section
205 and in this subsection, each taxpayer shall be allowed a
basic amount of $1000, except that for corporations the basic
amount shall be zero for tax years ending on or after
December 31, 2003, and for individuals the basic amount shall
be:
(1) for taxable years ending on or after December
31, 1998 and prior to December 31, 1999, $1,300;
(2) for taxable years ending on or after December
31, 1999 and prior to December 31, 2000, $1,650;
(3) for taxable years ending on or after December
31, 2000, $2,000.
For taxable years ending on or after December 31, 1992, a
taxpayer whose Illinois base income exceeds the basic amount
and who is claimed as a dependent on another person's tax
return under the Internal Revenue Code of 1986 shall not be
allowed any basic amount under this subsection.
(c) Additional amount for individuals. In the case of an
individual taxpayer, there shall be allowed for the purpose
of subsection (a), in addition to the basic amount provided
by subsection (b), an additional exemption equal to the basic
amount for each exemption in excess of one allowable to such
individual taxpayer for the taxable year under Section 151 of
the Internal Revenue Code.
(d) Additional exemptions for an individual taxpayer and
his or her spouse. In the case of an individual taxpayer and
his or her spouse, he or she shall each be allowed additional
exemptions as follows:
(1) Additional exemption for taxpayer or spouse 65
years of age or older.
(A) For taxpayer. An additional exemption of
$1,000 for the taxpayer if he or she has attained
the age of 65 before the end of the taxable year.
(B) For spouse when a joint return is not
filed. An additional exemption of $1,000 for the
spouse of the taxpayer if a joint return is not made
by the taxpayer and his spouse, and if the spouse
has attained the age of 65 before the end of such
taxable year, and, for the calendar year in which
the taxable year of the taxpayer begins, has no
gross income and is not the dependent of another
taxpayer.
(2) Additional exemption for blindness of taxpayer
or spouse.
(A) For taxpayer. An additional exemption of
$1,000 for the taxpayer if he or she is blind at the
end of the taxable year.
(B) For spouse when a joint return is not
filed. An additional exemption of $1,000 for the
spouse of the taxpayer if a separate return is made
by the taxpayer, and if the spouse is blind and, for
the calendar year in which the taxable year of the
taxpayer begins, has no gross income and is not the
dependent of another taxpayer. For purposes of this
paragraph, the determination of whether the spouse
is blind shall be made as of the end of the taxable
year of the taxpayer; except that if the spouse dies
during such taxable year such determination shall be
made as of the time of such death.
(C) Blindness defined. For purposes of this
subsection, an individual is blind only if his or
her central visual acuity does not exceed 20/200 in
the better eye with correcting lenses, or if his or
her visual acuity is greater than 20/200 but is
accompanied by a limitation in the fields of vision
such that the widest diameter of the visual fields
subtends an angle no greater than 20 degrees.
(e) Cross reference. See Article 3 for the manner of
determining base income allocable to this State.
(f) Application of Section 250. Section 250 does not
apply to the amendments to this Section made by Public Act
90-613.
(Source: P.A. 90-613, eff. 7-9-98; 91-357, eff. 7-29-99.)
(35 ILCS 5/207) (from Ch. 120, par. 2-207)
Sec. 207. Net Losses.
(a) If after applying all of the modifications provided
for in paragraph (2) of Section 203(b), paragraph (2) of
Section 203(c) and paragraph (2) of Section 203(d) and the
allocation and apportionment provisions of Article 3 of this
Act, the taxpayer's net income results in a loss;
(1) for any taxable year ending prior to December
31, 1999, such loss shall be allowed as a carryover or
carryback deduction in the manner allowed under Section
172 of the Internal Revenue Code; and
(2) for any taxable year ending on or after
December 31, 1999 and prior to December 31, 2003, such
loss shall be allowed as a carryback to each of the 2
taxable years preceding the taxable year of such loss and
shall be a net operating carryover to each of the 20
taxable years following the taxable year of such loss;
and
(3) for any taxable year ending on or after
December 31, 2003, such loss shall be allowed as a net
operating carryover to each of the 12 taxable years
following the taxable year of such loss.
(a-5) Election to relinquish carryback and order of
application of losses.
(A) For losses incurred in tax years ending
prior to December 31, 2003, the taxpayer may elect
to relinquish the entire carryback period with
respect to such loss. Such election shall be made
in the form and manner prescribed by the Department
and shall be made by the due date (including
extensions of time) for filing the taxpayer's return
for the taxable year in which such loss is incurred,
and such election, once made, shall be irrevocable.
(B) The entire amount of such loss shall be
carried to the earliest taxable year to which such
loss may be carried. The amount of such loss which
shall be carried to each of the other taxable years
shall be the excess, if any, of the amount of such
loss over the sum of the deductions for carryback or
carryover of such loss allowable for each of the
prior taxable years to which such loss may be
carried.
(b) Any loss determined under subsection (a) of this
Section must be carried back or carried forward in the same
manner for purposes of subsections (a) and (b) of Section 201
of this Act as for purposes of subsections (c) and (d) of
Section 201 of this Act.
(Source: P.A. 91-541, eff. 8-13-99.)
