Public Act 90-0458 of the 90th General Assembly

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Public Act 90-0458

HB0526 Enrolled                                LRB9000539DNmb

    AN ACT to amend the Illinois Income Tax Act  by  changing
Section 201.

    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 Section 201 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:
         (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)  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,  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.
    (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, 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.
    (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 and for
    shareholders of Subchapter S corporations, 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 subsection (b) 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  until  the  minimum
    investments  in  qualified  property set forth in Section
    5.5  of  the  Illinois  Enterprise  Zone  Act  have  been
    satisfied 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 minimum  investments  shall
    be  taken  in  the  taxable  year  in  which such minimum
    investments  have  been  completed.    The   credit   for
    additional investments beyond the minimum investment by a
    designated  high  impact business 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)  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.  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 subsection (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,  a  taxpayer  shall  be
allowed  a  credit  against the tax imposed by subsection (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  and  for  shareholders  of
subchapter  S  corporations,  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.
    (k)  Research and development credit.
    Beginning  with  tax  years  ending after July 1, 1990, 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   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.
    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,  1999,  except  for  costs
incurred  pursuant  to  a binding contract entered into on or
before December 31, 1999.
(Source: P.A. 88-45; 88-89;  88-141;  88-547,  eff.  6-30-94;
88-670,  eff.  12-2-94;  89-235,  eff.  8-4-95;  89-519, eff.
7-18-96; 89-591, eff. 8-1-96.)

    Section 10.  The Uniform  Penalty  and  Interest  Act  is
amended by changing Section 3-7 as follows:

    (35 ILCS 735/3-7) (from Ch. 120, par. 2603-7)
    Sec. 3-7.  Personal Liability Penalty.
    (a)  Any  officer  or employee of any taxpayer subject to
the provisions of a tax Act administered  by  the  Department
who  has the control, supervision or responsibility of filing
returns and making payment of the amount  of  any  trust  tax
imposed in accordance with that Act and who wilfully fails to
file  the  return  or  make  the payment to the Department or
wilfully attempts in any other manner to evade or defeat  the
tax  shall  be  personally  liable for a penalty equal to the
total amount of tax unpaid by the taxpayer including interest
and penalties  thereon.  The  Department  shall  determine  a
penalty due under this Section according to its best judgment
and  information, and that determination shall be prima facie
correct and shall be prima facie evidence of  a  penalty  due
under  this  Section.   Proof  of  that  determination by the
Department shall be made at any hearing before it or  in  any
legal  proceeding  by reproduced copy or computer printout of
the Department's record relating thereto in the name  of  the
Department  under the certificate of the Director of Revenue.
If reproduced copies of the Department's records are  offered
as  proof  of  that  determination, the Director must certify
that those copies are true and exact  copies  of  records  on
file  with  the  Department.   If  computer print-outs of the
Department's  records  are   offered   as   proof   of   such
determination,  the Director must certify that those computer
print-outs are true  and  exact  representations  of  records
properly   entered   into   standard   electronic   computing
equipment,   in   the  regular  course  of  the  Department's
business, at or reasonably near the time of the occurrence of
the   facts   recorded,   from   trustworthy   and   reliable
information.  That certified  reproduced  copy  or  certified
computer  print-out  shall without further proof, be admitted
into  evidence  before  the  Department  or  in   any   legal
proceeding  and shall be prima facie proof of the correctness
of the amount of tax or penalty due.
    (b)  The Department  shall  issue  a  notice  of  penalty
liability  for  the amount claimed by the Department pursuant
to this Section.  Procedures for  protest  and  review  of  a
notice  of  penalty liability issued pursuant to this Section
and assessment of the penalty due hereunder shall be the same
as those prescribed for protest and review of a notice of tax
liability or a notice of deficiency, as the case may be,  and
the  assessment  of tax liability under the Act imposing that
liability.
    (b-5)  Any   person   filing   an   action   under    the
Administrative  Review  Law  to  review a final assessment or
revised  final  assessment  (except  a  final  assessment  or
revised final assessment relating to any trust tax imposed in
accordance with the Illinois Income Tax Act)  issued  by  the
Department  under  this  Section  shall, within 20 days after
filing the complaint, file a bond with  good  and  sufficient
surety  or  sureties residing in this State or licensed to do
business in this State, or instead of bond, obtain  an  order
from  the court imposing a lien upon the plaintiff's property
as hereinafter provided.  If the person filing the  complaint
fails  to comply with this bonding requirement within 20 days
after filing the  complaint,  the  Department  shall  file  a
motion  to  dismiss  and  the  court shall dismiss the action
unless the person filing the action complies with the bonding
requirements set out with this provision within 30 days after
the filing of the Department's motion to dismiss.   A  court,
on  its  own  motion  or  on  motion of the Department, shall
dismiss an action under  the  Administrative  Review  Law  to
review  a final assessment or revised final assessment issued
by the Department under this Section (i) unless the plaintiff
files with the court, within 20 days after the filing of  the
complaint  and  the  issuance of the summons in the action, a
bond with good and sufficient surety or sureties residing  in
this  State  or licensed to do business in this State or (ii)
unless the court, in place of the bond and  with  plaintiff's
consent, enters an order imposing a lien upon the plaintiff's
property as provided in this subsection.
    Upon  dismissal of a complaint for failure to comply with
this subsection, the court shall enter judgment  against  the
taxpayer  and in favor of the Department in the amount of the
final assessment or revised final assessment,  together  with
any interest that has accrued since the Department issued the
final  assessment or revised final assessment, and for costs.
The judgment  is  enforceable  as  other  judgments  for  the
payment of money.
    The amount of the bond shall be fixed and approved by the
court,  but  shall not be less than the amount of the tax and
penalty claimed to be due by  the  Department  in  its  final
assessment  or  revised final assessment to the person filing
the bond, plus the amount of interest due from that person to
the Department at the time when  the  Department  issued  its
final  assessment or revised final assessment to that person.
The bond must be executed in  favor  of  the  Department  and
conditioned  on  the  taxpayer's payment within 30 days after
termination of the proceedings for  judicial  review  of  the
amount of tax, penalty, and interest found by the court to be
due in those proceedings.  The bond, when filed and approved,
is,  from  that  time  until 2 years after termination of the
proceedings for judicial review in which the bond is filed, a
lien against the real estate situated in the county in  which
the  bond  is  filed of the person filing the bond and of the
surety or sureties on the bond, until the  condition  of  the
bond  is  complied  with  or  until  the  bond is canceled as
provided  in  this  subsection.  The  lien  does  not  apply,
however, to the real property  of  a  corporate  surety  duly
licensed  to  do business in this State. If the person filing
the bond fails to keep its condition, the bond is  forfeited,
and  the  Department may institute an action upon the bond in
its own name for the entire amount of the bond and costs.  An
action upon the bond is  in  addition  to  any  other  remedy
provided by law.  If the person filing the bond complies with
its  condition  or if, in the proceedings for judicial review
in which the bond is filed, the court determines that no tax,
penalty, or interest is due, the bond shall  be  canceled  by
the issuer of the bond.
    If  the  court  finds  in  a  particular  case  that  the
plaintiff  cannot  furnish  a satisfactory surety or sureties
for the kind of bond required in this subsection,  the  court
may  relieve the plaintiff of the obligation of filing a bond
if, upon the timely application of the plaintiff for  a  lien
in  place  of  a  bond  and  accompanying proof, the court is
satisfied that a lien would secure the assessment as well  as
would  a  bond.   Upon that finding, the court shall enter an
order subjecting the plaintiff's real and  personal  property
(including  subsequently  acquired  property) situated in the
county in which the order is entered to a lien  in  favor  of