Section 10. The Illinois Insurance Code is amended by
changing Sections 445 and 531.13 as follows:
(215 ILCS 5/445) (from Ch. 73, par. 1057)
Sec. 445. Surplus line.
(1) Surplus line defined; surplus line insurer
requirements. Surplus line insurance is insurance on an
Illinois risk of the kinds specified in Classes 2 and 3 of
Section 4 of this Code procured from an unauthorized insurer
or a domestic surplus line insurer as defined in Section 445a
after the insurance producer representing the insured or the
surplus line producer is unable, after diligent effort, to
procure said insurance from insurers which are authorized to
transact business in this State other than domestic surplus
line insurers as defined in Section 445a.
Insurance producers may procure surplus line insurance
only if licensed as a surplus line producer under this
Section and may procure that insurance only from an
unauthorized insurer or from a domestic surplus line insurer
as defined in Section 445a:
(a) that based upon information available to the
surplus line producer has a policyholders surplus of not
less than $15,000,000 determined in accordance with
accounting rules that are applicable to authorized
insurers; and
(b) that has standards of solvency and management
that are adequate for the protection of policyholders;
and
(c) where an unauthorized insurer does not meet the
standards set forth in (a) and (b) above, a surplus line
producer may, if necessary, procure insurance from that
insurer only if prior written warning of such fact or
condition is given to the insured by the insurance
producer or surplus line producer.
(2) Surplus line producer; license. Any licensed
producer who is a resident of this State, or any nonresident
who qualifies under Section 500-40, may be licensed as a
surplus line producer upon:
(a) completing a prelicensing course of study. The
course provided for by this Section shall be conducted
under rules and regulations prescribed by the Director.
The Director may administer the course or may make
arrangements, including contracting with an outside
educational service, for administering the course and
collecting the non-refundable application fee provided
for in this subsection. Any charges assessed by the
Director or the educational service for administering the
course shall be paid directly by the individual
applicants. Each applicant required to take the course
shall enclose with the application a non-refundable $10
application fee payable to the Director plus a separate
course administration fee. An applicant who fails to
appear for the course as scheduled, or appears but fails
to complete the course, shall not be entitled to any
refund, and shall be required to submit a new request to
attend the course together with all the requisite fees
before being rescheduled for another course at a later
date; and
(b) payment of an annual license fee of $200; and
(c) procurement of the surety bond required in
subsection (4) of this Section.
A surplus line producer so licensed shall keep a separate
account of the business transacted thereunder which shall be
open at all times to the inspection of the Director or his
representative.
The prelicensing course of study requirement in (a) above
shall not apply to insurance producers who were licensed
under the Illinois surplus line law on or before the
effective date of this amendatory Act of the 92nd General
Assembly.
(3) Taxes and reports.
(a) Surplus line tax and penalty for late payment.
A surplus line producer shall file with the Director
on or before February 1 and August 1 of each year a
report in the form prescribed by the Director on all
surplus line insurance procured from unauthorized
insurers during the preceding 6 month period ending
December 31 or June 30 respectively, and on the filing of
such report shall pay to the Director for the use and
benefit of the State a sum equal to 3.5% 3% of the gross
premiums less returned premiums upon all surplus line
insurance procured or cancelled during the preceding 6
months.
Any surplus line producer who fails to pay the full
amount due under this subsection is liable, in addition
to the amount due, for such penalty and interest charges
as are provided for under Section 412 of this Code. The
Director, through the Attorney General, may institute an
action in the name of the People of the State of
Illinois, in any court of competent jurisdiction, for the
recovery of the amount of such taxes and penalties due,
and prosecute the same to final judgment, and take such
steps as are necessary to collect the same.
(b) Fire Marshal Tax.
Each surplus line producer shall file with the
Director on or before March 31 of each year a report in
the form prescribed by the Director on all fire insurance
procured from unauthorized insurers subject to tax under
Section 12 of the Fire Investigation Act and shall pay to
the Director the fire marshal tax required thereunder.
(c) Taxes and fees charged to insured. The taxes
imposed under this subsection and the countersigning fees
charged by the Surplus Line Association of Illinois may
be charged to and collected from surplus line insureds.
(4) Bond. Each surplus line producer, as a condition to
receiving a surplus line producer's license, shall execute
and deliver to the Director a surety bond to the People of
the State in the penal sum of $20,000, with a surety which is
authorized to transact business in this State, conditioned
that the surplus line producer will pay to the Director the
tax, interest and penalties levied under subsection (3) of
this Section.
(5) Submission of documents to Surplus Line Association
of Illinois. A surplus line producer shall submit every
insurance contract issued under his or her license to the
Surplus Line Association of Illinois for recording and
countersignature. The submission and countersignature may be
effected through electronic means. The submission shall set
forth:
(a) the name of the insured;
(b) the description and location of the insured
property or risk;
(c) the amount insured;
(d) the gross premiums charged or returned;
(e) the name of the unauthorized insurer or
domestic surplus line insurer as defined in Section 445a
from whom coverage has been procured;
(f) the kind or kinds of insurance procured; and
(g) amount of premium subject to tax required by
Section 12 of the Fire Investigation Act.