the  Department.  The lien shall be for the amount of the tax
and penalty claimed to be due by the Department in its  final
assessment  or  revised  final assessment, plus the amount of
interest due from that person to the Department at  the  time
when  the  Department  issued its final assessment or revised
final assessment to that person.   The  lien  shall  continue
until  the  court  determines in the proceedings for judicial
review that no tax, penalty, or interest is due, or until the
plaintiff pays  to  the  Department  the  tax,  penalty,  and
interest  secured  by the lien.  In its discretion, the court
may impose a lien regardless of the ratio of  the  taxpayer's
assets  to  the  final assessment or revised final assessment
plus the amount of the interest and penalty.  This subsection
does not give the Department a preference over the rights  of
a bona fide purchaser, mortgagee, judgment creditor, or other
lien  holder  arising  before the entry of the order creating
the lien in favor of the Department. "Bona fide", as used  in
this  subsection,  does  not  include  a  mortgage of real or
personal property or other credit transaction that results in
the mortgagee or the holder of the security acting as trustee
for unsecured creditors of  the  taxpayer  who  executed  the
chattel  or real property mortgage or the document evidencing
the credit transaction.  The lien is inferior to the lien  of
general  taxes, special assessments, and special taxes levied
by a political subdivision of this State.  The  lien  is  not
effective  against  a  purchaser with respect to an item in a
retailer's stock in trade purchased from the retailer in  the
usual course of the retailer's business.  The lien may not be
enforced  against  the  household  effects,  wearing apparel,
books, or tools or implements of a trade or  profession  kept
for use by any person. The lien is not effective against real
property  unless  and until a certified copy or memorandum of
such order is recorded in the Office of the Recorder of Deeds
for the county or counties in which the property is  located.
The  lien  is not effective against real property whose title
is registered under the provisions of the  Registered  Titles
(Torrens)  Act until the provisions of Section 85 of that Act
are complied with.
    Service upon the Director of  Revenue  or  the  Assistant
Director  of Revenue of summons issued in an action to review
a final administrative decision of the Department is  service
upon  the Department. The Department shall certify the record
of its proceedings if the taxpayer pays to it 75¢ per page of
testimony taken before the Department and 25¢ per page of all
other matters contained in  the  record,  except  that  these
charges  may  be waived when the Department is satisfied that
the aggrieved party is a poor person who cannot afford to pay
the charges.  If payment for the record is not  made  by  the
taxpayer  within  30 days after notice from the Department or
the Attorney General of the cost,  the  court  in  which  the
proceeding  is  pending,  on  motion of the Department, shall
dismiss the complaint and (when the  administrative  decision
as  to  which  the  action for judicial review was filed is a
final assessment or revised  final  assessment)  shall  enter
judgment  against the taxpayer and in favor of the Department
for the amount of tax and penalty shown by  the  Department's
final  assessment or revised final assessment to be due, plus
interest as provided for in this Act from the date  when  the
liability  upon  which the interest accrued became delinquent
until the entry of the judgment in the  action  for  judicial
review  under  the  Administrative  Review  Law, and also for
costs.
    (c)  The personal liability imposed by this Section shall
survive the dissolution of a partnership,  limited  liability
company,  or  corporation.    No  notice of penalty liability
shall be issued after the expiration of  3  years  after  the
date  all proceedings in court for the review of any final or
revised final assessments issued  against  a  taxpayer  which
constitute   the   basis   of  such  penalty  liability  have
terminated or the time for the  taking  thereof  has  expired
without  such  proceedings  being  instituted  or  after  the
expiration  of  3 years after the date a return is filed with
the Department by  a  taxpayer  in  cases  where  the  return
constitutes  the  basis  of  such  liability.  Interest shall
continue to accrue on that portion of the penalty imposed  by
this  Section which represents the tax unpaid by the taxpayer
at the same rate and in the same amount as  interest  accrues
on the tax unpaid by the taxpayer.
    (d)  In  addition to any other remedy provided for by the
laws  of  this  State,  and  provided  that  no  hearing   or
proceeding  for  review  is pending, any Section of a tax Act
which provides a means for collection of taxes shall  in  the
same  manner  and  to the same extent provide a means for the
collection of the  penalty  imposed  by  this  Section.   The
procedures  for the filing of an action for collection of the
penalty imposed by this Section shall be the  same  as  those
prescribed  by  a  tax  Act  for  the filing of an action for
collection of the tax assessed  under  that  Act.   The  time
limitation  period on the Department's right to bring suit to
recover the amount  of  such  tax,  or  portion  thereof,  or
penalty  or  interest  from  such  person,  or if deceased or
incompetent to file a claim thereof against his estate, shall
not run during:  (1) any period of time in which the order of
any Court has the effect  of  enjoining  or  restraining  the
Department  from  bringing  such  suit  or claim against such
person, or (2) any period of time in which the order  of  the
Court   has  the  effect  of  enjoining  or  restraining  the
Department from bringing  suit  or  initiating  other  proper
proceedings  for  the  collection  of  such  amounts from the
taxpayer, or (3) any period of time the person  departs  from
and  remains  out  of the State; but the foregoing provisions
concerning absence from the State shall not apply to any case
in which, at the time when a tax or penalty becomes due under
this Act, the person  allegedly  liable  therefor  is  not  a
resident of this State.
    (e)  For  the  purposes  of  this  Section,  "officer  or
employee   of   any   taxpayer"   includes  a  partner  of  a
partnership, a manager  or  member  of  a  limited  liability
corporation,  and  a member of a registered limited liability
partnership.
    (f)  A trust tax is  any  tax  for  which  an  amount  is
collected  or withheld by a taxpayer from another person, and
any tax for which an amount is required to  be  collected  or
withheld  by  a  taxpayer  from another person, regardless of
whether it is in fact collected or withheld.
    (g)  The personal liability imposed by this Section is in
addition to liability incurred by a partner of a  partnership
or  limited liability partnership resulting from the issuance
of a notice of tax liability issued  to  the  partnership  or
limited liability partnership.
(Source: P.A.  88-480;  88-683,  eff.  1-24-95;  89-399, eff.
8-20-95; 89-626, eff. 8-9-96.)

    Section 99.  Effective date.  This Act takes effect  upon
becoming law.

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