Proposals, endorsements, and other documents which
are incidental to the insurance but which do not affect
the premium charged are exempted from filing and
countersignature.
The submission of insuring contracts to the Surplus
Line Association of Illinois constitutes a certification
by the surplus line producer or by the insurance producer
who presented the risk to the surplus line producer for
placement as a surplus line risk that after diligent
effort the required insurance could not be procured from
insurers which are authorized to transact business in
this State other than domestic surplus line insurers as
defined in Section 445a and that such procurement was
otherwise in accordance with the surplus line law.
(6) Countersignature required. It shall be unlawful for
an insurance producer to deliver any unauthorized insurer
contract or domestic surplus line insurer contract unless
such insurance contract is countersigned by the Surplus Line
Association of Illinois.
(7) Inspection of records. A surplus line producer
shall maintain separate records of the business transacted
under his or her license, including complete copies of
surplus line insurance contracts maintained on paper or by
electronic means, which records shall be open at all times
for inspection by the Director and by the Surplus Line
Association of Illinois.
(8) Violations and penalties. The Director may suspend
or revoke or refuse to renew a surplus line producer license
for any violation of this Code. In addition to or in lieu of
suspension or revocation, the Director may subject a surplus
line producer to a civil penalty of up to $1,000 for each
cause for suspension or revocation. Such penalty is
enforceable under subsection (5) of Section 403A of this
Code.
(9) Director may declare insurer ineligible. If the
Director determines that the further assumption of risks
might be hazardous to the policyholders of an unauthorized
insurer, the Director may order the Surplus Line Association
of Illinois not to countersign insurance contracts evidencing
insurance in such insurer and order surplus line producers to
cease procuring insurance from such insurer.
(10) Service of process upon Director. Insurance
contracts delivered under this Section from unauthorized
insurers shall contain a provision designating the Director
and his successors in office the true and lawful attorney of
the insurer upon whom may be served all lawful process in any
action, suit or proceeding arising out of such insurance.
Service of process made upon the Director to be valid
hereunder must state the name of the insured, the name of the
unauthorized insurer and identify the contract of insurance.
The Director at his option is authorized to forward a copy of
the process to the Surplus Line Association of Illinois for
delivery to the unauthorized insurer or the Director may
deliver the process to the unauthorized insurer by other
means which he considers to be reasonably prompt and certain.
(11) The Illinois Surplus Line law does not apply to
insurance of property and operations of railroads or aircraft
engaged in interstate or foreign commerce, insurance of
vessels, crafts or hulls, cargoes, marine builder's risks,
marine protection and indemnity, or other risks including
strikes and war risks insured under ocean or wet marine forms
of policies.
(12) Surplus line insurance procured under this Section,
including insurance procured from a domestic surplus line
insurer, is not subject to the provisions of the Illinois
Insurance Code other than Sections 123, 123.1, 401, 401.1,
402, 403, 403A, 408, 412, 445, 445.1, 445.2, 445.3, 445.4,
and all of the provisions of Article XXXI to the extent that
the provisions of Article XXXI are not inconsistent with the
terms of this Act.
(Source: P.A. 92-386, eff. 1-1-02.)
(215 ILCS 5/531.13) (from Ch. 73, par. 1065.80-13)
Sec. 531.13. Tax offset. In the event the aggregate
Class A, B and C assessments for all member insurers do not
exceed $3,000,000 in any one calendar year, no member insurer
shall receive a tax offset. However, for any one calendar
year before 1998 in which the total of such assessments
exceeds $3,000,000, the amount in excess of $3,000,000 shall
be subject to a tax offset to the extent of 20% of the amount
of such assessment for each of the 5 calendar years following
the year in which such assessment was paid, and ending prior
to January 1, 2003, and each member insurer may offset the
proportionate amount of such excess paid by the insurer
against its liabilities for the tax imposed by subsections
(a) and (b) of Section 201 of the Illinois Income Tax Act.
The provisions of this Section shall expire and be given no
effect for any tax period commencing on and after January 1,
2003.
(Source: P.A. 90-583, eff. 5-29-98.)
Section 15. The Health Maintenance Organization Act is
amended by changing Section 6-13 as follows:
(215 ILCS 125/6-13) (from Ch. 111 1/2, par. 1418.13)
Sec. 6-13. Tax offset. In the event the aggregate Class
A and B assessments for all member organizations do not
exceed $3,000,000 in any one calendar year, no member
organization shall receive a tax offset. However, in any one
calendar year in which the total of such assessments exceeds
$3,000,000, the amount in excess of $3,000,000 shall be
subject to a tax offset to the extent of 20% of the amount of
such assessment for each of the five calendar years following
the year in which such assessment was paid, and ending prior
to January 1, 2003, and each member organization may offset
the proportionate amount of such excess paid by the
organization against its liabilities for the tax imposed by
subsections (a) and (b) of Section 201 of the Illinois Income
Tax Act. The provisions of this Section shall expire and be
given no effect on and after January 1, 2004.
(Source: P.A. 85-20.)
Section 99. Effective date. This Act takes effect upon
becoming law.
Effective Date: 6/20/2003
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